ENERGY WEST Incorporated
No. 1 First Avenue South, P. 0. Box 2229
Great Falls MT 59403-2229
Notice of Meeting
November 21, 1996
Dear Shareholders,
The Board of Directors joins me in extending to you a cordial invitation to
attend the 1996 Annual Meeting of Shareholders of ENERGY WEST Incorporated (the
Company). The meeting will be held on:
Thursday, November 21, 1996 at
11:00 A.M. Mountain Standard Time in the
Missouri Room of the Great Falls Civic Center
located at Park Drive and Central Avenue, Great Falls, Montana, for the
following purposes:
1. To elect seven directors to hold office for a one year term and until
their respective successors are elected and have qualified.
2. To approve a deferred incentive stock plan for directors.
3. To ratify the appointment of independent public accountants.
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
Shareholders of record at the close of business on September 20, 1996 are
entitled to be present and vote at the meeting; we welcome all shareholders.
YOUR VOTE IS IMPORTANT
Whether or not you expect to attend the Annual Meeting, it is important
that your shares be represented. Please sign and date the enclosed proxy
and return it promptly in the enclosed envelope (no postage required) to
insure that your shares will be represented at the meeting. If you
attend the meeting and wish to vote in person, you may, at that time,
revoke your proxy and vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Larry D. Geske
Chief Executive Officer
ENERGY WEST INCORPORATED
No. 1 First Avenue South, P.O. Box 2229
Great Falls, Montana 59403
PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD NOVEMBER 21, 1996
GENERAL INFORMATION
The accompanying proxy is being solicited by the Board of Directors of ENERGY
WEST Incorporated (the Company ) for the Annual Meeting of Shareholders to be
held on November 21, 1996 at 11:00 A.M. Mountain Standard Time, in the Missouri
Room of the Great Falls Civic Center located at Park Drive and Central in Great
Falls, Montana and any and all adjournments or postponements thereof, for the
purposes set forth in the accompanying Notice of Meeting. This Proxy Statement
and a copy of the Company s Annual Report to Shareholders for the year ended
June 30, 1996 is being mailed on or about October 16, 1996 to all shareholders
of record on September 20, 1996.
A shareholder giving a proxy for use at the meeting may revoke such proxy prior
to its exercise either by written notice, to be received by the Secretary of
the Company no later than the close of business on November 20, 1996, or by
appearing in person at the Annual Meeting and revoking his proxy. If no
direction is given, the proxy will be voted for the four proposals set forth in
the accompanying Notice of Meeting. A shareholder who has revoked his proxy may
choose to vote his shares by executing another proxy or by voting in person at
the Annual Meeting or may abstain from voting. A shareholder may, if he deems
it advisable, strike the names of management s proxy holders on the accompanying
proxy and insert names of his own choosing.
Only shareholders of record at the close of business on September 20, 1996, may
vote at the meeting or any adjournment thereof. There are issued and
outstanding 2,254,138 shares of Common Stock of the Company, the only class of
securities of the Company entitled to vote at the meeting. Each shareholder of
record is entitled to one vote for each share registered in his or her name as
of the record date, except that each shareholder is entitled to cumulate his
votes in electing directors by multiplying the number of votes to which he may
be entitled by the number of directors to be elected and casting all such votes
for one candidate or distributing them among any two or more candidates. To
vote cumulatively, the shareholder must write the words cumulative for ,
followed by the number of shares to be voted and name of the nominee or
nominees selected on the line provided under item No. 3 of the proxy. The seven
nominees for director receiving the highest number of votes at the meeting will
be elected.
Expenses in connection with the solicitation of proxies will be paid by the
Copany. Proxies are being solicited primarily by mail but, in addition,
officers and regular employees of the Company who will receive no extra
compensation for their efforts may solicit proxies by telephone, telegraph, or
personal calls. So far as the management of the Company is aware, no matters
other than those described in this Proxy Statement will be acted upon at the
meeting. In the event that any other matters properly come before the meeting
calling for a vote of shareholders, the persons named as proxies in the
enclosed form of proxy will vote in accordance with their best judgment on such
other matters.
For purposes of determining whether a proposal has received a majority vote,
abstentions will not be included in the vote total, and, therefore, will have
no effect on the outcome of the vote. For purposes of determining whether a
proposal has received a majority vote, in instances where brokers are
prohibited from exercising discretionary authority for beneficial owners of
Common Stock who have not returned a proxy (so-called Broker Non-Votes ), those
shares will not be included in the vote totals, and, therefore, will have no
effect on the outcome of the vote. Shares held by holders who are either
present in person or represented by proxy who abstain or for whom the authority
to vote is withheld on certain matters will, however, be treated as present for
quorum purposes on all matters. The Board of Directors is comprised of between
five and nine members. Seven directors are currently proposed for election, all
of whom, with the exception of Mr. Geske are not employees of the Company. The
business affairs of the Company are managed under the general direction of the
Board, although it is not involved in day-to-day operations. The Board of
Directors held four meetings since the last annual meeting held November 6,
1995. Six incumbent members of the Board are standing for reelection. Mr. Tim
Moylan died tragically in the late summer of 1996 and Mr. John Reichel has
announced his retirement from the Board at the conclusion of the current term.
ELECTION OF DIRECTORS
The following persons have been nominated to serve one-year terms or until
their successors are elected and have qualified.
Ian B. Davidson David A. Flitner Larry D. Geske
Thomas N. McGowen, Jr. G. Montgomery Mitchell George Ruff
Dean South
Each of the nominees for director is a member of the present Board of Directors
with the exception of Mr. Ruff who is proposed a s aboard member for the first
time with this proxy. It is intended that the proxies in the form enclosed will
be voted for the election of the nominees named above by regular or cumulative
voting, unless authority to do so is withheld as provided in the proxy. The
persons named in the proxy have the right, under the conditions stated in
General Information, page 2, to cumulate their votes and distribute them among
the nominees, at their discretion, unless otherwise specifially instructed. If
for any reason one or more of the nominees should be unable to serve or refuse
to serve as director (an event which is not anticipated), the proxies will be
voted for such substitute nominees as the proxy holders may determine. The
seven nominees for director receiving the highest number of votes will be
elected. With the exception of Mr. Ruff, the remaining six directors are
submitted for election at this time in accordance with a resolution adopted by
the directors at the Board meeting on August 29, 1996. Mr. Ruff was nominated
by resolution of the Board at a special meeting of the Board held
October 9, 1996.
