<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended MARCH 31, 1996
Commission File Number 1-8754
SWIFT ENERGY COMPANY
(Exact Name of Registrant as Specified in its Charter)
TEXAS 74-2073055
(State of Incorporation) (I.R.S. Employer Identification No.)
16825 Northchase Dr., Suite 400
Houston, Texas 77060
(713) 874-2700
(Address and telephone number of principal executive offices)
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 Registrant's
classes of common stock, as of the latest practicable date.
<TABLE>
<S> <C>
Common Stock 12,619,175 Shares
($.01 Par Value) (Outstanding at April 30, 1996)
(Class of Stock)
</TABLE>
<PAGE> 2
SWIFT ENERGY COMPANY
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
ITEM 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
- March 31, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Income
- For the Three-month periods ended
March 31, 1996 and 1995 5
Condensed Consolidated Statements of
Stockholders' Equity
- March 31, 1996 and December 31, 1995 6
Condensed Consolidated Statements of Cash Flows
- For the Three-month periods ended
March 31, 1996 and 1995 7
Notes to Condensed Consolidated Financial
Statements 8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
PART II. OTHER INFORMATION
ITEMS 1-5. None 22
ITEM 6 - Exhibits and Reports on Form 8-K 22
SIGNATURES 23
</TABLE>
<PAGE> 3
SWIFT ENERGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------- -------------
(Unaudited) (Note 1)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 2,943,337 $ 7,574,512
Accounts receivable -
Oil and gas sales 4,897,740 14,765,336
Associated limited partnerships
and joint ventures 14,193,575 16,108,298
Joint interest owners 3,909,143 4,044,817
Other current assets 857,848 887,491
------------- -------------
Total Current Assets 26,801,643 43,380,454
------------- -------------
Property and Equipment:
Oil and gas, using full-cost accounting
Proved properties being amortized 141,164,035 132,673,707
Unproved properties not being amortized 22,878,572 20,652,151
------------- -------------
164,042,607 153,325,858
Furniture, fixtures and other equipment 5,131,549 4,367,719
------------- -------------
169,174,156 157,693,577
Less-Accumulated depreciation, depletion,
and amortization (33,357,190) (30,169,303)
------------- -------------
135,816,966 127,524,274
------------- -------------
Other Assets:
Receivables from associated limited partnerships,
net of current portion 2,670,841 2,332,355
Limited partnership formation and
marketing costs 1,351,865 858,559
Deferred charges 1,127,308 1,157,065
------------- -------------
5,150,014 4,347,979
------------- -------------
$ 167,768,623 $ 175,252,707
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
SWIFT ENERGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
-------------- ---------------
(Unaudited) (Note 1)
<S> <C> <C>
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities:
Short-term bank borrowings $ 12,000,000 $ ---
Accounts payable and accrued liabilities 10,084,347 23,075,982
Payable to associated limited partnerships 745,743 16,983
Undistributed oil and gas revenues 5,287,223 17,040,304
-------------- ---------------
Total Current Liabilities 28,117,313 40,133,269
-------------- ---------------
Long-Term Debt 28,750,000 28,750,000
Deferred Revenues 5,629,515 6,063,467
Deferred Income Taxes 8,246,909 6,960,006
Commitments and Contingencies
Stockholders' Equity:
Preferred stock $.01 par value, 5,000,000
shares authorized, none outstanding --- ---
Common stock, $.01 par value, 35,000,000
shares authorized, 12,575,783 and 12,509,700
shares issued and outstanding, respectively 125,758 125,097
Additional paid-in capital 71,729,858 71,133,979
Retained earnings 25,169,270 22,086,889
-------------- ---------------
97,024,886 93,345,965
-------------- ---------------
$ 167,768,623 $ 175,252,707
-------------- ---------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
SWIFT ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------------
1996 1995
------------- ------------
<S> <C> <C>
Revenues:
Oil and gas sales $ 9,691,962 $ 4,876,041
Fees from limited partnerships and
joint ventures 69,923 113,430
Supervision fees 1,031,205 904,539
Interest income 8,436 7,484
Other, net 387,321 357,094
------------- ------------
11,188,847 6,258,588
------------- ------------
Costs and Expenses:
General and administrative,
net of reimbursement 1,437,508 1,306,765
Depreciation, depletion, and amortization 3,269,535 2,168,229
Oil and gas production 1,848,163 1,629,379
Interest expense, net 72,118 477,781
------------- ------------
6,627,324 5,582,154
------------- ------------
Income before Income Taxes 4,561,523 676,434
Provision for Income Taxes 1,479,142 151,834
------------- ------------
Net Income $ 3,082,381 $ 524,600
============= ============
Per share amounts -
Primary: $ 0.25 $ 0.08
============= ============
Fully diluted: $ 0.22 $ 0.08
============= ============
Weighted Average Shares Outstanding 12,540,381 6,689,350
============= ============
</TABLE>
5
<PAGE> 6
SWIFT ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Stock (1) Capital Earnings Total
-----------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $ 66,851 $24,885,903 $17,174,377 $42,127,131
Stock issued for benefit plans (31,113 shares) 311 283,463 --- 283,774
Stock options exercised (5,761 shares) 58 33,736 --- 33,794
Employee stock purchase plan (37,689 shares) 377 289,465 --- 289,842
Stock issued in public offering -
(5,750,000 shares) 57,500 45,641,412 --- 45,698,912
Net Income --- --- 4,912,512 4,912,512
-----------------------------------------------------
Balance, December 31, 1995 $125,097 $71,133,979 $22,086,889 $93,345,965
Stock issued for benefit plans (16,246 shares)(2) 163 193,861 --- 194,024
Stock options exercised (49,837 shares)(2) 498 402,018 --- 402,516
Net income(2) --- --- 3,082,381 3,082,381
-----------------------------------------------------
Balance, March 31, 1996(2) $125,758 $71,729,858 $25,169,270 $97,024,886
=====================================================
</TABLE>
(1) $.01 Par Value
(2) Unaudited
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
SWIFT ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months ended March 31,
--------------------------------
1996 1995
------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 3,082,381 $ 524,600
Adjustments to reconcile net income to net cash provided
by operating activities -
Depreciation, depletion, and amortization 3,269,535 2,168,229
Deferred income taxes 1,240,735 126,493
Deferred revenue amortization related to production
payment (433,952) (464,731)
Other 29,757 27,723
Change in assets and liabilities -
(Increase) decrease in accounts receivable (745,474) 27,181
Increase (decrease) in accounts payable and accrued
liabilities, excluding income taxes payable (462,779) 522,280
Increase in income taxes payable 218,953 32,322
------------- -----------
Net Cash Provided by Operating Activities 6,199,156 2,964,097
------------- -----------
Cash Flows From Investing Activities:
Additions to property and equipment (11,480,579) (5,744,576)
Net cash received (distributed) as operator
of oil and gas properties (13,142,919) (4,219,442)
Property acquisition costs (incurred on behalf of)
reimbursed by partnerships and joint ventures 1,914,723 4,245,278
Limited partnership formation and marketing costs (493,306) (170,549)
Prepaid drilling costs (143,142) (60,245)
Other (81,648) (16,068)
------------- -----------
Net Cash Used in Investing Activities (23,426,871) (5,965,602)
------------- -----------
Cash Flows From Financing Activities:
Net proceeds from short-term bank borrowings 12,000,000 3,321,000
Net proceeds from issuances of common stock 596,540 226,769
------------- -----------
Net Cash Provided by Financing Activities 12,596,540 3,547,769
------------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents $ (4,631,175) $ 546,264
Cash and Cash Equivalents at Beginning of Period 7,574,512 985,498
------------- -----------
Cash and Cash Equivalents at End of Period $ 2,943,337 $ 1,531,762
============= ===========
Supplemental disclosures of cash flow information:
- --------------------------------------------------
Cash paid during period for interest, net of amounts
capitalized $ 509,549 $ ---
Cash paid during period for income taxes $ 19,454 $ 3,019
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE> 8
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
(1) General Information -
The condensed consolidated financial statements included
herein have been prepared by Swift Energy Company (the "Company") and
are unaudited, except for the balance sheet at December 31, 1995 which
has been prepared from the audited financial statements at that date.
The financial statements reflect necessary adjustments, all of which
were of a recurring nature, and are in the opinion of management,
necessary for a fair presentation. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
omitted pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). The Company believes that the disclosures
presented are adequate to allow the information presented not to be
misleading. The condensed consolidated financial statements should be
read in conjunction with the audited financial statements and the
notes thereto included in the latest Form 10-K and Annual Report.
The statements contained in this Quarterly Report on Form 10-Q
("Quarterly Report") that are not historical facts, including
statements found in Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations, are forward-looking
statements as that term is defined in Section 21E of the Securities
and Exchange Act of 1934, as amended, that involve a number of risks
and uncertainties. The actual results of the future events described
in such forward-looking statements in this Quarterly Report could
differ materially. Among the factors that could cause actual results
to differ materially are: general economic conditions, competition and
government regulations, and fluctuations in oil and natural gas
prices, as well as the risks and uncertainties set forth from time to
time in the Company's other public reports, filings, and public
statements. Also, because of the volatility in oil and gas prices and
other factors, interim results are not necessarily indicative of those
for a full year.
Certain reclassifications have been made to the prior year
balances to conform to current year presentation.
(2) Summary of Significant Accounting Policies -
Oil and Gas Properties
For financial reporting purposes, the Company follows the
"full-cost" method of accounting for oil and gas property and
equipment costs. Under this method of accounting, all productive and
nonproductive costs incurred in the acquisition, exploration, and
development of oil and gas reserves are capitalized. Such costs
include lease acquisitions, geological and geophysical services,
drilling, completion, equipment, and certain general and
8
<PAGE> 9
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
administrative costs directly associated with acquisition,
exploration, and development activities. General and administrative
costs related to production and general overhead are expensed as
incurred. No gains or losses are recognized upon the sale or
disposition of oil and gas properties, except in transactions that
involve a significant amount of reserves. The proceeds from the sale
of oil and gas properties are generally treated as a reduction of oil
and gas property costs. Fees from associated oil and gas exploration
and development limited partnerships are credited to oil and gas
property costs to the extent they do not represent reimbursement of
general and administrative expenses currently charged to expense.
Future development, site restoration, and dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and
are amortized to expense as the Company's capitalized oil and gas
property costs are amortized. The Company's properties are all
onshore and historically the salvage value of the tangible equipment
offsets the Company's site restoration and dismantlement and
abandonment costs. The Company expects this relationship will
continue.
The Company computes the provision for depreciation,
depletion, and amortization of oil and gas properties on the
unit-of-production method. Under this method, the Company computes
the provision by multiplying the total unamortized cost of oil and gas
properties - including future development, site restoration, and
dismantlement and abandonment costs but excluding costs of unproved
properties - by an overall rate determined by dividing the physical
units of oil and gas produced during the period by the total estimated
units of proved oil and gas reserves. The cost of unproved properties
not being amortized is assessed quarterly to determine whether the
value has been impaired below the capitalized cost. Any impairment
assessed is added to the cost of proved properties being amortized.
At the end of each quarterly reporting period, the unamortized
cost of oil and gas properties, net of related deferred income taxes,
is limited to the sum of the estimated future net revenues from proved
properties using current prices, discounted at 10%, and the lower
of cost or fair value of unproved properties, adjusted for related
income tax effects.
9
<PAGE> 10
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
Deferred Charges
Legal and accounting fees, underwriting fees, printing costs,
and other direct expenses associated with the issuance of the
Company's Convertible Subordinated Debentures in June 1993 have been
capitalized and are being amortized over the life of the Debentures,
which mature on June 30, 2003. The balance at March 31, 1996, is net
of accumulated amortization of $297,692.
Hedging Activities
The Company's revenues are primarily the result of sales of
its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results. To mitigate
some of this risk, the Company does engage periodically in certain
limited hedging activities, but only to the extent of buying
protection price floors for portions of its and the limited
partnerships' oil and gas production. Costs and/or benefits derived
from these price floors are accordingly recorded as a reduction or
increase in oil and gas sales revenue and was not significant for any
period presented.
Deferred Revenues
In May 1992, the Company purchased interests in certain wells
using funds provided by the Company's sale of a volumetric production
payment in these properties. Under the terms of the production
payment agreement, the Company continues to own the properties
purchased but is required to deliver a minimum quantity of
hydrocarbons produced from the properties (meeting certain quality and
heating equivalent requirements) over a specified period. Since
entering into this agreement, the Company has met all scheduled
deliveries. Net proceeds from the sale of the production payment were
recorded as deferred revenues. Deliveries under the production
payment agreement are recorded as oil and gas sales revenues and a
corresponding reduction of deferred revenues.
Limited Partnerships and Joint Ventures
Between 1991 and 1995, the Company formed limited partnerships
and joint ventures for the purpose of acquiring interests in producing
oil and gas properties and, since 1993, partnerships engaged in
drilling for oil and gas reserves. The Company serves as managing
general partner or manager of these entities. The Company's
investments in associated oil and gas partnerships and its joint
ventures are accounted for using the proportionate consolidation
method, whereby the Company's proportionate share of each entity's
assets, liabilities, revenues and expenses is included in the
appropriate classifications in the consolidated financial
statements. Because the Company
10
<PAGE> 11
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
serves as the general partners of these entities, under state
partnership law it is contingently liable for the liabilities of these
partnerships, which liabilities are not material for any of the
periods presented in relation to the partnerships' respective assets.
These partnerships' liabilities generally consist of third party
borrowings from time to time to fund capital expenditures for
development of oil and gas properties, and will be repaid from oil and
gas sales proceeds of the partnerships in future periods.
Under the Swift Depositary Interests limited partnership
offering ("SDI Offering") which commenced in March 1991 and concluded
after the formation of its last two partnerships on December 14, 1995,
the Company received a reimbursement of certain costs and a fee, both
payable out of revenues. The Company bore all front-end costs of the
offering and partnership formations for which it received an interest
in the partnerships.
The Company acquires producing oil and gas properties and
transfers those properties to the entities at cost, including
interest, other carrying costs, closing costs, and screening and
evaluation costs of properties not acquired, or in certain instances
at fair market value based upon the opinion of an independent expert.
These costs are reduced by net operating revenues from the effective
date of the acquisition to the date of transfer to the entities.
Commencing September 15, 1993, the Company began offering, on
a private placement basis, general and limited partnership interests
in limited partnerships to be formed to drill for oil and gas. As
managing general partner, the Company pays for all front-end costs
incurred in connection with this offering, for which the Company
receives an interest in the partnerships. Through March 31, 1996,
approximately $19,900,000 been raised in five partnerships in which
the proceeds are to be invested in development drilling and
exploratory drilling. The first five partnerships closed December 8,
1993, July 18, 1994, March 15, 1995, August 1, 1995, and December 8,
1995.
Costs of syndication, registration, and qualification of these
limited partnerships incurred by the Company have been deferred.
Under the current private limited partnership offerings, selling and
formation costs borne by the Company serve as the Company's general
partner contribution to such partnerships. Upon the Company's
decision to conclude the SDI offering at the end of 1995, the
remaining limited partnership formation and marketing costs related to
the SDI offering (approximately $1,750,000) were accordingly
transferred to the oil and gas properties account.
11
<PAGE> 12
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
Income Taxes
The Company accounts for Income taxes using Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes." SFAS No. 109 utilizes the liability method and deferred taxes
are determined based on the estimated future tax effects of
differences between the financial statement and tax bases of assets
and liabilities given the provisions of the enacted tax laws.
Income taxes for the interim periods have been provided using
the estimated annualized effective tax rate.
Income Per Share
Primary income per share has been computed using the weighted
average number of common shares outstanding during the respective
periods. Stock options and warrants outstanding do not have a
dilutive effect on primary income per share. The Company's
Convertible Subordinated Debentures are not common stock equivalents
for the purpose of computing primary income per share.
The calculation of fully diluted income per share assumes
conversion of the Company's Convertible Subordinated Debentures as of
the beginning of the period and the elimination of the related
after-tax interest expense and assumes, as of the beginning of the
period, exercise (using the treasury stock method) of stock options
and warrants. The conversion price of the Convertible Subordinated
Debentures was revised to reflect the 10% stock dividend declared
September 6, 1994. The original conversion price was $13.50 per
common share and the revised conversion price per common share is
$12.27. The weighted average number of shares used in the computation
of fully diluted per share amounts was 15,133,648 for the three-month
period ended March 31, 1996. During 1995 such amounts were
antidilutive.
(3) Short-Term Bank Borrowings
The Company had available through a two bank-group, a
revolving line of credit of $35,000,000 at both March 31, 1996, and at
December 31, 1995, bearing interest at the banks' base rate plus 0.5%
(8.75% at March 31, 1996, and 9% at December 31, 1995), secured by
the Company's interests in certain oil and gas properties and general
partner interests. This facility also allows, at the Company's
option, draws which bear interest for specific periods at the London
Interbank Offered Rate ("LIBOR") plus 2.25%. There was no outstanding
balance under this line of credit at December 31, 1995. At March 31,
1996, $2,000,000 of the $7,000,000 outstanding was at the LIBOR plus
2.25% rate of 7.63%. The outstanding amount under this facility at
March 31, 1996 ($7,000,000) was borrowed primarily to fund the
12
<PAGE> 13
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
Company's working capital and capital expenditures needs. Effective
April 30, 1996, this credit agreement was restated. The facility was
increased to $100,000,000 and is now unsecured. The available
borrowing base currently will not change and will be redetermined
periodically. Depending on the level of outstanding debt, the
interest rate currently will be either the bank's base rate or the
bank's base rate plus 0.25%. The LIBOR option will now vary from plus
1% to plus 1.5%. The restated revolving line of credit extends
through September 30, 1999.
The terms of the revolving line of credit include, among other
restrictions, a limitation on the level of cash dividends (not to
exceed $2,000,000 in any fiscal year), requirements as to maintenance
of certain minimum financial ratios (principally pertaining to working
capital, debt, and equity ratios) and limitations on incurring other
debt. Since inception, no cash dividends have been declared on the
Company's common stock. The Company presently intends to continue a
policy of using retained earnings for expansion of its business. As
of March 31, 1996 and December 31, 1995, the Company was in compliance
with the provisions of these agreements.
The Company's other credit facility is an amended and restated
revolving line of credit with the lead bank of the two bank-group for
$5,000,000 bearing interest at the bank's base rate (8.25% at March
31, 1996, and 8.5% at December 31, 1995), secured by certain Company
receivables. At March 31, 1996, $5,000,000 was outstanding under
this facility. There was no outstanding amount on this facility at
December 31, 1995. This facility, effective April 30, 1996, was
amended to $7,000,000, with interest at the bank's base rate plus
0.25%. This restated credit facility extends through September 30,
1999.
In addition to interest on these credit facilities, the
Company pays a commitment fee to compensate the banks for making funds
available. The fee on the revolving line of credit is calculated on
the average daily remainder, if any, of the commitment amount less the
aggregate principal amounts outstanding plus the amount of all
outstanding letters of credit during the period. The aggregate
amounts of commitment fees paid by the Company were $53,000 for the
first three months of 1996 and $154,000 for the twelve-month period in
1995.
13
<PAGE> 14
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
(4) Long-Term Debt
The Company's long-term debt consists of $28,750,000 of 6.5%
Convertible Subordinated Debentures ("Debentures"). The Debentures
were issued on June 30, 1993, and will mature on June 30, 2003. The
Debentures are convertible into common stock of the Company by the
holders at any time prior to maturity at a conversion price of $12.27
per share, subject to adjustment upon the occurrence of certain
events. The conversion price reflects an adjustment of the original
conversion price of $13.50 per share to reflect the 10% stock dividend
declared September 6, 1994 and distributed September 29, 1994.
Interest on the Debentures is payable semi- annually on June 30 and
December 31, commencing with the payment made at December 31, 1993.
After June 30, 1997 (or in certain circumstances after June 30,
1996), the Debentures are redeemable for cash at the option of the
Company, with certain restrictions, at 104.55% of principal, declining
to 100.65% in 2002. Upon certain changes in control of the Company,
if the price of the Company's common stock is not above certain levels
each holder of Debentures will have the right to require the Company
to repurchase the Debentures at the principal amount thereof, together
with accrued and unpaid interest to the date of repurchase but after
the repayment of any Senior Indebtedness, as defined.
Interest expense on the Debentures, including amortization of
debt issuance costs, totaled $496,945 for the three-month period
ending March 31, 1996, and $1,981,639 for the twelve-month period
ending December 31, 1995.
(5) Stockholders' Equity
During the third quarter of 1995, the Company closed the sale
to the public of 5,750,000 shares of common stock at a price of $8.50
per share. Net proceeds from this offering were $45,698,912 and were
used to repay outstanding indebtedness, with the remaining proceeds
being used to finance the Company's exploration and development
activities, and to acquire producing oil and gas properties,
including limited partnership interests.
(6) Foreign Activities
Russia
On September 3, 1993, the Company signed a Participation
Agreement with Senega, a Russian Federation joint stock company (in
which the Company has an indirect interest of less than 1%), to assist
in the development and production of reserves from two fields in
Western Siberia. Under the terms of the Participation Agreement, the
Company will receive a minimum 5% net profits interest from the sale
of hydrocarbon products from the fields for providing
managerial, technical and financial support to Senega.
14
<PAGE> 15
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
Additionally, the Company purchased a 1% net profits interest from
Senega for $300,000. In May 1995, the Company executed a Management
Agreement with Senega. In return for undertaking to obtain financing
for development of these fields, Swift is entitled to a 49% interest
in production income derived by Senega from this project after
repayment of costs. At March 31, 1996, the Company's investment in
Russia was approximately $7,485,000 and is included in the unproved
properties portion of oil and gas properties.
Venezuela
The Company formed a wholly-owned subsidiary, Swift Energy de
Venezuela, C.A., for the purpose of submitting a bid on August 5,
1993, under the Venezuelan Marginal Oil Field Reactivation Program on
the Quiriquire Unit located in Northeastern Venezuela. Swift
(together with a minority interest holder) was one of six bidders on
the Quiriquire Unit. The Company did not win the bid for the
Quiriquire Unit; however, other fields and opportunities are
continuing to be evaluated in Venezuela. At March 31, 1996, the
Company's investment in Venezuela was approximately $1,190,000 and is
included in the unproved properties portion of oil and gas properties
net of impairments of $45,668.
New Zealand
On October 12, 1995, the Company was approved for the grant of
Petroleum Exploration Permit by the New Zealand Minister of Energy and
the acceptance of which was approved by the Company's board of
directors on November 7, 1995. This permit (PEP 38717) covers
approximately 65,000 acres in the Onshore Taranaki Basin region. This
permit primarily requires the Company to : (a) post a $175,000 bond
(which was done by the Company on December 22, 1995) before January
11, 1996; (b) before December 31, 1997, analyze and interpret
approximately 460 kilometers of existing seismic data and acquire
approximately 100 kilometers of new seismic data; (c) commence
drilling one well prior to July 31, 1998; (d) review results prior to
July 31, 1999, and (e) prior to July 31, 2000, drill a development
well or acquire additional seismic data. At March 31, 1996, the
Company's investment in New Zealand was approximately $270,000 and is
included in the unproved properties portion of oil and gas properties.
15
<PAGE> 16
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
the Company's Condensed Consolidated Financial Statements and Notes
thereto.
General
The Company has historically financed most of its growth with
capital raised through limited partnership financing, having raised
approximately $463 million through limited partnership financing from
1979 through 1995. Beginning in 1985, the Company increasingly
emphasized this financing vehicle thereby enabling the Company to
accelerate its growth and purchase larger producing properties.
Commencing in 1991, the Company began re-emphasizing the addition of
reserves through increased drilling on internally generated
exploration and development prospects.
The Company's revenue is primarily comprised of oil and gas
sales attributable to properties in which the Company owns a direct or
indirect interest. In May 1992, the Company purchased interests in
certain wells from the Manville Corporation for $13.8 million using
funds provided by the Company's sale of a volumetric production
payment in these properties to a subsidiary of Enron Corp. Net
proceeds from the sale of the production were recorded as deferred
revenues. Deliveries under the volumetric production payment are
recorded as oil and gas sales revenues which are offset by a
corresponding reduction of deferred revenues. Under this arrangement,
the Company is required to deliver a fixed quantity of hydrocarbons
produced from the properties over specified periods through October
2000. Volumes remaining to be delivered under the volumetric
production payment (approximately 3.8 Bcf) are not included in the
Company's proved reserves. Under the volumetric production payment,
hydrocarbons produced in excess of the amount required to be delivered
are sold by the Company for its own account.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has relied on limited partnership
capital as its principal financing vehicle to fund its acquisitions of
producing properties. Since 1991, however, the Company's strategy has
shifted toward increased reliance on exploration and development
activities, and it has significantly expanded reserves added through
these efforts. As a result, the Company has reduced its reliance on
cash flows generated from, and capital raised through, limited
partnerships. Supplemental cash and working capital are provided
through internally generated cash flows and debt and equity financing.
16
<PAGE> 17
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net Cash From Operations
For the three-month period ended March 31, 1996, cash flows
from operating activities increased significantly (109%) to
$6,199,156 as compared to $2,964,097 during the first three months of
1995. The 1996 increase of $3,235,059 was primarily due to an
increase in cash flows from oil and gas sales, which increased
$4,846,700 (110%), exclusive of the non-cash amortization of deferred
revenues associated with the Company's volumetric production payment.
1995 Equity Offering
During the third quarter of 1995, the Company closed the sale
to the public of 5,750,000 shares of common stock at a price of $8.50
per share. Net proceeds from this stock sale were $45,698,912.
Consequently, the Company's stockholders' equity at March 31, 1996,
has grown to over $97 million. Net proceeds from the offering were
used to repay outstanding indebtedness, and the remainder of the
proceeds will be used or have been used to finance the Company's
exploration and development activities and to acquire producing oil
and gas properties, including limited partnership interests.
Other Financing Activities
On June 30, 1993, the Company issued $28,750,000 of
Convertible Subordinated Debentures (Debentures) due June 30, 2003, in
a public offering. Proceeds of the offering were used primarily to
acquire producing oil and gas properties and to finance the Company's
expanding exploration and development programs. The principal terms
of these Debentures are described in Note 4 to the Company's condensed
consolidated financial statements included herein.
Between 1991 and 1995, the Company offered interests in oil
and gas production partnerships under its Swift Depositary Interests
(SDI), offering and since late 1993 has offered private partnerships
formed to drill for oil and gas. The SDI program concluded at the end
of 1995. Four SDI partnerships were formed during 1995, with total
subscriptions of approximately $12,400,000. During 1995, the Company
closed three drilling partnerships with a total of $15,900,000 of
subscriptions. The Company anticipates that it will continue to offer
the drilling partnerships for the foreseeable future, with the next
partnership planned to be formed in the second quarter of 1996.
At March 31, 1996, limited partnership formation and marketing
costs (which under the current drilling partnership offerings are
borne by the Company as part of the Company's general partner
contribution) amounted to $1,351,865, an increase of $493,306, when
compared with the December 31, 1995, balance. Upon the Company's
decision to
17
<PAGE> 18
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
conclude the SDI offering, the remaining limited partnership formation
and marketing costs related to the SDI offering (approximately
$1,750,000) were accordingly transferred to the oil and gas properties
account in December 1995.
Credit Facilities
The Company has established credit facilities which formerly
were used principally to finance the Company's purchase of producing
oil and gas properties on an interim basis pending transfer of the
properties to newly formed partnerships and joint ventures, and to
provide working capital. More recently, the Company's credit
facilities have been used to fund a portion of the Company's
exploration and development activities. The principal terms and
restrictions of these credit facilities are described in Note 3 to the
Company's condensed consolidated financial statements included herein
in December 1995.
At March 31, 1996, the Company had $12,000,000 outstanding
under these borrowing arrangements used, along with internally
generated cash flows, principally to fund the Company's capital
expenditures in the first quarter of 1996, and to a lesser extent, to
provide working capital. At December 31, 1995, the Company had no
outstanding balances under these borrowing arrangements, since these
borrowings were repaid with proceeds from the Company's 1995 stock
offering.
Working Capital
The Company's working capital has decreased over the last
three months, from positive working capital of $3,247,185 at December
31, 1995, to a working capital deficit of $1,315,670 at March 31,
1996. This decrease is primarily the result of the Company's capital
expenditures as described below.
Due to the nature of the Company's business highlighted above,
the individual components of working capital fluctuate considerably
from period to period. The Company incurs significant working capital
requirements in connection with its role as operator of approximately
770 wells, its accelerated drilling program, and the management of
affiliated partnerships. In this capacity, the Company is responsible
for certain day-to-day cash management, including the collection and
disbursement of oil and gas revenues and related expenses.
18
<PAGE> 19
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Expenditures
Additions to property, plant, and equipment during the first three
months of 1996 were $11,480,579. These capital expenditures include:
(a) $7,500,000 of drilling costs, both exploratory and developmental;
(b) $2,400,000 of prospect costs (principally prospect leasehold,
seismic and geological costs of unproved prospects for the Company's
account); (c) $800,000 invested in foreign business opportunities in
Russia (approximately $670,000), in Venezuela (approximately $70,000),
and in New Zealand (approximately $70,000), as described in Note 6 to
the Company's condensed consolidated financial statements included
herein and (d)$800,000 spent for furniture and fixtures. In the
remaining nine months of 1996, the Company expects capital expenditures
to be approximately $51,000,000, including investments in all areas in
which investments were made during the first three months of the year
as described above, with a particular focus on exploration and
development drilling. The Company currently plans to participate in
the drilling of 110 gross wells this year, compared to 76 wells in
1995. Through March 31, 1996, the Company had participated in drilling
2 exploratory and 28 development wells with 2 exploratory
successes and 26 development successes.
The Company believes that 1996's anticipated internally
generated cash flows (expected to increase as the Company's production
base increases as a result of its accelerated drilling program) and
its existing credit facilities, will be sufficient to finance the
costs associated with its currently budgeted capital expenditures at
least through 1996. Further liquidity needs may also be met by
additional availability under its credit facilities based upon the
value of the Company's proved reserves, as management continually
evaluates future use of debt and/or equity to finance its capital
needs.
