Exhibit 10.1
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (the "Agreement") is entered into as of September 2,
2003, by and between ENERGY WEST, INCORPORATED ("EW"), ENERGY WEST DEVELOPMENT,
INC. ("EWD"), ENERGY WEST PROPANE, INC. ("EWP") and ENERGY WEST RESOURCES, INC.
("EWR"), each a Montana corporation (individually and collectively, "Borrower"),
and XXXXX FARGO BANK MONTANA, NATIONAL ASSOCIATION (the "Bank").
RECITALS
Borrower has requested that Bank extend credit to Borrower as described
below, and Bank has agreed to provide such credit to Borrower on the terms and
conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
CREDIT TERMS
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this Agreement,
Bank hereby agrees to make advances to Borrower from time to time, once the
Drawdown Loan has been fully drawn, up to and including October 15, 2003, not to
exceed at any time the aggregate principal amount of Two Million Dollars
($2,000,000.00) (the "Line of Credit"), for working capital requirements and
other agreed upon expenses, if any. Borrower's obligation to repay advances
under the Line of Credit shall be evidenced by a promissory note substantially
in the form of Exhibit A attached hereto (the "Line of Credit Note"), all terms
of which are incorporated herein by this reference.
(b) Repayment. Interest on the Line of Credit shall be repaid in accordance
with the provisions of the Line of Credit Note and all outstanding principal and
interest shall be due and payable in full on October 15, 2003. Amounts of
principal repaid may be reborrowed from time to time during the term of this
Agreement.
SECTION 1.2. DRAWDOWN LOAN.
(a) $1,000,000.00 Drawdown Loan. Subject to the terms and conditions of
this Agreement, Bank hereby agrees to make a drawdown loan to Borrower up to the
maximum principal amount of One Million Dollars ($1,000,000.00) ("Drawdown
Loan"), the proceeds of which shall be used solely for working capital
requirements and other agreed upon expenses, if any. Borrower's obligation to
repay the Drawdown Loan shall be evidenced by a promissory note substantially in
the form of Exhibit B attached hereto ("Drawdown Note"), all terms of which are
incorporated herein by this reference.
(b) Repayment. Interest on the Drawdown Loan shall be repaid in accordance
with the provisions of the Drawdown Note and all outstanding principal and
interest shall be due and payable in full on October 15, 2003.
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(c) Prepayment. Borrower may prepay principal on the Drawdown Loan at any
time, in any amount and without penalty, if and only if the Line of Credit and
the Term Loan have been paid in full and terminated.
SECTION 1.3. TERM LOAN.
(a) Term Loan. Subject to the terms and conditions of this Agreement, Bank
hereby agrees to make a term loan to Borrower up to the maximum principal amount
of Ten Million Three Hundred Thirty-Eight Thousand Four Hundred Fifty-Two and
01/100 Dollars ($10,338,452.01) ("Term Loan"), the proceeds of which shall be
used solely to payoff the outstanding unpaid balance of Borrower's prior funded
line of credit with Bank, including amounts previously drawn under letters of
credit but not reimbursed (the "Prior Loan"), and any amounts drawn from and
after the date hereof under Bank letters of credit issued prior to the date of
this Agreement ("Letters of Credit"). The undrawn amount of all Letters of
Credit shall be reserved under the Term Loan and shall not be available for
borrowings thereunder. In respect of amounts not previously drawn, each Letter
of Credit shall remain subject to the additional terms and conditions of the
Letter of Credit agreements, applications and any related documents required by
Bank in connection with the issuance thereof. When Borrower replaces the Loans
with another credit facility or facilities with a new lender or lenders, the new
lender(s) shall issue replacement letters of credit for all outstanding Letters
of Credit or all such Letters of Credit must be cash collateralized or covered
by back-to-back letters of credit with no conditions, having an expiry date 30
days beyond the expiry date of the Letter of Credit and otherwise acceptable to
the Bank ("Back-to-Back L/Cs"). Amounts repaid by Borrower and undrawn amounts
under Letters of Credit which expire prior to the maturity of the Term Loan may
not be reborrowed. Borrower's obligation to repay the Term Loan shall be
evidenced by a promissory note substantially in the form of Exhibit C attached
hereto ("Term Note"), all terms of which are incorporated herein by this
reference.
