Exhibit 10.4
EXECUTION COPY

 
 
 
 
ENERGY WEST, INCORPORATED
$13,000,000
6.16% Senior Unsecured Notes, due June 29, 2017
 
NOTE PURCHASE AGREEMENT
 
Dated as of June 29, 2007
 
 
 
 
PPN: 29274A A*6

 

 

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TABLE OF CONTENTS

                  Section           Page  
 
                1.   AUTHORIZATION OF NOTES     1  
 
  1.1   Description of Notes     1  
 
  1.2   Subsidiary Guaranty     1  
 
                2.   SALE AND PURCHASE OF NOTES     2  
 
                3.   CLOSING     2  
 
                4.   CONDITIONS TO CLOSING     2  
 
  4.1   Representations and Warranties     2  
 
  4.2   Performance; No Default     2  
 
  4.3   Compliance Certificates     3  
 
  4.4   Opinions of Counsel     3  
 
  4.5   Purchase Permitted By Applicable Law, etc.     3  
 
  4.6   Sale of Other Notes     3  
 
  4.7   Payment of Special Counsel Fees     3  
 
  4.8   Private Placement Number     4  
 
  4.9   Changes in Corporate Structure     4  
 
  4.10   Funding Instructions     4  
 
  4.11   Credit Agreement     4  
 
  4.12   Proceedings and Documents     4  
 
  4.13   Release of Collateral     4  
 
                5.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY     4  
 
  5.1   Organization; Power and Authority     5  
 
  5.2   Authorization, etc.     5  
 
  5.3   Disclosure     5  
 
  5.4   Organization and Ownership of Shares of Subsidiaries     6  
 
  5.5   Financial Statements; Material Liabilities     6  
 
  5.6   Compliance with Laws, Other Instruments, etc.     7  
 
  5.7   Governmental Authorizations, etc.     7  
 
  5.8   Litigation; Observance of Statutes and Orders     7  
 
  5.9   Taxes     8  
 
  5.10   Title to Property; Leases     8  
 
  5.11   Licenses, Permits, etc.     8  
 
  5.12   Compliance with ERISA     9  
 
  5.13   Private Offering by the Company     10  
 
  5.14   Use of Proceeds; Margin Regulations     10  
 
  5.15   Existing Debt; Future Liens     10  
 
  5.16   Foreign Assets Control Regulations, etc.     11  
 
  5.17   Status under Certain Statutes     11  
 
  5.18   Environmental Matters     11  

 

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                  Section           Page  
 
                6.   REPRESENTATIONS OF THE PURCHASERS     12  
 
  6.1   Purchase for Investment     12  
 
  6.2   Source of Funds     12  
 
                7.   INFORMATION AS TO COMPANY     14  
 
  7.1   Financial and Business Information     14  
 
  7.2   Officer's Certificate     16  
 
  7.3   Electronic Delivery     17  
 
  7.4   Visitation     17  
 
                8.   PREPAYMENT OF THE NOTES     18  
 
  8.1   No Scheduled Prepayments     18  
 
  8.2   Optional Prepayments with Make-Whole Amount     18  
 
  8.3   Mandatory Offer to Prepay Upon Change of Control     18  
 
  8.4   Allocation of Partial Prepayments     20  
 
  8.5   Maturity; Surrender, etc.     20  
 
  8.6   Purchase of Notes     20  
 
  8.7   Make-Whole Amount     20  
 
                9.   AFFIRMATIVE COVENANTS     22  
 
  9.1   Compliance with Law     22  
 
  9.2   Insurance     22  
 
  9.3   Maintenance of Properties     22  
 
  9.4   Payment of Taxes and Claims     22  
 
  9.5   Corporate Existence, etc.     23  
 
  9.6   Subsidiary Guaranty; Release     23  
 
                10.   NEGATIVE COVENANTS     24  
 
  10.1   Funded Debt     24  
 
  10.2   Liens     24  
 
  10.3   Mergers, Consolidations, etc.     25  
 
  10.4   Sale of Assets     26  
 
  10.5   Dividends     27  
 
  10.6   Nature of Business     27  
 
  10.7   Transactions with Affiliates     27  
 
  10.8   Terrorism Sanctions Regulations     27  
 
                11.   EVENTS OF DEFAULT     27  
 
                12.   REMEDIES ON DEFAULT, ETC.     29  
 
  12.1   Acceleration     29  
 
  12.2   Other Remedies     30  
 
  12.3   Rescission     30  
 
  12.4   No Waivers or Election of Remedies, Expenses, etc.     30  

 

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                  Section           Page  
 
                13.   REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES     31  
 
  13.1   Registration of Notes     31  
 
  13.2   Transfer and Exchange of Notes     31  
 
  13.3   Replacement of Notes     31  
 
                14.   PAYMENTS ON NOTES     32  
 
  14.1   Place of Payment     32  
 
  14.2   Home Office Payment     32  
 
                15.   EXPENSES, ETC.     33  
 
  15.1   Transaction Expenses     33  
 
  15.2   Survival     33  
 
                16.   SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT     33  
 
                17.   AMENDMENT AND WAIVER     33  
 
  17.1   Requirements     33  
 
  17.2   Solicitation of Holders of Notes     35  
 
  17.3   Binding Effect, etc.     35  
 
  17.4   Notes held by Company, etc.     35  
 
                18.   NOTICES     35  
 
                19.   REPRODUCTION OF DOCUMENTS     35  
 
                20.   CONFIDENTIAL INFORMATION     36  
 
                21.   SUBSTITUTION OF PURCHASER     36  
 
                22.   MISCELLANEOUS     37  
 
  22.1   Successors and Assigns     37  
 
  22.2   Payments Due on Non-Business Days     37  
 
  22.3   Accounting Terms     37  
 
  22.4   Severability     37  
 
  22.5   Construction     38  
 
  22.6   Counterparts     38  
 
  22.7   Governing Law     38  
 
  22.8   Jurisdiction and Process; Waiver of Jury Trial     38  

 

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          SCHEDULE A   —  
Information Relating to Purchasers
SCHEDULE B   —  
Defined Terms
SCHEDULE 5.4   —  
Organization and Ownership of Shares of Subsidiaries
SCHEDULE 5.14   —  
Use of Proceeds
SCHEDULE 5.15   —  
Existing Indebtedness
SCHEDULE 5.18   —  
Environmental Matters
EXHIBIT 1.1   —  
Form of Senior Note
EXHIBIT 1.2   —  
Form of Subsidiary Guaranty
EXHIBIT 4.4(a)   —  
Form of Opinion of Special Counsel for the Company
EXHIBIT 4.4(b)   —  
Form of Opinion of Special Counsel to the Purchasers

 

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ENERGY WEST, INCORPORATED
1 First Avenue South
Great Falls, MT 59401
Phone: 406-791-7500
Fax: 406-791-7560
$13,000,000 6.16% Senior Unsecured Notes due June 29, 2017
Dated as of June 29, 2007

     
TO EACH OF THE PURCHASERS LISTED IN
    THE ATTACHED SCHEDULE A:    

Ladies and Gentlemen:
ENERGY WEST, INCORPORATED, a Montana corporation (the “Company”), agrees with
you as follows:

1.  
AUTHORIZATION OF NOTES.
  1.1  
Description of Notes.

The Company has authorized the issue and sale of $13,000,000 aggregate principal
amount of its 6.16% Senior Unsecured Notes, due June 29, 2017 (the “Notes”, such
term to include any such Notes issued in substitution therefor pursuant to
Section 13 of this Agreement). The Notes shall be substantially in the form set
out in Exhibit 1.1. Certain capitalized terms used in this Agreement are defined
in Schedule B; references to a “Schedule” or an “Exhibit” are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement.

1.2  
Subsidiary Guaranty.

The payment by the Company of all amounts due with respect to the Notes and the
performance by the Company of its obligations under this Agreement will be
guaranteed by each Subsidiary that is or hereafter becomes a borrower or
guarantor under the Credit Agreement (individually, a “Subsidiary Guarantor” and
collectively, the “Subsidiary Guarantors”), pursuant to the Subsidiary Guaranty
in substantially the form of the attached Exhibit 1.2, as it hereafter may be
amended or supplemented from time to time (the “Subsidiary Guaranty”).

 

 

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2.  
SALE AND PURCHASE OF NOTES.

Subject to the terms and conditions of this Agreement, the Company will issue
and sell to you and each of the other purchasers named in Schedule A (the “Other
Purchasers”), and you and the Other Purchasers will purchase from the Company,
at the Closing provided for in Section 3, Notes in the principal amount
specified opposite your names in Schedule A at the purchase price of 100% of the
principal amount thereof. Your obligation hereunder and the obligations of the
Other Purchasers are several and not joint obligations and you shall have no
obligation and no liability to any Person for the performance or non-performance
by any Other Purchaser hereunder.

3.  
CLOSING.

The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Foley & Lardner LLP, 321 North Clark
Street, Suite 2800, Chicago, Illinois 60610-4764, at 7:00 a.m., Chicago time, at
a closing (the “Closing”) on June 29, 2007. The date or time of the Closing may
be changed to such other Business Day as may be agreed upon by the Company and
the Purchasers. At the Closing, the Company will deliver to you the Notes to be
purchased by you in the form of a single Note (or such greater number of Notes
in denominations of at least $500,000 as you may request) dated the date of such
Closing and registered in your name (or in the name of your nominee), against
delivery by you to the Company or its order of immediately available funds in
the amount of the purchase price therefor, as follows: by wire transfer for the
account of the Company to account number 5800452095 at LaSalle Bank, N.A., 135
South LaSalle Street, Suite 628, Chicago, Illinois 60603-3499, ABA number
071000505 (“Funding Instructions”). If at the Closing the Company shall fail to
tender such Notes to you as provided above in this Section 3, or any of the
conditions specified in Section 4 shall not have been fulfilled to your
satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights you may
have by reason of such failure or such nonfulfillment.

4.  
CONDITIONS TO CLOSING.

Your obligation to purchase and pay for the Notes to be sold to you at the
Closing is subject to the fulfillment to your satisfaction, prior to or at the
Closing, of the following conditions:

4.1  
Representations and Warranties.

The representations and warranties of the Company in this Agreement shall be
correct when made and at the time of the Closing.

4.2  
Performance; No Default.

The Company shall have performed and complied with all agreements and conditions
contained in this Agreement required to be performed or complied with by it
prior to or at the Closing, and, after giving effect to the issue and sale of
the Notes (and the application of the proceeds thereof as contemplated by
Section 5.14), no Default or Event of Default shall have occurred and be
continuing.

 

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4.3  
Compliance Certificates.

(a) Officer’s Certificate. The Company shall have delivered to you an Officer’s
Certificate, dated the date of Closing, certifying that the conditions specified
in Sections 4.1, 4.2 and 4.9 have been fulfilled.
(b) Secretary’s Certificate. The Company shall have delivered to you
certificates of its and each Subsidiary Guarantor’s Secretary or an Assistant
Secretary, dated the date of Closing, certifying as to the resolutions attached
thereto and other corporate proceedings relating to the authorization, execution
and delivery of the Notes and this Agreement.

4.4  
Opinions of Counsel.

You shall have received opinions in form and substance satisfactory to you,
dated the date of the Closing (a) from Rogers & Hool LLP, counsel for the
Company and the Subsidiary Guarantors, and from Browning, Kaleczyc, Berry and
Hoven, P.C., special Montana counsel for the Company and the Subsidiary
Guarantors, covering the matters set forth in Exhibit 4.4(a) and covering such
other matters incident to the transactions contemplated hereby as you or your
counsel may reasonably request (and the Company instructs its counsel to deliver
such opinion to you), and (b) from Foley & Lardner LLP, your special counsel in
connection with such transactions, substantially in the form set forth in
Exhibit 4.4(b) and covering such other matters incident to such transactions as
you may reasonably request.

4.5  
Purchase Permitted By Applicable Law, etc.

On the date of the Closing your purchase of Notes shall (i) be permitted by the
laws and regulations of each jurisdiction to which you are subject, without
recourse to provisions (such as Section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (ii) not violate any
applicable law or regulation (including, without limitation, Regulation U, T or
X of the Board of Governors of the Federal Reserve System) and (iii) not subject
you to any tax, penalty or liability under or pursuant to any applicable law or
regulation, which law or regulation was not in effect on the date hereof. If
requested by you, you shall have received an Officer’s Certificate certifying as
to such matters of fact as you may reasonably specify to enable you to determine
whether such purchase is so permitted.

4.6  
Sale of Other Notes.

Contemporaneously with the Closing, the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them as specified in Schedule A.

4.7  
Payment of Special Counsel Fees.

Without limiting the provisions of Section 15.1, the Company shall have paid on
or before the Closing the fees, charges and disbursements of your special
counsel referred to in Section 4.4 to the extent reflected in a statement of
such counsel rendered to the Company at least one Business Day prior to such
Closing.

 

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4.8  
Private Placement Number.

Private Placement Number issued by Standard & Poor’s CUSIP Service Bureau (in
cooperation with the SVO) shall have been obtained by Foley & Lardner LLP for
the Notes.

4.9  
Changes in Corporate Structure.

The Company shall not have changed its jurisdiction of incorporation or been a
party to any merger or consolidation and shall not have succeeded to all or any
substantial part of the liabilities of any other entity, at any time following
the date of the most recent financial statements included in the Disclosure
Documents.

4.10  
Funding Instructions.

At least three Business Days prior to the date of the Closing, you shall have
received written Funding Instructions signed by a Responsible Officer on
letterhead of the Company confirming the Funding Instructions specified in
Section 3 including (i) the name and address of the transferee bank, (ii) such
transferee bank’s ABA number and (iii) the account name and number into which
the purchase price for the Notes is to be deposited.

4.11  
Credit Agreement.

The Company shall have entered into the Credit Agreement and you shall have
received a copy of a fully executed counterpart thereof.

4.12  
Proceedings and Documents.

All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be reasonably satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.

4.13  
Release of Collateral.

You and your special counsel shall have received evidence satisfactory to you
and your special counsel that the banks party to the Company’s prior credit
agreement released all collateral securing the Company’s obligations under such
credit agreement.

5.  
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to you that:

 

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5.1  
Organization; Power and Authority.

The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Montana, and is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has the corporate power and authority to own or hold under lease the properties
it purports to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement and the Notes
and to perform the provisions hereof and thereof.

5.2  
Authorization, etc.

This Agreement and the Notes have been duly authorized by all necessary
corporate action on the part of the Company, and this Agreement constitutes, and
upon execution and delivery thereof each Note will constitute, a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors’ rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
The Subsidiary Guaranty has been duly authorized by all necessary corporate
action on the part of each Subsidiary Guarantor and upon execution and delivery
thereof will constitute the legal, valid and binding obligation of such
Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
fraudulent transfer, moratorium or other similar laws affecting the enforcement
of creditors’ rights generally and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).

5.3  
Disclosure.

The Company has made available to you, through its public filings, the Company’s
Annual Report on Form 10-K for the year ended June 30, 2006, its Quarterly
Reports on Form 10-Q for the quarters ended September 30, 2006, December 31,
2006 and March 31, 2007, and its Current Report on Form 8-K/A dated May 14,
2007, each of which has been filed with the SEC under the Exchange Act (such
reports, together with such other reports as may be subsequently filed by the
Company with the SEC pursuant to §13(a) or §15(d) of the Exchange Act, the
“Disclosure Documents”). The Disclosure Documents, taken as a whole, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as disclosed in the Disclosure
Documents, since June 30, 2006, there has been no change in the financial
condition, operations, business or properties of the Company or any of its
Subsidiaries except changes that individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect.

 

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5.4  
Organization and Ownership of Shares of Subsidiaries.

(a) Schedule 5.4 contains (except as noted therein) complete and correct lists
of (i) the Company’s Subsidiaries, showing, as to each Subsidiary, the correct
name thereof, the jurisdiction of its organization, and the percentage of shares
of each class of its capital stock or similar equity interests outstanding owned
by the Company and each other Subsidiary, (ii) each other entity in which the
Company holds a direct or indirect investment, other than Subsidiaries, and
(iii) the Company’s directors and senior officers.
(b) All of the outstanding shares of capital stock or similar equity interests
of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its
Subsidiaries have been validly issued, are fully paid and nonassessable and are
owned by the Company or another Subsidiary free and clear of any Lien (except as
otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal
entity duly organized, validly existing and in good standing or equivalent
status under the laws of its jurisdiction of organization, and is duly qualified
as a foreign corporation or other legal entity and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each such Subsidiary has the corporate or other power
and authority to own or hold under lease the properties it purports to own or
hold under lease and to transact the business it transacts and proposes to
transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal, regulatory,
contractual or other restriction (other than this Agreement, the agreements
listed on Schedule 5.4 and customary limitations imposed by corporate law or
similar statutes) restricting the ability of such Subsidiary to pay dividends
out of profits or make any other similar distributions of profits to the Company
or any of its Subsidiaries that owns outstanding shares of capital stock or
similar equity interests of such Subsidiary.

