Document:

exv10w1

 

EXHIBIT 10.1

August 31, 2006

Dear Tim:

This letter confirms our discussions regarding your employment status with Energy West Incorporated
(the “Company”) and your subsequent separation from employment with the Company due to the
realignment and the movement of your position to our Great Falls, Montana headquarters offices.
The details of our discussions are set out below.

1. Employment and Separation from Employment

It is understood that during the period from the date of this letter through October 1, 2006 (the
“active employment period”) you shall remain in the employ of the Company with your current
employment duties with the title of Vice President Natural Gas. During the active employment
period, you shall make your transitional services available to employees and authorized
representatives of the Company as specifically requested by me or my designee. You shall not
independently initiate the provision of services nor shall you represent yourself as authorized to
act on behalf of the Company, except as approved in advance by me or my designee. Your
transitional services shall involve (i) those areas and matters in which you were involved prior to
the date of this letter agreement, and (ii) assistance in transitioning the Company’s ongoing
matters. During the active employment period, you will report to me.

Provided that you abide by your obligations under this letter agreement, fulfill your duties and
responsibilities in a satisfactory manner, and adhere to the Company’s policies, your current base
salary and employee benefits shall remain unchanged during the active employment period.

Provided that you remain in the employ of the Company through the active employment period, your
separation from employment with the Company shall be effective October 1, 2006, or (i) such earlier
date as designated in writing by me or (ii) such later date as designated in writing by me, but in
no event later than October 31, 2006.

All salary and any employee benefits, including accrued but unused vacation, due to you as of your
separation date according to the established policies, plans and procedures of the Company shall be
paid or made available to you in accordance with the terms of those established policies, plans and
procedures. Moreover, any employee benefit continuation or conversion rights existing under such
established plans of the Company shall be made available to you in accordance with the terms of
such established plans. If you have any questions regarding your benefit continuation or
conversion rights, please contact me.

 

 

Mr. Tim Good

August 31, 2006

Page 2

2. Separation Benefits

On the conditions that (i) you carry out your duties and responsibilities during the active
employment period in a satisfactory manner, abide by your obligations under this letter agreement
and adhere to the Company’s policies during the active employment period, (ii) not later than
September 22, 2006 you sign, date and return to me a copy of this letter agreement, (iii) on or
within five (5) days after your separation date, you sign, date and return to me the Waiver and
Release Agreement attached hereto as Attachment I, and (iv) you do not revoke the signed Waiver and
Release Agreement, you will receive from the Company the following Separation Benefits:

	 	(a)	 	As separation pay, the Company shall pay to you $131,016.00 which is the gross
amount equal to one (1) year of your existing annual base salary. Separation pay shall
be payable as follows: (i) one-half of such amount shall be paid in a single lump sum
payment on the third business day following the six-month anniversary of your
separation date and (ii) the balance of such amount shall be payable in such intervals
and at such times in accordance with the Company’s payroll payment practices in effect
from time to time over the six-month period following the six-month anniversary of your
separation date.
	 
	 	(b)	 	If you elect to continue your Company sponsored medical benefits, such medical
benefits shall be provided to you by the Company paying the employer portion of the
premium and your paying the employee portion of the premium at the Company active
employee contribution rate for medical benefits until the earlier of the last day of
the month in which you attain age sixty-five (65) or the date you become eligible for
coverage under another employer’s health benefits plan.
	 
	 	(c)	 	The Company shall provide you with an executive level career transition
assistance program provided by a career transition assistance firm selected and paid
for by the Company. The Company will not pay cash to you in lieu of such program.

You acknowledge that the foregoing Separation Benefits are extra benefits which you would not be
entitled to under the Company’s established policies, plans and procedures and the extra benefits
are in exchange for your signing the letter agreement and signing (and not later revoking) the
Waiver and Release Agreement. You further acknowledge and agree that the Company’s offer of the
Separation Benefits to you and your signing of this letter agreement and the Waiver and Release
Agreement does not in any way indicate that you have any viable claims against the Company or that
the Company has or admits any liability to you whatsoever.

You are encouraged to consult with an attorney of your choice at your own expense prior to signing
a copy of this letter agreement and the Waiver and Release Agreement,

 

 

Mr. Tim Good

August 31, 2006

Page 3

and you acknowledge that you
have been given at least twenty-one (21) days within which to consider this letter agreement and
the Waiver and Release Agreement.

You are further advised that you may revoke the signed Waiver and Release Agreement within seven
(7) days after its signing. Any such revocation must be made in writing and be received by me
within the seven (7) day period. All legally required taxes and any monies owed the Company shall
be deducted from the monies and the Separation Benefits provided under this letter agreement. The
Separation Benefits provided under this letter agreement shall not be considered or counted as
“compensation” for purposes of any of the Company’s welfare or pension benefit plans which provide
benefits based, in any part, on compensation.

3. Company Property/Expenses

On your separation date, or such earlier date requested by me or my designee, you must return to
the Company all Company property including, but not limited to, Company identification badge,
credit/calling cards, laptop computer, information technology equipment, pager, pda/Blackberry,
mobile phone, documents and records (in paper or electronic form), and other physical or personal
property of the Company in your possession or control and you agree you will not keep, transfer or
use any copies or excerpts of the foregoing items. You must also ensure that all business expenses
for which you are entitled to reimbursement under the Company’s expense reimbursement policy are
documented and submitted for approval on a timely basis and any final expenses are submitted within
ten (10) business days after your separation date and that all debit balances shall be timely paid
on any of your corporate charge cards as well.

4. Confidentiality/Cooperation/Covenants

You agree from and after today to keep strictly confidential the existence and terms of this letter
agreement and you further agree that you will not disclose them to any person or entity, other than
to your immediate family, your attorney, and your financial advisor, or except as may be required
by law. The Company agrees from and after today to keep strictly confidential the existence and
terms of this letter agreement and further agrees not to disclose them except on a strict
need-to-know basis or except as may be required by law.

Except as otherwise provided in this letter agreement or required under the terms of the
Company-sponsored employee benefit plans, following your separation date the Company will have no
further obligations to you and you will have no further obligations to the Company. You
acknowledge that after your separation date you shall not represent yourself to be an employee of
the Company nor take any action which may bind the Company with regard to any customer, supplier,
vendor or any other party with
whom you have had contact while performing your duties as an employee of the Company.

