REPLACEMENT CREDIT AGREEMENT
This Replacement Credit Agreement (the "Agreement") is dated as of the 8th
day of February 2001, and is by and between Energy West, Incorporated, formerly
known as Great Falls Gas Company, Energy West Resources, Inc., Energy West
Development Inc., Energy West Propane, Inc., all of P.O. Box 2229, No. 0 Xxxxx
Xxxx Xxxxx, Xxxxx Xxxxx, XX 00000-0000 (jointly and severally, the "Borrower"),
and Xxxxx Fargo Bank MONTANA, National Association, successor in interest to
Norwest Bank Great Falls, National Association, a national banking association
with offices located at 00 Xxxxx Xxxxxx Xxxxx, X.X. Xxx 0000, Great Falls,
Montana 59403-8200 (the "Bank"). This Agreement replaces all prior loan and
credit agreements among the parties or between the Bank and Energy West,
Incorporated. In consideration of the premises and of the mutual agreements
herein, the parties agree as follows:
1. Definitions
In addition to those terms defined in the above recitals, as used herein:
1.1. "Agreement" shall mean this Replacement Credit Agreement and all
amendments and supplements hereto which may from time to time become
effective hereafter in accordance with the terms hereof.
1.2. "Banking Day" shall mean a day on which banks are generally open for
business in Great Falls, Montana.
1.3. "Base Rate" shall mean the "base" or "prime" rate of interest as
announced by Xxxxx Fargo Bank Minnesota, National Association, as in
effect from time to time, subject to change as often as monthly with
each such change to take effect as of the first day of the immediately
succeeding month.
1.4. "Borrowed Money" shall mean funds obtained by incurring contractual
indebtedness and shall not include trade accounts payable or money
borrowed from the Bank.
1.5. "Closing Date" shall mean the date on which funds are advanced under
the Credit.
1.6. "Credit" shall mean the revolving credit line established under this
Agreement for Borrower.
1.7. "Debt" shall mean the aggregate of current liabilities and non-current
liabilities all as determined in accordance with generally accepted
accounting principles.
1.8. "Default" shall mean an Event of Default as referred to in Section 7
hereof, or an event which with notice or lapse of time or both would
become an Event of Default.
1.9. "Events of Default" shall mean any and all events of default described
in Section 7 hereof.
1.10. "Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles applied on a basis consistent with
those reflected in the financial statements referred to in Section 4.5
hereof.
1.11. "Interest Coverage Ratio" shall mean the total of net income, plus
interest expense, and income taxes; the total divided by interest
expense, all as determined in accordance with generally accepted
accounting principles.
1.12. "LIBOR" means the rate per annum for United States dollar deposits
quoted by Bank as the LIBOR Rate, with the understanding that such
rate is quoted by Bank for the purpose of calculating effective rates
of interest for loans making reference thereto, for delivery of funds
for a period of time approximately equal to the number of days
requested and in an amount approximately equal to the principal amount
requested. Borrower understands and agrees that Bank may base its
quotation of the Inter-Bank Market Offered Rate upon such offers or
other market indicators of the Inter-Bank Market as Bank in its
discretion deems appropriate including, but not limited to, the rate
offered for U.S. dollar deposits on the London Inter-Bank Market.
1.13. "Maturity Date" shall mean May 1, 2002.
1.14. "Note" shall mean the promissory note of the Borrower substantially
in the form of attached Exhibit A, evidencing borrowings under Section
2.1 hereof.
1.15. "Permitted Liens" shall mean:
1.15.1. Liens in favor of the Bank;
1.15.2. Existing liens disclosed to the Bank in writing prior to
the date of this Agreement; and,
1.15.3. Liens for taxes not delinquent or which Borrower is contesting
in good faith.
1.16. "Subsidiary" shall mean any corporation of which more than fifty
percent (50%) of the outstanding voting securities shall, at the time
of determination, be owned directly, or indirectly through one or more
intermediaries, by either Borrower.
1.17. "Tangible Net Worth" shall mean the sum of the par or stated value of
all outstanding capital stock, surplus and undivided profits of the
Borrower, less any amounts attributable to treasury stock, good will,
patents, copyrights, mailing lists, catalogues, trademarks, bond
discount and underwriting expenses, organization expenses and other
like intangibles (not including prepaid expenses classified as current
assets or intangible assets offset by equal related liabilities),
excluding also Subchapter S earnings unless such earnings are
converted to Note
Page 2 of 11
and subordinated to bank debt or the Bank is given written
confirmation, in form acceptable to the Bank, that such earnings are
being retained as equity capital, all as determined in accordance with
generally accepted accounting principles.