5.5  
Financial Statements; Material Liabilities.

The financial statements of the Company included in the Disclosure Documents
(including in each case the related schedules and notes) fairly present in all
material respects the consolidated financial position of the Company and its
Subsidiaries as of the respective dates specified therein and the consolidated
results of their operations and cash flows for the respective periods so
specified and have been prepared in accordance with GAAP consistently applied
throughout the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to normal year-end
adjustments). The Company and its Subsidiaries do not have any Material
liabilities that are not disclosed on such financial statements or otherwise
disclosed in the Disclosure Documents.

 

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5.6  
Compliance with Laws, Other Instruments, etc.

The execution, delivery and performance by the Company of this Agreement and the
Notes will not (i) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property of the
Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter or by-laws, or any other
agreement or instrument to which the Company or any Subsidiary is bound or by
which the Company or any Subsidiary or any of their respective properties may be
bound or affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Subsidiary
or (iii) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary.
The execution, delivery and performance by each Subsidiary Guarantor of the
Subsidiary Guaranty will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of such Subsidiary Guarantor under, any indenture, mortgage, deed
of trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which such Subsidiary Guarantor
is bound or by which such Subsidiary Guarantor or any of its properties may be
bound or affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to such Subsidiary Guarantor or
(iii) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to such Subsidiary Guarantor.

5.7  
Governmental Authorizations, etc.

Each of the Montana Public Service Commission (the “Montana Commission”) and the
Wyoming Public Service Commission (the “Wyoming 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 and no other consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the Notes or the execution, delivery or
performance by each Subsidiary Guarantor of the Subsidiary Guaranty.

5.8  
Litigation; Observance of Statutes and Orders.

(a) Except as set forth in the Disclosure Documents, there are no actions,
suits, proceedings or investigations pending or, to the knowledge of the
Company, threatened against or affecting the Company or any Subsidiary or any
property of the Company or any Subsidiary in any court or before any kind of
arbitrator or before or by any Governmental Authority that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any term of any
agreement or instrument to which it is a party or by which it is bound, or any
order, judgment, decree or ruling of any court, arbitrator or Governmental
Authority or is in violation of any applicable law, ordinance, rule or
regulation (including Environmental Laws and the USA Patriot Act) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

 

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5.9  
Taxes.

The Company and its Subsidiaries have filed all tax returns that are required to
have been filed in any jurisdiction, and have paid all taxes shown to be due and
payable on such returns and all other taxes and assessments levied upon them or
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
except for any taxes and assessments (i) the amount of which is not,
individually or in the aggregate, Material or (ii) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and reserves
on the books of the Company and its Subsidiaries in respect of Federal, state or
other taxes for all fiscal periods are adequate. The Federal income tax
liabilities of the Company and its Subsidiaries have been finally determined
(whether by reason of completed audits or the statute of limitations having run)
for all fiscal years up to and including the fiscal year ended June 30, 2003.

5.10  
Title to Property; Leases.

The Company and its Subsidiaries have good and sufficient title to their
respective properties that individually or in the aggregate are Material,
including all such properties that are individually or in the aggregate Material
and are reflected in the most recent audited balance sheet included in the
Disclosure Documents or purported to have been acquired by the Company or any
Subsidiary after said date (except as sold or otherwise disposed of as disclosed
in the Disclosure Documents or in the ordinary course of business), in each case
free and clear of Liens prohibited by this Agreement. All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects.

5.11  
Licenses, Permits, etc.

(a) The Company and its Subsidiaries own or possess all licenses, permits,
franchises, authorizations, patents, copyrights, proprietary software, service
marks, trademarks and trade names, or rights thereto, that individually or in
the aggregate are Material, without known conflict with the rights of others.
(b) To the best knowledge of the Company, no product of the Company or any of
its Subsidiaries infringes in any material respect any license, permit,
franchise, authorization, patent, copyright, proprietary software, service mark,
trademark, trade name or other right owned by any other Person.
(c) To the best knowledge of the Company, there is no Material violation by any
Person of any right of the Company or any of its Subsidiaries with respect to
any patent, copyright, proprietary software, service mark, trademark, trade name
or other right owned or used by the Company or any of its Subsidiaries.

 

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(d) The Company has valid and subsisting franchises, covering all municipalities
in which it operates, that authorize the Company to carry on the respective
utility businesses in which it is engaged in the municipalities covered by such
franchises.

5.12  
Compliance with ERISA.

(a) The Company and each ERISA Affiliate have operated and administered each
Plan in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and could not reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans (as defined
in section 3 of ERISA), and no event, transaction or condition has occurred or
exists that could reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to section 401(a)(29) or 412 of the Code or section
4068 of ERISA, other than such liabilities or Liens as would not be individually
or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each of the
Plans (other than Multiemployer Plans), determined as of the end of such Plan’s
most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan’s most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities by an amount that, individually, or in the
aggregate for all Plans, is Material. The term “benefit liabilities” has the
meaning specified in section 4001 of ERISA and the terms “current value” and
“present value” have the meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined as of the last
day of the Company’s most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the issuance and sale of
the Notes hereunder will not involve any transaction that is subject to the
prohibitions of section 406 of ERISA or in connection with which a tax could be
imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by
the Company in the first sentence of this Section 5.12(e) is made in reliance
upon and subject to the accuracy of your representation in Section 6.2 as to the
sources of the funds used to pay the purchase price of the Notes to be purchased
by you.

 

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5.13  
Private Offering by the Company.

Neither the Company nor anyone acting on its behalf has offered the Notes or any
similar securities for sale to, or solicited any offer to buy any of the same
from, or otherwise approached or negotiated in respect thereof with, any person
other than you, the Other Purchasers and not more than 7 other Accredited
Investors, each of which has been offered the Notes at a private sale for
investment. Neither the Company nor anyone acting on its behalf has taken, or
will take, any action that would subject the issuance or sale of the Notes to
the registration requirements of Section 5 of the Securities Act or to the
registration requirements of any securities or blue sky laws of any applicable
jurisdiction.

5.14  
Use of Proceeds; Margin Regulations.

The Company will apply the proceeds of the sale of the Notes to refinance
Indebtedness of the Company as set forth in Schedule 5.14 and for general
corporate purposes. No part of the proceeds from the sale of the Notes will be
used, directly or indirectly, for the purpose of buying or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve the Company in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin
stock does not constitute more than 1% of the value of the consolidated assets
of the Company and its Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 1% of the value of such
assets. As used in this Section, the terms “margin stock” and “purpose of buying
or carrying” shall have the meanings assigned to them in said Regulation U.

5.15  
Existing Debt; Future Liens.

(a) All outstanding Indebtedness of the Company and its Subsidiaries as of
March 31, 2007 was properly included on the consolidated balance sheet of the
Company and its Subsidiaries as of that date that was included in the Disclosure
Documents. Since March 31, 2007, there has been no Material change in the
amounts, interest rates, sinking funds, installment payments or maturities of
the Indebtedness of the Company or its Subsidiaries except as described in
Schedule 5.15 and except for the Credit Agreement, which is being entered into
on the date of Closing. Neither the Company nor any Subsidiary is in default and
no waiver of default is currently in effect, in the payment of any principal or
interest on any Indebtedness of the Company or any Subsidiary and no event or
condition exists with respect to any Indebtedness of the Company or any
Subsidiary that would permit (or that with notice or the lapse of time, or both,
would permit) one or more Persons to cause such Indebtedness to become due and
payable before its stated maturity or before its regularly scheduled dates of
payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor any Subsidiary
has agreed or consented to cause or permit in the future (upon the happening of
a contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien not permitted by Section 10.2.

 

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(c) Other than the Credit Agreement, neither the Company nor any Subsidiary is a
party to, or otherwise subject to any provision contained in, any instrument
evidencing Indebtedness of the Company or such Subsidiary, any agreement
relating thereto or any other agreement (including its charter or other
organizational document) that limits the amount of, or otherwise imposes
restrictions on the incurring of, Indebtedness of the Company, except as
specifically indicated in Schedule 5.15.

5.16  
Foreign Assets Control Regulations, etc.

(a) Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate (i) the Trading with the Enemy Act, as amended,
(ii) any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto, (iii) the Anti-Terrorism Order
or (iv) the United States Foreign Corrupt Practices Act of 1997, as amended.
Without limiting the foregoing, neither the Company nor any Subsidiary (A) is a
blocked person described in Section 1 of the Anti-Terrorism Order or
(B) knowingly engages in any dealings or transactions, or is otherwise
associated, with any such person.
(b) No part of the proceeds from the sale of the Notes hereunder will be used,
directly or indirectly, in violation of the United States Foreign Corrupt
Practices Act of 1977, as amended, assuming in all cases that such act applies
to the Company.

5.17  
Status under Certain Statutes.

Neither the Company nor any Subsidiary is subject to regulation under the
Investment Company Act of 1940, as amended, the ICC Termination Act, as amended,
or the Federal Power Act, as amended. The Company is not an “investment company”
or “controlled” by an “investment company,” as such terms are defined in the
Investment Company Act of 1940, as amended, and the rules and regulations
promulgated thereunder. The Company is a public utility as defined in the
statutes of the States of Montana and Wyoming and has the legal right to
function and operate as a natural gas utility in the States of Montana and
Wyoming.

5.18  
Environmental Matters.

Except as disclosed in Schedule 5.18:
(a) Neither the Company nor any Subsidiary has knowledge of any claim or has
received any notice of any claim, and no proceeding has been instituted raising
any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary has knowledge of any facts that would
give rise to any claim, public or private, of violation of Environmental Laws or
damage to the environment emanating from, occurring on or in any way related to
real properties now or formerly owned, leased or operated by any of them or to
other assets or their use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect.

 

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(c) Neither the Company nor any Subsidiary has stored any Hazardous Materials on
real properties now or formerly owned, leased or operated by any of them and has
not disposed of any Hazardous Materials in a manner contrary to any
Environmental Laws in each case in any manner that could reasonably be expected
to result in a Material Adverse Effect.
(d) All buildings on all real properties now owned, leased or operated by the
Company or any Subsidiary are in compliance with applicable Environmental Laws,
except where failure to comply could not reasonably be expected to result in a
Material Adverse Effect.

6.  
REPRESENTATIONS OF THE PURCHASERS.
  6.1  
Purchase for Investment.

You represent that you are an Accredited Investor and an Institutional Investor
purchasing the Notes for your own account or for one or more separate accounts
maintained by you or for the account of one or more pension or trust funds and
not with a view to the distribution thereof, provided that the disposition of
your or their property shall at all times be within your or their control. You
understand that the Notes have not been registered under the Securities Act and
may be resold or otherwise transferred only if registered pursuant to the
provisions of the Securities Act or if an exemption from registration is
available, except under circumstances where neither such registration nor such
an exemption is required by law, and that the Company is not required to
register the Notes.

6.2  
Source of Funds.

You represent that at least one of the following statements is an accurate
representation as to each source of funds (a “Source”) to be used by you to pay
the purchase price of the Notes to be purchased by you hereunder:
(a) the Source is an “insurance company general account” (as the term is defined
in the United States Department of Labor’s Prohibited Transaction Exemption
(“PTE”) 95-60) in respect of which the reserves and liabilities (as defined by
the annual statement for life insurance companies approved by the National
Association of Insurance Commissioners (the “NAIC Annual Statement”)) for the
general account contract(s) held by or on behalf of any employee benefit plan
together with the amount of the reserves and liabilities for the general account
contract(s) held by or on behalf of any other employee benefit plans maintained
by the same employer (or affiliate thereof as defined in PTE 95-60) or by the
same employee organization in the general account do not exceed 10% of the total
reserves and liabilities of the general account (exclusive of separate account
liabilities) plus surplus as set forth in the NAIC Annual Statement filed with
your state of domicile; or

 

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(b) the Source is a separate account that is maintained solely in connection
with your fixed contractual obligations under which the amounts payable, or
credited, to any employee benefit plan (or its related trust) that has any
interest in such separate account (or to any participant or beneficiary of such
plan (including any annuitant)) are not affected in any manner by the investment
performance of the separate account; or
(c) the Source is either (i) an insurance company pooled separate account,
within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank
collective investment fund, within the meaning of PTE 91-38 (issued July 12,
1991) and, except as you have disclosed to the Company in writing pursuant to
this paragraph (c), no employee benefit plan or group of plans maintained by the
same employer or employee organization beneficially owns more than 10% of all
assets allocated to such pooled separate account or collective investment fund;
or
(d) the Source constitutes assets of an “investment fund” (within the meaning of
Part V of PTE 84-14 (the “QPAM Exemption”)) managed by a “qualified professional
asset manager” or “QPAM” (within the meaning of Part V of the QPAM Exemption),
no employee benefit plan’s assets that are included in such investment fund,
when combined with the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client assets
managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption
are satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of “control” in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity of
such QPAM and (ii) the names of all employee benefit plans whose assets are
included in such investment fund have been disclosed to the Company in writing
pursuant to this clause (d); or
(e) the Source constitutes assets of a “plan(s)” (within the meaning of
Section IV of PTE 96-23 (the “INHAM Exemption”)) managed by an “in-house asset
manager” or “INHAM” (within the meaning of Part IV of the INHAM exemption), the
conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied,
neither the INHAM nor a person controlling or controlled by the INHAM (applying
the definition of “control” in Section IV(h) of the INHAM Exemption) owns a 5%
or more interest in the Company and (i) the identity of such INHAM and (ii) the
name(s) of the employee benefit plan(s) whose assets constitute the Source have
been disclosed to the Company in writing pursuant to this clause (e); or
(f) the Source is a governmental plan; or
(g) the Source is one or more employee benefit plans, or a separate account or
trust fund comprised of one or more employee benefit plans, each of which has
been identified to the Company in writing pursuant to this paragraph (g); or
(h) the Source does not include assets of any employee benefit plan, other than
a plan exempt from the coverage of ERISA.

 

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As used in this Section 6.2, the terms “employee benefit plan”, “governmental
plan” and “separate account” shall have the respective meanings assigned to such
terms in Section 3 of ERISA.

7.  
INFORMATION AS TO COMPANY.
  7.1  
Financial and Business Information.

The Company will deliver to each holder of Notes that is an Institutional
Investor:
(a) Quarterly Statements — within 60 days after the end of each quarterly fiscal
period in each fiscal year of the Company (other than the last quarterly fiscal
period of each such fiscal year), duplicate copies of,
(i) a consolidated balance sheet of the Company and its Subsidiaries as at the
end of such quarter, and
(ii) consolidated statements of operations of the Company and its Subsidiaries
for such quarter and (in the case of the second and third quarters) for the
portion of the fiscal year ending with such quarter,
(iii) consolidated statements of cash flows of the Company and its Subsidiaries
for such quarter or (in the case of the second and third quarters) for the
portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements generally,
unaudited, and certified by a Senior Financial Officer as fairly presenting, in
all material respects, the financial position of the companies being reported on
and their results of operations and cash flows, subject to changes resulting
from year-end adjustments and the absence of footnotes, provided that delivery
within the time period specified above of copies of the Company’s Quarterly
Report on Form 10-Q (the “Form 10-Q”) prepared in compliance with the
requirements therefor and filed with the SEC shall be deemed to satisfy the
requirements of this Section 7.1(a);
(b) Annual Statements — within 120 days after the end of each fiscal year of the
Company, duplicate copies of
(i) a consolidated balance sheet of the Company and its Subsidiaries, as at the
end of such year, and
(ii) consolidated statements of operations, changes in stockholders’ equity and
cash flows of the Company and its Subsidiaries for such year,

 

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setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied by an opinion thereon of independent public accountants of
recognized national standing, or other independent public accountants reasonably
satisfactory to the Required Holders, which opinion shall state that such
financial statements present fairly, in all material respects, the financial
position of the companies being reported upon and their results of operations
and cash flows and have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards, and that
such audit provides a reasonable basis for such opinion in the circumstances,
provided that the delivery within the time period specified above of the
Company’s Annual Report on Form 10-K (the “Form 10-K”) for such fiscal year
(together with the Company’s annual report to shareholders, if any, prepared
pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the
requirements therefor and filed with the SEC shall be deemed to satisfy the
requirements of this Section 7.1(b);
(c) SEC and Other Reports — promptly upon their becoming available, one copy of
(i) each financial statement, report, notice or proxy statement sent by the
Company or any Subsidiary to its public securities holders generally and
(ii) each regular or periodic report, each registration statement (without
exhibits except as expressly requested by such holder), and each prospectus and
all amendments thereto filed by the Company or any Subsidiary with the SEC;
(d) Notice of Default or Event of Default — promptly, and in any event within
five Business Days after a Responsible Officer becoming aware of the existence
of any Default or Event of Default or that any Person has given any notice or
taken any action with respect to a claimed default hereunder or that any Person
has given any notice or taken any action with respect to a claimed default of
the type referred to in Section 11(e), a written notice specifying the nature
and period of existence thereof, whether or not the Company agrees that any
claimed default constitutes a Default or Event of Default, and what action the
Company is taking or proposes to take with respect thereto;
(e) ERISA Matters — promptly, and in any event within five Business Days after a
Responsible Officer becoming aware of any of the following, a written notice
setting forth the nature thereof and the action, if any, that the Company or an
ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event, as defined in section
4043(c) of ERISA and the regulations thereunder, for which notice thereof has
not been waived pursuant to such regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the threatening by the
PBGC of the institution of, proceedings under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with respect to such
Multiemployer Plan; or

 

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(iii) any event, transaction or condition that could result in the incurrence of
any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans, or in the imposition of any Lien on any of the rights, properties
or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or such penalty or excise tax provisions, if such liability or Lien, taken
together with any other such liabilities or Liens then existing, could
reasonably be expected to have a Material Adverse Effect; and
(f) Notices from Governmental Authority — promptly, and in any event within 30
days of receipt thereof, copies of any notice to the Company or any Subsidiary
from any Federal or state Governmental Authority relating to any order, ruling,
statute or other law or regulation that could reasonably be expected to have a
Material Adverse Effect; and
(g) Requested Information — with reasonable promptness, such other data and
information relating to the business, operations, affairs, financial condition,
assets or properties of the Company or any of its Subsidiaries (including actual
copies of the Company’s Form 10-Q and Form 10-K) or relating to the ability of
the Company to perform its obligations hereunder and under the Notes as from
time to time may be reasonably requested by any such holder of Notes.