 

 

Mr. Tim Good

August 31, 2006

Page 4

You further agree that from and after today you shall not, directly or indirectly, make or cause to
be made any disparaging, derogatory, misleading or false statement, whether orally or in writing,
to any person or entity, including members of the investment community, press, customers,
competitors, and advisors to the Company, about the Company and its affiliates, and its and their
directors, officers or employees, or the business strategy, plans, policies, practices or
operations of the Company and its affiliates. The Company shall not, and shall instruct the senior
officers and members of the board of directors of the Company not to, directly or indirectly, make
or cause to be made any disparaging, derogatory, misleading or false statement, orally or in
writing, to any person or entity about you. Notwithstanding the foregoing provisions of this
paragraph, the Company and you may each confer in confidence with their own respective legal
counsel and, except for attorney-client privileged matters, nothing herein shall prevent either
party from responding truthfully to any information requests or questions posed in any formal or
informal legal, regulatory, administrative or investigative proceedings involving any court,
tribunal or governmental body or agency or otherwise required by law.

On your separation date, or such earlier date requested by me or my designee, you agree to resign
all officer and director positions you may hold in the Company or in any other entity for which you
serve as an officer and/or director at the request of the Company. You agree to execute and
deliver appropriate formal letters prepared by the Company confirming resignation to each affected
entity upon the Company’s request.

For a one (1) year period following your separation date, you further agree that, without my or my
designee’s prior express written consent, you will not, directly or indirectly, hire away nor
participate or assist in the hiring away of any person employed by the Company or its affiliates on
or within six months preceding your separation date and you will not solicit nor encourage any
person employed by the Company or its affiliates on or after your separation date to leave the
employ of the Company or its affiliates.

For a one (1) year period following your separation date, you also agree that, without my or my
designee’s prior express written consent, you will not engage in any activity, directly or
indirectly, as a director, managerial or executive level employee, consultant, expert witness or
otherwise on behalf of or with the Wyoming Public Service Commission.

You further agree from and after your separation date to make yourself available to the Company and
its legal counsel to provide reasonable cooperation and assistance to the Company with respect to
areas and matters in which you were involved during your employment, including any threatened or
actual investigation and/or litigation or any currently pending regulatory matter concerning the
Company, and to provide to the Company, if requested, information relating to ongoing matters of
interest to the
Company. The Company will, of course, take into consideration your personal and business
commitments, will give you as much advance notice as reasonably possible, and ask that you be
available at such time or times as are reasonably convenient to you

 

 

Mr. Tim Good

August 31, 2006

Page 5

and the Company. The Company
agrees to reimburse you for the actual out-of-pocket expenses you incur as a result of your
complying with this provision, subject to your submission to the Company of documentation
substantiating such expenses as the Company may require.

Proprietary information, confidential business information and trade secrets (hereinafter
collectively “Confidential Information”) which became known to you as an employee of the Company
remains the property of the Company. Such Confidential Information includes, but is not limited
to, materials, records, books, products, business plans, business proposals, software, personnel
information and data of the Company and its affiliates and its customers, but excludes information
which is generally known to the public or becomes known except through your actions. You agree
from and after today that you will not at any time, directly or indirectly, disclose Confidential
Information to any third party or otherwise use such Confidential Information for your own benefit
or the benefit of others.

You acknowledge that the provisions of this Paragraph 4 are reasonable and not unduly restrictive
of your rights as an individual and you warrant that as of the date you sign this letter agreement
you have not breached any of the provisions of this Paragraph 4. You further acknowledge that in
the event that you breach any of the provisions of this Paragraph 4, such breach will result in
immediate and irreparable harm to the business and goodwill of the Company and that damages, if
any, and remedies at law for such breach would be inadequate. The Company shall, therefore, be
entitled to apply without bond to any court of competent jurisdiction for an injunction to restrain
any violation of this Paragraph 4 by you and for such further relief as the court may deem just and
proper.

5. General Matters

You acknowledge and agree that in signing this letter agreement (including Attachment I) you do not
rely and have not relied on any representation or statement by the Company or by its employees,
agents, representatives, or attorneys with regard to the subject matter, basis or effect of the
letter agreement (including Attachment I).

This letter agreement is deemed made and entered into in the State of Montana, and in all respects
shall be interpreted, enforced and governed under the laws of the State of Montana, without given
effect to its choice of laws provisions, to the extent not preempted by federal law. Any dispute
under this letter agreement (including Attachment I) shall be adjudicated by a court of competent
jurisdiction in the State of Montana.

The language of all parts of this letter agreement shall in all cases be construed as a whole,
according to its fair meaning, and not strictly for or against either party. The provisions of
this letter agreement shall survive any termination of this letter agreement when necessary to
effect the intent and terms of this letter agreement expressed herein.

 

 

Mr. Tim Good

August 31, 2006

Page 6

If any of the provisions of this letter agreement (including Attachment I) shall be held to be
invalid by a court of competent jurisdiction, such holding shall not in any way whatsoever affect
the validity of the remainder of this letter agreement (including Attachment I).

This letter agreement contains the entire agreement between you and the Company with respect to the
matter of your employment and separation from employment. No modification of any provision of this
letter agreement shall be effective unless made in writing and signed by you and by me or my
designee. This letter agreement shall not be assignable by you.

Should you require further clarification of any aspect of the above arrangements, or wish to
discuss their implementation, please contact me.

Please indicate your agreement and acceptance of these provisions by signing and dating the
enclosed copy of this letter agreement and returning it to me not later than September 22, 2006.
Following your acceptance, the arrangements will be implemented and administered as described
herein.

So that there is no misunderstanding, please understand that if for any reason I do not receive the
signed copy of this letter agreement from you by September 22, 2006, the proposed arrangements
described in this letter agreement will be deemed to be withdrawn. Also, please note that the
signed Waiver and Release Agreement must be received by me on or within five (5) days after your
separation date, but not before that date.

Best wishes for success in your future endeavors.