(b) Repayment. Interest on the Term Loan shall be repaid in accordance with
the provisions of the Term Note and all outstanding principal and interest shall
be due and payable in full on October 15, 2003.
(c) Prepayment. Borrower may prepay principal on the Term Loan at any time,
in any amount and without penalty.
SECTION 1.4. INTEREST/FEES.
(a) Interest. The outstanding principal balance of the Line of Credit, the
Drawdown Loan and the Term Loan (collectively, the "Loans") shall bear interest,
and the amount of each drawing paid under any Letter of Credit shall bear
interest from the date such drawing is paid to the date such amount is fully
repaid by Borrower, at a rate per annum four percent (4.0%) above the Base Rate
in effect from time to time. Upon the occurrence of an Event of Default, the
outstanding principal balance of the Notes shall bear interest until paid in
full at an increased rate per annum equal to six percent (6%) above the Base
Rate in effect from time to time.
(b) Base Rate. The term "Base Rate" shall mean at any time the rate of
interest most recently announced within Bank at its principal office as its Base
Rate, with the understanding that the Base Rate is one of Bank's base rates and
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto, and is evidenced by
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the recording thereof in such internal publication or publications as Bank may
designate. Each change in the rate of interest shall become effective on the
date each Base Rate change is announced within Bank.
(c) Computation and Payment. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in each promissory note or other instrument or document required
hereby.
(d) Fees. Borrower shall pay to Bank a non-refundable extension fee of
$20,000.00 in accordance with Section 3.1. Should the Loans not be paid in full
on or before October 15, 2003, a non-refundable loan fee of $135,000.00 shall be
due and payable on October 15, 2003.
SECTION 1.5. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all principal, interest and fees due under each credit subject hereto by
charging Borrower's deposit account number 4810002866 with Bank, or any deposit
account maintained by Borrower with Bank, for the full amount thereof. Should
there be insufficient funds in any such deposit account to pay all such sums
when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.
SECTION 1.6 COLLATERAL.
As security for all indebtedness of Borrower to Bank subject hereto,
Borrower shall grant to Bank a security interest in all of EWR's, EWP's and
EWD's assets (except the vacant lot located in Great Falls, Montana, that
belongs to EWD and is presently under a contract of sale) and all assets of EW
that are related to EW's regulated operations in Arizona and are not related to
EW's regulated operations in Montana or Wyoming (collectively, the
"Collateral"). The vacant lot shall promptly be mortgaged to Bank and added to
Collateral hereunder should the pending sale not close by September 8, 2003. The
Drawdown Loan shall be secured by a first lien on the Collateral to the extent
permitted by the Indentures described below. The Line of Credit and the Term
Loan shall be secured with a second lien on the Collateral; however, the
Trustees ( i.e. (a) Davidson Trust Co., as successor Trustee under that certain
Indenture of Trust between Cascade County, Montana and the Trustcorp dated as of
September 1, 1992, as amended, restated, modified, supplemented or replaced from
time to time, (b) U.S. Bank National Association, as successor Trustee under
that certain Indenture between Great Falls Gas Company (now known as Energy
West, Incorporated) and the First Trust Company of Montana, National Association
dated as of June 1, 1993, as amended, restated, modified, supplemented or
replaced from time to time., and (c) HSBC Bank USA, as successor Trustee, under
that certain Indenture between Energy West, Incorporated and Norwest Bank
Minnesota, National Association, dated as of August 1, 1997, as amended,
restated, modified, supplemented or replaced from time to time), shall be
equally and ratably secured by such junior lien and security interest in the
Collateral.