7.2  
Officer’s Certificate.

Each set of financial statements delivered to a holder of Notes pursuant to
Section 7.1(a) or Section 7.1(b) will be accompanied by a certificate of a
Senior Financial Officer setting forth:
(a) Covenant Compliance — the information (including detailed calculations)
required in order to establish whether the Company was in compliance with the
requirements of Section 10.1 through Section 10.5, inclusive, during the
quarterly or annual period covered by the statements then being furnished
(including with respect to each such Section, where applicable, the calculations
of the maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Sections, and the calculation of the amount,
ratio or percentage then in existence); and
(b) Event of Default — a statement that such Senior Financial Officer has
reviewed the relevant terms hereof and has made, or caused to be made, under his
or her supervision, a review of the transactions and conditions of the Company
and its Subsidiaries from the beginning of the quarterly or annual period
covered by the statements then being furnished to the date of the certificate
and that such review shall not have disclosed the existence during such period
of any condition or event that constitutes a Default or an Event of Default or,
if any such condition or event existed or exists (including any such event or
condition resulting from the failure of the Company or any Subsidiary to comply
with any Environmental Law), specifying the nature and period of existence
thereof and what action the Company shall have taken or proposes to take with
respect thereto.

 

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7.3  
Electronic Delivery.

Financial statements and officers’ certificates required to be delivered by the
Company pursuant to Sections 7.1(a), (b) or (c) and Section 7.2 shall be deemed
to have been delivered if (i) the Company shall have timely filed such Form 10-Q
or Form 10-K, satisfying the requirements of Section 7.1(a) or (b) as the case
may be, with the SEC on “EDGAR” and shall have made such Form and the related
certificate satisfying the requirements of Section 7.2 available on its home
page on the worldwide web (at the date of this Agreement located at
http://www.ewst.com) or (ii) such financial statements satisfying the
requirements of Section 7.1(a) or (b) and related certificate satisfying the
requirements of Section 7.2 are timely posted by or on behalf of the Company on
IntraLinks or on any other similar website to which each holder of Notes has
free access or (iii) the Company shall have filed any of the items referred to
in Section 7.1(c) with the SEC on “EDGAR” and shall have made such items
available on its home page on the worldwide web or if any of such items are
timely posted by or on behalf of the Company on IntraLinks or on any other
similar website to which each holder of Notes has free access; provided however,
that in the case of any of clause (i), (ii) or (iii), the Company shall
concurrently with such filing or posting give notice to each holder of Notes of
such posting or filing and provided further, that upon request of any holder,
the Company will thereafter deliver written copies of such forms, financial
statements and certificates to such holder.

7.4  
Visitation.

The Company shall permit the representatives of each holder of Notes that is an
Institutional Investor:
(a) No Default — if no Default or Event of Default then exists, at the expense
of such holder and upon reasonable prior notice to the Company, to visit the
principal executive office of the Company during normal business hours, to
discuss the affairs, finances and accounts of the Company and its Subsidiaries
with the Company’s officers, and (with the consent of the Company, which consent
will not be unreasonably withheld) to visit the other offices and properties of
the Company and each Subsidiary, all at such reasonable times and as often as
may be reasonably requested in writing; and
(b) Default — if a Default or Event of Default then exists, at the expense of
the Company, to visit and inspect any of the offices or properties of the
Company or any Subsidiary during normal business hours, to examine all their
respective books of account, records, reports and other papers, to make copies
and extracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective officers and independent public accountants (and
by this provision the Company authorizes said accountants to discuss the
affairs, finances and accounts of the Company and its Subsidiaries), all at such
reasonable times and as often as may be reasonably requested.

 

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8.  
PREPAYMENT OF THE NOTES.
  8.1  
No Scheduled Prepayments.

No regularly scheduled prepayments are due on the Notes prior to their stated
maturity.

8.2  
Optional Prepayments with Make-Whole Amount.

The Company may, at its option, upon notice as provided below, prepay at any
time all, or from time to time any part of, the Notes in an amount not less than
$2,000,000 in the aggregate in the case of a partial prepayment, at 100% of the
principal amount so prepaid, and the Make-Whole Amount determined for the
prepayment date with respect to such principal amount. The Company will give
each holder of Notes written notice of each optional prepayment under this
Section 8.2 not less than 30 days and not more than 60 days prior to the date
fixed for such prepayment. Each such notice shall specify such date (which shall
be a Business Day), the aggregate principal amount of the Notes to be prepaid on
such date, the principal amount of each Note held by such holder to be prepaid
(determined in accordance with Section 8.4), and the interest to be paid on the
prepayment date with respect to such principal amount being prepaid, and shall
be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount due in connection with such prepayment (calculated
as if the date of such notice were the date of the prepayment), setting forth
the details of such computation. Two Business Days prior to such prepayment, the
Company shall deliver to each holder of Notes a certificate of a Senior
Financial Officer specifying the calculation of such Make-Whole Amount as of the
specified prepayment date.

8.3  
Mandatory Offer to Prepay Upon Change of Control.

(a) Notice of Change of Control or Control Event — The Company will, within five
Business Days after any Responsible Officer has knowledge of the occurrence of
any Change of Control or Control Event, give notice of such Change of Control or
Control Event to each holder of Notes unless notice in respect of such Change of
Control (or the Change of Control contemplated by such Control Event) shall have
been given pursuant to subparagraph (b) of this Section 8.3. If a Change of
Control has occurred, such notice shall contain and constitute an offer to
prepay Notes as described in paragraph (c) of this Section 8.3 and shall be
accompanied by the certificate described in paragraph (g) of this Section 8.3.
(b) Condition to Company Action — The Company will not take any action that
consummates or finalizes a Change of Control unless (i) at least 15 Business
Days prior to such action it shall have given to each holder of Notes written
notice containing and constituting an offer to prepay Notes accompanied by the
certificate described in paragraph (g) of this Section 8.3, and (ii) subject to
the provisions of paragraph (d) below, contemporaneously with such action, it
prepays all Notes required to be prepaid in accordance with this Section 8.3.

 

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(c) Offer to Prepay Notes — The offer to prepay Notes contemplated by paragraphs
(a) and (b) of this Section 8.3 shall be an offer to prepay, in accordance with
and subject to this Section 8.3, all, but not less than all, of the Notes held
by each holder (in this case only, “holder” in respect of any Note registered in
the name of a nominee for a disclosed beneficial owner shall mean such
beneficial owner) on a date specified in such offer (the “Proposed Prepayment
Date”). If such Proposed Prepayment Date is in connection with an offer
contemplated by paragraph (a) of this Section 8.3, such date shall be not less
than 30 days and not more than 60 days after the date of such offer.
(d) Acceptance; Rejection — A holder of Notes may accept the offer to prepay
made pursuant to this Section 8.3 by causing a notice of such acceptance to be
delivered to the Company on or before the date specified in the certificate
described in paragraph (g) of this Section 8.3. A failure by a holder of Notes
to respond to an offer to prepay made pursuant to this Section 8.3, or to accept
an offer as to all of the Notes held by the holder, within such time period
shall be deemed to constitute rejection of such offer by such holder.
(e) Prepayment — Prepayment of the Notes to be prepaid pursuant to this
Section 8.3 shall be at 100% of the principal amount of such Notes, together
with interest on such Notes accrued to the date of prepayment and shall not
require the payment of any Make-Whole Amount. The prepayment shall be made on
the Proposed Prepayment Date except as provided in paragraph (f) of this
Section 8.3.
(f) Deferral Pending Change of Control — The obligation of the Company to prepay
Notes pursuant to the offers required by paragraphs (a) and (b) and accepted in
accordance with paragraph (d) of this Section 8.3 is subject to the occurrence
of the Change of Control in respect of which such offers and acceptances shall
have been made. In the event that such Change of Control does not occur on or
prior to the Proposed Prepayment Date in respect thereof, the prepayment shall
be deferred until and shall be made on the date on which such Change of Control
occurs. The Company shall keep each holder of Notes reasonably and timely
informed of (i) any such deferral of the date of prepayment, (ii) the date on
which such Change of Control and the prepayment are reasonably expected to
occur, and (iii) any determination by the Company that efforts to effect such
Change of Control have ceased or been abandoned (in which case the offers and
acceptances made pursuant to this Section 8.3 in respect of such Change of
Control shall be deemed rescinded). Notwithstanding the foregoing, in the event
that the prepayment has not been made within 90 days after such Proposed
Prepayment Date by virtue of the deferral provided for in this Section 8.3(f),
the Company shall make a new offer to prepay in accordance with paragraph (c) of
this Section 8.3.
(g) Officer’s Certificate — Each offer to prepay the Notes pursuant to this
Section 8.3 shall be accompanied by a certificate, executed by a Senior
Financial Officer of the Company and dated the date of such offer, specifying:
(i) the Proposed Prepayment Date, (ii) that such offer is made pursuant to this
Section 8.3, (iii) the principal amount of each Note offered to be prepaid,
(iv) the interest that would be due on each Note offered to be prepaid, accrued
to the Proposed Prepayment Date, (v) that the conditions of this Section 8.3
have been fulfilled, (vi) in reasonable detail, the nature and date or proposed
date of the Change of Control and (vii) the date by which any holder of a Note
that wishes to accept such offer must deliver notice thereof to the Company,
which date shall not be earlier than seven Business Days prior to the Proposed
Prepayment Date or, in the case of a prepayment pursuant to Section 8.3(b), the
date of the action referred to in Section 8.3(b)(i).

 

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8.4  
Allocation of Partial Prepayments.

In the case of each partial prepayment of Notes pursuant to Section 8.2, the
principal amount of the Notes to be prepaid shall be allocated among all of the
Notes at the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof not theretofore called for
prepayment.

8.5  
Maturity; Surrender, etc.

In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment (which shall be a Business Day),
together with interest on such principal amount accrued to such date and the
applicable Make-Whole Amount, if any. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue. Any Note paid or prepaid in full
shall be surrendered to the Company and canceled and shall not be reissued, and
no Note shall be issued in lieu of any prepaid principal amount of any Note.

8.6  
Purchase of Notes.

The Company will not and will not permit any Affiliate to purchase, redeem,
prepay or otherwise acquire, directly or indirectly, any of the outstanding
Notes except upon the payment or prepayment of the Notes in accordance with the
terms of this Agreement and the Notes. The Company will promptly cancel all
Notes acquired by it or any Affiliate pursuant to any payment or prepayment of
Notes pursuant to any provision of this Agreement and no Notes may be issued in
substitution or exchange for any such Notes.

8.7  
Make-Whole Amount.

“Make-Whole Amount” means, with respect to any Note, an amount equal to the
excess, if any, of the Discounted Value of the Remaining Scheduled Payments with
respect to the Called Principal of such Note over the amount of such Called
Principal, provided that the Make-Whole Amount may in no event be less than
zero. For the purposes of determining the Make-Whole Amount, the following terms
have the following meanings:
“Called Principal” means, with respect to any Note, the principal of such Note
that is to be prepaid pursuant to Section 8.2 or has become or is declared to be
immediately due and payable pursuant to Section 12.1, as the context requires.

 

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“Discounted Value” means, with respect to the Called Principal of any Note, the
amount obtained by discounting all Remaining Scheduled Payments with respect to
such Called Principal from their respective scheduled due dates to the
Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
“Reinvestment Yield” means, with respect to the Called Principal of any Note,
.50% over the yield to maturity implied by (i) the yields reported as of
10:00 a.m. (New York City time) on the second Business Day preceding the
Settlement Date with respect to such Called Principal, on the display designated
as “Page PX1” (or such other display as may replace Page PX1 on Bloomberg
Financial Markets (“Bloomberg”) or, if Page PX1 (or its successor screen on
Bloomberg) is unavailable, the Telerate Access Service screen which corresponds
most closely to Page PX1 for the most recently issued actively traded on-the-run
U.S. Treasury securities having a maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date, or (ii) if such yields are
not reported as of such time or the yields reported as of such time are not
ascertainable (including by way of interpolation), the Treasury Constant
Maturity Series Yields reported, for the latest day for which such yields have
been so reported as of the second Business Day preceding the Settlement Date
with respect to such Called Principal, in Federal Reserve Statistical Release
H.15 (519) (or any comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date. Such implied yield
will be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between (1) the actively traded U.S.
Treasury security with the maturity closest to and greater than such Remaining
Average Life and (2) the actively traded U.S. Treasury security with the
maturity closest to and less than such Remaining Average Life. The Reinvestment
Yield shall be rounded to the number of decimal places as appears in the
interest rate of the applicable Note.
“Remaining Average Life” means, with respect to any Called Principal, the number
of years (calculated to the nearest one-twelfth year) obtained by dividing
(i) such Called Principal into (ii) the sum of the products obtained by
multiplying (a) the principal component of each Remaining Scheduled Payment with
respect to such Called Principal by (b) the number of years (calculated to the
nearest one-twelfth year) that will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of such Remaining
Scheduled Payment.
“Remaining Scheduled Payments” means, with respect to the Called Principal of
any Note, all payments of such Called Principal and interest thereon that would
be due after the Settlement Date with respect to such Called Principal if no
payment of such Called Principal were made prior to its scheduled due date,
provided that if such Settlement Date is not a date on which interest payments
are due to be made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of interest
accrued to such Settlement Date and required to be paid on such Settlement Date
pursuant to Section 8.2 or 12.1.
“Settlement Date” means, with respect to the Called Principal of any Note, the
date on which such Called Principal is to be prepaid pursuant to Section 8.2 or
has become or is declared to be immediately due and payable pursuant to
Section 12.1, as the context requires.

 

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9.  
AFFIRMATIVE COVENANTS.

The Company covenants that so long as any of the Notes are outstanding:

9.1  
Compliance with Law.

The Company will, and will cause each Subsidiary to, comply with all laws,
ordinances or governmental rules or regulations to which each of them is
subject, including ERISA, the USA Patriot Act and Environmental Laws, and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

9.2  
Insurance.

The Company will, and will cause each of its Subsidiaries to, maintain, with
financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated.

9.3  
Maintenance of Properties.

The Company will, and will cause each of its Subsidiaries to, maintain and keep,
or cause to be maintained and kept, their respective properties in good repair,
working order and condition (other than ordinary wear and tear), so that the
business carried on in connection therewith may be properly conducted at all
times, provided that this Section shall not prevent the Company or any
Subsidiary from discontinuing the operation and the maintenance of any of its
properties if such discontinuance is desirable in the conduct of its business
and the Company has concluded that such discontinuance could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

9.4  
Payment of Taxes and Claims.

The Company will, and will cause each Subsidiary to, file all tax returns
required to be filed in any jurisdiction and to pay and discharge all taxes
shown to be due and payable on such returns and all other taxes, assessments,
governmental charges, or levies imposed on them or any of their properties,
assets, income or franchises, to the extent such taxes and assessments have
become due and payable and before they have become delinquent and all claims for
which sums have become due and payable that have or might become a Lien on
properties or assets of the Company or any Subsidiary, provided that neither the
Company nor any Subsidiary need pay any such tax or assessment or claims if
(i) the amount, applicability or validity thereof is contested by the Company or
such Subsidiary on a timely basis in good faith and in appropriate proceedings,
and the Company or such Subsidiary has established adequate reserves therefor in
accordance with GAAP on the books of the Company or such Subsidiary or (ii) the
nonpayment of all such taxes, assessments and claims in the aggregate could not
reasonably be expected to have a Material Adverse Effect.

