<PAGE>
FILED PURSUANT TO RULE 424(b)(1)
FILE NO. 333-31907
$8,000,000
ENERGY WEST INCORPORATED
7.50% NOTES DUE JUNE 1, 2012
------------------
Energy West Incorporated (the "Company") is offering hereby $8,000,000 in
original principal amount of its 7.50% Notes due June 1, 2012 (the "Notes").
Interest on the Notes is payable semi-annually on June 1 and December 1 of each
year, commencing on December 1, 1997. All principal amount of Notes then
outstanding, plus accrued interest, will be due and payable on June 1, 2012. At
the option of the Company, the Notes are redeemable, in whole or in part, on or
after June 1, 2002, at the redemption prices set forth herein, plus accrued
interest to the date of redemption. There will be no sinking fund for the
redemption of the Notes. See "Description of Notes."
There is no market for the Notes and no assurance that one will develop. The
Company does not intend to list the Notes for trading on any national securities
exchange.
The Notes will initially be issued and represented solely by one or more
certificates that will be registered in the name of the nominee of The
Depository Trust Company or any successor depository (the "Depository"), and
such nominee will be the sole record holder of the Notes. An owner of an
interest in the Notes (a "Beneficial Owner") will not be entitled to the
delivery of a definitive security except in limited circumstances. A Beneficial
Owner's interest in the Notes will be recorded on the records of the
Depository's participants, in integral multiples of $1,000, and shall entitle
the Beneficial Owner to certain rights which may be exercised only through the
Depository and the Depository's book-entry system. See "Description of
Notes--Book-Entry Only System." At the option of the personal representative or
surviving joint tenant(s) of a deceased Beneficial Owner, interests in the Notes
are redeemable at 100% of their principal amount plus accrued interest, subject
to certain conditions and limitations described herein. See "Description of the
Notes--Limited Right of Redemption in the Event of the Death of a Beneficial
Owner."
This Prospectus is accompanied by the Company's Annual Report on Form
10-KA/1 for the fiscal year ended June 30, 1996 and Quarterly Report on Form
10-QA for the quarter ended March 31, 1997, which are incorporated by reference
herein. See "Incorporation of Certain Documents by Reference."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Note............................................... 100% 3.75% 96.25%
Total.................................................. $8,000,000 $300,000 $7,700,000
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses of this offering payable by the Company estimated
at $105,000.
------------------------
The Notes are offered by the Underwriters, subject to prior sale, when, as
and if delivered to and accepted by the Underwriters and subject to certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. The Notes will bear
interest from the date of delivery to the Underwriters, which is expected to be
on or about August 15, 1997.
D.A. Davidson & Co. Edward D. Jones & Co., L.P.
THE DATE OF THIS PROSPECTUS IS AUGUST 12, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements, and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements, and other information can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Seven World Trade Center, 13th Floor, New York, New
York 10007 and 1400 Northwestern Atrium Center, 500 Madison Street, Chicago,
Illinois 60661. Copies of such material can also be obtained at prescribed rates
by writing to the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, the Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding registrants; the address of this site is
http://www.sec.gov. Reports, proxy statements and other information concerning
the Company can also be inspected at the offices of The Nasdaq Stock Market at
1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed a registration statement on Form S-2 (together with
all amendments and exhibits thereto, including documents and information
incorporated by reference, the "Registration Statement") with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Notes offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
following documents filed with the Commission (File No. 0-14183):
(1) The Company's Annual Report on Form 10-KA/1 for the fiscal year ended
June 30, 1996.
(2) The Company's Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1996 and December 31, 1996 and the Company's Quarterly
Report on Form 10-QA for the quarter ended March 31, 1997.
(3) All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering of the Notes hereby shall
be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of filing such documents.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents referred to above or elsewhere herein which have been incorporated by
reference in this Prospectus, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates by reference). Written requests for such copies
should be directed to William J. Quast, Energy West Incorporated, P. O. Box
2229, Great Falls, Montana 59403-2229, telephone number (406) 791-7500.
2
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. When used in this Prospectus and in
future filings by the Company with the Securities and Exchange Commission, in
the Company's press releases and in oral statements made with the approval of an
authorized executive officer, the words or phrases "believes," "anticipates,"
"expects," "intends," "will likely result," "estimates," "projects" or similar
expressions are intended to identify such forward-looking statements, but are
not the exclusive means of identifying such statements. These forward-looking
statements involve risks and uncertainties that may cause the Company's actual
results to differ materially from the results discussed in the forward-looking
statements. In light of this, the Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made. The Company undertakes no obligation to revise any
forward-looking statements in order to reflect events or circumstances after the
date of such statements. Readers are urged carefully to review and consider the
various disclosures made by the Company in this report and in the Company's
other reports filed with the Securities and Exchange Commission, all of which
attempt to advise interested parties of the risks and factors that may affect
the Company's business. Factors that might cause such differences include, but
are not limited to, the following: a deterioration in economic conditions in
either of the Company's primary service areas (the Great Falls, Montana
metropolitan area and the Cody, Wyoming metropolitan area); the failure to
obtain adequate rate increases for regulated operations, when requested, in a
timely fashion or at all; the risk of adverse effects from the unbundling of
utility services; and the impact of competition in those areas where the Company
or its subsidiaries conduct regulated or unregulated business. The Company's
forward-looking statements are qualified in their entirety by the cautions set
forth more fully under the section entitled "The Company."
3
<PAGE>
PROSPECTUS SUMMARY
THE INFORMATION SET FORTH BELOW SHOULD BE READ IN CONJUNCTION WITH AND IS
QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION CONTAINED IN, AND THE
FINANCIAL STATEMENTS INCLUDED IN AND INCORPORATED BY REFERENCE INTO, THIS
PROSPECTUS. UNLESS OTHERWISE INDICATED, REFERENCES IN THIS PROSPECTUS TO THE
COMPANY INCLUDE ENERGY WEST INCORPORATED AND ITS SUBSIDIARIES.
THE COMPANY
Energy West Incorporated is a regulated public utility, with certain
non-utility operations conducted through its wholly-owned subsidiaries. In
fiscal year 1996, the Company's regulated utility operations accounted for
approximately 76% of revenues and 63% of earnings, with the Company's
non-utility operations accounting for the balance of the Company's revenues and
earnings.