	 	 	 	 	 
	 	 	Sincerely yours,
	 
	 	 	 	 
	 	 	ENERGY WEST INCORPORATED
	 
	 	 	 	 
	 

	 	By
	 	/s/ David Cerotzke
	 

	 	 	 	 
	 

	 	 	 	David Cerotzke
	 

	 	 	 	President and CEO

AGREED AND ACCEPTED:

	 	 	 
	/s/ Tim Good
 

	 	 
	Tim Good
	 	 
	 
	 	 
	9/18/06
 

	 	 
	Date
	 	 

 

 

ATTACHMENT I

ENERGY WEST INCORPORATED

WAIVER AND RELEASE AGREEMENT

     (1) General Release. In consideration for the Separation Benefits payable or
available to me under the terms of David Cerotzke’s August 31, 2006 letter to me (hereinafter
referred to as the “letter agreement”), I, on behalf of myself and my heirs, executors,
administrators, attorneys and assigns, hereby waive, release and forever discharge ENERGY WEST
INCORPORATED (hereinafter referred to as the “Company”) and the Company’s subsidiaries, divisions
and affiliates, whether direct or indirect, its and their joint ventures and joint venturers
(including its and their respective directors, officers, employees, shareholders, partners and
agents, past, present, and future), and each of its and their respective successors and assigns
(hereinafter collectively referred to as “Releasees”), from any and all known or unknown actions,
causes of action, claims or liabilities of any kind which have or could be asserted against the
Releasees arising out of or related to my employment with and/or separation from employment with
the Company and/or any of the other Releasees and/or any other occurrence up to and including the
date of this Waiver and Release Agreement, including but not limited to:

	 	(a)	 	claims, actions, causes of action or liabilities arising under Title VII of the
Civil Rights Act, as amended, the Age Discrimination in Employment Act, as amended
(“ADEA”), the Employee Retirement Income Security Act, as amended, the Rehabilitation
Act, as amended, the Americans with Disabilities Act, as amended, the Family and
Medical Leave Act, as amended, and/or any other federal, state, municipal, or local
employment discrimination statutes (including, but not limited to, claims based on age,
sex, attainment of benefit plan rights, race, religion, national origin, marital
status, sexual orientation, ancestry, harassment, parental status, handicap,
disability, retaliation, and veteran status); and/or
	 
	 	(b)	 	claims, actions, causes of action or liabilities arising under any other
federal, state, municipal, or local statute, law, ordinance or regulation; and/or
	 
	 	(c)	 	any other claim whatsoever including, but not limited to, claims for severance
pay under any voluntary or involuntary severance/separation plan, policy or program
maintained by the Releasees, claims based upon breach of contract, wrongful
termination, defamation, intentional infliction of emotional distress, tort, personal
injury, invasion of privacy, violation of public policy, negligence and/or any other
common law, statutory or other claim whatsoever arising out of or relating to my
employment with and/or separation from employment with the Company and/or any of the
other Releasees,

 

 

but excluding the filing of an administrative charge, any claims which I may make under state
workers’ compensation or unemployment laws, any claims to enforce the letter agreement, any vested
benefits rights which I may have, any rights to indemnification which I may have as a former
employee of the Company, and/or any claims which by law I cannot waive.

     (2) Covenant Not To Sue. In addition to and apart from the General Release contained
in paragraph 1 above, I also agree never to sue any of the Releasees or become a party to a lawsuit
on the basis of any claim of any type whatsoever arising out of or related to my employment with
and/or separation from employment with the Company and/or any of the other Releasees, other than a
lawsuit to challenge this Waiver and Release Agreement under the ADEA or to enforce the letter
agreement.

     (3) Consequences Of Breach Of Covenant Not To Sue. I further acknowledge and agree in
the event that I breach the provisions of paragraph (2) above, (a) the Company shall be entitled to
apply for and receive an injunction to restrain any violation of paragraph (2) above, (b) the
Company shall not be obligated to continue the availability of Separation Benefits to me, (c) I
shall be obligated to pay to the Company its costs and expenses in enforcing this Waiver and
Release Agreement and defending against such lawsuit (including court costs, expenses and
reasonable legal fees), and (d) as an alternative to (c), at the Company’s option, I shall be
obligated upon demand to repay to the Company all but $1,000.00 of the Separation Benefits paid or
provided to me, and the foregoing shall not affect the validity of this Waiver and Release
Agreement and shall not be deemed to be a penalty nor a forfeiture.

     (4) Further Release And Acknowledgement. To the extent permitted by law, I further
waive my right to any monetary recovery should any federal, state, or local administrative agency
pursue any claims on my behalf arising out of or related to my employment with and/or separation
from employment with the Company and/or any of the other Releasees. I also acknowledge that I have
not suffered any on-the-job injury for which I have not already filed a claim.

     (5) No Further Employment. To the extent permitted by law, I further waive, release,
and discharge Releasees from any reinstatement rights which I have or could have. I further
acknowledge and agree that I will not seek employment with the Company and/or any other of the
Releasees following the date of my separation from employment.

     (6) Non-Disparagement. I promise that I shall not at any time or in any way disparage
the Company and/or any of the other Releasees to any person, corporation, entity or other third
party whatsoever.

     (7) Consequences Of Other Breach. I further agree that if I breach the
Confidentiality/Cooperation/Covenants provisions of the letter agreement or the provisions of
paragraphs (5) and/or (6) above, then (a) the Company will be subject to irreparable injury and
shall be entitled to apply without bond for an injunction to restrain such breach and for such
further relief as the court may deem just and proper, (b) the

 

 

Company shall not be obligated to continue payment of the Separation Benefits to me, and (c) I
shall be obligated to pay to the Company its costs and expenses in enforcing the
Confidentiality/Cooperation/Covenants provisions of the letter agreement and the provisions of
paragraphs (5) and (6) above (including court costs, expenses and reasonable legal fees).

     (8) Time To Consider Agreement. I acknowledge that I have been given at least
twenty-one day (21) days to consider this Waiver and Release Agreement thoroughly.

     (9) Attorney Consultation. I acknowledge that I have been advised in writing to
consult with an attorney at my own expense, if desired, prior to signing this Waiver and Release
Agreement.

     (10) Time To Revoke Agreement. I understand that I may revoke this Waiver and Release
Agreement within seven (7) days after its signing and that any revocation must be made in writing
and submitted within such seven day period to David Cerotzke. I further understand that if I
revoke this Waiver and Release Agreement, I shall not receive the Separation Benefits.