 

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9.5  
Corporate Existence, etc.

Subject to Section 10.3, the Company will at all times preserve and keep in full
force and effect its corporate existence. Subject to Sections 10.3 and 10.4, the
Company will at all times preserve and keep in full force and effect the
corporate (or, as applicable, limited liability company) existence of each
Subsidiary (unless merged into the Company or a Wholly Owned Subsidiary) and all
rights and franchises of the Company and its Subsidiaries unless, in the good
faith judgment of the Company, the termination of or failure to preserve and
keep in full force and effect such corporate existence, right or franchise could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

9.6  
Subsidiary Guaranty; Release.

(a) Subsidiary Guarantors. The Company will cause each Subsidiary that becomes a
borrower or guarantor of Indebtedness in respect of the Credit Agreement, within
10 Business Days of its becoming a borrower or a guarantor of Indebtedness in
respect of the Credit Agreement, to become a party to the Subsidiary Guaranty,
and shall deliver to each holder:
(i) an executed counterpart of a Joinder to the Subsidiary Guaranty;
(ii) copies of such directors’ or other authorizing resolutions, charter, bylaws
and other constitutive documents of such Subsidiary as the Required Holders may
reasonably request; and
(iii) an opinion of counsel reasonably satisfactory to the Required Holders
covering the authorization, execution, delivery, compliance with law, no
conflict with other documents, no consents and enforceability of the Subsidiary
Guaranty against such Subsidiary in form and substance reasonably satisfactory
to the Required Holders.
(b) Release of Subsidiary Guarantor. Each holder of a Note fully releases and
discharges from the Subsidiary Guaranty a Subsidiary Guarantor, immediately and
without any further act, upon such Subsidiary Guarantor being released and
discharged as a borrower or guarantor under and in respect of the Credit
Agreement; provided that (i) no Default or Event of Default exists or will exist
immediately following such release and discharge; and (ii) at the time of such
release and discharge, the Company delivers to each holder of Notes a
certificate of a Responsible Officer certifying (x) that such Subsidiary
Guarantor has been or is being released and discharged as a borrower or
guarantor under and in respect of each of the Credit Agreement and (y) as to the
matters set forth in clause (i). Any outstanding Indebtedness of a Subsidiary
Guarantor shall be deemed to have been incurred by such Subsidiary Guarantor as
of the date it is released and discharged from the Subsidiary Guaranty.

 

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10.  
NEGATIVE COVENANTS.

The Company covenants that so long as any of the Notes are outstanding:

10.1  
Funded Debt.

The Company will not create, assume or incur additional Consolidated Funded Debt
unless:
(a) 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 Company and its Subsidiaries. If the proceeds from the additional
Consolidated Funded Debt are to be used to acquire an operating company that
will become a Subsidiary of the Company, Consolidated Net Income Available for
Interest Charges will be determined as if such company was a Subsidiary of the
Company during the three preceding fiscal years; and
(b) Consolidated Funded Debt of the Company, after giving effect to the
additional Consolidated Funded Debt to be incurred and to the use of the
proceeds therefrom, will not exceed 65% of the Total Capitalization of the
Company.

10.2  
Liens.

The Company will not, and the Company will not permit any Subsidiary to, create,
assume or suffer to exist, directly or indirectly, any Lien on its properties or
assets, whether now owned or hereafter acquired, 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, except:
(a) Liens for taxes, assessments, or governmental charges or levies not yet due
or which are being actively contested in good faith by appropriate proceedings;
(b) 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 GAAP 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;
(c) 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);
(d) 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;

 

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(e) leases or subleases granted to others in ordinary course of business and not
interfering with the ordinary conduct of the business of the Company or any
Subsidiary;
(f) 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;
(g) Liens on the property or assets of any Subsidiary securing Indebtedness of
such Subsidiary owing to the Company;
(h) 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
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 Agreement 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
(i) any other Liens or charges securing Indebtedness not exceeding $1,000,000 in
the aggregate.

10.3  
Mergers, Consolidations, etc.

The Company 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 Company 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 Company): (i) assumes all of
the obligations of the Company under this Agreement and the Notes 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; (iii) immediately after such acquisition,
consolidation or merger, is not in Default in the performance of any covenant or
condition under this Agreement; and (iv) has caused to be delivered to each
holder of any Notes an opinion of nationally recognized independent counsel, or
other independent counsel reasonably satisfactory to the Required Holders, to
the effect that all agreements or instruments effecting such assumption are
enforceable in accordance with their terms and comply with the terms hereof. For
purposes of this Section 10.3, the term “net worth” means the Consolidated
assets of the Company and its Consolidated Subsidiaries, less the Consolidated
liabilities of the Company and its Consolidated Subsidiaries as determined in
accordance with GAAP.

 

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No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any successor
corporation or limited liability company that shall theretofore have become such
in the manner prescribed in this Section 10.3 from its liability under this
Agreement or the Notes.

10.4  
Sale of Assets.

Except as limited by Section 10.6, the Company will not, and will not permit any
Subsidiary to, 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 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) properties or
assets transferred by the Company to a Subsidiary or by any Subsidiary to the
Company or another Subsidiary) if, as a result of such sale or other
disposition, the aggregate net book value of all properties and assets so
disposed of after the date of this Agreement 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 Company and its
Subsidiaries) of all Tangible Assets of the Company and its Subsidiaries;
provided, however, that any such sale may be disregarded for the purposes of
this Section 10.3 if the proceeds therefrom are (a) reinvested within twelve
months in businesses related to the business of the Company or (b) applied to
the payment or prepayment of the Notes or any other outstanding Indebtedness of
the Company or any Subsidiary owed to a non-Affiliate ranking pari passu with or
senior to the Notes.
For purposes of foregoing clause (b), if the Company elects to prepay the Notes,
the Company shall offer to prepay (on a Business Day not less than 30 or more
than 60 days following such offer) the Notes on a pro rata basis with any such
other Indebtedness that the Company elects to include in such offer at a price
of 100% of the principal amount of the Notes to be prepaid (without any
Make-Whole Amount) together with interest accrued to the date of prepayment;
provided that if any holder of the Notes declines or rejects such offer, the
proceeds that would have been paid to such holder shall be offered pro rata to
the other holders of the Notes that have accepted the offer. A failure by a
holder of Notes to respond in writing not later than 10 Business Days prior to
the proposed prepayment date to an offer to prepay made pursuant to this
Section 10.4 shall be deemed to constitute an acceptance of such offer by such
holder. Solely for the purposes of foregoing clause (b), whether or not such
offers are accepted by the holders, the entire principal amount of the Notes
subject thereto shall be deemed to have been prepaid.

 

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10.5  
Dividends.

The Company will not declare or pay any dividends (other than dividends payable
solely in shares of Common Stock of the Company or solely 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 the immediately preceding
60-month period would not exceed Consolidated Net Income for such period.

10.6  
Nature of Business.

The Company will not, and will not permit any Subsidiary to, engage in any
business if, as a result, the general nature of the business in which the
Company and its Subsidiaries, taken as a whole, would then be engaged would be
substantially changed from the general nature of the business in which the
Company and its Subsidiaries, taken as a whole, are engaged on the date of this
Agreement as described in the Disclosure Documents. The Company will not
transfer or sell a currently regulated business of the Company to its
Subsidiaries.

10.7  
Transactions with Affiliates.

The Company will not, and will not permit any Subsidiary to, enter into directly
or indirectly any Material transaction or Material group of related transactions
(including the purchase, lease, sale or exchange of properties of any kind or
the rendering of any service) with any Affiliate (other than the Company or
another Subsidiary), except in the ordinary course and pursuant to the
reasonable requirements of the Company’s or such Subsidiary’s business and upon
fair and reasonable terms no less favorable to the Company or such Subsidiary
than would be obtainable in a comparable arm’s-length transaction with a Person
not an Affiliate.

10.8  
Terrorism Sanctions Regulations.

The Company will not and will not permit any Subsidiary to (a) become a Person
described or designated in the Specially Designated Nationals and Blocked
Persons List of the Office of Foreign Assets Control or in Section 1 of the Anti
Terrorism Order or (b) knowingly engage in any dealings or transactions with any
such Person.

11.  
EVENTS OF DEFAULT.

An “Event of Default” shall exist if any of the following conditions or events
shall occur and be continuing:
(a) the Company defaults in the payment of any principal or Make-Whole Amount,
if any, on any Note when the same becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note for more
than 10 days after the same becomes due and payable; or
(c) the Company defaults in the performance of or compliance with any term
contained herein (other than those referred to in paragraphs (a) and (b) of this
Section 11) and such default is not remedied within 30 days after the earlier of
(i) a Responsible Officer obtaining actual knowledge of such default and
(ii) the Company receiving written notice of such default from any holder of a
Note (any such written notice to be identified as a “notice of default” and to
refer specifically to this paragraph (c) of Section 11); or

 

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(d) any representation or warranty made in writing by or on behalf of the
Company or any Subsidiary Guarantor or by any officer of the Company or a
Subsidiary Guarantor in this Agreement, the Subsidiary Guaranty or in any
writing furnished in connection with the transactions contemplated hereby or
thereby proves to have been false or incorrect in any material respect on the
date as of which made; or
(e) (i) the Company or any Subsidiary is in default (as principal or as
guarantor or other surety) in the payment of any principal of or premium or
make-whole amount or interest on any Indebtedness that is outstanding in an
aggregate principal amount of at least $1,000,000 beyond any period of grace
provided with respect thereto, or (ii) the Company or any Subsidiary is in
default in the performance of or compliance with any term of any evidence of any
Indebtedness that is outstanding in an aggregate principal amount of at least
$1,000,000 or of any mortgage, indenture or other agreement relating thereto or
any other condition exists thereunder, and as a consequence of such default or
condition such Indebtedness has become, or has been declared (or one or more
Persons are entitled to declare such Indebtedness to be), due and payable before
its stated maturity or before its regularly scheduled dates of payment, or
(iii) as a consequence of the occurrence or continuation of any event or
condition (other than the passage of time or the right of the holder of
Indebtedness to convert such Indebtedness into equity interests), the Company or
any Subsidiary has become obligated to purchase or repay Indebtedness before its
regular maturity or before its regularly scheduled dates of payment in an
aggregate outstanding principal amount of at least $1,000,000; or
(f) the Company or any Significant Subsidiary pursuant to or within the meaning
of any Bankruptcy Law (i) commences a voluntary case, (ii) consents to the entry
of an order for relief against it in an involuntary case, (iii) consents to the
appointment of a Custodian of it or for all or substantially all of its
property, or (iv) makes a general assignment for the benefit of its creditors;
or
(g) 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 (i) is for relief against the Company or any Significant
Subsidiary, in an involuntary case,(ii) appoints a Custodian of the Company, or
any Significant Subsidiary, or for all or substantially all of the property of
the Company, or any Significant Subsidiary, or (iii) orders the liquidation of
the Company, or any Significant Subsidiary; or

 

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(h) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA
or the Code for any plan year or part thereof or a waiver of such standards or
extension of any amortization period is sought or granted under section 412 of
the Code, (ii) a notice of intent to terminate any Plan shall have been or is
reasonably expected to be filed with the PBGC or the PBGC shall have instituted
proceedings under ERISA section 4042 to terminate or appoint a trustee to
administer any Plan or the PBGC shall have notified the Company or any ERISA
Affiliate that a Plan may become a subject of any such proceedings, (iii) the
aggregate “amount of unfunded benefit liabilities” (within the meaning of
section 4001(a)(18) of ERISA) under all Plans determined in accordance with
Title IV of ERISA, shall exceed $1,000,000, (iv) the Company or any ERISA
Affiliate shall have incurred or is reasonably expected to incur any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of
the Code relating to employee benefit plans, (v) the Company or any ERISA
Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any
Subsidiary establishes or amends any employee welfare benefit plan that provides
post-employment welfare benefits in a manner that would increase the liability
of the Company or any Subsidiary thereunder; and any such event or events
described in clauses (i) through (vi) above, either individually or together
with any other such event or events, could reasonably be expected to have a
Material Adverse Effect; or
(i) the Subsidiary Guaranty ceases to be in full force and effect (except in
accordance with and by reason of the provisions of Section 9.6(b)) or is
declared to be null and void in whole or in material part by a court or other
governmental or regulatory authority having jurisdiction or the validity or
enforceability thereof shall be contested by the Company or any Subsidiary
Guarantor or any of them renounces any of the same or denies that it has any or
further liability thereunder.
As used in Section 11(h), the terms “employee benefit plan” and “employee
welfare benefit plan” shall have the respective meanings assigned to such terms
in section 3 of ERISA.

12.  
REMEDIES ON DEFAULT, ETC.
  12.1  
Acceleration.

(a) If an Event of Default with respect to the Company described in paragraph
(f) or (g) of Section 11, all the Notes then outstanding shall automatically
become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, any holder or
holders of at least 51% in principal amount of the Notes at the time outstanding
may at any time at its or their option, by notice or notices to the Company,
declare all the Notes then outstanding to be immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b) of Section 11 has
occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all the Notes held by it or
them to be immediately due and payable.

 

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Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest
thereon (including, but not limited to, interest accrued thereon at the Default
Rate) and (y) the Make-Whole Amount determined in respect of such principal
amount (to the fullest extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.

12.2  
Other Remedies.

If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.

12.3  
Rescission.

At any time after any Notes have been declared due and payable pursuant to
clause (b) or (c) of Section 12.1, the holder or holders of at least 51% in
principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if
(a) the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) neither the Company nor any other Person shall have paid any amounts
that have become due solely by reason of such declaration; (c) all Events of
Default and Defaults, other than non-payment of amounts that have become due
solely by reason of such declaration, have been cured or have been waived
pursuant to Section 17, and (d) no judgment or decree has been entered for the
payment of any monies due pursuant hereto or to the Notes. No rescission and
annulment under this Section 12.3 will extend to or affect any subsequent Event
of Default or Default or impair any right consequent thereon.

12.4  
No Waivers or Election of Remedies, Expenses, etc.

No course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder’s rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 15, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including reasonable attorneys’
fees, expenses and disbursements.

 

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13.  
REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
  13.1  
Registration of Notes.

The Company shall keep at its principal executive office a register for the
registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder of a
Note that is an Institutional Investor, promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered holders
of Notes.

13.2  
Transfer and Exchange of Notes.

Upon surrender of any Note to the Company at the address and to the attention of
the designated officer (all as specified in Section 18(iii)), for registration
of transfer or exchange (and in the case of a surrender for registration of
transfer accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or such holder’s attorney duly authorized in
writing and accompanied by the relevant name, address and other information for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver within 10 Business Days, at the Company’s expense (except as
provided below), one or more new Notes (as requested by the holder thereof) in
exchange therefor, in an aggregate principal amount equal to the unpaid
principal amount of the surrendered Note. Each such new Note shall be payable to
such Person as such holder may request and shall be substantially in the form of
Exhibit 1.1. Each such new Note shall be dated and bear interest from the date
to which interest shall have been paid on the surrendered Note or dated the date
of the surrendered Note if no interest shall have been paid thereon. The Company
may require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $500,000, provided that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $500,000. Any transferee,
by its acceptance of a Note registered in its name (or the name of its nominee),
shall be deemed to have made the representations set forth in Sections 6.1 and
6.2.

13.3  
Replacement of Notes.

Upon receipt by the Company at the address and to the attention of the
designated officer (all as specified in Section 18(iii)) of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of any Note (which evidence shall be, in the case of an Institutional
Investor, notice from such Institutional Investor of such ownership and such
loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note is, or is a nominee
for, an original Purchaser or another holder of a Note with a minimum net worth
of at least $50,000,000 or a Qualified Institutional Buyer, such Person’s own
unsecured agreement of indemnity shall be deemed to be satisfactory), or

 

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(b) in the case of mutilation, upon surrender and cancellation thereof,
the Company at its own expense shall execute and deliver within 10 Business
Days, in lieu thereof, a new Note, dated and bearing interest from the date to
which interest shall have been paid on such lost, stolen, destroyed or mutilated
Note or dated the date of such lost, stolen, destroyed or mutilated Note if no
interest shall have been paid thereon.

14.  
PAYMENTS ON NOTES.
  14.1  
Place of Payment.

Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and
interest becoming due and payable on the Notes shall be made in New York, New
York at the principal office of JPMorgan Chase Bank, N.A. in such jurisdiction.
The Company may at any time, by notice to each holder of a Note, change the
place of payment of the Notes so long as such place of payment shall be either
the principal office of the Company in such jurisdiction or the principal office
of a bank or trust company in such jurisdiction.

14.2  
Home Office Payment.

So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in this
Section 14.2.