All of the foregoing shall be evidenced by and subject to the terms of such
security agreements, financing statements, mortgages, deeds of trust,
assignments, and other documents as Bank shall reasonably require, all in form
and substance satisfactory to Bank. Borrower shall reimburse Bank immediately
upon demand for all costs and expenses incurred by Bank in connection with any
of the foregoing security, including without limitation, filing and recording
fees and costs of any collateral audits performed by Bank.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.
SECTION 2.1. LEGAL STATUS. Each Borrower is a corporation, duly organized
and existing and in good standing under the laws of the State of Montana, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) (or, in the case of Energy West Propane, Inc. with
respect to the State of Arizona, has filed routine documents to become so
qualified and licensed) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each promissory
note, contract, instrument and other document required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the "Loan
Documents") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of Borrower's
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to Bank in writing
prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of
Borrower dated June 30, 2003, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the financial condition of Borrower, (b) discloses all
liabilities of Borrower that are required to be reflected or reserved against
under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered any of its assets or properties
except as contemplated by this Agreement or as otherwise permitted by Bank in
writing.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.
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SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract
or instrument to which Borrower is a party or by which Borrower may be bound
that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.
SECTION 2.9. ERISA. Borrower is in compliance in all material respects with
all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
SECTION 2.10. OTHER OBLIGATIONS. After giving effect to this Agreement and
application of the proceeds of the Loans, Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.
SECTION 2.12. REAL PROPERTY COLLATERAL. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, with respect to any real property
collateral required hereby:
(a) All taxes, governmental assessments, insurance premiums, and water,
sewer and municipal charges, and rents (if any) which previously became due and
owing in respect thereof have been paid as of the date hereof.
(b) There are no mechanics' or similar liens or claims which have been
filed for work, labor or material (and no rights are outstanding that under law
could give rise to any such lien) which affect all or any interest in any such
real property and which are or may be prior to or equal to the lien thereon in
favor of Bank.
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(c) None of the improvements lies outside of the boundaries and/or building
restriction lines thereof, and no improvements on adjoining properties
materially encroach upon any such real property.
(d) There is no pending, or to the best of Borrower's knowledge threatened,
proceeding for the total or partial condemnation of all or any portion of any
such real property, and all such real property is in good repair and free and
clear of any damage that would materially and adversely affect the value thereof
as security and/or the intended use thereof.
SECTION 2.13. NO LIENS. The property of the Borrower is not subject to any
lien except Permitted Liens. "Permitted Liens" shall mean (i) liens in favor of
the Bank; (ii) the lien in favor of the Trustees as set forth in Section 1.6
hereof; (iii) existing liens disclosed to the Bank in writing prior to the date
of this Agreement; (iv) liens for taxes not delinquent or which Borrower is
contesting in good faith; (v) liens of carriers, warehousemen, mechanics,
materialmen or landlords incurred in the ordinary course of business for sums
not overdue or being contested in good faith; and (vi) liens incurred in the
ordinary course of business in connection with workers' compensation,
unemployment insurance or other forms of governmental insurance or benefits, or
to secure performance of statutory obligations, leases or contracts (other than
for borrowed money) entered into in the ordinary course of business.
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Bank to extend the initial credit contemplated by this Agreement is subject to
the fulfillment to Bank's satisfaction of all of the following conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the extension
of credit by Bank shall be satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and each promissory note or other instrument or
document required hereby, duly executed.
(ii) Security Agreements granting first priority security interests to
Bank in the Collateral securing the Drawdown Loan up to the
Drawdown Amount and Security Agreements granting second priority
security interests to Bank securing the Term Loan and the Line of
Credit in the Collateral on a equal and ratable basis with the
Trustees.
(iii) All mortgages, deeds of trust and assignments granting first
liens to Bank and second equal and ratable liens to the Bank and
the Trustees which can be executed, delivered and recorded
without regulatory approval and all original titles to vehicles
and original promissory notes (endorsed in blank).
