United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2002.
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
For the transition period from _______________ to _______________.
Commission File Number 001-31303
Black Hills Corporation
Incorporated in South Dakota IRS Identification Number 46-0458824
625 Ninth Street
Rapid City, South Dakota 57701
Registrant's telephone number (605)-721-1700
Former name, former address, and former fiscal year if changed since last report
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---------- ----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the last practicable date.
Class Outstanding at October 31, 2002
Common stock, $1.00 par value 26,903,626 shares
1
BLACK HILLS CORPORATION
I N D E X
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income- 3
Three and Nine Months
Ended September 30, 2002 and 2001
Condensed Consolidated Balance Sheets- 4
September 30, 2002, December 31, 2001
and September 30, 2001
Condensed Consolidated Statements of Cash Flows- 5
Nine Months Ended
September 30, 2002 and 2001
Notes to Condensed Consolidated Financial Statements 6-23
Item 2. Management's Discussion and Analysis of 24-44
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about 44
Market Risk
Item 4. Controls and Procedures 44
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 45
Item 6. Exhibits and Reports on Form 8-K 45
Signatures 47
2
BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
(in thousands, except per share amounts)
Operating revenues $ 112,572 $ 94,813 $ 312,215 $ 365,800
---------- ---------- ----------- -----------
Operating expenses:
Fuel and purchased power 22,426 18,680 52,695 64,994
Operations and maintenance 16,670 15,252 47,296 43,051
Administrative and general 15,264 12,165 46,118 58,262
Depreciation, depletion and amortization 17,691 14,201 52,027 38,605
Taxes, other than income taxes 5,983 5,656 17,889 16,637
---------- ---------- ----------- -----------
78,034 65,954 216,025 221,549
---------- ---------- ----------- -----------
Equity in earnings of unconsolidated affiliates 907 1,958 4,187 11,066
---------- ---------- ----------- -----------
Operating income 35,445 30,817 100,377 155,317
---------- ---------- ----------- -----------
Other income (expense):
Interest expense (10,020) (9,213) (30,171) (29,181)
Interest income 428 725 1,748 1,804
Other expense (864) (713) (206) (1,024)
Other income 385 5,807 2,654 10,133
---------- ---------- ------------ ----------
(10,071) (3,394) (25,975) (18,268)
---------- ---------- ----------- ----------
Income from continuing operations before minority
interest, income taxes and change in accounting principle 25,374 27,423 74,402 137,049
Minority interest 1,488 163 (2,614) (4,408)
Income taxes (9,413) (10,582) (24,725) (49,672)
---------- ---------- ----------- ----------
Income from continuing operations before change in
accounting principle 17,449 17,004 47,063 82,969
Income (Loss) from discontinued operations, net of taxes - (638) (2,637) 342
Change in accounting principle, net of taxes - - 896 -
---------- ---------- ----------- ----------
Net income 17,449 16,366 45,322 83,311
Preferred stock dividends (56) (131) (168) (473)
---------- ---------- ----------- ----------
Net income available for common stock $ 17,393 $ 16,235 $ 45,154 $ 82,838
========== ========== =========== ==========
Weighted average common shares outstanding:
Basic 26,835 26,425 26,778 24,988
========== ========== =========== ==========
Diluted 27,078 26,802 27,052 25,404
========== ========== =========== ==========
Earnings per share:
Basic-
Continuing operations $ 0.65 $ 0.64 $ 1.75 $ 3.30
Discontinued operations - (0.03) (0.09) .02
Change in accounting principle - - 0.03 -
--------- --------- ---------- -----------
Total $ 0.65 $ 0.61 $ 1.69 $ 3.32
========= ========= ========== ===========
Diluted-
Continuing operations $ 0.64 $ 0.63 $ 1.74 $ 3.27
Discontinued operations - (0.02) (0.09) 0.01
Change in accounting principle - - 0.03 -
--------- --------- ---------- -----------
Total $ 0.64 $ 0.61 $ 1.68 $ 3.28
========= ========= ========== ===========
Dividends paid per share of common stock $ 0.29 $ 0.28 $ 0.87 $ 0.84
========= ========= ========== ===========
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated financial statements.
3
BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30 December 31 September 30
2002 2001 2001
---- ---- ----
(in thousands, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents $ 74,778 $ 29,956 $ 52,057
Securities available-for-sale - 3,550 3,770
Receivables (net of allowance for doubtful accounts of $3,361,
$5,913 and $5,226, respectively) - 157,754 110,831 116,898
Derivative assets 44,244 38,144 62,383
Other assets 40,571 29,992 36,455
Assets of discontinued operations - 10,090 12,971
----------- ----------- -----------
317,347 222,563 284,534
----------- ----------- -----------
Investments 19,920 59,895 61,284
----------- ----------- -----------
Property, plant and equipment 1,829,247 1,564,664 1,499,231
Less accumulated depreciation and depletion (398,137) (328,325) (312,109)
----------- ----------- ------------
1,431,110 1,236,339 1,187,122
----------- ----------- ------------
Other assets:
Derivatives assets 2,244 6,407 1,752
Goodwill 30,182 28,693 30,169
Intangible assets 79,369 86,528 65,083
Other 23,750 18,342 16,824
----------- ----------- -------------
135,545 139,970 113,828
----------- ----------- ------------
$ 1,903,922 $ 1,658,767 $1,646,768
=========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 142,464 $ 96,218 $ 103,627
Accrued liabilities 41,912 39,085 54,835
Current maturities of long-term debt 17,306 35,904 20,513
Notes payable 383,521 360,450 319,000
Derivative liabilities 47,831 42,681 64,121
Liabilities of discontinued operations - 8,820 11,777
----------- ----------- ------------
633,034 583,158 573,873
----------- ----------- ------------
Long-term debt, net of current maturities 561,399 415,798 434,993
----------- ----------- ------------
Deferred credits and other liabilities:
Federal income taxes 104,855 75,302 64,629
Derivative liabilities 10,897 7,119 1,636
Other 42,294 42,693 39,690
----------- ----------- ------------
158,046 125,114 105,955
----------- ----------- ------------
Minority interest in subsidiaries 16,616 19,533 25,940
----------- ----------- ------------
Stockholders' equity:
Preferred stock - no par Series 2000-A; 21,500 shares
authorized; Issued and Outstanding: 5,177 shares 5,549 5,549 5,549
----------- ----------- ------------
Common stock equity-
Common stock $1 par value; 100,000,000 shares authorized;
Issued: 27,056,390; 26,890,943 and 26,830,267 shares,
respectively 27,056 26,891 26,830
Additional paid-in capital 243,599 240,454 238,506
Retained earnings 272,339 250,515 253,240
Treasury stock, at cost (1,756) (4,503) (8,841)
Accumulated other comprehensive loss (11,960) (3,742) (9,277)
----------- ----------- ------------
529,278 509,615 500,458
----------- ----------- ------------
Total stockholders' equity 534,827 515,164 506,007
----------- ----------- ------------
$1,903,922 $ 1,658,767 $ 1,646,768
=========== =========== ============
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated financial statements.
4
BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30
2002 2001
---- ----
(in thousands)
Operating activities:
Net income available for common $ 45,154 $ 82,838
Adjustments to reconcile net income available for common to net cash
provided by operating activities:
(Income) loss from discontinued operations 2,637 (342)
Depreciation, depletion and amortization 52,027 38,605
Net change in derivative assets and liabilities (5,286) (10,978)
Deferred income taxes 34,237 1,950
Undistributed earnings in associated companies (4,328) (8,580)
Minority interest 2,614 4,408
Accounting change (896) -
Change in operating assets and liabilities-
Accounts receivable and other current assets (53,085) 166,045
Accounts payable and other current liabilities 48,012 (132,854)
Other, net (6,361) 873
--------- ----------
114,725 141,965
--------- ----------
Investing activities:
Property, plant and equipment additions (174,946) (441,778)
Payment for acquisition of net assets, net of cash acquired (23,229) (10,410)
Payment for intangible assets, including goodwill - (50,413)
Payment for acquisition of minority interest (3,617) -
--------- ----------
(201,792) (502,601)
--------- ----------
Financing activities:
Dividends paid on common stock (23,326) (20,752)
Treasury stock sold, net 2,747 226
Common stock issued 3,310 167,980
Increase in short-term borrowings, net 23,071 108,000
Long-term debt - issuance 156,133 145,649
Long-term debt - repayments (29,130) (11,195)
Subsidiary distributions to minority interests (916) (1,505)
--------- ----------
131,889 388,403
--------- ----------
Increase in cash and cash equivalents 44,822 27,767
Cash and cash equivalents:
Beginning of period 29,956 24,290
--------- ----------
End of period $ 74,778 $ 52,057
========= ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for-
Interest $ 31,240 $ 28,776
Income taxes $ 754 $ 34,800
Non-cash net assets acquired through issuance of common and preferred $ - $ 3,628
stock
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated financial statements.
5
BLACK HILLS CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Reference is made to Notes to Consolidated Financial
Statements included in the Company's Annual
Report on Form 10-K)
(1) MANAGEMENT'S STATEMENT
The financial statements included herein have been prepared by Black
Hills Corporation (the Company) without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted pursuant
to such rules and regulations; however, the Company believes that the
footnotes adequately disclose the information presented. These
financial statements should be read in conjunction with the financial
statements and the notes thereto, included in the Company's 2001 Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
Accounting methods historically employed require certain estimates as
of interim dates. The information furnished in the accompanying
financial statements reflects all adjustments which are, in the opinion
of management, necessary for a fair presentation of the September 30,
2002, December 31, 2001 and September 30, 2001, financial information
and are of a normal recurring nature. The results of operations for the
three and nine months ended September 30, 2002, are not necessarily
indicative of the results to be expected for the full year. All
earnings per share amounts discussed refer to diluted earnings per
share unless otherwise noted.
(2) RECLASSIFICATIONS
Realized and unrealized gains and losses under energy trading contracts
in the energy marketing segment have been reclassified to be presented
on a net basis in Operating revenues on the accompanying Condensed
Consolidated Statements of Income in accordance with Emerging Issues
Task Force (EITF) Issue No. 98-10, "Accounting for Contracts Involved
in Energy Trading and Risk Management Activities. If the company had
reported these items on a gross basis, both operating revenues and fuel
and purchased power costs would have been $264.4 million and $195.0
million higher for the three months ended September 30, 2002 and 2001,
respectively, and $752.7 million and $879.3 million more for the nine
months ended September 30, 2002 and 2001, respectively. The net
presentation of these items rather than a gross presentation has no
impact on operating income or net income.
In addition, certain other 2001 amounts in the financial statements
have been reclassified to conform to the 2002 presentation. These
reclassifications did not have an effect on the Company's total
stockholders' equity or net income available for common stock as
previously reported.
6
(3) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 143, "Accounting for
Asset Retirement Obligations" (SFAS 143). SFAS 143 requires that the
fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred with the associated
asset retirement costs being capitalized as part of the carrying amount
of the long-lived asset. Over time, the liability is accreted to its
present value each period and the capitalized cost is depreciated over
the useful life of the related asset. Management will adopt SFAS 143
effective January 1, 2003 and is currently evaluating the effects
adoption will have on the Company's consolidated financial statements.
During June 2002, the Emerging Issues Task Force (EITF) reached a
consensus on Issues 1 and 3 of EITF Issue No. 02-3, "Recognition and
Reporting of Gains and Losses on Energy Trading Contracts under EITF
Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading
and Risk Management Activities," and No. 00-17, "Measuring the Fair
Value of Energy-Related Contracts in Applying Issue No. 98-10."
At a meeting on October 25, 2002, the EITF reached new consensuses that
effectively supersede the consensus on EITF 02-3, reached at its June
2002 meeting. At its October 2002 meeting, the EITF reached a consensus
to rescind EITF 98-10, the impact of which is to preclude
mark-to-market accounting for all energy trading contracts not within
the scope of FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The EITF also reached a consensus
that gains and losses on derivative instruments within the scope of
Statement 133 should be shown net in the income statement if the
derivative instruments are held for trading purposes. The consensus
regarding the rescission of Issue 98-10 is applicable for fiscal
periods beginning after December 15, 2002. Energy trading contracts not
within the scope of Statement 133 entered into after October 25, 2002,
but prior to the implementation of the consensus are not permitted to
apply mark-to-market accounting. The Company has not yet quantified the
financial statement effect of this EITF action. The Company currently
reports its energy trading activities on a net basis.
(4) RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 141, "Business Combinations," (SFAS 141) and No. 142,
"Goodwill and Other Intangible Assets" (SFAS 142). The Company has
adopted SFAS 141, which requires all business combinations initiated
after June 30, 2001 to be accounted for using the purchase method of
accounting. Under SFAS 142, goodwill and intangible assets with
indefinite lives are no longer amortized but the carrying values are
reviewed annually (or more frequently if impairment indicators arise)
for impairment. If the carrying value exceeds the fair value, an
impairment loss shall be recognized. A discounted cash flow approach
was used to determine fair value of the Company's businesses for the
purposes of testing for impairment. Intangible assets with a defined
life will continue to be amortized over their useful lives (but with no
maximum life). The Company adopted SFAS 142 on January 1, 2002.
7
The pro forma effects of adopting SFAS No. 142 for the three and nine
month periods ended September 30, 2002 and 2001 are as follows (in
thousands):
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
Net income as reported $17,393 $16,235 $45,154 $82,838
Cumulative effect of change in
accounting principle, net of tax - - (896) -
Cumulative effect of change in
accounting principle included in
"Discontinued operations," net
of tax - - 755 -
------- ------- ------- -------
Income excluding cumulative
effect of change in accounting
principle 17,393 16,235 45,013 82,838
Add: goodwill amortization - 384 - 1,179
------- ------- ------- -------
Adjusted net income $17,393 $16,619 $45,013 $84,017
======= ======= ======= =======
The cumulative effect adjustment recognized upon adoption of SFAS 142
was $0.1 million (after tax), which had only a nominal impact on
earnings per share. The adjustment consisted of income from the
after-tax write-off of negative goodwill from prior acquisitions in our
power generation segment of $0.9 million, offset by a $0.8 million
after-tax write-off for the impairment of goodwill related to our
discontinued coal marketing operations (Note 5). The goodwill
impairment was a result of changes in the criteria for the measurement
of impairments from an undiscounted to a discounted cash flow method.
If SFAS 142 had been adopted on January 1, 2001, net income would have
been lower for the nine-month period ended September 30, 2002 by $0.1
million, or $0.01 per share. The three and nine-month periods ended
September 30, 2001 would have been higher by $0.4 million, or $0.01 per
share and $1.2 million, or $0.05 per share.
The substantial majority of the Company's goodwill and intangible
assets are contained within the Power Generation segment. Changes to
goodwill and intangible assets during the nine-month period ended
September 30, 2002, including the effects of adopting SFAS No. 142, but
excluding amounts from discontinued operations, are as follows (in
thousands):
Goodwill Other Intangible Assets
Balance at December 31, 2001, net of
accumulated amortization $28,693 $86,528
Change in accounting principle 1,492 -
Additions - 10,080
Adjustments (3) (14,108)
Amortization expense - (3,131)
------- -------
Balance at September 30, 2002, net of
accumulated amortization $30,182 $79,369
======= =======
8
On September 30, 2002, intangible assets totaled $79.4 million, net of
accumulated amortization of $7.6 million. Intangible assets are
primarily related to site development fees and above-market long-term
contracts, and all have definite lives ranging from 5 to 40 years, over
which they continue to be amortized. Amortization expense for existing
intangible assets for the next five years is expected to be
approximately $4.2 million a year.
Intangible asset additions during the nine month period ended September
30, 2002 were primarily the result of a $9.3 million addition related
to preliminary purchase allocations in the acquisition of additional
ownership interest in the Harbor Cogeneration Facility (See Note 13).
This intangible asset primarily relates to an acquired ownership of
additional interest in a contract termination payment stream at the
facility.
Adjustments of intangible assets during the nine-month period ended
September 30, 2002 primarily relate to final adjustments to the
preliminary purchase price allocation of the Company's third quarter
2001 Las Vegas Cogeneration acquisition.
In addition, during the first quarter of 2002, the Company had a $0.4
million (pre-tax) impairment loss of certain intangibles at the
Company's discontinued coal marketing business as a result of a weak
coal market. The intangible assets are included in "Assets of
discontinued operations" on the accompanying Condensed Consolidated
Balance Sheets and the related impairment loss is included in "(Loss)
Income from discontinued operations" on the accompanying Condensed
Consolidated Statements of Income.
In August 2001, the FASB issued SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS 144 supersedes FASB
Statement 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of" (SFAS 121) and the accounting
and reporting provisions of Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions" (APB 30). SFAS 144
establishes a single accounting model for long-lived assets to be
disposed of by sale and resolves implementation issues related to SFAS
121. The Company adopted SFAS 144 effective January 1, 2002. Adoption
did not have a material impact on the Company's consolidated financial
position, results of operations or cash flows.
(5) DISCONTINUED OPERATION
During the second quarter of 2002, the Company adopted a plan to
dispose of its coal marketing subsidiary, Black Hills Coal Network. The
sale and disposal was finalized in July 2002. In connection with the
plan of disposal, the Company determined that the carrying values of
some of the underlying assets exceeded their fair values and a charge
to operations was required.
Consequently, in the second quarter of 2002 the Company recorded an
after-tax charge of approximately $1.0 million, which represents the
difference between the carrying values of the assets and liabilities of
the subsidiary versus their fair values, less cost to sell. The
disposition has been accounted for under the provisions of Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." Accordingly, results of operations
and the related charge have been classified as "Discontinued
9
operations" in the accompanying Condensed Consolidated Statements of
Income, and prior periods have been restated. For business segment
reporting purposes, the coal marketing business results were previously
included in the segment "Energy marketing."
Gross margins on energy trading contracts and net income from the
discontinued operation are as follows (in thousands):
Three Months Nine Months
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
Gross margins on energy
trading contracts $ 190 $ 54 $ (235) $2,873
------ ------ ------- ------
Pre-tax income (loss) from
discontinued operation 65 (1,061) (2,679) 648
Pre-tax loss on disposal (65) - (1,588) -
Income tax benefit (expense) - 423 1,630 (306)
------ ------ ------- ------
Net (loss) income from
discontinued operations $ - $ (638) $(2,637) $ 342
====== ====== ======= ======
Assets and liabilities of the discontinued operation are as follows (in
thousands):
December 31 September 30
2001 2001
---- ----
Current assets $7,878 $11,429
Non-current assets 2,212 1,542
Current liabilities (8,724) (11,777)
Non-current liabilities (96) -
------ -------
Net assets of discontinued
operations $1,270 $ 1,194
====== =======
10
EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share gives effect to all dilutive potential
common shares outstanding during a period. A reconciliation of "Income
from continuing operations" and basic and diluted share amounts is as
follows:
Periods ended September 30, 2002 Three Months Nine Months
------------ -----------
(in thousands) Average Average
Income Shares Income Shares
Income from continuing operations $17,449 $47,063
Less: preferred stock dividends (56) (168)
------- -------
Basic - available for common
shareholders 17,393 26,835 46,895 26,778
Dilutive effect of:
Stock options - 69 - 100
Convertible preferred stock 56 148 168 148
Others - 26 - 26
------- ------ ------- ------
Diluted - available for common
shareholders $17,449 27,078 $47,063 27,052
======= ====== ======= ======
Periods ended September 30, 2001 Three Months Nine Months
------------ -----------
(in thousands) Average Average
Income Shares Income Shares
Income from continuing operations $17,004 $82,969
Less: preferred stock dividends (131) (473)
------- -------
Basic - available for common
shareholders 16,873 26,425 82,496 24,988
Dilutive effect of:
Stock options - 204 - 243
Convertible preferred stock 131 148 473 148
Others - 25 - 25
------- ------ ------- ------
Diluted - available for common
shareholders $17,004 26,802 $82,969 25,404
======= ====== ======= ======
11
(7) COMPREHENSIVE INCOME
The following table presents the components of the Company's
comprehensive income:
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
Net income $17,449 $16,366 $45,322 $83,311
Other comprehensive income:
Unrealized gain (loss) on
available-for-sale securities - 507 (219) 1,657
Reclassification adjustment
for unrealized gain on
available-for-sale securities
included in net income - - (406) -
Initial impact of adoption of
SFAS 133, net of minority
interest - - - (7,518)
Fair value adjustment on
derivatives designated as
cash flow hedges (4,875) (5,173) (7,593) (2,603)
------- ------- ------- -------
Comprehensive income $12,574 $11,700 $37,104 $74,847
======= ======= ======= =======
(8) CHANGES IN COMMON STOCK
Other than the following transactions, the Company had no other changes
in its common stock, as reported in Note 4 of the Company's 2001 Annual
Report on Form 10-K.
o The Company granted 111,985 stock options at a weighted average
exercise price of $34.42 per share.
o 110,864 stock options were exercised at a weighted average
exercise price of $20.84 per share.
o The Company issued 26,047 restricted shares of common stock to
certain officers. Compensation cost related to the award was $0.9
million, which is being expensed over the vesting period ranging
from two to three years.
o The Company issued 41,840 shares of common stock under its
dividend reinvestment plan.
o The Company issued 12,743 shares of common stock under its
employee stock purchase plan at a price of $27.08 per share.
o The Company issued 45,043 shares of common stock under the
short-term incentive compensation plan. Compensation cost related
to the award was $1.3 million which was accrued for in 2001.
12
(9) CHANGES IN LONG-TERM DEBT AND NOTES PAYABLE
On January 4, 2002, the Company closed on a $50.0 million bridge credit
agreement. The credit agreement supplemented our revolving credit
facilities and had the same terms as those facilities. The bridge
credit agreement had an original expiration date of June 30, 2002,
which was subsequently extended to September 27, 2002. On September 27,
2002, this $50 million facility was replaced by a $50 million secured
financing for the expansion at our Las Vegas II project, a 224-megawatt
gas-fired generation facility located in North Las Vegas, Nevada which
expires on November 26, 2002. This financing is guaranteed by the
Company.
On March 14, 2002, the Company closed on $135 million five-year senior
secured project-level financing for the Arapahoe and Valmont
Facilities. These projects have a total of 210 megawatts in service
and are located in the Denver, Colorado area. Proceeds from this
financing were used to refinance $53.8 million of an existing
seven-year, senior-secured term project-level facility, pay down
approximately $50.0 million of short-term credit facility borrowings
and approximately $31.2 million was used for project construction. At
September 30, 2002, all of the $135 million financing had been
utilized.
On June 18, 2002, the Company closed on a $75 million bridge credit
agreement. This credit agreement bridged the issuance of $75 million of
Black Hills Power First Mortgage Bonds, which were issued on August 13,
2002. The termination date of the bridge credit agreement was August
13, 2002, the date on which the First Mortgage Bonds were issued.
On June 28, 2002, Enserco Energy closed on a $135 million uncommitted,
discretionary credit facility, which became effective July 1, 2002 and
expires June 27, 2003. This facility replaced the $75 million Enserco
Energy facility.
On August 13, 2002, the Company's electric utility subsidiary, Black
Hills Power, Inc., issued $75 million of First Mortgage Bonds, Series
AE, due 2032. The First Mortgage Bonds have a 7.23 percent coupon with
interest payable semiannually, commencing February 15, 2003. Net
proceeds from the offering were and will be used to fund the Company's
portion of construction and installation costs for an AC-DC-AC
Converter Station; for general capital expenditures for the remainder
of 2002 and 2003; to repay a portion of current bank indebtedness; to
satisfy bond maturities for certain outstanding first mortgage bonds
due in 2003; and for general corporate purposes.
In August 2002, the Company closed on a $195 million unsecured
revolving credit facility that expires August 26, 2003. The credit
facility extended the Company's previous $200 million 364-day credit
facility that expired on August 27, 2002. Interest rates under the
facility vary and are based, at the option of the Company at the time
of loan origination, on either (i) a prime based borrowing rate varying
from prime rate to prime rate plus 0.40 percent, or (ii) on a London
Interbank Offered Rate (LIBOR) based borrowing rate varying from LIBOR
plus 0.420 percent to LIBOR plus 1.40 percent.
On September 25, 2002, the Company closed on a $35 million two-year
unsecured credit agreement. Proceeds were used to fund the Company's
working capital needs and for general corporate purposes. Interest
rates under the facility vary and are based, at the option of the
Company at the time of loan origination, on either (i) a prime based
borrowing rate varying from prime rate to prime rate plus 0.875
percent, or (ii) on a London Interbank Offered Rate (LIBOR) based
borrowing rate varying from LIBOR plus 1.0 percent to LIBOR plus 1.875
percent.
13
The Company's credit facilities include certain restrictive covenants
that are common in such arrangements. Such covenants include a
consolidated net worth in an amount of not less than the sum of $375
million and 50 percent of the aggregate consolidated net income
beginning June 30, 2001; a recourse leverage ratio not to exceed 0.65
to 1.00; an interest coverage ratio of not less than 3.00 to 1.00; and
restrictions on the ability to dividend cash to the parent company at
certain subsidiaries with project level financing or subsidiary credit
facilities. Approximately $46 million of the cash balance at September
30, 2002 was restricted by subsidiary debt agreements for such
purposes. If these covenants are violated, it would be considered an
event of default entitling the lender to terminate the remaining
commitment and accelerate all principal and interest outstanding. In
addition, certain of the Company's interest rate swap agreements
include cross-default provisions. These provisions would allow the
counterparty the right to terminate the swap agreement and liquidate at
a prevailing market rate, in the event of default. The Company complied
with all the covenants at September 30, 2002.
The $195 million 364-day credit facility, the $200 million three-year
credit facility, and the $35 million two-year credit facility contain a
liquidity covenant that requires the Company to have $30 million in
liquid assets as of the last day of each fiscal quarter beginning with
December 31, 2002. Liquid assets are defined as unrestricted cash and
available unused capacity under the Company's credit facilities.
Some of the facilities previously had a covenant whereby we were
required to maintain a credit rating of at least "BBB-" from Standard &
Poor's or "Baa3" from Moody's Investor Service. The facilities that
contained the rating triggers were amended during the second quarter of
2002 to remove default provisions pertaining to our credit rating
status.
Other than the above transactions, the Company had no other material
changes in its consolidated indebtedness, as reported in Notes 6 and 7
of the Company's 2001 Annual Report on Form 10-K.
(10) SUMMARY OF INFORMATION RELATING TO SEGMENTS OF THE COMPANY'S BUSINESS
The Company's reportable segments are those that are based on the
Company's method of internal reporting, which generally segregates the
strategic business groups due to differences in products, services and
regulation. As of September 30, 2002, substantially all of the
Company's operations and assets are located within the United States.
The Company's operations are conducted through six reporting segments
that include: Integrated Energy group consisting of the following
segments: Mining, which engages in the mining and sale of coal from its
mine near Gillette, Wyoming; Oil and Gas, which produces, explores and
operates oil and gas interests located in the Rocky Mountain region,
Texas, California and other states; Energy Marketing, which markets
natural gas, oil and related services to customers in the Midwest,
Southwest, Rocky Mountain, West Coast and Northwest regions and
transports crude oil in Texas; Power Generation, which produces and
sells power to wholesale customers; Electric group and segment, which
supplies electric utility service to western South Dakota, northeastern
Wyoming and southeastern Montana; and Communications group and segment,
which primarily markets communications and software development
services.
14
Segment information follows the same accounting policies as described
in Note 1 of the Company's 2001 Annual Report on Form 10-K. In
accordance with the provisions of SFAS No. 71, intercompany fuel sales
to the electric utility are not eliminated. Segment information
included in the accompanying Condensed Consolidated Balance Sheets and
Condensed Consolidated Statements of Income is as follows (in
thousands):
External Inter-segment Income (loss) from
Operating Revenues Operating Revenues Continuing Operations
Quarter to Date
September 30, 2002
Energy marketing $ 9,388* $ - $ 3,130
Power generation 34,700 - 4,822
Oil and gas 6,561 - 1,066
Mining 5,531 2,778 2,103
Electric 45,220 71 8,304
Communications 8,392 - (1,453)
Corporate - - (518)
Intersegment eliminations - (69) (5)
---------- ------------ ----------
Total $ 109,792 $ 2,780 $ 17,449
========== ============ ==========
*Operating revenues presented for Energy marketing represent trading margins.
See Note 2.
External Inter-segment Income (loss) from
Operating Revenues Operating Revenues Continuing Operations
Quarter to Date
September 30, 2001
Energy marketing $ 9,692* $ - $ 4,536
Power generation 21,544 - 1,246
Oil and gas 8,496 - 2,804
Mining 4,023 2,847 3,876
Electric 43,057 461 7,929
Communications 5,154 1,090 (2,661)
Corporate - - (614)
Intersegment eliminations - (1,551) (112)
--------- -------- --------
Total $ 91,966 $ 2,847 $ 17,004
========= ======== ========
*Operating revenues presented for Energy marketing represent trading margins.
See Note 2.
15
External Inter-segment Income (loss) from
Operating Revenues Operating Revenues Continuing Operations
Year to Date
September 30, 2002
Energy marketing $ 21,722* $ - $ 7,033
Power generation 102,849 - 13,775
Oil and gas 19,515 - 3,227
Mining 15,241 8,150 6,932
Electric 120,583 203 22,918
Communications 24,155 - (5,729)
Corporate - - (1,081)
Intersegment eliminations - ( 203) (12)
-------- -------- ---------
Total $304,065 $ 8,150 $ 47,063
======== ======== =========
*Operating revenues presented for Energy marketing represent trading margins.
See Note 2.
External Inter-segment Income (loss) from
Operating Revenues Operating Revenues Continuing Operations
Year to Date
September 30, 2001
Energy marketing $ 71,795* $ - $30,910
Power generation 56,061 - 3,827
Oil and gas 26,353 - 8,723
Mining 14,681 8,333 8,499
Electric 174,915 783 42,053
Communications 13,662 3,307 (9,343)
Corporate - - (1,081)
Intersegment eliminations - (4,090) (619)
-------- --------- -------
Total $357,467 $ 8,333 $82,969
======== ========= =======
*Operating revenues presented for Energy marketing represent trading margins.
See Note 2.
Other than the following transactions, the Company had no other
material changes in total assets of its reporting segments, as reported
in Note 14 of the Company's 2001 Annual Report on Form 10-K, beyond
discontinuing the coal marketing operations (Note 5) previously
included in the "Energy Marketing" segment and changes resulting from
normal operating activities.
The Power Generation segment had a net addition to non working capital
assets of approximately $106 million primarily related to ongoing
construction of the expansions at the Las Vegas Cogeneration II and
Arapahoe facilities and the acquisition of additional ownership
interest at the Harbor Cogeneration facility (Note 13).
16
The Energy Marketing segment acquired additional ownership interests in
pipelines for $17.7 million (Note 13).
(11) RISK MANAGEMENT ACTIVITIES
The Company actively manages its exposure to certain market risks as
described in Note 2 of the Company's Annual Report on Form 10-K.
Details of derivative and hedging activities included in the
accompanying Condensed Consolidated Balance Sheets and Condensed
Consolidated Statements of Income are as follows:
Energy Marketing Activities
The Company's energy marketing operations fall under the purview of
Statement of Financial Accounting Standard No. 133 (SFAS 133),
"Accounting for Derivative Instruments and Hedging Activities" and
Emerging Issues Task Force Issue No. 98-10, "Accounting for Energy
Trading and Risk Management Activities" (EITF 98-10). As such, these
activities are accounted for under mark-to-market accounting. The
Company records the fair values of its trading derivatives as either
Derivative assets and/or Derivative liabilities on the accompanying
Condensed Consolidated Balance Sheet. The net gains or losses on all
energy trading contracts are recorded as Revenues in the accompanying
Condensed Consolidated Statements of Income. During the second quarter
2002, the Company's gas marketing subsidiary revised its estimates of
fair values for certain derivatives valued using market based prices
which include a "bid/offer" spread. The change in estimate resulted in
a $0.8 million reduction in net income versus amounts that would have
been reported if the change in estimate had not occurred.
The contract or notional amounts and terms of the Company's derivative
commodity instruments held for trading purposes are set forth below:
September 30, 2002 December 31, 2001 September 30, 2001
Maximum Maximum Maximum
Notional Term in Notional Term in Notional Term in
(thousands of MMBtu's) Amounts Years Amounts Years Amounts Years
------- ----- ------- ----- ------- -------
Natural gas basis swaps purchased 46,354 1 9,882 1 17,449 2
Natural gas basis swaps sold 54,686 1 10,696 1 18,940 2
Natural gas fixed-for float swaps purchased 15,295 1 10,646 2 13,102 1
Natural gas fixed-for-float swaps sold 21,054 1 11,815 2 13,279 1
Natural gas swing swaps purchased - - 465 1 2,635 1
Natural gas swing swaps sold - - 930 1 3,410 1
Natural gas physical purchases 48,273 2 13,159 1 12,925 1
Natural gas physical sales 43,296 1 19,339 1 19,896 1
Transport purchase 81,759 5 41,136 6 43,780 6
(thousands of barrels)
Crude oil purchased 4,173 1 3,139 1 2,335 1
Crude oil sold 4,172 1 3,142 1 2,312 1
(megawatt-hours)
Power purchased 30,475 1 - - - -
Power sold 84,800 1 - - - -
17
As required under SFAS 133 and EITF 98-10, derivatives and energy
trading activities were marked to fair value and the gains and/or
losses recognized in earnings. The amounts related to the accompanying
Condensed Consolidated Balance Sheets and Statements of Income as of
September 30, 2002, December 31, 2001, and September 30, 2001, are as
follows (in thousands):
Current Non-current Current Non-current
Derivative Derivative Derivative Derivative Unrealized
September 30, 2002 Assets Assets Liabilities Liabilities Gain
------ ------ ----------- ----------- ----
Natural gas $37,009 $2,232 $30,443 $1,441 $7,357
Crude oil 6,624 - 5,849 - 775
Power generation 326 - 55 - 271
------- ------ ------- ------ ------
$43,959 $2,232 $36,347 $1,441 $8,403
======= ====== ======= ====== ======
December 31, 2001
Natural gas $29,755 $ 661 $25,437 $ 953 $4,026
Crude oil 6,267 - 5,497 - 770
------- ------- ------- ------- ------
$36,022 $ 661 $30,934 $ 953 $4,796
======= ======= ======= ======= ======
September 30, 2001
Natural gas $44,998 $1,752 $41,869 $1,636 $5,650
Crude oil 6,148 - 5,393 - 755
------- ------ ------- ------ ------
$51,146 $1,752 $47,262 $1,636 $6,405
======= ====== ======= ====== ======
At September 30, 2002, the Company had a mark to fair value unrealized
gain of $8.4 million for its energy marketing activities. Of this
amount, $7.6 million was current and $0.8 million was non-current.
Substantially all of the unrealized gain at September 30, 2002 results
from "back to back" transactions. The Company anticipates that
substantially all of the current portion of unrealized gains for hedged
transactions will be realized during the next twelve months.
18
Non-trading Energy Activities
On September 30, 2002, December 31, 2001 and September 30, 2001, the
Company had the following swaps and related balances for its
non-trading energy operations (in thousands):
Pre-tax
Accumulated
Maximum Current Non-current Current Non-current Other Pretax
Terms in Derivative Derivative Derivative Derivative Comprehensive Income
Notional* Years Assets Assets Liabilities Liabilities Income (Loss) (Loss)
--------- ----- --------- ------ ----------- ----------- ------------- ------
September 30, 2002
Crude oil swaps 420,000 1 $ 18 $ 12 $1,027 $ 73 $(1,003) $ (67)
Natural gas swaps 600,000 1 267 - 142 28 90 7
------- ----- ------ ----- ------- ------
$ 285 $ 12 $1,169 $ 101 $ (913) $ (60)
======= ===== ====== ===== ======= ======
December 31, 2001
Crude oil swaps 90,000 1 $ 529 $ - $ - $ - $ 529 $ -
Natural gas swaps 1,216,000 1 1,593 - - - 1,463 130
------- ----- ------ ----- ------- ------
$ 2,122 $ - $ - $ - $ 1,992 $ 130
======= ===== ====== ===== ======= ======
September 30, 2001
Crude oil swaps 141,000 1 $ 312 $ - $ - $ - $ 327 $ (15)
Crude oil options 60,000 1 35 - - - 105 (70)
Natural gas swaps 1,676,000 1 2,277 - - - 2,184 93
------- ----- ------ ----- ------- ------
$ 2,624 $ - $ - $ - $ 2,616 $ 8
======= ===== ====== ===== ======= ======
- -----------------------
*crude in bbls, gas in MMBtu's
Based on September 30, 2002 market prices, $(0.9) million will be
realized and reported in earnings during the next twelve months. These
estimated realized losses for the next twelve months were calculated
using September 30, 2002 market prices. Estimated and actual realized
losses will likely change during the next twelve months as market
prices change.
19
Financing Activities
On September 30, 2002, December 31, 2001 and September 30, 2001, the
Company's interest rate swaps and related balances were as follows (in
thousands):
Weighted Pre-tax
Average Non- Non- Accumulated
Current Fixed Maximum Current current Current current Other Pre-tax
Notional Interest Terms in Derivative Derivative Derivative Derivative Comprehensive Income
Amount Rate Years Assets Assets Liabilities Liabilities Loss (Loss)
----- ---- ----- ------ ------ ----------- ----------- ---- ------
September 30, 2002
Swaps on project
financing $213,636 5.99% 4 $ - $ - $ 9,114 $ 9,022 $(18,136) $ -
Swaps on corporate
debt 75,000 4.45% 2 - 1,201 333 (1,534) -
-------- ---- ---------- -------- -------- -------- --------
Total $288,636 $ - $ - $ 10,315 $ 9,355 $(19,670) $ -
======== ==== ========== ======== ======== ======== ========
December 31, 2001
Swaps on project
financing $316,397 5.85% 4 $ - $ 5,746 $ 10,212 $ 5,949 $(10,415) $ -
Swaps on corporate
debt 75,000 4.45% 3 - 1,535 217 (1,752) -
-------- ---- ---------- -------- -------- -------- --------
Total $391,397 $ - $ 5,746 $ 11,747 $ 6,166 $(12,167) $
======== ==== ========== ======== ======== ======== ========
September 30, 2001
Swaps on project
financing $318,906 5.86% 5 $ - $ - $15,101 $ - $(15,101) $ -
Swaps on corporate
debt 75,000 4.45% 3 - - 1,758 (1,758) -
-------- ---- ---------- -------- -------- -------- --------
Total $393,906 $ - $ - $ 16,859 $ - $(16,859) $ -
======== ==== ========== ======== ======== ======== ========
Based on September 30, 2002 market interest rates, approximately $10.3
million will be realized as additional interest expense during the next
twelve months. Estimated and realized amounts will likely change during
the next twelve months as market interest rates change.
At December 31, 2001, the Company had a $100 million forward starting
floating-to-fixed interest rate swap to hedge the anticipated floating
rate debt financing related to the Company's Las Vegas Cogeneration
expansion. This swap terminated during the second quarter 2002 and
resulted in a $1.1 million gain. This swap was treated as a cash flow
hedge and accordingly in the second quarter of 2002 the resulting gain
was carried in Accumulated Other Comprehensive Income on the Condensed
Consolidated Balance Sheet and was to be amortized over the life of the
anticipated long-term financing. In the third quarter of 2002, this
cash flow hedge was determined to be ineffective due to uncertainties
about the eventual timing and form of financing for this project. As a
result, $1.1 million was taken into earnings. The gain was offset by
the expensing of approximately $1.0 million of deferred financing costs
related to the anticipated financing.
20
In addition, the Company entered into a $50 million treasury lock to
hedge a portion of the Company's $75 million First Mortgage Bond
offering completed in August 2002 (Note 9). The treasury lock cash
settled on August 8, 2002, the bond pricing date, and resulted in a
$1.8 million loss. This treasury lock was treated as a cash flow hedge
and accordingly the resulting loss is carried in Accumulated Other
Comprehensive Loss on the Condensed Consolidated Balance Sheet and
amortized over the life of the related bonds as additional interest
expense.
(12) LEGAL PROCEEDINGS
In June 2002, a forest fire damaged approximately 11,000 acres of
private and government land located near Deadwood and Lead, South
Dakota. The fire destroyed approximately 20 structures (seven houses
and 13 outbuildings) and caused the evacuation of the cities of Lead
and Deadwood for approximately 48 hours.
The cause of the fire was investigated by the State of South Dakota.
Alleged contact between power lines owned by the Company and
undergrowth were implicated as the cause. The Company has initiated its
own investigation into the cause of the fire, including the hiring of
expert fire investigators, and that investigation is continuing.
The Company has been put on notice of potential private civil claims
for property damage and business loss. In addition, the State of South
Dakota initiated a civil action in the Seventh Judicial Circuit Court,
Pennington County, South Dakota, seeking recovery of damages for fire
suppression costs, reclamation and remediation. If it is determined
that power line contact was the cause of the fire, and that the Company
was negligent in the maintenance of those power lines, the Company
could be liable for resultant damages. Management cannot predict the
outcome of either the Company's investigation, or the viability of
potential claims. Management believes that any such claims will not
have a material adverse effect on the Company's financial condition or
results of operations.
(13) ACQUISITIONS
On March 8, 2002, the Company acquired an additional 67 percent
ownership interest in Millennium Pipeline Company L.P., which owns and
operates a 200-mile pipeline. The pipeline has a capacity of
approximately 65,000 barrels of oil per day and transports imported
crude oil from Beaumont, Texas to Longview, Texas, which is the
transfer point to connecting carriers. The Company also acquired
additional ownership interest in Millennium Terminal Company, L.P.,
which has 1.1 million barrels of crude oil storage connected to the
Millennium Pipeline at the Oil Tanking terminal in Beaumont. The
Millennium system is presently operating near capacity through shipper
agreements. These acquisitions give the Company 100 percent ownership
in the Millennium companies. Total cost of the acquisitions was $11.0
million and was funded through borrowings under short-term revolving
credit facilities.
On March 15, 2002, the Company paid $25.7 million to acquire an
additional 30 percent interest in the Harbor Cogeneration Facility (the
Facility), a 98-megawatt gas-fired plant located in Wilmington,
California. This acquisition was funded through borrowings under
short-term revolving credit facilities. At September 30, 2002 the
Company had an 88 percent ownership interest in the Facility.
21
The Company's investments in these entities prior to the above
acquisitions were accounted for under the equity method of accounting
and included in Investments on the accompanying Condensed Consolidated
Balance Sheets. Each of the above acquisitions gave the Company
majority ownership and voting control of the respective entities,
therefore, the Company now includes the accounts of each of the
entities in its consolidated financial statements.
During July 2002, the Company purchased the assets of the Kilgore to
Houston Pipeline System from Equilon Pipeline Company, LLC. The Kilgore
pipeline transports crude oil from the Kilgore, Texas region south to
Houston, Texas, which is the transfer point to connecting carriers via
the Oiltanking Houston terminal facilities. The 10-inch pipeline is
approximately 190 miles long and has a capacity of up to approximately
35,000 barrels per day. In addition, the Kilgore system has
approximately 400,000 barrels of crude oil storage at Kilgore and
375,000 barrels of storage at the Texoma Tank Farm located in Longview,
Texas. Total cost of the acquisition was $6.7 million and was funded
through borrowings under short-term credit facilities.
The above acquisitions have been accounted for under the purchase
method of accounting and, accordingly, the purchase prices have been
allocated to the acquired assets and liabilities based on preliminary
estimates of the fair values of the assets purchased and the
liabilities assumed as of the date of acquisition. The estimated
purchase price allocations are subject to adjustment, generally within
one year of the date of the acquisition. The purchase prices and
related acquisition costs exceeded the fair values assigned to net
tangible assets by approximately $9.3 million, which was recorded as
long-lived intangible assets.
The impact of these acquisitions was not material in relation to the
Company's results of operations. Consequently, pro forma information is
not presented.
(14) SUBSEQUENT EVENT
On October 1, 2002, the Company entered into a definitive merger
agreement to acquire Denver-based Mallon Resources Corporation. Total
cost of the acquisition is estimated to be $52 million, which includes
the Company's acquisition on October 1, 2002 of Mallon's debt to Aquila
Energy Capital Corporation and the settlement of outstanding hedges,
amounting to $30.5 million. The merger agreement, which has been
approved by both companies' Board of Directors, provides that Mallon
shareholders will receive 0.044 of a share of Black Hills for each
share of Mallon. Completion of the acquisition which is subject to
customary conditions, including approval by the shareholders of Mallon,
is expected in the first quarter of 2003.
Mallon Resources' proved reserves, as reported at December 31, 2001,
were 53.3 billion cubic feet of gas equivalent. The Company estimates
that Mallon's current proved reserves could be substantially higher
based on its independent review of the reserves and current oil and gas
prices. The reserves are located primarily on the Jicarilla Apache
Nation in the San Juan Basin of New Mexico and are comprised almost
entirely of natural gas in shallow sand formations. The oil and gas
leases of the acquisition total more than 66,500 gross acres (56,000
net), most of which is contained in a contiguous block that is in the
early stages of development. The Company believes it can recover
additional gas reserves from the shallow sands and from deeper horizons
that have yet to be explored but are productive elsewhere in the San
Juan Basin.
22
Current daily net production of the Mallon properties is nearly 13
million cubic feet of gas equivalent. Mallon operates 149 of 171 total
gas and oil wells, with working interests averaging 90 to 100 percent
in most of the wells and undeveloped acreage.
Upon closing, the acquisition is expected to increase gas and oil
production immediately by approximately 60 percent and more than double
our proven oil and gas reserves. After the acquisition is closed, the
Company plans to initiate a development and exploratory drilling
program on the properties. The acquisition is expected to have a
nominal earnings-per-share impact until production levels can be
increased.
23
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
We are a growth oriented, diversified energy holding company operating
principally in the United States. Our unregulated and regulated businesses have
expanded significantly in recent years. Our integrated energy group, Black Hills
Energy, Inc., produces and markets electric power and fuel. We produce and sell
electricity in a number of markets, with a strong emphasis in the western United
States. We also produce coal, natural gas and crude oil, primarily in the Rocky
Mountain region, and transport crude oil in Texas. Our electric utility, Black
Hills Power, Inc., serves an average of 59,600 customers in South Dakota,
Wyoming and Montana. Our communications group offers state-of-the-art broadband
communications services to over 23,700 residential and business customers in
Rapid City and the northern Black Hills region of South Dakota through Black
Hills FiberCom, LLC.
The following discussion should be read in conjunction with Item 7. -
Management's Discussion and Analysis of Financial Condition and Results of
Operations - included in our 2001 Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
Results of Operations
Consolidated Results
Revenue and Income (loss) from continuing operations provided by each
business group as a percentage of our total revenue and Income (loss)
from continuing operations were as follows:
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
Revenues
Integrated energy 52% 49% 53% 48%
Electric utility 40 45 39 48
Communications 8 6 8 4
--- --- --- ---
100% 100% 100% 100%
=== === === ===
Income/(Loss) from
Continuing Operations
Integrated energy 62% 70% 64% 61%
Electric utility 48 47 49 50
Communications and other (10) (17) (13) (11)
--- --- --- ---
100% 100% 100% 100%
=== === === ===
24
Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001. Consolidated income from continuing operations for the three-month
period ended September 30, 2002 was $17.4 million or $0.64 per share compared to
$17.0 million or $0.63 per share in the same period of the prior year.
The increase in net income from continuing operations was a result of an
increase in power generation and electric utility net income and a decrease in
the net loss of our communications business group offset by decreases in net
income in the energy marketing, oil and gas production and coal mining segments.
The power generation segment's net income more than tripled due to its
additional generating capacity and increased earnings from additional ownership
of an energy partnership. Net income for the electric utility business group
increased due to an increase in off-system sales and the communications business
group showed a decrease in its net loss attributable to a substantial expansion
of its customer base and a $0.6 million after-tax collection of previously
reserved amounts. Net income from energy marketing decreased due to a
substantial decline in margins received offset by increased volumes marketed and
unrealized gains recognized through mark-to-market accounting. The oil and gas
production segment's net income decreased due to a 17 percent decrease in
production volumes and an 11 percent decrease in average prices received. Coal
mining had strong operational performance with production increasing 27 percent,
however net income decreased due to a $3.4 million after-tax gain related to a
coal contract settlement that was recognized in the third quarter of 2001.
In addition, during the second quarter of 2002 we decided to discontinue
operations in our coal marketing business due primarily to challenges
encountered in marketing our Wyodak coal from the Powder River Basin of Wyoming
to midwestern and eastern coal markets. We sold the non-strategic assets
effective August 1, 2002. Net loss from discontinued operations was $(0.6)
million or $(0.02) per share for the three months ended September 30, 2001.
Prior year results of operations have been restated to reflect the discontinued
operations.
Consolidated revenues for the three-month period ended September 30, 2002 were
$112.6 million compared to $94.8 million for the same period in 2001. The
increase in revenues was a result of increased revenue in the communications
business unit and power generation segment and an increase in coal production
and volumes of energy marketed, partially offset by lower energy commodity
prices in 2002 and a decrease in the production of oil and gas.
Consolidated operating expenses for the three-month period increased from $66.0
million in 2001 to $78.0 million in 2002. The increase was due to an increase in
fuel and depreciation expense as a result of our increased investment in
independent power generation, partially offset by a substantial decrease in gas
prices as discussed above.
Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. Consolidated income from continuing operations for the nine-month period
ended September 30, 2002 was $47.1 million or $1.74 per share compared to $83.0
million or $3.27 per share in the same period of the prior year.
The decrease in income from continuing operations was a result of substantial
decreases in prevailing prices for natural gas, crude oil and wholesale
electricity and in gross margins from natural gas marketing activities compared
to the same period in 2001. Unusual energy marketing conditions existed in the
first half of 2001 stemming primarily from gas and electricity shortages in the
West. Approximately $1.40 per share of the 2001 year to date income from
continuing operations was attributed to the unusual market conditions that
existed at that time. Wholesale electricity average peak prices at Mid-Columbia
25
were approximately $182 per megawatt-hour during the first nine-months of 2001
compared to approximately $21 per megawatt-hour during the first nine months of
2002. Average spot gas prices in the West Coast region were approximately $8.60
per MMBtu in the first nine months of 2001 compared to $2.80 in the first nine
months of 2002. 2001 net income reflects a coal contract settlement which
resulted in a one-time gain of approximately $3.4 million or $0.13 per share.
While the above factors negatively impacted income from continuing operations,
they were offset in part by an increase in the production of coal, oil and
natural gas, an increase in independent power generation capacity and our
communications business group showed a decrease in its net loss attributable to
the continued expansion of its customer base.
In addition, during the second quarter of 2002 we decided to discontinue
operations in our coal marketing business due to challenges encountered in
marketing our Wyodak coal from the Powder River Basin of Wyoming to midwestern
and eastern coal markets. We sold the non-strategic assets effective August 1,
2002. Income (loss) from discontinued operations was $(2.6) million or $(0.09)
per share for the nine months ended September 30, 2002 compared to $0.3 million
or $0.01 per share for the same period of the prior year. Prior year results of
operations have been restated to reflect the discontinued operations.
Consolidated revenues for the nine-month period ended September 30, 2002 were
$312.2 million compared to $365.8 million for the same period in 2001. The
decrease in revenues was a result of the high energy commodity prices in 2001,
slightly offset by increased revenue in the communications business unit and
power generation segment, increased production in coal, oil and gas and
increased marketing volumes.
Consolidated operating expenses for the nine-month period decreased from $221.5
million in 2001 to $216.0 million in 2002. The decrease was primarily due to
lower fuel costs and incentive compensation offset by increased expenses related
to our increased investment in independent power generation.
The following results of operations for the Integrated Energy Group and its
segments, Electric Utility Group and Communications Group, does not include
intercompany eliminations.
Integrated Energy Group
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
Revenue:
Energy marketing $ 9,388 $ 9,692 $ 21,722 $ 71,795
Power generation 34,700 21,544 102,849 56,061
Oil and gas 6,561 8,496 19,515 26,353
Mining 8,309 6,870 23,391 23,014
---------- ---------- --------- ---------
Total revenue 58,958 46,602 167,477 177,223
---------- ---------- --------- ---------
Equity in investments of
unconsolidated
subsidiaries 907 1,958 4,187 11,066
---------- ---------- --------- ---------
Operating expenses 38,475 29,916 107,689 96,685
---------- ---------- --------- ---------
Operating income $ 21,390 $ 18,644 $ 63,975 $ 91,604
Net income $ 10,961 $ 12,029 $ 31,271 $ 50,718
26
The following is a summary of sales volumes of our coal, oil and natural gas
production and various measures of power generation:
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
Fuel production:
Tons of coal sold 1,110,800 872,900 2,955,500 2,465,700
Barrels of oil sold 110,403 126,557 340,036 335,585
Mcf of natural gas sold 1,019,564 1,273,667 3,567,135 3,295,442
Mcf equivalent sales 1,681,982 2,033,000 5,607,351 5,309,000
September 30
2002 2001
---- ----
Independent power capacity:
MWs of independent power capacity in service 657 625
MWs of independent power capacity under construction* 364 360
- -------------------
*includes a 90 MW plant under a lease arrangement
The following is a summary of average daily energy marketing volumes:
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
Natural gas - MMBtus 1,140,200 1,062,600 1,039,200 947,900
Crude oil - barrels 57,200 35,100 53,700 37,000
Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001. Net income for the integrated energy group for the three months ended
September 30, 2002 was $11.0 million compared to $12.0 million in the same
period of the prior year. Net income decreased slightly due to a decrease in net
income from energy marketing, oil and gas production and coal mining, partially
offset by an increase in power generation net income. The power generation
segment's net income more than tripled due to its additional generating capacity
and increased earnings from additional ownership of an energy partnership. Net
income from energy marketing decreased due to a substantial decline in margins
received offset by increased volumes marketed, the addition of pipeline earnings
and unrealized gains recognized through mark-to-market accounting. The oil and
gas production segment's net income decreased due to a 17 percent decrease in
production volumes and an 11 percent decrease in average prices received. Coal
mining had strong operational performance with production increasing 27 percent,
however net income decreased due to a $3.4 million after-tax gain related to a
coal contract settlement that was recognized in the third quarter of 2001.
27
The integrated energy business group's revenues and expenses increased 27
percent and 29 percent respectively for the three months ended September 30,
2002 compared to the same period in 2001. The increase in revenue was a result
of increased generation capacity offset by the substantial decline in commodity
prices. Expenses increased due to higher fuel costs and depreciation
expense resulting from increased capacity.
Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. Net income for the integrated energy group for the nine months ended
September 30, 2002 was $31.3 million compared to $50.7 million in the same
period of the prior year. Net income decreased primarily due to a substantial
decline in energy prices. The power generation segment reported net income
growth attributed to additional generating capacity, additional ownership of an
energy partnership, the addition of pipeline earnings and the reporting of
additional net income relating to the collection in 2002 of receivables from
California operations that were reserved for in the prior period. A 6 percent
increase in gas and oil production sales partially offset an earnings decrease
in the oil and gas segment caused by a 34 percent decrease in the average price
received. The energy marketing segment's net income decreased primarily due to a
substantial decrease in margins received, partially offset by increased volumes
marketed. Net income for the coal mining segment decreased due to a $3.4 million
after-tax gain related to a coal contract settlement that was recognized in the
third quarter of 2001 which was partially offset by the increase in tons of coal
sold in 2002.
The integrated energy business group's revenues decreased 6 percent and expenses
increased 11 percent, respectively, for the nine months ended September 30, 2002
compared to the same period in 2001. The decrease in revenue was a direct result
of the substantial decline in commodity prices. The increase in expenses
was primarily due to higher fuel costs and depreciation expense resulting from
the increased generating capacity.
Energy Marketing
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
Revenue* $ 9,388 $ 9,692 $ 21,722 $ 71,795
Operating income $ 4,860 $ 6,601 $ 10,479 $ 48,960
Net income $ 3,130 $ 4,536 $ 7,033 $ 30,910
*Revenues presented for Energy marketing represent trading margins. See Note 2.
Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001. The decrease in revenues is attributed to a decline in commodity
prices, partially offset by a 7 percent increase in natural gas average daily
volumes marketed and a 63 percent increase in crude oil average daily volumes
marketed. Net income decreased 31 percent due to a substantial decline in
commodity prices and margins. As a result of changing commodity prices,
net income was impacted by unrealized gains recognized through mark-to-market
accounting treatment. Unrealized pre-tax mark-to-market gains for the
three-month periods ended September 30, 2002 and 2001 were $1.5 million and $0.5
million, respectively, resulting in a quarter over quarter net income increase
of $1.0 million.
28
In addition, during the second quarter of 2002 we decided to discontinue
operations in our coal marketing business due primarily to challenges
encountered in marketing our Wyodak coal from the Powder River Basin of Wyoming
to midwestern and eastern coal markets. We sold the non-strategic assets
effective August 1, 2002. Net loss from discontinued operations was $(0.6)
million or $(0.02) per share for the third quarter of 2001. Prior year results
of operations have been restated to reflect the discontinued operations and the
coal marketing business is no longer reflected in the energy marketing segment.
Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. Revenues and net income decreased substantially primarily due to a
substantial decline in commodity prices and margins received, offset by a 10
percent increase in natural gas average daily volumes marketed and a 45 percent
increase in crude oil average daily volumes marketed. Unusual energy marketing
conditions existed in the first six months of 2001 stemming primarily from gas
and electricity shortages in the West. Average spot gas prices in the West Coast
region were approximately $8.60 per MMBtu in the first nine months of 2001
compared to $2.80 in the first nine months of 2002.
Income (loss) from discontinued operations was $(2.6) million or $(0.09) per
share for the nine months ended September 30, 2002 compared to $0.3 million or
$0.01 per share for the same period of the prior year.
Power Generation
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
Revenue $34,700 $21,544 $ 102,849 $56,061
Operating income $13,036 $ 7,752 $ 43,736 $25,316
Net income (loss) $ 4,822 $ 1,246 $ 14,670 $ 3,827
Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001. Revenue and operating income increased 61 percent and 68 percent,
respectively, and net income more than tripled for the three-month period ended
September 30, 2002 compared to the same period in 2001 and is attributed to
additional generating capacity and increased earnings from additional ownership
of an energy partnership. As of September 30, 2002, we had 657 megawatts of
independent power capacity in service compared to 625 megawatts at September 30,
2001. Approximately 300 megawatts of the 625 megawatts of capacity at September
30, 2001 were brought on during the third quarter of 2001. Additional
partnership equity was earned by the Company in July 2002 as a result of certain
performance measures being met at a consolidated energy partnership. The
earnings impact was approximately $1.6 million pre-tax and was recorded as a
reduction to "Minority interest" expense on the accompanying Condensed
Consolidated Statement of Income.
Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. Revenue and operating income increased 83 percent and 73 percent,
respectively, and net income more than tripled for the nine-month period ended
September 30, 2002 compared to the same period in 2001 and is attributed to
additional generating capacity and increased earnings from additional ownership
of an energy partnership. As of September 30, 2002, we had 657 megawatts of
29
independent power capacity in service compared to 625 megawatts at September 30,
2001. Approximately 300 megawatts of the 625 megawatts of capacity at September
30, 2001 were brought on during the third quarter of 2001.
The increase in net income for the nine-month period ended September 30, 2002
was also benefited by a $1.9 million after-tax benefit relating to the
collection of receivables previously reserved for in the prior period for
exposure to the California market and a $0.9 million after-tax adjustment for
negative goodwill to reflect the impact of a change in accounting for goodwill
in accordance with the adoption of Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" (SFAS 142) effective January 1,
2002.
Oil and Gas
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
Revenue $6,561 $8,496 $19,515 $26,353
Operating income $1,408 $4,305 $ 4,191 $12,929
Net income $1,066 $2,804 $ 3,227 $ 8,723
The following is a summary of our internally estimated economically recoverable
oil and gas reserves measured using constant product prices as of September 30,
2002 and 2001. Estimates of economically recoverable reserves are based on a
number of variables, which may differ from actual results.
September 30
2002 2001
---- ----
Barrels of oil (in millions) 4.9 4.2
Bcf of natural gas 32.3 25.7
Total in Bcf equivalents 61.7 50.9
Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001. Revenue and net income of the oil and gas production business segment
decreased 23 percent and 62 percent, respectively for the three-month period
ended September 30, 2002, compared to the same period in 2001 due to an 11
percent decrease in the average price received and a 17 percent decrease in
production volumes due in part to delayed drilling.
Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. Revenue and net income of the oil and gas production business segment
decreased 26 percent and 63 percent respectively, for the nine-month period
ended September 30, 2002, compared to the same period in 2001 due to a 34
percent decrease in the average price received partially offset by a 6 percent
increase in production volumes.
30
Mining
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
Revenue $8,309 $6,870 $23,391 $23,014
Operating income $2,503 $ 830 $ 6,937 $ 5,664
Net income $2,103 $3,876 $ 6,932 $ 8,499
Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001. Revenue from our mining segment increased 21 percent and net income
decreased 46 percent for the three-month period ended September 30, 2002,
compared to the same period in 2001. Revenues increased due to a 27 percent
increase in tons of coal sold, partially offset by lower prices received.
Net income decreased due to a $3.4 million after-tax gain related to a coal
contract settlement that was recognized in the third quarter of 2001 which was
partially offset by the increase in tons of coal sold in the third quarter of
2002.
Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. Revenue from our mining segment increased 2 percent and net income
decreased 18 percent for the nine-month period ended September 30, 2002,
compared to the same period in 2001. Revenue increased due to a 20 percent
increase in tons of coal sold, partially offset by lower prices received.
Net income decreased due to a $3.4 million after-tax gain related to a coal
contract settlement that was recognized in the third quarter of 2001 which was
partially offset by the increase in tons of coal sold in 2002.
Electric Utility Group
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
Revenue $45,291 $43,518 $120,786 $175,698
Operating expenses 29,316 28,272 77,131 102,477
------- ------- -------- --------
Operating income $15,975 $15,246 $ 43,655 $ 73,221
Net income $ 8,304 $ 7,929 $ 22,918 $ 42,053
The following table provides certain operating statistics:
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
Firm (system) sales - MWh 510,500 537,000 1,466,000 1,527,000
Off-system sales - MWh 317,600 211,000 688,700 761,000
31
Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001. Revenue, operating expenses and net income increased 4 percent, 4
percent and 5 percent, respectively for the three-month period ended September
30, 2002 compared to the same period in the prior year primarily due to a 51
percent increase in off-system electric megawatt-hour sales offset by a 22
percent decrease in the average price per megawatt-hour sold off-system. Firm
residential and contracted electricity sales increased, but were offset by a
decline in industrial sales due to the closing of the Homestake Gold Mine at
year-end 2001.
Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. Revenue, operating expenses and net income decreased 31 percent, 25
percent and 46 percent, respectively for the nine-month period ended September
30, 2002 compared to the same period in the prior year primarily due to a 10
percent decrease in off-system electric megawatt-hour sales and a 69 percent
decrease in the average price per megawatt-hour sold off-system. Firm
residential and contracted electricity sales increased, but were offset by a
decline in industrial sales due to the closing of the Homestake Gold Mine at
year-end 2001. Revenue declines were partially offset by lower operating
expenses attributable to lower fuel and purchased power costs.
Communications Group
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
Revenue $ 8,392 $ 5,154 $24,155 $13,717
Operating expenses 9,770 8,101 30,203 23,237
------- ------- ------- -------
Operating loss $(1,378) $(2,947) $(6,048) $(9,520)
Net loss $(1,453) $(2,661) $(5,729) $(9,343)
September 30 June 30 December 31 September 30
2002 2002 2001 2001
---- ---- ---- ----
Business customers 2,960 2,970 2,250 1,940
Business access lines 8,772 8,380 6,836 6,180
Residential customers 20,760 19,450 15,660 13,780
Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001. The communications business group's net loss for the three-month
period ended September 30, 2002 was $(1.5) million, compared to $(2.7) million
in 2001. The performance improvement is due largely to a 63 percent increase in
revenue as a result of a larger customer base and a $0.6 million after-tax
collection of previously reserved amounts, partially offset by increased costs
of sales and administrative expenses.
The total number of customers exceeded 23,700 at the end of September 2002 - a 6
percent and 32 percent increase over the customer base at June 30, 2002 and
December 31, 2001, respectively, and a 51 percent increase compared to September
30, 2001.
32
Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. The communications business group's net loss for the nine month period
ended September 30, 2002 was $(5.7) million, compared to $(9.3) million in 2001.
The performance improvement is due largely to a 76 percent increase in revenue
as a result of a larger customer base, partially offset by increased costs of
sales and administrative expenses.
The total number of customers exceeded 23,700 at the end of September 2002 - a 6
percent and 32 percent increase over the customer base at June 30, 2002 and
December 31, 2001, respectively, and a 51 percent increase compared to September
30, 2001.
We expect our communications group will sustain approximately $7.0 million in
net losses in calendar year 2002, with annual losses decreasing in 2003 and
profitability expected by 2004.
Earnings Guidance
We reaffirm confidence in our ongoing business strategy, which seeks long-term
growth through the expansion of integrated, balanced and diverse competitive
energy operations supplemented by the strength and stability of our electric
utility and improving results from our communication business. The energy
industry has encountered challenging market conditions this year, including low
and volatile prices for natural gas and wholesale power. Until market conditions
improve, we expect annual earnings per share percentage growth to be in the 8 to
10 percent range. We also expect recurring earnings for 2002 to be in the range
of $2.25 to $2.30 per share. We recognize that sustained growth requires capital
deployment to continue expanding our integrated energy operations. We strongly
believe that we are strategically positioned to take advantage of opportunities
to acquire and develop energy assets consistent with our investment criteria.
Critical Accounting Policies
Defined Benefit Pension Plan
We have a noncontributory defined benefit pension plan (Plan) covering our
employees and certain subsidiaries who meet eligibility requirements. The
benefits are based on years of service and compensation levels during the
highest five consecutive years of the last ten years of service. Our funding
policy is in accordance with the federal government's funding requirements. The
Plan's assets are held in trust and consist primarily of equity securities and
cash equivalents. The determination of our obligation and expense for pension
benefits is dependent on the use of certain assumptions by actuaries in
calculating the amounts. Those assumptions include, among others, the expected
long-term rate of return on Plan assets, the discount rate and the rate of
increase in compensation levels. The actuaries review the Plan annually and are
currently in the process of reviewing our Plan to determine our obligation and
our expense for next year. The market value of the Plan's assets has been
affected by declines in the equity market in the last year. As a result, we
could be required to recognize an additional minimum liability in the fourth
quarter of 2002 as prescribed by Statement of Financial Accounting Standards
(SFAS) No. 87 "Employers' Accounting for Pensions" and SFAS No. 132 "Employers'
Disclosure about Pensions and Postretirement Benefits." If required, the
liability would be recorded as a reduction to Other Comprehensive Income, and
would not affect net income. We do not expect this liability to be material, if
it is required. However, we currently anticipate the amount of our pre-tax
pension expense in 2003 will be in a range of $2.5 million to $3.5 million more
than the amount for 2002, which would have a negative effect on earnings per
share of $0.06 to $0.09 in 2003.
