<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY , 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ENERGY WEST INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MONTANA 81-0141785
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
ENERGY WEST INCORPORATED
1 FIRST AVENUE SOUTH
GREAT FALLS, MONTANA 59401
(406) 791-7500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------
LARRY D. GESKE, PRESIDENT AND CHIEF EXECUTIVE OFFICER
ENERGY WEST INCORPORATED
1 FIRST AVENUE SOUTH
GREAT FALLS, MONTANA 59401
(406) 791-7500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
JOHN C. ALLEN, ESQ. JACK W. MANNING, ESQ.
Corporate Counsel Dorsey & Whitney LLP
Energy West Incorporated 8 Third Street North
1 First Avenue South Great Falls, Montana 59401
Great Falls, Montana 59401 (406) 727-3632
(406) 791-7503
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earliest effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH PROPOSED MAXIMUM MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(1) OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C>
% Notes due June 1, 2012..................... $8,000,000 100% $8,000,000 $2,424
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 23, 1997
$8,000,000
ENERGY WEST INCORPORATED
% NOTES DUE JUNE 1, 2012
------------------
Energy West Incorporated (the "Company") is offering hereby $8,000,000 in
original principal amount of its % 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
Amendment 2 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% % %
Total.................................................. $8,000,000 $ $
</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 , 1997.
D. A. DAVIDSON & CO. EDWARD D. JONES & CO., L.P.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (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 that file electronically with the Commission; 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, 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 Amendment 2 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 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 and storage
of gas 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 % 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. Summary Consolidated Financial
Data.
</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 an assumed
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 involved in the marketing of gas in Montana
and Wyoming, gas storage and a small amount of oil and gas production. 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, including the
reduction in size or closure of Malmstrom, 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") 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 effect 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 $ ) 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 June 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 million. There will be no sinking fund
for the redemption of the Notes.
So long as the Company is a reporting company under the Exchange Act, the
Company will furnish to holders of the Notes annual reports of the Company
containing audited financial statements and interim reports with unaudited
financial data on a quarterly basis. If the Company ceases to be a reporting
company under the Exchange Act, the Company will furnish to holders of the Notes
information which is substantially comparable to the information provided as a
reporting company.
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 arrangements to evidence its
interest in the Notes. Beneficial ownership of the Notes may be transferred
10
<PAGE>
only by compliance with the procedures of a Beneficial Owner's Participant
(E.G., brokerage firm) and the Depository.
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, next preceding such
interest payment date. If any payment date would otherwise be a day that is not
a Business Day, the payment will be postponed to the next day that is a Business
Day, and no interest on such payment shall accrue for the period from and after
such otherwise schedule payment date for the purposes of the payment to be made
on such next succeeding Business Day.
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 to, notices to or payments made on account of, beneficial ownership
interests in the Notes, for maintaining,
11
<PAGE>
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 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 Representative (as defined below) 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 personal representative or surviving
joint tenant(s) of the Beneficial Owner (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 redeem such interest at a price equal to 100% of their
principal amount, plus accrued interest to the date on which it 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 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.
12
<PAGE>
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 percent 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 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 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
13
<PAGE>
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, goodwill, 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 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
14
<PAGE>
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
convey or lease all or substantially all of its assets to another entity, unless
immediately after such transaction, no Event of Default (as defined below) will
exist and such other entity, where the Company is not the surviving corporation,
assumes all the obligations of the Company under the Notes and the Indenture and
has a net worth immediately subsequent to such acquisition, consolidation or
merger equal to or greater than $10,000,000.
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 the Notes, default in payment of principal (or premium, if any) on
the Notes, failure by the Company to comply with any of its other agreements in
the Indenture which remains uncured for 60 days after notice, 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.
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 it 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 aggregate principal amount of the Notes then
outstanding, by notice in writing to the Company, may declare all unpaid
principal 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) an
uncured default in payment of or interest on the Notes, (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.
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.
15
<PAGE>
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture which materially affect the
rights of the holders of the Notes may be made by the Company and the Trustee
only with the consent of the holders of not less than 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
change the sinking fund obligations of the Company, 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 as they mature
prior to redemption or payment.
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 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 of a prudent person 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 % of the
principal amount of the Notes. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of % 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 of 1933, as amended.
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
THE AFFAIRS OF THE COMPANY SINCE THAT DATE HEREOF OR 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
% NOTES DUE
JUNE 1, 2012
---------------------
PROSPECTUS
---------------------
D. A. DAVIDSON & CO.
EDWARD D. JONES & CO., L.P.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses in connection with the distribution
of the securities being registered, other than underwriting expenses and
commissions. All such expenses are estimated, except for the SEC registration
fee and the NASD filing fee:
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 2,424
NASD filing fee................................................... 1,300
Accounting fees and expenses...................................... 35,000
Legal fees and expenses........................................... 47,500
Printing and engraving expenses................................... 14,000
Trustee fees and expenses......................................... 1,000
Blue Sky fees and expenses........................................ 2,000
Miscellaneous expenses............................................ 1,776
---------
Total......................................................... $ 105,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Sections 35-1-451 through 35-1-459 of the Montana
Business Corporation Act, which provide that a corporation may indemnify any
individual who was, is or is threatened to be made a named defendant in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of such corporation in which an individual was adjudged liable to the
corporation), and whether formal or informal, because such individual is or was
a director of the corporation or, while a director of the corporation, is or was
serving at the corporation's request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust employee, benefit plan or other enterprise. The indemnity may
include judgments, penalties, fines (including an excise tax assessed with
respect to an employee benefit plan), amounts paid in settlement and reasonable
expenses (including attorney's fees) incurred by such individual in connection
with such action, suit or proceeding if such individual conducted him or herself
in good faith and reasonably believed, in the case of conduct in an official
capacity with the corporation, that his or her conduct was in the corporation's
best interests, and, in all other cases, that his or her conduct was at least
not opposed to the corporation's best interests and if, in the case of any
criminal proceeding, such individual had no reasonable cause to believe his or
her conduct was unlawful. In addition, a Montana corporation may indemnify any
of its officers, employees and agents who are not directors to the same extent
as to a director and may also indemnity any officer, employee or agent who is
not a director to the extent, consistent with public policy, that may be
provided by the corporation's articles of incorporation, its by-laws, general or
specific action of its board of directors or contract.
Article VI, Section 6.1 of the Bylaws of the Company, as amended, provides
that the Company shall indemnify its officers and directors against certain
claims liabilities and expenses arising out of any action, suit or proceeding in
which such individual is a party by reason of being an officer or director of
the Company, provided that such individual shall not be adjudged to have been
liable for actual negligence or misconduct in the performance of his or her
duties.
Article 8 of the Company's Amended Articles of Incorporation provides that a
director of the Company shall not be personally liable to the Company or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty
II-1
<PAGE>
to the Company or its shareholders, (ii) for acts or omissions that constitute
willful misconduct, recklessness or a knowing violation of law, (iii) under
Section 35-1-713 of the Montana Business Corporation Act, or (iv) for a
transaction from which the director derives an improper personal benefit.
Pursuant to the form of Underwriting Agreement, a copy of which is included
as Exhibit 1.1 hereto, the Underwriters have agreed, under certain conditions,
to indemnify the Company, its directors, certain of its officers and persons who
control the Company within the meaning of the Securities Act of 1933, as
amended, against certain liabilities.
The foregoing discussion is qualified in its entirety by reference to the
Montana Business Corporation Act, the Company's Amended Articles of
Incorporation, the Company's Bylaws, as amended, and the referenced Underwriting
Agreement.
ITEM 16. EXHIBITS.
(a) Exhibits.
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement (filed herewith).
3.1 Restated Articles of Incorporation of the Company, as amended to date (filed
herewith).
3.2 Bylaws of the Company, as amended to date (filed herewith).
4.1 Form of Indenture (including form of Note) (filed herewith).
5.1 Opinion of John C. Allen as to the legality of the securities being registered
(filed herewith).
10.1 Credit Agreement dated as of January 18, 1995, by and between the Company and
Norwest Bank Great Falls, National Association (incorporated by reference to
Exhibit 10.1 to the Registrant's Annual Report on Form 10-KA Amendment 2 for
the fiscal year ended June 30, 1996, File No. 0-14183).
10.2 Amendment dated April 17, 1996 to Credit Agreement dated as of January 18, 1995,
by and between the Company and Norwest Bank Montana, National Association
(incorporated by reference to Exhibit 10.2 to the Registrant's Annual Report on
Form 10-KA Amendment 2 for the fiscal year ended June 30, 1996, File No.
0-14183).
10.3 Amendment dated November 7, 1996 to Credit Agreement dated as of January 18,
1995, the Company and Norwest Bank Montana, National Association (incorporated
by reference to Exhibit 10.3 to the Registrant's Annual Report on Form 10-KA
Amendment 2 for the fiscal year ended June 30, 1996, File No. 0-14183).
10.4 Promissory Note dated November 7, 1996, issued to Norwest Bank Montana, National
Association (incorporated by reference to Exhibit 10.4 to the Registrant's
Annual Report on Form 10-KA Amendment 2 for the fiscal year ended June 30,
1996, File No. 0-14183).
10.5 Credit Agreement dated as of February 12, 1997, by and between the Company and
First Bank Montana, National Association (incorporated by reference to Exhibit
10.5 to the Registrant's Annual Report on Form 10-KA Amendment 2 for the fiscal
year ended June 30, 1996, File No. 0-14183).
10.6 Delivered Gas Purchase Contract dated February 23, 1977, as amended by that
Letter Amendment Amending Gas Purchase Contract dated March 9, 1982; that
Amendment to Delivered Gas Purchase Contract applicable as of March 20, 1986;
that Letter Agreement dated December 18, 1986; that Letter Agreement dated
April 12, 1988; that Letter Agreement dated April 28, 1992; that Letter
Agreement dated March 14, 1996; that Letter Agreement dated April 15, 1996; a
second Letter Agreement dated April 15,
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
1996; that Letter dated February 18, 1997; and that Letter dated April 1, 1997,
transmitting a Notice of Assignment effective February 26, 1993 (filed
herewith).
10.7 Delivered Gas Purchase Contract dated December 1, 1985, as amended by that Letter
Agreement dated July 1, 1986; that Letter Agreement dated November 19, 1987;
that Letter Agreement dated December 1, 1988; that Letter Agreement dated July
30, 1992; that Assignment, Conveyance and Bill of Sale effective as of January
1, 1993; that Letter Agreement dated March 8, 1993; that Letter Agreement dated
October 21, 1993; that Letter Agreement dated October 18, 1994; that Letter
Agreement dated January 30, 1995; that Letter Agreement dated August 30, 1995;
that Letter Agreement dated October 3, 1995; that Letter Agreement dated
October 31, 1995; that Letter Agreement dated December 21, 1995; that Letter
Agreement dated April 25, 1996; that Letter Agreement dated January 29, 1997;
and that Letter dated April 11, 1997 (incorporated by reference to Exhibit 10.7
to the Registrant's Annual Report on Form 10-KA Amendment 2 for the fiscal year
ended June 30, 1996, File No. 0-14183).
10.8 Natural Gas Sale and Purchase Agreement dated July 20, 1992 between Shell Canada
Limited and the Company, as amended by that Letter Agreement dated August 23,
1993; that Amending Agreement effective as of November 1, 1994; and that
Schedule A Incorporated Into and Forming a Part of That Natural Gas Sale and
Purchase Agreement, effective as of November 1, 1996 (filed herewith).
10.9 Employee Stock Ownership Plan Trust Agreement (incorporated by reference to
Exhibit 10.2 to Registrant's Registration Statement on Form S-1, File No.
33-1672).
10.10 1992 Stock Option Plan (filed herewith).
10.11 Form of Incentive Stock Option under the 1992 Stock Option Plan (filed herewith).
10.12 Management Incentive Plan (incorporated by reference to Exhibit 10.12 to the
Registrant's Annual Report on Form 10-KA Amendment 2 for the fiscal year ended
June 30, 1996, File No. 0-14183).
23.1 Consent of John C. Allen (included in his opinion filed as Exhibit 5.1).
23.2 Consent of Ernst & Young LLP (filed herewith).
24.1 Powers of Attorney (included on signature page).
25.1 Statement of Eligibility and Qualification of Norwest Bank Minnesota, National
Association on Form T-1 (filed herewith).
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and to deliver or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide the interim financial
information required to be presented by Article 3 of Regulation S-X.
II-3
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Great Falls, State of Montana, on July 22, 1997.
ENERGY WEST INCORPORATED
By: /s/ LARRY D. GESKE
-----------------------------------------
Larry D. Geske
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Larry D. Geske and Edward J. Bernica, or either
of them (with full power to act alone), as his or her true and lawful
attorneys-in-fact and agents, with full powers of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any additional Registration Statement pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and any or all
amendments (including post-effective amendments) to this Registration Statement
(or Registration Statements, if an additional Registration Statement is filed
pursuant to Rule 462(b)), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities indicated
on July 22, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S>
President, Chief Executive
/s/ LARRY D. GESKE Officer and Director
- ------------------------------ (Principal Executive
Larry D. Geske Officer)
Vice President and Chief
/s/ EDWARD J. BERNICA Financial Officer
- ------------------------------ (Principal Financial
Edward J. Bernica Officer)
Vice President, Treasurer,
/s/ WILLIAM J. QUAST Controller and Assistant
- ------------------------------ Secretary (Principal
William J. Quast Accounting Officer)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S>
/s/ IAN B. DAVIDSON
- ------------------------------ Director
Ian B. Davidson
/s/ THOMAS N. MCGOWEN, JR.
- ------------------------------ Director
Thomas N. McGowen, Jr.
/s/ G. MONTGOMERY MITCHELL
- ------------------------------ Director
G. Montgomery Mitchell
/s/ DAVID A. FLITNER
- ------------------------------ Director
David A. Flitner
/s/ DEAN SOUTH
- ------------------------------ Director
Dean South
/s/ GEORGE RUFF
- ------------------------------ Director
George Ruff
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE NO.
-----------
<C> <S> <C>
1.1 Form of Underwriting Agreement (filed herewith)..................................................
3.1 Restated Articles of Incorporation of the Company, as amended to date (filed herewith)...........
3.2 Bylaws of the Company, as amended to date (filed herewith).......................................
4.1 Form of Indenture (including form of Note) (filed herewith)......................................
5.1 Opinion of John C. Allen as to the legality of the securities being registered (filed
herewith)......................................................................................
10.1 Credit Agreement dated as of January 18, 1995, by and between the Company and Norwest Bank Great
Falls, National Association (incorporated by reference to Exhibit 10.1 to the Registrant's
Annual Report on Form 10-KA Amendment 2 for the fiscal year ended June 30, 1996, File No.
0-14183).
10.2 Amendment dated April 17, 1996 to Credit Agreement dated as of January 18, 1995, by and between
the Company and Norwest Bank Montana, National Association (incorporated by reference to
Exhibit 10.2 to the Registrant's Annual Report on Form 10-KA Amendment 2 for the fiscal year
ended June 30, 1996, File No. 0-14183).
10.3 Amendment dated November 7, 1996 to Credit Agreement dated as of January 18, 1995, the Company
and Norwest Bank Montana, National Association (incorporated by reference to Exhibit 10.3 to
the Registrant's Annual Report on Form 10-KA Amendment 2 for the fiscal year ended June 30,
1996, File No. 0-14183).
10.4 Second Amendment, dated April 14, 1997, to Credit Agreement dated as of January 18, 1995, by and
between the Company and Norwest Bank Montana, National Association (incorporated by reference
to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-QA for the fiscal quarter ended
March 31, 1997, File No. 0-14183).
10.5 Promissory Note, dated April 14, 1997, issued to Norwest Bank Montana, National Association
(incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-QA
for the fiscal quarter ended March 31, 1997, File No. 0-14183).
10.6 Credit Agreement dated as of February 12, 1997, by and between the Company and First Bank
Montana, National Association (incorporated by reference to Exhibit 10.5 to the Registrant's
Annual Report on Form 10-KA Amendment 2 for the fiscal year ended June 30, 1996, File No.
0-14183).
10.7 Delivered Gas Purchase Contract dated February 23, 1977, as amended by that Letter Amendment
Amending Gas Purchase Contract dated March 9, 1982; that Amendment to Delivered Gas Purchase
Contract applicable as of March 20, 1986; that Letter Agreement dated December 18, 1986; that
Letter Agreement dated April 12, 1988; that Letter Agreement dated April 28, 1992; that Letter
Agreement dated March 14, 1996; that Letter Agreement dated April 15, 1996; a second Letter
Agreement dated April 15, 1996; that Letter dated February 18, 1997; and that Letter dated
April 1, 1997, transmitting a Notice of Assignment effective February 26, 1993 (filed
herewith)......................................................................................
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
PAGE NO.
-----------
<C> <S> <C>
10.8 Delivered Gas Purchase Contract dated December 1, 1985, as amended by that Letter Agreement dated
July 1, 1986; that Letter Agreement dated November 19, 1987; that Letter Agreement dated
December 1, 1988; that Letter Agreement dated July 30, 1992; that Assignment, Conveyance and
Bill of Sale effective as of January 1, 1993; that Letter Agreement dated March 8, 1993; that
Letter Agreement dated October 21, 1993; that Letter Agreement dated October 18, 1994; that
Letter Agreement dated January 30, 1995; that Letter Agreement dated August 30, 1995; that
Letter Agreement dated October 3, 1995; that Letter Agreement dated October 31, 1995; that
Letter Agreement dated December 21, 1995; that Letter Agreement dated April 25, 1996; that
Letter Agreement dated January 29, 1997; and that Letter dated April 11, 1997 (incorporated by
reference to Exhibit 10.7 to the Registrant's Annual Report on Form 10-KA Amendment 2 for the
fiscal year ended June 30, 1996, File No. 0-14183).
10.9 Natural Gas Sale and Purchase Agreement dated July 20, 1992 between Shell Canada Limited and the
Company, as amended by that Letter Agreement dated August 23, 1993; that Amending Agreement
effective as of November 1, 1994; and that Schedule A Incorporated Into and Forming a Part of
That Natural Gas Sale and Purchase Agreement, effective as of November 1, 1996 (filed
herewith)......................................................................................
10.10 Employee Stock Ownership Plan Trust Agreement (incorporated by reference to Exhibit 10.2 to
Registrant's Registration Statement on Form S-1, File No. 33-1672).
10.11 1992 Stock Option Plan (filed herewith)..........................................................
10.12 Form of Incentive Stock Option under the 1992 Stock Option Plan (filed herewith).................
10.13 Management Incentive Plan (incorporated by reference to Exhibit 10.12 to the Registrant's Annual
Report on Form 10-KA Amendment 2 for the fiscal year ended June 30, 1996, File No. 0-14183).
23.1 Consent of John C. Allen (included in his opinion filed as Exhibit 5.1).
23.2 Consent of Ernst & Young LLP (filed herewith)....................................................
24.1 Powers of Attorney (included on signature page).
25.1 Statement of Eligibility and Qualification of Norwest Bank Minnesota, National Association on
Form T-1 (filed herewith)......................................................................
</TABLE>
II-7
<PAGE>
ENERGY WEST INCORPORATED
$8,000,000 Aggregate Principal Amount
__% Notes due June 1, 2012
_________________
UNDERWRITING AGREEMENT
, 1997
D. A. Davidson & Co.
Edward D. Jones & Co., L.P.
c/o D. A. Davidson & Co.
8 Third Street North
Great Falls, Montana 59401
Dear Sirs:
Energy West Incorporated, a Montana corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and
sell to you as underwriters (the "Underwriters") $8,000,000 aggregate
principal amount of its __% Notes due June 1, 2012 (the "Notes"). The
Notes are to be issued pursuant to an indenture (the "Indenture") between the
Company and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee").
1. (a) The Company represents and warrants to, and agrees
with, each of you that:
(i) A registration statement in respect of the Notes has
been filed with the Securities and Exchange Commission (the
"Commission"); such registration statement and any
post-effective amendment thereto, each in the form heretofore
delivered to you, and, excluding exhibits thereto but
including all documents incorporated by reference in the
prospectus contained therein, have been declared effective by
the Commission in such form; no other document with respect to
such registration statement or document incorporated by
reference therein has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of
such registration statement has been issued and no proceeding
for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in such
registration statement or filed with the Commission pursuant
to Rule 424(a) of the rules and regulations of the Commission
under
<PAGE>
the Securities Act of 1933, as amended (the "Act"),
being hereinafter called a "Preliminary Prospectus"; the
various parts of such registration statement, including all
exhibits thereto (but excluding Form T-1) and including (i)
the information contained in the form of final prospectus
filed with the Commission pursuant to Rule 424(b) under the
Act in accordance with Section 5(a) hereof and deemed by
virtue of Rule 430A under the Act to be part of the
registration statement at the time it was declared effective
and (ii) the documents incorporated by reference in the
prospectus contained in the registration statement at the time
such part of the registration statement became effective, each
as amended at the time such part of the registration statement
became effective, being hereinafter called the "Registration
Statement"; such final prospectus, in the form first filed
pursuant to Rule 424(b) under the Act, being hereinafter
called the "Prospectus"; any reference herein to any
Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include the documents delivered therewith
pursuant to Item 11 of Form S-2 under the Act and the
documents incorporated by reference therein pursuant to Item
12 of Form S-2 under the Act, as of the date of such
Preliminary Prospectus or Prospectus, as the case may be; any
reference to any amendment or supplement to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and
include any documents filed after the date of such Preliminary
Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and incorporated by reference in such Preliminary
Prospectus or Prospectus, as the case may be; and any
reference to any amendment to the Registration Statement shall
be deemed to refer to and include any annual report of the
Company filed pursuant to Section 13(a) or 15(d) of the
Exchange Act after the effective date of the Registration
Statement that is incorporated by reference in the
Registration Statement;
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and
each Preliminary Prospectus, at the time of filing thereof,
conformed in all material respects to the requirements of the
Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
the light of the circumstances in which they were made, not
misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished
in writing to the Company by you expressly for use therein;
-2-
<PAGE>
(iii) The documents incorporated by reference in the
Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material
respects to the requirements of the Act or the Exchange Act,
as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances in which
they were made, not misleading; and any further documents so
filed and incorporated by reference in the Prospectus or any
further amendment or supplement thereto, when such documents
become effective or are filed with the Commission, as the case
may be, will conform in all material respects to the
requirements of the Act or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder and
will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading;
provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the
Company by you expressly for use therein;
(iv) The Registration Statement conforms, and the
Prospectus and any further amendments or supplements to the
Registration Statement or the Prospectus will conform, in all
material respects to the requirements of the Act, the Exchange
Act and the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), and the rules and regulations of the
Commission thereunder, and do not and will not, as of the
applicable effective date as to the Registration Statement and
any amendment thereto and as of the applicable filing date as
to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading;
provided, however, that this representation and warranty shall
not apply to (i) that part of the Registration Statement which
shall constitute the Statement of Eligibility (Form T-1) under
the Trust Indenture Act of the Trustee or (ii) any statements
or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by you
expressly for use therein;
(v) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial
statements included or incorporated by reference in the
Prospectus any material loss or interference with its business
from fire, explosion, flood or
-3-
<PAGE>
other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the
Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock
or long-term debt of the Company or any of its subsidiaries or
any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general
affairs, management, financial position, shareholders' equity or
results of operations of the Company and its subsidiaries,
otherwise than as set forth or contemplated in the Prospectus;
(vi) Each of the Company and each of its
subsidiaries has good and marketable title in fee simple to
all material real property and good and marketable title to
all personal property owned by it, in each case free and clear
of all liens, encumbrances and defects except such as are
described in the Prospectus or such as do not materially
affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the
Company or any such subsidiary; and any material real property
and buildings held under lease by the Company or any of its
subsidiaries are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material
and do not interfere with the use made and proposed to be made
of such property and buildings by the Company or any such
subsidiary;
(vii) The Company has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the State of Montana, with power
and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus, and has
been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such
qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any
such jurisdiction;
(viii) Each subsidiary of the Company has
been duly incorporated and is validly existing as a
corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority
(corporate and other) to own its properties and conduct its
business, and has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under
the laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such
qualification, or is subject to no
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<PAGE>
material liability or disability by reason of the failure to be
so qualified in any such jurisdiction;
(ix) The Company is a public utility as defined in the
statutes of the States of Montana, Wyoming and Arizona and is
authorized by its Restated Articles of Incorporation to carry
on the business in which it is engaged, as set forth in the
Prospectus; the Company has the legal right to function and
operate as a natural gas utility in the States of Montana,
Wyoming and Arizona; and the Company is subject as to rates,
issuance of securities, service and other matters to the
jurisdiction of certain authorities as and to the extent
stated in the Prospectus;
(x) The Company has valid and subsisting franchises
covering all municipalities in which it operates, which
authorize the Company to carry on the respective utility
businesses in which it is engaged in the municipalities
covered by such franchises;
(xi) The Company has an authorized capitalization as set
forth in the Prospectus;
(xii) The Notes have been duly authorized, and, when the
Notes are issued and delivered pursuant to this Agreement,
such Notes will have been duly executed, authenticated, issued
and delivered and will constitute valid and legally binding
obligations of the Company entitled to the benefits provided
by the Indenture, which will be substantially in the form
filed as an exhibit to the Registration Statement; the
Indenture has been duly authorized and duly qualified under
the Trust Indenture Act and at the Time of Delivery (as
defined in Section 4 hereof), the Indenture will constitute a
valid and legally binding instrument, enforceable in
accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors'
rights and to general equity principles; and the Indenture and
the Notes conform to the descriptions thereof contained in the
Prospectus;
(xiii) The issue and sale of the Notes and the
compliance by the Company with all of the provisions of the
Notes, the Indenture and this Agreement and the consummation
of the transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or
assets of the Company or any of its subsidiaries is subject,
nor will such action result
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<PAGE>
in any violation of the provisions of the Restated Articles of
Incorporation or Bylaws of the Company or any of its subsidiaries
or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company
or any of its properties which would be material to the Company
and its subsidiaries taken as a whole;
(xiv) Neither the Company nor any of its subsidiaries is
in violation of any law, ordinance, governmental rule or
regulation, or court decree to which it may be subject, and
neither the Company nor any subsidiary has failed to obtain
any license, certificate, permit, franchise or other
governmental authorization necessary to the ownership of its
property or to the conduct of its business as it is currently
being carried on and as described in the Prospectus, which
violation is likely to have a material adverse effect on the
general affairs, condition (financial or otherwise), business,
prospects, properties, net worth or results of operations of
the Company and its subsidiaries considered as a whole;
(xv) Each of the Montana Public Service Commission (the
"Montana Commission"), the Wyoming Public Service Commission
(the "Wyoming Commission") and the Arizona Corporation
Commission (the "Arizona Commission") has entered one or more
orders authorizing the issue and sale of the Notes by the
Company on the terms and conditions not inconsistent with the
terms and conditions set forth in or contemplated by this
Agreement as hereinafter provided; and no further approval,
authorization, consent, certificate or order of any state or
federal commission or regulatory authority is necessary with
respect to the execution and delivery of the Indenture or the
issue and sale of the Notes as contemplated herein or the
consummation by the Company of the transactions contemplated
by this Agreement or the Indenture, except such consents,
approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Notes by
the Underwriters. A true and complete copy of such order or
orders of the Montana Commission, the Wyoming Commissions and
the Arizona Commission has been delivered to the Underwriters;
(xvi) Other than as set forth in the Prospectus, there
are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is the
subject which, if determined adversely to the Company or any
of its subsidiaries, would individually or in the aggregate
have a material adverse effect on the financial position,
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<PAGE>
shareholders' equity or results of operations of the Company
and its subsidiaries taken as a whole; and, to the best of the
Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by
others;
(xvii) Ernst & Young LLP, which has certified certain
financial statements of the Company, are independent public
accountants as required by the Act and the rules and regulations
of the Commission thereunder;
(xviii) Each of the Company and each of its subsidiaries
owns or possesses all patents, patent applications,
trademarks, service marks, tradenames, trademark
registrations, service mark registrations, copyrights,
licenses, inventions, trade secrets and other similar rights
necessary for the conduct of its business as currently being
carried on, is complying therewith and has not received any
notice of conflict with the asserted rights of others in
respect of such matters. Except as stated in the Prospectus,
no name which the Company or any of its subsidiaries uses and
no other aspect of the business of the Company or any of its
subsidiaries will involve or give rise to any infringement of,
or license or similar fees for, any patents, patent
applications, trademarks, service marks, tradenames, trademark
registrations, service mark registrations, copyrights,
licenses, inventions, trade secrets or other similar rights of
others, which would have a material adverse effect on the
business of the Company and its subsidiaries taken as a whole,
and neither the Company nor any of its subsidiaries has
received any notice of any such infringement or fee, or any
claim with respect thereto, except as stated in the Prospectus;
(xix) Each of the Company and each of its subsidiaries
has filed all necessary federal, state, and foreign income and
franchise tax returns and has paid all taxes as shown as due
thereon; and there is no material tax deficiency which has
been asserted against the Company;
(xx) The Company has complied and will comply with all
provisions of Florida Statutes Section 517.075 (Chapter
92-198, Laws of Florida). Neither the Company, nor any
affiliate thereof, does business with the government of Cuba,
or with any person or affiliate located in Cuba; and
(xxi) The Company has not taken and will not take,
directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or
result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of
the Notes.
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<PAGE>
2. Subject to the terms and conditions herein set forth, the
Company agrees to sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company,
the aggregate principal amount of Notes set forth opposite the name of each
Underwriter in Schedule I hereto. The purchase price for the Notes shall be
% of the principal amount thereof.
3. Upon the authorization by you of the release of the Notes, the
several Underwriters propose to offer the Notes for sale upon the terms and
conditions set forth in the Prospectus.
4. Certificates in definitive form for the Notes to be purchased by
each Underwriter hereunder, and in such denominations and registered in such
names as D. A. Davidson & Co. may request upon at least forty-eight hours'
prior notice to the Company, shall be delivered by or on behalf of the
Company to you for the account of such Underwriter, against payment by such
Underwriter or on its behalf of the purchase price therefor by certified or
official bank check or checks, payable to the order of the Company in funds
available in Great Falls, Montana on the same day or the equivalent thereof,
all at the office D. A. Davidson & Co., 8 Third Street North, Great Falls,
Montana 59401. The time and date of such delivery and payment shall be, with
respect to the Notes, 9:00 a.m., Rocky Mountain time, on ,
1997 or such other time and date as you and the Company may agree upon in
writing. Such time and date for delivery of the Notes is herein called the
"Time of Delivery." Such certificates will be made available for checking
and packaging at least twenty-four hours prior to the Time of Delivery at the
office of D. A. Davidson & Co., 8 Third Street North, Great Falls, Montana
59401.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus prior to the Time of Delivery
which shall be disapproved by you promptly after reasonable notice
thereof; to advise you, promptly after it receives notice thereof,
of the time when the Registration Statement, or any amendment
thereto, has been filed or becomes effective or any supplement to
the Prospectus or any amended Prospectus has been filed and to
furnish you with copies thereof; to file promptly all reports and
any definitive proxy or information statements required to be filed
by the Company with the Commission pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of the
Prospectus and for so long as the delivery of a prospectus is
required in connection with the offering or sale of the Notes; to
advise you, promptly after it receives notice thereof, of the
issuance by the
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<PAGE>
Commission of any stop order or of any order preventing or suspending
the use of any Preliminary Prospectus or Prospectus, of the suspension
of the qualification of the Notes for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending
or supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its
withdrawal;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Notes for offering and sale under
the securities laws of such jurisdictions as you may request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be
necessary to complete the distribution of the Notes, provided that
in connection therewith the Company shall not be required to qualify
as a foreign corporation or to file a general consent to service of
process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus
in such quantities as you may from time to time reasonably request,
and, if the delivery of a prospectus is required at any time prior
to the expiration of nine months after the time of issue of the
Prospectus in connection with the offering or sale of the Notes and
if at such time any events shall have occurred as a result of which
the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light
of the circumstances in which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement the
Prospectus or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply with
the Act, the Exchange Act or the Trust Indenture Act, to notify you
and upon your request to file such document and to prepare and
furnish without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably
request of an amended Prospectus or a supplement to the Prospectus
which will correct such statement or omission or effect such
compliance, and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Notes at any time
nine months or more after the time of issue of the Prospectus, upon
your request but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many copies as you may request of an
amended or supplemented Prospectus complying with Section 10(a)(3)
of the Act;
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<PAGE>
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months
after the effective date of the Registration Statement (as defined
in Rule 158(c)), an earning statement of the Company and its
subsidiaries (which need not be audited) complying with Section
11(a) of the Act and the rules and regulations of the Commission
thereunder (including, at the option of the Company, Rule 158);
(e) During the period of 180 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise
dispose of any securities of the Company which are substantially
similar to the Notes, without your prior written consent;
(f) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports
or other communications (financial or other) furnished to
shareholders, and deliver to you (i) as soon as they are available,
copies of any reports and financial statements furnished to or filed
with the Commission or any national securities exchange on which any
class of securities of the Company is listed; and (ii) such
additional information concerning the business and financial
condition of the Company as you may from time to time reasonably
request (such financial statements to be on a consolidated basis to
the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its shareholders generally or
to the Commission); and
(g) To use the net proceeds received by it from the sale of the
Notes in the manner specified in the Prospectus under the caption "Use
of Proceeds."
6. The Company covenants and agrees with each Underwriter that the
Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants and
counsel for the Underwriters in connection with the registration of the Notes
under the Act and all other expenses in connection with the preparation,
printing and filing of the Indenture, Registration Statement, any Preliminary
Prospectus and the Prospectus and amendments and supplements thereto and the
mailing and delivering of copies thereof to the Underwriters and dealers and
the issuance and delivery of the Notes as contemplated by this Agreement;
(ii) the cost of printing or producing this Agreement, the Selling
Agreements, the Blue Sky Memorandum and any other documents in connection
with the offering, purchase, sale and delivery of the Notes; (iii) all
expenses in connection with the qualification of the Notes for offering and
sale under state securities laws as provided in Section 5(b) hereof,
including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky
survey; (iv) the filing fees and fees and disbursements of counsel for the
Underwriters incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the
Notes; (v) the cost of preparing certificates; (vi) the fees and
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<PAGE>
expenses of the Trustee and the fees and disbursements of counsel for the
Trustee in connection with the preparation of the Indenture and the Notes;
(vii) all expenses in connection with the qualification of the Notes as
book-entry Notes; and (viii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except for
fees and disbursements of counsel for the Underwriters and as otherwise
provided in this Section, Section 8 and Section 11 hereof, the Underwriters
will pay all of their own costs and expenses, including transfer taxes on
resale of any Notes by the Underwriters and any advertising expenses
connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Notes
to be delivered at the Time of Delivery, shall be subject, in their
discretion, to the condition that all representations and warranties and
other statements of the Company herein are, at and as of the Time of
Delivery, true and correct, the condition that the Company shall have
performed all of its obligations hereunder theretofore to be performed, and
the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; no stop order suspending the
effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Dorsey & Whitney LLP, counsel for the Underwriters, shall
have furnished to you such opinion or opinions, dated the Time of
Delivery, with respect to the incorporation of the Company, the
validity of the Notes and the Indenture being delivered, the
Registration Statement, the Prospectus, and other related matters as
you may reasonably request, and such counsel shall have received
such papers and information as they may reasonably request to enable
them to pass upon such matters;
(c) John C. Allen, Corporate Counsel of the Company, shall
have furnished to you his written opinion, dated the Time of
Delivery, in form and substance satisfactory to you, to the effect
that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Montana, with power and authority
(corporate and other) to own its properties and conduct its
business as described in the Prospectus;
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<PAGE>
(ii) Each of the Company's subsidiaries has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the state of its jurisdiction, with
power and authority (corporate and other) to own its
properties and conduct its business;
(iii) Each of the Company and each of its subsidiaries
has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such
qualification; or is subject to no material liability or
disability by reason of failure to be so qualified in any such
jurisdiction (such counsel being entitled to rely in respect
of the opinion in this clause upon opinions of local counsel
and in respect of matters of fact upon certificates of
officers of the Company, provided that counsel shall state
that he believes that both you and he are justified in relying
upon such opinions and certificates);
(iv) The Company is a public utility under the laws of
the States of Montana, Wyoming and Arizona and is authorized
by its Restated Articles of Incorporation to carry on the
business in which it is engaged, as set forth in the
Prospectus; the Company has the legal right to function and
operate as a natural gas utility in the States of Montana,
Wyoming and Arizona; and the Company is subject as to rates,
issuance of securities, service and other matters to the
jurisdiction of certain authorities as and to the extent
stated in the Prospectus;
(v) The Company has valid and subsisting franchises
covering all municipalities in which it operates, which
authorize the Company to carry on the respective utility
businesses in which it is engaged in the municipalities
covered by such franchises;
(vi) The Company has an authorized capitalization as set
forth in the Prospectus;
(vii) Each of the Company and its subsidiaries has good
and marketable title in fee simple to all material real
property owned by it, free and clear of all liens,
encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of
such property and do not interfere with the use made and
proposed to be made of such property by the Company or each
such subsidiary; and any real property and buildings held
under lease by the Company or any of its subsidiaries are held
by them under valid, subsisting and enforceable leases with
such exceptions as are not material and do not interfere with
the use made and proposed to be made of such property and
buildings by the Company or such subsidiary (in giving the
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<PAGE>
opinion in this clause, such counsel may state that no
examination of record titles for the purpose of such opinion
has been made, and that he is relying upon a general review of
the titles of the Company, upon opinions of local counsel and
abstracts, reports and policies of title companies rendered or
issued at or subsequent to the time of acquisition of such
property by the Company, upon opinions of counsel to the
lessors of such property and, in respect of matters of fact,
upon certificates of officers of the Company, provided that
such counsel shall state that he believes that both you and he
are justified in relying upon such opinions, abstracts,
reports, policies and certificates);
(viii) Other than as set forth in the Prospectus, after
due inquiry such counsel does not know of any legal or
governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a
material adverse effect on the financial position,
shareholders' equity or results of operations of the Company
and its subsidiaries; and, to the best of such counsel's
knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others;
(ix) This Agreement has been duly authorized, executed and
delivered by the Company;
(x) The Notes have been duly authorized, executed,
authenticated, issued and delivered and constitute valid and
legally binding obligations of the Company entitled to the
benefits provided by the Indenture; and the Notes and the
Indenture conform to the descriptions thereof in the
Prospectus as amended or supplemented;
(xi) The Indenture has been duly authorized, executed
and delivered by the Company and (assuming the due
authorization, execution and delivery of the Indenture by the
Trustee) constitutes a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and the
Indenture has been duly qualified under the Trust Indenture
Act;
(xii) The issue and sale of the Notes being delivered at
the Time of Delivery by the Company and the compliance by the
Company with all of the provisions of the Notes, the Indenture
and this Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or
result in a breach or violation of
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<PAGE>
any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the
Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of
the property or assets of the Company or any of its
subsidiaries is subject, neither will such action result in
any violation of the provisions of the Restated Articles of
Incorporation or Bylaws of the Company or any of its
subsidiaries or any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or
body having jurisdiction over the Company or any of its
properties;
(xiii) The order or orders of the Montana Commission,
the Wyoming Commission and the Arizona Commission referred to
in Section 1(a)(xv) have been duly entered and, to the best
knowledge of such counsel, are still in full force and effect,
and no further consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale
of the Notes or the consummation by the Company of the
transactions contemplated by this Agreement, except such
consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution
of the Notes by the Underwriters;
(xiv) The documents delivered with, or incorporated by
reference in, the Prospectus or any further amendment or
supplement thereto made by the Company prior to the Time of
Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no
opinion), when they or any further amendment or supplement
thereto made by the Company prior to the Time of Delivery
became effective or were filed with the Commission, as the
case may be, complied as to form in all material respects with
the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission
thereunder; and such counsel has no reason to believe that any
of such documents, when such documents became effective or
were so filed, as the case may be, contained, in the case of a
registration statement which became effective under the Act,
an untrue statement of a material fact, or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading, or, in the case of
other documents which were filed under the Exchange Act with
the Commission, an untrue statement of a material fact or
omitted to state a material fact necessary in order to make
the statements therein,
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<PAGE>
in the light of the circumstances in which they were made when such
documents were so filed, not misleading;
(xv) To the best of such counsel's knowledge, each of the
Company and each of its subsidiaries owns or possesses the
exclusive right to use all franchises, patents, patent
applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses,
inventions, trade secrets and rights necessary for the conduct of
its business as it is currently being carried on and as described
in the Prospectus and, except as described in the Prospectus, has
not received any notice of conflict with the asserted rights of
others in respect thereof. Except as stated in the Prospectus, no
name which either of the Company or any of its subsidiaries uses
and no other aspect of the business of either the Company or any of
its subsidiaries involves or gives, or will involve or give, rise
to any infringement of, or license or similar fees for, any
patents, patent applications, trademarks, service marks, trade
names, trademark registrations, service mark registrations,
copyrights, licenses, inventions, trade secrets or other similar
rights of others which would have a material adverse effect on the
business of the Company, and neither the Company nor any of its
subsidiaries has received any notice of any such infringement or
fee, or claim with respect thereto; and
(xvi) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company
prior to the Time of Delivery (other than the financial
statements and related schedules therein, as to which such
counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the
Trust Indenture Act and the rules and regulations thereunder;
such counsel has no reason to believe that, as of its
effective date, the Registration Statement or any further
amendment thereto made by the Company prior to the Time of
Delivery (other than the financial statements and restated
schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of
the circumstances in which they were made, not misleading or
that, as of its date, the Prospectus or any further amendment
or supplement thereto made by the Company prior to the Time of
Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in light of the circumstances in which
they were made, not misleading or that, as of the Time of
Delivery, either the Registration Statement or the
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Prospectus or any further amendment or supplement thereto made
by the Company prior to the Time of Delivery (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; and
such counsel does not know of any amendment to the
Registration Statement required to be filed or of any
contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or required
to be incorporated by reference into the Prospectus or
required to be described in the Registration Statement or the
Prospectus which are not filed or incorporated by reference or
described as required.
(d) At 8:00 a.m., Rocky Mountain time, on the effective date
of the Registration Statement and the effective date of the most
recently filed post-effective amendment to the Registration
Statement and also at the Time of Delivery, Ernst & Young LLP shall
have furnished to you a letter or letters, dated the respective
date of delivery thereof, in form and substance satisfactory to
you, to the effect set forth in Annex I hereto;
(e) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus
any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the
Prospectus, and (ii) since the respective dates as of which
information is given in the Prospectus there shall not have been
any change in the capital stock or long-term debt of the Company or
any of its subsidiaries or any change, or any development involving
a prospective change, in or affecting the general affairs,
management, financial position, shareholders' equity or results of
operations of the Company or any of its subsidiaries, taken as a
whole, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in
Clause (i) or (ii), is in your judgment so material and adverse as
to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Notes being delivered at the Time
of Delivery on the terms and in the manner contemplated in the
Prospectus;
(f) On or after the date hereof there shall not have occurred
any of the following: (i) a suspension or material limitation in
trading in securities generally on the New York Stock Exchange;
(ii) a general moratorium on commercial banking activities in New York
declared by either Federal or New York State authorities; or
(iii) the outbreak or escalation of hostilities
-16-
<PAGE>
involving the United States or the declaration by the United States
on or after the date hereof of a national emergency or war if the
effect of any such event specified in this Clause (iii) in your
judgment makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Notes being delivered at the
Time of Delivery on the terms and in the manner contemplated in the
Prospectus;
(g) There shall be in full force and effect one or more orders
of the Montana Commission, the Wyoming Commission and the Arizona
Commission authorizing the issue and sale of the Notes by the
Company on terms and conditions not inconsistent with the terms and
conditions set forth in this Agreement, and containing no
provisions unacceptable to the Underwriters, it being agreed that
the order or orders of the Montana Commission, the Wyoming
Commission and the Arizona Commission heretofore issued as
described in Section 1(a)(xv) contain no such unacceptable
provisions; and
(h) The Company shall have furnished or caused to be furnished
to you at the Time of Delivery certificates of officers of the
Company, satisfactory to you as to the accuracy of the
representations and warranties of the Company, herein at and as of
the Time of Delivery, as to the performance by the Company of all
of its obligations hereunder to be performed at or prior to the
Time of Delivery, and as to such other matters as you may
reasonably request and the Company shall have furnished or caused
to be furnished certificates as to the matters set forth in
subsections (a) and (g) of this Section, and as to such other
matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances in which they were made, not misleading,
and will reimburse each Underwriter for any legal or other expenses
reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or
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<PAGE>
supplement in reliance upon and in conformity with written
information furnished to the Company by you expressly for use
therein.
(b) Each Underwriter will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which
the Company may become subject, under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which
they were made, not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by
such Underwriter expressly for use therein; and will reimburse the
Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such
action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party, under
subsection (a) or (b) above, of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof
is to be made against the indemnifying party under such subsection,
notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any
indemnified party otherwise than under such subsection. In case
any such action shall be brought against any indemnified party and
it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein
and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and, after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any
legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a)
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<PAGE>
or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the
other from the offering of the Notes. If, however, the allocation
provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the
notice required under subsection (c) above, then each indemnifying
party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and
the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by the Company on the one hand or the Underwriters on the other and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed
to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which
the Notes underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such
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<PAGE>
fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall
be in addition to any liability which the Company may otherwise
have, and shall extend, upon the same terms and conditions, to each
officer, director and agent of the Underwriters and to each person,
if any, who controls any Underwriter within the meaning of the Act;
and the obligations of the Underwriters under this Section 8 shall
be in addition to any liability which the respective Underwriters
may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the
Act.
9. (a) If either Underwriter shall default in its obligation
to purchase the Notes which it has agreed to purchase hereunder at
the Time of Delivery, the other Underwriter may in its discretion
arrange for it or another party or other parties to purchase such
Notes on the terms contained herein. If within thirty-six hours
after such default by either Underwriter the other Underwriter does
not arrange for the purchase of such Notes, then the Company shall
be entitled to a further period of thirty-six hours within which to
procure another party or other parties satisfactory to such other
Underwriter to purchase such Notes on such terms. In the event
that, within the respective prescribed periods, the non-defaulting
Underwriter notifies the Company that it has so arranged for the
purchase of such Notes, or the Company notifies such non-defaulting
Underwriter that it has so arranged for the purchase of such Notes,
such non-defaulting Underwriter or the Company shall have the right
to postpone the Time of Delivery for a period of not more than
seven days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in
any other documents or arrangements, and the Company agrees to file
promptly any amendments to the Registration Statement or the
Prospectus which in the opinion of the non-defaulting Underwriter
may thereby be made necessary. The term "Underwriter" as used in
this Agreement shall include any person substituted under this
Section with like effect as if such person had originally been a
party to this Agreement with respect to such Notes.
