Document:

Exhibit 10.8

Exhibit 10.8

FIRST AMENDMENT

TO ENERGY WEST INCORPORATED

2002 STOCK OPTION PLAN

ENERGY WEST INCORPORATED (the “Company”), having adopted the 2002 Stock Option Plan (the
“Original Plan”) effective as of October 4, 2002, hereby amends the Original Plan in accordance
with this First Amendment to Energy West Incorporated 2002 Stock Option Plan, effective as of
December 31, 2008 (the “Amendment,” and together with the Original Plan, the “Amended Plan”), as
follows:

1. Addition of New Section 1.2 to the Amended Plan. The Company hereby adds Section
1.2 to the Amended Plan in its entirety as follows:

	 	1.2	 	Section 409A. This Plan and any Awards granted hereunder are
intended to be exempt from the requirements of Section 409A, and shall be
interpreted and administered in a manner consistent with those intentions. Any
provision of this Plan to the contrary notwithstanding, Grandfathered Awards
shall not be governed by the provisions of this Plan but instead shall continue
to be governed by the provisions of the Energy West Incorporated 2002 Stock
Plan effective as of October 4, 2002 (the “Original Plan”) as in effect on
December 31, 2004.

2. Changes to Section 2 of the Original Plan. The Company hereby amends Section 2 of
the Original Plan as follows:

	 	(a)	 	Section 2.14 is deleted from the Original Plan in its entirety
and is replaced in the Amended Plan by the following new Section 2.14:

2.14 “Fair Market Value” means, as of any given date, the value of a Share
determined as follows (in order of applicability): (i) if on the Grant
Date or other determination date the Share is listed on an established
national or regional stock exchange, is admitted to quotation on The NASDAQ
Stock Market, Inc. or is publicly traded on an established securities
market, the Fair Market Value of a Share shall be the closing price of the
Share on that exchange or in that market (if there is more than one such
exchange or market the Committee shall determine the appropriate exchange
or market) on the Grant Date or such other determination date (or if there
is no such reported closing price, the Fair Market Value shall be the mean
between the highest bid and lowest asked prices or between the high and low
sale prices on that trading day) or, (ii) if no sale of Shares is reported
for that trading day, on the next preceding day on which any sale has been
reported. If the Share is not listed on such an exchange, quoted on such
system or traded on such a market, Fair Market Value shall be the value of
the Share as determined by the
determined by such methods or procedures as shall be established from time
to time by the Committee in good faith in a manner consistent with Section
409A.

 

 

 

	 	(b)	 	The following is added in its entirety as the last sentence of
Section 2.16 of the Amended Plan:

The Grant Date of an Award shall not be earlier than the date the Award is
approved by the Committee.

	 	(c)	 	The following is added in its entirety as Section 2.17 of the
Amended Plan:

2.17 “Grandfathered Awards” means all Awards made under the Plan which were
earned and vested on or before December 31, 2004. Grandfathered Awards are
subject to the provisions of Section 1.2 above.To ensure compliance with
Section 409A, any bonus payment payable under this Section 3(b) shall be
paid no later than March 15 of the calendar year following the calendar year
in which the amount was earned and accrued.

	 	(d)	 	Section 2.17 of the Original Plan is redesignated in its
entirety as Section 2.18 of the Amended Plan.

	 	(e)	 	Section 2.18 of the Original Plan is redesignated in its
entirety as Section 2.19 of the Amended Plan.

	 	(f)	 	Section 2.19 of the Original Plan is redesignated in its
entirety as Section 2.20 of the Amended Plan.

	 	(g)	 	The following is added in its entirety as Section 2.21 of the
Amended Plan:

	 	2.21	 	“Original Plan” has the meaning set forth in
Section 1.2.

	 	(h)	 	Section 2.20 of the Original Plan is redesignated in its
entirety as Section 2.22 of the Amended Plan.

	 	(i)	 	Section 2.21 of the Original Plan is redesignated in its
entirety as Section 2.23 of the Amended Plan.

	 	(j)	 	Section 2.22 of the Original Plan is redesignated in its
entirety as Section 2.24 of the Amended Plan.

 

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	 	(k)	 	The following is added in its entirety as Section 2.25 of the
Amended Plan:

“Section 409A” means Section 409A of the Code and the U.S. Department of
Treasury regulations and other interpretive guidance issued thereunder.

	 	(l)	 	Section 2.23 of the Original Plan is redesignated in its
entirety as Section 2.26 of the Amended Plan.

	 	(m)	 	Section 2.24 of the Original Plan is redesignated in its
entirety as Section 2.27 of the Amended Plan.

	 	(n)	 	Section 2.25 of the Original Plan is redesignated in its
entirety as Section 2.28 of the Amended Plan.

3. Change to Section 4.2 of the Original Plan. The Company hereby amends Section 4.2
of the Original Plan by adding the following in its entirety as the last sentence of Section 4.2 in
the Amended Plan:

Notwithstanding the foregoing, no amendment or modification shall be made under
Section 4.2(d) which will result in an Award becoming subject to the terms and
conditions of Section 409A or otherwise constitute an impermissible acceleration,
unless agreed upon by the Committee and the Participant.

4. Change to Section 5.3 of the Original Plan. The Company hereby amends Section 5.3
of the Original Plan by adding the following in its entirety as the last sentence of Section 5.3 in
the Amended Plan:

Notwithstanding the foregoing, no adjustment shall be made which will result in an
Award becoming subject to the terms and conditions of Section 409A or otherwise
constitute an impermissible acceleration, unless agreed upon by the Committee and
the Participant.

5. Changes to Section 6 of the Original Plan. The Company hereby amends Section 6 of
the Original Plan as follows:

	 	(a)	 	The last sentence of Section 6.3.3 is deleted from the Original
Plan in its entirety and is replaced in the Amended Plan by the following:

If such substitute Options are granted, the Committee, consistent with
Section 424(a) of the Code and Section 409A, may determine that such
substitute Options shall have an exercise price less than one hundred
percent (100%) of the Fair Market Value of the Shares on the Grant Date.

 

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	 	(b)	 	The following is added in its entirety as the last two
sentences of Section 6.4.2 of the Amended Plan:

With respect to extensions that were not included in the original terms of
the Option but were provided by the Committee after the date of grant, if at
the time of any such extension, the exercise price per Share of the Option
is less than the Fair Market Value of a Share, the extension shall, unless
otherwise determined by the Committee, be limited to the earlier of (a) the
maximum term of the Option as set by its original terms or (b) ten (10)
years from the Grant Date. Unless otherwise determined by the Committee,
any extension of the term of an Option under this Section 6.4.2 shall comply
with Section 409A to the extent applicable.

	 	(c)	 	The second sentence of Section 6.5.1 of the Original Plan is
deleted in its entirety and is replaced in the Amended Plan by the following:

After an Option is granted, the Committee may accelerate the exercisability
of the Option; provided, however, that any such acceleration of the
exercisability of the Option is subject to the limitations of Section 409A
and, unless otherwise determined by the Committee, any acceleration of the
exercisability of the Option under this Section 6.5.1 shall comply with
Section 409A.