2. The Credit
2.1. The Bank agrees to lend to Borrower from time to time from the
effective date hereof until the Maturity Date sums not to exceed
Fifteen Million Dollars ($15,000,000.00) in aggregate principal amount
at any one time outstanding. Each borrowing under the Credit will be
requested in writing or in person by an authorized officer of
Borrower, or telephonically by any person reasonably believed by the
Bank to be an authorized officer of Borrower. Each request for
borrowing shall specify: (i) the interest rate option selected by
Borrower; (ii) the principal amount subject thereto; and (iii) for
each LIBOR request, the length of the applicable term. Any LIBOR
request shall be made prior to 11:00 a.m. on the date of the requested
advance. Each borrowing under the Credit will be evidenced by a
notation on the Bank's records, which shall be conclusive evidence of
such borrowing, and evidenced by the Note. Within the limits of the
Credit and subject to the terms and conditions hereof, Borrower may
borrow, prepay and reborrow pursuant to this Section 2.1; provided,
that outstanding borrowings under the Credit for any purpose other
than for advances resulting from the payment of any Letters of Credit
(as hereinafter defined), shall not at any time exceed an aggregate of
Ten Million Dollars ($10,000,000.00).
2.1.1. Letter of Credit Subfeature. As a subfeature under the Credit, Bank
agrees up to May l, 2002, to issue standby letters of credit for the
account of Borrower to support sales contracts (each, a "Letter of
Credit" and collectively, "Letters of Credit"); provided however, that
the form and substance of each Letter of Credit shall be subject to
approval by Bank, in its sole discretion; and provided further, that
the aggregate undrawn or unpaid amount of all outstanding Letters of
Credit plus any outstanding advances under the Line of Credit made for
the purpose of payment of any Letter of Credit, shall not at any time
exceed Five Million Dollars ($5,000,000.00). Each Letter of Credit
shall be issued for a term not to exceed three hundred sixty-five
(365) days, as designated by Borrower; provided however, that no
Letter of Credit shall have an expiration date subsequent to the
maturity date of the Line of Credit. The undrawn amount of all Letters
of Credit shall be reserved under the Credit and shall not be
available for borrowings thereunder. Each Letter of Credit shall be
subject to the additional terms and conditions of the Letter of Credit
Agreement and related documents, if any, required by Bank in
connection with the issuance thereof (each, a "Letter of Credit
Agreement" and collectively, "Letter of Credit Agreements"). Each
draft paid by Bank under a Letter of Credit shall be deemed an advance
under the Line of Credit and shall be repaid by Borrower in accordance
with the terms and conditions of this Agreement
Page 3 of 11
applicable to such advances; provided however, that if advances under
the Line of Credit are not available, for any reason, at the time any
draft is paid by Bank, then Borrower shall immediately pay to Bank the
full amount of such draft, together with interest thereon from the
date such amount is paid by Bank to the date such amount is fully
repaid by Borrower, at the rate of interest applicable to advances
under the Line of Credit. In such event Borrower agrees that Bank, in
its sole discretion, may debit any demand deposit account maintained
by Borrower with Bank for the amount of any such draft.
2.2. Interest on the unpaid principal of the Note shall be calculated at an
annual rate of six-tenths of one percent (0.6%) less than the Base
Rate in effect from time to time on the basis of the actual number of
days elapsed in a year of 360 days. Each change in the Base Rate shall
take effect on the first day of the month immediately succeeding such
change. The foregoing notwithstanding, Borrower shall have the option,
in $1,000,000.00 minimum increments, to fix interest rates for 30-day,
60-day or 90-day periods at 200 basis points in excess of 30-day
LIBOR, 60-day LIBOR or 90-day LIBOR, respectively; provided, however
that no fixed rate period shall extend beyond the scheduled Maturity
Date.
2.3. Interest on the Note shall be payable on demand but, until such demand
is made, monthly, commencing March 1, 2001, and continuing on the
first day of each succeeding month until the Note is paid.
2.4. The principal of the Note will be due and payable on the earlier of
demand or the Maturity Date.
2.5. Borrower may prepay principal on any portion of the Note which bears
interest determined in relation to the Base Rate at any time, in any
amount and without penalty. Borrower may not prepay principal on any
portion of the Note which bears interest determined in relation to
LIBOR.