(b) If, after giving effect to any arrangements for the
purchase of the Notes of a defaulting Underwriter by the
non-defaulting Underwriter and the Company as provided in
subsection (a) above, the aggregate principal amount of such Notes
which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Notes to be purchased at the
Time of Delivery, then the Company shall have the right to require
the non-defaulting Underwriter to purchase the number of Notes
which such
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<PAGE>
Underwriter agreed to purchase hereunder at the Time of Delivery
and, in addition, to require the non-defaulting Underwriter to
purchase its pro rata share (based on the aggregate principal
amount of Notes which such Underwriter agreed to purchase
hereunder) of the Notes of such defaulting Underwriter for which
such arrangements have not been made; but nothing herein shall
relieve the defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Notes of a defaulting Underwriter by the
non-defaulting Underwriter and the Company as provided in
subsection (a) above, the aggregate principal amount of such Notes
which remains unpurchased exceeds one-eleventh of the aggregate
principal amount of all the Notes to be purchased at the Time of
Delivery, or if the Company shall not exercise the right described
in subsection (b) above to require the non-defaulting Underwriter
to purchase Notes of the defaulting Underwriter, then this
Agreement shall thereupon terminate, without liability on the part
of any non-defaulting Underwriter or the Company, except for the
expenses to be borne by the Company and the Underwriters as
provided in Section 6 hereof and the indemnity and contribution
agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the Underwriters, as set
forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless
of any investigation (or any statement as to the results thereof) made by or
on behalf of any Underwriter or any controlling person of any Underwriter, or
the Company, or any officer or director or controlling person of the Company,
and shall survive delivery of and payment for the Notes.
11. If this Agreement shall be terminated pursuant to Section 9
hereof, the Company shall not then be under any liability to any Underwriter
except as provided in Section 6 and Section 8 hereof; but, if for any other
reason any Notes are not delivered by or on behalf of the Company as provided
herein, the Company will reimburse the Underwriters for all out-of-pocket
expenses, including fees and disbursements of counsel, reasonably incurred by
the Underwriters in making preparations for the purchase, sale and delivery
of the Notes not so delivered, but the Company shall then be under no further
liability to any Underwriter in respect of the Notes not so delivered except
as provided in Section 6 and Section 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of
the Underwriters, and the parties hereto shall be entitled to act and rely
upon any statement, request, notice or agreement on behalf of any Underwriter
made or given by D. A. Davidson & Co. on behalf of the Underwriters.
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<PAGE>
All statements, requests, notices and agreements hereunder shall be
in writing, and if to the Underwriters shall be delivered or sent by mail,
telex or facsimile transmission to you as the representatives in care of
D. A. Davidson & Co., at 8 Third Street North, Great Falls, Montana 59401,
Attention: Syndicate Department, and if to the Company shall be delivered or
sent by mail, telex or facsimile transmission to the address of the Company
set forth in the Registration Statement, Attention: President. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters and the Company and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and the
Underwriters and each person who controls the Company or any Underwriter, and
their respective heirs, executors, administrators, successors and assigns,
and no other person shall acquire or have any right under or by virtue of
this Agreement. No purchaser of any of the Notes from any Underwriter shall
be deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used
herein, the term "business day" shall mean any day when the Commission's
office in Washington, D. C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF MONTANA.
16. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one
and the same instrument.
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<PAGE>
If the foregoing is in accordance with your understanding, please
sign and return to us five counterparts hereof, and upon the acceptance
hereof by you, this letter and such acceptance hereof shall constitute a
binding agreement among each of the Underwriters and the Company.
Very truly yours,
ENERGY WEST INCORPORATED
By:
--------------------------------
Name:
Title:
Accepted as of the date hereof.
D. A. DAVIDSON & CO.
By:
-------------------------------
Authorized Signatory
EDWARD D. JONES & CO.
By:
-------------------------------
Authorized Signatory
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<PAGE>
SCHEDULE I
Total Aggregate
Principal Amount of Notes
Underwriter to be Purchased
- ----------- -------------------------
D. A. Davidson & Co. . . . . . . . . . . . . . . $
Edward D. Jones & Co.. . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . $8,000,000
<PAGE>
ANNEX I
Pursuant to Section 7(d) of the Underwriting Agreement, the
accountants shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if
applicable, prospective financial statements and/or pro forma
financial information) examined by them and included in, delivered
with or incorporated by reference in the Registration Statement or
the Prospectus comply as to form in all material respects with the
applicable accounting requirements of the Act or the Exchange Act,
as applicable, and the related published rules and regulations
thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of
Certified Public Accountants of the consolidated interim financial
statements, selected financial data, pro forma financial
information, prospective financial statements and/or condensed
financial statements derived from audited financial statements of
the Company for the periods specified in such letter, as indicated
in their reports thereon, copies of which have been furnished to
the Underwriters;
(iii) The unaudited selected financial information with
respect to the consolidated results of operations and financial
position of the Company for the five most recent fiscal years
included in the Prospectus and included or incorporated by
reference in Item 6 of the Company's Annual Report on Form 10-K for
the most recent fiscal year agrees with the corresponding amounts
(after restatement where applicable) in the audited consolidated
financial statements for such five fiscal years which were included
or incorporated by reference in the Company's Annual Reports on
Form 10-K for such fiscal years;
(iv) On the basis of limited procedures, not constituting
an examination in accordance with generally accepted auditing
standards, consisting of a reading of the unaudited financial
statements and other information referred to below, a reading of
the latest available interim financial statements of the Company
and its subsidiaries, inspection of the minute books of the Company
and its subsidiaries since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus,
inquiries of officials of the Company and its subsidiaries
responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
<PAGE>
(A) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows included or incorporated by reference
in the Company's Quarterly Reports on Form 10-Q delivered with
or incorporated by reference in the Prospectus do not comply
as to form in all material respects with the applicable
accounting requirements of the Exchange Act as it applies to
Form 10-Q and the related published rules and regulations
thereunder or are not in conformity with generally accepted
accounting principles applied on a basis substantially
consistent with the basis for the audited consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included or incorporated
by reference in the Company's Annual Report on Form 10-K for
the most recent fiscal year;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and
any such unaudited data and items were not determined on a
basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial
statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent
fiscal year;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived the
unaudited condensed financial statements referred to in Clause
(A) and any unaudited income statement data and balance sheet
items included in the Prospectus and referred to in Clause (B)
were not determined on a basis substantially consistent with
the basis for the audited financial statements included or
incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed
financial statements included in, deliverd with or
incorporated by reference in the Prospectus do not comply as
to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days prior
to the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital
stock upon exercise of options and stock appreciation rights,
upon earn-outs of performance shares and
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<PAGE>
upon conversions of convertible securities, in each case which
were outstanding on the date of the latest balance sheet
included in, delivered with or incorporated by reference in
the Prospectus) or any increase in the consolidated long-term
debt of the Company and its subsidiaries, or any decreases in
consolidated net current assets or net assets or other items
specified by the Underwriters, or any increases in any items
specified by the Underwriters, in each case as compared with
amounts shown in the latest balance sheet included or
incorporated by reference in the Prospectus, except in each
case for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in
such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the
Prospectus to the specified date referred to in Clause (E)
there were any decreases in consolidated net revenues or
operating profit or the total or per share amounts of
consolidated net income or other items specified by the
Underwriters, or any increases in any items specified by the
Underwriters, in each case as compared with the comparable
period of the preceding year and with any other period of
corresponding length specified by the Underwriters, except in
each case for increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in
such letter; and
(v) In addition to the examination referred to in their
report(s) included or incorporated by reference in the Prospectus
and the limited procedures, inspection of minute books, inquiries
and other procedures referred to in Paragraphs (iii) and (iv)
above, they have carried out certain specified procedures, not
constituting an examination in accordance with generally accepted
auditing standards, with respect to certain amounts, percentages
and financial information specified by the Underwriters which are
derived from the general accounting records of the Company and its
subsidiaries, which appear in the Prospectus (excluding documents
delivered therewith or incorporated by reference therein) or in
Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Underwriters or in documents delivered
with, or incorporated by reference in, the Prospectus specified by
the Underwriters, and have compared certain of such amounts,
percentages and financial information with the accounting records
of the Company and its subsidiaries and have found them to be in
agreement.
-3-
<PAGE>
[LETTERHEAD]
RESTATED CERTIFICATE OF
INCORPORATION
I, FRANK MURRAY, Secretary of State of the State of Montana, do hereby
certify that duplicate originals of Restate Articles of Incorporation of
GREAT FALLS GAS COMPANY
and Statement on Adoption thereon duly executed pursuant to the provisions of
Section 35-1-213 of the Montana Code Annotated have been received in my office
and found to conform to law.
NOW, THEREFORE, I, FRANK MURRAY, as such Secretary of Sate, by virtue of
the authority vested in me by law, HEREBY ISSUE this Restated Certificate of
Incorporation of Incorporation of
GREAT FALLS GAS COMPANY
and attach hereto a duplicate original of the Restated Articles of Incorporation
and the Statement on Adoption thereon.
IN WITNESS WHEREOF, I have
hereunto set my hand and affixed
the Great Seal of the State of
Montana, at Helena, the Capital
this 24th day of November, A.D. 1980.
/s/ Frank Murray
FRANK MURRAY
Secretary of State
/s/ Leonard C. Larson
By Leonard C. Larson
Chief Deputy
<PAGE>
281111
RESTATED ARTICLES OF INCORPORATION STATE OF MONTANA
FILED
OF NOV 24 1980
FRANK MURRAY
GREAT FALLS GAS COMPANY SECRETARY OF STATE
/s/ Frank Murray
Pursuant to the provisions of Section 58 of the Montana Business
Corporation Act (Section 35-1-213, MCA (1978)), the undersigned corporation,
pursuant to a resolution duly adopted by its Board of Directors, hereby adopts
the following Restated Articles of Incorporation:
FIRST: The name of the corporation is Great Falls Gas Company.
SECOND: The duration of the corporation is to be perpetual.
THIRD: The purposes for which the corporation was and is organized are as
follows:
(a) To acquire by purchase that certain gas franchise known as "Ordinance
No. 310", passed by the city council of the City of Great Falls, Montana, on the
20th day of January, 1908, and approved by the Mayor of said City on the 21st
day of January, 1908, being a grant to Charles U. Gordon, his associates,
successors and assigns, of the right to construct, maintain and operate a plant
for the manufacture, sale and distribution of illuminating and fuel gas and
their by-products, and to use the streets, alleys and public places of said City
therefor, and thereafter to own, said gas franchise and to use and enjoy the
same according to the nature thereof. (As originally pro-
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<PAGE>
vided in the Articles of Incorporation filed February 11, 1909.)
(b) To acquire, own and hold lands, buildings, tanks, machinery, pipes and
pipe lines, and any and all suitable appliances for manufacturing, producing,
and distributing illuminating and fuel gas, and by-products, and any and all
other illuminant products for lighting, heating, and any and all other
beneficial uses and purposes to which they may be applied. (As originally
provided in the Articles of Incorporation filed February 11, 1909.)
(c) To acquire, hold and operate machinery and other property for the
purpose of generating and transmitting electricity, electric energy and electric
light, heat and power; and to supply such gas and illuminant products, heat and
light to the said City of Great Falls, and to the inhabitants thereof, or to any
other useful purpose. (As originally provided in the Articles of Incorporation
filed February 11, 1309.)
(d) To acquire and hold mineral lands and rights to prospect for, bore,
sink wells, produce, pipe and transport natural gas, oil and petroleum; and to
refine, store and deal in petroleum and other oils and their products and
by-products; to operate and maintain oil and natural gas wells, with suitable
tanks and pipe lines for the same; and to acquire, own, dispose of, develop and
operate mines of coal and coal lands. (As originally provided in the Articles of
Incorporation filed
-2-
<PAGE>
February 11, 1909.)
(e) To incur indebtedness in such amount as may be deemed necessary or
proper; to evidence such indebtedness by the bonds or other written obligations
of this corporation; and to secure the payment of such indebtedness by mortgage,
deed of trust, or other form of incumbrance of and upon all or any part of the
property, rights, privileges and franchises of this corporation, whether
acquired at the time of making such incumbrance or thereafter to be acquired.
(As originally provided in the Articles of Incorporation filed February 11,
1909.)
(f) To carry on any other business, or to do any other thing in connection
with the objects and purposes above mentioned that may be necessary or proper to
successfully accomplish or promote said subjects and purposes. And to do any and
all other acts and things, and to exercise any and all other powers, which a
copartnership or natural person could do and exercise, and which now or
hereafter may be authorized by law. (As originally provided in the Articles of
Incorporation filed February 11, 1909.)
(g) To engage in any lawful act or activity for which corporations may be
organized under the Montana Business Corporation Act.
(h) To do each and every thing necessary, proper or convenient for the
accomplishment of any such purposes.
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<PAGE>
FOURTH: The aggregate number of shares which the corporation now has
authority to issue is One Hundred Twenty Thousand (120,000) shares of the par
value of One Dollar and Fifty Cents ($1.50) each, of which Eighty-Seven Thousand
Five Hundred Forty-Four (87,544) shares are issued and outstanding, including
Nine Hundred Thirty-Eight (938) shares of treasury stock. The stated capital of
the corporation is One Hundred Thirty-One Thousand Three Hundred Sixteen Dollars
($131,316.00).
FIFTH: The Bylaws of this corporation may be altered, amended, or
additional provisions adopted by a majority vote of all of the capital stock
represented in any regular or special meeting of the stockholders, or by a
majority of the directors in any regular or special meeting of the Board of
Directors.
SIXTH: The current address of the initial registered
office of the corporation is:
725 Central Avenue
P. O. Box 2229
Great Falls, Montana 59403.
And the name of its current registered agent at such
Address
Larry D. Geske
SEVENTH: The number of directors now constituting the Board of Directors of
the corporation is seven (7).
-4-
<PAGE>
The foregoing Restated Articles of Incorporation correctly set forth
without change the corresponding provisions of the Articles of Incorporation as
herein and as heretofore amended, and supersede the original Articles of
Incorporation and all amendments thereto. DATED this 1st day of May, 1980.
GREAT FALLS GAS COMPANY
BY: /s/ Larry D. Geske
------------------------------
LARRY D. GESKE, President
ATTEST:
/s/ Robert W. Creek
- ---------------------------
ROBERT W. CREEK, Secretary
VERIFICATION
------------
STATE OF MONTANA )
: ss.
County of Cascade )
On this 25th day of August, 1980, before me, the undersigned, a Notary
Public for the State of Montana, personally appeared LARRY D. GESKE and ROBERT
W. CREEK, known to me to be the president and secretary, respectively, of GREAT
FALLS GAS COMPANY, and they, upon their oath, acknowledged to me that such
corporation executed the foregoing Restated Articles of Incorporation of Great
Falls Gas Company and that the statements therein contained are true.
/s/ William Quast
---------------------------------------
Notary Public for the State of Montana
Residing at Great Falls, Montana
My Commission expires: June 16, 1981
(NOTARIAL SEAL)
-5-
<PAGE>
ARTICLES OF AMENDMENT TO ARTICLES OF
INCORPORATION
The name of the Corporation is the Great Falls Gas Company.
The following is the Article of Amendment to the Articles of Incorporation for
Great Falls Gas Company:
[STAMP]
RESOLVED, that the Shareholders amend the Articles of Incorporation, in
order to increase the number of authorized shares of Common Stock, to effect a
10-for-1 split of the Company's Common Stock and to authorize preferred shares
of Preferred Stock, and to establish the par value of said authorized shares,
such amendment to be effective June 15, 1984, and that to that end Article
Fourth be changed to read as follows:
"FOURTH. The total authorized number of shares of this Corporation is
5,000,000, of which 3,500,000 shall be shares of Common Stock of the par
value of $.15 each and of which 1,500,000 shall be shares of preferred stock
of the par value of $.15 each. The shares of Preferred Stock may be issued
from time to time by the Board of Directors in one or more series with such
designations, relative rights, preferences, limitations, dividend rates,
redemption prices, liquidation prices, conversion rights, sinking or purchase
fund rights, and other provisions as the Board of Directors may establish,
fix and determine. The holders of shares of Common Stock shall have one vote
for each share of Common Stock held on each matter submitted to the holders
of shares of Common Stock."
The date of adoption was May 10, 1984, which was the date of a Special
meeting of the Stockholders. There are 86,606 shares of common stock Outstanding
and entitled to vote. The corporation only had one class of stock at the time of
the vote. The holders of 81,066 shares of stock attended, in person or by proxy,
the Special Meeting of Stockholders. The following votes here received:
80,838 votes "for"
161 votes "against"
67 votes "abstained"
The 10-for-1 split of the Company's common stock requires the
issuance of 9 additional shares to each holder of shares, as of the effective
date of June 1984. The transfer agent will send the additional shares along with
a note of explanation signed by the President of the Corporation.
/s/Larry D. Geske /s/ William Quast
- ----------------------- ------------------------
President Secretary
<PAGE>
SECRETARY OF STATE
STATE OF MONTANA
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
I, JIM WALTERMIRE, Secretary of State of the State of Montana, do hereby
certify that the Articles of Amendment to the Articles of Incorporation of GREAT
FALLS GAS COMPANY, a Montana profit corporation, duly executed pursuant to the
provisions of Section 35-1-210, Montana Code Annotated, have been received in my
office and conform to law.
NOW, THEREFORE, I, JIM WALTERMIRE, as such Secretary of State, by virtue of
the authority vested in me by law, hereby issue this Certificate of Amendment to
the Certificate of Incorporation of GREAT FALLS GAS COMPANY, a Montana profit
corporation, and attach hereto a copy of the Articles of Amendment to the
Articles of Incorporation.
.
IN WITNESS WHEREOF, I
have hereunto set my hand and
affixed the Great Seal of the
State of Montana, at Helena,
the Capital, this December 10,
A.D. 1987.
/s/ Jim Waltermire
JIM WALTERMIRE
Secretary of State
<PAGE>
GREAT FALLS GAS COMPANY ARTICLES OF INCORPORATION
ARTICLES OF AMENDMENT
Pursuant to the provisions of the Montana Business Corporation Act ( MCA Section
35-1-207 et seq.), Great Falls Gas Company submits its Articles of Amendment as
follows:
1. The name of the corporation is Great Falls Gas Company.
2. The amendment adopted by its shareholders reads as follows:
EIGHTH. A director of the corporation shall not be personally liable
to the corporation or its shareholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its
shareholders, (ii) for acts or omissions that constitute willful
misconduct, recklessness, or a knowing violation of law, (iii) under
Section 409 of the Montana Business Corporation Act, or (iv) for a
transaction from which the director derives an improper personal
benefit. If the Montana Business Corporation Act is hereafter amended
to authorize further elimination or limitation of the liability of a
director then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Montana
Business Corporation Act, as so amended., Any repeal or modification
of the foregoing provisions of this Article Eight shall not adversely
affect any right or protection of a director of the corporation
existing at the time of such repeal or modification.
3. On August 25th the Board of Directors for Great Falls Gas Company adopted a
resolution proposing to amend the Articles of Incorporation in the above manner.
On November 5th shareholders approved that amendment at the annual shareholders
meeting.
4. The number of shares outstanding at the time of the annual meeting was
1,001,146. The number of shares entitled to vote was 991,766. At the time of the
annual meeting the Company had only one authorized class of stock.
5. The number of shares voted in favor of the amendment was 511,728. The number
of shares voted in opposition to the amendment was 14,800.
6. The amended article does not provide for exchange, reclassification or
cancellation of issued shares.
-1-
<PAGE>
Dated this 7th day of December, 1987.
By: /s/ Larry D. Geske
---------------------------
Larry D. Geske, President
Attest:
/s/ John C. Allen
- -----------------------------------
John C. Allen, Assistant Secretary
VERIFICATION
STATE OF MONTANA )
: ss.
County of Cascade )
On the 7th day of December, 1987, before me, the undersigned, a Notary
Public for the State of Montana, personally appeared LARRY D. GESKE, and JOHN C.
ALLEN, known to me to be the president and assistant secretary, respectively, of
GREAT FALLS GAS COMPANY, and they, upon their oath, acknowledged to me that such
corporation executed the foregoing Restated Articles of Incorporation of Great
Falls Gas Company and that the statements therein contained are true.
/s/ Cheryl Johnson
---------------------------------------
Notary Public for the State of Montana
Residing at Great Falls, Montana
My commission expires: February 21, 1988
(NOTARIAL SEAL)
-2-
<PAGE>
GREAT FALLS GAS COMPANY ARTICLES OF INCORPORATION
ARTICLES OF AMENDMENT
Pursuant to the provisions of the Montana Business Corporation Act (MCA 35-1-230
et seq.) Great Falls Gas Company submits its Articles of Amendment as follows:
1. The name of the corporation is Great Falls Gas Company.
2. At the Shareholders meeting held November 18, 1993, a majority of its
Shareholders adopted the following proposals:
1. To change the corporate name from Great Falls Gas Company to ENERGY
WEST, Incorporated,
2. To amend the Articles of Incorporation to allow for the election of a
range in the number of Directors from five to nine.
Therefore, the Articles of Incorporation shall be changed to replace the
name Great Falls Gas Company throughout the Articles of Incorporation,
wherever it appears with the name ENERGY WEST, Incorporated.
Furthermore, consistent with proposition Number 2 above, Article 3.2 shall
be changed to read as follows:
Section 3.2 Number, Qualification and Term of Office. The number of
directors which shall constitute the whole Board shall be determined by
resolution of the Board of Directors except that the number of directors
shall not be less than five or more than nine. Each director shall own at
least ten shares of capital stock of the Company. The term of office shall
be one year unless the Board of Directors by resolution implement staggered
terms consistent with the requirements of prevailing law. The terms of
directors, if staggered, shall be two years.
3. On November 18, 1993 the Board of Directors for Great Falls Gas Company
adopted a resolution proposing to amend the Articles of Incorporation in
the above manner. On November 18, 1993 shareholders approved that amendment
at the annual shareholders meeting.
4. The number of shares outstanding at the time of the annual meeting was
1,085,724. The number of shares entitled to vote was 1,085,724. At the time
of the annual meeting the Company had only one authorized class of stock.
5. The number of shares voted in favor of Proposal No. 1, the Name Change
amendment, was 951,716. The number of shares voted in opposition to the
amendment was 16,091.
<PAGE>
The number of shares voted in favor of the Proposal No. 2, Number of
Directors, was 941,505. The number of shares voted in opposition to the
amendment was 25,597.
6. The amended article does not provide for exchange, reclassification or
cancellation of issued shares.
Dated this 21st day of December, 1993.
By: /s/ Larry D. Geske
----------------------------------
Larry D. Geske, President and CEO
VERIFICATION
STATE OF MONTANA )
: ss.
County of Cascade )
On the 20th day of December, 1993, before me, the undersigned, a Notary Public
for the State of Montana, personally appeared LARRY D. GESKE, known to me to be
the President and CEO of ENERGY WEST, Incorporated, and upon his oath,
acknowledged to me that such corporation executed the foregoing Articles of
Amendment of ENERGY WEST, Incorporated and that the statements therein contained
are true.
/s/ Cheryl Johnson
- -----------------------------------------
Notary Public for the State of Montana
Residing at Great Falls, Montana
My commission expires: February 21, 1994
<PAGE>
BY LAWS OF ENERGY WEST, INC.
ARTICLE I
OFFICES
Section 1.1. PRINCIPAL OFFICE. The principal office of Great Falls Gas
Company, a Montana corporation, (hereinafter called the "Company"), shall be in
the City of Great Falls, County of Cascade, State of Montana.
Section 1.2. OTHER OFFICES. The Company may also have an office in the City
of Chicago, County of Cook, State of Illinois, and also an office or offices at
such other places either within or without the State of Montana as the board of
Directors (hereinafter called the "Board") may from time to time determine, or
the business of the Company may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. PLACE OF MEETINGS. All meetings of stockholders shall be held
at the principal office of the Company in Montana.
Section 2.2. ANNUAL MEETINGS. Commencing with the year 1951 an annual
meeting of the stockholders of the Company shall be held on the first Thursday
of April in each year if not a legal holiday, and if a legal holiday, then on
the next succeeding business day not a legal holiday. At each annual meeting,
directors shall be elected by stockholders in accordance with the provisions of
the Articles of Incorporation of the Company (hereinafter called the "Articles
of Incorporation") and these By-Laws. Each such annual meeting shall be a
general meeting, open for the transaction of any business within the powers of
the Company, without special notice of such business, except in any case where
special notice may be required by the laws of the State of Montana.
Section 2.3. SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of
stockholders for any purpose of purposes may be called at any time by the Board
or the President and shall be called by the Board or the President or the
Secretary upon the request in writing of a stockholder or stockholders holding
of record at least one-fifty of the number of outstanding shares of stock
entitled to vote at such meeting, provided that any such request shall state the
purpose or purposes of the proposed meeting.
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<PAGE>
Section 2.4. NOTICE OF MEETINGS. Except as otherwise provided by law, or by
the Articles of Incorporation or by the By-Laws, written notice of each annual
and special meeting of stockholders shall be given by at the direction of the
President or the Secretary, or, in case of a special meeting, by the officer or
the person calling the meeting as provided in these By-Laws, either personally
or by mail, not more than 40 days and not less than 10 days before the meeting,
to each stockholder of record entitled to vote there at. Every such notice shall
state the place, day and hour of the meeting, and, in the case of a special
meeting, shall state briefly the purpose or purposes thereof.
Section 2.5. QUORUM AND ADJOURNMENTS. For the purpose of any action to be
taken by stockholders at any meeting, the presence in person or by proxy of the
holders of a majority vote there at shall be necessary to constitute a quorum
for the transaction of business except as otherwise expressly provided by law.
If for any reason there is not present a quorum at any meeting as hereinbefore
provided, the stockholders present or represented at the meeting may adjourn,
and such adjournment and the reasons therefor shall be recorded in the journal
of the proceedings of the meetings of stockholders. If from any cause an
election does not take place on the day appointed in these By-laws, it may be
held on any day thereafter as shall be designated by a majority vote of the
stockholders present or represented at such meeting, or to which such election
may be adjourned or ordered by the Board. At any such adjourned meeting, at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally notified. The
absence from any meeting of the number required by law or by the Articles of
Incorporation or these By-laws for action upon any given matter shall not
prevent action at such meeting upon any other matter or matters which may
properly come before the meeting if the number required in respect of such other
matters shall be present. Any regularly called meeting of stockholders may
adjourn from day to day, from time to time.
Section 2.6. ORGANIZATION. Except as otherwise provided by law, at any
meeting of stockholders, the President, or, in the absence of the President, the
Vice President, or, in the absence of both the President and the Vice President,
a chairman, chosen by the vote of a majority in interest of the stockholders
present thereat in person or by proxy and entitled to vote shall act as a
chairman; and the Secretary, or in his absence, an Assistant Secretary, or in
the absence of the Secretary and all Assistant Secretaries, a person whom the
Chairman of the meeting shall appoint shall act as Secretary of the meeting.
Section 2.7. VOTING BY STOCKHOLDERS. Except as otherwise expressly provided
by law or the Articles of Incorporation, each stockholder present in person or
by proxy at any meeting shall have one vote with respect to each share of stock
registered in his name on the books of the Company:
2
<PAGE>
(a) on the date fixed pursuant to Section 8.5 hereof as the record date for
the determination of stockholders entitled to notice of and to vote at such
meeting, or
(b) in the event that no such record date shall have been fixed, then on
the date determined in accordance with Section 8.5 hereof;
provided, however, that, in all elections for Directors, every stockholder
shall have the right to vote in person or by proxy the number of shares standing
in his name, upon which he is entitled to vote, for as many persons as there are
directors to be elected, or to cumulate said shares, and give one candidate as
many votes as the number of directors multiplied by the number of his shares of
stock shall equal, or to distribute them on the same principle among as many
candidates as he shall think fit. The candidates receiving the highest number of
votes shall be deemed elected.
Any stockholder entitled to vote at any meeting may vote either in person
or by his proxy appointed by an instrument in writing, subscribed by such
stockholder, or his attorney or agent thereunto authorized in writing and
delivered to the Secretary of the meeting.
Except as otherwise expressly provided by law or by the Articles of
Incorporation, all matters to be decided by stockholders at any meeting,
shall be decided, if a quorum be present, by a plurality of the votes passed
at the meeting of the stockholders present in person, or by proxy and
entitled to vote thereon.
The vote for election of directors shall be by ballot. Unless directed by
the Chairman of the meeting or demanded by a majority in interest of the
stockholders present in person or by proxy at any meeting and entitled to
vote thereon, the vote on any other matter, other than the election of
directors need not be by ballot. Upon vote by ballot, each proxy if there be
such proxy, and shall state the number of shares voted by him. In the event
that a vote by ballot is so taken, the chairman of the meeting may, and, if
requested by any stockholder present in person or by proxy entitled to vote
thereon, shall appoint two persons to serve as inspectors of election for the
purpose of such vote. Such inspectors of election shall examine the ballots
cast upon the taking of such vote and shall report to the chairman the result
thereof.
3
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
Section 3.1. GENERAL POWERS. The corporate powers, business and property of
the Company shall be exercised, conducted and controlled by the Board as from
time to time constituted.
Section 3.2. NUMBER, QUALIFICATION AND TERM OF OFFICE. The number of
directors which shall constitute the whole Board shall be six directors, each
of whom shall be the holder of at least one share of capital stock of the
Company. The term of office of each director shall be for one year and until
his successor is elected and qualified.
Section 3.3. ELECTION OF DIRECTORS. Directors shall be elected solely
from the list of persons nominated for directors at the meeting. Each
stockholder entitled to vote, present in person or by proxy, shall have the
right to nominate persons to be voted upon.
Section 3.4. PLACE OF MEETINGS. The Board may hold its meetings at the
principal place of business of the Company in the State of Montana or at the
office of the Company in the City of Chicago, Illinois, or at such other
place or places either within or without the State of Montana as the Board
may from time to time determine or shall be specified or fixed in the
respective notices or waivers of notice thereof. In case the meetings of the
Board shall be held outside the State of Montana, either the original minutes
of each meeting containing a record of all proceedings has thereat and signed
by the chairman and the secretary of such meeting or full and complete copies
or duplicates of such minutes certified by such chairman and secretary, under
the seal of the Company, shall be sent to and kept at the principal office of
the Company in Montana and shall be a part of the records in Montana.
Section 3.5. FIRST MEETINGS. A meeting of the Board for the purposes of
organization, election of officers and transaction of other business shall be
held, if practicable, at the close of each annual meeting of stockholders for
election of Directors and at the place of the holding of such election. No
notice of any such meeting held at such time and place need be given. Such
meeting may be held at any other time and place which shall be specified in a
notice given as thereinafter provided of special meetings of the Board or in
a waiver of notice signed by all the Directors.
4
<PAGE>
Section 3.6. REGULAR MEETINGS. Regular meetings of the Board may be held,
with or without notice, at such time and place as may from time to time be
specified in a resolution adopted by the Board and at the time in effect.
Section 3.7. SPECIAL MEETINGS: NOTICE. Special meetings of the Board
shall be held whenever called by the President, or by the Secretary at the
request of the President, or by not less thank two of the Directors, or not
less than one-third of the number of Directors then constituting the Board,
whichever is the greater. Notice of such meetings shall be given to each
Director at least 48 hours before the time fixed for such meeting, and such
notice may be given in person or by mail, telegraph, or cable. Every such
notice shall state the time and place of the meeting, but need not state the
purposed thereof except as otherwise by law or in these By-Laws expressly
provided.
Section 3.8. QUORUM: MANNER OF ACTING. At each meeting of the Board the
presence of a majority of the full number of Directors shall be necessary to
constitute a quorum and sufficient to form a Board for the transaction of
business. Any act and every decision of a majority of the Directors present
at a meeting at which a quorum shall be present and forming such Board shall
be the act of the Board, except as may be otherwise specifically provided by
law or these By-Laws. Any meeting of the Board may be adjourned by a majority
vote of the Directors present at such meeting. In the absence of a quorum at
such meeting, a majority of the Directors present thereat may adjourn such
meeting from time to time until a quorum shall be present thereat. Notice of
any adjourned meeting need not be given. The Directors shall act only as a
Board, and the individual Directors shall have no power as such.
Section 3.9. ORGANIZATION. At all meetings of the Board, the President,
or, in the absence of the President, a Director chosen by the Board, shall
act as Chairman. The Secretary, or, in his absence, the Assistant Secretary
of the Company, or, in the absence of the Secretary and all Assistant
Secretaries, a person appointed by the chairman of the meeting shall act as
Secretary of the meeting.
Section 3.10. COMPENSATION. Directors shall be entitled to receive such
fees and expenses, if any, for attendance at meetings of the Board of
Directors, and/or fixed salaries for services as Directors, as may be fixed
from time to time by resolution of the Board. Directors may also receive
compensation for services rendered to the Company as officers, members of the
Executive Committee or other committee, or in any other capacity.
Section 3.11. VACANCIES. If the office of any director or directors
becomes vacant by reason of death, resignation, retirement, disqualification,
or otherwise, such vacancy or vacancies shall except as otherwise provided by
law of these By-
5
<PAGE>
Laws, be filled by an appointee of the remaining Directors, such appointee to
hold office for the unexpired term in respect of which the vacancy occurred
and until the next annual election of Directors.
ARTICLE IV
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 4.1. DESIGNATION: TERM: VACANCIES. The Board, by resolution
passed by a majority of the whole Board, may designate two or more Directors,
as it may from time to time determine, to constitute together with the
President as an ex-officio member, an Executive Committee, and may designate
one or more other Directors to serve as alternates for the members thereof in
such order and manner as may be fixed of the Executive Committee, and the
Secretary, or in his absence an Assistant Secretary, shall be the Secretary
of the Executive Committee. Any vacancy which may occur in the Executive
Committee shall be filled by the Board at any regular or special meeting
thereof.
Section 4.2. POWERS. To the extent provided in the resolution of the
Board establishing the Executive Committee, and to the extent permitted by
law, the Executive Committee shall have all of the powers vested in the Board
by law or by these By-Laws in the management of the property, business and
affairs of the Company, and such specific powers as may from time to time be
conferred upon the Executive Committee by resolution of the Board, and may
exercise such powers in such manner as the Executive Committee shall deem for
the best interests of the Company in all cases in which specific directions
shall not have been given by the Board; provided, however, that the Executive
Committee shall have no power to make any change in the By-Laws. All action
taken by the Executive Committee shall be subject to revision or alteration
by the Board; provided, however, that such revision or alternation shall not
affect any action taken by any officer or employee of the Company, or by any
third party, or any rights of third parties that have vested, in reliance
upon any action or direction of the Executive Committee.
Section 4.3. PROCEDURE: MEETINGS,: VOTING: RECORDS. The Executive Committee
may prescribe, for the conduct of its business, such rules and regulations, not
inconsistent with these By-Laws, or with such resolution of r the guidance and
control of the Executive Committee as may from time to time be passed by the
Board, as it shall deem necessary or desirable, including, without limitation,
rules fixing the time and place of meetings and the notice to be given thereof,
if any. A majority of the member of the Executive Committee shall constitute a
quorum. The affirmative vote of a majority of the whole Executive Committee, as
from time to time constituted, shall be necessary for the adoption of any
resolution or the taking of any other action. The Executive Committee shall
6
<PAGE>
keep a record of all action taken by it.
Section 4.4. OTHER COMMITTEES. The Board may from time to time by
resolution create such other committee or committees (in addition to the
Executive Committee) of Directors, officers, employees or other person
designated by it with such authority, function, and duties and compensation
as the Board shall by resolution prescribe. Each such committee passed by a
majority of the whole Board, and shall consist upon them by the resolution
creating such committee. A majority of all the members of any such committee
may determine the action and fix the time and place of its meetings, unless
the Board shall otherwise provide. The Board shall have power to change the
members of any such committee at any time, to fill vacancies, and to
discharge any such committee, either with or without cause, at any time.
ARTICLE V
OFFICERS
Section 5.1. DESIGNATION. The principal officers of the Company shall be
a President, one or more Vice Presidents (one of whom maybe designated as
the Senior or Executive Vice President), a Secretary, and a Treasurer; and
there may be, in addition, such appointive officer, agents and employees as
shall be appointed in accordance with the provisions of Section 4.4 of these
By-Laws. Two or more offices may be held by the same person, except the
offices of President and Secretary.
Section 5.2. ELECTION: QUALIFICATIONS. The principal officers of the
Company shall be elected annually by the Board at its first meeting following
the annual meeting of shareholders. The person receiving the greatest number
of votes cast for any principal office at a meeting of the Board for the
election of officers, a quorum being present, shall be deemed elected to such
office. The President shall be elected from among the Directors.
Section 5.3. TERM OF OFFICE: REMOVAL. Unless sooner removed, each
principal officer of the Company shall hold office until his successor shall
have been elected and qualified, but any principal officer may be removed
from office at any time at the pleasure of the Board.
Section 5.5. APPOINTIVE OFFICERS AND AGENTS. The Board may appoint such
officers, other than principal officers, including one or more Assistant
Secretaries, and Assistant Treasurers, and such agents and employees, as the
Board may deem necessary or advisable, each of whom shall hold office or his
position, as the case may be, for such period, have in these By-Laws or as
the Board may from time to
7
<PAGE>
time determine. The Board may delegate to any principal officer or to any
committee the power to appoint, remove, fill vacancies, define the tenure of
office or position, and prescribe the duties and responsibilities of any such
appointive officers, agents or employees.
Section 5.6. SALARIES. The compensation of all officers, agents and
employees of the Company shall be fixed from time to time by the Board, but,
in the absence of a determination by the board, the President or any other
principal officer of the Company designation by him shall have the power to
fix and determine the compensation to be paid appointive officers (other than
principal officers), agents and employees of the Company.
Section 5.7. BONDS. The Treasurer and any Assistant Treasurer and such
other officers and agents of the company as the Board shall prescribe may
each be required by the Board to give bond to the Company in such form and
amount and with such surety and upon such conditions as the Board may
determine. The Company may pay any reasonable premium cost of such bonds.
Section 5.8. EMPLOYMENT CONTRACTS. Every contract of employment for
services to be rendered to the Company shall be at the pleasure of the
Company unless paid contract of employment is in writing, signed by officers
of the company, and approved or authorized by the Board.
Section 5.9. PRESIDENT. The President shall be the executive officer of
the Company; shall preside at meetings for the election of Directors and at
other meetings of stockholders and at meetings of the Board and of the
Executive Committee; subject to the control and direction of the Board, shall
have general supervision, control and management of the affairs and business
of the Company, and general charge and supervision of all the officers,
agents and employees of the company, and shall see that all orders and
resolutions of the Board are carried into effect; shall sign with the
Secretary any or all certificates of shares of stock of the Company; shall
sign and execute in the name of the company all deeds, mortgages, bonds,
contracts or other instruments authorized by the Board, except in cases where
the signing and execution thereof shall be expressly delegated by the Board
or these By-Laws to some other officer or agent of the company; and in
general shall exercise all powers and perform all duties incident to the
office of President and such other powers and duties as may from time to time
be assigned to him by the Board or be prescribed by these By-Laws.
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Section 5.10. VICE PRESIDENT. At the request of the President, or during
his absence or disability, a Vice President shall exercise the powers and
perform the duties of the President. Each Vice President shall exercise such
other powers and perform such other duties as may from time to time be
assigned to him by the Board or by the President or prescribed by these
By-Laws. In case there shall be more than one Vice President, the foregoing
shall apply to all the Vice Presidents in the order of there seniority.
Section 5.11. SECRETARY. The Secretary shall attend all meetings of the
Board and all meetings of stockholders and shall be and act as the secretary
of such meetings; shall keep a journal of such meetings in the manner
provided in these ByLaws; shall give, or cause to be given, all notices
provided for in these By-Laws or required by the Articles of Incorporation or
by law; shall be custodian of the records and of the seal of the Company and
see that the seal is affixed to all documents the execution of which on
behalf of the Company under its seal is duly authorized in accordance with
these By-Laws; shall have charge of the Stock and Transfer Book of the
Company, and shall keep or cause to be kept said book in the manner provided
in these By-Laws; shall have charge of all books, records and papers of the
Company relating to its organization as a corporation, and shall see that all
reports, statements, and other documents required by are properly kept or
filed by the Treasurer or some other officer; shall sign with the President
any or all certificates of shares of stock of the company; and in general
shall exercise all powers and perform all duties incident to the office of
Secretary and such other powers and duties as may from time to time be
assigned to him by the Board or the President or be prescribed by these
By-Laws.
Section 5.12. ASSISTANT SECRETARIES. The Assistant Secretaries shall
assist at all time in the performance of the duties of the Secretary, subject
to his control and direction, and, in the absence of the Secretary, the
Assistant Secretary designated therefor by the President, or in the absence
of such designation, and Assistant Secretary, shall exercise the powers and
perform the duties of the Secretary. The Assistant Secretaries shall exercise
such other powers and perform such other duties as may from time to time be
assigned to them by the Board or the President to be prescribed by these
By-Laws.
Section 5.13. TREASURER. Subject to order of the Board or the President,
or as provided for in these By-Laws, the Treasurer shall have the custody of
the corporate fund and securities; shall keep, or cause to be kept, full and
accurate books and records of account of the Company; shall deposit all
moneys and other valuable effects in the name and to the credit of the
Company, in such depositaries as may be designated by the Board; shall
disburse the funds of the Company as may be ordered by the Board, taking
proper vouchers for such disbursements; shall render to the President and
Directors at the regular meeting of the Board, or whenever they
9
<PAGE>
may require it, an account of all his transactions as Treasurer and of the
Financial condition of the Company; and in general shall exercise all powers
and perform all duties incident of the office of Treasurer and such other
powers and duties as may from time to time be assigned to him by the Board,
or the President or be prescribed by these By-Laws.
Section 5.14. ASSISTANT TREASURERS. The Assistant Treasurers shall assist
at all times in the performance of the duties of the Treasurer, subject to
his control and direction, and in the absence of the Treasurer, the Assistant
Treasurer designated therefor by the President, or, in the absence of such
designation, any Assistant Treasurer, shall exercise the powers and perform
the duties of the Treasurer. The Assistant Treasurers shall exercise such
other powers and perform such other duties as may from time to time be
assigned to them by the Board or the President or be prescribed by these
By-Laws.
ARTICLE VI
INDEMNIFICATION
Section 6.1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Each director or
officer, and their personal representatives, of the Company, shall be
indemnified by the Company against claims, liabilities, expenses, and costs
actually and necessarily incurred by him or his estate in connection with or
arising out of, any action, suit or proceeding in which he is made a party by
reason of his being, or having been an officer or director of the Company, or
of any other company fifty per centum (50%) or more of the voting stock of
which is owned by the Company and which he serves as a Director or officer at
the request of the Company; provided that the Company shall not indemnify
such Director or officer with respect to any matters as to which he shall be
finally adjudged in such action, suit or proceeding to have been liable for
actual negligence or misconduct in the performance of his duties as such
Director or officer. The indemnification herein provided for shall also apply
in respect of any amount paid in compromise of any such claim asserted
against such Director or officer (including expenses and cost actually and
necessarily incurred in connection therewith), provided the Board shall have
first approved such proposed compromise settlement and determined that the
Director or officer involved was not guilty of actual negligence or
misconduct; but in taking such action, any Director involved shall not be
qualified to vote thereon, and if for this reason a quorum of the Board
cannot be obtained to vote on such matter, it shall be determined by a
majority of the disinterested members of the Board, whether or not a quorum,
or such matter may be determined by a committee of three (3) disinterested
stockholders appointed by the stockholders at a duly called special or
regular meeting. As to whether or not a Director or officer was guilty of
actual negligence or misconduct in relation to any such matters, the Board
and each
10
<PAGE>
Director and officer may conclusively rely upon an opinion of independent legal
counsel selected by the Board or by the disinterested members of the Board or by
said stockholders committee, as the case may be.
ARTICLE VII
CHECKS, CONTRACTS, LOANS, BANK ACCOUNT, ETC.
Section 7.1. CHECK, DRAFTS, ETC. All checks, drafts, bill of exchange or
other orders for the payment of money, obligations, notes, or other evidences
of indebtedness, bills of lading, warehouse receipts and insurance
certificates of the company shall be signed or endorsed by such officer or
officers, agent or agents, employee or employees of the Company as shall from
time to time be designated by the Board.
Section 7.2. CONTRACTS. Unless authorized so to do by these By-Laws or
the Board, no officer, agent or employee shall have any power or authority to
bind the Company by any contract or engagement or to pledge its credit or to
render it liable pecuniarily for any purpose or to any amount. The board may
authorize one or more officers, agents or employees of the Company to enter
into any contract or execute and deliver any contract or other instrument in
the name and on behalf of the Company, and such authority may be general or
be confined to specific instances.
Section 7.3. LOANS. No loans shall be contracted on behalf of the
Company, and no negotiable paper shall be issued in its name, unless
authorized by the Board. When so authorized, the officer or officers
thereunto authorized may effect loans and advances at any time of the Company
from any bank, trust Company or other institution or from any person, firm,
association or corporation, and or such loans and advances may make, execute
and deliver promissory notes or other evidences of indebtedness of the
Company and, when authorized as aforesaid, as security for the payment of any
and all loans, advances, indebtedness and liabilities of the company, may
mortgage, pledge, hypothecate or transfer any real or personal property at
the time or thereafter held or to be held by the Company and to that end
execute instruments of mortgage or pledge or otherwise transfer such
property. Such authority may be general or be confined to specific instances.
No loan of money shall be made by the Company to any stockholder thereof.
Section 7.4. DEPOSITS: BANK ACCOUNTS. All funds of the Company shall be
deposited from time to time to the credit of the company in such general or
special bank account or as the Board may from time to time designate, or as
may be designated by any officer or officers of the Company to whom the power
to do so may be delegated by the Board. The Board may make such special rules
and regulations with respect thereto, not inconsistent with the provisions of
these By-
11
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Laws, as it may deem expedient.