	 	(d)	 	The last sentence of Section 6.5.1 of the Original Plan is
deleted in its entirety and is replaced in the Amended Plan by the following:

If the Committee provides that any Option is exercisable only in
installments, the Committee may at any time waive such installment exercise
provisions, in whole or in part, based on such factors as the Committee may
determine; provided, however, that any such waiver of installment exercise
provisions of the Option is subject to the limitations of Section 409A and,
unless otherwise determined by the Committee, any waiver of installment
exercise provisions of the Option under this Section 6.5.1 shall comply with
Section 409A.

 

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	 	(e)	 	Section 6.5.2 is deleted from the Original Plan in its entirety
and is replaced in the Amended Plan by the following new Section 6.5.2:

Restrictions on Exercise. The Committee may postpone any exercise of an
Option for such period as the Committee in its discretion may deem necessary
in order to permit the Company (i) to effect or maintain registration of the
Plan or the Shares issuable upon the exercise of an Option under the
Securities Act of 1933, as amended, or the securities laws of any applicable
jurisdiction, (ii) to permit any action to be taken in order to comply with
restrictions or regulations incident to the maintenance of a public market
for its Shares or to list the Shares thereon; or (iii) to determine that
such Shares and the Plan
are exempt from such registration or that no action of the kind referred to
in (ii) above need be taken; and the Company shall not be obligated by
virtue of any terms and conditions of any Award or any provision of the Plan
to permit the exercise of an Option to sell or deliver Shares in violation
of any federal or state securities or other law. With respect to any
postponements that were not included in the original terms of the Option but
were provided by the Committee after the date of grant, if at the time of
any such postponement, the exercise price per Share of the Option is less
than the Fair Market Value of a Share, the postponement shall, unless
otherwise determined by the Committee, be limited to the earlier of (a) the
maximum term of the Option as set by its original terms or (b) ten (10)
years from the Grant Date. Unless otherwise determined by the Committee,
any postponement of the term of an Option under this Section 6.5.2 shall
comply with Section 409A to the extent applicable. Neither the Company nor
its directors or officers or any of them shall have any obligation or
liability to the Participant, to any successor of a Participant or to any
other person with respect to any Shares as to which an Option shall lapse
because of such postponement. The Company may toll the expiration of an
Option while the participant cannot exercise the Option because such an
exercise would jeopardize the ability of the Company to continue as a going
concern; provided that the period during which the Option may be exercised
is not extended by more than thirty (30) days after the exercise of the
Option (a) would no longer violate an applicable Federal, state, local, or
foreign law or (b) would first no longer jeopardize the ability of the
Company to continue as a going concern. Unless otherwise determined by the
Committee, any tolling of the expiration of an Option under this Section
6.5.2 shall comply with Section 409A to the extent applicable.

	 	(f)	 	The last sentence of Section 6.6.2 of the Original Plan is
deleted in its entirety and is replaced in the Amended Plan by the following:

The Committee may also permit exercise (a) by tendering previously acquired
Shares having an aggregate Fair Market Value at the time of exercise equal
to the total Exercise Price or (b) by any other means which the Committee
determines to provide legal consideration for the Shares, and to be
consistent with the purposes of the Plan and with all applicable laws and
regulations, provided that such other means shall be set forth in the Award
Agreement and provided further, that such form of payment does not
constitute a deferral of compensation within the meaning of Section 409A or
otherwise cause the Option to be subject to the requirements of Section
409A.

 

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6. Addition of New Section 7.9 to the Amended Plan. The Company hereby adds Section
7.9 to the Amended Plan in its entirety as follows:

7.9 Section 409A. The Plan is intended to comply with the requirements of Section
409A, without triggering the imposition of any tax penalty thereunder. To the
extent necessary or advisable, the Board may amend the Plan or any Award to delete
any conflicting provisions and to add any such other provisions as are required to
fully comply with the applicable provisions of Section 409A applicable to the Plan.
The Committee shall comply with Section 409A in establishing the rules and
procedures applicable to the Plan. Notwithstanding any provision of this Plan or
any Award to the contrary, if all or any portion of the payments and/or benefits
under this Plan or any Award are determined to be “nonqualified deferred
compensation” subject to Section 409A and the Participant is a “specified employee”
(within the meaning of Treasury Regulation Section 1.409A-1(i)), as determined by
the Committee in accordance with Section 409A, as of the date of the Participant’s
separation from service (within the meaning of Treasury Regulation Section
1.409A-1(h)), and the delayed payment or distribution of all or any portion of such
amounts to which the Participant is entitled under this Plan and/or any Award is
required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i)
of the Code, then such portion deferred under this Section 7.9 shall be paid or
distributed to the Participant in a lump sum on the earlier of (a) the date that is
six (6) months following termination of the Participant’s employment, (b) a date
that is no later than thirty (30) days after the date of the Participant’s death or
(c) the earliest date as is permitted under Section 409A. For purposes of clarity,
the six (6) month delay shall not apply in the case of severance pay contemplated by
Treasury Regulation Section 1.409A-1(b)(9)(iii) to the extent of the limits set
forth therein. Any remaining payments due under this Plan and any Award shall be
paid as otherwise provided therein.

7.
Change to Section 8.1 of the Original Plan. The Company hereby deletes
the first sentence of Section 8.1 of the Original Plan in its entirety and replaces in
it in the Amended Plan with the following:

The Board, in its sole discretion, may amend, suspend, or terminate the
Plan, or any part thereof, at any time and for any reason; provided,
however, that if and to the extent required by law or to maintain the Plan’s
qualification under the Code, the rules of any national securities exchange
(if applicable), or any other applicable law, any such amendment shall be
subject to stockholder approval.

 

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8. Change to Section 9.3 of the Original Plan. The Company hereby amends
Section 9.3 of the Original Plan by adding the following in its entirety as the last
sentence of Section 9.3 in the Amended Plan:

To ensure compliance with Section 409A, any tax bonus payable under
this Section 9.3 shall be paid no later than March 15 of the calendar year
following the calendar year in which the amount was earned and accrued and
in which the Participant’s right to the payment is no longer subject to a
substantial risk of forfeiture.

9. Full Force and Effect. Except to the extent specifically modified in this
Amendment, each and every provision of the Original Plan remains in full force and effect in the
Amended Plan.

10. Miscellaneous. This Amendment shall be governed by and construed in accordance
with the substantive laws of the State of Montana. In the event of any conflict between the
original terms of the Original Plan and this Amendment, the terms of this Amendment shall prevail.

 

7Exhibit 10.13

Exhibit 10.13

AMENDED AND RESTATED

ENERGY WEST INCORPORATED

DEFERRED COMPENSATION PLAN FOR DIRECTORS

Section 1. Introduction

1.1 Establishment. Energy West Incorporated, a Montana corporation (the “Company”), hereby
establishes the Energy West Incorporated Deferred Compensation Plan for Directors (the “Plan”) for
those directors of the Company who are neither officers nor employees of the Company. The Plan
provides the opportunity for Directors to defer in accordance with Section 409A receipt of all or
part of their cash compensation on a pretax basis, subject to approval of the Plan by
shareholders. Specifically, the Plan provides (i) the opportunity for Directors to elect to
receive Fees in the form of Stock or the opportunity to defer in accordance with Section 409A
receipt of those Fees in the form of cash or Stock Equivalents(ii) the opportunity for Directors
to be paid Incentive Awards in Stock or the opportunity for Directors to defer in accordance with
Section 409A receipt of such Incentive Awards in the form of Stock Equivalents; and (iii) the
opportunity for an investment return on those deferrals. Capitalized terms used herein are
defined in Section 2 hereof.