RESULTS OF OPERATIONS-
Three Months Ended March 31, 1996 and 1995
Net income of $3,082,381 and earnings per share of $0.25 for
the first quarter of 1996 were 488% and 213% higher, respectively than
net income of $524,600 and earnings per share of $0.08 in the same
period for 1995. This increase in net income primarily reflected the
effect of a 99% increase in oil and gas sales revenues as a result of
an 86% increase in natural gas production, an 18% increase in crude
oil production, and product price improvements. The lower percentage
increase in earnings per share reflects an 87% increase in weighted
average shares outstanding for the period, as a result of the sale of
5,750,000 shares of common stock in the third quarter of 1995.
19
<PAGE> 20
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Revenues
Oil and Gas Sales. Oil and gas sales increased 99% to
$9,691,962 in the first quarter of 1996, compared to $4,876,041 for
the comparative period in 1995. The 86% increase in natural gas
production and the 18% increase in oil production were primarily the
result of production from exploratory and developmental wells drilled
in late 1995 and in the first three months of 1996, most notably from
the Company's two primary development areas, the AWP Olmos and
Giddings fields. The Company's net sales volume (including the
volumetric production payment) in the first three months of 1996
increased by 64% or 1,616,915 Mcfe (thousand cubic feet equivalent)
over volumes in the comparable 1995 period. Oil and gas sales were
also aided by a 33% and 14% increase, respectively in gas prices
received and in oil prices received between the two periods.
Oil and gas sales comprised 87% and 78%, respectively of total
revenues for the first three months of 1996 and 1995. The majority of
these revenues were derived from the sale of the Company's gas
production. The Company expects oil and gas sales to continue to
increase as a direct consequence of the addition of oil and gas
reserves through the Company's active drilling programs.
The following table provides additional information regarding
the Company's oil and gas sales.
<TABLE>
<CAPTION>
NET SALES VOLUME AVERAGE SALES PRICE
------------------- -----------------------
Oil(Bbl) Gas(Mcf) Oil(Bbl) Gas(Mcf)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1995:
----
3 MONTHS
ENDED 3/31/95 134,626 1,702,658 $15.61 $1.63
1996:
----
3 MONTHS
ENDED 3/31/96 159,155 3,172,399 $17.78 $2.16
</TABLE>
Supervision Fees. Supervision fees increased 14%, having
grown from $904,539 in the first quarter of 1995 to $1,031,205 in the
first quarter of 1996. This increase is due to the change in
properties operated by the Company, the annual escalation in well
overhead rates, and the increase in drilling activity by the Company,
which in turn increases the drilling well overhead portion of such
fees.
20
<PAGE> 21
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Expenses
General and administrative expenses for the first
three months of 1996 increased approximately $130,000 or 10% when
compared to the same period in 1995. However, the Company's general
and administrative expenses per Mcfe produced decreased from $0.52 per
Mcfe produced for the first quarter of 1995 to $0.35 per Mcfe produced
for the same period in 1996.
Depreciation, depletion, and amortization ("DD&A") increased
51% (approximately $1,100,000), primarily due to the increase in the
Company's producing properties and the related sale of increased
quantities of oil and gas therefrom. The Company's DD&A rate per Mcfe
of production has, however, decreased from $0.86 per Mcfe produced in
the 1995 period to $0.79 per Mcfe produced in the 1996 period,
reflecting variations in the per unit cost of property additions and
changes in the mix of reserves.
The 13% increase in oil and gas production costs
(approximately $220,000) in the first three months of 1996 when
compared to the first quarter of 1995 also relates to the growth in
the Company's production volumes. The Company's production costs per
Mcfe of production also decreased from $0.65 per Mcfe produced in the
1995 period to $0.45 per Mcfe produced in the 1996 period.
Interest expense in the first quarter of 1996 on the
Debentures, including amortization of debt issuance costs, totaled
$496,945 ($494,910 in the 1995 period), while interest expense on the
credit facilities, including commitment fees, totaled $203,962
($653,701 in the 1995 period) for a total of $700,907 (of which
$628,709 was capitalized). The first quarter of 1995 total was
$1,148,611 (of which $670,830 was capitalized). The Company
capitalizes that portion of interest related to its exploration,
partnership, and foreign business development activities. The
decrease in interest expense in 1996 is attributable to the decrease
in the average balance under the Company's credit lines necessary to
finance the Company's capital expenditures as discussed above. The
Company expects interest expense to increase for the remainder of the
year as a larger portion of the Company's capital expenditures will be
financed through the use of its credit lines.
21
<PAGE> 22
SWIFT ENERGY COMPANY
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings - N/A
Item 2. Changes in Securities - N/A
Item 3. Defaults Upon Senior Securities - N/A
Item 4. Submission of Matters to a Vote of Security
Holders - N/A
Item 5. Other Information - N/A
Item 6. Exhibits & Reports on Form 8K
(a) Exhibits
10.1 Credit Agreement dated April 30, 1996, among Swift Energy
Company, Bank One, Texas, National Association and Bank of
Montreal.
10.2 Credit Agreement dated April 30, 1996, among Swift Energy
Company, Bank One, Texas, National Association
(b) Reports on Form 8K - None
22
<PAGE> 23
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.
SWIFT ENERGY COMPANY
(Registrant)
Date: May 13, 1996 By:(Original Signed By)
------------ ------------------
John R. Alden
Sr. Vice President, Secretary/
Principal Financial Officer
Date: May 13, 1996 By:(Original Signed By)
-------------------- ------------------
Alton D. Heckaman, Jr.
Vice President,
Controller and Principal
Accounting Officer
23
<PAGE> 24
EXHIBITS
10.1 Credit Agreement dated April 30, 1996, among Swift Energy Company,
Bank One, Texas, National Association and Bank of Montreal.
10.2 Credit Agreement dated April 30, 1996, among Swift Energy Company,
Bank One, Texas, National Association.
<PAGE> 1
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
AMONG
SWIFT ENERGY COMPANY,
AS BORROWER,
BANK ONE, TEXAS, NATIONAL ASSOCIATION,
AS AGENT,
AND
THE LENDERS SIGNATORY HERETO
-----------------------------------------
April 30, 1996
-----------------------------------------
Revolving Line of Credit
of up to $100,000,000
with Letter of Credit Subfacility
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS ........................................... 1
1.1 Terms Defined Above ................................... 1
1.2 Additional Defined Terms .............................. 1
1.3 Undefined Financial Accounting Terms .................. 15
1.4 References ............................................ 16
1.5 Articles and Sections ................................. 16
1.6 Number and Gender ..................................... 16
1.7 Incorporation of Exhibits ............................. 16
ARTICLE 2 TERMS OF THE FACILITY ................................. 16
2.1 Revolving Line of Credit .............................. 16
2.2 Letter of Credit Facility ............................. 17
2.3 Limitations on Interest Periods ....................... 19
2.4 Limitation on Types of Loans .......................... 19
2.5 Use of Loan Proceeds and Letters of Credit ............ 19
2.6 Interest .............................................. 19
2.7 Repayment of Loans and Interest ....................... 20
2.8 General Terms ......................................... 20
2.9 Time, Place, and Method of Payments ................... 21
2.10 Pro Rata Treatment; Adjustments ....................... 21
2.11 Borrowing Base Determinations ......................... 22
2.12 Mandatory Prepayments ................................. 23
2.13 Voluntary Prepayments and Conversions of Loans ........ 23
2.14 Commitment Fee ........................................ 23
2.15 Letter of Credit Fee .................................. 24
2.16 Loans to Satisfy Obligations of Borrower .............. 24
2.17 Security Interest in Accounts; Right of Offset ........ 24
2.18 General Provisions Relating to Interest ............... 24
2.19 Obligations Absolute .................................. 25
2.20 Yield Protection ...................................... 26
2.21 Illegality ............................................ 28
2.22 Taxes ................................................. 28
2.23 Replacement Lenders ................................... 29
2.24 Regulatory Change ..................................... 30
<PAGE> 3
ARTICLE 3 CONDITIONS .................................................. 30
3.1 Conditions Precedent to Initial Loan and Letter of Credit ... 30
3.2 Conditions Precedent to Each Loan ........................... 32
3.3 Conditions Precedent to Issuance of Letters of Credit ....... 33
ARTICLE 4 REPRESENTATIONS AND WARRANTIES .............................. 33
4.1 Existence of Borrower and Subsidiaries ...................... 33
4.2 Existence of Partnerships ................................... 33
4.3 Due Authorization ........................................... 33
4.4 Valid and Binding Obligations of Borrower ................... 34
4.5 Scope and Accuracy of Financial Statements .................. 34
4.6 Liabilities, Litigation and Restrictions .................... 34
4.7 Title to Properties ......................................... 34
4.8 Compliance with Federal Reserve Regulations. ................ 34
4.9 Authorizations and Consents ................................. 35
4.10 Compliance with Laws, Rules, Regulations and Orders ......... 35
4.11 Proper Filing of Tax Returns and Payment of Taxes Due ....... 35
4.12 ERISA Compliance ............................................ 35
4.13 Take-or-Pay; Gas Imbalances ................................. 35
4.14 Refunds ..................................................... 36
4.15 Casualties or Taking of Property ............................ 36
4.16 Locations of Business and Offices ........................... 36
4.17 Environmental Compliance .................................... 36
4.18 Investment Company Act Compliance ........................... 37
4.19 Public Utility Holding Company Act Compliance ............... 37
4.20 No Material Misstatements ................................... 37
4.21 Subsidiaries ................................................ 37
4.22 Defaults .................................................... 37
4.23 Maintenance of Properties ................................... 37
ARTICLE 5 AFFIRMATIVE COVENANTS ....................................... 38
5.1 Maintenance and Access to Records ........................... 38
5.2 Quarterly Financial Statements .............................. 38
5.3 Annual Financial Statements ................................. 38
5.4 Compliance Certificates ..................................... 38
5.5 Oil and Gas Reserve Reports ................................. 38
5.6 SEC and Other Reports ....................................... 39
5.7 Notices ..................................................... 39
5.8 Additional Information ...................................... 40
5.9 Payment of Assessments and Charges .......................... 41
5.10 Compliance with Laws ........................................ 41
5.11 ERISA Information and Compliance ............................ 41
5.12 Hazardous Substances Indemnification ........................ 41
<PAGE> 4
5.13 Further Assurances ......................................... 42
5.14 Fees and Expenses of Agent ................................. 42
5.15 Indemnification of Lenders and Agent ....................... 42
5.16 Maintenance of Existence and Good Standing ................. 43
5.17 Maintenance of Tangible Property ........................... 43
5.18 Maintenance of Insurance ................................... 43
5.19 Inspection of Tangible Property ............................ 43
5.20 Payment of Notes and Performance of Obligations ............ 44
5.21 Operation of Oil and Gas Properties ........................ 44
5.22 Performance of Designated Contracts ........................ 44
ARTICLE 6 NEGATIVE COVENANTS ......................................... 44
6.1 Indebtedness; Contingent Obligations ....................... 44
6.2 Loans or Advances .......................................... 45
6.3 Mortgages or Pledges of Assets ............................. 45
6.4 Sales of Properties; Leasebacks ............................ 45
6.5 Dividends and Distributions ................................ 45
6.6 Changes in Corporate Structure ............................. 46
6.7 Rental or Lease Agreements ................................. 46
6.8 Investments ................................................ 46
6.9 Lines of Business; Subsidiaries ............................ 47
6.10 ERISA Compliance ........................................... 47
6.11 Sale or Discount of Receivables ............................ 47
6.12 Transactions With Affiliates ............................... 47
6.13 Tangible Net Worth ......................................... 47
6.14 Current Ratio .............................................. 47
6.15 Debt Coverage Ratio ........................................ 47
6.16 Total Liabilities to Shareholders' Equity .................. 47
6.17 Amendment of Partnership Agreements ........................ 47
6.18 Subordinated Debt .......................................... 48
6.19 Negative Pledges ........................................... 48
ARTICLE 7 EVENTS OF DEFAULT .......................................... 48
7.1 Enumeration of Events of Default ........................... 48
7.2 Rights Upon Default ........................................ 50
ARTICLE 8 THE AGENT .................................................. 50
8.1 Appointment ................................................ 50
8.2 Delegation of Duties ....................................... 51
8.3 Exculpatory Provisions ..................................... 51
8.4 Reliance by Agent .......................................... 51
8.5 Notice of Default .......................................... 52
8.6 Non-Reliance on Agent and Other Lenders .................... 52
<PAGE> 5
8.7 Indemnification .......................................... 53
8.8 Restitution .............................................. 53
8.9 Agent in Its Individual Capacity ......................... 54
8.10 Successor Agent .......................................... 54
8.11 Applicable Parties ....................................... 54
ARTICLE 9 MISCELLANEOUS ............................................ 54
9.1 Assignments; Participations .............................. 54
9.2 Amendments and Waivers ................................... 55
9.3 Survival of Representations, Warranties and Covenants .... 56
9.4 Notices and Other Communications ......................... 56
9.5 Parties in Interest ...................................... 57
9.6 No Waiver; Rights Cumulative ............................. 57
9.7 Survival Upon Unenforceability ........................... 57
9.8 Rights of Third Parties .................................. 57
9.9 Controlling Agreement .................................... 57
9.10 Integration .............................................. 57
9.11 Jurisdiction and Venue ................................... 58
9.12 Waiver of Rights to Jury Trial ........................... 58
9.13 Governing Law ............................................ 58
9.14 Counterparts ............................................. 58
EXHIBITS
Exhibit I Form of Notes
Exhibit II Form of Assignment Agreement
Exhibit III Form of Borrowing Request
Exhibit IV Form of Compliance Certificate
Exhibit V Facility Amounts
Exhibit VI Disclosures
Exhibit VII Form of Opinion of Counsel
Exhibit VIII Subsidiaries and Partnerships
- iv -
<PAGE> 6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and entered into as of April 30,
1996, by and among SWIFT ENERGY COMPANY, a Texas corporation (the "Borrower"),
each lender that is a signatory hereto or becomes a signatory hereto as provided
in Section 9.1 (individually, together with its successors and assigns, a
"Lender" and, collectively, together with their respective successors and
assigns, the "Lenders"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national
banking association (in its individual capacity, "Bank One"), as agent for the
Lenders (in such capacity, together with its successors in such capacity
pursuant to the terms hereof, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, Bank One, and Bank of Montreal have
entered into the Amended and Restated Credit Agreement dated as of March 1,
1994, as heretofore amended (the "Existing Credit Agreement");
WHEREAS, the parties desire to amend and restate the Existing
Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows,
amending and restating in its entirety the Existing Credit Agreement:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. As used in this Agreement, the terms
"Agent," "Bank One," "Borrower," "Existing Credit Agreement," "Lender," and
"Lenders" shall have the meanings set forth above.
1.2 Additional Defined Terms. As used in this Agreement, the
following terms shall have the following meanings, unless the context otherwise
requires:
"Additional Costs" shall mean costs which the Agent or any Lender
determines are attributable to its obligation to make or its making or
maintaining any LIBO Rate Loan or issuing or participating in Letters of
Credit, or any reduction in any amount receivable by the Agent or such
Lender in respect of any such obligation or any LIBO Rate Loan or Letter of
Credit, resulting from any Regulatory Change which (a) changes the basis of
taxation of any amounts payable to the Agent or such Lender under this
Agreement or any Note in respect
<PAGE> 7
of any LIBO Rate Loan or Letter of Credit (other than taxes imposed on
the overall net income of the Agent or such Lender or its Applicable
Lending Office for any such LIBO Rate Loan by the jurisdiction in which the
Agent or such Lender has its principal office or Applicable Lending
Office), (b) imposes or modifies any reserve, special deposit, minimum
capital, capital ratio, or similar requirements (other than the Reserve
Requirement utilized in the determination of the Adjusted LIBO Rate for
such Loan) relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, the Agent or such Lender (including
LIBO Rate Loans and Dollar deposits in the London interbank market in
connection with LIBO Rate Loans), or any commitments of the Agent or such
Lender hereunder, or the London interbank market, or (c) imposes any other
condition affecting this Agreement or any of such extensions of credit,
liabilities, or commitments.
"Adjusted LIBO Rate" shall mean, for any Interest Period for any LIBO
Rate Loan, an interest rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by the Agent to be equal to the
quotient of (a) the sum of the LIBO Rate for such Interest Period for such
Loan plus the Applicable Margin for a LIBO Rate Loan divided by (b) 1 minus
the Reserve Requirement for such Loan for such Interest Period, such rate
to be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) during the period for
which payable, but in no event shall such rate exceed the Highest Lawful
Rate.
"Affiliate" shall mean any Person directly or indirectly controlling,
controlled by, or under common control with the Borrower, including each
Partnership and each affiliate and subsidiary (within the meaning of the
regulations promulgated pursuant to the Securities Act of 1933, as amended)
of the Borrower.
"Agreement" shall mean this Credit Agreement, as amended, restated or
supplemented from time to time.
"Applicable Lending Office" shall mean, for each Lender and type of
Loan, the lending office of such Lender (or an affiliate of such Lender)
designated for such type of Loan on the signature pages hereof or such
other office of such Lender (or an affiliate of such Lender) as such Lender
may from time to time specify to the Agent and the Borrower as the office
by which its Loans of such type are to be made and maintained.
"Applicable Margin" shall mean (a) at any time that the Loan Balance
plus the L/C Exposure is less than 50% of the Borrowing Base then in
effect, as to each LIBO Rate Loan, one percent (1%), and as to each
Floating Rate Loan, zero; (b) at any time that the Loan Balance plus the
L/C Exposure is at least 50% but not more than 75% of the Borrowing Base
then in effect, as to each LIBO Rate Loan, one and one-fourth percent
(1-1/4%), and as to each Floating Rate
2
<PAGE> 8
Loan, one-fourth percent (1/4%); and (c) at any time that the Loan
Balance plus the L/C Exposure is more than 75% of the Borrowing Base then
in effect, as to each LIBO Rate Loan, one and one-half percent (1-1/2%),
and as to each Floating Rate Loan, one-fourth percent (1/4%).
"Assignment Agreement" shall mean an Assignment Agreement,
substantially in the form of Exhibit II, with appropriate insertions.
"Available Commitment" shall mean, at any time, an amount equal to the
remainder, if any, of (a) the lesser of the Maximum Facility Amount or the
Borrowing Base in effect at such time minus (b) the sum of the Loan Balance
at such time plus the L/C Exposure at such time.
"Bank One Debt" shall mean the indebtedness of the Borrower to Bank
One in an amount not exceeding $7,000,000 in principal amount pursuant to
the Credit Agreement dated of even date herewith, by and between the
Borrower and Bank One, as amended, restated or supplemented from time to
time, and as such indebtedness may be renewed, extended or rearranged from
time to time.
"Base Rate" shall mean the interest rate announced or published by
Bank One from time to time as its general reference rate of interest, which
Base Rate shall change upon each change in such announced or published
general reference interest rate and which Base Rate may not be the lowest
interest rate charged by Bank One.
"Benefitted Lender" shall have the meaning assigned to such term in
Section 2.10(c).
"Borrowing Base" shall mean, at any time, an amount equal to the sum
of the value, for loan purposes, as determined by the Lenders from time to
time in accordance with Section 2.11, of the Distributive Shares and the
Oil and Gas Properties of the Borrower, reduced by the amount, if any, by
which the sum of Contingent Obligations, loans, advances, and Investments
made and outstanding pursuant to Sections 6.1(i), 6.2(g), and 6.8(h) exceed
$10,000,000.
"Borrowing Request" shall mean each written or oral (confirmed in
writing within three Business Days) request, in substantially the form
attached hereto as Exhibit III, by the Borrower to the Agent for a
borrowing or conversion pursuant to Sections 2.1 or 2.13, each of which
shall:
(a) be signed by a Responsible Officer;
(b) specify the amount and type of Loan requested or to be
converted and the date of the borrowing or conversion (which shall be
a Business Day);
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<PAGE> 9
(c) when requesting a Floating Rate Loan, be delivered to the
Agent no later than 11:00 a.m., Central Standard or Daylight Savings
Time, as the case may be, on the Business Day of the requested
borrowing or conversion; and
(d) when requesting a LIBO Rate Loan, be delivered to the Agent
no later than 11:00 a.m., Central Standard or Daylight Savings Time,
as the case may be, the third Business Day preceding the requested
borrowing or conversion and designate the Interest Period requested
with respect to such Loan.
"Business Day" shall mean a day other than a day when commercial banks
are authorized or required to close in the State of Texas and, with respect
to all requests, notices, and determinations in connection with, and
payments of principal and interest on, LIBO Rate Loans, which is also a day
for trading by and between banks in Dollar deposits in the London interbank
market.
"Cash Flow" shall mean, for any period, the sum of (a) the net income
(or loss) of the Borrower and its Subsidiaries on a consolidated basis for
such period, determined in accordance with GAAP, exclusive of non-cash
revenue, plus (b) depreciation, depletion, non-cash amortization, deferred
income taxes, and other non-cash charges to income, determined on a
consolidated basis for the Borrower and its Subsidiaries.
"Closing Date" shall mean April 30, 1996.
"Commitment Period" shall mean the period from and including the
Closing Date to but not including the Commitment Termination Date.
"Commitment Termination Date" shall mean September 30, 1999.
"Commitments" shall mean the several obligations of the Lenders to
make Loans to or for the benefit of the Borrower pursuant to Section 2.1
and the obligations of the Agent to issue and the Lenders to participate in
Letters of Credit pursuant to Section 2.2.
"Commonly Controlled Entity" shall mean any Person which is under
common control with the Borrower within the meaning of Section 4001 of
ERISA.
"Compliance Certificate" shall mean each certificate substantially in
the form attached hereto as Exhibit IV, signed by any Responsible Officer
and furnished to the Agent from time to time in accordance with the terms
hereof.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or in effect guaranteeing any Indebtedness,
leases,
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dividends, or other obligations of any other Person (for purposes of this
definition, a "primary obligation") in any manner, whether directly or
indirectly, including any obligation of such Person, regardless of whether
such obligation is contingent, (a) to purchase any primary obligation or
any Property constituting direct or indirect security therefor, (b) to
advance or supply funds (i) for the purchase or payment of any primary
obligation, or (ii) to maintain working or equity capital of any other
Person in respect of any primary obligation, or otherwise to maintain the
net worth or solvency of any other Person, (c) to purchase Property,
securities or services primarily for the purpose of assuring the owner of
any primary obligation of the ability of the Person primarily liable for
such primary obligation to make payment thereof, or (d) otherwise to assure
or hold harmless the owner of any such primary obligation against loss in
respect thereof, with the amount of any Contingent Obligation being deemed
to be equal to the stated or determinable amount of the primary obligation
in respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith.
"Current Assets" shall mean all assets which would, in accordance with
GAAP, be included as current assets on a consolidated balance sheet of the
Borrower and its Subsidiaries as of the date of calculation.
"Current Liabilities" shall mean all liabilities which would, in
accordance with GAAP, be included as current liabilities on a consolidated
balance sheet of the Borrower and its Subsidiaries as of the date of
calculation, but excluding current maturities in respect of the Loans.
"Debt Service" shall mean, at any time, five percent of all
Indebtedness of the Borrower for borrowed money at such time.
"Default" shall mean any event or occurrence which with the lapse of
time or the giving of notice or both would become an Event of Default.
"Default Rate" shall mean a per annum interest rate equal to the Base
Rate from time to time in effect plus two and one-half percent (2-1/2%),
such rate to be computed on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed (including the first day but excluding
the last day) during the period for which payable, but in no event shall
such rate exceed the Highest Lawful Rate.
"Distributive Share" shall mean, with respect to each Partnership, the
distributive share of the Borrower of profits and proceeds pursuant to the
applicable Partnership Agreement, and in the event that the amount of such
distributive share varies depending on events or circumstances, the minimum
distributive share of the Borrower.
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"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Environmental Complaint" shall mean any written complaint, order,
directive, claim, citation, notice of investigation or other notice by any
Governmental Authority or any other Person with respect to (a) air
emissions, (b) spills, releases, or discharges to soils or any improvements
located thereon, surface water, groundwater or the sewer, septic system or
waste treatment, storage or disposal systems servicing any Property of any
of the Borrower, its Subsidiaries or the Partnerships, (c) solid or liquid
waste disposal, (d) the use, generation, storage, transportation or
disposal of any Hazardous Substance, or (e) other environmental, health or
safety matters affecting any Property of any of the Borrower, its
Subsidiaries or the Partnerships or the business conducted thereon.
"Environmental Laws" shall mean (a) the following federal laws as they
may be cited, referenced, and amended from time to time: the Clean Air
Act, the Clean Water Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Endangered Species Act, the Hazardous
Materials Transportation Act of 1986, the Occupational Safety and Health
Act, the Oil Pollution Act of 1990, the Resource Conservation and Recovery
Act of 1976, the Safe Drinking Water Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (b) any and all
equivalent environmental statutes of any state in which Property of the
Borrower is situated, as they may be cited, referenced and amended from
time to time; (c) any rules or regulations promulgated under or adopted
pursuant to the above federal and state laws; and (d) any other equivalent
federal, state, or local statute or any requirement, rule, regulation,
code, ordinance, or order adopted pursuant thereto, including those
relating to the generation, transportation, treatment, storage, recycling,
disposal, handling, or release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations thereunder and
interpretations thereof.
"Event of Default" shall mean any of the events specified in Section
7.1.
"Existing Notes" shall mean the Notes (as such term is defined in the
Existing Credit Agreement).
"Facility Amount" shall mean, for each Lender, the amount set forth
opposite the name of such Lender on Exhibit V under the caption "Facility
Amounts," as modified from time to time to reflect assignments permitted by
Section 9.1 or otherwise pursuant to the terms hereof.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted
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<PAGE> 12
average of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers on such
day, as published by the Federal Reserve Bank of Dallas, Texas, on the
Business Day next succeeding such day, provided that (a) if the day for
which such rate is to be determined is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day,
and (b) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate charged to the Lender serving
as the Agent on such day on such transactions as determined by the Agent.
"Final Maturity" shall mean September 30, 1999.
"Financial Statements" shall mean statements of the financial
condition as at the point in time and for the period indicated and
consisting of at least a balance sheet and related statements of
operations, common stock and other stockholders' or partners' equity, and
cash flows and, when required by applicable provisions of this Agreement to
be audited, accompanied by the unqualified certification of a
nationally-recognized firm of independent certified public accountants or
other independent certified public accountants acceptable to the Agent and
footnotes to any of the foregoing, all of which, unless otherwise
indicated, shall be prepared in accordance with GAAP consistently applied
and in comparative form with respect to the corresponding period of the
preceding fiscal period.
"Floating Rate" shall mean, as of any day, an interest rate per annum
equal to the greater of (a) the Base Rate for such day plus the Applicable
Margin or (b) the Federal Funds Rate for such day plus one percent (1%),
such rate to be computed, in either case, on the basis of a year of 360
days and actual days elapsed (including the first day but excluding the
last day) during the period for which payable, but in no event shall such
rate exceed the Highest Lawful Rate.
"Floating Rate Loan" shall mean any Loan and any portion of the Loan
Balance which the Borrower has requested, in the initial Borrowing Request
for such Loan or a subsequent Borrowing Request for such portion of the
Loan Balance, bear interest at the Floating Rate, or which pursuant to the
terms hereof are otherwise required to bear interest at the Floating Rate.
"GAAP" shall mean generally accepted accounting principles established
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants and in effect in the United States from time
to time.
"Governmental Authority" shall mean any nation, country, commonwealth,
territory, government, state, county, parish, municipality or other
political subdivision and any court, governmental department or authority,
commission, board, bureau, agency, arbitrator or instrumentality thereof
and any other entity
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exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Hazardous Substances" shall mean flammables, explosives, radioactive
materials, hazardous wastes, asbestos or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or related materials, or
any substances defined as "contaminants," "hazardous substances,"
"hazardous materials," "hazardous wastes" or "toxic substances" under any
Environmental Law now or hereafter enacted or promulgated by any
Governmental Authority.
"Hedging Agreement" shall mean (a) any interest rate or currency swap,
rate cap, rate floor, rate collar, forward agreement, or other exchange or
rate protection agreement or any option with respect to any such
transaction and (b) any swap agreement, cap, floor, collar, exchange
transaction, forward agreement, or other exchange or protection agreement
relating to hydrocarbons or any option with respect to any such
transaction.
"Hedging Obligations" shall mean the indebtedness and obligations, now
or hereafter arising, of the Borrower under any Hedging Agreements with any
Lender or any affiliate of any Lender.
"Highest Lawful Rate" shall mean, with respect to each Lender, the
maximum non-usurious interest rate, if any (or, if the context so requires,
an amount calculated at such rate), that at any time or from time to time
may be contracted for, taken, reserved, charged, or received under laws
applicable to such Lender, as such laws are presently in effect or, to the
extent allowed by applicable law, as such laws may hereafter be in effect
and which allow a higher maximum non-usurious interest rate than such laws
now allow.
"Indebtedness" shall mean, as to any Person, without duplication, (a)
all liabilities (excluding reserves for deferred income taxes, deferred
compensation liabilities, and other deferred liabilities and credits) which
in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet, (b) all obligations of
such Person evidenced by bonds, debentures, promissory notes, or similar
evidences of indebtedness, (c) all other indebtedness of such Person for
borrowed money, and (d) all obligations of others, to the extent any such
obligation is secured by a Lien on the assets of such Person (whether or
not such Person has assumed or become liable for the obligation secured by
such Lien).
"Insolvency Proceeding" shall mean application (whether voluntary or
instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian, or liquidator of any Person or
of all or a substantial part of the Property of such Person, or the filing
of a petition (whether voluntary or instituted by another Person)
commencing a case under Title 11 of the United States Code, seeking
liquidation, reorganization, or rearrangement or
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<PAGE> 14
taking advantage of any bankruptcy, insolvency, debtor's relief, or other
similar law of the United States, the State of Texas, or any other
jurisdiction.