(iv) A copy, certified as of the most recent date practicable by the
Secretary of State of Montana of each Borrower's certificate of
incorporation, together with a certificate of each Borrower's
corporate secretary to the effect that such
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certificate of incorporation has not been amended since the date
of the aforesaid certification;
(v) Certificates, as of the most recent dates practicable, as to the
good standing of each such Borrower, of the Secretary of State of
Montana and the secretary of state of each state in which each
Borrower is qualified or licensed to do business or, in the case
of Energy West Propane, Inc. with respect to the State of
Arizona, copies of the recently filed routine documents to become
so qualified and licensed;
(vi) A certified copy of each Borrower's filed Articles of
Incorporation and By-laws;
(vii) A certified copy of resolutions of each Borrower's board of
directors authorizing the execution, delivery and performance of
this Agreement, the Notes, and each other document to be
delivered pursuant hereto; and
(viii) A certificate of each Borrower's corporate secretary as to the
incumbency and signatures of the officers of Borrower signing
this Agreement, the Notes, and each other document to be
delivered pursuant hereto.
(ix) An opinion of Borrower's counsel opining as to the validity and
enforceability of the Loans and Collateral documents in form and
substance satisfactory to Bank.
(x) A certified report dated as of July 31, 2003 as to cash on hand,
accounts receivable, inventory and accounts payable.
(xi) One or more accepted loan proposals from other lenders regarding
extensions of credit to Borrower which have a reasonable prospect
of being implemented in a timely manner and sufficient to pay off
the Loans in full prior to maturity including issuance of
replacement letters of credit.
(xi) Officer's Certificate Regarding Assets and Properties.
(xii) Such other documents as Bank may require as provided in any
other Section of this Agreement.
(c) Financial Condition. There shall have been no material adverse change,
as determined by Bank, in the financial condition or business of Borrower, nor
any material decline, as determined by Bank, in the market value of the
Collateral or a substantial or material portion of the assets of Borrower.
(d) Fees. Borrower shall pay $5478.00 for legal work incurred from July 24,
2003 to August 29, 2003 as required pursuant to Section 7.3 hereof with all
follow up invoices to be paid within ten days of receipt of invoices and
$20,000.00 for the extension fee pursuant to Section 1.5 herof.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank
to make each advance requested by Borrower hereunder shall be subject to the
fulfillment to Bank's satisfaction of each of the following conditions:
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(a) Compliance. The representations and warranties contained herein and in
each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) Borrowing Certificate. Borrower shall provide Bank with a certificate
confirming that all Loan proceeds and funds on hand shall be used in full
compliance with the Agreement including without limitation Section 5.1 hereof.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein, and immediately upon demand by Bank,
the amount by which the outstanding principal balance of any credit subject
hereto at any time exceeds any limitation on borrowings applicable thereto.
SECTION 4.2. ACCOUNTING RECORDS. Maintain true, complete and accurate books
and records in accordance with generally accepted accounting principles
consistently applied, and permit any representative of Bank, at any reasonable
time, to inspect, audit and examine such books and records, to make copies of
the same, and to inspect the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in
form and detail satisfactory to Bank:
(a) Within 120 days after the end of each fiscal year of the Borrowers (i)
a detailed, consolidated and consolidating report of audit of the Borrowers and
their subsidiaries for such fiscal year including the balance sheet of the
Borrower and their subsidiaries as of the end of such fiscal year and the
statements of profit and loss and surplus of the Borrower and their subsidiaries
for the fiscal year then ended, prepared by independent certified public
accountants satisfactory to the Bank, and (ii) a certificate of such accountants
stating whether, in making their audit, they have become aware of any Event of
Default set forth in Section 6 hereof, or of any event which might become an
Event of Default after the lapse of time or the giving of notice and the lapse
of time, which has occurred and is then continuing and, if any such event has
occurred and is continuing, specifying the nature and period of existence
thereof.
(b) Within 30 days after the end of each month, (i) the balance sheet of
the Borrower as of the end of such month, and (ii) the statement of profit and
loss and surplus of the Borrower from the beginning of such fiscal year to the
end of such month in a form acceptable to Bank.
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All of the foregoing shall be unaudited, but certified as correct (subject to
year end adjustments) by an appropriate officer of the Borrower.