 

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15.  
EXPENSES, ETC.
  15.1  
Transaction Expenses.

Whether or not the transactions contemplated hereby are consummated, the Company
will pay all costs and expenses (including reasonable attorneys’ fees of one
special counsel and, if reasonably required by the Required Holders, local or
other counsel) incurred by you and each Other Purchaser or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the Notes (whether or not
such amendment, waiver or consent becomes effective), including, without
limitation: (a) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this Agreement
or the Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a holder of any Note, (b) the costs and expenses, including
financial advisors’ fees, incurred in connection with the insolvency or
bankruptcy of the Company or any Subsidiary or in connection with any work-out
or restructuring of the transactions contemplated hereby and by the Notes and
(c) the costs and expenses incurred in connection with the initial filing of
this Agreement and all related documents and financial information with the SVO.
The Company will pay, and will save you and each Other Purchaser or holder of a
Note harmless from, all claims in respect of any fees, costs or expenses, if
any, of brokers and finders (other than those, if any, retained by a Purchaser
or other holder in connection with its purchase of the Notes).

15.2  
Survival.

The obligations of the Company under this Section 15 will survive the payment or
transfer of any Note, the enforcement, amendment or waiver of any provision of
this Agreement or the Notes, and the termination of this Agreement.

16.  
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

All representations and warranties contained herein shall survive the execution
and delivery of this Agreement and the Notes, the purchase or transfer by you of
any Note or portion thereof or interest therein and the payment of any Note, and
may be relied upon by any subsequent holder of a Note, regardless of any
investigation made at any time by or on behalf of you or any other holder of a
Note. All statements contained in any certificate or other instrument delivered
by or on behalf of the Company pursuant to this Agreement shall be deemed
representations and warranties of the Company under this Agreement. Subject to
the preceding sentence, this Agreement and the Notes embody the entire agreement
and understanding between you and the Company and supersede all prior agreements
and understandings relating to the subject matter hereof.

 

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17.  
AMENDMENT AND WAIVER.
  17.1  
Requirements.

This Agreement, the Notes and the Subsidiary Guaranty may be amended, and the
observance of any term hereof or thereof may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders (and the Subsidiary Guarantors, in the case of the Subsidiary
Guaranty), except that (a) no amendment or waiver of any of the provisions of
Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used
therein), will be effective as to you unless consented to by you in writing, and
(b) no such amendment or waiver may, without the written consent of the holder
of each Note at the time outstanding affected thereby, (i) subject to the
provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the principal
amount of the Notes the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or
20.

17.2  
Solicitation of Holders of Notes.

(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause to be paid
any remuneration, whether by way of supplemental or additional interest, fee or
otherwise, or grant any security, to any holder of Notes as consideration for or
as an inducement to the entering into by any holder of Notes of any waiver or
amendment of any of the terms and provisions hereof unless such remuneration is
concurrently paid, or security is concurrently granted, on the same terms,
ratably to each holder of Notes then outstanding that also enters into any such
waiver or amendment of any of the terms and provisions hereto. If any such
remuneration is paid to any holder of Notes that for any reason does not enter
into any waiver or amendment of any of the terms and provisions hereof, such
remuneration shall also be paid to all other non-consenting holders.

17.3  
Binding Effect, etc.

Any amendment or waiver consented to as provided in this Section 17 applies
equally to all holders of Notes and is binding upon them and upon each future
holder of any Note and upon the Company without regard to whether such Note has
been marked to indicate such amendment or waiver. No such amendment or waiver
will extend to or affect any obligation, covenant, agreement, Default or Event
of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
“this Agreement” or “the Agreement” and references thereto shall mean this Note
Purchase Agreement as it may from time to time be amended or supplemented.

 

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17.4  
Notes held by Company, etc.

Solely for the purpose of determining whether the holders of the requisite
percentage of the aggregate principal amount of Notes then outstanding approved
or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.

18.  
NOTICES.

All notices and communications provided for hereunder shall be in writing and
sent (a) by telecopy if the sender on the same day sends a confirming copy of
such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
prepaid), or (c) by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified for such
communications in Schedule A, or at such other address as you or it shall have
specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such address as such
other holder shall have specified to the Company in writing, or
(iii) if to the Company, to the Company at its address set forth at the
beginning hereof to the attention of Vice President Administration, or at such
other address as the Company shall have specified to the holder of each Note in
writing.
Notices under this Section 18 will be deemed given only when actually received.

19.  
REPRODUCTION OF DOCUMENTS.

This Agreement and all documents relating hereto, including (a) consents,
waivers and modifications that may hereafter be executed, (b) documents received
by you at a Closing (except the Notes themselves), and (c) financial statements,
certificates and other information previously or hereafter furnished to you, may
be reproduced by you by any photographic, photostatic, electronic, digital or
other similar process and you may destroy any original document so reproduced.
The Company agrees and stipulates that, to the extent permitted by applicable
law, any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding (whether or not the original
is in existence and whether or not such reproduction was made by you in the
regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence. This
Section 19 shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.

 

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20.  
CONFIDENTIAL INFORMATION.

For the purposes of this Section 20, “Confidential Information” means
information delivered to any Purchaser by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by you as
being confidential information of the Company or such Subsidiary, provided that
such term does not include information that (a) was publicly known or otherwise
known to you prior to the time of such disclosure, (b) subsequently becomes
publicly known through no act or omission by you or any Person acting on your
behalf, (c) otherwise becomes known to you other than through disclosure by the
Company or any Subsidiary, or (d) constitutes financial statements delivered to
you under Section 7.1 that are otherwise publicly available. You will maintain
the confidentiality of such Confidential Information in accordance with
procedures adopted by you in good faith to protect confidential information of
third parties delivered to you, provided that you may deliver or disclose
Confidential Information to (i) your directors, officers, employees, agents,
attorneys and affiliates (to the extent such disclosure reasonably relates to
the administration of the investment represented by your Notes), (ii) your
financial advisors and other professional advisors who agree to hold
confidential the Confidential Information substantially in accordance with the
terms of this Section 20, (iii) any other holder of any Note, (iv) any
Institutional Investor to which you sell or offer to sell such Note or any part
thereof or any participation therein (if such Person has agreed in writing prior
to its receipt of such Confidential Information to be bound by the provisions of
this Section 20), (v) any Person from which you offer to purchase any security
of the Company (if such Person has agreed in writing prior to its receipt of
such Confidential Information to be bound by the provisions of this Section 20),
(vi) any federal or state regulatory authority having jurisdiction over you,
(vii) the NAIC or the SVO or, in each case, any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.

21.  
SUBSTITUTION OF PURCHASER.

You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate’s agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word “you” is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word “you” is used in this Agreement (other than in this
Section 21), such word shall no longer be deemed to refer to such Affiliate, but
shall refer to you, and you shall have all the rights of an original holder of
the Notes under this Agreement.

 

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22.  
MISCELLANEOUS.
  22.1  
Successors and Assigns.

All covenants and other agreements contained in this Agreement by or on behalf
of any of the parties hereto bind and inure to the benefit of their respective
successors and assigns (including any subsequent holder of a Note) whether so
expressed or not.

22.2  
Payments Due on Non-Business Days.

Anything in this Agreement or the Notes to the contrary notwithstanding (but
without limiting the requirement in Section 8.2 that the notice of any optional
prepayment specify a Business Day as the date fixed for such prepayment), any
payment of principal of or Make-Whole Amount or interest on any Note that is due
on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation of
the interest payable on such next succeeding Business Day; provided that if the
maturity date of any Note is a date other than a Business Day, the payment
otherwise due on such maturity date shall be made on the next succeeding
Business Day and shall include the additional days elapsed in the computation of
interest payable on such next succeeding Business Day.

22.3  
Accounting Terms.

All accounting terms used herein that are not expressly defined in this
Agreement have the meanings respectively given to them in accordance with GAAP.
Except as otherwise specifically provided herein, (i) all computations made
pursuant to this Agreement shall be made in accordance with GAAP and (ii) all
financial statements shall be prepared in accordance with GAAP.

22.4  
Severability.

Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the fullest extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.

22.5  
Construction.

Each covenant contained herein shall be construed (absent express provision to
the contrary) as being independent of each other covenant contained herein, so
that compliance with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with any other covenant. Where any
provision herein refers to action to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be applicable whether
such action is taken directly or indirectly by such Person.

 

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For the avoidance of doubt, all Schedules and Exhibits attached to this
Agreement shall be deemed to be a part hereof.

22.6  
Counterparts.

This Agreement may be executed in any number of counterparts, each of which
shall be an original but all of which together shall constitute one instrument.
Each counterpart may consist of a number of copies hereof, each signed by less
than all, but together signed by all, of the parties hereto.

22.7  
Governing Law.

This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the law of the state of New York
excluding choice of law principles of the law of such state that would require
the application of the laws of a jurisdiction other than such state.

22.8  
Jurisdiction and Process; Waiver of Jury Trial.

(a) The Company irrevocably submits to the non-exclusive jurisdiction of any New
York state or federal court sitting in the Borough of Manhattan, The City of New
York, over any suit, action or proceeding arising out of or relating to this
Agreement or the Notes. To the fullest extent permitted by applicable law, the
Company irrevocably waives and agrees not to assert, by way of motion, as a
defense or otherwise, any claim that it is not subject to the jurisdiction of
any such court, any objection that it may now or hereafter have to the laying of
the venue of any such suit, action or proceeding brought in any such court and
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
(b) The Company consents to process being served by or on behalf of any holder
of Notes in any suit, action or proceeding of the nature referred to in
Section 22.8(a) by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, return receipt
requested, to it at its address specified in Section 18 or at such other address
of which such holder shall then have been notified pursuant to said Section. The
Company agrees that such service upon receipt (i) shall be deemed in every
respect effective service of process upon it in any such suit, action or
proceeding and (ii) shall, to the fullest extent permitted by applicable law, be
taken and held to be valid personal service upon and personal delivery to it.
Notices hereunder shall be conclusively presumed received as evidenced by a
delivery receipt furnished by the United States Postal Service or any reputable
commercial delivery service.

 

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(c) Nothing in this Section 22.8 shall affect the right of any holder of a Note
to serve process in any manner permitted by law, or limit any right that the
holders of any of the Notes may have to bring proceedings against the Company in
the courts of any appropriate jurisdiction or to enforce in any lawful manner a
judgment obtained in one jurisdiction in any other jurisdiction.
(d) THE PARTIES HERETO WAIVE TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH
RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT EXECUTED IN
CONNECTION HEREWITH OR THEREWITH.

 

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If you are in agreement with the foregoing, please sign the form of agreement on
a counterpart of this Agreement and return it to the Company, whereupon this
Agreement shall become a binding agreement between you and the Company.

            Very truly yours,
 
ENERGY WEST, INCORPORATED
      By:   /s/ David A. Cerotzke         Name:   David A. Cerotzke       
Title:   President and Chief Executive Officer     

 

S-1

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This Agreement is accepted and
agreed to as of the date thereof.
ALLSTATE LIFE INSURANCE COMPANY

         
By:
  /s/ John W. Kunkle    
 
       
Name:
  John W. Kunkle    
 
       
By:
  /s/ Jerry D. Zinkula    
 
       
Name:
  Jerry D. Zinkula    

Authorized Signatories

 

S-2

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CUNA MUTUAL LIFE INSURANCE COMPANY
CUNA MUTUAL INSURANCE SOCIETY
CUMIS INSURANCE SOCIETY, INC.
MEMBERS LIFE INSURANCE COMPANY

         
By:
  MEMBERS Capital Advisors, Inc.,
acting as Investment Advisor    
 
       
By:
  /s/ John Petchler    
 
       
Name:
  John Petchler    
Title:
  Managing Director, Investments    

 

S-3

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SCHEDULE A
INFORMATION RELATING TO PURCHASERS

          Principal Amount of Name and Address of Purchaser   Notes to be
Purchased       Allstate Life Insurance Company   $6,500,000

(1)  
All payments by Fedwire transfer of immediately available funds or ACH Payment,
identifying the name of the Issuer, the Private Placement Number and the payment
as principal, interest or premium, in the format as follows:

Bank: Citibank
ABA #: 021000089
Account Name: Allstate Life Insurance Company Collection Account — PP
Account #: 30547007
Reference: OBI [Insert 9-digit Private Placement No., Credit Name, Coupon,
Maturity here], Payment Due Date (MM/DD/YY) and the type and amount of payment
being made.
     For example:
     P  _____  (Enter “P” and amount of principal being remitted,
     for example, P5000000.00) -
     I  _____  (Enter “I” and amount of interest being remitted,
     for example, I225000.00)

(2)  
All notices of scheduled payments and written confirmations of such wire
transfer to be sent to:

Allstate Investments LLC
Investment Operations — Private Placements
3075 Sanders Road, STE G4A
Northbrook, IL 60062-7127
Telephone: (847) 402-6672 Private Placements
Telecopy: (847) 326-7032
E-Mail: PrivateIOD@allstate.com

(3)  
All financial reports, compliance certificates and all other written
communications, including notice of prepayments, to be sent by email
(PrivateCompliance@allstate.com) or hard copy to:

Allstate Investments LLC
Private Placements Department
3075 Sanders Road, STE G3A
Northbrook, Illinois 60062-7127
Telephone: (847) 402-7117
Telecopy: (847) 402-3092

 

1

Schedule A

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(4)  
Address for delivery of Notes:

Citibank N.A.
333 West 34th Street
3rd Floor Securities Vault
New York, N.Y. 10001
Attn: Danny Reyes
For Allstate Life Insurance Company/Safekeeping Account No. 846627

(5)  
E-mail Address for Electronic Delivery:

Privatecompliance@allstate.com

(6)  
One manually executed set of closing documents and two conformed copies to be
sent to:

Allstate Investments LLC
Attention: Kevin E. Trabaris
3075 Sanders Road, STE G5A
Northbrook, Illinois 60062-7127
Telephone: (847) 402-5000

(7)  
Tax ID No.: 36-2554642

 

2

Schedule A

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INFORMATION RELATING TO PURCHASERS

          Principal Amount of Name and Address of Purchaser   Notes to be
Purchased       CUNA MUTUAL LIFE INSURANCE COMPANY   $2,925,000

   
Register Notes in Name of: TURNSPEED + CO
  (1)  
All payments by wire transfer of immediately available funds to:

State Street Bank
DTC/New York Window
55 Water Street
Plaza Level — 3rd Floor
New York, NY 10041
Account: State Street Bank
ABA #: 011000028
A/C: CUNA Mutual Life Insurance Company
A/C Number: ZT2A
 
with sufficient information to identify the source and application of such
funds.

(2)  
All notices of payments and written confirmations of such wire transfers:

State Street Bank
Attn: Brian Kershner
801 Pennsylvania
Kansas City, MO 64105
FAX: 816-691-5545
E-Mail: bdkersh@statestreetkc.com
 
With copy to:
 
CUNA Mutual Insurance Society
Attn: Rosie Pope
5910 Mineral Point Road
Madison, WI 53705-4456
FAX: 608-231-8591
E-Mail: rosie.pope@cunamutual.com

 

3

Schedule A

--------------------------------------------------------------------------------

 

(3)  
All other communications:

CUNA Mutual Insurance Society
Attn: Managing Director — Investments
5910 Mineral Point Road
Madison, WI 53705-4456
Telephone: 608-231-8255
FAX: 608-236-6224
E-Mail: john.petchler@cunamutual.com 
 
With copy to: 
 
CUNA Mutual Insurance Society
Attn: Associate General Counsel
5910 Mineral Point Road
Madison, WI 53705-4456
Telephone: 608-231-7653
FAX: 608-236-7653
E-Mail: steve.suleski@cunamutual.com

(4)  
Address for delivery of Notes to DTC:

DTC / New York Window 
Attn: Robert Mendez 
55 Water Street
New York, New York 10041

(5)  
Tax ID No.: 42-0388260

 

4

Schedule A

--------------------------------------------------------------------------------

 

INFORMATION RELATING TO PURCHASERS

      Name and Address of Purchaser   Principal Amount of
Notes to be Purchased       CUNA MUTUAL INSURANCE SOCIETY   $1,950,000

   
Register Notes in Name of: TURNKEYS + CO
  (1)  
All payments by wire transfer of immediately available funds to:

State Street Bank
DTC/New York Window
55 Water Street
Plaza Level — 3rd Floor
New York, NY 10041
Account: State Street Bank
ABA #: 011000028
A/C: CUNA Mutual Insurance Society
A/C Number: ZT1E
 
with sufficient information to identify the source and application of such
funds.