The Company's regulated utility operations primarily involve the
distribution and sale of natural gas to the public in the Great Falls, Montana
and Cody, Wyoming areas and the distribution of propane to the public through
underground propane vapor systems in the Payson, Arizona and Cascade, Montana
areas. Since 1995, the Company's regulated utility operations have also included
the distribution of natural gas through an underground system in West
Yellowstone, Montana that is supplied by liquified natural gas.
The Company conducts certain non-regulated, non-utility operations through
three wholly-owned subsidiaries, Rocky Mountain Fuels, Inc. ("RMF"), Energy West
Resources ("EWR") and Montana Sun, Inc. ("Montana Sun"). RMF is engaged in the
distribution of bulk propane in northwestern Wyoming and the Payson, Arizona and
Cascade, Montana areas. EWR is principally involved in the marketing of gas and
electricity in Montana. Montana Sun owns two real estate properties in Great
Falls, Montana, along with certain other investments.
THE OFFERING
<TABLE>
<S> <C>
SECURITIES OFFERED................ $8,000,000 aggregate principal amount of 7.50% Notes due
June 1, 2012. The Notes will be unsecured obligations of
the Company.
INTEREST PAYMENT DATES............ Semi-annually, on each June 1 and December 1, commencing
December 1, 1997.
COMPANY'S REDEMPTION
PRIVILEGE....................... At the Company's option, beginning June 1, 2002, the
Notes may be redeemed prior to maturity, in whole or in
part, at redemption prices declining from 103% to 100%,
plus accrued interest.
LIMITED BENEFICIAL OWNER
REDEMPTION RIGHT................ Redeemable following the death of a Beneficial Owner at
100%, plus accrued interest, subject to certain
limitations.
USE OF PROCEEDS................... The net proceeds from the sale of the Notes offered
hereby will be used to repay a portion of the Company's
outstanding short-term indebtedness, which currently
aggregates approximately $9.0 million incurred to
finance, among other things, the construction of
facilities in West Yellowstone, Montana (approximately
$3.0 million) and to expand facilities in Payson,
Arizona (approximately $2.5 million). See "Use of
Proceeds."
TRUSTEE........................... Norwest Bank Minnesota, National Association, in
Minneapolis, Minnesota.
</TABLE>
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)(1)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEARS ENDED JUNE 30,
---------------------- ----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME DATA:
Total revenue..................... $ 34,175 $ 25,687 $ 31,318 $ 30,548 $ 29,347 $ 27,629 $ 22,951
Total operating expenses.......... 31,220 23,026 28,353 27,456 26,711 24,888 21,033
Operating income.................. 2,955 2,661 2,965 3,092 2,636 2,741 1,918
Other income--net................. 332 142 215 175 199 139 113
Income before interest charges and
taxes........................... 3,287 2,803 3,180 3,267 2,835 2,880 2,031
Total interest charges............ 1,151 948 1,243 938 962 959 815
Net income before income taxes.... 2,136 1,855 1,937 2,329 1,873 1,921 1,216
Income taxes...................... 759 657 670 816 522 637 384
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........................ $ 1,377 $ 1,198 $ 1,267 $ 1,513 $ 1,351 $ 1,284 $ 832
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings per common share......... $ .59 $ .52 $ .55 $ .68 $ .61 $ .59 $ .39
Dividends per common share........ .32 .30 .41 .39 .36 .32 .31
Weighted average common shares
outstanding..................... 2,353,541 2,288,870 2,298,734 2,235,413 2,205,050 2,171,448 2,159,092
Ratio of earnings to fixed
charges(2).................... 2.33 2.48 2.28 3.01 2.81 2.86 2.37
Pro forma ratio of earnings to
fixed charges(2)(3)........... 2.29
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------------------------------
ACTUAL AS ADJUSTED(3)
---------------------- ----------------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA AND CAPITALIZATION:
Total current assets.................................................... $ 13,965 $ 13,965
Total assets............................................................ 44,132 44,537
--------- ---------
--------- ---------
Total current liabilities............................................... $ 15,997 36% 8,402 19%
Deferred credits........................................................ 6,109 14 6,109 13
Long-term debt (less amounts due in one year)........................... 9,685 22 17,685 40
Total stockholders' equity.............................................. 12,341 28 12,341 28
--------- --- --------- ---
Total capitalization and liabilities.................................. $ 44,132 100% $ 44,537 100%
--------- --- --------- ---
--------- --- --------- ---
</TABLE>
- ------------------------
(1) All share and per share data reflects a two-for-one stock split effective
June 24, 1994.
(2) In computing the ratio of earnings to fixed charges, earnings consist of
income before income taxes and fixed charges. Fixed charges include interest
and related amortization of discount and premium on long-term borrowings,
interest on short-term borrowings, the implicit interest component of the
rental cost of the Company's office facilities in Cody, Wyoming and Payson,
Arizona. Ratios for March 31, 1997 and March 31, 1996 were computed using
trailing twelve month data.
(3) As adjusted to reflect the sale of the Notes offered hereby at the interest
rate of 7.50% and the application of the net proceeds therefrom.
5
<PAGE>
THE COMPANY
GENERAL
Energy West Incorporated (the "Company") is a regulated public utility, with
certain non-utility operations conducted through its wholly-owned subsidiaries.
In fiscal year 1996, the Company's regulated utility operations accounted for
approximately 76% of revenues and 63% of earnings, with the Company's
non-utility operations accounting for the balance of the Company's revenues and
earnings.
The Company's regulated utility operations primarily involve the
distribution and sale of natural gas to the public in the Great Falls, Montana
and Cody, Wyoming areas and the distribution of propane to the public through
underground propane vapor systems in the Payson, Arizona and Cascade, Montana
areas. Since 1995, the Company's regulated utility operations have also included
the distribution of natural gas through an underground system in West
Yellowstone, Montana that is supplied by liquified natural gas ("LNG").