"Interest Period" shall mean, subject to the limitations set forth in
Section 2.3, with respect to any LIBO Rate Loan, a period commencing on the
date such Loan is made or converted from a Loan of another type pursuant to
this Agreement or the last day of the next preceding Interest Period with
respect to such Loan and ending on the numerically corresponding day in the
calendar month that is one, two, three, or, subject to availability, six
months thereafter, as the Borrower may request in the Borrowing Request for
such Loan.
"Investment" shall mean, as to any Person, any stock, bond, note or
other evidence of Indebtedness or any other security (other than current
trade and customer accounts) of, investment or partnership interest in or
loan to, such Person.
"L/C Exposure" shall mean, at any time, the maximum amount available
to be drawn under outstanding Letters of Credit at such time.
"Letter of Credit" shall mean each standby letter of credit issued for
the account of the Borrower pursuant to this Agreement.
"Letter of Credit Application" shall mean the standard letter of
credit application employed by the Agent, as the issuer of the Letters of
Credit, from time to time in connection with letters of credit.
"Letter of Credit Payment" shall mean any payment made by the Lenders
or the Agent on behalf of the Lenders under a Letter of Credit, to the
extent that such payment has not been repaid by the Borrower.
"LIBO Rate" shall mean, with respect to any Interest Period for any
LIBO Rate Loan, the lesser of (a) the rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) equal to the average of the offered
quotations appearing on Telerate Page 3750 (or if such Telerate Page shall
not be available, any successor or similar service selected by the Agent
and the Borrower) as of approximately 11:00 a.m., Central Standard or
Daylight Savings Time, as the case may be, on the day two Business Days
prior to the first day of such Interest Period for Dollar deposits in an
amount comparable to the principal amount of such LIBO Rate Loan and having
a term comparable to the Interest Period for such LIBO Rate Loan, or (b)
the Highest Lawful Rate. If neither such Telerate Page 3750 nor any
successor or similar service is available, the term "LIBO Rate" shall mean,
with respect to any Interest Period for any LIBO Rate Loan, the lesser of
(a) the rate per annum (rounded upwards if necessary, to the nearest 1/16
of 1%) quoted by the Agent at approximately 11:00 a.m., London time (or as
soon thereafter as practicable) two Business Days prior to the first day of
the Interest Period for such LIBO Rate Loan for the offering by the Agent
to leading
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<PAGE> 15
banks in the London interbank market of Dollar deposits in an amount
comparable to the principal amount of such LIBO Rate Loan and having a term
comparable to the Interest Period for such LIBO Rate Loan, or (b) the
Highest Lawful Rate.
"LIBO Rate Loan" shall mean any Loan and any portion of the Loan
Balance which the Borrower has requested, in the initial or a subsequent
Borrowing Request for such Loan, bear interest at the Adjusted LIBO Rate
and which are permitted by the terms hereof to bear interest at the
Adjusted LIBO Rate.
"Lien" shall mean 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 common law, statute, or contract, and including
the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt, or a lease,
consignment or bailment for security purposes and reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
Property which secure an obligation owed to, or a claim by, a Person other
than the owner of such Property (for purposes of this Agreement, any of the
Borrower, its Subsidiaries or the Partnerships shall be deemed to be the
owner of any Property which it has acquired or holds subject to a
conditional sale agreement, financing 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 the filing or recording of any financing
statement or other security instrument in any public office.
"Limitation Period" shall mean, with respect to any Lender, any period
while any amount remains owing on any Note payable to such Lender and
during which interest on such amount calculated at the applicable interest
rate plus any fees or other sums payable to such Lender under any Loan
Document and deemed to be interest under applicable law, would exceed the
amount of interest which would accrue at the Highest Lawful Rate.
"Loan" shall mean any advance to or for the benefit of the Borrower
pursuant to this Agreement and any payment made by the Agent or any Lender
under a Letter of Credit.
"Loan Balance" shall mean, at any time, the aggregate outstanding
principal balance of the Notes at such time.
"Loan Documents" shall mean this Agreement, the Notes, the Letters of
Credit, the Letter of Credit Applications, and all other documents,
instruments and agreements now or hereafter delivered pursuant to the terms
of or in connection with this Agreement, the Notes, the Letters of Credit,
or the Letter
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<PAGE> 16
of Credit Applications, and all renewals, extensions, amendments,
supplements and restatements thereof.
"Material Adverse Effect" shall mean any material and adverse effect
on (a) the assets, liabilities, financial condition, business, operations
or prospects of the Borrower, or the Borrower and its Subsidiaries on a
consolidated basis, or the Partnerships taken as a whole, from those
reflected in the Financial Statements dated December 31, 1995, furnished to
the Lenders or from the facts represented or warranted in this Agreement or
any other Loan Document, (b) the ability of the Borrower individually, or
the Borrower and its Subsidiaries on a consolidated basis, or the
Partnerships taken as a whole, to carry out its or their business as at the
date of this Agreement conducted, or (c) the ability of the Borrower to
meet its obligations generally, or to meet its obligations under the Loan
Documents on a timely basis as provided therein.
"Maximum Facility Amount" shall mean the sum of the Facility Amounts
of all Lenders.
"Multi-employer Plan" shall mean a Plan which is a multi-employer plan
as defined in Section 4001(a)(3) of ERISA.
"Net Income" shall mean, for any period, the net income of the
Borrower for such period, determined in accordance with GAAP.
"Notes" shall mean, collectively, each of the promissory notes of the
Borrower payable to a Lender in the amount of the Facility Amount of such
Lender or such amount in excess thereof as may be agreed to by the
Borrower, the Agent, and such Lender, in the form attached hereto as
Exhibit I, with appropriate insertions, together with all renewals,
extensions for any period, increases, and rearrangements thereof.
"Notice of Termination" shall have the meaning assigned to such term
in Section 2.23.
"Obligations" shall mean, without duplication, (a) all Indebtedness
evidenced by the Notes, (b) the obligation of the Borrower to provide to or
reimburse the Agent or the Lenders, as the case may be, for amounts
payable, paid, or incurred with respect to Letters of Credit, (c) the
undrawn, unexpired amount of all outstanding Letters of Credit, (d) the
obligation of the Borrower for the payment of fees and expenses pursuant to
the Loan Documents, (f) the Hedging Obligations, and (g) all other
obligations and liabilities of the Borrower to the Agent and the Lenders,
now existing or hereafter incurred, under, arising out of or in connection
with any Loan Document, and to the extent that any of the foregoing
includes or refers to the payment of amounts deemed or constituting
interest, only so much thereof as shall have accrued, been earned and which
remains unpaid at each relevant time of determination.
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<PAGE> 17
"Oil and Gas Property" shall mean fee, leasehold or other interests in
or under mineral estates or oil, gas and other liquid or gaseous
hydrocarbon leases with respect to Properties situated in the United States
or offshore from any State of the United States, including overriding
royalty and royalty interests, leasehold estate interests, net profits
interests, production payment interests and mineral fee interests, together
with contracts executed in connection therewith and all tenements,
hereditaments, appurtenances and Properties appertaining, belonging,
affixed or incidental thereto.
"Partners" shall mean all present and future general and limited
partners of the Partnerships.
"Partnerships" shall mean all partnerships, including joint ventures,
in which the Borrower is a limited or general partner, including the
general and limited drilling partnerships and income funds now or hereafter
existing in connection with the exploration and drilling or property
acquisition and ownership programs of the Borrower and with respect to
which the Borrower is a general partner or the managing general partner,
and with respect to which a Distributive Share is included in the Borrowing
Base.
"Partnership Agreement" shall mean the partnership agreement of any
Partnership, as any such agreement may be amended, restated or supplemented
from time to time.
"Percentage Share" shall mean, as to any Lender, a fraction, expressed
as a percentage, the numerator of which is the Facility Amount of such
Lender and the denominator of which is the Maximum Facility Amount.
"Permitted Liens" shall mean (a) Liens for taxes, assessments or other
governmental charges or levies not yet due or which (if foreclosure,
distraint, sale, or other similar proceedings shall not have been
initiated) are being contested in good faith by appropriate proceedings
diligently conducted, if such reserve as may be required by GAAP shall have
been made therefor; (b) Liens in connection with workers' compensation,
unemployment insurance or other social security (other than Liens created
by Section 4068 of ERISA), old age pension or public liability obligations
which are not yet due or which are being contested in good faith by
appropriate proceedings diligently conducted, if such reserve as may be
required by GAAP shall have been made therefor; (c) Liens in favor of
vendors, carriers, warehousemen, repairmen, mechanics, workers, or
materialmen, and construction or other similar Liens arising by operation
of law in the ordinary course of business or incident to the construction
or improvement of any Property in respect of obligations which are not yet
due or which are being contested in good faith by appropriate proceedings
diligently conducted, if such reserve as may be required by GAAP shall have
been made therefor; (d) Liens securing the purchase price of equipment of
the Borrower, provided that (i) such Liens shall not extend to or cover any
other Property of the Borrower, and (ii)
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<PAGE> 18
the aggregate unpaid purchase price secured by all such Liens shall not
exceed $2,500,000; (e) Liens to operators and non-operators under joint
operating agreements arising in the ordinary course of business to secure
amounts owing to operators, which amounts are not yet due or are being
contested in good faith by appropriate proceedings diligently conducted;
(f) Liens under production sales agreements, division orders, operating
agreements and other agreements customary in the oil and gas industry for
processing, producing, and selling hydrocarbons securing obligations not
constituting Indebtedness and provided that such Liens do not secure
obligations to deliver hydrocarbons at some future date without receiving
full payment therefor within 90 days of delivery; (g) the currently
existing Liens described on Exhibit VI under the heading "Liens"; and (h)
easements, rights of way, restrictions and other similar encumbrances, and
minor defects in the chain of title which are customarily accepted in the
oil and gas financing industry, none of which interfere with the ordinary
conduct of the business of any of the Borrower, its Subsidiaries or the
Partnerships or materially detract from the value or use of the Property
to which they apply.
"Person" shall mean an individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization, Governmental Authority, or any other form of entity.
"Plan" shall mean, at any time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or any Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Principal Office" shall mean the principal office of the Agent in
Houston, Texas, presently located at 910 Travis Street.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal, or mixed, tangible or intangible.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System (or any successor), as amended or supplemented
from time to time.
"Regulatory Change" shall mean, with respect to any Lender, the
passage, adoption, institution, or modification of any federal, state,
local, or foreign Requirement of Law (including Regulation D), or any
interpretation, directive, or request (whether or not having the force of
law) of any Governmental Authority or monetary authority charged with the
enforcement, interpretation, or administration thereof, occurring after the
Closing Date and applying to a class of lenders including such Lender or
its Applicable Lending Office.
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"Release of Hazardous Substances" shall mean any emission, spill,
release, disposal or discharge, except in accordance with a valid permit,
license, certificate or approval of the relevant Governmental Authority, of
any reportable quantity of Hazardous Substance into or upon (a) the air,
(b) soils or any improvements located thereon, (c) surface water or
groundwater, or (d) the sewer, septic system or waste treatment, storage or
disposal system servicing any Property of any of the Borrower, its
Subsidiaries or the Partnerships.
"Replacement Lenders" shall have the meaning assigned to such term in
Section 2.23.
"Required Lenders" shall mean the Lender serving as the Agent,
together with such other Lenders as necessary to make the Percentage Share
for all of such Lenders total at least 66-2/3%.
"Required Payment" shall have the meaning assigned to such term in
Section 2.8.
"Requirement of Law" shall mean, as to any Person, any applicable law,
treaty, ordinance, order, judgment, rule, decree, regulation, or
determination of an arbitrator, court, or other Governmental Authority,
including rules, regulations, orders, and requirements for permits,
licenses, registrations, approvals, or authorizations, in each case as such
now exist or may be hereafter amended and are applicable to or binding upon
such Person or any of its Property or to which such Person or any of its
Property is subject.
"Reserve Report" shall mean each report provided by the Borrower
pursuant to Section 5.5.
"Reserve Requirement" shall mean, for any Interest Period for any LIBO
Rate Loan, the average maximum rate at which reserves (including any
marginal, supplemental, or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks
of the Federal Reserve System in Dallas, Texas, with deposits exceeding one
billion Dollars against "Eurocurrency liabilities" (as such term is used in
Regulation D) and any other reserves required by reason of any Regulatory
Change to be maintained by such member banks against (a) any category of
liabilities which includes deposits by reference to which the LIBO Rate is
to be determined as provided herein in the definition of the term "LIBO
Rate" or (b) any category of extensions of credit or other assets which
include a LIBO Rate Loan.
"Responsible Officer" shall mean any Vice President, the Treasurer or
other authorized representative of the Borrower as designated from time to
time pursuant to written designation by the Borrower.
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<PAGE> 20
"Shareholders' Equity" shall mean, at any time, all amounts which
would, in conformity with GAAP, be included under consolidated common stock
and other stockholders' equity of the Borrower (including amounts for
non-redeemable preferred stock, common stock, capital surplus and retained
earnings and other stockholders' equity so long as not subject to any
mandatory redemption), less all amounts which would, in conformity with
GAAP, be included under assets of the Borrower for intangible assets,
treasury stock, any cost of investments in excess of net assets acquired at
the time of acquisition, and reimbursable advances or expenditures made by
the Borrower on behalf of the Partnerships and classified as long-term
assets on the balance sheet of the Borrower in accordance with GAAP.
"Subordinated Debt" shall mean the Indebtedness of the Borrower under
the 6.5% Convertible Subordinated Debentures due June 30, 2003, in the
maximum original principal amount of $28,750,000, issued pursuant to
prospectus dated June 23, 1993.
"Subsidiary" shall mean, as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation are at the
time owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
"Superfund Site" shall mean those sites listed on the Environmental
Protection Agency National Priority List and eligible for remedial action,
or any comparable state registries or list in any state of the United
States.
"Tangible Net Worth" shall mean (a) total assets, as would be
reflected on a balance sheet of the Borrower prepared on a consolidated
basis and in accordance with GAAP, exclusive of experimental or
organization expenses, franchises, licenses, permits, and other intangible
assets, treasury stock, unamortized underwriters' debt discount and
expenses, and goodwill minus (b) total liabilities, as would be reflected
on a balance sheet of the Borrower prepared on a consolidated basis and in
accordance with GAAP.
"Taxes" shall have the meaning assigned to such term in Section 2.22.
"Terminated Lender" shall have the meaning assigned to such term in
Section 2.23.
"Termination Date" shall have the meaning assigned to such term in
Section 2.23.
1.3 Undefined Financial Accounting Terms. Undefined financial
accounting terms used in this Agreement shall be defined according to GAAP at
the time in effect.
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1.4 References. References in this Agreement to Article, Section, or
Exhibit numbers shall be to Articles, Sections, and Exhibits of this Agreement,
unless expressly stated to the contrary. References in this Agreement to
"hereby," "herein," "hereinabove," "hereinafter," "hereinbelow," "hereof,"
"hereunder," and words of similar import shall be to this Agreement in its
entirety and not only to the particular Article, Section or Exhibit in which
such reference appears. References in this Agreement to "includes" or
"including" shall mean "includes, without limitation," or "including, without
limitation," as the case may be. References in this Agreement to statutes,
sections, or regulations are to be construed as including all statutory or
regulatory provisions consolidating, amending, replacing, succeeding or
supplementing such statutes, sections, or regulations.
1.5 Articles and Sections. This Agreement, for convenience only, has
been divided into Articles and Sections; and it is understood that the rights
and other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
1.6 Number and Gender. Whenever the context requires, reference
herein made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions
of terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
1.7 Incorporation of Exhibits. The Exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
ARTICLE 2
TERMS OF THE FACILITY
2.1 Revolving Line of Credit. (a) Upon the terms and conditions and
relying on the representations and warranties contained in this Agreement, each
Lender severally agrees to make Loans during the Commitment Period to or for the
benefit of the Borrower in an aggregate principal amount not to exceed at any
time outstanding the lesser of the Facility Amount of such Lender or the
Percentage Share of such Lender of the Borrowing Base then in effect; provided,
however, that (i) the Loan Balance plus the L/C Exposure shall not exceed at any
time the lesser of the Maximum Facility Amount or the Borrowing Base then in
effect, and (ii) the sum of the outstanding principal balance of all Loans by
any Lender plus the Percentage Share of such Lender of the L/C Exposure shall
not exceed at any time an amount equal to the Percentage Share of such Lender
multiplied by the lesser of the Maximum Facility Amount or the Borrowing Base
then in effect. Loans shall be made from time to time on any Business Day
designated by the Borrower in its Borrowing Request.
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(b) Subject to the terms of this Agreement, during the
Commitment Period, the Borrower may borrow, repay, and reborrow and convert
Loans of one type or with one Interest Period into Loans of another type or with
a different Interest Period. Except for prepayments made pursuant to Section
2.12, each borrowing, conversion, and prepayment of principal of Loans shall be
in an amount at least equal to $100,000. Each borrowing, prepayment, or
conversion of or into a Loan of a different type or, in the case of a LIBO Rate
Loan, having a different Interest Period, shall be deemed a separate borrowing,
conversion, and prepayment for purposes of the foregoing, one for each type of
Loan or Interest Period. Anything in this Agreement to the contrary
notwithstanding, the aggregate principal amount of LIBO Rate Loans having the
same Interest Period shall be at least equal to $100,000; and if any LIBO Rate
Loan would otherwise be in a lesser principal amount for any period, such Loan
shall be a Floating Rate Loan during such period.
(c) Not later than 2:00 p.m., Central Standard or Daylight
Savings Time, as the case may be, on the date specified for each borrowing, each
Lender shall make available to the Agent an amount equal to the Percentage Share
of such Lender of the borrowing to be made on such date, at an account
designated by the Agent, for the account of the Borrower. The amount so
received by the Agent shall, subject to the terms and conditions hereof, be made
available to the Borrower in immediately available funds at the Principal
Office. All Loans by each Lender shall be maintained at the Applicable Lending
Office of such Lender and shall be evidenced by the Note of such Lender.
(d) The failure of any Lender to make any Loan required to be
made by it hereunder shall not relieve any other Lender of its obligation to
make any Loan required to be made by it, and no Lender shall be responsible for
the failure of any other Lender to make any Loan.
2.2 Letter of Credit Facility. (a) Upon the terms and conditions and
relying on the representations and warranties contained in this Agreement, the
Agent, as issuing bank for the Lenders, agrees, from the date of this Agreement
until the date which is 30 days prior to the Commitment Termination Date, to
issue, on behalf of the Lenders in their respective Percentage Shares, Letters
of Credit for the account of the Borrower and to renew and extend such Letters
of Credit. Letters of Credit shall be issued, renewed, or extended from time to
time on any Business Day designated by the Borrower following the receipt in
accordance with the terms hereof by the Agent of the written (or oral, confirmed
promptly in writing) request by a Responsible Officer of the Borrower therefor
and a Letter of Credit Application. Letters of Credit shall be issued in such
amounts as the Borrower may request; provided, however, that (i) no Letter of
Credit shall have an expiration date which is more than 365 days after the
issuance thereof or subsequent to five days prior to the Commitment Termination
Date, (ii) the Loan Balance plus the L/C Exposure shall not exceed at any time
the lesser of the Maximum Facility Amount or the Borrowing Base, and (iii) the
L/C Exposure shall not exceed at any time $10,000,000.
(b) Prior to any Letter of Credit Payment in respect of any
Letter of Credit, each Lender shall be deemed to be a participant through the
Agent with respect to the relevant Letter of Credit in the obligation of the
Agent, as the issuer of such Letter of Credit, in an
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amount equal to the Percentage Share of such Lender of the maximum amount which
is or at any time may become available to be drawn thereunder. Upon delivery
by such Lender of funds requested pursuant to Section 2.2(c), such Lender shall
be treated as having purchased a participating interest in an amount equal to
such funds delivered by such Lender to the Agent in the obligation of the
Borrower to reimburse the Agent, as the issuer of such Letter of Credit, for
any amounts payable, paid, or incurred by the Agent, as the issuer of such
Letter of Credit, with respect to such Letter of Credit.
(c) Each Lender shall be unconditionally and irrevocably liable,
without regard to the occurrence of any Default or Event of Default, to the
extent of the Percentage Share of such Lender at the time of issuance of each
Letter of Credit, to reimburse, on demand, the Agent, as the issuer of such
Letter of Credit, for the amount of each Letter of Credit Payment under such
Letter of Credit. Each Letter of Credit Payment shall be deemed to be a
Floating Rate Loan by each Lender to the extent of funds delivered by such
Lender to the Agent with respect to such Letter of Credit Payment and shall to
such extent be deemed a Floating Rate Loan under and shall be evidenced by the
Note of such Lender and shall be payable by the Borrower upon demand by the
Agent.
(d) EACH LENDER AGREES TO INDEMNIFY THE AGENT, AS THE ISSUER OF
EACH LETTER OF CREDIT, AND THE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT AND AFFILIATES OF THE AGENT (TO THE EXTENT NOT REIMBURSED BY
THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF THE BORROWER TO DO SO),
RATABLY ACCORDING TO THE PERCENTAGE SHARE OF SUCH LENDER AT THE TIME OF ISSUANCE
OF SUCH LETTER OF CREDIT, FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME
(INCLUDING ANY TIME FOLLOWING THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND
THE TERMINATION OF THIS AGREEMENT) BE IMPOSED ON, INCURRED BY OR ASSERTED
AGAINST THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY
RELATING TO OR ARISING OUT OF THIS AGREEMENT OR SUCH LETTER OF CREDIT OR ANY
ACTION TAKEN OR OMITTED BY THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR
ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR
AFFILIATES UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING ANY
LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED OR
ASSERTED AS A RESULT OF THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT
AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT NO LENDER
(OTHER THAN THE AGENT AS THE ISSUER OF A LETTER OF CREDIT) SHALL BE LIABLE FOR
THE PAYMENT OF ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING
SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT AS THE
ISSUER OF A LETTER OF CREDIT. THE AGREEMENTS IN THIS SECTION 2.2(d) SHALL
SURVIVE THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF
THIS AGREEMENT.
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2.3 Limitations on Interest Periods. Each Interest Period selected
by the Borrower (a) which commences on the last Business Day of a calendar month
(or any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month, (b) which would otherwise end on a day
which is not a Business Day shall end on the next succeeding Business Day (or,
if such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day), (c) which would otherwise end after
Final Maturity shall end on Final Maturity, and (d) shall have a duration of not
less than one month and, if any Interest Period would otherwise be a shorter
period, the relevant Loan shall be a Floating Rate Loan during such period.
2.4 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, no more than ten separate Loans shall be outstanding at any one
time, with, for purposes of this Section, all Floating Rate Loans constituting
one Loan, and all LIBO Rate Loans for the same Interest Period constituting one
Loan. Anything herein to the contrary notwithstanding, if, on or prior to the
determination of any interest rate for any LIBO Rate Loan for any Interest
Period therefor:
(a) the Agent determines (which determination shall be
conclusive, absent manifest error) that quotations of interest rates
for the deposits referred to in the definition of "LIBO Rate" in
Section 1.2 are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining the rate of interest
for such Loan as provided in this Agreement; or
(b) the Agent determines (which determination shall be
conclusive, absent manifest error) that the rates of interest referred
to in the definition of "LIBO Rate" in Section 1.2 upon the basis of
which the rate of interest for such Loan for such Interest Period is
to be determined do not adequately cover the cost to the Lenders of
making or maintaining such Loan for such Interest Period,
then the Agent shall give the Borrower and the Lenders prompt notice thereof;
and so long as such condition remains in effect, the Lenders shall be under no
obligation to make LIBO Rate Loans or to convert Floating Rate Loans into LIBO
Rate Loans, and the Borrower shall, on the last day of the then current
Interest Period for each outstanding LIBO Rate Loan, either prepay such LIBO
Rate Loan or convert such Loan into a Floating Rate Loan in accordance with
Section 2.13.
2.5 Use of Loan Proceeds and Letters of Credit. Proceeds of all
Loans shall be used for any corporate purpose of the Borrower not prohibited
under any Loan Document. Letters of Credit shall be obtained for any business
activity of the Borrower not prohibited under any Loan Document; provided,
however, Letters of Credit shall not be obtained to support Indebtedness to any
Person not a Lender or in lieu or in support of stay or appeal bonds in excess
of $1,000,000.
2.6 Interest. Subject to the terms of this Agreement (including
Section 2.18), interest on the Loans shall accrue and be payable at a rate per
annum equal to the Floating Rate
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for each Floating Rate Loan and the Adjusted LIBO Rate for each LIBO Rate Loan.
Notwithstanding the foregoing, interest on past-due principal and, to the extent
permitted by applicable law, past-due interest, shall accrue at the Default Rate
and shall be payable upon demand by the Agent at any time as to all or any
portion of such interest. In the event that the Borrower fails to select the
duration of any Interest Period for any LIBO Rate Loan within the time period
and otherwise as provided herein, such Loan (if outstanding as a LIBO Rate Loan)
will be automatically converted into a Floating Rate Loan on the last day of the
then current Interest Period for such Loan or (if outstanding as a Floating Rate
Loan) will remain as, or (if not then outstanding) will be made as, a Floating
Rate Loan. Interest provided for herein shall be calculated on unpaid sums
actually advanced and outstanding pursuant to the terms of this Agreement and
only for the period from the date or dates of such advances until repayment.
2.7 Repayment of Loans and Interest. Accrued and unpaid interest on
outstanding Floating Rate Loans shall be due and payable quarterly commencing
July 1, 1996, and continuing on the first day of each third calendar month
thereafter while any Floating Rate Loan remains outstanding, the payment in each
instance to be the amount of interest which has accrued and remains unpaid with
respect to Floating Rate Loans. Accrued and unpaid interest on each outstanding
LIBO Rate Loan shall be due and payable on the last day of the Interest Period
for such LIBO Rate Loan and, in the case of any Interest Period in excess of
three months, on the day of the third calendar month following the commencement
of such Interest Period corresponding to the day of the calendar month on which
such Interest Period commenced, the payment in each instance to be the amount of
interest which has accrued and remains unpaid in respect of the relevant Loan.
The Loan Balance, together with all accrued and unpaid interest thereon, shall
be due and payable at Final Maturity. At the time of making each payment
hereunder or under the Notes, the Borrower shall specify to the Agent the Loans
or other amounts payable by the Borrower hereunder to which such payment is to
be applied. In the event the Borrower fails to so specify, or if an Event of
Default has occurred and is continuing, the Agent may apply such payment as it
may elect in its discretion and in accordance with the terms hereof.
2.8 General Terms. (a) Absent manifest error, the outstanding
principal balance of the Note of each Lender reflected in the records of such
Lender shall be deemed rebuttably presumptive evidence of the principal amount
owing on such Note; provided, however, the liability for payment of principal
and interest evidenced by the Note of each Lender shall be limited to principal
amounts actually advanced and outstanding pursuant to this Agreement and
interest on such amounts calculated in accordance with this Agreement.
(b) Unless the Agent shall have been notified by a Lender or the
Borrower prior to the date on which either of them is scheduled to make payment
to the Agent of (in the case of a Lender) the proceeds of a Loan to be made by
such Lender hereunder or (in the case of the Borrower) a payment to the Agent
for the account of one or more of the Lenders hereunder (such payment being
herein called the "Required Payment"), which notice shall be effective upon
receipt, that it does not intend to make the Required Payment to the Agent, the
Agent may assume that the Required Payment has been made and, in reliance upon
such assumption, may (but shall not be required to) make the amount thereof
available to the intended recipient on such date. If such Lender or the
Borrower, as the case may be, has not in fact
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made the Required Payment to the Agent, the recipient of such payment shall, on
demand, repay to the Agent for its account the amount so made available together
with interest thereon in respect of each day during the period commencing on the
date such amount was so made available by the Agent until the date the Agent
recovers such amount at a rate per annum equal to, in the case of a Lender as
recipient, the Federal Funds Rate or, in the case of the Borrower as recipient,
the Floating Rate.
2.9 Time, Place, and Method of Payments. All payments required
pursuant to this Agreement or the Notes shall be made without set-off or
counterclaim in Dollars and in immediately available funds. All payments by the
Borrower shall be deemed received on the next Business Day following receipt if
such receipt is after 2:00 p.m., Central Standard or Daylight Savings Time, as
the case may be, on any Business Day, and shall be made to the Agent at the
Principal Office. Except as provided to the contrary herein, if the due date of
any payment hereunder or under any Note would otherwise fall on a day which is
not a Business Day, such date shall be extended to the next succeeding Business
Day, and interest shall be payable for any principal so extended for the period
of such extension.
2.10 Pro Rata Treatment; Adjustments. (a) Except to the extent
otherwise expressly provided herein, (i) each borrowing pursuant to this
Agreement shall be made from the Lenders pro rata in accordance with their
respective Percentage Shares, (ii) each payment by the Borrower of fees shall be
made for the account of the Lenders pro rata in accordance with their respective
Percentage Shares, (iii) each payment of principal of Loans shall be made for
the account of the Lenders pro rata in accordance with their respective shares
of the Loan Balance, and (iv) each payment of interest on Loans shall be made
for the account of the Lenders pro rata in accordance with their respective
shares of the aggregate amount of interest due and payable to the Lenders.
(b) The Agent shall distribute all payments with respect to the
Obligations to the Lenders promptly upon receipt in like funds as received. In
the event that any payments made hereunder by the Borrower at any particular
time are insufficient to satisfy in full the Obligations due and payable at such
time, such payments shall be applied (i) first, to fees and expenses due
pursuant to the terms of this Agreement or any other Loan Document, (ii) second,
to accrued interest, (iii) third, to the Loan Balance, and (iv) last, to any
other Obligations.
(c) If any Lender (for purposes of this Section, a "Benefitted
Lender") shall at any time receive any payment of all or part of its portion of
the Obligations, or receive any collateral or other Property in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Sections 7.1 (e) or 7.1 (f), or
otherwise) in an amount greater than such Lender was entitled to receive
pursuant to the terms hereof, such Benefitted Lender shall purchase for cash
from the other Lenders such portion of the Obligations of such other Lenders, or
shall provide such other Lenders with the benefits of any such collateral or
other Property or the proceeds thereof, as shall be necessary to cause such
Benefitted Lender to share the excess payment or benefits of such collateral or
other Property or proceeds with each of the Lenders according to the terms
hereof. If all or any portion of such excess payment or benefits is thereafter
recovered from such Benefitted Lender, such purchase shall be rescinded and the
purchase price and benefits returned by such Lender, to the
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extent of such recovery, but without interest. The Borrower agrees that each
such Lender so purchasing a portion of the Obligations of another Lender may
exercise all rights of payment (including rights of set-off) with respect to
such portion as fully as if such Lender were the direct holder of such portion.