THE BOARD of DIRECTORS of THE COMPANY
RECOMMENDS APPROVAL OF EACH NOMINEE.
INFORMATION ABOUT DIRECTORS AS OF JUNE 30, 1996 APPEARS BELOW:
Ian B. Davidson, has been a Director of the Company since 1969. Mr. Davidson
has served as Chairman and Chief Executive Officer of D. A. Davidson & Co.
since 1970. He is a Director of Plum Creek Management Company of Seattle,
Washington; serves on the Board of Governors of the Pacific Coast Stock
Exchange and the National Association of Securities Dealers.
David A. Flitner, has been a Director of the Company since 1988. He is owner
of Flitner Ranch and Hideout Adventures, Inc.
Larry D. Geske, has been employed by the Company since 1975. He became
President and Director of the Company in 1978, and in 1979, he was appointed to
the position of Chief Executive Officer of the Company. He is a Director of
American Gas Association as Chairman of the AGA Small Utilities Coordinating
Council, the Great Falls Dodgers Baseball Club.
Thomas N. McGowen, Jr., has been a Director of the Company since 1978. Mr.
McGowen is a retired attorney and is past President and Chairman of the Board
of Pabst Brewing Company. He is a Director of Federal Signal Corporation and
Ribi Immunchem Corporation.
G. Montgomery Mitchell, has been a Director of the Company since 1984. Mr.
Mitchell was Senior Vice President and Director of Stone and Webster Management
Consultants, Inc. from August 1980 until his retirement in 1993 and continues
with Stone and Webster as a senior advisor and consultant. Mr. Mitchell is a
Director of Mobile Gas Services Corporation (Alabama).
Dean South, is proposed for a Director seat for the first time at this meeting.
He currently ranches north of Helena, Montana. Mr. South has been active in the
management of propane distribution companies for most of his career. In 1991 he
retired from that industry having served as Vice President of Western Operation
for Heritage Propane Corporation from October of 1989 until his retirement in
1991. From 1986 until 1989 he served as President and Chief Operating Officer
of Louis Dreyfus Propane Corporation. From 1981 until 1986 he served as
President of Northern Energy Company which subsequently merged with Louis
Dreyfus Propane. He was appointed in August, 1996 to fill the unexpired term of
Mr. Moylan as a Director for ENERGY WEST, Inc.
George Ruff is proposed for a Director seat for the first time at this meeting.
Mr. Ruff is currently Vice President of Montana Operations for U. S. est,
Incorporated. He has held that position since June of 1983. He has been
employed in the telecommunications industry for over thirty years. He is also a
director of Norwest Bank, the Political Education Council of Montana, the
Montana Taxpayers Association and the Montana Tech Foundation.
THE BOARD AND COMMITTEES OF THE BOARD
The Company has a Compensation Committee which consisted during the fiscal year
of Messrs. Davidson, McGowen and Moylan. The Compensation Committee met four
times during the year. It has the responsibility to make recommendations to the
full board regarding base salaries of officers and certain pay for performance
plans or other compensation matters. The Company also has an Audit Committee
which during the fiscal year consisted of Messrs. Flitner, Mitchell and
Reichel. The Audit Committee met four times during the year and has
responsibility of reviewing the annual audit and making recommendations to the
full board regarding accounting matters that come to its attention.
Executive officers of the Company are elected by and serve at the discretion of
the Board of Directors. Directors of the Company are elected at the Annual
Meeting of Shareholders and serve until their successors are duly elected and
qualified. No director attended fewer than 75% of the board and committee
meetings on which he served. The Company paid its outside directors the
following fees in the fiscal year:
Annual fee $3,000 per year;
Board Meeting Fee $750 per Meeting;
Committee Meeting $375 per Committee Meeting unless held in
conjunction with a Board Meeting, in such case the
fee for the meeting is $100.
For Board or Committee meetings held by telephone conference the rate is one
half the regular rate indicated above. Furthermore, each Director receives an
annual award of Company Stock. The amount of stock purchased is determined by
an amount equal to a percentage of Director s compensation equivalent to the
highest percentage of compensation paid in incentives to any member of the
management incentive plan. For example, if the highest percentage of
compensation paid out as incentive under the management incentive plan was 30%,
that same 30% would be applied to the total compensation paid to each director
during the fiscal year to arrive at a dollar amount. Those incentive dollars
would then be utilized to purchase ENERGY WEST stock on behalf of each
director. During the fiscal year, $16,634 was paid out in aggregate to the
existing outside members of the Board as executive compensation in lieu of
stock pending the shareholder approval of the Deferred Compensation Plan for
Directors.
The Company also provides natural gas service at a 50% discount to those
Directors who reside within the Company s service area.
Deferred Compensation Plan for Directors.
ENERGY WEST has established, subject to shareholder approval, the ENERGY WEST
Incorporated Deferred Compensation Plan (the Plan ). The Plan provides the
opportunity for Directors of ENERGY WEST to defer receipt of all or part of
their director s fees on a pre-tax basis. There are two components of Directors
compensation. As noted above, there are annual fixed fees paid to the
Directors. In addition, the Plan provides for Incentive Awards to be made to
Directors, consisting of an amount equal to the product of the fees paid to a
director and the greatest percentage of incentive compensation (as a percent of
base salary) paid to employees receiving a bonus under the ENERGY WEST
Management Incentive Plan.
The Incentive Awards are paid only in shares of ENERGY WEST common stock. The
standard fees of a director are paid in cash, or the Director may elect to
receive an equivalent amount of stock. With respect to the standard fees paid
to a Director, the Director may choose to defer payment of the fees, to a later
time. If the Director has elected to receive stock in lieu of some or all of
the fees, the director may also elect to have the stock awarded as an Incentive
Award also deferred and delivered at a later time.