     (11) Consideration For Agreement. I also understand that the Separation Benefits
which I will receive in exchange for signing and not later revoking this Waiver and Release
Agreement are in addition to anything of value to which I am already entitled.

     (12) RELEASE OF UNKNOWN CLAIMS. I FURTHER UNDERSTAND THAT THIS WAIVER AND RELEASE
AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

     (13) Severability. I acknowledge and agree that if any provision of this Waiver and
Release Agreement is found, held or deemed by a court of competent jurisdiction to be void,
unlawful or unenforceable under any applicable statute or controlling law, the remainder of this
Waiver and Release Agreement shall continue in full force and effect.

     (14) Governing Law. This Waiver and Release Agreement is deemed made and entered into
in the State of Montana, and in all respects shall be interpreted, enforced and governed under
applicable federal law and in the event reference shall be made to State law the internal laws of
the State of Montana shall apply, without reference to its conflict of law provisions. Any dispute
under this Waiver and Release Agreement shall be adjudicated by a court of competent jurisdiction
in the State of Montana.

 

 

     (15) Knowing And Voluntary Waiver And Release. I further acknowledge and agree that I
have carefully read and fully understand all of the provisions of this Waiver and Release Agreement
and that I voluntarily enter into this Waiver and Release Agreement by signing below.

	 	 	 
	 

	 	/s/ Tim Good
	 

	 	 
	 

	 	Tim Good
	 
	 	 
	 

	 	October 1, 2006
	 

	 	 
	 

	 	(Date)exv10w2

 

EXHIBIT 10.2

VIA HAND DELIVERY
                                  September 19, 2006

PERSONAL AND CONFIDENTIAL

Mr. John Allen

                                       &
nbsp;                    

                                       &
nbsp;                    

Dear John:

This letter confirms our discussions regarding your employment status with Energy West Incorporated
(the “Company”) and your subsequent separation from employment with the Company. The details of
our discussions are set out below.

1. Active Employment Period

It is understood that during the period from the date of this letter through October 27, 2006 (the
“active employment period”) you shall remain in the employ of the Company with your current
employment duties and title and you shall continue to report to me.

Provided that you abide by your obligations under this letter agreement, fulfill your duties and
responsibilities in a satisfactory manner, and are in substantial compliance with the Company’s
policies, your current base salary and employee benefits shall remain unchanged during the active
employment period.

On October 27, 2006, or such earlier or later date requested by me or my designee, you agree to
resign all officer and director positions you may hold in the Company or any other entity for which
you serve as an officer and/or director at the request of the Company. You also agree to execute
and deliver appropriate formal letters prepared by the Company confirming your resignation to each
affected entity upon the Company’s request.

2. Inactive Employment Period

On the conditions that (i) you carry out your duties and responsibilities during the active
employment period in a satisfactory manner, abide by your obligations under this letter agreement
and adhere to the Company’s policies during the active employment period, (ii) not later than
October 12, 2006 you sign, date and return to me a copy of this letter agreement, (iii) on or
within five (5) days after the last day of the active employment period, October 27, 2006, you
sign, date and return to me the Waiver and Release Agreement attached hereto as Attachment I, and
(iv) you do not revoke the signed Waiver and Release Agreement, in lieu of your employment with the
Company ending as of October 27, 2006, the Company will enter into the following inactive
employment period arrangement with you:

 

 

Mr. John Allen

September 19, 2006

Page 2

	 	(a)	 	During the period from October 28, 2006 through November 28, 2006 you will be
paid your current rate of pay as vacation pay.
	 
	 	(b)	 	During the period from November 28, 2006 through July 16, 2007 (the “inactive
employment period”) you shall remain in the employ of the Company, however you will not
be required to be present at the Company’s offices unless otherwise requested by me or
my designee and you will be required to perform only those duties as may be reasonably
required by the Company and requested by me or my designee. It is agreed and
understood that you shall not independently initiate the provision of any employment
services to or on behalf of the Company nor shall you represent yourself as authorized
to act on behalf of the Company, except as approved in advance in writing by me or my
designee. During the inactive employment period you shall report to me or my designee.
	 
	 	(c)	 	During the inactive employment period beginning November 29, 2006 (ignoring
December 1, 2006 for which the pay earned in November is paid) there are fifteen (15)
Company pay periods. Your base salary during the inactive employment period shall be
$7,287.20 per pay period. During the inactive employment period you agree that (i) you
will not be eligible for any bonus for the inactive employment period and (ii) with
respect to employee benefits, you shall continue to be eligible to participate in the
employee benefits plans and programs of the Company in which you participated as of
October 27, 2006 except that you shall not accrue nor be entitled to any vacation.
	 
	 	(c)	 	It is explicitly understood that the stock options available to you under the
existing stock option agreements between you and the Company will vest according to the
terms of those agreements and that you will be considered an employee, for all
purposes, including vesting, under those agreements until July 16, 2007.

You acknowledge that the foregoing inactive employment period arrangement and the compensation
payable and employee benefits available during the inactive employment period are extra
compensation and benefits which you would not be entitled to under the Company’s established
policies, plans and procedures and the availability of the extra compensation and benefits is in
exchange for your signing the letter agreement and signing (and not later revoking) the
above-referenced Waiver and Release Agreement. You further acknowledge and agree that the
Company’s offer of the inactive employment period arrangement to you and your signing of this
letter agreement and the above-referenced Waiver and Release Agreement does not in any way indicate
that you have any viable claims against the Company nor that the Company admits or has any
liability to you whatsoever.

 

 

Mr. John Allen

September 19, 2006

Page 3

3. Separation From Employment/Separation Benefit

Provided that (i) you remain in the employ of the Company through the active employment period and
inactive employment period, and (ii) abide by your obligations under the letter agreement and
adhere to the Company’s policies during the active employment period and inactive employment
period, your separation from employment with the Company shall be effective July 16, 2007. The
Company reserves the right to separate you from employment prior to that date in the event that the
Company has a reasonable basis to determine in its sole discretion that you are in breach of this
letter agreement and/or the Waiver and Release Agreement attached hereto as Attachment I.