1.2 Purposes. The purposes of the Plan are to align the interests of Directors more closely
with the interests of other shareholders of the Company, to encourage the highest level of
Director performance by providing the Directors with a direct interest in the Company’s attainment
of its financial goals, and to help attract and retain qualified Directors.

1.3 Effective Date. This Plan shall be effective upon approval of the Plan by the Board;
provided that, until the later of the Shareholder Approval Date or the effective date of an
applicable election required pursuant to Sections 5.1 or 6.3, as the case may be, (i) no Stock
shall be issued under the Plan, (ii) no Fees shall be deferred as cash amounts or as Stock
Equivalents under the Plan, and (iii) no Incentive Award shall be made under the Plan. To the
extent an investment or distribution of Stock may be made under this Plan, the Plan is intended to
qualify for the exemption from short swing profits under Section 16(b) of the Exchange Act, as
amended, provided by Rule 16b-3 of the Securities and Exchange Commission and now in effect or as
hereafter amended. In the event the shareholders of the Company do not approve this Plan at the
Company’s 1996 annual meeting of shareholders, a participating Director may, within thirty days
after the date of such meeting, elect to terminate participation in this Plan and to receive a
one-time immediate cash distribution of the entire balance in the Deferred Account.

1.4 Section 409A. This Plan and any Awards made or granted hereunder are intended to comply
with or be exempt from the requirements of Section 409A, and shall be interpreted and administered
in a manner consistent with those intentions. Any provision of this Plan to the contrary
notwithstanding, Grandfathered Awards shall be governed by the provisions of the Energy West
Incorporated Deferred Compensation Plan for Directors effective as of                     , 1996 (the
“Original Plan”) as in effect on December 31, 2004.

 

 

 

Section 2. Definitions

2.1 Definitions. The following terms shall have the meanings set forth below:

	 	(a)	 	“409A Award” means an Award that provides for a deferral of
compensation from the Award Date, as determined under Section 409A.

	 	(b)	 	“Administrative Committee” means the committee designated in
Section 3 to administer the Plan.

	 	(c)	 	“Applicable Percentage” shall have the meaning set forth in
Section 5.2.

	 	(d)	 	“Award” means any right or interest relating to Deferred Stock
Fees, Stock, or Stock Equivalents of the Company granted under the provisions
of the Plan.

	 	(e)	 	“Award Date” means, as determined by the Administrative
Committee, the date on which the recipient of an Award first becomes eligible
to receive an Award under Section 5 of this Plan.

	 
	 	(f)	 	“Board” means the Board of Directors of the Company.

	 	(g)	 	“Change in Control” means the date on which any one of the
following occurs: (i) any one person, or more than one person acting as a
group (as determined under Section 409A), acquires (or has acquired during the
twelve (12) month period ending on the date of the most recent acquisition by
that person or persons) ownership of stock of the Company possessing 30% or
more of the total voting power of the stock of the Company; (ii) a majority of
members of the Board is replaced during any twelve (12) month period by
directors whose appointment or election is not endorsed by a majority of the
members of the Board before the date of that appointment or election; (iii) any
one person, or more than one person acting as a group (as determined under
Section 409A), acquires ownership of stock of the Company that, together with
stock held by that person or group, constitutes more than 50% of the total fair
market value or total voting power of the stock of the Company; or (iv) any one
person, or more than one person acting as a group (as determined under Section
409A), acquires (or has acquired during the twelve (12) month period ending on
the date of the most recent acquisition by that person or persons) assets from
the Company that have a total gross fair market value equal to more than 40% of
the total gross fair market value of all of the assets of the Company before
such acquisition or acquisitions. For this purpose, “gross fair market value”
means the value of the assets of the Company, or the value of the assets being
disposed of, without regard to any liabilities associated with those assets.

 

 

 

	 	(h)	 	“Code” means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.

	 	(i)	 	“Deferred Account” means the bookkeeping account established by
the Company in respect to each Director pursuant to Section 6.3 hereof and to
which shall be credited (i) an amount equal to the Fees deferred by the
Director and interest thereon, if any, as provided in this Plan, (ii) the Stock
Equivalents into which any deferred Fees and interest are converted by election
of the Director pursuant to the Plan, (iii) the Stock Equivalents credited to
such Director as Incentive Awards pursuant to Section 5.2 hereof, and (iv) the
Stock Equivalents credited to such Director in respect of dividends pursuant to
Section 6.4 hereof.

	 	(j)	 	“Deferred Stock Fee” means either cash or a number of Stock
Equivalent shares equal to the amount of Fees due to a Director, divided by the
Fair Market Value of a share of Stock, determined as of the Payment Dates for
such Fees.

	 	(k)	 	“Director” means a member of the Board who is neither an
officer nor an employee of the Company. For purposes of the Plan, an employee
is an individual whose wages are subject to the withholding of federal income
tax under section 3401 of the Internal Revenue Code, and an officer who is an
individual elected or appointed by the Board or chosen in such other manner as
may be prescribed in the Bylaws of the Company to serve as such.

	 	(l)	 	“Exchange Act” means the Securities Exchange Act of 1934, as
amended from time to time.

	 	(m)	 	“Fair Market Value” means, with respect to Stock, as of any
applicable date the value of a share of Stock determined as follows (in order
of applicability): (i) if on the Award Date or other determination date the
Stock is listed on an established national or regional stock exchange, is
admitted to quotation on The NASDAQ Stock Market, Inc. or is publicly traded on
an established securities market, the Fair Market Value of a share of Stock
shall be the closing price of the share of Stock on that exchange or in that
market (if there is more than one such exchange or market the Administrative
Committee shall determine the appropriate exchange or market) on the Award Date
or such other determination date (or if there is no such reported closing
price, the Fair Market Value shall be the mean between the highest bid and
lowest asked prices or between the high and low sale prices on that trading
day) or, (ii) if no sale of Stock is reported for that trading day, on the next
preceding day on which any sale has been reported. If the Stock is not listed
on such an exchange, quoted on such system or traded on such a market, Fair
Market Value shall
be the value of the share of Stock as determined by such methods or
procedures as shall be established from time to time by the Administrative
Committee in good faith in a manner consistent with Section 409A.

 

 

 

	 	(n)	 	“Fees” means any annual retainer, meeting fees, and committee
fees payable in cash to the Director for serving on the Board or any committee
thereof, but does not include reimbursable expenses or any Incentive Award
hereunder.

	 
	 	(o)	 	“Fiscal Year” means any fiscal year of the Company.