33
Special Purpose Entities
As described more fully in the Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Company's Annual Report on Form 10-K
for the year ended December 31, 2001, Black Hills Generation, a subsidiary in
our power generation segment, has entered into agreements with Wygen Funding,
Limited Partnership to lease the Wygen Plant, a 90 megawatt coal-fired power
plant under construction in Campbell County, Wyoming. Wygen Funding is a special
purpose entity that owns the Wygen Plant and has financed the project. Neither
Wygen Funding, its owners, nor its officers are related to us, and other than
the lease transaction and obligations incurred as a result of the transaction,
we have no obligation to provide additional funding or issue securities to Wygen
Funding. Lease payments are based on final construction and financing costs and
will begin after substantial completion of construction scheduled to occur in
the first quarter of 2003. The lease will be accounted for as an operating
lease.
The Financial Accounting Standards Board (FASB) expects to issue a new
accounting standard regarding the accounting treatment for special purpose
entities. The final provisions of this new standard may affect the accounting of
the lease arrangement. If the special purpose entity were to be consolidated
into our financial statements, we would record both the Wygen asset and its
related debt on our balance sheet. Total project costs are estimated to be in
the $130 - $140 million range. In addition, we would also have to recognize the
depreciation expense associated with the project which is estimated to be
approximately $3.5 million per year based upon a 40-year plant life and would
have reclassifications on the income statement primarily between operating
expenses and interest expense. We estimate the impact on earnings per share
would be approximately $(0.09) per share. We are monitoring this FASB project
and may consider other financing structures for the project in the future.
Goodwill and Other Intangible Assets
As required, on January 1, 2002 we adopted the provisions of Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
(SFAS 142). Under SFAS 142, goodwill and intangible assets with indefinite lives
are no longer amortized but the carrying values are reviewed annually (or more
frequently if impairment indicators arise) for impairment. Intangible assets
with a defined life will continue to be amortized over their useful lives (but
with no maximum life). Initial adoption of SFAS 142 did not have a material
impact on our financial position or results of operations. Adoption of SFAS 142
provisions for non-amortization of goodwill and indefinite lived intangibles
will impact our future earnings results. Results for the three and nine months
ended September 30, 2002 were approximately $0.4 million and $1.2 million, or
$0.01 per share and $0.05 per share, higher than the comparable periods in 2001
due to non-amortization of goodwill.
Other than the above, there have been no material changes in our critical
accounting policies from those reported in our 2001 Annual Report on Form 10-K
filed with the Securities Exchange Commission. For more information on our
critical accounting policies, see Part II, Item 7 in our 2001 Annual Report on
Form 10-K.
34
Liquidity and Capital Resources
Cash Flow Activities
During the nine-month period ended September 30, 2002, we generated sufficient
cash flow from operations to meet our operating needs, to pay dividends on
common and preferred stock, to pay a portion of our long-term debt maturities
and to fund a portion of our property additions. We continue to fund property
and investment additions primarily related to construction of additional
electric generation facilities for our integrated energy business group through
a combination of operating cash flow, increased short-term debt, long-term debt
and long-term non-recourse project financing.
Cash flows from operations decreased $27.2 million for the nine-month period
ended September 30, 2002 compared to the same period in the prior year primarily
due to the decrease in net income and cash provided by changes in working
capital.
On March 8, 2002, we acquired an additional 67 percent interest in Millennium
Pipeline Company, L.P., which owns and operates a 200-mile pipeline and an
additional ownership interest in Millennium Terminal Company, L.P., which has
1.1 million barrels of crude oil storage connected to the Millennium Pipeline at
the Oil Tanking terminal in Beaumont, Texas. Total cost of the acquisition was
$11.0 million and was funded through borrowings under short-term revolving
credit facilities.
On March 15, 2002, we acquired an additional 30 percent interest in the Harbor
Cogeneration Facility, a 98-megawatt gas-fired plant located in Wilmington,
California for $25.7 million. This acquisition was also funded through
borrowings under short-term revolving credit facilities.
On March 14, 2002, we closed on $135 million five-year senior secured
project-level financing for the Arapahoe and Valmont facilities. These projects
have a total of 210 megawatts in service and are located in the Denver, Colorado
area. Proceeds from this financing were used to refinance $53.8 million of an
existing seven-year, secured term project-level facility, pay down approximately
$50.0 million of short-term credit facility borrowings, and the remainder was
used for project construction.
During the first quarter of 2002, we completed a $50 million bridge credit
agreement. The credit agreement supplements our revolving credit facilities and
had the same terms as those facilities with an original expiration date of June
30, 2002, which subsequently was extended to September 27, 2002. On September
27, 2002 this $50 million facility was replaced by a $50 million secured
financing for the expansion at our Las Vegas II project, a 224 megawatt
gas-fired generation facility located in North Las Vegas, Nevada which expires
on November 26, 2002. This financing is guaranteed by the Company.
On June 18, 2002, we closed on a $75 million bridge credit agreement. This
credit agreement bridged the issuance of $75 million of Black Hills Power First
Mortgage bonds, which we issued on August 13, 2002. The termination date of the
bridge credit agreement was August 13, 2002, the date on which the First
Mortgage Bonds were issued.
During July 2002, we purchased the assets of the Kilgore to Houston Pipeline
System from Equilon Pipeline Company, LLC. The Kilgore pipeline transports crude
oil from the Kilgore, Texas region south to Houston, Texas, which is the
transfer point to connecting carriers via the Oil Tanking Houston terminal
35
facilities. The 10-inch pipeline is approximately 190 miles long and has a
capacity of up to approximately 35,000 barrels per day. In addition, the Kilgore
system has approximately 400,000 barrels of crude oil storage at Kilgore and
375,000 barrels of storage at the Texoma Tank Farm located in Longview, Texas.
Total cost of the acquisition was $6.7 million and was funded through borrowings
under short-term credit facilities.
On August 13, 2002, our electric utility subsidiary, Black Hills Power, Inc.,
issued $75 million of First Mortgage Bonds, series AE, due 2032. The Mortgage
Bonds have a 7.23 percent coupon with interest payable semiannually, commencing
February 15, 2003. Net proceeds from the offering were and will be used to fund
the utility's portion of construction and installation costs for an AC-DC-AC
Converter Station; for general capital expenditures for the remainder of 2002
and 2003; to repay a portion of current bank indebtedness; to satisfy bond
maturities for certain outstanding first mortgage bonds due in 2003; and for
general corporate purposes.
In August 2002, we closed on a $195 million revolving unsecured credit facility
that expires August 26, 2003. The credit facility extended our previous $200
million 364-day credit facility that expired on August 27, 2002.
On September 25, 2002, we closed on a $35 million unsecured two-year credit
agreement. Proceeds were used to fund our working capital needs and for general
corporate purposes.
Dividends
Dividends paid on our common stock totaled $0.29 per share in each of the first
three quarters of 2002. This reflects a 3.6 percent increase, as approved by our
board of directors in January 2002, from the prior periods. The determination of
the amount of future cash dividends, if any, to be declared and paid will depend
upon, among other things, our financial condition, funds from operations, the
level of our capital expenditures, restrictions under our credit facilities and
our future business prospects.
Short-Term Liquidity and Financing Transactions
Our principal sources of short-term liquidity are our revolving bank facilities
and cash provided by operations. As of September 30, 2002 we had approximately
$75 million of cash and $480 million of bank facilities. Approximately $46
million of the cash balance at September 30, 2002 was restricted by subsidiary
debt agreements in regards to the ability to dividend the cash to the parent
company. The bank facilities consisted of a $50 million facility due November
26, 2002, a $195 million facility due August 26, 2003, a $200 million facility
due August 27, 2004 and a $35 million facility due September 30, 2004. These
bank facilities can be used to fund our working capital needs, for general
corporate purposes and to provide liquidity for a commercial paper program if
implemented. At September 30, 2002, we had $383.5 million of bank borrowings
outstanding under these facilities. After inclusion of applicable letters of
credit, the remaining borrowing capacity under the bank facilities was $57.1
million at September 30, 2002.
Two significant cash events occurred subsequent to the third quarter. On October
1, 2002 we acquired Mallon Resources Corporation's debt to Aquila Energy Capital
Corporation and settled Mallon's outstanding hedges, amounting to $30.5 million,
as part of the definitive merger agreement to acquire Denver-based Mallon
Resources Corporation. The acquisition of this debt was funded with our
corporate credit facilities. Also, during October we received a $23.7 million
federal income tax refund as a result of filing our 2001 federal income tax
return. The refund was primarily due to accelerated depreciation and other plant
36
related timing differences for tax purposes. The income tax refund was used to
pay down our corporate credit facilities. At October 31, 2002, we had $403.0
million of bank borrowings outstanding under our corporate credit facilities
with $37.6 million of remaining borrowing capacity available after the inclusion
of applicable letters of credit.
The above bank facilities include covenants that are common in such
arrangements. Several of the facilities require that we maintain a consolidated
net worth in an amount of not less than the sum of $375 million and 50 percent
of the aggregate consolidated net income beginning June 30, 2001; a recourse
leverage ratio not to exceed 0.65 to 1.00; and an interest coverage ratio of not
less than 3.00 to 1.00. The $35 million credit facility's covenants include
consolidated net worth in an amount of not less than the sum of $425 million and
50 percent of the aggregate consolidated net income beginning April 1, 2002; a
recourse leverage ratio not to exceed 0.65 to 1.00; and an interest coverage
ratio of not less than 1.50 to 1.00. In addition the $195 million 364 day credit
facility, the $200 million three-year credit facility and the $35 million
two-year credit facility contain a liquidity covenant that requires us to have
$30 million of liquid assets as of the last day of each fiscal quarter beginning
with December 31, 2002. Liquid assets are defined as unrestricted cash and
available unused capacity under our credit facilities. If these covenants are
violated, it would be considered an event of default entitling the lender to
terminate the remaining commitment and accelerate all principal and interest
outstanding. In addition, certain of our interest rate swap agreements include
cross-default provisions. These provisions would allow the counterparty the
right to terminate the swap agreement and liquidate at a prevailing market rate,
in the event of default. As of September 30, 2002, we were in compliance with
the above covenants.
Some of the facilities previously had a covenant whereby we were required to
maintain a credit rating of at least "BBB-" from Standard & Poor's or "Baa3"
from Moody's Investor Service. The facilities that contained the rating triggers
were amended during the second quarter of 2002 to remove default provisions
pertaining to our credit rating status.
Our consolidated net worth was $534.8 million at September 30, 2002. The
long-term debt component of our capital structure at September 30, 2002 was 51
percent and our total debt leverage (long-term debt and short-term debt) was 64
percent.
In addition, Enserco Energy, Inc., our gas marketing unit, has a $135 million
uncommitted, discretionary line of credit to provide support for the purchase of
natural gas. We provided no guarantee to the lender under this facility. At
September 30, 2002, there were outstanding letters of credit issued under the
facility of $26.1 million with no borrowing balances on the facility.
Similarly, Black Hills Energy Resources, Inc., our oil marketing unit, had a $25
million uncommitted, discretionary credit facility. This line of credit provided
credit support for the purchases of crude oil by Black Hills Energy Resources.
We provided no guarantee to the lender under this facility. At September 30,
2002, Black Hills Energy Resources had letters of credit outstanding of $18.9
million and no balance outstanding on its overdraft line.
We continue to seek non-recourse project-level financing for our independent
power projects. Due to creditworthiness concerns with counterparties, financing
arrangements for the Las Vegas Cogeneration power plant expansion, currently
under construction, have been delayed.
37
Allegheny Energy Supply Company (AESC), a subsidiary of Allegheny Energy Inc.,
has a contract to purchase all of the facility's capacity and all associated
energy and ancillary services. Both AESC and its parent, Allegheny Energy Inc.
have recently had their credit ratings downgraded below investment grade status
and have technically defaulted on some of their credit agreements with other
counterparties. The Las Vegas expansion is expected to be operational in the
fourth quarter of 2002 and has been funded with the corporate credit facilities.
Total construction and acquisition costs, including Las Vegas Cogeneration I,
are expected to be $330 million of which $302 million was expended as of
September 30, 2002.
If we are not successful in extending the $50 million facility that expires on
November 26, 2002 or in obtaining other financing, a deficiency in our liquidity
could occur.
Our ability to obtain additional financing will depend upon a number of factors,
including our future performance and financial results and capital market
conditions. We can provide no assurance that we will be able to raise additional
capital on reasonable terms or at all.
There have been no other material changes in our forecasted changes in liquidity
and capital requirements from those reported in Item 7 of our 2001 Annual Report
on Form 10-K filed with the Securities Exchange Commission.
RISK FACTORS
We have substantial indebtedness and will require significant additional amounts
of debt and equity capital to grow our businesses and service our indebtedness.
Our future access to these funds is not certain, and our inability to access
funds in the future could adversely affect our liquidity.
Financing for construction requirements and operational needs is dependent upon
the cost and availability of external funds from capital markets and financial
institutions at both company and project levels. Access to funds is dependent
upon factors such as general economic conditions, regulatory authorizations and
policies, our credit rating, the operations of the projects funded, the credit
ratings of project counterparties, and the economics of the projects under
construction.
Counterparty Credit Risk
We perform ongoing credit evaluations of our customers and adjust credit limits
based upon payment history and the customer's current creditworthiness, as
determined by our review of their current credit information. We continuously
monitor collections and payments from our customers and maintain a provision for
estimated credit losses based upon historical experience and any specific
customer collection issue that we have identified. We cannot guarantee that we
will continue to experience the same credit loss rates that we have in the past
or that an investment grade counterparty will not default, as was the case with
Enron in 2001.
Our agreements with counterparties that have recently experienced downgrades in
their credit ratings expose us to the risk of counterparty default, which could
adversely affect our cash flow and profitability.
38
The credit ratings of the senior unsecured debt of Public Service Company of
Colorado (PSCo), Nevada Power Company and Allegheny Energy Supply Company,
counterparties under tolling agreements with our subsidiaries, have recently
been downgraded by one or more rating agencies. The credit ratings of Nevada
Power Company, its parent holding company, Sierra Pacific Resources, and
Allegheny Energy Supply Company, have all been downgraded to non-investment
grade status. In addition, project level financing arrangements in place for
projects in Colorado and New York provide for the potential acceleration of
payment obligations in the event of nonperformance by a counterparty under
related power purchase agreements. If these or other counterparties fail to
perform their obligations under their respective power purchase agreements,
our financial condition and results of operation may be adversely affected. We
may not be able to enter into agreements in replacement of our existing power
purchase agreements on terms as favorable as our existing agreements, or at all.
Our rate freeze agreement with the South Dakota Public Utilities Commission,
which prevents us, absent extraordinary circumstances, from passing on to our
South Dakota retail customers cost increases we may incur during the rate freeze
period, could decrease our operating margins.
Our rate freeze agreement with the South Dakota Public Utilities Commission
provides that, until January 1, 2005, we may not apply to the Commission for any
increase in rates, except upon the occurrence of various extraordinary events.
Our utility's historically stable returns could be threatened by plant outages,
machinery failure, increases in purchased power costs over which we have no
control, acts of nature or other unexpected events that could cause our
operating costs to increase and our operating margins to decline. Moreover, in
the event of unexpected plant outages or machinery failures, we may be required
to purchase replacement power in wholesale power markets at prices, which exceed
the rates we are permitted to charge our retail customers.
Because wholesale power, fuel prices and other costs are subject to volatility,
our revenues and expenses may fluctuate.
A substantial portion of our growth in net income in recent years is
attributable to increasing wholesale sales into a robust market. The prices of
energy products in the wholesale power markets have declined significantly since
the first half of 2001. Power prices are influenced by many factors outside our
control, including fuel prices, transmission constraints, supply and demand,
weather, economic conditions, and the rules, regulations and actions of the
system operators in those markets. Moreover, unlike most other commodities,
electricity cannot be stored and therefore must be produced concurrently with
its use. As a result, wholesale power markets are subject to significant price
fluctuations over relatively short periods of time and can be unpredictable.
Our broadband communications business is subject to significant competition for
its services and to rapid technological change.
Our communications group, which provides a full suite of communication
services, faces strong competition for its services from the incumbent local
exchange carrier as well as from long distance providers, Internet service
providers, the incumbent cable television provider and others.
39
The communications industry is subject to rapid and significant changes in
technology. There can be no assurance that future technological developments
will not have a material adverse effect on our competitive position.
Our ability to recover our capital investment is dependent on our ability to
sustain our customer base and is subject to the risk that technological advances
may render our network obsolete. If we determine that we will be unable to
recover our investment, we would be required to take a non-cash charge to
earnings in an amount that could be material in order to write down a portion of
our investment in our broadband communications business.
Construction, expansion, refurbishment and operation of power generation
facilities involve significant risks which could lead to lost revenues or
increased expenses.
The construction, expansion and refurbishment of power generation and
transmission and resource recovery facilities involve many risks, including: the
inability to obtain required governmental permits and approvals; the
unavailability of equipment; supply interruptions; work stoppages; labor
disputes; social unrest; weather interferences; unforeseen engineering,
environmental and geological problems and unanticipated cost overruns.
The ongoing operation of our facilities involves all of the risks described
above, in addition to risks relating to the breakdown or failure of equipment or
processes and performance below expected levels of output or efficiency. New
plants may employ recently developed and technologically complex equipment,
especially in the case of newer environmental emission control technology. Any
of these risks could cause us to operate below expected capacity levels, which
in turn could result in lost revenues, increased expenses, higher maintenance
costs and penalties. While we maintain insurance, obtain warranties from vendors
and obligate contractors to meet certain performance levels, the proceeds of
such insurance, and our rights under warranties or performance guarantees may
not be adequate to cover lost revenues, increased expenses or liquidated damage
payments.
Estimates of our proved reserves may materially change due to numerous
uncertainties inherent in estimating oil and natural gas reserves.
There are many uncertainties inherent in estimating quantities of proved
reserves and their values. The process of estimating oil and natural gas
reserves requires interpretations of available technical data and various
assumptions, including assumptions relating to economic factors. Any significant
inaccuracies in these interpretations or assumptions could materially affect the
estimated quantities and present value of our reserves. The accuracy of any
reserve estimate is a function of the quality of available data, engineering and
geological interpretations and judgement, and the assumptions used regarding
quantities of recoverable oil and gas reserves and prices for oil and natural
gas. Actual prices, production, development expenditures, operating expenses,
and quantities of recoverable oil and natural gas reserves will vary from those
assumed in our estimates, and these variances may be significant. Any
significant variance from the assumptions used could result in the actual
quantity of our reserves and future net cash flow being materially different
from the estimates in our reported reserves. In addition, results of drilling,
testing and production and changes in oil and natural gas prices after the date
of the estimate may result in substantial upward or downward revisions.
40
We face potential claims related to a forest fire in South Dakota.
In June 2002, a forest fire damaged approximately 11,000 acres of private and
governmental land located near Deadwood and Lead, South Dakota. The fire
destroyed approximately 20 structures (seven houses and 13 outbuildings) and
caused the evacuation of the cities of Lead and Deadwood for approximately 48
hours.
The cause of the fire was investigated by the State of South Dakota. Alleged
contact between power lines owned by us and undergrowth were implicated as the
cause. We have initiated our own investigation into the cause of the fire,
including the hiring of expert fire investigators and that investigation is
continuing.
We have been put on notice of potential private civil claims for property damage
and business loss. In addition, the State of South Dakota initiated a civil
action in the Seventh Judicial Circuit Court, Pennington County, South Dakota,
seeking recovery of damages for fire suppression costs, reclamation and
remediation. If it is determined that power line contact was the cause of the
fire and that we were negligent in the maintenance of those power lines, we
could be liable for resultant damages. We cannot predict the outcome of either
our investigation or the viability of potential claims. Management believes that
any such claims will not have a material adverse effect on our financial
condition or results of operations.
Our business is subject to substantial governmental regulation and permitting
requirements as well as on-site environmental liabilities we assumed when we
acquired some of our facilities. We may be adversely affected by any future
inability to comply with existing or future regulations or requirements or the
potentially high cost of maintaining the compliance of our facilities.
In General. Our business is subject to extensive energy, environmental and other
laws and regulations of federal, state and local authorities. We generally are
required to obtain and comply with a wide variety of licenses, permits and other
approvals in order to operate our facilities. In the course of complying with
these requirements, we may incur significant additional costs. If we fail to
comply with these requirements, we could be subject to civil or criminal
liability and the imposition of liens or fines. In addition, existing
regulations may be revised or reinterpreted, new laws and regulations may be
adopted or become applicable to us or our facilities, and future changes in laws
and regulation may have a detrimental effect on our business.
Environmental Regulation. In acquiring some of our facilities, we assumed
on-site liabilities associated with the environmental condition of those
facilities, regardless of when such liabilities arose and whether known or
unknown, and in some cases agreed to indemnify the former owners of those
facilities for on-site environmental liabilities. We strive at all times to be
in compliance with all applicable environmental laws and regulations. However,
steps to bring our facilities into compliance, if necessary, could be expensive,
and thus could adversely affect our financial condition. Furthermore, with the
continuing trends toward stricter standards, greater regulation, more extensive
permitting requirements and an increase in the assets we operate, we expect our
environmental expenditures to be substantial in the future.
41
Ongoing changes in the United States utility industry, such as state and federal
regulatory changes, a potential increase in the number of our competitors or the
imposition of price limitations to address market volatility, could adversely
affect our profitability.
The United States electric utility industry is currently experiencing increasing
competitive pressures as a result of consumer demands, technological advances,
deregulation, greater availability of natural gas-fired generation and other
factors. The FERC has implemented and continues to propose regulatory changes to
increase access to the nationwide transmission grid by utility and non-utility
purchasers and sellers of electricity. In addition, a number of states have
implemented or are considering or currently implementing methods to introduce
and promote retail competition. Industry deregulation in some states has led to
the disaggregation of some vertically integrated utilities into separate
generation, transmission and distribution businesses, and deregulation
initiatives in a number of states may encourage further disaggregation. As a
result, significant additional competitors could become active in the
generation, transmission and distribution segments of our industry.
Proposals have been introduced in Congress to repeal the Public Utility Holding
Company Act of 1935, or PUHCA, and the FERC has publicly indicated support for
the PUHCA repeal effort. To the extent competitive pressures increase and the
pricing and sale of electricity assume more characteristics of a commodity
business, the economics of domestic independent power generation projects may
come under increasing pressure.
In addition, the independent system operators who oversee most of the wholesale
power markets have in the past imposed, and may in the future continue to
impose, price limitations and other mechanisms to address some of the volatility
in these markets. These types of price limitations and other mechanisms may
adversely affect the profitability of our generation facilities that sell energy
into the wholesale power markets. Given the extreme volatility and lack of
meaningful long-term price history in some of these markets and the imposition
of price limitations by independent system operators, we may not be able to
operate profitably in all wholesale power markets.
NEW ACCOUNTING PRONOUNCEMENTS
During June 2002, the Emerging Issues Task Force (EITF) reached a consensus on
Issues 1 and 3 of EITF Issue No. 02-3, "Recognition and Reporting of Gains and
Losses on Energy Trading Contracts under EITF Issue No. 98-10, "Accounting for
Contracts Involved in Energy Trading and Risk Management Activities," and No.
00-17, "Measuring the Fair Value of Energy-Related Contracts in Applying Issue
No. 98-10."
At a meeting on October 25, 2002, the EITF reached new consensuses that
effectively supersede the consensuses on EITF 02-3, reached at its June 2002
meeting. At its October 2002 meeting, the EITF reached a consensus to rescind
EITF 98-10, the impact of which is to preclude mark-to-market accounting for all
energy trading contracts not within the scope of FASB Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The EITF also
reached a consensus that gains and losses on derivative instruments within the
scope of Statement 133 should be shown net in the income statement if the
derivative instruments are held for trading purposes. The consensus regarding
the rescission of Issue 98-10 is applicable for fiscal periods beginning after
December 15, 2002. Energy trading contracts not within the scope of Statement
133 purchased after October 25, 2002, but prior to the implementation of the
consensus are not permitted to apply mark-to-market accounting. We have not yet
42
quantified the financial statement effect of this EITF action. We currently
report our energy trading activities on a net basis.
Other than the above, and the new pronouncements reported in our 2001 Annual
Report on Form 10-K filed with the Securities Exchange Commission, there have
been no new accounting pronouncements issued that when implemented would require
us to either retroactively restate prior period financial statements or record a
cumulative catch-up adjustment.
Forward Looking Statements
Some of the statements in this Form 10-Q include "forward-looking statements" as
defined by the Securities and Exchange Commission, or SEC. We make these
forward-looking statements in reliance on the safe harbor protections provided
under the Private Securities Litigation Reform Act of 1995. All statements,
other than statements of historical facts, included in this Form 10-Q that
address activities, events or developments that we expect, believe or anticipate
will or may occur in the future are forward-looking statements. These
forward-looking statements are based on assumptions, which we believe are
reasonable based on current expectations and projections about future events and
industry conditions and trends affecting our business. However, whether actual
results and developments will conform to our expectations and predictions is
subject to a number of risks and uncertainties that could cause actual results
to differ materially from those contained in the forward-looking statements,
including, among other things: (1) unanticipated developments in the western
power markets, including unanticipated governmental intervention, deterioration
in the financial condition of counterparties, default on amounts due from
counterparties, adverse changes in current or future litigation, adverse changes
in the tariffs of the California Independent System Operator, market disruption
and adverse changes in energy and commodity supply, volume and pricing and
interest rates; (2) prevailing governmental policies and regulatory actions with
respect to allowed rates of return, industry and rate structure, acquisition and
disposal of assets and facilities, operation and construction of plant
facilities, recovery of purchased power and other capital investments, and
present or prospective wholesale and retail competition; (3) the State of
California's efforts to reform its long-term power purchase contracts and
recover refunds for alleged price manipulation; (4) changes in and compliance
with environmental and safety laws and policies; (5) weather conditions; (6)
population growth and demographic patterns; (7) competition for retail and
wholesale customers; (8) pricing and transportation of commodities; (9) market
demand, including structural market changes; (10) changes in tax rates or
policies or in rates of inflation; (11) changes in project costs; (12)
unanticipated changes in operating expenses or capital expenditures; (13)
capital market conditions; (14) technological advances by competitors; (15)
competition for new energy development opportunities; (16) legal and
administrative proceedings that influence our business and profitability; (17)
the effects on our business, including the availability of insurance, resulting
from the terrorist actions on September 11, 2001, or any other terrorist actions
or responses to such actions; (18) the effects on our business resulting from
the financial difficulties of Enron and other energy companies, including their
effects on liquidity in the trading and power industry, and their effects on the
capital markets views of the energy or trading industry, and our ability to
access the capital markets on the same favorable terms as in the past; (19) the
effects on our business in connection with a lowering of our credit rating (or
actions we may take in response to changing credit ratings criteria), including,
increased collateral requirements to execute our business plan, demands for
increased collateral by our current counterparties, refusal by our current or
potential counterparties or customers to enter into transactions with us and our
inability to obtain credit or capital in amounts or on terms favorable to us;
(20) risk factors discussed in this Form 10-Q; and (21) other factors discussed
from time to time in our filings with the SEC. New factors that could cause
43
actual results to differ materially from those described in forward-looking
statements emerge from time to time, and it is not possible for us to predict
all such factors, or the extent to which any such factor or combination of
factors may cause actual results to differ from those contained in any
forward-looking statement. We assume no obligation to update publicly any such
forward-looking statements, whether as a result of new information, future
events, or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk faced by us from those
reported in our 2001 Annual Report on Form 10-K filed with the Securities
Exchange Commission. For more information on market risk, see Part II, Item 7 in
our 2001 Annual Report on Form 10-K, and Notes to Condensed Consolidated
Financial Statements in this Form 10-Q.
ITEM 4. CONTROLS AND PROCEDURES
With the participation of management, our Chief Executive Officer and Chief
Financial Officer evaluated our disclosure controls and procedures within 90
days of the filing of this quarterly report. Based on this evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the disclosure
controls and procedures are effective in ensuring that information required to
be disclosed by us in the reports filed or submitted by us under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms.
There have been no significant changes in our internal controls or other factors
that could significantly affect these controls subsequent to the date of our
evaluation, including any significant deficiencies or material weaknesses of
internal controls that would require corrective action.
44
BLACK HILLS CORPORATION
Part II - Other Information
Item 1. Legal Proceedings
For information regarding legal proceedings, see Note 10 to the
Company's 2001 Annual Report on Form 10-K and Note 12 in Item 1 of
Part I of this Quarterly Report on Form 10-Q, which information from
Note 12 is incorporated by reference into this item.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
Exhibit 10.1 $195 million Amended and
Restated 364-day Credit Agreement
dated as of August 27, 2002, Among
Black Hills Corporation as Borrower,
the Financial Institutions Party
Hereto, as Banks, ABN Amro Bank
N.A., as Syndication Agent, Bank of
Montreal, as Co-Syndication Agent,
US Bank, National Association, as
Documentation Agent and Bank of Nova
Scotia, as Co-Documentation Agent.
Exhibit 10.2 $35 million Term Credit
Agreement dated as of September 25,
2002 among Black Hills Corporation
(Borrower), The Financial
Institutions Party Hereto (Banks),
and Credit Lyonnais New York Branch
(Administrative Agent).
Exhibit 10.3 The First Supplemental Indenture,
dated as of August 13, 2002,
between Black Hills Power, Inc. and
JPMorgan Chase Bank, as Trustee.
Exhibit 10.4 First Amendment to 3-year Credit
Agreement.
Exhibit 10.5 Second Amendment to 3-year Credit
Agreement.
Exhibit 99.1 Certification pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit 99.2 Certification pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
45
(b) Reports on Form 8-K
We have filed the following Reports on Form 8-K
during the quarter ended September 30, 2002.
Form 8-K dated August 12, 2002.
Reported under Item 9 the filing of sworn statements
by Daniel P. Landguth, Black Hills Corporation's
Principal Executive Officer and Mark T. Thies, Black
Hills Corporation's Principal Financial Officer
pursuant to Securities and Exchange
Commission Order No. 4-460.
Form 8-K dated October 1, 2002.
Reported under Item 5 that Black Hills Corporation
and Mallon Resources Corporation entered into a
definitive merger agreement for the acquisition of
Mallon Resources in a stock-for-stock transaction.
46
BLACK HILLS CORPORATION
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLACK HILLS CORPORATION
/s/ Daniel P. Landguth
----------------------------------------
Daniel P. Landguth, Chairman and
Chief Executive Officer
/s/ Mark T. Thies
----------------------------------------
Mark T. Thies, Senior Vice President and
Chief Financial Officer
Dated: November 14, 2002
47
CERTIFICATION
I, Daniel P. Landguth, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Black Hills
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
48
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ Daniel P. Landguth
------------------------
Chairman and
Chief Executive Officer
49
CERTIFICATION
I, Mark T. Thies, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Black Hills
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
50
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ Mark T. Thies
-------------------------
Senior Vice President and
Chief Financial Officer
51
EXHIBIT INDEX
Exhibit Number Description
Exhibit 10.1 $195 million Amended and Restated 364-day Credit
Agreement dated as of August 27, 2002, Among Black
Hills Corporation as Borrower, the Financial
Institutions Party Hereto, as Banks, ABN Amro
Bank N.A., as Syndication Agent, Bank of Montreal, as
Co-Syndication Agent, US Bank, National Association,
as Documentation Agent and Bank of Nova Scotia,
as Co-Documentation Agent.
Exhibit 10.2 $35 million Term Credit Agreement dated as of
September 25, 2002 among Black Hills Corporation
(Borrower), The Financial Institutions Party Hereto
(Banks), and Credit Lyonnais New York Branch
(Administrative Agent).
Exhibit 10.3 The First Supplemental Indenture, dated as of
August 13, 2002, between Black Hills
Power, Inc. and JPMorgan Chase Bank, as Trustee.
Exhibit 10.4 First Amendment to 3-year Credit Agreement.
Exhibit 10.5 Second Amendment to 3-year Credit Agreement.
Exhibit 99.1 Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit 99.2 Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
52
Execution Copy Exhibit 10.1
- -----------------------------------------------------------------------------
AMENDED AND RESTATED 364-DAY
CREDIT AGREEMENT
DATED AS OF
AUGUST 27, 2002
AMONG
BLACK HILLS CORPORATION,
as Borrower,
THE FINANCIAL INSTITUTIONS PARTY HERETO,
as Banks,
ABN AMRO BANK N.V.,
as Administrative Agent,
UNION BANK OF CALIFORNIA, N.A.,
as Syndication Agent,
BANK OF MONTREAL,
as Co-Syndication Agent,
U.S. BANK, NATIONAL ASSOCIATION,
as Documentation Agent
and
THE BANK OF NOVA SCOTIA,
as Co-Documentation Agent
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
(This Table of Contents is not part of the Agreement)
PAGE
SECTION 1 DEFINITIONS; INTERPRETATION.....................................................................1
Section 1.1 Definitions............................................................................1
Section 1.2 Interpretation........................................................................13
SECTION 2 THE CREDITS....................................................................................13
Section 2.1 The Revolving Loan Commitment.........................................................14
Section 2.2 [Intentionally Omitted]...............................................................14
Section 2.3 Applicable Interest Rates. (a) Base Rate Loans........................................14
Section 2.4 Minimum Borrowing Amounts.............................................................16
Section 2.5 Manner of Borrowing Loans and Designating Interest Rates Applicable to Loans 16.......16
Section 2.6 Interest Periods......................................................................18
Section 2.7 Maturity of Loans.....................................................................18
Section 2.8 Prepayments...........................................................................18
Section 2.9 Default Rate..........................................................................19
Section 2.10 The Notes.............................................................................19
Section 2.11 Funding Indemnity.....................................................................20
Section 2.12 Commitments...........................................................................20
SECTION 3 FEES AND EXTENSIONS............................................................................21
Section 3.1 Fees..................................................................................21
Section 3.2 Extensions............................................................................22
SECTION 4 PLACE AND APPLICATION OF PAYMENTS..............................................................22
Section 4.1 Place and Application of Payments.....................................................22
SECTION 5 REPRESENTATIONS AND WARRANTIES.................................................................23
Section 5.1 Corporate Organization and Authority..................................................23
Section 5.2 Subsidiaries..........................................................................23
Section 5.3 Corporate Authority and Validity of Obligations.......................................23
Section 5.4 Financial Statements..................................................................24
Section 5.5 No Litigation; No Labor Controversies.................................................24
Section 5.6 Taxes.................................................................................24
Section 5.7 Approvals.............................................................................24
Section 5.8 ERISA.................................................................................24
Section 5.9 Government Regulation.................................................................25
Section 5.10 Margin Stock; Use of Proceeds.........................................................25
Section 5.11 Licenses and Authorizations; Compliance with Laws.....................................25
Section 5.12 Ownership of Property; Liens..........................................................26
Section 5.13 No Burdensome Restrictions; Compliance with Agreements................................26
Section 5.14 Full Disclosure.......................................................................26
Section 5.15 Solvency..............................................................................26
SECTION 6 CONDITIONS PRECEDENT...........................................................................26
Section 6.1 Initial Credit Event..................................................................26
Section 6.2 All Credit Events.....................................................................27
SECTION 7 COVENANTS......................................................................................28
i
Section 7.1 Corporate Existence; Subsidiaries.....................................................28
Section 7.2 Maintenance...........................................................................28
Section 7.3 Taxes.................................................................................28
Section 7.4 ERISA.................................................................................28
Section 7.5 Insurance.............................................................................29
Section 7.6 Financial Reports and Other Information...............................................29
Section 7.7 Bank Inspection Rights................................................................31
Section 7.8 Conduct of Business...................................................................31
Section 7.9 Liens.................................................................................31
Section 7.10 Use of Proceeds; Regulation U.........................................................33
Section 7.11 Sales and Leasebacks..................................................................33
Section 7.12 Mergers, Consolidations and Sales of Assets...........................................34
Section 7.13 Use of Property and Facilities; Environmental and Health and Safety Laws..............35
Section 7.14 Investments, Acquisitions, Loans, Advances and Guaranties.............................35
Section 7.15 Restrictions on Indebtedness..........................................................37
Section 7.16 Consolidated Net Worth................................................................39
Section 7.17 Recourse Leverage Ratio...............................................................39
Section 7.18 Fixed Charge Coverage Ratio...........................................................39
Section 7.19 Dividends and Other Shareholder Distributions.........................................39
Section 7.20 No Negative Pledge....................................................................39
Section 7.21 Transactions with Affiliates..........................................................40
Section 7.22 Compliance with Laws..................................................................40
Section 7.23 Pari-Passu............................................................................40
Section 7.24 Certain Subsidiaries..................................................................40
Section 7.25 Ratings...............................................................................40
Section 7.26 Liquidity Covenant....................................................................40
SECTION 8 EVENTS OF DEFAULT AND REMEDIES.................................................................40
Section 8.1 Events of Default.....................................................................40
Section 8.2 Non-Bankruptcy Defaults...............................................................42
Section 8.3 Bankruptcy Defaults...................................................................43
Section 8.4 [Intentionally Omitted]...............................................................43
Section 8.5 Expenses..............................................................................43
SECTION 9 CHANGE IN CIRCUMSTANCES........................................................................43
Section 9.1 Change of Law.........................................................................43
Section 9.2 Unavailability of Deposits or Inability to Ascertain, or Inadequacy
of, LIBOR......................................................................................43
Section 9.3 Increased Cost and Reduced Return.....................................................44
Section 9.4 Lending Offices.......................................................................45
Section 9.5 Discretion of Bank as to Manner of Funding............................................45
SECTION 10 THE AGENT......................................................................................46
Section 10.1 Appointment and Authorization of Administrative Agent.................................46
Section 10.2 Administrative Agent and its Affiliates...............................................46
Section 10.3 Action by Administrative Agent........................................................46
Section 10.4 Consultation with Experts.............................................................46
Section 10.5 Liability of Administrative Agent; Credit Decision....................................47
Section 10.6 Indemnity.............................................................................47
ii
Section 10.7 Resignation of Administrative Agent and Successor Administrative Agent................47
SECTION 11 MISCELLANEOUS..................................................................................48
Section 11.1 Withholding Taxes.....................................................................48
Section 11.2 No Waiver of Rights...................................................................49
Section 11.3 Non-Business Day......................................................................49
Section 11.4 Documentary Taxes.....................................................................49
Section 11.5 Survival of Representations...........................................................50
Section 11.6 Survival of Indemnities...............................................................50
Section 11.7 Set-Off...............................................................................50
Section 11.8 Notices...............................................................................50
Section 11.9 Counterparts..........................................................................52
Section 11.10 Successors and Assigns................................................................52
Section 11.11 Participants and Note Assignees.......................................................52
Section 11.12 Assignment of Commitments by Banks....................................................52
Section 11.13 Amendments............................................................................53
Section 11.14 Headings..............................................................................54
Section 11.15 Legal Fees, Other Costs and Indemnification...........................................54
Section 11.16 Entire Agreement......................................................................54
Section 11.17 Construction..........................................................................54
Section 11.18 Governing Law.........................................................................54
Section 11.19 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL......................................54
Section 11.20 Replacement of Bank...................................................................55
Section 11.21 Confidentiality.......................................................................56
Section 11.22 Rights and Liabilities of Documentation Agents and Syndication Agents................56
Section 11.23 Amendment and Restatement of Existing 364-Day Credit Agreement........................56
iii
EXHIBITS
A - Form of Note
B - Form of Compliance Certificate
SCHEDULES
SCHEDULE 1 Pricing Grid
SCHEDULE 4 Administrative Agent Notice and Payment Info SCHEDULE 5.2
Schedule of Existing Subsidiaries SCHEDULE 5.5 Litigation and Labor
Controversies SCHEDULE 5.11 Environmental Matters SCHEDULE 7.9 Existing
Liens SCHEDULE 7.14 Existing Investments SCHEDULE 7.15(a) Marketing
Subsidiary Indebtedness SCHEDULE 7.15(b) Existing Secured Indebtedness
SCHEDULE 7.19 Restrictions on Distributions and Existing Negative
Pledges
iv
AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT
AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT, dated as of August 27,
2002 among Black Hills Corporation, a South Dakota corporation ("Borrower"), the
financial institutions from time to time party hereto (each a "Bank," and
collectively the "Banks"), U.S. Bank, National Association, and The Bank of Nova
Scotia, in their capacity as documentation agents for the Banks hereunder (in
such capacity, "Documentation Agents"), Union Bank of California, N.A., and Bank
of Montreal, in their capacity as syndication agents for the Banks hereunder (in
such capacity, "Syndication Agents") and ABN AMRO Bank N.V. in its capacity as
agent for the Banks hereunder (in such capacity, the "Administrative Agent").
WITNESSETH THAT:
WHEREAS, the Borrower, ABN AMRO Bank N.V., in its capacity as
administrative agent and certain other financial institutions are party to that
certain 364-Day Credit Agreement dated as of August 28, 2001 (the "Existing
364-Day Credit Agreement"); and
WHEREAS, the Borrower desires to amend and restate the Existing 364-Day
Credit Agreement in its entirety to be and to read as set forth herein and to
obtain the several commitments of the Banks to make available a revolving credit
for loans and letters of credit (the "Revolving Credit"), as described herein;
and
WHEREAS, the Banks are willing to extend such commitments subject to
all of the terms and conditions hereof and on the basis of the representations
and warranties hereinafter set forth.
NOW, THEREFORE, in consideration of the recitals set forth above and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree that the Existing 364-Day
Credit Agreement shall be amended and restated in its entirety as follows:
SECTION 1 DEFINITIONS; INTERPRETATION.
Section 1.1 Definitions. The following terms when used herein have the
following meanings:
"Adjusted Consolidated EBITDA" means, for any period, (A) Consolidated
EBITDA less (B) Restricted Earnings.
"Adjusted LIBOR" is defined in Section 2.3(b) hereof.
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with their correlative
meanings, "controlled by" and "under common control with") means possession,
directly or indirectly, of power to direct or cause the direction of management
or policies of a Person (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event for purposes of this definition: (i) any Person which owns directly or
indirectly twenty percent (20%) or more of the securities having ordinary voting
power for the election of directors or
1
other governing body of a corporation or twenty percent (20%) or more of the
partnership or other ownership interests of any other Person will be deemed to
control such corporation or other Person; and (ii) each director and executive
officer of Borrower or any Subsidiary of Borrower shall be deemed an Affiliate
of Borrower and each of its Subsidiaries.
"Administrative Agent" is defined in the first paragraph of this
Agreement and includes any successor Administrative Agent pursuant to Section
10.7 hereof.
"Agreement" means this Credit Agreement, including all Exhibits and
Schedules hereto, as it may be amended, supplemented or otherwise modified from
time to time in accordance with the terms hereof.
"Applicable Margin" means, at any time (i) with respect to Base Rate
Loans, the Base Rate Margin and (ii) with respect to Eurodollar Loans, the
Eurodollar Margin.
"Applicable Telerate Page" is defined in Section 2.3(b) hereof.
"Arrangers" means, collectively, ABN AMRO Bank N.V., Union Bank of
California, N.A., and U.S. Bank, National Association.
"Authorized Representative" means those persons shown on the list of
officers provided by Borrower pursuant to Section 6.1(e) hereof, or on any
updated such list provided by Borrower to the Administrative Agent, or any
further or different officer of Borrower so named by any Authorized
Representative of Borrower in a written notice to the Administrative Agent.
"Bank" and "Banks" are defined in the first paragraph of this
Agreement.
"Base Rate" is defined in Section 2.3(a) hereof.
"Base Rate Loan" means a Loan bearing interest prior to maturity at a
rate specified in Section 2.3(a) hereof.
"Base Rate Margin" means the percentage set forth in Schedule 1 hereto
beside the then applicable Level.
"BHP" means Black Hills Power, Inc., a South Dakota corporation.
"Borrower" is defined in the first paragraph of this Agreement.
"Borrowing" means the total of Loans of a single type advanced,
continued for an additional Interest Period, or converted from a different type
into such type by the Banks on a single date and for a single Interest Period.
Borrowings of Loans are made by and maintained ratably for each of the Banks
according to their Percentages. A Borrowing is "advanced" on the day Banks
advance funds comprising such Borrowing to Borrower, is "continued" on the date
a new Interest Period for the same type of Loans commences for such Borrowing
and is "converted" when such Borrowing is changed from one type of Loan to the
other, all as requested by Borrower pursuant to Section 2.5(a).
2
"Business Day" means any day other than a Saturday or Sunday on which
Banks are not authorized or required to close in New York, New York, Chicago,
Illinois or Rapid City, South Dakota and, if the applicable Business Day relates
to the borrowing or payment of a Eurodollar Loan, on which banks are dealing in
U.S. Dollars in the interbank market in London, England.
"Capital" means, as of any date of determination thereof, without
duplication, the sum of (A) Consolidated Net Worth plus (B) all Recourse
Indebtedness (provided that for purposes of clause (B) of this definition, to
the extent otherwise included, Indebtedness of Marketing Subsidiaries in an
aggregate amount not to exceed the Marketing Subsidiary Indebtedness Limit
incurred under Marketing Subsidiary Excluded Credit Facilities shall not be
deemed to be Recourse Indebtedness).
"Capital Lease" means at any date any lease of Property which, in
accordance with GAAP, would be required to be capitalized on the balance sheet
of the lessee.
"Capitalized Lease Obligations" means, for any Person, the amount of
such Person's liabilities under Capital Leases determined at any date in
accordance with GAAP.
"Change of Control Event" means one or more of the following events:
(a) less than a majority of the members of the Board of Directors
of Borrower shall be persons who either (i) were serving as directors
on the Effective Date or (ii) were nominated as directors and approved
by the vote of the majority of the directors who are directors
referred to in clause (i) above or this clause (ii); or
(b) the stockholders of Borrower shall approve any plan or
proposal for the liquidation or dissolution of Borrower; or
(c) a Person or group of Persons acting in concert (other than
the direct or indirect beneficial owners of the Voting Stock of
Borrower as of the Effective Date) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases
or otherwise, have become the direct or indirect beneficial owner
(within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended from time to time) of Voting Stock of Borrower
representing more than ten percent (10%) of the combined voting power
of the outstanding Voting Stock or other ownership interests for the
election of directors or shall have the right to elect a majority of
the Board of Directors of Borrower; or
(d) Except as permitted by Section 7.12, Borrower ceases at any
time to own one hundred percent (100%) of the Voting Stock and other
equity interest of any Material Subsidiary.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" and "Commitments" are defined in Section 2.1 hereof.
"Compliance Certificate" means a certificate in the form of Exhibit B
hereto.
3
"Consolidated Assets" means all assets which should be listed on the
consolidated balance sheet of Borrower and its Consolidated Subsidiaries, as
determined on a consolidated basis in accordance with GAAP.
"Consolidated EBITDA" means, for any period, for Borrower and its
Consolidated Subsidiaries on a consolidated basis, (A) the sum of the amounts
for such period of (i) Consolidated Net Income, (ii) to the extent deducted in
arriving at Consolidated Net Income, net federal, state and local income taxes
in respect of such period, (iii) to the extent deducted in arriving at
Consolidated Net Income, Consolidated Interest Expense, (iv) to the extent
deducted in arriving at Consolidated Net Income, the amount charged for the
amortization of intangible assets, (v) to the extent deducted in arriving at
Consolidated Net Income, the amount charged for the depreciation of assets, and
(vi) to the extent deducted in arriving at Consolidated Net Income, losses on
sales of assets (excluding sales in the ordinary course of business) and other
extraordinary losses, less (B) the amount for such period of (i) to the extent
added in arriving at Consolidated Net Income, interest income arising from
traditional investment activities with banks, investments banks and other
financial institutions or relating to governmental or other marketable
securities, (ii) to the extent added in arriving at Consolidated Net Income,
gains on sales of assets (excluding sales in the ordinary course of business)
and other extraordinary gains, all as determined on a consolidated basis in
accordance with GAAP, (iii) any maintenance capital expenditures made by the
Borrower or its Consolidated Subsidiaries in such period, (iv) without
duplication, any payments made by a Consolidated Subsidiary constituting a
repayment of principal Indebtedness (other than (x) the Obligations and (y)
repayments of principal made with the proceeds of a refinancing of such
Indebtedness otherwise permitted pursuant to this Agreement) or with respect to
a reserve, and (v) without duplication, any other mandatory payment made by a
Consolidated Subsidiary in such period not included as an expense or loss in
calculating Consolidated Net Income.
"Consolidated Fixed Charges" means, for any period and without
duplication the sum of (i) the aggregate amount of Consolidated Interest Expense
with respect to Recourse Indebtedness paid or scheduled to be paid for such
period, and (ii) the aggregate amount of all mandatory scheduled payments
(whether designated as payments or prepayments) and scheduled sinking fund
payments with respect to principal of any Recourse Indebtedness of the Borrower
or its Subsidiaries (including payments in the nature of principal under Capital
Leases).
"Consolidated Interest Expense" means, with reference to any period of
the Borrower and its Subsidiaries, the sum of (i) all interest charges
(including capitalized interest, imputed interest charges with respect to
Capitalized Lease Obligations and all amortization of debt discount and expense
and other deferred financing charges) of the Borrower and its Subsidiaries on a
consolidated basis for such period determined in accordance with GAAP, other
than interest charges relating to Non-Recourse Indebtedness, (ii) all commitment
or other fees payable in respect of the issuance of standby letters of credit or
other credit facilities for the account of the Borrower or its Subsidiaries, and
(iii) net costs/expenses incurred by the Borrower and its Subsidiaries under
Derivative Arrangements.
"Consolidated Net Income" means, for any period of the Borrower and its
Consolidated Subsidiaries, the amount for such period of consolidated net income
(or net loss) of the Borrower and its Consolidated Subsidiaries, as determined
on a consolidated basis in accordance with GAAP.
4
"Consolidated Net Worth" means, as of any time the same is to be
determined, the total shareholders' equity (including capital stock, additional
paid-in-capital and retained earnings after deducting treasury stock, but
excluding (to the extent otherwise included in calculating shareholders'
equity), minority interests in Subsidiaries) which would appear on the
consolidated balance sheet of Borrower determined on a consolidated basis in
accordance with GAAP.
"Consolidated Subsidiary" means, as to any Person, each subsidiary of
such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated, with
the financial statements of such Person in accordance with GAAP, including
principles of consolidation.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its Property is bound.
"Controlled Group" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated) under
common control that, together with Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Credit Documents" means this Agreement, the Notes, the Fee Letter and
all other documents executed in connection herewith or therewith.
"Credit Event" means any Borrowing.
"Default" means any event or condition the occurrence of which would,
with the passage of time or the giving of notice, or both, constitute an Event
of Default.
"Derivative Arrangement" means any agreement (including any master
agreement and any agreement, whether or not in writing, relating to any single
transaction) that is an interest rate swap agreement, basis swap, forward rate
agreement, commodity swap, commodity option, equity or equity index swap or
option, bond option, interest rate option, forward foreign exchange agreement,
rate cap, collar or floor agreement, future agreement, currency swap agreement,
cross-currency rate swap agreement, swaption, currency option, that relates to
fluctuations in raw material prices or utility or energy prices or other costs,
or any other similar agreement, including any option to enter into any of the
foregoing, or any combination of any of the foregoing. "Derivative Arrangements"
shall include all such agreements or arrangements made or entered into at any
time, or in effect at any time, whether or not related to a Loan.
"Derivative Obligations" means, with respect to any Person, all
liabilities of such Person under any Derivative Arrangement (including but not
limited to obligations and liabilities arising in connection with or as a result
of early or premature termination of a Derivative Arrangement, whether or not
occurring as a result of a default thereunder), absolute or contingent, now or
hereafter existing or incurred or due or to become due.
"Documentation Agents" is defined in the first paragraph of this
Agreement.
"Effective Date" means August 27, 2002.
5
"Environmental and Health Laws" means any and all federal, state, local
and foreign statutes, laws, regulations, ordinances, judgments, permits and
other governmental rules or restrictions relating to human health, safety
(including without limitation occupational safety and health standards), or the
environment or to emissions, discharges or releases of pollutants, contaminants,
hazardous or toxic substances, wastes or any other controlled or regulated
substance into the environment, including without limitation ambient air,
surface water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, hazardous or toxic substances, wastes or
any other controlled or regulated substance or the clean-up or other remediation
thereof.
"ERISA" is defined in Section 5.8 hereof.
"Eurodollar Loan" means a Loan bearing interest prior to its maturity
at the rate specified in Section 2.3(b) hereof.
"Eurodollar Margin" means the percentage set forth in Schedule 1 hereto
beside the then applicable Level.
"Eurodollar Reserve Percentage" is defined in Section 2.3(b) hereof.
"Event of Default" means any of the events or circumstances specified
in Section 8.1 hereof.
"Existing 364-Day Credit Agreement" is defined in the first Whereas
clause above.
"Facility Fee Rate" means the percentage set forth in Schedule 1 hereto
beside the then applicable Level.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to:
(a) the weighted average of the rates on overnight federal funds
transactions with members of the United States Federal Reserve System
arranged by federal funds brokers, as published for such day (or, if
such day is not a Business Day, for the next preceding Business Day)
by the United States Federal Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by it.
"Fee Letter" means that certain letter among the Administrative Agent
and Borrower pertaining to fees to be paid by Borrower to the Administrative
Agent for its sole account and benefit.
"Fixed Charge Coverage Ratio" means, for any period of four consecutive
quarters of the Borrower ending with the most recently completed such fiscal
quarter, the ratio of (A) Adjusted Consolidated EBITDA to (B) Consolidated Fixed
Charges for such period.
6
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time, applied by Borrower and its Subsidiaries on
a basis consistent with the preparation of Borrower's financial statements
furnished to the Banks as described in Section 5.4 hereof.
"Guarantee" means, in respect of any Person, any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness or other obligations of another Person, including, without
limitation, by means of an agreement to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or to maintain financial
covenants, or to assure the payment of such Indebtedness by an agreement to make
payments in respect of goods or services regardless of whether delivered, or
otherwise, provided, that the term "Guarantee" shall not include endorsements
for deposit or collection in the ordinary course of business; and such term when
used as a verb shall have a correlative meaning.
"Hazardous Material" means any substance or material which is hazardous
or toxic, and includes, without limitation, (a) asbestos, polychlorinated
biphenyls, dioxins and petroleum or its by-products or derivatives (including
crude oil or any fraction thereof) and (b) any other material or substance
classified or regulated as "hazardous" or "toxic" pursuant to any Environmental
and Health Law.
"Immaterial Subsidiary" shall mean, any direct or indirect subsidiary
of Borrower (i) whose total assets (as determined in accordance with GAAP) do
not represent at least five percent (5%) of the total assets (as determined in
accordance with GAAP) of Borrower and its subsidiaries on a consolidated basis
or (ii) whose total revenues (as determined in accordance with GAAP) do not
represent at least five percent (5%) of the total revenues (as determined in
accordance with GAAP) of Borrower and its subsidiaries on a consolidated basis,
provided that no subsidiary shall be deemed an Immaterial Subsidiary to the
extent (a) the total assets of such subsidiary, when combined with the total
assets of other subsidiaries which are Immaterial Subsidiaries, represent at
least ten percent (10%) of the total assets (as determined in accordance with
GAAP) of Borrower and its subsidiaries on a consolidated basis or (ii) the total
revenues of such subsidiary, when combined with the total revenues of other
Immaterial Subsidiaries, (as determined in accordance with GAAP) represent at
least ten percent (10%) of the total revenues (as determined in accordance with
GAAP) of Borrower and its subsidiaries on a consolidated basis. As used in this
definition "subsidiary" shall mean any Person whose financial statements are
consolidated into the financial statements of Borrower in accordance with GAAP.
"Indebtedness" means, as to any Person, without duplication: (i) all
obligations of such Person for borrowed money or evidenced by bonds, debentures,
notes or similar instruments; (ii) all obligations of such Person for the
deferred purchase price of property or services (other than in respect of trade
accounts payable arising in the ordinary course of business which are not
past-due); (iii) all Capitalized Lease Obligations of such Person; (iv) all
Indebtedness of others secured by a Lien on any properties, assets or revenues
of such Person (other than stock, partnership interests or other equity
interests of Borrower or any Subsidiary of Borrower in other entities) to the
extent of the lesser of the value of the property subject to such Lien or the
amount of such Indebtedness; (v) all Guarantees issued by such Person, provided
that Long-Term Guaranties shall not be deemed "Indebtedness" for purposes of
calculating Borrower's compliance with the financial covenants set forth in
Sections 7.16, 7.17 and 7.18 hereof; (vi) all obligations of such Person,
contingent or otherwise, in respect of any letters or credit (whether
7
commercial or standby) or bankers' acceptances, (vii) all Derivative Obligations
of such Person, provided that for purposes of determining Borrower's compliance
with the financial covenants set forth herein, only Borrower's Derivative
Obligations under Derivative Arrangements which must be marked-to-market in
accordance with GAAP shall be included as Indebtedness of Borrower, and (viii)
all obligations of such Person under synthetic (and similar type) lease
arrangements, provided that for purposes of calculating such Person's
Indebtedness under such synthetic (or similar type) lease arrangements, such
lease arrangement shall be treated as if it were a Capitalized Lease.
"Interest Period" is defined in Section 2.6 hereof.
"Investments" is defined in Section 7.14.
"L/C Obligations" has the same meaning herein as in the 3-Year Credit
Agreement.
"Lending Office" is defined in Section 9.4 hereof.
"Level I Status" means Borrower's S&P Rating is A+ or higher and its
Moody's Rating is A1 or higher.
"Level II Status" means Level I Status does not exist, but Borrower's
S&P Rating is A- or higher and its Moody's Rating is A3 or higher.
"Level III Status" means neither Level I Status nor Level II Status
exists, but Borrower's S&P Rating is BBB+ or higher and its Moody's rating is
Baa1 or higher.
"Level IV Status" means neither Level I Status, Level II Status, nor
Level III Status exists, but Borrower's S&P Rating is BBB or higher and its
Moody's rating is Baa2 or higher.
"Level V Status" means neither Level I Status, Level II Status, Level
III Status, nor Level IV Status exists, but Borrower's S&P Rating is BBB- or
higher and its Moody's rating is Baa3 or higher.
"Level VI Status" means none of Level I Status, Level II Status, Level
III Status, Level IV Status nor Level V Status exists.
"LIBOR" is defined in Section 2.3(b) hereof.
"LIBOR Loan Restriction Period" means the period commencing on and
including the fifth to last Business Day of any calendar year and ending on and
including the fifth Business Day of the immediately succeeding calendar year.
"Lien" means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, including, but not
limited to, the security interest or lien arising from a mortgage, encumbrance,
pledge, conditional sale, security agreement or trust receipt, or a lease,
consignment or bailment for security purposes. For the purposes of this
definition, a Person shall be deemed to be the owner of any Property which it
has acquired or holds subject to a conditional sale agreement, Capital Lease or
other arrangement pursuant to which title to the
8
Property has been retained by or vested in some other Person for security
purposes, and such retention of title shall constitute a "Lien."
"Liquid Assets" means, as the date of any calculation thereof, the sum
of (i) the amount of unrestricted cash which the Borrower then has available,
plus (ii) the aggregate amount of then available (meaning the Borrower is
entitled to borrow such amounts pursuant to the applicable documentation) unused
capacity under the Borrower's senior unsecured credit facilities (including this
Agreement and the 3-Year Credit Agreement).
"Loan" and "Loans" are defined in Section 2.1 hereof and includes a
Base Rate Loan or Eurodollar Loan, each of which is a "type" of Loan hereunder.
"Long-Term Guarantee" means (i) any Guarantee issued by Borrower or its
Subsidiaries under which the holder or beneficiary of such Guarantee is not
permitted under any circumstance or contingency to make demand or exercise any
other remedies under such Guarantee prior to the Termination Date, as extended
from time to time in accordance with the terms hereof and (ii) any coal mining
reclamation bonds or contingent indemnity or reimbursement obligations with
respect to such reclamation bonds (so long as such reclamation bonds have not
been called upon).
"Marketing Subsidiary" means each of Black Hills Coal Network, Inc.,
a South Dakota corporation, Black Hills Energy Resources, Inc., a South
Dakota corporation, and Enserco Energy, Inc., a South Dakota corporation,
and their respective subsidiaries.
"Marketing Subsidiary Excluded Credit Facilities" means those certain
credit facilities of the Marketing Subsidiaries described on Schedule 7.15(a)
hereof, as such credit facilities are in effect on the Effective Date, provided
that such credit facilities shall cease to be Marketing Subsidiary Excluded
Credit Facilities to the extent availability thereunder is increased, any
substantive term thereof is materially modified, or such credit facility is
extended more than once in any fiscal year for a period of more than one year.
Any replacement credit facility of a Marketing Subsidiary Excluded Credit
Facility shall be deemed a Marketing Subsidiary Excluded Credit Facility only if
such replacement credit facility contains terms substantially the same as the
Marketing Subsidiary Excluded Credit Facility being replaced (including tenor)
or is approved in writing by the Required Banks.
"Marketing Subsidiary Indebtedness Limit" means the sum of (i)
aggregate amount of credit availability (used or unused) under Marketing
Subsidiary Excluded Credit Facilities as of the Effective Date and (ii)
$25,000,000.
"Material Adverse Effect" means a material adverse effect on (i) the
business, financial position or results of operations of Borrower or Borrower
and its Subsidiaries taken as a whole, (ii) the ability of Borrower to perform
its material obligations under the Credit Documents, (iii) the validity or
enforceability of the material obligations of Borrower under any Credit
Document, (iv) the rights and remedies of the Banks or the Administrative Agent
against Borrower; or (v) the timely payment of the principal of and interest on
the Loans or other amounts payable by Borrower hereunder, provided, that a
downgrade of Borrower's S&P Rating and/or Moody's Rating shall not, in and of
itself, be deemed a "Material Adverse Effect" for purposes of this Agreement.
9
"Material Subsidiaries" means BHP, Black Hills Energy, Inc., a
South Dakota corporation, Wyodak Resources Development Corp., a Delaware
corporation, Black Hills Energy Capital, Inc., a Delaware corporation and
any other Subsidiary of Borrower which is not either an Immaterial Subsidiary
or a Project Finance Subsidiary.
"Moody's Rating" means the rating assigned by Moody's Investors
Service, Inc. and any successor thereto that is a nationally recognized rating
agency to the outstanding senior unsecured non-credit enhanced long-term
indebtedness of a Person (or if neither Moody's Investors Service, Inc. nor any
such successor shall be in the business of rating long-term indebtedness, a
nationally recognized rating agency in the United States of America as mutually
agreed between the Required Banks and Borrower). Any reference in this Agreement
to any specific rating is a reference to such rating as currently defined by
Moody's Investors Service, Inc. (or such a successor) and shall be deemed to
refer to the equivalent rating if such rating system changes.
"Non-Recourse Indebtedness" means, without duplication, all
Indebtedness of Borrower and its Consolidated Subsidiaries determined on a
consolidated basis in accordance with GAAP incurred in connection with project
financings (including project financings of existing assets the proceeds of
which are used to refinance such assets) as to which the holder of such
Indebtedness has recourse solely against the assets which were purchased or
refinanced with, or leased in connection with, such Indebtedness and not against
Borrower or a Consolidated Subsidiary of Borrower other than a Project Finance
Subsidiary or any of their other assets (whether directly, through a Guarantee
or otherwise), other than the pledge of the stock (or similar equity interest)
of the Project Finance Subsidiary which incurred such Indebtedness. For purposes
of clarification, any Indebtedness of a Project Finance Subsidiary which would
otherwise constitute Non-Recourse Indebtedness but for the issuance by the
Borrower or a Consolidated Subsidiary of the Borrower of a Guarantee or other
document which provides recourse with respect to such Indebtedness, such
Indebtedness shall for all purposes of this Agreement be deemed Non-Recourse
Indebtedness so long as (i) the Borrower's or such Consolidated Subsidiary's
obligations under such Guarantee or other document are treated for all purposes
as Recourse Indebtedness hereunder, (ii) such Recourse Indebtedness of the
Borrower or such Consolidated Subsidiary is unsecured and is otherwise permitted
by this Agreement, and (iii) such Recourse Indebtedness of the Borrower or such
Consolidated Subsidiary does not in the aggregate exceed $100,000,000 at any one
time outstanding.
"Note" is defined in Section 2.10(a) hereof.
"Obligations" means all fees payable hereunder, all obligations of
Borrower to pay principal or interest on Loans, fees, expenses, indemnities, and
all other payment obligations of Borrower arising under or in relation to any
Credit Document.
"Percentage" means, for each Bank, the percentage of the Commitments
represented by such Bank's Commitment or, if the Commitments have been
terminated, the percentage held by such Bank of the aggregate principal amount
of all outstanding Obligations.
"Permitted Derivative Obligations" means all Derivative Obligations as
to which the Derivative Arrangements giving rise to such Derivative Obligation
are entered into in the ordinary course of business to hedge interest rate risk,
currency risk, commodity price risk or the
10
production of Borrower or its Subsidiaries (and not for speculative purposes)
and if such Derivative Obligation is an obligation of Borrower, such Derivative
Obligation ranks no greater than pari passu to the Obligations.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization or any other
entity or organization, including a government or any agency or political
subdivision thereof.
"Plan " means at any time an employee pension benefit plan covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code that is either (i) maintained by a member of the Controlled Group or
(ii) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions.
"PBGC" is defined in Section 5.8 hereof.
"Project Finance Subsidiary" means any special purpose Subsidiary of
Borrower created to limit the recourse of the creditors of such Subsidiary and
as to which the creditors and other holders of Indebtedness of such Subsidiary
have recourse solely against the assets of such Subsidiary and not against
Borrower or any other Subsidiary of Borrower or any of their other assets
(whether directly, through a Guarantee or otherwise) other than (i) pursuant to
a Guarantee permitted hereunder and (ii) the stock of such special purpose
Subsidiary (or similar equity interest).