All base salary and any employee benefits due to you as of your separation date according to the
established policies, plans and procedures of the Company shall be paid or made available to you in
accordance with the terms of those established policies, plans and procedures. Moreover, any
employee benefit plan continuation or conversion rights existing under such established plans of
the Company shall be made available to you in accordance with the terms of such established plans.
If you have any questions regarding your benefit continuation or conversion rights, please contact
me.

On the condition that (i) on or within five (5) days after your July 16, 2007 separation date, you
sign, date and return to me the Waiver and Release Agreement attached hereto as Attachment II, and
(ii) you do not revoke the signed Waiver and Release Agreement, you will receive from the Company
as a Separation Benefit the sum of $10,000.00 payable in a single lump sum cash payment within
thirty (30) days following your July 16, 2007 separation date.

You acknowledge that the foregoing Separation Benefit is an extra benefit which you would not be
entitled to under the Company’s established policies, plans and procedures and the Separation
Benefit is in exchange for your signing (and not later revoking) the Waiver and Release Agreement
attached hereto as Attachment II.

4. Notice/Revocation

You are encouraged to consult with an attorney of your choice at your own expense prior to signing
a copy of this letter agreement and the Waiver and Release Agreements, and you acknowledge that you
have been given at least twenty-one (21) days within which to consider this letter agreement and
the Waiver and Release Agreements.

You are further advised that you may revoke either signed Waiver and Release Agreement within seven
(7) days after its signing. Any such revocation must be made in writing and be received by me
within the seven (7) day period. All legally required taxes and any monies owed the Company shall
be deducted from the monies and the employee benefits provided under this letter agreement.

 

 

Mr. John Allen

September 19, 2006

Page 4

5. Company Property/Expenses

On your separation date, or such earlier date requested by me or my designee, you must return to
the Company all Company property including, but not limited to, Company identification badge,
credit/calling cards, laptop computer, information technology equipment, pager, pda/Blackberry,
mobile phone, documents and records (in paper or electronic form), and other physical or personal
property of the Company in your possession or control and you agree you will not keep, transfer or
use any copies or excerpts of the foregoing items. You must also ensure that all business expenses
for which you are entitled to reimbursement under the Company’s expense reimbursement policy are
documented and submitted for approval on a timely basis and any final expenses are submitted within
ten (10) business days after your separation date and that all debit balances shall be timely paid
on any of your corporate charge cards as well.

6. Confidentiality/Cooperation/Covenants

You agree from and after today to keep strictly confidential the existence and terms of this letter
agreement and you further agree that you will not disclose them to any person or entity, other than
to your immediate family, your attorney, and your financial advisor, or except as may be required
by law. The Company agrees from and after today to keep strictly confidential the existence and
terms of this letter agreement and further agrees not to disclose them except on a strict
need-to-know basis or except as may be required by law.

Except as otherwise provided in this letter agreement or required under the terms of the
Company-sponsored employee benefit plans, following your separation date the Company will have no
further obligations to you and you will have no further obligations to the Company. You
acknowledge that after your separation date you shall not represent yourself to be an employee of
the Company nor take any action which may bind the Company with regard to any customer, supplier,
vendor or any other party with whom you have had contact while performing your duties as an
employee of the Company.

You further agree during the active employment period and the inactive employment period you shall
endeavor to maintain the Company’s reputation in your verbal and written communications with
others; and that during that period and from and after today you shall not, directly or indirectly,
make or cause to be made any disparaging, derogatory, misleading or false statement, whether orally
or in writing, to governmental officials, members of the investment community, press, customers,
competitors, and advisors to the Company, about the Company and its affiliates, and its and their
directors, officers or employees, or the business strategy, plans, policies, practices or
operations of the Company and its affiliates. The Company shall not, and shall instruct the senior
officers and members of the board of directors of the Company not to, directly or indirectly, make
or cause to be made any disparaging, derogatory, misleading or

 

 

Mr. John Allen

September 19, 2006

Page 5

false statement, orally or in writing, to any person or entity about you. Notwithstanding the
foregoing provisions of this paragraph, the Company and you may each confer in confidence with
their own respective legal counsel and, except for attorney-client privileged matters, nothing
herein shall prevent either party from responding truthfully to any information requests or
questions posed in any formal or informal legal, regulatory, administrative or investigative
proceedings involving any court, tribunal or governmental body or agency or otherwise required by
law.

During the active employment period, the inactive employment period and for a one (1) year period
following your separation date, you further agree that, without my or my designee’s prior express
written consent, you will not, directly or indirectly, hire away nor participate or assist in the
hiring away of any person employed by the Company or its affiliates on or within six months
preceding your separation date and you will not solicit nor encourage any person employed by the
Company or its affiliates on or after your separation date to leave the employ of the Company or
its affiliates.

During the active employment period, inactive employment period and for a one (1) year period
following your separation date, you also agree that, without my or my designee’s prior express
written consent, you will not engage in any activity, directly or indirectly, as a director,
managerial or executive level employee, consultant, expert witness or otherwise on behalf of or
with the Montana Consumer Council nor the Montana Public Utility Commission.

You further agree from and after your separation date to make yourself available to the Company and
its legal counsel to provide reasonable cooperation and assistance to the Company with respect to
areas and matters in which you were involved during your employment, including any threatened or
actual investigation and/or litigation or regulatory matter concerning the Company, and to provide
to the Company, if requested, information relating to ongoing matters of interest to the Company.
The Company will, of course, take into consideration your personal and business commitments, will
give you as much advance notice as reasonably possible, and ask that you be available at such time
or times as are reasonably convenient to you and the Company. The Company agrees to reimburse you
for the actual out-of-pocket expenses you incur as a result of your complying with this provision,
subject to your submission to the Company of documentation substantiating such expenses as the
Company may require.

Proprietary information, confidential business information and trade secrets (hereinafter
collectively “Confidential Information”) which became known to you as an employee of the Company
remains the property of the Company. Such Confidential Information includes, but is not limited
to, materials, records, books, products, business plans, business proposals, software, personnel
information and data of the Company and its affiliates and its customers, but excludes information
which is generally known to the public or becomes known except through your actions. You agree
from and after today that you will not at any time, directly or indirectly, disclose Confidential
Information to

 

 

Mr. John Allen

September 19, 2006

Page 6

any third party or otherwise use such Confidential Information for your own benefit or the benefit
of others.