(c) Not later than 25 days after and as of the end of each month, an
inventory collateral report, an aged listing of accounts receivable and accounts
payable, and a reconciliation of accounts, and immediately upon each request
from Bank, a list of the names and addresses of all Borrower's account debtors
(d) Contemporaneously with each annual and monthly financial statement of
Borrower required hereby, a certificate of the president or chief financial
officer of Borrower that said financial statements are accurate and that there
exists no Event of Default nor any condition, act or event which with the giving
of notice or the passage of time or both would constitute an Event of Default;
(e) Not later than 25 days after and as of the end of each month, reports
certifying as to cash on hand, accounts receivable , inventory and accounts
payable
(f) From time to time such other information as Bank may reasonably
request, including without limitation, information with respect to any real
property collateral required hereby.
SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.
SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types
and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect. Within ten days following the date of this Agreement,
Borrower shall deliver to Bank evidence of insurance coverage on all Borrower's
property, in form, substance, amounts, covering risks and issued by companies
satisfactory to Bank, and where required by Bank, with loss payable endorsements
in favor of Bank, including without limitation, policies of fire and extended
coverage insurance covering all real property collateral required hereby, with
replacement cost and mortgagee loss payable endorsements, and such policies of
insurance against specific hazards affecting any such real property as may be
required by governmental regulation or Bank.
SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide
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dispute may arise, and (b) for which Borrower has made provision, to Bank's
satisfaction, for eventual payment thereof in the event Borrower is obligated to
make such payment.
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower with a claim in excess of
$100,000.00.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's financial condition
as follows using generally accepted accounting principles consistently applied
and used consistently with prior practices (except to the extent modified by the
definitions herein), with compliance determined commencing with Borrower's
financial statements for the period ending June 30, 2003:
Net Worth not at any time less than $14,250,000.00, with "Net Worth"
defined as total stockholders' equity.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five (5)
days after the occurrence of each such event or matter) give written notice to
Bank in reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute an Event of Default; (b) any change in the name or the
organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property in
excess of an aggregate of $100,000.00.
SECTION 4.11. REPLACEMENT CREDIT FACILITIES. Use its best efforts to
arrange for new lenders to pay off the Loans in full including the issuance of
replacement letters of credit for all outstanding Letters of Credit (or cash
collateralization or Back-to-Back Letters) on or prior to October 15, 2003.
Borrower shall take all steps necessary or advisable to meet any requirements
imposed by such potential lender or lenders. Bank acknowledges that regulatory
approval from the States of Montana and Wyoming is required before Borrower can
encumber the majority of its assets ("Regulated Assets"). Borrower shall use all
commercially reasonable efforts to secure regulatory approvals to enable
Borrower to encumber the Regulated Assets as soon as possible unless Borrower is
able to obtain a firm commitment from a lender which does not require the pledge
of such collateral and which is of an amount sufficient to pay off the Loans
(including the replacement of any outstanding Letters of Credit, or cash
collateralization or Back-to-Back Letters) in full. Borrower acknowledges that
Bank does not intend to renew the Loans at October 15, 2003 if Borrower is
unable to enter into replacement credit facilities prior to maturity of the
Loans.
ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
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SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof. Borrower shall not
pay off any indebtedness associated with the formation or acquisition of any
legal entity, the settlement of the PPLM lawsuit, or the unsecured note to Xxxx
Xxxxx which financed the KOGI purchase; provided that Borrower may make payments
to settle the PPLM lawsuit to the extent that Borrower funds such payments from
the proceeds of unsecured, subordinated debt permitted under Section 5.4 hereof.
SECTION 5.2. CAPITAL OR LEASE EXPENDITURES. Make any additional investment
in fixed assets or incur any operating lease expense other than for normal
maintenance and emergencies.
SECTION 5.3. Section intentionally deleted.