	 	(p)	 	“Grandfathered Awards” means all awards made under the Plan
which were earned and vested on or before December 31, 2004. Grandfathered
Awards are subject to the provisions of Section 1.4 above.

	 	(q)	 	“Incentive Award” means an award of Stock or Stock Equivalents
pursuant to Section 5.2.

	 
	 	(r)	 	“Incentive Plan” means the Energy West Management Incentive Plan.

	 	(s)	 	“Internal Revenue Code” means the Internal Revenue Code of
1986, as amended from time to time.

	 	(t)	 	“Interest Rate” shall mean, from time to time, the annual rate
of interest on U.S. Treasury Notes maturing in seven years (or if none is
maturing in exactly seven years, the rate for the Treasury Note which has a
maturity closest to seven years in length), as listed in the edition of the
Wall Street Journal, published next following the last business day of
each calendar quarter, and shall be adjusted on a quarterly basis.

	 
	 	(u)	 	“Original Plan” has the meaning set forth in Section 1.4.

	 	(v)	 	“Payment Date” means each of the dates each year on which the
Company pays Fees to Directors.

	 	(w)	 	“Section 409A” means Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”), and the U.S. Department of Treasury
regulations and other interpretive guidance issued thereunder, each as in
effect from time to time.

	 	(x)	 	“Separation from Service” means a termination of services
provided by a Director to the Company, whether voluntarily or involuntarily, as
determined by the Company in accordance with Treasury Regulations Section
1.409-1(h).

	 	(y)	 	“Shareholder Approval Date” shall mean the date on which the
Plan is approved by the shareholders of the Company.

 

 

 

	 	(z)	 	“Specified Employee” means any Director who is determined to be
a “key employee” as defined under Code Section 416(i)) without regard to
paragraph (5) thereof) for the applicable period, as determined by the Company
under Section 409A and in accordance with Treasury Regulations Section
1.409A-1(i).

	 
	 	(aa)	 	“Stock” means the $.15 par value common stock of the Company.

	 	(bb)	 	“Stock Equivalent” means a hypothetical share of Stock which
shall have a value on any date equal to the Fair Market Value of one share of
Stock on that date.

	 	(cc)	 	“Treasury Regulations” means Regulations of the Department of
the Treasury under the Code as such regulations may be changed from time to
time.

	 	(dd)	 	“Unforeseeable Emergency” means, with respect to a Director,
any of the following as provided under, and determined by the Board in
accordance, with Section 409A: (i) a severe financial hardship to a Director
resulting from an illness or accident of the Director, the Director’s spouse,
the Director’s beneficiary, or the Director’s dependent (as defined in Code
Section 152, without regard to Code Sections 152(b)(1), (b)(2), and (d)(1)(B));
(ii) loss of a Director’s property due to casualty; and (iii) other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Director.

	 	(ee)	 	Unforeseeable Emergency Determination” has the meaning set
forth in Section 6.10.

	 	(ff)	 	“Unforeseeable Emergency Payment” means an amount payable upon
an Unforeseeable Emergency Determination, which amount is limited to the amount
reasonably necessary to satisfy the Unforeseeable Emergency and may include
amounts necessary to pay any Federal, state, local, or foreign income taxes or
penalties reasonably anticipated to result from the distribution. In
determining an Unforeseeable Emergency Payment, the Board is not required to
take into account any additional compensation that due to the Unforeseeable
Emergency is available under another nonqualified deferred compensation plan
but has not actually been paid, or that is available due to the Unforeseeable
Emergency under another plan that would provide for deferred compensation
except due to the application of the effective date provisions under Treasury
Regulation Section 1.409A-6.

	 	(gg)	 	“Unforeseeable Emergency Payment Application” has the meaning
set forth in Section 6.10.

 

 

 

2.2 Gender and Number. Except when indicated by the context, the masculine gender shall also
include the feminine gender, and the definitions of any term herein in the singular shall also
include the plural.

Section 3. Plan Administration

The Plan shall be administered by the Administrative Committee, which shall be appointed by
and serve at the pleasure of the Board. Subject to the limitations of the Plan, the Administrative
Committee shall have the sole and complete authority and discretion: (i) to impose such
limitations, restrictions and conditions as shall be deemed appropriate, (ii) to
interpret the Plan and to adopt, amend and rescind administrative guidelines and other rules and
regulations relating to the Plan and (iii) to make all other determinations and to take all other
actions necessary or advisable for the implementation and administration of the Plan.
Notwithstanding the foregoing, the Administrative Committee shall have no authority, discretion or
power to alter any terms or conditions specified in the Plan, except in the sense of administering
the Plan subject to the provisions of the Plan. The Administrative Committee’s determination on
matters within its authority shall be conclusive and binding upon the Company, the Directors and
all other persons.

Section 4. Stock Subject to the Plan

4.1 Number of Shares. There shall be authorized for issuance under the Plan, in accordance
with the provisions of the Plan, 100,000 shares of Stock. This authorization may be increased from
time to time by approval of the Board and by, the shareholders of the Company if such
shareholder approval is required. The Company shall at all times during the term of the Plan
retain as authorized and unissued Stock at least the number of shares from time to time which may
be required under the provisions of the Plan, or otherwise assure itself of its ability to perform
its obligations hereunder. The shares of Stock issuable hereunder shall be authorized and unissued
shares or previously issued and outstanding shares of Stock reacquired by the Company.

4.2 Adjustments Upon Changes in Stock. If there shall be any change in the Stock of the
Company, through merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, spinoff, split up, dividend in kind or other change in the corporate structure or
distribution to the shareholders, appropriate adjustments shall be made by the Administrative
Committee (or if the Company is not the surviving corporation in any such transaction, the board of
directors of the surviving corporation) in the aggregate number and kind of shares subject to the
Plan, and the number and kind of shares which may be issued under the Plan. Appropriate
adjustments may also be made by the Administrative Committee on an equitable basis as the
Administrative Committee in its discretion determines. Notwithstanding the foregoing, no
adjustment shall be made to an Award or a Deferred Account which will result in the Award or
Deferred Account becoming subject to the terms and conditions of Section 409A, unless agreed upon
by the Administrative Committee and the Director.

 

 

 

Section 5. Payment of Fees and Incentive Awards

5.1 Form of Payment of Fees. Unless a Director makes an election under the Plan, the Director
shall receive cash payment of all Fees on the Payment Dates for such Fees. Each Director may elect
to receive for the Director’s Fees, Stock or Deferred Stock Fees in accordance with Section 409A
and the terms of the Plan; provided that a Director shall be entitled to receive Stock or Deferred
Stock Fees only if he or she has filed a written election with the Company, in a form prescribed by
the Administrative Committee, in accordance with Section 6 of this Plan.