(2)  
All notices of payments and written confirmations of such wire transfers:

State Street Bank
Attn: Brian Kershner
801 Pennsylvania
Kansas City, MO 64105
FAX: 816-691-5545
E-Mail: bdkersh@statestreetkc.com
 
With copy to:
 
CUNA Mutual Insurance Society
Attn: Rosie Pope
5910 Mineral Point Road
Madison, WI 53705-4456
FAX: 608-231-8591
E-Mail: rosie.pope@cunamutual.com

 

5

Schedule A

--------------------------------------------------------------------------------

 

(3)  
All other communications:

CUNA Mutual Insurance Society
Attn: Managing Director — Investments
5910 Mineral Point Road
Madison, WI 53705-4456
Telephone: 608-231-8255
FAX: 608-236-6224
E-Mail: john.petchler@cunamutual.com
 
With copy to:
 
CUNA Mutual Insurance Society
Attn: Associate General Counsel
5910 Mineral Point Road
Madison, WI 53705-4456
Telephone: 608-231-7653
FAX: 608-236-7653
E-Mail: steve.suleski@cunamutual.com

(4)  
Address for delivery of Notes to DTC:

DTC / New York Window
Attn: Robert Mendez
55 Water Street
New York, New York 10041

(5)  
Tax ID No.: 39-0230590

 

6

Schedule A

--------------------------------------------------------------------------------

 

INFORMATION RELATING TO PURCHASERS

          Principal Amount of Name and Address of Purchaser   Notes to be
Purchased       CUMIS INSURANCE SOCIETY   $975,000

   
Register Notes in Name of: TURNJETTY + CO
  (1)  
All payments by wire transfer of immediately available funds to:

State Street Bank
DTC/New York Window
55 Water Street
Plaza Level — 3rd Floor
New York, NY 10041
Account: State Street Bank
ABA #: 011000028
A/C: CUMIS Insurance Society
A/C Number: ZT1I
 
with sufficient information to identify the source and application of such
funds.

(2)  
All notices of payments and written confirmations of such wire transfers:

State Street Bank
Attn: Brian Kershner
801 Pennsylvania
Kansas City, MO 64105
FAX: 816-691-5545
E-Mail: bdkersh@statestreetkc.com
 
With copy to:
 
CUNA Mutual Insurance Society
Attn: Rosie Pope
5910 Mineral Point Road
Madison, WI 53705-4456
FAX: 608-231-8591
E-Mail: rosie.pope@cunamutual.com

 

7

Schedule A

--------------------------------------------------------------------------------

 

(3)  
All other communications:

CUNA Mutual Insurance Society
Attn: Managing Director — Investments
5910 Mineral Point Road
Madison, WI 53705-4456
Telephone: 608-231-8255
FAX: 608-236-6224
E-Mail: john.petchler@cunamutual.com
 
With copy to:
 
CUNA Mutual Insurance Society
Attn: Associate General Counsel
5910 Mineral Point Road
Madison, WI 53705-4456
Telephone: 608-231-7653
FAX: 608-236-7653
E-Mail: steve.suleski@cunamutual.com

(4)  
Address for delivery of Notes to DTC:

DTC / New York Window
Attn: Robert Mendez
55 Water Street
New York, New York 10041

(5)  
Tax ID No.: 39-0972608

 

8

Schedule A

--------------------------------------------------------------------------------

 

INFORMATION RELATING TO PURCHASERS

          Principal Amount of Name and Address of Purchaser   Notes to be
Purchased       MEMBERS LIFE INSURANCE COMPANY   $650,000

   
Register Notes in Name of: TURNLAUNCH + CO
  (1)  
All payments by wire transfer of immediately available funds to:

State Street Bank
DTC/New York Window
55 Water Street
Plaza Level — 3rd Floor
New York, NY 10041
Account: State Street Bank
ABA #: 011000028
A/C: Members Life Insurance Company
A/C Number: ZT1J
 
with sufficient information to identify the source and application of such
funds.

(2)  
All notices of payments and written confirmations of such wire transfers:

     
State Street Bank
Attn: Brian Kershner
801 Pennsylvania
Kansas City, MO 64105
FAX: 816-691-5545
E-Mail: bdkersh@statestreetkc.com
 
With copy to:
 
CUNA Mutual Insurance Society
Attn: Rosie Pope
5910 Mineral Point Road
Madison, WI 53705-4456
FAX: 608-231-8591
E-Mail: rosie.pope@cunamutual.com

 

9

Schedule A

--------------------------------------------------------------------------------

 

(3)  
All other communications:

CUNA Mutual Insurance Society
Attn: Managing Director — Investments
5910 Mineral Point Road
Madison, WI 53705-4456
Telephone: 608-231-8255
FAX: 608-236-6224
E-Mail: john.petchler@cunamutual.com
 
With copy to:
 
CUNA Mutual Insurance Society
Attn: Associate General Counsel
5910 Mineral Point Road
Madison, WI 53705-4456
Telephone: 608-231-7653
FAX: 608-236-7653
E-Mail: steve.suleski@cunamutual.com

(4)  
Address for delivery of Notes to DTC:

DTC / New York Window
Attn: Robert Mendez
55 Water Street
New York, New York 10041

(5)  
Tax ID No.: 39-1236386

 

10

Schedule A

--------------------------------------------------------------------------------

 

SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set forth below
or set forth in the Section hereof following such term:
“Affiliate” means, at any time, and with respect to any Person, (a) any other
Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and, with respect to the Company, shall include (b) any
Person beneficially owning or holding, directly or indirectly, 10% or more of
any class of voting or equity interests of the Company or any Subsidiary or any
corporation of which the Company and its Subsidiaries beneficially own or hold,
in the aggregate, directly or indirectly, 10% or more of any class of voting or
equity interests. As used in this definition, “Control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. Unless the context otherwise clearly
requires, any reference to an “Affiliate” is a reference to an Affiliate of the
Company.
“Anti-Terrorism Order” means Executive Order 13224 of September 23, 2001,
Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten
to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)).
“Bankruptcy Law” means Title 11, U.S. Code or any similar Federal and State law
for the relief of debtors.
“Business Day” means any day other than a Saturday, a Sunday or a day on which
commercial banks in New York City are required or authorized to be closed.
“Capitalized Lease” means any lease of property (real, personal or mixed) which
in accordance with GAAP 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.
“Capital Stock” means any and all shares, interests, participations or other
equivalents (however designated) of corporate stock.
“Change of Control” means an event or series of events by which any person or
“group” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
(such person or persons hereinafter referred to as an “Acquiring Person”)
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of more than 50% of the voting power of the then
outstanding Voting Stock of the Company; provided that, notwithstanding the
foregoing, a “Change in Control” shall not be deemed to have occurred if the
Company (or the Acquiring Person if either (x) the Company is no longer in
existence or (y) the Acquiring Person has acquired all or substantially all of
the assets thereof) shall have an Investment Grade Rating immediately following
such Acquiring Person becoming the “beneficial owner” or consummating such
acquisition.

 

 

Schedule B

--------------------------------------------------------------------------------

 

“Closing” is defined in Section 3.
“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time.
“Common Stock” means the common stock, par value $0.15 per share, of the Company
as the same exists at the date of this Agreement or as such stock shall be
constituted from time to time.
“Company” means Energy West, Incorporated, a Montana corporation.
“Confidential Information” is defined in Section 20.
“Consolidated” when used in conjunction with any other defined term means the
aggregate amount of the items included within the defined term of the Company
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 Company’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
or loss of the Company 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.
“Control Event” means:
(a) the execution by the Company or any of its Subsidiaries or Affiliates of any
agreement with respect to any proposed transaction or event or series of
transactions or events that, individually or in the aggregate, may reasonably be
expected to result in a Change of Control, or
(b) the execution of any written agreement that, when fully performed by the
parties thereto, would result in a Change of Control.

 

2

Schedule B

--------------------------------------------------------------------------------

 

“Credit Agreement” means the Credit Agreement dated as of June 29, 2007 by and
among Energy West, Incorporated, various financial institutions and LaSalle Bank
National Association, as Agent, as such agreement may be amended, restated,
supplemented, modified, refinanced, extended or replaced.
“Custodian” means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
“Default” means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
“Default Rate” means that rate of interest that is the greater of (i) 2% per
annum above the rate of interest stated in clause (a) of the first paragraph of
the Notes or (ii) 2% over the rate of interest publicly announced by JPMorgan
Chase Bank, N.A. as its “base” or “prime” rate.
“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
GAAP.
“Disclosure Documents” is defined in Section 5.3.
“Environmental Laws” means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including those related to
Hazardous Materials.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time in effect.
“ERISA Affiliate” means any trade or business (whether or not incorporated) that
is treated as a single employer together with the Company under section 414 of
the Code.
“Event of Default” is defined in Section 11.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Form 10-K” is defined in Section 7.1(b).
“Form 10-Q” is defined in Section 7.1(a).
“Funded Debt” means without duplication (i) all Indebtedness maturing one year
or more from the date of the creation thereof and (ii) all Indebtedness under
any revolving credit facility measured at its lowest amount outstanding during
any 30 consecutive day period within the prior twelve months. Deferred Income
Taxes do not constitute Funded Debt.

 

3

Schedule B

--------------------------------------------------------------------------------

 

“Funding Instructions” is defined in Section 3.
“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States of America.
“Governmental Authority” means
(a) the government of
(i) the United States of America or any state or other political subdivision
thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary conducts all or any
part of its business, or which asserts jurisdiction over any properties of the
Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government.
“Guaranty” of a Person means any guaranty, assumption, endorsement, or
contingent agreement to purchase or provide funds for the payment of, or
otherwise become liable upon, the obligation of any other Person, or any
agreement to maintain the net worth or working capital or other financial
condition of any other Person or any other assurance to any creditor of any
Person against loss, including any comfort letter, operating agreement,
take-or-pay contract, or the contingent liability of such Person in connection
with any application for a letter of credit, excepting from the foregoing
contingent liabilities the amount of such Person’s obligations with respect to
bonds, deposits, standby letters of credit or other evidences of contingent
obligations given to governmental entities in compliance with local and state
requirements that have not been drawn or called upon.
“Hazardous Material” means any and all pollutants, toxic or hazardous wastes or
other substances that might pose a hazard to health and safety, the removal of
which may be required or the generation, manufacture, refining, production,
processing, treatment, storage, handling, transportation, transfer, use,
disposal, release, discharge, spillage, seepage or filtration of which is or
shall be restricted, prohibited or penalized by any applicable law including,
but not limited to, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum, petroleum products, lead based paint, radon gas or similar
restricted, prohibited or penalized substances.
“holder” means, with respect to any Note, the Person in whose name such Note is
registered in the register maintained by the Company pursuant to Section 13.1.
“INHAM Exemption” is defined in Section 6.2(e).
“Indebtedness” with respect to any Person means, at any time, without
duplication

 

4

Schedule B

--------------------------------------------------------------------------------

 

(a) 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 GAAP;
(b) 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;
(c) all Capitalized Lease Obligations; and
(d) all Guaranties by such Person.
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.
“Institutional Investor” means (a) any original purchaser of a Note, (b) any
holder of $5,000,000 or more in aggregate principal amount of the Notes and
(c) any bank, trust company, savings and loan association or other financial
institution, any pension plan, any investment company, any insurance company,
any broker or dealer, or any other similar financial institution or entity,
regardless of legal form.
“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 account of interest on such Indebtedness, including imputed interest in
respect of Capitalized Lease Obligations and amortization of debt discount and
expense.
“Investment Grade Rating” in respect of any Person means, at the time of
determination, at least two of the following ratings of its senior, unsecured
long-term indebtedness for borrowed money: (i) by Standard & Poor’s Rating
Services, a division of The McGraw-Hill Companies, or any successor thereof
(“S&P”), “BBB-” or better, (ii) by Moody’s Investors Service, Inc., or any
successor thereof (“Moody’s”), “Baa3” or better, or (iii) by another rating
agency of recognized national standing, an equivalent or better rating.
“Lien” as applied to the property of any Person means any mortgage, lien, charge
or encumbrance on, or security interest in, or pledge of, or conditional sale or
other title retention agreement.
“Make-Whole Amount” is defined in Section 8.7.

 

5

Schedule B

--------------------------------------------------------------------------------

 

“Material” means material in relation to the business, operations, affairs,
financial condition, assets, properties or prospects of the Company and its
Subsidiaries taken as a whole.
“Material Adverse Effect” means a material adverse effect on (a) the business,
operations, financial condition, assets or properties of the Company and its
Subsidiaries taken as a whole, (b) the ability of the Company to perform its
obligations under this Agreement or the Notes, (c) the ability of any Subsidiary
Guarantor to perform its obligations under the Subsidiary Guaranty, or (d) the
validity or enforceability of this Agreement, the Notes or the Subsidiary
Guaranty.
“Multiemployer Plan” means any Plan that is a “multiemployer plan” (as such term
is defined in section 4001(a)(3) of ERISA).
“NAIC” means the National Association of Insurance Commissioners or any
successor thereto.
“NAIC Annual Statement” is defined in Section 6.2(a).
“Notes” is defined in Section 1.
“Officer’s Certificate” means a certificate of a Senior Financial Officer or of
any other officer of the Company whose responsibilities extend to the subject
matter of such certificate.
“Other Purchasers” is defined in Section 2.
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA or any successor thereto.
“Person” means an individual or a corporation, partnership, trust, incorporated
or unincorporated association, joint venture, joint stock company, limited
liability company, government (or an agency or political subdivision thereof) or
other entity of any kind.
“Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA)
that is or, within the preceding five years, has been established or maintained,
or to which contributions are or, within the preceding five years, have been
made or required to be made, by the Company or any ERISA Affiliate or with
respect to which the Company or any ERISA Affiliate may have any liability.
“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.

 

6

Schedule B

--------------------------------------------------------------------------------

 

“property” or “properties” means, unless otherwise specifically limited, real or
personal property of any kind, tangible or intangible, choate or inchoate.
“Proposed Prepayment Date” is defined in Section 8.3(c).
“PTE” is defined in Section 6.2(a).
“Purchaser” means each purchaser listed in Schedule A.
“QPAM Exemption” is defined in Section 6.2(d).
“Qualified Institutional Buyer” means any Person that is a “qualified
institutional buyer” within the meaning of such term as set forth in
Rule 144A(a)(1) under the Securities Act.
“Required Holders” means, at any time, the holders of at least 51% in principal
amount of the Notes at the time outstanding (exclusive of Notes then owned by
the Company or any of its Affiliates).
“Responsible Officer” means any Senior Financial Officer and any other officer
of the Company with responsibility for the administration of the relevant
portion of this Agreement, including the President and Chief Executive Officer,
the Chief Financial Officer, the Vice President Administration or the
Controller.
“SEC” shall mean the Securities and Exchange Commission of the United States, or
any successor thereto.
“Securities Act” means the Securities Act of 1933, as amended from time to time.
“Senior Financial Officer” means the chief financial officer, principal
accounting officer, treasurer, Vice President Administration or controller of
the Company.
“Source” is defined in Section 6.2.
“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.
“Subsidiary” means any corporation, partnership, association, limited liability
company, or other business entity of which 50% or more of the Voting Stock or
other equity interests, as appropriate, is at the time directly or indirectly
owned by the Company and one or more other Subsidiaries, or by one or more other
Subsidiaries.
“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 GAAP.

 

7

Schedule B

--------------------------------------------------------------------------------

 

“Subsidiary Guarantor” is defined in Section 1.2.
“Subsidiary Guaranty” is defined in Section 1.2.
“SVO” means the Securities Valuation Office of the NAIC or any successor to such
Office.
“Tangible Assets” means, as applied to any Person at any date, all assets other
than those which would be treated as intangibles under GAAP, 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.
“this Agreement” or “the Agreement” is defined in Section 17.3.
“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.
“USA Patriot Act” means United States Public Law 107-56, Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.
“Voting Stock” means, with respect to any Person, any class of shares of stock
or other equity interests of such Person having general voting power under
ordinary circumstances to elect a majority of the board of directors or other
managing entities, as appropriate, of such Person (irrespective of whether or
not at the time stock of any other class or classes or other equity interests of
such Person shall have or might have voting power by reason of the happening of
any contingency).
“Wholly Owned Subsidiary” means, at any time, any Subsidiary 100% of all of the
Voting Stock (except directors’ qualifying shares and other minority shares held
solely to satisfy organization requirements of the applicable jurisdiction) and
voting interests of which are owned by any one or more of the Company and its
Wholly Owned Subsidiaries at such time.