In the event that a Director elects to defer the stock portion of his or her
fees or Incentive Awards, the stock to be deferred is converted into Stock
Equivalents of ENERGY WEST common stock and credited to a Deferred Account
maintained for each Director. Such Stock Equivalents are not actual shares of
common stock of ENERGY WEST, but are bookkeeping entries credited to the
Deferred Account representing the value of the Common Stock at the date it
would otherwise be paid to the Director. This account is credited with an
amount equal to appreciation or depreciation in the value of the common stock
and also with an amount equal to dividends which are paid on ENERGY WEST common
stock. Any cash amount that is deferred earns interest at the prime rate.
The Deferred Account is paid to a director as the director designates in a
deferral notice. The amount is also paid in the event of the Director s death,
or in the event of a change of control of ENERGY WEST. In addition, there is a
provision permitting payment in the event of an unforeseen emergency relating
to the Director.
It is intended that the amounts deferred under the Plan will be exempt from
federal and state income taxes until actually paid to the Director. Amounts
which are not deferred are currently taxable when paid to the Director. The
Plan would authorize up to 100,000 shares of ENERGY WEST Common Stock to be
issued under the Plan.
THE BOARD OF DIRECTOR S RECOMMENDS APPROVAL
OF THE DIRECTORS DEFERRED INCENTIVE STOCK PLAN.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company on or about June 30, 1996 by each
shareholder who is known by the Company to own beneficially more than 5% of the
outstanding Common Stock, by each director, and by all executive officers and
directors as a group.
Name and Address of Beneficial Owner or Group Number of Shares %Ownership
Ian B. & Nancy Davidson
Flood Road, Great Falls 639,101 (a) 28%
Larry D. & Sandy Geske
4 Meadowlark Ridge, Great Falls Mt 113,700 (b&c) 5% (b&c)
Thomas N. McGowen, Jr. 3,342 (d)
G. Montgomery Mitchell 7,342 (d)
David Flitner 3,524 (d)
All executive officers and directors as a group
(12 persons) 836,100 37% (c)
(a) Shares shown as owned by the Davidson s are owned in joint tenancy with
rights of survivorship, Mr. and Mrs. Davidson have sole power to vote and to
dispose of the shares.
(b) Mr. Geske owns 48,560 in his own name with sole power to vote and dispose
of the shares. Certain of these shares are incentive stock options which could
have been acquired within 60 days of Jun 30, 1996. These option shares amount
to 4,000 for Mr. Geske. That sum also includes shares held in the Company s
Employee Stock Ownership Plan (ESOP). There were 11,817 shares in the ESOP
allocated to Mr. Geske at the end of the fiscal year. Mr. Geske also owns
jointly with his wife 31,000 shares of stock for which they share the power to
vote and dispose of the shares. Included in the total in the chart above are
6,000 shares owned solely by Mrs. Geske and for which she has sole power to
vote and dispose of the stock.
(c) Included are shares allocated to the Company s employee stock ownership plan
which in accordance with SEC rules are considered to be beneficially owned.
(d) consists of less than 1%
(e) share ownership mentioned above has sole investment and voting power unless
otherwise noted.
Section 16 (a) Beneficial Ownership Reporting Compliance.
Under the securities laws of the United States, the Company s directors, its
executive officers, and any persons
holding more than ten percent of the Company s stock are required to report
their ownership of the Company s.
common stock and any changes in that ownership to the Securities Exchange
Commission. Specific due dates for these reports have been established and the
Company is required to report in this proxy statement any failure to file on
these date during fiscal 1993 and each year thereafter. All of these filing
requirements were satisfied by its directors and ten percent holders in fiscal
year 1994. However, in fiscal 1995, Larry Geske failed to timely report on the
purchase of 10,000 shares and Bill Quast failed to file, on a timely basis, one
report relating 880 shares of stock he acquired during that fiscal year. In
fiscal 1996, Ian Davidson failed to file one report relating to the
reinvestment of dividends totaling 14,902 shares. In that same year Sheila Rice
failed to file one report respecting the transfer of 285 shares. In making
these statements, the Company has relied on the written representations of its
directors and officers and its ten percent holders and copies of the reports
they have filed with the commission.
EXECUTIVE COMPENSATION
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
To Our Shareholders: The Compensation Committee of the Board of Directors (the
Committee ) reviews each salary adjustment for the Company s officers and
recommends those adjustments to the full board. The Committee also provides
recommendations to the full Board regarding contributions to the Company s
Management Incentive Plan, the Company s Incentive Stock Option Plan, as well as
the Employee Stock Ownership Plan (ESOP). It also provides recommendations
regarding Director Compensation. The Committee s objectives are as follows:
1. The Committee seeks to attract and retain the necessary management
talent to successfully lead the Company. The Committee believes it must
provide a compensation package which is competitive in the marketplace with
other comparable companies.
2. The Committee encourages decision making that enhances shareholder
value. The Committee believes that this objective is met by linking
executive pay to corporate performance.
3. The Committee seeks to promote a close identity of interest between
management and the Company s shareholders. The committee believes its CEO
compensation plan, the Employee Stock Ownership Plan and the Company s
Incentive Stock Option Plan promote this objective.
Total Compensation for executive officers is determined by marketplace survey
data, Company performance and individual performance. A control point and a
salary range is established for each executive based on market information of
companies in the gas utility industry. Each executive receives a base salary
and annual incentive award which when combined place the executive within the
salary range for the position. The amount of the incentive award varies based
upon performance nuance. Incentive awards have traditionally ranged from 12% to
50% of base salary.
Compensation for the Chief Executive Officer is accomplished through a
combination of annual incentive awards pursuant to the Company s Management
Incentive Plan and a deferred cash incentive plan. The Management Incentive
Plan provides for the payment of a cash bonus depending on two criteria, growth
in earnings per share relative to a predetermined target and achieving a return
on equity in the top 40% of Companies considered to be peer companies by Edward
D. Jones & Company. The annual cash incentive awarded under this plan increases
as the Company s performance, as measured by these two criteria, improves.