If any Lender ever receives, by voluntary payment, exercise of rights of set-off
or banker's lien, counterclaim, cross-action or otherwise, any funds of the
Borrower to be applied to the Obligations, or receives any proceeds by
realization on or with respect to any collateral or other Property, all such
funds and proceeds shall be forwarded immediately to the Agent for distribution
in accordance with the terms of this Agreement.
2.11 Borrowing Base Determinations. (a) The Borrowing Base as of the
Closing Date is acknowledged by the Borrower and the Lenders to be $35,000,000.
(b) The Borrowing Base shall be redetermined by the Agent with
the consent of the Lenders each May 1 during the term hereof on the basis of
information supplied by the Borrower in compliance with the provisions of this
Agreement, including Reserve Reports, and all other information available to the
Lenders. In addition, the Agent with the consent of the Lenders shall, in the
normal course of business following a request of the Borrower, redetermine the
Borrowing Base; provided, however, the Agent and the Lenders shall not be
obligated to respond to more than two such requests during any calendar year.
Notwithstanding the foregoing, the Lenders may at their discretion redetermine
the Borrowing Base at any time and from time to time, including, without
limitation, in connection with any sale or other transfer of Properties by the
Borrower pursuant to Section 6.4. To assist the Lenders in making a
redetermination of the Borrowing Base in connection with any sale or other
transfer of Properties by the Borrower pursuant to Section 6.4 and in making a
determination to make any such redetermination of the Borrowing Base, the
Borrower shall furnish to the Agent, contemporaneously with each such sale or
other transfer of Property, a breakout from the most recent Reserve Report
provided to the Lenders showing the value given to such Properties being sold or
transferred, together with any and all other information pertaining thereto as
the Agent may request.
(c) Upon each determination of the Borrowing Base, the Agent
shall notify the Borrower orally (confirming such notice promptly in writing) of
such determination, and the Borrowing Base so communicated to the Borrower shall
become effective upon such oral notification and shall remain in effect until
the next subsequent determination of the Borrowing Base.
(d) The Borrowing Base shall represent the determination by the
Lenders, in accordance with their customary lending procedures for evaluating
oil and gas reserves and other related assets at the time of determination, of
the value, for loan purposes, of the Distributive Shares and the Oil and Gas
Properties of the Borrower, subject, in the case of any increase in the
Borrowing Base, to the credit approval processes of the Lenders. Furthermore,
the Borrower acknowledges that the Lenders have no obligation to increase the
Borrowing Base and may reduce the Borrowing Base, in either case, at any time or
as a result of any circumstance and further acknowledges that the determination
of the Borrowing Base contains an equity cushion (market value in excess of loan
value), which is acknowledged by the Borrower to be essential for the adequate
protection of the Lenders.
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2.12 Mandatory Prepayments. If at any time the sum of the Loan
Balance and the L/C Exposure exceeds the lesser of the Maximum Facility Amount
or the Borrowing Base then in effect, the Borrower shall, within ten days of
notice from the Agent of such occurrence, (a) prepay, or make arrangements
acceptable to the Lenders for the prepayment of, the amount of such excess for
application on the Loan Balance, (b) provide collateral, of character and value
satisfactory to the Lenders in their sole discretion, to secure the Obligations
by the execution and delivery to the Agent of security instruments in form and
substance satisfactory to the Agent, or (c) effect any combination of the
alternatives described in clauses (a) and (b) of this Section and acceptable to
the Lenders in their discretion. In the event that a mandatory prepayment is
required under this Section and the Loan Balance is less than the amount
required to be prepaid, the Borrower shall repay the entire Loan Balance and, in
accordance with the provisions of the relevant Letter of Credit Applications
executed by the Borrower or otherwise to the satisfaction of the Agent, deposit
with the Agent, as additional collateral securing the Obligations, an amount of
cash, in immediately available funds, equal to the L/C Exposure minus the lesser
of the Maximum Facility Amount or the Borrowing Base. The cash deposited with
the Agent in satisfaction of the requirement provided in this Section may be
invested, at the sole discretion of the Agent and then only at the express
direction of the Borrower as to investment vehicle and maturity (which shall be
no later than the latest expiry date of any then outstanding Letter of Credit),
for the account of the Borrower in cash or cash equivalent investments offered
by or through the Lender serving as the Agent.
2.13 Voluntary Prepayments and Conversions of Loans. Subject to
applicable provisions of this Agreement, the Borrower shall have the right at
any time or from time to time to prepay Loans and to convert Loans of one type
or with one Interest Period into Loans of another type or with a different
Interest Period; provided, however, that (a) the Borrower shall give the Agent
notice of each such prepayment or conversion of all or any portion of a LIBO
Rate Loan no less than two Business Days prior to prepayment or conversion, (b)
any LIBO Rate Loan may be prepaid or converted only on the last day of an
Interest Period for such Loan, (c) each prepayment shall be in an amount not
less than $100,000 or incremental amounts of $10,000 in excess thereof or the
Loan Balance, (d) the Borrower shall pay all accrued and unpaid interest on the
amounts prepaid or converted, and (e) no such prepayment or conversion shall
serve to postpone the repayment when due of any Obligation.
2.14 Commitment Fee. To compensate the Lenders for making funds
available under this Agreement, the Borrower shall pay to the Agent for the
account of the Lenders in proportion to their respective Commitment Percentages,
on the first day of July 1996, and on the first day of each third calendar month
thereafter and on the Commitment Termination Date, a fee in the amount of
three-eighths of one percent (3/8%) per annum, calculated on the basis of a year
of 360 days and actual days elapsed (including the first day but excluding the
last day), on the average daily remainder, if any, of (a) the lesser of the
Maximum Facility Amount or the Borrowing Base minus (b) the aggregate principal
amount outstanding on the Notes plus the amount of all outstanding Letters of
Credit during the period from the date of this Agreement or the previous
calculation date, whichever is later, to the relevant calculation date or the
Commitment Termination Date, as the case may be.
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2.15 Letter of Credit Fee. The Borrower shall pay to the Agent for
the account of the Lenders on the date of issuance or renewal of each Letter of
Credit, an issuing fee equal to the greater of $350 or one-half of one percent
(1/2%) per annum, calculated on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day), on the face amount
of such Letter of Credit during the period for which such Letter of Credit is
issued or renewed. The Borrower also agrees to pay on demand to the Agent for
its own account as the issuer of the Letters of Credit its customary letter of
credit transactional fees and expenses, including amendment fees, payable with
respect to each Letter of Credit.
2.16 Loans to Satisfy Obligations of Borrower. The Lenders may, but
shall not be obligated to, make Loans for the benefit of the Borrower and apply
proceeds thereof to the satisfaction of any condition, warranty, representation,
or covenant of the Borrower contained in this Agreement or any other Loan
Document. Such Loans shall be evidenced by the Notes, shall bear interest at
the Default Rate and shall be payable upon demand.
2.17 Security Interest in Accounts; Right of Offset. As security for
the payment and performance of the Obligations, the Borrower hereby transfers,
assigns, and pledges to the Agent and each Lender (for the pro rata benefit of
all Lenders) and grants to the Agent and each Lender (for the pro rata benefit
of all Lenders) a security interest in all funds of the Borrower now or
hereafter or from time to time on deposit with the Agent or such Lender, with
such interest of the Agent and the Lenders to be retransferred, reassigned,
and/or released at the reasonable expense of the Borrower upon payment in full
and complete performance of all Obligations and the termination
of the Commitments. All remedies as secured party or assignee of such funds
shall be exercisable by the Agent and the Lenders with the oral consent
(confirmed promptly in writing) of the Required Lenders upon the occurrence of
any Event of Default, regardless of whether the exercise of any such remedy
would result in any penalty or loss of interest or profit with respect to any
withdrawal of funds deposited in a time deposit account prior to the maturity
thereof. Furthermore, the Borrower hereby grants to the Agent and each Lender
(for the pro rata benefit of all Lenders) the right, exercisable at such time
as any Event of Default shall occur, of offset or banker's lien against all
funds of the Borrower now or hereafter or from time to time on deposit with the
Agent or such Lender, regardless of whether the exercise of any such remedy
would result in any penalty or loss of interest or profit with respect to any
withdrawal of funds deposited in a time deposit account prior to the maturity
thereof.
2.18 General Provisions Relating to Interest. (a) It is the
intention of the parties hereto to comply strictly with all applicable usury
laws. In this connection, there shall never be collected, charged, or received
on the sums advanced hereunder interest in excess of that which would accrue at
the Highest Lawful Rate. For purposes of Article 5069-1.04, Vernon's Texas
Civil Statutes, as amended, the Borrower agrees that the Highest Lawful Rate
shall be the "indicated (weekly) rate ceiling" as defined in such Article,
provided that the Agent and the Lenders may also rely, to the extent permitted
by applicable laws, on alternative maximum rates of interest under other laws,
if greater.
(b) Notwithstanding anything herein or in the Notes to the
contrary, during any Limitation Period, the interest rate to be charged on
amounts evidenced by the Notes shall
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be the Highest Lawful Rate, and the obligation, if any, of the Borrower for the
payment of fees or other charges deemed to be interest under applicable law
shall be suspended. During any period or periods of time following a Limitation
Period, to the extent permitted by applicable laws, the interest rate to be
charged hereunder shall remain at the Highest Lawful Rate until such time as
there has been paid to the Agent and each Lender (i) the amount of interest in
excess of that accruing at the Highest Lawful Rate that such Lender would have
received during the Limitation Period had the interest rate remained at the
otherwise applicable rate, and (ii) all interest and fees otherwise payable to
the Agent and such Lender but for the effect of such Limitation Period.
(c) If, under any circumstances, the aggregate amounts paid on
the Notes or under this Agreement or any other Loan Document include amounts
which by law are deemed interest and which would exceed the amount permitted if
the Highest Lawful Rate were in effect, the Borrower stipulates that such
payment and collection will have been and will be deemed to have been, to the
extent permitted by applicable laws, the result of mathematical error on the
part of the Borrower, the Agent, and the Lenders; and the party receiving such
excess shall promptly refund the amount of such excess (to the extent only of
such interest payments in excess of that which would have accrued and been
payable on the basis of the Highest Lawful Rate) upon discovery of such error by
such party or notice thereof from the Borrower. In the event that the maturity
of any Obligation is accelerated, by reason of an election by the Lenders or
otherwise, or in the event of any required or permitted prepayment, then the
consideration constituting interest under applicable laws may never exceed the
Highest Lawful Rate; and excess amounts paid which by law are deemed interest,
if any, shall be credited by the Agent and the Lenders on the principal amount
of the Obligations, or if the principal amount of the Obligations shall have
been paid in full, refunded to the Borrower.
(d) All sums paid, or agreed to be paid, to the Agent and the
Lenders for the use, forbearance and detention of the proceeds of any advance
hereunder shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full term hereof until paid in
full so that the actual rate of interest is uniform but does not exceed the
Highest Lawful Rate throughout the full term hereof.
2.19 Obligations Absolute. Subject to the further provisions of this
Section, the Obligations of the Borrower under this Article shall be absolute
and unconditional under any and all circumstances and irrespective of any
set-off, counterclaim, or defense to payment or performance which the Borrower
may have or have had against the Agent, any Lender, or any beneficiary of any
Letter of Credit. The Borrower agrees that none of the Agent or the Lenders
shall be responsible for, nor shall the Obligations be affected by, among other
things, (a) the validity or genuineness of documents or any endorsements thereon
presented in connection with any Letter of Credit, even if such documents shall
in fact prove to be in any and all respects invalid, fraudulent or forged, AND
EVEN IF DUE TO THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT OR ANY
LENDER, so long as the Agent, as the issuer of such Letter of Credit, has no
actual knowledge of any such invalidity, lack of genuineness, fraud, or forgery
prior to the presentment for payment of a corresponding Letter of Credit or any
draft thereunder; provided, however, with respect to the preceding matters in
this Section, the Agent, as the issuer of the Letters of Credit, agrees to
exercise ordinary care in examining each
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document required to be presented pursuant to each Letter of Credit to ascertain
that each such document appears on its face to comply with the terms thereof, or
(b) any dispute between or among the Borrower and any beneficiary of any Letter
of Credit or any other party to which any Letter of Credit may be transferred,
or any claims whatsoever of the Borrower against any beneficiary of any Letter
of Credit or any such transferee, EVEN IF DUE TO THE NEGLIGENCE, WHETHER SOLE OR
CONCURRENT, OF THE AGENT OR ANY LENDER; provided, in all respects, that the
Agent, as the issuer of Letters of Credit, shall be liable to the Borrower to
the extent, but only to the extent, of any direct, as opposed to consequential
or punitive, damages suffered by the Borrower as a result of the willful
misconduct or gross negligence of the Agent as the issuer of Letters of Credit
in determining whether documents presented under a Letter of Credit complied
with the terms of such Letter of Credit that resulted in either a wrongful
payment under such Letter of Credit or a wrongful dishonor of a claim or draft
properly presented under such Letter of Credit. In the absence of gross
negligence or willful misconduct by the Agent as the issuer of Letters of
Credit, the Agent shall not be liable for any error, omission, interruption or
delay, EVEN IF DUE TO THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT,
in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. The Agent, the Lenders,
and the Borrower agree that any action taken or omitted by the Agent, as issuer
of any Letter of Credit, under or in connection with any Letter of Credit or the
related drafts or documents, EVEN IF DUE TO THE NEGLIGENCE, WHETHER SOLE OR
CONCURRENT, OF THE AGENT OR ANY LENDER, if done in the absence of gross
negligence or willful misconduct, shall be binding as among the Agent, as issuer
of such Letter of Credit or otherwise, the Lenders, and the Borrower and shall
not put the Agent, as issuer of such Letter of Credit or otherwise, or any
Lender under any liability to the Borrower.
2.20 Yield Protection. (a) Without limiting the effect of the other
provisions of this Section (but without duplication), the Borrower shall pay to
the Agent and each Lender from time to time such amounts as the Agent or such
Lender may determine are necessary to compensate it for any Additional Costs
incurred by the Agent or such Lender.
(b) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to each Lender from
time to time on request such amounts as such Lender may determine are necessary
to compensate such Lender for any costs attributable to the maintenance by such
Lender (or any Applicable Lending Office), pursuant to any Regulatory Change, of
capital in respect of its Commitment, such compensation to include an amount
equal to any reduction of the rate of return on assets or equity of such Lender
(or any Applicable Lending Office) to a level below that which such Lender (or
any Applicable Lending Office) could have achieved but for such Regulatory
Change.
(c) Without limiting the effect of the other provisions of this
Section (but without duplication), in the event that any Requirement of Law or
Regulatory Change or the compliance by the Agent or any Lender therewith shall
(i) impose, modify, or hold applicable any reserve, special deposit, or similar
requirement against any Letter of Credit or obligation to issue Letters of
Credit, or (ii) impose upon the Agent or such Lender any other condition
regarding any Letter of Credit or obligation to issue Letters of Credit, and the
result of any such event shall be to increase the cost to the Agent or such
Lender of issuing or maintaining any
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Letter of Credit or obligation to issue Letters of Credit or any liability with
respect to Letter of Credit Payments, or to reduce any amount receivable in
connection therewith, then upon demand by the Agent or such Lender, as the case
may be, the Borrower shall pay to the Agent or such Lender, from time to time as
specified by the Agent or such Lender, additional amounts which shall be
sufficient to compensate the Agent or such Lender for such increased cost or
reduced amount receivable.
(d) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to the Agent and each
Lender such amounts as shall be sufficient in the reasonable opinion of the
Agent and such Lender to compensate them for any loss, cost, or expense incurred
by and as a result of:
(i) any payment, prepayment, or conversion by the Borrower
of a LIBO Rate Loan on a date other than the last day
of an Interest Period for such Loan; or
(ii) any failure by the Borrower to borrow a LIBO Rate Loan
or to convert a Floating Rate Loan into a LIBO Rate
Loan on the date for such borrowing or conversion
specified in the relevant Borrowing Request;
such compensation to include with respect to any LIBO Rate Loan, an amount
equal to the excess, if any, of (A) the amount of interest which would have
accrued on the principal amount so paid, prepaid, converted, or not borrowed or
converted for the period from the date of such payment, prepayment, conversion,
or failure to borrow or convert to the last day of the then current Interest
Period for such Loan (or, in the case of a failure to borrow or convert, the
Interest Period for such Loan which would have commenced on the date of such
failure to borrow or convert) at the applicable rate of interest for such Loan
provided for herein over (B) the interest component of the amount the Agent or
such Lender would have bid in the London interbank market for Dollar deposits
of amounts comparable to such principal amount and maturities comparable to
such period, as reasonably determined by the Agent or such Lender.
(e) Determinations by the Agent or any Lender for purposes of
this Section of the effect of any Regulatory Change on capital maintained, its
costs or rate of return, maintaining Loans, issuing Letters of Credit, its
obligation to make Loans and issue Letters of Credit, or on amounts receivable
by it in respect of Loans, Letters of Credit, or such obligations, and the
additional amounts required to compensate the Agent and such Lender under this
Section shall be conclusive, absent manifest error, provided that such
determinations are made on a reasonable basis. The Agent or the relevant Lender
shall furnish the Borrower with a certificate setting forth in reasonable detail
the basis and amount of increased costs incurred or reduced amounts receivable
as a result of any such event, and the statements set forth therein shall be
conclusive, absent manifest error. The Agent or the relevant Lender shall (i)
notify the Borrower, as promptly as practicable after the Agent or such Lender
obtains knowledge of any Additional Costs or other sums payable pursuant to this
Section and determines to request compensation therefor, of any event occurring
after the Closing Date which will entitle the Agent or such Lender to
compensation pursuant to this Section; and (ii) designate a different
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Applicable Lending Office for the Loans affected by such event if such
designation will avoid the need for or reduce the amount of such compensation
and will not, in the sole opinion of the Agent or such Lender, be
disadvantageous to the Agent or such Lender. If any Lender requests
compensation from the Borrower under this Section, the Borrower may, after
payment of all compensation then accrued and by notice to the Agent and such
Lender, require that the Loans by such Lender of the type with respect to which
such compensation is requested be converted into Floating Rate Loans in
accordance with Section 2.13. Any compensation requested by the Agent or any
Lender pursuant to this Section shall be due and payable within five days of
delivery of any such notice to the Borrower.
(f) The Agent and the Lenders agree not to request, and the
Borrower shall not be obligated to pay, any Additional Costs or other sums
payable pursuant to this Section unless similar additional costs and other sums
payable are also generally assessed by the Agent or such Lender against other
customers similarly situated where such customers are subject to documents
providing for such assessment.
2.21 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to (a) honor its obligation to make LIBO Rate Loans,
or (b) maintain LIBO Rate Loans, then such Lender shall promptly notify the
Agent and the Borrower thereof. The obligation of such Lender to make LIBO Rate
Loans and convert Floating Rate Loans into LIBO Rate Loans shall then be
suspended until such time as such Lender may again make and maintain LIBO Rate
Loans, and the outstanding LIBO Rate Loans of such Lender shall be converted
into Floating Rate Loans in accordance with Section 2.13.
2.22 Taxes. (a) All payments made by the Borrower under this
Agreement shall be made free and clear of, and without reduction or withholding
for or on account of, present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority on the
basis of any change after the date hereof in any applicable treaty, law, rule,
guideline or regulations or in the interpretation or administration thereof,
excluding, in the case of the Agent and each Lender, net income and franchise
taxes imposed on the Agent or such Lender by the jurisdiction under the laws of
which the Agent or such Lender is organized or any political subdivision or
taxing authority thereof or therein, or by any jurisdiction in which such
Lender's lending office is located or any political subdivision or taxing
authority thereof or therein (all such non-excluded taxes, levies, imposts,
deductions, charges or withholdings being hereinafter called "Taxes"). If any
Taxes are required to be withheld from any amounts payable to the Agent or any
Lender hereunder or under any other Loan Document, the amounts so payable to the
Agent or such Lender shall be increased to the extent necessary to yield to the
Agent or such Lender (after payment of all Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement and the other Loan Documents. Whenever any Taxes are payable by the
Borrower, as promptly as possible thereafter, the Borrower shall send to the
Agent for its own account or for the account of such Lender, as the case may be,
a certified copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required
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documentary evidence, the Borrower shall indemnify the Agent and the Lenders for
any incremental taxes, interest or penalties that may become payable by the
Agent or any Lender as a result of any such failure. The agreements in this
Section shall survive the termination of this Agreement and the payment of all
Obligations.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof agrees that, prior to the first date
on which any payment is due to it hereunder, it will, to the extent it may
lawfully do so, deliver to the Borrower and the Agent two duly completed copies
of United States Internal Revenue Service Form 1001 or 4224 or successor
applicable form, as the case may be, certifying in each case that such Lender is
entitled to receive payments under this Agreement and the Note payable to it,
without deduction or withholding of any United States federal income taxes. At
the written request of the Borrower, each Lender which delivers to the Borrower
and the Agent a Form 1001 or 4224 pursuant to the preceding sentence further
undertakes to deliver to the Borrower and the Agent two further copies of such
Form 1001 or 4224, or successor applicable forms, or other manner of
certification, as the case may be, on or before the date that any such letter or
form expires or becomes obsolete or after the occurrence of any event requiring
a change in the most recent form previously delivered by it to the Borrower, and
such extensions or renewals thereof as may reasonably be requested by the
Borrower, certifying in the case of Form 1001 or 4224 that such Lender is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, unless in any such case,
an event (including any change in treaty, law or regulation) has occurred prior
to the date on which any such delivery would otherwise be required which renders
all such forms inapplicable or which would prevent such Lender from duly
completing and delivering any such form with respect to it and such Lender
advises the Borrower that it is not capable of receiving payments without any
deduction or withholding of United States federal income tax.
2.23 Replacement Lenders. (a) If any Lender has notified the
Borrower of its incurring additional costs under Section 2.20 or has required
the Borrower to make payments for Taxes under Section 2.22, the Borrower may,
unless such Lender has notified the Borrower that the circumstances giving rise
to such notice no longer apply, terminate, in whole but not in part, the
Commitment of such Lender (other than the Agent) (the "Terminated Lender") at
any time upon five Business Days' prior written notice to the Terminated Lender
and the Agent (such notice referred to herein as a "Notice of Termination").
(b) In order to effect the termination of the Commitment of the
Terminated Lender, the Borrower shall (i) obtain an agreement with one or more
Lenders to increase their Commitments and/or (ii) request any one or more other
banking institutions to become a "Lender" in place and instead of such
Terminated Lender and agree to accept a Commitment; provided, however, that such
one or more other banking institutions are reasonably acceptable to the Agent
and become parties by executing an Assignment Agreement (the Lenders or other
banking institutions that agree to accept in whole or in part the Commitment of
the Terminated Lender being referred to herein as the "Replacement Lenders"),
such that the aggregate increased and/or accepted Facility Amounts of the
Replacement Lenders under clauses (i) and (ii) above equal the Facility Amount
of the Terminated Lender.
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(c) The Notice of Termination shall include the name of the
Terminated Lender, the date the termination will occur (the "Termination Date"),
the Replacement Lender or Replacement Lenders to which the Terminated Lender
will assign its Commitment, and, if there will be more than one Replacement
Lender, the portion of the Terminated Lender's Commitment to be assigned to each
Replacement Lender.
(d) On the Termination Date, (i) the Terminated Lender shall by
execution and delivery of an Assignment Agreement assign its Commitment to the
Replacement Lender or Replacement Lenders (pro rata, if there is more than one
Replacement Lender, in proportion to the portion of the Terminated Lender's
Commitment to be assigned to each Replacement Lender) indicated in the Notice of
Termination and shall assign to the Replacement Lender or Replacement Lenders
its Loan (if any) then outstanding pro rata as aforesaid), (ii) the Terminated
Lender shall endorse its Note, payable without recourse, representation or
warranty to the order of the Replacement Lender or Replacement Lenders (pro rata
as aforesaid), (iii) the Replacement Lender or Replacement Lenders shall
purchase the Note held by the Terminated Lender (pro rata as aforesaid) at a
price equal to the unpaid principal amount thereof plus interest and fees
accrued and unpaid to the Termination Date, and (iv) the Replacement Lender or
Replacement Lenders will thereupon (pro rata as aforesaid) succeed to and be
substituted in all respects for the Terminated Lender with like effect as if
becoming a Lender pursuant to the terms of Section 9.1(b), and the Terminated
Lender will have the rights and benefits of an assignor under Section 9.1(b).
To the extent not in conflict, the terms of Section 9.1(b) shall supplement the
provisions of this Section.
2.24 Regulatory Change. In the event that by reason of any
Regulatory Change or any other circumstance arising after the Closing Date
affecting any Lender, such Lender (a) incurs Additional Costs based on or
measured by the excess above a specified level of the amount of a category of
deposits or other liabilities of such Lender which includes deposits by
reference to which the interest rate on any LIBO Rate Loan is determined as
provided in this Agreement or a category of extensions of credit or other assets
of such Lender which includes any LIBO Rate Loan, or (b) becomes subject to
restrictions on the amount of such a category of liabilities or assets which it
may hold, then, at the election of such Lender with notice to the Agent and the
Borrower, the obligation of such Lender to make LIBO Rate Loans and to convert
Floating Rate Loans into LIBO Rate Loans shall be suspended until such time as
such Regulatory Change or other circumstance ceases to be in effect, and all
such outstanding LIBO Rate Loans shall be converted into Floating Rate Loans in
accordance with Section 2.13.
ARTICLE 3
CONDITIONS
3.1 Conditions Precedent to Initial Loan and Letter of Credit. The
Lenders shall have no obligation to make the initial Loan and the Agent shall
have no obligation to issue the initial Letter of Credit unless and until all
matters incident to the consummation of the transactions contemplated herein
shall be satisfactory to the Agent, and the Agent shall have received, reviewed,
and approved the following documents and other items, appropriately
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executed when necessary and, where applicable, acknowledged by one or more
authorized officers of the Borrower, all in form and substance satisfactory to
the Agent and dated, where applicable, of even date herewith or a date prior
thereto and acceptable to the Agent:
(a) multiple counterparts of this Agreement, as requested by the
Agent;
(b) the Notes;
(c) copies of the Articles of Incorporation or Certificate of
Incorporation and all amendments thereto and the bylaws and all
amendments thereto of the Borrower, accompanied by a certificate
issued by the secretary or an assistant secretary of the Borrower, to
the effect that each such copy is correct and complete;
(d) certificates of incumbency and signatures of all officers of
the Borrower who are authorized to execute Loan Documents on behalf of
the Borrower, each such certificate being executed by the secretary or
an assistant secretary of the Borrower;
(e) copies of corporate resolutions approving the Loan Documents
and authorizing the transactions contemplated herein and therein, duly
adopted by the board of directors of the Borrower, accompanied by
certificates of the secretary or an assistant secretary of the
Borrower to the effect that such copies are true and correct copies of
resolutions duly adopted at a meeting or by unanimous consent of the
board of directors of the Borrower and that such resolutions
constitute all the resolutions adopted with respect to such
transactions, have not been amended, modified, or revoked in any
respect, and are in full force and effect as of the date of such
certificate;
(f) audited Financial Statements of the Borrower as of December
31, 1995;
(g) certificates dated as of a recent date from the Secretary of
State or other appropriate Governmental Authority for the State of
Texas evidencing the existence or qualification and good standing of
the Borrower in such jurisdiction;
(h) reserve data in a form and containing such information as
may be satisfactory to the Lenders covering the Oil and Gas Properties
of the Borrower, its Subsidiaries and the Partnerships;
(i) the opinion of Jenkens & Gilchrist, counsel to the Borrower,
in the form attached hereto as Exhibit VII, with such changes thereto
as may be approved by the Agent;
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(j) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Agent or any
Lender may reasonably request.
3.2 Conditions Precedent to Each Loan. The obligations of the
Lenders to make each Loan are subject to the satisfaction of the following
additional conditions precedent:
(a) the Borrower shall have delivered to the Agent a Borrowing
Request at least the requisite time prior to the requested date for
the relevant Loan; and each statement or certification made in such
Borrowing Request shall be true and correct in all material respects
on the requested date for such Loan;
(b) no Default or Event of Default shall exist or will occur as
a result of the making of the requested Loan;
(c) if requested by the Agent or any Lender, the Borrower shall
have delivered evidence satisfactory to the Agent or such Lender
substantiating any of the matters contained in this Agreement which
are necessary to enable the Borrower to qualify for such Loan;
(d) the Agent shall have received, reviewed, and approved such
additional documents and items as described in Section 3.1 as may be
requested by the Agent with respect to such Loan;
(e) no Material Adverse Effect shall have occurred;
(f) each of the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct and
shall be deemed to be repeated by the Borrower as if made on the
requested date for such Loan;
(g) neither the consummation of the transactions contemplated
hereby nor the making of such Loan shall contravene, violate, or
conflict with any Requirement of Law;
(h) the Agent and each Lender shall have received the payment of
all fees payable by the Borrower hereunder and the Agent shall have
received reimbursement from the Borrower, or special legal counsel for
the Agent shall have received payment from the Borrower, for all
reasonable fees and expenses of counsel to the Agent for which the
Borrower is responsible pursuant to applicable provisions of this
Agreement and for which invoices have been presented as of or prior to
the date of the relevant Loan; and
(i) all matters incident to the consummation of the transactions
hereby contemplated shall be satisfactory to the Agent and each
Lender.
