CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of the 18th day of January, 1995, and is
by and between ENERGY WEST, INCORPORATED, formerly known as Great Falls Gas
Company, of P.O. Box 2229, No. 1 River Park Tower, Great Falls, MT 59403-2229
(the "Borrower"), and NORWEST BANK GREAT FALLS, NATIONAL ASSOCIATION, a national
banking association with offices located at 21 Third Street North, P.O. Box
5011, Great Falls, Montana 59403-8200 (the "Bank").
RECITALS:
WHEREAS, Borrower desires to obtain a committed revolving credit line
in the principal amount of EIGHT MILLION AND NO/100 DOLLARS ($8,000,000.00) for
its own working capital purposes and to fund the working capital needs of
certain of its Subsidiaries; and,
WHEREAS, Borrower desires the Bank to continue to consider making zero
interest rate commercial loans to certain of Borrower's customers (the "Customer
Loans") in an aggregate amount not to exceed TWO MILLION ONE HUNDRED THOUSAND
AND NO/100 DOLLARS ($2,100,000.00);
WHEREAS, the Borrower desires the Bank to make certain
Borrower-guaranteed zero interest loans or CLIP Loans to customers whose
requests have been previously rejected by the Bank (the "Guaranteed Loans"), in
an aggregate amount outstanding not to exceed ONE HUNDRED THOUSAND AND NO/100
DOLLARS ($100,000.00) at any time outstanding.
WHEREAS, the Borrower desires to obtain a stand-by letter of credit
facility from the Bank in the amount of ONE MILLION AND NO/100 DOLLARS
(1,000,000.00);
WHEREAS, the Bank is willing to make the Credit and the Stand-By
Letter of Credit available to the Borrower, to continue consideration of
Customer Loans and to make available the Guaranteed Loans subject to the
provisions of this Credit Agreement;
NOW, THEREFORE, 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 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 Norwest Bank Minnesota, National Association, as in
effect from time to time.
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 hereby
for Borrower, which shall not in any event exceed the aggregate
principal amount of EIGHT MILLION AND NO/100 DOLLARS
($8,000,000.00) outstanding at any one time.
1.7. "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.
1.8. "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.
1.9. "Event of Default" shall mean any and all events of default
described in Section 7 hereof.
1.10. "Maturity Date" shall mean January 15, 1996.
1.11. "Note" shall mean the promissory note of the Borrower substantially
in the form of attached Exhibit A, evidencing borrowings under
Section 2.1 hereof.
1.12. "Permitted Liens" shall mean:
1.12.1. Liens in favor of the Bank;
1.12.2. Existing liens disclosed to the Bank in writing prior to
the date of this Agreement; and,
1.12.3. Liens for taxes not delinquent or which Borrower is
contesting in good faith.
1.13. "Stand-By Letter of Credit Line" shall mean the letter or letters
of credit issued under the letter of credit application and
agreement executed by Borrower in accordance with section 2.6 of
this Agreement, which shall be in form and substance as Exhibit C
attached hereto and incorporated herein, and which must not exceed
ONE MILLION AND NO/100 DOLLARS ($1,000,000.00) outstanding at any
one time.
1.14. "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.
1.15. "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 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 Loan
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
EIGHT MILLION AND NO/100 DOLLARS ($8,000,000.00) in aggregate
principal amount at any one time outstanding. Each
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borrowing under this Section 2.1. will be requested in writing or
in person by an authorized officer of Borrower, or telephonic ally
by any person reasonably believed by the Bank to be an authorized
officer of Borrower. Each borrowing under this Section 2.1. will
be evidenced by a notation on the Bank's records, which shall be
conclusive evidence of such borrowing, and by the Note. Within the
limits of the Credit and subject to the terms and conditions
hereof, Borrower may borrow, prepay pursuant to Section 2.5 hereof
and reborrow pursuant to this Section 2.1.
2.2. Interest on the unpaid principal of the Note shall be calculated at
an annual rate of ONE QUARTER OF ONE percent (1/4%) 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.
2.3. Interest on the Note shall be payable on demand but, until such
demand is made, monthly, commencing February 1, 1995, 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 Maturity
Date.
2.5. The Borrower may at any time prepay the Note in whole or from time
to time in part without premium or penalty.