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, whether now owned or
hereafter acquired.
"Recourse Indebtedness" means, without duplication, all Indebtedness of
Borrower and its Consolidated Subsidiaries determined on a consolidated basis in
accordance with GAAP other than Non-Recourse Indebtedness.
"Recourse Leverage Ratio" means, as of any time the same is to be
determined, the ratio of the amount of (A) Recourse Indebtedness outstanding at
such time (provided that for purposes of clause (A) of this definition, to the
extent otherwise included, Indebtedness of Marketing Subsidiaries in an
aggregate amount not to exceed the Marketing Subsidiary Indebtedness Limit
incurred under Marketing Subsidiary Excluded Credit Facilities shall not be
deemed to be Recourse Indebtedness) to (B) the amount of Capital at such time.
"Required Banks" means, as of the date of determination thereof, any
Banks holding in the aggregate more than fifty percent (50%) of the Percentages,
provided, that at any time there are two (2) or less Banks, Required Banks shall
mean Banks holding one hundred percent (100%) of the Percentages.
"Restricted Earnings" means, for any period, the amount of all
Consolidated Net Income earned by each of Borrower's Consolidated Subsidiaries
during such period which may not be distributed or dividended to Borrower due to
contractual or other restrictions on such distributions or dividends.
11
"SEC" means the United States Securities and Exchange Commission.
"Security" has the same meaning as in Section 2(l) of the Securities
Act of 1933, as amended.
"S&P Rating" means the rating assigned by Standard & Poor's Ratings
Group, a division of The McGraw-Hill Companies, Inc. and any successor thereto
that is a nationally recognized rating agency to the outstanding senior
unsecured non-credit enhanced long-term indebtedness of a Person (or, if neither
such division nor any successor shall be in the business of rating long-term
indebtedness, a nationally recognized rating agency in the United States as
mutually agreed between the Required Banks and Borrower). Any reference in this
Agreement to any specific rating is a reference to such rating as currently
defined by Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc. (or such a successor) and shall be deemed to refer to the
equivalent rating if such rating system changes.
"Solvent" means that (a) the fair value of a Person's assets is in
excess of the total amount of such Person's debts, as determined in accordance
with the United States Bankruptcy Code, and (b) the present fair saleable value
of a Person's assets is in excess of the amount that will be required to pay
such Person's debts as they become absolute and matured. As used in this
definition, the term "debts" includes any legal liability, whether matured or
unmatured, liquidated or unliquidated, absolute, fixed or contingent, as
determined in accordance with the United States Bankruptcy Code.
"Subsidiary" means, as to Borrower, any corporation or other entity (i)
which is consolidated into the financial statements of such Borrower in
accordance with GAAP or (ii) of which more than fifty percent (50%) of the
outstanding stock or comparable equity interests having ordinary voting power
for the election of the Board of Directors of such corporation or similar
governing body in the case of a non-corporation (irrespective of whether or not,
at the time, stock or other equity interests of any other class or classes of
such corporation or other entity shall have or might have voting power by reason
of the happening of any contingency) is at the time directly or indirectly owned
by such Borrower or by one or more of its Subsidiaries.
"Syndication Agents" is defined in the first paragraph of this
Agreement.
"Telerate Service" means the Dow Jones Telerate Service.
"Termination Date" means August 26, 2003, as extended from time to time
pursuant to Section 3.2.
"3-Year Credit Agreement" means that certain 3-Year Credit Agreement
dated as of August 28, 2001 among Borrower, ABN AMRO Bank, N.V., in its capacity
as administrative agent for the Banks thereunder, U.S. Bank, National
Association, and The Bank of Nova Scotia, in their capacity as documentation
agents for the Banks thereunder, Union Bank of California, N.A., and Bank of
Montreal, in their capacity as syndication agents for the Banks thereunder and
the various financial institutions from time to time party thereto as Banks, as
amended from time to time.
12
"3-Year Commitments" shall mean "Commitments", as such term is defined
in the 3-Year Day Credit Agreement.
"3-Year Credit Documents" shall mean "Credit Documents", as such term
is defined in the 3-Year Credit Agreement.
"3-Year Loans" shall mean "Loans", as such term is defined in the
3-Year Credit Agreement.
"Total Commitments" shall mean the sum of the Commitments and the
3-Year Commitments.
"Total Loans" shall mean the sum of the Loans and the 3-Year Loans.
"Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable accrued benefits under such Plan exceeds (ii) the fair market
value of all Plan assets allocable to such benefits, all determined as of the
then most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the Controlled Group to
the PBGC or the Plan under Title IV of ERISA.
"Utilization Fee Rate" means the percentage set forth in Schedule 1
hereto beside the then applicable Level.
"U.S. Dollars" and "$" each means the lawful currency of the United
States of America.
"Voting Stock" of any Person means capital stock of any class or
classes or other equity interests (however designated) having ordinary voting
power for the election of directors or similar governing body of such Person.
"Welfare Plan" means a "welfare plan", as defined in Section 3(l) of
ERISA.
"Wholly-Owned" when used in connection with any Subsidiary means a
Subsidiary of which all of the issued and outstanding shares of stock or other
equity interests (other than directors' qualifying shares as required by law)
shall be owned by Borrower and/or one or more of its Wholly-Owned Subsidiaries.
Section 1.2 Interpretation. The foregoing definitions shall be equally
applicable to both the singular and plural forms of the terms defined. All
references to times of day in this Agreement shall be references to New York,
New York time unless otherwise specifically provided. The word "including" means
including without limiting the generality of any description preceding such
term. Where the character or amount of any asset or liability or item of income
or expense is required to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this Agreement, the same
shall be done in accordance with GAAP in effect on the Effective Date, to the
extent applicable, except where such principles are inconsistent with the
specific provisions of this Agreement.
SECTION 2 THE CREDITS.
13
Section 2.1 The Revolving Loan Commitment. Subject to the terms and
conditions hereof (including Sections 6.1 and 6.2), each Bank, by its acceptance
hereof, severally agrees to make a loan or loans (individually a "Loan" and
collectively "Loans") to Borrower from time to time on a revolving basis in U.S.
Dollars in an aggregate outstanding amount up to the amount of its commitment
set forth on the applicable signature page hereof (such amount, as reduced
pursuant to Section 2.12(a), increased pursuant to Section 2.12(b), or changed
as a result of one or more assignments under Section 11.12, its "Commitment"
and, cumulatively for all the Banks, the "Commitments") before the Termination
Date, provided that the aggregate amount of Loans at any time outstanding shall
not exceed the Commitments in effect at such time. On the Termination Date the
Commitments shall terminate. Each Borrowing of Loans shall be made ratably from
the Banks in proportion to their respective Percentages. As provided in Section
2.5(a) hereof, Borrower may elect that each Borrowing of Loans be either Base
Rate Loans or Eurodollar Loans. Loans may be repaid and the principal amount
thereof reborrowed before the Termination Date, subject to all the terms and
conditions hereof. Unless an earlier maturity is provided for hereunder, all
Loans shall mature and be due and payable on the Termination Date.
Notwithstanding anything is this Agreement to the contrary, no Eurodollar Loans
may be advanced during the LIBOR Loan Restriction Period.
Section 2.2 [Intentionally Omitted]. (a)
Section 2.3 Applicable Interest Rates. (a) Base Rate Loans. Each Base Rate
Loan made or maintained by a Bank shall bear interest during each Interest
Period it is outstanding (computed (x) at all times the Base Rate is based on
the rate described in clause (i) of the definition thereof, on the basis of a
year of 365 or 366 days, as applicable, and actual days elapsed or (y) at all
times the Base Rate is based on the rate described in clause (ii) of the
definition thereof, on the basis of a year of 360 days and actual days elapsed)
on the unpaid principal amount thereof from the date such Loan is advanced,
continued or created by conversion from a Eurodollar Loan until maturity
(whether by acceleration or otherwise) at a rate per annum equal to the sum of
the Applicable Margin plus the Base Rate from time to time in effect, payable on
the last day of its Interest Period and at maturity (whether by acceleration or
otherwise).
"Base Rate" means for any day the greater of:
(i) the rate of interest announced by ABN AMRO Bank N.V. from time to
time as its prime rate, or equivalent, for U.S. Dollar loans within the
United States as in effect on such day, with any change in the Base Rate
resulting from a change in said prime rate to be effective as of the date
of the relevant change in said prime rate; and
(ii) the sum of (x) the Federal Funds Rate, plus (y)1/2of 1% (0.50%).
(b) Eurodollar Loans. Each Eurodollar Loan made or maintained by a Bank
shall bear interest during each Interest Period it is outstanding (computed on
the basis of a year of 360 days and actual days elapsed) on the unpaid principal
amount thereof from the date such Loan is advanced, continued, or created by
conversion from a Base Rate Loan until maturity (whether by acceleration or
otherwise) at a rate per annum equal to the sum of the Applicable Margin plus
the Adjusted LIBOR applicable for such Interest Period, payable on the last day
of the Interest Period and at maturity (whether by acceleration or otherwise),
and, if the applicable Interest
14
Period is longer than three months, on each day occurring every three months
after the commencement of such Interest Period.
"Adjusted LIBOR" means, for any Borrowing of Eurodollar Loans, a rate
per annum determined in accordance with the following formula:
Adjusted LIBOR = LIBOR
-------------------------------------------
1 - Eurodollar Reserve Percentage
"LIBOR" means, for an Interest Period for a Borrowing of Eurodollar
Loans, (a) the LIBOR Index Rate for such Interest Period, if such rate is
available, and (b) if the LIBOR Index Rate cannot be determined, the
arithmetical average of the rates of interest per annum (rounded upwards, if
necessary, to the nearest one-sixteenth of one percent) at which deposits in
U.S. Dollars, in immediately available funds are offered to the Administrative
Agent at 11:00 a.m. (London, England time) two (2) Business Days before the
beginning of such Interest Period by major banks in the interbank eurodollar
market for delivery on the first day of and for a period equal to such Interest
Period in an amount equal or comparable to the principal amount of the
Eurodollar Loan scheduled to be made by each Lender as part of such Borrowing.
"LIBOR Index Rate" means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one-sixteenth of one percent)
for deposits in U.S. Dollars for delivery on the first day of and for a period
equal to such Interest Period in an amount equal or comparable to the principal
amount of the Eurodollar Loan scheduled to be made by each Lender as part of
such Borrowing, which appears on the Applicable Telerate Page as of 11:00 a.m.
(London, England time) on the day two (2) Business Days before the commencement
of such Interest Period.
"Applicable Telerate Page" means the display page designated as "Page
3750" on the Telerate Service (or such other pages as may replace any such page
on that service or such other service as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
British Bankers' Association Interest Settlement Rates for deposits in U.S.
Dollars).
"Eurodollar Reserve Percentage" means for an Borrowing of Eurodollar
Loans from any Bank, the daily average for the applicable Interest Period of the
actual effective rate, expressed as a decimal, at which reserves (including,
without limitation, any supplemental, marginal and emergency reserves) are
maintained by such Bank during such Interest Period pursuant to Regulation D of
the Board of Governors of the Federal Reserve System (or any successor) on
"eurocurrency liabilities", as defined in such Board's Regulation D (or in
respect of any other category of liabilities that includes deposits by reference
to which the interest rate on Eurodollar Loans is determined or any category of
extensions of credit or other assets that include loans by non-United States
offices of any Bank to United States residents), subject to any amendments of
such reserve requirement by such Board or its successor, taking into account any
transitional adjustments thereto. For purposes of this definition, the
Eurodollar Loans shall be deemed to be "eurocurrency liabilities" as defined in
Regulation D without benefit or credit for any prorations, exemptions or offsets
under Regulation D.
15
(c) Rate Determinations. The Administrative Agent shall determine each
interest rate applicable to Obligations, and a determination thereof by the
Administrative Agent shall be conclusive and binding except in the case of
manifest error.
Section 2.4 Minimum Borrowing Amounts. Each Borrowing of Base Rate Loans
and Eurodollar Loans shall be in an amount not less than (i) if such Borrowing
is comprised of Borrowing of Base Rate Loans, $1,000,000 and integral multiples
of $500,000 in excess thereof, and (ii) if such Borrowing is comprised of
Borrowing of Eurodollar Loans, $2,000,000 and integral multiples of $1,000,000
in excess thereof.
Section 2.5 Manner of Borrowing Loans and Designating Interest Rates
Applicable to Loans. (a) Notice to the Administrative Agent. (a) The Borrower
shall give notice to the Administrative Agent by no later than 12:00 noon (New
York time) (i) at least three (3) Business Days before the date on which
Borrower requests the Banks to advance a Borrowing of Eurodollar Loans, or (ii)
on the date on which Borrower requests the Banks to advance a Borrowing of Base
Rate Loans. The Loans included in each Borrowing shall bear interest initially
at the type of rate specified in such notice of a new Borrowing. Thereafter,
Borrower may from time to time elect to change or continue the type of interest
rate borne by each Borrowing or, subject to Section 2.4's minimum amount
requirement for each outstanding Borrowing, a portion thereof, as follows: (i)
if such Borrowing is of Eurodollar Loans, on the last day of the Interest Period
applicable thereto, Borrower may continue part or all of such Borrowing as
Eurodollar Loans for an Interest Period or Interest Periods specified by
Borrower or convert part or all of such Borrowing into Base Rate Loans, and (ii)
if such Borrowing is of Base Rate Loans, on any Business Day, Borrower may
convert all or part of such Borrowing into Eurodollar Loans for an Interest
Period or Interest Periods specified by Borrower. Borrower shall give all such
notices requesting, the advance, continuation, or conversion of a Borrowing to
the Administrative Agent by telephone or telecopy (which notice shall be
irrevocable once given and, if by telephone, shall be promptly confirmed in
writing). Notices of the continuation of a Borrowing of Eurodollar Loans for an
additional Interest Period or of the conversion of part or all of a Borrowing of
Eurodollar Loans into Base Rate Loans or of Base Rate Loans into Eurodollar
Loans must be given by no later than 12:00 noon (New York time) at least three
(3) Business Days before the date of the requested continuation or conversion.
All such notices concerning the advance, continuation, or conversion of a
Borrowing shall be irrevocable once given and shall specify the date of the
requested advance, continuation or conversion of a Borrowing (which shall be a
Business Day), the amount of the requested Borrowing to be advanced, continued,
or converted, the type of Loans to comprise such new, continued or converted
Borrowing and, if such Borrowing is to be comprised of Eurodollar Loans, the
Interest Period applicable thereto. Borrower agrees that the Administrative
Agent may rely on any such telephonic or telecopy notice given by any person it
in good faith believes is an Authorized Representative without the necessity of
independent investigation, and in the event any such notice by telephone
conflicts with any written confirmation, such telephonic notice shall govern if
the Administrative Agent has acted in reliance thereon. There may be no more
than six different Interest Periods in effect at any one time, provided that for
purposes of determining the number of Interest Periods in effect at any one
time, all Base Rate Loans shall be deemed to have one and the same Interest
Period.
16
(b) Notice to the Banks. The Administrative Agent shall give prompt
telephonic or telecopy notice to each Bank of any notice from Borrower received
pursuant to Section 2.5(a) above. The Administrative Agent shall give notice to
Borrower and each Bank by like means of the interest rate applicable to each
Borrowing of Eurodollar Loans.
(c) Borrower' Failure to Notify. Any outstanding Borrowing of Base Rate
Loans shall, subject to Section 6.2 hereof, automatically be continued for an
additional Interest Period on the last day of its then current Interest Period
unless Borrower has notified the Administrative Agent within the period required
by Section 2.5(a) that it intends to convert such Borrowing into a Borrowing of
Eurodollar Loans or notifies the Administrative Agent within the period required
by Section 2.8(a) that it intends to prepay such Borrowing. If Borrower fails to
give notice pursuant to Section 2.5(a) above of the continuation or conversion
of any outstanding principal amount of a Borrowing of Eurodollar Loans before
the last day of its then current Interest Period within the period required by
Section 2.5(a) and has not notified the Administrative Agent within the period
required by Section 2.8(a) that it intends to prepay such Borrowing, such
Borrowing shall automatically be converted into a Borrowing of Base Rate Loans,
subject to Section 6.2 hereof. The Administrative Agent shall promptly notify
the Banks of Borrower's failure to so give a notice under Section 2.5(a).
(d) Disbursement of Loans. Not later than 12:00 noon (New York time) on the
date of any requested advance of a new Borrowing of Eurodollar Loans, and not
later than 2:00 p.m. (New York time) on the date of any requested advance of a
new Borrowing of Base Rate Loans, subject to Section 6 hereof, each Bank shall
make available its Loan comprising part of such Borrowing in funds immediately
available at the principal office of the Administrative Agent in New York, New
York. The Administrative Agent shall make available to Borrower Loans at the
Administrative Agent's principal office in New York, New York or such other
office as the Administrative Agent has previously agreed in writing to with
Borrower, in each case in the type of funds received by the Administrative Agent
from the Banks.
(e) Administrative Agent Reliance on Bank Funding. Unless the
Administrative Agent shall have been notified by a Bank before the date on which
such Bank is scheduled to make payment to the Administrative Agent of the
proceeds of a Loan (which notice shall be effective upon receipt) that such Bank
does not intend to make such payment, the Administrative Agent may assume that
such Bank has made such payment when due and the Administrative Agent may in
reliance upon such assumption (but shall not be required to) make available to
Borrower the proceeds of the Loan to be made by such Bank and, if any Bank has
not in fact made such payment to the Administrative Agent, such Bank shall, on
demand, pay to the Administrative Agent the amount made available to Borrower
attributable to such Bank together with interest thereon in respect of each day
during the period commencing on the date such amount was made available to
Borrower and ending on (but excluding) the date such Bank pays such amount to
the Administrative Agent at a rate per annum equal to (i) from the date the
related payment was made by the Administrative Agent to the date two (2)
Business Days after payment by such Bank is due hereunder, the Federal Funds
Rate for each such day and (ii) from the date two (2) Business Days after the
date such payment is due from such Bank to the date such payment is made by such
Bank, the Base Rate in effect for each such day. If such amount is not received
from such Bank by the Administrative Agent immediately upon demand, Borrower
will, on demand, repay to the Administrative Agent the proceeds of the Loan
17
attributable to such Bank with interest thereon at a rate per annum equal to the
interest rate applicable to the relevant Loan.
Section 2.6 Interest Periods. As provided in Section 2.5(a) hereof, at the time
of each request of a Borrowing of Eurodollar Loans, Borrower shall select an
Interest Period applicable to such Loans from among the available options. The
term "Interest Period" means the period commencing on the date a Borrowing of
Loans is advanced, continued, or created by conversion and ending: (a) in the
case of Base Rate Loans, on the last Business Day of the calendar quarter in
which such Borrowing is advanced, continued, or created by conversion (or on the
last day of the following calendar quarter if such Loan is advanced, continued
or created by conversion on the last Business Day of a calendar quarter), and
(b) in the case of Eurodollar Loans, 1, 2, 3, or 6 months thereafter; provided,
however, that:
(a) any Interest Period for a Borrowing of Base Rate Loans that
otherwise would end after the Termination Date shall end on the Termination
Date;
(b) for any Borrowing of Eurodollar Loans, Borrower may not select an
Interest Period that extends beyond either (i) the fifth to last Business
Day of any calendar year or (ii) the Termination Date;
(c) whenever the last day of any Interest Period would otherwise be a
day that is not a Business Day, the last day of such Interest Period shall
be extended to the next succeeding Business Day, provided that, if such
extension would cause the last day of an Interest Period for a Borrowing of
Eurodollar Loans to occur in the following calendar month, the last day of
such Interest Period shall be the immediately preceding Business Day; and
(d) for purposes of determining an Interest Period for a Borrowing of
Eurodollar Loans, a month means a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next calendar
month; provided, however, that if there is no numerically corresponding day
in the month in which such an Interest Period is to end or if such an
Interest Period begins on the last Business Day of a calendar month, then
such Interest Period shall end on the last Business Day of the calendar
month in which such Interest Period is to end.
Section 2.7 Maturity of Loans. Unless an earlier maturity is provided for
hereunder (whether by acceleration or otherwise), all Obligations (including
principal and interest on all outstanding Loans) shall mature and become due and
payable by Borrower on the Termination Date.
Section 2.8 Prepayments. (a) (a) Borrower may prepay without premium or
penalty and in whole or in part (but, if in part, then (i) in an amount not less
than $5,000,000 and integral multiples of $1,000,000 in excess thereof, and (ii)
in an amount such that the minimum amount required for a Borrowing pursuant to
Section 2.4 hereof remains outstanding) any Borrowing of Eurodollar Loans upon
three (3) Business Days' prior irrevocable notice to the Administrative Agent
or, in the case of a Borrowing of Base Rate Loans, irrevocable notice delivered
to the Administrative Agent no later than 12:00 noon (New York time) on the date
of prepayment, such prepayment to be made by the payment of the principal amount
to be prepaid and accrued
18
interest thereon to the date fixed for prepayment. In the case of Eurodollar
Loans, any amounts owing under Section 2.11 hereof as a result of such
prepayment shall be paid contemporaneously with such prepayment. The
Administrative Agent will promptly advise each Bank of any such prepayment
notice it receives from Borrower. Any amount paid or prepaid before the
Termination Date may, subject to the terms and conditions of this Agreement, be
borrowed, repaid and borrowed again.
(b) If the aggregate amount of outstanding Loans shall at any time for any
reason exceed the Commitments then in effect, Borrower shall, immediately and
without notice or demand, pay the amount of such excess to the Administrative
Agent for the ratable benefit of the Banks as a prepayment of the Loans and, if
necessary, a prefunding of Letters of Credit. Immediately upon determining the
need to make any such prepayment Borrower shall notify the Administrative Agent
of such required prepayment. Each such prepayment shall be accompanied by a
payment of all accrued and unpaid interest on the Loans prepaid and shall be
subject to Section 2.11.
Section 2.9 Default Rate. If any payment of principal or interest on any
Loan, or payment of any other Obligation, is not made when due (whether by
acceleration or otherwise), such principal, interest or other Obligation shall
bear interest (computed on the basis of a year of 360 days and actual days
elapsed or, if based on the rate described in clause (i) of the definition of
Base Rate, on the basis of a year of 365 or 366 days, as applicable, and the
actual number of days elapsed) from the date such payment was due until paid in
full, payable on demand, at a rate per annum equal to:
(a) for any Obligation other than a Eurodollar Loan (including
principal and interest relating to Base Rate Loans and interest on
Eurodollar Loans), the sum of two percent (2%) plus the Applicable Margin
plus the Base Rate from time to time in effect; and
(b) for the principal of any Eurodollar Loan, the sum of two percent
(2%) plus the rate of interest in effect thereon at the time of such
default until the end of the Interest Period applicable thereto and,
thereafter, at a rate per annum equal to the sum of two percent (2%) plus
the Applicable Margin plus the Base Rate from time to time in effect.
Section 2.10 The Notes. (a) The Loans made to Borrower by each Bank shall
be evidenced by a single promissory note of Borrower issued to such Bank in the
form of Exhibit A hereto. Each such promissory note is hereinafter referred to
as a "Note" and collectively such promissory notes are referred to as the
"Notes."
(a) Each Bank shall record on its books and records or on a schedule to its
Note the amount of each Loan advanced, continued, or converted by it, all
payments of principal and interest and the principal balance from time to time
outstanding thereon, the type of such Loan, and, for any Eurodollar Loan, the
Interest Period and the interest rate applicable thereto. The record thereof,
whether shown on such books and records of a Bank or on a schedule to any Note,
shall be prima facie evidence of the same; provided, however, that the failure
of any Bank to record any of the foregoing or any error in any such record shall
not limit or otherwise affect the obligation of Borrower to repay all Loans made
hereunder together with accrued interest thereon. At the request of any Bank and
upon such Bank tendering to Borrower the Note to be
19
replaced, Borrower shall furnish a new Note to such Bank to replace any
outstanding Note, and at such time the first notation appearing on a schedule on
the reverse side of, or attached to, such Note shall set forth the aggregate
unpaid principal amount of all Loans, if any, then outstanding thereon.
Section 2.11 Funding Indemnity. If any Bank shall incur any loss, cost or
expense (including, without limitation, any loss, cost or expense (excluding
loss of margin) incurred by reason of the liquidation or re-employment of
deposits or other funds acquired by such Bank to fund or maintain any Eurodollar
Loan or the relending or reinvesting of such deposits or amounts paid or prepaid
to such Bank) as a result of:
(a) any payment (whether by acceleration or otherwise), prepayment or
conversion of a Eurodollar Loan on a date other than the last day of its
Interest Period,
(b) any failure (because of a failure to meet the conditions of
Section 6 or otherwise) by Borrower to borrow or continue a Eurodollar
Loan, or to convert a Base Rate Loan into a Eurodollar Loan, on the date
specified in a notice given pursuant to Section 2.5(a) or established
pursuant to Section 2.5(c) hereof,
(c) any failure by Borrower to make any payment or prepayment of
principal on any Eurodollar Loan when due (whether by acceleration or
otherwise), or
(d) any acceleration of the maturity of a Eurodollar Loan as a result
of the occurrence of any Event of Default hereunder, then, upon the demand
of such Bank, Borrower shall pay to such Bank such amount as will reimburse
such Bank for such loss, cost or expense. If any Bank makes such a claim
for compensation, it shall provide to Borrower, with a copy to the
Administrative Agent, a certificate executed by an officer of such Bank
setting forth the amount of such loss, cost or expense in reasonable detail
(including an explanation of the basis for and the computation of such
loss, cost or expense) and the amounts shown on such certificate if
reasonably calculated shall be prima facie evidence of the amount of such
loss, cost or expense.
Section 2.12 Commitments. (a) Borrower shall have the right at any time and
from time to time, upon five (5) Business Days' prior written notice to the
Administrative Agent, to terminate the Commitments without premium or penalty,
in whole or in part, any partial termination to be (i) in an amount not less
than $5,000,000 and integral multiples of $1,000,000 in excess thereof, and (ii)
allocated ratably among the Banks in proportion to their respective Percentages,
provided that the Commitments may not be reduced to an amount less than the
amount of the Loans then outstanding. The Administrative Agent shall give prompt
notice to each Bank of any such termination of Commitments. Any termination of
Commitments pursuant to this Section 2.12 may not be reinstated.
(b) The Borrower and the Administrative Agent may from time to time
add additional financial institutions as parties to this Agreement or, with
the written consent of an existing Bank, increase the Commitment of such
existing Bank (any such financial institution or existing Bank which is
increasing its commitment being referred to as an "Added Bank") pursuant to
documentation satisfactory to the Borrower and the Administrative Agent and
any such Added Bank shall for all purposes be considered a Bank for
purposes of this Agreement and
20
the other Credit Documents with a Commitment as set forth in such
documentation. Any such Added Bank shall on the date it is deemed a party
to this Agreement purchase from the other Banks its Percentage (or the
increase in its Percentage, in the case of an Added Bank which is an
existing Bank) of the Loans outstanding. Notwithstanding anything contained
in this Section 2.12(b) to the contrary, the aggregate amount of
Commitments may not at any time exceed $300,000,000 without the consent of
the Required Banks.
SECTION 3 FEES AND EXTENSIONS.
Section 3.1 Fees.
(a) Facility Fee. From and after the Effective Date, Borrower shall pay to
the Administrative Agent for the ratable account of the Banks in accordance with
their Percentages a facility fee accruing at a rate per annum equal to the
Facility Fee Rate on the average daily amount of the Commitments (whether used
or unused), or if the Commitments have expired or terminated, on the principal
amount of Loans then outstanding. Such facility fee is payable in arrears on the
last Business Day of each calendar quarter and on the Termination Date, and if
the Commitments are terminated in whole prior to the Termination Date, the fee
for the period to but not including the date of such termination shall be paid
in whole on the date of such termination.
(b) [Intentionally Omitted].
(c) Utilization Fee. From and after the Effective Date, for any day on
which (i) the aggregate principal amount of Total Loans and L/C Obligations then
outstanding exceeds thirty three percent (33%) of the Total Commitments then in
effect or (ii) the Commitments have been terminated by the Administrative Agent
or the Lenders in accordance with this Agreement, Borrower shall pay to the
Administrative Agent for the ratable account of the Banks in accordance with
their Percentages a utilization fee accruing at a rate per annum equal to the
Utilization Fee Rate on the aggregate amount of Total Loans and L/C Obligations
outstanding on such date. Such fee is payable in arrears on the last Business
Day of each calendar quarter and on the Termination Date, and if the Commitments
are terminated in whole prior to the Termination Date, the fee for the period to
but not including the date of such termination shall be paid in whole on the
date of such termination. The utilization fee payable pursuant to this Section
3.2(c) shall be one and the same, and not in addition to, the utilization fee
payable by the Borrower under the 3-Year Credit Agreement and shall be divided
among this Agreement and the 3-Year Credit Agreement pro rata based on the
percentage which the amount of Loans outstanding under this Agreement on the
date such fee accrued comprises of the aggregate amount of Total Loans and L/C
Obligations outstanding on such date.
(d) Arranger Fees. Borrower shall pay to the Arrangers for the sole account
of the Arrangers the fees agreed to between the Arrangers and Borrower in the
Fee Letter or as otherwise agreed in writing among them.
(e) Fee Calculations. All fees payable under this Agreement shall be
payable in U.S. Dollars and shall be computed on the basis of a year of 360
days, for the actual number of days elapsed. All determinations of the amount of
fees owing hereunder (and the components thereof)
21
shall be made by the Administrative Agent and shall be prima facie evidence of
the amount of such fee.
Section 3.2 Extensions. The Borrower may request that each Bank's
Commitment be renewed by providing notice of such requests to the Administrative
Agent no earlier than 45 days but no later than 30 days prior to the then
existing Termination Date (the "Existing Termination Date") applicable to such
Banks. If a Bank agrees, in its individual and sole discretion, to renew its
Commitment, such Bank (a "Renewing Bank") will notify the Administrative Agent,
in writing, of its decision to do so no earlier than 30 days prior to the
Existing Termination Date applicable to such Bank (but in any event no later
than 20 days prior to the Existing Termination Date). If a Bank does not
affirmatively notify the Bank in writing of its willingness to renew its
Commitment within such time period, such Bank shall be deemed to have declined
the Borrower's request. Notwithstanding any provision of this Agreement to the
contrary, any notice by any Bank of its willingness to renew its Commitment
shall be revocable by such Bank in its sole and absolute discretion at any time
prior to the date which is 20 days prior to the related Commitment Termination
Date then in effect. The Administrative Agent will notify the Borrower, in
writing, of each Bank's decision no later than 15 days prior to the Existing
Termination Date applicable to such Bank. The Renewing Banks' Commitments will
be renewed pursuant to an amendment to this Agreement in form and substance
satisfactory to the Renewing Banks, provided that (x) each extension of the
Termination Date pursuant to this Section 3.2 shall be for a period of 364 days
and (y) any such extension shall only be permitted if more than 50% of the
aggregate Commitments as of the Termination Date then in effect are extended or
otherwise committed to by Renewing Banks and any new Banks. Any Bank that
declines the Borrower's request for a Commitment renewal (a "Declining Bank")
will have its Commitment terminated on the Existing Termination Date applicable
to such Bank (without regard to any renewals by other Banks), unless terminated
earlier in accordance with this Agreement. The Borrower will have the right to
accept Commitments from Persons acceptable to the Administrative Agent in an
amount up to the amount of the pre-termination Commitments of any Declining
Banks, provided that the Renewing Banks will have the right to increase their
Commitments up to the amount of the Declining Banks' Commitments before the
Borrower will be permitted to substitute Persons for the Declining Banks.
SECTION 4 PLACE AND APPLICATION OF PAYMENTS.
Section 4.1 Place and Application of Payments. All payments of principal of
and interest on the Loans, and of all other Obligations and other amounts
payable by Borrower under the Credit Documents, shall be made by Borrower in
U.S. Dollars to the Administrative Agent by no later than 2:00 p.m. (New York
time) on the due date thereof at the principal office of the Administrative
Agent in New York, New York pursuant to the payment instructions set forth on
Part A of Schedule 4 hereof (or such other location in the, United States as the
Administrative Agent may designate to Borrower) for the benefit of the Person or
Persons entitled thereto. Any payments received after such time shall be deemed
to have been received by the Administrative Agent on the next Business Day. All
such payments shall be made free and clear of, and without deduction for, any
set-off, defense, counterclaim, levy, or any other deduction of any kind in
immediately available funds at the place of payment. The Administrative Agent,
will promptly thereafter cause to be distributed like funds relating to the
payment of principal or interest on
22
Loans or applicable fees ratably to the Banks and like funds relating to the
payment of any other amount payable to any Person to such Person, in each case
to be applied in accordance with the terms of this Agreement.
SECTION 5 REPRESENTATIONS AND WARRANTIES.
The Borrower hereby represents and warrants to each Bank as to itself and,
where the following representations and warranties apply to its Subsidiaries, as
to each Subsidiary of Borrower, as follows:
Section 5.1 Corporate Organization and Authority. Borrower is duly
organized and existing in good standing under the laws of the state of South
Dakota; has all necessary corporate power to carry on its present business; and
is duly licensed or qualified and in good standing in each jurisdiction in which
the nature of the business transacted by it or the nature of the Property owned
or leased by it makes such licensing, qualification or good standing necessary
and in which the failure to be so licensed, qualified or in good standing would
have a Material Adverse Effect.
Section 5.2 Subsidiaries. Schedule 5.2 (as updated from time to time
pursuant to Section 7.1) hereto identifies each Subsidiary of Borrower, the
jurisdiction of incorporation, the percentage of issued and outstanding shares
of each class of its capital stock owned by the Borrower and its Subsidiaries
and, if such percentage is not one hundred percent (100%) (excluding directors'
qualifying shares as required by law), a description of each class of its
authorized capital stock and the number of shares of each class issued and
outstanding. Each Subsidiary is duly incorporated and existing in good standing
as a corporation under the laws of the jurisdiction of its incorporation, has
all necessary corporate power to carry on its present business, and is duly
licensed or qualified and in good standing in each jurisdiction in which the
nature of the business transacted by it or the nature of the Property owned or
leased by it makes such licensing or qualification necessary and in which the
failure to be so licensed or qualified would have a Material Adverse Effect. All
of the issued and outstanding shares of capital stock of each Subsidiary owned
directly or indirectly by Borrower are validly issued and outstanding and fully
paid and nonassessable except as set forth on Schedule 5.2 hereto. All such
shares owned by Borrower are owned beneficially, and of record, free of any
Lien, except as permitted in Section 7.9.
Section 5.3 Corporate Authority and Validity of Obligations. Borrower has
full right and authority to enter into this Agreement and the other Credit
Documents to which it is a party, to make the borrowings herein provided for, to
issue its Notes in evidence thereof, to apply (and to have applied) for the
issuance of the Letters of Credit, and to perform all of its obligations under
the Credit Documents to which it is a party. Each Credit Document to which it is
a party has been duly authorized, executed and delivered by Borrower and
constitutes valid and binding obligations of Borrower enforceable in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally and by equitable principles of
general applicability (regardless of whether such enforceability is considered
in a proceeding in equity or at law). No Credit Document, nor the performance or
observance by Borrower of any of the matters or things therein provided for,
contravenes any provision of law or any charter or by-law provision of Borrower
or any material Contractual Obligation of or affecting Borrower or any of
23
Borrower's Properties or results in or requires the creation or imposition of
any Lien on any of the Properties or revenues of Borrower.
Section 5.4 Financial Statements. All financial statements heretofore delivered
to the Banks showing historical performance of Borrower for Borrower's fiscal
years ending on or before December 31, 2001, have been prepared in accordance
generally accepted accounting principles applied on a basis consistent, except
as otherwise noted therein, with that of the previous fiscal year. The unaudited
financial statements for the fiscal period ended June 30, 2002 have been
prepared in accordance generally accepted accounting principles applicable to
interim financial statements applied on a basis consistent, except as otherwise
noted therein, with the previous same fiscal period of Borrower in the prior
fiscal year (subject to normal year-end adjustments). Each of such financial
statements fairly presents on a consolidated basis the financial condition of
Borrower and its Subsidiaries as of the dates thereof and the results of
operations for the periods covered thereby. Borrower and its Subsidiaries have
no material contingent liabilities other than those disclosed in such financial
statements referred to in this Section 5.4 or in comments or footnotes thereto,
or in any report supplementary thereto, heretofore furnished to the Banks. Since
December 31, 2001, there has been no event or series of events which has
resulted in, or reasonably could be expected to result in, a Material Adverse
Effect.
Section 5.5 No Litigation; No Labor Controversies.(a) Except as set forth
on Schedule 5.5, there is no litigation or governmental proceeding pending, or
to the knowledge of Borrower, threatened, against Borrower or any Subsidiary of
Borrower in which there is a reasonable possibility of an adverse decision
which, if adversely determined, could (individually or in the aggregate) have a
Material Adverse Effect.
(b) Except as set forth on Schedule 5.5, there are no labor controversies
pending or, to the best knowledge of Borrower, threatened against Borrower or
any Subsidiary of Borrower which could (individually or in the aggregate) have a
Material Adverse Effect.
Section 5.6 Taxes. Borrower and its Subsidiaries have filed all United
States federal tax returns, and all other foreign, state, local and other tax
returns, required to be filed and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by Borrower or any Subsidiary of
Borrower, except such taxes, if any, as are being contested in good faith and
for which adequate reserves have been provided. No notices of tax liens have
been filed and no claims are being asserted concerning any such taxes, which
liens or claims are material to the financial condition of Borrower or any of
its Subsidiaries (individually or in the aggregate). The charges, accruals and
reserves on the books of Borrower and its Subsidiaries for any taxes or other
governmental charges are adequate and in conformance with GAAP.
Section 5.7 Approvals. No authorization, consent, approval, license,
exemption, filing or registration with any court or governmental department,
agency or instrumentality, nor any approval or consent of the stockholders of
Borrower or any Subsidiary of Borrower or from any other Person, is necessary to
the valid execution, delivery or performance by Borrower or any Subsidiary of
Borrower of any Credit Document to which it is a party.
Section 5.8 ERISA. With respect to each Plan, Borrower and each other
member of the Controlled Group has fulfilled its obligations under the minimum
funding standards of and is
24
in compliance in all material respects with the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and with the Code to the extent
applicable to it and has not incurred any liability to the Pension Benefit
Guaranty Corporation ("PBGC") or a Plan under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA. Neither Borrower
nor any Subsidiary of Borrower has any contingent liabilities for any
post-retirement benefits under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
Section 5.9 Government Regulation. Neither Borrower nor any Subsidiary of
Borrower is an "investment company" within the meaning of the Investment Company
Act of 1940, as amended, or a "registered holding company", or a "Subsidiary
company" of a "registered holding company", or an "affiliate" of a "registered
holding company" or of a "Subsidiary company" of a "registered holding company",
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
Section 5.10 Margin Stock; Use of Proceeds. Neither Borrower nor any
Subsidiary of Borrower is engaged principally, or as one of its primary
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock ("margin stock" to have the same meaning herein as in
Regulation U of the Board of Governors of the Federal Reserve System). The
proceeds of the Loans and Letters of Credit are to be used solely (i) to provide
liquidity support for Borrower's commercial paper program, (ii) to fund
Borrower's working capital needs, and (iii) for general corporate purposes of
Borrower. Borrower will not use the proceeds of any Loan in a manner that
violates any provision of Regulation U or X of the Board of Governors of the
Federal Reserve System.
Section 5.11 Licenses and Authorizations; Compliance with Laws. (a) (a)
Borrower and each of its Subsidiaries has all necessary licenses, permits and
governmental authorizations to own and operate its Properties and to carry on
its business as currently conducted and contemplated. Borrower and each of its
Subsidiaries is in compliance with all applicable laws, regulations, ordinances
and orders of any governmental or judicial authorities except for any such law,
regulation, ordinance or order which, the failure to comply therewith, could not
reasonably expected to have a Material Adverse Effect.
(a) In the ordinary course of its business, Borrower and each of its
Subsidiaries conduct an ongoing review of the effect of Environmental and Health
Laws on the Properties and all aspects of the business and operations of such
Borrower and its Subsidiaries in the course of which such Borrower identifies
and evaluates associated liabilities and costs (including, without limitation,
any capital or operating expenditures required for clean-up or closure of
Properties currently or previously owned, any capital or operating expenditures
required to achieve or maintain compliance with standards imposed by law and any
actual or potential liabilities to third parties, including employees or
governmental entities, and any related costs and expenses). On the basis of this
review, Borrower has reasonably concluded that Environmental and Health Laws are
unlikely to have any Material Adverse Effect.
(b) Except as set forth on Schedule 5.11 (as amended from time to time in
accordance with the provisions hereof), neither the Borrower nor any Subsidiary
of Borrower has given, nor is it required to give, nor has it received, any
notice, letter, citation, order, warning, complaint, inquiry, claim or demand to
or from any governmental entity or in connection with
25
any court proceeding which could reasonably have a Material Adverse Effect
claiming that: (i) Borrower or any Subsidiary of Borrower has violated, or is
about to violate, any Environmental and Health Law; (ii) there has been a
release, or there is a threat of release, of Hazardous Materials from Borrower's
or any of its Subsidiary's Property, facilities, equipment or vehicles; (iii)
Borrower or any of its Subsidiary may be or is liable, in whole or in part, for
the costs of cleaning up, remediating or responding to a release of Hazardous
Materials; or (iv) any of Borrower's or any of its Subsidiary's Property or
assets are subject to a Lien in favor of any governmental entity for any
liability, costs or damages, under any Environmental and Health Law arising
from, or costs incurred by such governmental entity in response to, a release of
a Hazardous Materials.
Section 5.12 Ownership of Property; Liens. Borrower and each Subsidiary of
Borrower has good title to or valid leasehold interests in all its Property.
None of Borrower's or any Subsidiary's Property is subject to any Lien, except
as permitted in Section 7.9.
Section 5.13 No Burdensome Restrictions; Compliance with Agreements.
Neither Borrower nor any Subsidiary of Borrower is (a) party or subject to any
law, regulation, rule or order, or any Contractual Obligation, that
(individually or in the aggregate) materially adversely affects the business,
operations, Property or financial or other condition of Borrower and its
Subsidiaries (individually or in the aggregate) or (b) in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement to which it is a party (including any
Contractual Obligation), which default could materially adversely affects the
business, operations, Property or financial or other condition of Borrower and
its Subsidiaries (individually or in the aggregate).
Section 5.14 Full Disclosure. All information heretofore furnished by
Borrower to the Administrative Agent or any Bank for purposes of or in
connection with the Credit Documents or any transaction contemplated thereby is,
and all such information hereafter furnished by Borrower to the Administrative
Agent or any Bank will be, true and accurate in all material respects and not
misleading.
Section 5.15 Solvency. Borrower and each of its Subsidiaries, individually
and on a consolidated basis, is Solvent.
SECTION 6 CONDITIONS PRECEDENT.
The obligation of each Bank to effect a Borrowing shall be subject to the
following conditions precedent:
Section 6.1 Initial Credit Event. Before or concurrently with the initial
Credit Event:
(a) The Administrative Agent shall have received for each Bank the
favorable written opinion of (i) Morgan, Lewis & Bockius LLP, counsel to
Borrower, and (ii) General Counsel to the Borrower;
(b) The Administrative Agent shall have received for each Bank copies
of Borrower's (i) Articles of Incorporation, together with all amendments
and (ii) bylaws (or
26
comparable constituent documents) and any amendments thereto,
certified in each instance by its Secretary or an Assistant
Secretary;
(c) The Administrative Agent shall have received for each Bank copies
of resolutions of Borrower's Board of Directors authorizing the execution
and delivery of the Credit Documents and the consummation of the
transactions contemplated thereby together with specimen signatures of the
persons authorized to execute such documents on such Borrower's behalf, all
certified in each instance by its Secretary or Assistant Secretary;
(d) The Administrative Agent shall have received for each Bank such
Bank's duly executed Note of Borrower dated the date hereof and otherwise
in compliance with the provisions of Section 2.10(a) hereof;
(e) The Administrative Agent shall have received for each Bank a duly
executed original of (i) this Agreement, and (ii) a list of Borrower's
Authorized Representatives;
(f) All legal matters incident to the execution and delivery of the
Credit Documents shall be satisfactory to the Banks;
(g) The Administrative Agent shall have received a duly executed
original of the Fee Letter;
(h) The Administrative Agent shall have received a duly executed
Compliance Certificate containing financial information as of June 30,
2002;
(i) With the exception of the $75,000,000 First Mortgage Bonds issued
by BHP, neither Borrower nor any of its Subsidiaries shall have, during the
period from July 1, 2002 to the Effective Date, issued, incurred, assumed,
created, become liable for, contingently or otherwise, any material
Indebtedness;
(j) The Borrower shall have provided a certificate stating that the
conditions set forth precedent set forth in this Section 6.1 have been
satisfied;
(k) The Borrower shall have converted, continued or repaid each Loan
previously outstanding so that the Effective Date is the first day of an
Interest Period for all outstanding Loans; and
(l) The Borrower shall have paid to each Bank the applicable fees for
providing its Commitment under this Agreement; and
(m) The Administrative Agent shall have received such other documents
and information as it may reasonably request.
Section 6.2 All Credit Events. As of the time of each Credit Event
hereunder:
(a) The Administrative Agent shall have received the notice required
by Section 2.5 hereof;
27
(b) Each of the representations and warranties set forth in Section 5
hereof shall be and remain true and correct in all material respects as of
said time, except that if any such representation or warranty relates
solely to an earlier date it need only remain true as of such date; and
(c) Borrower shall be in full compliance with all of the terms and
conditions hereof, and no Default or Event of Default shall have occurred
and be continuing or would occur as a result of such Credit Event.
Each request for a Credit Event shall be deemed to be a representation
and warranty by Borrower on the date of such Credit Event as to the facts
specified in paragraphs (b) and (c) of this Section 6.2.
SECTION 7 COVENANTS.
Borrower covenants and agrees that, so long as any Note or Loan is
outstanding hereunder, or any Commitment is available to or in use by Borrower
hereunder, except to the extent compliance in any case is waived in writing by
the Required Banks:
Section 7.1 Corporate Existence; Subsidiaries. Borrower shall, and shall
cause each of its Subsidiaries to, preserve and maintain its corporate
existence, subject to the provisions of Section 7.12 hereof. Together with any
financial statements delivered pursuant to Section 7.6 hereof, Borrower shall
deliver an updated Schedule 5.2 to reflect any changes from the existing
Schedule 5.2.
Section 7.2 Maintenance. Borrower will maintain, preserve and keep its
plants, Properties and equipment necessary to the proper conduct of its business
in reasonably good repair, working order and condition and will from time to
time make all reasonably necessary repairs, renewals, replacements, additions
and betterments thereto so that at all times such plants, Properties and
equipment shall be reasonably preserved and maintained, and Borrower will cause
each of its Subsidiaries to do so in respect of Property owned or used by it;
provided, however, that nothing in this Section 7.2 shall prevent Borrower or a
Subsidiary of Borrower from discontinuing the operation or maintenance of any
such Properties if such discontinuance is not disadvantageous to the Banks or
the holders of the Notes, does not materially impair the operations of Borrower
or any Subsidiary of Borrower and is, in the judgment of Borrower, desirable in
the conduct of its business or the business of its Subsidiaries.
Section 7.3 Taxes. Borrower will duly pay and discharge, and will cause
each of its Subsidiaries duly to pay and discharge, all taxes, rates,
assessments, fees and governmental charges upon or against it or against its
Properties, in each case before the same becomes delinquent and before penalties
accrue thereon, unless and to the extent that the same is being contested in
good faith by appropriate proceedings and reserves in conformity with GAAP have
been provided therefor on the books of Borrower.
Section 7.4 ERISA. Borrower will, and will cause each of its Subsidiaries
to, promptly pay and discharge all obligations and liabilities arising under
ERISA of a character which if unpaid or unperformed might result in the
imposition of a Lien against any of its properties or assets and will promptly
notify the Administrative Agent of (i) the occurrence of any reportable
28
event (as defined in ERISA) affecting a Plan, other than any such event of which
the PBGC has waived notice by regulation, (ii) receipt of any notice from PBGC
of its intention to seek termination of any Plan or appointment of a trustee
therefor, (iii) its or any of its Subsidiaries' intention to terminate or
withdraw from any Plan, and (iv) the occurrence of any event affecting any Plan
which could result in the incurrence by Borrower or any of its Subsidiaries of
any material liability, fine or penalty, or any material increase in the
contingent liability of Borrower or any of its Subsidiaries under any
post-retirement Welfare Plan benefit. The Administrative Agent will promptly
distribute to each Bank any notice it receives from Borrower pursuant to this
Section 7.4.
Section 7.5 Insurance. Borrower will insure, and keep insured, and will
cause each of its Subsidiaries to insure, and keep insured, with good and
responsible insurance companies, all insurable Property owned by it of a
character usually insured by companies similarly situated and operating like
Property. To the extent usually insured by companies similarly situated and
conducting similar businesses, Borrower will also insure, and cause each of its
Subsidiaries to insure, employers' and public and product liability risks with
good and responsible insurance companies. Borrower will, upon request of any
Bank, furnish to such Bank a summary setting forth the nature and extent of the
insurance maintained pursuant to this Section 7.5.
Section 7.6 Financial Reports and Other Information. (a) Borrower will
maintain a system of accounting in accordance with GAAP and will furnish to the
Banks and their respective duly authorized representatives such information
respecting the business and financial condition of Borrower and its Subsidiaries
as any Bank may reasonably request; and without any request, the Borrower shall
deliver to the Administrative Agent in form and detail satisfactory to the
Administrative Agent, with copies for each Bank in form and substance
satisfactory to them, each of the following:
(i) within 120 days after the end of each fiscal year of Borrower, a
copy of Borrower financial statements for such fiscal year, including the
consolidated balance sheet of Borrower and its Subsidiaries for such year
and the related statements of income and statements of cash flow, each as
certified by independent public accountants of recognized national standing
selected by Borrower in accordance with GAAP with such accountants'
unqualified opinion to the effect that the financial statements have been
prepared in accordance with GAAP and present fairly in all material
respects in accordance with GAAP the consolidated financial position of
Borrower and its Subsidiaries as of the close of such fiscal year and the
results of their operations and cash flows for the fiscal year then ended
and that an examination of such accounts in connection with such financial
statements has been made in accordance with generally accepted auditing
standards and, accordingly, such examination included such tests of the
accounting records and such other auditing procedures as were considered
necessary in the circumstances, provided that if Borrower files its annual
report on Form 10-K for the applicable annual period, and such annual
report contains the financial statements and accountants certifications,
opinions and statements described above, the Borrower may satisfy the
requirements of this Section 7.6(a)(i) by delivering a copy of such annual
report to each Bank. Together with such information the Borrower shall
provide to each Bank such consolidating information as may be necessary for
the Banks to determine the Borrower's compliance with Section 7.17 hereof;
29
(ii) within 60 days after the end of each of the first three quarterly
fiscal periods of Borrower, a consolidated unaudited balance sheet of
Borrower and its Subsidiaries, and the related statements of income and
statements of cash flow, as of the close of such period, all of the
foregoing prepared by Borrower in reasonable detail in accordance with GAAP
and certified by Borrower's chief financial officer or corporate controller
as fairly presenting the financial condition as at the dates thereof and
the results of operations for the periods covered thereby, provided that if
Borrower files a Form 10-Q for the applicable quarterly period, and such
quarterly report contains the financial statements and certifications
described above, the Borrower may satisfy the requirements of this Section
7.6(a)(ii) by delivering a copy of such quarterly report to each Bank.
Together with such information the Borrower shall provide to each Bank such
consolidating information as may be necessary for the Banks to determine
the Borrower's compliance with Section 7.17 hereof;
(iii) within the period provided in subsection (i) above, the written
statement of the accountants who certified the audit report thereby
required that in the course of their audit they have obtained no knowledge
of any Default or Event of Default, or, if such accountants have obtained
knowledge of any such Default or Event of Default, they shall disclose in
such statement the nature and period of the existence thereof; and
(iv) promptly after the sending or filing thereof, copies of all proxy
statements, financial statements and reports Borrower or any of its
Subsidiaries sends to their shareholders, and copies of all other regular,
periodic and special reports and all registration statements Borrower or
any of its Subsidiaries file with the SEC or any successor thereto, or with
any national securities exchanges.
(b) Each financial statement furnished to the Banks pursuant to subsection
(i) or (ii) of this Section 7.6 shall be accompanied by (A) a written
certificate signed by Borrower's chief financial officer or corporate controller
to the effect that (i) no Default or Event of Default has occurred during the
period covered by such statements or, if any such Default or Event of Default
has occurred during such period, setting forth a description of such Default or
Event of Default and specifying the action, if any, taken by Borrower to remedy
the same, (ii) the representations and warranties contained in Section 5 hereof
are true and correct in all material respects as though made on the date of such
certificate (other than those made solely as of an earlier date, which need only
remain true as of such date), except as otherwise described therein, and (B) a
Compliance Certificate in the form of Exhibit B hereto showing Borrower's
compliance with the covenants set forth in Sections 7.9, 7.11, 7.12 and 7.14
through 7.19 hereof.
(c) Borrower will promptly (and in any event within three Business Days
after an officer of Borrower has knowledge thereof) give notice to the
Administrative Agent and each Bank:
(i) of the occurrence of any Default or Event of Default;
(ii) any event or condition which could reasonably be expected to have
a Material Adverse Effect;
30
(iii) of any litigation or governmental proceeding of the type
described in Section 5.5 hereof;
(iv) of any material change in the information set forth on the
Schedules hereto; and
(v) of the entering into of any Long-Term Guaranties, and Borrower
shall promptly provide the Administrative Agent with a copy of any such
Guarantee and any modification to such Guarantee.
Section 7.7 Bank Inspection Rights. For purposes of confirming compliance
with the Credit Documents or after the occurrence and during the continuance of
an Event of Default, upon reasonable notice from the Administrative Agent or the
Required Banks, Borrower will, at Borrower's expense, permit such Banks (and
such Persons as any Bank may designate) during normal business hours to visit
and inspect, under Borrower's guidance, any of the Properties of Borrower or any
of its Subsidiaries, to examine all of their books of account, records, reports
and other papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and with their independent public accountants (and by this provision
Borrower authorizes such accountants to discuss with the Banks (and such Persons
as any Bank may designate) the finances and affairs of Borrower and its
Subsidiaries) all at such reasonable times and as often as may be reasonably
requested; provided, however, that except upon the occurrence and during the
continuation of any Default or Event of Default, not more than one such visit
and inspection may be conducted each calendar quarter.
Section 7.8 Conduct of Business. Neither Borrower nor any Subsidiary of
Borrower will engage in any line of business other than business activities in
the field of (i) cogeneration and related thermal uses, (ii) energy production,
(iii) energy development, (iv) energy recovery, (v) utility operation and
management, (vi) demand side management services, (vii) energy trading, (viii)
management of investment funds which invest in energy related businesses and
investments in such funds, (ix) hedging but not speculative activities relating
to any of the foregoing lines of business, (x) telecommunications, (xi)
management and operating services related to any of the foregoing lines of
business, and (xii) other businesses not described in the foregoing so long as
the Investments and expenses made in such other businesses does not exceed
$20,000,000.
Section 7.9 Liens. Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, permit to exist or to be incurred any Lien of
any kind on any Property owned by the Borrower or any Subsidiary of Borrower;
provided, however, that this Section 7.9 shall not apply to or operate to
prevent:
(a) Liens arising by operation of law in respect of Property of
Borrower or any of its Subsidiaries which are incurred in the ordinary
course of business which do not in the aggregate materially detract from
the value of such Property or materially impair the use thereof in the
operation of the business of Borrower or any of its Subsidiaries;
(b) Liens securing Non-Recourse Indebtedness of any Subsidiary of
Borrower, provided that any such Lien is limited to the Property being
financed or
31
refinanced by such Indebtedness and the stock (or similar equity
interest) of the Subsidiary which incurred such Non-Recourse
Indebtedness;
(c) Liens for taxes or assessments or other government charges or
levies on Borrower or any Subsidiary of Borrower or their respective
Properties which are being contested in good faith by appropriate
proceedings and for which reserves in conformity with GAAP have been
provided on the books of Borrower; provided that the aggregate amount of
liabilities (including interest and penalties, if any) of Borrower and its
Subsidiaries secured by such Liens shall not exceed $20,000,000 at any one
time outstanding;
(d) Liens arising out of judgments or awards against Borrower or any
Subsidiary of Borrower, or in connection with surety or appeal bonds in
connection with bonding such judgments or awards, the time for appeal from
which or petition for rehearing of which shall not have expired or with
respect to which such Borrower or such Subsidiary shall be prosecuting an
appeal or proceeding for review, and with respect to which it shall have
obtained a stay of execution pending such appeal or proceeding for review;
provided that the aggregate amount of liabilities (including interest and
penalties, if any) of Borrower and its Subsidiaries secured by such Liens
shall not exceed $20,000,000 at any one time outstanding;
(e) Survey exceptions or encumbrances, easements or reservations, or
rights of others for rights-of-way, utilities and other similar purposes,
or zoning or other restrictions as to the use of real properties which are
necessary for the conduct of the activities of Borrower and any Subsidiary
of Borrower or which customarily exist on properties of corporations
engaged in similar activities and similarly situated and which do not in
any event materially impair their use in the operation of the business of
Borrower or any Subsidiary of Borrower;
(f) Liens existing on the date hereof and listed on Schedule 7.9
hereto;
(g) Liens securing (i) Indebtedness evidencing the deferred purchase
price of newly acquired property or incurred to finance the acquisition of
personal property of Borrower or a Subsidiary of Borrower used in the
ordinary course of business of Borrower or a Subsidiary of Borrower, (ii)
Capitalized Lease Obligations, and (iii) the performance of tenders,
statutory obligations, bids, leases or other similar obligations (other
than for borrowed money) entered into in the ordinary course of business or
to secure obligations on performance bonds; provided, that such Liens shall
only be permitted to the extent the aggregate amount of Indebtedness and
other obligations secured by all such Liens does not exceed five percent
(5%) of Consolidated Assets as reflected on the most recent balance sheet
delivered by Borrower pursuant to Section 7.6;
(h) Liens in favor of carriers, warehousemen, mechanics, materialmen
and landlords granted in the ordinary course of business for amounts not
overdue or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall
have been set aside on its books;
32
(i) Liens incurred or deposits made in the ordinary course of business
in connection with worker's compensation, unemployment insurance or other
forms of governmental insurance or benefits;
(j) Liens relating to synthetic lease arrangements of Borrower or a
Subsidiary of Borrower, provided that (i) such Lien is limited to the
Property being leased, and (ii) to the extent the lessor or any other
Person has recourse to the Borrower, any Subsidiary or any of their
Property (other than the Property being so leased), through a Guarantee
(including a residual guarantee) or otherwise, such Lien shall be permitted
if Borrower has included the recourse portion of such obligations as
Indebtedness for all purposes (including financial covenant calculations)
under the Credit Documents;
(k) Liens on assets of the Marketing Subsidiaries granted in the
ordinary course of business securing the reimbursement obligations of
Marketing Subsidiaries with respect to letters of credit and any working
capital facility of the Marketing Subsidiaries so long as the holder of
such reimbursement obligation or provider of such working capital facility
has no recourse against Borrower or a Consolidated Subsidiary of Borrower
other than such Marketing Subsidiary or any of their other assets (whether
directly, through a Guarantee or otherwise) other than pursuant to a
Guarantee permitted pursuant to Section 7.15(f);
(l) Liens securing Indebtedness issued pursuant to that certain
Restated and Amended Indenture of Mortgage and Deed of Trust dated as of
September 1, 1999 between Borrower and The Chase Manhattan Bank, as trustee
(and any successor trustee thereunder); and
(m) Any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Lien referred to in
the foregoing paragraphs (a) through (j), inclusive, provided, however,
that the principal amount of Indebtedness secured thereby shall not exceed
the principal amount of Indebtedness so secured at the time of such
extension, renewal or replacement, and that such extension, renewal or
replacement shall be limited to the Property which was subject to the Lien
so extended, renewed or replaced.
provided, that the foregoing paragraphs shall not be deemed under any
circumstance to permit a Lien to exist on any capital stock or other equity
interests of the Material Subsidiaries.
Section 7.10 Use of Proceeds; Regulation U. The proceeds of each Borrowing,
and the credit provided by Letters of Credit, will be used by Borrower solely
(i) to provide liquidity support for Borrower's commercial paper program, (ii)
to fund Borrower's working capital needs, and (iii) for general corporate
purposes of Borrower. Borrower will not use any part of the proceeds of any of
the Borrowings or of the Letters of Credit directly or indirectly to purchase or
carry any margin stock (as defined in Section 5.10 hereof) or to extend credit
to others for the purpose of purchasing or carrying any such margin stock.
Section 7.11 Sales and Leasebacks. Borrower will not, nor will it permit
any of its Subsidiaries to, enter into any arrangement with any bank, insurance
company or other lender or investor providing for the leasing by Borrower or any
Subsidiary of Borrower of any Property
33
theretofore owned by it and which has been or is to be sold or transferred by
such owner to such lender or investor if the total amount of rent and other
obligations of the Borrower and its Subsidiaries under such lease, when combined
with all rent and other obligations of Borrower and its Subsidiaries under all
such leases, would exceed $30,000,000 in the aggregate, provided that Borrower
and its Subsidiaries may engage in synthetic lease transactions so long as the
Borrower's or such Subsidiary's, as applicable, obligations under such synthetic
leases are included as Indebtedness for all purposes (including financial
covenant calculations) under the Credit Documents.
Section 7.12 Mergers, Consolidations and Sales of Assets.
(a) Borrower will not, and will not permit any of its Material
Subsidiaries to, (i) consolidate with or be a party to merger with any
other Person or (ii) sell, lease or otherwise dispose of all or a
"substantial part" of the assets of Borrower and its Subsidiaries;
provided, however, that (w) the foregoing shall not prohibit any sale,
lease, transfer or disposition to which the Required Banks have consented,
such consent not to by unreasonably withheld if (A) such transaction does
not result in a downgrade of either Borrower's S&P Rating or Moody's
Rating, (B) such transaction is for cash consideration (or other
consideration acceptable to the Required Banks) in an amount not less than
the fair market value of the applicable assets, and (C) such transaction,
when combined with all other such transactions, would not have a Material
Adverse Effect, taken as a whole, (x) any Subsidiary of Borrower may merge
or consolidate with or into or sell, lease or otherwise convey all or a
substantial part of its assets to Borrower or any Subsidiary of which
Borrower holds (directly or indirectly) at least the same percentage equity
ownership; provided that in any such merger or consolidation involving
Borrower, Borrower shall be the surviving or continuing corporation, (y)
Borrower and its Subsidiaries may sell inventory, reserves and electricity
in the ordinary course of business, and (z) Borrower may enter into a
merger with, or acquisition of all of, another Person so long as:
(1) Borrower is the surviving entity,
(2) unless consented to by the Required Banks, no downgrade in the
Borrower's S&P Rating or Moody's Rating would occur as a result of the
consummation of such a transaction,
(3) if such transaction is an acquisition, the Board of Directors (or
similar governing body) of the Person being acquired has approved
being so acquired,
(4) no Default or Event of Default would has occurred and is continuing at
the time of, or would occur as a result of, such transaction.
As used in this Section 7.12(a), a sale, lease, transfer or disposition of
assets during any fiscal year shall be deemed to be of a "substantial part" of
the consolidated assets of Borrower and its Subsidiaries if the net book value
of such assets, when added to the net book value of all other assets sold,
leased, transferred or disposed of by the Borrower and its Subsidiaries
(excluding the Marketing Subsidiaries) during such fiscal year (other than
inventory, reserves and electricity in the ordinary course of business) exceeds
ten percent (10%) of the total assets of
34
Borrower and its Consolidated Subsidiaries, determined on a consolidated basis
as of the last day of the immediately preceding fiscal year.
(b) Except as permitted pursuant to Section 7.14 hereof, Borrower will
not sell, transfer or otherwise dispose of, or permit any of its
Subsidiaries to issue, sell, transfer or otherwise dispose of, any shares
of stock of any class (including as "stock" for purposes of this Section,
any warrants, rights or options to purchase or otherwise acquire stock or
other Securities exchangeable for or convertible into stock) of any
Subsidiary of Borrower, except to Borrower or a Wholly-Owned Subsidiary of
Borrower or except for the purpose of qualifying directors.
Section 7.13 Use of Property and Facilities; Environmental and Health and
Safety Laws.
(a) Borrower will, and will cause each of its Subsidiaries to, comply
in all material respects with the requirements of all Environmental and
Health Laws applicable to or pertaining to the Properties or business
operations of Borrower or any Subsidiary of Borrower. Without limiting the
foregoing, Borrower will not, and will not permit any Person to, except in
accordance with applicable law, dispose of any Hazardous Material into,
onto or upon any real property owned or operated by Borrower or any of its
Subsidiaries.
(b) Borrower will promptly provide the Banks with copies of any notice
or other instrument of the type described in Section 5.11(b) hereof, and in
no event later than five (5) Business Days after an officer of Borrower or
a Subsidiary of Borrower receives such notice or instrument.
Section 7.14 Investments, Acquisitions, Loans, Advances and Guaranties.