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3.3 Conditions Precedent to Issuance of Letters of Credit. The
obligation of the Agent, as the issuer of the Letters of Credit, to issue,
renew, or extend any Letter of Credit is subject to the satisfaction of the
following additional conditions precedent:
(a) the Borrower shall have delivered to the Agent a written (or
oral, confirmed promptly in writing) request for the issuance,
renewal, or extension of a Letter of Credit at least three Business
Days prior to the requested issuance, renewal, or extension date and a
Letter of Credit Application at least one Business Day prior to the
requested issuance date; and each statement or certification made in
such Letter of Credit Application shall be true and correct in all
material respects on the requested date for the issuance of such
Letter of Credit;
(b) no Default or Event of Default shall exist or will occur as
a result of the issuance, renewal, or extension of such Letter of
Credit; and
(c) the terms, provisions, and beneficiary of the Letter of
Credit or such renewal or extension shall be satisfactory to the
Agent, as the issuer of the Letters of Credit, in its sole discretion.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement
and to extend credit to the Borrower, the Borrower represents and warrants to
the Agent and each Lender (which representations and warranties shall survive
the delivery of the Notes) that:
4.1 Existence of Borrower and Subsidiaries. Each of the Borrower and
its Subsidiaries is a corporation, duly organized, validly existing and in good
standing under the laws of the state of its incorporation and is authorized to
do business and in good standing as a foreign corporation in every jurisdiction
in which it owns or leases real property or in which the nature of its business
requires it to be so qualified, except where the failure to so qualify,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
4.2 Existence of Partnerships. Each of the Partnerships is duly
formed and legally existing under the laws of its jurisdiction of formation and
is qualified to do business in every jurisdiction in which the nature of its
business requires it to be so qualified, except where the failure to so qualify,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
4.3 Due Authorization. The execution and delivery by the Borrower of
this Agreement and the borrowings hereunder; the execution and delivery by the
Borrower of the Notes and the other Loan Documents; the repayment by the
Borrower of the Indebtedness evidenced by the Notes and interest and fees, if
any, provided in the Notes and the other Loan
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Documents are within the power of the Borrower; have been duly authorized by all
necessary action; and do not and will not (a) require the consent of any
Governmental Authority, (b) contravene or conflict with any Requirement of Law
or the articles or certificate of incorporation, bylaws, or other organizational
or governing documents of the Borrower, (c) contravene or conflict with any
Partnership Agreement, or any indenture, instrument or other agreement to which
the Borrower is a party or by which the Property of the Borrower is bound or
encumbered, or (d) result in or require the creation or imposition of any Lien
upon any of the Properties of the Borrower other than as contemplated in the
Loan Documents.
4.4 Valid and Binding Obligations of Borrower. This Agreement and
the other Loan Documents, when duly executed and delivered, will be legal, valid
and binding obligations of the Borrower, enforceable in accordance with their
respective terms, subject to any applicable bankruptcy, insolvency or other laws
of general application affecting creditors' rights and judicial decisions
interpreting any of the foregoing.
4.5 Scope and Accuracy of Financial Statements. The Financial
Statements of the Borrower, its Subsidiaries and the Partnerships as of December
31, 1995, provided to the Lenders have been prepared in accordance with GAAP
consistently applied and fairly reflect the financial condition and the results
of the operations of the Borrower, its Subsidiaries and the Partnerships in all
material respects as of the dates and for the periods stated therein. No event
or circumstance has occurred since December 31, 1995, that has resulted or could
reasonably be expected to result in a Material Adverse Effect.
4.6 Liabilities, Litigation and Restrictions. Except for the
liabilities shown in the Financial Statements provided to the Lenders prior to
the Closing Date, none of the Borrower, its Subsidiaries or the Partnerships has
any liabilities, direct or contingent, which may reasonably be expected to
result in a Material Adverse Effect. Except as disclosed to the Lenders in
writing prior to the Closing Date, no litigation or other action of any nature
affecting any of the Borrower, its Subsidiaries or the Partnerships is pending
before any Governmental Authority or, to the knowledge of the Borrower,
threatened against or affecting any of the Borrower, its Subsidiaries or the
Partnerships, which might reasonably be expected to result in a Material Adverse
Effect. To the knowledge of the Borrower, no unusual or unduly burdensome
restriction, restraint or hazard exists by contract, law, governmental
regulation or otherwise relative to the business or material Properties of any
of the Borrower, its Subsidiaries or the Partnerships other than such as relate
generally to Persons engaged in the business activities similar to those
conducted by the Borrower or such Subsidiary or Partnership, as the case may be.
4.7 Title to Properties. Each of the Borrower, its Subsidiaries and
the Partnerships has good and indefeasible title to all of its material
(individually or in the aggregate) Properties, free and clear of all Liens other
than Permitted Liens.
4.8 Compliance with Federal Reserve Regulations. The Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, U or X of the Board of Governors of the Federal
Reserve System). No part of the proceeds of any
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extension of credit under this Agreement will be used to purchase or carry any
such margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock. No transaction contemplated by the Loan
Documents is in violation of any regulations promulgated by the Board of
Governors of the Federal Reserve System, including Regulations G, T, U or X.
4.9 Authorizations and Consents. No authorization, consent,
approval, exemption, franchise, permit or license of, or filing with, any
Governmental Authority or other Person is required to authorize, or is otherwise
required in connection with, the valid execution and delivery by the Borrower of
this Agreement and the other Loan Documents or the repayment and performance by
the Borrower of the Obligations.
4.10 Compliance with Laws, Rules, Regulations and Orders. To the
knowledge of the Borrower, neither the business nor any of the activities of any
of the Borrower, its Subsidiaries or the Partnerships, as presently conducted,
violates any Requirement of Law the result of which violation could reasonably
be expected to result in a Material Adverse Effect. Each of the Borrower, its
Subsidiaries and the Partnerships possesses all licenses, approvals,
registrations, permits and other authorizations necessary to enable it to carry
on its business in all material respects as now conducted; all such licenses,
approvals, registrations, permits and other authorizations are in full force and
effect; and the Borrower has no reason to believe that it or any Subsidiary or
Partnership will be unable to obtain the renewal of any such licenses,
approvals, registrations, permits and other authorizations.
4.11 Proper Filing of Tax Returns and Payment of Taxes Due. Each of
the Borrower, its Subsidiaries and the Partnerships has duly and properly filed
all United States income tax returns and all other tax returns which are
required to be filed and has paid all taxes due, except such taxes, if any, as
are being contested in good faith and as to which adequate reserves in
accordance with GAAP have been made. The charges and reserves on the books of
each of the Borrower, its Subsidiaries and the Partnerships with respect to
taxes and other governmental charges are adequate.
4.12 ERISA Compliance. Each of the Borrower, its Subsidiaries and
the Partnerships is in compliance in all material respects with the applicable
provisions of ERISA. No "reportable event", as such term is defined in Section
4043 of ERISA, has occurred with respect to any Plan. None of the Borrower,
its Subsidiaries or the Partnerships has incurred or expects to incur any
material liability to the Pension Benefit Guaranty Corporation or any Plan. With
respect to each Plan, the total value of the accrued benefits (both vested and
nonvested) does not materially exceed the value of the assets of such Plan, both
valued as of the end of the Plan year immediately prior to the date of this
Agreement. None of the Borrower, its Subsidiaries or the Partnerships currently
contributes to, or has an obligation to contribute to, or has at any time
contributed to, or had an obligation to contribute to, any Multi-employer Plan.
4.13 Take-or-Pay; Gas Imbalances. Except as disclosed in writing to
the Lenders prior to the Closing Date, none of the Borrower, its Subsidiaries or
the Partnerships is obligated in any material respect by virtue of any
prepayment made under any contract
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containing a "take-or-pay" or "prepayment" provision or under any similar
agreement to deliver hydrocarbons produced from or allocated to any of its Oil
and Gas Properties at some future date without receiving full payment therefor
at the time of delivery. Except as disclosed in writing to the Lenders prior to
the Closing Date, none of the Borrower, its Subsidiaries or the Partnerships has
produced gas, in any material amount, subject to balancing rights of third
parties or subject to balancing duties under governmental requirements, except
as to such matters for which the Borrower or the relevant Subsidiary or
Partnership has established monetary reserves adequate in amount to satisfy such
obligations and has segregated such reserves from other accounts.
4.14 Refunds. No orders of, proceedings pending before, or other
requirements of, the Federal Energy Regulatory Commission, the Texas Railroad
Commission, the Oklahoma Corporation Commission, the Louisiana Conservation
Commission, or any other Governmental Authority exist which could result in any
of the Borrower, its Subsidiaries or the Partnerships being required to refund
any material portion of the proceeds received or to be received from the sale of
hydrocarbons constituting part of its Oil and Gas Properties.
4.15 Casualties or Taking of Property. Except as disclosed to the
Lenders in writing prior to the Closing Date, since December 31, 1995, neither
the business nor any Property of any of the Borrower, its Subsidiaries or the
Partnerships has been materially adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike or other
labor disturbance, embargo, requisition of taking of Property or cancellation of
contracts, permits or concessions by any Governmental Authority, riot,
activities of armed forces or acts of God.
4.16 Locations of Business and Offices. The principal place of
business and chief executive office of the Borrower is located at the address
for the Borrower set forth in Section 9.4 or at such other location as the
Borrower may have, with prior written notice, advised the Agent.
4.17 Environmental Compliance. Except as has been disclosed to the
Lenders in writing prior to the Closing Date:
(a) no Property of any of the Borrower, its Subsidiaries
or the Partnerships is currently on, or, to the best
knowledge of the Borrower after due inquiry made in
accordance with good commercial practices, has ever been on,
any federal or state list of Superfund Sites;
(b) except in compliance with all applicable Requirements
of Law, no Hazardous Substances have been generated,
transported and/or disposed of by any of the Borrower, its
Subsidiaries or the Partnerships at a site which was, at the
time of such generation, transportation and/or disposal, or
has since become, a Superfund Site;
(c) no Release of Hazardous Substances by any of the
Borrower, its Subsidiaries or the Partnerships or, to the
best knowledge of the Borrower
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after due inquiry made in accordance with good commercial practices,
from, affecting or related to any Property of any of the Borrower,
its Subsidiaries or the Partnerships has occurred; and
(d) no Environmental Complaint has been received by the
any of the Borrower, its Subsidiaries or the Partnerships.
4.18 Investment Company Act Compliance. The Borrower is not an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
4.19 Public Utility Holding Company Act Compliance. The Borrower is
not a "holding company," or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
4.20 No Material Misstatements. No information, exhibit or report
prepared by or at the direction or with the supervision of the Borrower and
furnished to any Lender or the Agent in connection with the negotiation and
preparation of this Agreement or any Loan Document contains any material
misstatements of fact or omits to state a material fact necessary to make the
statements contained therein not misleading as of the date made or deemed made.
4.21 Subsidiaries. As of the date hereof, except as set forth on
Exhibit VIII, the Borrower has no Subsidiaries and none of the Borrower or its
Subsidiaries is a partner or participant in any partnership or joint venture.
The percentage ownership by the Borrower of outstanding common stock of each
Subsidiary and the partnership interest (Distributive Share) of the Borrower in
each Partnership is as set forth on Exhibit VIII.
4.22 Defaults. None of the Borrower, its Subsidiaries or the
Partnerships is in default, nor has any event or circumstance occurred which,
but for the passage of time or the giving of notice, or both, would constitute a
default, under any loan or credit agreement, indenture, mortgage, deed of trust,
security agreement or other instrument or agreement evidencing or pertaining to
any Indebtedness of the Borrower or such Subsidiary or Partnership, as the case
may be, or under any other material agreement or instrument to which the
Borrower or such Subsidiary or Partnership is a party or by which any of them or
the Property of any of them is bound, including agreements and instruments
relating to the Oil and Gas Properties. No Default or Event of Default exists.
4.23 Maintenance of Properties. Each of the Borrower, its
Subsidiaries and the Partnerships has maintained its Properties in good and
workable condition, ordinary wear and tear excepted, and in compliance in all
material respects with all applicable Requirements of Law.
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ARTICLE 5
AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrower shall:
5.1 Maintenance and Access to Records. Keep, and cause each of its
Subsidiaries and the Partnerships to keep, adequate records in accordance with
GAAP, of all of its transactions so that at any time, and from time to time, its
financial condition may be readily determined and, at the reasonable request of
the Agent or any Lender, make such records available for inspection and permit
the Agent or such Lender to make and take away copies thereof.
5.2 Quarterly Financial Statements. Deliver to each Lender, on or
before the 60th day after the end of each of the first three fiscal quarters of
the Borrower, the unaudited consolidated and consolidating Financial Statements
of the Borrower and its Subsidiaries, as at the end of such period and from the
beginning of such fiscal year to the end of such period, as applicable, which
Financial Statements shall be certified by the chief financial officer of the
Borrower as having been prepared in accordance with GAAP, consistently applied,
and as a fair presentation of the condition of the Borrower and its
Subsidiaries, subject to changes resulting from normal year-end audit
adjustments.
5.3 Annual Financial Statements. Deliver to each Lender, as soon as
available but not later than the 120th day after the close of each fiscal year
of the Borrower, a copy of the annual audited consolidated and consolidating
Financial Statements of the Borrower and its Subsidiaries.
5.4 Compliance Certificates. Concurrently with the furnishing of the
Financial Statements submitted pursuant to Sections 5.2 and 5.3, provide each
Lender a Compliance Certificate; and concurrently with the furnishing of the
Financial Statements submitted pursuant to Section 5.3 if requested by any
Lender, provide each Lender a certificate in customary form from the independent
certified public accountants for the Borrower stating that their audit has not
disclosed the existence of any Default or Event of Default or, if their audit
has disclosed the existence of any Default or Event of Default, specifying the
nature, period of existence and status thereof.
5.5 Oil and Gas Reserve Reports. (a) Deliver to each Lender each
April 1 during the term of this Agreement, engineering reports in usual and
customary form and substance, certified by any nationally- or regionally-
recognized independent consulting petroleum engineers acceptable to the Lenders
as fairly and accurately setting forth (i) the proven and producing, shut in,
behind pipe and undeveloped oil and gas reserves (separately classified as such)
attributable to the Oil and Gas Properties of the Borrower, its Subsidiaries and
the Partnerships as of January 1 of the year for which such reserve reports are
furnished, (ii) the aggregate present value of the future net income with
respect to such Properties, discounted at a stated per annum discount rate of
proven and producing reserves, (iii) projections of the annual
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rate of production, gross income and net income with respect to such proven and
producing reserves, and (iv) information with respect to the "take or pay,"
"prepayment" and gas balancing liabilities of the Borrower, its Subsidiaries and
the Partnerships.
(B) All of the reports provided pursuant to this Section shall
be submitted to the Lenders together with additional data concerning pricing,
quantities of production from the Oil and Gas Properties of the Borrower, its
Subsidiaries and the Partnerships, purchasers of production and such other
information and engineering and geological data with respect thereto as the
Lenders may reasonably request and shall set forth the interests of the Borrower
in all such Oil and Gas Properties and separately designate such Properties by
field.
5.6 SEC and Other Reports. Deliver to each Lender, within five days
after any material report (other than financial statements) or other
communication is sent by any of the Borrower, its Subsidiaries or the
Partnerships to its stockholders or partners or is filed by any of the Borrower,
its Subsidiaries or the Partnerships with the Securities and Exchange Commission
or any successor or analogous Governmental Authority, copies of such report or
communication.
5.7 Notices. Deliver to each Lender, promptly upon any officer of
the Borrower having knowledge of the occurrence of any of the following events
or circumstances, a written statement with respect thereto, signed by the chief
financial officer of the Borrower, or other authorized representative of the
Borrower designated from time to time pursuant to written designation by the
Borrower delivered to the Agent, advising the Lenders of the occurrence of such
event or circumstance and the steps, if any, being taken by the Borrower with
respect thereto:
(a) any Default or Event of Default;
(b) any default or event of default under any contractual
obligation of the Borrower, or any litigation, investigation
or proceeding between any of the Borrower, its Subsidiaries
or the Partnerships and any Governmental Authority which, in
either case, if not cured or if adversely determined, as the
case may be, could reasonably be expected to have a Material
Adverse Effect;
(c) any litigation or proceeding involving any of the
Borrower, its Subsidiaries or the Partnerships as a defendant
or in which any Property of any of the Borrower, its
Subsidiaries or the Partnerships is subject to a claim and in
which the amount involved is $1,000,000 or more and which is
not covered by insurance or in which injunctive or similar
relief is sought;
(d) the receipt by any of the Borrower, its Subsidiaries
or the Partnerships of any Environmental Complaint or any
formal request from any Governmental Authority or other
Person for information (other than requirements for
compliance reports) regarding any Release of Hazardous
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Substances by any of the Borrower, its Subsidiaries or the
Partnerships or from, affecting or related to any Property of
any of the Borrower, its Subsidiaries or the Partnerships or
adjacent to any Property of any of the Borrower, its
Subsidiaries or the Partnerships;
(e) any actual, proposed or threatened testing or other
investigation by any Governmental Authority or other Person
concerning the environmental condition of, or relating to,
any Property of any of the Borrower, its Subsidiaries or the
Partnerships or adjacent to any Property of any of the
Borrower, its Subsidiaries or the Partnerships following any
allegation of a violation of any Requirement of Law;
(f) any Release of Hazardous Substances by any of the
Borrower, its Subsidiaries or the Partnerships or from,
affecting or related to any Property of any of the Borrower,
its Subsidiaries or the Partnerships or adjacent to any
Property of any of the Borrower, its Subsidiaries or the
Partnerships;
(g) the violation of any Environmental Law or the
revocation, suspension or forfeiture of or failure to renew,
any permit, license, registration, approval or authorization
which could reasonably be expected to have a Material Adverse
Effect;
(h) the institution by the Borrower or any of its
Affiliates of any Multi-employer Plan or the withdrawal or
partial withdrawal by the Borrower or any of its Affiliates
from any Multi-employer Plan;
(i) the sale or other transfer of any Oil and Gas
Properties or any interest therein to any Partnership;
(j) the incurrence of any Contingent Obligation permitted
by Section 6.1(i), the making of any loan or advance
permitted by Section 6.2(g), or the acquisition or making of
any Investment permitted by Section 6.8(h) which causes the
aggregate of all such Contingent Obligations, loans,
advances, and Investments to exceed $10,000,000; and
(k) any other event or condition which could reasonably be
expected to have a Material Adverse Effect.
5.8 Additional Information. Furnish to the Agent, promptly upon the
request of the Agent, such additional financial or other information concerning
the assets, liabilities, operations and transactions of the Borrower, its
Subsidiaries and the Partnerships as the Agent or any Lender may from time to
time reasonably request, including copies of the Partnership Agreements and all
amendments thereto, certified as being true and correct by the secretary or
assistant secretary of the Borrower; and promptly notify the Agent each time
that a change in the Loan Balance, L/C Exposure, or Borrowing Base would result
in a change in the Applicable Margin.
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5.9 Payment of Assessments and Charges. Pay, and cause each of its
Subsidiaries and the Partnerships to pay, all taxes, assessments, governmental
charges, claims for labor, supplies, rent and other obligations which, if
unpaid, might become a Lien against any of its Property, except any of the
foregoing being contested in good faith and as to which adequate reserves in
accordance with GAAP have been established or unless failure to pay would not
have a Material Adverse Effect.
5.10 Compliance with Laws. Comply, and cause each of its
Subsidiaries and the Partnerships to comply, with all Requirements of Law,
including (a) the Natural Gas Policy Act of 1978, as amended, (b) Environmental
Laws, and (c) all permits, licenses, registrations, approvals and authorizations
(i) related to any natural or environmental resource or media located on, above,
within, in the vicinity of, related to or affected by any of its Property, (ii)
required for the performance or conduct of its operations, or (iii) applicable
to the use, generation, handling, storage, treatment, transport or disposal of
Hazardous Substances; and cause all of its employees, agents, contractors,
subcontractors and future lessees (pursuant to appropriate lease provisions),
while such Persons are acting within the scope of their relationship with the
Borrower, such Subsidiary or Partnership, as the case may be, to comply with all
applicable Requirements of Law as may be necessary or appropriate to enable the
Borrower or such Subsidiary or Partnership, as the case may be, to so comply.
5.11 ERISA Information and Compliance. Furnish to each Lender upon
request, copies of each annual and other report with respect to each Plan or any
trust created thereunder filed with the United States Secretary of Labor or the
Pension Benefit Guaranty Corporation; fund, and cause each of its Subsidiaries
and the Partnerships to fund, all current service pension liabilities as they
are incurred under the provisions of all Plans and Multi-employer Plans; and
comply, and cause each of its Subsidiaries and the Partnerships to comply, with
all applicable provisions of ERISA.
5.12 Hazardous Substances Indemnification. INDEMNIFY AND HOLD EACH
LENDER AND THE AGENT AND ALL OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT AND AFFILIATES OF EACH LENDER AND THE AGENT HARMLESS FROM AND
AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES,
CHARGES, ADMINISTRATIVE AND JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL
ACTIONS, REQUIREMENTS AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND
EXPENSES INCURRED IN CONNECTION THEREWITH (INCLUDING ATTORNEYS' FEES AND
EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCE ON, UNDER OR FROM THE PROPERTY OF ANY OF THE
BORROWER, ITS SUBSIDIARIES OR THE PARTNERSHIPS, WHETHER PRIOR TO OR DURING THE
TERM HEREOF, (B) ANY ACTIVITY CARRIED ON OR UNDERTAKEN ON OR OFF THE PROPERTY OF
ANY OF THE BORROWER, ITS SUBSIDIARIES OR THE PARTNERSHIPS, WHETHER PRIOR TO OR
DURING THE TERM HEREOF, AND WHETHER BY ANY OF THE BORROWER, ITS SUBSIDIARIES OR
THE PARTNERSHIPS OR ANY PREDECESSOR IN TITLE OR ANY EMPLOYEES, AGENTS,
CONTRACTORS OR SUB-CONTRACTORS OF ANY OF THE BORROWER, ITS SUBSIDIARIES OR THE
PARTNERSHIPS OR ANY PREDECESSOR IN TITLE, OR ANY THIRD PERSONS AT ANY TIME
OCCUPYING OR PRESENT ON SUCH PROPERTIES, IN CONNECTION WITH THE HANDLING,
TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION OR
DISPOSAL OF ANY HAZARDOUS SUBSTANCE AT ANY TIME LOCATED OR PRESENT ON OR UNDER
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SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER THE PROPERTY OF ANY
OF THE BORROWER, ITS SUBSIDIARIES OR THE PARTNERSHIPS, OR (D) ANY CONTAMINATION
OF ANY PROPERTY OR NATURAL RESOURCES ARISING IN CONNECTION WITH OR RESULTING
FROM THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR DISPOSAL OF ANY
HAZARDOUS SUBSTANCE BY ANY OF THE BORROWER, ITS SUBSIDIARIES OR THE
PARTNERSHIPS OR ANY EMPLOYEE, AGENT, CONTRACTOR OR SUBCONTRACTOR OF ANY OF THE
BORROWER, ITS SUBSIDIARIES OR THE PARTNERSHIPS WHILE SUCH PERSONS ARE ACTING
WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH THE BORROWER, SUCH SUBSIDIARY OR
PARTNERSHIP, AS THE CASE MAY BE, IRRESPECTIVE OF WHETHER ANY OF SUCH ACTIVITIES
WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH REQUIREMENTS OF LAW, INCLUDING
ANY OF THE FOREGOING ARISING FROM NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF
ANY LENDER OR THE AGENT OR ANY OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS IN FACT AND AFFILIATES. THE FOREGOING INDEMNITY SHALL SURVIVE
SATISFACTION OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
5.13 Further Assurances. Promptly cure any defects, errors, or
omissions in the execution and delivery of any of the Loan Documents and all
agreements contemplated thereby, and upon notice, promptly execute and deliver
to the Agent all such other assurances and instruments as shall, in the opinion
of the Agent, be necessary to fulfill the terms of the Loan Documents.
5.14 Fees and Expenses of Agent. Upon request, promptly reimburse
the Agent for all amounts reasonably expended, advanced or incurred by the Agent
in connection with the development, preparation and execution of this Agreement
and the other Loan Documents and all amendments, restatements, supplements and
modifications hereto and thereto and the consummation of the transactions
contemplated hereby and thereby and to collect the Notes and enforce the rights
of the Lenders and the Agent under this Agreement and the other Loan Documents,
which amounts shall be deemed compensatory in nature and liquidated as to amount
upon notice to the Borrower by the Agent and which amounts will include, but not
be limited to, (a) attorneys' fees, (b) all court costs, (c) fees of auditors
and accountants, (d) investigation expenses, (e) fees and expenses incurred in
connection with the participation of the Lenders and the Agent as members of the
creditors' committee in a case commenced under Title 11 of the United States
Code or other similar law of the United States, the State of Texas or any other
jurisdiction, incurred by the Agent in connection with the collection of the
Obligations, and (f) any and all search, registration, recording and filing fees
and any and all liabilities with respect to stamp, excise and other taxes,
together with interest at the Floating Rate, calculated on the basis of a year
of 365 or 366 days, as the case may be, on each such amount from the date of
notification to the Borrower that the same was expended, advanced or incurred by
the Agent until the date it is repaid to the Agent. The obligations of the
Borrower under this Section shall survive the nonassumption of this Agreement in
a case commenced under Title 11 of the United States Code or other similar law
of the United States, the State of Texas or any other jurisdiction and be
binding upon the Borrower and any trustee, receiver or liquidator of the
Borrower appointed in any such case.
5.15 Indemnification of Lenders and Agent. INDEMNIFY AND HOLD EACH
LENDER AND THE AGENT AND ALL OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-
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IN-FACT AND AFFILIATES OF EACH LENDER AND THE AGENT (EACH SUCH PERSON AN
"INDEMNITEE") HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS
OF ANY KIND OR NATURE WHATSOEVER (INCLUDING REASONABLE ATTORNEYS' FEES AND
DISBURSEMENTS) INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN
ANY WAY CONNECTED WITH, OR AS A RESULT OF (A) THE EXECUTION OR DELIVERY OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, (B) THE PERFORMANCE BY THE PARTIES TO THE
LOAN DOCUMENTS OF THEIR RESPECTIVE OBLIGATIONS THEREUNDER OR THE CONSUMMATION OF
THE TRANSACTIONS CONTEMPLATED THEREBY, OR (C) THE ENFORCEMENT OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS (ALL THE FOREGOING IN THIS SECTION, COLLECTIVELY,
THE "INDEMNIFIED LIABILITIES"), INCLUDING INDEMNIFIED LIABILITIES ARISING FROM
THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF ANY INDEMNITEE; PROVIDED THAT THE
BORROWER SHALL HAVE NO OBLIGATION UNDER THIS SECTION TO ANY INDEMNITEE WITH
RESPECT TO INDEMNIFIED LIABILITIES THAT ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NON-APPEALABLE JUDGMENT TO HAVE RESULTED FROM THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR FROM THE BREACH BY
SUCH INDEMNITEE OF ITS OBLIGATIONS UNDER ANY LOAN DOCUMENT. THE OBLIGATIONS OF
THE BORROWER UNDER THIS SECTION SHALL SURVIVE THE SATISFACTION OF ALL
OBLIGATIONS, THE TERMINATION OF THIS AGREEMENT AND THE NONASSUMPTION OF THIS
AGREEMENT IN A CASE COMMENCED UNDER TITLE 11 OF THE UNITED STATES CODE OR OTHER
SIMILAR LAW OF THE UNITED STATES, THE STATE OF TEXAS OR ANY OTHER JURISDICTION
AND BE BINDING UPON THE BORROWER AND ANY TRUSTEE, RECEIVER OR LIQUIDATOR OF THE
BORROWER APPOINTED IN ANY SUCH CASE.
5.16 Maintenance of Existence and Good Standing. Maintain, and cause
each of its Subsidiaries and the Partnerships to maintain, its corporate or
partnership existence, as the case may be; and maintain, and cause each of its
Subsidiaries and the Partnerships to maintain, its qualification and good
standing in all jurisdictions wherein the Property now owned or hereafter
acquired or the business now or hereafter conducted necessitates same except
where the failure to so maintain such qualification and good standing would not
have a Material Adverse Effect.
5.17 Maintenance of Tangible Property. Maintain, and cause each of
its Subsidiaries and the Partnerships to maintain, all of its material tangible
Property in good repair and condition and make all necessary replacements
thereof and operate such Property in a good and workmanlike manner.
5.18 Maintenance of Insurance. Maintain, or cause to be maintained,
insurance with respect to the properties and business of each of the Borrower,
its Subsidiaries and the Partnerships against such liabilities, casualties,
risks and contingencies and in such amounts as is customary in the industry; and
furnish to the Agent, at the execution of this Agreement and at the request of
any Lender thereafter, certificates evidencing such insurance.
5.19 Inspection of Tangible Property. Permit any authorized
representative of any Lender or the Agent, at the sole risk of such party and
such authorized representatives, to visit and inspect any tangible Property of
any of the Borrower, its Subsidiaries or the Partnerships.
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5.20 Payment of Notes and Performance of Obligations. Pay the Notes
according to the reading, tenor and effect thereof, as modified by this
Agreement, and pay and perform all Obligations.
5.21 Operation of Oil and Gas Properties. Develop, maintain and
operate, and cause each of its Subsidiaries and the Partnerships to develop,
maintain and operate, its Oil and Gas Properties in a prudent and workmanlike
manner in accordance with industry standards.
5.22 Performance of Designated Contracts. Perform and observe in all
material respects all of its obligations under the Partnership Agreements and
perform and observe, and cause each of its Subsidiaries and the Partnerships to
perform and observe, in all material respects all of its obligations under all
material agreements and contracts of such Person.