2.6. The Bank shall issue stand-by letters of credit to Enron Risk
Management Services Corporation for the account of Borrower, in an
aggregate amount not to exceed ONE MILLION AND NO/100 DOLLARS. The
Stand-By Letter of Credit shall expire on December 27, 1995.
Borrower shall execute an application, agreement and promissory
note for standby letters of credit (Exhibit B), on standard Norwest
forms as required by the Bank.
2.7. Fees on the Stand-By Letter of Credit Line shall be calculated at a
rate of 1.5% of the amount issued under the Stand-By Letter of
Credit on the basis of the actual number of days elapsed in a year
of 360 days. Borrower shall also pay all additional fees assessed
by Bank in connection with the Stand-By Letter of Credit Line,
issuance of letters of credit or any amendments or modifications of
the Stand-By Letter of Credit Line or letters or credit issued
under the Stand-By Letter of Credit Line.
2.8. Interest on the Stand-By Letter of Credit Line shall be payable on
demand but, until such demand is made, monthly, commencing February
1, 1995, and continuing on the first day of each succeeding month
until the Note is paid.
2.9. In addition, the Bank shall continue to consider making Customer
Loans for the purpose of funding purchases of energy conservation
devices, provided, however, that no such Customer Loan shall be in
an amount in excess of ONE THOUSAND FIVE HUNDRED AND NO/100 DOLLARS
($1,500.00) per household or per unit of an apartment building,
shall not exceed a term of five (5) years and shall require a
minimum payment of $25.00 per month, and the aggregate outstanding
of all Customer Loans shall not at any time exceed TWO MILLION ONE
HUNDRED THOUSAND AND NO/100 DOLLARS ($2,100,000.00). Applications
for Customer Loans shall be subjected to the Bank's customary credit
review policies.
2.10. 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
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making of such loans and, in addition, shall pay to the Bank
interest at an annual rate equal to TWO AND ONE-HALF percent
(2 1/2%) in excess of the Base Rate.
2.11. 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 $5.00, 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 leter of
credit application and agreement, and each other document
to be delivered pursuant hereto; and,
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 leter 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. Borrower is a corporation duly organized, existing and in good
standing under the laws of the State of Montana.
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4.2. The execution, delivery and performance of this Agreement and the
Note by the Borrower are within their corporate powers, have been
duly authorized, and are not in contravention of law, or the terms
of either Borrower's 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 Borrower's financial
condition or business.
4.5. The consolidated financial statements of Borrower and its
Subsidiaries for the fiscal year ending June 30, 1994, prepared by
certified public accountants, and for the period ending November 30,
1994, 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 November 30, 1994, to
the date hereof.
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 150 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
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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 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.
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 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.
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, indebtedness for
Borrowed Money, except: (i) indebtedness arising from issuance of
bonds; (ii) indebtedness arising under this Agreement; (iii)
indebtedness disclosed to the Bank in writing as existing at the
time of execution of this Agreement; and (iv) 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. Purchase or otherwise acquire all or substantially all of the
assets of any person, firm, corporation or association unless after
the consummation of such transaction, and after giving effect
thereto and to any concurrent transactions, no Event of Default
specified in Section 7 hereof, and no event which with notice or
lapse of time or both would become such an Event of Default would
exist.
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6.6. Permit the ratio of its Debt to Tangible Net Worth at fiscal year
end to be more than 3.0 to 1.0.
7. Events of Default
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.
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
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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
P.O. Box 2229
No. 1 River Park Towers
Great Falls, MT 59403-2229
Attention: Larry D. Geske, President and CEO
William J. Quast, Vice President
Treasurer and Comptroller
Edward J. Bernica, Vice President
and CFO
8.4.2. If to the Bank:
Norwest Bank Great Falls, National
Association
21 3rd Street North
Great Falls, MT 59403
Attention: John Koslosky, 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 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.
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ENERGY WEST, INCORPORATED NORWEST BANK GREAT FALLS,
NATIONAL ASSOCIATION
By: /s/ Larry D. Geske By: /s/ John Koslosky
---------------------------------- --------------------------------
Larry D. Geske, President and CEO John Koslosky, Vice President
By: /s/ William J. Quast
----------------------------------
William J. Quast, Vice President,
Treasurer and Controller
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