5.2 Incentive Awards. Each Director shall receive an Incentive Award following the end of
each Fiscal Year equal to the product of (x) total Fees earned by such Director during such Fiscal
Year, multiplied by the (y) Applicable Percentage with respect to such Fiscal Year (which
Applicable Percentage will be zero if no awards are made by the Company under the Incentive Plan
for that year) (such product being referred to as the “Incentive Award Value”); provided that such
Director must have been a Director as of the last day of such Fiscal Year in order to be eligible
for an Incentive Award with respect to such Fiscal Year. As used herein, the “Applicable
Percentage” means the greatest (in percentage terms and not in absolute dollar terms) of the
amounts of incentive compensation awarded to eligible participants pursuant to the Incentive Plan
expressed as a percentage of such eligible participants’ base salaries for the Fiscal Year with
respect to which such awards are made. The “Applicable Percentage” shall be expressed as a
decimal. (Example: The Incentive Plan has two participants for 1.997, A and B. A’s base salary
for 1997 is $50,000, and A receives incentive compensation under the Incentive Plan of $5,000. B’s
base salary for 1997 is $40,000, and B receives incentive compensation under the Incentive Plan of
$4,400. In this example, the Applicable Percentage is .11 because B received incentive pay equal
to 11 % of his base salary for the Fiscal Year in question.) Incentive Awards shall be paid only
in (i) Stock or, (ii) if the Director has elected to defer receipt of such Incentive Award pursuant
to Section 6, in the form of Stock Equivalents credited to the Director’s Deferred Account. For
each Incentive Award, the number of shares of Stock to be issued or the number of Stock Equivalents
to be credited, as the case may be, shall be equal to the Incentive Award Value of such Incentive
Award, divided by the Fair Market Value of a share of Stock determined as of the date incentive
bonuses become payable to employees of the Company under the Incentive Plan. Incentive Awards
shall, subject to receipt of approval by the shareholders of the Company, be awarded to Directors
beginning with awards for the Fiscal Year ended June 30, 1996, and for each Fiscal Year thereafter
during the term of this Plan. The Incentive Awards for the Fiscal Year ended June 30, 1996 shall
be made as soon as practicable following the Shareholder Approval Date.

Section 6. Deferrals and Distributions

6.1 Deferral Elections.

	 	(a)	 	A Director may elect to defer receipt of (i) Fees otherwise
payable to him as provided under Section 5.1; and (ii) Incentive Awards payable
to the Director pursuant to Section 5.2. A Director may make the elections
permitted hereunder by giving written notice to the Company in a form approved
by the Administrative Committee.

 

 

 

	 	(b)	 	The election provided for under Section 5.1 must meet the
following requirements:

	 	(i)	 	Election relating to Fees. The election notice
relating to Fees shall provide each of the following: (i) whether the
Director elects to receive Stock or to defer payment; (ii) if the
Director elects to defer payment, whether such payment deferral shall
be in the form of cash or Stock Equivalents; and (iii) the elected
payment time. For purposes of specifying the elected payment time, the
Director must specify in the election form that the Director is
electing either (A) a specified date for payment and set forth the
elected payment date on the election form or (B) payment under a fixed
payment schedule designated in the election form.

	 	(ii)	 	Election relating to Incentive Awards. The
election notice relating to Incentive Awards shall provide each of the
following: (i) that the Director elects to receive Stock Equivalents;
and (ii) the elected payment time. For purposes of specifying the
elected payment time, the Director must provide in the election form
that the Director is electing either (A) a specified date for payment
and set forth the elected payment date or (B) payment under a fixed
schedule and designate in the election form the fixed schedule under
which the Director shall receive payments.

6.2 Time for Electing Deferral and Change in Election.

	 	(a)	 	Election for Deferral. An election to defer receipt of Fees
and/or Incentive Awards shall be made in accordance with each of the following:

	 	(i)	 	Initial Deferral Elections by Directors.
Except as otherwise provided in this Section 6.2(a), the Director must
make a written, irrevocable election as to the deferral of payment in
respect of Fees or an Incentive Award in a form approved by the
Administrative Committee no later than: (A) December 31st
of the calendar year preceding the calendar year during which the
Director will commence performing the services giving rise to the Fee
or Incentive Award subject to the deferral election; or (B) for the
first year in which the Director becomes eligible to participate in the
Plan, thirty (30) days after the date the Director first becomes
eligible to participate in the Plan, provided that such an election
will only be effective with respect to (1) the portion of the Fees
related to services performed after the election and (2) Incentive
Awards with respect to calendar years beginning after the date of the
election. Any such election will remain in effect for continuing years
until revoked or modified by the Director by written notice to the
Company prior to the beginning of a year for which Fees
and/or Incentive Awards would otherwise be deferred, except that as
of each December 31, the election becomes irrevocable with respect to
Fees or Incentive Awards payable in connection with services
performed in the immediately following year.

 

 

 

	 	(ii)	 	Initial Director Deferral Elections for Fiscal
Year Compensation. In the event that the Administrative Committee
determines that a deferral election may be made with respect to Fees or
an Incentive Award that is Fiscal Year Compensation (as defined below),
the Director may make a written, irrevocable election as to the
deferral of payment in respect of the Fees or Incentive Award and the
time and form of that payment not be later than the close of the
Employer’s Fiscal Year immediately preceding the first Fiscal Year in
which any services are performed for which the Fees or Incentive Award
is payable. For purposes of this Section 6.2(a)(ii), the term “Fiscal
Year Compensation” means Fees or an Incentive Award relating to a
period of service coextensive with one or more consecutive Fiscal Years
of the Employer, of which no amount is paid or payable during the
Fiscal Year(s) constituting the period of service. Any such election
will remain in effect for continuing Fiscal Years until revoked or
modified by the Director by written notice to the Company prior to the
beginning of a Fiscal Year for which Fees and/or Incentive Awards would
otherwise be deferred, except that as of the last day of each Fiscal
Year, the election becomes irrevocable with respect to Fees or
Incentive Awards payable in connection with services performed in the
immediately following Fiscal Year.

	 	(b)	 	Subsequent Deferral Elections. Notwithstanding the foregoing
provisions of this Section 6.2, with the approval of the Administrative
Committee, a Director may elect to further delay payment in respect of Fees or
an Incentive Award or change the form of payment if each of the following
conditions is met:

	 	(i)	 	The election will not take effect until at
least 12 months after the date on which the election is made.

	 	(ii)	 	For any payment not made on account of death or
an Unforeseeable Emergency, the payment is deferred for a period of not
less than five years from the date the payment would otherwise have
been paid.

	 	(iii)	 	Any election related to a payment to be made
at a specified time or under a fixed schedule must be made not less
than 12 months before the date the payment is scheduled to be paid.

 

 

 

	 	(c)	 	Acceleration of Payments. Notwithstanding any other provision
of this Plan or a deferral election to the contrary, the Administrative
Committee in its discretion, may accelerate payment in respect of an Award in
accordance with the provisions of Regulations § 1.409A-2(b)(7), provided that
the Administrative Committee treats all payments to similarly situated
Directors on a reasonably consistent basis.

	 	(d)	 	Delay of Payments. Notwithstanding any other provision of this
Plan or a deferral election to the contrary, payment under an Award may be
delayed by the Administrative Committee under the circumstances described in
Regulations § 1.409A-2(b)(7), provided that the Administrative Committee treats
all payments to similarly situated Directors on a reasonably consistent basis.