ARTICLE 6
NEGATIVE COVENANTS
So long as any Obligation remains outstanding or any Commitment
exists, without the prior written consent of the Required Lenders, the Borrower
will not:
6.1 Indebtedness; Contingent Obligations. Create, incur, assume or
permit to exist any Indebtedness or Contingent Obligations, or permit any of its
Subsidiaries or the Partnerships to do so; provided, however, the foregoing
restrictions shall not apply to (a) the Obligations other than Hedging
Obligations; (b) unsecured accounts payable incurred in the ordinary course of
business, which are not unpaid in excess of 60 days beyond invoice date or are
being contested in good faith and as to which such reserve as is required by
GAAP has been made; (c) Bank One Debt; (d) performance guarantees and
performance surety or other bonds provided in the ordinary course of business;
(e) operating leases entered into in the ordinary course of business or
endorsements of instruments for collection in the ordinary course of business;
(f) purchase-money Indebtedness of the Borrower only incurred in connection with
the acquisition of equipment not exceeding $2,500,000 at any time outstanding;
(g) Subordinated Debt; (h) obligations with respect to Hedging Agreements
entered into with any Lender or any affiliate of any Lender or another
counterparty satisfactory to the Agent provided that (i) in the case of
hydrocarbon Hedging Agreements, such Hedging Agreements protect against actual
exposure to volatility in hydrocarbon prices and the aggregate of the notional
and contracted amounts of such Hedging Agreements in any form other than put
options do not cover at any time a volume of hydrocarbons exceeding 80% of the
projected production from the proved producing reserves as reflected on the
Reserve Report most recently provided to the Agent, and the aggregate of the
notional and contracted amounts of all Hedging Agreements do not cover at any
time a volume of hydrocarbons exceeding 100% of the projected production from
the proved producing reserves as reflected on the Reserve Report most recently
provided to the Agent, and (ii) the net mark-to-market exposure under such
Hedging Agreements does not exceed $2,500,000 in the aggregate for the Borrower,
its Subsidiaries, and the Partnerships, (i) Contingent Obligations with respect
to the oil and gas project of the Borrower in Russia, which, together with loans
and advances permitted by Section 6.2(g) and Investments permitted by
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Section 6.8(h), shall not exceed $25,000,000, and (j) other Indebtedness not
exceeding $2,500,000 in the aggregate at any time outstanding for the Borrower
and its Subsidiaries.
6.2 Loans or Advances. Make or agree to make or allow to remain
outstanding any loans or advances to any Person, or permit any of its
Subsidiaries or the Partnerships to do so; provided, however, the foregoing
restrictions shall not apply to (a) advances or extensions of credit in the form
of accounts receivable incurred in the ordinary course of business and upon
terms common in the industry for such accounts receivable, (b) accounts
receivable owed by the Partnerships to the Borrower with respect to general and
administrative and/or direct expenses and not outstanding for more than 60 days,
(c) loans, advances or extensions of credit to suppliers or contractors under
applicable contracts or agreements in connection with oil and gas development
activities of the Borrower or such Subsidiary or Partnership, (d) loans and
advances to employees of the Borrower or such Subsidiary in the ordinary course
of business not exceeding $1,000,000 in the aggregate at any time outstanding,
(e) loans or advances by the Borrower to any Partnership not outstanding for
more than 60 days and not exceeding the uncollected but accrued revenues payable
to the Borrower with respect to Oil and Gas Properties but attributable to such
Partnership, the aggregate of which for all Partnerships shall not exceed
$8,000,000 at any time outstanding, (f) loans or advances by the Borrower to
Swift Energy Marketing Company which, together with Investments permitted
pursuant to Section 6.8(g) shall not exceed $6,000,000, or (g) loans or advances
by the Borrower to its oil and gas project in Russia which, together with
Investments permitted by Section 6.8(h), shall not exceed $10,000,000.
6.3 Mortgages or Pledges of Assets. Create, incur, assume or permit
to exist, any Lien on any of its Properties, or permit any of its Subsidiaries
or the Partnerships to do so; provided, however, the foregoing restriction in
this Section shall not apply to Permitted Liens.
6.4 Sales of Properties; Leasebacks. Sell, transfer or otherwise
dispose of, in any 12-month period, in one or any series of transactions, more
than ten percent in value (determined on the basis of the greater of market or
book value) of its Property, or enter into any arrangement to do so, or enter
into any arrangement to sell or transfer any Property and thereafter rent or
lease as lessee such Property or other Property intended for the same use or
purpose of the Property sold or transferred, or permit any of its Subsidiaries
or the Partnerships to do any of the foregoing in this Section; provided,
however, the foregoing restrictions shall not apply to (a) the sale of
hydrocarbons or inventory in the ordinary course of business at prices at least
substantially equivalent to the open market prices at the time of sale for
comparable hydrocarbons or inventory other than the sale of a production payment
and provided that no contract for the sale of hydrocarbons shall obligate any of
the Borrower, its Subsidiaries or the Partnerships to deliver hydrocarbons at
some future date without receiving full payment therefor within 90 days of
delivery, (b) the transfer of Oil and Gas Property of the Borrower to the
Partnerships in the ordinary course of business upon terms customary in the
industry for sales of comparable nature, (c) the sale or other disposition of
Property destroyed, lost, worn out, damaged or having only salvage value or no
longer used or useful in the business of the Borrower, or (d) farmouts or
similar agreements entered into in the ordinary course of business.
6.5 Dividends and Distributions. Declare, pay or make, whether in
cash or other Property, any dividend or distribution on any share of any class
of its capital stock other
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than cash dividends not exceeding $2,000,000 in any fiscal year and dividends
paid in capital stock of the Borrower; or purchase, redeem or otherwise acquire,
directly or indirectly, for value or set apart in any way for redemption,
retirement or other acquisition, directly or indirectly, any of its stock now or
hereafter outstanding; return any capital to its stockholders; or make any
distribution (whether by reduction of capital or otherwise) of its assets to its
stockholders.
6.6 Changes in Corporate Structure. Enter into any transaction of
consolidation, merger or amalgamation unless the Borrower is the surviving
corporation of any such consolidation, merger or amalgamation and no Default or
Event of Default exists or will occur as a result thereof; or liquidate, wind up
or dissolve or suffer any liquidation or dissolution.
6.7 Rental or Lease Agreements. Enter into any contract to rent or
lease any Properties, real or personal, the aggregate of rental and lease
payments under which for the Borrower, its Subsidiaries and the Partnerships on
a consolidated basis will exceed $1,000,000 in any calendar or fiscal year or
$5,000,000 during the term of such leases; provided, however, the foregoing
restriction shall not apply to (a) leases entered into in the ordinary course of
business which have been or should be, in accordance with GAAP, recorded as
capital leases, (b) bonuses and rentals paid under oil, gas and mineral leases,
or (c) the lease covering the corporate office of the Borrower.
6.8 Investments. Acquire Investments in, or purchase or otherwise
acquire all or substantially all of the assets of, any Person, or permit any of
its Subsidiaries or the Partnerships to do so; provided, however, the foregoing
shall not apply to (a) investments in United States government-issued securities
with maturities of no more than one year or certificates of deposit or
repurchase agreements issued by (i) any Lender or (ii) any bank or trust company
organized under the laws of the United States or any state thereof and having
capital surplus and undivided profits aggregating at least $250,000,000 and with
maturities of no more than one year, (b) commercial paper rated at least P-1 by
Moody's Investor Service, Inc. or A-1 by Standard & Poor's Corporation and with
maturities of no more than nine months from the date of acquisition thereof, (c)
short-term investments in the Eurodollar market through (i) any Lender, (ii) any
bank or trust company organized under the laws of the United States or any state
thereof and having capital surplus and undivided profits aggregating at least
$250,000,000, or (iii) any other Person acceptable to the Agent, (d) short-term
interest bearing deposits with any Lender or any bank or trust company organized
under the laws of the United States or any state thereof and having capital
surplus and undivided profits aggregating at least $250,000,000, (e) the
purchase of Oil and Gas Properties or investments with respect to and relating
to the production of oil, gas and other liquid or gaseous hydrocarbons from Oil
and Gas Properties, or (f) investments by the Borrower in the Partnerships in
amounts not to exceed those required as capital contributions under the
applicable Partnership Agreements; provided, however, at any time that a Default
or Event of Default exists, no investment may be made in any partnership or
joint venture in which the Borrower is not, at such time, a partner or joint
venturer other than those formed pursuant to Registration Statement No. 33-37983
on Form S-1 filed by the Borrower with the Securities and Exchange Commission on
November 28, 1990 (Swift Depositary Interests I), (g) Investments by the
Borrower in Swift Energy Marketing Company which, together with loans and
advances permitted by Section 6.2(f) shall not exceed
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$6,000,000, or (h) Investments by the Borrower in its oil and gas project in
Russia, which, together with loans and advances permitted by Section 6.2(g),
shall not exceed $10,000,000.
6.9 Lines of Business; Subsidiaries. Expand, on its own or through a
Subsidiary, into any line of business other than (a) those in which the Borrower
or such Subsidiary is engaged as of the date hereof and (b) other lines of
business related to the production of oil, gas and other hydrocarbons; or permit
any material change to be made in the character of its business as conducted as
of the date hereof.
6.10 ERISA Compliance. Permit any Plan maintained by it or any
Partnership to (a) engage in any "prohibited transaction" as such term is
defined in Section 4975 of the Internal Revenue Code of 1954, as amended, (b)
incur any "accumulated funding deficiency," as such term is defined in Section
302 of ERISA, or (c) terminate in a manner which could result in the imposition
of a Lien on any Property of the Borrower pursuant to Section 4068 of ERISA;
assume an obligation to contribute to any Multi-employer Plan; or acquire any
Person or the assets of any Person which has now or has had at any time an
obligation to contribute to any Multi-employer Plan.
6.11 Sale or Discount of Receivables. Except to minimize losses on
bona fide debts previously contracted, discount or sell with recourse, or sell
for less than the greater of the face or market value thereof, any of its notes
receivable or accounts receivable.
6.12 Transactions With Affiliates. Enter into any transaction
(including the sale, lease or exchange of Property or the rendering of service),
directly or indirectly, with any of its Affiliates other than upon fair and
reasonable terms no less favorable than the Borrower could obtain in an arm's
length transaction with a Person which was not an Affiliate.
6.13 Tangible Net Worth. Permit Tangible Net Worth as of the close
of any fiscal quarter to be less than $85,000,000 plus 75% of positive Net
Income for all fiscal periods ending subsequent to September 30, 1995.
6.14 Current Ratio. Permit the ratio of Current Assets to Current
Liabilities to be at any time less than 0.9 to 1.0.
6.15 Debt Coverage Ratio. Permit the ratio of Cash Flow for any
fiscal quarter to Debt Service determined as of the end of such fiscal quarter
to be less than 1.3 to 1.0.
6.16 Total Liabilities to Shareholders' Equity. Permit the ratio of
total liabilities of the Borrower to Shareholders' Equity to be at any time
greater than 2.0 to 1.0.
6.17 Amendment of Partnership Agreements. Amend or consent to the
amendment of any Partnership Agreement the effect of which may result in the
diminution of
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the Distributive Share with respect to the relevant Partnership or otherwise
adversely affect the interest of the Borrower in such Partnership or increase
the capital contribution of the Borrower with respect to such Partnership.
6.18 Subordinated Debt. Amend, extend or modify any of the terms or
provisions of any documents, notes, or agreements evidencing or governing the
Subordinated Debt or consent to any of the foregoing; or at any time following
the occurrence and during the continuance of any Default or Event of Default,
make any payment, whether in cash or other Property, on or with respect to the
Subordinated Debt.
6.19 Negative Pledges. Except pursuant to this Agreement and the
agreement governing the Bank One Debt, enter into or permit to exist any
agreement which prohibits or restricts the granting, incurring, assuming, or
permitting to exist any Lien on any of its Properties or provides that any such
occurrence shall constitute a default or breach of such agreement.
ARTICLE 7
EVENTS OF DEFAULT
7.1 Enumeration of Events of Default. Any of the following events
shall be considered an Event of Default as that term is used herein:
(a) Default shall be made in the payment when due of any
installment of principal or interest under this Agreement or
any Note or any fees or other sums payable hereunder or under
any other Loan Document;
(b) Default shall be made by the Borrower in the due
observance or performance of any covenant or agreement set
forth in any of Sections 5.2 through 5.7 and such default
shall continue for in excess of 15 days after the earlier of
notice thereof by the Agent to the Borrower or knowledge
thereof by the Borrower, or default shall be made by the
Borrower in the due observance or performance of any other
covenant or agreement set forth in this Agreement or any
other Loan Document;
(c) Any representation or warranty made by any of the
Borrower, its Subsidiaries, or the Partnerships in this
Agreement or any other Loan Document proves to have been
untrue in any material respect when made or deemed to have
been made, or any representation, warranty, statement
(including Financial Statements), certificate or data
furnished or made by any of the Borrower, its Subsidiaries, or the
Partnerships to any Lender or the Agent in connection herewith proves
to have been untrue in any material respect as of the date the facts
therein set forth were stated or certified;
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(d) Default shall be made by any of the Borrower, its
Subsidiaries, or the Partnerships in the payment or
performance of any bond, debenture, note, security (as
defined in the Securities Act of 1933, as amended), or other
evidence of Indebtedness, or under any credit agreement, loan
agreement, indenture, promissory note, or similar agreement
or instrument executed in connection with any of the
foregoing, and such default shall remain unremedied for in
excess of the period of grace, if any, with respect thereto,
and the effect of such default is to cause, or permit the
holders of such Indebtedness or security to cause, the
acceleration of the maturity of any such Indebtedness or to
permit a trustee or holder of any security to elect (whether
or not such trustee or holder does elect) a majority of the
directors on the board of directors of any of the Borrower or
its Subsidiaries;
(e) Any of the Borrower, its Subsidiaries, or the
Partnerships shall (i) apply for or consent to the
appointment of a receiver, trustee, or liquidator of it or
all or a substantial part of its assets, (ii) file a
voluntary petition commencing an Insolvency Proceeding, (iii)
make a general assignment for the benefit of creditors, (iv)
be unable, or admit in writing its inability, to pay its
debts generally as they become due, or (v) file an answer
admitting the material allegations of a petition filed
against it in any Insolvency Proceeding;
(f) An order, judgment or decree shall be entered against
any of the Borrower, its Subsidiaries, or the Partnerships by
any court of competent jurisdiction or by any other duly
authorized authority, on the petition of a creditor or
otherwise, granting relief in any Insolvency Proceeding or
approving a petition seeking reorganization or an arrangement
of its debts or appointing a receiver, trustee, conservator,
custodian, or liquidator of it or all or any substantial part
of its assets, and such order, judgment, or decree shall not
be dismissed or stayed within 30 days;
(g) Any of the Borrower, its Subsidiaries, or the
Partnerships shall have (i) concealed, removed, or permitted
to be concealed or removed, any part of its Property, with
intent to hinder, delay, or defraud its creditors or any of
them, (ii) made or suffered a transfer of any of its Property
which may be fraudulent under any bankruptcy, fraudulent
conveyance, or similar law and not otherwise permitted under
the provisions of this Agreement, or (iii) made any transfer
of its Property to or for the benefit of a creditor at a time when
other creditors similarly situated have not been paid;
(h) The levy against any significant portion of the
Property of any of the Borrower, its Subsidiaries, or the
Partnerships or any execution, garnishment, attachment,
sequestration, or other writ or similar proceeding which is
not permanently dismissed or discharged within 60 days;
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(i) A final and non-appealable order, judgment, or decree
shall be entered against any of the Borrower, its
Subsidiaries, or the Partnerships for money damages and/or
Indebtedness due in an amount in excess of $50,000 and such
order, judgment, or decree shall not be dismissed or stayed
within 60 days; or
(j) The Borrower shall default in any of its material
obligations as a Partner under any Partnership Agreement.
7.2 Rights Upon Default. (a) Upon the occurrence of any Event of
Default specified in Sections 7.1 (e) or (f), immediately and without notice,
(i) all Obligations shall become due and payable, without presentment, demand,
protest, notice of protest or dishonor, notice of intent to accelerate maturity,
notice of acceleration of maturity or other notice of any kind, all of which are
expressly waived by the Borrower, (ii) the Commitments shall immediately
terminate unless and until the Lenders and the Agent shall reinstate the same in
writing, and (iii) with the oral consent of the Required Lenders (confirmed
promptly in writing), each Lender and the Agent are hereby authorized at any
time and from time to time, without notice to the Borrower (any such notice
being expressly waived by the Borrower), to set-off and apply any and all
deposits (general or special, time or demand, provisional or final) held by such
Lender or the Agent and any and all other indebtedness at any time owing by such
Lender or the Agent to or for the credit or account of the Borrower against any
and all Obligations.
(b) Upon the occurrence of any other Event of Default, (i) the
Agent may, or upon the request of the Required Lenders, the Agent shall, declare
all Obligations immediately due and payable, without presentment, demand,
protest, notice of protest or dishonor, notice of intent to accelerate maturity,
notice of acceleration of maturity or other notice of any kind, all of which are
hereby expressly waived by the Borrower, (ii) the Agent may, or upon the request
of the Required Lenders, the Agent shall, declare the Commitments terminated,
whereupon the Commitments shall immediately terminate unless and until the
Lenders and the Agent shall reinstate the same in writing, and (iii) with the
oral consent of the Required Lenders (confirmed promptly in writing), the Agent
and each Lender are hereby authorized at any time and from time to time, without
notice to the Borrower (any such notice being expressly waived by the Borrower),
to set-off and apply any and all deposits (general or special, time or demand,
provisional or final) held by the Agent or such Lender and any and all other
indebtedness at any time owing by the Agent or such Lender to or for the credit
or account of the Borrower against any and all Obligations.
(C) In addition to the foregoing, upon the occurrence of any
Event of Default, each Lender and the Agent in accordance with the provisions of
this Agreement may exercise any or all of their rights and remedies provided by
law or pursuant to the Loan Documents.
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ARTICLE 8
THE AGENT
8.1 Appointment. Each Lender hereby designates and appoints the
Agent as the agent of such Lender under this Agreement and the other Loan
Documents. Each Lender authorizes the Agent, as the agent for such Lender, to
take such action on behalf of such Lender under the provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to the Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or in any other Loan Document, the Agent shall not have any
duties or responsibilities except those expressly set forth herein or in any
other Loan Document or any fiduciary relationship with any Lender; and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities on the part of the Agent shall be read into this Agreement or any
other Loan Document or otherwise exist against the Agent.
8.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
8.3 Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(a) required to initiate or conduct any litigation or collection proceedings
hereunder, except with the concurrence of the Required Lenders and contribution
by each Lender of its Percentage Share of costs reasonably expected by the Agent
to be incurred in connection therewith, (b) liable for any action lawfully taken
or omitted to be taken by it or such Person under or in connection with this
Agreement or any other Loan Document (except for gross negligence or willful
misconduct of the Agent or such Person), or (c) responsible in any manner to any
Lender for any recitals, statements, representations or warranties made by the
Borrower or any officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of the Borrower to perform its obligations hereunder
or thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower.
8.4 Reliance by Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel
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(including counsel to the Borrower), independent accountants and other experts
selected by the Agent. The Agent may deem and treat the payee of any Note as
the owner thereof for all purposes unless and until a written notice of
assignment, negotiation or transfer thereof shall have been received by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate and contribution by each Lender of its Percentage Share of costs
reasonably expected by the Agent to be incurred in connection therewith. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the other Loan Documents in accordance with a
request of the Required Lenders. Such request and any action taken or failure
to act pursuant thereto shall be binding upon the Lenders and all future
holders of the Notes. In no event shall the Agent be required to take any
action that exposes the Agent to personal liability or that is contrary to any
Loan Document or applicable Requirement of Law.
8.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agent has received notice from a Lender or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default." In the event that the Agent receives such a
notice, the Agent shall give notice thereof to the Lenders. The Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; provided that unless and until the
Agent shall have received such directions, subject to the provisions of Section
7.2, the Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders. In the event that
the officer of the Agent primarily responsible for the lending relationship with
the Borrower or the officer of any Lender primarily responsible for the lending
relationship with the Borrower becomes aware that a Default or Event of Default
has occurred and is continuing, the Agent or such Lender, as the case may be,
shall use its good faith efforts to inform the other Lenders and/or the Agent,
as the case may be, of such occurrence. Notwithstanding the preceding sentence,
failure to comply with the preceding sentence shall not result in any liability
to the Agent or any Lender.
8.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither the Agent nor any other Lender nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representation or warranty to such Lender and that no
act by the Agent or any other Lender hereafter taken, including any review of
the affairs of the Borrower, shall be deemed to constitute any representation or
warranty by the Agent or any Lender to any other Lender. Each Lender represents
to the Agent that it has, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, condition (financial and otherwise) and creditworthiness
of the Borrower and the value of the Properties of the Borrower and has made its
own decision to enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement
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and the other Loan Documents, and to make such investigation as it deems
necessary to inform itself as to the business, operations, property, condition
(financial and otherwise) and creditworthiness of the Borrower and the value of
the Properties of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business,
operations, property, condition (financial and otherwise) or creditworthiness
of the Borrower or the value of the Properties of the Borrower which may come
into the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
8.7 Indemnification. EACH LENDER AGREES TO INDEMNIFY THE AGENT AND
ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES (TO
THE EXTENT NOT REIMBURSED BY THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF
THE BORROWER TO DO SO), RATABLY ACCORDING TO THE PERCENTAGE SHARE OF SUCH
LENDER, FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS
OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING ANY TIME FOLLOWING THE
PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT) BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT OR ANY OF
ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN
ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
OR ANY OTHER DOCUMENT CONTEMPLATED OR REFERRED TO HEREIN OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR ANY ACTION TAKEN OR OMITTED BY THE AGENT OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR
IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING ANY LIABILITIES, CLAIMS,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED OR ASSERTED AS A RESULT OF THE
NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED
THAT NO LENDER SHALL BE LIABLE FOR THE PAYMENT OF ANY PORTION OF SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING SOLELY FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES. THE AGREEMENTS
IN THIS SECTION SHALL SURVIVE THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS
AND THE TERMINATION OF THIS AGREEMENT.
8.8 Restitution. Should the right of the Agent or any Lender to
realize funds with respect to the Obligations be challenged and any application
of such funds to the Obligations be reversed, whether by Governmental Authority
or otherwise, or should the Borrower otherwise be entitled to a refund or return
of funds distributed to the Lenders in connection with the Obligations, the
Agent or such Lender, as the case may be, shall promptly notify the Lenders of
such fact. Not later than Noon, Central Standard or Daylight Savings Time, as
the case may be, of the Business Day following such notice, each Lender shall
pay to the Agent an amount equal to the ratable share of such Lender of the
funds required to be returned to the Borrower. The ratable share of each Lender
shall be determined on the basis of the percentage of the
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payment all or a portion of which is required to be refunded originally
distributed to such Lender, if such percentage can be determined, or, if such
percentage cannot be determined, on the basis of the Percentage Share of such
Lender. The Agent shall forward such funds to the Borrower or to the Lender
required to return such funds. If any such amount due to the Agent is made
available by any Lender after Noon, Central Standard or Daylight Savings Time,
as the case may be, of the Business Day following such notice, such Lender shall
pay to the Agent (or the Lender required to return funds to the Borrower, as the
case may be) for its own account interest on such amount at a rate equal to the
Federal Funds Rate for the period from and including the date on which
restitution to the Borrower is made by the Agent (or the Lender required to
return funds to the Borrower, as the case may be) to but not including the date
on which such Lender failing to timely forward its share of funds required to be
returned to the Borrower shall have made its ratable share of such funds
available.
8.9 Agent in Its Individual Capacity. The Agent and its affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrower as though the Agent were not the agent hereunder.
With respect to any Note issued to the Lender serving as the Agent, the Agent
shall have the same rights and powers under this Agreement as a Lender and may
exercise such rights and powers as though it were not the Agent. The terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.
8.10 Successor Agent. The Agent may resign as Agent upon ten days'
notice to the Lenders and the Borrower. If the Agent shall resign as Agent
under this Agreement and the other Loan Documents, Lenders for which the
Percentage Shares aggregate at least 66-2/3% shall appoint from among the
Lenders a successor agent for the Lenders, whereupon such successor agent shall
succeed to the rights, powers and duties of the Agent. The term "Agent" shall
mean such successor agent effective upon its appointment. The rights, powers and
duties of the former Agent as Agent shall be terminated, without any other or
further act or deed on the part of such former Agent or any of the parties to
this Agreement or any holders of the Notes. After the removal or resignation of
any Agent hereunder as Agent, the provisions of this Article and Sections 5.12,
5.14, and 5.15 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement and the other Loan
Documents.
8.11 Applicable Parties. The provisions of this Article 8 are solely
for the benefit of the Agent and the Lenders, and the Borrower shall not have
any rights as a third party beneficiary or otherwise under any of the provisions
of this Article. In performing functions and duties hereunder and under the
other Loan Documents, the Agent shall act solely as the agent of the Lenders and
does not assume, nor shall it be deemed to have assumed, any obligation or
relationship of trust or agency with or for the Borrower or any legal
representative, successor and assign of the Borrower.
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ARTICLE 9
MISCELLANEOUS
9.1 Assignments; Participations. (a) The Borrower may not assign any
of its rights or obligations under any Loan Document without the prior consent
of the Agent and the Lenders.
(b) With the consent of the Agent (which shall not be
unreasonably withheld), any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement pursuant to an
Assignment Agreement. Any such assignment shall be in the amount of at least
$1,000,000 (or any whole multiple of $500,000 in excess thereof). Any such
assignment shall become effective upon the execution and delivery to the Agent
of the Assignment Agreement and the consent of the Agent. Promptly following
receipt of an executed Assignment Agreement, the Agent shall send to the
Borrower a copy of such executed Assignment Agreement. Promptly following
receipt of such executed Assignment Agreement, the Borrower shall execute and
deliver, at its own expense, new Notes to the assignee and, if applicable, the
assignor, in accordance with their respective interests, whereupon the prior
Notes of the assignor and, if applicable, the assignee, shall be cancelled and
returned to the Borrower. Upon the effectiveness of any assignment pursuant to
this Section 9.1(b), the assignee will become a "Lender," if not already a
"Lender," for all purposes of the Loan Documents, and the assignor shall be
relieved of its obligations hereunder to the extent of such assignment. If the
assignor no longer holds any rights or obligations under this Agreement, such
assignor shall cease to be a "Lender" hereunder, except that its rights under
Sections 2.19, 5.13, and 5.16 shall not be affected. On the last Business Day
of each month during which an assignment has become effective pursuant to this
Section 9.1(b), the Agent shall prepare a new Exhibit V giving effect to all
such assignments effected during such month and will promptly provide a copy
thereof to the Borrower and each Lender.
(c) Each Lender may transfer, grant, or assign participations in
all or any portion of its interests hereunder to any Person pursuant to this
Section 9.1(c), provided that such Lender shall remain a "Lender" for all
purposes of this Agreement and the transferee of such participation shall not
constitute a "Lender" hereunder. In the case of any such participation, the
participant shall not have any rights under any Loan Document, the rights of the
participant in respect of such participation to be against the granting Lender
as set forth in the agreement with such Lender creating such participation, and
all amounts payable by the Borrower hereunder shall be determined as if such
Lender had not sold such participation.
(d) The Lenders may furnish any information concerning the
Borrower in the possession of the Lenders from time to time to assignees and
participants and prospective assignees and participants.
(e) Notwithstanding anything in this Section to the contrary,
any Lender may assign and pledge all or any of its Notes or any interest therein
to any Federal Reserve Bank or the United States Treasury as collateral security
pursuant to Regulation A of the Board of Governors of the Federal Reserve System
and any operating circular issued by such Federal
55
<PAGE> 61
Reserve System and/or such Federal Reserve Bank. No such assignment or pledge
shall release the assigning or pledging Lender from its obligations hereunder.
(f) Notwithstanding any other provisions of this Section, no
transfer or assignment of the interests or obligations of any Lender or grant of
participations therein shall be permitted if such transfer, assignment, or grant
would require the Borrower to file a registration statement with the Securities
and Exchange Commission or any successor Governmental Authority or qualify the
Loans under the "Blue Sky" laws of any state.
9.2 Amendments and Waivers. Neither this Agreement nor any of the
other Loan Documents nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
Section. The Agent and the Borrower may, with the written consent of the
Required Lenders, from time to time, enter into written amendments, supplements
or modifications to the Loan Documents for the purpose of adding any provisions
to this Agreement or the other Loan Documents or changing in any manner the
rights of the Lenders or the Borrower hereunder or thereunder or waiving, on
such terms and conditions as the Agent may specify in such instrument, any of
the requirements of this Agreement or the other Loan Documents or any Default or
Event of Default and its consequences; provided, however, that no such
amendment, supplement, modification or waiver shall (a) extend the time of
payment of any Note or any installment thereof, reduce the rate or extend the
time of payment of interest thereon, extend the Commitment Termination Date or
Final Maturity, reduce any fee payable to the Lenders hereunder, reduce the
principal amount of the Obligations, change the Percentage Share of any Lender
or the definition of the Facility Amount or the Borrowing Base, amend, modify or
waive any provision of this Section or Section 2.11, 3.2, 3.3, 5.12, 5.15 or
8.10 or any other provision applicable to the determination of the Borrowing
Base, change the percentage specified in the definition of Required Lenders, or
consent to the assignment or transfer by the Borrower of any of its rights or
obligations under this Agreement or the other Loan Documents, in any such case
without the written consent of all Lenders, (b) amend, modify or waive any
provision of Article 8 or the rights or obligations of the Agent without the
written consent of the Agent, or (c) amend, modify or waive any provision of
Section 2.20 or the rights or obligations of the Agent as the issuer of Letters
of Credit without the written consent of the Agent. Any such amendment,
supplement, modification or waiver shall apply equally to each of the Lenders
and shall be binding upon the Borrower, the Lenders, the Agent, and all future
holders of the Notes. In the event of any waiver, the Borrower, the Lenders,
and the Agent shall be restored to their respective former positions and rights
hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right with respect thereto. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
9.3 Survival of Representations, Warranties and Covenants. All
representations and warranties of the Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Notes and this
Agreement and shall remain in force and effect so long as any Obligation remains
outstanding or any Commitment exists.
56
<PAGE> 62
9.4 Notices and Other Communications. Except as to oral notices
expressly authorized herein, which oral notices shall be confirmed in writing,
all notices, requests, and communications hereunder shall be in writing
(including by telecopy). Unless otherwise expressly provided herein, any such
notice, request, demand, or other communication shall be deemed to have been
duly given or made when delivered by hand, or, in the case of delivery by mail,
two Business Days after deposited in the mail, certified mail, return receipt
requested, postage prepaid, or, in the case of telecopy notice, when receipt
thereof is acknowledged orally or by written confirmation report, addressed to
each party at the "Address for Notices" specified below its name on the
signature pages hereof or at such other address as shall be designated by such
party in a properly given notice; provided, that notice, request or
communication to or upon the Agent pursuant to Section 2.1(a) or Section 2.2(a)
shall not be effective until actually received.