The Company conducts certain non-regulated, non-utility operations through
three wholly-owned subsidiaries, Rocky Mountain Fuels, Inc. ("RMF"), Energy West
Resources, Inc. ("EWR") and Montana Sun, Inc. ("Montana Sun"). RMF is engaged in
the distribution of bulk propane in northwestern Wyoming and the Payson, Arizona
and Cascade, Montana areas. EWR is principally involved in the marketing of gas
and electricity in Montana. Montana Sun owns two real estate properties in Great
Falls, Montana, along with certain other investments.
The Company was incorporated under the laws of the State of Montana in 1909.
The address of the principal executive offices of the Company is No. 1 First
Avenue South, Great Falls, Montana 59401 and the telephone number at such
offices is (406) 791-7500.
PRIMARY SERVICE AREAS AND SIGNIFICANT CUSTOMERS
The Company's primary service areas are the Great Falls, Montana
metropolitan area and the Cody, Wyoming metropolitan area. As such, the
Company's future revenues and earnings are dependent on economic conditions in
these two areas. The Great Falls economy is primarily dependent on agriculture,
Malmstrom Air Force Base ("Malmstrom") and the city's role as a regional trade
and medical center. The Cody economy is primarily dependent on oil and gas
development and production and on tourism. A deterioration in economic
conditions in either of these areas or any of these industries would have an
adverse effect on the Company's future results of operations and financial
condition.
Malmstrom, which is located near Great Falls, is a transportation customer
of the Great Falls division and a gas supply customer of EWR. Malmstrom is the
Company's largest customer, accounting for approximately 4% of the consolidated
revenues of the Company in fiscal 1996. Malmstrom has several wings of
intercontinental nuclear missiles. At September 30, 1996, the base employed
approximately 3,900 military personnel and 465 civilian personnel.
In the Cody division, the largest customer is The Celotex Corporation
("Celotex"), a manufacturer of gypsum wallboard. Celotex accounted for
approximately 23% of the revenues of the division and 4% of the consolidated
revenues of the Company in fiscal 1996. Sales to Celotex are made pursuant to a
long-term contract that expires in 2000 and provides for a special tariff that
fluctuates with the cost of gas. Celotex and its parent company have been
operating under Chapter 11 bankruptcy protection since 1990. The Cody division
has made a claim of approximately $132,000 for amounts Celotex owed the Company
prior to the bankruptcy filing. The bankruptcy court confirmed the Plan of
Reorganization on December 6, 1996. The Company expects to receive approximately
90% of the principal amount of its claim, resulting in a $45,000 recovery of
amounts previously written off.
6
<PAGE>
There can be no assurance that either of Malmstrom or Celotex will continue
as customers of the Company or that their usage will remain at current levels.
The loss of either would adversely impact the Company's future revenues and
earnings. In addition, a significant reduction in the size or the closure of
Malmstrom would have a significant adverse impact on the economic condition of
the Great Falls area.
CHANGING COMPETITIVE ENVIRONMENT
In recent years, the natural gas industry has undergone structural changes
in response to federal and state regulatory policies intended to increase
competition, which began in 1986 when the Federal Energy Regulatory Commission
issued Order 636. These policies are designed to separate, or "unbundle,"
various natural gas services (such as purchasing, storage and transportation),
which traditionally had been sold as a package. In Montana, the first unbundling
occurred in 1992 when the Montana Public Service Commission approved
transportation service rates applicable to third party use of the Montana Power
pipeline system. In response to federal and Montana regulation, the Company
began purchasing gas in 1992 directly from producers and marketers for the
Company's Great Falls market. Great Falls Gas Company has recently received
approval to unbundle the gas commodity aspect of its utility services for all of
its customers except for residential customers and small commercial customers.
Great Falls Gas Company intends to apply to the Montana Public Service
Commission for permission to unbundle the gas commodity aspect of those two
classes of customers effective as of approximately the fall of 1998.
The Montana Legislature recently passed legislation permitting unbundling
for both gas and electric utilities upon approval of the Montana Public Service
Commission. The Company believes the new legislation will present EWR, the
Company's marketing affiliate, with an opportunity to increase its sales by
penetrating markets opened as a result of the unbundling of Montana Power
Company's system. As a result of the legislation, EWR also has the opportunity
to market electricity.
Wyoming and Arizona have not taken steps to unbundle gas services, but a
pilot project has been conducted recently in one area of Wyoming. The Company
anticipates that it will apply for unbundling in Wyoming and Arizona in the
future when unbundling is authorized by regulatory authorities in those states.
Unbundling provides for competition in the sale of the gas commodity which
has traditionally been part of the bundled service provided by the utility. The
Company believes that unbundling creates opportunity for its marketing affiliate
in a line of business in which the Company has significant experience. However,
unbundling also provides other gas marketing companies with access to users
within the Company's service territory that were previously "tied" to the
Company. To the extent that other gas marketing companies offer more attractive
rates, customers of the Company could decide to purchase natural gas from a
competitor or from competitors. In such instances, however, the Company's local
distribution companies ("LDCs") would continue to receive transportation tariffs
related to the delivery, through the Company's distribution system, of the gas
purchased from third parties. It is not possible to predict the impact of
unbundling on the Company. However, at this time, the Company does not
anticipate that unbundling is likely to have a significant adverse impact on its
gas utility margin in the foreseeable future. The Company's belief is based, in
part, upon the fact that margin is derived from services related to the
distribution of the gas rather than the sale of the gas commodity (i.e. the
Company's regulated utility divisions are required, with the exception of the
gas cost incentive allowance in its Cody division, to pass along the actual cost
of purchased gas directly to the customer). It is also possible that unbundling
may increase the risk of "bypass," in which a customer formerly served by the
Company connects to a gas supply line that does not belong to the Company's LDC,
with the resulting loss of both gas supply and transportation revenues related
to such customer. While no alternate supply lines of this sort currently exist
in either the Company's Great Falls, Montana service area or the Company's Cody,
Wyoming service area, and there would be capital costs to construct such lines,
there can be no assurance that such lines will not be built in the future.