The deferred cash incentive plan has been approved by the Compensation
committee effective July 1, 1995. The plan calls for the payment of a cash
amount in lieu of salary increases. The cash amount is calculated by a formula
that is governed by the total return to the ENERGY WEST shareholder. Cash
payments under this plan are calculated by a formula tied to total shareholder
return (dividends and stock price appreciation). It is designed to be
equivalent to a salary adjustment of 3% if the Company s growth in total return
is commensurate with the total return growth of 7.93%, which is equivalent to
the S&P Utility average growth over the five year period ending June 30, 1995.
The cash contributions calculated by that formula are deferred for three years
from the year in which they are earned and paid out in that third year. If the
CEO retires at or after age 65 he is entitled to the total cash balance
existing in his deferral account at the time of his retirement. The plan,
therefore, eliminates base wage increases and replaces them with an incentive
tied to increases in shareholder value.
MEMBERS OF THE COMPENSATION COMMITTEE
Ian Davidson, Compensation Committee Chairman; Tom McGowen, Jr.; Tim Moylan
The table following sets forth the cash compensation of the executive officers
of the Company earning compensation in excess of $100,000.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Other LTIP All
Name and Annual Restrict- Payouts other
Principal Compen- ing Stock Options/ ($) Compen-
Position Year Salary Bonus sation Awards SAR(#)(1) sation(2)
Larry D.
Geske, 1994 $101,971 $25,470 0 0 25,000 0 18,050
President 1995 $104,972 $52,507 0 0 15,000 0 18,906
and CEO 1996 $104,972 $17,979(3) 0 0 5,000 0 20,174
(1) Consists of stock options held at the end of the fiscal year. 5,000 of such
options are limited to the amount that can be exercised in the period. Of that
5,000 Mr. Geske could have exercised 2,000, 3,000 and 4,000 for the respective
fiscal years 1994, 1995 and 1996.
2) Includes amounts contributed to the ENERGY WEST Money Purchase Defined
Contribution
Plan on behalf of Mr. Geske in the following amounts for the fiscal years
1994, 1995, and 1996
shown respectively $12,634, $13,044 and $15,477; also includes amounts
contributed to the ENERGY WEST Employee Stock Ownership Plan in the following
amounts for the fiscal years shown respectively $3,976, $4,422 and $4,426;
finally, the amount shown includes amounts expended by the Company to be used
at the employee s discretion to purchase benefits from a cafeteria plan menu.
Those amounts for the periods shown are as follows respectively: $1,440,
$1,440, and $1,440.
(3) Represents amount set aside for Mr. Geske pursuant to the CEO Deferred
Compensation Plan.
The following graph sets forth the cumulative total shareholder return
(assuming reinvestment of dividends) to shareholders of ENERGY WEST
Incorporated during the five year period ended June 30, 1996, as well as an
overall stock market index (S&P 500 Index) and the peer group index (S&P
Utility Index).
<PAGE>
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COMPARISON OF FIVE YEAR CUMULATIVE RETURNS
250----------------------------------------------------------------
2
0
1 1 1 7 1
8 8 8 @ 9
200------------------------------- 1 5 1 8 9 @ 1 -----
7 # 6 # = @ #
2 # 1 5 # = @ #
1 # # 5 @ # = @ #
4 1 # 1 1 # 3 @ # = @ #
150----------------------- 1 3 2 # 3 3 # = @ # = @ # -----
1 1 1 = 9 # 3 0 # = @ # = @ #
1 1 1 1 1 8 = @ # = @ # = @ # = @ #
0 0 0 4 3 # = @ # = @ # = @ # = @ #
0 0 0 = @ # = @ # = @ # = @ # = @ #
100---------- = @ # = @ # = @ # = @ # = @ # = @ # -----
= @ # = @ # = @ # = @ # = @ # = @ #
= @ # = @ # = @ # = @ # = @ # = @ #
= @ # = @ # = @ # = @ # = @ # = @ #
= @ # = @ # = @ # = @ # = @ # = @ #
50---------- = @ # = @ # = @ # = @ # = @ # = @ # -----
= @ # = @ # = @ # = @ # = @ # = @ #
= @ # = @ # = @ # = @ # = @ # = @ #
= @ # = @ # = @ # = @ # = @ # = @ #
0 0 0 = @ # = @ # = @ # = @ # = @ # = @ #
0-- = @ # = @ # = @ # = @ # = @ # = @ # = @ # -----
| | | | | | |
1990 1991 1992 1993 1994 1995 1996
LEGEND: = S&P Utilities
@ S&P 500 Composite
# ENERGY WEST, Inc.
*******************************************************************
Tabular data for the graph
1990 1991 1992 1993 1994 1995 1996
S&P Utilities $0 $100 $114 $143 $133 $153 $189
S&P 500 Composite $0 $100 $113 $129 $130 $165 $207
ENERGY WEST, INC. $0 $100 $118 $172 $185 $188 $191
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-end Option/SAR
Values
The following table provides information with respect to the named executive
officers, concerning any exercise of stock options during the fiscal year.
Shares Number of Unexercised Value of Unexercised
Acquired on Value Options/SARs at 6/30/96 Options/SARs at 6/30/96
Name Exercise(#) Realized($) (#)Exercisable (E) ($)Exercisable(E)
Unexercisable (U) Unexercisable (U)
Larry D. $10,000 $35,440 4,000(E) $33,676(E)
Geske 1,000(U) $8,419(U)
Values are calculated by subtracting the exercise price from the fair market
value of the stock as at the fiscal year-end multiplied by the number of option
shares. The average of the bid and close price for the month of June 1996 is
used. That average price was $8.419.