Borrower will not, nor will it permit any Subsidiary of Borrower to, directly or
indirectly, make, retain or have outstanding any investments (whether through
purchase of stock or obligations or otherwise) in, or loans or advances to, any
other Person, or acquire all or any substantial part of the assets or business
of any other Person or division thereof, or be or become liable as endorser,
guarantor, surety or otherwise (such as liability as a general partner) for any
debt, obligation or undertaking of any other Person, or otherwise agree to
provide funds for payment of the obligations of another, or supply funds thereto
or invest therein or otherwise assure a creditor of another against loss, or
apply for or become liable to the issuer of a letter of credit which supports an
obligation of another, or subordinate any claim or demand it may have to the
claim or demand of any other Person (cumulatively, all of the foregoing
"Investments"); provided, however, that the foregoing provisions shall not apply
to nor operate to prevent:
(a) investments in direct obligations of the United States of America
or of any agency or instrumentality thereof whose obligations constitute
full faith and credit obligations of the United States of America provided
that any such obligation matures within one year from the date it is
acquired by Borrower or Subsidiary;
(b) investments in commercial paper rated P-1 by Moody's Investors
Services, Inc. or A-1 by Standard & Poor's Corporation maturing within one
year of its date of issuance;
35
(c) investments in certificates of deposit issued by any Bank or any
United States commercial bank having capital and surplus of not less than
$200,000,000 maturing within one year from the date of issuance thereof or
in banker's acceptances endorsed by any Bank or other such commercial bank
and maturing within six months of the date of acceptance;
(d) investments in repurchase obligations with a term of not more than
seven (7) days for underlying securities of the types described in
subsection (a) above entered into with any bank meeting the qualifications
specified in subsection (c) above, provided all such agreements require
physical delivery of the securities securing such repurchase agreement,
except those delivered through the Federal Reserve Book Entry System;
(e) investments in money market funds that invest solely, and which
are restricted by their respective charters to invest solely, in
investments of the type described in the immediately preceding subsections
(a), (b), (c) and (d) above;
(f) ownership of stock, obligations or securities received in
settlement of debts (created in the ordinary course of business) owing to
Borrower or any Subsidiary;
(g) endorsements of negotiable instruments for collection in the
ordinary course of business;
(h) loans and advances to employees in the ordinary course of business
for travel, relocation, and similar purposes;
(i) Investments (i) existing on the Effective Date in Subsidiaries of
Borrower, (ii) existing on the Effective Date and identified in Schedule
7.14 hereof, or (iii) consisting of intercompany loans permitted pursuant
to Section 7.15(e);
(j) Investments constituting (i) accounts receivable arising, (ii)
trade debt granted, or (iii) deposits made in connection with the purchase
price of goods or services, in each case in the ordinary course of
business;
(k) Investments in Persons other than Marketing Subsidiaries engaged
in lines of business related to the lines of business described in Section
7.8 so long as (i) both before and after giving effect to such Investment
no Default of Event of Default shall have occurred and be continuing, (ii)
such Investments do not permit any creditor of such Person recourse to
Borrower or any other Subsidiary of Borrower or any of their assets (other
than the assets and/or the stock or similar equity interest of such Person)
and (iii) if such Investments are in Persons engaged in the lines of
business described in clause (xii) of Section 7.8, such Investments and
expenses in the aggregate do not exceed $20,000,000 outstanding at any
time;
(l) Guaranties, other than Long-Term Guaranties, so long as such
Indebtedness is permitted pursuant to Section 7.15;
(m) acquisitions permitted pursuant to Section 7.12(a);
36
(n) Investments constituting Long-Term Guaranties other than Long-Term
Guarantees of Indebtedness of the Marketing Subsidiaries;
(o) (i) Investments in Marketing Subsidiaries (other than Investments
in Marketing Subsidiaries consisting of Guaranties of Indebtedness of
Marketing Subsidiaries) existing on August 28, 2001 and listed on Schedule
7.14 and (ii) Investments consisting of Guaranties of Indebtedness of
Marketing Subsidiaries in existence on the Effective Date and Investments
in Marketing Subsidiaries made after the Effective Date (including through
Guaranties (including Long-Term Guaranties)) provided, that the aggregate
amount of Investments permitted by this clause (ii) when combined with the
amount of intercompany Indebtedness owing by Marketing Subsidiaries
permitted pursuant to Section 7.15(e)(iii) shall not in the aggregate
exceed $10,000,000 outstanding at any time (it being understood that any
increase in the value of any such Investment attributable to the
undistributed net earnings of the Marketing Subsidiaries shall not be
deemed a violation of this Section 7.14(o)); and
(p) Investments consisting of promissory notes issued in consideration
for the sale by the Borrower or a Subsidiary of a portion of the stock (or
similar equity interests) of a Subsidiary where (i) such note is secured by
the stock (or similar equity interest) sold, and (ii) one of the purposes
of such sale is to ensure that such Subsidiary qualifies as a "qualifying
facility" under the Public Utility Regulatory Policies Act of 1978, as
amended
Any Investment which when made complies with the requirements of paragraphs
(a) through (e) may continue to be held notwithstanding that such Investment if
made thereafter would not comply with such requirements;
In determining the amount of investments, acquisitions, loans, advances and
guarantees permitted under this Section 7.14, investments and acquisitions shall
always be taken at the original cost thereof (regardless of any subsequent
appreciation or depreciation therein), loans and advances shall be taken at the
principal amount thereof then remaining unpaid, and guarantees shall be taken at
the amount of obligations guaranteed thereby.
Section 7.15 Restrictions on Indebtedness. Borrower will not, nor will it
permit any Subsidiary of Borrower to, issue, incur, assume, create, become
liable for, contingently or otherwise, or have outstanding any Indebtedness;
provided, however, that the foregoing provisions shall not restrict nor operate
to prevent the following Indebtedness, so long as the incurrence and maintenance
of such Indebtedness would not cause the Borrower to be in violation of Section
7.17 hereof if compliance with such covenant were measured on the date of the
incurrence of such Indebtedness:
(a) the Obligations;
(b) Non-Recourse Indebtedness of any Project Finance Subsidiary;
(c) so long as the Borrower would be in compliance with Section 7.17
hereof (calculated as of the date of, and after giving affect to, the
incurrence of such Indebtedness), secured Indebtedness (excluding
Indebtedness of the type described in (e),
37
(f), and (g) below but including the pledge of stock or similar equity
interest of any Project Finance Subsidiary or any Subsidiary which is a
special purpose entity whose sole purpose is to own the stock or similar
equity interest of a Project Finance Subsidiary) (A) set forth on Schedule
7.15(b) hereto, and (B) (i) of BHP, (ii) evidencing the deferred purchase
price of newly acquired property or incurred to finance the acquisition of
personal property of the Borrower or a Subsidiary of the Borrower used in
the ordinary course of business of the Borrower or Subsidiary, (iii)
constituting Capitalized Lease Obligations or with respect to synthetic (or
similar type) lease arrangements, or (iv) incurred in connection with the
performance of tenders, statutory obligations, bids, leases or other
similar obligations (other than for borrowed money) entered into in the
ordinary course of business or to secure obligations on performance bonds;
provided, that the aggregate amount of Indebtedness permitted by this
clause (B) at any time outstanding shall not exceed 5% of Consolidated
Assets as reflected on the most recent balance sheet delivered by the
Borrower pursuant to Section 7.6, provided that Borrower shall promptly
provide the Administrative Agent with a copy of any documentation
evidencing such Indebtedness in excess of $25,000,000 and any modification
to such Indebtedness;
(d) so long as the Borrower would be in compliance with Section 7.17
hereof (calculated as of the date of, and after giving affect to, the
incurrence of such Indebtedness), other Indebtedness (excluding
Indebtedness of the type described in (e), (f), and (g) below) which is
unsecured and either junior in right of payment to the Obligations or pari
passu to the Obligations or is equally and ratably secured with the
Obligations, provided that Borrower shall promptly provide the
Administrative Agent with a copy of any documentation evidencing such
Indebtedness in excess of $25,000,000 and any modification to such
Indebtedness;
(e) intercompany loans (i) from (x) Subsidiary to Borrower so long as
such loans are subordinated to the Obligations on terms reasonably
satisfactory to the Administrative Agent, and (y) Borrower to a Subsidiary
of Borrower, (ii) among Wholly-Owned Subsidiaries, and (iii) from a
Subsidiary of Borrower to a Marketing Subsidiary, so long as the aggregate
amount of such loans from time to time owing by the Marketing Subsidiaries
does not exceed the difference between (I) $10,000,000, less (II) the sum
of (A) the aggregate amount of Guaranties outstanding pursuant to Section
7.15(f), and (B) the aggregate amount of other Investments then made in the
Marketing Subsidiaries pursuant to Section 7.14(o)(ii) (it being understood
that to the extent such limit is exceeded solely as a result of an increase
in the value of any such Investment attributable to the undistributed net
earnings of the Marketing Subsidiaries, it shall not be deemed a violation
of this Section 7.15(e));
(f) Indebtedness consisting of Guaranties of the Indebtedness of the
Marketing Subsidiaries (including Long-Term Guaranties), provided that such
Indebtedness shall only be permitted to the extent the aggregate amount of
such Indebtedness, when added to the sum of (i) the aggregate amount of all
intercompany loans made to the Marketing Subsidiaries pursuant to Section
7.15(e), plus (ii) the aggregate amount of all other Investments made in
Marketing Subsidiaries pursuant to Section 7.14(o)(ii), does not exceed
$10,000,000 (it being understood that to the extent such limit is exceeded
solely as a result of an increase in the value of any such
38
Investment attributable to the undistributed net earnings of the Marketing
Subsidiaries, it shall not be deemed a violation of this Section 7.15(f))
provided, further that Borrower shall promptly provide the Administrative
Agent with a copy of any such Guarantee and any modification to such
Guarantee;
(g) Indebtedness of the Marketing Subsidiaries under Marketing
Subsidiary Excluded Credit Facilities in an aggregate amount not to exceed
the Marketing Subsidiary Indebtedness Limit;
(h) Permitted Derivative Obligations; and
(i) Indebtedness pursuant to Long-Term Guaranties (other than
Long-Term Guaranties of Indebtedness of Marketing Subsidiaries).
Indebtedness shall only be permitted under (e), (f), (h), and (i) above to
the extent such Indebtedness will have a priority of payment with the
Obligations which is no greater than pari passu.
Section 7.16 Consolidated Net Worth. Borrower will at the end of each
fiscal quarter maintain Consolidated Net Worth in an amount of not less than the
sum of (i) $425,000,000 and (ii) fifty percent (50%) of the aggregate
Consolidated Net Income, if positive, for the period beginning April 1, 2002 and
ending on the last day of such fiscal quarter.
Section 7.17 Recourse Leverage Ratio. Borrower will not at the end of any
fiscal quarter permit the Recourse Leverage Ratio to exceed 0.65 to 1.00.
Section 7.18 Fixed Charge Coverage Ratio. Borrower will maintain a Fixed
Charge Coverage Ratio of not less than 1.50:1.00, as determined at the end of
each fiscal quarter.
Section 7.19 Dividends and Other Shareholder Distributions. (a) (a)
Borrower shall not (i) declare or pay any dividends or make a distribution of
any kind (including by redemption or purchase) on or relating to its outstanding
capital stock, or (ii) repay (directly, through sinking fund payments or
otherwise) any Indebtedness or other obligations owing to a shareholder unless
in either circumstance no Default or Event of Default exists prior to or would
result after giving effect to such action.
(b) Except (i) as set forth on Schedule 7.19 and (ii) in connection with
Non-Recourse Indebtedness of a Project Finance Subsidiary, Borrower will not,
and will not permit any of its Subsidiaries, directly or indirectly to create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary to:
(1) pay dividends or make any other distribution on any of such Subsidiary's
capital stock owned by Borrower or any Subsidiary of Borrower; (2) pay any
Indebtedness owed to Borrower or any other Subsidiary; (3) make loans or
advances to Borrower or any other Subsidiary; or (4) transfer any of its
property or assets to Borrower or any other Subsidiary.
Section 7.20 No Negative Pledge. Except (i) as set forth on Schedule 7.19
and (ii) in connection with Non-Recourse Indebtedness of a Project Finance
Subsidiary, the Borrower will not, and will not permit any of its Subsidiaries
(other than Project Finance Subsidiaries), directly
39
or indirectly to enter into or assume any agreement (other than customary
non-assignment and no sub-letting provisions in leases consistent with
Borrower's past practices and the Credit Documents and, solely with respect to
the asset so financed, Capitalized Leases, to the extent such Indebtedness is
permitted herein) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired.
Section 7.21 Transactions with Affiliates. Borrower will not, and will not
permit any of its Subsidiaries to, enter into or be a party to any material
transaction or arrangement with any Affiliate of such Person (other than
Borrower), including without limitation, the purchase from, sale to or exchange
of Property with, any merger or consolidation with or into, or the rendering of
any service by or for, any Affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's or such Subsidiary's
business and upon terms no less favorable to such Borrower or such Subsidiary
than could be obtained in a similar transaction involving a third-party.
Section 7.22 Compliance with Laws. Without limiting any of the other
covenants of Borrower in this Section 7, Borrower will, and will cause each of
its Subsidiaries to, conduct its business, and otherwise be, in compliance with
all applicable laws, regulations, ordinances and orders of any governmental or
judicial authorities; provided, however, that neither Borrower nor any
Subsidiary of Borrower shall be required to comply with any such law,
regulation, ordinance or order if the failure to comply therewith could not
reasonably be expected to have a Material Adverse Effect.
Section 7.23 Pari-Passu. Borrower will at all times cause the Obligations
to rank at least pari passu with all other senior unsecured Indebtedness of
Borrower.
Section 7.24 Certain Subsidiaries. Unless pursuant to Indebtedness which is
authorized pursuant to this Agreement, Borrower will not, and the Subsidiaries
of Borrower will not, permit any creditor of a Marketing Subsidiary or a Project
Finance Subsidiary to have recourse to any Borrower or any Subsidiary of
Borrower or any of their assets (other than (i) the stock or similar equity
interest of the applicable Subsidiary and (ii) with respect to a Permitted
Derivative Obligation) other than recourse under Guaranties permitted pursuant
to Sections 7.15(f) and (i).
Section 7.25 Ratings. Borrower will at all times this Agreement is in
effect maintain a S&P Rating and a Moody's Rating (or if one or both of such
ratings are unavailable, rating(s) from such other recognized national rating
agency or agencies as may be acceptable to the Administrative Agent and the
Required Banks).
Section 7.26 Liquidity Covenant. Borrower will, as of the last day of each
fiscal quarter commencing with the fiscal quarter ending December 31, 2002,
maintain Liquid Assets of at least $30,000,000.
SECTION 8 EVENTS OF DEFAULT AND REMEDIES.
Section 8.1 Events of Default. Any one or more of the following shall
constitute an Event of Default:
40
(a) (i) default in the payment when due of any fees, interest or of
any other Obligation not covered by clause (ii) below and such payment
default continues for three (3) days or (ii) default in the payment when
due of the principal amount of any Loan;
(b) default by Borrower or any Subsidiary in the observance or
performance of any covenant set forth in Section 7.1, Section 7.6(c),
Section 7.9 through 7.12, Sections 7.14 through 7.21, 7.23, 7.24 and 7.25
hereof;
(c) default by Borrower or any Subsidiary in the observance or
performance of any provision hereof or of any other Credit Document not
mentioned in (a) or (b) above, which is not remedied within thirty (30)
days after notice thereof shall have been given to the Borrower by the
Administrative Agent;
(d) (i) failure to pay when due Indebtedness in an aggregate principal
amount of (x) $10,000,000 or more of Borrower or any Material Subsidiary,
or (ii) default shall occur under one or more indentures, agreements or
other instruments under which any Indebtedness of Borrower or any of its
Material Subsidiary in an aggregate principal amount of $10,000,000 or more
may be issued or created and such default shall continue for a period of
time sufficient to permit the holder or beneficiary of such Indebtedness or
a trustee therefor to cause the acceleration of the maturity of any such
Indebtedness or any mandatory unscheduled prepayment, purchase or funding
thereof, or (iii) a default shall occur under the US Bank Credit Agreement
or the Wells Fargo Credit Agreement;
(e) any representation or warranty made herein or in any other Credit
Document by Borrower or any Subsidiary of Borrower, or in any statement or
certificate furnished pursuant hereto or pursuant to any other Credit
Document by Borrower or any Subsidiary of Borrower, or in connection with
any Credit Document, proves untrue in any material respect as of the date
of the issuance or making, or deemed making or issuance, thereof;
(f) Borrower or any Material Subsidiary shall (i) fail to pay its
debts generally as they become due or admit in writing its inability to pay
its debts generally as they become due, (ii) make an assignment for the
benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in,
the appointment of a receiver, custodian, trustee, examiner, liquidator or
similar official for it or any substantial part of its Property, (iv)
institute any proceeding seeking to have entered against it an order for
relief under the United States Bankruptcy Code, as amended, to adjudicate
it insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it or any
analogous action is taken under any other applicable law relating to
bankruptcy or insolvency, (v) take any corporate action (such as the
passage by its board of directors of a resolution) in furtherance of any
matter described in parts (i)-(iv) above, or (vi) fail to contest in good
faith any appointment or proceeding described in Section 8.1(g) hereof;
(g) a custodian, receiver, trustee, examiner, liquidator or similar
official shall be appointed for Borrower or any Material Subsidiary, or any
substantial part of any of
41
their Property, or a proceeding described in Section 8.1(f)(iv) shall be
instituted against Borrower or any Material Subsidiary, and such
appointment continues undischarged or such proceeding continues undismissed
or unstayed for a period of sixty (60) days;
(h) Borrower or any Material Subsidiary shall fail within thirty (30)
days to pay, bond or otherwise discharge any judgment or order for the
payment of money in excess of $10,000,000, which is not stayed on appeal or
otherwise being appropriately contested in good faith in a manner that
stays execution thereon;
(i) Borrower or any other member of the Controlled Group shall fail to
pay when due an amount or amounts which it shall have become liable, to pay
to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to
terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in
excess of $10,000,000 (collectively, a "Material Plan") shall be filed
under Title IV of ERISA by Borrower or any Subsidiary of Borrower or any
other member of the Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any Material Plan or a proceeding shall be instituted by a
fiduciary of any Material Plan against Borrower or any other member of the
Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within thirty (30) days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated;
(j) Borrower or any Subsidiary of Borrower or any Person acting on
behalf of Borrower, a Subsidiary or any governmental authority challenges
the validity of any Credit Document or Borrower's or one of its
Subsidiary's obligations thereunder or any Credit Document ceases to be in
full force and effect or is modified other than in accordance with the
terms thereof and hereof;
(k) a Change of Control Event shall have occurred; or
(l) Borrower shall for any reason cease to be wholly liable for the
full amount of the Obligations.
Section 8.2 Non-Bankruptcy Defaults. When any Event of Default other than
those described in subsections (f) or (g) of Section 8.1 hereof has occurred and
is continuing, the Administrative Agent shall, if so directed by the Required
Banks, by written notice to Borrower: (a) terminate the remaining Commitments
and all other obligations of the Banks hereunder on the date stated in such
notice (which may be the date thereof); and (b) declare the principal of and the
accrued interest on all outstanding Notes to be forthwith due and payable and
thereupon all outstanding Notes, including both principal and interest thereon,
and all other Obligations, shall be and become immediately due and payable
together with all other amounts payable under the Credit Documents without
further demand, presentment, protest or notice of any kind. The Administrative
Agent, after giving notice to Borrower pursuant to Section 8.1(c) or this
Section 8.2, shall also promptly send a copy of such notice to the other Banks,
but the failure to do so shall not impair or annul the effect of such notice.
42
Section 8.3 Bankruptcy Defaults. When any Event of Default described in
subsections (f) or (g) of Section 8.1 hereof has occurred and is continuing,
then all outstanding Notes, including both interest and principal thereon, and
all other Obligations shall immediately become due and payable together with all
other amounts payable under the Credit Documents without presentment, demand,
protest or notice of any kind, the obligation of the Banks to extend further
credit pursuant to any of the terms hereof shall immediately terminate and
Borrower shall immediately pay to the Administrative Agent, subject to Section
8.4, the full amount then available for drawing, under all outstanding Letters
of Credit, Borrower acknowledging that the Banks would not have an adequate
remedy at law for failure by Borrower to honor any such demand and that the
Banks, and the Administrative Agent on their behalf, shall have the right to
require Borrower to specifically perform such undertaking whether or not any
draws or other demands for payment have been made under any of the Letters of
Credit.
Section 8.4 [Intentionally Omitted](a).
Section 8.5 Expenses. Borrower agrees to pay to the Administrative Agent
and each Bank, and any other holder of any Note outstanding hereunder, all costs
and expenses incurred or paid by the Administrative Agent or such Bank or any
such holder, including attorneys' fees (including allocable fees of in-house
counsel) and court costs, in connection with (i) any amendment or waiver to the
Credit Documents requested by Borrower, (ii) any Default or Event of Default by
Borrower hereunder, or (iii) the enforcement of any of the Credit Documents.
SECTION 9 CHANGE IN CIRCUMSTANCES.
Section 9.1 Change of Law. Notwithstanding any other provisions of this
Agreement or any Note, if at any time after the date hereof any change in
applicable law or regulation or in the interpretation thereof makes it unlawful
for any Bank to make or continue to maintain Eurodollar Loans or to perform its
obligations as contemplated hereby, such Bank shall promptly give notice thereof
to Borrower and such Bank's obligations to make or maintain Eurodollar Loans
under this Agreement shall terminate until it is no longer unlawful for such
Bank to make or maintain Eurodollar Loans. Borrower shall prepay on demand the
outstanding principal amount of any such affected Eurodollar Loans, together
with all interest accrued thereon at a rate per annum equal to the interest rate
applicable to such Loan; provided, however, subject to all of the terms and
conditions of this Agreement, Borrower may then elect to borrow the principal
amount of the affected Eurodollar Loans from such Bank by means of Base Rate
Loans from such Bank, which Base Rate Loans shall not be made ratably by the
Banks but only from such affected Bank.
Section 9.2 Unavailability of Deposits or Inability to Ascertain, or
Inadequacy of, LIBOR. If on or prior to the first day of any Interest Period for
any Borrowing of Eurodollar Loans:
(a) the Administrative Agent determines that deposits in U.S. Dollars
(in the applicable amounts) are not being offered to major banks in the
eurodollar interbank market for such Interest Period, or that by reason of
circumstances affecting the interbank eurodollar market adequate and
reasonable means do not exist for ascertaining the applicable LIBOR, or
43
(b) Banks having more than 33% percent (33)% or more of the aggregate
amount of the Commitments reasonably determine and so advise the
Administrative Agent that LIBOR as reasonably determined by the
Administrative Agent will not adequately and fairly reflect the cost to
such Banks or Bank of funding their or its Eurodollar Loans or Loan for
such Interest Period,
then the Administrative Agent shall forthwith give notice thereof to Borrower
and the Banks, whereupon until the Administrative Agent notifies Borrower that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Banks or of the relevant Bank to make Eurodollar Loans shall
be suspended.
Section 9.3 Increased Cost and Reduced Return.
(a) If, on or after the date hereof, the adoption of any applicable
law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Lending Office)
with any request or directive (whether or not having the force of law but,
if not having the force of law, compliance with which is customary in the
relevant jurisdiction) of any such authority, central bank or comparable
agency:
(i) shall subject any Bank (or its Lending Office) to any tax, duty or
other charge with respect to its Eurodollar Loans, its Notes or its
obligation to make Eurodollar Loans, or shall change the basis of taxation
of payments to any Bank (or its Lending Office) of the principal of or
interest on its Eurodollar Loans or any other amounts due under this
Agreement in respect of its Eurodollar Loans or its obligation to make
Eurodollar Loans (except for changes in the rate of tax on the overall net
income or profits of such Bank or its Lending Office imposed by the
jurisdiction in which such Bank or its lending office is incorporated in
which such Bank's principal executive office or Lending Office is located);
or
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding with respect to any Eurodollar Loans any such
requirement included in an applicable Eurodollar Reserve Percentage)
against assets of, deposits with or for the account of, or credit extended
by, any Bank (or its Lending Office) or shall impose on any Bank (or its
Lending Office) or on the interbank market any other condition affecting
its Eurodollar Loans, its Notes, or its obligation to make Eurodollar
Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Eurodollar Loan or to reduce
the amount of any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its Notes with respect thereto, by an
amount deemed by such Bank to be material, then, within fifteen (15) days after
demand by such Bank (with a copy to the Administrative Agent), Borrower shall be
obligated to pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction. In the event any law,
rule, regulation or interpretation described above is revoked, declared invalid
or inapplicable or is otherwise rescinded, and as a
44
result thereof a Bank is determined to be entitled to a refund from the
applicable authority for any amount or amounts which were paid or reimbursed by
Borrower to such Bank hereunder, such Bank shall refund such amount or amounts
to Borrower without interest.
(b) If, after the date hereof, any Bank or the Administrative Agent shall
have determined that the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein (including, without
limitation, any revision in the Final Risk-Based Capital Guidelines of the Board
of Governors of the Federal Reserve System (12 CFR Part 208, Appendix A; 12 CFR
Part 225, Appendix A) or of the Office of the Comptroller of the Currency (12
CFR Part 3, Appendix A), or in any other applicable capital rules heretofore
adopted and issued by any governmental authority), or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Lending Office) with any request or
directive regarding capital adequacy (whether or not having the force of law
but, if not having the force of law, compliance with which is customary in the
applicable jurisdiction) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on such
Bank's capital, or on the capital of any corporation controlling such Bank, as a
consequence of its obligations hereunder to a level below that which such Bank
could have achieved but for such adoption, change or compliance (taking into
consideration such Bank's policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, then from time to time, within
fifteen (15) days after demand by such Bank (with a copy to the Administrative
Agent), Borrower shall pay to such Bank such additional amount or amounts as
will compensate such Bank for such reduction.
(c) Each Bank that determines to seek compensation under this Section 9.3
shall notify Borrower and the Administrative Agent of the circumstances that
entitle the Bank to such compensation pursuant to this Section 9.3 and will
designate a different Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the sole
judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate
of any Bank claiming compensation under this Section 9.3 and setting forth the
additional amount or amounts to be paid to it hereunder submitted to Borrower
and the Administrative Agent by such Bank in good faith shall be prima facie
evidence of the amount of such compensation. In determining such amount, such
Bank may use any reasonable averaging and attribution methods.
Section 9.4 Lending Offices. Each Bank may, at its option, elect to make
its Loans hereunder at the branch, office or affiliate specified on the
appropriate signature page hereof or in the assignment agreement which any
assignee bank executes pursuant to Section 11.12 hereof (each a "Lending
Office") for each type of Loan available hereunder or at such other of its
branches, offices or affiliates as it may from time to time elect and designate
in a written notice to Borrower and the Administrative Agent, so long as such
election does not increase costs or other amounts payable by Borrower to such
Bank hereunder.
Section 9.5 Discretion of Bank as to Manner of Funding. Notwithstanding any
other provision of this Agreement, each Bank shall be entitled to fund and
maintain its funding of all or any part of its Loans in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if each Bank had actually funded and
maintained each Eurodollar Loan through the purchase of deposits in the
45
eurodollar interbank market having a maturity corresponding to such Loan's
Interest Period and bearing an interest rate equal to LIBOR for such Interest
Period.
SECTION 10 THE AGENT.
Section 10.1 Appointment and Authorization of Administrative Agent. Each
Bank hereby appoints ABN AMRO Bank N.V. as the Administrative Agent under the
Credit Documents and hereby authorizes the Administrative Agent to take such
action as Administrative Agent on its behalf and to exercise such powers under
the Credit Documents as are delegated to the Administrative Agent by the terms
thereof, together with such powers as are reasonably incidental thereto. The
Administrative Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and the Credit Documents. The duties of
the Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have by reason of this Agreement or any other
Credit Document a fiduciary relationship in respect of any Bank, the holder of
any Note or any other Person; and nothing in this Agreement or any other Credit
Document, expressed or implied, is intended to or shall be so construed as to
impose upon the Administrative Agent any obligations in respect of this
Agreement or any other Credit Document except as expressly set forth herein or
therein.
Section 10.2 Administrative Agent and its Affiliates. The Administrative
Agent shall have the same rights and powers under this Agreement and the other
Credit Documents as any other Bank and may exercise or refrain from exercising
the same as though it were not the Administrative Agent, and the Administrative
Agent and its affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with Borrower or any Affiliate of Borrower as if
it were not the Administrative Agent under the Credit Documents.
Section 10.3 Action by Administrative Agent. If the Administrative Agent
receives from Borrower a written notice of an Event of Default pursuant to
Section 7.6(c)(i) hereof, the Administrative Agent shall promptly give each of
the Banks written notice thereof. The obligations of the Administrative Agent
under the Credit Documents are only those expressly set forth therein. Without
limiting the generality of the foregoing, the Administrative Agent shall not be
required to take any action hereunder with respect to any Default or Event of
Default, except as expressly provided in Sections 8.2 and 8.3. In no event,
however, shall the Administrative Agent be required to take any action in
violation of applicable law or of any provision of any Credit Document, and the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder or under any other Credit Document unless it shall be
first indemnified to its reasonable satisfaction by the Banks against any and
all costs, expense, and liability which may be incurred by it by reason of
taking or continuing to take any such action. The Administrative Agent shall be
entitled to assume that no Default or Event of Default exists unless notified to
the contrary in writing by a Bank or Borrower. In all cases in which this
Agreement and the other Credit Documents do not require the Administrative Agent
to take certain actions, the Administrative Agent shall be fully justified in
using its discretion in failing to take or in taking any action hereunder and
thereunder.
Section 10.4 Consultation with Experts. The Administrative Agent may
consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.
46
Section 10.5 Liability of Administrative Agent; Credit Decision. Neither
the Administrative Agent nor any of its directors, officers, agents, or
employees shall be liable for any action taken or not taken by it in connection
with the Credit Documents (i) with the consent or at the request of the Required
Banks or (ii) in the absence of its own gross negligence or willful misconduct.
Neither the Administrative Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (i) any statement, warranty or representation made in connection with
this Agreement, any other Credit Document or any Credit Event; (ii) the
performance or observance of any of the covenants or agreements of Borrower or
any other party contained herein or in any other Credit Document; (iii) the
satisfaction of any condition specified in Section 6 hereof; or (iv) the
validity, effectiveness, genuineness, enforceability, perfection, value, worth
or collectibility hereof or of any other Credit Document or of any other
documents or writing furnished in connection with any Credit Document; and the
Administrative Agent makes no representation of any kind or character with
respect to any such matter mentioned in this sentence. The Administrative Agent
may execute any of its duties under any of the Credit Documents by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Banks, Borrower, or any other Person for the default or misconduct of any such
agents or attorneys-in-fact selected with reasonable care. The Administrative
Agent shall not incur any liability by acting in reliance upon any notice,
consent, certificate, other document or statement (whether written or oral)
believed by it to be genuine or to be sent by the proper party or parties. In
particular and without limiting any of the foregoing, the Administrative Agent
shall have no responsibility for confirming the accuracy of any Compliance
Certificate or other document or instrument received by it under the Credit
Documents. The Administrative Agent may treat the payee of any Note as the
holder thereof until written notice of transfer shall have been filed with the
Administrative Agent signed by such payee in form satisfactory to the
Administrative Agent. Each Bank acknowledges that it has independently and
without reliance on the Administrative Agent or any other Bank, and based upon
such information, investigations and inquiries as it deems appropriate, made its
own credit analysis and decision to extend credit to Borrower in the manner set
forth in the Credit Documents. It shall be the responsibility of each Bank to
keep itself informed as to the creditworthiness of Borrower and any other
relevant Person, and the Administrative Agent shall have no liability to any
Bank with respect thereto.
Section 10.6 Indemnity. The Banks shall ratably, in accordance with their
respective Percentages, indemnify and hold the Administrative Agent, and its
directors, officers, employees, agents and representatives harmless from and
against any liabilities, losses, costs or expenses suffered or incurred by it
under any Credit Document or in connection with the transactions contemplated
thereby, regardless of when asserted or arising, except to the extent the
Administrative Agent is promptly reimbursed for the same by Borrower and except
to the extent that any event giving rise to a claim was caused by the gross
negligence or willful misconduct of the party seeking to be indemnified. The
obligations of the Banks under this Section 10.6 shall survive termination of
this Agreement.
Section 10.7 Resignation of Administrative Agent and Successor
Administrative Agent. The Administrative Agent may resign at any time by giving
written notice thereof to the Banks and Borrower. Upon any such resignation of
the Administrative Agent, the Required Banks shall have the right to appoint a
successor Administrative Agent with the consent of Borrower. If no successor
Administrative Agent shall have been so appointed by the Required Banks, and
shall
47
have accepted such appointment, within thirty (30) days after the retiring
Administrative Agent's giving of notice of resignation, then the retiring
Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent, which shall be any Bank hereunder or any commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $200,000,000. Upon the
acceptance of its appointment as the Administrative Agent hereunder, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights and duties of the retiring or removed Administrative Agent under
the Credit Documents, and the retiring Administrative Agent shall be discharged
from its duties and obligations thereunder. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of this
Section 10 and all protective provisions of the other Credit Documents shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent.
SECTION 11 MISCELLANEOUS.
Section 11.1 Withholding Taxes.
(a) Payments Free of Withholding. Subject to Section 11.1 (b) hereof,
each payment by Borrower under this Agreement or the other Credit Documents
shall be made without withholding for or on account of any present or
future taxes (other than overall net income taxes on the recipient). If any
such withholding is so required, Borrower shall make the withholding, pay
the amount withheld to the appropriate governmental authority before
penalties attach thereto or interest accrues thereon and forthwith pay such
additional amount as may be necessary to ensure that the net amount
actually received by each Bank and the Administrative Agent free and clear
of such taxes (including such taxes on such additional amount) is equal to
the amount which that Bank or the Administrative Agent (as the case may be)
would have received had such withholding not been made. If the
Administrative Agent or any Bank pays any amount in respect of any such
taxes, penalties or interest Borrower shall reimburse the Administrative
Agent or that Bank for that payment on demand in the currency in which such
payment was made. If Borrower pay any such taxes, penalties or interest,
they shall deliver official tax receipts evidencing that payment or
certified copies thereof to the Bank or Administrative Agent on whose
account such withholding was made (with a copy to the Administrative Agent
if not the recipient of the original) on or before the thirtieth day after
payment. If any Bank or the Administrative Agent determines it has received
or been granted a credit against or relief or remission for, or repayment
of, any taxes paid or payable by it because of any taxes, penalties or
interest paid by Borrower and evidenced by such a tax receipt, such Bank or
Administrative Agent shall, to the extent it can do so without prejudice to
the retention of the amount of such credit, relief, remission or repayment,
pay to Borrower such amount as such Bank or Administrative Agent determines
is attributable to such deduction or withholding and which will leave such
Bank or Administrative Agent (after such payment) in no better or worse
position than it would have been in if Borrower had not been required to
make such deduction or withholding. Nothing in this Agreement shall
interfere with the right of each Bank and the Administrative Agent to
arrange its tax affairs in whatever manner it thinks fit nor obligate any
Bank or the Administrative Agent to disclose any information relating to
its tax affairs or any computations in connection with such taxes.
48
(b) U.S. Withholding Tax Exemptions. Each Bank that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code)
shall submit to Borrower and the Administrative Agent on or before the date
of the initial Borrowing hereunder two duly completed and signed copies of
either Form W8BEN (relating to such Bank and entitling it to a complete
exemption from withholding under the Code on all amounts to be received by
such Bank, including fees, pursuant to the Credit Documents and the Loans)
or Form W8ECI (relating to all amounts to be received by such Bank,
including fees, pursuant to the Credit Documents and the Loans) of the
United States Internal Revenue Service. Thereafter and from time to time,
each Bank shall submit to Borrower and the Administrative Agent such
additional duly completed and signed copies of one or the other of such
Forms (or such successor forms as shall be adopted from time to time by the
relevant United States taxing authorities) as may be (i) requested by
Borrower in a written notice, directly or through the Administrative Agent,
to such Bank and (ii) required under then current United States law or
regulations to avoid or reduce United States withholding taxes on payments
in respect of all amounts to be received by such Bank, including fees,
pursuant to the Credit Documents or the Loans.
(c) Inability of Bank to Submit Forms. If any Bank determines, as a
result of any change in applicable law, regulation or treaty, or in any
official application or interpretation thereof, that it is unable to submit
to Borrower or Administrative Agent any form or certificate that such Bank
is obligated to submit pursuant to subsection (b) of this Section 11.1 or
that such Bank is required to withdraw or cancel any such form or
certificate previously submitted or any such form or certificate otherwise
becomes ineffective or inaccurate, such Bank shall promptly notify Borrower
and Administrative Agent of such fact and the Bank shall to that extent not
be obligated to provide any such form or certificate and will be entitled
to withdraw or cancel any affected form or certificate, as applicable.
Section 11.2 No Waiver of Rights. No delay or failure on the part of the
Administrative Agent or any Bank or on the part of the holder or holders of any
Note in the exercise of any power or right under any Credit Document shall
operate as a waiver thereof, nor as an acquiescence in any default, nor shall
any single or partial exercise thereof preclude any other or further exercise of
any other power or right, and the rights and remedies hereunder of the
Administrative Agent, the Banks and the holder or holders of any Notes are
cumulative to, and not exclusive of, any rights or remedies which any of them
would otherwise have.
Section 11.3 Non-Business Day. If any payment of principal or interest on
any Loan or of any other Obligation shall fall due on a day which is not a
Business Day, interest or fees (as applicable) at the rate, if any, such Loan or
other Obligation bears for the period prior to maturity shall continue to accrue
on such Obligation from the stated due date thereof to and including the next
succeeding Business Day, on which the same shall be payable.
Section 11.4 Documentary Taxes. Borrower agrees that it will pay any
documentary, stamp or similar taxes payable in respect to any Credit Document,
including interest and penalties, in the event any such taxes are assessed,
irrespective of when such assessment is made and whether or not any credit is
then in use or available hereunder.
49
Section 11.5 Survival of Representations. All representations and
warranties made herein or in certificates given pursuant hereto shall survive
the execution and delivery of this Agreement and the other Credit Documents, and
shall continue in full force and effect with respect to the date as of which
they were made as long as any credit is in use or available hereunder.
Section 11.6 Survival of Indemnities. All indemnities and all other
provisions relative to reimbursement to the Banks of amounts sufficient to
protect the yield of the Banks with respect to the Loans, including, but not
limited to, Section 2.11, Section 9.3 and Section 11.15 hereof, shall survive
the termination of this Agreement and the other Credit Documents and the payment
of the Loans and all other Obligations.
Section 11.7 Set-Off. (a) (a) In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence of any Event of Default, each Bank and each subsequent
holder of any Note is hereby authorized by Borrower at any time or from time to
time, without notice to Borrower or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, Indebtedness
evidenced by certificates of deposit, whether matured or unmatured, and in
whatever currency denominated) and any other Indebtedness at any time held or
owing by that Bank or that subsequent holder to or for the credit or the account
of Borrower, whether or not matured, against and on account of the obligations
and liabilities of Borrower to that Bank or that subsequent holder under the
Credit Documents, including, but not limited to, all claims of any nature or
description arising out of or connected with the Credit Documents, irrespective
of whether or not (a) that Bank or that subsequent holder shall have made any
demand hereunder or (b) the principal of or the interest on the Loans or Notes
and other amounts due hereunder shall have become due and payable pursuant to
Section 8 and although said obligations and liabilities, or any of them, may be
contingent or unmatured.
(b) Each Bank agrees with each other Bank a party hereto that if such Bank
shall receive and retain any payment, whether by set-off or application of
deposit balances or otherwise, on any of the Loans in excess of its ratable
share of payments on all such obligations then outstanding to the Banks, then
such Bank shall purchase for cash at face value, but without recourse, ratably
from each of the other Banks such amount of the Loans held by each such other
Banks (or interest therein) as shall be necessary to cause such Bank to share
such excess payment ratably with all the other Banks; provided, however, that if
any such purchase is made by any Bank, and if such excess payment or part
thereof is thereafter recovered from such purchasing Bank, the related purchases
from the other Banks shall be rescinded ratably and the purchase price restored
as to the portion of such excess payment so recovered, but without interest.
Section 11.8 Notices. Except as otherwise specified herein, all notices
under the Credit Documents shall be in writing (including facsimile or other
electronic communication) and shall be given to a party hereunder at its address
or facsimile number set forth below or such other address or facsimile number as
such party may hereafter specify by notice to the Administrative Agent and
Borrower, given by courier, by United States certified or registered mail, or by
other telecommunication device capable of creating a written record of such
notice and its receipt. Notices under the Credit Documents to the Banks shall be
addressed to their respective addresses, facsimile or telephone numbers set
forth on the signature pages hereof or in the
50
assignment agreement which any assignee bank executes pursuant to Section 11.12
hereof, and to Borrower and to the Administrative Agent to:
If to Borrower:
Black Hills Corporation
625 9th Street
Rapid City, South Dakota 57709
Attention: Garner M. Anderson
Facsimile: 605.721.2597
Telephone: 605.721.2311
with copies to:
Black Hills Corporation
625 9th Street
Rapid City, South Dakota 57709
Attention: Mark T. Thies
Facsimile: 605.721.2599
Telephone: 605.721.2331
Black Hills Corporation
1075 Noel Avenue
Wheeling, Illinois 60090
Attention: Richard T. Ashbeck
Facsimile: 847.459.4140
Telephone: 847.465.3033
If to the Administrative Agent:
Notices shall be sent to the applicable address set forth on
Part B of Schedule 4 hereto.
With copies of all such notices to:
ABN AMRO Bank N.V.
135 South LaSalle Street
Suite 710
Chicago, Illinois 60603
Attention: David B. Bryant/Saad Qais
Facsimile: 312.904.1466
Telephone: 312.904.2799 (Mr. Bryant)
312.904.6473 (Mr. Qais)
Each such notice, request or other communication shall be effective (i) if
given by facsimile, when such facsimile is transmitted to the facsimile number
specified in this
51
Section 11.8 or on the signature pages hereof and a confirmation of receipt of
such facsimile has been received by the sender, (ii) if given by courier, when
delivered, (iii) if given by mail, three business days after such communication
is deposited in the mail, registered with return receipt requested, addressed as
aforesaid or (iv) if given by any other means, when delivered at the addresses
specified in this Section 11.8; provided that any notice given pursuant to
Section 2 hereof shall be effective only upon receipt.
Section 11.9 Counterparts. This Agreement may be executed in any number of
counterpart signature pages, and by the different parties on different
counterparts, each of which when executed shall be deemed an original but all
such counterparts taken together shall constitute one and the same instrument.
Section 11.10 Successors and Assigns. This Agreement shall be binding upon
Borrower and its successors and assigns, and shall inure to the benefit of each
of the Banks and the benefit of their permitted respective successors, and
assigns, including any subsequent holder of any Note. Borrower may not assign
any of its rights or obligations under any Credit Document unless (i) such
assignation occurs in connection with a merger or acquisition by Borrower which
is otherwise permitted under the terms of this Agreement and the appropriate
Credit Document, if applicable and (ii) Borrower obtains the prior written
consent of all of the Banks, which consent shall be in form and substance
satisfactory to Administrative Agent.
Section 11.11 Participants and Note Assignees. Each Bank shall have the
right at its own cost to grant participations (to be evidenced by one or more
agreements or certificates of participation) in the Loans made, Commitments held
and/or participations in Letters of Credit, by such Bank at any time and from
time to time, and to assign its rights under such Loans or the Note evidencing
such Loans to a federal reserve bank; provided that (i) no such participation or
assignment shall relieve any Bank of any of its obligations under this
Agreement, (ii) no such assignee or participant shall have any rights under this
Agreement except as provided in this Section 11.11, and (iii) the Administrative
Agent shall have no obligation or responsibility to such participant or
assignee, except that nothing herein is intended to affect the rights of an
assignee of a Note to enforce the Note assigned. Any party to which such a
participation or assignment has been granted shall have the benefits of Section
2.11 and Section 9.3, but shall not be entitled to receive any greater payment
under either such Section than the Bank granting such participation would have
been entitled to receive in connection with the rights transferred. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of Borrower hereunder, including, without limitation,
the right to approve any amendment, modification or waiver of any provision of
this Agreement; provided that such participation agreement may provide that such
Bank will not agree to any modification, amendment or waiver of this Agreement
that would (A) increase any Commitment of such Bank if such increase would also
increase the participant's obligations, (B) forgive any amount of or postpone
the date for payment of any principal of or interest on any Loan or of any fee
payable hereunder in which such participant has an interest or (C) reduce the
stated rate at which interest or fees in which such participant has an interest
accrue hereunder.
Section 11.12 Assignment of Commitments by Banks. Each Bank shall have the
right at any time, with the written consent of Administrative Agent, which
consent shall not be unreasonably withheld, and, prior to the occurrence of a
Default or Event of Default, Borrower,
52
to assign all or any part of its Commitment (including the same percentage of
its Note and outstanding Loanst, and provided that the same percentage of its
commitment and loans outstanding under the 3-Year Credit Agreement are also
assigned) to one or more other Persons; provided that such assignment is in an
amount of at least $5,000,000 or the entire Commitment of such Bank, and if such
assignment is not for such Bank's entire Commitment then such Bank's Commitment
after giving effect to such assignment shall not be less than $5,000,000; and
provided further that neither the consent of Borrower nor the Administrative
Agent shall be required for any Bank to assign all or part of its Commitment to
any Affiliate of the assigning Bank so long as the same percentage of such
Bank's commitment under the 3-Year Credit Agreement are also assigned to such
Affiliate. Each such assignment shall set forth the assignees address for
notices to be given under Section 11.8 hereof hereunder and its designated
Lending Office pursuant to Section 9.4 hereof. Upon any such assignment,
delivery to the Administrative Agent of an executed copy of such assignment
agreement and the forms referred to in Section 11.1 hereof, if applicable, and
the payment of a $3,500 recordation fee to the Administrative Agent, the
assignee shall become a Bank hereunder, all Loans, participations in Letters of
Credit and the Commitment it thereby holds shall be governed by all the terms
and conditions hereof and the Bank granting such assignment shall have its
Commitment, and its obligations and rights in connection therewith, reduced by
the amount of such assignment.
Section 11.13 Amendments. Any provision of the Credit Documents may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by (a) Borrower, (b) the Required Banks, and (c) if the rights or duties
of the Administrative Agent are affected thereby, the Administrative Agent;
provided that:
(i) no amendment or waiver pursuant to this Section. 11.13 shall (A)
increase, decrease or extend any Commitment of any Bank without the consent
of such Bank or (B) reduce the amount of or postpone any fixed date for
payment of any principal of or interest on any Loan or of any fee or other
Obligation payable hereunder without the consent of each Bank; and
(ii) no amendment or waiver pursuant to this Section 11.13 shall,
unless signed by each Bank, change this Section 11.13, or the definition of
Required Banks, or affect the number of Banks required to take any action
under the Credit Documents.
Anything in this Agreement to the contrary notwithstanding, if at any time
when the conditions precedent set forth in Section 6.2 hereof to any Loan
hereunder are satisfied, any Bank shall fail to fulfill its obligations to make
such Loan (any such Bank, a "Defaulting Bank") then, for so long as such failure
shall continue, the Defaulting Bank shall (unless Borrower, the Administrative
Agent and the Required Banks (determined as if the Defaulting Bank were not a
Bank hereunder) shall otherwise consent in writing) be deemed for all purposes
related to amendments, modifications, waivers or consents under this Agreement
(other than amendments or waivers referred to in clause (i) and (ii) above) to
have no Loans or Commitments and shall not be treated as a Bank hereunder when
performing the computation of the Required Banks. To the extent the
Administrative Agent receives any payments or other amounts for the account of a
Defaulting Bank such Defaulting Bank shall be deemed to have requested that the
Administrative Agent use such payment or other amount to fulfill its obligations
to make such Loan.
53
Section 11.14 Headings. Section headings used in this Agreement are for
reference only and shall not affect the construction of this Agreement.
Section 11.15 Legal Fees, Other Costs and Indemnification. Borrower agrees
to pay all reasonable costs and expenses of the Arrangers in connection with the
preparation and negotiation of the Credit Documents (including past and future
reasonable out-of-pocket expenses incurred by the Arrangers in connection with
the syndication of the transaction), including without limitation, the
reasonable fees and disbursements of counsel to the Arrangers, in connection
with the preparation and execution of the Credit Documents, and any amendment,
waiver or consent related hereto, whether or not the transactions contemplated
herein are consummated. Borrower further agrees to indemnify each Bank, the
Administrative Agent, and their respective directors, agents, officers and
employees, against all losses, claims, damages, penalties, judgments,
liabilities and expenses (including, without limitation, all expenses of
litigation or preparation therefor, whether or not the indemnified Person is a
party thereto) which any of them may incur or reasonably pay arising out of or
relating to any Credit Document (including any relating to a misrepresentation
by Borrower under any Credit Document) or any of the transactions contemplated
thereby or the direct or indirect application or proposed application of the
proceeds of any Loan, other than those which arise from the gross negligence or
willful misconduct of the party claiming indemnification. Borrower, upon demand
by any of the Administrative Agentor a Bank at any time, shall reimburse the
Administrative Agent or Bank for any reasonable legal or other expenses
(including allocable fees and expenses of in-house counsel) incurred in
connection with investigating or defending against any of the foregoing except
if the same is directly due to the gross negligence or willful misconduct of the
party to be indemnified, provided that with respect to legal costs and expenses
incurred in connection with the enforcement of the Banks rights hereunder or any
work-out or similar situation, Borrower shall only be obligated to pay the legal
fees of the Administrative Agent and not of any other Bank.
Section 11.16 Entire Agreement. The Credit Documents constitute the entire
understanding of the parties thereto with respect to the subject matter thereof
and any prior or contemporaneous agreements, whether written or oral, with
respect thereto are superseded thereby.
Section 11.17 Construction. The parties hereto acknowledge and agree that
neither this Agreement nor the other Credit Documents shall be construed more
favorably in favor of one than the other based upon which party drafted the
same, it being acknowledged that all parties hereto contributed substantially to
the negotiation of this Agreement and the other Credit Documents.
Section 11.18 Governing Law. This Agreement and the other Credit Documents,
and the rights and duties of the parties hereto, shall be construed and
determined in accordance with the internal laws of the State of New York.
Section 11.19 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. BORROWER
HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT
SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING
OUT OF
54
OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. BORROWER IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM
THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. BORROWER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO ANY CREDIT
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.
Section 11.20 Replacement of Bank. Each Bank agrees that, upon the
occurrence of any event set forth in Sections 9.1, 9.3 and 11.1, such Bank will
use reasonable efforts to book and maintain its Loans through a different
Lending Office or to transfer its Loans to an Affiliate with the objective of
avoiding or minimizing the consequences of such event; provided that such
booking or transfer is not otherwise disadvantageous to such Bank as determined
by such Bank in its sole and absolute discretion. If any Bank has demanded to be
paid additional amounts pursuant to Sections 9.1, 9.3 and 11.1, and the payment
of such additional amounts are, and are likely to continue to be, more onerous
in the reasonable judgment of Borrower than with respect to the other Banks,
then Borrower shall have the right at any time when no Default or Event of
Default shall have occurred and be continuing to seek one or more financial
institutions which are not Affiliates of Borrower (each, a "Replacement Bank")
to purchase with the written consent of the Administrative Agent (which consent
shall not be (x) required if such proposed Replacement Bank is already a Bank,
or an Affiliate of a Bank, or (y) unreasonably delayed or withheld) the
outstanding Loans and Commitments of such Bank (the "Affected Bank"), and if
Borrower locate a Replacement Bank, the Affected Bank shall, upon
i. prior written notice to the Administrative Agent,
ii. (i) payment to the Affected Bank of the purchase price agreed
between it and the Replacement Bank (or, failing such agreement,
a purchase price in the amount of the outstanding principal
amount of the Affected Bank's Loans and accrued interest thereon
to the date of payment) by the Replacement Bank plus (ii) payment
by Borrower of all Obligations (other than principal and interest
with respect to Loans) then due to the Affected Bank or accrued
for its account hereunder or under any other Loan Document,
iii. satisfaction of the provisions set forth in Section 11.12, and
iv. payment by Borrower to the Affected Bank and the Administrative
Agent of all reasonable out-of-pocket expenses in connection with
such assignment and assumption (including the recordation fee
described in Section 11.12),
assign and delegate all its rights and obligations under this Agreement and any
other Credit Document to which it is a party (including its outstanding Loans)
to the Replacement Bank (such assignment to be made without recourse,
representation or warranty), and the Replacement Bank
55
shall assume such rights and obligations, whereupon the Replacement Bank shall
in accordance with Section 11.12 become a party to each Credit Document to which
the Affected Bank is a party and shall have the rights and obligations of a Bank
thereunder and the Affected Bank shall be released from its obligations
hereunder and each other Credit Document to the extent of such assignment and
delegation.
Section 11.21 Confidentiality. The Administrative Agent and the Banks shall
hold all non-public information provided to them by Borrower pursuant to or in
connection with this Agreement in accordance with their customary procedures for
handling confidential information of this nature, but may make disclosure to any
of their examiners, regulators, Affiliates, outside auditors, counsel and other
professional advisors in connection with this Agreement or any other Credit
Document or as reasonably required by any potential bona fide transferee,
participant or assignee, or in connection with the exercise of remedies under a
Credit Document, or to any direct or indirect contractual counterparty in swap
agreements or such contractual counterparty's professional advisor (so long as
such contractual counterparty or professional advisor to such contractual
counterparty agrees to be bound by the provisions of this Section 11.21), or to
any nationally recognized rating agency that requires access to information
about a Bank's investment portfolio in connection with ratings issued with
respect to such Bank, or as requested by any governmental agency or
representative thereof or pursuant to legal process; provided, however, that
unless specifically prohibited by applicable law or court order, the
Administrative Agent and each Bank shall use reasonable efforts to promptly
notify Borrower of any request by any governmental agency or representative
thereof (other than any such request in connection with an examination of the
financial condition of the Administrative Agent or such Bank by such
governmental agency) for disclosure of any such non-public information and,
where practicable, prior to disclosure of such information. Prior to any such
disclosure pursuant to this Section 11.21, the Administrative Agent and each
Bank shall require any such bona fide transferee, participant and assignee
receiving a disclosure of non-public information to agree, for the benefit of
Borrower, in writing to be bound by this Section 11.21; and to require such
Person to require any other Person to whom such Person discloses such non-public
information to be similarly bound by this Section 11.21.
Section 11.22 Rights and Liabilities of Documentation Agents and
Syndication Agents. Neither Documentation Agents nor Syndication Agents have any
special rights, powers, obligations, liabilities, responsibilities or duties
under this Agreement as a result of acting in the capacity of Documentation
Agents or Syndication Agents, as applicable, other than those applicable to them
in their capacity as Banks hereunder. Without limiting the foregoing, neither
Documentation Agents nor Syndication Agents shall have or be deemed to have a
fiduciary relationship with any Bank. Each Bank hereby makes the same
acknowledgments and undertakings with respect to Documentation Agents and the
Syndication Agents as it makes with respect to the Administrative Agent and any
directors, officers, agents and employees of the Administrative Agent in Section
10.5.
Section 11.23 Amendment and Restatement of Existing 364-Day Credit
Agreement. This Agreement amends and restates the Existing 364-Day Credit
Agreement in its entirety. From and after the date hereof any financial
institution that was a "Bank" under the Existing 364-Day Credit Agreement but
which is not a party to this Agreement shall have no obligation to make
56
loans to the Borrower either under the Existing 364-Day Credit Agreement, this
Agreement or any other Credit Document.
- Remainder of Page Intentionally Left Blank -
[Signature Page Follows]
57
In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York by their duly authorized
officers as of the day and year first above written.
BLACK HILLS CORPORATION, a
South Dakota corporation
By: _____________________________
Name: _____________________________
Title: _____________________________
58
Commitment: $[___________] ABN AMRO BANK N.V., in its individual
capacity as a Bank and as Administrative
Agent
By: _____________________________
Name: David B. Bryant
Title: Senior Vice President &
Managing Director
By: _____________________________
Name: _____________________________
Title: _____________________________
Address for notices:
ABN AMRO Bank N.V.
135 South LaSalle Street
Suite 710
Chicago, Illinois 60603
Attention: David B. Bryant/Saad Qais
Facsimile: 312.904.1466
Telephone: 312.904.2799 (Mr. Bryant)
312.904.6473 (Mr. Qais)
With copy to:
ABN AMRO Bank N.V.
208 South LaSalle Street
Suite 1500
Chicago, Illinois 60604-1003
Attention: Ken Keck
Facsimile: (312) 992-5111
Telephone: (312) 992-5134
Lending Offices: Same as above
Base Rate Loans: Same as above
Eurocurrency Loans: Same as above
59
Commitment: $[__________] UNION BANK OF CALIFORNIA, N.A.
By: _____________________________
Name: Robert J. Cole
Title: Vice President
Address for notices:
1980 Saturn St.
Monterey Park, CA 91754
Attention: Ruby Gonzales
Phone: (323) 720-7055
Fax: (323) 724-6198
Lending Offices:
445 South Figueroa St., 15th Floor
Los Angeles, CA 90071
Attention: Bryan Read
Base Rate Loans:
Same as address for notices.
Eurocurrency Loans:
Same as address for notices.
60
Commitment: $[___________] U.S. BANK, NATIONAL
ASSOCIATION, in its individual capacity
as a Bank and as Documentation Agent
By: _____________________________
Name: Sandra Vollmer
Title: Senior Lender
Address for notices:
U.S. Bank, National Association
701 St. Joseph Street
Rapid City, South Dakota 57701
Attention: Ms. Sandra Vollmer
Facsimile: 605.394.5500
Telephone: 605.394.2019
Lending Offices: Same as above
Base Rate Loans: Same as above
Eurocurrency Loans: Same as above
61
Commitment: $[____________] BANK OF MONTREAL
By: _____________________________
Name: Ian M. Plester
Title: Director
Address for notices:
115 South LaSalle St.
Floor: 111-17W
Chicago, Illinois 60603
Attention: Client Services
Phone: (312) 750 3771
Fax: (312) 750 6061
Lending Offices:
Base Rate Loans:
115 South LaSalle St.
Floor: 111-17W
Chicago, Illinois 60603
Eurocurrency Loans:
115 South LaSalle St.
Floor: 111-17W
Chicago, Illinois 60603
62
Commitment: $[____________] THE BANK OF NOVA SCOTIA
By: _____________________________
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
Address for notices:
600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Attention: Demetria January
Phone: (404) 877-1578
Fax: (404) 888-8998
Lending Offices:
Base Rate Loans:
Same As Above
Eurocurrency Loans:
Same As Above
63
Comitment: $[____________] CIBC INC., as a Lender
By: _____________________________
Name: M. Sanjeeva Senanayake
Title: Executive Director
CIBC World Markets Corp. As Agent
Address for notices:
CIBC Inc.
425 Lexington Avenue
New York, NY 10017
Attention: Sanjeeva Senanayake
Phone: (212) 856-3595
Fax: (212) 885-4911
Lending Offices:
Base Rate Loans:
CIBC Inc.
2727 Paces Ferry Road, Suite 1200
Atlanta, GA 30339
Attention: Miriam McCart
Facsimile No.: (770) 319-4950
Eurocurrency Loans:
CIBC Inc.
2727 Paces Ferry Road, Suite 1200
Atlanta, GA 30339
Attention: Miriam McCart
Facsimile No.: (770) 319-4950
64
Commitment: $[____________] COBANK, ACB
By: _____________________________
Name: Cathleen Reed
Title: Assistant Vice President
Address for notices:
5500 S. Quebec St.
Greenwood Village, CO 80111
Attention: Cathleen Reed
Phone: 303-740-4101
Fax: 303-224-2590
Lending Offices:
5500 S. Quebec St.
Greenwood Village, CO 80111
Base Rate Loans:
5500 S. Quebec St.
Greenwood Village, CO 80111
Eurocurrency Loans:
5500 S. Quebec St.
Greenwood Village, CO 80111
65
Commitment: $[___________] WELLS FARGO BANK, N.A.
By: _____________________________
Name: Thomas M. Foncannon
Title: Senior Vice President
Address for notices:
Wells Fargo Bank, N.A.
Energy Department
MAC C7301-046
1740 Broadway
Denver, CO 80274
Attention: Thomas M. Foncannon
Phone: 303.863.5017
Fax: 303.863.5196
Lending Offices: Same as above
Base Rate Loans: Same as above
Eurocurrency Loans: Same as above
66
Commitment: $[___________] THE DAI-ICHI KANGYO BANK, LTD.
By: _____________________________
Name: Nobuyasu Fukatsu
Title: General Manager
Address for notices:
10 South Wacker Drive, Suite 2600
Chicago, IL 60606
Attention: J. Richard Cummings
Phone: 312-715-6386
Fax: 312-876-2011
Lending Offices:
Base Rate Loans:
Loan Operations Department
1 World Trade Center, Suite 4911
New York, NY 10048-0487
Eurocurrency Loans:
Loan Operations Department
1 World Trade Center, Suite 4911
New York, NY 10048-0487
67
Commitment: $[___________] THE FUJI BANK, LIMITED
By: _____________________________
Name: Peter L. Chinnic
Title: Senior Vice President & Group Head
Address for notices:
Suite 2000
225 W. Wacker Drive
Chicago, IL 60606
Attention: Takeyuki Kuroki
Phone: (312) 621-0534
Fax: (312) 621-3386
Lending Offices:
Two World Trade Center
New York, NY 10048
Attention: Tina Catapana
Phone: (212) 898-2069
Fax: (212) 775-1460
Base Rate Loans:
Two World Trade Center
New York, NY 10048
Attention: Tina Catapana
Phone: (212) 898-2069
Fax: (212) 775-1460
Eurocurrency Loans:
Two World Trade Center
New York, NY 10048
Attention: Tina Catapana
Phone: (212) 898-2069
Fax: (212) 775-1460
68
Commitment: $[_____________] NATIONAL CITY BANK OF
MICHIGAN/ILLINOIS
By: _____________________________
Name: Mark R. Long
Title: Senior Vice President
Address for notices:
National City Bank of Michigan/Illinois
2021 Spring Road, Suite 600
Oak Brook, IL 60523
Attention: Donna Benson
Phone: 630-954-3189
Fax: 630-954-5570
Lending Offices:
National City Bank of Michigan/Illinois
2021 Spring Road, Suite 600
Oak Brook, IL 60523
Base Rate Loans:
National City Bank of Michigan/Illinois
2021 Spring Road, Suite 600
Oak Brook, IL 60523
Eurocurrency Loans:
National City Bank of Michigan/Illinois
2021 Spring Road, Suite 600
Oak Brook, IL 60523
69
Commitment: $[______________] NORDEUTSCHE LANDESBANK
GIROZENTRALE NEW YORK/
CAYMAN ISLANDS BRANCH
By: _____________________________
Name: Stephanie Finnen
Title: Vice President
By: _____________________________
Name: Joseph Haas
Title: Vice President
Address for notices:
Norddeutsche Landesbank Girozentrale
1114 Avenue of the Americas, 37th Floor
New York, NY 10036
Attention: Stephanie Finnen
Phone: 212-812-6806
Fax: 212-812-6860
Lending Offices:
Base Rate Loans:
Norddeutsche Landesbank Girozentrale
1114 Avenue of the Americas, 37th Floor
New York, NY 10036
Attention: Andrea Johann
Phone: 212-812-6830
Fax: 212-812-6930
Eurocurrency Loans:
Norddeutsche Landesbank Girozentrale
1114 Avenue of the Americas, 37th Floor
New York, NY 10036
Attention: Andrea Johann
Phone: 212-812-6830
Fax: 212-812-6930
70
EXHIBIT A
364-DAY NOTE
August [__], 2002
FOR VALUE RECEIVED, the undersigned, Black Hills Corporation, a South
Dakota corporation ("Borrower"), promises to pay to the order of
[_________________] (the "Bank") on the Termination Date of the hereinafter
defined Credit Agreement, at the principal office of ABN AMRO Bank N.V., in New
York, New York, in accordance with Section 4.1 of the Credit Agreement (as
hereafter defined), the aggregate unpaid principal amount of all Loans made by
the Bank to Borrower pursuant to the Credit Agreement, together with interest on
the principal amount of each Loan from time to time outstanding hereunder at the
rates, and payable in the manner and on the dates, specified in the Credit
Agreement.
The Bank shall record on its books or records or on a schedule attached
to this Note, which is a part hereof, each Loan made by it pursuant to the
Credit Agreement, together with all payments of principal and interest and the
principal balances from time to time outstanding hereon, whether the Loan is a
Base Rate Loan or a Eurodollar Loan, and the interest rate and Interest Period
applicable thereto, provided that prior to the transfer of this Note all such
amounts shall be recorded on a schedule attached to this Note. The record
thereof, whether shown on such books or records or on a schedule to this Note,
shall be shall be prima facie evidence of the same; provided, however, that the
failure of the Bank to record any of the foregoing or any error in any such
record shall not limit or otherwise affect the obligation of Borrower to repay
all Loans made to it pursuant to the Credit Agreement together with accrued
interest thereon.
This Note is one of the Notes referred to in the Amended and Restated
364-Day Credit Agreement dated as of August 27, 2002, among Borrower, ABN AMRO
Bank N.V., as Administrative Agent, U.S. Bank, National Association and The Bank
of Nova Scotiaas Documentation Agents, Union Bank of California, N.A. and Bank
of Montreal, as Syndication Agents and the financial institutions party thereto
(the "Credit Agreement"), and this Note and the holder hereof are entitled to
all the benefits provided for thereby or referred to therein, to which Credit
Agreement reference is hereby made for a statement thereof. All defined terms
used in this Note, except terms otherwise defined herein, shall have the same
meaning as in the Credit Agreement. This Note shall be governed by and construed
in accordance with the internal laws of the State of New York.
Prepayments may be made hereon and this Note may be declared due prior
to the expressed maturity hereof, all in the events, on the terms and in the
manner as provided for in the Credit Agreement.
- Remainder of Page Intentionally Left Blank -
[Signature Page Follows]
71
The Borrower hereby waives demand, presentment, protest or notice of
any kind hereunder.
BLACK HILLS CORPORATION, a
South Dakota corporation
By: _____________________________
Name: _____________________________
Title: _____________________________
72
EXHIBIT B
COMPLIANCE CERTIFICATE
This Compliance Certificate is furnished to ABN AMRO Bank N.V., as
Administrative Agent pursuant to the Amended and Restated 364-Day Credit
Agreement dated as of August 27, 2002, among Black Hills Corporation, a South
Dakota corporation ("Borrower"), ABN AMRO Bank N.V., as Administrative Agent,
U.S. Bank, National Association and The Bank of Nova Scotia, as Documentation
Agents, Union Bank of California, N.A., and Bank of Montreal, as Syndication
Agents and the financial institutions party thereto (the "Credit Agreement").