2.7 Borrower shall pay to Bank (i) a facility fee for the Letter of Credit
subfeature calculated on 360/365 day basis at a rate of 65 basis
points (0.65%) of the aggregate amount of all outstanding or
unreimbursed Letters of Credit which shall be payable monthly upon
billing by Bank, and (ii) fees upon the issuance of each Letter of
Credit, upon the payment or negotiation by Bank of each draft under
any Letter of Credit and upon the occurrence of any other activity
with respect to any Letter of Credit (including without limitation,
the transfer, amendment or cancellation of any Letter of Credit)
determined in accordance with Bank's standard fees and charges then in
effect for such activity.
2.8 In addition, the Bank may, in its sole discretion, upon request by
Borrower make loans to Borrower's customers for the purpose of funding
purchases of energy conservation devices (each, a "Customer Loan"),
provided, however, that no such Customer Loan shall be in an amount in
excess of $1,500.00 per household or per unit of an apartment
building, shall not exceed a term of five
Page 4 of 11
(5) years, and shall require a minimum payment of $25.00 per month,
and the aggregate outstanding balances of all Customer Loans shall not
at any time exceed $2,100,000.00. Applications for Customer Loans
shall be subjected to the Bank's customary credit review policies.
Bank may, in its sole discretion, make certain Borrower-guaranteed
zero-interest loans or CLIP loans to customers of Borrower whose
requests for Customer Loans have been previously rejected by the Bank
(the "Guaranteed Loans"), which Guaranteed Loans shall not exceed an
aggregate amount of $100,000.00 at any time outstanding.
2.9 The interest rate to obligors on the Customer Loans and the Guaranteed
Loans shall be 0%. Borrower, however, shall reimburse the Bank for all
expenses incurred in the making of such loans and, in addition, shall
pay to the Bank interest on each of the Customer Loans and Guaranteed
Loans at a fluctuating annual rate equal to two and one-half percent
(2.5%) in excess of the Base Rate from time to time outstanding.
2.10 In addition, Borrower shall, on the last day of each month, pay to
Bank for each Customer Loan and/or Guaranteed Loan made by the Bank:
an origination fee of $40.00, a monthly servicing fee of $0.40, and a
delinquency fee, where incurred, of $1.00 for each payment past due
for 30 days or less and $5.00 for each payment past due more than 30
days.
3. Conditions Precedent
3.1. The Borrower shall deliver the following to the Bank on or before the
Closing Date:
3.1.1. The Note, duly executed by Borrower;
3.1.2. A copy, certified as of the most recent date practicable by the
Secretary of State of Montana of Borrower's certificate of
incorporation, together with a certificate of Borrower's
corporate secretary to the effect that such certificate of
incorporation has not been amended since the date of the
aforesaid certification;
3.1.3. Certificates, as of the most recent dates practicable, of the
Secretary of State of Montana and the secretary of state of each
state in which Borrower is qualified as a foreign corporation,as
to the good standing of Borrower;
3.1.4. A certified copy of Borrower's filed Articles of Incorporation
and By-laws;
3.1.5. A certified copy of resolutions of Borrower's board of
directors authorizing the execution, delivery and performance of
this Agreement, the Note, the letter of credit application and
agreement, and each other document to be delivered pursuant
hereto; and,
Page 5 of 11
3.1.6. A certificate of Borrower's corporate secretary as to the
incumbency and signatures of the officers of Borrower signing
this Agreement, the Note, the letter of credit application and
agreement and each other document to be delivered pursuant
hereto.
3.2. The Bank shall not be obligated to lend hereunder on the occasion for
any borrowing unless:
3.2.1. The representations and warranties contained in Section 5
hereof are true and accurate on and as of such date; and,
3.2.2. No Event of Default, and no event which might become an Event
of Default after the lapse of time or the giving of notice and
the lapse of time, has occurred and is continuing or will exist
upon the disbursement of such loan.
4. Representations and Warranties
To induce the Bank to enter into this Agreement, the Borrower represents and
warrants to the Bank as follows:
4.1. The Borrower entities are corporations duly organized, existing and in
good standing under the laws of the State of Montana.
4.2. The execution, delivery and performance of this Agreement and the Note
by the Borrower entities are within their corporate powers, have been
duly authorized, and are not in contravention of law, or the terms of
any of their articles of incorporation or by-laws or of any
undertaking to which either Borrower is a party or by which it is
bound.
4.3. The property of the Borrower is not subject to any lien except
Permitted Liens.
4.4. No litigation or governmental proceeding is pending or, to the
knowledge of the officers of Borrower, threatened against Borrower
which could have a material adverse effect on Borrowers financial
condition or business.