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Ernst & Young LLP of Denver, Colorado, as
independent public accountants for the Company, to examine the Company s
financial statements for the current year ending June 30, 1996 and to perform
other appropriate accounting services and recommends that the shareholders of
the Company ratify that appointment. Ernst & Young LLP has served as the
Company s independent accountants for more than thirty years, including fiscal
years ended June 30, 1996, 1995, and 1994 and have no relationship with the
Company other than that arising from their employment as independent public
accountants. While representatives of Ernst & Young LLP will not be available
to make a statement or answer questions at the meeting, the Company will, upon
request, forward any shareholder inquiries to Ernst & Young LLP and forward
responses thereto to interested shareholders subsequent to the meeting.
It is intended that the proxies will be voted for the ratification of the
appointment of such firm unless otherwise indicated. If the appointment is not
ratified by shareholders, the Board of Directors is not obligated to appoint
other auditors, but the Board of Directors will give consideration to such
unfavorable vote.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS APPROVAL OF THE
SELECTION OF ERNST AND YOUNG LLP AS AUDITORS FOR FISCAL YEAR 1997.
Stockholder Proposals for 1997 Annual Meeting
In order for proposals for stockholders to be considered for inclusion in
the proxy statement for the 1997 Annual Meeting of Shareholders of ENERGY
WEST, such proposals must be received by the Secretary of ENERGY WEST
before June 20, 1997.
Your immediate attention to completing and mailing this proxy will be greatly
appreciated.
Dated: October 10 , 1996
By Order of the Board of Directors
Great Falls, Montana
John C. Allen, Corporate Secretary
(406) 791-7503
EXHIBIT "A"
ENERGY WEST INCORPORATED
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Section 1. Introduction
1.1 Establishment. Energy West Incorporated, a Montana
corporation (the "Company"), hereby establishes the Energy West
Incorporated Deferred Compensation Plan for Directors (the "Plan")
for those directors of the Company who are neither officers nor
employees of the Company. The Plan provides the opportunity for
Directors to defer receipt of all or part of their cash compensation
on a pretax basis and, subject to approval of the Plan by
shareholders, provide (i) the opportunity for Directors to elect to
receive Fees in the form of Stock; (ii) the opportunity for an
investment return on those deferrals based upon Stock Equivalents,
and for payment of deferred amounts in the form of Stock; (iii)
incentive compensation to Directors, to be paid only in Stock; and
(iv) the opportunity for Directors to defer receipt of such
incentive compensation in the form of Stock Equivalents, and for
payment of such deferred compensation in the form of Stock.
Capitalized terms used herein are defined in Section 2 hereof.
1.2 Purposes. The purposes of the Plan are to align the
interests of Directors more closely with the interests of other
shareholders of the Company, to encourage the highest level of
Director performance by providing the Directors with a direct
interest in the Company's attainment of its financial goals, and to
help attract and retain qualified Directors.
1.3 Effective Date. This Plan shall be effective upon
approval of the Plan by the Board; provided that, until the later of
the Shareholder Approval Date or the effective date of an applicable
election required pursuant to Sections 5.1 or 6.3, as the case may
be, (i) no Stock shall be issued under the Plan, (ii) no deferred
cash amounts shall be converted into Stock Equivalents under the
Plan, and (iii) no Incentive Award shall be made under the Plan. To
the extent an investment or distribution of Stock may be made under
this Plan, the Plan is intended to qualify for the exemption from
short swing profits under Section 16(b) of the Exchange Act, as
amended, provided by Rule 16b-3 of the Securities and Exchange
Commission and now in effect or as hereafter amended. In the event
the shareholders of the Company do not approve this Plan at the
Company's 1996 annual meeting of shareholders, a participating
Director may, within thirty days after the date of such meeting,
elect to terminate participation in this Plan and to receive a one-
time immediate cash distribution of the entire balance in the
Deferred Account.
Section 2. Definitions
2.1 Definitions. The following terms shall have the
meanings set forth below:
(a) "Administrative Committee" means the committee
designated in Section 3 to administer the Plan.
(b) "Applicable Percentage" shall have the meaning
set forth in Section 5.2.
(c) "Board" means the Board of Directors of the
Company.
(d) "Change in Control" means any of the events set
forth below:
(i) any person, as defined in Sections
3(a)(9) and 13(d)(3) of the Exchange Act, becomes
the "beneficial owner" (as defined in Rule 13d-3
promulgated pursuant to the Exchange Act),
directly or indirectly, of securities of the
Company having 25% or more of the voting power in
the election of directors of the Company;
excluding, however, any person or an "affiliate"
(as defined in the Exchange Act) of such person
who was the beneficial owner of 25% or more of
the outstanding shares of any class (preferred or
common) of the Company's capital stock on
February 29, 1996, and also excluding any
acquisition or holding by the Company, its direct
or indirect subsidiaries or any employee benefit
plan of the Company or any such subsidiary; or
(ii) at the time that individuals who, as
of the Shareholder Approval Date, constitute the
board of directors of the Company (as of such
date, the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board,
provided that any person becoming a director
subsequent to such date whose election, or
nomination for election by the Company's
shareholders, was approved by a vote of at least
a majority of the directors then comprising the
Incumbent Board (other than an election or
nomination of an individual whose initial
assumption of office is in connection with an
actual or threatened election contest relating to
the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) shall be,
for purposes of this Plan, considered as though
such person were a member of the Incumbent Board.
(e) "Stock Equivalent" means a hypothetical share of
Stock which shall have a value on any date equal
to the Fair Market Value of one share of Stock on
that date.
(f) "Deferred Account" means the bookkeeping account
established by the Company in respect to each
Director pursuant to Section 6.3 hereof and to
which shall be credited (i) an amount equal to
the Fees deferred by the Director and interest
thereon, if any, as provided in this Plan, (ii)
the Stock Equivalents into which any deferred
Fees and interest are converted by election of
the Director pursuant to the Plan, (iii) the
Stock Equivalents credited to such Director as
Incentive Awards pursuant to Section 5.2 hereof,
and (iv) the Stock Equivalents credited to such
Director in respect of dividends pursuant to
Section 6.4 hereof.