Section 7.5. PROXIES. The Board, by resolution from time to time, and
either generally or in specific instances, or the President, unless the Board
shall have acted, may appoint an attorney or attorneys or agent or agents of the
Company, in its name and behalf, to cast the votes, which the Company may be
entitled to cast as a shareholder or otherwise in any other corporation any of
whose stock or other securities may be held by the Company, at meetings of the
holders of the stock or other securities of such other corporation, or to
consent tin writing to any action by such other corporation. Unless otherwise
ordered by the Board, the present, or any other person designated by him for the
purpose, shall have the full power and authority in behalf of the company to
attend and to act and to vote at any meetings of holders of stock or other
securities of any corporation in which the Company may hold stock or securities,
and, at any such meeting, shall possess and may exercise any and all the rights
and powers incident to the ownership of such stock or securities.
ARTICLE VIII
SHARES AND THEIR TRANSFER
Section 8.1. CERTIFICATES FOR SHARES. Certificates for shares of stock of
the Company shall be in such form as shall be approved by the Board. Each
such certificate shall bear the corporate seal or a facsimile thereof and
shall be signed by the President and the Secretary of the Company. In case
any officer or officers who shall have signed any such certificate or
certificates shall cease to be such officer or officers before such
certificate or certificates shall have been issued by the Company, such
certificate or certificates may none the less be adopted by the Company and
be issued and delivered as though the person or person who signed such
certificates or certificates had not ceased to be such officer or officers.
Section 8.2. TRANSFER OF SHARES. Transfer of shares of stock of the
Company, whether part paid or full paid, shall be made only on the books of
the Company, on payment of all taxes thereon and such shares (except as
hereinafter provided in the case of loss, destruction or mutilation of
certificates) properly endorsed by the holder thereof, or accompanied by
proper evidence of succession, assignment or authority to transfer, and
delivered to Secretary of the Company or a transfer agent, if any, of the
company. In addition to such other evidence of succession, assignment or
authority to transfer as may be required by the Company, President, or
Directors of Company may require when shares are owned by person residing out
of the of Montana and before entering any transfer of the shares on the books
of the Company or issuing a certificate therefor to the transferee, from
attorney or agent of the non-resident owner, or from person claiming under
the transfer, an
12
<PAGE>
affidavit or other evidences, that the non-resident owner was alive at the
date of the transfer, and if such affidavit or other satisfactory evidence is
not furnished, may require from the attorney, agent or claimant, a bond of
indemnity, with two sureties, satisfactory to the office of the Company or,
if not so satisfactory, then one approved by the judge of the District Court
of county in which the principal office of the Company is situated,
conditioned to protect the Company against any liability to the legal
representatives of the owners of the shares, in case of his or her death
before the transfer; and if such affidavit or other evidence or bond be not
furnished when required as herein provided, neither the Company nor any
officer thereof, shall be liable for refusing to enter the transfer on the
book of the Company.
A person in whose name shares of stock stand on books of Company shall be
deemed the owner thereof as regards the Company, and, upon any transfer of
shares, the person or persons into whose name or names such shares shall be
transferred on books of the Company shall be substituted for the person or
person out of whose name or names such shares shall have been transferred
with respect to all rights, privileges and obligations of holders of stock of
the Company and as against the Company or any other person or persons. Except
to extent permitted and provided for by law, no transfer of shares of stock
of the Company shall be valid against the Company, its stockholders or its
creditors, for any purpose until they shall have been entered on the records
of the company as hereinbefore in this section provided, or until a new
certificate is issued to the person to whom it has been transferred. The
Company shall be entitled to treat the holder of record of any share or
shares as the holder in fact thereof and, accordingly, shall not be sound to
recognize any equitable or other claim to or interest in such share on the
part of any other person, whether or not it shall have express or other
notice thereof, except as expressly provided by law and these By-Laws.
Section 8.3. LOST, DESTROYED AND MUTILATED CERTIFICATES. The holder of
any stock of the company shall immediately notify the company of any loss,
destruction or mutilation of the certificate for any such stock, and the
Board may, in its discretion, cause to be issued to him a new certificate or
certificates of stock upon the surrender of the mutilate certificate or, in
case or loss or destruction, upon satisfactory proof of such loss or
destruction; and the board may, in its discretion, require the owner of the
lost or destroyed certificate or his legal representative to give such surety
or sureties as it may direct, to indemnify the Company against any claim that
may be made against it with respect to the certificate or certificates
alleged to have been lost or destroyed.
Section 8.4. TRANSFER AGENT AND REGISTRAR: REGULATIONS. The company
shall, if and whenever the Board shall so determine, maintain one or more
transfer officers or agencies, each in charge of a transfer agent designated
by the Board, where the share of the stock of the Company shall be directly
transferable, and/or one or more
13
<PAGE>
registry offices, each in charge or a registrar designated by the Board where
such shares of stock shall be registered, and no certificate for share of
stock of the Company, in respect of which a transfer agent and/or a registrar
shall have been designated, shall be valid unless countersigned by such
transfer agent and/or registered by such registrar. The Board may also make
such additional rules and regulations as it may deem expedient concerning the
issue, transfer and registration of certificates for shares of the stock of
the Company.
Section 8.5. CLOSING OF TRANSFER BOOKS: RECORD DATE. The Board may close
the stock transfer books of the Company for a period not exceeding forty (40)
days preceding the date of any meeting of stockholders or election to vote,
or the date for the payment of any dividend, allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into
effect or the date of any other corporate action or proceeding; provided,
however, that in lieu of closing the stock transfer books as aforesaid, the
Board may fix in advance a date not exceeding forty (40) days preceding the
date of any meeting of stockholders, election or vote, or the date of the
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into
effect, or the date for any other corporate action or proceeding, as a record
date for the determination of the stockholders entitled to notice of and to
vote at any such dividend, or any such allotment of rights, or to exercise
the rights in respect of any such change or conversion or exchange of capital
stock, or entitled to participate in or benefit by such other corporate
action or proceeding, and, in such case, such stockholders, and only such
stockholders, as shall be stockholders of record on the date so fixed shall
be entitled to notice of and to vote at such meeting, election or vote, or to
receive payment of such dividend, or to receive such allotment of rights, or
to exercise such rights of change or conversion or exchange of stock, or to
participate in or benefit by such other corporate action or proceeding,
notwithstanding any transfer of any stock on the books of the Company, after
any such record date fixed as aforesaid. Each share of stock entitled under
the Article of Incorporation and the laws and constitution of Montana to be
voted may, at every meeting of the stockholders, be voted by the holder of
record thereof, on the books of the Company shall have closed, or a date
shall have been fixed as the record date for the determination of its
stockholders entitled to vote, as hereinbefore provided, no share of stock
shall be voted on at any election of directors which shall have been
transferred on the books of the company within the (10) days next preceding
such election of directors.
ARTICLE IX
DIVIDENDS
Section 9.1. PAYMENTS OF DIVIDENDS. Subject to the provisions of law and the
14
<PAGE>
provisions of the Articles of Incorporation, the Board may, at any regular or
special meeting, declare a dividend out of any funds legally available for
such purpose on the outstanding share of the Company, which dividends may be
paid in cash, in property, or in shares of the Company.
ARTICLE X
BOOKS AND RECORDS
Section 10.1. BOOK OF BY-LAWS. A copy of these By-Laws, certified by a
majority of the Directors and the Secretary of the Company, shall be
typewritten in a book kept in the principal office of the Company to be known
as the "Book of By-Laws". Said book shall be open to the inspection of the
public during the office hours of the Company each day except holidays.
Whenever any amendment to these By-Laws or new by-laws is adopted, it shall
be typewritten in the book of By-Laws, with the original By-Laws, and
immediately after them. If any By-Laws be repealed, the fact of repeal, with
the date of the meeting at which the repeal was enacted, or written consent
was filed, shall be stated in said book.
Section 10.2. JOURNAL OF MEETINGS OF BOARD OF DIRECTORS AND STOCKHOLDERS.
The Company shall also keep a journal of all meeting of its directors and
stockholders, with the time and place of holding the same, whether regular or
special, and if special, its object, how authorized, and the notice thereof
given. Such record must embrace every act done or ordered to be done; who
were present, and, in the record of directors' meetings, who absent. If
requested by any Director or stockholder, the time must be noted when he
entered the meeting or obtained leave of absence therefrom. On a similar
request, the "ayes" and "nays" must be taken on any action or proposed
action, and a record thereof made. On a similar request, the protest of any
Director or stockholder to any
15
<PAGE>
action or proposed action, must be entered in full, and such records must be
opened to the inspection of any Director, stockholder or creditor of the
Company. In lieu of embracing in the records of stockholders' meetings who
were present, a list showing the names of those present at any such meeting,
certified by the chairman and secretary thereof, may be filed and kept in the
office of the Secretary of the Company.
Section 10.3. STOCK AND TRANSFER BOOK. The Company shall also keep a
book, to be know as the "stock and transfer book" in which must be kept a
record of all stock; the names of the stockholders alphabetically arranged;
installments paid or unpaid; assessments levied, and paid and unpaid, a
statement of every alienation, sale or transfer of stock made, the date
thereof, and by and to whom. The Stock and Transfer creditor, provided that
the Board, may, from time to time, prescribe the conditions and regulations
pursuant to which such inspections will be permitted.
Section 10.4. OTHER BOOKS AND RECORDS. The company shall keep a record of
all business transactions and shall keep such other books and records as the
Board or the officers may from time to time determine.
Section 10.5. PLACE OF KEEPING. The books and records of the Company, or
duplicates duly certified thereof, shall be kept at the principal office of
the Company.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1. SEAL. The corporate seal shall have inscribed thereon the
name of the Company, the year of its organization, the State of its
incorporation, and the words "Corporate Seal". Such seal may be used by
causing it or a facsimile or equivalent thereof to be impressed or affixed or
reproduced.
Section 11.2. FISCAL YEAR. The fiscal year of the Company shall begin on
January 1 and end of December 31 in each year.
16
<PAGE>
Section 11.3. NOTICES. Any notice required by these By-Laws, or
otherwise, to be given by mail shall be deemed to have been given by mail to
any person entitled thereto at the time it shall have been deposited in a
Post Office or mail box or mail chute maintained of the purpose by the United
States Government, provided that it shall at the time of such deposit be
enclosed in a postage prepaid envelope or wrapped addressed to such person at
his address as it appears on the books and records of the Company, or, if no
address appears on such books and records, then at such address as shall be
otherwise known to the Secretary, or, if no such address appears on such
books and records or is otherwise know to the Secretary, then in care of the
agent of the Company at its principal office in the State of Montana.
Whenever, by any provisions of the Articles of Incorporation or these
By-Laws, or otherwise, any notice is required to be given any specified
number of days before any meeting or other event, the day on which such
notice was given shall be counted, but the day of such meeting or other event
shall not be counted in determining whether or not notice has been given in
proper time in a particular case.
Section 11.4. WAIVER OF NOTICE. Except as may be expressly provided by
law or by the Articles of Incorporation, whenever any notice whatever is
required to be given under the provisions of the laws of the State of Montana
or under the provisions of the Articles of Incorporation or these By-Laws, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Except as maybe otherwise specifically provided by law,
any waiver by mail, telegraph, cable or wireless, bearing the name of the
person entitled to notice, shall be deemed a waiver in writing, duly signed.
The presence of any person at any meeting, either in person or by proxy,
shall be deemed the equivalent of a waiver in writing, duly signed.
Attendance of a Director at any meeting of the Board shall constituted a
waiver of notice of such meeting except where a Director attends for the
express purpose of objecting to the transaction of any business because the
meeting was not lawfully called or convened.
Section 11.5. INFORMAL ACTION BY STOCKHOLDER. When all the stockholders
entitled under the Articles of Incorporation and the law and constitution of
Montana to vote at any meeting are present at any meeting, however called or
notified, and sign a written consent thereto on a record of such meeting, the
act and proceedings of such meeting are as valid as if has at a meeting
legally called and noticed.
17
<PAGE>
Section 11.6. RESIGNATIONS. Except as otherwise provided by law, any
officer or Director may resign at any time upon giving written notice to the
President or the Secretary. Such resignation shall take effect at the time
specified in the notice and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 11.7. AMENDMENT OF BY-LAWS. These By-Laws may be repealed and
amended and new By-Law maybe adopted by the affirmative vote of a majority of
the Board at any Special meeting of the Board if notice of the proposed
repeal, amendment or new by-law to be adopted be contained in the notice of
such special meeting, provided that the power to be revoked by the vote of
the holders of two-thirds (2/3) of the capital stock of the Company at any
regular meeting of law shall take effect until typewritten, and no repeal of
any by-law shall take effect until the fact of such repeal shall be stated in
the Book of By-Laws in accordance with Section 10.1.
18
<PAGE>
AMENDMENTS
OF THE BY-LAWS
Section 2.2.
Section 2.2. ANNUAL MEETINGS. Commencing with the year 1974 an annual
meeting of the stockholders of the Company shall be held on the first
Thursday of May in each year if not a legal holiday, and if a legal holiday,
then on the next succeeding business day not a legal holiday. At each annual
meeting, directors shall be elected by stockholders in accordance with the
provisions of the Articles of Incorporation of the Company (hereinafter
called the "Articles of Incorporation") and these By-Laws. Each annual
meeting shall be a general meeting, open for the transaction of any business
within the powers of the Company, without special notice of such business,
except in any case where special notice may be required by the laws of the
State of Montana.
Section 3.2.
Section 3.2. NUMBER QUALIFICATIONS AND TERMS OF OFFICE. The number of
directors which shall constitute the whole Board shall be seven directors,
each of whom shall be the holder of at least one share of capital stock of
the Company. The term of office of each Director shall be for one year and
until his successor is elected and qualified.
19
<PAGE>
AMENDMENTS
OF THE BY-LAWS (At September 1, 1982)
Section 2.2.
Section 2.2. ANNUAL MEETING. Commencing with the current fiscal year, an
Annual Meeting of the Stockholders of the Company shall be held on the first
Thursday of November in each year if not a legal holiday, and if a legal
holiday, then on the next succeeding business day not a legal holiday. The
first of the November Annual Meetings is to be held on Thursday, November 4,
1982. At each Annual Meeting, Directors shall be elected by Stockholders in
accordance with the provisions of the Articles of Incorporation of the
Company (hereinafter called the "Articles of Incorporation") and these
By-Laws. Each Annual Meeting shall be a general meeting, open for the
transaction of any business within the powers of the Company, without special
notice of such business except in any case where special notice may be
required by the laws of the State of Montana.
Section 11.2.
Section 11.2. FISCAL YEAR. The Fiscal Year of the Company shall begin on
July 1 and end on June 30 in each year.
20
<PAGE>
AMENDMENTS
OF THE BY-LAWS
Section 3.2
Section 3.2. NUMBER, QUALIFICATION AND TERM OF OFFICE. The number of
directors which shall constitute the whole Board shall be determined by
resolution of the Board of Directors except that the number of directors
shall not be less than five or more than nine. Each director shall own at
least ten shares of capital stock of the Company. The term of office shall be
one year unless the Board of Directors by resolution implement staggered
terms consistent with the requirements of prevailing law. The terms of
directors, if staggered, shall be two years.
21
<PAGE>
AMENDMENTS
OF THE BY-LAWS
Section 5.9. PRESIDENT. The President shall be the executive officer of
the Company; shall preside at stockholder meetings and at meetings of the
board subject to the control of the board; shall preside at meetings for the
election of Directors and at other meetings of stockholders and at meetings
of the board of the Executive Committee; subject to the control and direction
of the Board, shall have general supervision, control and management of the
affairs and business of the Company, and, general charge and supervision of
Vice Presidents and Division Managers, and shall see that all orders and
resolutions of the Board are carried into effect; shall sign or delegate to
one or more Vice Presidents, the power to sign and execute in the name of the
company all deeds mortgages, bonds, contracts or other instruments as may be
required in the ordinary course of business; and in general shall exercise
all powers and perform the duties incident to the office of President and
such other powers and duties as may from time to time be assigned to him by
the Board or be prescribed by these By-Laws.
22
<PAGE>
_____________________________________________________
ENERGY WEST INCORPORATED
and
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
Trustee
_____________________________________________________
INDENTURE
Dated as of ______, 1997
_____________________________________________________
$8,000,000
__% Notes due June 1, 2012
_____________________________________________________
<PAGE>
ENERGY WEST INCORPORATED
Reconciliation and tie between Trust Indenture Act of 1939, as amended,
and Indenture, dated as of __________, 1997
CROSS-REFERENCE TABLE*
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
--------------- -----------------
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . 7.10(a)
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.10(a)
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . 7.12
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . N.A.**
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . 7.10(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10; 11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . N.A.**
311 (a) . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . N.A.**
312 (a) . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . 11.03
(c) . . . . . . . . . . . . . . . . . . . . . . . 11.03
313 (a) . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . N.A.**
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . 11.02
(d) . . . . . . . . . . . . . . . . . . . . . . . 7.06
314 (a) . . . . . . . . . . . . . . . . . . . . . . . 4.02; 4.10; 11.02
(b) . . . . . . . . . . . . . . . . . . . . . . . N.A.**
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . N.A.**
(d) . . . . . . . . . . . . . . . . . . . . . . . N.A.**
(e) . . . . . . . . . . . . . . . . . . . . . . . 11.05
(f) . . . . . . . . . . . . . . . . . . . . . . . N.A.**
315 (a) . . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . 7.05; 11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . 6.11
<PAGE>
316 (a) (last sentence). . . . . . . . . . . . . . . . . 2.09
(a)(1)(A). . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B). . . . . . . . . . . . . . . . . . . . 6.04
(a)(2). . . . . . . . . . . . . . . . . . . . N.A.**
(b). . . . . . . . . . . . . . . . . . . . 6.07
(c). . . . . . . . . . . . . . . . . . . . 6.14
317(a)(1). . . . . . . . . . . . . . . . . . . . 6.08
(a)(2). . . . . . . . . . . . . . . . . . . . 6.09
(b). . . . . . . . . . . . . . . . . . . . 2.04
318 (a). . . . . . . . . . . . . . . . . . . . 11.01
(b). . . . . . . . . . . . . . . . . . . . N.A.**
(c). . . . . . . . . . . . . . . . . . . . 11.01
____________________________
* This reconciliation and tie shall not, for any purpose, be
deemed to be part of the Indenture.
** N.A. means not applicable.
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TABLE OF CONTENTS
SECTION HEADING PAGE
DEFINITIONS AND INCORPORATION BY REFERENCE . . . . 1
1.01 Definitions. . . . . . . . . . . . . . . . . . . . 1
1.02 Other Definitions. . . . . . . . . . . . . . 6
1.03 Incorporation by Reference of Trust Indenture Act 6
1.04 Rules of Construction. . . . . . . . . . . . . . . 6
THE NOTES. . . . . . . . . . . . . . . . . . . . . 7
2.01 Authorization and Description; Form and Dating . . 7
2.02 Execution and Authentication . . . . . . . . . . . 8
2.03 Registrar and Paying Agent . . . . . . . . . . . . 8
2.04 Paying Agent to Hold Money in Trust. . . . . . . . 9
2.05 Noteholder Lists . . . . . . . . . . . . . . . . . 9
2.06 Transfer and Exchange. . . . . . . . . . . . . . . 9
2.07 Replacement Notes. . . . . . . . . . . . . . . . . 10
2.08 Outstanding Notes. . . . . . . . . . . . . . . . . 10
2.09 Treasury Notes . . . . . . . . . . . . . . . . . . 11
2.10 Temporary Notes. . . . . . . . . . . . . . . . . . 11
2.11 Cancellation . . . . . . . . . . . . . . . . . . . 11
2.12 Defaulted Interest . . . . . . . . . . . . . . . . 11
2.13 Persons Deemed Owners. . . . . . . . . . . . . . . 11
REDEMPTION OF NOTES AT CORPORATION'S OPTION. . . . 12
3.01 Redemption Right at Corporation's Option . . . . . 12
3.02 Notices to Trustee . . . . . . . . . . . . . . . . 12
3.03 Selection of Notes to be Redeemed. . . . . . . . . 12
3.04 Notice of Redemption . . . . . . . . . . . . . . . 13
3.05 Effect of Notice of Redemption . . . . . . . . . . 13
3.06 Deposit of Redemption Price. . . . . . . . . . . . 13
3.07 Notes Redeemed in Part . . . . . . . . . . . . . . 13
COVENANTS. . . . . . . . . . . . . . . . . . . . . 14
4.01 Payment of Notes . . . . . . . . . . . . . . . . . 14
4.02 Reporting. . . . . . . . . . . . . . . . . . . . . 14
4.03 Corporate Existence. . . . . . . . . . . . . . . . 14
4.04 Payment of Taxes and Other Claims. . . . . . . . . 14
4.05 Restrictions on Sale of Assets . . . . . . . . . . 15
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4.06 Restrictions on Liens or Secured Indebtedness . . 15
4.07 Restrictions on Incurring Additional Fund Debt . . 16
4.08 Restrictions on the Declaration of Dividends . . . 17
4.09 Reports to Governmental Agencies . . . . . . . . . 17
4.10 Compliance Certificate . . . . . . . . . . . . . . 17
SUCCESSORS . . . . . . . . . . . . . . . . . . . . 18
5.01 When Corporation May Merge, etc. . . . . . . . . . 18
DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . 18
6.01 Events of Default. . . . . . . . . . . . . . . . . 18
6.02 Acceleration . . . . . . . . . . . . . . . . . . . 21
6.03 Other Remedies . . . . . . . . . . . . . . . . . . 21
6.04 Waiver of Past Default . . . . . . . . . . . . . . 21
6.05 Control by Majority. . . . . . . . . . . . . . . . 21
6.06 Limitation on Suits. . . . . . . . . . . . . . . . 22
6.07 Rights of Holders to Receive Payment . . . . . . . 22
6.08 Collection Suit by Trustee . . . . . . . . . . . . 22
6.09 Trustee May File Proofs of Claim . . . . . . . . . 22
6.10 Priorities . . . . . . . . . . . . . . . . . . . . 23
6.11 Undertaking for Costs. . . . . . . . . . . . . . . 23
6.12 Waiver of Stay or Extension Laws . . . . . . . . . 23
6.13 Restoration of Rights and Remedies . . . . . . . . 24
6.14 Record Date. . . . . . . . . . . . . . . . . . . . 24
TRUSTEE. . . . . . . . . . . . . . . . . . . . . . 24
7.01 Duties of Trustee. . . . . . . . . . . . . . . . . 24
7.02 Rights of Trustee. . . . . . . . . . . . . . . . . 25
7.03 Individual Rights of Trustee . . . . . . . . . . . 26
7.04 Trustee's Disclaimer . . . . . . . . . . . . . . . 26
7.05 Notice of Defaults . . . . . . . . . . . . . . . . 26
7.06 Reports by Trustee to Holders. . . . . . . . . . . 26
7.07 Compensation and Indemnity . . . . . . . . . . . . 26
7.08 Replacement of Trustee . . . . . . . . . . . . . . 27
7.09 Successor Trustee by Merger, etc.. . . . . . . . . 28
7.10 Eligibility; Disqualification. . . . . . . . . . . 28
7.11 Preferential Collection of Claim Against Corporation 30
7.12 Appointment of Co-Trustee. . . . . . . . . . . . . 30
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DISCHARGE OF INDENTURE . . . . . . . . . . . . . . 31
8.01 Termination of Corporation's Obligations . . . . . 31
8.02 Application of Trust Money . . . . . . . . . . . . 32
8.03 Repayment to Corporation . . . . . . . . . . . . . 32
AMENDMENTS, SUPPLEMENTS, AND WAIVERS . . . . . . . 32
9.01 Without Consent of Holders . . . . . . . . . . . . 32
9.02 With Consent of Holders. . . . . . . . . . . . . . 32
9.03 Compliance with Trust Indenture Act. . . . . . . . 33
9.04 Revocation and Effect of Consents. . . . . . . . . 33
9.05 Notation on or Exchange of Notes . . . . . . . . . 33
9.06 Trustee Protected. . . . . . . . . . . . . . . . . 33
REDEMPTION OF NOTES AT HOLDER'S OPTION . . . . . . 33
10.01 Redemption Right at Holder's Option. . . . . . . . 33
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . 33
11.01 Trust Indenture Act Controls . . . . . . . . . . . 33
11.02 Notices. . . . . . . . . . . . . . . . . . . . . . 33
11.03 Communication by Holders with Other Holders. . . . 35
11.04 Certificate and Opinion as to Conditions Precedent 35
11.05 Statements Required in Certificate or Opinion. . . 35
11.06 Rules by Trustee and Agent . . . . . . . . . . . . 35
11.07 Legal Holidays . . . . . . . . . . . . . . . . . . 36
11.08 No Recourse Against Others . . . . . . . . . . . . 36
11.09 Duplicate Originals. . . . . . . . . . . . . . . . 36
11.10 Governing Law. . . . . . . . . . . . . . . . . . . 36
11.11 Table of Contents, Headings, etc.. . . . . . . . . 36
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . 37
ACKNOWLEDGEMENTS. . . . . . . . . . . . . . . . . . . . . . . 38
EXHIBIT A - FORM OF GLOBAL SECURITY . . . . . . . . . . . . . A-1
EXHIBIT B - FORM OF NOTE. . . . . . . . . . . . . . . . . . . B-1
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INDENTURE dated as of _________, 1997, between ENERGY
WEST INCORPORATED, a Montana corporation ("Corporation"), and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, a national banking association organized and
existing under the laws of the United States of America ("Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Corporation's
__% Notes due June 1, 2012 ("Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"AFFILIATE" means any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Corporation.
"AGENT" means any Registrar, Paying Agent or co-registrar
or agent for service of notices and demands. See Section 2.03.
"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.
"BOARD OF DIRECTORS" means the Board of Directors of the
Corporation or any authorized committee of the Board.
"BOARD RESOLUTION" means a copy of a resolution certified
by the Secretary or an Assistant Secretary of the Corporation to have been duly
adopted by the Board of Directors and to be in full force and effect.
"CAPITALIZED LEASE" means any lease of property (real,
personal or mixed) which in accordance with generally accepted accounting
principles in effect from time to time during the term (original or renewal)
of such lease is required to be capitalized on a balance sheet of the lessee.
"CAPITALIZED LEASE OBLIGATION" means at any time, the
aggregate amount included as a liability on the balance sheet of the lessee
with respect to the present value of the minimum rental commitment under a
Capitalized Lease of the lessee.
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"CAPITAL STOCK" means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock.
"COMMON STOCK" means the common stock, par value $0.15
per share, of the Corporation as the same exists at the date of this
Indenture or as such stock shall be constituted from time to time.
"CONSOLIDATED", when used in conjunction with any other
defined term means the aggregate amount of the items included within the
defined term of the Corporation and any Subsidiary (provided, however, that
in the case of a Subsidiary, the amount of the items included within the defined
term of such Subsidiary shall be calculated only with respect to the
Corporation's percentage ownership interest in such Subsidiary) on a
consolidated basis eliminating inter-company items.
"CONSOLIDATED NET INCOME" for any period means the aggregate
of the net income of the Corporation and its Subsidiaries for such period after
eliminating all inter-company items and portions of earnings properly
attributable to minority interests, if any, in shares of capital stock of such
Subsidiaries, and after eliminating any extraordinary gains or losses on the
sale or other disposition of investments, fixed assets or capital assets, and
any tax deductions or credits on account of such excluded gains or losses, all
computed in accordance with generally accepted accounting principles.
"CONSOLIDATED NET INCOME AVAILABLE FOR INTEREST CHARGES"
for any period means Consolidated Net Income for such period, plus (without
duplication) all amounts deducted in the computation thereof on account of
(i) Interest Charges on Consolidated Indebtedness, and (ii) taxes in respect
of income and excess profits.
"CORPORATE TRUST OFFICE" means the office of the Trustee
located in Minneapolis, Minnesota, at which at any time its corporate trust
business shall be principally administered, which office at the date of
execution of this Indenture is located at Norwest Center, Sixth Street and
Marquette Avenue, Minneapolis, Minnesota 55479-0069, Attention: Corporate Trust
Department.
"CORPORATION" means the party named as such above until a
successor replaces it pursuant to the applicable provisions of the Indenture and
thereafter means the successor.
"DEFAULT" means any event which is, or after notice or
passage of time would be, an Event of Default.
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"DEFERRED INCOME TAXES" means 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.
"DEPOSITORY" means The Depository Trust Company in the City
of New York and any successor to such Person.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
from time to time amended.
"FUNDED DEBT" means all Indebtedness maturing one year or
more from the date of the creation thereof. Deferred Income Taxes do not
constitute Funded Debt.
"GLOBAL SECURITY" means a security evidencing all of the
Notes issued to the Depository or its nominee and registered in the name of such
Depository or nominee.
"HOLDER" OR "NOTEHOLDER" means a person in whose name a Note
is registered; provided, however, that for purposes of Sections 6.06 and 6.07
and Article 10 hereof, such terms shall also include the Beneficial Owner of any
Note.
"INDEBTEDNESS" of a Person means (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 a
balance sheet of such Person prepared in accordance with generally accepted
accounting principles as of such date; (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 such Person
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 such Person has guaranteed.
For the purpose of computing the Indebtedness of any Person,
there shall be excluded any particular Indebtedness 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.
"INDENTURE" means this Indenture as amended from time to
time.
"INTEREST CHARGES" on any Indebtedness of any Person for any
period, means all amounts which would, in accordance with generally accepted
accounting principles, be deducted in computing net income for such Person for
such period on
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account of interest on such Indebtedness, including imputed interest in respect
of Capitalized Lease Obligations and amortization of debt discount and expense.
"NOTE" OR "NOTES" means the Notes described above issued
under this Indenture.
"OFFICERS" means the Chairman of the Board, any Vice
Chairman, the President, any Senior Vice President, Executive Vice President,
Vice President or Assistant Vice President, the Treasurer, the Controller, the
Secretary, any Assistant Treasurer or any Assistant Secretary of the
Corporation.
"OFFICERS' CERTIFICATE" means a certificate signed by two
Officers, one of whom must be the Chairman of the Board, a Vice Chairman,
President, a Senior Vice President, an Executive Vice President, a Vice
President or the Treasurer of the Corporation. See Section 11.04 and 11.05.
"OPINION OF COUNSEL" means a written opinion from legal
counsel who may be an employee of or counsel to the Corporation or the Trustee
and who is acceptable to the Trustee. See Sections 11.04 and 11.05.
"PERSON" means any individual, corporation, partnership,
joint venture, association, joint-stock company, limited liability company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"PRINCIPAL" of any Note means the principal of such Note
plus the premium, if any, on such Note.
"PRO FORMA ANNUAL INTEREST CHARGES" means as of any date,
the net amount (without duplication) of (i) Interest Charges in respect of
Consolidated Indebtedness outstanding on such date, after giving effect to any
Consolidated Indebtedness being retired out of the proceeds of any Indebtedness
being created, assumed, incurred or guaranteed on such date, for the period of
12 full calendar months next preceding such date, plus (ii) Interest Charges in
respect of any Indebtedness being created, assumed, incurred or guaranteed on
such date for the period of 12 full calendar months next succeeding such date.
"REDEMPTION DATE" when used with respect to any Note to be
redeemed means the date fixed for such redemption pursuant to this Indenture.
"REDEMPTION PRICE" when used with respect to any Note to be
redeemed means the price at which it is to be redeemed pursuant to this
Indenture and the Note.
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"SEC" means the Securities and Exchange Commission.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary within the
meaning of Rule 12b-2 under the Exchange Act, as the same may be amended from
time to time.
"STOCKHOLDERS' EQUITY" means, as applied to any Person on
any date of determination, the amount which would be shown on the balance sheet
of such Person as the difference between such Person's total assets and total
liabilities, which amount will include capital stock, capital surplus and
retained earnings, all as calculated in accordance with generally accepted
accounting principles.
"SUBSIDIARY" means any company (i) a majority (by number of
votes) of the outstanding shares of any class or classes of which shall at the
time be owned by the Corporation or by any Subsidiary of the Corporation if the
holders of the shares of such class or classes are ordinarily, in the absence of
contingencies, entitled to vote for the election of a majority of the directors
(or persons performing similar functions) of the issuer thereof, even though the
right so to vote has been suspended by the happening of such a contingency; or
(ii) a majority of other ownership interests of which shall be owned by the
Corporation or by any Subsidiary of the Corporation, including, without
limitation partnership interests, joint venture interests or ownership by means
of asset ownership and control.
"TANGIBLE ASSETS" means, as applied to any Person at any
date, all assets other than those which would be treated as intangibles under
generally accepted accounting principles, including, without limitation, as
intangibles such items as good will, trademark, trade names, service marks,
brand names, copyrights, patents, licenses and rights with respect to the
foregoing, unamortized debt discount and expense, and organization expenses.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date shown above except as provided
in Section 9.03.
"TOTAL CAPITALIZATION" means as applied to any Person on any
date of determination, the sum of such Person's Funded Debt and Stockholder's
Equity.
"TRUSTEE" means the party named as such above until a
successor replaces it pursuant to the applicable provisions of the Indenture and
thereafter means the successor.
"TRUST OFFICER" means the Chairman of the Board, the
President or any other officer or assistant officer of the Trustee assigned by
the Trustee to administer its corporate trust matters.
"UNITED STATES" means the United States of America.
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"U.S. GOVERNMENT OBLIGATIONS" means securities that are
(x) direct obligations of the United States of America for the payment of which
its full faith and credit is pledged or (y) obligations of a person controlled
or supervised by and acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States, which, in either case, are not
callable or redeemable at the option of the issuer thereof.
"VOTING STOCK" means stock having the present right to vote
for the election of directors of a corporation.
SECTION 1.02 OTHER DEFINITIONS.
Term Defined in Section
"BANKRUPTCY LAW" 6.01
"CUSTODIAN" 6.01
"EVENTS OF DEFAULT" 6.01
"LEGAL HOLIDAY" 11.07
"PAYING AGENT" 2.03
"REGISTRAR" 2.03
"REPRESENTATIVE" 10.01
"REDEMPTION REQUEST" 10.02
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE
ACT. Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"INDENTURE SECURITIES" means the Notes.
"INDENTURE SECURITY HOLDER" means a Noteholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUST" or "INSTITUTIONAL TRUSTEE" means the
Trustee.
"OBLIGOR" on the indenture securities means the Corporation.
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All other terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule
under the TIA have the meanings assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION. Unless the context
otherwise requires:
(1) a term has the meaning assigned
to it;
(2) an accounting term not otherwise defined has
the meaning assigned to it in accordance with
generally accepted accounting principles;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and
in the plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) "Section" shall refer to a Section of this
Indenture.
ARTICLE 2
THE NOTES
SECTION 2.01. AUTHORIZATION AND DESCRIPTION; FORM AND
DATING. There is hereby authorized to be issued under this Indenture a single
issue or series of Notes designated __% Notes due June 1, 2012, limited in
aggregate principal amount to $8,000,000. The form of the Notes to be
originally issued as Global Securities shall be substantially in the form of
Exhibit A attached hereto and the form of the Notes to be issued in exchange
for a Global Security shall be substantially in the form of Exhibit B attached
hereto, respectively, with such insertions, omissions and other variations as
may be necessary to conform to the provisions of this Indenture, the terms of
such Exhibits A and B being incorporated herein by reference and made a part of
this Indenture. The Notes may have notations, legends or endorsements required
by law, stock exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall mature and become payable on June 1, 2012 and
shall bear interest from the date set forth in the form of Note contained herein
at the rate of __% per annum.
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SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers
shall sign the Notes for the Corporation by manual or facsimile signature. The
Corporation's seal shall be reproduced on the Notes.
If an Officer whose signature is on a Note no longer holds
that office at the time the Note is authenticated, the Note shall nevertheless
be valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall authenticate Notes for original issue up
to aggregate principal amount of $8,000,000 upon a written order of the
Corporation signed by two Officers. The aggregate principal amount of Notes
outstanding at any time may not exceed that amount except as provided in Section
2.07.
The Trustee may appoint an authenticating agent acceptable
to the Corporation to authenticate Notes. An authenticating agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication of such
agent. An authenticating agent has the same rights as an Agent to deal with the
Corporation or an Affiliate.
SECTION 2.03. REGISTRAR AND PAYING AGENT. The Corporation
shall maintain an office or agency where Notes may be presented for registration
of transfer or for exchange ("Registrar"), an office or agency where Notes may
be presented for payment ("Paying Agent") and an office or agency where notices
and demands to or upon the Corporation in respect of the Notes and this
Indenture may be served. The Registrar shall keep a register of the Notes and
of their transfer and exchange. The Corporation may appoint one or more
co-registrars and one or more additional paying agents. The Corporation or any
Subsidiary may act as Registrar or Paying Agent. The term "Paying Agent"
includes any additional paying agent.
The Corporation shall notify the Trustee of the name and
address of any Agent not a party to this Indenture. If the Corporation fails to
maintain a Registrar, Paying Agent or agent for service of notices and demands
or fails to give the foregoing notice, the Trustee shall act as such.
The Corporation initially appoints Norwest Bank Minnesota,
National Association, as Registrar, Paying Agent and agent for service of
notices and demands.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The
Corporation shall require each Paying Agent other than the Trustee to agree in
writing that the
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Paying Agent will hold in trust for the benefit of Noteholders or the Trustee
all money held by the Paying Agent for the payment of principal or interest on
the Notes, and will notify the Trustee of any Default by the Corporation in
making such payment. While any such Default continues, the Trustee may require
a Paying Agent to pay all money held by it to the Trustee. The Corporation at
any time may require a Paying Agent to pay all money held by it to the Trustee.
Upon payment over to the Trustee, the Paying Agent shall have no further
liability for the money. If the Corporation (or any Subsidiary) acts as Paying
Agent, it shall segregate and hold as a separate trust fund all money held by it
as Paying Agent.
SECTION 2.05. NOTEHOLDER LISTS. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Noteholders. If the Trustee is not the
Registrar, the Corporation shall furnish to the Trustee on or before each
interest payment date and at such other times as the Trustee may request in
writing a list of names and addresses of Noteholders in such form and as of such
date as the Trustee may reasonably require.
SECTION 2.06. TRANSFER AND EXCHANGE. When Notes are
presented to the Registrar or a co-registrar with a request to register the
transfer or to exchange them for an equal principal amount of Notes of other
denominations, the Registrar shall register the transfer or make the exchange,
provided that every Note presented or surrendered for registration of transfer
or exchange shall be duly endorsed or be accompanied by a written instrument of
transfer in form satisfactory to the Corporation and the Registrar duly executed
by the Holder thereof or by his or her attorney duly authorized in writing. To
permit registrations of transfer and exchanges, the Trustee shall authenticate
Notes at the Registrar's request. No service charge shall be made for any
registration of transfer or exchange of Notes, but the Corporation may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto, other than exchanges pursuant to
Sections 2.10 or 3.07. A Global Security shall be exchangeable pursuant to this
Section 2.06 for Notes registered in the names of Persons other than the
Depository or its nominee only as provided in this paragraph. A Global Security
shall be exchangeable pursuant to this Section 2.06 if (x) such Depository
notifies the Company that it is unwilling or unable to continue as Depository
for such series or at any time ceases to be a clearing agency registered as such
under the Exchange Act, (y) the Corporation executes and delivers to the Trustee
an Officers' Certificate providing that such Global Security shall be so
exchangeable or (z) there shall have occurred and be continuing an Event of
Default which entitles the Holders to accelerate the maturity thereof. Notes so
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.
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Notwithstanding any other provisions of this Section 2.06, a
Global Security may not be transferred except as a whole by the Depository to a
nominee of such Depository or by a nominee of such Depository to such Depository
or another nominee of such Depository.
SECTION 2.07. REPLACEMENT NOTES. If the Holder of a Note
claims that the Note has been lost, destroyed or wrongfully taken, the
Corporation shall issue and the Trustee shall authenticate a replacement Note if
the Trustee's requirements are met. If required by the Trustee or the
Corporation, an indemnity bond must be obtained and be sufficient in the
judgment of both to protect the Corporation, the Trustee, any Agent or any
authenticating agent from any loss which any of them may suffer if a Note is
replaced. The Corporation may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the
Corporation.
SECTION 2.08. OUTSTANDING NOTES. The Notes outstanding at
any time are all the Notes authenticated by the Trustee except for those
cancelled by it, and those described in this Section 2.08 as not outstanding.
If a Note is replaced pursuant to Section 2.07, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If Notes are considered paid under Section 4.01, they cease
to be outstanding and interest on them ceases to accrue.
A Note does not cease to be outstanding because the
Corporation or an Affiliate holds the Note.
SECTION 2.09. TREASURY NOTES. In determining whether the
Holders of the required principal amount of Notes have concurred in any
direction, waiver or consent, Notes owned by the Corporation or an Affiliate
shall be disregarded, except for purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent. Only
Notes which the Trustee knows are so owned shall be disregarded.
SECTION 2.10. TEMPORARY NOTES. Until definitive Notes are
ready for delivery, the Corporation may prepare and the Trustee shall
authenticate temporary Notes. Temporary Notes shall be substantially in the
form of definitive Notes but may have variations that the Corporation considers
appropriate for temporary Notes. Without unreasonable delay, the Corporation
shall prepare and the Trustee shall authenticate definitive Notes in exchange
for temporary Notes.
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SECTION 2.11 CANCELLATION. The Corporation at any time may
deliver Notes to the Trustee for cancellation. The Registrar and the Paying
Agent shall forward to the Trustee any Notes surrendered to them for
registration of transfer, exchange or payment. The Trustee shall cancel all
Notes surrendered for registration of transfer, exchange or payment and shall
dispose of cancelled Notes as the Corporation directs. The Corporation may not
issue new Notes to replace Notes that it has paid or delivered to the Trustee
for cancellation.
SECTION 2.12. DEFAULTED INTEREST. If the Corporation
defaults in a payment of interest on the Notes, it shall pay the defaulted
interest in any lawful manner. It may pay the defaulted interest, plus any
interest payable on the defaulted interest, to the persons who are Noteholders
on a subsequent record date. The Corporation shall fix the special record date
and payment date in a manner satisfactory to the Trustee. At least 15 days
before the special record date, the Corporation shall mail to Noteholders a
notice that states a special record date, the payment date and the amount of
interest to be paid.
SECTION 2.13. PERSONS DEEMED OWNERS. Prior to due
presentment of a Note for registration of transfer, the Corporation, the
Trustee and any agent of the Corporation or the Trustee may treat the Person in
whose name such Note is registered as the owner of such Note for purposes of
receiving payment of principal of (and premium, if any) and (subject to
Section 2.12) interest, if any, on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and neither the Corporation,
the Trustee nor any agent of the Corporation or the Trustee shall be affected by
notice to the contrary. All such payments so made to any such Person, or upon
such Person's order, shall be valid, and, to the extent of the sums so paid,
effectual to satisfy and discharge the liability for moneys payable upon any
such Note.
Except to the extent provided in Section 6.06 and 6.07
hereof, no Beneficial Owner of any interest in any Global Security held on its
behalf by a Depository shall have any rights under this Indenture with respect
to such Global Security, and such Depository may be treated by the Corporation,
the Trustee, and any agent of the Corporation or the Trustee as the owner of
such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall impair, as between a Depository and such
Beneficial Owners of interests, the operation of customary practices governing
the exercise of the rights of the Depository as holder of any Note.
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ARTICLE 3
REDEMPTION OF NOTES AT
CORPORATION'S OPTION
SECTION 3.01. REDEMPTION RIGHT AT CORPORATION'S OPTION.
The Corporation has the right to redeem the Notes prior to maturity at its sole
option, in whole or in part, at any time and from time to time on or after
December 1, 2002 at the Redemption Prices specified in paragraph 5 of the Note,
subject to the terms and conditions set forth in this Article 3. The election
of the Corporation to redeem any Note shall be evidenced by a Board Resolution.
SECTION 3.02. NOTICES TO TRUSTEE. If the Corporation
wishes to redeem Notes pursuant to paragraph 5 of the Note, it shall notify the
Trustee of the Redemption Date and the principal amount and maturities of Notes
to be redeemed. The Corporation shall give the notice provided for in this
Section not less than 45 days prior to the Redemption Date.
SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED. If less
than all the Notes are to be redeemed, the Trustee shall select the Notes to be
redeemed by lot. The Trustee shall make the selection not more than 60 days
before the Redemption Date from Notes then outstanding that have not been
previously called for redemption. The Trustee may select for redemption
portions of the principal of Notes that have denominations larger than $1,000.
Notes and portions of Notes that the Trustee selects shall be in amounts of
$1,000 or integral multiples of $1,000. Provisions of this Indenture that apply
to Notes called for redemption also apply to portions of Notes called for
redemption.
SECTION 3.04. NOTICE OF REDEMPTION. At least 30 days but
not more than 60 days before a Redemption Date, the Corporation shall mail
notice of redemption to each Holder whose Notes are to be redeemed.
The notice shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the name and address of the Paying Agent;
(4) that Notes called for redemption must be
surrendered to the Paying Agent to collect the
Redemption Price;
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(5) that interest on Notes called for redemption
ceases to accrue on and after the Redemption
Date (unless the Corporation shall default in
the payment of the Redemption Price): and
(6) if less than all of the Notes outstanding are
to be redeemed, the identification (and in the
case of partial redemption, the respective
principal amounts) of the Notes to be redeemed.
At the Corporation's request, the Trustee shall give notice
of redemption in the Corporation's name and at its expense.
SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION. Once notice
of redemption is mailed, Notes called for redemption become due and payable on
the Redemption Date at the Redemption Price.
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE. On or before
the Redemption Date, the Corporation shall deposit with the Paying Agent cash
sufficient to pay the Redemption Price and accrued interest on all Notes to be
redeemed.
SECTION 3.07. NOTES REDEEMED IN PART. Upon surrender of a
Note that is redeemed in part, the Trustee shall authenticate for the Holder a
new Note having the same maturity as, and equal in principal amount to, the
unredeemed portion of the Note surrendered.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES. The Corporation shall pay
the principal of and interest on the Notes on the dates and in the manner
provided in the Notes. Principal and interest shall be considered paid on the
date due if the Trustee or any Paying Agent holds on that date money sufficient
to pay all principal and interest then due, provided that if Notes are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made.