Unless otherwise defined herein, the terms used in this Compliance Certificate
have the meanings ascribed thereto in the Credit Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected or appointed ___________________of Borrower;
2. I have reviewed the terms of the Credit Agreement and I have made,
or have caused to be made under my supervision, a detailed review of the
transactions and conditions of Borrower and its Subsidiaries during the
accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which
constitutes a Default or an Event of Default during or at the end of the
accounting period covered by the attached financial statements or as of the
date of this Certificate, except as set forth below; and
4. Schedule 1 attached hereto sets forth financial data and
computations evidencing compliance with certain covenants of the Credit
Agreement, all of which data and computations are true, complete and
correct. All computations are made in accordance with the terms of the
Credit Agreement.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which Borrower has taken, is taking, or proposes to take
with respect to each such condition or event:
_______________________________________________________________________________
_______________________________________________________________________________
The foregoing certifications, together with the computations set forth in
Schedule 1 hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this ___________day of __________,
200_.
___________________________________
73
SCHEDULE 1 TO COMPLIANCE CERTIFICATE
Compliance Calculations for Credit Agreement
CALCULATION AS OF ________ __,200_
- ------------------------------------------------------------------ --------------------- ---------------------------
A. Liens (Sec. 7.9(c), (d), and (g))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Liens securing taxes or assessments or other _____________________ (Answer should be yes)
government charges or levies equal to or less
than $20,000,000 (Section 7.9(c))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Liens securing judgments or awards or surety _____________________ (Answer should be yes)
or appeal bonds issued in connection therewith
equal to or less than $20,000,000 (Section
7.9(d))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Is the aggregate amount of Indebtedness and _____________________ (Answer should be yes)
other obligations consisting of (i) the
deferred purchase price of newly acquired
property or incurred to finance the
acquisition of personal property of Borrower
used in the ordinary course of business of
such Borrower, (ii) Capitalized Lease
Obligations, and (iii) the performance of
tenders, statutory obligations, bids, leases
or other similar obligations (other than for
borrowed money) entered into in the ordinary
course of business or to secure obligations on
performance bonds which is secured by Liens
equal to or less than 5% of Consolidated
Assets as reflected on the most recent balance
sheet delivered by Borrower (Section 7.9(g)).
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
B. Sale and Leasebacks (Section 7.11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Aggregate obligations under all Sale and $____________________ (Line B1 not to exceed
Leasebacks arrangements (other than synthetic $30,000,000)
lease transactions excluded by Section 7.11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
C. Sale of Assets (Section 7.12)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Net book value of assets (other than $____________________ (Line C1 not to exceed
inventory, reserves and electricity in the 10% of total consolidated
ordinary course of business) sold during this assets)
fiscal year
- ------------------------------------------------------------------ --------------------- ---------------------------
74
- ------------------------------------------------------------------ --------------------- ---------------------------
D. Permitted Investments (Section 7.14)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Aggregate amount of Investments in Marketing $____________________
Subsidiaries made after the August 28, 2001
(Section 7.14(o)(ii))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Investments consisting of Guaranties of $____________________
Indebtedness of Marketing Subsidiaries
existing on the Effective Date
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Intercompany loans permitted pursuant to $____________________ Line E3
Section 7.15(e)(iii) owing by Marketing
Subsidiaries (Line E3)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
4. Sum of Lines D1, D2 and D3 $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
5. Is Line D4 equal to or less than $10,000,000? _____________________ (Answer should be yes)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
6. Aggregate amount of Investments in Persons $____________________ (Line D6 not to exceed
engaged in the lines of business described in $20,000,000)
clause (xii) of Section 7.8 (Section 7.14(k))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
E. Permitted Indebtedness (Section 7.15)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Secured Indebtedness except as set forth on $____________________ (Line E1 not to exceed 5%
Schedule 7.15(b): (i) of BHP (ii) evidencing of Consolidated Assets)
the deferred purchase price of newly acquired property or
incurred to finance the acquisition of personal property of
Borrower or a Subsidiary used in the ordinary course of
business of the Borrower of a Subsidiary, (iii) constituting
Capitalized Lease Obligations or with respect to synthetic (or
similar type) lease transactions, or (iv) incurred in
connection with the performance of tenders, statutory
obligations, bids, leases or other similar obligations (other
than for borrowed money) entered into in the ordinary course
of business or to secure obligations on performance bonds
(Section 7.15(c))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Intercompany loans owing by Borrower (Section $____________________ (Must be subordinated to
7.15(e)(i)(x)) Obligations)
- ------------------------------------------------------------------ --------------------- ---------------------------
75
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Intercompany Indebtedness owing by Marketing $____________________ (Line E3 not to exceed
Subsidiaries to Subsidiaries (Section the difference between
7.15(e)(iii)) (i) $10,000,000 less (ii)
the sum of Lines E4 and
D1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
4. Indebtedness consisting of Guarantees $____________________ (Line E4 not to exceed
(including Long-Term Guaranties) of Marketing the difference between
Subsidiary Indebtedness (Section 7.15(f)) (i) $10,000,000 less (ii)
the sum of Lines E3 and
D1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
5. Indebtedness of Marketing Subsidiaries under $____________________ (Line E5 not to exceed
Marketing Subsidiary Excluded Credit Marketing Subsidiary
Facilities (Section 7.15(g)) Indebtedness Limit)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
F. Consolidated Net Worth (Section 7.16)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Consolidated Net Worth $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. 50% of aggregate Consolidated Net Income, if $____________________
positive, from and including April 1, 2002
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Does Line F1 exceed sum of (i) $425,000,000 _____________________ (Answer should be yes)
plus (ii) line F2
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
G. Recourse Leverage Ratio (Section 7.17)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. consolidated Indebtedness $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Non-Recourse Indebtedness $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Recourse Indebtedness (Line G1 minus Line G2) $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
4. Indebtedness of Marketing Subsidiaries under $____________________ (Not to exceed Marketing
Marketing Subsidiary Excluded Credit Subsidiary Indebtedness
Facilities (Line E5) Limit)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
5. Consolidated Net Worth $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
6. Capital (Line G3 minus Line G4 plus Line G5) $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
7. Recourse Leverage Ratio _________ :1.00 (ratio of (A) difference
between (x) Line G3 minus
(y) Line G4 to (B) Line
G6 not to exceed 0.65 to
1.00)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
H. Fixed Charge Coverage Ratio (Section 7.18)
- ------------------------------------------------------------------ --------------------- ---------------------------
76
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Consolidated Net Income for past four fiscal $____________________
quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Income taxes for past four fiscal quarters (to $____________________
the extent subtracted in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Consolidated Interest Expense for past four $____________________ Insert amount from Line
fiscal quarters (to the extent subtracted in H18
calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
4. Amortization expense for intangible assets $____________________
for past four fiscal quarters (to the extent
subtracted in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
5. Depreciation expense for past four fiscal
quarters (to the extent subtracted in
calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
6. Losses on sales of assets (excluding sales in $____________________
the ordinary course of business) and other
extraordinary losses for past four fiscal
quarters (to the extent subtracted in
calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
7. Interest income for past four fiscal quarters $____________________
arising from traditional investment
activities with banks, investment banks
and other financial institutions or relating
to governmental or other marketable securities
(to the extent added in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
8. Gains on sales of assets (excluding sales in $____________________
the ordinary course of business) and other
extraordinary gains for past four fiscal
quarters (to the extent added in calculating
H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
9. Capital Expenditures for past four fiscal $____________________
quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
10. Without duplication, any payments made by a
Consolidated Subsidiary constituting a
repayment of principal Indebtedness (other
than (x) the Obligations and (y) repayments of
principal made with the proceeds of a $____________________
refinancing of such Indebtedness otherwise
permitted pursuant to this Agreement) or with
respect to a reserve, and
- ------------------------------------------------------------------ --------------------- ---------------------------
77
- ------------------------------------------------------------------ --------------------- ---------------------------
11. Without duplication, any other mandatory
payment made by a Consolidated Subsidiary in
such period not included as an expense or loss $____________________
in calculating Consolidated Net Income
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
12. Consolidated EBITDA (sum of Lines H1, H2, H3, $____________________
H4, H5 and H6 less sum of Lines H7, H8, H9,
H10 and H11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
13. Restricted Earnings for the past four fiscal $____________________
quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
14. Adjusted Consolidated EBITDA (Line H12 minus $____________________
Line H13)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
15. All interest charges (including capitalized $____________________
interest, imputed interest charges with
respect to Capitalized Lease Obligations and
all amortization of debt discount and expense
and other deferred financing charges) of the
Borrower and its Subsidiaries on a
consolidated basis for such period determined
in accordance with GAAP, other than interest
charges relating to Non-Recourse Indebtedness
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
16. All commitment or other fees payable in $____________________
respect of the issuance of standby letters of
credit or other credit facilities for the
account of the Borrower or its Subsidiaries
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
17. Net costs/expenses incurred by the Borrower $____________________
and its Subsidiaries under Derivative
Arrangements
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
18. Consolidated Interest Expense (Sum of Lines $____________________
H15, H16 and H17)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
19. The aggregate amount of all mandatory $____________________
scheduled payments (whether designated as
payments or prepayments) and scheduled sinking
fund payments with respect to principal of any
Recourse Indebtedness of the Borrower or its
Subsidiaries (including payments in the nature
of principal under Capital Leases) for the
last 4 quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
20. Consolidated Fixed Charges (Sum of Lines H18 $____________________
and H19)
- ------------------------------------------------------------------ --------------------- ---------------------------
78
- ------------------------------------------------------------------ --------------------- ---------------------------
21. Fixed Charge Coverage Ratio (ratio of Lines _________1.00 (ratio must not be less
H14 to (ii) Line H20) than 1.50 to 1.00)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
I. Liquidity Covenant (Section 7.26)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Unrestricted cash at Borrower $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Unused availability of senior unsecured credit $____________________
facilities available to Borrower
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Liquid Assets (Line I1 plus Line I2) $___________________ (amount must exceed
$30,000,000)
- ------------------------------------------------------------------ --------------------- ---------------------------
79
SCHEDULE 1
PRICING GRID
- ------------------ ------------------- ------------ ------------------- -------------------
If the Level The Facility Fee The The Eurodollar The Base Rate
Status Is Rate is: Utilization Margin is: Margin is:
Fee Rate
is:
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level I Status 0.080% 0.100% 0.420% 0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level II Status 0.100% 0.125% 0.500% 0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level III Status 0.125% 0.150% 0.625% 0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
Level IV Status 0.150% 0.200% 0.725% 0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level V Status 0.200% 0.250% 0.800% 0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level VI Status 0.600% 0.500% 1.400% 0.400%
- ------------------ ------------------- ------------ ------------------- -------------------
Each change in a rating shall be effective as of the date it is
announced by the applicable rating agency.
In the event that the Moody's Rating and the S&P Rating fall in
consecutive Levels, the rating falling in the lower Level (with Level I being
the highest Level and Level VI being the lowest Level) shall govern for purposes
of determining the applicable pricing pursuant to the above pricing grid. In the
event that the Moody's Rating and the S&P Rating fall in non-consecutive Levels,
the Level immediately above the Level in which the lower rating falls (with
Level I being the highest Level and Level VI being the lowest Level) shall
govern for purposes of determining the applicable pricing pursuant to the above
pricing grid.
80
SCHEDULE 4
ADMINISTRATIVE AGENT'S NOTICE AND PAYMENT INFORMATION
Part A - Payments
Loan Repayments, Interest, Fees:
ABN AMRO Bank N.V.
New York, NY
ABA # 026009580
F/O ABN AMRO Bank, N.V.
Chicago Branch CPU
Account # 650-001-1789-41
Reference: Agency Services Black Hills Corporation
Part B - Notices
Notices related to commitments, covenants or extensions of expiry/termination
dates:
ABN AMRO Bank N.V.
208 South LaSalle Street, Suite 1500
Chicago, IL 60604-1003
Attn: Agency Services
E-Mail: beata.konopko@abnamro.com
FAX: (312)-992-5157
ABN AMRO Bank N.V.
208 South LaSalle Street, Suite 1500
Chicago, IL 60604-1003
Attn: Credit Administration
E-Mail: kenneth.keck@abnamro.com
FAX: 312-992-5111
ABN AMRO Bank N.V.
135 South LaSalle Street, Suite 710
Chicago, Illinois 60603
Attn: Thomas Sterr
E-Mail: thomas.sterr@abnamro.com
FAX: (312)-904-6387
Notices related to Loans, Letters of Credit and Fees:
ABN AMRO Bank N.V.
208 South LaSalle Street, Suite 1500
Chicago, IL 60604-1003
Attn: Agency Services
81
E-Mail: beata.konopko@abnamro.com
FAX: 312-992-5157
Address for all Required Executed Documentation and Financial Information:
ABN AMRO Bank N.V.
208 South LaSalle Street, Suite 1500
Chicago, IL 60604-1003
Attn: Credit Administration
E-Mail: kenneth.keck@abnamro.com
FAX: 312-992-5111
82
SCHEDULE 5.2
BLACK HILLS CORPORATION SUBSIDIARIES
Subsidiary Name State of Origin BHC's Description of Subsidiary's
Ownership Authorized Capital Stock, if
not wholly owned
1 Acquisition Partners, L.P. New York 100% N/A
2. Adirondack Hydro Development Delaware 100% N/A
Corporation
3. Adirondack Hydro-Fourth Branch, LLC New York 100% N/A
4. Adirondack Operating Services, LLC New York 100% N/A
5. Black Hills Berkshire, LLC Delaware 100% N/A
6. Black Hills Capital Development, Inc. Illinois 100% N/A
7. Black Hills Colorado, LLC Delaware 100% N/A
8. Black Hills Energy Capital, Inc. Delaware 100% N/A
9. Black Hills Energy Pipeline, LLC Delaware 100% N/A
10. Black Hills Energy Resources, Inc. South Dakota 100% N/A
11. Black Hills Energy Terminal, LLC South Dakota 100% N/A
12. Black Hills Energy, Inc. South Dakota 100% N/A
13. Black Hills Exploration and Wyoming 100% N/A
Production, Inc.
14. Black Hills Fiber Systems, Inc. South Dakota 100% N/A
15. Black Hills Fibercom, LLC South Dakota 51% Black Hills Fibercom, LLC
has a single class of units
of membership of which 41
units are issued and
outstanding. Black Hills
Fiber Systems, Inc. holds 21
units.
16. Black Hills Fountain Valley, LLC Delaware 100% N/A
17. Black Hills Generation, Inc. Wyoming 100% N/A
18. Black Hills Harbor, LLC Delaware 83.3% Black Hills Harbor, LLC has
83
a single class of units of
membership. 100 units of
which are currently issued
and outstanding. Black
Hills Corporation indirectly
holds interests in 83.3% of
the units.
19. Black Hills High Desert, Inc. Delaware 100% N/A
20. Black Hills Idaho Operations, LLC Delaware 100% N/A
21. Black Hills Independent Power Fund, Texas 100% N/A
Inc.
22. Black Hills Kilgore Energy Pipeline, Delaware 100% N/A
LLC
23. Black Hills Kilgore Pipeline, Inc. Delaware 100% N/A
24. Black Hills Kilgore Pipeline Texas 100% N/A
Company, L.P.
25. Black Hills Long Beach, Inc. Delaware 100% N/A
26. Black Hills Millennium Pipeline, Inc. South Dakota 100% N/A
27. Black Hills Millennium Terminal, Inc. South Dakota 100% N/A
28. Black Hills Nevada Operations, LLC Delaware 100% N/A
29. Black Hills Nevada Real Estate Delaware 100% N/A
Holdings, LLC
30. Black Hills Nevada, LLC Delaware 100% N/A
31. Black Hills North America, Inc. Delaware 100% N/A
32. Black Hills Operating Company, LLC Delaware 100%
33. Black Hills Ontario, LLC Delaware 50% Black Hills Ontario, LLC has
a single class of units of
membership, of which 100
units are issued and
outstanding.
34. Black Hills Power, Inc. South Dakota 100% N/A
35. Black Hills Southwest, LLC Delaware 100% N/A
36 Black Hills Valmont Colorado, Inc. Delaware 100% N/A
37. DAKSOFT, Inc. South Dakota 100% N/A
38. Desert Arc I, LLC Delaware 50% Desert Arc I, LLC has a
single class of units of
membership, of which
84
Black Hills Corporation
indirectly holds 50%.
39. Desert Arc II, LLC Delaware 50% Desert Arc II, LLC has a
single class of unites of
membership, of which
Black Hills Corporation
indirectly holds 50%.
40. EIF Investors, Inc. Delaware 100% N/A
41. E-Next A Equipment Leasing Company, Delaware 100% N/A
LLC
42. Enserco Energy, Inc. South Dakota 100% N/A
43. Fountain Valley Power, L.L.C. Delaware 100% N/A
44. Harbor Cogeneration Company California 83.3% Harbor Cogeneration Company
is a California general
partnership. Black Hills
Corporation has an indirect
ownership interest of 83.3%
45. Hudson Falls, LLC New York 100% N/A
46. ICPM, Inc. Illinois 100% N/A
47. Indeck Auburndale, LLC Delaware 100% N/A
48. Indeck Gordonsville, LLC Delaware 100% N/A
49. Indeck North American Power Fund, LP Delaware 81.9% Indeck North American Power
Fund, L.P. is a limited.
Black Hills Corporation
holds direct and indirect
general and limited
partnership interests
totaling up to 81.9%.
50. Indeck Hills North American Power Delaware 85.7% Indeck North American Power
Partners, LP Partners, LP is a limited.
Black Hills Corporation
holds direct and indirect
general and limited
partnership interests
totaling up to 85.7%
51. Indeck Pepperell Power Associates, Delaware 82.9% Indeck Pepperell Power
Inc. Associates, Inc. has a
single class of stock
with 100 shares issued
and outstanding. Black
85
Hills Corporation
indirectly owns 82.9%
of the capital stock of
Indeck Pepperell, by
and through its interests
in Indeck North
American Power Fund,
L.P.
52. Landrica Development Company South Dakota 100% N/A
53. Las Vegas Cogeneration Energy Delaware 100% N/A
Financing, LLC
54. Las Vegas Cogeneration II, LLC Delaware 100% N/A
55. Las Vegas Cogeneration Limited Nevada 50% Las Vegas Cogeneration
Partnership Limited Partnership has an
85% general partnership
interest, of which Black
Hills Corporation indirectly
owns 50%, and a 15% limited
partnership interest, of
which Black Hills
Corporation indirectly owns
50%.
56. Middle Falls Corporation New York 100% N/A
57. Middle Falls II, LLC New York 100% N/A
58. Middle Falls Limited Partnership New York 50% Middle Falls Limited
Partnership has a 2%
general partnership
interest, of which Black
Hills Corporation
indirectly holds 1%, and
a 98% limited
partnership interest, of
which Black Hills
Corporation indirectly
holds 49%
59. Middle Falls Partners, LLC New York 50% Middle Falls Partners,
LLC has a single class
of units of membership,
of which Black Hills
Corporation indirectly
86
holds 50%.
60. Millennium Pipeline Company, L.P. Texas 100%
61. Millennium Terminal Company, L.P. Texas 100%
62. NHP, L.P. New York 100% N/A
63. North American Funding, L.L.C. Delaware 100% N/A
64. Northern Electric Power Company, L.P. New York 37% Northern Electric Power
Company, L.P. has a
99% limited partnership
interest, of which Black
Hills Corporation
indirectly owns 36.5%
and a 1% general
partnership interest, of
which Black Hills
Corporation indirectly
owns 0.5%.
65. NYSD Limited Partnership New York 100% N/A
66. NYSD Partners, LLC New York 100% N/A
67. Sissonville Corporation New York 100% N/A
68. Sissonville II, LLC New York 100% N/A
69. Sissonville Limited Partnership New York 100% N/A
70. Sissonville Partners, LLC New York 100% N/A
71. South Glens Falls, L.P. New York 30.2% South Glens Falls, L.P.
has a 99% limited
partnership interest, of
which Black Hills
Corporation indirectly
owns 29.7% and a 1%
general partnership
interest, of which Black
Hills Corporation
indirectly owns 0.5%.
72. South Glens Falls, LLC New York 100% N/A
73. State Dam Corporation New York 100% N/A
74. State Dam II, LLC New York 100% N/A
75. Sunco, Ltd., a limited liability Nevada 100% N/A
company
76. VariFuel, LLC South Dakota 100% N/A
77. Warrensburg Corporation New York 100% N/A
78. Warrensburg Hydro Power Limited New York 100% N/A
Partnership
87
79. Warrensburg II Corporation New York 100% N/A
80. Wyodak Resources Development Corp. Delaware 100% N/A
88
SCHEDULE 5.5
LITIGATION AND LABOR CONTROVERSIES
Black Hills Harbor, LLC - City of Long Beach
In June of 2000, the City of Long Beach, a municipal corporation in the
State of California, acting for the Port of Long Beach ("City"), brought an
action against Black Hills Harbor, LLC (formerly known as Indeck Harbor, LLC)
("Fund"), alleging breaches of a partnership interest purchase agreement dated
as of January 1, 1995 ("Agreement"), relating to the amount and timing of
certain contingent payments, if any, due the City resulting in claims by the
City in excess of $9 million. The court ordered that the disputes raised in
litigation must be resolved by arbitration in accordance with the terms of the
Agreement. Representatives of the City and the Fund engaged in mediation to
attempt to resolve the disputes involving a transportation tax for natural gas
delivered to a power facility located in Long Beach and owned by the Fund.
Because the parties were unable to reach resolution of the dispute, they have
pursued arbitration.
Grizzly Gulch Fire
On June 29, 2002, a forest fire began near Deadwood, South Dakota.
Before being contained more than eight days later, the fire consumed over 10,000
acres of public and private land, mostly consisting of rugged forested areas.
The fire destroyed 7 homes, and approximately 15 outbuildings. There are no
reported personal injuries at this time. In addition, the fire burned to the
edge of the City of Deadwood, forcing the evacuation of the City of Deadwood,
and an adjacent City of Lead, South Dakota. These communities are active in the
tourist and gaming industries. Individuals were ordered to leave their homes and
motels, and businesses were closed for a short period of time. On July 16, 2002,
the State of South Dakota announced the results of its investigation of the
cause and origin of the fire. The State concluded that the fire was caused by
tree encroachment into and contact with a transmission line owned and maintained
by Black Hills Power, Inc.
Black Hills Power is in the process of completing its own investigation
of the fire, and will request access to the materials that form the basis for
the State's conclusions. This investigation is not complete. Depending on the
outcome of this process, it is possible that claims will be made against Black
Hills Power for damages allegedly caused by the fire, for fire suppression costs
and costs of remediation of burned areas, for individual and business losses
relating to injury to personal and real property, and lost income. No civil
action or regulatory proceeding is pending at this time.
89
SCHEDULE 5.11
ENVIRONMENTAL MATTERS
None.
90
SCHEDULE 7.9
EXISTING LIENS
1. Enserco Energy Inc. has granted a security interest in favor of Fortis
Capital Corp., with respect to Enserco Energy Inc.'s personal property
assets to secure the $135,000,000 credit facility referred to in on
Schedule 7.15.
2. Black Hills Energy Resources, Inc. has granted a security interest in favor
of Fortis Capital Corp., with respect to Black Hills Energy Resources,
Inc.'s personal property assets to secure the $25,000,000 credit facility
referred to on Schedule 7.15.
3. Black Hills Power, Inc. Indenture of Mortgage and Deed of Trust has a first
mortgage lien on substantially all of the properties used in the electric
utility business excluding "Excepted Property." Excepted property includes
all cash and securities; all contracts, leases and other agreements; all
permits, licenses, franchises and rights granted by governmental entities;
all movable equipment and parts including motor vehicles; all materials,
supplies and merchandise offered for sale in the ordinary course of
business, fuel and other consumables; all office furniture and office
equipment, communications equipment and computer equipment; all minerals,
crops and timber harvested or extracted from land; all leasehold interests;
and all property not used in the electric utility business.
4. Black Hills Exploration and Production has granted security interests in
various certificates of deposits for oil & gas leases and operations
totaling less than $150,000 in aggregate.
5. Wyodak Resources Development Corp. has granted a security interest in a
certificate of deposit in the amount of $397,000 to securitize its
self-insurance permit for black lung liability.
91
Schedule 7.14
Existing Investments
1. Landrica Development Company holds 700,000 registered and unrestricted
shares of the common stock of KFx, Inc. and 1,300,000 warrants to purchase
a single share of the common stock of KFx at $3.48 at any time prior to
April 30, 2005.
2. Landrica Development Company holds a $450,000 equity investment in Phase
Technology, LLC.
3. Landrica Development Company holds a $50,000 equity investment in Genesis
Equity Fund, LLC.
4. Black Hills Corporation holds investments in life insurance policies and
nonqualified deferred compensation plans in the amount of $2,363,000.
5. Black Hills Power, Inc. holds investments in life insurance policies and
nonqualified deferred compensation plans in the amount of $2,586,000.
6. Wyodak Resources Development Corp. holds investments in life insurance
policies in the amount of $451,000.
7. Black Hills Exploration and Production, Inc. holds investments in life
insurance policies in the amount of $72,000.
8. Black Hills FiberCom, LLC holds investments in life insurance policies in
the amount of $108,000.
9. Daksoft, Inc. holds investments in life insurance policies in the amount of
$149,000.
10. Black Hills Energy Capital, Inc. has an equity investment in Black Hills
Idaho Operations, LLC in the amount of $2,968,000.
11. Black Hills Energy Capital, Inc. has an equity investment in EIF Funds in
the amount of $9,888,000.
12. Black Hills Energy Capital, Inc. holds other various notes receivable in
the aggregate amount of $1,676,000
13. Black Hills Fiber Systems, Inc. holds a convertible debenture note in the
amount of $40,000,000 due from Black Hills FiberCom, LLC.
92
SCHEDULE 7.15
PERMITTED INDEBTEDNESS
(A) Indebtedness of Marketing Subsidiaries
1. Enserco Energy Inc. Credit Facility with Fortis Capital Corp. $135,000,000
2. Black Hills Energy Resources, Inc. Credit Facility with Fortis Capital $25,000,000
Corp. (In addition there is a $12,500,000 overdraft line).
(B) Other Indebtedness
1. Black Hills Power, Inc./Black Hills Generation, Inc. Note Payable to $992,909
Bear Paw Energy, LLC.
2. Credit Agreement between Black Hills Colorado, LLC, the Bank Nova $135,000,000
Scotia, and various other banks.
3. Black Hills Corporation First Mortgage Bonds. $187,835,904
4. Black Hills Power, Inc. Pollution Control Revenue Bonds. $24,500,000
5. Black Hills Power, Inc. Environmental Improvement Revenue Bonds $2,855,000
(Floating Rate).
6. Wyodak Resources Development Corp. reclamation bond obligations $21,644,000
relating to its mining permits.
7. Landrica Development Company reclamation bond obligation relating to $3,794,997
its mining permits.
8. Black Hills Exploration and Production, Inc. miscellaneous performance $500,000
bonds and letters of credit relating to oil and gas well leases and
operations.
9. Black Hills Corporation and Black Hills Nevada, LLC bridge loan $50,000,000
secured by the Las Vegas Cogen II facility.
10. Term loan and letter of credit facility between Black Hills Fountain $164,471,218
Valley, LLC, Fountain Valley Power, LLC, and E-Next A Equipment
Leasing Company, LLC and various banks (including Union Bank of
California as agent bank).
11. Northern Electric Power Co. L.P. project financing term loan secured $66,878,240
by the Hudson Falls generating plant.
12. South Glens Falls LP project financing term loan secured by the South $22,878,498
Glens Falls generating plant.
13. Black Hills Corporation guarantee of lease payments on the Wygen 1 $140,000,000
facility.
14. Black Hills Corporation guarantee in favor of Cheyenne Light, Fuel and $5,000,000
Power in connection with performance of the Wygen 1 Power Purchase
Agreement.
15. Black Hills Corporation guarantee in favor of Cheyenne Light, Fuel and $10,000,000
Power in connection with performance of Black Hills Generation under
the Gillette Turbine Power Purchase Agreement.
93
16. Black Hills Corporation guarantee in favor of Las Vegas Cogen II $749,970
interconnection agreement with Nevada Power Company.
17. Black Hills Corporation completion guarantee in favor of Bank of Nova All payments
Scotia in connection with expanded Colorado facilities.
18. Black Hills Corporation guarantee in favor of UBS AG in connection $3,000,000
with Enserco Energy, Inc.'s Derivative, Power and Gas Agreements with
UBS AG.
19. Black Hills Corporation guarantee in favor of Koch Exploration $4,500,000
Company, LLC in connection with Enserco Energy, Inc. agreements with
Koch Exploration Company, LLC.
All indebtedness balances are as of June 30, 2002 (except for inclusion of
additional $75,000,000 on First Mortgage Bonds issued August 8, 2002).
94
SCHEDULE 7.19
RESTRICTIONS ON DISTRIBUTIONS AND EXISTING NEGATIVE PLEDGES
1. Enserco Energy Inc. has granted a security interest in favor of Fortis
Capital Corp., with respect to Enserco Energy Inc.'s personal property
assets to secure the $135,000,000 credit facility referred to in on
Schedule 7.15.
2. Black Hills Energy Resources, Inc. has granted a security interest in favor
of Fortis Capital Corp., with respect to Black Hills Energy Resources,
Inc.'s personal property assets to secure the $25,000,000 credit facility
referred to on Schedule 7.15.
3. Black Hills Power, Inc. Indenture of Mortgage and Deed of Trust contains a
provision which prohibits the payment of dividends should the Company's
retained earnings amount not meet certain minimal levels. Currently the
Company is required to maintain a retained earnings level of greater than
$318,000 for dividend payments to be allowed under the indenture.
4. Substantially all of Black Hills Energy Capital, Inc.'s project finance
subsidiaries' nonrecourse debt contain restrictions which prohibit
distributions unless certain financial covenants limits are met.
Dividends on Black Hills Corporation's preferred stock must be paid or declared
and set apart for payment before any dividends may be paid or declared and set
apart for payment on the Company's common stock. The Company's preferred stock
is cumulative.
95
Execution Copy Exhibit 10.2
- ----------------------------------------------------------------------------
TERM CREDIT AGREEMENT
DATED AS OF
SEPTEMBER 25, 2002
AMONG
BLACK HILLS CORPORATION,
as Borrower,
THE FINANCIAL INSTITUTIONS PARTY HERETO,
as Banks,
AND
CREDIT LYONNAIS NEW YORK BRANCH,
as Administrative Agent,
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
(This Table of Contents is not part of the Agreement)
PAGE
SECTION 1 DEFINITIONS; INTERPRETATION.....................................................................1
Section 1.1 Definitions............................................................................1
Section 1.2 Interpretation........................................................................12
SECTION 2 THE CREDITS....................................................................................12
Section 2.1 The Term Loan.........................................................................12
Section 2.2 [Intentionally Omitted]...............................................................13
Section 2.3 Applicable Interest Rates. (a) Base Rate Loans........................................13
Section 2.4 Minimum Borrowing Amounts.............................................................14
Section 2.5 Manner of Borrowing Loans and Designating Interest Rates Applicable
to Loans 15
Section 2.6 Interest Periods......................................................................16
Section 2.7 Maturity of Loans.....................................................................17
Section 2.8 Prepayments...........................................................................17
Section 2.9 Default Rate..........................................................................17
Section 2.10 The Notes.............................................................................18
Section 2.11 Funding Indemnity.....................................................................18
SECTION 3 FEES...........................................................................................19
Section 3.1 Fees..................................................................................19
SECTION 4 PLACE AND APPLICATION OF PAYMENTS..............................................................19
Section 4.1 Place and Application of Payments.....................................................19
SECTION 5 REPRESENTATIONS AND WARRANTIES.................................................................19
Section 5.1 Corporate Organization and Authority..................................................19
Section 5.2 Subsidiaries..........................................................................20
Section 5.3 Corporate Authority and Validity of Obligations.......................................20
Section 5.4 Financial Statements..................................................................20
Section 5.5 No Litigation; No Labor Controversies.................................................21
Section 5.6 Taxes.................................................................................21
Section 5.7 Approvals.............................................................................21
Section 5.8 ERISA.................................................................................21
Section 5.9 Government Regulation.................................................................21
Section 5.10 Margin Stock; Use of Proceeds.........................................................22
Section 5.11 Licenses and Authorizations; Compliance with Laws. (a)................................22
Section 5.12 Ownership of Property; Liens..........................................................22
Section 5.13 No Burdensome Restrictions; Compliance with Agreements................................23
Section 5.14 Full Disclosure.......................................................................23
Section 5.15 Solvency..............................................................................23
SECTION 6 CONDITIONS PRECEDENT...........................................................................23
Section 6.1 Initial Credit Event..................................................................23
Section 6.2 All Credit Events.....................................................................24
SECTION 7 COVENANTS......................................................................................25
Section 7.1 Corporate Existence; Subsidiaries.....................................................25
Section 7.2 Maintenance...........................................................................25
Section 7.3 Taxes.................................................................................25
i
Section 7.4 ERISA.................................................................................25
Section 7.5 Insurance.............................................................................26
Section 7.6 Financial Reports and Other Information...............................................26
Section 7.7 Bank Inspection Rights................................................................28
Section 7.8 Conduct of Business...................................................................28
Section 7.9 Liens.................................................................................28
Section 7.10 Use of Proceeds; Regulation U.........................................................28
Section 7.11 Sales and Leasebacks..................................................................28
Section 7.12 Mergers, Consolidations and Sales of Assets...........................................29
Section 7.13 Use of Property and Facilities; Environmental and Health and Safety Laws..............30
Section 7.14 Investments, Acquisitions, Loans, Advances and Guaranties.............................30
Section 7.15 Restrictions on Indebtedness..........................................................32
Section 7.16 Consolidated Net Worth................................................................34
Section 7.17 Recourse Leverage Ratio...............................................................34
Section 7.18 Fixed Charge Coverage Ratio...........................................................34
Section 7.19 Dividends and Other Shareholder Distributions.........................................34
Section 7.20 No Negative Pledge....................................................................34
Section 7.21 Transactions with Affiliates..........................................................35
Section 7.22 Compliance with Laws..................................................................35
Section 7.23 Pari-Passu............................................................................35
Section 7.24 Certain Subsidiaries..................................................................35
Section 7.25 Ratings...............................................................................35
Section 7.26 Liquidity Covenant....................................................................35
Section 7.27 Existing Credit Agreements............................................................35
SECTION 8 EVENTS OF DEFAULT AND REMEDIES.................................................................35
Section 8.1 Events of Default.....................................................................36
Section 8.2 Non-Bankruptcy Defaults...............................................................37
Section 8.3 Bankruptcy Defaults...................................................................38
Section 8.4 [Intentionally Omitted]...............................................................38
Section 8.5 Expenses..............................................................................38
SECTION 9 CHANGE IN CIRCUMSTANCES........................................................................38
Section 9.1 Change of Law.........................................................................38
Section 9.2 Unavailability of Deposits or Inability to Ascertain, or Inadequacy of, LIBOR.........38
Section 9.3 Increased Cost and Reduced Return.....................................................39
Section 9.4 Lending Offices.......................................................................40
Section 9.5 Discretion of Bank as to Manner of Funding............................................40
SECTION 10 THE AGENT......................................................................................40
Section 10.1 Appointment and Authorization of Administrative Agent.................................40
Section 10.2 Administrative Agent and its Affiliates...............................................41
Section 10.3 Action by Administrative Agent........................................................41
Section 10.4 Consultation with Experts.............................................................41
Section 10.5 Liability of Administrative Agent; Credit Decision....................................41
Section 10.6 Indemnity.............................................................................42
Section 10.7 Resignation of Administrative Agent and Successor Administrative Agent................42
ii
SECTION 11 MISCELLANEOUS..................................................................................43
Section 11.1 Withholding Taxes.....................................................................43
Section 11.2 No Waiver of Rights...................................................................44
Section 11.3 Non-Business Day......................................................................44
Section 11.4 Documentary Taxes.....................................................................44
Section 11.5 Survival of Representations...........................................................44
Section 11.6 Survival of Indemnities...............................................................45
Section 11.7 Set-Off...............................................................................45
Section 11.8 Notices...............................................................................45
Section 11.9 Counterparts..........................................................................46
Section 11.10 Successors and Assigns................................................................46
Section 11.11 Participants and Note Assignees.......................................................47
Section 11.12 Assignments by Banks..................................................................47
Section 11.13 Amendments............................................................................48
Section 11.14 Headings..............................................................................48
Section 11.15 Legal Fees, Other Costs and Indemnification...........................................48
Section 11.16 Entire Agreement......................................................................49
Section 11.17 Construction..........................................................................49
Section 11.18 Governing Law.........................................................................49
Section 11.19 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL......................................49
Section 11.20 Replacement of Bank...................................................................49
Section 11.21 Confidentiality.......................................................................50
iii
EXHIBITS
A - Form of Note
B - Form of Compliance Certificate
SCHEDULES
SCHEDULE 1 Pricing Grid
SCHEDULE 4 Administrative Agent Notice and Payment Info
SCHEDULE 5.2 Schedule of Existing Subsidiaries
SCHEDULE 5.5 Litigation and Labor Controversies
SCHEDULE 5.11 Environmental Matters
SCHEDULE 7.9 Existing Liens
SCHEDULE 7.14 Existing Investments
SCHEDULE 7.15(a) Marketing Subsidiary Indebtedness
SCHEDULE 7.15(b) Existing Secured Indebtedness
SCHEDULE 7.19 Restrictions on Distributions and Existing Negative
Pledges
iv
TERM CREDIT AGREEMENT
TERM CREDIT AGREEMENT, dated as of September 25, 2002 among Black Hills
Corporation, a South Dakota corporation ("Borrower"), the financial institutions
from time to time party hereto (each a "Bank," and collectively the "Banks"),
and Credit Lyonnais New York Branch in its capacity as agent for the Banks
hereunder (in such capacity, the "Administrative Agent").
WITNESSETH THAT:
WHEREAS, the Borrower desires to obtain the several commitments of the
Banks to make available a term loan, as described herein; and
WHEREAS, the Banks are willing to extend such commitments subject to
all of the terms and conditions hereof and on the basis of the representations
and warranties hereinafter set forth.
NOW, THEREFORE, in consideration of the recitals set forth above and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1 DEFINITIONS; INTERPRETATION.
Section 1.1 Definitions. The following terms when used herein have the
following meanings:
"Adjusted Consolidated EBITDA" means, for any period, (A) Consolidated
EBITDA less (B) Restricted Earnings.
"Adjusted LIBOR" is defined in Section 2.3(b) hereof.
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with their correlative
meanings, "controlled by" and "under common control with") means possession,
directly or indirectly, of power to direct or cause the direction of management
or policies of a Person (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event for purposes of this definition: (i) any Person which owns directly or
indirectly twenty percent (20%) or more of the securities having ordinary voting
power for the election of directors or other governing body of a corporation or
twenty percent (20%) or more of the partnership or other ownership interests of
any other Person will be deemed to control such corporation or other Person; and
(ii) each director and executive officer of Borrower or any Subsidiary of
Borrower shall be deemed an Affiliate of Borrower and each of its Subsidiaries.
"Administrative Agent" is defined in the first paragraph of this Agreement
and includes any successor Administrative Agent pursuant to Section 10.7 hereof.
1
"Agreement" means this Term Credit Agreement, including all Exhibits
and Schedules hereto, as it may be amended, supplemented or otherwise modified
from time to time in accordance with the terms hereof.
"Applicable Margin" means, at any time (i) with respect to Base Rate
Loans, the Base Rate Margin and (ii) with respect to Eurodollar Loans, the
Eurodollar Margin.
"Applicable Telerate Page" is defined in Section 2.3(b) hereof.
"Authorized Representative" means those persons shown on the list of
officers provided by Borrower pursuant to Section 6.1(e) hereof, or on any
updated such list provided by Borrower to the Administrative Agent, or any
further or different officer of Borrower so named by any Authorized
Representative of Borrower in a written notice to the Administrative Agent.
"Bank" and "Banks" are defined in the first paragraph of this
Agreement.
"Base Rate" is defined in Section 2.3(a) hereof.
"Base Rate Loan" means a Loan bearing interest prior to maturity at a
rate specified in Section 2.3(a) hereof.
"Base Rate Margin" means the percentage set forth in Schedule 1 hereto
beside the then applicable Level.
"BHP" means Black Hills Power, Inc., a South Dakota corporation.
"Borrower" is defined in the first paragraph of this Agreement.
"Borrowing" means the total of Loans of a single type advanced,
continued for an additional Interest Period, or converted from a different type
into such type by the Banks on a single date and for a single Interest Period.
Borrowings of Loans are made by and maintained ratably for each of the Banks
according to their Percentages. A Borrowing is "advanced" on the day Banks
advance funds comprising such Borrowing to Borrower, is "continued" on the date
a new Interest Period for the same type of Loans commences for such Borrowing
and is "converted" when such Borrowing is changed from one type of Loan to the
other, all as requested by Borrower pursuant to Section 2.5(a).
"Business Day" means any day other than a Saturday or Sunday on which
Banks are not authorized or required to close in New York, New York or Rapid
City, South Dakota and, if the applicable Business Day relates to the borrowing
or payment of a Eurodollar Loan, on which banks are dealing in U.S. Dollars in
the interbank market in London, England.
"Capital" means, as of any date of determination thereof, without
duplication, the sum of (A) Consolidated Net Worth plus (B) all Recourse
Indebtedness (provided that for purposes of clause (B) of this definition, to
the extent otherwise included, Indebtedness of Marketing Subsidiaries in an
aggregate amount not to exceed the Marketing Subsidiary Indebtedness Limit
incurred under Marketing Subsidiary Excluded Credit Facilities shall not be
deemed to be Recourse Indebtedness).
2
"Capital Lease" means at any date any lease of Property which, in
accordance with GAAP, would be required to be capitalized on the balance sheet
of the lessee.
"Capitalized Lease Obligations" means, for any Person, the amount of
such Person's liabilities under Capital Leases determined at any date in
accordance with GAAP.
"Change of Control Event" means one or more of the following events:
(a) less than a majority of the members of the Board of Directors
of Borrower shall be persons who either (i) were serving as directors
on the Effective Date or (ii) were nominated as directors and approved
by the vote of the majority of the directors who are directors
referred to in clause (i) above or this clause (ii); or
(b) the stockholders of Borrower shall approve any plan or
proposal for the liquidation or dissolution of Borrower; or
(c) a Person or group of Persons acting in concert (other than
the direct or indirect beneficial owners of the Voting Stock of
Borrower as of the Effective Date) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases
or otherwise, have become the direct or indirect beneficial owner
(within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended from time to time) of Voting Stock of Borrower
representing more than ten percent (10%) of the combined voting power
of the outstanding Voting Stock or other ownership interests for the
election of directors or shall have the right to elect a majority of
the Board of Directors of Borrower; or
(d) Except as permitted by Section 7.12, Borrower ceases at any
time to own one hundred percent (100%) of the Voting Stock and other
equity interest of any Material Subsidiary.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" and "Commitments" are defined in Section 2.1 hereof.
"Compliance Certificate" means a certificate in the form of Exhibit B
hereto.
"Consolidated Assets" means all assets which should be listed on the
consolidated balance sheet of Borrower and its Consolidated Subsidiaries, as
determined on a consolidated basis in accordance with GAAP.
"Consolidated EBITDA" means, for any period, for Borrower and its
Consolidated Subsidiaries on a consolidated basis, (A) the sum of the amounts
for such period of (i) Consolidated Net Income, (ii) to the extent deducted in
arriving at Consolidated Net Income, net federal, state and local income taxes
in respect of such period, (iii) to the extent deducted in arriving at
Consolidated Net Income, Consolidated Interest Expense, (iv) to the extent
deducted in arriving at Consolidated Net Income, the amount charged for the
amortization of intangible assets, (v) to the extent deducted in arriving at
Consolidated Net Income, the amount charged for the depreciation of assets, and
(vi) to the extent deducted in arriving at Consolidated Net Income, losses on
sales of assets (excluding sales in the ordinary course of business) and other
3
extraordinary losses, less (B) the amount for such period of (i) to the extent
added in arriving at Consolidated Net Income, interest income arising from
traditional investment activities with banks, investments banks and other
financial institutions or relating to governmental or other marketable
securities, (ii) to the extent added in arriving at Consolidated Net Income,
gains on sales of assets (excluding sales in the ordinary course of business)
and other extraordinary gains, all as determined on a consolidated basis in
accordance with GAAP, (iii) any maintenance capital expenditures made by the
Borrower or its Consolidated Subsidiaries in such period, (iv) without
duplication, any payments made by a Consolidated Subsidiary constituting a
repayment of principal Indebtedness (other than (x) the Obligations and (y)
repayments of principal made with the proceeds of a refinancing of such
Indebtedness otherwise permitted pursuant to this Agreement) or with respect to
a reserve, and (v) without duplication, any other mandatory payment made by a
Consolidated Subsidiary in such period not included as an expense or loss in
calculating Consolidated Net Income.
"Consolidated Fixed Charges" means, for any period and without
duplication the sum of (i) the aggregate amount of Consolidated Interest Expense
with respect to Recourse Indebtedness paid or scheduled to be paid for such
period, and (ii) the aggregate amount of all mandatory scheduled payments
(whether designated as payments or prepayments) and scheduled sinking fund
payments with respect to principal of any Recourse Indebtedness of the Borrower
or its Subsidiaries (including payments in the nature of principal under Capital
Leases).
"Consolidated Interest Expense" means, with reference to any period of
the Borrower and its Subsidiaries, the sum of (i) all interest charges
(including capitalized interest, imputed interest charges with respect to
Capitalized Lease Obligations and all amortization of debt discount and expense
and other deferred financing charges) of the Borrower and its Subsidiaries on a
consolidated basis for such period determined in accordance with GAAP, other
than interest charges relating to Non-Recourse Indebtedness, (ii) all commitment
or other fees payable in respect of the issuance of standby letters of credit or
other credit facilities for the account of the Borrower or its Subsidiaries, and
(iii) net costs/expenses incurred by the Borrower and its Subsidiaries under
Derivative Arrangements.
"Consolidated Net Income" means, for any period of the Borrower and its
Consolidated Subsidiaries, the amount for such period of consolidated net income
(or net loss) of the Borrower and its Consolidated Subsidiaries, as determined
on a consolidated basis in accordance with GAAP.
"Consolidated Net Worth" means, as of any time the same is to be
determined, the total shareholders' equity (including capital stock, additional
paid-in-capital and retained earnings after deducting treasury stock, but
excluding (to the extent otherwise included in calculating shareholders'
equity), minority interests in Subsidiaries) which would appear on the
consolidated balance sheet of Borrower determined on a consolidated basis in
accordance with GAAP.
"Consolidated Subsidiary" means, as to any Person, each subsidiary of
such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated, with
the financial statements of such Person in accordance with GAAP, including
principles of consolidation.
4
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its Property is bound.
"Controlled Group" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated) under
common control that, together with Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Credit Documents" means this Agreement, the Notes, the Fee Letter and
all other documents executed in connection herewith or therewith.
"Credit Event" means any Borrowing.
"Default" means any event or condition the occurrence of which would,
with the passage of time or the giving of notice, or both, constitute an Event
of Default.
"Derivative Arrangement" means any agreement (including any master
agreement and any agreement, whether or not in writing, relating to any single
transaction) that is an interest rate swap agreement, basis swap, forward rate
agreement, commodity swap, commodity option, equity or equity index swap or
option, bond option, interest rate option, forward foreign exchange agreement,
rate cap, collar or floor agreement, future agreement, currency swap agreement,
cross-currency rate swap agreement, swaption, currency option, that relates to
fluctuations in raw material prices or utility or energy prices or other costs,
or any other similar agreement, including any option to enter into any of the
foregoing, or any combination of any of the foregoing. "Derivative Arrangements"
shall include all such agreements or arrangements made or entered into at any
time, or in effect at any time, whether or not related to a Loan.
"Derivative Obligations" means, with respect to any Person, all
liabilities of such Person under any Derivative Arrangement (including but not
limited to obligations and liabilities arising in connection with or as a result
of early or premature termination of a Derivative Arrangement, whether or not
occurring as a result of a default thereunder), absolute or contingent, now or
hereafter existing or incurred or due or to become due.
"Effective Date" means September 25, 2002.
"Environmental and Health Laws" means any and all federal, state, local
and foreign statutes, laws, regulations, ordinances, judgments, permits and
other governmental rules or restrictions relating to human health, safety
(including without limitation occupational safety and health standards), or the
environment or to emissions, discharges or releases of pollutants, contaminants,
hazardous or toxic substances, wastes or any other controlled or regulated
substance into the environment, including without limitation Hazardous Material,
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, hazardous or toxic
substances, wastes or any other controlled or regulated substance or the
clean-up or other remediation thereof.
"ERISA" is defined in Section 5.8 hereof.
5
"Eurodollar Loan" means a Loan bearing interest prior to its maturity
at the rate specified in Section 2.3(b) hereof.
"Eurodollar Margin" means the percentage set forth in Schedule 1 hereto
beside the then applicable Level.
"Eurodollar Reserve Percentage" is defined in Section 2.3(b) hereof.
"Event of Default" means any of the events or circumstances specified
in Section 8.1 hereof.
"Existing Credit Agreements" means that certain Amended and Restated
364-Day Credit Agreement dated as of August 27, 2002 and that certain 3-Year
Credit Agreement dated as of August 28, 2001, each among the Borrower, the
financial institutions from time to time party thereto, U.S. Bank and
ScotiaBank, in their capacity as documentation agents for the Banks thereunder
(in such capacity, "Documentation Agents"), UBOC and BMO, in their capacity as
syndication agents for the Banks thereunder (in such capacity, "Syndication
Agents") and ABN AMRO Bank N.V. in its capacity as Administrative Agent for such
financial institutions.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to:
(a) the weighted average of the rates on overnight federal funds
transactions with members of the United States Federal Reserve System
arranged by federal funds brokers, as published for such day (or, if
such day is not a Business Day, for the next preceding Business Day)
by the United States Federal Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by it.
"Fee Letter" means that certain letter among the Administrative Agent
and Borrower pertaining to fees to be paid by Borrower to the Administrative
Agent for its sole account and benefit.
"Fixed Charge Coverage Ratio" means, for any period of four consecutive
quarters of the Borrower ending with the most recently completed such fiscal
quarter, the ratio of (A) Adjusted Consolidated EBITDA to (B) Consolidated Fixed
Charges for such period.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time, applied by Borrower and its Subsidiaries on
a basis consistent with the preparation of Borrower's financial statements
furnished to the Banks as described in Section 5.4 hereof.
"Guarantee" means, in respect of any Person, any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness or other obligations of another Person, including, without
limitation, by means of an agreement to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or to maintain financial
6
covenants, or to assure the payment of such Indebtedness by an agreement to make
payments in respect of goods or services regardless of whether delivered, or
otherwise, provided, that the term "Guarantee" shall not include endorsements
for deposit or collection in the ordinary course of business; and such term when
used as a verb shall have a correlative meaning.
"Hazardous Material" means any substance or material which is hazardous
or toxic, and includes, without limitation, (a) asbestos, polychlorinated
biphenyls, dioxins and petroleum or its by-products or derivatives (including
crude oil or any fraction thereof) and (b) any other material or substance
classified or regulated as "hazardous" or "toxic" pursuant to any Environmental
and Health Law.
"Immaterial Subsidiary" shall mean, any direct or indirect subsidiary
of Borrower (i) whose total assets (as determined in accordance with GAAP) do
not represent at least five percent (5%) of the total assets (as determined in
accordance with GAAP) of Borrower and its subsidiaries on a consolidated basis
or (ii) whose total revenues (as determined in accordance with GAAP) do not
represent at least five percent (5%) of the total revenues (as determined in
accordance with GAAP) of Borrower and its subsidiaries on a consolidated basis,
provided that no subsidiary shall be deemed an Immaterial Subsidiary to the
extent (a) the total assets of such subsidiary, when combined with the total
assets of other subsidiaries which are Immaterial Subsidiaries, represent at
least ten percent (10%) of the total assets (as determined in accordance with
GAAP) of Borrower and its subsidiaries on a consolidated basis or (ii) the total
revenues of such subsidiary, when combined with the total revenues of other
Immaterial Subsidiaries, (as determined in accordance with GAAP) represent at
least ten percent (10%) of the total revenues (as determined in accordance with
GAAP) of Borrower and its subsidiaries on a consolidated basis. As used in this
definition "subsidiary" shall mean any Person whose financial statements are
consolidated into the financial statements of Borrower in accordance with GAAP.
"Indebtedness" means, as to any Person, without duplication: (i) all
obligations of such Person for borrowed money or evidenced by bonds, debentures,
notes or similar instruments; (ii) all obligations of such Person for the
deferred purchase price of property or services (other than in respect of trade
accounts payable arising in the ordinary course of business which are not
past-due); (iii) all Capitalized Lease Obligations of such Person; (iv) all
Indebtedness of others secured by a Lien on any properties, assets or revenues
of such Person (other than stock, partnership interests or other equity
interests of Borrower or any Subsidiary of Borrower in other entities) to the
extent of the lesser of the value of the property subject to such Lien or the
amount of such Indebtedness; (v) all Guarantees issued by such Person, provided
that Long-Term Guaranties shall not be deemed "Indebtedness" for purposes of
calculating Borrower's compliance with the financial covenants set forth in
Sections 7.16, 7.17 and 7.18 hereof; (vi) all obligations of such Person,
contingent or otherwise, in respect of any letters or credit (whether commercial
or standby) or bankers' acceptances, (vii) all Derivative Obligations of such
Person, provided that for purposes of determining Borrower's compliance with the
financial covenants set forth herein, only Borrower's Derivative Obligations
under Derivative Arrangements which must be marked-to-market in accordance with
GAAP shall be included as Indebtedness of Borrower, and (viii) all obligations
of such Person under synthetic (and similar type) lease arrangements, provided
that for purposes of calculating such Person's Indebtedness under such synthetic
(or similar type) lease arrangements, such lease arrangement shall be treated as
if it were a Capitalized Lease.
7
"Interest Period" is defined in Section 2.6 hereof.
"Investments" is defined in Section 7.14.
"L/C Obligations" has the same meaning herein as in the 3-Year Credit
Agreement.
"Lending Office" is defined in Section 9.4 hereof.
"Level I Status" means Borrower's S&P Rating is BBB or higher and its
Moody's Rating is Baa2 or higher.
"Level II Status" means Level I Status does not exist, but Borrower's
S&P Rating is BBB- or higher and its Moody's Rating is Baa3 or higher.
"Level III Status" means neither Level I Status nor Level II Status
exists.
"LIBOR" is defined in Section 2.3(b) hereof.
"Lien" means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, including, but not
limited to, the security interest or lien arising from a mortgage, encumbrance,
pledge, conditional sale, security agreement or trust receipt, or a lease,
consignment or bailment for security purposes. For the purposes of this
definition, a Person shall be deemed to be the owner of any Property which it
has acquired or holds subject to a conditional sale agreement, Capital Lease or
other arrangement pursuant to which title to the Property has been retained by
or vested in some other Person for security purposes, and such retention of
title shall constitute a "Lien."
"Liquid Assets" means, as the date of any calculation thereof, the sum
of (i) the amount of unrestricted cash which the Borrower then has available,
plus (ii) the aggregate amount of then available (meaning the Borrower is
entitled to borrow such amounts pursuant to the applicable documentation) unused
capacity under the Borrower's senior unsecured credit facilities (including the
Existing Credit Agreements).
"Loan" and "Loans" are defined in Section 2.1 hereof and includes a
Base Rate Loan or Eurodollar Loan, each of which is a "type" of Loan hereunder.
"Long-Term Guarantee" means (i) any Guarantee issued by Borrower or its
Subsidiaries under which the holder or beneficiary of such Guarantee is not
permitted under any circumstance or contingency to make demand or exercise any
other remedies under such Guarantee prior to the Termination Date, as extended
from time to time in accordance with the terms hereof and (ii) any coal mining
reclamation bonds or contingent indemnity or reimbursement obligations with
respect to such reclamation bonds (so long as such reclamation bonds have not
been called upon).
"Marketing Subsidiary" means each of Black Hills Energy Resources, Inc.
a South Dakota corporation, and Enserco Energy, Inc., a South Dakota
corporation, and their respective subsidiaries.
8
"Marketing Subsidiary Excluded Credit Facilities" means those certain
credit facilities of the Marketing Subsidiaries described on Schedule 7.15(a)
hereof, as such credit facilities are in effect on the Effective Date, provided
that such credit facilities shall cease to be Marketing Subsidiary Excluded
Credit Facilities to the extent availability thereunder is increased, any
substantive term thereof is materially modified, or such credit facility is
extended more than once in any fiscal year for a period of more than one year.
Any replacement credit facility of a Marketing Subsidiary Excluded Credit
Facility shall be deemed a Marketing Subsidiary Excluded Credit Facility only if
such replacement credit facility contains terms substantially the same as the
Marketing Subsidiary Excluded Credit Facility being replaced (including tenor)
or is approved in writing by the Required Banks.
"Marketing Subsidiary Indebtedness Limit" means the sum of (i)
aggregate amount of credit availability (used or unused) under Marketing
Subsidiary Excluded Credit Facilities as of the Effective Date and (ii)
$25,000,000.
"Material Adverse Effect" means a material adverse effect on (i) the
business, financial position or results of operations of Borrower or Borrower
and its Subsidiaries taken as a whole, (ii) the ability of Borrower to perform
its material obligations under the Credit Documents, (iii) the validity or
enforceability of the material obligations of Borrower under any Credit
Document, (iv) the rights and remedies of the Banks or the Administrative Agent
against Borrower; or (v) the timely payment of the principal of and interest on
the Loans or other amounts payable by Borrower hereunder, provided, that a
downgrade of Borrower's S&P Rating and/or Moody's Rating shall not, in and of
itself, be deemed a "Material Adverse Effect" for purposes of this Agreement.
"Material Subsidiaries" means BHP, Black Hills Energy, Inc., a
South Dakota corporation, Wyodak Resources Development Corp., a Delaware
corporation, Black Hills Energy Capital, Inc., a Delaware corporation and
any other Subsidiary of Borrower which is not either an Immaterial Subsidiary
or a Project Finance Subsidiary.
"Moody's Rating" means the rating assigned by Moody's Investors
Service, Inc. and any successor thereto that is a nationally recognized rating
agency to the outstanding senior unsecured non-credit enhanced long-term
indebtedness of a Person (or if neither Moody's Investors Service, Inc. nor any
such successor shall be in the business of rating long-term indebtedness, a
nationally recognized rating agency in the United States of America as mutually
agreed between the Required Banks and Borrower). Any reference in this Agreement
to any specific rating is a reference to such rating as currently defined by
Moody's Investors Service, Inc. (or such a successor) and shall be deemed to
refer to the equivalent rating if such rating system changes.
"Non-Recourse Indebtedness" means, without duplication, all
Indebtedness of Borrower and its Consolidated Subsidiaries determined on a
consolidated basis in accordance with GAAP incurred in connection with project
financings (including project financings of existing assets the proceeds of
which are used to refinance such assets) as to which the holder of such
Indebtedness has recourse solely against the assets which were purchased or
refinanced with, or leased in connection with, such Indebtedness and not against
Borrower or a Consolidated Subsidiary of Borrower other than a Project Finance
Subsidiary or any of their other assets (whether directly, through a Guarantee
or otherwise), other than the pledge of the stock (or similar equity interest)
9
of the Project Finance Subsidiary which incurred such Indebtedness. For purposes
of clarification, any Indebtedness of a Project Finance Subsidiary which would
otherwise constitute Non-Recourse Indebtedness but for the issuance by the
Borrower or a Consolidated Subsidiary of the Borrower of a Guarantee or other
document which provides recourse with respect to such Indebtedness, such
Indebtedness shall for all purposes of this Agreement be deemed Non-Recourse
Indebtedness so long as (i) the Borrower's or such Consolidated Subsidiary's
obligations under such Guarantee or other document are treated for all purposes
as Recourse Indebtedness hereunder, (ii) such Recourse Indebtedness of the
Borrower or such Consolidated Subsidiary is unsecured and is otherwise permitted
by this Agreement, and (iii) such Recourse Indebtedness of the Borrower or such
Consolidated Subsidiary does not in the aggregate exceed $100,000,000 at any one
time outstanding.
"Note" is defined in Section 2.10(a) hereof.
"Obligations" means all fees payable hereunder, all obligations of
Borrower to pay principal or interest on Loans, fees, expenses, indemnities, and
all other payment obligations of Borrower arising under or in relation to any
Credit Document.
"Percentage" means, for each Bank, the percentage held by such Bank of
the aggregate principal amount of all outstanding Obligations.
"Permitted Derivative Obligations" means all Derivative Obligations as
to which the Derivative Arrangements giving rise to such Derivative Obligation
are entered into in the ordinary course of business to hedge interest rate risk,
currency risk, commodity price risk or the production of Borrower or its
Subsidiaries (and not for speculative purposes) and if such Derivative
Obligation is an obligation of Borrower, such Derivative Obligation ranks no
greater than pari passu to the Obligations.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization or any other
entity or organization, including a government or any agency or political
subdivision thereof.
"Plan " means at any time an employee pension benefit plan covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code that is either (i) maintained by a member of the Controlled Group or
(ii) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions.
"PBGC" is defined in Section 5.8 hereof.
"Project Finance Subsidiary" means any special purpose Subsidiary of
Borrower created to limit the recourse of the creditors of such Subsidiary and
as to which the creditors and other holders of Indebtedness of such Subsidiary
have recourse solely against the assets of such Subsidiary and not against
Borrower or any other Subsidiary of Borrower or any of their other assets
(whether directly, through a Guarantee or otherwise) other than (i) pursuant to
a Guarantee permitted hereunder and (ii) the stock of such special purpose
Subsidiary (or similar equity interest).
10
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, whether now owned or
hereafter acquired.
"Recourse Indebtedness" means, without duplication, all Indebtedness of
Borrower and its Consolidated Subsidiaries determined on a consolidated basis in
accordance with GAAP other than Non-Recourse Indebtedness.
"Recourse Leverage Ratio" means, as of any time the same is to be
determined, the ratio of the amount of (A) Recourse Indebtedness outstanding at
such time (provided that for purposes of clause (A) of this definition, to the
extent otherwise included, Indebtedness of Marketing Subsidiaries in an
aggregate amount not to exceed the Marketing Subsidiary Indebtedness Limit
incurred under Marketing Subsidiary Excluded Credit Facilities shall not be
deemed to be Recourse Indebtedness) to (B) the amount of Capital at such time.
"Required Banks" means, as of the date of determination thereof, any
Banks holding in the aggregate more than fifty percent (50%) of the Percentages,
provided, that at any time there are two (2) or less Banks, Required Banks shall
mean Banks holding one hundred percent (100%) of the Percentages.
"Restricted Earnings" means, for any period, the amount of all
Consolidated Net Income earned by each of Borrower's Consolidated Subsidiaries
during such period which may not be distributed or dividended to Borrower due to
contractual or other restrictions on such distributions or dividends.
"SEC" means the United States Securities and Exchange Commission.
"Security" has the same meaning as in Section 2(l) of the Securities
Act of 1933, as amended.
"S&P Rating" means the rating assigned by Standard & Poor's Ratings
Group, a division of The McGraw-Hill Companies, Inc. and any successor thereto
that is a nationally recognized rating agency to the outstanding senior
unsecured non-credit enhanced long-term indebtedness of a Person (or, if neither
such division nor any successor shall be in the business of rating long-term
indebtedness, a nationally recognized rating agency in the United States as
mutually agreed between the Required Banks and Borrower). Any reference in this
Agreement to any specific rating is a reference to such rating as currently
defined by Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc. (or such a successor) and shall be deemed to refer to the
equivalent rating if such rating system changes.
"Solvent" means that (a) the fair value of a Person's assets is in
excess of the total amount of such Person's debts, as determined in accordance
with the United States Bankruptcy Code, and (b) the present fair saleable value
of a Person's assets is in excess of the amount that will be required to pay
such Person's debts as they become absolute and matured. As used in this
definition, the term "debts" includes any legal liability, whether matured or
unmatured, liquidated or unliquidated, absolute, fixed or contingent, as
determined in accordance with the United States Bankruptcy Code.
11
"Subsidiary" means, as to Borrower, any corporation or other entity (i)
which is consolidated into the financial statements of such Borrower in
accordance with GAAP or (ii) of which more than fifty percent (50%) of the
outstanding stock or comparable equity interests having ordinary voting power
for the election of the Board of Directors of such corporation or similar
governing body in the case of a non-corporation (irrespective of whether or not,
at the time, stock or other equity interests of any other class or classes of
such corporation or other entity shall have or might have voting power by reason
of the happening of any contingency) is at the time directly or indirectly owned
by such Borrower or by one or more of its Subsidiaries.
"Telerate Service" means the Dow Jones Telerate Service.
"Termination Date" means September 30, 2004.
"Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable accrued benefits under such Plan exceeds (ii) the fair market
value of all Plan assets allocable to such benefits, all determined as of the
then most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the Controlled Group to
the PBGC or the Plan under Title IV of ERISA.
"U.S. Dollars" and "$" each means the lawful currency of the United
States of America.
"Voting Stock" of any Person means capital stock of any class or
classes or other equity interests (however designated) having ordinary voting
power for the election of directors or similar governing body of such Person.
"Welfare Plan" means a "welfare plan", as defined in Section 3(l) of
ERISA.
"Wholly-Owned" when used in connection with any Subsidiary means a
Subsidiary of which all of the issued and outstanding shares of stock or other
equity interests (other than directors' qualifying shares as required by law)
shall be owned by Borrower and/or one or more of its Wholly-Owned Subsidiaries.
Section 1.2 Interpretation. The foregoing definitions shall be equally
applicable to both the singular and plural forms of the terms defined. All
references to times of day in this Agreement shall be references to New York,
New York time unless otherwise specifically provided. The word "including" means
including without limiting the generality of any description preceding such
term. Where the character or amount of any asset or liability or item of income
or expense is required to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this Agreement, the same
shall be done in accordance with GAAP in effect on the Effective Date, to the
extent applicable, except where such principles are inconsistent with the
specific provisions of this Agreement.
SECTION 2 THE CREDITS.
Section 2.1 The Term Loan. Subject to the terms and conditions hereof
(including Sections 6.1 and 6.2), each Bank, by its acceptance hereof, severally
agrees to make a loan (individually a "Loan" and collectively "Loans") to
Borrower on the Effective Date in U.S.