4.5. The consolidated financial statements of Borrower and its Subsidiaries
for the fiscal year ending June 30, 2000, prepared by certified public
accountants, and for the period ending December 31, 2000, prepared by
the Borrower, copies of which financial statements have been furnished
to the Bank, are complete and accurate in all respects and present
fairly the financial condition of the Borrower and its Subsidiaries as
of such dates, and the results of their operations for the periods
covered thereby in accordance with Generally Accepted Accounting
Principles, and there have been no material adverse changes in the
consolidated financial condition or business of the Borrower from
December 31, 2000, to the date hereof.
Page 6 of 11
5. Affirmative Covenants
Borrower covenants and agrees that so long as any indebtedness remains
outstanding hereunder, unless the Bank shall otherwise consent in writing, it
will:
5.1. Pay, when due, all taxes assessed against it or its property except to
the extent and so long as contested in good faith.
5.2. Maintain its corporate existence and comply with all laws and
regulations applicable thereto.
5.3. Furnish to the Bank:
5.3.1. Within 120 days after the end of each fiscal year of the
Borrower (i) a detailed, consolidated and consolidating report of
audit of the Borrower 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 7 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.
5.3.2. Within 45 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. All of the foregoing shall be unaudited, but
certified as correct (subject to year end adjustments) by an
appropriate officer of the Borrower.
5.3.3. Promptly upon knowledge thereof, notice to the Bank in writing
of the occurrence of any event which has or might, after the
lapse of time or the giving of notice and the lapse of time,
become an Event of Default under Section 7 hereof.
5.3.4. Promptly, such other information as the Bank may reasonably
request.
5.4. Cause its properties of an insurable nature to be adequately insured
by reputable and solvent insurance companies against loss or damages
customarily insured against by persons operating similar properties,
and similarly situated, and carry such other insurance (including
business interruption insurance) as usually
Page 7 of 11
carried by persons engaged in the same or similar businesses and
similarly situated.
5.5. Keep true, complete and accurate books, records and accounts in
accordance with Generally Accepted Accounting Principles consistently
applied.
5.6. Inform the Bank of any indebtedness for Borrowed Money, as permitted
by Section 6.3 of this Agreement, incurred from any other entity and
of the amount, rate and maturity of any such indebtedness.
6. Negative Covenants
Without the Bank's written consent, which the Bank will not unreasonably
withhold, so long as any indebtedness remains outstanding under the Credit,
Borrower not will:
6.1. Permit any lien including, without limitation, any pledge, assignment,
mortgage, title retaining contract or other type of security interest
to exist on its property, real or personal; except Permitted Liens,
unless consent of the Bank is given otherwise, and the Bank is
provided with a first security interest in any assets of the Borrower
that the Borrower desires to subject to liens.
6.2. Enter into any transaction of merger or consolidation, or transfer,
sell, assign, lease or otherwise dispose of (other than sales in the
ordinary course of business) all or a substantial part of its
properties or assets, or any of its promissory notes or accounts
receivable, or any stock (other than directors qualifying shares) or
any assets or properties necessary or desirable for the proper conduct
of its business, or change the nature of its business, or wind up,
liquidate or dissolve, or agree to do any of the foregoing.
6.3. Create, incur, assume or suffer to exist, contingently or otherwise,
other than in the ordinary course of business for conducting its
present business operation, unsecured indebtedness for Borrowed Money
including indebtedness to the Bank, except: (i) indebtedness arising
from issuance of bonds; and (ii) indebtedness incurred in connection
with the Energy West purchase of Wyo-LP, Broken Bow Gas Company and
Petrogas.
6.4. Become or remain a guarantor or surety, or pledge its credit or become
liable in any manner (except by endorsement for deposit in the
ordinary course of business, and except for the Guaranteed Loans, as
defined herein) on undertakings of another.
6.5. Permit the ratio of its Debt to Tangible Net Worth at each fiscal year
end to be more than 3.0 to 1.0.
6.6. Permit the Interest Coverage Ratio to be less than 2.00:1 at each
fiscal year end.