The Corporation shall pay interest on overdue principal at
the rate borne by the Notes; it shall pay interest on overdue installments of
interest at the same rate to the extent lawful.
SECTION 4.02. REPORTING. The Corporation shall file with
the Trustee within 30 days after it files them with the SEC copies of the annual
reports and of
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the information, documents, and other reports (or copies of such portions of any
of the foregoing as the SEC may by rules and regulations prescribe) which the
Corporation is required to file with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act. The Corporation also shall comply with the other provisions
of TIA Section 314(a).
SECTION 4.03. CORPORATE EXISTENCE. Subject to Article 5,
the Corporation will continue to be qualified to do business as a Montana
corporation and will do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence (charter and statutory)
and franchises of the Corporation; provided however, that the Corporation shall
not be required to preserve any such right or franchise, if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Corporation and that the loss thereof is
not, and will not be, adverse in any material respect to the Holders.
SECTION 4.04. PAYMENT OF TAXES AND OTHER CLAIMS. The
Corporation will pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (i) all taxes, assessments and governmental
charges levied or imposed upon it or upon the income, profits or property of the
Corporation and (ii) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of the Corporation;
provided, however, that the Corporation shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings.
SECTION 4.05. RESTRICTIONS ON SALE OF ASSETS. The
Corporation will not directly or indirectly sell or otherwise dispose of any of
its properties or assets (except (i) properties or assets disposed of in the
ordinary course of business, (ii) properties or assets which the Corporation
determines in good faith are no longer usable or of economic advantage in the
conduct of any business by the Corporation or any Subsidiary or (iii) properties
or assets transferred by any Subsidiary to the Corporation 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 for the Corporation and
its Subsidiaries) of all Tangible Assets of the Corporation and its
Subsidiaries; provided, however, that any such sale may be disregarded for the
purposes of this Section 4.05 if the proceeds therefrom are reinvested within
twelve months in businesses related to the business of the Corporation or are
used to prepay Notes upon their terms.
SECTION 4.06. RESTRICTIONS ON LIENS OR SECURED
INDEBTEDNESS. The Corporation and its Subsidiaries will not directly or
indirectly, create, incur, assume
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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
Section 4.06 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 Corporation 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 the restrictions of this Section 4.06
shall not prohibit:
(1) liens for taxes, assessments or governmental charges or claims
the payment of which is not at the time required by Section 4.04 hereof;
(2) 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;
(3) 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 payments of borrowed
money);
(4) 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;
(5) leases or subleases granted to others in ordinary course of
business and not interfering with the ordinary conduct of the business
of the Corporation or any Subsidiary;
(6) easements, rights of way, restrictions and other similar
charges or encumbrances incurred in the ordinary course of business
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and not interfering with the ordinary conduct of the business of the
Corporation or any Subsidiary;
(7) liens on the property or assets of any Subsidiary securing
Indebtedness of such Subsidiary owing to the Corporation;
(8) liens to secure the purchase price or construction cost of
capital assets acquired by or constructed for the Corporation or any
Subsidiary after the date hereof or existing on assets of the Company or
any Subsidiary acquired at the time of acquisition provided that (i)
each such lien shall at all times be confined solely to the asset in
question, (ii) 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 (iii) any such lien on any
property acquired, constructed or improved by the Company or any
Subsidiary after the date of this 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
(9) any other liens or charges securing indebtedness not exceeding
$1,000,000 in the aggregate.
SECTION 4.07. RESTRICTIONS ON INCURRING ADDITIONAL FUNDED DEBT. The
Corporation will not create, assume or incur additional Funded Debt unless:
(1) Consolidated Net Income Available for Interest Charges in two
of the three preceding fiscal years shall have exceeded 150% of the
Pro Forma Annual Interest Charges of the Corporation 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 Corporation, Consolidated Net Income Available for Interest Charges
will be determined as if such company was a Subsidiary of the
Corporation during the three preceding fiscal years; and
(2) Consolidated Funded Debt of the Corporation, after giving
effect to the additional Funded Debt to be incurred, will not exceed 65%
of the Total Capitalization of the Corporation, after giving effect to
the additional Funded Debt and the use of the proceeds therefrom.
SECTION 4.08. RESTRICTIONS ON THE DECLARATION OF DIVIDENDS. The
Corporation shall not declare or pay any dividends (other than dividends payable
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solely in shares of Common Stock of the Corporation or solely in rights to
purchase Capital Stock of the Corporation) on, or set apart any sum for the
payment of any dividends on, or make any other distribution, by reduction of
capital or otherwise, in respect of, any shares of any class of Capital Stock
of the Corporation 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 for such
period.
SECTION 4.09. REPORTS TO GOVERNMENTAL AGENCIES. The Corporation
will furnish to agencies of the State of Montana, including but not limited
to the Public Service Commission of the State of Montana, the Commissioner of
Insurance and the Securities Commissioner, such periodic reports or
statements as they may reasonably require by law or regulation throughout the
period in which the Notes remain outstanding.
SECTION 4.10. COMPLIANCE CERTIFICATE. The Corporation shall deliver
to the Trustee within 120 days after the end of each fiscal year of the
Corporation an Officers' Certificate stating whether or not the signers know
of any Default that occurred during fiscal year. If they do, the certificate
shall describe the Default and its status. The certificate need not comply
with Section 11.05.
ARTICLE 5
SUCCESSORS
SECTION 5.01. WHEN CORPORATION MAY MERGE, ETC. The Corporation
will not dissolve or otherwise dispose of all or substantially all of its
assets, and will not consolidate with or merge into another corporation,
partnership or other entity; provided that the Corporation may consolidate
with or merge into a corporation or partnership organized and existing under
the laws of one of the states of the United States, or sell or otherwise
transfer to another domestic corporation or partnership all or substantially
all of its assets and thereafter dissolve, if the surviving, resulting or
transferee corporation or partnership, as the case may be (if other than the
Corporation): (i) assumes by supplemental indenture all of the obligations
of the Corporation under this Indenture and further 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; and (ii) has a net worth
immediately subsequent to such acquisition, consolidation or merger equal to
or greater than $10,000,000; and (iii) immediately after such acquisition,
consolidation or merger, is not in default in the performance of any covenant
or condition under this Indenture; and (iv) immediately after giving effect
to such transaction, no Default, shall have happened and be continuing. For
purposes of this Section 5.01, the term "net worth" shall mean the
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Consolidated assets of the Corporation and its Consolidated Subsidiaries,
less the Consolidated liabilities of the Corporation and its Consolidated
Subsidiaries as determined in accordance with generally accepted accounting
principles.
At least 30 days prior to the consummation of any of the actions
contemplated by this Section the Corporation shall deliver to the Trustee an
Officers' Certificate and Opinion of Counsel each stating that the
transaction and supplemental indenture comply with this Article. The
surviving, resulting or transferee corporation or partnership, as the case
may be, shall be the successor to the Corporation and deemed to and be
substituted for the Corporation under the Indenture, and the predecessor
Corporation in the case of a transfer or lease shall be released from all
obligations and covenants under the Indenture and the Notes.
ARTICLE 6
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if:
(1) the Corporation defaults in the payment of interest on any Note
when the same becomes due and payable and the Default continues for
a period of 30 days;
(2) the Corporation defaults in the payment of the principal of (or
premium, if any, on) any Note when the same becomes due and payable
at maturity, upon redemption or otherwise;
(3) the Corporation fails to comply with any of its other agreements in
the Notes or this Indenture and the Default continues for the period
and after the notice specified below;
(4) if an event of default as defined in any mortgage, indenture or
instrument under which there is outstanding, or by which there may
be secured or evidenced, any (A) Indebtedness for money borrowed
for which the Corporation or a Subsidiary is responsible or liable
as obligor, guarantor or otherwise or (B) obligations of the
Corporation or a Subsidiary as a lessee under leases required to be
capitalized under generally accepted accounting principles, in
either case in an aggregate principal amount of $1,000,000 or more,
whether such Indebtedness or obligation now exists or shall
hereafter be created, shall happen and shall result in such
Indebtedness or obligation becoming or being declared due and
payable prior to the date on which it
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would otherwise become due and payable, and such acceleration shall
not be rescinded or annulled, or such Indebtedness or obligation
shall not have been discharged, within a period of 10 days after
written notice has been given to the Corporation by the Trustee or
to the Corporation and the Trustee by the Holders of at least 25% in
principal amount of the Notes then outstanding, specifying such
event of default and requiring the Corporation to cause such
acceleration to be rescinded or annulled or to cause such
Indebtedness or obligation to be discharged and stating that such
notice is a "Notice of Default" hereunder.
(5) the Corporation or any Significant Subsidiary, pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors; or
(6) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law, and the order or decree remains unstayed and in
effect for 60 days, that:
(A) is for relief against the Corporation or any Significant
Subsidiary, in an involuntary case,
(B) appoints a Custodian of the Corporation, or any Significant
Subsidiary, or for all or substantially all of the property of
the Corporation, or any Significant Subsidiary, or
(C) orders the liquidation of the Corporation, or any Significant
Subsidiary.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal and State law for the relief of debtors. The term "Custodian" means
any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
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A Default under clause (3) is not an Event of Default until the
Trustee or the Holders of at least 25% in principal amount of the Notes then
outstanding notify the Corporation of the Default and the Corporation does
not cure the Default within 30 days after receipt of the notice. The notice
must specify the Default, demand that it be remedied and state that the
notice is a "Notice of Default." The Trustee shall, if requested to do so by
the holders of 25% in principal amount of the Notes, notify the Corporation
of the Default pursuant to this Section.
Subject to the provisions of Sections 7.01 and 7.02, the Trustee
shall not be charged with knowledge of any Event of Default (except for
defaults to clauses (1) and (2) of Section 6.01 for which no written notice
shall be required) unless written notice thereof shall have been given to a
Trust Officer of the Trustee at the Corporate Trust Office by the
Corporation, the Paying Agent, the Holder of a Note or an agent of such
Holder or, in the case of an Event of Default under clause (4), by the
trustee acting under any mortgage, indenture, or other instrument under which
the event of default shall have occurred or by the holder or the agent of any
holder of such Indebtedness.
SECTION 6.02. ACCELERATION. If an Event of Default occurs and is
continuing, the Trustee, by notice to the Corporation, or the Holders of at
least 25% in principal amount of the Notes then outstanding, by notice to the
Corporation and the Trustee, may declare the principal of, and accrued
interest on, all the Notes to be due and payable. Upon such declaration, the
principal and interest shall be due and payable immediately.
The Holders of a majority in principal amount of the Notes then
outstanding, by notice to the Trustee, may rescind an acceleration of all the
Notes and its consequences if (i) all existing Events of Default have been
cured or waived except nonpayment of the principal and interest that has
become due solely because of the acceleration and (ii) if the rescission
would not conflict with any judgment or decree of a court of competent
jurisdiction. No such rescission shall affect any subsequent default or
impair any right consequent thereon.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any to them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute
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a waiver of or acquiescence in such Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULT. The Holders of a majority in
principal amount of the Notes, by notice to the Trustee, may waive an
existing Default and its consequences, except a Default in the payment of
principal of or interest on any Note, an uncured failure to make any
redemption payment or an uncured Default with respect to a provision which
cannot be modified under the terms of this Indenture without the consent of
each Holder affected.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in
principal amount of the Notes then outstanding may direct the time (subject
to the reasonable time requirements of the Trustee), method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture, is
unduly prejudicial to the rights of other Noteholders, or, unless the Trustee
is provided with indemnity pursuant to Section 7.01(e), would involve the
Trustee in personal liability; provided, that the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
direction.
SECTION 6.06. LIMITATION ON SUITS. A Noteholder may pursue a remedy
with respect to this Indenture or the Notes only if:
(1) the Holder gives to the Trustee notice of a continuing Event of
Default;
(2) the Holders of at least 25% in principal amount of the Notes then
outstanding make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer to the Trustee indemnity satisfactory
to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority in principal
amount of the Notes then outstanding do not give the Trustee a
direction inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the rights of another
Noteholder or to obtain a preference or priority over another Noteholder.
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SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding
any other provision of this Indenture, the right of any Holder of a Note to
receive payment of principal and interest on the Note, on or after the
respective due dates expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, is
absolute and unconditional and shall not be impaired or affected without the
consent of the Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default in
payment of interest or principal specified in Section 6.01(1) or (2) occurs
and is continuing, the Trustee may recover judgment in its own name and as
trustee of an express trust against the Corporation for the whole amount of
unpaid principal and accrued interest remaining unpaid.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may
file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and the Noteholders allowed in any judicial
proceedings relative to the Corporation, its creditors or its property, and
shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the
same, and any Custodian in any such judicial proceeding is hereby authorized
by each Noteholder to make such payment to the Trustee, and in the event that
the Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses and disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section 7.07.
SECTION 6.10. PRIORITIES. If the Trustee collects any money
pursuant to this Article, it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Noteholders for amounts due and unpaid on the
Notes for principal and interest, ratably, without preference
or priority of any kind, according to the amounts due and
payable on the Notes for principal and interest, respectively;
and
THIRD: to the Corporation.
The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Article.
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SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as Trustee, a court
in its discretion may require the filing by any party litigant in the suit of
an undertaking to pay the costs of the suit, and the court in its discretion
may assess reasonable costs, including reasonable attorneys' fees, against
any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section
does not apply to a suit by the Trustee, a suit by a Holder pursuant to
Section 6.07 or a suit by Holders of more than 10% in principal amount of the
Notes.
SECTION 6.12. WAIVER OF STAY OR EXTENSION LAWS. The Corporation
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or
at any time hereafter in force, which may affect the covenants or the
performance of the Indenture; and the Corporation (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 6.13. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or
any Holder has instituted any proceeding to enforce any right or remedy under
the Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder,
then and in every such case the Corporation, the Trustee and the Holders
shall, subject to any determination in such proceeding, be restored severally
and respectively to their former positions hereunder, and thereafter all
rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
SECTION 6.14. RECORD DATE. The Corporation may set a record date
for purposes of determining the identity of Noteholders entitled to vote or
consent to any action by vote or consent authorized or permitted by Section
7.04 and Section 7.05 of this Indenture. Such record date shall be the later
of 30 days prior to the first solicitation of such consent or the date of the
most recent list of holders furnished to the Trustee pursuant to Section 2.05
of this Indenture prior to such solicitation.
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ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise
as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall examine
the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct,
except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section;
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(3) The Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
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(e) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as otherwise agreed with the Corporation. Money held in
trust by the Trustee need not be segregated from other funds except to
the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE. Except as otherwise provided in
Section 7.01:
(a) The Trustee may rely on any document believed by it to be genuine and
to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in
reliance on the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its
rights or powers.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Corporation or an Affiliate with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee makes no
representation as to the validity or adequacy of this Indenture or the Notes,
it shall not be accountable for the Corporation's use of the proceeds from
the Notes, and it shall not be responsible for any statement in the Notes
other than its authentication.
SECTION 7.05. NOTICE OF DEFAULTS. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to
Noteholders a notice of the Default within 90 days after it occurs. Except
in the case of Default in payment on any Note, the Trustee may withhold the
notice if and so long as a committee of
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its Trust Officers in good faith determines that withholding the notice is in
the interests of Noteholders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. If required, within 60
days after each May 15 beginning with the May 15 following the date of this
Indenture, the Trustee shall mail to each Noteholder a brief report, dated as
of such reporting date, that complies with TIA Section 313(a). The Trustee
also shall comply with TIA Section 313(b)(2).
A copy of each report at the time of its mailing to Noteholders shall
be filed with the SEC, each stock exchange on which the Notes are listed and
the Corporation. The Corporation shall notify the Trustee when the Notes are
listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Corporation shall pay
to the Trustee from time to time reasonable compensation for its services,
including, following an Event of Default, the reasonable extraordinary fees
and expenses of the Trustee for its services. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Corporation shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred by it. Such expenses shall
include the reasonable compensation and out-of-pocket expenses of the
Trustee's agents and counsel.
The Corporation shall indemnify the Trustee against any loss or
liability incurred by it, with respect to the Trustee's fulfillment of its
duties hereunder. The Trustee shall notify the Corporation promptly of any
claim for which it may seek indemnity. The Corporation shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Corporation shall pay the reasonable fees and
expenses of such counsel. The Corporation need not pay for any settlement
made without its consent.
The Corporation need not reimburse any expense or indemnify against
any loss or liability incurred by the Trustee through negligence or bad faith.
To secure the Corporation's payment obligations in this Section, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal of and
interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(5) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
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SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of
the Trustee and appointment of a successor Trustee shall become effective
only upon the successor Trustee's acceptance of appointment as provided in
this Section.
The Trustee may resign by so notifying the Corporation. The Holders
of a majority in principal amount of the Notes may remove the Trustee by so
notifying the Trustee and the Corporation. The Corporation may remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Corporation shall promptly appoint a
successor Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Corporation
or the Holders of at least 10% in principal amount of the Notes then
outstanding may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10(b), any Noteholder
who has been a bond fide Holder of Notes for at least six months may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee if the Trustee fails to comply with the
written request of such Noteholder to comply with Section 7.10(b).
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Corporation. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of
its succession to Noteholders. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, subject to the
lien provided for in Section 7.07.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee
consolidates, merges or converts into, or transfers all or substantially all
of its corporate trust business to, another corporation, the resulting,
surviving or transferee corporation without any further act shall be the
successor Trustee.
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SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
(a) This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee shall always have a
combined capital and surplus of at least $150,000 as set forth in its most
recent published annual report of condition.
(b) In no event shall the Corporation, or any person directly or
indirectly controlling, controlled or under common control with the
Corporation, serve as Trustee or Co-Trustee.
(c) If the Trustee has or shall acquire any conflicting interest, as
defined in this Section and if the default to which such conflicting interest
related has not been cured or duly waived or otherwise eliminated within 90
days after the Trustee has ascertained that it has such conflicting interest,
the Trustee shall within such 90-day period either eliminate such conflicting
interest or resign in the manner and with the effect hereinabove specified in
Section 7.08 of this Article, such resignation to become effective upon the
appointment of a successor trustee and such successor's acceptance of such
appointment, and the Corporation shall take prompt steps to have a successor
appointed in the manner provided in Section 7.08.
(d) In the event that the Trustee shall fail to comply with the
provisions of paragraph (c) of this Section, the Trustee shall, within 10
days after the expiration of such 90-day period, transmit by mail to all
Holders, as their names and address appear in the register of Noteholders,
notice of such failure.
(e) For the purposes of this Section, the Trustee shall be deemed to
have a conflicting interest if the Notes are in default and:
(1) the Trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the Corporation are outstanding or is Trustee for more
than one outstanding series of securities under a single indenture of
the Corporation, unless such other indenture is a collateral trust
indenture under which the only collateral consists of Notes issued under
this Indenture, provided that there shall be excluded from the operation
of this paragraph any other indenture or indentures under which other
securities, or certificates of interest or participation in other
securities, of the Corporation are outstanding, if
(A) this Indenture and such other indenture or indentures (and all
series of securities issuable thereunder) are wholly unsecured and
rank equally, and such other indenture or indentures (and
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such series) are hereafter qualified under the TIA, unless the SEC
shall have found and declared by order pursuant to Section 305(b)
or Section 307(c) of the TIA that differences exist between the
provisions of this Indenture (or such series) and the provisions
of such other indenture or indentures (or such series) which are so
likely to involve a material conflict of interest as to make it
necessary in the public interest or for the protection of investors
to disqualify the Trustee from acting as such under one of such
indentures, or
(B) the Corporation shall have sustained the burden of proving, on
application to the SEC and after opportunity for hearing thereon,
that trusteeship under this Indenture and such other indenture or
under more than one outstanding series under a single indenture is
not so likely to involve a material conflict of interest as to make
it necessary in the public interest or for the protection of
investors to disqualify the Trustee from acting as such under
one of such indentures or with respect to such series; or
(2) the Trustee shall come within the provisions of paragraphs (2) through
(10) of TIA Section 310(b), subject to the exception permitted by the
second sentence of TIA Section 310(b)(9).
(f) Except in the case of Default in payment on any Note, the Trustee
shall not be required to resign as provided in this Indenture if the Trustee
sustains the burden of proving, on application to the SEC and after
opportunity for hearing thereon, that
(1) the Default under this Indenture may be cured or waived during a
reasonable period and under the procedures of such application, and
(2) a stay of the Trustee's duty to resign will not be inconsistent with
the interests of the Noteholders.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST CORPORATION.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or
been removed is subject to TIA Section 311(a) to the extent indicated.
SECTION 7.12. APPOINTMENT OF CO-TRUSTEE. It is the purpose of this
Indenture that there shall be no violation of any law of any jurisdiction
denying or restricting the right of banking corporations or associations to
transact business as trustees in such jurisdiction. It is recognized that in
case of litigation under this
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Indenture, and in particular in case of the enforcement on an Event of
Default, or in case the Trustee deems that by reason of any present or future
law of any jurisdiction it may not exercise any of the powers, rights or
remedies herein granted to the Trustee in trust, as herein granted, or take
any other action which may be desirable or necessary in connection therewith,
it may be necessary that an additional individual or institution be appointed
as a separate or Co-Trustee.
At any time or times, for the purpose of meeting the legal
requirements of any jurisdiction, the Trustee and the Corporation may appoint
an additional individual or institution as a separate or Co-Trustee, in which
event each and every remedy, power, right, claim, demand, cause of action,
immunity, estate, title, interest and lien expressed or intended by this
Indenture, to be exercised by or vested in or conveyed to the Trustee with
respect thereto shall be exercisable by and vest in such separate or
Co-Trustee but only to the extent necessary to enable such separate or
Co-Trustee to exercise such powers, rights and remedies, and every covenant
and obligation necessary to the exercise thereof by such separate or
Co-Trustee shall run to and be enforceable by either of them. If the
Corporation does not join in such appointment within 15 days after receipt by
it of a request so to do, or in case an Event of Default has occurred and is
continuing, the Trustee alone shall have power to make such appointment.
Should any deed, conveyance or instrument in writing from the
Corporation be required by the separate or Co-Trustee so appointed by the
Trustee for more fully and certainly vesting in and confirming to it such
properties, rights, powers, trusts, duties and obligations, including
particularly the right to be paid its fees and expenses for services
rendered, any and all such deeds, conveyances and instruments in writing
shall, on request, be executed, acknowledged and delivered by the
Corporation. In case any separate or Co-Trustee, or a successor to either,
shall die, become incapable of acting, resign or be removed, all the estates,
properties, rights, powers, trusts, duties and obligations of such separate
or Co-Trustee, so far as permitted by law, shall vest in and be exercised by
the Trustee until the appointment of a new Trustee or successor to such
separate or Co-Trustee.
The rights, powers, duties and obligations hereby conferred or
imposed upon the Trustee in respect of this Indenture shall be conferred or
imposed upon and exercised or performed by the Trustee or by the Trustee and
such separate or Co-Trustee jointly, as shall be provided in the instrument
appointing such separate or Co-Trustee, except to the extent that under any
law of any jurisdiction in which any particular act is to be performed, the
Trustee shall be incompetent or unqualified to perform such act, in which
event such rights, powers, duties and obligations shall be exercised and
performed by such separate or Co-Trustee.
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ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. TERMINATION OF CORPORATION'S OBLIGATIONS. The Corporation
may at any time terminate all of its obligations under this Indenture if:
(1) the Notes mature within one year or all of them are to be called
for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption, or, if the
earliest date on which the Notes may be called for redemption is
more than one year from such date, all of them are to be called for
redemption on the earliest date on which they may be redeemed under
arrangements satisfactory to the Trustee for giving the notice of
redemption; and
(2) the Corporation irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations sufficient to pay principal
and interest on the Notes at maturity or on redemption, as the case
may be, and any interest payments due prior to maturity or
redemption.
However, the Corporation's obligations in Sections 2.03, 2.04, 2.05, 2.06,
2.07, 4.01, 7.07, 7.08 and 8.03 shall survive until the Notes are no longer
outstanding. Thereafter, the Corporation's obligations in Sections 7.07 and
8.03 shall survive.
After a deposit the Trustee upon request shall acknowledge in writing
the discharge of the Corporation's obligations under this Indenture except
for those surviving obligations specified above.
In order to have money available on a payment date to pay principal or
interest on the Notes, the U.S. Government Obligations shall be payable as to
principal or interest on or before such payment date in such amounts as will
provide the necessary money. The U.S. Government Obligations shall not be
callable at the issuer's option.
SECTION 8.02. APPLICATION OF TRUST MONEY. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to
Section 8.01. It shall apply the deposited money and the money from the U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal and interest on the Notes.
SECTION 8.03. REPAYMENT TO CORPORATION. The Trustee and the Paying
Agent shall promptly pay to the Corporation upon request any excess money or
securities held by them at any time. The obligation of the Trustee and the
Paying Agent to pay such excess money or securities to the Corporation shall
survive the
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payment and/or cancellation of all of the Notes until all such excess funds
or securities have been so paid.
The Trustee and the Paying Agent shall pay to the Corporation upon
request any money held by them for the payment of principal or interest that
remains unclaimed for two years. After payment to the Corporation,
Noteholders entitled to the money must look to the Corporation for payment as
general creditors unless an applicable abandoned property law designates
another person.
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01 WITHOUT CONSENT OF HOLDERS. The Corporation and the
Trustee may amend or supplement this Indenture or the Notes without notice to
or consent of any Noteholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Section 5.01; or
(3) to make any change that does not materially adversely affect the
rights of any Noteholder.
SECTION 9.02. WITH CONSENT OF HOLDERS. The Corporation and the Trustee
may amend or supplement this Indenture or the Notes with the written consent
of the Holders of at least a majority in principal amount of the Notes then
outstanding. Without the consent of each Noteholder affected, however, an
amendment under this Section may not:
(1) reduce the amount of Notes whose Holders must consent to an amendment
or waiver;
(2) reduce the rate of or change the time for payment of interest on any
Note;
(3) reduce the principal of or change the maturity of any Note;
(4) waive a Default in the payment of the principal of or interest on any
Note;
(5) make any Note payable in money other than that stated in the Note; or
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(6) modify the provisions of Sections 6.04, 6.07 and 9.02 (second
sentence).
After an amendment or supplement under this Section becomes effective,
the Corporation shall mail to Noteholders a notice briefly describing the
amendment.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment to
or supplement of this Indenture or the Notes shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Holder of a Note
is a continuing consent by the Holder and every subsequent Holder of a Note
or portion of a Note that evidences the same debt as the consenting Holder's
Note, even if notation of the consent is not made on any Note. However, any
such Holder or subsequent Holder may revoke the consent as to such Note or
portion of a Note if the Trustee receives the notice of revocation before the
date the amendment, supplement or waiver becomes effective.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. The Trustee may place
an appropriate notation about an amendment, supplement or waiver on any Note
thereafter authenticated. The Corporation in exchange for all Notes may
issue and the Trustee shall authenticate new Notes that reflect the
amendment, supplement or waiver.
SECTION 9.06. TRUSTEE PROTECTED. The Trustee need not sign any
supplemental indenture that adversely affects its rights.
ARTICLE 10
REDEMPTION OF NOTES AT HOLDER'S OPTION
SECTION 10.01. REDEMPTION RIGHT AT HOLDER'S OPTION. Representatives of
deceased Holders and, in the case of a Global Security, representatives of
deceased Beneficial Owners of such Global Security, have certain optional
redemption rights as set forth in the forms of Notes attached as Exhibits A
and B hereto.
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ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS. If any provision of this
Indenture limits, qualifies, or conflicts with the duties imposed by TIA
Section 310 to Section 317, the duties so imposed by the TIA shall control.
SECTION 11.02. NOTICES. Any notice or communication by the Corporation
or the Trustee to the other is duly given if in writing and delivered in
person or mailed by first-class mail addressed as follows:
if to the Corporation
ENERGY WEST INCORPORATED
1 First Avenue South
Great Falls, Montana 59401
Attn: Treasurer
if to the Trustee:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Norwest Center
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attn: Corporate Trust Department
The Corporation or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication to a Noteholder shall be mailed by
first-class mail to his or her address shown on the register kept by the
Registrar. Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other
Noteholders.
If a notice of communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Corporation mails a notice or communication to Noteholders, it
shall mail a copy to the Trustee and each Agent at the same time.
All notices or communications shall be in writing, except as set forth
below.
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In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice required
by this Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Noteholders
may communicate pursuant to TIA Section 312(b) with other Noteholders with
respect to their rights under this Indenture or the Notes. The Corporation,
the Trustee, the Registrar and anyone else shall have the protection of TIA
Section 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon
any request or application by the Corporation to the Trustee to take any
action under this Indenture, the Corporation shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with;
and
(2) an Opinion of Counsel stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
Officers' Certificate (other than certificates provided pursuant to TIA
Section 314(a)(4)) or Opinion of Counsel with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such Officers' Certificate or
Opinion of Counsel has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in
such Officers' Certificate or Opinion of Counsel are based;
(3) a statement that, in the opinion of such person, he or she has made
such examination or investigation as is necessary to enable him or
her to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
SECTION 11.06. RULES BY TRUSTEE AND AGENT. The Trustee may make
reasonable rules for action by or at a meeting of Noteholders. The Registrar
or
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Paying Agent may make reasonable rules and set reasonable requirements for
its functions.
SECTION 11.07. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a
Sunday, or a day on which banking institutions in the relevant jurisdiction
are not required to be open. If a payment date is a Legal Holiday at a place
of payment, payment may be made at that place on the next succeeding day that
is not a Legal Holiday, and no interest shall accrue for the intervening
period.
SECTION 11.08. NO RECOURSE AGAINST OTHERS. No liability under the
Notes shall inure to any director, officer, employee or stockholders, as
such, of the Corporation and each Noteholder, by accepting a Note, waives and
releases all such liability.
SECTION 11.09. DUPLICATE ORIGINALS. The parties may sign any number of
copies of this Indenture. One signed copy is enough to prove this Indenture.
SECTION 11.10. GOVERNING LAW. The laws of the State of Montana shall
govern this Indenture and the Notes.
SECTION 11.11. TABLE OF CONTENTS, HEADINGS, ETC. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
to be considered a part hereof, and shall in no way modify or restrict any of
the terms or provisions hereof.
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SIGNATURES
ENERGY WEST INCORPORATED
By __________________________________
Name _____________________________
Title ____________________________
Attest:
_________________________________
Name _______________________
Title ______________________
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By ____________________________________
Curtis D. Schwegman,
Assistant Vice President
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EXHIBIT A
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS GLOBAL SECURITY IS EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE
ONLY IN THE LIMITED CIRCUMSTANCES HEREINAFTER DESCRIBED AND MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY.
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to Energy West
Incorporated, a Montana corporation, or its agent for registration of
transfer, exchange, or payment, and any certificate issued is registered in
the name of Cede & Co. (or in such other name as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.
ENERGY WEST INCORPORATED
__% Note due June 1, 2012
No. _________________ $______________________
CUSIP No. ______________
ENERGY WEST INCORPORATED, a Montana corporation, for value received,
hereby promises to pay to ______________________ , or registered assigns, the
principal sum of ____________________ DOLLARS on June 1, 2012 and to pay
interest on said principal sum at the rate of __% per annum calculated on the
basis of a 360-day year of twelve 30-day months.
1. Interest.
ENERGY WEST INCORPORATED ("Corporation"), a Montana corporation,
promises to pay interest on the principal amount of this Note at the rate per
annum shown above. The Corporation will pay interest semi-annually on
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June 1 and December 1 of each year, commencing June 1, 1997. Interest on
the Notes will accrue from the most recent date to which interest has been
paid, or, if no interest has been paid previously, from the date of original
issuance of this Note; provided that, if there is no existing default in the
payment of interest, and if this Note is authenticated between a record date
referred to below and the next succeeding interest payment date, interest
shall accrue from the next interest payment date.
2. Method of Payment.
The Corporation will pay interest on the Notes (except defaulted
interest) to the persons who are registered holders of Notes at the close of
business on the record date next preceding the interest payment date. The
Corporation will pay interest to such holders on the next interest payment
date even though Notes are cancelled after the record date but on or before
the interest payment date. The record date for payments on any June 1 shall
be the immediately preceding May 15, and the record date for payments on any
December 1, shall be the immediately preceding November 15. Holders must
surrender Notes to a Paying Agent to collect principal payments. The
Corporation will pay principal and interest in money of the United States
that at the time of payment is legal tender for payment of public and private
debts. However, the Corporation may pay principal and interest by check
payable in such money. The Corporation may mail an interest check to a
holder's registered address.
3. Paying Agent and Registrar.
Initially, Norwest Bank Minnesota, National Association, Norwest Center,
Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0069 will act
as Paying Agent and Registrar. The Corporation may change any Paying Agent,
Registrar or Co-Registrar without notice. The Corporation or any of its
Subsidiaries may act in any such capacity.
4. Indenture.
The Corporation issued the Notes under an Indenture dated as of _______,
1997 (the "Indenture"), between the Corporation and the Trustee. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Section
Section 77aaa-77bbbb) (the "Act") as in effect on the date of the Indenture.
The Notes are subject to all such terms, and Noteholders are referred to
the Indenture and the Act for a statement of such terms. The Notes are
unsecured general obligations of the Corporation limited to $8,000,000 in
aggregate principal amount.
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5. Redemption at Corporation's Option.
The Corporation may, at its option, at any time on or after June 1,
2002 redeem prior to maturity all the Notes or some of them from time to time
after issuance at the following redemption prices (expressed in percentages
of principal amount of the Notes) plus unpaid accrued interest to the
redemption date.
If redeemed during the twelve-month period beginning June 1:
Year Percentage
---- ----------
2002 103%
2003 102%
2004 101%
2005 until maturity 100%
6. Notice of Redemption.
Notice of redemption at the Corporation's option will be mailed at least
30 days but not more than 60 days before the redemption date to each holder
of Notes to be redeemed at such holder's registered address as set forth in
the register. Notes in denominations larger than $1,000 may be redeemed in
part but only in integral multiples of $1,000. On and after the redemption
date (if there is no default in the payment of the redemption price by the
Corporation), interest ceases to accrue on Notes or portions thereof called
for redemption.
7. Redemption at Beneficial Owner's Option.
For purposes hereof, "Beneficial Owner" means 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. In general, a determination
of beneficial ownership in the Notes will be subject to the rules,
regulations and procedures governing the Depository and institutions that
have accounts with the Depository or a nominee thereof ("Participants").
Participants may hold interests in the Notes as Beneficial Owners for their
own accounts or as nominees for other Persons.
Unless (i) the Notes have been declared due and payable prior to their
maturity by reason of an Event of Default or (ii) the Corporation has mailed
a notice of redemption, then in the event of the death of a Beneficial Owner,
such Beneficial Owner's personal representative or surviving joint tenant(s)
(the "Representative") has the right to request redemption of the Notes
beneficially owned by such
-40-
<PAGE>
Beneficial Owner prior to death, subject to the terms and conditions set
forth in this paragraph 7.
To request redemption of all or part of such deceased Beneficial Owner's
interest in the Notes, the Representative shall deliver to the Trustee a
written request for redemption in form satisfactory to the Trustee, signed by
the Representative, accompanied by (i) a statement of the principal amount of
the interest in the Notes to be redeemed (which amount shall be an integral
multiple of $1,000), (ii) appropriate evidence of the Beneficial Owner's
death and beneficial ownership at the time of death and (iii) appropriate
evidence of the authority of the Representative (a "Redemption Request").
The 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 such interest.
The Trustee shall promptly inform the Corporation of the receipt of a
proper Redemption Request. On or before the date 60 days following the date
on which the Trustee receives a proper Redemption Request, the Corporation
shall deposit with the Paying Agent cash sufficient to redeem the interests
covered by such Redemption Request at a price equal to 100% of their
principal amount, plus accrued interest to the date of such deposit. Subject
to arrangements with the Depository, all payments for interests in this Note
that are to be redeemed pursuant to a Redemption Request shall be made to the
Depository.
The Corporation's obligation to redeem an interest in the Notes
following receipt of a Redemption Request is subject to the following
limitations: (i) the Corporation 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 Corporation 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 Corporation may, at its discretion, exceed the $25,000 and two
percent (2%) limitations. If the Corporation, although not obligated to do
so, chooses to redeem interests of a deceased Beneficial Owner in excess of
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.
8. Denominations, Transfer, Exchange.
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples thereof. The transfer of Notes may be
registered and
-41-
<PAGE>
Notes may be exchanged as provided in the Indenture. The Registrar may
require a holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not exchange or register the transfer
of any Note or portion of a Note selected for redemption. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before
a selection of Notes to be redeemed.
9. Persons Deemed Owners.
The registered holder of a Note may be treated as its owner for all
purposes.
10. Amendments, Supplements and Waivers.
Subject to certain exceptions, the Indenture or the Notes may be amended
or supplemented, and any existing default may be waived, with the consent of
holders of a majority in principal amount of the Notes then outstanding.
Without the consent of any Noteholder, the Indenture or the Notes may be
amended or supplemented to cure any ambiguity, defect or inconsistency, to
provide for assumption of Corporation obligations to Noteholders or to make
any change that does not materially adversely affect the rights of any
Noteholder.
11. Defaults and Remedies.
An Event of Default is: default for 30 days in payment of interest on
the Notes; default in payment of principal on the Notes; failure by the
Corporation for 30 days after notice to it to comply with any of its other
agreements in the Indenture or the Notes; default in the payment of
indebtedness having an outstanding principal balance of $1,000,000 or more
under certain circumstances; and certain events of bankruptcy or insolvency.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the Notes may declare all the Notes to
be due and payable immediately. Noteholders may not enforce the Indenture or
the Notes except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Notes.
Subject to certain limitations, holders of a majority in principal amount of
the Notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Noteholders notice of any continuing default
(except a default in payment of principal or interest) if it determines that
withholding notice is in their interests. The Corporation must furnish an
annual compliance certificate to the Trustee.
-42-
<PAGE>
12. Trustee Dealings with Corporation.
Norwest Bank Minnesota, National Association, the Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and preform services for the Corporation or its Affiliates,
and may otherwise deal with the Corporation or its Affiliates, as if it were
not Trustee.
13. No Recourse Against Others.
A director, officer, employee or shareholder, as such, of the
Corporation shall not have any liability for any obligations of the
Corporation under the Notes or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. Each
Noteholder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the Notes.
14. Authentication.
This Note shall not be valid until authenticated by the manual signature
of the Trustee or an authenticating agent.
15. Abbreviations.
Customary abbreviations may be used in the name of a Noteholder or an
assignee, such as TEN COM = tenants in common, TEN ENT = tenants by the
entireties, JT TEN = joint tenants with right of survivorship and not as
tenants in common, CUST= Custodian, and U/G/M/A = Uniform Gifts to Minors Act.
Dated: ______________________
Authenticated:
NORWEST BANK MINNESOTA, ENERGY WEST INCORPORATED
NATIONAL ASSOCIATION, as Trustee
By ______________________________ By ____________________________________
Its Authorized Signer Its
By ____________________________________
Its Treasurer
(SEAL)
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<PAGE>
__________________________
The Corporation will furnish to any Noteholder upon written request and
without charge a copy of the Indenture.
Requests may be made to: Treasurer, Energy West Incorporated, 1 First Avenue
South, Great Falls, Montana 59401.
-44-
<PAGE>
ASSIGNMENT FORM
I/We assign and transfer this Note to
[ ]
(Insert assignee's social
security or tax I.D. number)
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint _____________________________________ as agent to
transfer this Note on the books of the Corporation. The agent may substitute
another to act for him.
Date:_________________ Signature _____________________________
(Sign exactly as your name
appears on the other side of
this Note)
-45-
<PAGE>
EXHIBIT B
(Face of Note)
ENERGY WEST INCORPORATED
__% Note due June 1, 2012
No. R- $
--------------------- ------------------
CUSIP No.
----------------------
ENERGY WEST INCORPORATED, a Montana corporation, for value
received, hereby promises to pay to , or registered
--------------------------
assigns, the principal sum of DOLLARS on June 1,
----------------------------
2012 and to pay interest on said principal sum at the rate of per annum
---------
calculated on the basis of a 360-day year of twelve 30-day months.
Dated:
-----------------------
Authenticated:
NORWEST BANK MINNESOTA, ENERGY WEST INCOPORATED
NATIONAL ASSOCIATION,
as Trustee
By By
-------------------------- ----------------------------
Its Authorized Signer Its
-------------------------
By
----------------------------
Its Treasurer
(SEAL)
B-1
<PAGE>
(REVERSE OF NOTE)
1. Interest.
ENERGY WEST INCORPORATED ("Corporation"), a Montana
corporation, promises to pay interest on the principal amount of
this Note at the rate per annum shown above. The Corporation will
pay interest semi-annually on June 1 and December 1 of each year,
commencing June 1, 1997. Interest on the Notes will accrue from
the most recent date to which interest has been paid, or, if no
interest has been paid previously, from the date of original
issuance of this Note; provided that, if there is no existing
default in the payment of interest, and if this Note is
authenticated between a record date referred to below and the next
succeeding interest payment date, interest shall accrue from the
next interest payment date.
2. Method of Payment.
The Corporation will pay interest on the Notes (except
defaulted interest) to the persons who are registered holders of
Notes at the close of business on the record date next preceding
the interest payment date. The Corporation will pay interest to
such holders on the next interest payment date even though Notes
are cancelled after the record date but on or before the interest
payment date. The record date for payments on any June 1 shall be
the immediately preceding May 15, and the record date for payments
on any December 1, shall be the immediately preceding November 15.
Holders must surrender Notes to a Paying Agent to collect principal
payments. The Corporation will pay principal and interest in money
of the United States that at the time of payment is legal tender
for payment of public and private debts. However, the Corporation
may pay principal and interest by check payable in such money. The
Corporation may mail an interest check to a holder's registered
address.
3. Paying Agent and Registrar.
Initially, Norwest Bank Minnesota, National Association,
Norwest Center, Sixth Street and Marquette Avenue, Minneapolis,
Minnesota 55479-0069, will act as Paying Agent and Registrar. The
Corporation may change any Paying Agent, Registrar or Co-Registrar
without notice. The Corporation or any of its Subsidiaries may act
in any such capacity.
4. Indenture.
The Corporation issued the Notes under an Indenture dated
as of _______, 1997 (the "Indenture"), between the Corporation and
the Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the
B-2
<PAGE>
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) (the "Act") as in effect on the date of the Indenture.
The Notes are subject to all such terms, and Noteholders
are referred to the Indenture and the Act for a statement of such
terms. The Notes are unsecured general obligations of the
Corporation limited to $8,000,000 in aggregate principal amount.
5. Redemption at Corporation's Option.
The Corporation may, at its option, at any time on or after
June 1, 2002 redeem prior to maturity all the Notes or some of them from
time to time after issuance at the following redemption prices (expressed in
percentages of principal amount of the Notes) plus unpaid accrued interest to
the redemption date.
If redeemed during the twelve-month period beginning June 1:
Year Percentage
---- ----------
2002 103%
2003 102%
2004 101%
2005 until maturity 100%
6. Notice of Redemption.
Notice of redemption at the Corporation's option will be mailed
at least 30 days but not more than 60 days before the redemption date to each
holder of Notes to be redeemed at his registered address as set forth in the
register. Notes in denominations larger than $1,000 may be redeemed in part
but only in integral multiples of $1,000. On and after the redemption date
(if there is no default in the payment of the redemption price by the
Corporation), interest ceases to accrue on Notes or portions thereof called
for redemption.
7. Redemption at Beneficial Owner's Option.
For purposes hereof, "Beneficial Owner" means 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.
Unless (i) the Notes have been declared due and payable prior to
their maturity by reason of an Event of Default or (ii) the Corporation has
mailed a notice of redemption, then in the event of the death of a Beneficial
Owner, such Beneficial
B-3
<PAGE>
Owner's personal representative or surviving joint tenant(s) (the
"Representative") has the right to request redemption of the Notes
beneficially owned by such Beneficial Owner prior to death, subject to the
terms and conditions set forth in this paragraph 7.
To request redemption of all or part of such deceased Beneficial
Owner's interest in the Notes, the Representative shall deliver to the
Trustee a written request for redemption in form satisfactory to the Trustee,
signed by the Representative, accompanied by (i) a statement of the principal
amount of the interest in the Notes to be redeemed (which amount shall be an
integral multiple of $1,000), (ii) appropriate evidence of the Beneficial
Owner's death and beneficial ownership at the time of death and (iii)
appropriate evidence of the authority of the Representative (a "Redemption
Request"). The 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 such interest.
The Trustee shall promptly inform the Corporation of the receipt
of a proper Redemption Request. On or before the date 60 days following the
date on which the Trustee receives a proper Redemption Request, the
Corporation shall deposit with the Paying Agent cash sufficient to redeem the
interests covered by such Redemption Request at a price equal to 100% of
their principal amount, plus accrued interest to the date of such deposit.
The Corporation's obligation to redeem an interest in the Notes
following receipt of a Redemption Request is subject to the following
limitations: (i) the Corporation 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 Corporation 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 Corporation may, at its discretion, exceed the $25,000 and two
percent (2%) limitations. If the Corporation, although not obligated to do
so, chooses to redeem interests of a deceased Beneficial Owner in excess of
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.
B-4
<PAGE>
8. Denominations, Transfer, Exchange.
The Notes are in registered form without coupons in denominations
of $1,000 and integral multiples thereof. The transfer of Notes may be
registered and Notes may be exchanged as provided in the Indenture. The
Registrar may require a holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or
register the transfer of any Note or portion of a Note selected for
redemption. Also, it need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed.
9. Persons Deemed Owners.
The registered holder of a Note may be treated as its owner for
all purposes.
10. Amendments, Supplements and Waivers.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented, and any existing default may be waived, with the
consent of holders of a majority in principal amount of the Notes then
outstanding. Without the consent of any Noteholder, the Indenture or the
Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for assumption of Corporation obligations to
Noteholders or to make any change that does not materially adversely affect
the rights of any Noteholder.
11. Defaults and Remedies.
An Event of Default is: default for 30 days in payment of
interest on the Notes; default in payment of principal on the Notes; failure
by the Corporation for 30 days after notice to it to comply with any of its
other agreements in the Indenture or the Notes; default in the payment of
indebtedness having an outstanding principal balance of $1,000,000 or more
under certain circumstances; and certain events of bankruptcy or insolvency.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the Notes may declare all the Notes to
be due and payable immediately. Noteholders may not enforce the Indenture or
the Notes except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Notes.