 

8

Schedule B

--------------------------------------------------------------------------------

 

SCHEDULE 5.4
ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES

              Name   Jurisdiction   % Owned
 
           
Energy West Resources, Inc.
  Montana     100.00 %
Energy West Propane, Inc.
  Montana     100.00 %
Energy West Development, Inc.
  Montana     100.00 %

Directors and Senior Officers
Directors:
W.E. ‘Gene’ Argo
Steve A. Calabrese
David A. Cerotzke
Mark D. Grossi
Richard M. Osborne
James R. Smail
Thomas J. Smith
James E. Sprague
Senior Officers:
David A. Cerotzke, President and Chief Executive Officer
Wade F. Brooksby, Chief Financial Officer and Corporate Secretary
Kevin Degenstein, Senior Vice-President Operations
Jed Henthorne, Vice-President Administration

 

 

Schedule 5.4

--------------------------------------------------------------------------------

 

SCHEDULE 5.14
USE OF PROCEEDS
Proceeds of the Notes will be used principally to repay Indebtedness outstanding
under its outstanding credit agreement (that is being terminated on the date of
Closing and replaced by the Credit Agreement) that was incurred to repay:

  1.  
Series 1997 notes — principal outstanding $7,830,000; total payoff:
$7,870,781.25
    2.  
Series 1993 notes — principal outstanding $4,290,000; total payoff:
$4,312,518.76
    3.  
Cascade County, Montana Series 1992B Industrial Development Revenue Obligations
— principal outstanding $775,000; total payoff: $799,895.00

 

 

Schedule 5.14

--------------------------------------------------------------------------------

 

SCHEDULE 5.15
EXISTING INDEBTEDNESS
The following is our long-term indebtedness as of June 21, 2007 (See
Schedule 5.14).

  1.  
Series 1997 notes — principal outstanding $7,830,000; total payoff:
$7,870,781.25
    2.  
Series 1993 notes — principal outstanding $4,290,000; total payoff:
$4,312,518.76
    3.  
Cascade County, Montana Series 1992B Industrial Development Revenue Obligations
— principal outstanding $775,000; total payoff: $799,895.00

 

 

Schedule 5.15

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SCHEDULE 5.18
ENVIRONMENTAL MATTERS
The Company owns property on which it operated a manufactured gas plant from
1909 to 1928. The site is currently used as an office facility for Company field
personnel and a storage location for certain equipment and materials. The coal
gasification process utilized in the plant resulted in the production of certain
by-products which have been classified by the federal government and the State
of Montana as hazardous to the environment.
The Company has completed its remediation of soil contaminants and in April of
2002 received a closure letter from the Montana Department of Environmental
Quality (“MDEQ”) approving the completion of such remediation program. The
Company and its consultants continue to work with the MDEQ relating to the
remediation plan for water contaminants. The MDEQ has established regulations
that allow water contaminants at a site to exceed standards if it is technically
impracticable to achieve them. Although the MDEQ has not established guidance to
attain a technical waiver, the U.S. Environmental Protection Agency (“EPA”) has
developed such guidance. The EPA guidance lists factors which render remediation
technically impracticable. The Company has filed a request for a waiver
respecting compliance with certain standards with the MDEQ.

 

 

Schedule 5.18

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EXHIBIT 1.1
[FORM OF SENIOR NOTE]
ENERGY WEST, INCORPORATED
6.16% Senior Unsecured Note due June 29, 2017

      No. R-[___]   [Date] $[_____]   PPN: 29274A A*6

FOR VALUE RECEIVED, the undersigned, ENERGY WEST, INCORPORATED (herein called
the “Company”), a corporation organized and existing under the laws of the state
of Montana promises to pay to [_____], or registered assigns, the principal sum
of $[_____] on June 29, 2017, with interest (computed on the basis of a 360-day
year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of
6.16% per annum from the date hereof, payable semiannually, on June 29 and
December 29 in each year, commencing with the June 29 or December 29 next
succeeding the date hereof, until the principal hereof shall have become due and
payable, and (b) to the extent permitted by law, at a rate per annum from time
to time equal to the greater of (i) 8.16% or (ii) 2% over the rate of interest
publicly announced by JPMorgan Chase Bank, N.A. from time to time in New York,
New York as its “base” or “prime” rate, on any overdue payment of interest and,
during the continuance of an Event of Default, on the unpaid balance hereof and
on any overdue payment of any Make-Whole Amount, payable semiannually as
aforesaid (or, at the option of the registered holder hereof, on demand).
Payments of principal of, interest on and any Make-Whole Amount with respect to
this Note are to be made in lawful money of the United States of America at the
principal office of JPMorgan Chase Bank, N.A. in New York, New York or at such
other place as the Company shall have designated by written notice to the holder
of this Note as provided in the Note Purchase Agreement referred to below.
This Note is one of a series of Senior Notes (herein called the “Notes”) issued
pursuant to the Note Purchase Agreement dated as of June 29, 2007 (as from time
to time amended, the “Note Purchase Agreement”), between the Company and the
respective Purchasers named therein and is entitled to the benefits thereof.
Each holder of this Note will be deemed, by its acceptance hereof, (i) to have
agreed to the confidentiality provisions set forth in Section 20 of the Note
Purchase Agreement and (ii) to have made the representation set forth in
Section 6.2 of the Note Purchase Agreement. Unless otherwise indicated,
capitalized terms used in this Note shall have the respective meanings ascribed
to such terms in the Note Purchase Agreement.
This Note is a registered Note and, as provided in the Note Purchase Agreement,
upon surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder’s attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the Person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company will not be affected by any notice to the contrary.

 

 

Exhibit 1.1

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This Note is subject to optional prepayment, in whole or from time to time in
part, at the times and on the terms specified in the Note Purchase Agreement,
but not otherwise.
If an Event of Default occurs and is continuing, the principal of this Note may
be declared or otherwise become due and payable in the manner, at the price
(including any applicable Make-Whole Amount) and with the effect provided in the
Note Purchase Agreement.
This Note shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by, the law of the state of New York excluding
choice-of-law principles of the law of such state that would require the
application of the laws of a jurisdiction other than such state.

            ENERGY WEST, INCORPORATED
      By:           Name:   David A. Cerotzke        Title:   President and
Chief Executive Officer     

 

2

Exhibit 1.1

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EXHIBIT 1.2
[FORM OF SUBSIDIARY GUARANTY]
THIS GUARANTY (this “Guaranty”) dated as of June 29, 2007 is made by the
undersigned (each, a “Guarantor”), in favor of the holders from time to time of
the Notes hereinafter referred to, including each purchaser named in the Note
Purchase Agreement hereinafter referred to, and their respective successors and
assigns (collectively, the “Holders” and each individually, a “Holder”).
W I T N E S S E T H:
WHEREAS, Energy West, Incorporated a Montana corporation (the “Company”), and
the initial Holders have entered into a Note Purchase Agreement dated as of
June 29, 2007 (the Note Purchase Agreement as amended, restated or otherwise
modified from time to time in accordance with its terms and in effect, the “Note
Purchase Agreement”);
WHEREAS, the Note Purchase Agreement provides for the issuance by the Company of
$13,000,000 aggregate principal amount of Notes (as defined in the Note Purchase
Agreement);
WHEREAS, the Company directly or indirectly owns all or a substantial portion of
the issued and outstanding capital stock of each Guarantor and, by virtue of
such ownership and otherwise, each Guarantor will derive substantial benefits
from the purchase by the Holders of the Company’s Notes;
WHEREAS, it is a condition precedent to the obligation of the Holders to
purchase the Notes that each Guarantor shall have executed and delivered this
Guaranty to the Holders; and
WHEREAS, each Guarantor desires to execute and deliver this Guaranty to satisfy
the conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the premises and other benefits to each
Guarantor, and of the purchase of the Company’s Notes by the Holders, and for
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, each Guarantor makes this Guaranty as follows:
1) Definitions. Any capitalized terms not otherwise herein defined shall have
the meanings attributed to them in the Note Purchase Agreement.

 

 

Exhibit 1.2

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2) Guaranty. Each Guarantor, jointly and severally with each other Guarantor,
unconditionally and irrevocably guarantees to the Holders the due, prompt and
complete payment by the Company of the principal of, make-whole amount, if any,
prepayment premium, if any, breakage amount, if any, and interest on, and each
other amount due under, the Notes or the Note Purchase Agreement, when and as
the same shall become due and payable (whether at stated maturity or by required
or optional prepayment or by acceleration or otherwise) in accordance with the
terms of the Notes and the Note Purchase Agreement (the Notes and the Note
Purchase Agreement being sometimes hereinafter collectively referred to as the
“Note Documents” and the amounts payable by the Company under the Note
Documents, and all other monetary obligations of the Company thereunder
(including any attorneys’ fees and expenses), being sometimes collectively
hereinafter referred to as the “Obligations”). This Guaranty is a guaranty of
payment and not just of collectibility and is in no way conditioned or
contingent upon any attempt to collect from the Company or upon any other event,
contingency or circumstance whatsoever. If for any reason whatsoever the Company
shall fail or be unable duly, punctually and fully to pay such amounts as and
when the same shall become due and payable, each Guarantor, without demand,
presentment, protest or notice of any kind, will forthwith pay or cause to be
paid such amounts to the Holders under the terms of such Note Documents, in
lawful money of the United States, at the place specified in the Note Purchase
Agreement, or perform or comply with the same or cause the same to be performed
or complied with, together with interest (to the extent provided for under such
Note Documents) on any amount due and owing from the Company. Each Guarantor,
promptly after demand, will pay to the Holders the reasonable costs and expenses
of collecting such amounts or otherwise enforcing this Guaranty, including,
without limitation, the reasonable fees and expenses of counsel. Notwithstanding
the foregoing, the right of recovery against each Guarantor under this Guaranty
is limited to the extent it is judicially determined with respect to any
Guarantor that entering into this Guaranty would violate Section 548 of the
United States Bankruptcy Code or any comparable provisions of any state law, in
which case such Guarantor shall be liable under this Guaranty only for amounts
aggregating up to the largest amount that would not render such Guarantor’s
obligations hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code or any comparable provisions of any state law.
3) Guarantor’s Obligations Unconditional. The obligations of each Guarantor
under this Guaranty shall be primary, absolute and unconditional obligations of
each Guarantor, shall not be subject to any counterclaim, set-off, deduction,
diminution, abatement, recoupment, suspension, deferment, reduction or defense
based upon any claim each Guarantor or any other person may have against the
Company or any other person, and to the full extent permitted by applicable law
shall remain in full force and effect without regard to, and shall not be
released, discharged or in any way affected by (other than a release of
Guarantor herefrom pursuant to Section 9.6(b) of the Note Purchase Agreement),
any circumstance or condition whatsoever (whether or not each Guarantor or the
Company shall have any knowledge or notice thereof), including:
(a) any termination, amendment or modification of or deletion from or addition
or supplement to or other change in any of the Note Documents or any other
instrument or agreement applicable to any of the parties to any of the Note
Documents;
(b) any furnishing or acceptance of any security, or any release of any
security, for the Obligations, or the failure of any security or the failure of
any person to perfect any interest in any collateral;

 

2

Exhibit 1.2

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(c) any failure, omission or delay on the part of the Company to conform or
comply with any term of any of the Note Documents or any other instrument or
agreement referred to in paragraph (a) above, including, without limitation,
failure to give notice to any Guarantor of the occurrence of a “Default” or an
“Event of Default” under any Note Document;
(d) any waiver of the payment, performance or observance of any of the
obligations, conditions, covenants or agreements contained in any Note Document,
or any other waiver, consent, extension, indulgence, compromise, settlement,
release or other action or inaction under or in respect of any of the Note
Documents or any other instrument or agreement referred to in paragraph
(a) above or any obligation or liability of the Company, or any exercise or
non-exercise of any right, remedy, power or privilege under or in respect of any
such instrument or agreement or any such obligation or liability;
(e) any failure, omission or delay on the part of any of the Holders to enforce,
assert or exercise any right, power or remedy conferred on such Holder in this
Guaranty, or any such failure, omission or delay on the part of such Holder in
connection with any Note Document, or any other action on the part of such
Holder;
(f) any voluntary or involuntary bankruptcy, insolvency, reorganization,
arrangement, readjustment, assignment for the benefit of creditors, composition,
receivership, conservatorship, custodianship, liquidation, marshaling of assets
and liabilities or similar proceedings with respect to the Company, any
Guarantor or to any other person or any of their respective properties or
creditors, or any action taken by any trustee or receiver or by any court in any
such proceeding;
(g) any discharge, termination, cancellation, frustration, irregularity,
invalidity or unenforceability, in whole or in part, of any of the Note
Documents or any other agreement or instrument referred to in paragraph
(a) above or any term hereof;
(h) any merger or consolidation of the Company or any Guarantor into or with any
other corporation, or any sale, lease or transfer of any of the assets of the
Company or any Guarantor to any other person;
(i) any change in the ownership of any shares of capital stock of the Company or
any change in the corporate relationship between the Company and any Guarantor,
or any termination of such relationship;
(j) any release or discharge, by operation of law, of any Guarantor from the
performance or observance of any obligation, covenant or agreement contained in
this Guaranty; or
(k) any other occurrence, circumstance, happening or event whatsoever, whether
similar or dissimilar to the foregoing, whether foreseen or unforeseen, and any
other circumstance which might otherwise constitute a legal or equitable defense
or discharge of the liabilities of a guarantor or surety or which might
otherwise limit recourse against any Guarantor.

 

3

Exhibit 1.2

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4) Full Recourse Obligations. The obligations of each Guarantor set forth herein
constitute the full recourse obligations of such Guarantor enforceable against
it to the full extent of all its assets and properties.
5) Waiver. Each Guarantor unconditionally waives, to the extent permitted by
applicable law, (a) notice of any of the matters referred to in Section 3,
(b) notice to such Guarantor of the incurrence of any of the Obligations, notice
to such Guarantor or the Company of any breach or default by such Guarantor or
the Company with respect to any of the Obligations or any other notice that may
be required, by statute, rule of law or otherwise, to preserve any rights of the
Holders against such Guarantor, (c) presentment to or demand of payment from the
Company or the Guarantor with respect to any amount due under any Note Document
or protest for nonpayment or dishonor, (d) any right to the enforcement,
assertion or exercise by any of the Holders of any right, power, privilege or
remedy conferred in the Note Purchase Agreement or any other Note Document or
otherwise, (e) any requirement of diligence on the part of any of the Holders,
(f) any requirement to exhaust any remedies or to mitigate the damages resulting
from any default under any Note Document, (g) any notice of any sale, transfer
or other disposition by any of the Holders of any right, title to or interest in
the Note Purchase Agreement or in any other Note Document and (h) any other
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge, release (other than a release of such Guarantor herefrom pursuant to
Section 9.6(b) of the Note Purchase Agreement) or defense of a guarantor or
surety (other than the defense of payment) or which might otherwise limit
recourse against such Guarantor.
6) Subrogation, Contribution, Reimbursement or Indemnity. Until all Obligations
have been indefeasibly paid in full, each Guarantor agrees not to take any
action pursuant to any rights which may have arisen in connection with this
Guaranty to be subrogated to any of the rights (whether contractual, under the
United States Bankruptcy Code, as amended, including Section 509 thereof, under
common law or otherwise) of any of the Holders against the Company or against
any collateral security or guaranty or right of offset held by the Holders for
the payment of the Obligations. Until all Obligations have been indefeasibly
paid in full, each Guarantor agrees not to take any action pursuant to any
contractual, common law, statutory or other rights of reimbursement,
contribution, exoneration or indemnity (or any similar right) from or against
the Company which may have arisen in connection with this Guaranty. So long as
any Obligations remain outstanding, if any amount shall be paid by or on behalf
of the Company to any Guarantor on account of any of the rights waived in this
Section 6, such amount shall be held by such Guarantor in trust, segregated from
other funds of such Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Holders (duly endorsed by such Guarantor to the
Holders, if required), to be applied against the Obligations, whether matured or
unmatured, in such order as the Holders may determine. The provisions of this
Section 6 shall survive the term of this Guaranty and the payment in full of the
Obligations.