SECTION 5.4. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist
any indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower to Bank or to Bank and
the Trustees, (b) unsecured debt that is subordinated to the Loans; and (c) any
other liabilities of Borrower existing as of, and disclosed to Bank prior to,
the date hereof.
SECTION 5.5. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower's core utility business as conducted as of the date hereof; acquire all
or substantially all of the assets of any other entity; nor sell, lease,
transfer or otherwise dispose of all or a substantial or material portion of
Borrower's assets except in the ordinary course of its business.
SECTION 5.6. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Bank.
SECTION 5.7. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to,
or any new or additional investments in, any person or entity, nor create or
acquire any other entity. Borrower shall not purchase any interest in any gas
production fields.
SECTION 5.8. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower's stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower's stock now or hereafter outstanding.
SECTION 5.9. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any portion of Borrower's assets now
owned or hereafter acquired, except any of the foregoing in favor of Bank, the
Bank and the Trustees, Permitted Liens, or which is existing as of, and
disclosed to Bank in writing prior to, the date hereof.
SECTION 5.10. BOND DEBT. Prepay any bond indebtedness or refinance any
outstanding bond indebtedness.
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees or
other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in connection
with, or any representation or warranty made by Borrower or any other party
under this Agreement or any other Loan Document shall prove to be incorrect,
false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be cured, such default shall
continue for a period of twenty (20) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any material contract or instrument
(other than any of the Loan Documents) pursuant to which Borrower has incurred
any debt or other liability to any person or entity, including Bank.
(e) The filing of a notice of judgment lien against Borrower or the
recording of any abstract of judgment against Borrower in any county in which
Borrower has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower; or the entry of a judgment against Borrower, in each case
which is not stayed or satisfied within 30 days.
(f) Borrower shall become insolvent, or shall suffer or consent to or apply
for the appointment of a receiver, trustee, custodian or liquidator of itself or
any of its property, or shall generally fail to pay its debts as they become
due, or shall make a general assignment for the benefit of creditors; Borrower
shall file a voluntary petition in bankruptcy, or seeking reorganization, in
order to effect a plan or other arrangement with creditors or any other relief
under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended
or recodified from time to time ("Bankruptcy Code"), or under any state or
federal law granting relief to debtors, whether now or hereafter in effect; or
any involuntary petition or proceeding pursuant to the Bankruptcy Code or any
other applicable state or federal law relating to bankruptcy, reorganization or
other relief for debtors is filed or commenced against Borrower, or Borrower
shall file an answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition; or Borrower shall be adjudicated a
bankrupt, or an order for relief shall be entered against Borrower by any court
of competent jurisdiction under the Bankruptcy Code or any other applicable
state or federal law relating to bankruptcy, reorganization or other relief for
debtors.
(g) There shall exist or occur any event or condition which Bank in good
faith believes impairs the prospect of payment or performance by Borrower of its
obligations under any of the Loan Documents.
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(h) The dissolution or liquidation of Borrower; or Borrower, or any of its
directors, stockholders or members, shall take action seeking to effect the
dissolution or liquidation of Borrower.
(i) The sale, transfer, hypothecation, assignment or encumbrance, whether
voluntary, involuntary or by operation of law, without Bank's prior written
consent, of all or any part of or interest in any real property collateral
required hereby.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank's option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by each Borrower; (b) the
obligation, if any, of Bank to extend any further credit under any of the Loan
Documents shall immediately cease and terminate; and (c) Bank shall have all
rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit subject hereto and to exercise any or all of the rights
of a beneficiary or secured party pursuant to applicable law. All rights, powers
and remedies of Bank may be exercised at any time by Bank and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by law
or equity.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: Energy West, Incorporated
Energy West Development, Inc.
Energy West Propane, Inc.
Energy West Resources, Inc.