Subject to certain limitations, holders of a majority in principal amount of
the Notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Noteholders notice of any continuing default
(except a default in payment of principal or interest) if it determines that
B-5
<PAGE>
withholding notice is in their interests. The Corporation must furnish an
annual compliance certificate to the Trustee.
12. Trustee Dealings with Corporation.
Norwest Bank Minnesota, National Association, the Trustee under
the Indenture, in its individual or any other capacity, may make loans to,
accept deposits from, and perform services for the Corporation or its
Affiliates, and may otherwise deal with the Corporation or its Affiliates, as
if it were not Trustee.
13. No Recourse Against Others.
A director, officer, employee or shareholder, as such, of the
Corporation shall not have any liability for any obligations of the
Corporation under the Notes or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. Each
Noteholder by accepting this Note waives and releases all such liability.
The waiver and release are part of the consideration for the issue of the
Notes.
14. Authentication.
This Note shall not be valid until authenticated by the manual
signature of the Trustee or an authenticating agent.
15. Abbreviations.
Customary abbreviations may be used in the name of a Noteholder
or an assignee, such as TEN COM = tenants in common, TEN ENT = tenants by the
entireties, JT TEN = joint tenants with right of survivorship and not as
tenants in common, CUST= Custodian, and U/G/M/A = Uniform Gifts to Minors Act.
-------------------------------------------------
The Corporation will furnish to any Noteholder upon
written request and without charge a copy of the Indenture.
Requests may be made to: Treasurer, Energy West Incorporated, 1
First Avenue South, Great Falls, Montana 59401.
B-6
<PAGE>
ASSIGNMENT FORM
I/We assign and transfer this Note to
[ ]
(Insert assignee's social
security or tax I.D. number)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint as agent to
-------------------------------------------
transfer this Note on the books of the Corporation. The agent may substitute
another to act for him.
Date: Signature
---------------------------- --------------------------
(Sign exactly as your name
appears on the other side
of this Note)
<PAGE>
[LETTERHEAD]
July 22, 1997
ENERGY WEST, INCORPORATED
1 First Avenue South
Great Falls, MT 59401
RE: Registration Statement on Form S-2
$8,000,000 of Notes due June 1, 2012
Ladies and Gentlemen:
I am Corporate Counsel of ENERGY WEST, INCORPORATED, a Montana Corporation (the
"Company"), and have acted as counsel to the Company in connection with a
Registration Statement of Form S-2 (the "Registration Statement") relating to
the sale by the Company of $8,000,000 of its Notes due June 1, 2012 (the
"Notes").
I have examined such documents and have reviewed such questions of law as I
have considered necessary and appropriate for the purposes of my opinion set
forth below. In rendering my opinion set forth below, I have assumed the
authenticity of all documents submitted to me as originals, the genuineness
of all signatures and the conformity to authentic originals of all documents
submitted to me as copies. I have also assumed the legal capacity for all
purposes relevant hereto of all natural persons and, with respect to all
parties to agreements or instruments relevant hereto other than the Company,
that such parties had the requisite power and authority (corporate or
otherwise) to execute, deliver and perform such agreements or instruments,
that such agreements or instruments have been duly authorized by all
requisite action (corporate or otherwise), executed and delivered by such
parties and that such agreements or instruments are the valid, binding and
enforceable obligations of such parties. As to certain questions of fact
material to my opinion, I have relied upon certificates of other officers of
the Company and of public officials.
Based on the foregoing, I am of the opinion that when the Notes and the
Indenture pursuant to which such Notes will be issued have been duly executed
and delivered by all parties thereto, the Notes and the Indenture will
constitute valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their terms.
My opinion set forth above is subject to the following qualifications and
exceptions.
(a) My opinion is subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar law of general
application affecting creditors' rights.
<PAGE>
(b) My opinion is subject to the effect of general principles of equity,
including (without limitation) concepts of materiality, reasonableness,
good faith and fair dealing, and other similar doctrines affecting the
enforceability of agreement generally (regardless of whether considered in
a proceeding in equity or at law.)
My opinion expressed above is limited to the laws of the State of Montana.
I hereby consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to me under the caption "Validity
of Notes" contained in the Prospectus included therein.
Dated: July 22, 1997
Very truly yours,
/s/ John C. Allen
John C. Allen
Corporate Counsel
<PAGE>
DELIVERED GAS PURCHASE CONTRACT
FEBRUARY 23, 1977
CASCADE GAS CO.
SELLER
THE MONTANA POWER COMPANY
BUYER
<PAGE>
DELIVERED GAS PURCHASE CONTRACT
Index
Page
Article Title Number
------- ----- ------
I Definitions 1
II Commitment of Gas Reserves 2
III Seller's Obligations 2
IV Quantity of Gas 6
V Determinations of Gas Reserves 10
VI Delivery Pressure and Delivery Points 13
VII Quality of Gas 14
VIII Measurement and Tests 15
IX Price and Payment 21
X Seller's Representations 27
XI Title to Gas 28
XII Force Majeure 29
XIII Term 31
XIV Miscellaneous 31
<PAGE>
DELIVERED GAS PURCHASE CONTRACT
(Montana)
THIS CONTRACT, EFFECTIVE and agreed to by the parties hereto this 23rd of
February, 1977, is by and between CASCADE GAS CO., P. O. Box 577, Shelby,
Montana, 59474 (hereinafter called "Seller") and THE MONTANA POWER COMPANY
(hereinafter called "Buyer").
WITNESSETH:
WHEREAS, Seller is the contract purchaser of gas produced from those lands
situated in the State of Montana, and described on Schedule "A" attached hereto,
on which gas production has been developed; and
WHEREAS, Buyer is willing to buy gas which may be purchased by Seller from
said lands in commercial quantities; and
WHEREAS, the parties hereto are desirous of entering into a contract
providing for the sale by Seller and purchase by Buyer of volumes of gas
delivered by Seller;
NOW, THEREFORE, in consideration of the premises and the covenants herein
contained, Seller agrees to sell and deliver to Buyer and Buyer agrees to
purchase and receive from Seller, pursuant to the terms and conditions
hereinafter set forth, all of the gas purchased, produced or otherwise obtained
by Seller from acreage described on Schedule "A" attached hereto.
-1-
<PAGE>
ARTICLE I
DEFINITIONS
For the purpose of the Contract, the following words and terms are defined
as follows:
1. "CONTRACT YEAR" means a calendar year except that the first "Contract
Year" is deemed to commence on the date of initial delivery of gas hereunder and
extending to, but not including the following January 1.
2. The "ANNIVERSARY DATE" of this Contract is deemed to be January l in
each Contract year.
3. "DAY" means a period of twenty-four (24) consecutive hours beginning and
ending at 8:00 a.m., Mountain Time. The reference date for any day shall be the
calendar date upon which said 24-hour period shall commence.
4. "MONTH" means the period of time beginning at 8:00 a.m., Mountain Time
on the first day of a calendar month and ending at 8:00 a.m., Mountain Time on
the first day of the next calendar month.
5. "GAS" means either natural gas obtained from the wells or the residue
remaining after the natural gas has been treated by Seller for the removal of
any of its constituent parts other than methane and the removal of methane to
such extent as is necessary in removing other constituents, as the context may
require, but not including casinghead gas.
6. "CASINGHEAD GAS" means gas which has its rate of production controlled
by the amount of oil simultaneously produced therewith.
-2-
<PAGE>
7. "RECOVERABLE GAS RESERVES" means the quantity of gas which is determined
or redetermined at a future date to be economically recoverable and deliverable
during the initial term of this Contract from all Gas Production Units connected
to Seller's gathering system and available for delivery as of the date of
initial delivery hereunder after processing, if any, to satisfy the quality
specifications hereof, less the quantities of gas reserved by the Seller
hereunder. Such reserves shall be computed by accepted reservoir engineering and
geological procedures, and shall consist of only those reserves controlled by
Seller and underlying or attributable to the lands listed on Schedule "A", but
shall not include casinghead gas.
8. "RESERVOIR" means stratigraphic trap, or pool, from which gas is
produced, and one (1) or more "reservoirs" may be produced by means of a single
well.
9. "CUBIC FOOT OF GAS" is the unit of volume for purposes of measurement
hereunder, except for gross heating value, and means one cubic foot of gas at a
temperature of 60 DEG. F. and at a pressure of 14.73 pounds per square inch
absolute. For purposes of measurement, the atmospheric pressure shall be assumed
to remain constant at 13 pounds per square inch absolute.
10. "MCF" means one thousand (1,000) cubic feet.
11. "BTU" means British Thermal Unit. "GROSS HEATING VALUE" means the total
calorific value expressed in BTU's obtained by the complete combustion at
constant pressure of the amount of gas which would occupy a volume of one cubic
foot at
-3-
<PAGE>
a temperature of 60 DEG. F. if saturated with water vapor and under a pressure
equivalent to that of 30 inches of mercury at 32 DEG. F. and under standard
gravitational force (980.665 c.m. per sec. sec.) with air of the same
temperature and pressure as the gas, when the products of combustion are cooled
to the initial temperature of gas and air and when the water formed by
combustion is condensed to the liquid state.
12. "DCQ" means Daily Contract Quantity, and is defined in Article IV,
Section 1, of this agreement.
13. "ANNUAL CONTRACT VOLUME" means the DCQ multiplied by the number of
calendar days in the Contract Year.
ARTICLE II
COMMITMENT OF GAS RESERVES
Seller hereby commits to the performance of the Contract all of the gas
purchased, produced or otherwise obtained by Seller from the lands specified and
described on Schedule "A".
ARTICLE III
SELLER'S OBLIGATION
SECTION 1:
GAS TO BE PURCHASED AND SOLD. Subject to the provisions of this Agreement,
during the term hereof the Seller shall gather, compress, dehydrate, sell and
deliver to Buyer, and the Buyer shall purchase and receive from the Seller at
the delivery point the natural gas purchased, produced or otherwise obtained by
Seller from wells on the lands described in Schedule "A".
-4-
<PAGE>
SECTION 2:
(a) SELLER'S OBLIGATION TO DELIVER. Seller shall available for delivery
all volumes requested by not to exceed 125% of the DCQ, provided however,
Seller shall not be required to demand that the owners produce any wells in
excess of the legal of such wells as may be fixed from time to time
regulatory bodies or in excess of any rate which, judgment of the well
owners, may damage the well.
(b) LIMITATION ON SELLER'S OBLIGATIONS.
(i) RATE OF DELIVERY. Seller shall not be obligated to demand delivery
of gas from any well at a rate which in the opinion of the well owner,
acting as a reasonably prudent operator, would be injurious to such well or
to the reservoir or reservoirs from which such well is produced.
(ii) RESERVATION OF GAS BY THE SELLER. The Seller reserves the
following rights:
(1) the right to retain or allow others to retain title and
possession to such quantities of gas produced from the lands described
in Schedule "A" as may be required to fulfill the obligations of the
Seller under the terms of the Agreement or other document by which
Seller derives its right to sell the gas to be sold hereunder;
(2) the right to use such quantities of gas as may be needed or
required for delivery of gas for
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<PAGE>
sale under this Contract from the lands described in Schedule "A";
(3) the right to process or allow others to process gas produced
from any one or more of the wells located on the lands described in
Schedule "A" for the removal of any component other than methane prior
to delivery of such gas to the Buyer, which components so removed
shall belong to the Seller or other processor; provided however, that
the gas which is delivered to Buyer after such processing shall meet
the quality requirements of Article VII hereof.
ARTICLE IV
QUANTITY OF GAS
SECTION 1
VOLUME OBLIGATION. Commencing on the date that Seller notifies Buyer in
writing that Seller is prepared, pursuant to the terms of this Delivered Gas
Purchase Contract, to deliver gas to Buyer at the discharge side of Seller's
plant and facilities located in the NW1/4 NW1/4 NE1/4 of Section 34, Township 34
North, Range 2 West, Toole County, Montana, (Delivery Point), the volume of gas
which Buyer shall be obligated to take and pay for, or pay for if available and
not taken, and which Seller shall be obligated to have available for delivery,
shall be the Daily Contract Quantity (DCQ).
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Until such time as Seller has available for delivery to Buyer in excess of
ten million (10,000,000) cubic feet of gas per day, the DCQ shall be eighty
percent (80%) of the daily volume available for delivery by Seller, whether or
not taken by Buyer. However, at such time as the DCQ so computed equals or
exceeds eight million (8,000,000) cubic feet per day, the DCQ shall be one
million (1,000,000) cubic feet per day for each five billion five hundred
million (5,500,000,000) cubic feet of Recoverable Gas Reserves as defined
herein.
The parties have agreed that, at the date of inception of Buyer's
obligation to take or pay for gas under the terms of this Contract, and until
initial delivery of gas to Buyer, the DCQ shall equal one million two hundred
thousand (1,200,000) cubic feet of gas per day.
SECTION 2:
CASINGHEAD GAS. Subject to the Quality Provisions of Article VII, Seller
may deliver to Buyer, in addition to the volumes of gas determined under Section
1 of the Article IV, Casinghead Gas purchased by Seller from the lands described
in Schedule "A". Buyer shall be obligated to accept delivery of such
Casinghead Gas only to the extent that the daily volume delivery thereof does
not exceed the DCQ (that is the total daily volume delivered does not exceed
two times the DCQ). Buyer, at its option, may accept Casinghead volumes in
excess of the DCQ.
SECTION 3:
DRAINAGE. If a reservoir producing gas delivered to Buyer under this
Contract is produced by anyone other than a well owner
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selling to Seller at a rate which makes imminent, in Seller's judgment, the
drainage of gas from land under Seller's purchase contracts, then Seller shall
immediately notify Buyer in writing of the existence of such situation and may
request that Buyer, to the extent reasonabley possible, increase its takes from
Seller by a volume sufficient to protect Seller and Seller's well owners from
drainage of the reservoir.
SECTION 4:
MAKE-UP OF DEFICIENCIES IN PURCHASE.
(a) Beginning with initial delivery hereunder, all volumes of gas taken by
Buyer during a contract year in excess of the Annual Contract Volume up to
a total quantity having a total value (calculated at the price being paid
hereunder at the time such gas is so made up) equal to the payments
theretofore made by Buyer to Seller for gas not taken shall be credited to
the make-up of take or pay deficiencies limited to the five (5) contract
years immediately following the later of: (1) the contract year in which
the deficiency occurred, or (2) the contract year in which all take or pay
deficiencies which occurred prior to initial delivery have been recouped.
Nothing contained in this Section 4 shall reduce Buyer's obligation to take
and pay for, or nevertheless pay for if available and not taken, the Annual
Contract Volume during each contract year.
(b) In the event that this Contract terminates for any
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reason other than the breach of the terms hereof by Buyer prior to the
Buyer's recovery of any volumes paid for but not taken hereunder, and
Seller begins deliveries of gas to another purchaser, Seller shall pay to
Buyer one-third (1/3) of the then current sales value of such gas each
month until the Buyer has recovered in full the sums paid by Buyer for gas
not taken.
SECTION 5:
LIMITATIONS UPON BUYER'S OBLIGATION TO PURCHASE GAS.
(a) DELIVERY CAPACITY OF SELLER. Buyer's obligation to purchase the Annual
Contract Volume during each contract year is conditioned upon Seller having
the capability at all times of delivering a daily volume of gas equal to at
least 125% of the DCQ.
(b) FAILURE TO DELIVER CONTRACT VOLUME. If the Seller fails for any
calendar month to deliver to Buyer the daily quantity of gas requested by
Buyer up to 125% of the DCQ, Buyer may notify Seller in writing of such
failure. Seller shall have such time as may be necessary, but in no event
more than twelve (12) months from the date of receipt by Seller of Buyer's
notice, in which period the DCQ shall be reduced temporarily to a volume
equal to 80% of the average daily volume of gas Seller delivered to Buyer
during the calendar month on which Buyer's notice was based. In the event
Seller's attempts to restore its ability to deliver 125% of the DCQ
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in effect prior to such notice are unsuccessful, as evidenced by Seller's
failure to deliver such quantity on each day of a calendar month test
conducted by Seller and Buyer for the period commencing on the day
following the end of said twelve (12) month period, or at such earlier time
as Seller may request, Buyer shall have the right to reduce the DCQ to a
volume equal to 80% of the average daily volume of gas delivered to Buyer
during the calendar month of said delivery test.
ARTICLE V
DETERMINATION OF GAS RESERVES
At such time as the DCQ is equal to eight million (8,000,000) cubic feet
per day, and thereafter, from time to time as new wells are completed or
discoveries of gas are made for which Seller is the contract purchaser, Seller
will provide Buyer with the basic geological, engineering, production and other
data within Seller's possession which would be needed in making a determination
of gas reserves and deliverability of each well.
SECTION 1:
RECOVERABLE GAS RESERVE DETERMINATION: One (1) month prior to the expected
initial delivery of gas from any such new well hereunder, Buyer shall furnish
Seller an estimate of Recoverable Gas Reserves. The estimate shall not include
nor be based in any manner upon volumes of casinghead gas.
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Within fifteen (15) days after Buyer's furnishing its estimate of the
Recoverable Gas Reserves, Seller shall advise Buyer whether Buyer's estimate is
acceptable. If Buyer's estimate of such Recoverable Gas Reserves is not
acceptable to Seller, and Seller and Buyer are unable to negotiate an agreeable
settlement, then the matter shall be determined by arbitration as provided in
this Article V. The Recoverable Gas Reserves when determined will form the basis
for determining the DCQ and take or pay obligations. Such DCQ shall be effective
until superseded by a subsequent redetermination of Recoverable Gas Reserves or
until changed under the provisions of Article IV, Section 5.
The fact that Buyer and Seller cannot agree on the Recoverable Gas Reserves
for any well and find it necessary to submit such matter to arbitration shall
not prevent the connection of such well and the commencement of production
therefrom. The Recoverable Gas Reserves as finally determined by arbitration
shall be used to determine the DCQ retroactive to the date of initial delivery
from such well.
SECTION 2:
SUBSEQUENT REDETERMINATIONS OF RECOVERABLE GAS RESERVES. Either party may
request a redetermination of Recoverable Gas Reserves during the month of July
of every second contract year hereof. Upon request Buyer shall, between July 1
and September 1 of each such year, estimate the quantity of Seller's Recoverable
Gas Reserves and promptly provide Seller with a statement thereof.
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Within fifteen (15) days after Buyer's furnishing its estimate of such
reserves, Seller shall advise Buyer whether Buyer's estimate of such reserves is
acceptable. If Seller and Buyer reach agreement on Recoverable Gas Reserves,
then such reserve agreement shall form the basis for determining the DCQ
effective the following January 1, unless limited by the provisions of Article
IV, Section 5. If Buyer's estimate of such reserves is not acceptable to Seller,
and Seller and Buyer are unable to negotiate an agreeable settlement, then the
matter shall be determined by arbitration as provided in this Article V.
SECTION 3:
ARBITRATION OF RESERVES. If Seller and Buyer are unable to agree upon the
Recoverable Gas Reserves in any of the foregoing instances and such disagreement
cannot be resolved by negotiation within sixty (60) days after Buyer has
submitted its determination of Recoverable Gas Reserves, then the determination
of such reserves will, at the request of either party, be submitted to
arbitration as hereinafter set forth.
Upon written demand of either party, the parties shall meet and attempt to
appoint a single arbitrator. If the parties fail to name an arbitrator within
ten (10) days from such demand, then the arbitrator shall be appointed by the
American Arbitration Society.
The arbitrator selected to act hereunder shall be qualified by education,
training and experience to determine gas reserves.
The arbitrator so chosen shall proceed immediately to hear
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and determine Recoverable Gas Reserves. The decision of the arbitrator shall be
made within thirty (30) days after his appointment, subject to any reasonable
delay due to unforeseen circumstances. Notwithstanding the foregoing, in the
event the arbitrator fails to make a decision within sixty (60) days after his
appointment, then either party may elect to have a new arbitrator chosen in like
manner as if none had previously been selected. If such election is made, the
decision of the previous arbitrator shall be null and void.
The decision of the arbitrator shall be in writing and signed by the
arbitrator and shall be final and binding upon the parties hereto as to
Recoverable Gas Reserves hereunder, until such time as a redetermination may be
made as herein provided.
The compensation and expenses of the arbitrator shall be paid in equal
proportions by Buyer and Seller.
An initial determination of a redetermination of Recoverable Gas Reserves
rendered by an arbitrator shall form the basis of determining the DCQ effective
January 1 of the year following the year in which such arbitration was
requested, subject to the provisions of Article IV, Section 5.
ARTICLE VI
DELIVERY PRESSURE AND DELIVERY POINTS
SECTION 1:
DELIVERY PRESSURE. Delivery by Seller of gas shall be made at a pressure
that is sufficient to effect delivery of gas into
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Buyer's pipeline but not in excess of one thousand (1,000) pounds
per square inch. Maintenance by Seller of sufficient pressure to
enter Buyer's pipeline shall be a condition of Buyer's obligation
to purchase and receive from Seller the quantities of gas specified
in Article III hereof.
SECTION 2:
DELIVERY POINT. Delivery of natural gas hereunder shall be
at the discharge side of Seller's plant and facilities located in
the NW 1/4 NW 1/4 NE 1/4 of Section 34, Township 34 North, Range 2 West,
Toole County, Montana.
SECTION 3:
TITLE: Title to all gas shall pass at the point of delivery.
ARTICLE VII
QUALITY OF GAS
SECTION 1:
Seller agrees that the gas delivered hereunder shall be
merchantable natural gas, at all times complying with the following
quality requirements:
(a) The gas shall be in its natural state as produced, including all
hydrocarbon constituents therein contained, except gas from which Seller
has removed liquid hydrocarbons under the provisions of Article III,
Section 2(b)(ii)(3) hereof. Seller shall also have the right to remove
nonhydrocarbon constituents and hydrocarbons as required to
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remove other constituents. Seller may enrich the gas to the extent required
to meet the gross heating requirement set forth in Paragraph (b) below, and
may subject the gas, or permit the gas to be subjected, to compression,
cooling, cleaning and other processes.
(b) The weighted average gross heating value of gas delivered to Buyer
hereunder shall not be less than nine hundred (900) British Thermal Units
per cubic foot, and shall not be more than one thousand two hundred (1,200)
British Thermal Units per cubic foot. Buyer may reject delivery of gas
having a weighted average gross heating value of less than nine hundred
(900) British Thermal Units or more than one thousand two hundred (1,200)
British Thermal Units.
(c) The gas shall be commercially free from sand, dust, gums, liquid water,
crude oil, impurities and other objectionable substances and shall have
been dehydrated by Seller for removal of water present therein in a vapor
state, and in no event contain more than four (4) pounds of water vapor per
one million (1,000,000) cubic feet of gas, and shall be free from
hydrocarbons liquifiable at temperatures in excess of fifteen degrees
(15 DEG) Fahrenheit at pressures up to 800 psig.
(d) The gas shall not contain more than one-quarter (1/4) grain of hydrogen
sulphide per one hundred (100) cubic feet of gas.
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(e) The gas shall not contain in excess of three percent (3%) by volume of
carbon dioxide.
(f) The temperature of the gas at the delivery point or delivery points
shall not be in excess of one hundred twenty degrees (120 DEG) Fahrenheit.
ARTICLE VIII
MEASUREMENT AND TESTS
SECTION l:
UNIT OF VOLUME. The unit of volume for all gas hereunder shall be one (l)
cubic foot of gas, and the term "Cubic foot of Gas" wherever used in the
Contract shall mean a cubic foot of gas at a temperature of sixty degrees
(60 DEG) Fahrenheit and at a pressure of 14.73 pounds per square inch absolute.
SECTION 2:
SALES UNIT. The sales unit of the gas delivered hereunder shall be one
thousand (1,000) cubic feet.
SECTION 3.
OWNERSHIP OF MEASURING EQUIPMENT. All measuring devices and materials
required at the point or points of delivery shall be installed, maintained, and
operated or furnished by Buyer at Buyer's expense. Seller may install and
operate check measuring equipment provided it does not interfere with the use of
Buyer's equipment in determining the volumes of gas delivered by Seller to Buyer
at the points of delivery.
SECTION 4:
METERING AND COMPUTATION OF VOLUME. The gas shall be
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metered by orifice meters or other measurement facilities constructed,
installed, and maintained by Buyer at or near the point or points of delivery.
Such measurement facilities of Buyer shall be constructed and installed in
accordance with the applicable provisions of the American Gas Association's "Gas
Measurement Committee Report No. 3, dated April, 1955". The volumes of gas
delivered to Buyer shall be computed from the meter records and converted into
the units of measurement specified herein in accordance with the methods
prescribed in Gas Measurement Committee Report No. 3 of the American Gas
Association, including the appendix thereto, as published April, 1955, or any
subsequent revision thereof acceptable to Buyer and Seller. Corrections shall be
made for deviation from the Ideal Gas Laws at the pressure and temperature at
which the gas is metered. To determine the factors for such correction a
quantitative analysis of the gas shall be made at reasonable intervals with such
apparatus as shall be agreed upon by Buyer and Seller, and such factors shall be
obtained from data contained in "Supercompressibility Factors for Natural Gas",
Volumes 1 through 6, inclusive, or in "Tables for Determination of
Supercompressibility Factors for Natural Gas Containing Nitrogen and/or Carbon
Dioxide", Volume 7, as published by the American Gas Association in 1955, or any
subsequent revision thereof acceptable to Buyer and Seller. For the purpose of
measurement and meter calibration, the atmospheric pressure shall be assumed to
be 13 pounds per square inch, irrespective of variations in natural atmospheric
pressure from time to time. Seller agrees
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to provide sufficient pulsation dampening equipment so that measurement at the
point of delivery will not be affected by pulsation.
SECTION 5:
SPECIFIC GRAVITY. The specific gravity of the gas flowing through the well
meter, or meters, shall be determined by Buyer, or, at Seller's election, by
joint tests, at intervals of appoximately twelve (12) months as may be
practicable under the circumstances. All such determinations of specific gravity
shall be made by a standard gravity balance or by a gravitometer employing the
"Momentum Method" of specific gravity determinations as described in Chapter
VII, "Determination of Specific Gravity", of the American Gas Association Gas
Measurement Manual, 1963 edition. The specific gravity of the gas flowing
through each meter determined by either of the above-mentioned methods shall be
used in computing the volume of gas delivered through such meter. The specific
gravity determined by any test shall apply from the date the test was taken
until the date of the next test.
SECTION 6.
TEMPERATURE. The temperature of the gas delivered at the points of delivery
hereunder shall be determined by means of an indicating thermometer. The
arithmetic average of readings taken at the beginning and end of each chart
period shall be used in computing the volumes delivered hereunder.
SECTION 7:
EQUIPMENT TESTING. The accuracy of Buyer's measuring equipment shall be
verified by test, using means and methods
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generally acceptable in the gas industry, at least annually or upon the written
request of Seller. Notice of the time and nature of each test shall be given by
Buyer to Seller sufficiently in advance to permit convenient arrangement for
Seller's representative to be present. Measuring equipment found to be
registering inaccurately shall be adjusted to read as accurately as possible.
If, after notice, Seller fails to have a representative present, the results of
the test shall nevertheless be considered accurate until the next test. All
tests of such measuring equipment shall be made at Buyer's expense, except that
Seller shall bear the expense of tests made at its request if the inaccuracy is
found to produce an error of two percent (2%) or less in the measurement of gas.
SECTION 8:
MEASURING EQUIPMENT OUT OF REPAIR. If, for any reason any measuring
equipment is inoperative or inaccurate so that the volume of gas delivered is
not correctly indicated by the reading thereof, and if such reading is in error
by more than two percent (2%) in the measurement of gas, then the volume of gas
delivered, during the period such measuring equipment is inoperative or
inaccurate, shall be determined by the parties hereto on the basis of the best
date available using the first of the following methods which is feasible:
(a) By using the registration of any check measuring equipment installed
and accurately registering;
(b) By correcting the error if the percentage of error is ascertainable by
calibration, test, or mathematical
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calculations; or
(c) By comparing deliveries made during preceding periods under similar
delivery conditions when the meter was registering accurately.
An adjustment based on such determination shall be made for such period of
inaccuracy as may be definitely known, or if not known, then for one-half the
period since the date of the last meter test. In no event, however, shall any
adjustment extend back beyond six months from the date the error was first made
known by one party hereunder to the other.
SECTION 9:
INSPECTION OF EQUIPMENT. Buyer and Seller shall have the right to inspect
equipment installed or furnished by the other party, and the charts and other
measurement or test data of the other party, at all times during business hours;
but the reading, calibration, and adjustment of such equipment and changing of
charts shall be done only by the party installing and furnishing the same.
Unless the parties otherwise agree, each party shall perserve all original test
data, charts, and other similar records in such party's possession for a period
of at least five (5) years.
SECTION 10:
GROSS HEATING VALUE. The gross heating value per cubic foot of gas shall be
determined from time to time by the Buyer at the Buyer's expense, using an
accurately calibrated Culter-Hammer calorimeter from samples of the gas taken at
the delivery point or points. The Seller shall have the right to witness any and
all tests of gross heating value made by the Buyer. The Seller
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shall have the right at any time to make or to require the Buyer to make a
special test of the gross heating value of gas delivered hereunder, but the
Seller shall bear the expense of any special tests made at its request. Tests of
gross heating value of gas delivered hereunder shall be made by the Buyer after
giving Seller ten (10) days written notice thereof.
SECTION 11:
HYDROGEN SULPHIDE. Tests to determine hydrogen sulphide content shall be
made whenever necessary, but not oftener than two (2) times during any calendar
year, to determine whether the gas meets the requirements of Article VII,
Section 1 (d) hereof. Such test shall be made at the expense of the Buyer.
Seller shall have the right to witness and verify all tests.
SECTION 12:
DATA TO BE PROVIDED TO SELLER. Buyer shall provide Seller with all
information, data, test results, reservoir information, etc, immediately upon
receipt of same by Buyer, to the end that at all times Seller shall have all
information relative to its wells that is available to Buyer.
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ARTICLE IX
PRICE AND PAYMENT
SECTION 1:
(a) Buyer shall pay the Seller on or before the 25th day of each month for
gas volumes delivered and actually taken in the preceding month. If during
any calendar month Seller has available for delivery 125% of the DCQ and
Buyer does not take a total volume of gas equal to the DCQ multiplied by
the number of days in said calendar month, then, on or before the 25th day
of the succeeding month Buyer shall pay Seller, as take-or-pay payment, the
value of such volume of gas not taken. If Buyer shall have taken a total
volume of gas in excess of the DCQ multiplied by the number of days in any
calendar month, and if said excess has not been credited to make up of
deficiencies pursuant to Article IV, Section 4(a) hereof, then Buyer shall
be entitled to credit such excess against any deficiency in take occurring
in any subsequent month in the same calendar year.
(b) The price to be paid by the Buyer to the Seller for gas delivered to
the Buyer at the delivery point or for take or pay payments shall be in
U. S. funds and shall be at all times equivalent to the Canadian Border
price for gas produced in Alberta and delivered to Buyer at the
Canadian-Montana border at Aden, Alberta. Proper adjustments shall be made
monthly for Pressure Base,
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BTU Content, (none required at present since this Contract and the Canadian
Border price are both stated at 14.73 psia and 1000 BTU), and currency
adjustment between Canandian and U. S. currency. The currency adjustment
shall be based on the arithmetic average of the daily exchange rate of
Canadian currency and United States currency as published at Twelve O'clock
(12:00) noon by the Royal Bank of Canada at the City of Ottawa.
In the event deliveries of gas produced in Alberta at the Aden border
export point cease but Buyer continues to import gas produced in Alberta at
the Carway border export point, then the Canadian Border price at Carway
will determine the price hereunder.
(c) If the gas delivered hereunder has a gross heating value of less than
one thousand (1,000) BTU per cubic foot, then the price payable for such
gas shall be reduced. If the gas has a gross heating value of more than one
thousand (1,000) BTU per cubic foot, then the price payable for such gas
shall be increased. Such reduced or increased price shall be determined by
multiplying the price otherwise payable by a fraction, the numerator of
which is the actual gross heating value of the gas delivered, express in
BTU per cubic foot, and the denominator of which is one thousand (1,000);
provided, however, such fraction shall not exceed 12/10 even though the
gross heating value of the gas is found to be in excess of one thousand two
hundred (1,200) BTU per cubic foot.
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SECTION 2:
(a) If Buyer ceases to import gas produced in the Province of Alberta, then
the price per MCF to be paid pursuant to Section 1 of this Article IX
shall, upon demand by either party, be renegotiated, effective the day
Canadian gas produced in Alberta ceases to flow into Buyer's Montana
system, pursuant to the provisions of this Section. Either party shall also
have the right to demand renegotiation, pursuant to this Section, on the
second (2nd) anniversary date following the date on which gas produced in
Alberta ceases to flow into Buyer's Montana system and on each second
anniversary date thereafter.
(b) Upon demand made at least six (6) months but not more than ten (10)
months prior to the second (2nd) "anniversary date", and/or at least six
(6) months but not more than ten (10) months prior to the "anniversary
date" of each second (2nd) year thereafter, as appropriate, the parties
shall renegotiate the price to be paid pursuant to this Contract. Failure
to make the demand within the times allowed shall be deemed a waiver of the
right to renegotiate.
(c) Such renegotiation shall arrive at the fair market price of the gas
hereunder based upon similar sales of gas, irrespective of whether such
sales are delivered or wellhead sales, for ultimate delivery to pipeline
transmission companies or upon sales of gas derived from field sales of gas
to pipeline transmission companies, produced
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from fields and reservoirs located in the State of Montana. In determining
the fair market price, all pertinent factors, such as point of delivery,
cost of gathering, quality, quantity and delivery pressure, shall be
considered and given due weight.
If the parties are successful in negotiating a price, as provided
above, said price shall become effective on the "anniversary date" for which
such price renegotiation is requested.
If the parties are unable to agree upon such fair market price by sixty
(60) days prior to the appropriate "anniversary date", then either party shall
have the right to refer the matter to arbitration to determine the price of gas
to be delivered hereunder.
Upon written demand of either party, the parties shall meet and attempt to
appoint a single arbitrator. If the parties are unable to agree on a single
arbitrator, then upon written demand of either party and within ten (10) days of
such demand, each party shall name an arbitrator; and the two arbitrators so
named shall within ten (10) days therafter choose a third. If either party shall
fail to name an arbitrator within ten (10) days from the date of such demand,
then the second arbitrator shall be appointed by the American Arbitration
Society. If the two arbitrators shall fail within ten (10) days from their
appointment to agree upon and appoint the third arbitrator, then upon written
application by either party such third arbitrator shall be appointed by the
American Arbitration Society.
The arbitrator or arbitrators selected to act hereunder shall be qualified
by education and training to determine the appropriate price for gas delivered
hereunder.
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The single arbitrator or the arbitrators so chosen shall proceed
immediately to determine the price for gas delivered hereunder. The cecision of
the single arbitrator shall be made within thirty (30) days after his
appointment, subject to any reasonable delay due to unforeseen circumstances.
The decision of the arbitrators, or a majority of them, shall be made within
forty-five (45) days after the appointment of the third arbitrator, subject to
any reasonable delay due to unforeseen circumstances. Notwithstanding the
foregoing, in the event the single arbitrator fails to make a decision within
sixty (60) days after his appointment or if the arbitrators, or a majority of
them, fail to make a decision within sixty (60) days after the appointment of
the third arbitrator, then either party may elect to have a new single
arbitrator or arbitrators chosen in like manner as if none had previously been
selected.
The decision of the single arbitrator or the decision of the arbitrators,
or a majority of them shall be drawn up in writing and signed by the single
arbitrator or by the arbitrators, or a majority of them and shall be final and
binding upon the parties as to the price of gas delivered hereunder, effective
on the "anniversary date" for which such price renegotiation was requested.
The compensation and expenses of the single arbitrator shall be paid in
equal proportions by Buyer and Seller.
If each party has named an arbitrator, and the third has been appointed as
provided herein, the compensation and expenses of such arbitrator shall be paid
by the party appointing him or
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in whose behalf such arbitrator was appointed, and the compensation and expenses
of the third arbitrator shall be paid in equal proportions by Buyer and Seller.
SECTION 3:
On or before the fifteenth (15th) day of each calendar month after
deliveries of gas are commenced hereunder, the Buyer shall render to Seller a
statement showing the amount of gas delivered during the preceding calendar
month, together with sufficient information to explain and support any
adjustment by the Buyer with respect to the value of gas delivered in
determining the amounts stated to be due. Payment shall be made by Buyer to
Seller on or before the twenty-fifth (25th) day of said month.
SECTION 4:
Seller shall have, upon request within one (l) year after receipt of the
statement referred to in Section 3 of this Article IX, the right to examine the
meter charts and computations upon which such statements are based. If the
Seller deems such charts for computations to be inaccurate, Seller may protest
the statement within one (l) year of the examination thereof, and may request a
check to be made of the meter installed pursuant to Article VIII hereof. Any
statement not protested within one (l) year of the examination of meter charts
and computations thereof shall be deemed to be correct. The Buyer shall make
current meter charts available to the Seller for examination.
ARTICLE X
SELLER'S REPRESENTATIONS
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SECTION 1:
AGREEMENT. Seller represents and warrants that it is the purchaser of and
has the right to sell gas to be produced from the land described in Schedule "A"
and agrees to maintain its purchase contracts in full force and effect, at its
own expense.
SECTION 2:
WELLS. Seller's gathering system and the wells connected thereto shall be
equipped and operated as required to meet the Quality provisions of Article VII
hereof and shall be maintained in good operating condition, in accordance with
approved practices, without cost to Buyer. In the event liquids exist, requiring
separation from the gas, then Seller agrees to install, operate, and maintain,
without cost to Buyer, such liquid removal equipment operated at normal
temperatures, as may be necessary to separate such liquids from the gas.
SECTION 3:
NOTICE TO BUYER. Seller will advise Buyer, at the earliest possible date,
its best estimate of the initial delivery date of gas from any new wells
connected to Seller's gathering system.
ARTICLE XI
TITLE TO GAS
Seller warrants that it has title to all gas delivered to Buyer under this
Contract and that Seller has authority to sell the same, and Seller agrees to
indemnify and save Buyer harmless from any and all suits, claims, and liens of
whatsoever nature
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<PAGE>
relating to such gas or the title thereto. If the title to any property or
interest in any property from which gas is purchased by Seller and sold to Buyer
hereunder shall at any time be involved in litigation, Buyer shall have the
right to withhold (invested in certificates of deposit, short-term government
securities or similar obligations or deposited in an interest bearing account,
such interest to be paid along with the principal sum) the proceeds payable for
the gas produced from the particular property or interest in property in
litigation during the period of such litigation or until Seller shall furnish a
bond, in form and with sureties acceptable to Buyer, conditioned to save Buyer
harmless.
If it should be finally determined that there is a defect in Seller's right
to or ownerhsip of the gas to be sold hereunder, Seller shall, with reasonable
promptness, attempt to remedy such defect. Until the defect to such title shall
have been remedied, Buyer shall have the right either to refuse to accept
deliveries of gas hereunder and withhold (invested in certificates of deposit,
short-term government securities or similar obligations or deposited in an
interest bearing account, such interest to be paid along with the principal sum)
the proceeds otherwise payable to Seller hereunder.
Title to the gas delivered hereunder shall pass to the Buyer at the
Delivery Point.
ARTICLE XII
FORCE MAJEURE
If either party to this Contract shall fail to perform any
-29-
<PAGE>
obligation hereby imposed upon it and such failure shall be caused, or
materially contributed to by acts of God, strikes, lockouts, or other industrial
disturbances in the operation of Seller or Buyer or their customers, acts of
enemies of the State, sabotage, wars, blockades, insurrections, riots,
epidemics, landslides, lightning, earthquakes, floods, storms, fires, washouts,
arrests and restraints of rulers and people, civil disturbances, explosions,
breakage of or accident to machinery or lines of pipe, hydrate obstructions to
lines of pipe, temporary failure of gas supply, freezing of wells or delivery
facilities, well blowouts, craterings, inability to obtain pipe, materials or
equipment, the order of any court or governmental authority, or by any act or
omission which is occasioned by any event or occurrence of the character
described in this Article XII as constituting force majeure, or by the necessity
for making repairs to or reconditioning wells, a gas processing plant,
machinery, equipment, or pipe lines, not resulting from the fault or negligence
of such party, or by any other cause, whether of the kind herein enumerated or
otherwise, all such causes being beyond control of the party invoking this
Article and being such that by the exercise of due diligence such party could
not have prevented, such failure shall not give rise to any cause of action
based on breach of the obligations to such party hereunder, but such party shall
use reasonable diligence to put itself again in a position to carry out its
obligations hereunder. Nothing contained herein shall be construed to require
either party to settle a strike or lockout by acceding against its judgment to
the demands of opposing parties.
-30-
<PAGE>
No such cause affecting the performance of the Contract by either party
shall continue to avoid a cause of action after the expiration of a reasonable
period of time within which by the use of due diligence such party could have
remedied the situation preventing its performance, nor shall any such cause
relieve either party from its obligation to make payment of amounts then due
hereunder for gas already delivered nor shall any such cause avoid a cause of
action unless such party shall give notice of such cause in writing to the other
party with reasonable promptness; and like notice shall be given upon
termination of such cause.
For purposes of determining the occurrence of performance of obligations
under this agreement, it is mutually agreed that, during a period of force
majeure, the party affected shall be deemed to have performed all of its
obligations as if it had delivered or purchased the gas required to be delivered
or purchased during said period.
ARTICLE XIII
TERM
SECTION 1:
This Contract shall become effective on the Effective Date hereof and shall
continue in effect for a period of fifteen (15) Contract Years (initial term)
from the date of initial delivery of gas hereunder and thereafter from year to
year until cancelled by one (1) year's written notice from one party to the
other.
-31-
<PAGE>
ARTICLE XIV
MISCELLANEOUS
SECTION 1:
NOTICES. Notices to Buyer shall be addressed to:
The Montana Power Company
40 East Broadway
Butte, Montana 59701
Notices to Seller shall be addressed to:
Cascade Gas Co.
P. O. Box 577
Shelby, Montana 59474
Either party may change its address under this Section at any time upon
written notice.
SECTION 2:
REGULATORY JURISDICTION. This Contract is subject to all valid legislation
and to all valid present and future orders, rules, and regulations of duly
constituted authorities having jurisdiction.
Should Buyer propose to transport, sell or use gas purchased hereunder in
such a manner that would, in Seller's opinion, subject Seller to jurisdiction of
the Federal Power Commission with respect to Seller's performance of this
Agreement, Seller may terminate this Agreement prior to consummation of such
proposals of Buyer upon written notice of such termination to Buyer. Such notice
must be given to Buyer not more than thirty (30) days after Buyer provides
Seller with written notice of any such proposal; provided Buyer shall not
inaugurate any such proposals prior to the effective date of any termination
Seller may elect pursuant to this paragraph. After any
-32-
<PAGE>
such termination, Seller shall not sell or contract to sell such gas under
circumstances which would render Seller subject to jurisdiction of the Federal
Power Commission respecting such sale or contract without first offering the gas
to Buyer on the same terms, which offer shall be in writing and shall be open
for thirty (30) days after given. Thereafter, unless such offer is accepted
within said time, Seller may sell or contract to sell such gas to any person.
SECTION 3.
This Contract shall bind and inure to the benefit of the parties hereto,
their successors and assigns.
SECTION 4:
EASEMENTS. Seller hereby grants and assigns to Buyer all requisite
easements and rights-of-way over, across and under any of the land covered
hereby that Seller has the right so to do under the terms of the Agreement
covering such lands, and the right to perform thereon any acts necessary or
convenient in carrying out the terms of this Contract and Buyer's obligations
hereunder.
SECTION 5.
TITLES. The numbering and titling of particular provisions of the Contract
is for the purpose of facilitating administration and shall not be construed as
having any substantive effect on the terms of this Contract.
SECTION 6.
INTERPRETATION. The terms of this Contract shall be construed according to
the laws of the State of Montana.
-33-
<PAGE>
SECTION 7.
The effective date of this Contract is the day and date first above
written.
SECTION 8.
SEVERABILITY. The various articles, sections, provisions and clauses of
this Contract are severable. The invalidity of any portion hereof shall not
affect the validity of any other portion of nor the entire Contract.
SECTION 9.
TIME. Time is of the essence in this Agreement.
SECTION 10.
PAYMENT. All take-or-pay payments or payments for gas taken shall be made
to:
Cascade Gas Co.
P. O. Box 577
Shelby, Montana 59474
SECTION 11:
EXECUTED at Butte, Montana, the day and year first above written.
THE MONTANA POWER COMPANY
By /s/ [ILLEGIBLE]
-----------------------
ATTEST:
/s/ F.A. McElwain
- -----------------------------------
ASSISTANT SECRETARY
BUYER
-34-
<PAGE>
EXECUTED at Shelby, Montana, as of the day and year first
above written.
CASCADE GAS CO.
ATTEST: By /s/ Jerry L. Branch
--------------------------
/s/ [ILLEGIBLE]
- ---------------------------
ASSISTANT SECRETARY
SELLER
-35-
<PAGE>
SCHEDULE A
A part of the Delivered Gas Purchase
Contract dated February 23, 1977,
between The Montana Power Company as
Buyer and Cascade Gas Co. as Seller.
DESCRIPTION OF LANDS
Toole County, Montana
Township 34 North, Range 2 West
Section 14, 15, 16, 20, 21, 22, 23, 26,
27, 28, 29, 32, 34 and 35
Township 33 North, Range 2 West
Sections 3 and 4
<PAGE>
[LETTERHEAD]
LETTER AGREEMENT AMENDING
GAS PURCHASE CONTRACT
March 9, 1982
Cascade Gas Company
P. O. Box 577
Shelby, MT 59474
Gentlemen:
Please refer to that certain Delivered Gas Purchase Contract dated February 23,
1977 (hereinafter called the "Contract") by and between The Montana Power
Company (hereinafter called "Buyer") and Cascade Gas Company (hereinafter called
"Seller").
