AGREEMENT REGARDING
Exhibit 10.6
SUPPLEMENTAL RETIREMENT BENEFITS
This agreement is being entered into between Xxxx Xxxxx (“Executive”) and Cascade Natural Gas Corporation (“Cascade”) to document their agreement with respect to supplemental retirement benefits.
A. Executive and Cascade entered into an employment agreement date June 16, 2005 (the “Employment Agreement”).
B. Section 4.4 of the Employment Agreement provides that Cascade will provide Executive the opportunity to participate in a supplemental deferred compensation plan that will be anticipated, using reasonable assumptions concerning the rate of investment returns, to provide Executive with replacement pay at retirement equal to 55 percent of his average base salary at normal retirement age 65 with 15 years of service, under the Employment Agreement, after taking into account Social Security retirement benefits and any retirement benefits payable to Executive under any qualified or nonqualified retirement plan sponsored by Cascade or by Executive’s prior employer.
C. Cascade is adopting a new executive deferred compensation plan that will credit to an account for Executive a net contribution amount as well as a rate of investment return based on elections made by Executive.
D. The new plan will not provide a guaranteed level of retirement income because it will provide benefits based on the rate at which net contribution amounts and investment earnings are credited to Executive’s account and, as a result, it is possible that the value of the account may provide more or less than 55 percent of Executive’s average base salary.
E. Actuaries retained by Cascade have produced the attached schedule of net contribution amounts to be credited to Executive’s account that will reasonably be expected, based on the assumptions set out in the schedule, to provide the targeted rate of replacement pay.
In consideration of the premises, the parties agree as follows:
1. Net contributions to the account under the deferred compensation plan that are in accordance with the attached schedule will satisfy Cascade’s obligations to Executive under section 4.4 of the Employment Agreement.
2. Cascade shall have no liability to Executive under section 4.4 of the Employment Agreement other than to credit contributions to the Executive’s account under the plan at the rates set forth in the attached schedule during the term of Executive’s employment with Cascade.
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CASCADE NATURAL GAS CORPORATION |
EXECUTIVE |
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By |
/s/ Xxxxx X. Xxxxx |
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/s/ Xxxx Xxxxx |
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Title |
Chairman |
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Executed: January 11, 2006 |
Executed: January 11, 2006 |
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Cascade Natural Gas
Executive Defined Contribution Plan Benefit Projection
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Input Data for Xxxx Xxxxx as of October 1, 2005 |
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Hire Age: |
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52 |
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Current Annual Base Pay (excluding bonus): |
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$ |
240,000 |
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Current Age: |
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52 |
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Future Pay Increases: |
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4.00 |
% |
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Retirement Age: |
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65 |
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Pre-Ret DC Investment Return: |
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6.50 |
%(1) |
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Service at Retirement: |
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13 |
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Post-Ret DC Investment Return: |
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5.50 |
%(2) |
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Assumed Bonus %: |
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24.5 |
%(4) |
401(k) Annual Deferral (% of Qualified Pay): |
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6.00 |
%(3) |
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Corporate Tax Rate: |
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36.5 |
% |
Assumed Future Profit Sharing Contribution: |
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2.00 |
% |
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Benefit Development for Xxxx Xxxxx
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Qualified |
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Prior Er |
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Plan |
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Qual DC |
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CNG |
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CNG |
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CNG |
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BOY |
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Total |
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Limited |
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(now XXX) |
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Match |
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CNG Match |
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Other DC |
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Other DC |
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BOY |
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Age |
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Comp |
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Base Pay |
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Comp |
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Acct EOY |
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Cont. |
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Acct EOY |
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Cont. |
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Acct EOY |
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Service |
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51 |
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172,909 |
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52 |
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298,800 |
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240,000 |
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210,000 |
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184,148 |
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0 |
(6) |
0 |
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0 |
(6) |
0 |
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0.25 |
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53 |
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310,752 |
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249,600 |
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215,000 |
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196,118 |
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6,450 |
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6,656 |
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12,900 |
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13,313 |
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1.25 |
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54 |
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323,182 |
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259,584 |
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220,000 |
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208,866 |
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6,600 |
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13,900 |
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13,200 |
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27,800 |
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2.25 |
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55 |
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336,109 |
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269,967 |
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225,000 |
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222,442 |
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6,750 |
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21,770 |
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13,500 |
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43,539 |
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3.25 |
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56 |
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349,554 |
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280,766 |
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235,000 |
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236,901 |
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7,050 |
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30,460 |
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14,100 |
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60,920 |
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4.25 |
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57 |
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363,536 |
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291,997 |
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240,000 |
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252,299 |
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7,200 |
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39,870 |
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14,400 |
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79,741 |
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5.25 |
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58 |
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378,077 |
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303,677 |
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245,000 |
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268,699 |
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7,350 |
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50,047 |
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14,700 |
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100,094 |
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6.25 |
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59 |
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393,200 |
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315,824 |
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250,000 |
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286,164 |
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7,500 |
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61,040 |
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15,000 |
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122,080 |
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7.25 |
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60 |
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408,928 |
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328,457 |
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255,000 |
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304,765 |
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7,650 |
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72,902 |
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15,300 |
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145,805 |
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8.25 |
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61 |
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425,286 |
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341,595 |
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265,000 |
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324,575 |
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7,950 |
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85,845 |
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15,900 |
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171,690 |
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9.25 |
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62 |
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442,297 |
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355,259 |
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270,000 |
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345,672 |
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8,100 |
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99,784 |
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16,200 |
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199,569 |
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10.25 |