7
<PAGE>
The Company's operations in the West Yellowstone, Montana area, where the
Company distributes gas that must be trucked in and stored as liquified natural
gas prior to delivery, and in the Payson, Arizona and Cascade, Montana areas,
where the Company's distribution systems deliver vaporized propane, may be less
affected by unbundling. The cost of fuel delivered by these systems is higher
than the cost of natural gas that is transported as a gas. Consequently, in
these areas the Company currently already faces greater competition, which is
unrelated to unbundling, from suppliers of alternate fuels, in particular
suppliers of bulk propane and propane tanks.
As the natural gas distribution business becomes more competitive,
management believes the principal factor for determining success is likely to be
price, followed closely by customer loyalty and satisfaction.
REGULATION AND RATE CASES
The Company is an operating public utility regulated by the public service
commissions of Montana, Wyoming and Arizona, which must approve rates charged by
the Company for its regulated utility divisions. There can be no assurance that
these divisions will be able to obtain adequate rate increases, when requested,
in a timely fashion or at all. The failure to do so could adversely affect the
Company's ability to obtain a sufficient return on invested capital and its
future revenues and earnings.
The Company currently has a general rate case pending in Arizona. On
September 26, 1996, the Company filed for a rate increase for Broken Bow Gas (a
regulated utility in Payson, Arizona). The request is the result of increased
costs of service primarily due to increased operating expenses and higher
capital investment for utility operations tied to increased levels of service.
The Company currently anticipates that a final ruling will be issued in October
1997. There can be no assurance that the Company will receive permission to
increase its general rates to the level requested.
On July 8, 1996, the Company filed a general rate case with the Montana
Public Service Commission, requesting a revenue increase for its Great Falls Gas
operations. On November 4, 1996, the Montana Public Service Commission issued an
interim order that approved an interim rate increase and a surcharge related to
the costs of a no interest loan program. On April 8, 1997, the Montana Public
Service Commission issued its final order which, among other things, (a)
approved a general rate increase of $294,635, (b) authorized a rate increase of
$385,906 to reflect the gas tracking period from July 1, 1995, to June 30, 1996,
(c) approved a surcharge for costs associated with the Company's no interest
loan program, and (d) authorized recovery of $66,725 for costs associated with
the Company's low income discount program. Such rates are effective on and after
May 1, 1997.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes offered hereby
(estimated at $7,595,000) will be used to repay a portion of the Company's
outstanding short-term indebtedness, which currently aggregates approximately
$9.0 million. The short-term indebtedness, which bears interest at rates between
7.70% and 8.25% per annum and matures on dates ranging from August 13, 1997 to
January 15, 1998, was incurred largely to finance the construction of the
Company's facilities in West Yellowstone, Montana (approximately $3.0 million)
and to expand the Company's facilities in Payson, Arizona (approximately $2.5
million).
8
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization and short-term
indebtedness of the Company and its subsidiaries as of March 31, 1997, and such
capitalization and short-term indebtedness adjusted to reflect the issuance of
the Notes offered hereby and the application of the net proceeds therefrom.
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------------------------------
ACTUAL AS ADJUSTED
---------------------- ----------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Long-term obligations (1):
Series 1992A industrial development revenue obligations................. $ 360 $ 360
Series 1992B industrial development revenue obligations................. 1,515 1,515
Series 1993 Notes....................................................... 7,800 7,800
Notes due June 1, 2012.................................................. 0 8,000
Other................................................................... 10 10
--------- --- --------- ---
Total long-term obligations........................................... $ 9,685 44% $ 17,685 59%
Stockholders' equity:
Preferred Stock; $.15 par value; 1,500,000 shares authorized; no shares
outstanding........................................................... $ 0 $ 0
Common Stock; $.15 par value; 3,500,000 shares authorized; 2,357,471
shares issued and outstanding......................................... 354 354
Capital in excess of par value.......................................... 2,933 2,933
Retained earnings....................................................... 9,054 9,054
--------- ---------
Total stockholders' equity............................................ 12,341 56% 12,341 41%
--------- --- --------- ---
Total capitalization...................................................... 22,026 100% $ 30,026 100%
--------- --- --------- ---
--------- --- --------- ---
Short-term indebtedness (1)............................................... $ 10,407 $ 2,812
--------- ---------
</TABLE>
- ------------------------
(1) Long-term obligations due within one year are included in short-term
indebtedness.
9
<PAGE>
DESCRIPTION OF NOTES
The Notes are to be issued under an Indenture, dated as of August 1, 1997
(the "Indenture"), between the Company and Norwest Bank Minnesota, National
Association, Minneapolis, Minnesota, as Trustee (the "Trustee"), a copy of which
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The terms of the Notes include those stated in the
Indenture and those made a part of the Indenture by reference to the Trust
Indenture Act of 1939 (the "Trust Indenture Act") as in effect on the date of
the Indenture. Potential investors are referred to the Indenture and the Trust
Indenture Act for a statement of such terms. The following statements relating
to the Notes and certain provisions of the Indenture are summaries, do not
purport to be complete, and are subject to and are qualified in their entirety
by reference to the provisions of the Indenture. Unless otherwise stated,
capitalized terms defined in the Indenture have the same meanings when used
herein.
GENERAL
The Notes will be unsecured obligations and will rank, PARI PASSU, with all
of the other unsecured indebtedness of the Company outstanding from time to
time. The Company presently has no long-term secured indebtedness, and pursuant
to the Indenture the Company has agreed, subject to certain exceptions, that it
will not issue senior secured indebtedness without securing the Notes with a
lien ranking ratably with and equal to such secured indebtedness. See
"Description of Notes--Restrictions on Liens or Senior Indebtedness." The Notes
will not constitute indebtedness of the Company's subsidiaries and, therefore,
will not rank PARI PASSU with indebtedness of any subsidiary. Following the
issuance of the Notes offered hereby, the Company's consolidated long-term
indebtedness will be approximately $17.7 million. There will be no sinking fund
for the redemption of the Notes.
The Indenture provides that the Company will file with the Trustee within 30
days after it files them with the Commission copies of the annual reports and of
the information, documents and other reports (or copies of such portions of any
such as the Commission may by rules and regulations prescribe) which the Company
is required to file with the Commission under the Exchange Act. The Indenture
further provides that the Company will also comply with the provisions of the
Trust Indenture Act with respect to reports to be furnished to the Trustee and
the holders of Notes.