(g) "Director" means a member of the Board who is
neither an officer nor an employee of the
Company. For purposes of the Plan, an employee
is an individual whose wages are subject to the
withholding of federal income tax under section
3401 of the Internal Revenue Code, and an officer
who is an individual elected or appointed by the
Board or chosen in such other manner as may be
prescribed in the Bylaws of the Company to serve
as such.
(h) "Exchange Act" means the Securities Exchange Act
of 1934, as amended from time to time.
(i) "Fair Market Value" means, with respect to Stock,
as of any applicable date the last closing bid
quotation with respect to a share of such Stock
immediately preceding the time in question on the
National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in
use (or any other system of reporting or
ascertaining quotations then available), or if
such Stock is not so quoted, the fair market
value at the time in question of a share of such
Stock as determined by the Company's Board in
good faith; provided, that if the Company's
Common Stock is hereafter listed on a United
States securities exchange registered under the
Exchange Act, then "Fair Market Value" shall
mean, as of any applicable date (and as the
following may be applicable), the closing sale
price of a share of the Company's Common Stock in
question on the Composite Tape for New York Stock
Exchange-Listed Stock, or, if such Stock is not
quoted on the Composite Tape, on the New York
Stock Exchange, or if, such Stock is not listed
on such Exchange, on the principal United States
securities exchange registered under the Exchange
Act on which such Stock is listed, as the case
may be.
(j) "Fees" means any annual retainer, meeting fees,
and committee fees payable in cash to the
Director for serving on the Board or any
committee thereof, but does not include
reimbursable expenses or any Incentive Award
hereunder.
(k) "Fiscal Year" means any fiscal year of the
Company.
(l) "Incentive Award" means an award of Stock
Equivalents pursuant to Section 5.2.
(m) "Incentive Plan" means the Energy West Management
Incentive Plan.
(n) "Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended from time to
time.
(o) "Interest Rate" shall mean, from time to time,
the annual rate of interest on U.S. Treasury
Notes maturing in seven years (or if none is
maturing in exactly seven years, the rate for the
Treasury Note which has a maturity closest to
seven years in length), as listed in the edition
of the Wall Street Journal published next
following the last business day of each calendar
quarter, and shall be adjusted on a quarterly
basis.
(p) "Shareholder Approval Date" shall mean the date
on which the Plan is approved by the shareholders
of the Company.
(q) "Stock" means the $.15 par value common stock of
the Company.
(r) "Payment Date" means each of the dates each year
on which the Company pays Fees to Directors.
2.2 Gender and Number. Except when otherwise indicated by
the context, the masculine gender shall also include the feminine
gender, and the definitions of any term herein in the singular shall
also include the plural.
Section 3. Plan Administration
The Plan shall be administered by the Administrative
Committee, which shall be appointed by and serve at the pleasure of
the Board. Subject to the limitations of the Plan, the
Administrative Committee shall have the sole and complete authority
and discretion: (i) to impose such limitations, restrictions and
conditions as shall be deemed appropriate, (ii) to interpret the
Plan and to adopt, amend and rescind administrative guidelines and
other rules and regulations relating to the Plan and (iii) to make
all other determinations and to take all other actions necessary or
advisable for the implementation and administration of the Plan.
Notwithstanding the foregoing, the Administrative Committee shall
have no authority, discretion or power to alter any terms or
conditions specified in the Plan, except in the sense of
administering the Plan subject to the provisions of the Plan. The
Administrative Committee's determination on matters within its
authority shall be conclusive and binding upon the Company, the
Directors and all other persons.
Section 4. Stock Subject to the Plan
4.1 Number of Shares. There shall be authorized for
issuance under the Plan, in accordance with the provisions of the
Plan, 100,000 shares of Stock. This authorization may be increased
from time to time by approval of the Board and by the shareholders
of the Company if such shareholder approval is required. The
Company shall at all times during the term of the Plan retain as
authorized and unissued Stock at least the number of shares from
time to time which may be required under the provisions of the Plan,
or otherwise assure itself of its ability to perform its obligations
hereunder. The shares of Stock issuable hereunder shall be
authorized and unissued shares or previously issued and outstanding
shares of Stock reacquired by the Company.
4.2 Adjustments Upon Changes in Stock. If there shall be
any change in the Stock of the Company, through merger,
consolidation, reorganization, recapitalization, stock dividend,
stock split, spinoff, split up, dividend in kind or other change in
the corporate structure or distribution to the shareholders,
appropriate adjustments shall be made by the Administrative
Committee (or if the Company is not the surviving corporation in any
such transaction, the board of directors of the surviving
corporation) in the aggregate number and kind of shares subject to
the Plan, and the number and kind of shares which may be issued
under the Plan. Appropriate adjustments may also be made by the
Administrative Committee on an equitable basis as the Administrative
Committee in its discretion determines.
Section 5. Payment of Fees and Incentive Awards
5.1 Form of Payment of Fees. Each Director shall have the
option of (i) continuing to receive cash payment of all Fees on the
Payment Dates for such Fees, or (ii) receiving a number of shares of
Stock equal to the amount of Fees due, divided by the Fair Market
Value of a share of Stock, determined as of the Payment Dates for
such Fees; provided that a Director shall be entitled to receive
Stock pursuant to (ii) above only if he or she has filed a written
election with the Company, in a form prescribed by the
Administrative Committee, prior to the Payment Date for the Fees to
be received in Stock. Any election filed by a Director to receive
Fees in Stock shall be effective until revoked, which revocation
shall not become effective until the date such revocation is
delivered to the Company.