12
Dollars in an aggregate amount equal to the amount of its commitment set forth
on the applicable signature page hereof (for each Bank, its "Commitment" and,
cumulatively for all the Banks, the "Commitments"). After the making of such
Loans on the Effective Date, the Commitments shall terminate and no Bank shall
have any further obligation to advance any new Borrowings. Each Borrowing of
Loans shall be made ratably from the Banks in proportion to their respective
Percentages. As provided in Section 2.5(a) hereof, Borrower may elect that each
Borrowing of Loans be either Base Rate Loans or Eurodollar Loans. Any Loans
repaid may not be reborrowed. Unless an earlier maturity is provided for
hereunder, all Loans shall mature and be due and payable on the Termination
Date.
Section 2.2 [Intentionally Omitted].
Section 2.3 Applicable Interest Rates. (a) Base Rate Loans. Each Base Rate
Loan made or maintained by a Bank shall bear interest during each Interest
Period it is outstanding (computed (x) at all times the Base Rate is based on
the rate described in clause (i) of the definition thereof, on the basis of a
year of 365 or 366 days, as applicable, and actual days elapsed or (y) at all
times the Base Rate is based on the rate described in clause (ii) of the
definition thereof, on the basis of a year of 360 days and actual days elapsed)
on the unpaid principal amount thereof from the date such Loan is advanced,
continued or created by conversion from a Eurodollar Loan until maturity
(whether by acceleration or otherwise) at a rate per annum equal to the sum of
the Applicable Margin plus the Base Rate from time to time in effect, payable on
the last day of its Interest Period and at maturity (whether by acceleration or
otherwise).
"Base Rate" means for any day the greater of:
(i) the rate of interest announced by the Administrative Agent from
time to time as its prime rate, or equivalent, for U.S. Dollar loans within
the United States as in effect on such day, with any change in the Base
Rate resulting from a change in said prime rate to be effective as of the
date of the relevant change in said prime rate; and
(ii) the sum of (x) the Federal Funds Rate, plus (y)1/2of 1% (0.50%).
(b) Eurodollar Loans. Each Eurodollar Loan made or maintained by a Bank
shall bear interest during each Interest Period it is outstanding (computed on
the basis of a year of 360 days and actual days elapsed) on the unpaid principal
amount thereof from the date such Loan is advanced, continued, or created by
conversion from a Base Rate Loan until maturity (whether by acceleration or
otherwise) at a rate per annum equal to the sum of the Applicable Margin plus
the Adjusted LIBOR applicable for such Interest Period, payable on the last day
of the Interest Period and at maturity (whether by acceleration or otherwise),
and, if the applicable Interest Period is longer than three months, on each day
occurring every three months after the commencement of such Interest Period.
"Adjusted LIBOR" means, for any Borrowing of Eurodollar Loans, a rate
per annum determined in accordance with the following formula:
Adjusted LIBOR = LIBOR
---------------------------------------------
1 - Eurodollar Reserve Percentage
13
"LIBOR" means, for an Interest Period for a Borrowing of Eurodollar
Loans, (a) the LIBOR Index Rate for such Interest Period, if such rate is
available, and (b) if the LIBOR Index Rate cannot be determined, the
arithmetical average of the rates of interest per annum (rounded upwards, if
necessary, to the nearest one-sixteenth of one percent) at which deposits in
U.S. Dollars, in immediately available funds are offered to the Administrative
Agent at 11:00 a.m. (London, England time) two (2) Business Days before the
beginning of such Interest Period by major banks in the interbank eurodollar
market for delivery on the first day of and for a period equal to such Interest
Period in an amount equal or comparable to the principal amount of the smallest
Eurodollar Loan scheduled to be made by a Lender as part of such Borrowing.
"LIBOR Index Rate" means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one-sixteenth of one percent)
for deposits in U.S. Dollars for delivery on the first day of and for a period
equal to such Interest Period in an amount equal or comparable to the principal
amount of the smallest Eurodollar Loan scheduled to be made by a Lender as part
of such Borrowing, which appears on the Applicable Telerate Page as of 11:00
a.m. (London, England time) on the day two (2) Business Days before the
commencement of such Interest Period.
"Applicable Telerate Page" means the display page designated as "Page
3750" on the Telerate Service (or such other pages as may replace any such page
on that service or such other service as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
British Bankers' Association Interest Settlement Rates for deposits in U.S.
Dollars).
"Eurodollar Reserve Percentage" means for any Borrowing of Eurodollar
Loans from any Bank, the daily average for the applicable Interest Period of the
actual effective rate, expressed as a decimal, at which reserves (including,
without limitation, any supplemental, marginal and emergency reserves) are
maintained by such Bank during such Interest Period pursuant to Regulation D of
the Board of Governors of the Federal Reserve System (or any successor) on
"eurocurrency liabilities", as defined in such Board's Regulation D (or in
respect of any other category of liabilities that includes deposits by reference
to which the interest rate on Eurodollar Loans is determined or any category of
extensions of credit or other assets that include loans by non-United States
offices of any Bank to United States residents), subject to any amendments of
such reserve requirement by such Board or its successor, taking into account any
transitional adjustments thereto. For purposes of this definition, the
Eurodollar Loans shall be deemed to be "eurocurrency liabilities" as defined in
Regulation D without benefit or credit for any prorations, exemptions or offsets
under Regulation D.
(c) Rate Determinations. The Administrative Agent shall determine each
interest rate applicable to Obligations, and a determination thereof by the
Administrative Agent shall be conclusive and binding except in the case of
manifest error.
Section 2.4 Minimum Borrowing Amounts. Each Borrowing of Base Rate Loans
and Eurodollar Loans shall be in an amount not less than (i) if such Borrowing
is comprised of Base Rate Loans, $1,000,000 and integral multiples of $500,000
in excess thereof, and (ii) if such Borrowing is comprised of Eurodollar Loans,
$2,000,000 and integral multiples of $1,000,000 in excess thereof.
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Section 2.5 Manner of Borrowing Loans and Designating Interest Rates
Applicable to Loans. (a) Notice to the Administrative Agent. (a) The Borrower
shall give notice to the Administrative Agent by no later than 12:00 noon (New
York time) on the Effective Date specifying the amount of Loans it desires to
borrow pursuant to this Agreement. The initial Borrowing of Loans shall be Base
Rate Loans. Thereafter, Borrower may from time to time elect to change or
continue the type of interest rate borne by each Borrowing or, subject to
Section 2.4's minimum amount requirement for each outstanding Borrowing, a
portion thereof, as follows: (i) if such Borrowing is of Eurodollar Loans, on
the last day of the Interest Period applicable thereto, Borrower may continue
part or all of such Borrowing as Eurodollar Loans for an Interest Period or
Interest Periods specified by Borrower or convert part or all of such Borrowing
into Base Rate Loans, and (ii) if such Borrowing is of Base Rate Loans, on any
Business Day, Borrower may convert all or part of such Borrowing into Eurodollar
Loans for an Interest Period or Interest Periods specified by Borrower. Borrower
shall give all such notices requesting the continuation or conversion of a
Borrowing to the Administrative Agent by telephone or telecopy (which notice
shall be irrevocable once given and, if by telephone, shall be promptly
confirmed in writing). Notices of the continuation of a Borrowing of Eurodollar
Loans for an additional Interest Period or of the conversion of part or all of a
Borrowing of Eurodollar Loans into Base Rate Loans or of Base Rate Loans into
Eurodollar Loans must be given by no later than 12:00 noon (New York time) at
least three (3) Business Days before the date of the requested continuation or
conversion. All such notices concerning the continuation or conversion of a
Borrowing shall be irrevocable once given and shall specify the date of the
requested continuation or conversion of a Borrowing (which shall be a Business
Day), the amount of the requested Borrowing to be continued or converted, the
type of Loans to comprise such new, continued or converted Borrowing and, if
such Borrowing is to be comprised of Eurodollar Loans, the Interest Period
applicable thereto. Borrower agrees that the Administrative Agent may rely on
any such telephonic or telecopy notice given by any person it in good faith
believes is an Authorized Representative without the necessity of independent
investigation, and in the event any such notice by telephone conflicts with any
written confirmation, such telephonic notice shall govern if the Administrative
Agent has acted in reliance thereon. There may be no more than six different
Interest Periods in effect at any one time, provided that for purposes of
determining the number of Interest Periods in effect at any one time, all Base
Rate Loans shall be deemed to have one and the same Interest Period.
(b) Notice to the Banks. The Administrative Agent shall give prompt
telephonic or telecopy notice to each Bank of any notice from Borrower received
pursuant to Section 2.5(a) above. The Administrative Agent shall give notice to
Borrower and each Bank by like means of the interest rate applicable to each
Borrowing of Eurodollar Loans.
(c) Borrower' Failure to Notify. Any outstanding Borrowing of Base Rate
Loans shall, subject to Section 6.2 hereof, automatically be continued for an
additional Interest Period on the last day of its then current Interest Period
unless Borrower has notified the Administrative Agent within the period required
by Section 2.5(a) that it intends to convert such Borrowing into a Borrowing of
Eurodollar Loans or notifies the Administrative Agent within the period required
by Section 2.8(a) that it intends to prepay such Borrowing. If Borrower fails to
give notice pursuant to Section 2.5(a) above of the continuation or conversion
of any outstanding principal amount of a Borrowing of Eurodollar Loans before
the last day of its then current Interest Period within the period required by
Section 2.5(a) and has not notified the Administrative Agent within
15
the period required by Section 2.8(a) that it intends to prepay such Borrowing,
such Borrowing shall automatically be converted into a Borrowing of Base Rate
Loans, subject to Section 6.2 hereof. The Administrative Agent shall promptly
notify the Banks of Borrower's failure to so give a notice under Section 2.5(a).
(d) Disbursement of Loans. Not later than 2:00 p.m. (New York time) on the
Effective Date, subject to Section 6 hereof, each Bank shall make available its
Loan comprising part of the initial Borrowing in funds immediately available at
the principal office of the Administrative Agent in New York, New York. The
Administrative Agent shall make available to Borrower Loans at the
Administrative Agent's principal office in New York, New York or such other
office as the Administrative Agent has previously agreed in writing to with
Borrower, in each case in the type of funds received by the Administrative Agent
from the Banks.
(e) Administrative Agent Reliance on Bank Funding. Unless the
Administrative Agent shall have been notified by a Bank before the date on which
such Bank is scheduled to make payment to the Administrative Agent of the
proceeds of a Loan (which notice shall be effective upon receipt) that such Bank
does not intend to make such payment, the Administrative Agent may assume that
such Bank has made such payment when due and the Administrative Agent may in
reliance upon such assumption (but shall not be required to) make available to
Borrower the proceeds of the Loan to be made by such Bank and, if any Bank has
not in fact made such payment to the Administrative Agent, such Bank shall, on
demand, pay to the Administrative Agent the amount made available to Borrower
attributable to such Bank together with interest thereon in respect of each day
during the period commencing on the date such amount was made available to
Borrower and ending on (but excluding) the date such Bank pays such amount to
the Administrative Agent at a rate per annum equal to (i) from the date the
related payment was made by the Administrative Agent to the date two (2)
Business Days after payment by such Bank is due hereunder, the Federal Funds
Rate for each such day and (ii) from the date two (2) Business Days after the
date such payment is due from such Bank to the date such payment is made by such
Bank, the Base Rate in effect for each such day. If such amount is not received
from such Bank by the Administrative Agent immediately upon demand, Borrower
will, on demand, repay to the Administrative Agent the proceeds of the Loan
attributable to such Bank with interest thereon at a rate per annum equal to the
interest rate applicable to the relevant Loan.
Section 2.6 Interest Periods. As provided in Section 2.5(a) hereof, at the
time of each request of a Borrowing of Eurodollar Loans, Borrower shall select
an Interest Period applicable to such Loans from among the available options.
The term "Interest Period" means the period commencing on the date a Borrowing
of Loans is advanced, continued, or created by conversion and ending: (a) in the
case of Base Rate Loans, on the last Business Day of the calendar quarter in
which such Borrowing is advanced, continued, or created by conversion (or on the
last day of the following calendar quarter if such Loan is advanced, continued
or created by conversion on the last Business Day of a calendar quarter), and
(b) in the case of Eurodollar Loans, 1, 2, 3, or 6 months thereafter; provided,
however, that:
(a) any Interest Period for a Borrowing of Base Rate Loans that
otherwise would end after the Termination Date shall end on the Termination
Date;
16
(b) for any Borrowing of Eurodollar Loans, Borrower may not select an
Interest Period that extends beyond the Termination Date;
(c) whenever the last day of any Interest Period would otherwise be a
day that is not a Business Day, the last day of such Interest Period shall
be extended to the next succeeding Business Day, provided that, if such
extension would cause the last day of an Interest Period for a Borrowing of
Eurodollar Loans to occur in the following calendar month, the last day of
such Interest Period shall be the immediately preceding Business Day; and
(d) for purposes of determining an Interest Period for a Borrowing of
Eurodollar Loans, a month means a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next calendar
month; provided, however, that if there is no numerically corresponding day
in the month in which such an Interest Period is to end or if such an
Interest Period begins on the last Business Day of a calendar month, then
such Interest Period shall end on the last Business Day of the calendar
month in which such Interest Period is to end.
Section 2.7 Maturity of Loans. Unless an earlier maturity is provided for
hereunder (whether by acceleration or otherwise), all Obligations (including
principal and interest on all outstanding Loans) shall mature and become due and
payable by Borrower on the Termination Date.
Section 2.8 Prepayments. (a) (a) Borrower may prepay without premium or
penalty and in whole or in part (but, if in part, then (i) in an amount not less
than $5,000,000 and integral multiples of $1,000,000 in excess thereof, and (ii)
in an amount such that the minimum amount required for a Borrowing pursuant to
Section 2.4 hereof remains outstanding) any Borrowing of Eurodollar Loans upon
three (3) Business Days' prior irrevocable notice to the Administrative Agent
or, in the case of a Borrowing of Base Rate Loans, irrevocable notice delivered
to the Administrative Agent no later than 12:00 noon (New York time) on the date
of prepayment, such prepayment to be made by the payment of the principal amount
to be prepaid and accrued interest thereon to the date fixed for prepayment. In
the case of Eurodollar Loans, any amounts owing under Section 2.11 hereof as a
result of such prepayment shall be paid contemporaneously with such prepayment.
The Administrative Agent will promptly advise each Bank of any such prepayment
notice it receives from Borrower. Any amount paid or prepaid before the
Termination Date may not be borrowed again.
Section 2.9 Default Rate. If any payment of principal or interest on any
Loan, or payment of any other Obligation, is not made when due (whether by
acceleration or otherwise), such principal, interest or other Obligation shall
bear interest (computed on the basis of a year of 360 days and actual days
elapsed or, if based on the rate described in clause (i) of the definition of
Base Rate, on the basis of a year of 365 or 366 days, as applicable, and the
actual number of days elapsed) from the date such payment was due until paid in
full, payable on demand, at a rate per annum equal to:
(a) for any Obligation other than a Eurodollar Loan (including
principal and interest relating to Base Rate Loans and interest on
Eurodollar Loans), the sum of two
17
percent (2%) plus the Applicable Margin plus the Base Rate from time to time in
effect; and
(b) for the principal of any Eurodollar Loan, the sum of two percent
(2%) plus the rate of interest in effect thereon at the time of such
default until the end of the Interest Period applicable thereto and,
thereafter, at a rate per annum equal to the sum of two percent (2%) plus
the Applicable Margin plus the Base Rate from time to time in effect.
Section 2.10 The Notes. (a) The Loans made to Borrower by each Bank shall
be evidenced by a single promissory note of Borrower issued to such Bank in the
form of Exhibit A hereto. Each such promissory note is hereinafter referred to
as a "Note" and collectively such promissory notes are referred to as the
"Notes."
(a) Each Bank shall record on its books and records or on a schedule to its
Note the amount of each Loan advanced, continued, or converted by it, all
payments of principal and interest and the principal balance from time to time
outstanding thereon, the type of such Loan, and, for any Eurodollar Loan, the
Interest Period and the interest rate applicable thereto. The record thereof,
whether shown on such books and records of a Bank or on a schedule to any Note,
shall be prima facie evidence of the same; provided, however, that the failure
of any Bank to record any of the foregoing or any error in any such record shall
not limit or otherwise affect the obligation of Borrower to repay all Loans made
hereunder together with accrued interest thereon. At the request of any Bank and
upon such Bank tendering to Borrower the Note to be replaced, Borrower shall
furnish a new Note to such Bank to replace any outstanding Note, and at such
time the first notation appearing on a schedule on the reverse side of, or
attached to, such Note shall set forth the aggregate unpaid principal amount of
all Loans, if any, then outstanding thereon.
Section 2.11 Funding Indemnity. If any Bank shall incur any loss, cost or
expense (including, without limitation, any loss, cost or expense (excluding
loss of margin) incurred by reason of the liquidation or re-employment of
deposits or other funds acquired by such Bank to fund or maintain any Eurodollar
Loan or the relending or reinvesting of such deposits or amounts paid or prepaid
to such Bank) as a result of:
(a) any payment (whether by acceleration or otherwise), prepayment or
conversion of a Eurodollar Loan on a date other than the last day of its
Interest Period,
(b) any failure (because of a failure to meet the conditions of
Section 6 or otherwise) by Borrower to borrow or continue a Eurodollar
Loan, or to convert a Base Rate Loan into a Eurodollar Loan, on the date
specified in a notice given pursuant to Section 2.5(a) or established
pursuant to Section 2.5(c) hereof,
(c) any failure by Borrower to make any payment or prepayment of
principal on any Eurodollar Loan when due (whether by acceleration or
otherwise), or
(d) any acceleration of the maturity of a Eurodollar Loan as a result
of the occurrence of any Event of Default hereunder, then, upon the demand
of such Bank, Borrower shall pay to such Bank such amount as will reimburse
such Bank for such loss, cost or expense. If any Bank makes such a claim
for compensation, it shall provide to
18
Borrower, with a copy to the Administrative Agent, a certificate executed
by an officer of such Bank setting forth the amount of such loss, cost or
expense in reasonable detail (including an explanation of the basis for and
the computation of such loss, cost or expense) and the amounts shown on
such certificate if reasonably calculated shall be prima facie evidence of
the amount of such loss, cost or expense.
SECTION 3 FEES.
Section 3.1 Fees.
(a) Administrative Agent Fees. Borrower shall pay to the Administrative
Agent, for the Administrative Agent's sole account, the fees agreed to in the
Fee Letter, which fees shall be fully earned and non-refundable once paid.
SECTION 4 PLACE AND APPLICATION OF PAYMENTS.
Section 4.1 Place and Application of Payments. All payments of principal of
and interest on the Loans, and of all other Obligations and other amounts
payable by Borrower under the Credit Documents, shall be made by Borrower in
U.S. Dollars to the Administrative Agent by no later than 2:00 p.m. (New York
time) on the due date thereof at the principal office of the Administrative
Agent in New York, New York pursuant to the payment instructions set forth on
Part A of Schedule 4 hereof (or such other location in the, United States as the
Administrative Agent may designate to Borrower) for the benefit of the Person or
Persons entitled thereto. Any payments received after such time shall be deemed
to have been received by the Administrative Agent on the next Business Day. All
such payments shall be made free and clear of, and without deduction for, any
set-off, defense, counterclaim, levy, or any other deduction of any kind in
immediately available funds at the place of payment. The Administrative Agent,
will promptly thereafter cause to be distributed like funds relating to the
payment of principal or interest on Loans or applicable fees ratably to the
Banks and like funds relating to the payment of any other amount payable to any
Person to such Person, in each case to be applied in accordance with the terms
of this Agreement.
SECTION 5 REPRESENTATIONS AND WARRANTIES.
The Borrower hereby represents and warrants to each Bank as to itself and,
where the following representations and warranties apply to its Subsidiaries, as
to each Subsidiary of Borrower, as follows:
Section 5.1 Corporate Organization and Authority. Borrower is duly
organized and existing in good standing under the laws of the state of South
Dakota; has all necessary corporate power to carry on its present business; and
is duly licensed or qualified and in good standing in each jurisdiction in which
the nature of the business transacted by it or the nature of the Property owned
or leased by it makes such licensing, qualification or good standing necessary
and in which the failure to be so licensed, qualified or in good standing would
have a Material Adverse Effect.
19
Section 5.2 Subsidiaries. Schedule 5.2 (as updated from time to time
pursuant to Section 7.1) hereto identifies each Subsidiary of Borrower, the
jurisdiction of incorporation, the percentage of issued and outstanding shares
of each class of its capital stock owned by the Borrower and its Subsidiaries
and, if such percentage is not one hundred percent (100%) (excluding directors'
qualifying shares as required by law), a description of each class of its
authorized capital stock and the number of shares of each class issued and
outstanding. Each Subsidiary is duly incorporated and existing in good standing
as a corporation under the laws of the jurisdiction of its incorporation, has
all necessary corporate power to carry on its present business, and is duly
licensed or qualified and in good standing in each jurisdiction in which the
nature of the business transacted by it or the nature of the Property owned or
leased by it makes such licensing or qualification necessary and in which the
failure to be so licensed or qualified would have a Material Adverse Effect. All
of the issued and outstanding shares of capital stock of each Subsidiary owned
directly or indirectly by Borrower are validly issued and outstanding and fully
paid and nonassessable except as set forth on Schedule 5.2 hereto. All such
shares owned by Borrower are owned beneficially, and of record, free of any
Lien, except as permitted in Section 7.9.
Section 5.3 Corporate Authority and Validity of Obligations. Borrower has
full right and authority to enter into this Agreement and the other Credit
Documents to which it is a party, to make the borrowings herein provided for, to
issue its Notes in evidence thereof, to apply (and to have applied), and to
perform all of its obligations under the Credit Documents to which it is a
party. Each Credit Document to which it is a party has been duly authorized,
executed and delivered by Borrower and constitutes valid and binding obligations
of Borrower enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforceability of creditors' rights
generally and by equitable principles of general applicability (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
No Credit Document, nor the performance or observance by Borrower of any of the
matters or things therein provided for, contravenes any provision of law or any
charter or by-law provision of Borrower or any material Contractual Obligation
of or affecting Borrower or any of Borrower's Properties or results in or
requires the creation or imposition of any Lien on any of the Properties or
revenues of Borrower.
Section 5.4 Financial Statements. All financial statements heretofore
delivered to the Banks showing historical performance of Borrower for Borrower's
fiscal years ending on or before December 31, 2001, have been prepared in
accordance generally accepted accounting principles applied on a basis
consistent, except as otherwise noted therein, with that of the previous fiscal
year. The unaudited financial statements for the fiscal period ended June 30,
2002 have been prepared in accordance generally accepted accounting principles
applicable to interim financial statements applied on a basis consistent, except
as otherwise noted therein, with the previous same fiscal period of Borrower in
the prior fiscal year (subject to normal year-end adjustments). Each of such
financial statements fairly presents on a consolidated basis the financial
condition of Borrower and its Subsidiaries as of the dates thereof and the
results of operations for the periods covered thereby. Borrower and its
Subsidiaries have no material contingent liabilities other than those disclosed
in such financial statements referred to in this Section 5.4 or in comments or
footnotes thereto, or in any report supplementary thereto, heretofore furnished
to the Banks. Since December 31, 2001, there has been no event or series
20
of events which has resulted in, or reasonably could be expected to result in,
a Material Adverse Effect.
Section 5.5 No Litigation; No Labor Controversies.(a) Except as set forth
on Schedule 5.5, there is no litigation or governmental proceeding pending, or
to the knowledge of Borrower, threatened, against Borrower or any Subsidiary of
Borrower in which there is a reasonable possibility of an adverse decision
which, if adversely determined, could (individually or in the aggregate) have a
Material Adverse Effect.
(b) Except as set forth on Schedule 5.5, there are no labor controversies
pending or, to the best knowledge of Borrower, threatened against Borrower or
any Subsidiary of Borrower which could (individually or in the aggregate) have a
Material Adverse Effect.
Section 5.6 Taxes. Borrower and its Subsidiaries have filed all United
States federal tax returns, and all other foreign, state, local and other tax
returns, required to be filed and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by Borrower or any Subsidiary of
Borrower, except such taxes, if any, as are being contested in good faith and
for which adequate reserves have been provided. No notices of tax liens have
been filed and no claims are being asserted concerning any such taxes, which
liens or claims are material to the financial condition of Borrower or any of
its Subsidiaries (individually or in the aggregate). The charges, accruals and
reserves on the books of Borrower and its Subsidiaries for any taxes or other
governmental charges are adequate and in conformance with GAAP.
Section 5.7 Approvals. No authorization, consent, approval, license,
exemption, filing or registration with any court or governmental department,
agency or instrumentality, nor any approval or consent of the stockholders of
Borrower or any Subsidiary of Borrower or from any other Person, is necessary to
the valid execution, delivery or performance by Borrower or any Subsidiary of
Borrower of any Credit Document to which it is a party.
Section 5.8 ERISA. With respect to each Plan, Borrower and each other
member of the Controlled Group has fulfilled its obligations under the minimum
funding standards of and is in compliance in all material respects with the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and with
the Code to the extent applicable to it and has not incurred any liability to
the Pension Benefit Guaranty Corporation ("PBGC") or a Plan under Title IV of
ERISA other than a liability to the PBGC for premiums under Section 4007 of
ERISA. Neither Borrower nor any Subsidiary of Borrower has any contingent
liabilities for any post-retirement benefits under a Welfare Plan, other than
liability for continuation coverage described in Part 6 of Title I of ERISA.
Section 5.9 Government Regulation. Neither Borrower nor any Subsidiary of
Borrower is an "investment company" within the meaning of the Investment Company
Act of 1940, as amended, or a "registered holding company", or a "Subsidiary
company" of a "registered holding company", or an "affiliate" of a "registered
holding company" or of a "Subsidiary company" of a "registered holding company",
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
Section 5.10 Margin Stock; Use of Proceeds. Neither Borrower nor any
Subsidiary of Borrower is engaged principally, or as one of its primary
activities, in the business of extending
21
credit for the purpose of purchasing or carrying margin stock ("margin stock" to
have the same meaning herein as in Regulation U of the Board of Governors of the
Federal Reserve System). The proceeds of the Loans are to be used solely (i) to
provide liquidity support for Borrower's commercial paper program, (ii) to fund
Borrower's working capital needs, and (iii) for general corporate purposes of
Borrower. Borrower will not use the proceeds of any Loan in a manner that
violates any provision of Regulation U or X of the Board of Governors of the
Federal Reserve System.
Section 5.11 Licenses and Authorizations; Compliance with Laws. (a) (a)
Borrower and each of its Subsidiaries has all necessary licenses, permits and
governmental authorizations to own and operate its Properties and to carry on
its business as currently conducted and contemplated. Borrower and each of its
Subsidiaries is in compliance with all applicable laws, regulations, ordinances
and orders of any governmental or judicial authorities except for any such law,
regulation, ordinance or order which, the failure to comply therewith, could not
reasonably expected to have a Material Adverse Effect.
(b) In the ordinary course of its business, Borrower and each of its
Subsidiaries conduct an ongoing review of the effect of Environmental and Health
Laws on the Properties and all aspects of the business and operations of
Borrower and its Subsidiaries in the course of which such Borrower identifies
and evaluates associated liabilities and costs (including, without limitation,
any capital or operating expenditures required for clean-up or closure of
Properties currently or previously owned or used, any capital or operating
expenditures required to achieve or maintain compliance with standards imposed
by law and any actual or potential liabilities to third parties, including
employees or governmental entities, and any related costs and expenses). On the
basis of this review, Borrower has reasonably concluded that Environmental and
Health Laws are unlikely to have any Material Adverse Effect.
(c) Except as set forth on Schedule 5.11 (as amended from time to time in
accordance with the provisions hereof), neither the Borrower nor any Subsidiary
of Borrower has given, nor is it required to give, nor has it received, any
notice, letter, citation, order, warning, complaint, inquiry, claim or demand to
or from any governmental entity or in connection with any court proceeding which
could reasonably have a Material Adverse Effect claiming that: (i) Borrower or
any Subsidiary of Borrower has violated, or is about to violate, any
Environmental and Health Law; (ii) there has been a release, or there is a
threat of release, of Hazardous Materials from Borrower's or any of its
Subsidiary's Property, facilities, equipment or vehicles; (iii) Borrower or any
of its Subsidiary may be or is liable, in whole or in part, for the costs of
cleaning up, remediating or responding to a release of Hazardous Materials; or
(iv) any of Borrower's or any of its Subsidiary's Property or assets are subject
to a Lien in favor of any governmental entity for any liability, costs or
damages, under any Environmental and Health Law arising from, or costs incurred
by such governmental entity in response to, a release of a Hazardous Materials.
Section 5.12 Ownership of Property; Liens. Borrower and each Subsidiary of
Borrower has good title to or valid leasehold interests in all its Property.
None of Borrower's or any Subsidiary's Property is subject to any Lien, except
as permitted in Section 7.9.
Section 5.13 No Burdensome Restrictions; Compliance with Agreements.
Neither Borrower nor any Subsidiary of Borrower is (a) party or subject to any
law, regulation, rule or
22
order, or any Contractual Obligation, that (individually or in the aggregate)
materially adversely affects the business, operations, Property or financial or
other condition of Borrower and its Subsidiaries (individually or in the
aggregate) or (b) in default in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any agreement to
which it is a party (including any Contractual Obligation), which default could
materially adversely affects the business, operations, Property or financial or
other condition of Borrower and its Subsidiaries (individually or in the
aggregate).
Section 5.14 Full Disclosure. All information heretofore furnished by
Borrower to the Administrative Agent or any Bank for purposes of or in
connection with the Credit Documents or any transaction contemplated thereby is,
and all such information hereafter furnished by Borrower to the Administrative
Agent or any Bank will be, true and accurate in all material respects and not
misleading.
Section 5.15 Solvency. Borrower and each of its Subsidiaries, individually
and on a consolidated basis, is Solvent.
SECTION 6 CONDITIONS PRECEDENT.
The obligation of each Bank to effect a Borrowing shall be subject to the
following conditions precedent:
Section 6.1 Initial Credit Event. Before or concurrently with the initial
Credit Event:
(a) The Administrative Agent shall have received for each Bank the
favorable written opinion of (i) Morgan, Lewis & Bockius LLP, counsel to
Borrower, and (ii) General Counsel to the Borrower;
(b) The Administrative Agent shall have received for each Bank copies of
Borrower's (i) Articles of Incorporation, together with all amendments and (ii)
bylaws (or comparable constituent documents) and any amendments thereto,
certified in each instance by its Secretary or an Assistant Secretary;
(c) The Administrative Agent shall have received for each Bank copies of
resolutions of Borrower's Board of Directors authorizing the execution and
delivery of the Credit Documents and the consummation of the transactions
contemplated thereby together with specimen signatures of the persons authorized
to execute such documents on such Borrower's behalf, all certified in each
instance by its Secretary or Assistant Secretary;
(d) The Administrative Agent shall have received for each Bank such Bank's
duly executed Note of Borrower dated the date hereof and otherwise in compliance
with the provisions of Section 2.10(a) hereof;
(e) The Administrative Agent shall have received for each Bank a duly
executed original of (i) this Agreement, and (ii) a list of Borrower's
Authorized Representatives;
23
(f) All legal matters incident to the execution and delivery of the Credit
Documents shall be satisfactory to the Banks;
(g) The Administrative Agent shall have received a duly executed original
of the Fee Letter;
(h) The Administrative Agent shall have received a duly executed Compliance
Certificate containing financial information as of June 30, 2002;
(i) With the exception of the $75,000,000 First Mortgage Bonds issued by
BHP, the extensions of the maturity date of the $50,000,000 Bridge Credit
Agreement between Borrower and ABN AMRO Bank N.V. relating to the Las Vegas
Cogeneration II, L.L.C. project, and the Amended and Restated 364-Day Credit
Agreement, neither Borrower nor any of its Subsidiaries shall have, during the
period from July 1, 2002 to the Effective Date, issued, incurred, assumed,
created, become liable for, contingently or otherwise, any material
Indebtedness;
(j) The Borrower shall have provided a certificate stating that the
conditions set forth precedent set forth in this Section 6.1 have been
satisfied;
(k) The Borrower shall have paid to each Bank the applicable fees for
providing its Commitment under this Agreement; and
(l) The Borrower's S&P Rating shall be BBB or better and its Moody's Rating
shall be Baa2 or better; and
(m) The Administrative Agent shall have received such other documents and
information as it may reasonably request.
Section 6.2 All Credit Events. As of the time of each Credit Event
hereunder:
(a) The Administrative Agent shall have received the notice required by
Section 2.5 hereof;
(b) Each of the representations and warranties set forth in Section 5
hereof shall be and remain true and correct in all material respects as of said
time, except that if any such representation or warranty relates solely to an
earlier date it need only remain true as of such date; and
(c) Borrower shall be in full compliance with all of the terms and
conditions hereof, and no Default or Event of Default shall have occurred and be
continuing or would occur as a result of such Credit Event.
Each request for a Credit Event shall be deemed to be a representation and
warranty by Borrower on the date of such Credit Event as to the facts specified
in paragraphs (b) and (c) of this Section 6.2.
SECTION 7 COVENANTS.
24
Borrower covenants and agrees that, so long as any Note or Loan is
outstanding hereunder, except to the extent compliance in any case is waived in
writing by the Required Banks:
Section 7.1 Corporate Existence; Subsidiaries. Borrower shall, and shall
cause each of its Subsidiaries to, preserve and maintain its corporate
existence, subject to the provisions of Section 7.12 hereof. Together with any
financial statements delivered pursuant to Section 7.6 hereof, Borrower shall
deliver an updated Schedule 5.2 to reflect any changes from the existing
Schedule 5.2.
Section 7.2 Maintenance. Borrower will maintain, preserve and keep its
plants, Properties and equipment necessary to the proper conduct of its business
in reasonably good repair, working order and condition and will from time to
time make all reasonably necessary repairs, renewals, replacements, additions
and betterments thereto so that at all times such plants, Properties and
equipment shall be reasonably preserved and maintained, and Borrower will cause
each of its Subsidiaries to do so in respect of Property owned or used by it;
provided, however, that nothing in this Section 7.2 shall prevent Borrower or a
Subsidiary of Borrower from discontinuing the operation or maintenance of any
such Properties if such discontinuance is not disadvantageous to the Banks or
the holders of the Notes, does not materially impair the operations of Borrower
or any Subsidiary of Borrower and is, in the judgment of Borrower, desirable in
the conduct of its business or the business of its Subsidiaries.
Section 7.3 Taxes. Borrower will duly pay and discharge, and will cause
each of its Subsidiaries duly to pay and discharge, all taxes, rates,
assessments, fees and governmental charges upon or against it or against its
Properties, in each case before the same becomes delinquent and before penalties
accrue thereon, unless and to the extent that the same is being contested in
good faith by appropriate proceedings and reserves in conformity with GAAP have
been provided therefor on the books of Borrower.
Section 7.4 ERISA. Borrower will, and will cause each of its Subsidiaries
to, promptly pay and discharge all obligations and liabilities arising under
ERISA of a character which if unpaid or unperformed might result in the
imposition of a Lien against any of its properties or assets and will promptly
notify the Administrative Agent of (i) the occurrence of any reportable event
(as defined in ERISA) affecting a Plan, other than any such event of which the
PBGC has waived notice by regulation, (ii) receipt of any notice from PBGC of
its intention to seek termination of any Plan or appointment of a trustee
therefor, (iii) its or any of its Subsidiaries' intention to terminate or
withdraw from any Plan, and (iv) the occurrence of any event affecting any Plan
which could result in the incurrence by Borrower or any of its Subsidiaries of
any material liability, fine or penalty, or any material increase in the
contingent liability of Borrower or any of its Subsidiaries under any
post-retirement Welfare Plan benefit. The Administrative Agent will promptly
distribute to each Bank any notice it receives from Borrower pursuant to this
Section 7.4.
Section 7.5 Insurance. Borrower will insure, and keep insured, and will
cause each of its Subsidiaries to insure, and keep insured, with good and
responsible insurance companies, all insurable Property owned by it of a
character usually insured by companies similarly situated and operating like
Property. To the extent usually insured by companies similarly situated and
conducting similar businesses, Borrower will also insure, and cause each of its
Subsidiaries to
25
insure, employers' and public and product liability risks with good and
responsible insurance companies. Borrower will, upon request of any Bank,
furnish to such Bank a summary setting forth the nature and extent of the
insurance maintained pursuant to this Section 7.5.
Section 7.6 Financial Reports and Other Information. (a) Borrower will
maintain a system of accounting in accordance with GAAP and will furnish to the
Banks and their respective duly authorized representatives such information
respecting the business and financial condition of Borrower and its Subsidiaries
as any Bank may reasonably request; and without any request, the Borrower shall
deliver to the Administrative Agent in form and detail satisfactory to the
Administrative Agent, with copies for each Bank in form and substance
satisfactory to them, each of the following:
(i) within 120 days after the end of each fiscal year of Borrower, a
copy of Borrower financial statements for such fiscal year, including the
consolidated balance sheet of Borrower and its Subsidiaries for such year
and the related statements of income and statements of cash flow, each as
certified by independent public accountants of recognized national standing
selected by Borrower in accordance with GAAP with such accountants'
unqualified opinion to the effect that the financial statements have been
prepared in accordance with GAAP and present fairly in all material
respects in accordance with GAAP the consolidated financial position of
Borrower and its Subsidiaries as of the close of such fiscal year and the
results of their operations and cash flows for the fiscal year then ended
and that an examination of such accounts in connection with such financial
statements has been made in accordance with generally accepted auditing
standards and, accordingly, such examination included such tests of the
accounting records and such other auditing procedures as were considered
necessary in the circumstances, provided that if Borrower files its annual
report on Form 10-K for the applicable annual period, and such annual
report contains the financial statements and accountants certifications,
opinions and statements described above, the Borrower may satisfy the
requirements of this Section 7.6(a)(i) by delivering a copy of such annual
report to each Bank. Together with such information the Borrower shall
provide to each Bank such consolidating information as may be necessary for
the Banks to determine the Borrower's compliance with Section 7.17 hereof;
(ii) within 60 days after the end of each of the first three quarterly
fiscal periods of Borrower, a consolidated unaudited balance sheet of
Borrower and its Subsidiaries, and the related statements of income and
statements of cash flow, as of the close of such period, all of the
foregoing prepared by Borrower in reasonable detail in accordance with GAAP
and certified by Borrower's chief financial officer or corporate controller
as fairly presenting the financial condition as at the dates thereof and
the results of operations for the periods covered thereby, provided that if
Borrower files a Form 10-Q for the applicable quarterly period, and such
quarterly report contains the financial statements and certifications
described above, the Borrower may satisfy the requirements of this Section
7.6(a)(ii) by delivering a copy of such quarterly report to each Bank.
Together with such information the Borrower shall provide to each Bank such
consolidating information as may be necessary for the Banks to determine
the Borrower's compliance with Section 7.17 hereof;
26
(iii) within the period provided in subsection (i) above, the written
statement of the accountants who certified the audit report thereby
required that in the course of their audit they have obtained no knowledge
of any Default or Event of Default, or, if such accountants have obtained
knowledge of any such Default or Event of Default, they shall disclose in
such statement the nature and period of the existence thereof; and
(iv) promptly after the sending or filing thereof, copies of all proxy
statements, financial statements and reports Borrower or any of its
Subsidiaries sends to their shareholders, and copies of all other regular,
periodic and special reports and all registration statements Borrower or
any of its Subsidiaries file with the SEC or any successor thereto, or with
any national securities exchanges.
(b) Each financial statement furnished to the Banks pursuant to subsection
(i) or (ii) of this Section 7.6 shall be accompanied by (A) a written
certificate signed by Borrower's chief financial officer or corporate controller
to the effect that (i) no Default or Event of Default has occurred during the
period covered by such statements or, if any such Default or Event of Default
has occurred during such period, setting forth a description of such Default or
Event of Default and specifying the action, if any, taken by Borrower to remedy
the same, (ii) the representations and warranties contained in Section 5 hereof
are true and correct in all material respects as though made on the date of such
certificate (other than those made solely as of an earlier date, which need only
remain true as of such date), except as otherwise described therein, and (B) a
Compliance Certificate in the form of Exhibit B hereto showing Borrower's
compliance with the covenants set forth in Sections 7.9, 7.11, 7.12 and 7.14
through 7.19 hereof.
(c) Borrower will promptly (and in any event within three Business Days
after an officer of Borrower has knowledge thereof) give notice to the
Administrative Agent and each Bank:
(i) of the occurrence of any Default or Event of Default;
(ii) any event or condition which could reasonably be expected to have
a Material Adverse Effect;
(iii) of any litigation or governmental proceeding of the type
described in Section 5.5 hereof;
(iv) of any material change in the information set forth on the
Schedules hereto; and
(v) of the entering into of any Long-Term Guaranties, and Borrower
shall promptly provide the Administrative Agent with a copy of any such
Guarantee and any modification to such Guarantee.
Section 7.7 Bank Inspection Rights. For purposes of confirming compliance
with the Credit Documents or after the occurrence and during the continuance of
an Event of Default, upon reasonable notice from the Administrative Agent or the
Required Banks, Borrower will, at Borrower's expense, permit such Banks (and
such Persons as any Bank may designate) during normal business hours to visit
and inspect, under Borrower's guidance, any of the Properties of
27
Borrower or any of its Subsidiaries, to examine all of their books of account,
records, reports and other papers, to make copies and extracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and with their independent public accountants (and by this
provision Borrower authorizes such accountants to discuss with the Banks (and
such Persons as any Bank may designate) the finances and affairs of Borrower and
its Subsidiaries) all at such reasonable times and as often as may be reasonably
requested; provided, however, that except upon the occurrence and during the
continuation of any Default or Event of Default, not more than one such visit
and inspection may be conducted each calendar quarter.
Section 7.8 Conduct of Business. Neither Borrower nor any Subsidiary of
Borrower will engage in any line of business other than business activities in
the field of (i) cogeneration and related thermal uses, (ii) energy production,
(iii) energy development, (iv) energy recovery, (v) utility operation and
management, (vi) demand side management services, (vii) energy trading, (viii)
management of investment funds which invest in energy related businesses and
investments in such funds, (ix) hedging but not speculative activities relating
to any of the foregoing lines of business, (x) telecommunications, (xi)
management and operating services related to any of the foregoing lines of
business, and (xii) other businesses not described in the foregoing so long as
the Investments and expenses made in such other businesses does not exceed
$20,000,000.
Section 7.9 Liens. To the extent Borrower or any of its Subsidiaries grants
a Lien on any of their Property to secure Borrower's obligations under the
Existing Credit Agreements, Borrower will, or will cause such Subsidiary to,
concurrently with the granting of such Lien, grant a pari passu Lien to the
Administrative Agent for the benefit of the Banks to secure the Obligations.
Section 7.10 Use of Proceeds; Regulation U. The proceeds of each Borrowing
will be used by Borrower solely to fund Borrower's working capital needs, and
(ii) for general corporate purposes of Borrower. Borrower will not use any part
of the proceeds of any of the Borrowings directly or indirectly to purchase or
carry any margin stock (as defined in Section 5.10 hereof) or to extend credit
to others for the purpose of purchasing or carrying any such margin stock.
Section 7.11 Sales and Leasebacks. Borrower will not, nor will it permit
any of its Subsidiaries to, enter into any arrangement with any bank, insurance
company or other lender or investor providing for the leasing by Borrower or any
Subsidiary of Borrower of any Property theretofore owned by it and which has
been or is to be sold or transferred by such owner to such lender or investor if
the total amount of rent and other obligations of the Borrower and its
Subsidiaries under such lease, when combined with all rent and other obligations
of Borrower and its Subsidiaries under all such leases, would exceed $30,000,000
in the aggregate, provided that Borrower and its Subsidiaries may engage in
synthetic lease transactions so long as the Borrower's or such Subsidiary's, as
applicable, obligations under such synthetic leases are included as Indebtedness
for all purposes (including financial covenant calculations) under the Credit
Documents.
Section 7.12 Mergers, Consolidations and Sales of Assets.
28
(a) Borrower will not, and will not permit any of its Material
Subsidiaries to, (i) consolidate with or be a party to merger with any
other Person or (ii) sell, lease or otherwise dispose of all or a
"substantial part" of the assets of Borrower and its Subsidiaries;
provided, however, that (w) the foregoing shall not prohibit any sale,
lease, transfer or disposition to which the Required Banks have consented,
such consent not to by unreasonably withheld if (A) such transaction does
not result in a downgrade of either Borrower's S&P Rating or Moody's
Rating, (B) such transaction is for cash consideration (or other
consideration acceptable to the Required Banks) in an amount not less than
the fair market value of the applicable assets, and (C) such transaction,
when combined with all other such transactions, would not have a Material
Adverse Effect, taken as a whole, (x) any Subsidiary of Borrower may merge
or consolidate with or into or sell, lease or otherwise convey all or a
substantial part of its assets to Borrower or any Subsidiary of which
Borrower holds (directly or indirectly) at least the same percentage equity
ownership; provided that in any such merger or consolidation involving
Borrower, Borrower shall be the surviving or continuing corporation, (y)
Borrower and its Subsidiaries may sell inventory, reserves and electricity
in the ordinary course of business, and (z) Borrower may enter into a
merger with, or acquisition of all of, another Person so long as:
(1) Borrower is the surviving entity,
(2) unless consented to by the Required Banks, no downgrade in the
Borrower's S&P Rating or Moody's Rating would occur as a result of the
consummation of such a transaction,
(3) if such transaction is an acquisition, the Board of Directors (or
similar governing body) of the Person being acquired has approved
being so acquired,
(4) no Default or Event of Default has occurred and is continuing at the
time of, or would occur as a result of, such transaction.
As used in this Section 7.12(a), a sale, lease, transfer or disposition of
assets during any fiscal year shall be deemed to be of a "substantial part" of
the consolidated assets of Borrower and its Subsidiaries if the net book value
of such assets, when added to the net book value of all other assets sold,
leased, transferred or disposed of by the Borrower and its Subsidiaries
(excluding the Marketing Subsidiaries) during such fiscal year (other than
inventory, reserves and electricity in the ordinary course of business) exceeds
ten percent (10%) of the total assets of Borrower and its Consolidated
Subsidiaries, determined on a consolidated basis as of the last day of the
immediately preceding fiscal year.
(b) Except as permitted pursuant to Section 7.14 hereof, Borrower will
not sell, transfer or otherwise dispose of, or permit any of its
Subsidiaries to issue, sell, transfer or otherwise dispose of, any shares
of stock of any class (including as "stock" for purposes of this Section,
any warrants, rights or options to purchase or otherwise acquire stock or
other Securities exchangeable for or convertible into stock) of any
Subsidiary of Borrower, except to Borrower or a Wholly-Owned Subsidiary of
Borrower or except for the purpose of qualifying directors.
29
Section 7.13 Use of Property and Facilities; Environmental and Health and
Safety Laws.
(a) Borrower will, and will cause each of its Subsidiaries to, comply
in all material respects with the requirements of all Environmental and
Health Laws applicable to or pertaining to the Properties or business
operations of Borrower or any Subsidiary of Borrower. Without limiting the
foregoing, Borrower will not, and will not permit any Person to, except in
accordance with applicable law, dispose of any Hazardous Material into,
onto or upon any real property owned or operated by Borrower or any of its
Subsidiaries.
(b) Borrower will promptly provide the Banks with copies of any notice
or other instrument of the type described in Section 5.11(c) hereof, and in
no event later than five (5) Business Days after an officer of Borrower or
a Subsidiary of Borrower receives such notice or instrument.
Section 7.14 Investments, Acquisitions, Loans, Advances and Guaranties.
Borrower will not, nor will it permit any Subsidiary of Borrower to, directly or
indirectly, make, retain or have outstanding any investments (whether through
purchase of stock or obligations or otherwise) in, or loans or advances to, any
other Person, or acquire all or any substantial part of the assets or business
of any other Person or division thereof, or be or become liable as endorser,
guarantor, surety or otherwise (such as liability as a general partner) for any
debt, obligation or undertaking of any other Person, or otherwise agree to
provide funds for payment of the obligations of another, or supply funds thereto
or invest therein or otherwise assure a creditor of another against loss, or
apply for or become liable to the issuer of a letter of credit which supports an
obligation of another, or subordinate any claim or demand it may have to the
claim or demand of any other Person (cumulatively, all of the foregoing
"Investments"); provided, however, that the foregoing provisions shall not apply
to nor operate to prevent:
(a) investments in direct obligations of the United States of America
or of any agency or instrumentality thereof whose obligations constitute
full faith and credit obligations of the United States of America provided
that any such obligation matures within one year from the date it is
acquired by Borrower or Subsidiary;
(b) investments in commercial paper rated P-1 by Moody's Investors
Services, Inc. or A-1 by Standard & Poor's Corporation maturing within one
year of its date of issuance;
(c) investments in certificates of deposit issued by any Bank or any
United States commercial bank having capital and surplus of not less than
$200,000,000 maturing within one year from the date of issuance thereof or
in banker's acceptances endorsed by any Bank or other such commercial bank
and maturing within six months of the date of acceptance;
(d) investments in repurchase obligations with a term of not more than
seven (7) days for underlying securities of the types described in
subsection (a) above entered into with any bank meeting the qualifications
specified in subsection (c) above, provided
30
all such agreements require physical delivery of the securities securing
such repurchase agreement, except those delivered through the Federal
Reserve Book Entry System;
(e) investments in money market funds that invest solely, and which
are restricted by their respective charters to invest solely, in
investments of the type described in the immediately preceding subsections
(a), (b), (c) and (d) above;
(f) ownership of stock, obligations or securities received in
settlement of debts (created in the ordinary course of business) owing to
Borrower or any Subsidiary;
(g) endorsements of negotiable instruments for collection in the
ordinary course of business;
(h) loans and advances to employees in the ordinary course of business
for travel, relocation, and similar purposes;
(i) Investments (i) existing on the Effective Date in Subsidiaries of
Borrower, (ii) existing on the Effective Date and identified in Schedule
7.14 hereof, or (iii) consisting of intercompany loans permitted pursuant
to Section 7.15(e);
(j) Investments constituting (i) accounts receivable arising, (ii)
trade debt granted, or (iii) deposits made in connection with the purchase
price of goods or services, in each case in the ordinary course of
business;
(k) Investments in Persons other than Marketing Subsidiaries engaged
in lines of business related to the lines of business described in Section
7.8 so long as (i) both before and after giving effect to such Investment
no Default of Event of Default shall have occurred and be continuing, (ii)
such Investments do not permit any creditor of such Person recourse to
Borrower or any other Subsidiary of Borrower or any of their assets (other
than the assets and/or the stock or similar equity interest of such Person)
and (iii) if such Investments are in Persons engaged in the lines of
business described in clause (xii) of Section 7.8, such Investments and
expenses in the aggregate do not exceed $20,000,000 outstanding at any
time;
(l) Guaranties, other than Long-Term Guaranties, so long as such
Indebtedness is permitted pursuant to Section 7.15;
(m) acquisitions permitted pursuant to Section 7.12(a);
(n) Investments constituting Long-Term Guaranties other than Long-Term
Guarantees of Indebtedness of the Marketing Subsidiaries;
(o) (i) Investments in Marketing Subsidiaries (other than Investments
in Marketing Subsidiaries consisting of Guaranties of Indebtedness of
Marketing Subsidiaries) existing on August 28, 2001 and listed on Schedule
7.14 and (ii) Investments consisting of Guaranties of Indebtedness of
Marketing Subsidiaries in existence on the Effective Date and Investments
in Marketing Subsidiaries made after the Effective Date (including through
Guaranties (including Long-Term Guaranties)) provided, that the aggregate
amount of Investments permitted by this clause (ii) when
31
combined with the amount of intercompany Indebtedness owing by Marketing
Subsidiaries permitted pursuant to Section 7.15(e)(iii) shall not in the
aggregate exceed $10,000,000 outstanding at any time (it being understood
that any increase in the value of any such Investment attributable to the
undistributed net earnings of the Marketing Subsidiaries shall not be
deemed a violation of this Section 7.14(o)); and
(p) Investments consisting of promissory notes issued in consideration
for the sale by the Borrower or a Subsidiary of a portion of the stock (or
similar equity interests) of a Subsidiary where (i) such note is secured by
the stock (or similar equity interest) sold, and (ii) one of the purposes
of such sale is to ensure that such Subsidiary qualifies as a "qualifying
facility" under the Public Utility Regulatory Policies Act of 1978, as
amended.
Any Investment which when made complies with the requirements of
paragraphs (a) through (e) may continue to be held notwithstanding that such
Investment if made thereafter would not comply with such requirements;
In determining the amount of investments, acquisitions, loans, advances
and guarantees permitted under this Section 7.14, investments and acquisitions
shall always be taken at the original cost thereof (regardless of any subsequent
appreciation or depreciation therein), loans and advances shall be taken at the
principal amount thereof then remaining unpaid, and guarantees shall be taken at
the amount of obligations guaranteed thereby.
Section 7.15 Restrictions on Indebtedness. Borrower will not, nor will it
permit any Subsidiary of Borrower to, issue, incur, assume, create, become
liable for, contingently or otherwise, or have outstanding any Indebtedness;
provided, however, that the foregoing provisions shall not restrict nor operate
to prevent the following Indebtedness, so long as the incurrence and maintenance
of such Indebtedness would not cause the Borrower to be in violation of Section
7.17 hereof if compliance with such covenant were measured on the date of the
incurrence of such Indebtedness:
(a) the Obligations;
(b) Non-Recourse Indebtedness of any Project Finance Subsidiary;
(c) so long as the Borrower would be in compliance with Section 7.17
hereof (calculated as of the date of, and after giving affect to, the
incurrence of such Indebtedness), secured Indebtedness (excluding
Indebtedness of the type described in (e), (f), and (g) below but including
the pledge of stock or similar equity interest of any Project Finance
Subsidiary or any Subsidiary which is a special purpose entity whose sole
purpose is to own the stock or similar equity interest of a Project Finance
Subsidiary) (A) set forth on Schedule 7.15(b) hereto, and (B) (i) of BHP,
(ii) evidencing the deferred purchase price of newly acquired property or
incurred to finance the acquisition of personal property of the Borrower or
a Subsidiary of the Borrower used in the ordinary course of business of the
Borrower or Subsidiary, (iii) constituting Capitalized Lease Obligations or
with respect to synthetic (or similar type) lease arrangements, or (iv)
incurred in connection with the performance of tenders, statutory
obligations, bids, leases or other similar obligations (other than for
borrowed money) entered into in the ordinary
32
course of business or to secure obligations on performance bonds; provided,
that the aggregate amount of Indebtedness permitted by this clause (B) at
any time outstanding shall not exceed 5% of Consolidated Assets as
reflected on the most recent balance sheet delivered by the Borrower
pursuant to Section 7.6, provided that Borrower shall promptly provide the
Administrative Agent with a copy of any documentation evidencing such
Indebtedness in excess of $25,000,000 and any modification to such
Indebtedness;
(d) so long as the Borrower would be in compliance with Section 7.17
hereof (calculated as of the date of, and after giving affect to, the
incurrence of such Indebtedness), other Indebtedness (excluding
Indebtedness of the type described in (e), (f), and (g) below) which is
unsecured and either junior in right of payment to the Obligations or pari
passu to the Obligations or is equally and ratably secured with the
Obligations, provided that Borrower shall promptly provide the
Administrative Agent with a copy of any documentation evidencing such
Indebtedness in excess of $25,000,000 and any modification to such
Indebtedness;
(e) intercompany loans (i) from (x) Subsidiary to Borrower so long as
such loans are subordinated to the Obligations on terms reasonably
satisfactory to the Administrative Agent, and (y) Borrower to a Subsidiary
of Borrower, (ii) among Wholly-Owned Subsidiaries, and (iii) from a
Subsidiary of Borrower to a Marketing Subsidiary, so long as the aggregate
amount of such loans from time to time owing by the Marketing Subsidiaries
does not exceed the difference between (I) $10,000,000, less (II) the sum
of (A) the aggregate amount of Guaranties outstanding pursuant to Section
7.15(f), and (B) the aggregate amount of other Investments then made in the
Marketing Subsidiaries pursuant to Section 7.14(o)(ii) (it being understood
that to the extent such limit is exceeded solely as a result of an increase
in the value of any such Investment attributable to the undistributed net
earnings of the Marketing Subsidiaries, it shall not be deemed a violation
of this Section 7.15(e));
(f) Indebtedness consisting of Guaranties of the Indebtedness of the
Marketing Subsidiaries (including Long-Term Guaranties), provided that such
Indebtedness shall only be permitted to the extent the aggregate amount of
such Indebtedness, when added to the sum of (i) the aggregate amount of all
intercompany loans made to the Marketing Subsidiaries pursuant to Section
7.15(e), plus (ii) the aggregate amount of all other Investments made in
Marketing Subsidiaries pursuant to Section 7.14(o)(ii), does not exceed
$10,000,000 (it being understood that to the extent such limit is exceeded
solely as a result of an increase in the value of any such Investment
attributable to the undistributed net earnings of the Marketing
Subsidiaries, it shall not be deemed a violation of this Section 7.15(f))
provided, further that Borrower shall promptly provide the Administrative
Agent with a copy of any such Guarantee and any modification to such
Guarantee;
(g) Indebtedness of the Marketing Subsidiaries under Marketing
Subsidiary Excluded Credit Facilities in an aggregate amount not to exceed
the Marketing Subsidiary Indebtedness Limit;
(h) Permitted Derivative Obligations; and
33
(i) Indebtedness pursuant to Long-Term Guaranties (other than
Long-Term Guaranties of Indebtedness of Marketing Subsidiaries).
Indebtedness shall only be permitted under (e), (f), (h), and (i) above
to the extent such Indebtedness will have a priority of payment with the
Obligations which is no greater than pari passu.
Section 7.16 Consolidated Net Worth. Borrower will at the end of each
fiscal quarter maintain Consolidated Net Worth in an amount of not less than the
sum of (i) $425,000,000 and (ii) fifty percent (50%) of the aggregate
Consolidated Net Income, if positive, for the period beginning April 1, 2002 and
ending on the last day of such fiscal quarter.
Section 7.17 Recourse Leverage Ratio. Borrower will not at the end of any
fiscal quarter permit the Recourse Leverage Ratio to exceed 0.65 to 1.00.
Section 7.18 Fixed Charge Coverage Ratio. Borrower will maintain a Fixed
Charge Coverage Ratio of not less than 1.50:1.00, as determined at the end of
each fiscal quarter.
Section 7.19 Dividends and Other Shareholder Distributions. (a) (a)
Borrower shall not (i) declare or pay any dividends or make a distribution of
any kind (including by redemption or purchase) on or relating to its outstanding
capital stock, or (ii) repay (directly, through sinking fund payments or
otherwise) any Indebtedness or other obligations owing to a shareholder unless
in either circumstance no Default or Event of Default exists prior to or would
result after giving effect to such action.
(b) Except (i) as set forth in the Existing Credit Agreements or on
Schedule 7.19 and (ii) in connection with Non-Recourse Indebtedness of a Project
Finance Subsidiary, Borrower will not, and will not permit any of its
Subsidiaries, directly or indirectly to create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any such Subsidiary to: (1) pay dividends or make any other
distribution on any of such Subsidiary's capital stock owned by Borrower or any
Subsidiary of Borrower; (2) pay any Indebtedness owed to Borrower or any other
Subsidiary; (3) make loans or advances to Borrower or any other Subsidiary; or
(4) transfer any of its property or assets to Borrower or any other Subsidiary.
Section 7.20 No Negative Pledge. Except (i) as set forth in the Existing
Credit Agreements or on Schedule 7.19 and (ii) in connection with Non-Recourse
Indebtedness of a Project Finance Subsidiary, the Borrower will not, and will
not permit any of its Subsidiaries (other than Project Finance Subsidiaries),
directly or indirectly to enter into or assume any agreement (other than
customary non-assignment and no sub-letting provisions in leases consistent with
Borrower's past practices and the Credit Documents and, solely with respect to
the asset so financed, Capitalized Leases, to the extent such Indebtedness is
permitted herein) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired.
Section 7.21 Transactions with Affiliates. Borrower will not, and will not
permit any of its Subsidiaries to, enter into or be a party to any material
transaction or arrangement with any Affiliate of such Person (other than
Borrower), including without limitation, the purchase from,
34
sale to or exchange of Property with, any merger or consolidation with or into,
or the rendering of any service by or for, any Affiliate, except in the ordinary
course of and pursuant to the reasonable requirements of Borrower's or such
Subsidiary's business and upon terms no less favorable to such Borrower or such
Subsidiary than could be obtained in a similar transaction involving a
third-party.
Section 7.22 Compliance with Laws. Without limiting any of the other
covenants of Borrower in this Section 7, Borrower will, and will cause each of
its Subsidiaries to, conduct its business, and otherwise be, in compliance with
all applicable laws, regulations, ordinances and orders of any governmental or
judicial authorities; provided, however, that neither Borrower nor any
Subsidiary of Borrower shall be required to comply with any such law,
regulation, ordinance or order if the failure to comply therewith could not
reasonably be expected to have a Material Adverse Effect.
Section 7.23 Pari-Passu. Borrower will at all times cause the Obligations
to rank at least pari passu with all other senior unsecured Indebtedness of
Borrower.
Section 7.24 Certain Subsidiaries. Unless pursuant to Indebtedness which is
authorized pursuant to this Agreement, Borrower will not, and the Subsidiaries
of Borrower will not, permit any creditor of a Marketing Subsidiary or a Project
Finance Subsidiary to have recourse to any Borrower or any Subsidiary of
Borrower or any of their assets (other than (i) the stock or similar equity
interest of the applicable Subsidiary and (ii) with respect to a Permitted
Derivative Obligation) other than recourse under Guaranties permitted pursuant
to Sections 7.15(f) and (i).
Section 7.25 Ratings. Borrower will at all times this Agreement is in
effect maintain a S&P Rating and a Moody's Rating (or if one or both of such
ratings are unavailable, rating(s) from such other recognized national rating
agency or agencies as may be acceptable to the Administrative Agent and the
Required Banks).
Section 7.26 Liquidity Covenant. Borrower will, as of the last day of each
fiscal quarter commencing with the fiscal quarter ending December 31, 2002,
maintain Liquid Assets of at least $30,000,000.
Section 7.27 Existing Credit Agreements. Borrower will not make any
modification(s) to the Existing Credit Agreements which is favorable to the
lenders thereunder (other than pricing) unless the same modification(s) is made
to this Agreement. In the event the Borrower makes any such modification to the
Existing Credit Agreements, the terms of this Agreement shall be automatically
modified to incorporate such favorable provision(s) for the benefit of the Banks
into this Agreement. At the request of the Administrative Agent, Borrower shall
execute such documentation as Administrative Agent may request to evidence any
such modification to this Agreement.
SECTION 8 EVENTS OF DEFAULT AND REMEDIES.
Section 8.1 Events of Default. Any one or more of the following shall
constitute an Event of Default:
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(a) (i) default in the payment when due of any fees, interest or of
any other Obligation not covered by clause (ii) below and such payment
default continues for three (3) days or (ii) default in the payment when
due of the principal amount of any Loan;
(b) default by Borrower or any Subsidiary in the observance or
performance of any covenant set forth in Section 7.1, Section 7.6(c),
Section 7.9 through 7.12, Sections 7.14 through 7.21, 7.23, 7.24 and 7.25
hereof;
(c) default by Borrower or any Subsidiary in the observance or
performance of any provision hereof or of any other Credit Document not
mentioned in (a) or (b) above, which is not remedied within thirty (30)
days after notice thereof shall have been given to the Borrower by the
Administrative Agent;
(d) (i) failure to pay when due Indebtedness in an aggregate principal
amount of (x) $10,000,000 or more of Borrower or any Material Subsidiary,
(ii) default shall occur under one or more indentures, agreements or other
instruments under which any Indebtedness of Borrower or any of its Material
Subsidiary in an aggregate principal amount of $10,000,000 or more may be
issued or created and such default shall continue for a period of time
sufficient to permit the holder or beneficiary of such Indebtedness or a
trustee therefor to cause the acceleration of the maturity of any such
Indebtedness or any mandatory unscheduled prepayment, purchase or funding
thereof, or (iii) a default shall occur under either of the Existing Credit
Agreements;
(e) any representation or warranty made herein or in any other Credit
Document by Borrower or any Subsidiary of Borrower, or in any statement or
certificate furnished pursuant hereto or pursuant to any other Credit
Document by Borrower or any Subsidiary of Borrower, or in connection with
any Credit Document, proves untrue in any material respect as of the date
of the issuance or making, or deemed making or issuance, thereof;
(f) Borrower or any Material Subsidiary shall (i) fail to pay its
debts generally as they become due or admit in writing its inability to pay
its debts generally as they become due, (ii) make an assignment for the
benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in,
the appointment of a receiver, custodian, trustee, examiner, liquidator or
similar official for it or any substantial part of its Property, (iv)
institute any proceeding seeking to have entered against it an order for
relief under the United States Bankruptcy Code, as amended, to adjudicate
it insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it or any
analogous action is taken under any other applicable law relating to
bankruptcy or insolvency or any such order for relief is in fact granted,
(v) take any corporate action (such as the passage by its board of
directors of a resolution) in furtherance of any matter described in parts
(i)-(iv) above, or (vi) fail to contest in good faith any appointment or
proceeding described in Section 8.1(g) hereof;
(g) a custodian, receiver, trustee, examiner, liquidator or similar
official shall be appointed for Borrower or any Material Subsidiary, or any
substantial part of any of
36
their Property, or a proceeding described in Section 8.1(f)(iv) shall be
instituted against Borrower or any Material Subsidiary, and such
appointment continues undischarged or such proceeding continues undismissed
or unstayed for a period of sixty (60) days;
(h) Borrower or any Material Subsidiary shall fail within thirty (30)
days to pay, bond or otherwise discharge any judgment or order for the
payment of money in excess of $10,000,000, which is not stayed on appeal or
otherwise being appropriately contested in good faith in a manner that
stays execution thereon;
(i) Borrower or any other member of the Controlled Group shall fail to
pay when due an amount or amounts which it shall have become liable, to pay
to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to
terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in
excess of $10,000,000 (collectively, a "Material Plan") shall be filed
under Title IV of ERISA by Borrower or any Subsidiary of Borrower or any
other member of the Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any Material Plan or a proceeding shall be instituted by a
fiduciary of any Material Plan against Borrower or any other member of the
Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within thirty (30) days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated;
(j) Borrower or any Subsidiary of Borrower or any Person acting on
behalf of Borrower, a Subsidiary or any governmental authority challenges
the validity of any Credit Document or Borrower's or one of its
Subsidiary's obligations thereunder or any Credit Document ceases to be in
full force and effect or is modified other than in accordance with the
terms thereof and hereof;
(k) a Change of Control Event shall have occurred; or
(l) Borrower shall for any reason cease to be wholly liable for the
full amount of the Obligations.