BOOK-ENTRY ONLY SYSTEM
The Notes will be issued in the aggregate initial principal amount of
$8,000,000, which will be represented by one or more certificates (each a
"Global Security") to be registered in the name of the nominee of The Depository
Trust Company ("DTC") or any successor depository (the "Depository"). The
Depository will maintain the Notes in denominations of $1,000 and integral
multiples thereof through its book-entry facilities. In accordance with its
normal procedures, the Depository will record the interests of each Depository
participating firm ("Participant") in the Notes, whether held for its own
account or as a nominee for another person.
So long as the nominee of the Depository is the registered owner of the
Notes, such nominee will be considered the sole owner or holder of the Notes for
all purposes under the Indenture and any applicable laws, except as noted below.
Except as otherwise provided below, a Beneficial Owner, as hereinafter defined,
of interests in the Notes will not be entitled to receive a physical certificate
representing such ownership interest and will not be considered an owner or
holder of the Notes under the Indenture. A Beneficial Owner is the Person who
has the right to sell, transfer or otherwise dispose of an interest in the Notes
and the right to receive the proceeds therefrom, as well as interest, principal
and premium (if any) payable in respect thereof. A Beneficial Owner's interest
in the Notes will be recorded, in integral multiples of $1,000, on the records
of the Participant that maintains such Beneficial Owner's account for such
purpose. In turn, the Participant's interest in such Notes will be recorded, in
integral multiples of $1,000, on the records of the Depository. Therefore, the
Beneficial Owner must rely on the foregoing
10
<PAGE>
arrangements to evidence its interest in the Notes. Beneficial ownership of the
Notes may be transferred only by compliance with the procedures of a Beneficial
Owner's Participant (E.G., brokerage firm) and the Depository. In general, a
determination of beneficial ownership in the Notes will be subject to the rules,
regulations and procedures governing the Depository and the Participants.
All rights of ownership must be exercised through the Depository and the
book-entry system, except that a Beneficial Owner is entitled to directly
exercise its rights under Section 316(b) of the Trust Indenture Act with respect
to the payment of principal and interest on the Notes. Notices that are to be
given to registered owners by the Company or the Trustee will be given only to
the Depository. It is expected that the Depository will forward the notices to
the Participants by its usual procedures, so that each such Participant may
forward such notices to the Beneficial Owners. Neither the Company nor the
Trustee will have any responsibility or obligation to assure that any notices
are forwarded by the Depository to the Participants or by any Participant to the
Beneficial Owners.
A Global Security shall only be exchangeable for definitive securities
registered in the name of Beneficial Owners if (i) the Depository notifies the
Company that it is unwilling or unable to continue as Depository for the Notes
or at any time ceases to be a clearing agency registered as such under the
Exchange Act, (ii) the Corporation executes and delivers to the Trustee an
Officers' Certificate providing that such Global Security shall be so
exchangeable or (iii) there shall have occurred and be continuing an Event of
Default (as defined below) which entitles the holders of the Notes to accelerate
the maturity thereof. Notes issued in exchange for a Global Security shall be of
like tenor and maturity, in authorized denominations and in the aggregate having
the same principal amount as the Global Security to be exchanged, and shall be
registered in such names as the Depository for such Global Security shall
direct.
DTC has advised the Company and the Underwriters as follows: DTC is a
limited-purpose trust company organized under the Banking Law of the State of
New York, a member of the Federal Reserve System and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities of Participants and facilitates the clearance and settlement of
securities transactions among Participants in such securities transactions
through electronic book-entry changes in accounts of Participants, thereby
eliminating the need for physical movement of securities certificates.
Participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own DTC. Access to
DTC's book-entry system is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by DTC only through
Participants.
INTEREST AND PAYMENT
The Notes will mature on June 1, 2012. The Notes will bear interest from the
date of issuance at the rate per annum stated on the cover page hereof, payable
semi-annually on June 1 and December 1 of each year, commencing December 1,
1997, to the persons in whose names the Notes are registered at the close of
business on the May 15 or November 15, respectively, immediately preceding such
interest payment date. If any payment date would otherwise be a day that is a
Legal Holiday (as defined), the payment will be postponed to the next day that
is not a Legal Holiday, and no interest on such payment shall accrue for the
intervening period.
So long as the nominee of the Depository is the registered owner of the
Notes, payments of interest, principal and premium (if any) on the Notes will be
made to the Depository. The Depository will be responsible for crediting the
amount of such distributions to the accounts of the Participants entitled
thereto, in accordance with the Depository's normal procedures. Each Participant
will be responsible for disbursing such distributions to the Beneficial Owners
of the interests in Notes that it represents. Neither the Company nor the
Trustee will have any responsibility or liability for any aspect of the records
relating
11
<PAGE>
to, notices to or payments made on account of, beneficial ownership interests in
the Notes, for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests or for the selection of any Beneficial Owner
to receive payment in the event of a partial redemption of a Global Security or
for consents given or other action taken on behalf of any Beneficial Owner.
REDEMPTION AT THE OPTION OF THE COMPANY
At any time on or after June 1, 2002, the Notes will be redeemable, as a
whole or in part, at the election of the Company, on not less than 30 nor more
than 60 days notice given as provided in the Indenture, at the following
Redemption Prices (expressed as percentages of the principal amount) together
with accrued interest to the Redemption Date (subject to the right of holders of
record on a regular record date to receive interest due on an interest payment
date that is on or prior to the Redemption Date) if redeemed during the
twelve-month period beginning June 1 of the years indicated:
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
YEAR PRICE % YEAR PRICE %
- ----------------------------------------- --------------- ----------------------------------------- ---------------
<S> <C> <C> <C>
2002..................................... 103 2004..................................... 101
2003..................................... 102 2005 and thereafter...................... 100
</TABLE>
Notice of redemption will be mailed, at least 30 but not more than 60 days
before the Redemption Date, to each holder of Notes to be redeemed at the
holder's registered address.
On and after the Redemption Date, interest will cease to accrue on Notes or
portions thereof called for redemption, unless the Company shall default in the
payment of the Redemption Price.