Because Cascade Gas Company has obtained the rights to produce gas from
lands not originally covered by the Contract, and as a consequence The
Montana Power Company will receive an additional gas supply, The Montana
Power Company hereby proposes to amend the Contract as follows, subject to
the terms and conditions hereinafter set forth:
1. SCHEDULE A
Add T33N-R2W - All Sections
Add T33N-R3W - Sections 23, 24, 25, 26, 35, 36
2. Whenever Seller's deliverability reaches 1000 MCFD or more under the
Contract then whenever it appears in the Contract, Seller's obligation
to deliver 125% of the DCQ shall be changed to 150% and Buyer's right
to reduce the DCQ to 80% of average daily volume of gas shall be
changed to 66-2/3%.
3. Whenever Seller's deliverability is less than 1000 MCFD under the
Contract then Seller's obligation to deliver 125% of the DCQ and
Buyer's right to reduce the DCQ to 80% of average daily volume of gas
shall be reinstated. In this case Buyer will use its best efforts to
take delivery of all the gas Seller is capable of delivering.
<PAGE>
Page Two
LETTER AGREEMENT AMENDING
GAS PURCHASE CONTRACT
4. Under no circumstances will the Buyer be required to conduct a
deliverability test during the month of June, July and August under
the Contract.
5. These contract amendments will be effective October 1, 1981. These
amendments make no changes to the Contract other than those specified
herein.
If these contract amendments are satisfactory, please signify your acceptance by
signing in the space provided and return the "Montana Copy" to me.
THE MONTANA POWER COMPANY
BY: /s/ R.P. Madison
-----------------------
TITLE: MGR, GAS SUPPLY
--------------------
AGREED TO AND ACCEPTED
CASCADE GAS COMPANY
BY: /s/ Jerry L. Branch
-----------------------------
TITLE: Manager
--------------------------
DATE: April 23, 1982
---------------------------
<PAGE>
AMENDMENT TO
DELIVERED GAS PURCHASE CONTRACT
Dated February 23, 1977
Cascade Gas Co. - Seller
The Montana Power Company - Buyer
THE UNDERSIGNED, CASCADE GAS CO. (hereinafter SELLER) and THE MONTANA POWER
COMPANY (hereinafter BUYER), in consideration of the mutual benefits to accrue
to each Party, do hereby agree that that certain Delivered Gas Purchase Contract
between the Parties hereto, dated February 23, 1977, is hereby amended as
follows:
I.
The amendments herein set forth shall be applicable as of 8:00 o'clock A.M.
on March 20, 1986.
II.
Section 1, Delivery Pressure, of Article VI, Delivery Pressure and Delivery
Points, appearing on pages 13 and 14 of said Contract of February 23, 1977 shall
be deleted in its entirety and the following inserted in place thereof:
"Section 1:
DELIVERY PRESSURE. Delivery by Seller of gas shall be made at a pressure
that is sufficient to effect delivery of gas into Buyer's pipeline but not in
excess of one thousand (1,000) pounds per square inch. However, Buyer agrees
that it will not operate its pipeline at a pressure greater than eight hundred
(800) pounds per square inch unless Buyer gives Seller one (1) year's advance
written notice of the need to increase the pipeline pressure to more than eight
hundred (800) pounds per square inch (but not more than one thousand (1,000)
pounds per square inch) and, pursuant to such written notice Buyer does, in
fact, at the stated time increase its pipeline pressure to the pressure set
forth in the written notice. Maintenance by Seller of sufficient pressure to
enter Buyer's pipeline shall be a condition of Buyer's obligation to purchase
and receive from Seller the quantities of gas specified in Article III hereof."
1
<PAGE>
III.
Sections 1 and 2 of Article IX, Price and Payment, beginning on page 22 and
continuing to page 27 of said Contract of February 23, 1977, shall be deleted in
their entirety and the following inserted in place thereof:
"SECTION 1:
(a) Buyer shall pay the Seller on or before the 25th day of each month
for gas volumes delivered and actually taken in the preceding month.
If during any calendar month Seller has available for delivery 125% of
the DCQ and Buyer does not take a total volume of gas equal to the DCQ
multiplied by the number of days in said calendar month, then, on or
before the 25th day of the succeeding month Buyer shall pay Seller, as
take-or-pay payment, the value of such volume of gas not taken. If
Buyer shall have taken a total volume of gas in excess of the DCQ
multiplied by the number of days in any calendar month, and if said
excess has not been credited to make up of deficiencies pursuant to
Article IV, Section 4(a) hereof, then Buyer shall be entitled to
credit such excess against any deficiency in take occurring in any
subsequent month in the same calendar year.
(b) The price to be paid by the Buyer to the Seller for gas delivered
to Buyer at the delivery point or for take-or-pay payments, for the
period of time expiring on December 31, 1987, shall be Two Dollars and
25/lOOths ($2.25) in U.S. funds per MCF.
(c) If the gas delivered hereunder has a gross heating value of less
than one thousand (1,000) BTU per cubic foot, then the price payable
for such gas shall be reduced. If the gas has a gross heating value of
more than one thousand (1,000) BTU per cubic foot, then the price
payable for such gas shall be increased. Such reduced or increased
price shall be determined by multiplying the price otherwise payable
by a fraction, the numerator of which is the actual gross heating
value of the gas delivered, expressed in BTU per cubic foot, and the
denominator of which is one thousand (1,000); provided, however,
2
<PAGE>
such fraction shall not exceed 12/10 even though the gross heating
value of the gas is found to be in excess of one thousand two hundred
(1,200) BTU per cubic foot.
SECTION 2:
(a) Either party shall have the right to demand renegotiation of the
price to be paid for gas hereunder as hereinafter provided.
(b) Upon demand made at least six (6) months but not more than ten
(10) months prior to the anniversary date of January 1, 1988, and/or
at least six (6) months but not more than ten (10) months prior to
each second anniversary date thereafter (i.e., January 1, 1990, et
seq.), the parties shall renegotiate the price to be paid pursuant to
this Contract. Failure to make the demand within the times allowed
shall be deemed a WAIVER OF THE right to renegotiate.
(c) Such renegotiation shall arrive at the fair market price of the
gas hereunder based on similar sales of gas, irrespective of whether
such sales are delivered or wellhead sales, for ultimate delivery to
pipeline transmission companies or upon sales of gas derived from
field sales of gas to pipeline transmission companies, produced from
fields snd reservoirs located in the State of Montana. In determining
the fair market price, all pertinent facts, such as point of delivery,
cost of gathering, quality, quantity and delivery pressure, shall be
considered and given due weight.
If the parties are successful in negotiating a price, as provided
above, said price shall become effective on the "anniversary date" for
which such price renegotiation is requested.
If the parties are unable to agree upon such fair market price by
sixty (60) days prior to the appropriate "anniversary date", then either
party shall have the right to refer the matter to arbitration to determine
the price of gas to be delivered hereunder. If written demand for
arbitration is not delivered or mailed, certified mail with postage
prepaid, on or before November 15 prior to such "anniversary date", the
right shall be deemed waived, and the price in effect on the "anniversary
date" shall remain in effect.
3
<PAGE>
Upon written demand of either perty, the parties shall meet end
attempt to appoint a single arbitrator. If the parties are unable to agree
on a single arbitrator, then upon written demand of either party and within
ten (10) days of such demand, each party shall name an arbitrator; and the
two arbitrators so named shall within ten (10) days thereafter choose a
third. If either party shall fail to name an arbitrator within ten (10)
days from the date of such demand, then the second arbitrator shall be
appointed by the American Arbitration Society. If the two arbitrators shall
fail within ten (10) days from their appointment to agree upon and appoint
the third arbitrator, then upon written application by either party such
third arbitvator shall be appointed by the American Arbitration Society.
The arbitrator or arbitrators selected to act hereunder shall be
qualified by education and training to determine the appropriate price for
gas delivered hereunder.
The single arbitrator or the arbitrators so chosen shall proceed
immediately to determine the price for gas delivered hereunder. The
decision of the single arbitrator shall be made within thirty (30) days
after his appointment, subject to any reasonable delay due to unforeseen
circumstances. The decision of the arbitrators, or a majority of them,
shall be made within forty-five (45) days after the appointment of the
third arbitrator, subject to any reasonable delay due to unforeseen
circumstances. Notwithstanding the foregoing, in the event the single
arbitrator fails to make a decision within sixty (60) days after his
appointment or if the arbitrators, or a majority of them, fail to make a
decision within sixty (60) days after the appointment of the third
arbitrator, then either party may elect to have a new single arbitrator or
arbitrators chosen in like manner as if none had previously been selected.
The decision of the single arbitrator or the decision of the
arbitrators, or a majority of them, shall be drawn up in writing and signed
by the single arbitrator or by the arbitrators, or a majority of them and
shall be final and binding upon the parties as to the price of gas
delivered hereunder, effective on the "anniversary date" for which such
price renegotiation was requested.
4
<PAGE>
The compensation and expenses of the single arbitrator shall be paid
in equal proportions by Buyer and Seller.
If each party has named an arbitrator, and the third has been
appointed as provided herein, the compensation and expenses of such
arbitrator shall be paid by the party appointing him or in whose behalf
such arbitrator was appointed, and the compensation and expenses of the
third arbitrator shall be paid in equal proportions by Buyer and Seller."
IV.
Section 1 of Article XIII, Term, appearing on page 31 of said Contract of
February 23, 1977, shall be deleted in its entirety and the following inserted
in place thereof:
"SECTION 1:
This Contract shall become effective on the Effective Date hereof and
shall continue in effect for a period of twenty-five (25) Contract Years
(initial term) from the date of initial delivery of gas hereunder and
thereafter from year to year until canceled by one (1) year's written
notice from one party to the other. The twenty-five (25) Contract Years
(initial term) shall expire on December 31, 2001."
V.
Schedule A attached to said Contract of February 23, 1977 shall be deleted
in its entirety and the following inserted in place thereof:
"SCHEDULE A
A part of the Delivered Gas Purchase Contract
dated February 23, 1977 between The Montana
Power Company as Buyer and Cascade Gas Co. as
Seller
DESCRIPTION OF LANDS
Toole County, Montana
TOWNSHIP 34 NORTH, RANGE 1 WEST
Sections: All (being 1 through 36 inclusive)
TOWNSHIP 34 NORTH, RANGE 2 WEST
Sections: All (being 1 through 36 inclusive)
5
<PAGE>
TOWNSHIP 34 NORTH, RANGE 3 WEST
Sections E1/2 (being Sections 1, 2, 3, 10, 11, 12, 13
14, 15, 22, 23, 24, 25, 26, 27, 34, 35, 36
TOWNSHIP 33 NORTH, RANGE 1 WEST
Sections: All (being 1 through 36 INCLUSIVE)
TOWNSHIP 33 NORTH, RANGE 2 WEST
Sections: All (being 1 through 36 inclusive)
TOWNSHIP 33 NORTH. RANGE 3 WEST
SECTIONS E1/2 (being Sections 1, 2, 3, 10, 11, 12, 13,
14, 15, 22, 23, 24, 25, 26, 27, 34, 35, 36
TOWNSHIP 32 NORTH, RANGE 1 WEST
Sections: N1/2 (being Sections 1 through 18 inclusive)
TOWNSHIP 32 NORTH. RANGE 2 WEST
Sections: N1/2 (being sections 1 through 18 inclusive)
TOWNSHIP 32 NORTH, RANGE 3 WEST
Sections: NE1/4 (being Sections 1, 2, 3, 10, 11, 12,
13, 14 & 15 inclusive)"
VI.
With respect to Articles III, IV and IX of the Delivered Gas Purchase
Contract dated February 23, 1977, whenever reference is made to Seller's
obligation to deliver 125% OF DCQ, SAID reference shall be changed to 150% of
the DCQ. Likewise, whenever reference is made to Buyer's right to reduce the DCQ
to 80% of average daily volume of gas, said reference shall be changed to 66
2/3%. The changes hereinabove specified shall be effective to and including
December 31, 1987. Commencing January 1, 1988 and thereafter during the term of
said Delivered Gas Purchase Contract, whenever reference is made to Seller's
obligation to deliver 125% of the DCQ, said reference shall be changed to 133
1/3% of the DCQ and, likewise, whenever reference is made to Buyer's right to
reduce the DCQ to 80% of AVERAGE DAILY volume of gas, said reference shall be
changed to 75%.
VII.
Except as herein specifically modified, the terms and conditions of that
certain Delivered Gas Purchase Contract, dated February 23, 1977, between the
Parties hereto are hereby ratified and confirmed in all respects as being and
remaining in full force and effect.
6
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused execution of this
Amendment to Delivered Gas Purchase Contract to be made as of the date
hereinafter specified beside the execution of each party, but effective as
provided in Paragraph I hereof.
CASCADE GAS CO.
DATED:
May 2, 1986 By /s/ Billy Froman
- -------------------------- ---------------------------------
Billy Froman, President
SELLER
THE MONTANA POWER COMPANY
DATED:
5-12-86 By /s/ David A. Johnson
- -------------------------- ---------------------------------
David A. Johnson
Vice President, Gas Operations
BUYER
7
<PAGE>
State of Montana )
: ss
County of Toole )
On this 2nd day of May, 1986, before me, the undersigned, a Notary Public
in and for the State of Montana, personally appeared BILLY FROMAN known to me to
be the President of CASCADE GAS CO., and acknowledged to me that he executed the
foregoing document for and on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
Seal the day and year first hereinabove written.
/s/ Loretta J. Schoenduller
--------------------------------------
Notary Public for the State of Montana
Residing at Shelby, MT
My Commission expires 1/22/89
State of Montana )
: ss
County of Silver Bow )
On this 12th day Of May, 1986, before me, the undersigned, a Notary Public
in and for the State of Montana, personally appeared DAVID A. JOHNSON, known to
me to be the Vice President, Gas Operations, of THE MONTANA POWER COMPANY, a
corporation, and acknowledged to me that he executed the foregoing document for
and on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
Seal the day and year first hereinabove written.
/s/ Terrence O. Wisner
- --------------------------------------
Notary Public for the State of Montana
Residing at Butte, Montana
My Commission expires 11-13-87
8
<PAGE>
RELEASE AND SETTLEMENT AGREEMENT
THIS AGREEMENT, Made, entered into and effective as of the date hereinafter
provided is by and between CASCADE GAS CO. hereinafter FIRST PARTY, and THE
MONTANA POWER COMPANY, hereinafter SECOND PARTY,
WITNESSETH:
WHEREAS, a controversy exists between the Parties as to amounts of money
allegedly owed by Second Party to First Party, said controversy having arisen by
differences in interpretation of the effect of the provisions of Section 110 of
the Natural Gas Policy Act of 1978 when applied to the terms of that certain
Delivered Gas Purchase Contract dated February 23, 1977 (wherein First Party
appears as Seller and Second Party appears as Buyer), and
WHEREAS, without admission by either Party of the validity of the position
advanced by the other, the Parties hereto have agreed to compromise and resolve
all of said disputed issues in the manner hereinafter set forth,
NOW, THEREFORE, in consideration of the payments and performances
hereinafter provided to be made, and the mutual agreements and releases as
hereinafter set forth, the Parties do hereby agree as follows:
I.
Second Party agrees to pay to First Party the sum of Five Hundred
Sixty-five Thousand Nine Hundred Seventy-five and no/lOOths Dollars
($565,975.00) payable as follows:
(A) The sum of One Hundred Twenty-three Thousand Seven Hundred Twenty-five
and no/lOOths Dollars ($123,725.00) payable simultaneously with
execution hereof, receipt of which is hereby acknowledged;
(B) The sum of Four Hundred Forty-two Thousand Two Hundred Fifty and
no/lOOths Dollars ($442,250.00) payable in nineteen (19) monthly
installments, without interest, beginning with an installment due June
15, 1986, with subsequent installments due on the 15th day of each
month thereafter, through and including November 15, 1987, and the
final installment due December 27, 1987. Each of the first eighteen
(18) monthly installments shall be calculated as follows:
(i) Fifty cents ($.50) per mof times the first 1,450 mcfd of gas
delivered to Second Party by First
1
<PAGE>
Party during the preceding calendar month; provided, however,
that in the event total deliveries during any calendar month
shall be less than an average of 1,450 mcfd for said month, then
the payment shall be calculated upon the DCQ then in effect or
1,450 mcfd, whichever is the lesser.
In the further event that any monthly payment so calculated
should be less than an amount calculated at the rate of fifty
cents (5.50) per mcf times 1,450 mcfd, then the underpayment
shall be carried forward into the next succeeding month or
months, as necessary, so that said underpayment will be made up
against gas delivered in each subsequent month or months wherein
deliveries exceed the average of 1,450 mcfd.
(ii) Any remaining unpaid balance of said sum of Four Hundred
Forty-two Two Hundred Fifty Dollars and no/lOOths Dollars
($442,250.00) will be paid in the final monthly installment due
December 27, 1987.
(iii) Recoupment of underpayments pursuant to subparagraphs (i) and
(ii) above shall be permitted only so long as First Party
complies with the best efforts provisions of Paragraph II
hereinafter set forth. In the event First Party does not comply
with the provisions of Paragraph II hereof, Second Party shall
not be obligated to pay the underpayment amounts referred to in
subparagraphs (i) and (ii) above.
II.
First Party agrees that, during the period of time from effective date
hereof to and including December 31, 1987, it will manage and operate the
Cascade Gas Go. compressor ano related facilities in a good and workmanlike
manner, in accordance with accepted oil and gas field practices, to the end
that it shall exercise absolute good faith to attempt to deliver to Second as
Second Party, from time to time, the rights granted Second Party under the
terms of the Delivered Gas Purchase Contract dated February 23, 1977. It is
the intent of this Paragraph II that First Party will exercise all good faith
in delivery of volumes of properly requested gas and will not unilaterally
attempt, by any means, to reduce the volumes of delivered gas below those
properly requested by Second Party pursuant to said Delivered Gas Purchase
Contract. Both Parties recognize that mechanical breakdowns, shutdowns for
normal maintenance and repair, factors
2
<PAGE>
that constitute items of force majeure under said contract or other similar
causes can or might interrupt delivery of requested gas volumes by First Party.
Such type of interruptions shall not be deemed to be in contravention of First
Party's good faith obligations herein set forth.
III.
Second Party shall, simultaneously with execution hereof, assign and convey
unto First Party, without warranty of title and without warranty of fitness for
use, all right, title and interest in and to that portion of a certain gas
pipeline, together with attendent rights-of-way or easements, more particularly
described as follows, to-wit:
The portion of a certain gas pipeline which originates in
Section 30, Township 34 North, Range 2 West; thence
proceeding southeasterly through Sections 29, 32 and 33,
Township 34 North, Range 2 West; thence proceeding on into
Sections 3, 4 and 10 of Township 33 North, Range 2 West,
Toole County, Montana.
First Party shall be solely responsible for payment of personal property
taxes for the year 1986 and all years subsequent thereto attributable to the
above referenced portion of said gas pipeline, or if appropriate, will reimburse
Second Party for such taxes for the year 1986.
First Party further agrees to hold harmless and indemnify Second Party of
and from any and all liability of whatsoever nature arising from or attributable
to First Party's usage of said gas pipeline from and after the effective date
hereof.
IV.
Except for the payments and performances herein above set forth to be made
and performed by each respective Party hereto, the Parties do hereby agree that
all of the claims heretofore existing by either Party against the other arising
by virtue of the application of the provisions of Section 110 of the Natural Gas
Policy Act of 1978 to the Delivered Gas Purchase Contract dated February 23,
1977 are hereby fully and finally compromised and settled in all respects. Each
Party does hereby relieve, release and discharge the other Party of and from any
and all claims heretofore existing or alleged to exist, contingent or accrued,
of any nature whatsoever relative to or arising under or out of the application
of the provisions of Section 110 of the Natural Gas Policy Act of 1978 to the
Delivered Gas Purchase contract dated February 23, 1977, and each Party agrees
to indemnify and hold the other Party harmless of and from any and all liability
arising from any such claims.
3
<PAGE>
V.
This Release and Settlement Agreement shall be effective as of the date of
execution hereof by the last of the Parties signatory hereto.
IN WITNESS WHEREOF, the Parties hereto have caused execution of this
Release and Settlement Agreement to be made as of the date hereinafter specified
beside the execution of each Party.
CASCADE GAS CO.
DATED:
May 2, 1986 By /s/ Billy Froman
- -------------------------- ---------------------------------
Billy Froman, President
FIRST PARTY
THE MONTANA POWER COMPANY
DATED:
5-12-86 By /s/ David A. Johnson
- -------------------------- ---------------------------------
David A. Johnson
Vice President, Gas Operations
SECOND PARTY
4
<PAGE>
State of Montana )
: ss
County of Toole )
On this 2nd day of May, 1986, before me, the undersigned, a Notary Public
in and for the State of Montana, personally appeared BILLY FROMAN, known to me
to be the President of CASCADE GAS CO. and acknowledged to me that he executed
the foregoing document for and on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
Seal the day and year first hereinabove written.
/s/ Loretta J. Schoenduller
--------------------------------------
Notary Public for the State of Montana
Residing at Shelby, MT
My Commission expires 1/22/89
State of Montana )
: ss
County of Silver Bow )
On this 12th day Of May, 1986, before me, the undersigned, a Notary Public
in and for the State of Montana, personally appeared DAVID A. JOHNSON, known to
me to be the Vice President, Gas Operations, of THE MONTANA POWER COMPANY, a
corporation, and acknowledged to me that he executed the foregoing document for
and on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
Seal the day and year first hereinabove written.
/s/ Terrence O. Wisner
--------------------------------------
Notary Public for the State of Montana
Residing at Butte, Montana
My Commission expires 11-13-87
5
<PAGE>
[LETTERHEAD]
December 18, 1986
Cascade Gas Company
P. O. Box 488
Cut Bank, MT 59427
Gentlemen:
Please refer to that certain Gas Purchase Contract dated February 23, 1977,
as amended (hereinafter referred to as the "Contract") by and between The
Montana Power Company (hereinafter referred to as "Buyer") and Cascade Gas
Company (hereinafter referred to as "Seller").
Buyer and Seller have agreed to amend the Price and Quantity sections of
the Contract as the result of an agreement between the parties whereby Seller
buys gas from Buyer and redelivers said gas to Buyer at the Contract delivery
point.
AGREEMENT
In consideration of the representations and promises stated in this Letter
Agreement, Seller and Buyer agree to amend the Contract effective October 1,
1986 as follows:
1. ARTICLE IV QUANTITY OF GAS
Add the following Section 6:
Section 6:
LIMITATION UPON GAS GATHERED BY SELLER FOR BUYER.
Seller has agreed by separate Gathered Gas Purchase Contract dated
October 1, 1986 (hereinafter referred to as "Gathered Contract") to
gather and compress gas for the Buyer from the Buyer's existing
gathering system in the Kevin area. This gas is to be delivered to
Buyer in a common stream with Seller's gas under the Contract. The gas
delivered to the Buyer by the Seller that was originally delivered to
the Seller by the Buyer under the Gathered Contract will not be viewed
as production by Seller at anytime, including production test periods
and the subsequent calculation of the Contract DCQ.
<PAGE>
Cascade Gas Company
Gas Purchase Contract
Dated February 23, 1977
2. ARTICLE IX. PRICE AND PAYMENT
Delete Section 1, paragraph (b) of the Contract amendment that was
effective on March 20, 1986 and replace it with the following:
b. PRICE
(i) AMOUNT TO BE PAID FOR BUYER'S GAS DELIVERED BY SELLER. From
the effective date hereof, and thereafter as specified in
the Gathered Contract, the price to be paid by the Buyer to
the Seller for gas originally sold to the Seller under said
Gathered Contract and subsequently redelivered to the Buyer
at the Contract delivery point shall be (in U.S. funds) the
amount specified in Article V of the Gathered Contract.
This gas will always represent the first increment that is
purchased and payment will be based on Buyer's meters in
accordance with the Gathered Contract.
(ii) AMOUNT TO BE PAID FOR SELLER'S PRODUCTION.
From the effective date hereof, and thereafter until January
1, 1988, the price to be paid by the Buyer to the Seller for
gas from Seller's production delivered to the Buyer at the
delivery point or for take-or-pay payment shall be (in U.S.
funds) two dollars and twenty five cents ($2.25) per Mcf.
These contract amendments will become effective on October 1, 1986.
Please signify your acceptance by signing in the space provided below and
return the fully executed "Montana Copy" to John Smith.
THE MONTANA POWER COMPANY
BY /s/ David A. Johnson
-----------------------------------
Vice President, Gas Supply
AGREED TO AND ACCEPTED
CASCADE GAS COMPANY
BY /s/ [ILLEGIBLE]
----------------------------------------
DATE September 18, 1987
--------------------------------------
<PAGE>
[LETTERHEAD]
April 12, 1988
Adobe Gas Gathering & Processing Co.
300 West Texas, Suite 1100
Midland, Texas 79701-9990
Gentlemen:
Please refer to that certain Gas Purchase Contract dated February 23, 1977,
as amended (hereinafter referred to as the "Contract") between The Montana Power
Company (hereinafter referred to as "Buyer") and Adobe Gas Gathering &
Processing Company (hereinafter referred to as "Seller").
Buyer and Seller have agreed to amend the Seller's Obligations, Quantity of
Gas, Price and Payment and Schedule A Sections of the Contract as the result of
a price renegotiation that is effective January 1, 1988.
AGREEMENT:
In consideration of the representations and promises stated in this Letter
Agreement, Buyer and Seller agree to amend the Contract effective January 1,
1988 as follows:
1. ARTICLES III, IV AND IX
With respect to Articles III, IV and IX of the Contract, whenever reference
is made to Seller's obligation to deliver 133-1/3% of DCQ, said reference shall
be changed to 125% of the DCQ. Likewise, whenever reference is made to Buyer's
right to reduce the DCQ to 75% of average daily volume of gas, said reference
shall be changed to 80%. The changes hereinabove specified shall be effective
from January 1, 1988 to and including December 31, 1989. Commencing January 1,
1990 and thereafter during the term of said Contract, whenever reference is made
to Seller's obligation to deliver 125% of the DCQ, said reference shall be
changed to 133-1/3% of the DCQ and, likewise, whenever reference is made to
Buyer's right to reduce the DCQ to 80% of average daily volume of gas, said
reference shall be changed to 75%.
2. ARTICLE IV
Add the following paragraph to Section 5:
(c) MONTHLY NOMINATIONS. Buyer shall nominate monthly for a volume of gas
to be delivered by Seller at the delivery point. When calculating whether
Buyer has complied with the obligation to purchase the Annual Contract
Volume under this Contract, Buyer will take credit for the greater of the
volume of gas nominated by Buyer or the volume of gas delivered by Seller.
The determination as to whether the Seller has delivered the volume of gas
requested by Buyer is done on a monthly basis.
<PAGE>
3. ARTICLE IX
Delete paragraphs (a) and (b) of Section 1 and replace them with the
following:
SECTION 1:
(a) Buyer shall pay the Seller monthly for gas volumes delivered and
actually taken in the preceding month. Buyer shall pay Seller for all deficiency
volumes on or before the 25th day of February in the year following the year in
which a deficiency volume occurred. The payment shall equal the deficiency
volumes times the average unit price applicable in the preceding year. A
deficiency volume is calculated by subtracting the greater of purchased volumes
or nominated volumes from the Annual Contract Volume. If the nominated volume or
purchased volume exceeds the Annual Contract Volume, a deficiency has not
occurred.
(b) The price to be paid by the Buyer to the Seller for gas delivered to
the Buyer at the delivery points or for take-or-pay payment shall be two dollars
and ten cents ($2.10) per MCF with no escalation. No adjustment to this price
will be made to provide for reimbursement of production-related taxes or any
other NGPA Section 110 add-ons.
4. SCHEDULE A.
Add the following lands to Schedule A:
Township 35 North, Range 2 West: All Sections
Township 35 North, Range 1 West: All Sections
Township 35 North, Range 1 East: All Sections
Township 34 North, Range 1 East: All Sections
Delete the following lands from Schedule A:
Township 32 North, Range 2 West, Sections: N 1/2
(being sections 1 through 18 inclusive).
Township 32 North, Range 3 West, Sections: NE 1/4
(being sections 1, 2, 3, 10, 11, 12, 13, 14, and 15 inclusive).
THE MONTANA POWER COMPANY
BY: /s/ David A. Johnson
---------------------------------
Vice President, Gas Operations
AGREED TO AND ACCEPTED:
Adobe Gas Gathering & Processing Company
BY /s/ [ILLEGIBLE]
-------------------------
TITLE President
----------------------
DATE: 4-23-88
----------------------
<PAGE>
Northland Royalty Operating Company
[GRAPHIC] 3030 4th Avenue North
Billings, Montana 59101
(406) 259-5400
Fax(406) 259-7345
April 28, 1992
Mr. Douglas R. Mann
Great Falls Gas Company
P.O. Box 2229
Great Falls, MT 59403-2229
Dear Mr. Mann,
Please refer to that certain Gas Purchase Contract dated February 23, 1977,
as amended, (hereinafter referred to as the "Contract") between the Montana
Power Company as Buyer and Cascade Gas Gathering Company as Seller, to which
Great Falls Gas Company (hereinafter referred to as "Buyer") has become the
successor in the Buyer's interest and to which Northland Royalty Operating
Company (hereinafter referred to as "Seller") has become the successor in the
Seller's interest.
Buyer and Seller have agreed to amend Article II-Commitment of Gas Reserves
and Article IX-Price and Payment as the result of a price renegotiation that is
effective on January 1st, 1992.
AGREEMENT
In consideration of the representations and promises stated in this Letter
Agreement, Buyer and Seller agree to amend the Contract effective January 1,
1992 as follows:
1. ARTICLE II. COMMITMENT OF GAS RESERVES
Delete Article II and replace it with the following:
ARTICLE II. COMMITMENT OF GAS RESERVES
With respect to all of the gas purchased, produced or otherwise obtained by
Seller from the lands specified and described on Schedule A, Buyer shall
have the right to all such gas except as follows:
In each month of the contract period, Seller shall have the right to
sell gas it produces, in excess of that required by Buyer, to third
parties on an interruptible basis. Nothing herein shall limit Buyer
from its right to purchase the total production of Seller at any time.
Furthermore, in months when Seller makes such third party sales,
Buyer's volumes for the month shall be considered the first volumes
through the meter, on a daily basis.
<PAGE>
2. ARTICLE IX. PRICE AND PAYMENT
Delete Section 1 and replace it with the following:
SECTION 1:
The price to be paid by Buyer to Seller for gas delivered to Buyer at the
delivery points shall be one dollar and ninety cents ($1.90) per mcf with
no escalation. No adjustment to this price will be made to provide for
reimbursement of production-related taxes or any other costs.
Signed this 29th day of April, 1992.
Agreed to and accepted by:
Northland Royalty Operating Company Great Falls Gas Company
By: /s/ W.F. Sheehan, III By: /s/ Larry D. Geske
---------------------------- ---------------------------
Title: Secretary Title: President
------------------------- ------------------------
<PAGE>
Northland Royalty Operating Company
[GRAPHIC] 3030 4th Avenue North
Billings, Montana 59101
(406) 259-5400
Fax(406) 259-7345
March 14, 1996
Lynn F. Hardin
Assistant Vice President
Great Falls Gas Company
Energy West, Incorporated
P.O. Box 2229
Great Falls, MT 59403-2229
RE: Cascade Gas Contract Price Negotiations
Dear Mr. Hardin,
Please find enclosed an executed original of your gas price offer to
Northland Royalty Operating Company on the Cascade gas System Contract.
Since we have been unable to arrive at a mutually acceptable and beneficial
"Pre-Buy" purchase and development program, Northland has no other alternative
at this time with Great Falls Gas Company than to execute the enclosed offer and
return it to you.
Northland will be willing to meet with Great Falls Gas Company at a
mutually convenient time to have what we believe could be a jointly profitable
and beneficial contract for the sale of summertime gas and for delivering a
larger quantity of gas in the winter peak months.
Yours Truly,
Northland Royalty Operating Company
/s/ W. F Sheehan, III
W. F. Sheehan, III
<PAGE>
[LETTERHEAD]
December 7, 1995
Mr. William Sheehan III
Northland Royalty Operating Company
3030 4th Ave. N.
Billings, MT 59101
Re: Requested Price Renegotiation
Dear Mr. Sheehan:
Great Falls Gas Company, agrees that arbitration in determining a price for your
Cascade gas would be costly and should be unnecessary. I have little doubt that
such arbitration would result in a two year price of $1.60. This is the price
that we have contracted for with other suppliers on MPC's system. Please
consider the following proposal.
1. For Jan, Feb, Mar, Nov & Dec of 1996 and 1997, $1.80/MMBtu.
2. For Apr through Oct of 1996 and 1997, the monthly Aeco Storage Hub Index
(US/MMBtu) plus transport to Carway (currently $.09 US/MMBtu) plus a premium of
$.05/MMBtu, but not less than $1.40/MMBtu.
3. Prior to each of these months (Apr-Oct), if seller has a higher offer from
another buyer, Great Falls Gas will have the option to match the offer or to
release the deliverability for that month. Any released deliverability will
apply to the ACQ. Seller would have the option to shut-in for any of these
months.
At 1029 Btu/cf, $1.80/MMBtu is the same as $1.85/Mcf @ 14.9#.
The above should guarantee seller a floor average price of over $1.60/MMBtu with
the ability to improve that average price by taking advantage of stronger market
conditions as they develop.
If the above meets with your approval, please indicate so by your signature
below, return an original to us and keep one for your records.
Very truly yours,
/s/ Lynn F. Hardin
Lynn F. Hardin
Assistant Vice President
Agreed to this 14th day of March, 1996
Northland Royalty Operating Company
By: /s/ W. F. Sheehan III
-------------------------------
<PAGE>
[LETTERHEAD]
April 15, 1996
Mr. W.F. Sheehan III
Northland Royalty Company
3030 4th Avenue North
Billings, Montana 59101
Dear Mr. Sheehan,
This letter is intended to resolve the arbitration of the contract between
Northland Royalty Company and Great Falls Gas Company held by Great Falls Gas
Company by assignment from Montana Power Company. If the contents of this letter
adequately reflect your understanding of our settlement please sign both copies
of this letter and return one for our records. This settlement is intended to
supersede and replace any of the conditions and terms of the contract which was
entered into between Northland Royalty Company (NRC) and Montana Power Company
(MPC) and which has subsequently been assigned to Great Falls Gas Company, a
division of ENERGY WEST Incorporated (GFG). That contract will be referred to
throughout this agreement as the "Contract". The terms of that contract will
continue in full force and effect except when a provision of this agreement is
inconsistent with the terms of the Contract. In that event the terms of this
agreement are intended to prevail as the binding agreement of the parties.
1. GFG will prepay for gas in the amount of $500,000 upon final execution by
both parties of the settlement agreement. The $500,000 has been placed in escrow
at Norwest Investment Management & Trust Company (Norwest). NRC may receive
disbursement of the funds so placed according to the following instruction which
GFG agrees to include in it's escrow agreement with Norwest:
Upon execution of this agreement, NRC will receive a disbursement of
$250,000. After copies of paid invoices are presented that exceed $250,000
in aggregate, the remaining escrow balance will be available for the
funding of expenditures directly related to increasing the deliverability
of natural gas from the fields identifiecl in the Contract between NRC and
GFG. Norwest is hereby instructed to disburse to NRC amounts corresponding
to expenditures which have been submitted to and approved by GFG which
approval shall not be unreasonably denied.
2. The DCQ under Article IV Section I will be reduced to 50% of the daily
contract quantity available for delivery by NRC, but will increase to 62.5%
should the outstanding prepayment
<PAGE>
balance be extinguished by NRC. Quantities of gas available for delivery but not
taken by GFG are hereby released to NRC for resale to third parties.
3. The price paid for gas delivered would be the monthly AECO Storage Hub Index
(US/MMBtu) plus transport to Carway (currently $.09 US/MMBtu) plus a premium of
$.05 per MMBtu, but not less than $1.40/MMBtu for the months of April through
September and $1.80 per MMBtu for the months of October through March. This
pricing provision will be in effect from January 1, 1996 until January 1, 1998
or until such time as any outstanding prepayment has been extinguished whichever
occurs latest in time.
4. GFG would pay NRC for 60% of the delivered gas at prices established in
paragraph 3, above, 40% of the gas taken each year will be credited against the
prepayment. Payments will be apportioned each month between the gas credited
against prepayment and the gas paid in cash until such time as the prepayment
amount is extinguished when the entire amount shall be paid in cash. NRC may
elect from time to time to make cash payments to GFG to be applied against the
prepayment balance.
5. GFG would have the option to prepay for additional gas each six months of the
contact beginning six months from the date of the first prepayment. GFG will
notify NRC within 30 days of the six month anniversary of its desire to prepay.
If GFG prepays, its prepayment will be limited to an amount equal to $1.60
multiplied by 50% of the gas taken by GFG during the previous six months. GFG
may elect to make such prepayments (which would be paid pursuant to the pricing
provisions of #4 above) until such time as the Contract expires. At the
expiration of the Contract, GFG would be entitled to an amount of gas equivalent
to the amount of prepayment balance divided by $1.60. If in any six month period
GFG does not elect to prepay, either party will have the option to continue
according to the provisions of this agreement or to notify the other party of
its intention to renegotiate the contract terms pursuant to provisions of
Article IX of the Contract. However, such notice must be received by the other
party by July 1 of ANY calendar year. When notice is so given the parties agree
that the effective date of the price renegotiated pursuant to such notice shall
be January 1 of the year following the giving of such notice.
This agreement is subject to satisfactory review by GFG of appropriate financial
statements of NRC.
Agreed to this 17th day of April, 1996.
Great Falls Gas Company Northland Royalty Company
By: /s/ [ILLEGIBLE] By: /s/ W.F. Sheehan III
----------------------- -------------------------
<PAGE>
[LETTERHEAD]
April 15, 1996
Mr. William F. Sheehan III
Northland Royalty Company
3030 4th Avenue North
Billings, Mt. 59101
Dear Mr. Sheehan,
This letter when signed by you is intended to constitute an agreement between
Northland Royalty Company (NRC) and Energy West Resources, Incorporated.
1. NRC agrees to sell 100% of its released output from its contract with Great
Falls Gas Company (GFG) to Energy West Resources (EWR). EWR agrees to purchase
100% of such gas at a price 10% under the monthly Aeco Storage Hub Index
(US/MMBtu) plus transport to Carway (currently $.09 US/MMBtu) index at Empress
as published in the Canadian Gas Price Reporter.
2. Northland will produce its fields at full capability, (which is interpreted
to mean 90% of the ACQ, as that term is defined in the contract between Great
Falls Gas Company and NRC for the term of this agreement. This is intended to
mean that NRC will shut in its wells only for required maintenance and not for
economic considerations. Further, NRC will conduct its scheduled maintenance in
the months of June, July or August to allow for the utilization of the gas when
it will be in greatest demand by EWR customers.
3. The term of this agreement is effective on the date of NRC's settlement
agreement with GFG and will continue for the term of that settlement agreement.
Agreed to this 17th day of April, 1996
Energy West Resources, Incorporated Northland Royalty Company
By: /s/ [ILLEGIBLE] By: /s/ W.F. Sheehan III
----------------------- -------------------------
<PAGE>
Northland Royalty Operating Company
[GRAPHIC] 3030 4th Avenue North
Billings, Montana 59101
(406) 259-5400
Fax(406) 259-7345
Energy West Incorporated
No.1 First Avenue South
P.O. Box 2229
Great Falls, MT 59403-2229
Attention: Mr. Lynn Hardin, Assistant Vice President
Fax: 406-791-7560
February 18, 1997
Dear Mr. Hardin,
Pursuant to Gas Contract Between Great Falls Gas and the Northland Royalty
Operating Company (MPC #93) we hereby request that future payment for gas sold
under this contract be made to the Northland Royalty Company rather than
Northland Royalty Operating Company. A recent change in our accounting
procedure requires us to make this change.
Thank you for your assistance and if you have any questions concerning this
request please contact me in our Billings offfice.
Sincerely,
/s/ Peter C. Sheehan
Peter C. Sheehan
Northland Royalty Operating Company
<PAGE>
[LETTERHEAD]
April 1, 1997
VIA FEDERAL EXPRESS: 8830183283
Energy West Resources
No. 1 First Avenue South
P.O. Box 2229
Great Falls, MT 59403-2229
ATTN: Jim Morin
RE: Northland Royalty Company and Northland Royalty Operating Company; KeyBank
of Wyoming
Dear Mr. Morin
This firm represents KeyBank of Wyoming (the "Bank") with respect to loans
which it has made to Northland Royalty Company and Northland Royalty Operating
Company ("Northland"). Pursuant to the enclosed Mortgage, Assignment of
Proceeds, Security Agreement and Financing Statement ("Mortgage") between the
Bank and Northland, the Bank is the assignee of the production and proceeds from
the properties encumbered by the Mortgage which are therefore the property of
the Bank. In addition, pursuant to the enclosed Notice of Assignment ("Notice"),
Northland has directed any purchaser of oil or gas pertaining to the lands or
contracts described in the Notice to pay all proceeds attributable to the
interests of Northland to the Bank. Please note that the lands and contracts set
forth in the Notice correlate with the lands and contracts set forth in each
respective Exhibit A to the Mortgage.
The purpose of this letter is to place you on notice of the Bank's claim of
first priority to payment of proceeds attributable to the interests of Northland
arising from the purchase and sale of oil or gas attributable to the lands or
contracts described in the Mortgage and/or the Notice and located in the
following counties within the State of Montana:
5. Glacier; and
6. Toole.
<PAGE>
Energy West Resources
Page two
April 1, 1997
Please make payment directly to the following address:
KeyBank of Wyoming
1800 Carey Avenue
P.O. Box 924
Cheyenne, WY 82001
ATTN: Cathy Ford, Assistant Vice-President
Special Assets Department
If for whatever reason funds are placed in suspense and not paid directly
to the Bank as set forth above, please contact the undersigned directly.
Very truly yours,
POULSON, ODELL & PETERSON, LLC
/s/ William F. Leonard
William F. Leonard
WFL/kak
Enclosures
xc: KeyBank of Wyoming
ATTN: Cathy Ford
<PAGE>
NOTICE OF ASSIGNMENT
NOTICE IS HEREBY GIVEN, that effective February 26, 1993, Northland Royalty
Company and Northland Royalty Operating Company have assigned to Key Bank of
Wyoming all right, title and interest in:
A. All proceeds of production from oil and gas wells located on the
following described lands:
1. Glacier County, Montana
Township 36 North, Range 6 West, MPM
Sections: 11, 13, 14, 22, 23, 24, 25, 26, 27, and 34.
2. Toole County, Montana
Township 34 North, Range 2 West, MPM
Sections: 4, 9, 10, 14, 15, 16, 17, 19, 20, 21, 22, 23, 26, 27,
28, 32, 33, 34, and 35.
Township 33 North, Range 2 West, MPM
Sections: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 14, 15, 16, 17,
19, 20, 21, 22, 23, 26, 27, 28, and 30.
B. That certain Gathered Gas Purchase Contract, dated December 18,
1979, MPC Contract No. 327, wherein originally Fourem Company is "Seller" and
The Montana Power Company is "Buyer" and Northland Royalty Operating Company
is now "Seller", together with all prior amendments, as well as all future
renewals, modifications, amendments, substitutions or replacements thereof
pertaining to the lands described above and those referenced in said contract.
C. That certain Delivered Gas Purchase Contract, dated February 23,
1977, wherein originally Cascade Gas Co. is "Seller" and The Montana Power
Company is "Buyer" and Northland Royalty Operating Company is now "Seller"
and Great Falls Gas Company is now "Buyer", together will all prior
amendments, as well as all future renewals, modifications, amendments,
substitutions or replacements thereof pertaining to the lands described above
and those referenced in said contract.
IT IS HEREBY DIRECTED that all rights, benefits and privileges pertaining
to the above described items are hereby transferred to Key Bank of Wyoming and
any purchaser of oil or gas pertaining to the lands or contracts described above
is to pay all proceeds attributable to the interests of Northland Royalty
Company or Northland Royalty Operating Company to:
Key Bank of Wyoming
Attention: Cary E. Brus
1130 Sheridan Avenue
Cody, Wyoming 82414
<PAGE>
until further notice from Key Bank of Wyoming.
DATED this 26th day of February, 1993.
NORTHLAND ROYALTY COMPANY
By /s/ W. F. Sheehan, Jr.
---------------------------
Name: William F. Sheehan, Jr.
-------------------------
Title: President
--------------------------
NORTHLAND ROYALTY OPERATING COMPANY
By /s/ W. F. Sheehan, Jr.
---------------------------
Name: William F. Sheehan, Jr.
-------------------------
Title: President
--------------------------
CORPORATE ACKNOWLEDGMENT
STATE OF MONTANA )
) SS.
COUNTY OF YELLOWSTONE )
On this 26th day of February, 1993, before me Joseph R. Glennon, a
notary public personally appeared William F. Sheehan, Jr. known to me to be
the President of Northland Royalty Company and Northland Royalty Operating
Company and acknowledged to me that he executed the within instrument on
behalf of such corporations.
Given under my hand and notarial seal this 26th day of February, 1993.
/s/ Joseph R. Glennon
--------------------------------------
NOTARY PUBLIC
My Commission Expires:
10-27-95
- --------------------------------
- -------------------------------------------------------------------------------
ACKNOWLEDGMENT
The undersigned hereby acknowledges receipt of a copy of the above and
foregoing Notice of Assignment and consents to the terms thereof.
DATED this ______________ day of __________________, 199__.
Company Name
--------------------------
By
------------------------------------
Name
----------------------------------
Title
---------------------------------
<PAGE>
NATURAL GAS SALE AND PURCHASE AGREEMENT
BETWEEN:
SHELL CANADA LIMITED, A Canadian Corporation with
head office in Calgary, Alberta, Canada.
(hereinafter referred to as "Seller")
and
GREAT FALLS GAS COMPANY, A Montana Corporation
with head offices in Great Falls, Montana USA
(hereinafter referred to as "Buyer")
<PAGE>
INDEX
ARTICLE PAGE
I Interpretation. . . . . . . . . . . . . . . . . . . . . . . . 1
II Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . 4
III Delivery and Ownership. . . . . . . . . . . . . . . . . . . . 5
IV Gas Specifications and Measurement. . . . . . . . . . . . . . 5
V Contract Volumes. . . . . . . . . . . . . . . . . . . . . . . 6
VI Term and Price. . . . . . . . . . . . . . . . . . . . . . . . 8
VII Payment . . . . . . . . . . . . . . . . . . . . . . . . . . .12
VIII Force Majeure . . . . . . . . . . . . . . . . . . . . . . . .15
IX Covenants, Warranties and Indemnities by Seller . . . . . . .18
X Arbitration . . . . . . . . . . . . . . . . . . . . . . . . .19
XI Default and Remedies. . . . . . . . . . . . . . . . . . . . .21
XI General Provisions. . . . . . . . . . . . . . . . . . . . . .22
<PAGE>
NATURAL GAS SALE AND PURCHASE AGREEMENT
This Agreement dated the 20th day of July, 1992 is made between:
SHELL CANADA LIMITED, A Canadian Corporation with
head office in Calgary, Alberta, Canada.