9.5 Parties in Interest. All covenants and agreements herein
contained by or on behalf of the Borrower, the Lenders, and the Agent shall be
binding upon and inure to the benefit of the Borrower, the Lenders, or the
Agent, as the case may be, and their respective legal representatives,
successors and assigns.
9.6 No Waiver; Rights Cumulative. No course of dealing on the part
of any Lender or the Agent or the officers or employees of any Lender or the
Agent, nor any failure or delay by any Lender or the Agent with respect to
exercising any of their rights, powers or privileges under this Agreement or any
other Loan Document shall operate as a waiver thereof. The rights and remedies
of the Lenders and the Agent under this Agreement and the other Loan Documents
shall be cumulative, and the exercise or partial exercise of any such right or
remedy shall not preclude the exercise of any other right or remedy. No making
of a Loan or issuance of a Letter of Credit shall constitute a waiver of any of
the covenants or warranties of the Borrower contained herein or of any of the
conditions to the obligation of the Lenders to make other Loans or the Agent to
issue other Letters of Credit hereunder. In the event the Borrower is unable to
satisfy any such covenant, warranty or condition, no such Loan shall have the
effect of precluding the Agent from thereafter declaring such inability to be an
Event of Default as hereinabove provided.
9.7 Survival Upon Unenforceability. In the event any one or more of
the provisions contained in this Agreement or any other Loan Document shall, for
any reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof or of any other Loan Document.
9.8 Rights of Third Parties. All provisions herein are imposed
solely and exclusively for the benefit of the Lenders, the Agent, and the
Borrower; and no other Person shall have standing to require satisfaction of
such provisions in accordance with their terms or be entitled to assume that the
Lenders will refuse to make Loans or the Agent will refuse to issue Letters of
Credit in the absence of strict compliance with any or all of such provisions;
and any or all of such provisions may, subject to the provisions of Section 9.2
as to the rights of the Lenders, be freely waived in whole or in part by the
Agent at any time if in its sole discretion it deems it advisable to do so.
57
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9.9 Controlling Agreement. In the event of a conflict between the
provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall control.
9.10 Integration. THIS AGREEMENT AMENDS, RESTATES, AND REPLACES THE
EXISTING CREDIT AGREEMENT AND CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT HEREOF. ALL REFERENCES TO THE EXISTING
CREDIT AGREEMENT IN ANY DOCUMENT HERETOFORE OR HEREAFTER EXECUTED IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED HEREIN SHALL BE DEEMED TO REFER TO THIS
AGREEMENT. THIS AGREEMENT SUPERSEDES ANY PRIOR AGREEMENT AMONG THE PARTIES
HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF, INCLUDING THE
EXISTING CREDIT AGREEMENT AND THE TERM SHEET DATED FEBRUARY 15, 1996, FROM BANK
ONE TO THE BORROWER. THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS
REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
9.11 Jurisdiction and Venue. ALL ACTIONS OR PROCEEDINGS WITH RESPECT
TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR
FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE
DISCRETION AND ELECTION OF THE AGENT, IN COURTS HAVING SITUS IN HOUSTON, HARRIS
COUNTY, TEXAS. THE BORROWER HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS, AND HEREBY
WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF
ANY LITIGATION BROUGHT AGAINST IT BY THE AGENT OR ANY LENDER IN ACCORDANCE WITH
THIS SECTION.
9.12 Waiver of Rights to Jury Trial. THE BORROWER, THE AGENT, AND
EACH LENDER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND
UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF
ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE
AGENT OR ANY LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE
PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE AGENT AND THE
LENDERS ENTERING INTO THIS AGREEMENT.
9.13 Governing Law. THIS AGREEMENT AND THE NOTES SHALL BE DEEMED TO
BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT VERNON'S TEXAS CIVIL
STATUTES, ARTICLE 5069, CHAPTER 15 (WHICH REGULATES CERTAIN REVOLVING CREDIT
LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY.
58
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9.14 Counterparts. For the convenience of the parties, this
Agreement may be executed in multiple counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, this Agreement is executed effective as of the date
first above written.
BORROWER:
SWIFT ENERGY COMPANY
By: /s/ JOHN R. ALDEN
---------------------------
John R. Alden
Senior Vice President
Address for Notices:
Swift Energy Corporation
16825 Northchase Drive, Suite 400
Houston, Texas 77060
Attention: John R. Alden
Telecopy: (713) 874-2701
(Signatures Continued on Next Page)
59
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AGENT AND LENDER:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By: /s/ CHARLES KINGSWELL-SMITH
-----------------------------
Charles Kingswell-Smith
Vice President
Applicable Lending Office
for Floating Rate Loans and
LIBO Rate Loans:
910 Travis
Houston, Texas 77002
Address for Notices:
Bank One, Texas, National Association
910 Travis
Houston, Texas 77002
Attention: Charles Kingswell-Smith
Telecopy: (713) 751-7894
(Signatures Continued on Next Page)
60
<PAGE> 66
LENDER:
BANK OF MONTREAL
By: /s/ ROBERT L. ROBERTS
------------------------
Robert L. Roberts
Director
Applicable Lending Office
for Floating Rate Loans and
LIBO Rate Loans:
700 Louisiana, Suite 4400
Houston, Texas 77002
Address for Notices:
Bank of Montreal
700 Louisiana, Suite 4400
Houston, Texas 77002
Attention: Robert Roberts
Telecopy: (713) 223-4007
61
<PAGE> 1
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
BETWEEN
SWIFT ENERGY COMPANY
AND
BANK ONE, TEXAS, NATIONAL ASSOCIATION
April 30, 1996
------------------------
Revolving Line of Credit
of up to $7,000,000
------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Article Page
ARTICLE 1 DEFINITIONS AND INTERPRETATION......................... 1
1.1 Terms Defined Above.................................... 1
1.2 Additional Defined Terms............................... 1
1.3 Undefined Financial Accounting Terms................... 13
1.4 References............................................. 13
1.5 Articles and Sections.................................. 13
1.6 Number and Gender...................................... 13
1.7 Incorporation of Exhibits.............................. 13
ARTICLE 2 TERMS OF THE FACILITY.................................. 13
2.1 Revolving Line of Credit............................... 13
2.2 Use of Loan Proceeds................................... 14
2.3 Interest............................................... 14
2.4 Repayment of Loans and Interest........................ 14
2.5 General Terms.......................................... 14
2.6 Time, Place, and Method of Payments.................... 14
2.7 Borrowing Base Determinations.......................... 14
2.8 Mandatory Prepayments.................................. 15
2.9 Voluntary Prepayments.................................. 15
2.10 Commitment Fee......................................... 15
2.11 Loans to Satisfy Obligations of Borrower............... 15
2.12 Security Interest in Accounts; Right of Offset......... 16
2.13 General Provisions Relating to Interest................ 16
2.14 Yield Protection....................................... 17
2.15 Taxes.................................................. 17
ARTICLE 3 CONDITIONS............................................. 18
3.1 Receipt of Loan Documents and Other Items.............. 18
3.2 Conditions Precedent to Each Loan...................... 19
ARTICLE 4 REPRESENTATIONS AND WARRANTIES......................... 20
4.1 Existence of Borrower and Subsidiaries................. 20
4.2 Existence of Partnerships.............................. 20
4.3 Due Authorization...................................... 21
4.4 Valid and Binding Obligations of Borrower.............. 21
4.5 Scope and Accuracy of Financial Statements............. 21
4.6 Liabilities, Litigation and Restrictions............... 21
4.7 Title to Properties.................................... 22
4.8 Compliance with Federal Reserve Regulations............ 22
4.9 Authorizations and Consents............................ 22
- i -
<PAGE> 3
4.10 Compliance with Laws, Rules, Regulations and Orders..... 22
4.11 Proper Filing of Tax Returns and Payment of Taxes Due... 22
4.12 ERISA Compliance........................................ 22
4.13 Casualties or Taking of Property........................ 23
4.14 Locations of Business and Offices....................... 23
4.15 Environmental Compliance................................ 23
4.16 Investment Company Act Compliance....................... 23
4.17 Public Utility Holding Company Act Compliance........... 24
4.18 No Material Misstatements............................... 24
4.19 Subsidiaries............................................ 24
4.20 Defaults................................................ 24
4.21 Maintenance of Properties............................... 24
ARTICLE 5 AFFIRMATIVE COVENANTS................................... 24
5.1 Maintenance and Access to Records....................... 24
5.2 Quarterly Financial Statements.......................... 25
5.3 Annual Financial Statements............................. 25
5.4 Compliance Certificates................................. 25
5.5 SEC and Other Reports................................... 25
5.6 Aging Reports; Borrowing Base Certificates.............. 25
5.7 Notices................................................. 25
5.8 Additional Information.................................. 27
5.9 Payment of Assessments and Charges...................... 27
5.10 Compliance with Laws.................................... 27
5.11 ERISA Information and Compliance........................ 27
5.12 Hazardous Substances Indemnification.................... 28
5.13 Further Assurances...................................... 28
5.14 Fees and Expenses of Lender............................. 28
5.15 Indemnification......................................... 29
5.16 Maintenance of Existence and Good Standing.............. 29
5.17 Maintenance of Tangible Property........................ 30
5.18 Maintenance of Insurance................................ 30
5.19 Inspection of Tangible Property......................... 30
5.20 Payment of Note and Performance of Obligations.......... 30
5.21 Operation of Oil and Gas Properties..................... 30
5.22 Performance of Designated Contracts..................... 30
5.23 Notice Letters.......................................... 30
ARTICLE 6 NEGATIVE COVENANTS...................................... 30
6.1 Indebtedness; Contingent Obligations.................... 30
6.2 Loans or Advances....................................... 31
6.3 Mortgages or Pledges of Assets.......................... 32
6.4 Sales of Properties; Leasebacks......................... 32
6.5 Dividends and Distributions............................. 32
6.6 Changes in Corporate Structure.......................... 32
6.7 Rental or Lease Agreements.............................. 32
6.8 Investments............................................. 33
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<PAGE> 4
6.9 Lines of Business; Subsidiaries......................... 33
6.10 ERISA Compliance........................................ 33
6.11 Sale or Discount of Receivables......................... 34
6.12 Transactions With Affiliates............................ 34
6.13 Tangible Net Worth...................................... 34
6.14 Current Ratio........................................... 34
6.15 Debt Coverage Ratio..................................... 34
6.16 Total Liabilities to Shareholders' Equity............... 34
6.17 Subordinated Debt....................................... 34
6.18 Negative Pledges........................................ 34
ARTICLE 7 EVENTS OF DEFAULT....................................... 34
7.1 Enumeration of Events of Default........................ 34
7.2 Rights Upon Default..................................... 36
ARTICLE 8 MISCELLANEOUS........................................... 37
8.1 Amendments and Waivers.................................. 37
8.2 Survival of Representations, Warranties and Covenants... 37
8.3 Notices and Other Communications........................ 37
8.4 Parties in Interest..................................... 38
8.5 Transfers and Participations............................ 38
8.6 No Waiver; Rights Cumulative............................ 38
8.7 Survival Upon Unenforceability.......................... 38
8.8 Rights of Third Parties................................. 39
8.9 Controlling Agreement................................... 39
8.10 Integration............................................. 39
8.11 Jurisdiction and Venue.................................. 39
8.12 Waiver of Rights to Jury Trial.......................... 39
8.13 Governing Law........................................... 40
8.14 Counterparts............................................ 40
EXHIBITS
Exhibit I Form of Note
Exhibit II Form of Borrowing Base Certificate
Exhibit III Form of Borrowing Request
Exhibit IV Form of Compliance Certificate
Exhibit V Disclosures
Exhibit VI Form of Opinion of Counsel
Exhibit VII Subsidiaries and Partnerships
- iii -
<PAGE> 5
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and entered into as of April 30,
1996, by and between SWIFT ENERGY COMPANY, a Texas corporation (the "Borrower"),
and BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking association (the
"Lender").
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender have entered into the
Amended and Restated Credit Agreement dated as of March 24, 1992, as heretofore
amended (the "Existing Credit Agreement");
WHEREAS, the parties desire to amend and restate the Existing
Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows,
amending and restating in its entirety the Existing Credit Agreement:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. As used in this Agreement, the terms
"Borrower," "Existing Credit Agreement," and "Lender" shall have the meanings
set forth above.
1.2 Additional Defined Terms. As used in this Agreement, the
following terms shall have the following meanings, unless the context otherwise
requires:
"Affiliate" shall mean any Person directly or indirectly controlling,
controlled by, or under common control with the Borrower, including each
Partnership and each affiliate and subsidiary (within the meaning of the
regulations promulgated pursuant to the Securities Act of 1933, as
amended) of the Borrower.
"Agreement" shall mean this Credit Agreement, as amended,
restated or supplemented from time to time.
"Available Commitment" shall mean, at any time, an amount
equal to the remainder, if any, of (a) the lesser of the
Commitment Amount or the Borrowing Base in effect at such time
minus (b) the Loan Balance at such time.
"Base Rate" shall mean the interest rate announced or
published by the Lender from time to time as its general reference
rate of interest, which Base
<PAGE> 6
Rate shall change upon each change in such announced or published general
reference interest rate and which Base Rate may not be the lowest interest
rate charged by the Lender.
"Borrowing Base" shall mean, at any time, an amount equal to
80% of the aggregate amount of all Eligible Swift Receivables.
"Borrowing Base Certificate" shall mean each certificate,
substantially in the form of Exhibit II, signed by the President,
Treasurer or chief financial or accounting officer of the
Borrower.
"Borrowing Request" shall mean each written or oral
(confirmed in writing within three Business Days) request, in
substantially the form attached hereto as Exhibit III, by the
Borrower to the Lender for a borrowing pursuant to Section 2.1,
each of which shall:
(a) be signed by a Responsible Officer;
(b) specify the amount and the date of the
borrowing (which shall be a Business Day); and
(c) be delivered to the Lender no later than
11:00 a.m., Central Standard or Daylight Savings Time,
as the case may be, on the Business Day of the
requested borrowing.
"Business Day" shall mean a day other than a day when
commercial banks are authorized or required to close in the State
of Texas.
"Cash Flow" shall mean, for any period, the sum of (a) the
net income (or loss) of the Borrower and its Subsidiaries on a
consolidated basis for such period, determined in accordance with
GAAP, exclusive of non-cash revenue, plus (b) depreciation,
depletion, non-cash amortization, deferred income taxes, and other
non-cash charges to income, determined on a consolidated basis for
the Borrower and its Subsidiaries.
"Closing Date" shall mean April 30, 1996.
"Commitment" shall mean the obligation of the Lender to make
Loans to or for the benefit of the Borrower pursuant to Section
2.1.
"Commitment Amount" shall mean, at any time, an amount equal
to the lesser of the Borrowing Base then in effect or $7,000,000.
"Commitment Period" shall mean the period from and including
the Closing Date to but not including the Commitment Termination
Date.
2
<PAGE> 7
"Commitment Termination Date" shall mean September 30, 1999.
"Commonly Controlled Entity" shall mean any Person which is
under common control with the Borrower within the meaning of
Section 4001 of ERISA.
"Compliance Certificate" shall mean each certificate
substantially in the form attached hereto as Exhibit IV, signed by
any Responsible Officer and furnished to the Lender from time to
time in accordance with the terms hereof.
"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing or in effect guaranteeing
any Indebtedness, leases, dividends, or other obligations of any
other Person (for purposes of this definition, a "primary
obligation") in any manner, whether directly or indirectly,
including any obligation of such Person, regardless of whether
such obligation is contingent, (a) to purchase any primary
obligation or any Property constituting direct or indirect
security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any primary obligation, or (ii) to maintain
working or equity capital of any other Person in respect of any
primary obligation, or otherwise to maintain the net worth or
solvency of any other Person, (c) to purchase Property, securities
or services primarily for the purpose of assuring the owner of any
primary obligation of the ability of the Person primarily liable
for such primary obligation to make payment thereof, or (d)
otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof, with the amount of any
Contingent Obligation being deemed to be equal to the stated or
determinable amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in
respect thereof as determined by such Person in good faith.
"Current Assets" shall mean all assets which would, in
accordance with GAAP, be included as current assets on a
consolidated balance sheet of the Borrower and its Subsidiaries as
of the date of calculation.
"Current Liabilities" shall mean all liabilities which would,
in accordance with GAAP, be included as current liabilities on a
consolidated balance sheet of the Borrower and its Subsidiaries as
of the date of calculation, but excluding current maturities in
respect of the Loans.
"Debt Service" shall mean, at any time, five percent of all
Indebtedness of the Borrower for borrowed money at such time.
"Default" shall mean any event or occurrence which with the
lapse of time or the giving of notice or both would become an
Event of Default.
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<PAGE> 8
"Default Rate" shall mean a per annum interest rate equal to
the Base Rate from time to time in effect plus two and one-half
percent (2-1/2%), such rate to be computed on the basis of a year
of 365 or 366 days, as the case may be, and actual days elapsed
(including the first day but excluding the last day) during the
period for which payable, but in no event shall such rate exceed
the Highest Lawful Rate.
"Dollars" and "$" shall mean dollars in lawful currency of
the United States of America.
"Eligible Swift Receivable" shall mean any Swift Receivable:
(a) which is not outstanding more than 60 days
past the due date therefor set forth in the related
evidence of such Swift Receivable;
(b) which is not due more than 90 days after the
related Indebtedness to the Borrower has been
incurred, unless otherwise approved by the Lender;
(c) which is not owed by a Partnership which has
taken any of the actions or suffered any of the events
of the kind described in Sections 7.1(e) or (f);
(d) which is a bona fide, valid and legally
enforceable obligation of the relevant account debtor;
(e) as to which all consents, licenses, approvals
or authorizations of, or registrations or declarations
with, any governmental authority required to be
obtained, effected or given in connection with the
execution, delivery and performance thereof by the
relevant account debtor have been duly obtained,
effected or given, are in full force and effect and do
not subject the scope of such Swift Receivable to any materially
adverse limitation, either specific or general in nature;
(f) as to which the relevant account debtor is
not in default and is not likely to become in default
in the performance or observance of any of the terms
thereof;
(g) against which no defense, offset,
counterclaim or claim has been asserted or alleged and
which is not subject to any defense, offset,
counterclaim or claim;
(h) as to which no security agreement, financing
statement, equivalent security or Lien instrument or
continuation
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<PAGE> 9
statement covering all or any part thereof is on file or of record
in any public office; and
(i) which the Lender has not otherwise determined
in the exercise of its good faith discretion to be
unacceptable in accordance with its customary
practices for facilities of this nature.
"Environmental Complaint" shall mean any written complaint,
order, directive, claim, citation, notice of investigation or
other notice by any Governmental Authority or any other Person
with respect to (a) air emissions, (b) spills, releases, or
discharges to soils or any improvements located thereon, surface
water, groundwater or the sewer, septic system or waste treatment,
storage or disposal systems servicing any Property of any of the
Borrower, its Subsidiaries or the Partnerships, (c) solid or
liquid waste disposal, (d) the use, generation, storage,
transportation or disposal of any Hazardous Substance, or (e)
other environmental, health or safety matters affecting any
Property of any of the Borrower, its Subsidiaries or the
Partnerships or the business conducted thereon.
"Environmental Laws" shall mean (a) the following federal laws as
they may be cited, referenced, and amended from time to time: the Clean
Air Act, the Clean Water Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Endangered Species Act, the Hazardous
Materials Transportation Act of 1986, the Occupational Safety and Health
Act, the Oil Pollution Act of 1990, the Resource Conservation and Recovery
Act of 1976, the Safe Drinking Water Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (b) any and all
equivalent environmental statutes of any state in which Property of the
Borrower is situated, as they may be cited, referenced and amended from
time to time; (c) any rules or regulations promulgated under or adopted
pursuant to the above federal and state laws; and (d) any other equivalent
federal, state, or local statute or any requirement, rule, regulation,
code, ordinance, or order adopted pursuant thereto, including those
relating to the generation, transportation, treatment, storage, recycling,
disposal, handling, or release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations
thereunder and interpretations thereof.
"Event of Default" shall mean any of the events specified in
Section 7.1.
"Existing Note" shall mean the Note (as such term is defined
in the Existing Credit Agreement).
"Federal Funds Rate" shall mean, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
equal to the weighted average of the rates on overnight federal
funds transactions with members of the
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<PAGE> 10
Federal Reserve System arranged by federal funds brokers on such day, as
published by the Federal Reserve Bank of Dallas, Texas, on the Business
Day next succeeding such day, provided that (a) if the day for which such
rate is to be determined is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (b)
if such rate is not so published for any day, the Federal Funds Rate for
such day shall be the average rate charged to the Lender on such day on
such transactions as determined by the Lender.
"Final Maturity" shall mean September 30, 1999.
"Financial Statements" shall mean statements of the financial
condition as at the point in time and for the period indicated and
consisting of at least a balance sheet and related statements of
operations, common stock and other stockholders' or partners'
equity, and cash flows and, when required by applicable provisions
of this Agreement to be audited, accompanied by the unqualified
certification of a nationally-recognized firm of independent
certified public accountants or other independent certified public
accountants acceptable to the Lender and footnotes to any of the
foregoing, all of which, unless otherwise indicated, shall be
prepared in accordance with GAAP consistently applied and in
comparative form with respect to the corresponding period of the
preceding fiscal period.
"Floating Rate" shall mean, as of any day, an interest rate
per annum equal to the greater of (a) the Base Rate for such day
minus one-quarter of one percent (1/4%), or (b) the Federal Funds
Rate for such day plus one percent (1%), such rate to be computed,
in either case, on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day)
during the period for which payable, but in no event shall such
rate exceed the Highest Lawful Rate.
"GAAP" shall mean generally accepted accounting principles
established by the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants and in effect
in the United States from time to time.
"Governmental Authority" shall mean any nation, country,
commonwealth, territory, government, state, county, parish,
municipality or other political subdivision and any court,
governmental department or authority, commission, board, bureau,
agency, arbitrator or instrumentality thereof and any other entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Substances" shall mean flammables, explosives,
radioactive materials, hazardous wastes, asbestos or any material
containing asbestos, polychlorinated biphenyls (PCBs), toxic
substances or related materials, or any
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<PAGE> 11
substances defined as "contaminants," "hazardous substances," "hazardous
materials," "hazardous wastes" or "toxic substances" under any
Environmental Law now or hereafter enacted or promulgated by any
Governmental Authority.
"Hedging Agreement" shall mean (a) any interest rate or
currency swap, rate cap, rate floor, rate collar, forward
agreement, or other exchange or rate protection agreement or any
option with respect to any such transaction and (b) any swap
agreement, cap, floor, collar, exchange transaction, forward
agreement, or other exchange or protection agreement relating to
hydrocarbons or any option with respect to any such transaction.
"Hedging Obligations" shall mean the indebtedness and
obligations, now or hereafter arising, of the Borrower under any
Hedging Agreements with the Lender.
"Highest Lawful Rate" shall mean the maximum non-usurious
interest rate, if any (or, if the context so requires, an amount
calculated at such rate), that at any time or from time to time
may be contracted for, taken, reserved, charged, or received under
applicable laws, as such laws are presently in effect or, to the
extent allowed by applicable law, as such laws may hereafter be in
effect and which allow a higher maximum non-usurious interest rate
than such laws now allow.
"Indebtedness" shall mean, as to any Person, without duplication, (a)
all liabilities (excluding reserves for deferred income taxes, deferred
compensation liabilities, and other deferred liabilities and credits)
which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet, (b) all
obligations of such Person evidenced by bonds, debentures, promissory
notes, or similar evidences of indebtedness, (c) all other indebtedness of
such Person for borrowed money, and (d) all obligations of others, to the
extent any such obligation is secured by a Lien on the assets of such
Person (whether or not such Person has assumed or become liable for the
obligation secured by such Lien).
"Insolvency Proceeding" shall mean application (whether
voluntary or instituted by another Person) for or the consent to
the appointment of a receiver, trustee, conservator, custodian, or
liquidator of any Person or of all or a substantial part of the
Property of such Person, or the filing of a petition (whether
voluntary or instituted by another Person) commencing a case under
Title 11 of the United States Code, seeking liquidation,
reorganization, or rearrangement or taking advantage of any
bankruptcy, insolvency, debtor's relief, or other similar law of
the United States, the State of Texas, or any other jurisdiction.
"Investment" shall mean, as to any Person, any stock, bond,
note or other evidence of Indebtedness or any other security
(other than current trade and
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<PAGE> 12
customer accounts) of, investment or partnership interest in or loan to,
such Person.
"Lien" shall mean 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 common law,
statute, or contract, and including the lien or security interest
arising from a mortgage, encumbrance, pledge, security agreement,
conditional sale or trust receipt, or a lease, consignment or
bailment for security purposes and reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances
affecting Property which secure an obligation owed to, or a claim
by, a Person other than the owner of such Property (for purposes
of this Agreement, any of the Borrower, its Subsidiaries or the
Partnerships shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement,
financing 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 the filing or recording of any
financing statement or other security instrument in any public
office.
"Limitation Period" shall mean any period while any amount
remains owing on the Note and during which interest on such amount
calculated at the applicable interest rate plus any fees or other
sums payable under any Loan Document and deemed to be interest
under applicable law, would exceed the amount of interest which
would accrue at the Highest Lawful Rate.
"Loan" shall mean any advance to or for the benefit of the
Borrower pursuant to this Agreement.
"Loan Balance" shall mean, at any time, the aggregate
outstanding principal balance of the Note at such time.
"Loan Documents" shall mean this Agreement, the Note, and all
other documents, instruments and agreements now or hereafter
delivered pursuant to the terms of or in connection with this
Agreement or the Note, and all renewals, extensions, amendments,
supplements and restatements thereof.
"Material Adverse Effect" shall mean any material and adverse
effect on (a) the assets, liabilities, financial condition,
business, operations or prospects of the Borrower, or the Borrower
and its Subsidiaries on a consolidated basis, or the Partnerships
taken as a whole, from those reflected in the Financial Statements
dated December 31, 1995, furnished to the Lender or from the facts
represented or warranted in this Agreement or any other Loan
Document, (b) the ability of the Borrower individually, or the
Borrower and its Subsidiaries on a consolidated basis, or the
Partnerships taken as a whole, to carry out its or their business
as at the date of this Agreement conducted, or (c) the ability of
the Borrower to
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<PAGE> 13
meet its obligations generally, or to meet its obligations under the Loan
Documents on a timely basis as provided therein.
"Multi-employer Plan" shall mean a Plan which is a
multi-employer plan as defined in Section 4001(a)(3) of ERISA.
"Net Income" shall mean, for any period, the net income of
the Borrower for such period, determined in accordance with GAAP.
"Note" shall mean the promissory note of the Borrower payable
to the Lender in the amount of the Commitment Amount or such
amount in excess thereof as may be agreed to by the Borrower and
the Lender, in the form attached hereto as Exhibit I, with
appropriate insertions, together with all renewals, extensions for
any period, increases, and rearrangements thereof.
"Obligations" shall mean, without duplication, (a) all
Indebtedness evidenced by the Note, (b) the obligation of the
Borrower for the payment of fees and expenses pursuant to the Loan
Documents, (c) the Hedging Obligations, and (d) all other
obligations and liabilities of the Borrower to the Lender, now
existing or hereafter incurred, under, arising out of or in
connection with any Loan Document, and to the extent that any of
the foregoing includes or refers to the payment of amounts deemed
or constituting interest, only so much thereof as shall have
accrued, been earned and which remains unpaid at each relevant
time of determination.
"Oil and Gas Property" shall mean fee, leasehold or other interests
in or under mineral estates or oil, gas and other liquid or gaseous
hydrocarbon leases with respect to Properties situated in the United
States or offshore from any State of the United States, including
overriding royalty and royalty interests, leasehold estate interests, net
profits interests, production payment interests and mineral fee interests,
together with contracts executed in connection therewith and all
tenements, hereditaments, appurtenances and Properties appertaining,
belonging, affixed or incidental thereto.
"Partners" shall mean all present and future general and
limited partners of the Partnerships.
"Partnerships" shall mean all partnerships, including joint
ventures, in which the Borrower is a limited or general partner,
including the general and limited drilling partnerships and income
funds now or hereafter existing in connection with the exploration
and drilling or property acquisition and ownership programs of the
Borrower and with respect to which the Borrower is a general
partner or the managing general partner.
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<PAGE> 14
"Partnership Agreement" shall mean the partnership agreement
of any Partnership, as any such agreement may be amended, restated
or supplemented from time to time.
"Permitted Liens" shall mean (a) Liens for taxes, assessments or
other governmental charges or levies not yet due or which (if foreclosure,
distraint, sale, or other similar proceedings shall not have been
initiated) are being contested in good faith by appropriate proceedings
diligently conducted, if such reserve as may be required by GAAP shall
have been made therefor; (b) Liens in connection with workers'
compensation, unemployment insurance or other social security (other than
Liens created by Section 4068 of ERISA), old age pension or public
liability obligations which are not yet due or which are being contested
in good faith by appropriate proceedings diligently conducted, if such
reserve as may be required by GAAP shall have been made therefor; (c)
Liens in favor of vendors, carriers, warehousemen, repairmen, mechanics,
workers, or materialmen, and construction or other similar Liens arising
by operation of law in the ordinary course of business or incident to the
construction or improvement of any Property in respect of obligations
which are not yet due or which are being contested in good faith by
appropriate proceedings diligently conducted, if such reserve as may be
required by GAAP shall have been made therefor; (d) Liens securing the
purchase price of equipment of the Borrower, provided that (i) such Liens
shall not extend to or cover any other Property of the Borrower, and (ii)
the aggregate unpaid purchase price secured by all such Liens shall not
exceed $2,500,000; (e) Liens to operators and non-operators under joint
operating agreements arising in the ordinary course of business to secure
amounts owing to operators, which amounts are not yet due or are being
contested in good faith by appropriate proceedings diligently conducted;
(f) Liens under production sales agreements, division orders, operating
agreements and other agreements customary in the oil and gas industry for
processing, producing, and selling hydrocarbons securing obligations not
constituting Indebtedness and provided that such Liens do not secure
obligations to deliver hydrocarbons at some future date without receiving
full payment therefor within 90 days of delivery; (g) the currently
existing Liens described on Exhibit V under the heading "Liens"; and (h)
easements, rights of way, restrictions and other similar encumbrances, and
minor defects in the chain of title which are customarily accepted in the
oil and gas financing industry, none of which interfere with the ordinary
conduct of the business of any of the Borrower, its Subsidiaries or the
Partnerships or materially detract from the value or use of the Property
to which they apply.