You acknowledge that the provisions of this Paragraph 6 are reasonable and not unduly restrictive
of your rights as an individual and you warrant that as of the date you sign this letter agreement
you have not breached any of the provisions of this Paragraph 6. You further acknowledge that in
the event that you breach any of the provisions of this Paragraph 6, such breach will result in
immediate and irreparable harm to the business and goodwill of the Company and that damages, if
any, and remedies at law for such breach would be inadequate. The Company shall, therefore, be
entitled to apply without bond to any court of competent jurisdiction for an injunction to restrain
any violation of this Paragraph 6 by you and for such further relief as the court may deem just and
proper.

7. General Matters

You acknowledge and agree that in signing this letter agreement (including Attachments I and II)
you do not rely and have not relied on any representation or statement by the Company or by its
employees, agents, representatives, or attorneys with regard to the subject matter, basis or effect
of the letter agreement (including Attachments I and II).

This letter agreement is deemed made and entered into in the State of Montana, and in all respects
shall be interpreted, enforced and governed under the laws of the State of Montana, without given
effect to its choice of laws provisions, to the extent not preempted by federal law. Any dispute
under this letter agreement (including Attachments I and II) shall be adjudicated by a court of
competent jurisdiction in the State of Montana.

The language of all parts of this letter agreement shall in all cases be construed as a whole,
according to its fair meaning, and not strictly for or against either party. The provisions of
this letter agreement shall survive any termination of this letter agreement when necessary to
effect the intent and terms of this letter agreement expressed herein.

If any of the provisions of this letter agreement (including Attachments I and II) shall be held to
be invalid by a court of competent jurisdiction, such holding shall not in any way whatsoever
affect the validity of the remainder of this letter agreement (including Attachments I and II).

This letter agreement contains the entire agreement between you and the Company with respect to the
matter of your employment and separation from employment. No modification of any provision of this
letter agreement shall be effective unless made in writing and signed by you and by me or my
designee. This letter agreement shall not be assignable by you.

 

 

Mr. John Allen

September 19, 2006

Page 7

Should you require further clarification of any aspect of the above arrangements, or wish to
discuss their implementation, please contact me.

Please indicate your agreement and acceptance of these provisions by signing and dating the
enclosed copy of this letter agreement and returning it to me not later than October 12, 2006.
Following your acceptance, the arrangements will be implemented and administered as described
herein.

So that there is no misunderstanding, please understand that if for any reason I do not receive the
signed copy of this letter agreement from you by October 12, 2006, the proposed arrangements
described in this letter agreement will be deemed to be withdrawn. Also, please note that the
signed Waiver and Release Agreement attached hereto as Attachment I must be received by me on or
within five (5) days after October 27, 2006, but not before that date.

Best wishes for success in your future endeavors.

	 	 	 	 	 	 	 
	 	 	 	 	Sincerely yours,
	 
	 	 	 	 	 	 
	 	 	 	 	ENERGY WEST INCORPORATED
	 
	 	 	 	 	 	 
	 

	 	 	 	By
	 	/s/ David A. Cerotzke
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	David Cerotzke
	 

	 	 	 	 	 	President and CEO
	 
	 	 	 	 	 	 
	AGREED AND ACCEPTED:

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ John C. Allen
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	John Allen
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	9-21-06
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	Date
	 	 	 	 	 	 

 

 

ATTACHMENT I

ENERGY WEST INCORPORATED

WAIVER AND RELEASE AGREEMENT

     (1) General Release. In consideration for the inactive employment period arrangement
and the compensation payable and benefits available to me under the terms of Paragraph 2 of David
Cerotzke’s September 19, 2006 letter to me (hereinafter referred to as the “letter agreement”), I,
on behalf of myself and my heirs, executors, administrators, attorneys and assigns, hereby waive,
release and forever discharge ENERGY WEST INCORPORATED (hereinafter referred to as the “Company”)
and the Company’s subsidiaries, divisions and affiliates, whether direct or indirect, its and their
joint ventures and joint venturers (including its and their respective directors, officers,
employees, shareholders, partners and agents, past, present, and future), and each of its and their
respective successors and assigns (hereinafter collectively referred to as “Releasees”), from any
and all known or unknown actions, causes of action, claims or liabilities of any kind which have or
could be asserted against the Releasees arising out of or related to my employment with the Company
and/or any of the other Releasees and/or any other occurrence up to and including the date of this
Waiver and Release Agreement, including but not limited to:

	 	(a)	 	claims, actions, causes of action or liabilities arising under Title VII of the
Civil Rights Act, as amended, the Age Discrimination in Employment Act, as amended
(“ADEA”), the Employee Retirement Income Security Act, as amended, the Rehabilitation
Act, as amended, the Americans with Disabilities Act, as amended, the Family and
Medical Leave Act, as amended, and/or any other federal, state, municipal, or local
employment discrimination statutes (including, but not limited to, claims based on age,
sex, attainment of benefit plan rights, race, religion, national origin, marital
status, sexual orientation, ancestry, harassment, parental status, handicap,
disability, retaliation, and veteran status); and/or
	 
	 	(b)	 	claims, actions, causes of action or liabilities arising under any other
federal, state, municipal, or local statute, law, ordinance or regulation; and/or
	 
	 	(c)	 	any other claim whatsoever including, but not limited to, claims for bonus
payments, claims for severance pay under any voluntary or involuntary
severance/separation plan, policy or program maintained by the Releasees, claims based
upon breach of contract, wrongful termination, defamation, intentional infliction of
emotional distress, tort, personal injury, invasion of privacy, violation of public
policy, negligence and/or any other common law, statutory or other claim whatsoever
arising out of or relating to my employment with the Company and/or any of the other
Releasees,

 

 

but excluding the filing of an administrative charge, any claims which I may make under state
workers’ compensation or unemployment laws, any claims to enforce the letter agreement, any vested
benefits rights which I may have, any rights to indemnification which I may have as an employee of
the Company, and/or any claims which by law I cannot waive.