(hereinafter referred to as "Seller")
and
GREAT FALLS GAS COMPANY, A Montana Corporation
with head offices in Great Falls, Montana USA
(hereinafter referred to as "Buyer")
WHEREAS, Seller has available for sale certain supplies of natural gas, and
Seller desires to sell and deliver to Buyer such natural gas supplies in the
quantities and under the terms and conditions hereinafter provided; and
WHEREAS, Buyer and it's subsidiaries desire to receive and purchase such
natural gas in the quantities and under the terms and conditions hereinafter
provided;
NOW THEREFORE, in consideration of the premises and mutual covenants and
agreements herein set forth, Seller and Buyer contract and agree as follows:
ARTICLE I - INTERPRETATION
1.01 DEFINITIONS
As used in this Agreement:
(a) "ANNUAL CONTRACT QUANTITY" OR "ACQ" means the volume obtained when
multiplying the number of Days in the Contract Year by the Maximum
Daily Quantity in effect for that Contract Year;
(b) "BUSINESS DAY" means all calendar days excluding:
(i) Saturdays and Sundays;
(ii) All statutory holidays under the laws of Alberta, Montana,
Canada or the United States of America; and,
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(iii) All calendar days on which the head office of Seller or Buyer
is not open for business, provided however that all such
calendar days during each calendar year shall be identified
by notice from Seller to Buyer and vice versa on or before
February 15 of the calendar year in question;
(c) "BRITISH THERMAL UNIT" OR "BTU" means the amount of heat required to
raise the temperature of one (1) pound of water from fifty-nine degrees
Fahrenheit (59 DEG F) to sixty degrees Fahrenheit (60 DEG F) at a
constant pressure of fourteen and seventy-three hundredths pounds per
square inch absolute (14.73) psia). Total BTU's shall be determined by
multiplying the total volume of Gas delivered times the Gas Heating
Value expressed in BTU's per cubic foot of Gas adjusted on a dry basis;
(d) "MAXIMUM DAILY QUANTITY" or "MDQ" means the specified volume of Gas
which Buyer contracts to purchase each Day under this Agreement as set
out in section 5.02 herein, or as otherwise provided in this Agreement;
(e) "DAY" means a period of 24 consecutive hours, beginning and ending at
0800 hours MST;
(f) "DELIVERY POINT" has the meaning as set forth in section 3.01;
(g) "INTERRUPTIBLE DAILY QUANTITY" or "IDQ" means the specified volume of
Gas which Buyer may purchase on an interruptible basis, as set forth in
section 5.06;
(h) "Mcf" means the quantity of Gas occupying a volume of one thousand
(1,000) cubic feet at a temperature of sixty degrees Fahrenheit (60 DEG
F) and at a pressure of fourteen and seventy-three hundredths pounds
per square inch absolute (14.73 psia);
(i) "MONTH" means a period beginning at 0800 hours MST on the first Day of
a calendar month and ending 0800 hours MST on the first Day of the next
succeeding calendar month;
(j) "GAS" means natural gas and or residue gas comprised primarily of
methane;
(k) "NOVA" means Nova Corporation of Alberta or any successor thereof;
(1) "PARTY" means a party to this Agreement;
(m) "YEAR" or "CONTRACT YEAR" means a period of 12 consecutive months
commencing on November 1, 1992 and on each subsequent anniversary
thereof;
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(n) "HEATING VALUE" means the quantity of heat, measured in Btu, produced
by combustion in air of one (1) cubic foot of anhydrous Gas at a
temperature of sixty degrees Fahrenheit (60 DEG F) and a constant
pressure of fourteen and seventy-three hundredths pounds per square
inch absolute (14.73 psia), the air being at the same temperature and
pressure as the Gas, after the products of combustion are cooled to the
initial temperature of the Gas and air, and after condensation of the
water formed by combustion;
(o) "CANADIAN REGULATORY AUTHORITIES" means the federal, provincial or
local governmental agencies or other authorities in Canada, which have
jurisdiction over the sale, export or transportation of Gas or other
matters in question, including, without limitation, the National Energy
Board of Canada ("NEB"), the Energy Resources Conservation Board of
Alberta ("ERCB"), the Alberta Petroleum Marketing Commission ("APMC"),
and the federal and provincial Governors-in-Council; and,
(p) "U.S. REGULATORY AUTHORITIES" means the federal, state or local
government agencies or other authorities in the United States of
America which have jurisdiction over the sale, import, transportation
of Gas or other matters in question, including, without limitation,
the Office of Fossil Fuels of the United States Department of Energy
("OFE"), the Federal Energy Regulatory Commission ("FERC") and the
Montana Department of Public Service Regulation ("PSR").
1.02 CUSTOM
In this Agreement, words, phrases or expressions which are not defined
herein, and which, in the usage or custom of the business of the exploration,
production, transportation, distribution or sale of Gas, have an accepted
meaning, shall have that meaning.
1.03 SCHEDULES
Any and all schedules appended hereto shall constitute part of, and be
incorporated into this Agreement.
1.04 CURRENCY
All conversions from Canadian currency to currency of the United States or
vice-versa, shall be done by the parties using the average Bank of Canada
posted noon spot exchange rates for the conversion of Canadian funds into
United States funds or vice-versa, as quoted for the calendar month in which
the transaction occurred.
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ARTICLE II - CONDITIONS
2.01 CONDITIONS PRECEDENT
This Agreement is subject to the satisfaction of the following conditions
precedent on terms and conditions satisfactory to the Party, acting
reasonably, entering into or obtaining same:
(a) Seller entering into firm, non-interruptible transportation agreements
with NOVA and Seller and NOVA obtaining all necessary certificates,
permits, licenses and authorizations from Canadian Regulatory
Authorities for the transactions contemplated by this Agreement,
including without limitation, the sale and removal of the Maximum Daily
Quantity from Alberta, the export of the Maximum Daily Quantity from
Canada and the firm, non-interruptible transportation of the Maximum
Daily Quantity in Canada from Seller's facilities through the
facilities of NOVA;
(b) Buyer entering into firm, non-interruptible transportation agreements
with Montana Power Company and Buyer and Montana Power Company
obtaining all necessary certificates, permits licenses and
authorizations from U.S. Regulatory Authorities for the transactions
contemplated by this Agreement for the full term of this Agreement,
including without limitation, the purchase and importation of the
Maximum Daily Quantity from Canada and for the firm, non-interruptible
transportation of the Maximum Daily Quantity in the United States
through the facilities of Montana Power Company.
2.02 FULFILLING CONDITIONS
(a) If by October 15, 1992, any condition precedent referred to in section
2.01 has not been satisfied, or with respect to subsection 2.01(a)
waived by written notice provided by Seller or with respect to
subsection 2.01(b) waived by written notice provided by Buyer then
either Party may thereafter, at any time, provide written notice to the
other Party of its election to terminate this Agreement and unless such
conditions precedent are so satisfied or waived within ninety (90) Days
after the receipt of such notice, this Agreement shall thereupon
terminate.
(b) Both Buyer and Seller shall act with due diligence and exercise all
reasonable efforts to fulfill all such conditions precedent.
(c) Buyer and Seller shall notify each other forthwith in writing upon the
conditions precedent in section 2.01 having been met.
(d) Seller and Buyer shall cooperate with each other so as to assist each
other in fulfilling the conditions precedent set forth in section 2.01
in order that the delivery of Gas hereunder may commence on a timely
basis.
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ARTICLE III - DELIVERY AND OWNERSHIP
3.01 DELIVERY POINT
The Delivery Point for all Gas delivered hereunder shall be that point on the
Canada/United States of America border at the interconnection of the pipeline
systems of NOVA and Montana Power Company near Carway, Alberta.
3.02 TITLE AND POSSESSION
Property in and title to the Gas and all risk of loss respecting all Gas
delivered hereunder shall pass from Seller to Buyer and shall vest in Buyer at
the Delivery Point. As between Seller and Buyer, until delivery of the Gas at
the Delivery Point, Seller shall be deemed to be in control and possession of
the Gas and shall be responsible for all costs, losses, damages, injuries to
persons or property or liabilities arising from or out of Seller's title,
possession, custody or control of Gas hereunder prior to title to the Gas
passing to Buyer at the Delivery Point. As between Seller and Buyer, after
delivery of the Gas at the Delivery Point, Buyer shall be deemed to be in
control and possession of the Gas and shall be responsible for all costs,
losses, damages, injuries to persons or property or liabilities arising from or
out of Buyer's title, possession, custody or control of Gas hereunder after
title to the Gas passes to Buyer at the Delivery Point.
3.03 ROYALTIES AND TAXES
Seller shall pay or cause to be paid and shall be solely responsible for all
royalties, overriding royalties and payments out of production, together with
all applicable federal, provincial, municipal and local taxes, levies or
surcharges imposed by authorities that are applicable on Gas delivered
hereunder before title to such Gas passes to Buyer at the Delivery Point.
Buyer shall be solely responsible for the above enumerated payments, taxes,
levies or surcharges that are applicable on Gas delivered hereunder when and
after title to such Gas passes to Buyer at the Delivery Point.
ARTICLE IV - GAS SPECIFICATIONS & MEASUREMENT
4.01 GAS SPECIFICATIONS
Buyer and Seller each agree that Gas delivered hereunder will be in a
commingled stream and shall be at the pressure and meet or exceed the minimum
quality specifications required by NOVA and Montana Power Company.
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4.02 MEASUREMENT
It is understood and agreed that neither Buyer nor Seller owns or operates
measuring and testing equipment at the Delivery Point. Therefore, all Gas
delivered to Buyer hereunder shall be measured at the Delivery Point as to
volume and Heating value by Montana Power Company, in accordance with its
filed and approved tariffs and standard Industry practice. All such
measurements made (including all correction thereof) shall be final and
binding upon Seller and Buyer as to the Gas delivered under this Agreement.
Seller or Buyer may at their sole cost, risk and expense witness such
measuring and the testing of measuring equipment if they so desire.
ARTICLE V - CONTRACT VOLUMES
5.01 SUPPLY COMMITMENT
Subject to Article VIII, Force Majeure, Seller has, or shall have and shall
maintain at all times throughout the term of this Agreement, sufficient Gas
reserves and deliverability with respect to the delivery of Gas to the
Delivery Point, so as to enable Seller to meet its obligations hereunder.
5.02 MAXIMUM DAILY QUANTITY
The Maximum Daily Quantity shall be equal to 5,000 MMBtu/day (140
10(3)m(3)/d). On each Day during the term of this Agreement, Buyer may
nominate its Gas requirement and Seller shall be obligated to deliver the
amount so nominated by Buyer up to the MDQ.
5.03 CATEGORIES OF GAS
The quantities of Gas to be purchased by Buyer hereunder shall consist of
Tier I Gas and Tier II Gas which shall bear different prices as set forth in
Article VI below.
5.04 TIER I GAS
Commencing with each Contract Year, Buyer will purchase the initial
sixty-five percent (65%) of the ACQ ("Tier I Gas") at the then applicable
price for Tier I Gas, as set forth in section 6.02 herein. If and when the
Tier I Gas is taken by Buyer, the remainder of gas taken by Buyer in that
Contract Year will be Tier II Gas.
5.05 TIER II GAS
Commencing with the completion of the Tier I Gas Volume (defined as the
product of the MDQ and the number of Days in the Contract Year multiplied by
0.65), all Gas taken thereafter by Buyer in that Contract Year will be Tier
II Gas.
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5.06 INTERRUPTIBLE DAILY QUANTITY ("IDQ")
On any Day Buyer may request, over and above the MDQ, up to an additional
5,000 MMBtu/day (140 10(3)m(3)/d) and subject to agreement upon price, Seller
shall endeavor, on an interruptible basis, to supply the difference between
the IDQ and the MDQ. The price for the volume of gas that is the difference
between the IDQ and the MDQ shall be established on a monthly basis by
negotiation between Buyer and Seller.
5.07 GAS TAKE LEVELS
If, during any Contract Year, Buyer does not purchase at least eighty percent
(80%) of the then applicable ACQ, a "Shortfall Year" will exist. The
difference between eighty percent (80%) of the then applicable ACQ and the
amount actually taken by the Buyer will be the "Shortfall Amount". Within
ninety (90) Days of the commencement of the Contract Year following the end
of the Shortfall Year (the "Make-up Year"), Seller may elect to provide
notice to Buyer stating the Shortfall Amount and the proportionate reduction
in the ACQ and MDQ that will be in effect at the commencement of the Contract
Year following the Make-up Year. Subject to the limitation created by the MDQ
and ACQ applicable during the Make-up Year, buyer may elect to avoid all or
part of this reduction by first purchasing eighty percent (80%) of the
applicable ACQ in the Make-up Year and then purchasing all or a portion of
the Shortfall Amount prior to the end of the Make-up Year. The Commodity
Charge for the Shortfall Amount will be the applicable rate (depending upon
whether the Shortfall Amount being purchased represents Tier I Gas or Tier II
Gas) in effect during the Make-up Year.
The ACQ and MDQ in the Contract Year following the Make-up Year will be
proportionately reduced by the remaining Shortfall Amount, unpurchased, if
any, at the end of the Make-up Year.
5.08 NOMINATIONS
Buyer or Buyer's nominee shall nominate to Seller or Seller's nominee, by
written telecommunication each and every Day by 1200 hours MST, Buyer's daily
requirements for Gas for the following Day. Failure to so nominate to Seller
shall cause continuation of the last received nomination.
5.09 FAILURE TO TAKE NOMINATION
In the event that Buyer nominates quantities and Seller delivers such
quantities into the NOVA pipeline system and Buyer is unable or unwilling for
whatever reason to take delivery of such quantities at the Delivery Point,
then Buyer shall pay the price calculated on a per MMBtu on a 100% Load
Factor basis for such volumes so nominated and delivered to NOVA, including
the actual associated transportation and inventory penalty incurred by Seller
for such quantities of Gas, provided that Seller makes reasonable efforts to
mitigate such transportation penalties.
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5.10 FAILURE TO DELIVER
If Seller is unable to meet Buyer's nomination, Seller shall promptly notify
Buyer of Seller's inability to deliver Gas, whether or not such inability
covers all or part of Buyer's nomination. Seller shall use its reasonable
efforts to obtain and supply from other sources the volumes of Gas that
Seller is obligated but unable to deliver to Buyer at the Delivery Point
("Replacement Gas"). Seller shall endeavor to arrange for delivery of
Replacement Gas, to the Delivery Point on the same Day at a price which shall
not exceed the delivered cost to Buyer of Gas that Seller was obligated to
deliver in accordance with Buyer's nomination ("Buyer's Cost of Gas").
Notwithstanding the foregoing, if Seller is unable to deliver Replacement Gas
hereunder, Buyer may purchase Replacement Gas and Seller shall reimburse
Buyer for any unabsorbed demand charges incurred on the Montana Power Company
system and the price of Replacement Gas, in excess of the price hereunder,
that Buyer is required to pay to any other producer or local distribution
company as a result of Seller's failure to deliver Gas nominated by Buyer,
adjusted for transportation, if applicable. Buyer shall make reasonable
efforts to mitigate the cost of Replacement Gas. Seller's sole liability and
Buyer's sole remedy with respect to Seller's failure to supply Gas shall be
limited to such cost of Replacement Gas. In no event shall Seller, it's
directors, trustees, agents, officers or employees be liable to Buyer, it's
directors, trustees, agents, officers or employees for any incidental,
special, indirect or consequential damages of any nature including without
limitation any claims of customers of Buyer, connected with or resulting from
Seller's failure to supply Gas under this Agreement.
ARTICLE VI - TERM AND PRICE
6.01 TERM
(a) Subject to the satisfaction or waiver of the conditions precedent set
forth in section 2.01, deliveries of Gas under this Agreement shall
commence on November 1, 1992 ("Commencement Date") and shall except as
otherwise specifically provided for herein continue for a term of
fifteen (15) Contract Years after November 1, 1992.
(b) The Term of the Agreement shall consist of three (3) segments of five
(5) Contract Year periods as follows:
Segment 1 November 1, 1992 - October 31, 1997;
Segment 2 November 1, 1997 - October 31, 2002;
Segment 3 November 1, 2002 - October 31, 2007.
(c) Unless either Party gives notice to the other Party at least
twenty-seven (27) Months prior to the end of Segment 1 specifying its
intention to terminate this Agreement at the end of Segment 1 the term
shall continue into Segment 2.
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(d) Anytime on or after August 1, 1995, either Party may give notice to the
other Party of at least twenty-seven (27) Months to terminate this
Agreement prior to the end of the Term.
6.02 PRICE
The Price to be paid by Buyer to Seller for Gas purchased and sold and the
service provided hereunder for the period of time commencing with the
Commencement Date will consist of the sum of the four (4) components identified
hereunder. The Price will be in U.S. dollars.
(a) Each Month, Buyer shall pay Seller a "Demand Charge" equal to Seller's
actual cost for that Month of reserving the firm transportation
required to transport the MDQ on NOVA to the Delivery Point.
(b) Each Month, Buyer shall pay Seller a "Reservation Charge" equal to the
product of the MDQ times the number of days in the Month times the
Reservation Charge. The Reservation Charge for the first two years of
this Agreement shall be $0.06 U.S./MMBtu.
(c) Each Month, Buyer shall pay Seller for each MMBtu of Tier I Gas
delivered and received at the Delivery Point, a "Commodity Charge"
equal to a per MMBtu price fixed for at least one year by agreement of
the Parties in advance. The Commodity Charge for Tier I Gas for the
first two Years of this Agreement shall be $1.31 U.S./MMBtu on a dry
basis.
(d) Commencing with the completion of Tier I Gas purchases in each Contract
Year, the Commodity Charge for Tier II Gas will be negotiated and
agreed to by the Parties prior to the end of each previous Month. The
Parties will take into consideration the prepaid Demand Charge when
arriving at the Commodity Charge for the following month. Failing
agreement by the Parties, the Commodity Charge for the applicable Month
will equal the price published by NATURAL GAS WEEK in their Canadian
Price Report Section, under the Empress Border - Contract Subsection.
In the event that such price is no longer published or such publication
is no longer published then, failing agreement by the parties, the
Commodity Charge or a method of determining it shall be determined by
arbitration pursuant to Article X hereof. The prepaid Demand Charge
will be subtracted from the published price to arrive at the Commodity
Charge. Each Month Buyer shall pay Seller for each MMBtu of Tier II Gas
delivered and received at the Delivery Point, the above applicable
Commodity Charge.
If Buyer elects not to take gas during a Tier II Gas Month, Seller will be
allowed to sell that gas on an interruptible basis to third party purchasers.
The Demand Charge and the Reservation Charge shall be paid each Month
regardless of the quantity of Gas purchased and sold hereunder, except to the
extent that Seller fails to deliver Gas nominated.
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6.03 FUTURE PRICE DETERMINATION
(a) The Parties agree that they will meet from time to time to negotiate
the Tier I Commodity Charge and Reservation Charge components of the
Price payable hereunder for subsequent Contract Years. In any such
negotiations or resulting arbitration with respect to Price during the
Term of this Agreement only the Tier I Commodity Charge and Reservation
Charge components of the Price shall be redetermined and the Demand
Charge component of the Price shall not be subject to redetermination.
(b) Subject to 6.03 (a) The Parties agree, to establish a new Price for the
next Contract Year at least one hundred and twenty (120) Days prior to
the termination date of the current Contract Year and the Parties will
commence procedures for such redetermination no later than one hundred
and eighty (180) Days prior to the termination date of the current
Contract Year by either Party giving fifteen (15) Days written notice
to the other, to meet and negotiate. Such Price, and the various
components making up that Price, will be effective for a period of
time, as then agreed to, and will become effective on the commencement
of the next Contract Year. If neither Party has given written notice
to the other to renegotiate at least one hundred and eighty (180) Days
prior to the termination date of the current Contract Year, then the
Price for the current Contract Year shall continue in effect for the
next Contract Year.
6.04 FAILURE TO REACH AGREEMENT ON PRICE
In the event that the Parties are unable to reach agreement on the Price, or
the Price components at least one hundred and twenty (120) Days prior to the
termination date of the current Contract Year, as provided pursuant to
section 6.03 herein, either Party may, upon not less than fifteen (15) days
written notice to the other Party, have the Price determined pursuant to the
Arbitration provisions contained in Article X herein and exclusively in
accordance with the principles set forth in section 6.05 herein. Should no
notice for Arbitration be given at least ninety (90) days prior to the
termination date of the current Contract Year, the Price for the next
Contract Year shall continue to be the Price in effect for the current
Contract Year.
6.05 PRICING PRINCIPLES
For each Contract Year subsequent to the Contract Year for which the Price of
Gas to be sold and purchased hereunder has been established and specified,
the Parties agree to determine Price by negotiation or by arbitration. If the
Price for Gas delivered in any Contract Year is to be determined by
arbitration, the arbitrators shall determine a Price that, under the
prevailing market circumstances for long term firm Gas Supply and in the
opinion of the arbitrators, is fair and reasonable to both Buyer and Seller.
In making such determination, the arbitrators shall limit
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their consideration to the evidence which is presented by the Parties, and to
the extent that evidence is presented, shall base their determination upon
and shall give due consideration to each of the following criteria:
(i) The weighted average cost of gas paid by Buyer during the next
Contract Year for firm gas supplies with a term of two (2) years
or more;
(ii) The prices being paid during the next Contract Year for other firm
gas supplies by local distribution companies with a term of two
(2) years or more in the state of Montana; and,
(iii) The prices being paid during the next Contract Year for other
firm gas supplies by local distribution companies with a term
of two (2) years or more in the province of Alberta;
provided that the arbitrators shall consider the above matters in light of the
following:
(a) To the extent that evidence with respect to Prices for the next
Contract Year is not available or is insufficient, prices for the
current Contract Year will be considered;
(b) The times at which the prices were agreed to between the respective
buyers and sellers;
(c) Differences in transportation costs relevant to establishing a point of
comparison at the Delivery Point;
(d) The similarities and dissimilarities between the service provided
hereunder and the sales and transportation arrangements under which
other gas is being sold for consumption in Buyer's market area and in
Alberta, including in particular but not limited to the similarities
and dissimilarities between the quality of service and the security of
supply provided hereunder and provided under such other arrangements;
and,
(e) Any other considerations in respect of which relevant evidence is
adduced by the Parties and which is relevant to the determination of
such matters.
In the event that a negotiated or arbitrated Price is determined for a
Contract Year after commencement thereof, Seller shall retroactively adjust
its invoices to Buyer to the first Day of that Contract Year, to take into
account the revised Price. Until a new Price is concluded and retroactively
implemented, the previous Price shall remain in effect. If the Price
settlement date exceeds sixty (60) Days past the Contract Year commencement,
the retroactive invoice shall be adjusted for interest at the prime rate
pursuant to section 7.04.
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6.06 REGULATORY INTERVENTION
If Canadian Regulatory Authorities or U.S. Regulatory Authorities take action
by rule, order or other official means which materially and fundamentally
alters the operation of this Article VI such that Gas cannot be sold and
purchased hereunder at a market based price for long term firm Gas supply,
then either Buyer or Seller may notify the other Party by the means
identified in Article XII hereof of its intention to terminate this Agreement
This Agreement shall then terminate in all respects one hundred and eighty
(180) days after the provision of such notice unless within such one hundred
and eighty (180) day period the regulatory action has been modified or
revoked such that the operation of Article VI has been restored. The Parties
shall use due diligence and exercise all reasonable efforts to oppose any
regulatory action which might trigger the operation of this section 6.06.
ARTICLE VII - PAYMENT
7.01 MONTHLY BILLING
Once service or deliveries of Gas have commenced hereunder, Seller shall send
by facsimile to Buyer on or before the fifteenth (15th) Day of each Month
(the "Billing Month") with the original to follow by mail:
(a) A statement for the preceding Month showing the daily and total amount
of Gas delivered hereunder or, if such information is not available by
that Day, an estimate of such daily and total amounts; and,
(b) A bill in U.S. dollars with respect to the preceding Month together
with information sufficient to explain and support the amount billed.
7.02 PAYMENT DATE
Buyer shall pay Seller in U.S. dollars by direct electronic transfer to the
account of Seller designated herein, within ten (10) Days of receipt of
Seller's bill, the amount due to Seller with regard to Gas sold or reasonably
estimated to have been sold hereunder and service provided in the preceding
Month in accordance with the provisions of this Agreement as follows:
The Chase Manhattan Bank, N.Y.
Fedwire #0210-0002-1
Account: 001-1-146305
Bank of Montreal, Montreal
For Transfer to: Calgary Main Office
For Credit Account: 00109-4604-211
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In addition, Buyer shall send a copy of payment record by facsimile to
Seller. In the event that the tenth (10th) Day after receipt of Seller's bill
is not a Business Day, then Buyer shall pay Seller as aforesaid on or before
the Business Day immediately before such tenth (10th) Day. If Seller's bill
for any Month is based on an estimate of the Gas sold in the previous Month,
then the Parties shall make all necessary adjustments in the Month following
the billing Month to reflect the actual volumes of Gas Sold.
7.03 EXAMINATION OF RECORDS
Subject to the confidentiality provisions of this Agreement, Seller and Buyer
shall have the right, at any reasonable time and from time to time during the
term of this Agreement, to examine the books, records and accounts of the
other to the extent reasonably necessary to verify the accuracy of any
statement, billing, computation or procedure made under or pursuant to the
provisions of this Agreement.
7.04 REMEDIES FOR NON-PAYMENT
(a) Should Buyer fail to pay all of the amount of the bill as herein
provided when such amount is due, then commencing on the date such
payment is due, late payment charges shall accrue daily on the unpaid
part of such bill and be paid at a rate of interest per annum which is
equal to the prime rate charged from time to time by The Chase
Manhattan Bank of New York for loans to commercial borrowers, plus 1%
compounded monthly until paid. All such late payment charges shall be
payable on demand by Buyer to Seller. If either principal or late
payment interest charges are due, any payments thereafter received
shall first be applied to late payment charges due, then to the
previously outstanding principal due and lastly, to the most current
principal due.
(b) In the event of any such failure to pay, Seller may, in addition to any
other remedies that it may have under the terms of this Agreement, upon
10 Days written notice via facsimile and courier to Buyer, suspend
further delivery of Gas hereunder until such amount is paid. During the
period of any such suspension, Buyer shall continue to be liable to
Seller for the amounts set forth in section 6.02 with respect to the
Reservation Charge and Demand Charge attributable to such suspended
deliveries and such suspended deliveries shall not be considered to be
a failure by Seller to deliver gas under section 5.10
(c) Notwithstanding the foregoing, if Buyer shall in good faith dispute the
amount of any such bill or any part thereof, if Buyer shall pay to
Seller such amounts as it concedes to be correct and if Buyer at any
time within ten (10) Days after a demand made upon it by Seller for a
letter of credit with respect to the amount in dispute shall furnish
security by way of a letter of credit in a form reasonably satisfactory
to Seller assuring payment to Seller of the amount ultimately found to
be due to Seller upon such bill by agreement or
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by a decision of a court of competent jurisdiction, as the case may be,
then Seller shall not be entitled to suspend further delivery of Gas
hereunder as a result of any such nonpayment unless and until a default
occurs in relation to the conditions of any such letter of credit or
any renewal thereof. If it is determined that Buyer owes Seller the
disputed amount, Buyer shall pay Seller the disputed amount within five
(5) Days of the determination thereof.
(d) Notwithstanding the provisions of subsection 7.04 (b), if Buyer does
not in good faith dispute the payment of the amount of any such bill
or any part thereof not paid, Seller, in addition to any other remedies
that it may have under the terms of this Agreement, at law or in
equity, may on written notice of at least thirty (30) Days, elect to
terminate this Agreement. Such notice may only be given after the
suspension of Gas deliveries referred to in subsection 7.04 (b) has
commenced.
7.05 ADJUSTMENTS
Subject to the provisions of section 7.02, if it shall be found that at any
time Buyer has been overcharged by Seller in relation to this Agreement and
Buyer shall have actually paid the bills containing such overcharge, then
within thirty (30) Days after the final determination thereof, Seller shall
refund the amount of any such overcharge and if such overcharge was the
result of Seller's error, then interest shall be paid by Seller on the amount
in question on the same basis as interest is charged under the provisions of
section 7.04 from the date the overcharge was paid to the date Buyer is
reimbursed for the overcharge. If any such overcharge is not a result of an
error on the part of Seller, then no interest shall be charged to Seller.
Similarly, if it shall be found that at any time Buyer has been undercharged
under the provisions of this Agreement, then within thirty (30) Days after
the final determination thereof, Buyer shall pay the amount undercharged. No
interest shall be payable by Buyer on the amount of any undercharge unless
Buyer shall fail to pay the amount thereof within such thirty (30) Day
period, in which event interest shall be calculated and payable thereon on
the same basis as is described in section 7.04 from the first Day after such
thirty (30) Day period to the date of payment of the undercharge by Buyer.
7.06 EXTENSION OF TIME FOR PAYMENT WHEN BILL DELAYED
If presentation of the bill to Buyer is delayed after the fifteenth (15th)
Day of the billing Month, then the time of payment shall be extended
accordingly unless Buyer is responsible for such delay.
7.07 DISPUTES
Notwithstanding anything herein contained to the contrary, neither Party
hereto shall be entitled to dispute the volume of Gas delivered, or the
amount paid or payable with respect thereto, unless such dispute is raised by
notice to the other Party within two years after the end of the Month in
question.
<PAGE>
- 15 -
7.08 CREDIT APPROVAL
Upon Seller's request at any time prior to commencement of Gas deliveries or
during the Term of this Agreement, Buyer shall provide Seller with evidence
satisfactory to Seller of Buyer's ability to perform its financial
obligations under this Agreement. If Seller is not so satisfied, Seller may,
acting reasonably, having provided Buyer written notice of suspension in
accordance with section 7.04(b), suspend deliveries of Gas hereunder. During
the period of any such suspension, Buyer shall continue to be liable to
Seller for the amounts set forth in section 6.02 with respect to the
Reservation Charge and Demand Charge attributable to such suspended
deliveries and such suspended deliveries shall not be considered to be a
failure by Seller to deliver Gas under section 5.10. Deliveries shall
recommence upon Buyer providing to Seller an irrevocable stand-by letter of
credit from a banking institution which is satisfactory to Seller. The letter
of credit shall be a dollar amount reasonably specified by Seller which will
cover the full Price for two (2) Months worth of Gas purchases at the MDQ or
such other assurance as is acceptable to Seller. The letter of credit shall
provide that it will be automatically renewed every twelve (12) Months unless
notice of the issuer's intent to cancel the letter of credit as of any
anniversary date of the issuance thereof is received by Seller no later than
sixty (60) Days prior to such proposed expiration date.
ARTICLE VIII - FORCE MAJEURE
8.01 SUSPENSION
Subject to section 8.03 hereof, to the extent that either Party to this
Agreement fails to observe or perform any of the covenants or obligations
herein imposed upon it and such failure shall have been solely caused by
Force Majeure, then such failure shall be deemed not to be a breach of such
covenants or obligations and such covenants and obligations to the extent
affected by such Force Majeure shall be suspended during the continuance of
the event of Force Majeure.
8.02 FORCE MAJEURE
(a) For the purposes of this Agreement, the term "Force Majeure" shall mean
any acts of God, lightning, earthquakes, storms, strikes, lockouts or
other industrial disturbances, acts of the Queen's or country's
enemies, sabotage, wars, blockades, insurrections, riots, epidemics,
landslides, floods, fires, washouts, arrests and restraints of
governments and people, civil disturbances, explosions, breakages of or
accidents to machinery or lines of pipe, interruptions in
transportation service on any of the pipeline facilities required for
delivery of Gas not reasonably within the control of Seller or Buyer,
the orders of any court or government authority, agency or tribunal, or
any other extraordinary cause, whether of the kind herein enumerated or
otherwise, not within the reasonable control of the Party claiming
suspension and which, by the exercise of due diligence, such Party
could not have prevented or is unable to overcome.
<PAGE>
- 16 -
(b) For the purposes of this Agreement, the term "Force Majeure" shall also
mean any action not caused by and beyond the reasonable control of
either Party hereto which results in the interruption of deliveries or
which prevents totally or partially the exportation of Gas from Canada
by Seller or the importation of Gas into the U.S. by Buyer, or its
transportation by NOVA or Montana Power Company, provided however, that
where the exportation, importation or transportation is only partially
prevented by the action, the parties' obligations hereunder shall be
suspended only to the extent prevented by such action.
8.03 NO RELIEF
(a) Neither Party shall be entitled to the benefit of the provisions of
section 8.01 under any of the following circumstances:
(i) to the extent that the failure was caused by the negligence
or contributory negligence of the Party claiming suspension;
(ii) to the extent that the failure was caused by the Party
claiming suspension having not made reasonable efforts to
remedy the condition and remove the cause or circumstances of
Force Majeure in an adequate manner, or having failed to
resume with all reasonable dispatch the performance of such
covenants or obligations;
(iii) if the event of Force Majeure was caused by lack of finances
or was related to the payment of any amount or amounts due
hereunder;
(iv) to the extent that the failure was caused by the
insufficiency of Seller's Gas supply as opposed to an event
of the nature described in section 8.02;
(v) to the extent that the failure was caused by the failure of
Buyer or Buyer's market to require Gas;
(vi) unless as soon as reasonably possible after the happening of
the occurrence relied upon, or as soon as possible after
determining that the occurrence was in the nature of Force
Majeure and would affect the claiming Party's ability to
observe or perform any of its covenants or obligations under
this Agreement, the Party claiming suspension shall have
given to the other Party hereto notice to the effect that by
reason of Force Majeure (the nature whereof shall be therein
specified) the claiming Party is unable to perform the
particular covenants or obligations.
(b) (i) Buyer's obligation to pay the Demand Charge and Reservation
Charge as set forth in section 6.02, shall be suspended in
the event and to the extent that a claim of Force Majeure by
Seller hereunder reduces the quantity of Gas delivered
<PAGE>
- 17 -
hereunder by Seller, however, in the event of a claim of
Force Majeure by Buyer hereunder, Buyer's Demand Charge and
Reservation Charge payment obligation shall not be suspended
but shall remain its responsibility and obligation provided
that it shall be reduced to the extent of any reduction in
the actual demand charges paid by Seller.
(ii) In the event of a claim of Force Majeure hereunder by Seller,
Seller shall not be liable for Replacement Gas costs or
unabsorbed demand charges as described in section 5.10,
provided however, that Seller will use reasonable efforts to
locate replacement natural gas supplies for the quantity of
Gas not delivered hereunder as a result of Seller's Force
Majeure, which replacement natural gas, upon and subject to
the negotiation and agreement between Seller and Buyer as to
the terms and conditions of the sale thereof from Seller to
Buyer, shall be sold and delivered by Seller and purchased by
Buyer.
(iii) In the event of and during a claim of Force Majeure hereunder
by Seller, Buyer shall have the right to locate an
alternative supply of gas and direct Seller to use on Buyer's
behalf Seller's firm NOVA transportation covered by this
Agreement to move such gas, to the extent of any reduction in
the quantity of Gas and/or replacement natural gas pursuant
to subsection 8.03(b)(ii), delivered by Seller under this
Agreement, which reduction results from Seller's Force
Majeure. Notwithstanding subsection 8.03(b)(i) hereof, to the
extent that Seller uses any such NOVA transportation on
Buyer's behalf, Buyer shall pay the Demand Charge relating
thereto.
8.04 END OF SUSPENSION
The party claiming suspension by reason of Force Majeure shall give notice to
the other Party, as soon as possible after the event of Force Majeure shall
have been remedied, to the effect that the same has been remedied and that
such Party has resumed, or is then in a position to resume, the performance
of the suspended covenants or obligations under this Agreement.
8.05 STRIKES OR LOCKOUTS
Notwithstanding anything to the contrary in this Article VIII expressed or
implied, the settlement of strikes, lockouts and other industrial
disturbances shall be entirely within the discretion of the Party involved
therein and such Party may make settlement thereof at such time and on such
terms and conditions as it may deem to be advisable and no delay in making
such settlement shall deprive such Party of the benefit of section 8.01.
<PAGE>
- 18 -
8.06 LIMITATION ON SUSPENSION OF OBLIGATIONS
If at any time during the Term hereof, either Buyer or Seller (the "Party
Claiming Force Majeure") has claimed Force Majeure and (i) such Force Majeure
remains in effect for at least one hundred and eighty (180) consecutive Days
or (ii) such Force Majeure remains in effect for at least thirty (30)
consecutive Days during which time such Party fails to deliver or take at
least 10% of the Maximum Daily Quantity as a daily average over such thirty
(30) day period, then so long as the Force Majeure event is still continuing,
the other party hereto may by notice to the Party Claiming Force Majeure,
terminate this Agreement effective as of the date of such notice. The Party
Claiming Force Majeure shall not manipulate its performance under this
Agreement in order to avoid the application of this section 8.06.
ARTICLE IX - COVENANTS, WARRANTIES AND INDEMNITIES BY SELLER
9.01 WARRANTIES
With respect to the Gas sold hereunder, Seller hereby covenants, warrants and
represents to Buyer that:
(i) Seller shall at the Delivery Point have good right or title
to all Gas delivered hereunder, free and clear of all liens
and adverse claims whatsoever, except those being contested
in good faith by Seller, and,
(ii) Seller shall at the Delivery Point have the right to sell the
Gas delivered or tendered for delivery hereunder.
9.02 INDEMNITY
Seller shall indemnify Buyer and hereby agrees to save Buyer harmless from
and in respect of all suits, actions, debts, accounts, damages, costs, losses
and expenses of every nature and kind whatsoever arising from or in
connection with any adverse claims of any or all persons to the Gas or to
royalties, taxes, license fees or charges thereon, which are applicable
before the title to the Gas passes to Buyer at the Delivery Point. In the
event that any such adverse claim is prosecuted against Buyer in respect of
any of the Gas as aforesaid, Buyer may retain the Price thereof up to the
amount of such claim, until such claim has been finally determined, as
security for the performance of Seller's obligations hereunder with respect
to such claim or until Seller shall have furnished a surety bond or other
form of security satisfactory to Buyer in connection with the subject claim.
Buyer shall invest any amount withheld from Seller at any short term rate of
interest available to the Buyer, acting reasonably, until the amount withheld
is released to the Seller, at which time all interest earned thereon shall be
paid to Seller.
<PAGE>
- 19 -
9.03 PAYMENTS BY SELLER
Seller shall at all times pay all fees, rentals and royalties due and
payments due to all mineral and all royalty owners and all amounts due under
all documents, as may appear of record or otherwise to be binding upon
Seller, and shall pay all other persons having any interests in the Gas sold
and delivered hereunder, which interests arise prior to the Delivery Point.
ARTICLE X - ARBITRATION
10.01 PRICING DISPUTES
All disputes arising out of or in connection with the determination of the
Price for Gas sold hereunder shall be referred to and finally resolved in a
manner which shall be final and binding on the Parties hereto, by an
arbitration pursuant to the principles outlined herein and subject to the
criteria set forth in section 6.05 and pursuant to the International
Commercial Arbitration Act, of the Province of Alberta, except to the extent
that the provisions of such Act are contrary to the principles outlined
herein.
10.02 APPOINTMENT OF ARBITRATORS
The Party hereto initiating the arbitration (the "Initiating Party") shall in
its written notice of request to arbitrate, which notice shall be sent to the
other Party hereto (the "Receiving Party"), name one arbitrator. Within
twenty-one (21) Days after receipt of such notice, the Receiving Party shall
serve notice on the Initiating Party, which notice shall contain the name of
a second arbitrator.
10.03 ARBITRATION BOARD
If the Receiving Party fails to name a second arbitrator, then the Initiating
Party's arbitrator shall function as a single arbitrator. In the event that
both Parties appoint their own arbitrator, the two arbitrators so appointed
shall name a third arbitrator, or, if they fail to do so within ten (10) Days
of the second arbitrator's appointment, the Parties hereto shall promptly
meet and attempt to agree upon and appoint such third arbitrator. If the
parties hereto are unable to agree within ten (10) Days on the choice of the
third arbitrator, then, on the request of either Party hereto, the third
arbitrator shall be appointed by the consulting firm of Stone & Webster
Engineering Corporation. If for any reason the third arbitrator is not
appointed by the Consulting Firm or otherwise agreed upon by the Parties or
the two arbitrators within thirty (30) Days of the second arbitrator's
appointment then on the request of either Party hereto the third arbitrator
shall be appointed by any Justice of the Court of Queen's Bench of Alberta.
<PAGE>
- 20 -
10.04 QUALIFICATIONS OF ARBITRATORS
The single arbitrator (the "Arbitrator") or the three arbitrators (the
"Board") appointed hereunder shall be qualified by education or experience to
decide the particular pricing matters in dispute, and shall not be employees
or agents of either Party hereto or any of their affiliates.
10.05 PROCEDURE
The Arbitrator or the Board shall proceed immediately to hear and determine
the pricing question or questions in dispute. The decision of the Arbitrator
shall be made within forty-five (45) Days after his or her appointment,
subject to any reasonable delay due to unforeseen circumstances. The decision
of the Board, or the majority thereof, shall be made within forty-five (45)
Days after the appointment of the third arbitrator, subject to any reasonable
delay due to unforeseen circumstances. Notwithstanding the foregoing, in the
event the Arbitrator fails to make a decision within sixty (60) Days after
his or her appointment or if the Board, or the majority thereof, fails to
make a decision within sixty (60) Days after the appointment of the third
arbitrator then either Party may elect to have a new Arbitrator or Board
chosen in like manner as if none had previously been selected.
10.06 BINDING DECISION
The decision of the Arbitrator or the decision of the Board, or the majority
thereof, shall be drawn up in writing and signed by the Arbitrator or by the
Board members, or the majority thereof, and shall adopt the last position put
forward in writing by Seller or Buyer in the negotiations preceding the
request for arbitration and shall be final and binding upon the Parties
hereto as to any pricing question or questions so submitted to arbitration,
and the Parties shall be bound by such decision and perform the terms and
conditions thereof.
10.07 COMPENSATION OF ARBITRATORS
Each Party shall pay the compensation and expenses of the Arbitrator
appointed by that Party and the compensation and expenses of the third
Arbitrator (unless otherwise determined by the Arbitrator or the Board) shall
be paid in equal proportions by Buyer and Seller.
10.08 PLACE OF ARBITRATION
The place of arbitration shall be determined by the Arbitrator or the Board.
10.09 PRICING CRITERIA
Notwithstanding anything to the contrary contained in this Agreement, in any
pricing arbitration the Arbitrator or the Board, as the case may be, shall
use the criteria contained in section 6.05 in making a determination of the
Price along with such other criteria, if any, as may then be agreed upon by
Seller and Buyer and submitted to the Arbitrator or the Board.
<PAGE>
- 21 -
10.10 OPERATIONS CONTINUED
Whenever there is an arbitration proceeding, operations under this Agreement
shall continue in the same fashion as they were conducted before the
arbitration proceeding was commenced, without prejudice to either Party,
pending a decision in the arbitration proceeding.
ARTICLE XI - DEFAULT AND REMEDIES
11.01 EVENT OF DEFAULT
An Event of Default under this Agreement shall be deemed to exist upon the
occurrence of any one or more of the following events:
(a) Failure by either Party to make payment of any amounts due to the other
Party under this Agreement, and that failure continues for a period of
thirty (30) days after written notice of non-payment; or
(b) Failure by either Party to perform fully any other material provision
of this Agreement, and (i) such failure continues for a period of
thirty (30) days after written notice of such non-performance from the
other Party is received, or (ii) if within such thirty (30) day period
the non-performing Party commences and proceeds with due diligence to
cure the failure and the failure is not cured within ninety (90) days
after written notice of nonperformance from the other Party is received
or such longer period of time agreed to by the Parties in writing as
being necessary for the Party to cure the failure with all due
diligence; or
(c) If by order of a court of competent jurisdiction, a receiver or
liquidator or trustee of either Party or of all or any of the property
of either Party shall be appointed, and such receiver or liquidator or
trustee shall not have been discharged within a period of sixty (60)
days after its appointment; or if by decree of such a court, either
Party shall be adjudicated bankrupt or insolvent or any substantial
part of the property of such Party shall have been sequestered, or such
decree shall have continued undischarged and unstayed for a period of
sixty (60) days after the entry thereof; or if a petition to declare
bankruptcy or to reorganize Buyer or Seller pursuant to any of the
provisions of any Canadian or United States federal, provincial or
state bankruptcy law shall be filed against such Party and shall not be
dismissed within sixty (60) days after such filing; or
(d) If either Party shall file a voluntary petition in bankruptcy under any
provision of any Canadian or United States federal, provincial or state
bankruptcy law or shall consent to the filing of any bankruptcy or
reorganization petition against it under any similar law; or if either
Party shall make an assignment for the benefit of its creditors; or if
either Party
<PAGE>
- 22 -
shall admit in writing its inability to pay its debts generally as they
become due; or if either Party shall consent to the appointment of a
receiver or receivers, or trustee or trustees, or liquidator or
liquidators of it or of all or of any part of its property.
11.02 TERMINATION
Upon the occurrence and during the continuance of an Event of Default, the
Party not in default shall have the right to terminate this Agreement upon
ten (10) days' written notice to the defaulting Party.