5.2 Incentive Awards. Each Director shall receive an
Incentive Award following the end of each Fiscal Year equal to the
product of (x) total Fees earned by such Director during such Fiscal
Year, multiplied by the (y) Applicable Percentage with respect to
such Fiscal Year (which Applicable Percentage will be zero if no
awards are made by the Company under the Incentive Plan for that
year) (such product being referred to as the "Incentive Award
Value"); provided that such Director must have been a Director as of
the last day of such Fiscal Year in order to be eligible for an
Incentive Award with respect to such Fiscal Year. As used herein,
the "Applicable Percentage" means the greatest (in percentage terms
and not in absolute dollar terms) of the amounts of incentive
compensation awarded to eligible participants pursuant to the
Incentive Plan expressed as a percentage of such eligible
participants' base salaries for the Fiscal Year with respect to
which such awards are made. The "Applicable Percentage" shall be
expressed as a decimal. (Example: The Incentive Plan has two
participants for 1997, A and B. A's base salary for 1997 is
$50,000, and A receives incentive compensation under the Incentive
Plan of $5,000. B's base salary for 1997 is $40,000, and B receives
incentive compensation under the Incentive Plan of $4,400. In this
example, the Applicable Percentage is .11 because B received
incentive pay equal to 11% of his base salary for the Fiscal Year in
question.) Incentive Awards shall be paid only in Stock or, if the
Director has elected to defer receipt of such Incentive Award
pursuant to Section 6.1, in the form of Stock Equivalents credited
to the Director's Deferred Account. For each Incentive Award, the
number of shares of Stock to be issued or the number of Stock
Equivalents to be credited, as the case may be, shall be equal to
the Incentive Award Value of such Incentive Award, divided by the
Fair Market Value of a share of Stock determined as of the date
incentive bonuses become payable to employees of the Company under
the Incentive Plan. Incentive Awards shall, subject to receipt of
approval by the shareholders of the Company, be awarded to Directors
beginning with awards for the Fiscal Year ended June 30, 1996, and
for each Fiscal Year thereafter during the term of this Plan. The
Incentive Awards for the Fiscal Year ended June 30, 1996 shall be
made as soon as practicable following the Shareholder Approval Date.
Section 6. Deferrals and Distributions
6.1 Deferral Elections. A Director may elect to defer
receipt of (i) Fees otherwise payable to him; and (ii) Incentive
Awards to the Director pursuant to Section 5.2. A Director may make
the elections permitted hereunder by giving written notice to the
Company in a form approved by the Administrative Committee. The
notice shall state: (i) whether Fees or Incentive Awards or both
are to be deferred and (ii) the date as of which deferral is to
commence. Subject to any exceptions provided in this Plan, the year
in which distribution is to commence shall be the year in which the
Director ceases to be a director of the Company.
6.2 Time for Electing Deferral and Change in Election. An
election to defer receipt of Fees and/or Incentive Awards shall be
made prior to the later to occur of the following: (i) the
beginning of the calendar year during which the Fees and/or
Incentive Awards to be deferred are to be earned; or (ii) the
thirty-first day following the date the Director first becomes
eligible to participate in the Plan; provided that, an election made
after the first day of a calendar year shall only apply to (A) Fees
earned after the date of the election and (B) Incentive Awards with
respect to calendar years beginning after the date of the election.
An election to defer, once made, is irrevocable for the first
calendar year with respect to which the election is made, except as
provided in Section 6.11 hereof. An election to defer, once made,
shall continue to be effective for succeeding calendar years until
revoked or modified by the Director by written notice to the Company
prior to the beginning of a calendar year for which Fees and/or
Incentive Awards would otherwise be deferred.
6.3 Deferred Accounts. A Deferred Account shall be
established for each Director. An amount equal to Fees deferred by
a Director shall be credited to such Account as of the date such
amounts would otherwise have been paid in cash to the Director. If
the Director has previously given written notice of an election to
have cash compensation converted into Stock Equivalents to the
Company in a form approved by the Administrative Committee, such
compensation, and accrued interest thereon, if any, shall be
converted into Stock Equivalents based on Fair Market Value as of
the latest to occur of (i) the date such amounts would have
otherwise been paid in cash to the Director or (ii) the Shareholder
Approval Date. Any cash amount credited to a Deferred Account shall
earn interest at the Interest Rate from the date as of which the
amount was credited to the Deferred Account until the earlier of (i)
the date as of which any such amount is converted into Stock
Equivalents as provided in this Section, or (ii) the date of
distribution of such amounts pursuant to this Plan. Stock
Equivalents representing deferred Incentive Awards shall be credited
to such Account as of the date on which incentive compensation for
such Fiscal Year becomes payable pursuant to the Incentive Plan. A
Director's Deferred Account shall also be credited with hypothetical
dividends and other distributions pursuant to Section 6.4.
6.4 Hypothetical Dividends on Stock Equivalents. Stock
Equivalents having a Fair Market Value as of the applicable
distribution date equal to Dividends and other distributions that
would have been paid if Stock Equivalents credited to a Deferred
Account had been outstanding as Stock shall be credited to such
Deferred Account as of the respective distribution dates for such
Dividends or other distributions. Stock Equivalents having a Fair
Market Value as of the applicable distribution date equal to the
values as of such date of any securities that would have been issued
in respect of Stock Equivalents, if such Stock Equivalents credited
to a Deferred Account had been outstanding as Stock, in connection
with reclassification, spinoffs and the like shall be credited to
such Deferred Account as of the respective distribution date for
such securities. Fractional shares shall be credited to a
Director's Deferred Account cumulatively, but the balance of shares
of Stock Equivalents in a Director's Deferred Account shall be
rounded to the next highest whole share for any distribution to such
Director pursuant to this Section 6.
6.5 Statement of Accounts. A statement will be sent to each
Director as to the dollar amount and Stock Equivalents credited to
his or her Deferred Account at least once each calendar year.
6.6 Payment of Accounts. Distribution of a Deferred Account
shall be made in accordance with a Director's deferral notice. Such
distribution shall consist of (A) the dollar amount credited to the
Deferred Account in respect of Fees, for which no election to
convert into Stock Equivalents shall have been made, and interest
accrued thereon, and (B) one share of Stock for each Stock
Equivalent credited to the Deferred Account as of the date for
distribution.
6.7 Payments to a Deceased Director's Estate. In the event
of a Director's death before the balance of his Deferred Account is
paid, payment of the balance of the Director's Deferred Account
shall then be made to the beneficiary designated by the Director
pursuant to Section 6.8 or, in the absence of a designation of a
beneficiary pursuant to Section 6.8, to his estate, in the time and
manner selected by the Administrative Committee. The Administrative
Committee may take into account the application of any duly
appointed administrator or executor of a Director's estate and
direct that the balance of the Director's Deferred Account be paid
to his estate in the manner requested by such application.