     (2) Covenant Not To Sue. In addition to and apart from the General Release contained
in paragraph 1 above, I also agree never to sue any of the Releasees or become a party to a lawsuit
on the basis of any claim of any type whatsoever arising out of or related to my employment with
the Company and/or any of the other Releasees, other than a lawsuit to challenge this Waiver and
Release Agreement under the ADEA or to enforce the letter agreement.

     (3) Consequences Of Breach Of Covenant Not To Sue. I further acknowledge and agree in
the event that I breach the provisions of paragraph (2) above, (a) the Company shall be entitled to
apply for and receive an injunction to restrain any violation of paragraph (2) above, (b) the
Company shall not be obligated to continue the inactive employment period arrangement with me nor
continue the compensation payable and benefits available during such period, (c) I shall be
obligated to pay to the Company its costs and expenses in enforcing this Waiver and Release
Agreement and defending against such lawsuit (including court costs, expenses and reasonable legal
fees), and (d) as an alternative to (c), at the Company’s option, I shall be obligated upon demand
to repay to the Company all but $1,000.00 of the compensation paid to me and the costs of the
benefits provided to me during the inactive employment period, and the foregoing shall not affect
the validity of this Waiver and Release Agreement and shall not be deemed to be a penalty nor a
forfeiture.

     (4) Further Release And Acknowledgement. To the extent permitted by law, I further
waive my right to any monetary recovery should any federal, state, or local administrative agency
pursue any claims on my behalf arising out of or related to my employment with the Company and/or
any of the other Releasees. I also acknowledge that I have not suffered any on-the-job injury for
which I have not already filed a claim.

     (5) No Further Employment. To the extent permitted by law, I further waive, release,
and discharge Releasees from any reinstatement rights which I have or could have. I further
acknowledge and agree that I will not seek employment with the Company and/or any other of the
Releasees following the date of my separation from employment.

     (6) Non-Disparagement. I promise that I shall not at any time or in any way disparage
the Company and/or any of the other Releasees to any person, corporation, entity or other third
party whatsoever.

     (7) Consequences Of Other Breach. I further agree that if I breach the
Confidentiality/Cooperation/Covenants provisions of the letter agreement or the provisions of
paragraphs (5) and/or (6) above, then (a) the Company will be subject to irreparable injury and
shall be entitled to apply without bond for an injunction to restrain

2

 

such breach and for such further relief as the court may deem just and proper, (b) the Company
shall not be obligated to continue the inactive employment period arrangement with me nor continue
the compensation payable and benefits available during such period, and (c) I shall be obligated to
pay to the Company its costs and expenses in enforcing the Confidentiality/Cooperation/Covenants
provisions of the letter agreement and the provisions of paragraphs (5) and (6) above (including
court costs, expenses and reasonable legal fees).

     (8) Time To Consider Agreement. I acknowledge that I have been given at least
twenty-one day (21) days to consider this Waiver and Release Agreement thoroughly.

     (9) Attorney Consultation. I acknowledge that I have been advised in writing to
consult with an attorney at my own expense, if desired, prior to signing this Waiver and Release
Agreement.

     (10) Time To Revoke Agreement. I understand that I may revoke this Waiver and Release
Agreement within seven (7) days after its signing and that any revocation must be made in writing
and submitted within such seven day period to David Cerotzke. I further understand that if I
revoke this Waiver and Release Agreement, I shall not be eligible for the inactive employment
period arrangement nor the compensation and benefits payable or available pursuant to that
arrangement.

     (11) Consideration For Agreement. I also understand that the compensation payable and
benefits available to me pursuant to the inactive employment period arrangement which are in
exchange for signing and not later revoking this Waiver and Release Agreement are in addition to
anything of value to which I am already entitled.

     (12) RELEASE OF UNKNOWN CLAIMS. I FURTHER UNDERSTAND THAT THIS WAIVER AND RELEASE
AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS arising out of or related to my
employment with the Company and/or any of the other Releasees.

     (13) Severability. I acknowledge and agree that if any provision of this Waiver and
Release Agreement is found, held or deemed by a court of competent jurisdiction to be void,
unlawful or unenforceable under any applicable statute or controlling law, the remainder of this
Waiver and Release Agreement shall continue in full force and effect.

     (14) Governing Law. This Waiver and Release Agreement is deemed made and entered into
in the State of Montana, and in all respects shall be interpreted, enforced and governed under
applicable federal law and in the event reference shall be made to State law the internal laws of
the State of Montana shall apply, without reference to its conflict of law provisions. Any dispute
under this Waiver and Release Agreement shall be adjudicated by a court of competent jurisdiction
in the State of Montana.

     (15) Knowing And Voluntary Waiver And Release. I further acknowledge and agree that I
have carefully read and fully understand all of the provisions of this

3

 

Waiver and Release Agreement and that I voluntarily enter into this Waiver and Release
Agreement by signing below.

	 	 	 	 	 
	 

	 	/s/ John C. Allen	 	 
	 

	 	 

John Allen
	 	 
	 
	 	 	 	 
	 

	 	9-21-06	 	 
	 

	 	 

	 	 
	 

	 	(Date)	 	 

4

 

ATTACHMENT II

ENERGY WEST INCORPORATED

WAIVER AND RELEASE AGREEMENT

     (1) General Release. In consideration for the Separation Benefit payable to me under
the terms of Paragraph 3 of David Cerotzke’s September 19, 2006 letter to me (hereinafter referred
to as the “letter agreement”), I, on behalf of myself and my heirs, executors, administrators,
attorneys and assigns, hereby waive, release and forever discharge ENERGY WEST INCORPORATED
(hereinafter referred to as the “Company”) and the Company’s subsidiaries, divisions and
affiliates, whether direct or indirect, its and their joint ventures and joint venturers (including
its and their respective directors, officers, employees, shareholders, partners and agents, past,
present, and future), and each of its and their respective successors and assigns (hereinafter
collectively referred to as “Releasees”), from any and all known or unknown actions, causes of
action, claims or liabilities of any kind which have or could be asserted against the Releasees
arising out of or related to my employment with and/or separation from employment with the Company
and/or any of the other Releasees and/or any other occurrence up to and including the date of this
Waiver and Release Agreement, including but not limited to:

	 	(a)	 	claims, actions, causes of action or liabilities arising under Title VII of the
Civil Rights Act, as amended, the Age Discrimination in Employment Act, as amended
(“ADEA”), the Employee Retirement Income Security Act, as amended, the Rehabilitation
Act, as amended, the Americans with Disabilities Act, as amended, the Family and
Medical Leave Act, as amended, and/or any other federal, state, municipal, or local
employment discrimination statutes (including, but not limited to, claims based on age,
sex, attainment of benefit plan rights, race, religion, national origin, marital
status, sexual orientation, ancestry, harassment, parental status, handicap,
disability, retaliation, and veteran status); and/or
	 
	 	(b)	 	claims, actions, causes of action or liabilities arising under any other
federal, state, municipal, or local statute, law, ordinance or regulation; and/or
	 
	 	(c)	 	any other claim whatsoever including, but not limited to, claims for bonus
payments, claims for severance pay under any voluntary or involuntary
severance/separation plan, policy or program maintained by the Releasees, claims based
upon breach of contract, wrongful termination, defamation, intentional infliction of
emotional distress, tort, personal injury, invasion of privacy, violation of public
policy, negligence and/or any other common law, statutory or other claim whatsoever
arising out of or relating to my employment with and/or separation from employment with
the Company and/or any of the other Releasees,

 

 

but excluding the filing of an administrative charge, any claims which I may make under state
workers’ compensation or unemployment laws, any claims to enforce the letter agreement, any vested
benefits rights which I may have, any rights to indemnification which I may have as a former
employee of the Company, and/or any claims which by law I cannot waive.

     (2) Covenant Not To Sue. In addition to and apart from the General Release contained
in paragraph 1 above, I also agree never to sue any of the Releasees or become a party to a lawsuit
on the basis of any claim of any type whatsoever arising out of or related to my employment with
and/or separation from employment with the Company and/or any of the other Releasees, other than a
lawsuit to challenge this Waiver and Release Agreement under the ADEA or to enforce the letter
agreement.

     (3) Consequences Of Breach Of Covenant Not To Sue. I further acknowledge and agree in
the event that I breach the provisions of paragraph (2) above, (a) the Company shall be entitled to
apply for and receive an injunction to restrain any violation of paragraph (2) above, (b) the
Company shall not be obligated to pay the Separation Benefit to me, (c) I shall be obligated to pay
to the Company its costs and expenses in enforcing this Waiver and Release Agreement and defending
against such lawsuit (including court costs, expenses and reasonable legal fees), and (d) as an
alternative to (c), at the Company’s option, I shall be obligated upon demand to repay to the
Company all but $1,000.00 of the Separation Benefit paid to me, and the foregoing shall not affect
the validity of this Waiver and Release Agreement and shall not be deemed to be a penalty nor a
forfeiture.

     (4) Further Release And Acknowledgement. To the extent permitted by law, I further
waive my right to any monetary recovery should any federal, state, or local administrative agency
pursue any claims on my behalf arising out of or related to my employment with and/or separation
from employment with the Company and/or any of the other Releasees. I also acknowledge that I have
not suffered any on-the-job injury for which I have not already filed a claim.

     (5) No Further Employment. To the extent permitted by law, I further waive, release,
and discharge Releasees from any reinstatement rights which I have or could have. I further
acknowledge and agree that I will not seek employment with the Company and/or any other of the
Releasees following the date of my separation from employment.

     (6) Non-Disparagement. I promise that I shall not at any time or in any way disparage
the Company and/or any of the other Releasees to any person, corporation, entity or other third
party whatsoever.

     (7) Consequences Of Other Breach. I further agree that if I breach the
Confidentiality/Cooperation/Covenants provisions of the letter agreement or the provisions of
paragraphs (5) and/or (6) above, then (a) the Company will be subject to irreparable injury and
shall be entitled to apply without bond for an injunction to restrain such breach and for such
further relief as the court may deem just and proper, (b) the

2

 

Company shall not be obligated to make payment of the Separation Benefit to me, and (c) I
shall be obligated to pay to the Company its costs and expenses in enforcing the
Confidentiality/Cooperation/Covenants provisions of the letter agreement and the provisions of
paragraphs (5) and (6) above (including court costs, expenses and reasonable legal fees).

     (8) Time To Consider Agreement. I acknowledge that I have been given at least
twenty-one day (21) days to consider this Waiver and Release Agreement thoroughly.

     (9) Attorney Consultation. I acknowledge that I have been advised in writing to
consult with an attorney at my own expense, if desired, prior to signing this Waiver and Release
Agreement.

     (10) Time To Revoke Agreement. I understand that I may revoke this Waiver and Release
Agreement within seven (7) days after its signing and that any revocation must be made in writing
and submitted within such seven day period to David Cerotzke. I further understand that if I
revoke this Waiver and Release Agreement, I shall not receive the Separation Benefit.

     (11) Consideration For Agreement. I also understand that the Separation Benefit which
I will receive in exchange for signing and not later revoking this Waiver and Release Agreement are
in addition to anything of value to which I am already entitled.

     (12) RELEASE OF UNKNOWN CLAIMS. I FURTHER UNDERSTAND THAT THIS WAIVER AND RELEASE
AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS arising out of or related to my
employment with the Company and/or any of the other Releasees. .

     (13) Severability. I acknowledge and agree that if any provision of this Waiver and
Release Agreement is found, held or deemed by a court of competent jurisdiction to be void,
unlawful or unenforceable under any applicable statute or controlling law, the remainder of this
Waiver and Release Agreement shall continue in full force and effect.

     (14) Governing Law. This Waiver and Release Agreement is deemed made and entered into
in the State of Montana, and in all respects shall be interpreted, enforced and governed under
applicable federal law and in the event reference shall be made to State law the internal laws of
the State of Montana shall apply, without reference to its conflict of law provisions. Any dispute
under this Waiver and Release Agreement shall be adjudicated by a court of competent jurisdiction
in the State of Montana.

3

 

     (15) Knowing And Voluntary Waiver And Release. I further acknowledge and agree that I
have carefully read and fully understand all of the provisions of this Waiver and Release Agreement
and that I voluntarily enter into this Waiver and Release Agreement by signing below.

	 	 	 	 	 
	 

	 	 

John Allen
	 	 
	 
	 	 	 	 
	 

	 	 

(Date)
	 	 

4

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