6.3 Deferred Accounts. A Deferred Account shall be established for each Director. An amount
equal to Fees deferred by a Director shall be credited to such Account as of the date such amounts
would otherwise have been paid in cash to the Director. Any cash amount credited to a Deferred
Account shall earn interest at the Interest Rate from the date as of which the amount was credited
to the Deferred Account until the date of distribution of such amounts pursuant to this Plan. If
the Director has previously given written notice to the Company of an election, in a form approved
by the Administrative Committee, to have Fees deferred in the form of Stock Equivalents, such Fees
shall be converted into Stock Equivalents based on Fair Market Value as of the date such Fees would
have otherwise been paid in cash to the Director. Stock Equivalents representing deferred Fees
shall be credited to such Account as of the date on which the Fees would otherwise have been paid
in cash to the Director and Stock Equivalents representing deferred Incentive Awards shall be
credited to such Account as of the date on which incentive compensation for such Fiscal Year
becomes payable pursuant to the Incentive Plan. A Director’s Deferred Account shall also be
credited with hypothetical dividends and other distributions pursuant to Section 6.4.

6.4 Hypothetical Dividends on Stock Equivalents. Stock Equivalents having a Fair Market Value
as of the applicable distribution date equal to Dividends and other distributions that would have
been paid if Stock Equivalents credited to a Deferred Account had been outstanding as Stock shall
be credited to such Deferred Account as of the respective distribution dates for such Dividends or
other distributions. Stock Equivalents having a Fair Market Value as of the applicable
distribution date equal to the values as of such date of any securities that would have been issued
in respect of Stock Equivalents, if such Stock Equivalents credited to a Deferred Account had been
outstanding as Stock, in connection with reclassification, spinoffs and the like shall be credited
to such Deferred Account as of the respective distribution date for such securities. Fractional
shares shall be credited to a Director’s Deferred Account cumulatively, but the balance of shares
of Stock Equivalents in a Director’s Deferred Account shall be rounded to the next highest whole
share for any distribution to such Director pursuant to this Section 6. Notwithstanding the
foregoing, no adjustment shall be made to a Deferred Account which will result in an Award becoming
subject to the terms and conditions of Section 409A, unless agreed upon by the Administrative
Committee and the participant Director.

 

 

 

6.5 Statement of Accounts. A statement will be sent to each Director as to the dollar amount
and Stock Equivalents credited to his or her Deferred Account at least once each calendar year.

6.6 Payment of Accounts. Unless otherwise provided under the Plan, distribution of a Deferred
Account shall be made on either a specified date or under a fixed schedule in accordance with a
Director’s deferral notice. Such distribution shall consist of (A) the dollar amount credited to
the Deferred Account in respect of Fees and interest accrued thereon, and (B) one share of Stock
for each Stock Equivalent credited to the Deferred Account as of the date for distribution.

6.7 Payments to a Deceased Director’s Estate. Notwithstanding any provision of this Plan to
the contrary, in the event of a Director’s death before the balance of his Deferred Account is
paid, payment of the balance of the Director’s Deferred Account shall then be made to the
beneficiary designated by the Director pursuant to Section 6.8 or, in the absence of a designation
of a beneficiary pursuant to Section 6.8, to his estate, in the time and manner selected by the
Administrative Committee. The Administrative Committee may take into account the application of
any duly appointed administrator or executor of a Director’s estate and direct that the balance of
the Director’s Deferred Account be paid to his estate in the manner requested by such application.

6.8 Designation of Beneficiary. A Director may designate one or more beneficiaries in the
manner and on a form approved by the Administrative Committee.

6.9 Change in Control. Notwithstanding any provision of this Plan to the contrary, in the
event a Change in Control of the Company occurs, within ten (10) days of the date of such Change in
Control, each Director shall receive a lump sum distribution in cash equal to the dollar amount of
(a) the value of all Stock Equivalents credited to such Director’s Deferred Account as of the
Payment Date immediately preceding the date of distribution (based upon the highest Fair Market
Value during the 30 days immediately preceding the Change in Control) and (b) the dollar amount
credited to the Deferred Account in respect of deferred cash Fees and interest accrued thereon.

6.10 Emergency Payments. Notwithstanding any provision of this Plan to the contrary, upon the
incurrence by a Director of an Unforeseeable Emergency, the Director may request to apply for an
Unforeseeable Emergency Payment. The Director (or the Director’s legal representatives or
successors) shall make such application, in writing, to the Board no later than thirty (30) days
after the occurrence of the Unforeseeable Emergency (the “Unforeseeable Emergency Payment
Application”). The Unforeseeable Emergency Payment Application shall contain a full description of
the circumstances which are deemed to justify the Unforeseeable Emergency Payment, together with an
estimate of the amount necessary to prevent financial hardship arising from the Unforeseeable
Emergency. Within ten (10) days of receipt of an Unforeseeable Emergency Payment Application, a
majority of the full Board (except that the member requesting distribution pursuant to this Section 6.10 shall not participate in any decision of the Board pursuant to this Section 6.10), shall
determine, after making such inquiries as the Board deems necessary or appropriate, (i) whether an
Unforeseeable Emergency has occurred (an “Unforeseeable Emergency Determination”), and (ii) the Unforeseeable Emergency Payment
(if any) payable to the Director under this Section 6.10, without regard to the payment dates
otherwise provided under the Plan and any deferral election, to the extent the Board determines, in
its sole and absolute discretion, that such payment of the Unforeseeable Emergency Payment is
necessary and appropriate in light of immediate and substantial needs of the Director (or his
beneficiary) occasioned by the Unforeseeable Emergency. No Unforeseeable Eemergency Payment shall
be made to the extent that the Unforeseeable Emergency is or may be relieved: (a) through
reimbursement or compensation by insurance or otherwise, (b) by liquidation of the Director’s or
assets, to the extent the liquidation of such assets would not itself cause severe financial
hardship, or (c) by cessation of the Director’s deferrals under the Plan. Within ten (10) days of
the date of such Unforeseeable Emergency Determination, the Director shall receive a lump sum
distribution in cash equal to the Unforeseeable Emergency Payment.

 

 

 

6.11 Payment of Taxable Amount. Notwithstanding any other provision of this Section 6 and
regardless of whether payments have commenced under this Section 6, in the event that the Internal
Revenue Service should finally determine that part or all of the value of a Director’s Deferred
Account which has not actually been distributed to the Director is nevertheless required under
Section 409A to be included in the Director’s gross income for Federal income tax purposes, then
part of the Deferred Account that was determined under Section 409A to be includable in gross
income shall be distributed to the Director in a lump sum as soon as is practicable after such
determination, without any action or approval by the Administrative Committee. A “final
determination” of the Internal Revenue Service for purposes of this Section is a determination in
writing by said Service ordering the payment of additional tax, reporting of additional gross
income or otherwise requiring Plan amounts to be included in gross income, which is not appealable
or which the Director does not appeal within the time prescribed for appeals.

6.12 Payment upon a Separation from Service. Notwithstanding any provision of this Plan to
the contrary, upon the occurrence of a Director’s Separation from Service with the Company, within
ten (10) days of the date of such Separation from Service, the Director shall receive a lump sum
distribution in cash equal to the dollar amount of (a) the value of all Stock Equivalents credited
to such Director’s Deferred Account as of the Payment Date immediately preceding the date of
distribution (based upon the highest Fair Market Value during the 30 days immediately preceding the
Separation from Service) and (b) the dollar amount credited to the Deferred Account in respect of
deferred cash Fees and interest accrued thereon.