Attn: Xxxxxx X. Xxxxxxx, President and CEO
P.O. Box 2229
No. 0 Xxxxxx Xxxx Xxxxxx
Xxxxx Xxxxx, XX 00000-0000
Facsimile 406-791-7560
With a copy to:
Xxxxxxxxx Xxxxxxx Xxxxx Xxxxxx LLP
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Two Pershing Square
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Facsimile 000-000-0000
BANK: XXXXX FARGO BANK MONTANA, NATIONAL ASSOCIATION
Attn: Xxxx Xxxxxx
MAC N9314-050
000 0xx Xxx. X, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Facsimile 000-000-0000
With a copy to:
Xxxxx X. Xxxxx, Esq.
Xxxxx Fargo & Co.
MAC C7300-126
12th Floor
0000 Xxxxxxx Xx.
Xxxxxx, XX 00000-0000
Facsimile 000-000-0000
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents, Bank's continued administration hereof
and thereof, and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank's rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors
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and assigns of the parties; provided however, that Borrower may not assign or
transfer its interest hereunder without Bank's prior written consent. Bank
reserves the right to sell, assign, transfer, negotiate or grant participations
in all or any part of, or any interest in, Bank's rights and benefits under each
of the Loan Documents. In connection therewith, Bank may disclose all documents
and information which Bank now has or may hereafter acquire relating to any
credit subject hereto, Borrower or its business, or any collateral required
hereunder.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan
Documents constitute the entire agreement between Borrower and Bank with respect
to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only in writing signed by each
party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Montana.
SECTION 7.11. ARBITRATION.
(a)Arbitration. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise arising out of or relating
to in any way (i) the loan and related Loan Documents which are the subject of
this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for additional
credit.
(b)Governing Rules. Any arbitration proceeding will (i) proceed in a
location in Montana selected by the American Arbitration Association ("AAA");
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA's commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the
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arbitration shall be conducted in accordance with the AAA's optional procedures
for large, complex commercial disputes (the commercial dispute resolution
procedures or the optional procedures for large, complex commercial disputes to
be referred to, as applicable, as the "Rules"). If there is any inconsistency
between the terms hereof and the Rules, the terms and procedures set forth
herein shall control. Any party who fails or refuses to submit to arbitration
following a demand by any other party shall bear all costs and expenses incurred
by such other party in compelling arbitration of any dispute. Nothing contained
herein shall be deemed to be a waiver by any party that is a bank of the
protections afforded to it under 12 U.S.C. ss.91 or any similar applicable state
law.
(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.
(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of Montana or a neutral retired judge of the
state or federal judiciary of Idaho, in either case with a minimum of ten years
experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator's discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of Montana and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the Montana Rules of Civil Procedure or other applicable
law. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.
(e) Discovery. In any arbitration proceeding discovery will be permitted in
accordance with the Rules. All discovery shall be expressly limited to matters
directly relevant to the dispute being arbitrated and must be completed no later
than 20 days before the hearing date and within 180 days of the filing of the
dispute with the AAA. Any requests for an extension of the discovery periods, or
any discovery disputes, will be subject to final determination by the arbitrator
upon a showing that the request for discovery is essential for the party's
presentation and that no alternative means for obtaining information is
available.
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(f) Class Proceedings and Consolidations. The resolution of any dispute
arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.
(g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all
costs and expenses of the arbitration proceeding.
(h) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
XXXXX FARGO BANK MONTANA.
NATIONAL ASSOCIATION
By: /s/ Xxxx X. Xxxxxx
-----------------------------
Title: Vice President
--------------------------
Energy West Incorporated Energy West Development, Inc.
By: /s/ XxXxx Xxxxx By: /s/ Xxxx X. Xxxxx
----------------------------------- -----------------------------------
Name: XxXxx Xxxxx Name: Xxxx X. Xxxxx
--------------------------------- ---------------------------------
Title: Assist. V.P. & Treasurer Title: President
-------------------------------- ---------------------------------
Energy West Propane, Inc. Energy West Resources, Inc.
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxxx X. Xxxxx
----------------------------------- -----------------------------------
Name: Xxxx X. Xxxxx Name: Xxxxx X. Xxxxx
--------------------------------- ---------------------------------
Title: Secretary Title: President
-------------------------------- ---------------------------------
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