6.8 Designation of Beneficiary. A Director may designate
one or more beneficiaries in the manner and on a form approved by
the Administrative Committee.
6.9 Change in Control. Notwithstanding any provision of
this Plan to the contrary, in the event a Change in Control of the
Company occurs, within ten (10) days of the date of such Change in
Control, each Director shall receive a lump sum distribution in cash
equal to the dollar amount of the value of all Stock Equivalents
credited to such Director's Deferred Account as of the Payment Date
immediately preceding the date of distribution (based upon the
highest Fair Market Value during the 30 days immediately preceding
the Change in Control).
6.10 Emergency Payments. In the event of an "unforeseeable
emergency" as defined herein, a majority of the full Board (except
that the member requesting distribution pursuant to this Section
6.10 shall not participate in any decision of the Board pursuant to
this Section 6.10), may determine the amounts payable under Section
6 hereof and pay all or a part of such amounts without regard to the
payment dates provided in Section 6, to the extent the Board
determines that such action is necessary in light of immediate and
substantial needs of the Director (or his beneficiary) occasioned by
severe financial hardship and otherwise determines such payment is
appropriate in its sole and absolute discretion. For the purposes
of this Section, an "unforeseeable emergency" is a severe financial
hardship to the Director resulting from a sudden and unexpected
illness or accident of the Director or beneficiary, or of a
dependent (as defined in Section 152(a) of the Internal Revenue Code
of 1986, as amended) of the Director or beneficiary, loss of the
Director's or beneficiary's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Director or beneficiary.
Payments shall not be made pursuant to this Section to the extent
that such hardship is or may be relieved: (a) through reimbursement
or compensation by insurance or otherwise, (b) by liquidation of the
Director's or beneficiary's assets, to the extent the liquidation of
such assets would not itself cause severe financial hardship, or (c)
by cessation of the Director's deferrals under the Plan. Such
action shall be taken only if a Director (or a Director's legal
representatives or successors) signs an application describing fully
the circumstances which are deemed to justify the payment, together
with an estimate of the amounts necessary to prevent such hardship,
which application shall be approved by the Board after making such
inquiries as the Board deems necessary or appropriate.
6.11 Payment of Taxable Amount. Notwithstanding any other
provision of this Section 6 and regardless of whether payments have
commenced under this Section 6, in the event that the Internal
Revenue Service should finally determine that part or all of the
value of a Director's Deferred Account which has not actually been
distributed to the Director is nevertheless required to be included
in the Director's gross income for Federal and/or state income tax
purposes, then the balance of the Deferred Account or the part
thereof that was determined to be includable in gross income shall
be distributed to the Director in a lump sum as soon as is
practicable after such determination, without any action or approval
by the Administrative Committee. A "final determination" of the
Internal Revenue Service for purposes of this Section is a
determination in writing by said Service ordering the payment of
additional tax, reporting of additional gross income or otherwise
requiring Plan amounts to be included in gross income, which is not
appealable or which the Director does not appeal within the time
prescribed for appeals.
Section 7. General Creditor Status
Each Director, and each other recipient under a Director's
Deferred Account pursuant to Section 6, shall be and remain an
unsecured general creditor of the Company with respect to any
payments due and owing to such Director hereunder. All payments to
persons entitled to benefits hereunder shall be made out of the
general assets, and shall be the sole obligations, of the Company.
The Plan is a promise to pay benefits in the future and it is the
intention of the parties that it be "unfunded" for tax purposes (and
for the purposes of Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), although it is not
intended that this plan be subject to ERISA because Directors are
not employees.
Section 8. Claims Procedures
If a claim for benefits made by any person (the "Applicant")
is denied, the Administrative Committee shall furnish to the
Applicant, within 90 days after its receipt of such claim (or within
180 days after such receipt if special circumstances require an
extension of time), a written notice which: (i) specifies the
reasons for the denial, (ii) refers to the pertinent provisions of
the Plan on which the denial is based, (iii) describes any
additional material or information necessary for the perfection of
the claim and explains why such material or information is
necessary, and (iv) explains the claim review procedures. Upon
written request of the Applicant submitted within 60 days after
receipt of such written notice, the Administrative Committee shall
afford the Applicant a full and fair review of the decision denying
the claim, and if so requested: (i) permit the Applicant to review
any documents which are pertinent to the claim, (ii) permit the
Applicant to submit to the Administrative Committee issues and
comments in writing, and (iii) afford the Applicant an opportunity
to meet with the Administrative Committee as a part of the review
procedure. Within 60 days after its receipt of request for review
(or within 120 days after such receipt if special circumstances,
such as the need to hold a hearing, require an extension of time)
the Administrative Committee shall notify the Applicant in writing
of its decision and the reasons for its decision and shall refer the
Applicant to the provisions of the Plan which form the basis for its
decision.
Section 9. Assignability
The right to receive payments or distributions hereunder shall
not be transferable or assignable by a Director other than by will
or the laws of descent and distribution.
Section 10. Plan Termination, Amendment and Modification
The Board may at any time terminate, and from time to time may
amend or modify the Plan, provided, however, that no amendment or
modification may become effective without approval of the amendment
or modification by the shareholders if shareholder approval is
required to enable the Plan to satisfy any applicable statutory or
regulatory requirements, and, provided further that no termination,
amendment or modification shall reduce the amount then credited to
any Director's Deferred Account or otherwise adversely change the
terms and conditions thereof without the Director's consent.
Section 11. Governing Law/Plan Construction
The Plan and all agreements hereunder shall be construed in
accordance with and governed by the laws of the State of Montana.
Nothing in this document shall be construed as an employment
agreement or in any way impairing the right of the Company, its
board, committees or shareholders, to remove a Director from service
as a director, to refuse to renominate or reelect such person as a
director, or to enforce the duly adopted retirement policies of the
board of directors of the Company.