LIMITED RIGHT OF REDEMPTION IN THE EVENT OF THE DEATH OF A BENEFICIAL OWNER
Unless the Notes have been declared due and payable prior to their maturity
by reason of an Event of Default (as defined below) or unless the Company has
mailed a notice of redemption, the personal representative or surviving joint
tenant(s) (the "Representative") of a deceased Beneficial Owner has the right at
any time to request redemption of all or part of such Beneficial Owner's
interest in the Notes, expressed in integral multiples of $1,000, for payment
prior to maturity. Such a request shall be made by delivering to the Trustee (i)
a written request for redemption in form satisfactory to the Trustee, signed by
the Representative, (ii) a statement of the principal amount of the interest in
the Notes to be redeemed, (iii) appropriate evidence of death and beneficial
ownership at the time of death and (iv) appropriate evidence of the authority of
such Representative (a "Redemption Request"). Within 60 days following receipt
by the Trustee of a Redemption Request, the Company will deposit with Paying
Agent cash sufficient to redeem such interest at a price equal to 100% of its
principal amount, plus accrued interest to the date on which the Company
deposits such redemption price. Subject to arrangements with the Depository,
payment for an interest in the Notes that is to be redeemed pursuant to a
Redemption Request shall be made to the Depository.
The Company's obligation to redeem an interest in the Notes following
receipt of a Redemption Request is subject to the following limitations: (i) the
Company is not obligated to redeem on behalf of any deceased Beneficial Owner
any interest in the Notes that exceeds an aggregate principal amount of $25,000
and (ii) in any 12-month period beginning June 1 the Company shall not be
obligated to redeem interests in the Notes in excess of two percent (2%) of the
aggregate principal amount of the Notes originally issued. Representatives may
present Redemption Requests to the Trustee at any time and in any principal
amount. Any interests in Notes that are not redeemed in any 12-month period
beginning June 1 as the result of the two percent (2%) limitation will be held
for redemption in the succeeding year. The Company may, at its discretion,
exceed the $25,000 and two percent (2%) limitations. If the Company, although
not obligated to do so, chooses to redeem interests of a deceased Beneficial
Owner in excess of
12
<PAGE>
the $25,000 limitation, such redemption, to the extent that it exceeds the
$25,000 limitation, shall not be included in the computation of the two percent
(2%) limitation.
In the case of a Redemption Request that is presented on behalf of a
deceased Beneficial Owner and has not been fulfilled at such time as the Company
gives notice of its election to redeem the Notes, the interests in the Notes
that are the subject of such Redemption Request shall not be eligible for
redemption pursuant to the Company's option to redeem but shall remain subject
to fulfillment pursuant to the Redemption Request.
A Representative may withdraw any Redemption Request by delivering a written
request for withdrawal to the Trustee prior to the payment of the redemption
price of the interest to be redeemed.
Due to the limitations outlined above, there can be no assurance that the
interest of a deceased Beneficial Owner will be redeemed before maturity.
RESTRICTIONS ON ADDITIONAL INDEBTEDNESS
The Indenture limits the amount of "Funded Debt" of the Company. Funded Debt
includes all Indebtedness maturing one year or more from the date of the
creation thereof. Expressly excluded from the definition of Funded Debt are all
taxes in respect of income and excess profits not due within one year from the
date of accrual thereof in accordance with generally accepted accounting
principles. "Indebtedness" is defined as (i) all amounts in respect of borrowed
money (excluding capital stock, earned and capital surplus and general
contingency reserves) which would be shown on the liabilities side of the
Company's balance sheet prepared in accordance with generally accepted
accounting principles as of the date of determination of such Indebtedness; (ii)
all indebtedness secured by any mortgage, pledge, lien, security interest or
conditional sale or other title retention agreement to which any property or
asset owned or held by the Company is subject, whether or not the indebtedness
secured thereby shall have been assumed; (iii) all capitalized lease
obligations; and (iv) all indebtedness of others which the Company has
guaranteed. For the purpose of computing Indebtedness, any particular
Indebtedness shall be excluded to the extent that, upon or prior to the maturity
thereof, there shall have been deposited with the proper depository in trust the
necessary funds, or evidences of such Indebtedness if permitted by the
instrument creating such Indebtedness, for the payment, redemption or
satisfaction of such Indebtedness. The Company covenants in the Indenture that
it will not create, incur or assume any additional Funded Debt unless (i)
Consolidated Net Income Available for Interest Charges (consolidated net income
for any period, plus all amounts deducted in the computation thereof on account
of interest charges on consolidated indebtedness and taxes in respect of income
and excess profits for such period) in two of the three preceding fiscal years
shall have exceeded 150% of the Pro Forma Annual Interest Charges of the Company
and its Subsidiaries (if the proceeds from the additional Funded Debt are to be
used to acquire an operating company which will become a Subsidiary of the
Company, Consolidated Net Income Available for Annual Interest Charges will be
determined as if such company had been a Subsidiary of the Company during the
three preceding fiscal years), and (ii) Consolidated Funded Debt of the Company,
after giving effect to the additional Funded Debt to be incurred, will not
exceed 65% of Total Capitalization of the Company (after giving effect to the
additional Funded Debt and the use of proceeds therefrom). Except with respect
to the foregoing, there is no limitation in the Indenture on the right of the
Company to issue additional debt that is on a parity with the Notes.
Under the foregoing restriction, and after giving effect to the sale of the
Notes offered hereby, the Company could have incurred approximately $7 million
of additional Funded Debt at March 31, 1997.
RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS
The Company covenants in the Indenture that it will not declare or pay any
dividends (other than dividends payable only in shares of Common Stock or in
rights to purchase capital stock of the Company) on, or set apart any sum for
the payment of any dividends on, or make any other distribution, by reduction
13
<PAGE>
of capital or otherwise, in respect of, any shares of any class of capital stock
of the Company unless after giving effect to such action the aggregate amount of
dividend payments and related distributions made in the immediately preceding
60-month period would not exceed Consolidated Net Income of the Company and its
Subsidiaries for such period.