ARTICLE XII - GENERAL PROVISIONS
12.01 NOTICES
Any notice, request, consent, direction, demand, waiver of condition, invoice
or other instrument required or permitted to be given under the provisions of
this Agreement shall be in writing. Written communications as aforesaid may
be given by delivering same in person or by prepaid courier or sending same
by facsimile, in each case addressed as follows:
TO BUYER: GREAT FALLS GAS COMPANY
(i) General P.O. Box 2229
Great Falls, Montana 59403 or,
#1 First Avenue South
Great Falls, Montana 59401
Attention: Director, Gas Supply
and Industrial Marketing
Facsimile: (406) 791-7560
Telephone: (406) 791-7504
(ii) Nominations GREAT FALLS GAS COMPANY
P.O. Box 2229
Great Falls, Montana 59403
Attention: Director, Gas Supply and Industrial
Marketing
Facsimile: (406) 791-7560
Telephone: (406) 791-7504
(iii) Billings GREAT FALLS GAS COMPANY
P.O. Box 2229
Great Falls, Montana 59403
Attention: Director, Accounting
Facsimile: (406) 791-7560
Telephone: (406) 791-5206
<PAGE>
- 23 -
TO SELLER: SHELL CANADA LIMITED
(i) General Natural Gas Business Centre
400 - 4th Avenue S.W.
Calgary, Alberta
T2P 0J4
Attention: Manager, Direct Marketing
Facsimile: (403) 269-7818
Telephone: (403) 691-3189
(ii) Billings 400 - 4th Avenue S.W.
Calgary, Alberta
T2P 0J4
Attention: Supervisor, Natural Gas Accounting
Facsimile: (403) 269-7818
Telephone: (403) 691-4069
(iii) Nominations 400 - 4th Avenue S.W.
Calgary, Alberta
T2P 0J4
Attention: Operations Analyst
Facsimile: (403) 269-7818
Telephone: (403) 691 -3044 or (403) 691-3878
Any written communication as aforesaid, if delivered in person or SENT BY
facsimile, shall be deemed to have been given or made on the Business Day on
which it was received as aforesaid, and, if delivered by prepaid courier,
shall be deemed to have been given or made on the second Business Day
following the Day on which it is so received. Any Party may give written
notice of change of address in the same manner, in which event any written
communication as aforesaid shall thereafter be given to it as above provided
at such changed address.
12.02 FURTHER ASSURANCES
Each Party shall from time to time and at all times hereafter upon reasonable
written request so to do, make, do, execute and deliver, or cause to be made,
done, executed and delivered all such further acts, deeds, assurances and
things as may be reasonably required for more effectually implementing and
carrying out the true intent and meaning of this Agreement.
12.03 MORTGAGES
Notwithstanding anything to the contrary contained in this Agreement, either
Party shall have the right to mortgage, pledge, hypothecate or otherwise
encumber its interest in and to this Agreement as security for its
indebtedness to any other person.
<PAGE>
- 24 -
12.04 WAIVERS
Either Party hereto in its sole discretion may waive, without thereby
prejudicing such Party's right to rely on any other conditions inserted
herein for such Party's sole benefit, a breach or default of any covenant or
condition inserted herein for the benefit or protection of such Party. No
such waiver, however, shall operate as a waiver of any future breach or
default, whether of a like or different character.
12.05 INTERPRETATIONS
In the event that Buyer or Seller are in disagreement as to the
interpretation to be placed on any term, condition, covenant or agreement
contained in this Agreement or the performance or satisfaction thereof by any
such Party, or any such Party asserts that the other Party has committed a
breach of this Agreement, Buyer or Seller, as the case may be, may give
written notice of such disagreement or asserted breach to the other such
Party. If Buyer and Seller are unable to settle the controversy or claim
within (thirty) 30 Days of the delivery of such notice, the Parties may then
agree to submit with all reasonable dispatch, such disagreement or asserted
breach to a competent court of law for determination.
12.06 APPLICABLE LAWS
This Agreement for all purposes shall be construed in accordance with and
governed by the laws of the Province of Alberta. The Courts of the Province
of Alberta shall have exclusive jurisdiction in relation to any legal
proceedings arising in connection with this Agreement. The Parties hereby
expressly and exclusively submit to the jurisdiction of the courts of the
said Province.
The Parties agree to share equally all travel and hotel expenses incurred in
connection with disputes raised under this Agreement.
12.07 INVALIDITY OF PROVISIONS
The intention of the Parties to this Agreement is to comply fully with all
applicable laws, and this Agreement shall be construed consistently with such
laws to the extent possible. If and to the extent that any court of competent
jurisdiction determines it is impossible to construe any provision of this
Agreement consistently with any applicable law and consequently holds that
provision to be invalid, such holding shall in no way affect the validity of
the other provisions of this Agreement, which shall remain in full force and
effect.
<PAGE>
- 25 -
12.08 FULL UNDERSTANDING
The terms of this Agreement represent the full understanding between the
Parties and replaces all other contracts, agreements or representations
whether written or oral. No amendments to this Agreement shall be made or be
binding on either Party unless made in writing and signed by each Party.
12.09 GENDER AND NUMBER REFERENCES
Whenever the singular, masculine or neuter is used in this Agreement the same
shall be construed as being the plural or feminine or body corporate or vice
versa where the context or reference so require.
12.10 CONFIDENTIALITY
All data, documents and information of a confidential nature concerning the
business or assets of either Party to this Agreement which is made available
or disclosed to either other Party hereto pursuant to the terms of this
Agreement (the "Confidential Information"), shall be kept and maintained on a
confidential basis by the Party hereto which is the recipient thereof. Each
Party hereto shall implement such measures and shall take such precautions as
may be reasonably necessary to endeavor to ensure the confidentiality of all
Confidential Information. Notwithstanding the foregoing, either Party hereto
may, without consultation with or notice to the other Party hereto, from time
to time disclose Confidential Information to any court, government,
governmental agency, regulatory body or quasijudicial agency ("Regulatory
Agency") at any time and from time to time and may thereby cause the
Confidential Information to become public if and to the extent that may be
required by any Regulatory Agency or the rules, regulations, procedures,
requirements or practices of any Regulatory Agency.
12.11 REQUESTS FOR CONSENT
Whenever a request is made hereunder by one Party hereto to the other for a
consent, approval or authorization, such request shall be deemed to have been
refused or declined if it is not granted in writing within thirty (30) Days
after the request is made.
12.12 SUCCESSORS AND ASSIGNMENT
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the Parties, but no assignment shall release either
Party from such Party's obligations hereunder without the written consent of
the other Party to such release, which consent shall not be unreasonably
withheld.
<PAGE>
- 26 -
IN WITNESS WHEREOF the parties hereto have duly executed and delivered this
Agreement as of the Day and year first above written.
SHELL CANADA LIMITED GREAT FALLS GAS COMPANY
Per: /s/ illegible Per: /s/ Larry D. Geske
------------------------ ------------------------
92-07-29 8/6/92
Per: Per:
------------------------ ------------------------
<PAGE>
[LOGO]
[LETTERHEAD]
August 23, 1993
VIA COURIER
Mr. Lynn Hardin
Director, Gas Supply and Industrial Marketing
TransEnergy
#1 First Avenue South
Great Falls, Montana
59401
Dear Mr. Hardin
RE: LETTER AGREEMENT FOR THE SHORT TERM AMENDMENT TO
SECTION 6.02 OF ARTICLE VI OF
THE NATURAL GAS SALE AND PURCHASE AGREEMENT
BETWEEN SHELL CANADA LIMITED ("SHELL") AND
GREAT FALLS GAS COMPANY ("GFG") DATED JULY 20, 1992
- --------------------------------------------------------------------------------
The parties do hereby agree to temporarily amend the referenced Agreement
pursuant to the following terms and conditions:
1. TERM
The term of this Letter Agreement shall commence on November 1,
1993 and continue until October 31, 1995.
2. DEMAND CHARGE (6.02 (a))
The Demand Charge component of the Price, as defined in section
6.02 of the referenced Agreement shall not change. The Demand
Charge shall be paid each Month regardless of the quantity of Gas
purchased and sold hereunder, except to the extent that Shell
fails to deliver Gas nominated.
3. RESERVATION CHARGE (6.02(b))
The Reservation Charge component of the Price, as defined in
section 6.02 of the referenced Agreement shall be deleted for the
term of this Letter Agreement.
<PAGE>
Page 2 [LOGO]
August 23, 1993
4. PRICING ELECTION
On or before September 15, 1993, GFG will have the option of
choosing a fixed or variable pricing mechanism for each of the
four periods pursuant to the following paragraph 5 of this Letter
Agreement.
5. COMMODITY CHARGE (6.02(c))
The Commodity Charge component of the Price, as defined in section
6.02 of the referenced Agreement shall be deleted for the term of
this Letter Agreement and replaced with the following:
(a) For the time period commencing November 1, 1993, for the
first 755,000 MMBtus of Gas delivered:
(i) A fixed price of $2.10 US dollars per MMBtu, less the
Demand Charge on a US dollar per MMBtu basis; or
(ii) A rolling three Month "average" of the Canadian Gas
Price Reporter mid month index of "Alberta Short-Term
Spot Prices at the Alberta Border (Empress)" converted
to US dollars per MMBtu plus $0.25 US dollar per MMBtu,
less the Demand Charge on a US dollar per MMBtu basis.
(b) After the fulfillment of 5(a) hereof, for the balance of the
1993 Contract Year:
(i) A fixed price of $ 1.75 US dollar per MMBtu, less the
Demand Charge on a US dollar per MMBtu basis; or
(ii) A rolling three Month "average" of the Canadian Gas
Price Reporter mid month index of "Alberta Short-Term
Spot Prices at the Alberta Border (Empress)" converted
to US dollars per MMBtu, less the Demand Charge on a US
dollar per MMBtu basis.
(c) For the time period commencing November 1, 1994, for the
first 755,000 MMBtus of Gas delivered:
(i) A fixed price of $2.20 US dollars per MMBtu less the
Demand Charge on a US dollar per MMBtu basis; or
(ii) A rolling three Month "average" of the Canadian Gas
Price Reporter mid month index of "Alberta Short-Term
Spot Prices at the Alberta Border (Empress)" converted
to US dollars per MMBtu plus $0.25 US dollar per MMBtu,
less the Demand Charge on a US dollar per MMBtu basis.
<PAGE>
Page 3 [LOGO]
August 23, 1993
(d) After the fulfillment of 5(c) hereof, for the balance of the
1994 Contract Year:
(i) A fixed price of S1.85 US dollars per MMBtu, less the
Demand Charge on a US dollar per MMBtu basis; or
(ii) A rolling three Month "average" of the Canadian Gas
Price Reporter mid month index of "Alberta Short-Term
Spot Prices at the Alberta Border (Empress)" converted
to US dollars per MMBtu, less the Demand Charge on a US
dollar per MMBtu basis.
6. PRICING DATA
Pursuant to paragraph 5 of the Letter Agreement, in the event that
such pricing data is no longer published or such publication is no
longer published then, failing agreement by the parties, the
Commodity Charge or a method of determining it shall be determined
by arbitration pursuant to Article X of the referenced Agreement.
7. OTHER TERMS AND CONDITIONS
All other terms and conditions of the referenced Agreement shall
remain in full force and effect.
8. REGULATORY APPROVALS
This Letter Agreement is subject to all applicable American and
Canadian federal, provincial and state regulatory approvals.
If you are in agreement with the foregoing, please indicate your acceptance in
the space provided below and return one copy of this Letter Agreement to our
office.
Yours truly,
/s/ S. MacCulloch
- ------------------------
S. D. (Sandy) MacCulloch
Coordinator, Market Development
GREAT FALLS GAS COMPANY
Accepted and Agreed to this day of , 1993
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Per: /s/ Larry D. Geske
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Title: President
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<PAGE>
AMENDING AGREEMENT
BETWEEN:
SHELL CANADA LIMITED ("SELLER")
AND
GREAT FALLS GAS COMPANY ("BUYER")
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THIS AMENDING AGREEMENT is made effective as of November 1, 1994.
WHEREAS, Seller and Buyer are parties to a Natural Gas Sale and
Purchase Agreement dated July 20, 1992 (the "Contract"), as temporarily
amended by a Letter Agreement dated August 23, 1993, (the "Letter Agreement")
regarding the long term firm supply of Canadian natural Gas from Seller to
Buyer, and
WHEREAS, Seller and Buyer wish to further amend the Contract and
Letter Agreement so as to provide for a different pricing mechanism under the
Contract effective November 1, 1994.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, Seller and Buyer agree as follows:
1. All words and phases as used in this Amending Agreement shall have
the same meaning as attributed to them in the Contract.
2. The Letter Agreement is hereby amended so as to reduce the term
thereof to a one (1) year period by deleting from Article 1 thereof the words
"October 31, 1995" and replacing them with the words "November 1, 1994", and
by deleting paragraphs 5(c) and 5(d) thereof.
3. The Contract is amended by adding thereto the following definition;
"Pricing Period" means that period of time as set forth in Schedule "A"
hereto for which a Price has been agreed to or otherwise established, and
which shall not be less than one (1) Contract Year.
4. The Contract is amended by deleting in their entirety Sections 5.03,
5.04 and 5.05, without changing the numbering of any other Sections of the
Contract.
5. The Contract is hereby amended by deleting from the second last line
of paragraph 1 in Section 5.07 the words "(depending upon whether the
Shortfall Amount being purchased represents Tier I Gas or Tier II Gas)".
6. Article VI of the Contract is amended by deleting therefrom Sections
6.02, 6.03, 6.04 and 6.05 in their entirety and replacing them with the
following:
"6.02 PRICE
The price to be paid by Buyer to Seller for Gas purchased and sold
and the service provided hereunder for the period of time commencing with the
Commencement Date will consist of the sum of the three (3) components
identified hereunder. The Price will be in U.S. dollars.
(a) Each Month, Buyer shall pay Seller a "Demand Charge" equal to
Seller's actual cost for that Month of reserving the firm
transportation required to transport the MDQ on NOVA to the Delivery
Point.
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(b) Each Month, Buyer shall pay Seller a "Reservation Charge" equal to the
product of the MDQ times the number of days in the Month times the
Reservation Charge. The Reservation Charge shall be as set forth from
time to time in Schedule "A" hereto.
(c) Each Month, Buyer shall pay Seller for each MMBtu of Gas delivered and
received at the Delivery Point, a "Commodity Charge" equal to a per
MMBtu price on a dry basis as set forth from time to time in Schedule
"A" hereto.
In the event the parties utilize index data in determining the
Commodity Charge component and such index data is no longer
ascertainable, for whatever reason, then, failing agreement between
Seller and Buyer on a new Commodity Charge within forty-five (45) days
of such event, the new Commodity Charge shall be determined by
arbitration pursuant to Article X hereof. Until a new Commodity Charge
has been determined the parties agree to use the last ascertainable
Commodity Charge. The new Commodity Charge shall be retroactive to the
date the index data became unascertainable and any necessary
adjustments shall be dealt with in accordance with Section 7.05 hereof.
If Buyer elects not to take Gas during any Month, Seller will be allowed to
sell that gas on an interruptible basis to third party purchasers.
The Demand Charge and the Reservation Charge shall be paid each Month
regardless of the quantity of Gas purchased and sold hereunder, except to the
extent that Seller fails to deliver Gas nominated.
6.03 FUTURE PRICE DETERMINATION
(a) The Parties agree that they will meet from time to time to
negotiate the Commodity Charge and Reservation Charge components
of the Price payable hereunder for subsequent Pricing Periods.
In any such negotiations or resulting arbitration with respect to
Price during the Term of this Agreement only the Commodity Charge
and Reservation Charge components of the Price shall be
redetermined and the Demand Charge component of the Price shall
not be subject to redetermination.
(b) Subject to 6.03 (a), the Parties agree to establish a new Price
for the next Pricing Period at least one hundred and twenty (120)
Days prior to the termination date of the current Pricing Period
and the Parties will commence procedures for such redetermination
no later than one hundred and eighty (180) Days prior to the
termination date of the current Pricing Period by either Party
giving fifteen (15) Days written notice to the other, to meet and
negotiate. Such Price, and the various components making up that
Price, will be effective for a period of time, as then agreed to,
and will become effective on the commencement of the next Pricing
Period. If neither Party has given written notice to the other to
renegotiate at least one hundred and eighty (180) Days prior to
the termination date of the current Pricing Period, then the LAST
Price in effect for the current Pricing Period shall continue in
effect for the next one year period which shall then become the
next Pricing Period.
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6.04 FAILURE TO REACH AGREEMENT ON PRICE
In the event that the Parties are unable to reach agreement on the
Price, or the Price components at least one hundred and twenty (120) Days
prior to the termination date of the current pricing period, as provided
pursuant to section 6.03 herein, either Party may, upon not less than fifteen
(15) days written notice to the other Party, have the Price determined
pursuant to the Arbitration provisions contained in Article X herein and
exclusively in accordance with the principles set forth in section 6.05
herein. Should no notice for Arbitration be given at least ninety (90) days
prior to the termination date of the current Pricing Period, the Price for
the next one year period, which shall then become the next Pricing Period,
shall continue to be the last Price in effect for the current Pricing Period.
6.05 PRICING PRINCIPLES
For each Pricing Period subsequent to the Pricing Period for which
the price of gas to be sold and purchased hereunder has been established and
specified, the Parties agree to determine Price by negotiation or, if
unsuccessful, by arbitration. If the Price for Gas delivered in any Pricing
Period is to be determined by arbitration, the arbitrators shall determine a
Price that, under the prevailing market circumstances for long term firm Gas
Supply and in the opinion of the arbitrators, is fair and reasonable to both
Buyer and Seller. In making such determination, the arbitrators shall limit
their consideration to the evidence which is presented by the Parties, and to
the extent that evidence is presented, shall base their determination upon
and shall give due consideration to each of the following criteria:
(i) The weighted average cost of gas paid by Buyer during the
next one year period for firm gas supplies with a term of two
(2) years or more;
(ii) The prices being paid during the next one year period for
other firm gas supplies by local distribution companies with
a term of two (2) years or more in the state of Montana; and,
(iii) The prices being paid during the next one year period for
other firm gas supplies by local distribution companies with
a term of two (2) years or more in the province of Alberta;
provided that the arbitrators shall consider the above matters in light of
the following:
(a) To the extent that evidence with respect to Prices for the next one
year period is not available or is insufficient, prices for the current
Pricing Period will be considered;
(b) The times at which the prices were agreed to between the respective
buyers and sellers;
(c) Differences in transportation costs relevant to establishing a point of
comparison at the Delivery Point;
(d) The similarities and dissimilarities between the service provided
hereunder and the sales and transportation arrangements under which
other gas is being sold for consumption in Buyer's market area and in
Alberta, including in particular but not limited to the similarities
and
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dissimilarities between the quality of service and the security of
supply provided hereunder and provided under such other arrangements;
and,
(e) Any other considerations in respect of which relevant evidence is
adduced by the Parties and which is relevant to the determination of
such matters.
In the event that a negotiated or arbitrated Price is determined for
a Pricing Period after commencement thereof, Seller shall retroactively
adjust its invoices to Buyer to the first Day of that Pricing Period, to take
into account the revised Price. Until a new Price is concluded and
retroactively implemented, the previous Price shall remain in effect. If the
Price settlement date exceeds sixty (60) Days past the Pricing Period
commencement, the retroactive invoice shall be adjusted for interest at the
prime rate pursuant to section 7.04."
7. The Contract is hereby amended by incorporating Schedule "A" attached
hereto as Schedule "A" to the Contract.
8. As amended by this Amending Agreement, the Contract is hereby
ratified and confirmed and shall continue in full force and effect.
IN WITNESS WHEREOF this Amending Agreement has been executed by the
parties hereto effective as of the day and year first above written.
SHELL CANADA LIMITED GREAT FALLS GAS COMPANY
Per: /s/ Eric Le Dain Per: /s/ Larry D. Geske
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Name: ERIC LE DAIN Name: LARRY D. GESKE
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Title: MANAGER MARKETING - Title: PRESIDENT & CEO
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NE/MIDWEST U.S.
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SCHEDULE A
SCHEDULE A INCORPORATED INTO AND FORMING A PART OF THAT NATURAL GAS SALE AND
PURCHASE AGREEMENT BETWEEN SHELL CANADA LIMITED ("SELLER") AND GREAT FALLS
GAS COMPANY ("BUYER") DATED THE 20TH DAY OF JULY, 1992 AS AMENDED FROM TIME
TO TIME (THE "AGREEMENT")
All words and phrases used in this Schedule "A" shall have the same meaning
as provided for in the Agreement.
PRICING PERIOD: November 1, 1994 to November 1, 1996
RESERVATION CHARGE: During this Pricing Period the Reservation Charge as
defined in Section 6.02 of the Agreement shall be set at
$0.00 US./MMBtu.
COMMODITY CHARGE:
During this Pricing Period, the Commodity Charge component of the Price, as
defined in Section 6.02 of the Agreement shall be as follows:
1. For the period November 1, 1994 to November 1, 1995:
For 50% of the volume of Gas delivered each Month up to 50% of the MDQ,
the Commodity Charge shall be $1.58 US/MMBtu on a dry basis at the
Delivery Point, less the Demand Charge calculated on a US dollar per
MMBtu basis at a 100% load factor.
For 50% of the volume of Gas delivered each Month up to 50% of the MDQ,
the Commodity Charge shall be the Average Alberta Border (Empress) Spot
(one month) Firm (100% LF) price for such Month as reported in the
Canadian Gas Price Reporter published by Canadian Enerdata Ltd. plus
$0.25 US/MMBtu for the period November 1, 1994 to April 1, 1995; and
plus $0.05 US/MMBtu for the period April 1, 1995 to November 1, 1995,
less the Demand Charge calculated on a US dollar per MMBtu basis at a
100% load factor.
2. For the period November 1, 1995 to November 1, 1996;
For 100% of the volume of Gas delivered each Month, up to the MDQ, the
Commodity Charge shall be the Average Alberta Border (Empress) Spot
(one month) Firm (100% LF) price for such Month as reported in the
Canadian Gas Price Reporter published by Canadian Enerdata Ltd. plus
$0.05 US/MMBtu, less the Demand Charge calculated on a US dollar per
MMBtu basis at a 100% load factor.
Accepted and agreed to as of the 1st day of November, 1994.
SHELL CANADA LIMITED GREAT FALLS GAS COMPANY
Per: /s/ Eric Le Dain Per: /s/ Larry D. Geske
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Name: ERIC LE DAIN Name: LARRY D. GESKE
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Title: MANAGER MARKETING - Title: PRESIDENT & CEO
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NE/MIDWEST U.S.
<PAGE>
SCHEDULE "A"
SCHEDULE A INCORPORATED INTO AND FORMING A PART OF THAT NATURAL GAS SALE AND
PURCHASE AGREEMENT BETWEEN SHELL CANADA LIMITED ("SELLER") AND GREAT FALLS
GAS COMPANY ("BUYER") DATED THE 20TH DAY OF JULY, 1992 AS AMENDED FROM TIME
TO TIME (THE "AGREEMENT")
All words and phrases used in this Schedule "A" shall have the same meaning
as provided for in the Agreement.
PRICING PERIOD: November 1, 1996 to November 1, 1997
RESERVATION CHARGE: During this Pricing Period, the Reservation Charge as
defined in Section 6.02 of the Agreement shall be set at
$0.00 US./MMBtu.
COMMODITY CHARGE: During this Pricing Period, the Commodity Charge
component of the Price, as defined in Section 6.02 of
the Agreement shall be as follows:
$1.19 US/MMBtu on a dry basis at the Delivery Point.
FURTHER AMENDMENTS:
During the above Pricing Period, in place of the provisions dealing with
incurring a Shortfall Amount as set forth in Section 5.07 of the Agreement,
if on any Day Buyer does not purchase one hundred percent (100%) of the then
applicable MDQ, a Deficit will exist. The difference between the MDQ and the
amount actually taken by Buyer on any Day will be the Deficit for that Day.
On a Monthly basis, in accordance with Article VII of the Agreement, Buyer
shall pay Seller, at the Commodity Charge rate then in effect, for the
Deficit incurred on each Day during the preceding Month, regardless of
whether or not Buyer has been able to take, as hereinafter provided, the
Deficit Gas after it has been incurred. Buyer shall have the opportunity to
nominate and take Deficit Gas on any Day after it has been incurred, provided
however, that:
(i) Buyer shall first purchase 100% of the MDQ;
(ii) Seller's obligation to deliver Deficit Gas shall only be on
an interruptible basis;
(iii) Buyer shall pay Seller for any additional transportation
charges Seller incurs in delivering the Deficit Gas to the
Delivery Point; and
(iv) the maximum amount of Deficit Gas (or any Gas) that Seller
shall be obligated to deliver on any Day above the MDQ shall
be the IDQ limit set out in Section 5.06 of the Agreement.
If a Shortfall Amount was incurred in the Contract Year preceding the first
above referenced Pricing Period, the provisions of Section 5.07 regarding
Buyer's purchase of the Shortfall Amount in the Make-up Year shall apply in
that Pricing Period, however, subject to the same conditions as outlined
above in (i) through (iv) with respect to Deficit Gas, and further provided
that any Gas taken above the MDQ shall first be applied to Deficit Gas, then
to the Shortfall Amount and finally to any agreed upon interruptible gas
<PAGE>
pursuant to Section 5.06 of the Agreement. The Commodity Charge for the
Shortfall Amount shall be as specified in Section 5.07 of the Agreement.
Accepted and agreed to as of the day of , 1996.
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SHELL CANADA LIMITED GREAT FALLS GAS COMPANY
Per: /s/ James Chunn Per: /s/ Larry D. Geske
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Name: James Chunn Name: LARRY D. GESKE
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Title: MGR. - BC & WESTERN U.S. Title: President & CEO
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<PAGE>
GREAT FALLS GAS COMPANY
1992 STOCK OPTION PLAN
1. PURPOSE OF PLAN.
This Plan shall be known as the "GREAT FALLS GAS COMPANY 1992 STOCK
OPTION PLAN" and is hereinafter referred to as the "Plan". The purpose of the
Plan is to aid in maintaining and developing personnel capable of assuring the
future success of Great Falls Gas Company, a Montana corporation (the
"Company"), to offer such personnel additional incentives to put forth maximum
efforts for the success of the business, and to afford them an opportunity to
acquire a proprietary interest in the Company through stock options. Options
granted under this Plan may be either incentive stock options ("Incentive Stock
Options") within the meaning of Section 422 of the Internal Revenue Code of 1986
(the "Code"), or options which do not qualify as Incentive Stock Options.
2. STOCK SUBJECT TO PLAN.
Subject to the provisions of Section 12 hereof, the stock to be
subject to options under the Plan shall be the Company's authorized Common
Shares, $.15 par value per share. Such shares may be either authorized but
unissued shares, or issued shares which have been reacquired by the Company.
Subject to adjustment as provided in Section 12 hereof, the maximum number of
shares on which options may be exercised issued under this Plan shall be 50,000
shares. If an option under the Plan expires, or for any reason is terminated or
unexercised with respect to any shares, such shares shall again be available for
options thereafter granted during the term of the Plan.
<PAGE>
3. ADMINISTRATION OF PLAN.
(a) The Plan shall be administered by a committee (the "Committee") of
two or more directors of the Company, none of whom shall be officers or
employees of the Company and all of whom shall be "disinterested persons" with
respect to the Plan within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor rule or
regulation thereto.
(b) The Committee shall have plenary authority in its discretion, but
subject to the express provisions of the Plan: (i) to determine the purchase
price of the Common Stock covered by each option, (ii) to determine the
employees to whom and the time or times at which such options shall be granted
and the number of shares to be subject to such options, (iii) to determine the
terms of exercise of each option, (iv) to accelerate the time at which all or
any part of an option may be exercised, (v) to amend or modify the terms of any
option with the consent of the optionee, (vi) to interpret the Plan, (vii) to
prescribe, amend and rescind rules and regulations relating to the Plan, (viii)
to determine the terms and provisions of each option agreement under the Plan
(which agreements need not be identical), including the designation of those
options intended to be Incentive Stock Options, and (ix) to make all other
determinations necessary or advisable for the administration of the Plan,
subject to the exclusive authority of the Board of Directors under Section 13
herein to amend or terminate the Plan. The
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Committee's determinations on the foregoing matters, unless otherwise
disapproved by the Board of Directors of the Company, shall be final and
conclusive.
(c) The Committee shall select one of its members as its Chairman and
shall hold its meetings at such times and places as it may determine. A majority
of its members shall constitute a quorum. All determinations of the Committee
shall be made by not less than a majority of its members. Any decision or
determination reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a majority vote at
a meeting duly called and held. The grant of an option shall be effective only
if a written agreement shall have been duly executed and delivered by and on
behalf of the Company following such grant. The Committee may appoint a
Secretary and may make such rules and regulations for the conduct of its
business as it shall deem advisable.
4. ELIGIBILITY.
Incentive Stock Options may only be granted under this Plan to any
full or part-time employee (which term as used herein includes, but is not
limited to, officers and directors who are also employees) of the Company and of
its present and future subsidiary corporations within the meaning of Section
424(f) of the Code (herein called "subsidiaries"). Full or part-time employees,
directors who are not also employees, consultants or independent contractors to
the Company or one of its subsidiaries shall be eligible to receive options
which do not qualify as Incentive Stock Options. In determining the persons to
whom options shall be granted and the number of shares subject to such options,
the Committee may take into account
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the nature of services rendered by the respective employees or consultants,
their present and potential contributions to the success of the Company and such
other factors as the Committee in its discretion shall deem relevant. A person
who has been granted an option under this Plan may be granted additional options
under the Plan if the Committee shall so determine; provided, however, that for
Incentive Stock Options granted after December 31, 1986, to the extent the
aggregate fair market value (determined at the time the Incentive Stock Option
is granted) of the Common Shares with respect to which all Incentive Stock
Options are exercisable for the first time by an employee during any calendar
year (under all plans described in subsection (d) of Section 422 of the Code of
his employer corporation and its parent and subsidiary corporations) exceeds
$100,000, such options shall be treated as options which do not qualify as
Incentive Stock Options. Nothing in the Plan or in any agreement thereunder
shall confer on any employee any right to continue in the employ of the Company
or any of its subsidiaries or affect, in any way, the right of the Company or
any of its subsidiaries to terminate his or her employment at any time.
5. PRICE.
The option price for all Incentive Stock Options granted under the
Plan shall be determined by the Committee but shall not be less than 100% of the
fair market value of the Common Shares at the date of grant of such option. The
option price for options granted under the Plan which do not qualify as
Incentive Stock Options shall also be determined by the Committee but shall not
be less than 100%
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of the fair market value of the Common Shares at the date of grant of such
option. For purposes of the preceding two sentences and for all other valuation
purposes under the Plan, the fair market value of the Common Shares shall be (i)
the closing price of the Common Stock as reported for composite transactions if
the Common Stock is then traded on a national securities exchange, (ii) the last
sale price if the Common Stock is then quoted on the NASDAQ National Market
System, or (iii) the average of the closing representative bid and asked prices
of the Common Stock as reported on NASDAQ on the date as of which the fair
market value is being determined. If on the date of grant of any option
hereunder the Common Shares are not traded on an established securities market,
the Committee shall make a good faith attempt to satisfy the requirements of
this Section 5 and in connection therewith shall take such action as it deems
necessary or advisable.
6. TERM.
Each option and all rights and obligations thereunder shall expire on
the date determined by the Committee and specified in the option agreement. The
Committee shall be under no duty to provide terms of like duration for options
granted under the Plan, but the term of an Incentive Stock Option may not extend
more than ten (10) years from the date of grant of such option and the term of
options granted under the Plan which do not qualify as Incentive Stock Options
may not extend more than ten (10) years from the date of granting of such
option.
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7. EXERCISE OF OPTION.
(a) The Committee shall have full and complete authority to determine
whether an option will be exercisable in full at any time or from time to time
during the term thereof, or to provide for the exercise thereof in such
installments, upon the occurrence of such events (such as termination of
employment for any reason) and at such times during the term of the option as
the Committee may determine and specify in the option agreement.
(b) The exercise of any option granted hereunder shall only be
effective at such time that the sale of Common Shares pursuant to such exercise
will not violate any state or federal securities or other laws. Only to the
extent required in order to comply with Rule 16b-3 under the Exchange Act, in
the case of an option or other award granted to a person considered by the
Company as one of its officers or directors for purposes of Section 16 of the
Exchange Act, the terms of the option or other award will require that such
shares are not disposed of by such officer or director for a period of at least
six months from the date of grant.
(c) An optionee or grantee electing to exercise an option shall give
written notice to the Company of such election and of the number of shares
subject to such exercise. The full purchase price of such shares shall be
tendered with such notice of exercise. Payment shall be made to the Company in
cash (including bank check, certified check, personal check, or money order),
or, at the discretion of the Committee and as specified by the Committee, (i) by
delivering certificates for the Company's Common Shares already owned by the
optionee or grantee having a fair
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market value as of the date of grant equal to the full purchase price of the
shares, or (ii) by delivering the optionee's or grantee's promissory note, which
shall provide for interest at a rate not less than the minimum rate required to
avoid the imputation of income, original issue discount or a below-market-rate
loan pursuant to Sections 483, 1274 or 7872 of the Code or any successor
provisions thereto, or (iii) a combination of cash, the optionee's or grantee
promissory note and such shares. The fair market value of such tendered shares
shall be determined as provided in Section 5 herein. The optionee's or grantee's
promissory note shall be a full recourse liability of the optionee and may, at
the discretion of the Committee, be secured by a pledge of the shares being
purchased. Until such person has been issued the shares subject to such
exercise, he or she shall possess no rights as a shareholder with respect to
such shares.
8. INCOME TAX WITHHOLDING AND TAX BONUSES.
(a) In order to comply with all applicable federal or state income tax
laws or regulations, the Company may take such action as it deems appropriate to
ensure that all applicable federal or state payroll, withholding, income or
other taxes, which are the sole and absolute responsibility of an optionee or
grantee under the Plan, are withheld or collected from such optionee or grantee.
In order to assist an optionee or grantee in paying all federal and state taxes
to be withheld or collected upon exercise of an option which does not qualify as
an Incentive Stock Option hereunder, the Committee, in its absolute discretion
and subject to such additional terms and conditions as it may adopt, shall
permit the optionee or
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grantee to satisfy such tax obligation by (i) electing to have the Company
withhold a portion of the shares otherwise to be delivered upon exercise of such
option with a fair market value, determined in accordance with Section 5 herein,
equal to such taxes or (ii) delivering to the Company Common Shares other than
the shares issuable upon exercise of such option with a fair market value,
determined in accordance with Section 5, equal to such taxes.
(b) The Committee shall have the authority, at the time of grant of an
option under the Plan or at any time thereafter, to approve tax bonuses to
designated optionees or grantees to be paid upon their exercise of options
granted hereunder. The amount of any such payments shall be determined by the
Committee. The Committee shall have full authority in its absolute discretion to
determine the amount of any such tax bonus and the terms and conditions
affecting the vesting and payment thereafter.
9. ADDITIONAL RESTRICTIONS.
The Committee shall have full and complete authority to determine
whether all or any part of the Common Shares of the Company acquired upon
exercise of any of the options granted under the Plan shall be subject to
restrictions on the transferability thereof or any other restrictions affecting
in any manner the optionee's or grantee's rights with respect thereto, but any
such restriction shall be contained in the agreement relating to such options.
10. TEN PERCENT SHAREHOLDER RULE.
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Notwithstanding any other provision in the Plan, if at the time an
option is otherwise to be granted pursuant to the Plan the optionee owns
directly or indirectly (within the meaning of Section 424(d) of the Code) Common
Shares of the Company possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or its parent or
subsidiary corporations, if any (within the meaning of Section 422(b)(6) of the
Code), then any Incentive Stock Option to be granted to such optionee pursuant
to the Plan shall satisfy the requirements of Section 422(c)(5) of the Code, and
the option price shall be not less than 110% of the fair market value of the
Common Shares of the Company determined as described herein, and such option by
its terms shall not be exercisable after the expiration of five (5) years from
the date such option is granted.
11. NON-TRANSFERABILITY.
No option granted under the Plan shall be transferable by an optionee
or grantee, otherwise than by will or the laws of descent or distribution.
Except as otherwise provided in an option agreement, during the lifetime of an
optionee or grantee, the option shall be exercisable only by such optionee or
grantee.
12. DILUTION OR OTHER ADJUSTMENTS.
If there shall be any change in the Common Shares through merger,
consolidation, reorganization, recapitalization, dividend in the form of stock
(of whatever amount), stock split or other change in the corporate structure,
appropriate adjustments in the Plan and outstanding options shall be made by the
Committee. In the event of any such changes, adjustments shall include, where
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<PAGE>
appropriate, changes in the aggregate number of shares subject to the Plan and
the number of shares and the price per share subject to outstanding options, in
order to prevent dilution or enlargement of option rights.
13. AMENDMENT OR DISCONTINUANCE OF PLAN.
The Board of Directors may amend or discontinue the Plan at any time.
Subject to the provisions of Section 12 no amendment of the Plan, however, shall
without shareholder approval: (i) increase the maximum number of shares under
the Plan as provided in Section 2 herein, (ii) decrease the minimum price
provided in Section 5 herein, (iii) extend the maximum term under Section 6, or
(iv) modify the eligibility requirements for participation in the Plan. The
Board of Directors shall not alter or impair any option theretofore granted
under the Plan without the consent of the holder of the option.
14. TIME OF GRANTING.
Nothing contained in the Plan or in any resolution adopted or to be
adopted by the Board of Directors or by the shareholders of the Company, and no
action taken by the Committee or the Board of Directors (other than the
execution and delivery of an option agreement), shall constitute the granting of
an option hereunder.
15. EFFECTIVE DATE AND TERMINATION OF PLAN.
(a) The Plan was approved by the Board of Directors on September 1,
1992, and shall be approved by the shareholders of the Company within twelve
(12) months thereof.
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(b) Unless the Plan shall have been discontinued as provided in Section 13
hereof, the Plan shall terminate September 1, 2002. No option may be granted
after such termination, but termination of the Plan shall not, without the
consent of the optionee or grantee, alter or impair any rights or obligations
under any option theretofore granted.
-11-
<PAGE>
GREAT FALLS GAS COMPANY
INCENTIVE STOCK OPTION PLAN
THIS AGREEMENT, made in Great Falls, Montana on this 6th day of November,
1992, between Great Falls Gas Company (hereinafter referred to as "Company")
and hereinafter referred to as "Optionee"), an employee of the Company or a
subsidiary thereof.
WHEREAS, the Company desires to maintain and develop personnel capable of
assuring the future success of the Company, to offer such personnel additional
incentives to put forth maximum efforts for the success of the business, and to
afford them an opportunity to acquire a proprietary interest in the Company
through stock options:
NOW, THEREFORE, in consideration of the mutual agreements stated hereinafter,
the Company and Optionee agree that:
1. STOCK OPTION. The Company hereby grants to the Optionee and the Optionee
accepts an incentive option to purchase 2200 shares of the Company's stock
at any time prior to November 6, 1997 at a purchase price of $14.25 per
share, all subject to the terms, provisions and conditions of this
Agreement and of the Company's 1984 Stock Option Plan (hereinafter referred
to as the "Plan"), which is incorporated herein by reference. Should there
be any inconsistency between the provisions of this Agreement and the Plan,
the provisions of the Plan shall control. This option may be exercised in
the following manner. In the first twelve months from the date of this
agreement no more than twenty percent (440) of the options granted herein
may be exercised; in the next succeeding twelve months no more than forty
percent (880) of said options shall be exercisable, in the next succeeding
twelve months no more than sixty percent (1320) of said options shall be
exercisable; in the next succeeding twelve months no more than eighty
percent (1760) of the options shall be exercisable. Other than the
foregoing restriction this Agreement shall be exercised in the manner
provided in the Plan as to all or any part of the shares of stock subject
to the option from time to time during the option period, and exercise of
the option as to part of such shares shall not exhaust or terminate the
option. The option shall be exercised as to not less than One Hundred (100)
shares at any one time, however. Payment of the option price shall be made
concurrently with the exercise of the option as provided in the Plan.
2. LIMITATION ON AMOUNT. In any calendar year, the aggregate fair market value
(such value being determined as of the time the option is granted) of stock
for which Optionee may be granted Incentive Stock Options shall not exceed
One Hundred Thousand Dollars (100,000) plus any unused limit carryover to
such year. (Any unused limit carryover amount shall be
<PAGE>
determined as prescribed by Section 422A(c)(4) of the Internal Revenue Code
of 1954, or similar provisions in succeeding enactments, and the
regulations and rulings promulgated thereunder). In determining the maximum
permissible value of Incentive Stock Options which may be granted to
Optionee in any calendar year, all Incentive Stock Options granted under
Incentive Stock Option Plans of the Company and its divisions or subsidiary
corporations shall be considered in the aggregate. This annual $100,000
limitation shall not apply to any stock option which is not an Incentive
Stock Option as defined by Section 433A of the Internal Revenue Code of
1954 (or similar provisions in succeeding enactments).
3. EXERCISE OF OPTION. All Incentive Stock Options must be exercised
sequentially; i.e., no Incentive Stock Option may be exercised by any one
individual while there is outstanding any Incentive Stock Option to that
same individual which was granted prior to the grant date of the Incentive
Stock Option sought to be exercised. Any outstanding Incentive Stock Option
shall be treated as outstanding until such option is exercised in full or
expires by reason of lapse of time.
4. PERCENT SHAREHOLDER RULE. Notwithstanding any other provision in the Plan,
if at the time an option is otherwise to be granted pursuant to the Plan
the Optionee owns directly or indirectly (within the meaning of Section
425(d) of the Code), common stock of the Company possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or its parent or subsidiary corporations, if any (within the
meaning of Section 422A(c)(8) of the Code, and the option price shall be
not less than 110% of the fair market value of the common stock of the
Company determined as described herein, and such option by its terms shall
not be exercisable after the expiration of five (5) years from the date
such option is granted.
5. NON-TRANSFERABILITY AND TERMINATION OF EMPLOYMENT. No option granted under
the Plan shall be transferable by an Optionee, otherwise than by will or
the laws of descent of distribution as provided in Section 9(c) of the
Plan. During the lifetime of an Optionee, the option shall be exercisable
only by such Optionee. In the event that Optionee ceases to be employed
by the Company or its subsidiaries, if any, for any reason other than his
gross and willful misconduct or his death or disability, such Optionee
shall have the right to exercise the option at any time within three (3)
months after such termination of employment to the extent of the full
number of shares he was entitled to purchase under the option on the date
of termination, subject to the condition that no option shall be
exercisable after the expiration of the term of the option.
6. DILUTION OR OTHER ADJUSTMENTS. If there shall be any change in the common
stock through merger, consolidation, reorganization, recapitalization,
stock dividend (of whatever amount), stock split or other
<PAGE>
change in the corporate structure, appropriate adjustments in the Plan and
outstanding options shall be made by the Committee. In the event of any
such changes adjustments shall include, where appropriate, changes in the
aggregate number of shares subject to the Plan and the number of shares and
the price per share subject to outstanding options.
7. RIGHTS OF OPTIONEE NOT THAT OF SHAREHOLDER. The Optionee shall have no
rights as a shareholder in respect of shares as to which this option shall
not have been exercised and payment made as provided in the Plan, and the
Optionee shall not be considered or treated as a record owner of shares
with respect to which this option is exercised until the date that the
stock certificate or certificates are actually issued and such issuance
reflected on the stock records of the Company.
8. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be
binding upon the heirs, legatees, legal representatives, successors and
assigns of the parties hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by
its Compensation Committee thereunto duly authorized, and the Optionee has
signed the same, in duplicate originals, on the date and year first above
written.
GREAT FALLS GAS COMPANY
/s/ Ian B. Davidson /s/ Thomas N. McGowen, Jr.
- ------------------------------ --------------------------
Ian B. Davidson Thomas N. McGowen, Jr.
/s/ Timothy J. Moylan
--------------------------
Timothy Moylan
/s/ John P. Allen
--------------------------
Optionee
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
on Form S-2 of Energy West Incorporated and in the related Prospectus dated
July 23, 1997, of our report dated August 15, 1996, with respect to the
consolidated financial statements of Energy West Incorporated included in
its Annual Report, as amended on Form 10-KA/1 for the year ended June 30, 1996
and the related financial statement schedule included therein, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Ernst & Young LLP
Denver, Colorado
July 23, 1997
<PAGE>
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------------
___ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b) (2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
ENERGY WEST INCORPORATED
(Exact name of obligor as specified in its charter)
MONTANA 81-0141785
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 FIRST AVENUE SOUTH
GREAT FALLS MONTANA 59401
(Address of principal executive offices) (Zip code)
-----------------------------
__% NOTES DUE JUNE 1, 2012
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Item 1. GENERAL INFORMATION. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. FOREIGN TRUSTEE. Not applicable.
Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part of this
Statement of Eligibility. Norwest Bank
incorporates by reference into this Form T-1 the
exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the trustee
now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the trustee
to commence business issued June 28, 1872, by the
Comptroller of the Currency to The Northwestern
National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller of the
Currency dated January 2, 1934, approving the
consolidation of The Northwestern National Bank of
Minneapolis and The Minnesota Loan and Trust Company of
Minneapolis, with the surviving entity being titled
Northwestern National Bank and Trust Company of
Minneapolis.*
c. A copy of the certificate of the Acting Comptroller of
the Currency dated January 12, 1943, as to change of
corporate title of Northwestern National Bank and Trust
Company of Minneapolis to Northwestern National Bank of
Minneapolis.*
<PAGE>
d. A copy of the letter dated May 12, 1983 from the
Regional Counsel, Comptroller of the Currency,
acknowledging receipt of notice of name change
effective May 1, 1983 from Northwestern National Bank
of Minneapolis to Norwest Bank Minneapolis, National
Association.*
e. A copy of the letter dated January 4, 1988 from the
Administrator of National Banks for the Comptroller of
the Currency certifying approval of consolidation and
merger effective January 1, 1988 of Norwest Bank
Minneapolis, National Association with various other
banks under the title of "Norwest Bank Minnesota,
National Association."*
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers issued January 2, 1934, by the
Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b) of the
Act. **
Exhibit 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority. ***
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with registration
statement number 33-66026.
** Filed herewith.
*** Incorporated by reference to exhibit number 7 filed with
registration statement number 333-7575. Such exhibit was filed in
paper format under cover of Form SE pursuant to a continuing hardship
exemption granted on March 13, 1997 in accordance with Rule 202 of
Regulation S-T.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 22nd day of July, 1997.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Curtis D. Schwegman
------------------------------
Curtis D. Schwegman
Assistant Vice President
<PAGE>
[LETTERHEAD]
EXHIBIT 6
July 22, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Curtis D. Schwegman
------------------------------
Curtis D. Schwegman
Assistant Vice President