 

4

--------------------------------------------------------------------------------

 

7) Effect of Bankruptcy Proceedings, etc. This Guaranty shall continue to be
effective or be automatically reinstated, as the case may be, if at any time
payment, in whole or in part, of any of the sums due to any of the Holders
pursuant to the terms of the Note Purchase Agreement or any other Note Document
is rescinded or must otherwise be restored or returned by such Holder upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company or any other person, or upon or as a result of the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to the Company or other person or any substantial part of its property, or
otherwise, all as though such payment had not been made. If an event permitting
the acceleration of the maturity of the principal amount of the Notes shall at
any time have occurred and be continuing, and such acceleration shall at such
time be prevented by reason of the pendency against the Company or any other
person of a case or proceeding under a bankruptcy or insolvency law, each
Guarantor agrees that, for purposes of this Guaranty and its obligations
hereunder, the maturity of the principal amount of the Notes and all other
Obligations shall be deemed to have been accelerated with the same effect as if
any Holder had accelerated the same in accordance with the terms of the Note
Purchase Agreement or other applicable Note Document, and such Guarantor shall
forthwith pay such principal amount, Make-Whole Amount, if any, and interest
thereon and any other amounts guaranteed hereunder without further notice or
demand.
8) Term of Agreement. This Guaranty and all guaranties, covenants and agreements
of each Guarantor contained herein shall continue in full force and effect and
shall not be discharged until such time as all of the Obligations shall be paid
and performed in full and all of the agreements of such Guarantor hereunder
shall be duly paid and performed in full; provided that each Guarantor shall be
automatically and immediately released herefrom without any further act by any
Person as provided in Section 9.6(b) of the Note Purchase Agreement.
9) Representations and Warranties. Each Guarantor represents and warrants to
each Holder that:
(a) such Guarantor is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization and has the requisite power
and authority to own and operate its property, to lease the property it operates
as lessee and to conduct the business in which it is currently engaged;
(b) such Guarantor has the requisite power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Guaranty, and
has taken all necessary action to authorize its execution, delivery and
performance of this Guaranty;
(c) this Guaranty constitutes a legal, valid and binding obligation of such
Guarantor enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors’ rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law);

 

5

Exhibit 1.2

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(d) the execution, delivery and performance of this Guaranty will not
(i) contravene, result in any breach of, or constitute a default under, or
result in the creation of any Lien in respect of any property of such Guarantor
under any indenture, mortgage, deed of trust, loan, credit agreement, corporate
charter or by-laws, or any other agreement evidencing Debt, (ii) contravene,
result in any breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of such Guarantor under, any
other agreement or instrument to which such Guarantor is bound or by which such
Guarantor or any of its properties may be bound or affected, except as could not
reasonably be expected to have a Material Adverse Effect, (iii) conflict with or
result in a breach of any of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or Governmental Authority
applicable to such Guarantor, except as could not reasonably be expected to have
a Material Adverse Effect, or (iv) violate any provision of any statute or other
rule or regulation of any Governmental Authority applicable to such Guarantor,
except as could not reasonably be expected to have a Material Adverse Effect;
(e) no consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by such Guarantor of this Guaranty;
(f) no litigation, investigation or proceeding of or before any arbitrator or
governmental authority is pending or, to the knowledge of such Guarantor,
threatened by or against such Guarantor or any of its properties or revenues
(i) with respect to this Guaranty or any of the transactions contemplated hereby
or (ii) that could reasonably be expected to have a material adverse effect upon
the business, operations or financial condition of such Guarantor and its
Subsidiaries taken as a whole;
(g) such Guarantor (after giving due consideration to any rights of
contribution) has received fair consideration and reasonably equivalent value
for the incurrence of its obligations hereunder or as contemplated hereby and
after giving effect to the transactions contemplated herein, (i) the fair value
of the assets of such Guarantor (both at fair valuation and at present fair
saleable value) exceeds its liabilities, (ii) such Guarantor is able to and
expects to be able to pay its debts as they mature, and (iii) such Guarantor has
capital sufficient to carry on its business as conducted and as proposed to be
conducted.
10) Notices. All notices and communications provided for hereunder shall be in
writing and sent (a) by facsimile if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid), addressed (a) if to the Company or any Holder at the
address or telecopy number set forth in the Note Purchase Agreement or (b) if to
a Guarantor, in care of the Company at the Company’s address or telecopy number
set forth in the Note Purchase Agreement, or in each case at such other address
or telecopy number as the Company, any Holder or such Guarantor shall from time
to time designate in writing to the other parties. Any notice so addressed shall
be deemed to be given when actually received.

 

6

Exhibit 1.2

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11) Survival. All warranties, representations and covenants made by each
Guarantor herein or in any certificate or other instrument delivered by it or on
its behalf hereunder shall be considered to have been relied upon by the Holders
and shall survive the execution and delivery of this Guaranty, regardless of any
investigation made by any of the Holders. All statements in any such certificate
or other instrument shall constitute warranties and representations by such
Guarantor hereunder.
12) Jurisdiction and Process; Waiver of Jury Trial.
(a) Each Guarantor irrevocably submits to the non exclusive jurisdiction of any
New York State or federal court sitting in the Borough of Manhattan, The City of
New York, over any suit, action or proceeding arising out of or relating solely
to this Agreement or the Notes. To the fullest extent permitted by applicable
law, each Guarantor irrevocably waives and agrees not to assert, by way of
motion, as a defense or otherwise, any claim that it is not subject to the
jurisdiction of any such court, any objection that it may now or hereafter have
to the laying of the venue of any such suit, action or proceeding brought in any
such court and any claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum.
(b) Each Guarantor consents to process being served in any suit, action or
proceeding solely of the nature referred to in Section 12(a) by mailing a copy
thereof by registered or certified or priority mail, postage prepaid, return
receipt requested, or delivering a copy thereof in the manner for delivery of
notices specified in Section 10, to it. Each Guarantor agrees that such service
upon receipt (i) shall be deemed in every respect effective service of process
upon it in any such suit, action or proceeding and (ii) shall, to the fullest
extent permitted by applicable law, be taken and held to be valid personal
service upon and personal delivery to it. Notices hereunder shall be
conclusively presumed received as evidenced by a delivery receipt furnished by
the United States Postal Service or any reputable commercial delivery service.
(c) Nothing in this Section 12 shall affect the right of any holder of a Note to
serve process in any manner permitted by law, or limit any right that the
holders of any of the Notes may have to bring proceedings against any Guarantor
in the courts of any appropriate jurisdiction or to enforce in any lawful manner
a judgment obtained in one jurisdiction in any other jurisdiction.
(d) EACH GUARANTOR WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT
TO THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION
HEREWITH OR THEREWITH.
13) Miscellaneous. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, each Guarantor
hereby waives any provision of law that renders any provisions hereof prohibited
or unenforceable in any respect. The terms of this Guaranty shall be binding
upon, and inure to the benefit of, each Guarantor and the Holders and their
respective successors and assigns. No term or provision of this Guaranty may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by each Guarantor and the Required Holders. The section and
paragraph headings in this Guaranty and the table of contents are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof, and all references herein to numbered
sections, unless otherwise indicated, are to sections in this Guaranty. This
Guaranty shall in all respects be governed by, and construed in accordance with,
the laws of the State of New York, including all matters of construction,
validity and performance.

 

7

Exhibit 1.2

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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed
as of the day and year first above written.

            ENERGY WEST RESOURCES, INC.
      By:           Name:           Title:           ENERGY WEST PROPANE, INC.
      By:           Name:           Title:           ENERGY WEST DEVELOPMENT,
INC.
      By:           Name:           Title:        

 

8

Exhibit 1.2

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FORM OF JOINDER TO SUBSIDIARY GUARANTY
The undersigned (the “Guarantor”), joins in the Subsidiary Guaranty dated as of
June 29, 2007 from the Guarantors named therein in favor of the Holders, as
defined therein, and agrees to be bound by all of the terms thereof and
represents and warrants to the Holders that:
(a) the Guarantor is duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization and has the requisite power and
authority to own and operate its property, to lease the property it operates as
lessee and to conduct the business in which it is currently engaged;
(b) the Guarantor has the requisite power and authority and the legal right to
execute and deliver this Joinder to Subsidiary Guaranty (“Joinder”) and to
perform its obligations hereunder and under the Subsidiary Guaranty and has
taken all necessary action to authorize its execution and delivery of this
Joinder and its performance of the Subsidiary Guaranty;
(c) the Subsidiary Guaranty constitutes a legal, valid and binding obligation of
the Guarantor enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors’ rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law);
(d) the execution, delivery and performance of this Joinder and performance of
the Subsidiary Guaranty will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of such Guarantor under any indenture, mortgage, deed of trust,
loan, credit agreement, corporate charter or by-laws, or any other agreement
evidencing Debt, (ii) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any property
of such Guarantor under, any other agreement or instrument to which such
Guarantor is bound or by which such Guarantor or any of its properties may be
bound or affected, except as could not reasonably be expected to have a Material
Adverse Effect, (iii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to such Guarantor, except as
could not reasonably be expected to have a Material Adverse Effect, or
(iv) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to such Guarantor, except as could not
reasonably be expected to have a Material Adverse Effect;
(e) no consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by such Guarantor of this Joinder or the
Subsidiary Guaranty;

 

9

Exhibit 1.2

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(f) except as disclosed in writing to the holders, no litigation, investigation
or proceeding of or before any arbitrator or governmental authority is pending
or, to the knowledge of the Guarantor, threatened by or against the Guarantor or
any of its properties or revenues (i) with respect to this Joinder, the
Subsidiary Guaranty or any of the transactions contemplated hereby or (ii) that
could reasonably be expected to have a material adverse effect on the business,
operations or financial condition of the Guarantor and its subsidiaries taken as
a whole;
(g) such Guarantor (after giving due consideration to any rights of
contribution) has received fair consideration and reasonably equivalent value
for the incurrence of its obligations hereunder or as contemplated hereby and
after giving effect to the transactions contemplated herein, (i) the fair value
of the assets of such Guarantor (both at fair valuation and at present fair
saleable value) exceeds its liabilities, (ii) such Guarantor is able to and
expects to be able to pay its debts as they mature, and (iii) such Guarantor has
capital sufficient to carry on its business as conducted and as proposed to be
conducted.
Capitalized Terms used but not defined herein have the meanings ascribed in the
Subsidiary Guaranty.
IN WITNESS WHEREOF, the undersigned has caused this Joinder to Subsidiary
Guaranty to be duly executed as of  __________,  _____.

            [Name of Guarantor]
      By:           Name:           Title:        

 

10

Exhibit 1.2

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EXHIBIT 4.4(a)
FORM OF OPINION OF COUNSEL
FOR THE COMPANY
The opinions of Rogers & Hool LLP, counsel for the Company and the Subsidiary
Guarantors, and Browning, Kaleczyc, Berry and Hoven, P.C., special Montana
counsel for the Company and the Subsidiary Guarantors, shall be to the effect
that:
1. Each of the Company and each Subsidiary Guarantor is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and each has all requisite corporate power and
authority to own and operate its properties, to carry on its business as now
conducted, and, in the case of the Company, to enter into and perform the Note
Purchase Agreement and to issue and sell the Notes and, in the case of each
Subsidiary Guarantor, to enter into and perform the Subsidiary Guaranty.
2. The Note Purchase Agreement and the Notes have been duly authorized by proper
corporate action on the part of the Company, have been duly executed and
delivered by an authorized officer of the Company, and constitute the legal,
valid and binding agreements of the Company, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
fraudulent transfer, moratorium or similar laws of general application relating
to or affecting the enforcement of the rights of creditors or by equitable
principles, regardless of whether enforcement is sought in a proceeding in
equity or at law.
3. The Subsidiary Guaranty has been duly authorized by proper corporate action
on the part of each Subsidiary Guarantor, has been duly executed and delivered
by an authorized officer each such Subsidiary Guarantor, and constitutes the
legal, valid and binding obligation of each Subsidiary Guarantor, enforceable in
accordance with its terms, except to the extent the enforcement thereof may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws of general application relating to or
affecting the enforcement of the rights of creditors or by equitable principles,
regardless of whether enforcement is sought in a proceeding in equity or at law.
4. In any action or proceeding arising out of or relating to the Agreement, the
Notes or the Subsidiary Guaranty in any federal court sitting in the State of
Montana or any Montana state court, such court would recognize and give effect
to the governing law provisions of such documents choosing the laws of the State
of New York; or alternatively, if Montana law were deemed to govern the
Agreement, the Notes and the Subsidiary Guaranty, each such agreement would be
enforceable against the Company or the Subsidiary Guarantors, as the case may
be, in accordance with its terms, except to the extent the enforcement thereof
may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws of general application relating to or
affecting the enforcement of the rights of creditors or by equitable principles,
regardless of whether enforcement is sought in a proceeding in equity or at law.

 

Exhibit 4.4(a)

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5. Based on the representations set forth in the Agreement, the offering, sale
and delivery of the Notes and delivery of the Subsidiary Guaranty do not require
the registration of the Notes or the Subsidiary Guaranty under the Securities
Act of 1933, as amended, or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
6. No authorization, approval or consent of, and no designation, filing,
declaration, registration and/or qualification with, any Governmental Authority
is necessary or required in connection with the execution, delivery and
performance by the Company of the Note Purchase Agreement or the offering,
issuance and sale by the Company of the Notes, and no authorization, approval or
consent of, and no designation, filing, declaration, registration and/or
qualification with, any Governmental Authority is necessary or required in
connection with the execution, delivery and performance by any Subsidiary
Guarantor of the Subsidiary Guaranty.
7. The issuance and sale of the Notes by the Company, the performance of the
terms and conditions of the Notes and the Note Purchase Agreement by the Company
and the execution and delivery of the Note Purchase Agreement by the Company do
not conflict with, or result in any breach or violation of any of the provisions
of, or constitute a default under, or result in the creation or imposition of
any Lien on, the property of the Company pursuant to the provisions of (i) the
articles of incorporation or bylaws of the Company, (ii) any loan agreement
known to such counsel to which the Company is a party or by which the Company or
its property is bound, (iii) any other Material agreement or instrument known to
such counsel to which the Company is a party or by which the Company or its
property is bound, (iv) any law (including usury laws) or regulation applicable
to the Company, or (v) to the knowledge of such counsel, any order, writ,
injunction or decree of any court or Governmental Authority applicable to the
Company.
8. The execution, delivery and performance of the Subsidiary Guaranty will not
conflict with, or result in any breach or violation of any of the provisions of,
or constitute a default under, or result in the creation or imposition of any
Lien on, the property of any Subsidiary Guarantor pursuant to the provisions of
(i) the articles of incorporation or bylaws of such Subsidiary Guarantor,
(ii) any loan agreement known to such counsel to which such Subsidiary Guarantor
is a party or by which such Subsidiary Guarantor or its property is bound,
(iii) any other Material agreement or instrument known to such counsel to which
the Subsidiary Guarantor is a party or by which the Subsidiary Guarantor or its
property is bound, (iv) any law (including usury laws) or regulation applicable
to the Subsidiary Guarantor, or (v) to the knowledge of such counsel, any order,
writ, injunction or decree of any court or Governmental Authority applicable to
the Subsidiary Guarantor.
9. Neither the Company nor any Subsidiary is (i) a “public utility” as defined
in the Federal Power Act, as amended, or (ii) an “investment company” or a
company “controlled” by an “investment company,” as such terms are defined in
the Investment Company Act of 1940, as amended.
10. Based on the representations set forth in the Note Purchase Agreement, the
issuance of the Notes and the intended use of the proceeds of the sale of the
Notes do not violate or conflict with Regulation U, T or X of the Board of
Governors of the Federal Reserve System.
The opinion of Rogers & Hool LLP shall cover such other matters relating to the
sale of the Notes as the Purchasers may reasonably request. With respect to
matters of fact on which such opinion is based, such counsel shall be entitled
to rely on appropriate certificates of public officials and officers of the
Company and with respect to matters governed by the laws of any jurisdiction
other than the United States of America, the laws of the State of Montana or
Wyoming, such counsel may rely upon the opinions of counsel deemed (and stated
in their opinion to be deemed) by them to be competent and reliable.. The
opinion shall state that subsequent transferees and assignees of the Notes and
Foley & Lardner LLP may rely thereon.

 

2

Exhibit 4.4(a)

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EXHIBIT 4.4(b)
FORM OF OPINION OF SPECIAL COUNSEL
TO THE PURCHASERS
The opinion of Foley & Lardner LLP, special counsel to the Purchasers, shall be
to the effect that:
1. The Agreement and the Notes constitute the legal, valid and binding
agreements of the Company, enforceable in accordance with their terms, except to
the extent that enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, fraudulent transfer,
moratorium or similar laws of general application relating to or affecting the
enforcement of the rights of creditors or by equitable principles, regardless of
whether enforcement is sought in a proceeding in equity or at law.
2. The Subsidiary Guaranty constitutes the legal, valid and binding agreement of
each Subsidiary Guarantor, enforceable in accordance with its terms, except to
the extent that enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, fraudulent transfer,
moratorium or similar laws of general application relating to or affecting the
enforcement of the rights of creditors or by equitable principles, regardless of
whether enforcement is sought in a proceeding in equity or at law.
3. Based on the representations set forth in the Agreement, the offering, sale
and delivery of the Notes and delivery of the Subsidiary Guaranty do not require
the registration of the Notes or the Subsidiary Guaranty under the Securities
Act of 1933, as amended, or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
4. No approval, consent or withholding of objection on the part of, or filing,
registration or qualification with, any Federal governmental body is necessary
in connection with the execution and delivery of the Note Agreement or the
Notes.
Foley & Lardner LLP may rely upon the opinion of Browning, Kaleczyc, Berry and
Hoven, P.C., special Montana counsel for the Company as to the due
authorization, execution and delivery of the Agreement, the Notes and the
Subsidiary Guaranty. Such opinion shall state that the opinion of Browning,
Kaleczyc, Berry and Hoven, P.C. is satisfactory in form and scope to it, and
that, in its opinion, the Purchasers and it are justified in relying thereon and
shall cover such other matters relating to the sale of the Notes as the
Purchasers may reasonably request.

 

Exhibit 4.4(b)