Section 7. General Creditor Status

Each Director, and each other recipient under a Director’s Deferred Account pursuant to
Section 6, shall be and remain an unsecured general creditor of the Company with respect to any
payments due and owing to such Director hereunder. All payments to persons entitled to benefits
hereunder shall be made out of the general assets, and shall be the sole obligations, of the
Company. The Plan is a promise to pay benefits in the future and it is the intention of the
parties that it be “unfunded” for tax purposes (and for the purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”)), although it is not intended that
this plan be subject to ERISA because Directors are not employees.

 

 

 

Section 8. Claims Procedures

If a claim for benefits made by any person (the “Applicant”) is denied, the Administrative
Committee shall furnish to the Applicant, within 90 days after its receipt of such claim (or
within 180 days after such receipt if special circumstances require an extension of tune), a
written notice which: (i) specifies the reasons for the denial, (ii) refers to the pertinent
provisions of the Plan on which the denial is based, (iii) describes any additional material or
information necessary for the perfection of the claim and explains why such material or
information is necessary, and (iv) explains the claim review procedures. Upon written request of
the Applicant submitted within 60 days after receipt of such written notice, the Administrative
Committee shall afford the Applicant a full and fair review of the decision denying the claim, and
if so requested: (i) permit the Applicant to review any documents which are pertinent to the
claim, (ii) permit the Applicant to submit to the Administrative Committee issues and comments in
writing, and (iii) afford the Applicant an opportunity to meet with the Administrative Committee
as a part of the review procedure. Within 60 days after its receipt of request for review (or
within 120 days after such receipt if special circumstances, such as the need to hold a hearing,
require an extension of time) the Administrative Committee shall notify the Applicant in writing
of its decision and the reasons for its decision and shall refer the Applicant to the provisions
of the Plan which form the basis for its decision.

Section 9. Assignability

The right to receive payments or distributions hereunder shall not be transferable or
assignable by a Director other than by will or the laws of descent and distribution.

Section 10. Plan Termination, Amendment and Modification

The Board may at any time terminate, and from time to time may amend or modify the Plan,
provided, however, that no amendment or modification may become effective without approval of the
amendment or modification by the shareholders if shareholder approval is required to enable the
Plan to satisfy any applicable statutory or regulatory requirements, and, provided further that no
termination, amendment or modification shall reduce the amount then credited to any Director’s
Deferred Account or otherwise adversely change the terms and conditions thereof without the
Director’s consent.

Section 11. Governing Law/Plan Construction

The Plan and all agreements hereunder shall be construed in accordance with and governed by
the laws of the State of Montana. Nothing in this document shall be construed as an employment
agreement or in any way impairing the right of the Company, its board, committees or shareholders,
to remove a Director from service as a director, to refuse to renominate or reelect such person as
a director, or to enforce the duly adopted retirement policies of the board of directors of the
Company.

 

 

 

Section 12. Section 409A

	 	(a)	 	To the extent applicable, this Plan shall be interpreted in
accordance with Section 409A.

	 
	 	(b)	 	Limitations on Awards to ensure compliance with Section 409A.

	 	(i)	 	409A Awards and Deferrals. Other provisions of
this Plan notwithstanding, the terms of any 409A Award, including any
authority of the Company or the Administrative Committee and rights of
the Director with respect to the 409A Award, shall be limited to those
terms permitted under Section 409A. Each of the following provisions
will apply to 409A Awards:

	 	(A)	 	Any election to defer an Award or
any payment under an Award, shall be permitted only at time in
compliance with Section 409A and as provided under Section 6
above.

	 	(B)	 	The Company shall have no
authority to accelerate or delay distributions relating to 409A
Awards in excess of the authority permitted under Section 409A.

	 	(C)	 	Any distribution of a 409A Award
triggered by a Director’s termination of employment shall be
made only at the time that the Director has a Separation from
Service (or at such earlier time preceding a termination of
employment that there occurs another event triggering a
distribution under the Plan in compliance with Section 409A).

	 	(D)	 	Any distribution to a Specified
Employee after Separation from Service shall occur at the
expiration of the six-month period following that Specified
Employee’s Separation from Service in accordance with Section
12(f) below.

	 	(c)	 	Interpretation. If and to the extent that any provision of an
Award is required or intended to comply with Section 409A, that provision shall
be administered and interpreted in a manner consistent with the requirements of
Section 409A. If and solely to the extent that any such provision of any Award
as currently written would conflict with or result in adverse consequences to a
Director under Section 409A, the Administrative Committee shall have the
authority, without the consent of the Director, to administer that provision
and to amend the Award with respect to that provision to the extent the
Administrative Committee deems necessary for
the purposes of avoiding any portion of the shares of Stock or amounts to be
delivered to the Director being subject to additional income or other taxes
under Section 409A.

 

 

 

	 	(d)	 	Permissible Payment Events/Times. Payment of a 409A Award may
only be made under any of the following events: (i) Separation from Service;
(ii) death; (iii) a specified date or under a fixed schedule as set forth by a
Director in an election form; (iv) a Change in Control; or (v) an Unforeseeable
Emergency.

	 	(e)	 	Time of Payment. The payment date with respect to payment of
an Award that is deferred under Section 6.2 above shall be the permissible
payment event or time under Section 12(d) above designated by the Director or
the Administrative Committee, as applicable, in accordance with Section 6.
Payment in respect of an Award shall be made within ten (10) days following the
payment date; provided, however, that payment may be made at a later date for
administrative reasons to the extent permitted by Section 409A; provided,
further, that the Director shall not be permitted, directly or indirectly, to
designate the calendar year of the payment.

	 	(f)	 	Specified Employees. Any provision of this Plan to the
contrary notwithstanding, if (i) any payment under a Director’s Award provides
for a deferral of compensation under Section 409A, (ii) the Director is a
Specified Employee as of the date of that Director’s Separation from Service
and (iii) the delayed payment or distribution of all or any portion of such
amounts to which the Director is entitled under this Plan is required in order
to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code,
then such portion deferred under this Section 12(f) shall be paid or
distributed (without interest) to the Director in a lump sum on the earlier of
(i) the date that is six (6) months after the Director’s Separation of Service,
(ii) a date that is no later than thirty (30) days after the date of Employee’s
death or (iii) the earliest date as is permitted under Section 409A. For
purposes of clarity, the six (6) month delay shall not apply in the case of
severance pay contemplated by Treasury Regulation Section 1.409A-1(b)(9)(iii)
to the extent of the limits set forth therein. Any remaining payments due
under the Plan shall be paid as otherwise provided herein.

 

 

 

	 	(g)	 	For purposes of Section 409A (including, without
limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), a
Director’s right to receive a fixed series of installment payments under an
election shall be treated as a right to receive a series of separate payments
and, accordingly, each installment payment shall at all times be
considered a separate and distinct
payment.