RESTRICTIONS ON SALE OF ASSETS
The Company covenants in the Indenture that it will not directly or
indirectly sell or otherwise dispose of any of its properties or assets (except
properties or assets (i) disposed of in the ordinary course of business, (ii)
which the Company determines in good faith are no longer usable or of economic
advantage in the conduct of any business by the Company or any Subsidiary or
(iii) transferred by any Subsidiary to the Company or a Subsidiary) if, as a
result of such sale or other disposition, the aggregate net book value of all
properties and assets so disposed of during the twelve-month period next
preceding the date of such sale or other disposition would constitute more than
15% of the aggregate book value (on a consolidated basis) of all Tangible Assets
of the Company and its Subsidiaries; provided, however, that any such sale may
be disregarded if the proceeds therefrom are reinvested within twelve months in
businesses related to the business of the Company or are used to prepay the
Notes in accordance with their terms. "Tangible Assets" are defined as all
assets other than those which would be treated as intangibles under generally
accepted accounting principles, including as intangibles such items as, without
limitation, good will, trademarks, trade names, service marks, brand names,
copyrights, patents, licenses and rights with respect to the foregoing,
unamortized debt discount and expense and organization expense.
RESTRICTIONS ON LIENS OR SECURED INDEBTEDNESS
The Company covenants in the Indenture that neither it nor its Subsidiaries
will directly or indirectly, create, incur, assume or permit to exist any
mortgage, lien, charge or encumbrance on, or security interest in, or pledge of,
or conditional sale or other title retention agreement (all such mortgages,
liens, charges, encumbrances, security interests, pledges and agreements being
hereinafter referred to in this paragraph as "liens") with respect to any
property or asset (including any document or instrument in respect of goods or
accounts receivable) now owned or hereafter acquired by the Company or any
Subsidiary, or any interest therein or income or profits therefrom, without
equally and ratably securing the Notes with a lien ranking ratably with, and
equal to, such secured indebtedness; provided, however, that such restrictions
will not prohibit: (i) liens for taxes, assessments or governmental charges or
claims the payment of which is at the time being contested in accordance with
the provisions of the Indenture; (ii) statutory liens of landlords and liens of
carriers, warehousemen, mechanics and materialmen incurred in the ordinary
course of business for sums not yet due or being contested in good faith and by
appropriate proceedings promptly initiated and diligently conducted, if such
reserve or other appropriate provision, if any, as shall be required by
generally accepted accounting principles shall have been made therefor and if no
material items of property would be lost, forfeited or materially damaged as a
result of such contest; (iii) liens incurred or deposits made in the ordinary
course of business in connection with workmen's compensation, unemployment
insurance and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
performance and return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money); (iv) any judgment lien,
unless the judgment it secures shall not, within 60 days after the entry
thereof, have been discharged or execution thereof stayed pending appeal or
shall not have been discharged within 60 days after the expiration of any such
stay; (v) leases or subleases granted to others in the ordinary course of
business and not interfering with the ordinary conduct of the business of the
Company or any Subsidiary; (vi) easements, rights of way, restrictions and other
similar charges or encumbrances incurred in the ordinary course of business and
not interfering with the ordinary conduct of the business of the Company or any
Subsidiary; (vii) liens on the property or assets of any Subsidiary securing
Indebtedness of such Subsidiary owing to the Company; (viii) liens to secure the
purchase price or construction cost of capital assets acquired by or constructed
for the Company or any Subsidiary after the date of the Indenture or existing on
assets of the
14
<PAGE>
Company or any Subsidiary acquired at the time of acquisition provided that (a)
each such lien shall at all times be confined solely to the asset in question,
(b) the aggregate principal amount of Indebtedness secured by any such lien
shall not exceed 100% of the cost of the acquisition or construction of the
asset subject thereto or the fair market value of such asset, whichever is lower
and (c) any such lien on any property acquired, constructed or improved by the
Company or any Subsidiary after the date of the Indenture shall be created or
assumed contemporaneously with, or within 180 days after, such acquisition, or
completion of such construction or improvement, or within six months thereafter
pursuant to a firm commitment for financing arranged with a lender or investor
within such 180 day period; and (ix) any other liens or charges securing
indebtedness not exceeding $1,000,000 in the aggregate.
SUCCESSOR CORPORATION
Under the Indenture, the Company may not consolidate with or merge into or
sell or otherwise transfer all or substantially all of its assets to another
entity, unless such other entity, if other than the Company: assumes all the
obligations of the Company under the Notes and the Indenture, agrees that it
will continue to operate its facilities as part of a system comprising a public
utility regulated by the Public Service Commission of the State of Montana or
another federal or state agency or authority, has a net worth immediately
subsequent to such acquisition, consolidation or merger equal to or greater than
$10,000,000 immediately after such transaction is not in default in the
performance of any covenant or condition under the Indenture and no Default (as
defined below) shall have happened and be continuing.
Subject to the foregoing restrictions, restrictions on Funded Debt described
above and restrictions on liens and secured indebtedness described above, the
Indenture does not afford any protection to Beneficial Owners solely on account
of the Company's involvement in a highly-leveraged transaction.
DEFAULTS AND REMEDIES
An "Event of Default" is defined as default for 30 days in payment of
interest on any Note, default in payment of principal (or premium, if any) on
any Note, failure by the Company to comply with any of its other agreements in
the Indenture which remains uncured for 30 days after receipt of notice from the
Trustee or the holders of at least 25% in principal amount of Notes then
outstanding, acceleration of certain indebtedness of the Company or its
Subsidiaries under the terms of any instrument under which indebtedness of
$1,000,000 or more is outstanding or secured and certain events of bankruptcy or
insolvency. A "Default" is defined as any event which is, or after notice or
passage of time would be, an Event of Default.
The Indenture provides that the Trustee, within 90 days after the occurrence
of a Default which is continuing and known to it, shall give notice thereof to
the holders of the Notes, provided that, except in the case of a Default in the
payment of principal or interest on any of the Notes, the Trustee shall be
protected in withholding such notice if a committee or its trust officers in
good faith determines that the withholding of such notice is in the interests of
the holders of the Notes.
In case an Event of Default shall occur and be continuing, the Trustee or
the holders of at least 25% in principal amount of the Notes then outstanding,
by notice in writing to the Company, may declare the unpaid principal of and
accrued interest on the Notes then outstanding to be due and payable
immediately. Any such acceleration may be rescinded by the holders of a majority
in principal amount of the Notes then outstanding, upon the conditions provided
in the Indenture.