Section 8.2 Non-Bankruptcy Defaults. When any Event of Default other than
those described in subsections (f) or (g) of Section 8.1 hereof has occurred and
is continuing, the Administrative Agent shall, if so directed by the Required
Banks, by written notice to Borrower: declare the principal of and the accrued
interest on all outstanding Notes to be forthwith due and payable and thereupon
all outstanding Notes, including both principal and interest thereon, and all
other Obligations, shall be and become immediately due and payable together with
all other amounts payable under the Credit Documents without further demand,
presentment, protest or notice of any kind. The Administrative Agent, after
giving notice to Borrower pursuant to Section 8.1(c) or this Section 8.2, shall
also promptly send a copy of such notice to the other Banks, but the failure to
do so shall not impair or annul the effect of such notice.
Section 8.3 Bankruptcy Defaults. When any Event of Default described in
subsections (f) or (g) of Section 8.1 hereof has occurred, then all outstanding
Notes, including both interest and principal thereon, and all other Obligations
shall immediately become due and payable
37
together with all other amounts payable under the Credit Documents without
presentment, demand, protest or notice of any kind.
Section 8.4 [Intentionally Omitted](a).
Section 8.5 Expenses. Borrower agrees to pay to the Administrative Agent
and each Bank, and any other holder of any Note outstanding hereunder, all costs
and expenses incurred or paid by the Administrative Agent or such Bank or any
such holder, including attorneys' fees (including allocable fees of in-house
counsel) and court costs, in connection with (i) any amendment or waiver to the
Credit Documents requested by Borrower, (ii) any Default or Event of Default by
Borrower hereunder, or (iii) the enforcement of any of the Credit Documents.
SECTION 9 CHANGE IN CIRCUMSTANCES.
Section 9.1 Change of Law. Notwithstanding any other provisions of this
Agreement or any Note, if at any time after the date hereof any change in
applicable law or regulation or in the interpretation thereof makes it unlawful
for any Bank to make or continue to maintain Eurodollar Loans or to perform its
obligations as contemplated hereby, such Bank shall promptly give notice thereof
to Borrower and such Bank's obligations to make or maintain Eurodollar Loans
under this Agreement shall terminate until it is no longer unlawful for such
Bank to make or maintain Eurodollar Loans. Borrower shall prepay on demand the
outstanding principal amount of any such affected Eurodollar Loans, together
with all interest accrued thereon at a rate per annum equal to the interest rate
applicable to such Loan; provided, however, subject to all of the terms and
conditions of this Agreement, Borrower may then elect to borrow the principal
amount of the affected Eurodollar Loans from such Bank by means of Base Rate
Loans from such Bank, which Base Rate Loans shall not be made ratably by the
Banks but only from such affected Bank.
Section 9.2 Unavailability of Deposits or Inability to Ascertain, or
Inadequacy of, LIBOR. If on or prior to the first day of any Interest Period for
any Borrowing of Eurodollar Loans:
(a) the Administrative Agent determines that deposits in U.S. Dollars
(in the applicable amounts) are not being offered to major banks in the
eurodollar interbank market for such Interest Period, or that by reason of
circumstances affecting the interbank eurodollar market adequate and
reasonable means do not exist for ascertaining the applicable LIBOR, or
(b) Banks with Percentages aggregating at least 33% percent (33)% or
more reasonably determine and so advise the Administrative Agent that LIBOR
as reasonably determined by the Administrative Agent will not adequately
and fairly reflect the cost to such Banks or Bank of funding their or its
Eurodollar Loans or Loan for such Interest Period,
then the Administrative Agent shall forthwith give notice thereof to Borrower
and the Banks, whereupon until the Administrative Agent notifies Borrower that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Banks or of the relevant Bank to make Eurodollar Loans shall
be suspended.
38
Section 9.3 Increased Cost and Reduced Return.
(a) If, on or after the date hereof, the adoption of any applicable
law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Lending Office)
with any request or directive (whether or not having the force of law but,
if not having the force of law, compliance with which is customary in the
relevant jurisdiction) of any such authority, central bank or comparable
agency:
(i) shall subject any Bank (or its Lending Office) to any tax, duty or
other charge with respect to its Eurodollar Loans, its Notes or its
obligation to make Eurodollar Loans, or shall change the basis of taxation
of payments to any Bank (or its Lending Office) of the principal of or
interest on its Eurodollar Loans or any other amounts due under this
Agreement in respect of its Eurodollar Loans or its obligation to make
Eurodollar Loans (except for changes in the rate of tax on the overall net
income or profits of such Bank or its Lending Office imposed by the
jurisdiction in which such Bank or its lending office is incorporated in
which such Bank's principal executive office or Lending Office is located);
or
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding with respect to any Eurodollar Loans any such
requirement included in an applicable Eurodollar Reserve Percentage)
against assets of, deposits with or for the account of, or credit extended
by, any Bank (or its Lending Office) or shall impose on any Bank (or its
Lending Office) or on the interbank market any other condition affecting
its Eurodollar Loans, its Notes, or its obligation to make Eurodollar
Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Eurodollar Loan or to reduce
the amount of any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its Notes with respect thereto, by an
amount deemed by such Bank to be material, then, within fifteen (15) days after
demand by such Bank (with a copy to the Administrative Agent), Borrower shall be
obligated to pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction. In the event any law,
rule, regulation or interpretation described above is revoked, declared invalid
or inapplicable or is otherwise rescinded, and as a result thereof a Bank is
determined to be entitled to a refund from the applicable authority for any
amount or amounts which were paid or reimbursed by Borrower to such Bank
hereunder, such Bank shall refund such amount or amounts to Borrower without
interest.
(b) If, after the date hereof, any Bank or the Administrative Agent shall
have determined that the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein (including, without
limitation, any revision in the Final Risk-Based Capital Guidelines of the Board
of Governors of the Federal Reserve System (12 CFR Part 208, Appendix A; 12 CFR
Part 225, Appendix A) or of the Office of the Comptroller of the Currency (12
CFR Part 3, Appendix A), or in any other applicable capital rules heretofore
adopted and issued by any governmental authority), or any change in the
interpretation or
39
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Lending Office) with any request or directive regarding
capital adequacy (whether or not having the force of law but, if not having the
force of law, compliance with which is customary in the applicable jurisdiction)
of any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Bank's capital, or on the capital
of any corporation controlling such Bank, as a consequence of its obligations
hereunder to a level below that which such Bank could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's policies
with respect to capital adequacy) by an amount deemed by such Bank to be
material, then from time to time, within fifteen (15) days after demand by such
Bank (with a copy to the Administrative Agent), Borrower shall pay to such Bank
such additional amount or amounts as will compensate such Bank for such
reduction.
(c) Each Bank that determines to seek compensation under this Section 9.3
shall notify Borrower and the Administrative Agent of the circumstances that
entitle the Bank to such compensation pursuant to this Section 9.3 and will
designate a different Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the sole
judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate
of any Bank claiming compensation under this Section 9.3 and setting forth the
additional amount or amounts to be paid to it hereunder submitted to Borrower
and the Administrative Agent by such Bank in good faith shall be prima facie
evidence of the amount of such compensation. In determining such amount, such
Bank may use any reasonable averaging and attribution methods.
Section 9.4 Lending Offices. Each Bank may, at its option, elect to make
its Loans hereunder at the branch, office or affiliate specified on the
appropriate signature page hereof or in the assignment agreement which any
assignee bank executes pursuant to Section 11.12 hereof (each a "Lending
Office") for each type of Loan available hereunder or at such other of its
branches, offices or affiliates as it may from time to time elect and designate
in a written notice to Borrower and the Administrative Agent, so long as such
election does not increase costs or other amounts payable by Borrower to such
Bank hereunder.
Section 9.5 Discretion of Bank as to Manner of Funding. Notwithstanding any
other provision of this Agreement, each Bank shall be entitled to fund and
maintain its funding of all or any part of its Loans in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if each Bank had actually funded and
maintained each Eurodollar Loan through the purchase of deposits in the
eurodollar interbank market having a maturity corresponding to such Loan's
Interest Period and bearing an interest rate equal to LIBOR for such Interest
Period.
SECTION 10 THE AGENT.
Section 10.1 Appointment and Authorization of Administrative Agent. Each
Bank hereby appoints Credit Lyonnais New York Branch as the Administrative Agent
under the Credit Documents and hereby authorizes the Administrative Agent to
take such action as Administrative Agent on its behalf and to exercise such
powers under the Credit Documents as are delegated to the Administrative Agent
by the terms thereof, together with such powers as are reasonably incidental
thereto. The Administrative Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Credit Documents. The
duties of the
40
Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have by reason of this Agreement or any other
Credit Document a fiduciary relationship in respect of any Bank, the holder of
any Note or any other Person; and nothing in this Agreement or any other Credit
Document, expressed or implied, is intended to or shall be so construed as to
impose upon the Administrative Agent any obligations in respect of this
Agreement or any other Credit Document except as expressly set forth herein or
therein.
Section 10.2 Administrative Agent and its Affiliates. The Administrative
Agent shall have the same rights and powers under this Agreement and the other
Credit Documents as any other Bank and may exercise or refrain from exercising
the same as though it were not the Administrative Agent, and the Administrative
Agent and its affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with Borrower or any Affiliate of Borrower as if
it were not the Administrative Agent under the Credit Documents.
Section 10.3 Action by Administrative Agent. If the Administrative Agent
receives from Borrower a written notice of an Event of Default pursuant to
Section 7.6(c)(i) hereof, the Administrative Agent shall promptly give each of
the Banks written notice thereof. The obligations of the Administrative Agent
under the Credit Documents are only those expressly set forth therein. Without
limiting the generality of the foregoing, the Administrative Agent shall not be
required to take any action hereunder with respect to any Default or Event of
Default, except as expressly provided in Sections 8.2 and 8.3. In no event,
however, shall the Administrative Agent be required to take any action in
violation of applicable law or of any provision of any Credit Document, and the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder or under any other Credit Document unless it shall be
first indemnified to its reasonable satisfaction by the Banks against any and
all costs, expense, and liability which may be incurred by it by reason of
taking or continuing to take any such action. The Administrative Agent shall be
entitled to assume that no Default or Event of Default exists unless notified to
the contrary in writing by a Bank or Borrower. In all cases in which this
Agreement and the other Credit Documents do not require the Administrative Agent
to take certain actions, the Administrative Agent shall be fully justified in
using its discretion in failing to take or in taking any action hereunder and
thereunder.
Section 10.4 Consultation with Experts. The Administrative Agent may
consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.
Section 10.5 Liability of Administrative Agent; Credit Decision. Neither
the Administrative Agent nor any of its directors, officers, agents, or
employees shall be liable for any action taken or not taken by it in connection
with the Credit Documents (i) with the consent or at the request of the Required
Banks or (ii) in the absence of its own gross negligence or willful misconduct.
Neither the Administrative Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (i) any statement, warranty or representation made in connection with
this Agreement, any other Credit Document or any Credit Event; (ii) the
performance or observance of any of the covenants or agreements of Borrower or
any other party contained herein or in any other Credit Document; (iii) the
satisfaction of any condition specified in Section 6 hereof; or (iv) the
validity, effectiveness, genuineness, enforceability, perfection, value, worth
or collectibility hereof or of
41
any other Credit Document or of any other documents or writing furnished in
connection with any Credit Document; and the Administrative Agent makes no
representation of any kind or character with respect to any such matter
mentioned in this sentence. The Administrative Agent may execute any of its
duties under any of the Credit Documents by or through employees, agents, and
attorneys-in-fact and shall not be answerable to the Banks, Borrower, or any
other Person for the default or misconduct of any such agents or
attorneys-in-fact selected with reasonable care. The Administrative Agent shall
not incur any liability by acting in reliance upon any notice, consent,
certificate, other document or statement (whether written or oral) believed by
it to be genuine or to be sent by the proper party or parties. In particular and
without limiting any of the foregoing, the Administrative Agent shall have no
responsibility for confirming the accuracy of any Compliance Certificate or
other document or instrument received by it under the Credit Documents. The
Administrative Agent may treat the payee of any Note as the holder thereof until
written notice of transfer shall have been filed with the Administrative Agent
signed by such payee in form satisfactory to the Administrative Agent. Each Bank
acknowledges that it has independently and without reliance on the
Administrative Agent or any other Bank, and based upon such information,
investigations and inquiries as it deems appropriate, made its own credit
analysis and decision to extend credit to Borrower in the manner set forth in
the Credit Documents. It shall be the responsibility of each Bank to keep itself
informed as to the creditworthiness of Borrower and any other relevant Person,
and the Administrative Agent shall have no liability to any Bank with respect
thereto.
Section 10.6 Indemnity. The Banks shall ratably, in accordance with their
respective Percentages, indemnify and hold the Administrative Agent, and its
directors, officers, employees, agents and representatives harmless from and
against any liabilities, losses, costs or expenses suffered or incurred by it
under any Credit Document or in connection with the transactions contemplated
thereby, regardless of when asserted or arising, except to the extent the
Administrative Agent is promptly reimbursed for the same by Borrower and except
to the extent that any event giving rise to a claim was caused by the gross
negligence or willful misconduct of the party seeking to be indemnified. The
obligations of the Banks under this Section 10.6 shall survive termination of
this Agreement.
Section 10.7 Resignation of Administrative Agent and Successor
Administrative Agent. The Administrative Agent may resign at any time by giving
written notice thereof to the Banks and Borrower. Upon any such resignation of
the Administrative Agent, the Required Banks shall have the right to appoint a
successor Administrative Agent with the consent of Borrower. If no successor
Administrative Agent shall have been so appointed by the Required Banks, and
shall have accepted such appointment, within thirty (30) days after the retiring
Administrative Agent's giving of notice of resignation, then the retiring
Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent, which shall be any Bank hereunder or any commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $200,000,000. Upon the
acceptance of its appointment as the Administrative Agent hereunder, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights and duties of the retiring or removed Administrative Agent under
the Credit Documents, and the retiring Administrative Agent shall be discharged
from its duties and obligations thereunder. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of
42
this Section 10 and all protective provisions of the other Credit Documents
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent.
SECTION 11 MISCELLANEOUS.
Section 11.1 Withholding Taxes.
(a) Payments Free of Withholding. Subject to Section 11.1 (b) hereof,
each payment by Borrower under this Agreement or the other Credit Documents
shall be made without withholding for or on account of any present or
future taxes (other than overall net income taxes on the recipient). If any
such withholding is so required, Borrower shall make the withholding, pay
the amount withheld to the appropriate governmental authority before
penalties attach thereto or interest accrues thereon and forthwith pay such
additional amount as may be necessary to ensure that the net amount
actually received by each Bank and the Administrative Agent free and clear
of such taxes (including such taxes on such additional amount) is equal to
the amount which that Bank or the Administrative Agent (as the case may be)
would have received had such withholding not been made. If the
Administrative Agent or any Bank pays any amount in respect of any such
taxes, penalties or interest Borrower shall reimburse the Administrative
Agent or that Bank for that payment on demand in the currency in which such
payment was made. If Borrower pay any such taxes, penalties or interest,
they shall deliver official tax receipts evidencing that payment or
certified copies thereof to the Bank or Administrative Agent on whose
account such withholding was made (with a copy to the Administrative Agent
if not the recipient of the original) on or before the thirtieth day after
payment. If any Bank or the Administrative Agent determines it has received
or been granted a credit against or relief or remission for, or repayment
of, any taxes paid or payable by it because of any taxes, penalties or
interest paid by Borrower and evidenced by such a tax receipt, such Bank or
Administrative Agent shall, to the extent it can do so without prejudice to
the retention of the amount of such credit, relief, remission or repayment,
pay to Borrower such amount as such Bank or Administrative Agent determines
is attributable to such deduction or withholding and which will leave such
Bank or Administrative Agent (after such payment) in no better or worse
position than it would have been in if Borrower had not been required to
make such deduction or withholding. Nothing in this Agreement shall
interfere with the right of each Bank and the Administrative Agent to
arrange its tax affairs in whatever manner it thinks fit nor obligate any
Bank or the Administrative Agent to disclose any information relating to
its tax affairs or any computations in connection with such taxes.
(b) U.S. Withholding Tax Exemptions. Each Bank that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code)
shall submit to Borrower and the Administrative Agent on or before the date
of the initial Borrowing hereunder two duly completed and signed copies of
either Form W8BEN (relating to such Bank and entitling it to a complete
exemption from withholding under the Code on all amounts to be received by
such Bank, including fees, pursuant to the Credit Documents and the Loans)
or Form W8ECI (relating to all amounts to be received by such Bank,
including fees, pursuant to the Credit Documents and the Loans) of the
United States Internal Revenue Service. Thereafter and from time to time,
each Bank shall submit to Borrower and the Administrative Agent such
additional duly completed
43
and signed copies of one or the other of such Forms (or such successor
forms as shall be adopted from time to time by the relevant United States
taxing authorities) as may be (i) requested by Borrower in a written
notice, directly or through the Administrative Agent, to such Bank and (ii)
required under then current United States law or regulations to avoid or
reduce United States withholding taxes on payments in respect of all
amounts to be received by such Bank, including fees, pursuant to the Credit
Documents or the Loans.
(c) Inability of Bank to Submit Forms. If any Bank determines, as a
result of any change in applicable law, regulation or treaty, or in any
official application or interpretation thereof, that it is unable to submit
to Borrower or Administrative Agent any form or certificate that such Bank
is obligated to submit pursuant to subsection (b) of this Section 11.1 or
that such Bank is required to withdraw or cancel any such form or
certificate previously submitted or any such form or certificate otherwise
becomes ineffective or inaccurate, such Bank shall promptly notify Borrower
and Administrative Agent of such fact and the Bank shall to that extent not
be obligated to provide any such form or certificate and will be entitled
to withdraw or cancel any affected form or certificate, as applicable.
Section 11.2 No Waiver of Rights. No delay or failure on the part of the
Administrative Agent or any Bank or on the part of the holder or holders of any
Note in the exercise of any power or right under any Credit Document shall
operate as a waiver thereof, nor as an acquiescence in any default, nor shall
any single or partial exercise thereof preclude any other or further exercise of
any other power or right, and the rights and remedies hereunder of the
Administrative Agent, the Banks and the holder or holders of any Notes are
cumulative to, and not exclusive of, any rights or remedies which any of them
would otherwise have.
Section 11.3 Non-Business Day. If any payment of principal or interest on
any Loan or of any other Obligation shall fall due on a day which is not a
Business Day, interest or fees (as applicable) at the rate, if any, such Loan or
other Obligation bears for the period prior to maturity shall continue to accrue
on such Obligation from the stated due date thereof to and including the next
succeeding Business Day, on which the same shall be payable.
Section 11.4 Documentary Taxes. Borrower agrees that it will pay any
documentary, stamp or similar taxes payable in respect to any Credit Document,
including interest and penalties, in the event any such taxes are assessed,
irrespective of when such assessment is made and whether or not any credit is
then in use or available hereunder.
Section 11.5 Survival of Representations. All representations and
warranties made herein or in certificates given pursuant hereto shall survive
the execution and delivery of this Agreement and the other Credit Documents, and
shall continue in full force and effect with respect to the date as of which
they were made as long as any credit is in use or available hereunder.
Section 11.6 Survival of Indemnities. All indemnities and all other
provisions relative to reimbursement to the Banks of amounts sufficient to
protect the yield of the Banks with respect to the Loans, including, but not
limited to, Section 2.11, Section 9.3 and Section 11.15 hereof, shall survive
the termination of this Agreement and the other Credit Documents and the payment
of the Loans and all other Obligations.
44
Section 11.7 Set-Off. (a) (a) In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence of any Event of Default, each Bank and each subsequent
holder of any Note is hereby authorized by Borrower at any time or from time to
time, without notice to Borrower or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, Indebtedness
evidenced by certificates of deposit, whether matured or unmatured, and in
whatever currency denominated) and any other Indebtedness at any time held or
owing by that Bank or that subsequent holder to or for the credit or the account
of Borrower, whether or not matured, against and on account of the obligations
and liabilities of Borrower to that Bank or that subsequent holder under the
Credit Documents, including, but not limited to, all claims of any nature or
description arising out of or connected with the Credit Documents, irrespective
of whether or not (a) that Bank or that subsequent holder shall have made any
demand hereunder or (b) the principal of or the interest on the Loans or Notes
and other amounts due hereunder shall have become due and payable pursuant to
Section 8 and although said obligations and liabilities, or any of them, may be
contingent or unmatured.
(b) Each Bank agrees with each other Bank a party hereto that if such Bank
shall receive and retain any payment, whether by set-off or application of
deposit balances or otherwise, on any of the Loans in excess of its ratable
share of payments on all such obligations then outstanding to the Banks, then
such Bank shall purchase for cash at face value, but without recourse, ratably
from each of the other Banks such amount of the Loans held by each such other
Banks (or interest therein) as shall be necessary to cause such Bank to share
such excess payment ratably with all the other Banks; provided, however, that if
any such purchase is made by any Bank, and if such excess payment or part
thereof is thereafter recovered from such purchasing Bank, the related purchases
from the other Banks shall be rescinded ratably and the purchase price restored
as to the portion of such excess payment so recovered, but without interest.
Section 11.8 Notices. Except as otherwise specified herein, all notices
under the Credit Documents shall be in writing (including facsimile or other
electronic communication) and shall be given to a party hereunder at its address
or facsimile number set forth below or such other address or facsimile number as
such party may hereafter specify by notice to the Administrative Agent and
Borrower, given by courier, by United States certified or registered mail, or by
other telecommunication device capable of creating a written record of such
notice and its receipt. Notices under the Credit Documents to the Banks shall be
addressed to their respective addresses, facsimile or telephone numbers set
forth on the signature pages hereof or in the assignment agreement which any
assignee bank executes pursuant to Section 11.12 hereof, and to Borrower and to
the Administrative Agent to:
If to Borrower:
Black Hills Corporation
625 9th Street
Rapid City, South Dakota 57709
Attention: Garner M. Anderson
Facsimile: 605.721.2597
Telephone: 605.721.2311
45
with copies to:
Black Hills Corporation
625 9th Street
Rapid City, South Dakota 57709
Attention: Mark T. Thies
Facsimile: 605.721.2599
Telephone: 605.721.2331
Black Hills Corporation
1075 Noel Avenue
Wheeling, Illinois 60090
Attention: Richard T. Ashbeck
Facsimile: 847.459.4140
Telephone: 847.465.3033
If to the Administrative Agent:
Notices shall be sent to the applicable address set forth on
Part B of Schedule 4 hereto.
Each such notice, request or other communication shall be effective (i) if
given by facsimile, when such facsimile is transmitted to the facsimile number
specified in this Section 11.8 or on the signature pages hereof and a
confirmation of receipt of such facsimile has been received by the sender, (ii)
if given by courier, when delivered, (iii) if given by mail, three business days
after such communication is deposited in the mail, registered with return
receipt requested, addressed as aforesaid or (iv) if given by any other means,
when delivered at the addresses specified in this Section 11.8; provided that
any notice given pursuant to Section 2 hereof shall be effective only upon
receipt.
Section 11.9 Counterparts. This Agreement may be executed in any number of
counterpart signature pages, and by the different parties on different
counterparts, each of which when executed shall be deemed an original but all
such counterparts taken together shall constitute one and the same instrument.
Delivery of an executed counterpart via facsimile shall for all purposes be
deemed as effective as delivery of an original counterpart.
Section 11.10 Successors and Assigns. This Agreement shall be binding upon
Borrower and its successors and assigns, and shall inure to the benefit of each
of the Banks and the benefit of their permitted respective successors, and
assigns, including any subsequent holder of any Note. Borrower may not assign
any of its rights or obligations under any Credit Document unless (i) such
assignation occurs in connection with a merger or acquisition by Borrower which
is otherwise permitted under the terms of this Agreement and the appropriate
Credit Document, if applicable and (ii) Borrower obtains the prior written
consent of all of the Banks, which consent shall be in form and substance
satisfactory to Administrative Agent.
Section 11.11 Participants and Note Assignees. Each Bank shall have the
right at its own cost to grant participations (to be evidenced by one or more
agreements or certificates of
46
participation) in the Loans made by such Bank at any time and from time to time,
and to assign its rights under such Loans or the Note evidencing such Loans to a
federal reserve bank; provided that (i) no such participation or assignment
shall relieve any Bank of any of its obligations under this Agreement, (ii) no
such assignee or participant shall have any rights under this Agreement except
as provided in this Section 11.11, and (iii) the Administrative Agent shall have
no obligation or responsibility to such participant or assignee, except that
nothing herein is intended to affect the rights of an assignee of a Note to
enforce the Note assigned. Any party to which such a participation or assignment
has been granted shall have the benefits of Section 2.11 and Section 9.3, but
shall not be entitled to receive any greater payment under either such Section
than the Bank granting such participation would have been entitled to receive in
connection with the rights transferred. Any agreement pursuant to which any Bank
may grant such a participating interest shall provide that such Bank shall
retain the sole right and responsibility to enforce the obligations of Borrower
hereunder, including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement that would (A) forgive any
amount of or postpone the date for payment of any principal of or interest on
any Loan or of any fee payable hereunder in which such participant has an
interest or (B) reduce the stated rate at which interest or fees in which such
participant has an interest accrue hereunder.
Section 11.12 Assignments by Banks. Each Bank shall have the right at any
time, with the written consent of Administrative Agent, and, prior to the
occurrence of a Default or Event of Default, Borrower, which consents shall not
be unreasonably withheld, to assign all or any part of its Note and outstanding
Loans to one or more other Persons; provided that such assignment is in an
amount of at least $5,000,000 or the entire outstanding amount of Loans made by
such Bank, and if such assignment is not for such Bank's entire outstanding
amount of Loans then the amount of outstanding Loans made by such Bank after
giving effect to such assignment shall not be less than $5,000,000; and provided
further that neither the consent of Borrower nor the Administrative Agent shall
be required for any Bank to assign all or part of its Note and outstanding Loans
to any Affiliate of the assigning Bank. Each such assignment shall set forth the
assignees address for notices to be given under Section 11.8 hereof hereunder
and its designated Lending Office pursuant to Section 9.4 hereof. Upon any such
assignment, delivery to the Administrative Agent of an executed copy of such
assignment agreement and the forms referred to in Section 11.1 hereof, if
applicable, and the payment of a $3,500 recordation fee to the Administrative
Agent, the assignee shall become a Bank hereunder, all Loans it thereby holds
shall be governed by all the terms and conditions hereof and the Bank granting
such assignment shall have its rights in connection therewith reduced by the
amount of such assignment.
Section 11.13 Amendments. Any provision of the Credit Documents may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by (a) Borrower, (b) the Required Banks, and (c) if the rights or duties
of the Administrative Agent are affected thereby, the Administrative Agent;
provided that:
(i) no amendment or waiver pursuant to this Section. 11.13 shall
reduce the amount of or postpone any fixed date for payment of any
principal of or interest on any Loan or of any fee or other Obligation
payable hereunder without the consent of each Bank; and
47
(ii) no amendment or waiver pursuant to this Section 11.13 shall,
unless signed by each Bank, change this Section 11.13, or the definition of
Required Banks, or affect the number of Banks required to take any action
under the Credit Documents.
Anything in this Agreement to the contrary notwithstanding, if at any time
when the conditions precedent set forth in Section 6.2 hereof to any Loan
hereunder are satisfied, any Bank shall fail to fulfill its obligations to make
such Loan (any such Bank, a "Defaulting Bank") then, for so long as such failure
shall continue, the Defaulting Bank shall (unless Borrower, the Administrative
Agent and the Required Banks (determined as if the Defaulting Bank were not a
Bank hereunder) shall otherwise consent in writing) be deemed for all purposes
related to amendments, modifications, waivers or consents under this Agreement
(other than amendments or waivers referred to in clause (i) and (ii) above) to
have no Loans and shall not be treated as a Bank hereunder when performing the
computation of the Required Banks. To the extent the Administrative Agent
receives any payments or other amounts for the account of a Defaulting Bank such
Defaulting Bank shall be deemed to have requested that the Administrative Agent
use such payment or other amount to fulfill its obligations to make such Loan.
Section 11.14 Headings. Section headings used in this Agreement are for
reference only and shall not affect the construction of this Agreement.
Section 11.15 Legal Fees, Other Costs and Indemnification. Borrower agrees
to pay all reasonable costs and expenses of the Administrative Agent in
connection with the preparation and negotiation of the Credit Documents
(including past and future reasonable out-of-pocket expenses incurred by the
Administrative Agent in connection with the syndication of the transaction),
including without limitation, the reasonable fees and disbursements of counsel
to the Administrative Agent, in connection with the preparation and execution of
the Credit Documents, and any amendment, waiver or consent related hereto,
whether or not the transactions contemplated herein are consummated. Borrower
further agrees to indemnify each Bank, the Administrative Agent, and their
respective directors, agents, officers and employees, against all losses,
claims, damages, penalties, judgments, liabilities and expenses (including,
without limitation, all expenses of litigation or preparation therefor, whether
or not the indemnified Person is a party thereto) which any of them may incur or
reasonably pay arising out of or relating to any Credit Document (including any
relating to a misrepresentation by Borrower under any Credit Document) or any of
the transactions contemplated thereby or the direct or indirect application or
proposed application of the proceeds of any Loan, other than those which arise
from the gross negligence or willful misconduct of the party claiming
indemnification. Borrower, upon demand by any of the Administrative Agent or a
Bank at any time, shall reimburse the Administrative Agent or Bank for any
reasonable legal or other expenses (including allocable fees and expenses of
in-house counsel) incurred in connection with investigating or defending against
any of the foregoing except if the same is directly due to the gross negligence
or willful misconduct of the party to be indemnified, provided that with respect
to legal costs and expenses incurred in connection with the enforcement of the
Banks rights hereunder or any work-out or similar situation, Borrower shall only
be obligated to pay the legal fees of the Administrative Agent and not of any
other Bank.
Section 11.16 Entire Agreement. The Credit Documents constitute the entire
understanding of the parties thereto with respect to the subject matter thereof
and any prior or
48
contemporaneous agreements, whether written or oral, with respect thereto are
superseded thereby.
Section 11.17 Construction. The parties hereto acknowledge and agree that
neither this Agreement nor the other Credit Documents shall be construed more
favorably in favor of one than the other based upon which party drafted the
same, it being acknowledged that all parties hereto contributed substantially to
the negotiation of this Agreement and the other Credit Documents.
Section 11.18 Governing Law. This Agreement and the other Credit Documents,
and the rights and duties of the parties hereto, shall be construed and
determined in accordance with the internal laws of the State of New York.
Section 11.19 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. BORROWER,
ADMINISTRATIVE AGENT AND EACH BANK HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK FOR
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT,
THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
BORROWER, ADMINISTRATIVE AGENT AND EACH BANK IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM
THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. BORROWER, ADMINISTRATIVE AGENT AND EACH BANK HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
Section 11.20 Replacement of Bank. Each Bank agrees that, upon the
occurrence of any event set forth in Sections 9.1, 9.3 and 11.1, such Bank will
use reasonable efforts to book and maintain its Loans through a different
Lending Office or to transfer its Loans to an Affiliate with the objective of
avoiding or minimizing the consequences of such event; provided that such
booking or transfer is not otherwise disadvantageous to such Bank as determined
by such Bank in its sole and absolute discretion. If any Bank has demanded to be
paid additional amounts pursuant to Sections 9.1, 9.3 and 11.1, and the payment
of such additional amounts are, and are likely to continue to be, more onerous
in the reasonable judgment of Borrower than with respect to the other Banks,
then Borrower shall have the right at any time when no Default or Event of
Default shall have occurred and be continuing to seek one or more financial
institutions which are not Affiliates of Borrower (each, a "Replacement Bank")
to purchase with the written consent of the Administrative Agent (which consent
shall not be (x) required if such proposed Replacement Bank is already a Bank,
or an Affiliate of a Bank, or (y) unreasonably delayed or withheld) the
outstanding Loans of such Bank (the "Affected Bank"), and if Borrower locate a
Replacement Bank, the Affected Bank shall, upon
i. prior written notice to the Administrative Agent,
49
ii. (i) payment to the Affected Bank of the purchase price agreed
between it and the Replacement Bank (or, failing such agreement,
a purchase price in the amount of the outstanding principal
amount of the Affected Bank's Loans and accrued interest thereon
to the date of payment) by the Replacement Bank plus (ii) payment
by Borrower of all Obligations (other than principal and interest
with respect to Loans) then due to the Affected Bank or accrued
for its account hereunder or under any other Loan Document,
iii. satisfaction of the provisions set forth in Section 11.12, and
iv. payment by Borrower to the Affected Bank and the Administrative
Agent of all reasonable out-of-pocket expenses in connection with
such assignment and assumption (including the recordation fee
described in Section 11.12),
assign and delegate all its rights and obligations under this Agreement and any
other Credit Document to which it is a party (including its outstanding Loans)
to the Replacement Bank (such assignment to be made without recourse,
representation or warranty), and the Replacement Bank shall assume such rights
and obligations, whereupon the Replacement Bank shall in accordance with Section
11.12 become a party to each Credit Document to which the Affected Bank is a
party and shall have the rights and obligations of a Bank thereunder and the
Affected Bank shall be released from its obligations hereunder and each other
Credit Document to the extent of such assignment and delegation.
Section 11.21 Confidentiality. The Administrative Agent and the Banks shall hold
all non-public information provided to them by Borrower pursuant to or in
connection with this Agreement in accordance with their customary procedures for
handling confidential information of this nature, but may make disclosure to any
of their examiners, regulators, Affiliates, outside auditors, counsel and other
professional advisors in connection with this Agreement or any other Credit
Document or as reasonably required by any potential bona fide transferee,
participant or assignee, or in connection with the exercise of remedies under a
Credit Document, or to any direct or indirect contractual counterparty in swap
agreements or such contractual counterparty's professional advisor (so long as
such contractual counterparty or professional advisor to such contractual
counterparty agrees to be bound by the provisions of this Section 11.21), or to
any nationally recognized rating agency that requires access to information
about a Bank's investment portfolio in connection with ratings issued with
respect to such Bank, or as requested by any governmental agency or
representative thereof or pursuant to legal process; provided, however, that
unless specifically prohibited by applicable law or court order, the
Administrative Agent and each Bank shall use reasonable efforts to promptly
notify Borrower of any request by any governmental agency or representative
thereof (other than any such request in connection with an examination of the
financial condition of the Administrative Agent or such Bank by such
governmental agency) for disclosure of any such non-public information and,
where practicable, prior to disclosure of such information. Prior to any such
disclosure pursuant to this Section 11.21, the Administrative Agent and each
Bank shall require any such bona fide transferee, participant and assignee
receiving a disclosure of non-public information to agree, for the benefit of
Borrower, in writing to be bound by this Section 11.21; and to require such
Person
50
to require any other Person to whom such Person discloses such non-public
information to be similarly bound by this Section 11.21.
- Remainder of Page Intentionally Left Blank -
[Signature Page Follows]
51
In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York by their duly authorized
officers as of the day and year first above written.
BLACK HILLS CORPORATION, a
South Dakota corporation
By: _____________________________
Name: _____________________________
Title: _____________________________
52
Commitment: $35,000,000 CREDIT LYONNAIS NEW YORK
BRANCH., in its individual capacity as a
Bank and as Administrative Agent
By: _____________________________
Name: Richard Randall
Title: Vice President
Address for notices:
Richard Randall
Credit Lyonnais
1301 Avenue of the Americas
New York, New York 10019
Phone: 212-261-3367
Fax: 212-261-3421
Justine Ventrelli
Credit Lyonnais
1301 Avenue of the Americas
New York, New York 10019
Phone: 212-261- 7886
Fax: 212-261-3421
Lending Offices: Same as above
Base Rate Loans: Same as above
Eurocurrency Loans: Same as above
53
EXHIBIT A
NOTE
September 25, 2002
FOR VALUE RECEIVED, the undersigned, Black Hills Corporation, a South
Dakota corporation ("Borrower"), promises to pay to the order of Credit Lyonnais
New York Branch (the "Bank") on the Termination Date of the hereinafter defined
Credit Agreement, at the principal office of Credit Lyonnais New York Branch, in
New York, New York, in accordance with Section 4.1 of the Credit Agreement (as
hereafter defined), the aggregate unpaid principal amount of all Loans made by
the Bank to Borrower pursuant to the Credit Agreement, together with interest on
the principal amount of each Loan from time to time outstanding hereunder at the
rates, and payable in the manner and on the dates, specified in the Credit
Agreement.
The Bank shall record on its books or records or on a schedule attached
to this Note, which is a part hereof, each Loan made by it pursuant to the
Credit Agreement, together with all payments of principal and interest and the
principal balances from time to time outstanding hereon, whether the Loan is a
Base Rate Loan or a Eurodollar Loan, and the interest rate and Interest Period
applicable thereto, provided that prior to the transfer of this Note all such
amounts shall be recorded on a schedule attached to this Note. The record
thereof, whether shown on such books or records or on a schedule to this Note,
shall be shall be prima facie evidence of the same; provided, however, that the
failure of the Bank to record any of the foregoing or any error in any such
record shall not limit or otherwise affect the obligation of Borrower to repay
all Loans made to it pursuant to the Credit Agreement together with accrued
interest thereon.
This Note is one of the Notes referred to in the Term Credit Agreement
dated as of September 25, 2002, among Borrower, Credit Lyonnais New York Branch,
as Administrative Agent and the financial institutions party thereto (the
"Credit Agreement"), and this Note and the holder hereof are entitled to all the
benefits provided for thereby or referred to therein, to which Credit Agreement
reference is hereby made for a statement thereof. All defined terms used in this
Note, except terms otherwise defined herein, shall have the same meaning as in
the Credit Agreement. This Note shall be governed by and construed in accordance
with the internal laws of the State of New York.
Prepayments may be made hereon and this Note may be declared due prior
to the expressed maturity hereof, all in the events, on the terms and in the
manner as provided for in the Credit Agreement.
- Remainder of Page Intentionally Left Blank -
[Signature Page Follows]
54
The Borrower hereby waives demand, presentment, protest or notice of
any kind hereunder.
BLACK HILLS CORPORATION, a
South Dakota corporation
By: _____________________________
Name: _____________________________
Title: _____________________________
55
EXHIBIT B
COMPLIANCE CERTIFICATE
This Compliance Certificate is furnished to Credit Lyonnais New York
Branch, as Administrative Agent pursuant to the Term Credit Agreement dated as
of September 25, 2002, among Black Hills Corporation, a South Dakota corporation
("Borrower"), Credit Lyonnais New York Branch, as Administrative Agent and the
financial institutions party thereto (the "Credit Agreement"). Unless otherwise
defined herein, the terms used in this Compliance Certificate have the meanings
ascribed thereto in the Credit Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected or appointed ___________________of
Borrower;
2. I have reviewed the terms of the Credit Agreement and I have
made, or have caused to be made under my supervision, a detailed
review of the transactions and conditions of Borrower and its
Subsidiaries during the accounting period covered by the attached
financial statements;
3. The examinations described in paragraph 2 did not disclose,
and I have no knowledge of, the existence of any condition or event
which constitutes a Default or an Event of Default during or at the
end of the accounting period covered by the attached financial
statements or as of the date of this Certificate, except as set forth
below; and
4. Schedule 1 attached hereto sets forth financial data and
computations evidencing compliance with certain covenants of the
Credit Agreement, all of which data and computations are true,
complete and correct. All computations are made in accordance with the
terms of the Credit Agreement.
Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which Borrower has taken, is taking, or proposes to take
with respect to each such condition or event:
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
The foregoing certifications, together with the computations set forth
in Schedule 1 hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this ___________day of
__________, 200__.
______________________________
56
SCHEDULE 1 TO COMPLIANCE CERTIFICATE
Compliance Calculations for Credit Agreement
CALCULATION AS OF ________ __,200_
- ------------------------------------------------------------------ --------------------- ---------------------------
A. Liens (Sec. 7.9(c), (d), and (g))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Liens securing taxes or assessments or other _____________________ (Answer should be yes)
government charges or levies equal to or less
than $20,000,000 (Section 7.9(c))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Liens securing judgments or awards or surety _____________________ (Answer should be yes)
or appeal bonds issued in connection therewith
equal to or less than $20,000,000 (Section
7.9(d))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Is the aggregate amount of Indebtedness and _____________________ (Answer should be yes)
other obligations consisting of (i) the
deferred purchase price of newly acquired
property or incurred to finance the
acquisition of personal property of Borrower
used in the ordinary course of business of
such Borrower, (ii) Capitalized Lease
Obligations, and (iii) the performance of
tenders, statutory obligations, bids, leases
or other similar obligations (other than for
borrowed money) entered into in the ordinary
course of business or to secure obligations on
performance bonds which is secured by Liens
equal to or less than 5% of Consolidated
Assets as reflected on the most recent balance
sheet delivered by Borrower (Section 7.9(g)).
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
B. Sale and Leasebacks (Section 7.11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Aggregate obligations under all Sale and $____________________ (Line B1 not to exceed
Leasebacks arrangements (other than synthetic $30,000,000)
lease transactions excluded by Section 7.11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
C. Sale of Assets (Section 7.12)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Net book value of assets (other than $____________________ (Line C1 not to exceed
inventory, reserves and electricity in the 10% of total consolidated
ordinary course of business) sold during this assets)
fiscal year
- ------------------------------------------------------------------ --------------------- ---------------------------
57
- ------------------------------------------------------------------ --------------------- ---------------------------
D. Permitted Investments (Section 7.14)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Aggregate amount of Investments in Marketing $____________________
Subsidiaries made after the August 28, 2001
(Section 7.14(o)(ii))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Investments consisting of Guaranties of $____________________
Indebtedness of Marketing Subsidiaries
existing on the Effective Date
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Intercompany loans permitted pursuant to $____________________ Line E3
Section 7.15(e)(iii) owing by Marketing
Subsidiaries (Line E3)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
4. Sum of Lines D1, D2 and D3 $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
5. Is Line D4 equal to or less than $10,000,000? _____________________ (Answer should be yes)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
6. Aggregate amount of Investments in Persons $____________________ (Line D6 not to exceed
engaged in the lines of business described in $20,000,000)
clause (xii) of Section 7.8 (Section 7.14(k))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
E. Permitted Indebtedness (Section 7.15)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Secured Indebtedness except as set forth on $____________________ (Line E1 not to exceed 5%
Schedule 7.15(b): (i) of BHP (ii) evidencing of Consolidated Assets)
the deferred purchase price of newly acquired
property or incurred to finance the acquisition
of personal property of Borrower or a Subsidiary
used in the ordinary course of business of the
Borrower of a Subsidiary, (iii) constituting
Capitalized Lease Obligations or with respect
to synthetic (or similar type) lease
transactions, or (iv) incurred in connection
with the performance of tenders, statutory
obligations, bids, leases or other similar
obligations (other than for borrowed money)
entered into in the ordinary course
of business or to secure obligations on
performance bonds (Section 7.15(c))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Intercompany loans owing by Borrower (Section $____________________ (Must be subordinated to
7.15(e)(i)(x)) Obligations)
- ------------------------------------------------------------------ --------------------- ---------------------------
58
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Intercompany Indebtedness owing by Marketing $____________________ (Line E3 not to exceed
Subsidiaries to Subsidiaries (Section the difference between
7.15(e)(iii)) (i) $10,000,000 less (ii)
the sum of Lines E4 and
D1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
4. Indebtedness consisting of Guarantees $____________________ (Line E4 not to exceed
(including Long-Term Guaranties) of Marketing the difference between
Subsidiary Indebtedness (Section 7.15(f)) (i) $10,000,000 less (ii)
the sum of Lines E3 and
D1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
5. Indebtedness of Marketing Subsidiaries under $____________________ (Line E5 not to exceed
Marketing Subsidiary Excluded Credit Marketing Subsidiary
Facilities (Section 7.15(g)) Indebtedness Limit)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
F. Consolidated Net Worth (Section 7.16)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Consolidated Net Worth $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. 50% of aggregate Consolidated Net Income, if $____________________
positive, from and including April 1, 2002
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Does Line F1 exceed sum of (i) $425,000,000 _____________________ (Answer should be yes)
plus (ii) line F2
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
G. Recourse Leverage Ratio (Section 7.17)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. consolidated Indebtedness $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Non-Recourse Indebtedness $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Recourse Indebtedness (Line G1 minus Line G2) $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
4. Indebtedness of Marketing Subsidiaries under $____________________ (Not to exceed Marketing
Marketing Subsidiary Excluded Credit Subsidiary Indebtedness
Facilities (Line E5) Limit)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
5. Consolidated Net Worth $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
6. Capital (Line G3 minus Line G4 plus Line G5) $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
7. Recourse Leverage Ratio ________:1.00 (ratio of (A) difference
between (x) Line G3 minus
(y) Line G4 to (B) Line
G6 not to exceed 0.65 to
1.00)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
H. Fixed Charge Coverage Ratio (Section 7.18)
- ------------------------------------------------------------------ --------------------- ---------------------------
59
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Consolidated Net Income for past four fiscal $____________________
quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Income taxes for past four fiscal quarters (to $____________________
the extent subtracted in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Consolidated Interest Expense for past four $____________________ Insert amount from Line
fiscal quarters (to the extent subtracted in H18
calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
4. Amortization expense for intangible assets $____________________
for past four fiscal quarters (to the extent
subtracted in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
5. Depreciation expense for past four fiscal
quarters (to the extent subtracted in
calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
6. Losses on sales of assets (excluding sales in $____________________
the ordinary course of business) and other
extraordinary losses for past four fiscal
quarters (to the extent subtracted in
calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
7. Interest income for past four fiscal quarters $____________________
arising from traditional investment activities
with banks, investment banks and other
financial institutions or relating to
governmental or other marketable securities
(to the extent added in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
8. Gains on sales of assets (excluding sales in $____________________
the ordinary course of business) and other
extraordinary gains for past four fiscal
quarters (to the extent added in calculating
H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
9. Capital Expenditures for past four fiscal $____________________
quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
10. Without duplication, any payments made by a $____________________
Consolidated Subsidiary constituting a
repayment of principal Indebtedness (other
than (x) the Obligations and (y) repayments of
principal made with the proceeds of a
refinancing of such Indebtedness otherwise
permitted pursuant to this Agreement) or with
respect to a reserve, and
- ------------------------------------------------------------------ --------------------- ---------------------------
60
- ------------------------------------------------------------------ --------------------- ---------------------------
11. Without duplication, any other mandatory
payment made by a Consolidated Subsidiary in
such period not included as an expense or loss $____________________
in calculating Consolidated Net Income
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
12. Consolidated EBITDA (sum of Lines H1, H2, H3, $____________________
H4, H5 and H6 less sum of Lines H7, H8, H9,
H10 and H11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
13. Restricted Earnings for the past four fiscal $____________________
quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
14. Adjusted Consolidated EBITDA (Line H12 minus $____________________
Line H13)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
15. All interest charges (including capitalized $____________________
interest, imputed interest charges with
respect to Capitalized Lease Obligations and
all amortization of debt discount and expense
and other deferred financing charges) of the
Borrower and its Subsidiaries on a
consolidated basis for such period determined
in accordance with GAAP, other than interest
charges relating to Non-Recourse Indebtedness
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
16. All commitment or other fees payable in $____________________
respect of the issuance of standby letters of
credit or other credit facilities for the
account of the Borrower or its Subsidiaries
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
17. Net costs/expenses incurred by the Borrower $____________________
and its Subsidiaries under Derivative
Arrangements
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
18. Consolidated Interest Expense (Sum of Lines $____________________
H15, H16 and H17)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
19. The aggregate amount of all mandatory $____________________
scheduled payments (whether designated as
payments or prepayments) and scheduled sinking
fund payments with respect to principal of any
Recourse Indebtedness of the Borrower or its
Subsidiaries (including payments in the nature
of principal under Capital Leases) for the
last 4 quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
20. Consolidated Fixed Charges (Sum of Lines H18 $____________________
and H19)
- ------------------------------------------------------------------ --------------------- ---------------------------
61
- ------------------------------------------------------------------ --------------------- ---------------------------
21. Fixed Charge Coverage Ratio (ratio of Lines _________:1.00 (ratio must not be less
H14 to (ii) Line H20) than 1.50 to 1.00)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
I. Liquidity Covenant (Section 7.26)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Unrestricted cash at Borrower $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Unused availability of senior unsecured credit $____________________
facilities available to Borrower
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Liquid Assets (Line I1 plus Line I2) $____________________ (amount must exceed
$30,000,000)
- ------------------------------------------------------------------ --------------------- ---------------------------
62
SCHEDULE 1
PRICING GRID
- ---------------------- ------------------- ----------------------
If the Level Status The Eurodollar The Base Rate Margin
Is Margin is: is:
- ---------------------- ------------------- ----------------------
- ---------------------- ------------------- ----------------------
Level I Status 1.000% 0.000%
- ---------------------- ------------------- ----------------------
- ---------------------- ------------------- ----------------------
Level II Status 1.250% 0.250%
- ---------------------- ------------------- ----------------------
- ---------------------- ------------------- ----------------------
Level III Status 1.875% 0.875%
- ---------------------- ------------------- ----------------------
Each change in a rating shall be effective as of the date it is
announced by the applicable rating agency.
In the event that the Moody's Rating and the S&P Rating fall in
different Levels, the lower Level (with Level I being the highest Level and
Level III being the lowest Level) shall govern for purposes of determining the
applicable pricing pursuant to the above pricing grid.
63
SCHEDULE 4
ADMINISTRATIVE AGENT'S NOTICE AND PAYMENT INFORMATION
Part A - Payments
[Credit Lyonnais to provide wiring instructions]
Part B - Notices
Richard Randall
Credit Lyonnais
1301 Avenue of the Americas
New York, New York 10019
Phone: 212-261-3367
Fax: 212-261-3421
Justine Ventrelli
Credit Lyonnais
1301 Avenue of the Americas
New York, New York 10019
Phone: 212-261- 7886
Fax: 212-261-3421
64
SCHEDULE 5.2
BLACK HILLS CORPORATION SUBSIDIARIES
------------------------------------- --------------------- ---------------- ------------------------------------------------
Description of Subsidiary's
BHC's Authorized Capital Stock, if not
Subsidiary Name State of Origin Ownership wholly owned
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
1. Acquisition Partners, L.P. New York 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
2. Adirondack Hydro Delaware 100% N/A
Development Corporation
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
3. Adirondack Hydro- Fourth New York 100% N/A
Branch, LLC
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
4. Adirondack Operating New York 100% N/A
Services, LLC
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
5. Black Hills Berkshire, LLC Delaware 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
6. Black Hills Capital Illinois 100% N/A
Development, Inc.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
7. Black Hills Colorado, LLC Delaware 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
8. Black Hills Energy Delaware 100% N/A
Capital, Inc.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
9. Black Hills Energy Delaware 100% N/A
Pipeline, LLC
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
10. Black Hills Energy South Dakota 100% N/A
Resources, Inc.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
11. Black Hills Energy South Dakota 100% N/A
Terminal, LLC
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
12. Black Hills Energy, Inc. South Dakota 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
13. Black Hills Exploration Wyoming 100% N/A
and Production, Inc.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
14. Black Hills Fiber Systems, South Dakota 100% N/A
Inc.
------------------------------------- --------------------- ---------------- ------------------------------------------------
65
------------------------------------- --------------------- ---------------- ------------------------------------------------
15. Black Hills Fibercom, LLC South Dakota 51% Black Hills Fibercom, LLC has a single class
of units of membership of which 41 units are
issued and outstanding. Black Hills Fiber
Systems, Inc. holds 21 units.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
16. Black Hills Fountain Delaware 100% N/A
Valley, LLC
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
17. Black Hills Generation, Wyoming 100% N/A
Inc.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
18. Black Hills Harbor, LLC Delaware 76.11% Black Hills Harbor, LLC has a single class of
units of membership. 100 units of which are
currently issued and outstanding. Black Hills
Corporation indirectly holds interests in
76.12% of the units.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
19. Black Hills High Desert, Delaware 100% N/A
Inc.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
20. Black Hills Idaho Delaware 100% N/A
Operations, LLC
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
21. Black Hills Independent Texas 100% N/A
Power Fund, Inc.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
22. Black Hills Kilgore Energy Delaware 100% N/A
Pipeline, LLC
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
23. Black Hills Kilgore Delaware 100% N/A
Pipeline, Inc.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
24. Black Hills Kilgore Texas 100% N/A
Pipeline Company, L.P.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
25. Black Hills Long Beach, Delaware 100% N/A
Inc.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
26. Black Hills Millennium South Dakota 100% N/A
Pipeline, Inc.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
27. Black Hills Millennium South Dakota 100% N/A
Terminal, Inc.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
28. Black Hills Nevada Delaware 100% N/A
Operations, LLC
------------------------------------- --------------------- ---------------- ------------------------------------------------
66
------------------------------------- --------------------- ---------------- ------------------------------------------------
29. Black Hills Nevada Real Delaware 100% N/A
Estate Holdings, LLC
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
30. Black Hills Nevada, LLC Delaware 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
31. Black Hills North America, Delaware 100% N/A
Inc.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
32. Black Hills Operating Delaware 100%
Compnay, LLC
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
33. Black Hills Ontario, LLC Delaware 50% Black Hills Ontario, LLC has a single class of
units of membership, of which 100 units are
issued and outstanding.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
34. Black Hills Power, Inc. South Dakota 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
35. Black Hills Southwest, LLC Delaware 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
36. Black Hills Valmont Delaware 100% N/A
Colorado, Inc.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
37. DAKSOFT, Inc. South Dakota 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
38. Desert Arc I, LLC Delaware 50% Desert Arc I, LLC has a single class of units
of membership, of which Black Hills
Corporation indirectly holds 50%
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
39. Desert Arc II, LLC Delaware 50% Desert Arc II, LLC has a single class of units
of membership, of which Black Hills
Corporation indirectly holds 50%
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
40. EIF Investors, Inc. Delaware 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
41. E-Next A Equipment Leasing Delaware 100% N/A
Company, LLC
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
42. Enserco Energy Inc. South Dakota 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
43. Fountain Valley Power, Delaware 100% N/A
L.L.C.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
44. Harbor Cogeneration Company California 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
45. Hudson Falls, LLC New York 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
67
------------------------------------- --------------------- ---------------- ------------------------------------------------
46. ICPM, Inc. Illinois 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
47. Indeck Auburndale, LLC Delaware 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
48. Indeck Gordonsville, LLC Delaware 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
49. Indeck North American Delaware 81.9% Indeck North American Power Fund, L.P. is a
Power Fund, LP limited. Black Hills Corporation holds direct
and indirect general and limited partnerhsip
interests totaling up to 81.9%..
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
50. Indeck Hills North Delaware 85.7% Indeck North American Power Partners, LP is a
American Power Partners, LP limited. Black Hills Corporation holds direct
and indirect general and limited partnership
interests totaling up to 85.7%.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
51. Indeck Pepperell Power Delaware 82.9% Indeck Pepperell Power Associates, Inc. has a
Associates, Inc. single class of stock with 100 shares issued
and outstanding. Black Hills Corporation
indirectly owns 82.9% of the capital
stock of Indeck Pepperell, by and through
its interests in Indeck North American
Power Fund, L.P.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
52. Landrica Development South Dakota 100% N/A
Company
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
53. Las Vegas Cogeneration Delaware 100% N/A
Energy Financing, LLC
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
54. Las Vegas Cogeneration II, Delaware 100% N/A
LLC
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
55. Las Vegas Cogeneration Nevada 50% Las Vegas Cogeneration Limited Partnership has
Limited Partnership an 85% general partnership interest, of which
Black Hills Corporation indirectly owns 50%,
and a 15% limited partnership interest, of which
Black Hills Corporation indirectly owns 50%
Hills Corporation indirectly owns 50%.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
56. Middle Falls Corporation New York 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
57. Middle Falls II, LLC New York 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
68
------------------------------------- --------------------- ---------------- ------------------------------------------------
58. Middle Falls Limited New York 50% Middle Falls Limited Partnership has a 2%
Partnership general partnership interest, of which Black
Hills Corporation indrectly holds 1%, and a
98% limited partnership interest, of which Black
Hills Corporation indirectly holds 49%.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
59. Middle Falls Partners, LLC New York 50% Middle Falls Partners, LLC has a single class
of units of membership, of which Black Hills
Corporation indirectly holds 50%.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
60. Millennium Pipeline Texas 100%
Company, L.P.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
61. Millennium Terminal Texas 100%
Company, L.P.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
62. NHP, L.P. New York 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
63. North American Funding, Delaware 100% N/A
L.L.C.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
64. Northern Electric Power New York 33% Northern Electric Power Company, L.P. has a
Company, L.P 99% limited partnership interest, of which
Black Hills Corporation indirectly owns 32.5%
and a 1% general partnership interest, of which
Black Hills Corporation indirectly owns 0.5%.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
65. NYSD Limited Partnership New York 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
66. NYSD Partners, LLC New York 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
67. Sissonville Corporation New York 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
68. Sissonville II, LLC New York 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
69. Sissonville Limited New York 100% N/A
Partnership
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
70. Sissonville Partners, LLC New York 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
69
------------------------------------- --------------------- ---------------- ------------------------------------------------
71. South Glens Falls, L.P. New York 30.2% South Glens Falls, L.P. has a 99% limited
partnership interest, of which Black Hills
Corporation indirectly owns 29.7%, and a 1%
general partnership interest, of which Black
Hills Corporation indirectly owns 0.5%.
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
72. South Glens Falls, LLC New York 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
73. State Dam Corporation New York 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
74. State Dam II, LLC New York 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
75. Sunco, Ltd., a limited Nevada 100% N/A
liability company
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
76. VariFuel, LLC South Dakota 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
77. Warrensburg Corporation New York 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
78. Warrensburg Hydro Power New York 100% N/A
Limited Partnership
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
79. Warrensburg II Corporation New York 100% N/A
------------------------------------- --------------------- ---------------- ------------------------------------------------
------------------------------------- --------------------- ---------------- ------------------------------------------------
80. Wyodak Resources Delaware 100% N/A
Development Corp.
------------------------------------- --------------------- ---------------- ------------------------------------------------
70
SCHEDULE 5.5
LITIGATION AND LABOR CONTROVERSIES
Black Hills Harbor, LLC--City of Long Beach
In June of 2000, the City of Long Beach, a municipal corporation in the
State of California, acting for the Port of Long Beach ("City"), brought an
action against Black Hills Harbor, LLC (formerly known as Indeck Harbor, LLC)
("Fund"), alleging breaches of a partnership interest purchase agreement dated
as of January 1, 1995 ("Agreement"), relating to the amount and timing of
certain contingent payments, if any, due the City resulting in claims by the
City in excess of $9 million. The court ordered that the disputes raised in
litigation must be resolved by arbitration in accordance with the terms of the
Agreement. Representatives of the City and the Fund engaged in mediation to
attempt to resolve the disputes involving a transportation tax for natural gas
delivered to a power facility located in Long Beach and owned by the Fund.
Because the parties were unable to reach resolution of the dispute, they have
pursued arbitration.
Grizzly Gulch Fire
On June 29, 2002, a forest fire began near Deadwood, South Dakota.
Before being contained more than eight days later, the fire consumed over 10,000
acres of public and private land, mostly consisting of rugged forested areas.
The fire destroyed 7 homes, and approximately 15 outbuildings. There are no
reported personal injuries at this time. In addition, the fire burned to the
edge of the City of Deadwood, forcing the evacuation of the City of Deadwood,
and an adjacent City of Lead, South Dakota. These communities are active in the
tourist and gaming industries. Individuals were ordered to leave their homes and
motels, and businesses were closed for a short period of time. On July 16, 2002,
the State of South Dakota announced the results of its investigation of the
cause and origin of the fire. The State concluded that the fire was caused by
tree encroachment into and contact with a transmission line owned and maintained
by Black Hills Power, Inc.
Black Hills Power is in the process of completing its own investigation
of the fire, and will request access to the materials that form the basis for
the State's conclusions. This investigation is not complete. Depending on the
outcome of this process, it is possible that claims will be made against Black
Hills Power for damages allegedly caused by the fire, for fire suppression costs
and costs of remediation of burned areas, for individual and business losses
relating to injury to personal and real property, and lost income. A civil
action has been commenced by the State against Black Hills Power, Inc., and we
anticipate others will intervene in this suit or will file separately.
71
SCHEDULE 5.11
ENVIRONMENTAL MATTERS
None.
72
SCHEDULE 7.9
EXISTING LIENS
1. Enserco Energy Inc. has granted a security interest in favor of Fortis
Capital Corp., with respect to Enserco Energy Inc.'s personal property
assets to secure the $135,000,000 credit facility referred to in on
Schedule 7.15.
2. Black Hills Energy Resources, Inc. has granted a security interest in favor
of Fortis Capital Corp., with respect to Black Hills Energy Resources,
Inc.'s personal property assets to secure the $25,000,000 credit facility
referred to on Schedule 7.15.
3. Black Hills Power, Inc. Indenture of Mortgage and Deed of Trust has a first
mortgage lien on substantially all of the properties used in the electric
utility business excluding "Excepted Property." Excepted property includes
all cash and securities; all contracts, leases and other agreements; all
permits, licenses, franchises and rights granted by governmental entities;
all movable equipment and parts including motor vehicles; all materials,
supplies and merchandise offered for sale in the ordinary course of
business, fuel and other consumables; all office furniture and office
equipment, communications equipment and computer equipment; all minerals,
crops and timber harvested or extracted from land; all leasehold interests;
and all property not used in the electric utility business.
4. Black Hills Exploration and Production has granted security interests in
various certificates of deposits for oil & gas leases and operations
totaling less than $150,000 in aggregate.
5. Wyodak Resources Development Corp. has granted a security interest in a
certificate of deposit in the amount of $397,000 to securitize its
self-insurance permit for black lung liability.
73
Schedule 7.14
Existing Investments
- ---------------------------------------------------------------------------------------------------------------
1. Landrica Development Company holds 700,000 registered and unrestricted
shares of the common stock of KFx, Inc. and 1,300,000 warrants to
purchase a single share of the common stock of KFx at $3.48 at any time
prior to April 30, 2005.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
2. Landrica Development Company holds a $450,000 equity investment in Phase Technology, LLC.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
3. Landrica Development Company holds a $50,000 equity investment in Genesis Equity Fund, LLC.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
4. Black Hills Corporation holds investments in life insurance policies and nonqualified deferred
compensation plans in the amount of $ 2,363,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
5. Black Hills Power, Inc. holds investments in life insurance policies and nonqualified deferred
compensation plans in the amount of $ 2,586,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
6. Wyodak Resources Development Corp. holds investments in life insurance policies in the amount of
$451,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
7. Black Hills Exploration and Production, Inc. holds investments in life insurance policies in the
amount of $72,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
8. Black Hills FiberCom, LLC holds investments in life insurance policies in the amount of $108,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
9. Daksoft, Inc. holds investments in life insurance policies in the amount of $149,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
10. Black Hills Energy Capital, Inc. has an equity investment in Black Hills Idaho Operations, LLC in
the amount of $ 2,968,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
11. Black Hills Energy Capital, Inc. has an equity investment in EIF Funds in the amount of $9,888,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
12. Black Hills Energy Capital, Inc. holds other various notes receivable in the aggregate amount of
$1,676,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
13. Black Hills Fiber Systems, Inc. holds a convertible debenture note in the amount of $40,000,000 due
from Black Hills FiberCom, LLC.
- ---------------------------------------------------------------------------------------------------------------
74
SCHEDULE 7.15
PERMITTED INDEBTEDNESS
(A) Indebtedness of Marketing Subsidiaries
1. Enserco Energy Inc. Credit Facility with Fortis Capital Corp. $135,000,000
2. Black Hills Energy Resources, Inc. Credit Facility with Fortis Capital Corp. $ 25,000,000
(In addition there is a $12,500,000 overdraft line)
(B) Other Indebtedness
1. 3-Year Credit Agreement (revolving credit facility) among Black Hills
Corporation and various banks $200,000,000
2. 1-Year Credit Agreement (revolving credit facility) among Black Hills
Corporation and various banks $195,000,000
3. Black Hills Power, Inc./Black Hills Generation, Inc. Note Payable to
Bear Paw Energy, LLC $ 992,909
4. Credit Agreement between Black Hills Colorado, LLC, the Bank
Nova Scotia, and various other banks $135,000,000
5. Black Hills Corporation First Mortgage Bonds $215,000,000
6. Black Hills Power, Inc. Pollution Control Revenue Bonds $ 24,500,000
7. Black Hills Power, Inc. Environmental Improvement Revenue Bonds
(Floating Rate) $ 2,855,000
8. Wyodak Resources Development Corp. reclamation bond obligations
relating to its mining permits. $ 21,644,000
9. Landrica Development Company reclamation bond obligation relating to its
mining permits. $ 3,794,997
10. Black Hills Exploration and Production, Inc. miscellaneous performance
bonds and letters of credit relating to oil and gas well leases and operations $ 500,000
11. Black Hills Corporation and Black Hills Nevada, LLC bridge
loan relating to the Las Vegas Cogen II facility $ 50,000,000
12. Term loan and letter of credit facility between Black Hills Fountain Valley,
LLC, Fountain Valley Power, LLC, and E-Next A Equipment Leasing
Company, LLC and various banks (including Union Bank of California
75
as agent bank) $164,471,218
13. Northern Electric Power Co. L.P. project financing term loan secured
by the Hudson Falls generating plant. $ 66,878,240
14. South Glens Falls LP project financing term loan secured by the South
Glens Falls generating plant. $ 22.878,498
15. Black Hills Corporation guarantee of lease payments on the
Wygen 1 facility. $140,000,000
16. Black Hills Corporation guarantee in favor of Cheyenne Light, Fuel and Power
in connection with performance of the Wygen 1 Power Purchase Agreement $ 5,000,000
17. Black Hills Corporation guarantee in favor of Cheyenne Light, Fuel and
Power in connection with performance of Black Hills Generation under the
Gillette Turbine Power Purchase Agreement. $ 10,000,000
16. Black Hills Corporation guarantee in favor of Las Vegas Cogen II
interconnection agreement with Nevada Power Company. $ 749,970
17. Black Hills Corporation completion guarantee in favor of Bank
of Nova Scotia in connection expanded Colorado facilities. All payments
18. Black Hills Corporation guarantee in favor of UBS AG in connection
with Enserco Energy, Inc.'s Derivative, Power and Gas Agreements
with UBS AG. $ 3,000,000
19. Black Hills Corporation guarantee in favor of Koch Exploration
Company, LLC in connection with Enserco Energy, Inc. agreements with
Koch Exploration Company, LLC. $ 4,500,000
76
All indebtedness balances are as of June 30, 2002 (except for inclusion of
additional $75,000,000 on First Mortgage Bonds issued August 8, 2002).