 

	 	(h)	 	As provided in Internal Revenue Notice 2007-86, notwithstanding
any other provision of this Plan, with respect to an election or amendment to
change a time and form of payment under this Plan that is subject to Section
409A made on or after January 1, 2008 and on or before December 31, 2008,
the election or amendment may apply only to amounts that would not otherwise
be payable in 2008 and may not cause an amount to be paid in 2008 that would
not otherwise be payable in 2008.

 

 

 

EXECUTIVE SUMMARY OF

ENERGY WEST INCORPORATED

DEFERRED COMPENSATION PLAN FOR DIRECTORS

A. General

The Plan provides the following benefits to Directors:

1. A Director can defer receipt of directors’ fees and incentive awards until such time as
he ceases to be a director of the Company by retirement or otherwise. Any fees and awards
deferred would be taxed only upon receipt.

2. A Director can elect to receive directors’ fees in Energy West stock, either currently or
on a deferred basis. Fees paid in the form of stock would be taxed on the basis of fair market
value of the stock at the time of distribution to the Director.

3. Directors will participate in an incentive compensation arrangement. The incentive
compensation will be paid only in stock, and can be distributed on a current basis or a Director
can elect to receive Stock on a deferred basis. For any given year, the amount of incentive
compensation will be the total fees earned by each Director for that year multiplied by the
highest percentage incentive award for that year to any employee under the Company’s management
incentive compensation plan.

B. Deferral Elections

1. Fees (either cash or stock) and incentive compensation (stock only) can be received either
currently, as they are earned, or on a deferred basis. Elections to defer receipt are subject to
timing requirements:

	 	(a)	 	Any election to defer receipt of fees to be paid in cash must be provided to
the Company prior to the calendar year in which the fees are to be earned. If a
person becomes a Director during a year, he or she may file an election to defer
receipt of fees within 30 days after he or she becomes a Director. In all cases,
elections to defer can relate only to:

	 	(i)	 	Fees earned after the date of election;

	 	(ii)	 	Incentive compensation for years following the year in which
the election is made.

	 	(b)	 	An election to defer is irrevocable for the first calendar year following the
date of the election. A deferral election may be revoked for succeeding years so long
as notice of such revocation is delivered to the Company prior to the beginning of the
calendar year for which Fees or Incentive Awards otherwise would have been
deferred.

 

 

 

C. Elections to Review Stock Equivalents

1. A Director may elect to receive directors’ fees in the form of stock instead of cash. Such
stock may be received on a current or deferred basis.

2. In order to receive fees in the form of stock, a Director must file an election to that
effect prior to the date on which the fees are to be paid. Any revocation of an election to
receive fees in stock shall become effective on the date of such revocation.

3. If a Director has elected to defer receipt of fees in the form of stock, those fees will be
deferred as stock equivalents (based on the fair market value of such stock as of the date on
which such fees would have otherwise been paid in cash to the Director.

D. Interest

Any cash amount that has been deferred will earn interest at the annual prime rate of Norwest
Bank, or any successor entity as of the last day of each calendar quarter, until paid.

E. Treatment of Deferred Stock Equivalents, Dividends

1. All deferrals of receipt of stock under the Plan (deferred fees in the form of stock and
incentive awards) will take the form of stock equivalents credited to the account of the Director.
During the period of deferral, no actual stock will be issued and stock equivalents will not carry
voting rights. The number of stock equivalents credited to a Director’s account will be the number
of actual shares of stock that could have been purchased on the date those fees or incentive
compensation would otherwise be payable or distributable to the Director based on the amount or
value of such fees or incentive compensation. Upon the lapse of the period of deferral, the
Company will issue to the Director a number of shares of stock equal to the number of stock
equivalents credited to the Director’s account. It should be noted that the value of the stock
received by Directors upon lapse of the period of deferral will be greater or lesser than the value
of such stock on the date stock equivalents are credited to Directors’ accounts, based on increases
or decreases from the date credited to the date distributed.

2. On each date set for payment of dividends on the Company’s stock, a Director’s account
will be credited with stock equivalents equal in value to the amount of dividends that would have
been paid on the stock equivalents then in the account had such stock equivalents been outstanding
as shares of stock.

3. See the example of deferred receipt of stock and distribution of stock upon lapse of the
deferral period attached hereto as Exhibit A.

 

 

 

F. Other Provisions

1. Upon certain changes of control of the Company, the value of cash and stock equivalents
credited to each Director’s account shall be distributed immediately in cash.

2. Upon a Director’s separation from service with the Company, the value of cash and stock
equivalents credited to that Director’s account shall be distributed immediately in cash.

3. Payment may be made prior to the end of the period of deferral for emergencies, or if a
determination is made that some or all of the amounts deferred are includable under Section 409A in
the Director’s gross income for tax purposes for an earlier year.

4. As to all deferred amounts, Directors shall be unsecured general creditors of the Company.

 

 

 

EXHIBIT A

Example of Deferred Receipt of Stock and

Distribution of Stock Upon Lapse of Deferral Period

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	YR1	 	 	YR2	 	 	YR3	 	 	YR4	 	 	YR5	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Deferred Fees
	 	$	8,000.00	 	 	$	8,000.00	 	 	$	8,000.00	 	 	$	8,000.00	 	 	$	8,000.00	 
	Deferred Incentive
Comp.
	 	$	2,400.00	 	 	$	2,400.00	 	 	$	2,400.00	 	 	$	2,400.00	 	 	$	2,400.00	 
	FMV of Stock
	 	$	9/Share	 	 	$	10/Share	 	 	$	11/Share	 	 	$	12/Share	 	 	$	13/Share	 
	 
	Stock Equivalents
for
Current Year
	 	 	1,155.55	 	 	 	1,040.00	 	 	 	945.45	 	 	 	866.67	 	 	 	800.00	 
	Carry Over From
Prior Year
	 	 	—	 	 	 	1,206.61	 	 	 	2336.47	 	 	 	3,401.26	 	 	 	4,410.19	 
	Balance Before
Dividends
	 	 	1,155.55	 	 	 	2,246.61	 	 	 	3,281.92	 	 	 	4,267.93	 	 	 	5,210.19	 
	.40/Share Annual
Dividend in Stock
Equivalents
	 	 	51.36	 	 	 	89.86	 	 	 	119.34	 	 	 	142.26	 	 	 	160.31	 
	Balance After
Dividends
	 	 	1,206.61	 	 	 	2,336.47	 	 	 	3,401.26	 	 	 	4,410.19	 	 	 	5,370.50	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	DOLLAR VALUE
OF DEFERRED
STOCK PORTION
OF ACCOUNT
	 	 	10,859.49	 	 	 	23,364.70	 	 	 	37,413.86	 	 	 	52,922.28	 	 	 	69,816.50	 

The foregoing example is purely hypothetical and should be used solely for the purpose of
illustrating the treatment of deferred fees and incentive compensation under the Company’s Deferred
Compensation Plan for Directors. Nothing in this example should be construed as indicating the
true potential for (i) the payment of dividends or the amount thereof or (ii) capital appreciation
or depreciation of the Company’s common stock.

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