Defaults may be waived by the holders of a majority of the principal amount
of the Notes, upon the conditions provided in the Indenture, except for: (i) a
Default in payment of principal or interest on any Note; (ii) an uncured failure
to make any redemption payment; or (iii) an uncured Default with respect to a
provision which cannot be modified under the terms of the Indenture without the
consent of each holder affected.
15
<PAGE>
The Indenture includes a covenant that the Company will file annually with
the Trustee a statement regarding compliance by the Company with the terms
thereof and specifying any Defaults by the Company of which the signers may have
knowledge.
MODIFICATION OF THE INDENTURE
The Company and the Trustee may amend or supplement the Indenture to cure
any ambiguity, omission, defect or inconsistency, to allow a successor entity to
assume the obligations of the Company under the Indenture or to make any change
that does not materially adversely affect the rights of any holder of Notes.
Modifications and amendments of the Indenture which materially adversely affect
the rights of any of the holders of the Notes may be made by the Company and the
Trustee only with the consent of the holders of at least a majority in principal
amount of the Notes then outstanding, provided that no such modification or
amendment may change the stated maturity of any Note, or reduce the principal
amount of or interest rate on any Note, or change the interest payment date or
otherwise modify the terms of the principal of or interest on the Notes, or
reduce the percentage required for modification, or modify certain other
provisions of the Indenture, without the consent of each holder of any Note
affected thereby.
DISCHARGE OF THE INDENTURE
The Indenture will be discharged and canceled upon payment of all the Notes
or upon deposit with the Trustee of funds or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes at maturity or on
redemption and any interest payments due prior to maturity redemption.
CONCERNING THE TRUSTEE
Norwest Bank Minnesota, National Association will be the Trustee under the
Indenture. Its address is Norwest Center, Sixth Street and Marquette Avenue,
Minneapolis, Minnesota 55479-0069 (Attention: Corporate Trust Department). The
Company also has appointed Norwest as the Registrar and Paying Agent under the
Indenture.
The Indenture contains limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received in respect of any such claim as
security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest (as defined in
the Indenture) it must eliminate such conflict or resign.
The holders of a majority in principal amount of all outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, provided that such direction
does not conflict with any law or the Indenture, would not be unduly prejudicial
to the rights of other holders and, unless the Trustee is provided with
indemnity as provided in the Indenture, would not involve the Trustee in
personal liability. The Indenture provides that in case an Event of Default
shall occur (and be continuing) and be known to the Trustee, the Trustee will be
required to use the degree of care and skill that a prudent person would
exercise under the circumstances in the conduct of his or her own affairs. The
Trustee will be under no obligation to exercise any of its powers under the
Indenture at the request of any of the holders of the Notes, unless such holders
shall have offered to the Trustee indemnity satisfactory to it.
16
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Underwriters named below have severally agreed to purchase, and the Company
has agreed to sell to the Underwriters, $8,000,000 in aggregate principal amount
of Notes in the dollar amount of Notes set forth opposite their names in the
table below:
<TABLE>
<CAPTION>
UNDERWRITER PRINCIPAL AMOUNT
- ---------------------------------------------------------------------------- ----------------
<S> <C>
D.A. Davidson & Co.......................................................... $ 4,800,000
Edward D. Jones & Co., L.P.................................................. 3,200,000
----------------
Total................................................................... $ 8,000,000
----------------
----------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes offered hereby,
if any are taken.
In offering the Notes as an Underwriter, D.A. Davidson & Co. ("D.A.
Davidson") will be deemed, under Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc. (the "NASD"), to be participating in the
distribution of securities of an affiliate because Mr. Ian B. Davidson, Chairman
and Chief Executive Officer of D.A. Davidson, possesses beneficial ownership of
more than 10% of the voting securities of both D.A. Davidson and the Company. At
June 30, 1997, Mr. Davidson owned directly 613,532.1388 shares, or 26.03%, of
the Company's common stock. D.A. Davidson's participation in the offer and sale
of the Notes offered hereby conforms with the applicable requirements of the
Conduct Rule of the NASD.
The Underwriters propose to offer the Notes to the public at the initial
public offering price set forth on the cover page of this Prospectus and in part
to certain securities dealers at such price less a concession of 1.0% of the
principal amount of the Notes. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of 1.0% of the principal amount of the Notes
to certain brokers and dealers. After the initial public offering, the public
offering price and other selling terms may be changed by the Underwriters. The
initial public offering price will be determined in accordance with the NASD
requirement that the yield be no lower than that recommended by a "qualified
independent underwriter" that has participated in the preparation of the
Registration Statement and this Prospectus and has exercised the usual standards
of due diligence in respect thereto. Edward D. Jones & Co., L.P. is acting as
the qualified independent underwriter.
In addition to the underwriting discount set forth on the cover page of this
Prospectus, the Company has agreed to pay the fees and expenses of counsel for
the Underwriters.
The Underwriting Agreement between the Company and the Underwriters contains
agreements of indemnity by the Company and the Underwriters as to certain
liabilities in connection with the offering, including liabilities under the
Securities Act.
17
<PAGE>
VALIDITY OF NOTES
The validity of the Notes offered hereby will be passed upon for the Company
by John C. Allen, Corporate Counsel of the Company. Certain legal matters will
be passed upon for the Underwriters by Dorsey & Whitney LLP, Minneapolis,
Minnesota and Great Falls, Montana. As of June 30, 1997, Mr. Allen beneficially
owned 10,443 shares of the Company's common stock.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference from the Company's Annual Report on Form 10-KA/1 for the year ended
June 30, 1996, have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF
THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
Forward-Looking Statements..................... 3
Prospectus Summary............................. 4
The Company.................................... 6
Use of Proceeds................................ 8
Capitalization................................. 9
Description of Notes........................... 10
Underwriting................................... 17
Validity of Notes.............................. 18
Experts........................................ 18
</TABLE>
$8,000,000
ENERGY WEST INCORPORATED
7.50% NOTES DUE
JUNE 1, 2012
---------------------
PROSPECTUS
---------------------
D.A. Davidson & Co.
Edward D. Jones & Co., L.P.
AUGUST 12, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