SCHEDULE 7.19
RESTRICTIONS ON DISTRIBUTIONS AND EXISTING NEGATIVE PLEDGES
1. Enserco Energy Inc. has granted a security interest in favor of Fortis
Capital Corp., with respect to Enserco Energy Inc.'s personal property
assets to secure the $135,000,000 credit facility referred to in on
Schedule 7.15.
3. Black Hills Energy Resources, Inc. has granted a security interest in favor
of Fortis Capital Corp., with respect to Black Hills Energy Resources,
Inc.'s personal property assets to secure the $25,000,000 credit facility
referred to on Schedule 7.15.
4. Black Hills Power, Inc. Indenture of Mortgage and Deed of Trust contains a
provision which prohibits the payment of dividends should the Company's
retained earnings amount not meet certain minimal levels. Currently the
Company is required to maintain a retained earnings level of greater than
$318,000 for dividend payments to be allowed under the indenture.
5. Substantially all of Black Hills Energy Capital, Inc.'s project finance
subsidiaries' nonrecourse debt contain restrictions which prohibit
distributions unless certain financial covenants limits are met.
Dividends on Black Hills Corporation's preferred stock must be paid or declared
and set apart for payment before any dividends may be paid or declared and set
apart for payment on the Company's common stock. The Company's preferred stock
is cumulative.
77
Exhibit 10.3
BLACK HILLS POWER, INC.
TO
JPMORGAN CHASE BANK,
As Trustee
____________________________
FIRST SUPPLEMENTAL INDENTURE
Dated as of August 13, 2002
____________________________
Supplemental to Restated and Amended
Indenture of Mortgage and Deed of Trust
Dated as of September 1, 1999
First Mortgage Bonds, 7.23%
Series AE Due 2032
FIRST SUPPLEMENTAL INDENTURE, dated as of the 13 `h day of
August, 2002, between Black Hills Power, Inc., a corporation duly organized and
existing under the laws of the State of South Dakota (formerly known as Black
Hills Corporation) (hereinafter called the "Company"), party of the first part,
and JPMORGAN CHASE BANK, a corporation organized and existing under the laws of
the State of New York, as Trustee under the Indenture hereinafter mentioned
(hereinafter called the "Trustee"), party of the second part.
WHEREAS, in order to secure an authorized issue of First
Mortgage Bonds of the Company, the Company has executed and delivered a Restated
and Amended Indenture of Mortgage and Deed of Trust to JPMorgan Chase Bank f/k/a
The Chase Manhattan Bank, as Trustee, dated as of September 1, 1999 (hereinafter
referred to as the "Indenture"), which amended and restated the Indenture of
Mortgage and Deed of Trust to Central Hanover Bank and Trust Company (the
successor by various mergers of which is JPMorgan Chase Bank) hereinafter
referred to as the "Original Indenture."
WHEREAS, pursuant to the provisions of the Indenture, First
Mortgage Bonds have been duly issued under the Original Indenture and are
presently outstanding and continue to be secured by the Indenture as follows:
Principal Amount
Series Outstanding
Series Y, 9.49%, due June 15, 2018 $4,550,000
Series Z, 9.35%, due May 29, 2021 31,635,000
Series AA, 9.00%, due September 1, 2003 1,650,904
Series AB, 8.30%, due September 1, 2024 45,000,000
Series AC, 8.06%, due February 1, 2010 30,000,000
----------
$112,835,904
and
WHEREAS, as permitted by the Indenture, the Company, by
resolutions of its Board of Directors duly adopted, has determined to create a
new series of bonds to be known as its "First Mortgage Bonds, 7.23% Series AE
Due 2032" (herein called the "Series AE Bonds"), to be initially authenticated
and delivered in the aggregate principal amount of $75,000,000 in the form,
having the characteristics and being entitled to the benefits as in the
Indenture or as in this Supplemental Indenture provided; and
WHEREAS, the Company, in exercise of the powers and authority
conferred upon and reserved to it under and by virtue of the provisions of the
Indenture, and particularly the provisions contained in Articles Two and Sixteen
thereof, and pursuant to appropriate resolutions of its Board of Directors, has
duly resolved and determined to make, execute and deliver to the Trustee a First
Supplemental Indenture in the form hereof (herein sometimes referred to as "this
Supplemental Indenture") for the purposes herein provided; and
WHEREAS, all conditions and requirements necessary to make
this Supplemental Indenture a valid, binding and legal instrument in accordance
with its terms have been done,
1
performed and fulfilled, and the execution and delivery hereof have been in
all respects duly authorized;
NOW THEREFORE, in consideration of the premises and of one
dollar to it duly paid by the Trustee at or before the ensealing and delivery of
these presents, the receipt whereof is hereby acknowledged, and of other good
and valuable consideration, in order to establish the terms of the Series AE
Bonds, the Company hereby further covenants and agrees to and with the Trustee
and its successors in the trust under the Indenture for the benefit of all those
who shall from time to time hold the Series AE Bonds as follows:
The Company does hereby ratify and confirm its Mortgage and
Pledge to the Trustee of all property described in the Indenture and does hereby
grant, bargain, sell, release, convey, assign, transfer, mortgage, pledge and
set over unto the Trustee, and to its successors and assigns forever, the
following described property acquired by the Company and not specifically
described under the Indenture which following described property shall be
incorporated into the terms of Exhibit A to the Indenture as if more fully set
forth therein:
LANDS IN BUTTE COUNTY, SOUTH DAKOTA
1. Tracts C, D and E of the Southeast Quarter (SE1/4) of Section Ten (10),
Township Eight (8) North, Range Two (2) East of the Black Hills Meridian in
the City of Belle Fourche, Butte County, South Dakota, as shown by the Plat
recorded in Plat Book 5, Page 18, excepting therefrom that part of Tract C
and Tract D deeded to Floyd Cooper, in instrument recorded December 22,
1949, in Book 137, Page 137; and also excepting therefrom that part of
Tract C deeded to Albert W. Turbiville and Alice L. Turbiville, in
instrument recorded October 24, 1961 in Book 156, Page 585 of the Butte
County real estate records.
LANDS IN MEADE COUNTY, SOUTH DAKOTA
1. Lots Twenty-seven (27), Twenty-eight (28), Twenty-nine (29), and Thirty
(30), in Block Four of Fort Meade Addition to Sturgis, in the County of
Meade and State of South Dakota.
2. A parcel of land approximately 3.08 acres known as the BHP&L Utility Lot
formerly a portion of lot four (4) of the Northeast Quarter of the
Southeast Quarter (SE 1/4) of Section Thirty-six (36), Township Five (5)
North, Range Five (5) East of the Black Hills Meridian, in Meade County,
South Dakota.
3. Plat of Piedmont Valley Substation Lot being a portion of Lot Eight (8),
Block One (1), Coopers Subdivision located in the Northwest Quarter of the
Northeast Quarter (NW 1/4NE1/4), Section Fifteen (15), Township Three (3)
North, Range Six (6) East of the Black Hills Meridian, in Meade County,
South Dakota.
2
LANDS IN PENNINGTON COUNTY, SOUTH DAKOTA
1. A Forty (40) acre parcel described as the Southwest Quarter of the
Southwest Quarter (SW 1ASW1/4) of Section Twenty-four (24), in Township One
(1) North, Range Seven (7) East of the Black Hills Meridian in Pennington
County, South Dakota excepting therefrom Highway 16 Bypass and also
excepting therefrom Lot H 1 as shown on the plat filed in Highway Plat Book
6, Page 22 of the Pennington County real estate records.
2. Lot Two (2) in Prairie Hills Subdivision, Rapid City, located in the
Southwest Quarter of the Southwest Quarter (SW 1/4SW 1/4) of Section
Nineteen (19), Township Two (2) North, Range Eight (8) East of the Black
Hills Meridian, Pennington County, South Dakota.
ARTICLE ONE
DEFINITIONS
SECTION 1.01. General. For all purposes of this Supplemental Indenture:
(a) capitalized terms used herein without definition shall have the
meanings specified in the Indenture;
(b) all references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of this
Supplemental Indenture;
(c) the terms "herein," "hereof," "hereunder" and other words of
similar import refer to this Supplemental Indenture; and
(d) in the event of a conflict between any definition set forth in the
Indenture and any definition set forth in this Supplemental Indenture, the
definition set forth in this Supplemental Indenture shall control.
SECTION 1.02. Definitions. The following definitions shall apply to
this Supplemental Indenture:
"Business Day" means any day other than a Saturday or Sunday and other
than a day on which banking institutions in Rapid City, South Dakota, or
New York, New York, are authorized or obligated by law or executive order
to close.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity
comparable to the remaining term of the Series AE Bonds to be redeemed that
would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to the remaining term of the Series AE
Bonds.
3
"Comparable Treasury Price" means the average of two Reference
Treasury Dealer Quotations obtained with respect to any redemption date.
"Depository" means The Depository Trust Company, a New York
corporation, or any successor thereto.
"Global Bond" shall have the meaning set forth in Section 2.05(a).
"Independent Investment Banker" means ABN AMRO Incorporated or one of the
Reference Treasury Dealers appointed by the Trustee after consultation with
the Company.
"Reference Treasury Dealer" means ABN AMRO Incorporated and its
successors; provided, however, that if ABN AMRO Incorporated or its
successors shall cease to be a primary United States government securities
dealer (a "Primary Treasury Dealer"), the Company will substitute for it
another nationally recognized investment bank that is a Primary Treasury
Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as
determined by the Independent Investment Banker, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the Independent
Investment Banker at 5:00 p.m., New York City time, on the third Business
Day preceding such redemption date.
"Treasury Rate" means, for any redemption date, (i) the yield, under
the heading which represents the average for the immediately preceding
week, appearing in the most recently published statistical release
designated "H.15(519)" or any successor publication which is published
weekly by the Board of Governors of the Federal Reserve System and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity corresponding to the Comparable Treasury
Issue (if no maturity is within three months before or after the remaining
term of the Series AE Bonds, yields for the two published maturities most
closely corresponding to the Comparable Treasury Issue shall be determined
and the Treasury Rate shall be interpolated or extrapolated from such
yields on a straight line basis, rounding to the nearest month) or (ii) if
such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate
per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, calculated using a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to
the Comparable Treasury Price. The Treasury Rate shall be calculated on the
third Business Day preceding the redemption date.
4
ARTICLE TWO
TERMS AND CONDITIONS OF SERIES AE BONDS
SECTION 2.01. General.
(a) There is hereby created a series of Bonds, known as and entitled
"First Mortgage Bonds, 7.23% Series AE Due 2032," and the form thereof
shall be as provided in this Supplemental Indenture.
(b) The aggregate principal amount of Series AE Bonds which may be
authenticated and delivered and outstanding under the Indenture and this
Supplemental Indenture shall be limited in aggregate principal amount to
$75,000,000, except as provided under Section 2.02 of the Indenture. The
Series AE Bonds shall bear interest at the rate of 7.23% per annum until
the principal thereof becomes due and payable and shall bear interest on
overdue principal (including any overdue mandatory prepayment of principal)
and premium, if any, and (to the extent legally enforceable) on any overdue
installment of interest at the rate of 8.23% per annum until such overdue
principal, premium or interest shall be paid. The Series AE Bonds shall
mature August 15, 2032.
(c) The Series AE Bonds shall be registered Bonds without coupons in
denominations of $100,000 and any multiples of $1,000 which may be executed
by the Company and delivered to the Trustee for authentication and
delivery. The date of commencement of the first interest period for the
Series AE Bonds shall be the date of initial authentication and delivery
thereof. The Series AE Bonds shall be dated as provided in Section 2.06 of
the Indenture. All Series AE Bonds shall bear interest from their
respective issue dates. The principal and interest shall be due and payable
as provided in the Bond form set forth in Section 2.02 of this Supplemental
Indenture. The principal of, premium, if any, and interest on the Series AE
Bonds shall be payable at the principal corporate trust office of the
Trustee, in the Borough of Manhattan, The City of New York, in any coin or
currency of the United States of America which at the time of payment shall
be legal tender for the payment of public and private debts. The Series AE
Bonds shall be subject to redemption only as provided in Section 2.03 of
this Supplemental Indenture and Section 8.08 of the Indenture.
(d) Without limiting the other indemnities provided to the Trustee,
the Company shall indemnify and save the Trustee harmless from any
liabilities and costs incurred by the Trustee arising out of the making of
the final payment when due of the principal owing on any of the Series AE
Bonds without the surrender of such Bond to the Trustee.
(e) The Trustee is hereby appointed Registrar in respect of the Series
AE Bonds, and the principal corporate trust office of the Trustee in the
Borough of Manhattan, The City of New York, is hereby designated as the
office or agency of the Company in said Borough where notices or demands in
respect of Series AE Bonds may be served.
5
SECTION 2.02. Form of Bonds. The text of the Series AE Bonds, and the
certificate of authentication of the Trustee to be executed thereon, are to be
substantially in the following forms, respectively:
[FORM OF GLOBAL BOND]
Unless this Bond is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the issuer or its
agent for registration of transfer, exchange or payment, and any Bond issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
Unless and until it is exchanged in whole or in part for Bonds in
definitive registered form, this Bond may not be transferred except as a whole
by the Depositary to the nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
No.___________________ $______________________
CUSIP No. 092114 AA 5
BLACK HILLS POWER, INC.
FIRST MORTGAGE BOND, 7.23%
SERIES AE DUE 2032
BLACK HILLS POWER, INC. (hereinafter called the "Company"), a corporation
organized and existing under the laws of the State of South Dakota, for value
received, hereby promises to pay to , or registered assigns, on the 15th day of
August, 2032, at the principal corporate trust office of the Trustee, in the
Borough of Manhattan, The City of New York, Dollars, in any coin or currency of
the United States of America which at the time of payment shall be legal tender
for the payment of public and private debts, and to pay interest thereon from
the date hereof, at the rate of 7.23 percent, per annum (computed on the basis
of a 360-day year of 12 thirty-day months), payable at said principal office of
the Trustee in like coin or currency semi-annually on February 15 and August 15
in each year until the principal hereof shall have become due and payable, and
thereafter if default be made in the payment of such principal and premium, if
any, and on any overdue installment of interest, at the rate of 8.23 percent,
per annum until the overdue principal, premium or interest shall be paid.
6
This Bond shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Trustee, or
its successor as Trustee, under the Indenture.
This Bond is one of an authorized issue of Bonds of the Company known as
its "First Mortgage Bonds," issued and to be issued in one or more series under,
and all equally and ratably secured (except as any sinking, amortization,
improvement, renewal or other analogous fund, established in accordance with the
provisions of the Indenture hereinafter mentioned, may afford additional
security for the Bonds of any particular series) by a Restated and Amended
Indenture of Mortgage and Deed of Trust, dated as of September 1, 1999, executed
by the Company to JPMorgan Chase Bank f/k/a The Chase Manhattan Bank, as
Trustee, as supplemented and amended by a First Supplemental Indenture, dated
August 13, 2002 (said Restated Indenture as so supplemented and amended being
hereinafter collectively called the "Indenture"), to which Indenture and all
further instruments supplemental thereto reference is hereby made for a
description of the properties mortgaged and pledged, the nature and extent of
the security, the rights of the holders of said Bonds and the coupons
appurtenant to coupon Bonds, if any, and of the Trustee and of the Company in
respect of such security, and the terms and conditions upon which said Bonds are
and are to be issued and secured.
To the extent permitted by the Indenture and as provided therein, with the
consent of the Company and upon the written consent or affirmative vote of at
least sixty-six and twothirds percent in principal amount of the Bonds then
outstanding and entitled to consent, and of not less than sixty-six and two-
third percent, in principal amount of the Bonds then outstanding and entitled to
consent of each series affected thereby in case one or more but less than all of
the series of Bonds issued under the Indenture are so affected, the rights and
obligations of the Company and of the holders of Bonds and coupons appurtenant
to coupon Bonds, if any, and the terms and provisions of the Indenture and of
any instrument supplemental thereto may be modified from time to time, provided
that no such modification or alteration shall be made which would postpone the
date fixed herein or in the Indenture for the payment of the principal of, or
any installment of interest on, the Bonds, or reduce the principal of, or the
rate of interest payable on, the Bonds, or reduce the percentage of the
principal amount of Bonds the consent of which is required for the authorization
of any such modification or alteration, without the consent of all of the
holders affected thereby. The rights, duties or immunities of the Trustee shall
not be modified without the written consent of the Trustee.
As provided in the Indenture, said Bonds are issuable in series which may
vary as in the Indenture provided or permitted. This Bond is one of a series of
Bonds authorized by the First Supplemental Indenture and entitled "First
Mortgage Bonds, 7.23% Series AE Due 2032" (the "Series AE Bonds").
Pursuant to the provisions of Section 8.05 of the Indenture, the Company
may request the Trustee to apply moneys deposited with the Trustee ("Trust
Moneys") for various reasons toward the redemption of those Bonds, including
payment of premium and accrued interest, selected by the Company. In the First
Supplemental Indenture, the Company has covenanted that the Bonds may only be
called for redemption by the Company, as a whole at any time or in part from
time to time, at a redemption price equal to the greater of (i) 100% of the
principal amount of Series AE Bonds to be redeemed or (ii) the sum of the
present values of the
7
remaining scheduled payments of principal and interest thereon (exclusive of
interest accrued to the date of redemption) discounted, at the then current
Treasury Rate (as defined in the Supplemental Indenture) plus 30 basis points,
to the date of redemption on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) plus in each case, accrued and unpaid
interest on the principal amount being redeemed to the date of redemption.
Notice of each redemption shall be mailed to all registered owners not less
than thirty nor more than forty-five days before the redemption date.
Pursuant to the provisions of Section 8.08 of the Indenture, the Series AE
Bonds are further subject to redemption, in whole or in part, by the Trustee
applying certain Trust Moneys which have been held by the Trustee for a period
of over two years. Any such redemption is made pro rata among the series of
Bonds then outstanding in the ratio of principal amount. Redemption is at 100
percent of principal, plus any premium due at the time of redemption and accrued
interest to the redemption date.
If this Bond or any portion thereof ($1,000 or a multiple) shall be duly
called for redemption as provided in the Indenture, this Bond or such portion
thereof shall (unless the Company shall default in the payment of the redemption
price) cease to bear interest from and after the date fixed for redemption.
Upon any partial redemption of this Bond, this Bond may, at the option of
the registered holder hereof, be either (a) surrendered to the Trustee in
exchange for one or more new Series AE Bonds for the principal amount of the
unredeemed portion of this Bond or (b) submitted to the Trustee for notation
hereon by the Trustee of the payment of the portion of the principal hereof so
called for redemption.
If an Event of Default, as defined in the Indenture, shall occur, the
principal of this Bond may become or be declared due and payable, in the manner
and with the effect provided in the Indenture.
A certificate in global form representing all of a portion of the Bonds may
not be transferred except as a whole by the Depositary for such series to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor Depositary for such Bonds or a nominee of such successor
Depositary.
The Series AE Bonds are issuable as fully registered Bonds without coupons
of the denominations of $100,000 and any multiple of $1,000 which may be
executed by the Company and delivered to the Trustee for authentication and
delivery. The Series AE Bonds, upon surrender thereof to the Trustee at its
principal corporate trust office in the Borough of Manhattan, The City of New
York, are exchangeable for other Bonds of the same series in such authorized
denomination or denominations in the same aggregate principal amount, as may be
requested by the holders surrendering the same.
The Company and the Trustee may deem and treat the person in whose name
this Bond is registered as the absolute owner hereof, for the purpose of
receiving payment of or on account of the principal hereof and interest due
hereon, and neither the Company nor the Trustee
8
shall be affected by any notice to the contrary. Interest payable herein shall
be paid to the person in whose name the Bond is registered at the close of
business on February 1 or August 1 (whether or not on a business day) next
preceding the interest payment date, except for defaulted interest and unmatured
accrued interest on the Series AE Bonds called for redemption on a date other
than an interest payment date.
No recourse shall be had for the payment of the principal of or the
interest on this Bond, or for any claim based hereon or otherwise in respect
hereof or of the Indenture or of any indenture supplemental thereto, against any
incorporator, stockholder, director or officer, as such, past, present or
future, of the Company or of any predecessor or successor corporation, either
directly or through the Company or any predecessor or successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or by any legal or equitable proceeding
or otherwise howsoever; all such liability being, by the acceptance hereof and
as a part of the consideration for the issuance hereof, expressly waived and
released by every holder hereof, as more fully provided in the Indenture;
provided, however, that nothing herein or in the Indenture contained shall be
taken to prevent recourse to and the enforcement of the liability, if any, of
any shareholder or any stockholder or subscriber to capital stock upon or in
respect of shares of capital stock not fully paid up.
IN WITNESS WHEREOF, the Company has caused this Bond to be signed in its
name by its President or one of its Vice Presidents, and its corporate seal to
be impressed or imprinted hereon and attested by its Secretary or one of its
Assistant Secretaries.
Dated:
BLACK HILLS POWER, INC.
By:__________________________________
Name:
Title:
ATTEST:
___________________________________
Secretary
9
(FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION)
This is one of the Bonds, of the series designated therein, described in
the within mentioned Indenture.
JPMORGAN CHASE BANK, as Trustee
By:__________________________________
Authorized Officer
SECTION 2.03. Optional Redemption.
(a) Notwithstanding the provisions of Section 8.05 of the Indenture,
the Series AE Bonds, upon the mailing of notice and in the manner provided
in Section 10.03 of the Indenture, shall be redeemable at the option of the
Company, as a whole at any time or in part from time to time, at a
redemption price equal to the greater of (i) 100% of the principal amount
of Series AE Bonds to be redeemed or (ii) the sum of the present values of
the remaining scheduled payments of principal and interest thereon
(exclusive of interest accrued to the date of redemption) discounted, at
the then current Treasury Rate plus 30 basis points, to the date of
redemption on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) plus in each case, accrued and unpaid interest on the
principal amount being redeemed to the date of redemption.
(b) Notwithstanding the provisions of Section 10.03 of the Indenture,
in case of the redemption at any time of less than all the outstanding
Series AE Bonds, the particular Bonds or parts thereof to be redeemed shall
be selected by the Trustee from the outstanding Series AE Bonds not
previously called for redemption as nearly as practicable pro rata among
the registered holders of the Series AE Bonds according to the respective
principal amounts of such Bonds, provided that the portions of the
principal of Series AE Bonds at any time so selected for redemption in part
shall be equal to $1,000 or a multiple thereof. (c) Notwithstanding that
Section 8.05 of the Indenture authorizes the Company to request the Trustee
to apply Trust Moneys toward the redemption of Bonds to be selected by the
Company, the Company does hereby covenant that the Company will not request
the Trustee to apply any Trust Moneys to the redemption of the Series AE
Bonds except pursuant to Section 2.03(a) of this Supplemental Indenture.
SECTION 2.04. No Sinking Fund. The Series AE Bonds are not entitled to the
benefit of any sinking fund.
10
SECTION 2.05. Bonds to be Issued in Global Form.
(a) The Series AE Bonds will be initially represented by one or more
Bonds in global form (the "Global Bonds"). The Company hereby designates
The Depository Trust Company as the initial Depositary for the Global
Bonds. The Global Bonds will be deposited with the Trustee, as custodian
for the Depositary. Unless and until it is exchanged in whole or in part
for Bonds in certificated form, the Global Bonds may not be transferred
except as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor
Depositary for the Bonds or a nominee of such successor Depositary. The
Depositary may surrender the Global Bonds in exchange in whole or in part
for Bonds in certificated form on such terms as are acceptable to the
Company and the Depositary.
(b) If at any time the Depositary for the Global Bonds notifies the
Company that it is unwilling or unable to continue as Depositary for such
Global Bonds or if at any time the Depositary for the Series AE Bonds shall
no longer be eligible or in good standing under the Securities Exchange Act
of 1934, as amended, or other applicable statute or regulation, the Company
shall appoint a successor Depositary with respect to such Global Bonds. If
a successor Depositary for such Global Bonds is not appointed by the
Company within 90 days after the Company receives notice or becomes aware
of such ineligibility, the Series AE Bonds shall no longer be represented
by Global Bonds and, subject to Section 2.07 of the Indenture, the Company
will execute, and the Trustee, upon receipt of a Written Order of the
Company for the authentication and delivery of individual Bonds in exchange
for such Global Bonds, will authenticate and deliver individual Bonds of
like tenor and terms in definitive form in an aggregate principal amount
equal to the principal amount of such Global Bonds in exchange for such
Global Bonds.
(c) The Company may at any time and in its sole discretion determine
that the Series AE Bonds issued or issuable in the form of one or more
Global Bonds shall no longer be represented by such Global Bond or Bonds.
In such event, subject to Section 2.07 of the Indenture, the Company will
execute, and the Trustee, upon receipt of a Written Order of the Company
for the authentication and delivery of individual Bonds in exchange in
whole or in part for such Global Bonds, will authenticate and deliver
individual Bonds of like tenor and terms in definitive form in an aggregate
principal amount equal to the principal amount of such Global Bonds in
exchange for such Global Bonds.
(d) In any exchange provided for in Section 2.05(b) or (c), the
Company will execute and the Trustee will authenticate and deliver
individual Bonds in definitive registered form in authorized denominations.
Upon the exchange of Global Bonds for individual Bonds, such Global Bonds
shall be canceled by the Trustee. Series AE Bonds issued in exchange for
Global Bonds pursuant to this Section 2.05 shall be registered in such
names and in such authorized denominations as the Depositary for such
Global Bonds, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall
deliver such Bonds to the Persons in whose names such Bonds are so
registered.
11
ARTICLE THREE
MISCELLANEOUS
SECTION 3.01. Outstanding Bonds. The aggregate principal amount of Bonds
which, immediately after the authentication and delivery of the Series AE Bonds
to be issued under this Supplemental Indenture, will be outstanding under the
provisions of, and secured by, the Indenture, as amended by this Supplemental
Indenture, will be $187,835,904, consisting of the Bonds of Series Y, Z, AA, AB
and AC hereinbefore set forth in the second recital of this Supplemental
Indenture and $75,000,000 aggregate principal amount of Series AE Bonds hereby
created.
SECTION 3.02. Receipt of Supplemental Indenture. The Company, by the
execution hereof, acknowledges that a true copy of this Supplemental Indenture
has been delivered to and received by it.
SECTION 3.03. Ratification of Indenture. Except as amended by this
Supplemental Indenture, all the provisions, terms and conditions of the
Indenture shall continue in full force and effect. The Company does hereby
ratify and confirm its mortgage and pledge to the Trustee of that property,
real, personal and mixed described in the Indenture as being subject to the Lien
of the Indenture.
SECTION 3.04. Sufficiency of Supplemental Indenture. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.
SECTION 3.05. Counterparts. This Supplemental Indenture may be executed in
several counterparts, all or any of which may be treated for all purposes as one
original and shall constitute and be one and the same instrument.
SECTION 3.06. Governing Law. This Supplemental Indenture and each Series AE
Bond shall be governed by and construed in accordance with the laws of the State
of South Dakota without regard to the choice of law principles thereof.
Notwithstanding the foregoing, the immunities and standard of care of the
Trustee, Registrar and paying agent in connection with the administration of
trusts and duties hereunder shall be governed by and construed in accordance
with the laws of the State of New York.
12
IN WITNESS WHEREOF, BLACK HILLS POWER, INC., party hereto of the first
part, has caused this Supplemental Indenture to be executed on its behalf by its
Chairman of the Board or its President or one of its Vice Presidents and its
corporate seal to be hereto affixed and to be attested by its Secretary or an
Assistant Secretary, and JPMORGAN CHASE BANK, party hereto of the second part,
in evidence of its acceptance of the trust hereby created, has caused this
Supplemental Indenture to be executed on its behalf by one of its Vice
Presidents or Assistant Vice Presidents and its corporate seal to be hereto
affixed and to be attested by a Trust Officer, all as of the day and year first
above written.
BLACK HILLS POWER, INC.
By:________________________________
Name:
Title:
ATTEST:
_____________________________________
Secretary
Signed, sealed and delivered by
BLACK HILLS POWER, INC.
in the presence of:
_____________________________________
_____________________________________
JPMORGAN CHASE BANK, as Trustee
By:________________________________
Name:
Title:
ATTEST:
_____________________________________
Trust Officer
Signed, sealed and delivered by
JPMORGAN CHASE BANK, as Trustee
in the presence of:
_____________________________________
_____________________________________
13
STATE OF SOUTH DAKOTA )
)SS.:
COUNTY OF PENNINGTON )
On this 12th day of August, 2002, before me, Karen R. Tucker, the
undersigned officer, personally appeared Everett E. Hoyt, to me personally
known, who acknowledged himself to be, and being by me duly sworn, did say that
he is President of BLACK HILLS POWER, INC., a corporation, and that the seal
affixed to the foregoing instrument is the corporate seal of said corporation
and that said instrument was executed by, and signed in the name of, the
corporation, by him, as such President and sealed on behalf of the corporation
by authority of its Board of Directors for the purposes therein contained, and
the said Everett E. Hoyt acknowledged the same as the free act and deed of said
corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
[Notarial Seal]
________________________________
Notary Public
My Commission expires___________
STATE OF NEW YORK )
)SS.:
COUNTY OF NEW YORK )
On this 9TH day of August, 2002, before me, James M. Foley, the undersigned
officer, personally appeared L. O'Brien, to me personally known, who
acknowledged himself to be, and being by me duly sworn, did say that he is A
Vice President of JPMORGAN CHASE BANK, a corporation, and that the seal affixed
to the foregoing instrument is the corporate seal of said corporation and that
said instrument was executed by, and signed in the name of, the corporation, by
him, as such Vice President, and sealed on behalf of the corporation by
authority of its Board of Directors for the purposes therein contained, and the
said L.O'Brien acknowledged the same as the free act and deed of said
corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
[Notarial Seal]
________________________________
Notary Public
My Commission expires___________
14
Exhibit 10.4
FIRST AMENDMENT TO 3-YEAR AND 364-DAY REVOLVING CREDIT AGREEMENTS
This FIRST AMENDMENT TO 3-YEAR AND 364-DAY REVOLVING CREDIT AGREEMENTS
(this "Amendment") is dated as of June 13, 2002, and is entered into by and
among Black Hills Corporation, a South Dakota corporation (the "Borrower"), ABN
AMRO Bank N.V. in its capacity as administrative agent for the Banks party to
each of the Credit Agreements described below (in such capacity, the
"Administrative Agent"), and the Required Banks.
WHEREAS, the Administrative Agent, the Banks and the Borrower have
entered into that certain 364-Day Credit Agreement (as the same has been
amended, extended, modified or restated, the "364-Day Credit Agreement") and
that certain 3-Year Credit Agreement (as the same has been amended, extended,
modified or restated, the "3-Year Credit Agreement") each dated as of August 28,
2001 and each among the Borrower, the financial institutions from time to time
party thereto (each a "Bank," and collectively the "Banks"), U.S. Bank, National
Association and The Bank of Nova Scotia, in their capacity as documentation
agents for the Banks thereunder (in such capacity, "Documentation Agents"),
Union Bank of California, N.A. and Bank of Montreal, in their capacity as
syndication agents for the Banks thereunder (in such capacity, "Syndication
Agents") and ABN AMRO Bank N.V. in its capacity as Administrative Agent for the
Banks thereunder (the 364-Day Credit Agreement and the 3-Year Credit Agreement
are each referred to individually as a "Credit Agreement" and collectively as
the "Credit Agreements");
WHEREAS, the Borrower has requested that the Credit Agreement be
amended to, among other things, eliminate a downgrade of its S&P Rating or
Moody's Rating below investment grade as an Event of Default and the Banks are,
subject to the terms hereof, willing to so amend the Credit Agreement.
NOW THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Credit Agreements and this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used in this Amendment, unless otherwise
defined herein, shall have the meaning ascribed to such terms in the Credit
Agreements.
2. Amendments. Subject to the conditions set forth below, each Credit
Agreement is amended as follows:
(a) Section 1.1 of each Credit Agreement is hereby amended by amending
and restating the following definition in its entirety:
1
"Material Adverse Effect" means a material adverse
effect on (i) the business, financial position or results of
operations of Borrower or Borrower and its Subsidiaries taken
as a whole, (ii) the ability of Borrower to perform its
material obligations under the Credit Documents, (iii) the
validity or enforceability of the material obligations of
Borrower under any Credit Document, (iv) the rights and
remedies of the Banks or the Administrative Agent against
Borrower; or (v) the timely payment of the principal of and
interest on the Loans or other amounts payable by Borrower
hereunder, provided, that a downgrade of Borrower's S&P Rating
and/or Moody's Rating shall not, in and of itself, be deemed a
"Material Adverse Effect" for purposes of this Agreement.
(b) Section 1.1 of each Credit Agreement is hereby amended by amending
and restating clause (v) of the definition of "Indebtedness" to be and to
read as follows:
(v) all Guarantees issued by such Person, provided
that Long-Term Guaranties shall not be deemed "Indebtedness"
for purposes of calculating Borrower's compliance with the
financial covenants set forth in Sections 7.16, 7.17 and 7.18
hereof;
(c) Section 8.1 of each Credit Agreement is hereby amended by (i)
inserting the word "or" at the end of subsection (k) thereof, (ii) deleting
the "; or" appearing at the end of subsection (l) thereof and replacing it
with ".", and (iii) deleting subsection (m) thereof in its entirety.
(d) Schedule 1 to the 364-Day Credit Agreement is hereby deleted in
its entirety and a new Schedule 1 in the form of Schedule 1 (364-Day Credit
Agreement) attached to this Amendment is hereby substituted therefor.
(e) Schedule 1 to the 3-Year Credit Agreement is hereby deleted in its
entirety and a new Schedule 1 in the form of Schedule 1 (3-Year Credit
Agreement) attached to this Amendment is hereby substituted therefor.
(f) Schedule 1 to Exhibit B of each Credit Agreement is hereby amended
by changing the words "must not be less than" appearing in Section G(7) of
each such schedule to "not to exceed".
3. Ratification. The Borrower hereby ratifies, acknowledges, affirms and
reconfirms its rights, interests and obligations under each Credit Document and
agrees to perform each of its obligations thereunder as and when required. By
executing this Amendment, the Borrower hereby further ratifies, acknowledges,
affirms and reconfirms that each Credit Document, as amended hereby, constitutes
a legal, valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with its terms, and that each such Credit Document, as
amended hereby, is in full force and effect.
2
4. Conditions. The effectiveness of this Amendment is subject to the
following conditions precedent (unless specifically waived in writing by the
Administrative Agent):
(a) The Borrower and the Required Banks shall have executed and
delivered this Amendment, and the Borrower shall have executed and/or
delivered such other documents and instruments as Administrative Agent may
require.
(b) The representations and warranties set forth in Section 5 of this
Amendment shall be true and correct.
(c) All proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other
legal matters incident thereto shall be reasonably satisfactory to
Administrative Agent and its legal counsel.
5. Representations and Warranties. To induce the Administrative Agent and
the Banks to enter into this Amendment, the Borrower represents and warrants to
the Administrative Agent and the Banks that (i) the execution, delivery and
performance of this Amendment has been duly authorized by all requisite
corporate action on the part of the Borrower and that this Amendment has been
duly executed and delivered by the Borrower and this Amendment and the Credit
Agreements, as amended hereby, constitute valid and binding obligations of the
Borrower enforceable in accordance with their respective terms, (ii) no Default
or Event of Default (after giving effect to this Amendment) has occurred and is
continuing under the Credit Agreements or would result from the execution and
delivery of this Amendment, and (iii) each of the representations and warranties
set forth in Section 5 of the Credit Agreements, as amended hereby, is true and
correct in all material respects as of the date hereof, except that if any such
representation or warranty relates solely to an earlier date it need only remain
true as of such date.
6. Severability. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
7. References. Any reference to the Credit Agreements contained in any
document, instrument or agreement executed in connection with the Credit
Agreements shall be deemed to be a reference to the Credit Agreements as
modified by this Amendment.
8. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all of which taken
together shall be one and the same instrument. This Amendment may also be
executed by facsimile and each facsimile signature hereto shall be deemed for
all purposes to be an original signatory page.
3
9. Costs. The Borrower agrees to pay on demand all reasonable costs and
expenses incurred by the Administrative Agent (including fees and expenses of
counsel) incurred in connection with the negotiation and preparation of this
Amendment.
10. Governing Law. The validity and interpretation of this Amendment and
the terms and conditions set forth herein, shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
provisions relating to conflict of laws other than section 5-1401 of the New
York General Obligations Laws.
11. Miscellaneous. This Amendment shall be deemed to be a Credit Document.
[- Remainder of Page Left Blank - Signature Pages Follow -]
4
In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York by their duly authorized
officers as of the day and year first above written.
BLACK HILLS CORPORATION, a
South Dakota corporation
By: _____________________________
Name: _____________________________
Title: _____________________________
5
ABN AMRO BANK N.V., in its individual
capacity as a Bank and as Administrative
Agent
By: _____________________________
Name: David B. Bryant
Title: Senior Vice President &
Managing Director
By: _____________________________
Name: _____________________________
Title: _____________________________
6
UNION BANK OF CALIFORNIA, N.A.
By: _____________________________
Name: Robert J. Cole
Title: Vice President
7
U.S. BANK, NATIONAL
ASSOCIATION, in its individual capacity
as a Bank and as Documentation Agent
By: _____________________________
Name: Sandra Vollmer
Title: Senior Lender
8
BANK OF MONTREAL
By: _____________________________
Name: Ian M. Plester
Title: Director
9
THE BANK OF NOVA SCOTIA
By: _____________________________
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
10
CIBC INC., as a Lender
By: _____________________________
Name: M. Sanjeeva Senanayake
Title: Executive Director
CIBC World Markets Corp. As Agent
11
COBANK, ACB
By: _____________________________
Name: Cathleen Reed
Title: Assistant Vice President
12
WELLS FARGO BANK, N.A.
By: _____________________________
Name: Thomas M. Foncannon
Title: Senior Vice President
13
MIZUHO CORPORATE BANK, LTD.
By: _____________________________
Name: Nobuyasu Fukatsu
Title: Senior Vice President
14
NATIONAL CITY BANK OF
MICHIGAN/ILLINOIS
By: _____________________________
Name: Mark R. Long
Title: Senior Vice President
15
NORDEUTSCHE LANDESBANK
GIROZENTRALE NEW YORK/
CAYMAN ISLANDS BRANCH
By: _____________________________
Name: Stephanie Finnen
Title: Vice President
By: _____________________________
Name: Joseph Haas
Title: Vice President
16
CHANG HWA BANK, LOS ANGELES BRANCH
By: _____________________________
Name: James Lin
Title: Senior Vice President and General Manager
17
SCHEDULE 1 (364-Day Credit Agreement)
PRICING GRID
- ------------------ ------------------- ------------ ------------------- -------------------
If the Level Subject to the The Subject to the Subject to the
Status Is proviso below Utilization proviso below proviso below
this grid, the Fee Rate this grid, the this grid, the
Facility Fee Rate is: Eurodollar Margin Base Rate Margin
is: is: is:
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level I Status 0.080% 0.100% 0.420% 0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level II Status 0.100% 0.125% 0.500% 0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level III Status 0.125% 0.125% 0.625% 0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
Level IV Status 0.150% 0.125% 0.725% 0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level V Status 0.200% 0.250% 0.800% 0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level VI Status 0.600% 0.500% 1.400% 0.475%
- ------------------ ------------------- ------------ ------------------- -------------------
Each change in a rating shall be effective as of the date it is
announced by the applicable rating agency. Until the Borrower receives an S&P
Rating, the applicable Level shall be determined based upon the Borrower's
Moody's Rating.
In the event that the Moody's Rating and the S&P Rating fall in
consecutive Levels, the rating falling in the lower Level (with Level I being
the highest Level and Level VI being the lowest Level) shall govern for purposes
of determining the applicable pricing pursuant to the above pricing grid. In the
event that the Moody's Rating and the S&P Rating fall in non-consecutive Levels,
the Level immediately above the Level in which the lower rating falls (with
Level I being the highest Level and Level VI being the lowest Level) shall
govern for purposes of determining the applicable pricing pursuant to the above
pricing grid.
18
SCHEDULE 1 (3-Year Credit Agreement)
PRICING GRID
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
If the Level Subject to the The Subject to the Subject to the Subject to the
Status Is proviso below Utilization proviso below proviso below proviso below this
this grid, the Fee Rate this grid, the this grid, the grid, the Base
Facility Fee Rate is: L/C Fee Rate is: Eurodollar Rate Margin is:
is: Margin is:
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level I Status 0.100% 0.100% 0.400% 0.400% 0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level II Status 0.125% 0.125% 0.475% 0.475% 0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level III Status 0.150% 0.125% 0.600% 0.600% 0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level IV Status 0.175% 0.125% 0700% 0.700% 0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level V Status 0.250% 0.250% 0.750% 0.750% 0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level VI Status 0.500% 0.500% 1.500% 1.500% 0.500%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Each change in a rating shall be effective as of the date it is
announced by the applicable rating agency. Until the Borrower receives an S&P
Rating, the applicable Level shall be determined based upon the Borrower's
Moody's Rating.
In the event that the Moody's Rating and the S&P Rating fall in
consecutive Levels, the rating falling in the lower Level (with Level I being
the highest Level and Level VI being the lowest Level) shall govern for purposes
of determining the applicable pricing pursuant to the above pricing grid. In the
event that the Moody's Rating and the S&P Rating fall in non-consecutive Levels,
the Level immediately above the Level in which the lower rating falls (with
Level I being the highest Level and Level VI being the lowest Level) shall
govern for purposes of determining the applicable pricing pursuant to the above
pricing grid.
Execution Copy Exhibit 10.5
SECOND AMENDMENT TO 3-YEAR CREDIT AGREEMENT
This SECOND AMENDMENT TO 3-YEAR CREDIT AGREEMENT (this "Amendment") is
dated as of August 27, 2002, and is entered into by and among Black Hills
Corporation, a South Dakota corporation (the "Borrower"), ABN AMRO Bank N.V. in
its capacity as administrative agent for the Banks party to the Credit Agreement
described below (in such capacity, the "Administrative Agent"), and the
financial institutions party hereto.
WHEREAS, the Administrative Agent, the Banks and the Borrower have
entered into that certain 3-Year Credit Agreement (as the same has been amended
(including via that certain First Amendment to 3-Year and 364-Day Revolving
Credit Agreements dated as of June 13, 2002), extended, modified or restated,
the "Credit Agreement") dated as of August 28, 2001 among the Borrower, the
financial institutions from time to time party thereto (each a "Bank," and
collectively the "Banks"), U.S. Bank, National Association and The Bank of Nova
Scotia, in their capacity as documentation agents for the Banks thereunder (in
such capacity, "Documentation Agents"), Union Bank of California, N.A. and Bank
of Montreal, in their capacity as syndication agents for the Banks thereunder
(in such capacity, "Syndication Agents") and ABN AMRO Bank N.V. in its capacity
as Administrative Agent for the Banks thereunder; and
WHEREAS, the Borrower has requested that the Credit Agreement be
amended as set forth herein and the Banks are, subject to the terms hereof,
willing to so amend the Credit Agreement.
NOW THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Credit Agreement and this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used in this Amendment, unless otherwise
defined herein, shall have the meaning ascribed to such terms in the Credit
Agreement.
2. Amendments. Subject to the conditions set forth below, the Credit
Agreement is amended as follows:
(a) Section 1.1 of the Credit Agreement is hereby amended by amending
and restating the following definitions in their entirety as follows:
"L/C Commitment" means an amount equal to $100,000,000.
1
"Level V Status" means neither Level I Status, Level II Status,
Level III Status, nor Level IV Status exists, but Borrower's S&P
Rating is BBB- or higher and its Moody's Rating is Baa3 or higher.
"364 Day Credit Agreement" means that certain Amended and
Restated 364 Day Credit Agreement dated as of August 27, 2002 among
Borrower, ABN AMRO Bank, N.V., in its capacity as administrative agent
for the Banks thereunder, U.S. Bank, National Association and The Bank
of Nova Scotia, in their capacity as documentation agents for the
Banks thereunder, Union Bank of California, N.A. and Bank of Montreal,
in their capacity as syndication agents for the Banks thereunder and
the various financial institutions from time to time party thereto as
Banks
(b) Section 1.1 of the Credit Agreement is hereby amended by (i)
deleting the definitions of "ABN AMRO Credit Agreement", "Interest Coverage
Ratio", "Consolidating Interest Expense", "US Bank Credit Agreements", and
"Wells Fargo Credit Agreements" appearing therein, (ii) deleting the
parenthetical "(once obtained)" in each place such parenthetical appears in
the definitions of "Level I Status", "Level II Status", "Level II Status",
"Level IV Status", "Level V Status", and "Level VI Status", (iii) changing
the words "Consolidating Interest Expense" too "Consolidated Interest
Expenses" in the definition of "Consolidated EBITDA", (iv) changing the
words "Black Hills Energy Ventures, Inc." to "Black Hills Energy, Inc." in
the definition of "Material Subsidiaries" and (v) inserting the following
definitions in proper alphabetical order:
"Consolidated Fixed Charges" means, for any period and without
duplication the sum of (i) the aggregate amount of Consolidated
Interest Expense with respect to Recourse Indebtedness paid or
scheduled to be paid for such period, and (ii) the aggregate amount of
all mandatory scheduled payments (whether designated as payments or
prepayments) and scheduled sinking fund payments with respect to
principal of any Recourse Indebtedness of the Borrower or its
Subsidiaries (including payments in the nature of principal under
Capital Leases).
"Consolidated Interest Expense" means, with reference to any
period of the Borrower and its Subsidiaries, the sum of (i) all
interest charges (including capitalized interest, imputed interest
charges with respect to Capitalized Lease Obligations and all
amortization of debt discount and expense and other deferred financing
charges) of the Borrower and its Subsidiaries on a consolidated basis
for such period determined in accordance with GAAP, other than
interest charges relating to Non-Recourse Indebtedness, (ii) all
commitment or other fees payable in respect of the issuance of standby
letters of credit or other credit facilities for the account of the
Borrower or its Subsidiaries, and (iii) net costs/expenses incurred by
the Borrower and its Subsidiaries under Derivative Arrangements.
2
"Fixed Charge Coverage Ratio" means, for any period of four
consecutive quarters of the Borrower ending with the most recently
completed such fiscal quarter, the ratio of (A) Adjusted Consolidated
EBITDA to (B) Consolidated Fixed Charges for such period.
"Liquid Assets" means, as the date of any calculation thereof,
the sum of (i) the amount of unrestricted cash which the Borrower then
has available, plus (ii) the aggregate amount of then available
(meaning the Borrower is entitled to borrow such amounts pursuant to
the applicable documentation) unused capacity under the Borrower's
senior unsecured credit facilities (including this Agreement and the
364-Day Credit Agreement).
(c) Section 2.2(a) of the Credit Agreement is hereby amended by adding
the following sentence to the end of such subsection:
No Issuing Agent shall have an obligation pursuant to the Credit
Documents to issue any Letter of Credit if, after giving effect to the
issuance of such Letter of Credit, the aggregate face amount of
Letters of Credit issued by such Issuing Agent then outstanding would
exceed $50,000,000.
(d) Section 2.12(b) of the Credit Agreement is hereby amended by
changing the amount "$200,000,000" appearing in such subsection to
"$300,000,000".
(e) Section 5.4 of the Credit Agreement is hereby amended by (i)
changing the date "December 31, 2000" in both places it appears in each
Section to "December 31, 2001", and (ii) changing the date "June 30, 2001"
to "June 30, 2002".
(f) Sections 7.15(c) and 7.15(d) of the Credit Agreement are hereby
amended be inserting the following text at the beginning of such
subsections:
so long as the Borrower would be in compliance with Section
7.17 hereof (calculated as of the date of, and after giving
affect to, such incurrence),
(g) Section 7.16 of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
Section 7.16 Consolidated Net Worth. Borrower will at the end
of each fiscal quarter maintain Consolidated Net Worth in an
amount of not less than the sum of (i) $425,000,000 plus (ii)
fifty percent (50%) of the aggregate Consolidated Net Income,
if positive, for the period beginning April 1, 2002 and ending
on the last day of such fiscal quarter.
(h) Section 7.18 of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
3
Section 7.18 Fixed Charge Coverage Ratio. Borrower will
maintain a Fixed Charge Coverage Ratio of not less than
1.50:1.00, as determined at the end of each fiscal quarter.
(i) Section 7.25 of the Credit Agreement is hereby amended in its
entirety to be and to read as follows:
Section 7.25 Ratings. Borrower will at all times this
Agreement is in effect maintain a S&P Rating and a Moody's
Rating (or if one or both of such ratings are unavailable,
rating(s) from such other recognized national rating agency or
agencies as may be acceptable to the Administrative Agent and
the Required Banks).
(j) A new Section 7.26 of the Credit Agreement is hereby added in
proper numerical order to be and to read as follows:
Section 7.26 Liquidity Covenant. Borrower will, as of the last
day of each fiscal quarter commencing with the fiscal quarter
ending December 31, 2002, maintain Liquid Assets of at least
$30,000,000.
(k) Schedule 1 to the Credit Agreement is hereby deleted in its
entirety and a new Schedule 1 in the form of Schedule 1 (3-Year Credit
Agreement) attached to this Amendment is hereby substituted therefor.
(l) Schedule 1 to Exhibit B of the Credit Agreement is hereby deleted
in its entirety and Schedule 1 to this Amendment is hereby substituted
therefor.
(m) Schedules 5.2, 5.5, 5.11, 7.9, 7.14, 7.15(a), 7.15(b), and 7.19 of
the Credit Agreement are hereby amended in their entirety to be and to read
the same as the corresponding schedules attached to the 364 Day Credit
Agreement being executed as of the date of this Amendment.
3. Ratification. The Borrower hereby ratifies, acknowledges, affirms and
reconfirms its rights, interests and obligations under each Credit Document and
agrees to perform each of its obligations thereunder as and when required. By
executing this Amendment, the Borrower hereby further ratifies, acknowledges,
affirms and reconfirms that each Credit Document, as amended hereby, constitutes
a legal, valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with its terms, and that each such Credit Document, as
amended hereby, is in full force and effect.
4. Conditions. The effectiveness of this Amendment is subject to the
following conditions precedent:
4
(a) The Borrower shall have executed and delivered this Amendment, and
the Borrower shall have executed and/or delivered such other documents and
instruments as Administrative Agent may require.
(b) The representations and warranties set forth in Section 5 of this
Amendment shall be true and correct.
(c) All proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other
legal matters incident thereto shall be reasonably satisfactory to
Administrative Agent and its legal counsel.
5. Representations and Warranties. To induce the Administrative Agent and
the Banks to enter into this Amendment, the Borrower represents and warrants to
the Administrative Agent and the Banks that (i) the execution, delivery and
performance of this Amendment has been duly authorized by all requisite
corporate action on the part of the Borrower and that this Amendment has been
duly executed and delivered by the Borrower and this Amendment and the Credit
Agreement, as amended hereby, constitutes valid and binding obligations of the
Borrower enforceable in accordance with its terms, (ii) no Default or Event of
Default (after giving effect to this Amendment) has occurred and is continuing
under the Credit Agreement or would result from the execution and delivery of
this Amendment, and (iii) each of the representations and warranties set forth
in Section 5 of the Credit Agreement, as amended hereby, is true and correct in
all material respects as of the date hereof, except that if any such
representation or warranty relates solely to an earlier date it need only remain
true as of such date.
6. Severability. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
7. References. Any reference to the Credit Agreement contained in any
document, instrument or agreement executed in connection with the Credit
Agreement shall be deemed to be a reference to the Credit Agreement as modified
by this Amendment.
8. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all of which taken
together shall be one and the same instrument. This Amendment may also be
executed by facsimile and each facsimile signature hereto shall be deemed for
all purposes to be an original signatory page.
9. Costs. The Borrower agrees to pay on demand all reasonable costs and
expenses incurred by the Administrative Agent (including fees and expenses of
counsel) incurred in connection with the negotiation and preparation of this
Amendment or the syndication (whether incurred before or after the date hereof)
of the Credit Agreement.
5
10. Governing Law. The validity and interpretation of this Amendment and
the terms and conditions set forth herein, shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
provisions relating to conflict of laws other than section 5-1401 of the New
York General Obligations Laws.
11. Miscellaneous. This Amendment shall be deemed to be a Credit Document.
[- Remainder of Page Left Blank - Signature Pages Follow -]
6
In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York by their duly authorized
officers as of the day and year first above written.
BLACK HILLS CORPORATION, a
South Dakota corporation
By: _____________________________
Name: _____________________________
Title: _____________________________
7
ABN AMRO BANK N.V., in its individual
capacity as a Bank and as Administrative
Agent
By: _____________________________
Name: David B. Bryant
Title: Senior Vice President &
Managing Director
By: _____________________________
Name: _____________________________
Title: _____________________________
8
UNION BANK OF CALIFORNIA, N.A.
By: _____________________________
Name: Robert J. Cole
Title: Vice President
9
U.S. BANK, NATIONAL
ASSOCIATION, in its individual capacity
as a Bank and as Documentation Agent
By: _____________________________
Name: Sandra Vollmer
Title: Senior Lender
10
BANK OF MONTREAL
By: _____________________________
Name: Ian M. Plester
Title: Director
11
THE BANK OF NOVA SCOTIA
By: _____________________________
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
12
CIBC INC., as a Lender
By: _____________________________
Name: M. Sanjeeva Senanayake
Title: Executive Director
CIBC World Markets Corp. As Agent
13
COBANK, ACB
By: _____________________________
Name: Cathleen Reed
Title: Assistant Vice President
14
WELLS FARGO BANK, N.A.
By: _____________________________
Name: Thomas M. Foncannon
Title: Senior Vice President
15
MIZUHO CORPORATE BANK, LTD.
By: _____________________________
Name: Nobuyasu Fukatsu
Title: Senior Vice President
16
NATIONAL CITY BANK OF
MICHIGAN/ILLINOIS
By: _____________________________
Name: Mark R. Long
Title: Senior Vice President
17
NORDEUTSCHE LANDESBANK
GIROZENTRALE NEW YORK/
CAYMAN ISLANDS BRANCH
By: _____________________________
Name: Stephanie Finnen
Title: Vice President
By: _____________________________
Name: Joseph Haas
Title: Vice President
18
CHANG HWA BANK, LOS ANGELES
BRANCH
By: _____________________________
Name: Jim Chen
Title: Vice President and General Manager
19
SCHEDULE 1 (3-Year Credit Agreement)
PRICING GRID
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
If the Level The Facility Fee The The L/C Fee Rate The Eurodollar The Base Rate
Status Is Rate is: Utilization is: Margin is: Margin is:
Fee Rate
is:
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level I Status 0.100% 0.100% 0.400% 0.400% 0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level II Status 0.125% 0.125% 0.475% 0.475% 0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level III Status 0.150% 0.150% 0.600% 0.600% 0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level IV Status 0.175% 0.200% 0700% 0.700% 0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level V Status 0.250% 0.250% 0.750% 0.750% 0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level VI Status 0.6725% 0.500% 1.400% 1.400% 0.400%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Each change in a rating shall be effective as of the date it is
announced by the applicable rating agency.
In the event that the Moody's Rating and the S&P Rating fall in
consecutive Levels, the rating falling in the lower Level (with Level I being
the highest Level and Level VI being the lowest Level) shall govern for purposes
of determining the applicable pricing pursuant to the above pricing grid. In the
event that the Moody's Rating and the S&P Rating fall in non-consecutive Levels,
the Level immediately above the Level in which the lower rating falls (with
Level I being the highest Level and Level VI being the lowest Level) shall
govern for purposes of determining the applicable pricing pursuant to the above
pricing grid.
20
SCHEDULE 1 TO COMPLIANCE CERTIFICATE
Compliance Calculations for Credit Agreement
CALCULATION AS OF ________ __,200_
- ------------------------------------------------------------------ --------------------- ---------------------------
A. Liens (Sec. 7.9(c), (d), and (g))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Liens securing taxes or assessments or other _____________________ (Answer should be yes)
government charges or levies equal to or less
than $20,000,000 (Section 7.9(c))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Liens securing judgments or awards or surety _____________________ (Answer should be yes)
or appeal bonds issued in connection therewith
equal to or less than $20,000,000 (Section
7.9(d))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Is the aggregate amount of Indebtedness and _____________________ (Answer should be yes)
other obligations consisting of (i) the
deferred purchase price of newly acquired
property or incurred to finance the
acquisition of personal property of Borrower
used in the ordinary course of business of
such Borrower, (ii) Capitalized Lease
Obligations, and (iii) the performance of
tenders, statutory obligations, bids, leases
or other similar obligations (other than for
borrowed money) entered into in the ordinary
course of business or to secure obligations on
performance bonds which is secured by Liens
equal to or less than 5% of Consolidated
Assets as reflected on the most recent balance
sheet delivered by Borrower (Section 7.9(g)).
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
B. Sale and Leasebacks (Section 7.11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Aggregate obligations under all Sale and $____________________ (Line B1 not to exceed
Leasebacks arrangements (other than synthetic $30,000,000)
lease transactions excluded by Section 7.11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
C. Sale of Assets (Section 7.12)
- ------------------------------------------------------------------ --------------------- ---------------------------
21
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Net book value of assets (other than $____________________ (Line C1 not to exceed
inventory, reserves and electricity in the 10% of total consolidated
ordinary course of business) sold during this assets)
fiscal year
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
D. Permitted Investments (Section 7.14)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Aggregate amount of Investments in Marketing $____________________
Subsidiaries made after the Effective Date
(Section 7.14(o)(ii))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Investments consisting of Guaranties of $____________________
Indebtedness of Marketing Subsidiaries
existing on the Effective Date
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Intercompany loans permitted pursuant to $____________________ Line E3
Section 7.15(e)(iii) owing by Marketing
Subsidiaries (Line E3)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
4. Sum of Lines D1, D2 and D3 $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
5. Is Line D4 equal to or less than $10,000,000? _____________________ (Answer should be yes)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
6. Aggregate amount of Investments in Persons $____________________ (Line D6 not to exceed
engaged in the lines of business described in $20,000,000)
clause (xii) of Section 7.8 (Section 7.14(k))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
E. Permitted Indebtedness (Section 7.15)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Secured Indebtedness except as set forth on $____________________ (Line E1 not to exceed 5%
Schedule 7.15(b): (i) of BHP (ii) evidencing of Consolidated Assets)
the deferred purchase price of newly acquired property or
incurred to finance the acquisition of personal property of
Borrower or a Subsidiary used in the ordinary course of
business of the Borrower of a Subsidiary, (iii) constituting
Capitalized Lease Obligations or with respect to synthetic (or
similar type) lease transactions, or (iv) incurred in
connection with the performance of tenders, statutory
obligations, bids, leases or other similar obligations (other
than for borrowed money) entered into in the ordinary course
of business or to secure obligations on performance bonds
(Section 7.15(c))
- ------------------------------------------------------------------ --------------------- ---------------------------
22
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Intercompany loans owing by Borrower (Section $____________________ (Must be subordinated to
7.15(e)(i)(x)) Obligations)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Intercompany Indebtedness owing by Marketing $____________________ (Line E3 not to exceed
Subsidiaries to Subsidiaries (Section the difference between
7.15(e)(iii)) (i) $10,000,000 less (ii)
the sum of Lines E4 and
D1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
4. Indebtedness consisting of Guarantees $____________________ (Line E4 not to exceed
(including Long-Term Guaranties) of Marketing the difference between
Subsidiary Indebtedness (Section 7.15(f)) (i) $10,000,000 less (ii)
the sum of Lines E3 and
D1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
5. Indebtedness of Marketing Subsidiaries under $____________________ (Line E5 not to exceed
Marketing Subsidiary Excluded Credit Marketing Subsidiary
Facilities (Section 7.15(g)) Indebtedness Limit)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
F. Consolidated Net Worth (Section 7.16)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Consolidated Net Worth $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. 50% of aggregate Consolidated Net Income, if $____________________
positive, from and including April 1, 2002
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Does Line F1 exceed sum of (i) $425,000,000 _____________________ (Answer should be yes)
plus (ii) line F2
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
G. Recourse Leverage Ratio (Section 7.17)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. consolidated Indebtedness $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Non-Recourse Indebtedness $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Recourse Indebtedness (Line G1 minus Line G2) $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
4. Indebtedness of Marketing Subsidiaries under $____________________ (Not to exceed Marketing
Marketing Subsidiary Excluded Credit Subsidiary Indebtedness
Facilities (Line E5) Limit)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
5. Consolidated Net Worth $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
6. Capital (Line G3 minus Line G4 plus Line G5) $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
23
- ------------------------------------------------------------------ --------------------- ---------------------------
7. Recourse Leverage Ratio _________:1.00 (ratio of (A) difference
between (x) Line G3 minus
(y) Line G4 to (B) Line
G6 not to exceed 0.65 to
1.00)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
H. Fixed Charge Coverage Ratio (Section 7.18)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Consolidated Net Income for past four fiscal $____________________
quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Income taxes for past four fiscal quarters (to $____________________
the extent subtracted in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Consolidated Interest Expense for past four $____________________ Insert amount from Line
fiscal quarters (to the extent subtracted in H18
calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
4. Amortization expense for intangible assets $____________________
for past four fiscal quarters (to the extent
subtracted in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
5. Depreciation expense for past four fiscal
quarters (to the extent subtracted in
calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
6. Losses on sales of assets (excluding sales in $____________________
the ordinary course of business) and other
extraordinary losses for past four fiscal
quarters (to the extent subtracted in
calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
7. Interest income for past four fiscal $____________________
quarters arising from traditional
investment activities with banks,
investment banks and other financial
institutions or relating to
governmental or other marketable
securities (to the extent added in
calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
8. Gains on sales of assets (excluding sales in $____________________
the ordinary course of business) and other
extraordinary gains for past four fiscal
quarters (to the extent added in calculating
H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
9. Capital Expenditures for past four fiscal $____________________
quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
24
- ------------------------------------------------------------------ --------------------- ---------------------------
10. Without duplication, any payments made by a
Consolidated Subsidiary constituting a
repayment of principal Indebtedness (other
than (x) the Obligations and (y) repayments of
principal made with the proceeds of a $____________________
refinancing of such Indebtedness otherwise
permitted pursuant to this Agreement) or with
respect to a reserve, and
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
11. Without duplication, any other mandatory
payment made by a Consolidated Subsidiary in
such period not included as an expense or loss $____________________
in calculating Consolidated Net Income
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
12. Consolidated EBITDA (sum of Lines H1, H2, H3, $____________________
H4, H5 and H6 less sum of Lines H7, H8, H9,
H10 and H11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
13. Restricted Earnings for the past four fiscal $____________________
quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
14. Adjusted Consolidated EBITDA (Line H12 minus $____________________
Line H13)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
15. All interest charges (including capitalized $____________________
interest, imputed interest charges with
respect to Capitalized Lease Obligations and
all amortization of debt discount and expense
and other deferred financing charges) of the
Borrower and its Subsidiaries on a
consolidated basis for such period determined
in accordance with GAAP, other than interest
charges relating to Non-Recourse Indebtedness
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
16. All commitment or other fees payable in $____________________
respect of the issuance of standby letters of
credit or other credit facilities for the
account of the Borrower or its Subsidiaries
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
17. Net costs/expenses incurred by the Borrower $____________________
and its Subsidiaries under Derivative
Arrangements
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
18. Consolidated Interest Expense (Sum of Lines $____________________
H15, H16 and H17)
- ------------------------------------------------------------------ --------------------- ---------------------------
25
- ------------------------------------------------------------------ --------------------- ---------------------------
19. The aggregate amount of all mandatory $____________________
scheduled payments (whether designated as
payments or prepayments) and scheduled sinking
fund payments with respect to principal of any
Recourse Indebtedness of the Borrower or its
Subsidiaries (including payments in the nature
of principal under Capital Leases) for the
last 4 quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
20. Consolidated Fixed Charges (Sum of Lines H18 $____________________
and H19)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
21. Fixed Charge Coverage Ratio (ratio of Lines ________:1.00 (ratio must not be less
H14 to (ii) Line H20) than 1.50 to 1.00)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
I. Liquidity Covenant (Section 7.26)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
1. Unrestricted cash at Borrower $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
2. Unused availability of senior unsecured credit $____________________
facilities available to Borrower
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
3. Liquid Assets (Line I1 plus Line I2) $____________________ (amount must exceed
$30,000,000)
- ------------------------------------------------------------------ --------------------- ---------------------------
26
Exhibit 99.1
BLACK HILLS CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Black Hills Corporation (the
"Company") on Form 10-Q for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Daniel P. Landguth, Chairman of the Board and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13 (a) or 15 (d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Daniel P. Landguth
- ------------------------------------
Daniel P. Landguth
Chairman of the Board and
Chief Executive Officer
November 14, 2002
Exhibit 99.2
BLACK HILLS CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Black Hills Corporation (the
"Company") on Form 10-Q for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Mark T. Thies, Senior Vice President and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13 (a) or 15 (d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Mark T. Thies
- ---------------------------
Mark T. Thies
Senior Vice President and
Chief Financial Officer
November 14, 2002