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63 |
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459,989 |
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369,469 |
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275,000 |
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368,141 |
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8,250 |
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114,784 |
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16,500 |
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229,568 |
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11.25 |
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64 |
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478,388 |
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384,248 |
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285,000 |
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392,070 |
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8,550 |
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131,069 |
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17,100 |
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262,137 |
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12.25 |
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Exec |
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Gross |
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Exec |
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Corp Tax on |
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Total Cost of |
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BOY |
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Total |
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Cont |
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Gross |
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Exec Net |
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Exec Acct |
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Exec Inv |
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Exec Plan |
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Age |
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Comp |
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Percent |
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Cont. |
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Cont.(5) |
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EOY |
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Earnings |
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(Cont. + Tax) |
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51 |
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52 |
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298,800 |
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14,00 |
% |
33,600 |
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33,600 |
(8) |
34,675 |
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392 |
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33,992 |
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53 |
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310,752 |
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14,00 |
% |
34,944 |
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15,594 |
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53,021 |
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1,005 |
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16,599 |
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54 |
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323,182 |
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14,00 |
% |
36,342 |
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16,542 |
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73,539 |
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1,451 |
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17,993 |
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55 |
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336,109 |
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14.00 |
% |
37,795 |
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17,545 |
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96,426 |
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1,950 |
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19,495 |
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56 |
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349,554 |
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14.00 |
% |
39,307 |
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18,157 |
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121,431 |
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2,500 |
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20,657 |
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57 |
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363,536 |
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15.00 |
% |
43,800 |
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22,200 |
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152,234 |
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3,140 |
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25,340 |
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58 |
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378,077 |
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15.00 |
% |
45,551 |
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23,501 |
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186,382 |
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3,886 |
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27,388 |
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59 |
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393,200 |
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15.00 |
% |
47,374 |
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24,874 |
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224,166 |
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4,712 |
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29,586 |
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60 |
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408,928 |
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15.00 |
% |
49,268 |
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26,318 |
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265,898 |
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5,626 |
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31,944 |
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61 |
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425,286 |
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15.00 |
% |
51,239 |
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27,389 |
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311,446 |
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6,628 |
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34,017 |
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62 |
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442,297 |
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16.00 |
% |
56,841 |
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32,541 |
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365,273 |
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7,769 |
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40,310 |
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|
63 |
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459,989 |
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16.00 |
% |
59,115 |
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34,365 |
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424,480 |
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9,067 |
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43,432 |
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64 |
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478,388 |
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16.00 |
% |
61,480 |
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35,830 |
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489,047 |
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10,489 |
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46,319 |
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a. Size of fund will limit investment options. |
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b. Size of fund will result in higher fees than company pension plan. |
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c. 8% pension plan assumption is relatively aggressive today. |
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d. Company has risk if defined benefit pension plan fails to meet the 8% assumption. |
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(2) Annuity purchase interest assumption. Represents fixed Income return rate. |
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(3) Assumes full company match. No employee contributions are counted toward the 47% of pay target. (4) Short term bonus assumption is approximately half of target. (5) Plan is graduated for larger contributions in later years. (6) First year exclusion from Cascade qualified plans. |
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Cascade Natural Gas
Executive Defined Contribution Plan Benefit Projection
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Benefit |
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Pct of Final 3yr Avg |
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Age 65 Benefit Calculation for Xxxx Xxxxx |
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Total Target Replacement Ratio Under Non Qualified Plan at Age 65 |
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1) Final 3 Year Average Base Salary |
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369,658 |
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2) 47% x Final 3 Year Average Base Salary |
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173,739 |
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47.0 |
% |
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Elements to Reach Target |
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1. |
Social Security Benefit |
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1) Projected Social Security benefit beginning at age 65 |
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36,665 |
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2) One half of Projected Social Security benefit |
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18,332 |
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5.0 |
% |
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2. |
Qualified Plan Benefit |
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1) CNG Match Account |
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131,069 |
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2) CNG Other DC Accounts |
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262,137 |
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3) Annuity Factor at age 65 |
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11.31327 |
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4) CNG Qualified Plans annual annuity at age 65 |
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34,756 |
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9.4 |
% |
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3. |
Prior Employer Qualified Benefits |
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1) Weyerhaueser single life annuity at age 65 |
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32,488 |
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2) DC plan account, converted to single life annuity at age 65 |
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34,656 |
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3) Total annuity from prior employer qualified plans |
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67,144 |
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18.2 |
% |
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4. |
Prior Employer Non-Qualified Benefits |
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|
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1) Weyerhaueser non-qualified single life annuity at age 65 |
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9,890 |
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2.7 |
% |
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5. |
Target Executive DC Benefit Payable in Order to Meet Retirement Objective at Age 65 |
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43,617 |
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11.8 |
% |
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Proposed Executive DC Plan Design Results |
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1) Executive DC Plan account balance at age 65 |
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489,047 |
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2) Executive DC Plan annual annuity at age 65 |
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43,228 |
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11.7 |
% |