7. Events of Default
Page 8 of 11
7.1. Upon the occurrence of any of the following Events of Default:
7.1.1. Default in any payment of interest or of principal on the Note
when due, and continuance thereof for 15 calendar days;
7.1.2. Default in the observance or performance of any other agreement
of Borrower or any Subsidiary thereof set forth herein and
continuance thereof for 30 days;
7.1.3. Default by Borrower or any Subsidiary thereof in the payment of
any other indebtedness for Borrowed Money or in the observance or
performance of any term, covenant or agreement of Borrower or any
Subsidiary thereof in any agreement relating to any indebtedness
of Borrower or Subsidiary, the effect of which default is to
permit the holder of such indebtedness to declare the same due
prior to the date fixed for its payment under the terms thereof;
7.1.4. Any representation or warranty made by Borrower herein, or in
any statement or certificate furnished by Borrower hereunder, is
untrue in any material respect; or,
7.1.5. The occurrence of any litigation or governmental proceeding
which is pending or threatened against Borrower or any Subsidiary
thereof, which, in the reasonable opinion of Borrower's legal
counsel, could have a material adverse effect on Borrower's or
such Subsidiary's financial condition or business, and which is
not remedied within a reasonable period of time (a reasonable
period of time not to exceed 10 days) after notice thereof to the
Borrower;
then, or at any time thereafter, unless such Event of Default is remedied, the
Bank or the holder of the Note may, by notice in writing to the Borrower,
terminate the Credit or declare the Note to be due and payable, or both,
whereupon the Credit shall terminate forthwith or the Note shall immediately
become due and payable, or both, as the case may be.
7.2. Upon the occurrence of any of the following Events of Default:
Borrower or any Subsidiary thereof becomes insolvent or bankrupt, or
makes an appointment for the benefit of creditors or consents to the
appointment of a custodian, trustee or receiver for itself or for the
greater part of its properties; or a custodian, trustee or receiver is
appointed for Borrower or any Subsidiary thereof, or for the greater
part of its properties without its consent and is not discharged
within 30 days; or bankruptcy, reorganization or liquidation
proceedings are instituted by or against Borrower or Subsidiary and,
if instituted against it, are consented to by it or remain undismissed
for 30 days;
then the Credits shall automatically terminate and the Note shall
automatically become immediately due and payable, without notice.
Page 9 of 11
8. Miscellaneous
8.1. The provisions of this Agreement shall be in addition to those of any
guaranty, pledge or security agreement, note or other evidence of
liability held by the Bank, all of which shall be construed as
complementary to each other. Nothing herein contained shall prevent
the Bank from enforcing any or all other Notes, guaranties, pledges or
security agreements in accordance with their respective terms.
8.2. From time to time, the Borrower will execute and deliver to the Bank
such additional documents and will provide such additional information
as the Bank may reasonably require to carry out the terms of this
Agreement and be informed of the Borrower's status and affairs.
8.3. The Borrower will pay all expenses, including the reasonable fees and
expenses of legal counsel for the Bank, incurred in connection with
the preparation, administration, amendment, modification or
enforcement of this Agreement, and the collection or attempted
collection of the Note.
8.4. Any notices or consents required or permitted by this Agreement shall
be in writing and shall be deemed delivered if delivered in person or
if sent by certified mail, postage prepaid, return receipt requested,
or telegraph, as follows, unless such address is changed by written
notice hereunder:
8.4.1. If to the Borrower: Energy West, Incorporated
(on behalf of all) X.X. Xxx 0000
No. 0 Xxxxx Xxxx Xxxxxx
Xxxxx Xxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxx,
President and CEO
Xxxxxx X. Xxxxxxx, Executive
Vice President, COO & CFO
8.4.2. If to the Bank: Xxxxx Fargo Bank Montana,
National Association
00 0xx Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attention: Xxxx Xxxxxxxx, Vice President
8.5. The substantive Laws of the State of Montana shall govern the
construction of this Agreement and the rights and remedies of the
parties hereto.
8.6. This Agreement shall inure to the benefit of, and shall be binding
upon, the respective successors and permitted assigns of the parties
hereto. The Borrower has no right to assign any of their rights or
obligations hereunder without the
Page 10 of 11
prior written consent of the Bank. This Agreement, and the documents
executed and delivered pursuant hereto, constitute the entire
agreement between the parties, and may be amended only by a writing
signed on behalf of each party.
8.7. If any provision of this Agreement shall be held invalid under any
applicable Laws, such invalidity shall not affect any other provision
of this Agreement that can be given effect without the invalid
provision, and, to this end, the provisions hereof are severable.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
Energy West, Incorporated
Energy West Resources, Inc.
Energy West Development, Inc.
Energy West Propane, Inc.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxxx, Executive Vice President
COO & CFO of all the foregoing
corporations
Xxxxx Fargo Bank Montana, National Association
By: /s/ Xxxx Xxxxxxxx
-------------------------------------------
Xxxx Xxxxxxxx, Vice President
Page 11 of 11