"Person" shall mean an individual, corporation, partnership,
joint venture, association, joint stock company, trust,
unincorporated organization, Governmental Authority, or any other
form of entity.
"Plan" shall mean, at any time, any employee benefit plan
which is covered by ERISA and in respect of which the Borrower or
any Commonly Controlled Entity is (or, if such plan were
terminated at such time, would under
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<PAGE> 15
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section
3(5) of ERISA.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal, or mixed, tangible or intangible.
"Regulatory Change" shall mean the passage, adoption,
institution, or modification of any federal, state, local or
foreign Requirement of Law (including Regulation D of the Board of
Governors of the Federal Reserve System), or any interpretation,
directive, or request (whether or not having the force of law) of
any Governmental Authority or monetary authority charged with the
enforcement, interpretation, or administration thereof, occurring
after the Closing Date and applying to a class of lenders
including the Lender.
"Release of Hazardous Substances" shall mean any emission,
spill, release, disposal or discharge, except in accordance with a
valid permit, license, certificate or approval of the relevant
Governmental Authority, of any reportable quantity of Hazardous
Substance into or upon (a) the air, (b) soils or any improvements
located thereon, (c) surface water or groundwater, or (d) the
sewer, septic system or waste treatment, storage or disposal
system servicing any Property of any of the Borrower, its
Subsidiaries or the Partnerships.
"Requirement of Law" shall mean, as to any Person, any applicable
law, treaty, ordinance, order, judgment, rule, decree, regulation, or
determination of an arbitrator, court, or other Governmental Authority,
including rules, regulations, orders, and requirements for permits,
licenses, registrations, approvals, or authorizations, in each case as
such now exist or may be hereafter amended and are applicable to or
binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
"Responsible Officer" shall mean any Vice President, the
Treasurer or other authorized representative of the Borrower as
designated from time to time pursuant to written designation by
the Borrower.
"Shareholders' Equity" shall mean, at any time, all amounts
which would, in conformity with GAAP, be included under
consolidated common stock and other stockholders' equity of the
Borrower (including amounts for non-redeemable preferred stock,
common stock, capital surplus and retained earnings and other
stockholders' equity so long as not subject to any mandatory
redemption), less all amounts which would, in conformity with
GAAP, be included under assets of the Borrower for intangible
assets, treasury stock, any cost of investments in excess of net
assets acquired at the time of acquisition, and reimbursable
advances or expenditures made by the Borrower on behalf of the
Partnerships and classified as long-term assets on the balance
sheet of the Borrower in accordance with GAAP.
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<PAGE> 16
"Subordinated Debt" shall mean the Indebtedness of the
Borrower under the 6.5% Convertible Subordinated Debentures due
June 30, 2003, in the maximum original principal amount of
$28,750,000, issued pursuant to prospectus dated June 23, 1993.
"Subsidiary" shall mean, as to any Person, a corporation of
which shares of stock having ordinary voting power (other than
stock having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or
other managers of such corporation are at the time owned, or the
management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such
Person.
"Superfund Site" shall mean those sites listed on the
Environmental Protection Agency National Priority List and
eligible for remedial action, or any comparable state registries
or list in any state of the United States.
"Swift Receivables" shall mean, collectively, the Indebtedness,
whether characterized as an account, account receivable or general
intangible, (a) of each Partnership to the Borrower arising in connection
with the making of loans or advances by the Borrower to such Partnership
in an amount not exceeding the uncollected but accrued revenues
attributable to such Partnership but which, pursuant to contracts with
third-party purchasers, are payable to the Borrower with respect to Oil
and Gas Properties of such Partnership, and (b) of each third party
interest owner to the Borrower arising in connection with joint interest
billings and, in each case, all documents, notes, instruments, chattel
paper or other evidence of such Indebtedness and all security therefor.
"Syndicated Credit Agreement" shall mean the Credit Agreement
dated as of even date herewith by and among the Borrower, the
Lender, Individually and as the Agent, and Bank of Montreal, as
amended, restated or supplemented from time to time.
"Syndicated Debt" shall mean the indebtedness of the Borrower
in an amount not exceeding $100,000,000 in principal amount
pursuant to the Syndicated Credit Agreement, as such indebtedness
may be renewed, extended or rearranged from time to time.
"Tangible Net Worth" shall mean (a) total assets, as would be
reflected on a balance sheet of the Borrower prepared on a
consolidated basis and in accordance with GAAP, exclusive of
experimental or organization expenses, franchises, licenses,
permits, and other intangible assets, treasury stock, unamortized
underwriters' debt discount and expenses, and goodwill minus (b)
total liabilities, as would be reflected on a balance sheet of the
Borrower prepared on a consolidated basis and in accordance with
GAAP.
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<PAGE> 17
1.3 Undefined Financial Accounting Terms. Undefined financial
accounting terms used in this Agreement shall be defined according to GAAP at
the time in effect.
1.4 References. References in this Agreement to Article, Section, or
Exhibit numbers shall be to Articles, Sections, and Exhibits of this Agreement,
unless expressly stated to the contrary. References in this Agreement to
"hereby," "herein," "hereinabove," "hereinafter," "hereinbelow," "hereof,"
"hereunder," and words of similar import shall be to this Agreement in its
entirety and not only to the particular Article, Section or Exhibit in which
such reference appears. References in this Agreement to "includes" or
"including" shall mean "includes, without limitation," or "including, without
limitation," as the case may be. References in this Agreement to statutes,
sections, or regulations are to be construed as including all statutory or
regulatory provisions consolidating, amending, replacing, succeeding or
supplementing such statutes, sections, or regulations.
1.5 Articles and Sections. This Agreement, for convenience only, has
been divided into Articles and Sections; and it is understood that the rights
and other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
1.6 Number and Gender. Whenever the context requires, reference
herein made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions
of terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
1.7 Incorporation of Exhibits. The Exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
ARTICLE 2
TERMS OF THE FACILITY
2.1 Revolving Line of Credit. (a) Upon the terms and conditions and
relying on the representations and warranties contained in this Agreement, the
Lender agrees to make Loans during the Commitment Period to or for the benefit
of the Borrower from time to time on any Business Day designated by the Borrower
in its Borrowing Request; provided, however, no loans shall exceed the then
existing Available Commitment.
(b) Subject to the terms of this Agreement, during the
Commitment Period, the Borrower may borrow, repay and reborrow funds. Except
for prepayments made pursuant to Section 2.8, each borrowing and prepayment of
principal of Loans shall be in an amount at least equal to $100,000.
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2.2 Use of Loan Proceeds. Proceeds of all Loans shall be used to
provide working capital to the Borrower.
2.3 Interest. Subject to the terms of this Agreement (including
Section 2.13), interest on the Loans shall accrue and be payable at a rate per
annum equal to the Floating Rate. Notwithstanding the foregoing, interest on
past-due principal and, to the extent permitted by applicable law, past-due
interest, shall accrue at the Default Rate and shall be payable upon demand by
the Lender at any time as to all or any portion of such interest. Interest
provided for herein shall be calculated on unpaid sums actually advanced and
outstanding pursuant to the terms of this Agreement and only for the period from
the date or dates of such advances until repayment.
2.4 Repayment of Loans and Interest. Accrued and unpaid interest on
outstanding Loans shall be due and payable quarterly commencing July 1, 1996,
and continuing on the first day of each third calendar month thereafter while
any Loan remains outstanding, the payment in each instance to be the amount of
interest which has accrued and remains unpaid. The Loan Balance, together with
all accrued and unpaid interest thereon, shall be due and payable at Final
Maturity.
2.5 General Terms. Absent manifest error, the outstanding principal
balance of the Note reflected in the records of the Lender shall be deemed
rebuttably presumptive evidence of the principal amount owing on the Note;
provided, however, the liability for payment of principal and interest evidenced
by the Note shall be limited to principal amounts actually advanced and
outstanding pursuant to this Agreement and interest on such amounts calculated
in accordance with this Agreement.
2.6 Time, Place, and Method of Payments. All payments required
pursuant to this Agreement or the Note shall be made without set-off or
counterclaim in Dollars and in immediately available funds. All payments by the
Borrower shall be deemed received on the next Business Day following receipt if
such receipt is after 2:00 p.m., Central Standard or Daylight Savings Time, as
the case may be, on any Business Day, and shall be made to the Lender at its
principal office. Except as provided to the contrary herein, if the due date of
any payment hereunder or under the Note would otherwise fall on a day which is
not a Business Day, such date shall be extended to the next succeeding Business
Day, and interest shall be payable for any principal so extended for the period
of such extension.
2.7 Borrowing Base Determinations. (a) The Borrowing Base as of the
Closing Date is acknowledged by the Borrower and the Lender to be $7,000,000.
(b) The Borrowing Base shall be redetermined by the Lender each
calendar quarter during the term hereof commencing on the 15th day of July,
1996, and continuing thereafter on the 15th day of each succeeding calendar
quarter on the basis of information supplied by the Borrower in compliance with
the provisions of this Agreement, including the reports provided pursuant to
Section 5.6, and all other information available to the Lender. Notwithstanding
the foregoing, the Lender may at its discretion redetermine the Borrowing Base
at any time and from time to time.
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(c) The Borrowing Base at any time shall be that set forth in
the Borrowing Base Certificate most recently provided to the Lender, as adjusted
by the Lender in accordance with the definition of Eligible Swift Receivables
and the other provisions hereof. Upon any such adjustment in the determination
of the Borrowing Base, the Lender shall notify the Borrower verbally (confirming
such notice promptly in writing) of such determination. The Borrowing Base so
communicated to the Borrower shall become effective upon such verbal
notification to the Borrower and shall remain in effect until notification by
the Lender to the Borrower of a revised Borrowing Base.
(d) Determinations of the Borrowing Base shall be made by the
Lender upon the basis of the most recent Borrowing Base Certificate and the
reports provided pursuant to Section 5.6 and all other information available to
the Lender, including, without limitation, any liabilities, direct or
contingent, of the Borrower, and shall be made in the exercise of its sole
discretion and in accordance with its customary practices and standards for
loans of similar nature. Due to the uncertainties of the market and the
industry in which the Borrower is a participant, the Eligible Swift Receivables
are not subject to evaluation with a high degree of accuracy and are potentially
subject to rapid deterioration in value. Due to the foregoing and the
difficulties and expenses which may be involved in liquidating the Eligible
Swift Receivables, the determination by the Lender of each Borrowing Base
contains an equity cushion (dollar value in excess of loan value), which is
acknowledged by the Borrower to be essential for the adequate protection of the
Lender.
2.8 Mandatory Prepayments. If at any time the sum of the Loan
Balance exceeds the Commitment Amount, the Borrower shall immediately prepay the
amount of such excess for application on the Loan Balance. In addition, all
sums received by the Borrower in payment of Eligible Swift Receivables shall be
applied to the Loan Balance.
2.9 Voluntary Prepayments. Subject to applicable provisions of this
Agreement, the Borrower shall have the right at any time or from time to time to
prepay Loans; provided, however, that (a) the Borrower shall pay all accrued and
unpaid interest on the amounts prepaid, and (b) no such prepayment shall serve
to postpone the repayment when due of any Obligation.
2.10 Commitment Fee. To compensate the Lender for maintaining funds
available under this Agreement, the Borrower shall pay to the Lender on the
first day of July, 1996, and on the first day of each third calendar month
thereafter and on the Commitment Termination Date, a fee in the amount of
three-eighths of one percent (3/8%) per annum, calculated on the basis of a year
of 360 days and actual days elapsed (including the first day but excluding the
last day), on the average daily remainder, if any, of (a) the lesser of the
Commitment Amount or the Borrowing Base minus (b) the principal amount
outstanding on the Note during the period from the date of this Agreement or the
previous calculation date, whichever is later, to the relevant calculation date
or the Commitment Termination Date, as the case may be.
2.11 Loans to Satisfy Obligations of Borrower. The Lender may, but
shall not be obligated to, make Loans for the benefit of the Borrower and apply
proceeds thereof to the
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satisfaction of any condition, warranty, representation, or covenant of the
Borrower contained in this Agreement or any other Loan Document. Such Loans
shall be evidenced by the Note, shall bear interest at the Default Rate and
shall be payable upon demand.
2.12 Security Interest in Accounts; Right of Offset. As security for
the payment and performance of the Obligations, the Borrower hereby transfers,
assigns, and pledges to the Lender and grants to the Lender a security interest
in all funds of the Borrower now or hereafter or from time to time on deposit
with the Lender, with such interest of the Lender to be retransferred,
reassigned, and/or released at the reasonable expense of the Borrower upon
payment in full and complete performance of all Obligations and the termination
of the Commitment. All remedies as secured party or assignee of such funds
shall be exercisable by the Lender upon the occurrence of any Event of Default,
regardless of whether the exercise of any such remedy would result in any
penalty or loss of interest or profit with respect to any withdrawal of funds
deposited in a time deposit account prior to the maturity thereof. Furthermore,
the Borrower hereby grants to the Lender the right, exercisable at such time as
any Event of Default shall occur, of offset or banker's lien against all funds
of the Borrower now or hereafter or from time to time on deposit with the
Lender, regardless of whether the exercise of any such remedy would result in
any penalty or loss of interest or profit with respect to any withdrawal of
funds deposited in a time deposit account prior to the maturity thereof.
2.13 General Provisions Relating to Interest. (a) It is the
intention of the parties hereto to comply strictly with all applicable usury
laws. In this connection, there shall never be collected, charged, or received
on the sums advanced hereunder interest in excess of that which would accrue at
the Highest Lawful Rate. For purposes of Article 5069-1.04, Vernon's Texas
Civil Statutes, as amended, the Borrower agrees that the Highest Lawful Rate
shall be the "indicated (weekly) rate ceiling" as defined in such Article,
provided that the Lender may also rely, to the extent permitted by applicable
laws, on alternative maximum rates of interest under other laws, if greater.
(b) Notwithstanding anything herein or in the Note to the
contrary, during any Limitation Period, the interest rate to be charged on
amounts evidenced by the Note shall be the Highest Lawful Rate, and the
obligation, if any, of the Borrower for the payment of fees or other charges
deemed to be interest under applicable law shall be suspended. During any
period or periods of time following a Limitation Period, to the extent permitted
by applicable laws, the interest rate to be charged hereunder shall remain at
the Highest Lawful Rate until such time as there has been paid to the Lender (i)
the amount of interest in excess of that accruing at the Highest Lawful Rate
that the Lender would have received during the Limitation Period had the
interest rate remained at the otherwise applicable rate, and (ii) all interest
and fees otherwise payable to the Lender but for the effect of such Limitation
Period.
(c) If, under any circumstances, the aggregate amounts paid on
the Note or under this Agreement or any other Loan Document include amounts
which by law are deemed interest and which would exceed the amount permitted if
the Highest Lawful Rate were in effect, the Borrower stipulates that such
payment and collection will have been and will be deemed to have been, to the
extent permitted by applicable laws, the result of mathematical error on the
part of the Borrower and the Lender, and the Lender shall promptly refund the
amount of such
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excess (to the extent only of such interest payments in excess of that which
would have accrued and been payable on the basis of the Highest Lawful Rate)
upon discovery of such error by the Lender or notice thereof from the Borrower.
In the event that the maturity of any Obligation is accelerated, by reason of an
election by the Lender or otherwise, or in the event of any required or
permitted prepayment, then the consideration constituting interest under
applicable laws may never exceed the Highest Lawful Rate; and excess amounts
paid which by law are deemed interest, if any, shall be credited by the Lender
on the principal amount of the Obligations, or if the principal amount of the
Obligations shall have been paid in full, refunded to the Borrower.
(d) All sums paid, or agreed to be paid, to the Lender for the
use, forbearance and detention of the proceeds of any advance hereunder shall,
to the extent permitted by applicable law, be amortized, prorated, allocated,
and spread throughout the full term hereof until paid in full so that the actual
rate of interest is uniform but does not exceed the Highest Lawful Rate
throughout the full term hereof.
2.14 Yield Protection. (a) If at any time after the Closing Date,
and from time to time, the Lender determines that any Regulatory Change has or
would have the effect of (i) increasing the costs of the Lender relating to the
Obligations, the Commitment, or the maintenance or extension of credit by the
Lender hereunder, or (ii) reducing the yield or rate of return of the Lender on
the Obligations to a level below that which the Lender could have achieved but
for the adoption or modification of any such requirements, the Borrower shall,
within ten Business Days of any request by the Lender, pay to the Lender such
additional amounts as (in the good faith judgment of the Lender based on
reasonable computation) will compensate the Lender for such increase in costs or
reduction in yield or rate of return of the Lender. Nothing contained in this
Section shall be construed or so operate as to require the Borrower to pay any
interest, fees, costs, or charges greater than permitted by applicable
Requirements of Law.
(b) Determinations by the Lender for purposes of this Section of
the effect of any Regulatory Change and the additional amounts required to
compensate the Lender under this Section shall be conclusive, absent manifest
error, provided that such determinations are made on a reasonable basis. The
Lender shall furnish the Borrower with a certificate setting forth in reasonable
detail the basis and amount of increased costs incurred or reduced amounts
receivable as a result of any such event, and the statements set forth therein
shall be conclusive, absent manifest error. The Lender shall (i) notify the
Borrower, as promptly as practicable after the Lender obtains knowledge of any
sums payable pursuant to this Section and determines to request compensation
therefor, of any event occurring after the Closing Date which will entitle the
Lender to compensation pursuant to this Section. Any compensation requested by
the Lender pursuant to this Section shall be due and payable to the Lender
within five days of delivery of any such notice by the Lender to the Borrower.
No failure by the Lender to demand immediate payment of any additional amounts
payable under this Section shall constitute a waiver of the right of the Lender
to demand payment of such amounts at any subsequent time.
2.15 Taxes. All payments made by the Borrower under this Agreement
shall be made free and clear of, and without reduction or withholding for or on
account of, present
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or future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority on the basis of any change after the date
hereof in any applicable treaty, law, rule, guideline or regulations or in the
interpretation or administration thereof, excluding, in the case of the Lender,
net income and franchise taxes imposed on the Lender by the jurisdiction under
the laws of which the Lender is organized or any political subdivision or taxing
authority thereof or therein, or by any jurisdiction in which the Lender's
lending office is located or any political subdivision or taxing authority
thereof or therein (all such non-excluded taxes, levies, imposts, deductions,
charges or withholdings being hereinafter called "Taxes"). If any Taxes are
required to be withheld from any amounts payable to the Lender hereunder or
under any other Loan Document, the amounts so payable to the Lender shall be
increased to the extent necessary to yield to the Lender (after payment of all
Taxes) interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement and the other Loan Documents. Whenever
any Taxes are payable by the Borrower, as promptly as possible thereafter, the
Borrower shall send to the Lender a certified copy of an original official
receipt received by the Borrower showing payment thereof. If the Borrower fails
to pay any Taxes when due to the appropriate taxing authority or fails to remit
to the Lender the required receipts or other required documentary evidence, the
Borrower shall indemnify the Lender for any incremental taxes, interest or
penalties that may become payable by the Lender as a result of any such failure.
The agreements in this Section shall survive the termination of this Agreement
and the payment of all Obligations.
ARTICLE 3
CONDITIONS
3.1 Receipt of Loan Documents and Other Items. The Lender shall have
no obligation to the Borrower under this Agreement unless and until all matters
incident to the consummation of the transactions contemplated herein shall be
satisfactory to the Lender, and the Lender shall have received, reviewed, and
approved the following documents and other items, appropriately executed when
necessary and, where applicable, acknowledged by one or more authorized officers
of the Borrower, all in form and substance satisfactory to the Lender and dated,
where applicable, of even date herewith or a date prior thereto and acceptable
to the Lender:
(a) multiple counterparts of this Agreement, as requested by
the Lender;
(b) the Note;
(c) copies of the certificate of incorporation and bylaws of the
Borrower and all amendments, accompanied by a certificate issued by the
secretary or an assistant secretary of the Borrower, to the effect that
each such copy is correct and complete;
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(d) certificates of incumbency and signatures of all officers
of the Borrower who are authorized to execute Loan Documents on
behalf of the Borrower, each such certificate being executed by
the secretary or an assistant secretary of the Borrower;
(e) copies of corporate resolutions approving the Loan
Documents and authorizing the transactions contemplated herein and
therein, duly adopted by the board of directors of the Borrower,
accompanied by certificates of the secretary or an assistant
secretary of the Borrower to the effect that such copies are true
and correct copies of resolutions duly adopted at a meeting or by
unanimous consent of the board of directors of the Borrower and
that such resolutions constitute all the resolutions adopted with
respect to such transactions, have not been amended, modified, or
revoked in any respect, and are in full force and effect as of the
date of such certificate;
(f) audited Financial Statements of the Borrower as of
December 31, 1995;
(g) certificates dated as of a recent date from the Secretary
of State or other appropriate Governmental Authority for the State
of Texas evidencing the existence or qualification and good
standing of the Borrower in such jurisdiction;
(h) the opinion of Jenkens & Gilchrist, counsel to the
Borrower, in the form attached hereto as Exhibit VI, with such
changes thereto as may be approved by the Lender; and
(i) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Lender may
reasonably request.
3.2 Conditions Precedent to Each Loan. The obligations of the Lender
to make each Loan are subject to the satisfaction of the following additional
conditions precedent:
(a) the Borrower shall have delivered to the Lender a
Borrowing Request at least the requisite time prior to the
requested date for the relevant Loan; and each statement or
certification made in such Borrowing Request shall be true and
correct in all material respects on the requested date for such
Loan;
(b) no Default or Event of Default shall exist or will occur as a
result of the making of the requested Loan;
(c) if requested by the Lender, the Borrower shall have
delivered evidence satisfactory to the Lender substantiating any
of the matters contained in this Agreement which are necessary to
enable the Borrower to qualify for such Loan;
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(d) the Lender shall have received, reviewed, and approved
such additional documents and items as described in Section 3.1 as
may be requested by the Lender with respect to such Loan;
(e) no Material Adverse Effect shall have occurred;
(f) each of the representations and warranties contained in
this Agreement and the other Loan Documents shall be true and
correct and shall be deemed to be repeated by the Borrower as if
made on the requested date for such Loan;
(g) neither the consummation of the transactions contemplated
hereby nor the making of such Loan shall contravene, violate, or
conflict with any Requirement of Law;
(h) the Lender shall have received the payment of all fees
payable by the Borrower hereunder and the Lender shall have
received reimbursement from the Borrower, or special legal counsel
for the Lender shall have received payment from the Borrower, for
all reasonable fees and expenses of counsel to the Lender for
which the Borrower is responsible pursuant to applicable
provisions of this Agreement and for which invoices have been
presented as of or prior to the date of the relevant Loan; and
(i) all matters incident to the consummation of the
transactions hereby contemplated shall be satisfactory to the
Lender.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to extend
credit to the Borrower, the Borrower represents and warrants to the Lender
(which representations and warranties shall survive the delivery of the Note)
that:
4.1 Existence of Borrower and Subsidiaries. Each of the Borrower and
its Subsidiaries is a corporation, duly organized, validly existing and in good
standing under the laws of the state of its incorporation and is authorized to
do business and in good standing as a foreign corporation in every jurisdiction
in which it owns or leases real property or in which the nature of its business
requires it to be so qualified, except where the failure to so qualify,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
4.2 Existence of Partnerships. Each of the Partnerships is duly
formed and legally existing under the laws of its jurisdiction of formation and
is qualified to do business in every jurisdiction in which the nature of its
business requires it to be so qualified, except where
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the failure to so qualify, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
4.3 Due Authorization. The execution and delivery by the Borrower of
this Agreement and the borrowings hereunder; the execution and delivery by the
Borrower of the Note and the other Loan Documents; the repayment by the Borrower
of the Indebtedness evidenced by the Note and interest and fees, if any,
provided in the Note and the other Loan Documents are within the power of the
Borrower; have been duly authorized by all necessary action; and do not and will
not (a) require the consent of any Governmental Authority, (b) contravene or
conflict with any Requirement of Law or the articles or certificate of
incorporation, bylaws, or other organizational or governing documents of the
Borrower, (c) contravene or conflict with any Partnership Agreement, or any
indenture, instrument or other agreement to which the Borrower is a party or by
which the Property of the Borrower is bound or encumbered, or (d) result in or
require the creation or imposition of any Lien upon any of the Properties of the
Borrower other than as contemplated in the Loan Documents.
4.4 Valid and Binding Obligations of Borrower. This Agreement and
the other Loan Documents, when duly executed and delivered, will be legal, valid
and binding obligations of the Borrower, enforceable in accordance with their
respective terms, subject to any applicable bankruptcy, insolvency or other laws
of general application affecting creditors' rights and judicial decisions
interpreting any of the foregoing.
4.5 Scope and Accuracy of Financial Statements. The Financial
Statements of the Borrower, its Subsidiaries and the Partnerships as of December
31, 1995, provided to the Lender have been prepared in accordance with GAAP
consistently applied and fairly reflect the financial condition and the results
of the operations of the Borrower, its Subsidiaries and the Partnerships in all
material respects as of the dates and for the periods stated therein. No event
or circumstance has occurred since December 31, 1995, that has resulted or could
reasonably be expected to result in a Material Adverse Effect.
4.6 Liabilities, Litigation and Restrictions. Except for the
liabilities shown in the Financial Statements provided to the Lender prior to
the Closing Date, none of the Borrower, its Subsidiaries or the Partnerships has
any liabilities, direct or contingent, which may reasonably be expected to
result in a Material Adverse Effect. Except as disclosed to the Lender in
writing prior to the Closing Date, no litigation or other action of any nature
affecting any of the Borrower, its Subsidiaries or the Partnerships is pending
before any Governmental Authority or, to the knowledge of the Borrower,
threatened against or affecting any of the Borrower, its Subsidiaries or the
Partnerships, which might reasonably be expected to result in a Material Adverse
Effect. To the knowledge of the Borrower, no unusual or unduly burdensome
restriction, restraint or hazard exists by contract, law, governmental
regulation or otherwise relative to the business or material Properties of any
of the Borrower, its Subsidiaries or the Partnerships other than such as relate
generally to Persons engaged in the business activities similar to those
conducted by the Borrower or such Subsidiary or Partnership, as the case may be.
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4.7 Title to Properties. Each of the Borrower, its Subsidiaries and
the Partnerships has good and indefeasible title to all of its material
(individually or in the aggregate) Properties, free and clear of all Liens other
than Permitted Liens.
4.8 Compliance with Federal Reserve Regulations. The Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, U or X of the Board of Governors of the Federal
Reserve System). No part of the proceeds of any extension of credit under this
Agreement will be used to purchase or carry any such margin stock or to extend
credit to others for the purpose of purchasing or carrying any such margin
stock. No transaction contemplated by the Loan Documents is in violation of any
regulations promulgated by the Board of Governors of the Federal Reserve System,
including Regulations G, T, U or X.
4.9 Authorizations and Consents. No authorization, consent,
approval, exemption, franchise, permit or license of, or filing with, any
Governmental Authority or other Person is required to authorize, or is otherwise
required in connection with, the valid execution and delivery by the Borrower of
this Agreement and the other Loan Documents or the repayment and performance by
the Borrower of the Obligations.
4.10 Compliance with Laws, Rules, Regulations and Orders. To the
knowledge of the Borrower, neither the business nor any of the activities of any
of the Borrower, its Subsidiaries or the Partnerships, as presently conducted,
violates any Requirement of Law the result of which violation could reasonably
be expected to result in a Material Adverse Effect. Each of the Borrower, its
Subsidiaries and the Partnerships possesses all licenses, approvals,
registrations, permits and other authorizations necessary to enable it to carry
on its business in all material respects as now conducted; all such licenses,
approvals, registrations, permits and other authorizations are in full force and
effect; and the Borrower has no reason to believe that it or any Subsidiary or
Partnership will be unable to obtain the renewal of any such licenses,
approvals, registrations, permits and other authorizations.
4.11 Proper Filing of Tax Returns and Payment of Taxes Due. Each of
the Borrower, its Subsidiaries and the Partnerships has duly and properly filed
all United States income tax returns and all other tax returns which are
required to be filed and has paid all taxes due, except such taxes, if any, as
are being contested in good faith and as to which adequate reserves in
accordance with GAAP have been made. The charges and reserves on the books of
each of the Borrower, its Subsidiaries and the Partnerships with respect to
taxes and other governmental charges are adequate.
4.12 ERISA Compliance. Each of the Borrower, its Subsidiaries and
the Partnerships is in compliance in all material respects with the applicable
provisions of ERISA. No "reportable event", as such term is defined in Section
4043 of ERISA, has occurred with respect to any Plan. None of the Borrower,
its Subsidiaries or the Partnerships has incurred or expects to incur any
material liability to the Pension Benefit Guaranty Corporation or any Plan. With
respect to each Plan, the total value of the accrued benefits (both vested and
nonvested) does not materially exceed the value of the assets of such Plan, both
valued as of the
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end of the Plan year immediately prior to the date of this Agreement. None of
the Borrower, its Subsidiaries or the Partnerships currently contributes to, or
has an obligation to contribute to, or has at any time contributed to, or had an
obligation to contribute to, any Multi-employer Plan.
4.13 Casualties or Taking of Property. Except as disclosed to the
Lender in writing prior to the Closing Date, since December 31, 1995, neither
the business nor any Property of any of the Borrower, its Subsidiaries or the
Partnerships has been materially adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike or other
labor disturbance, embargo, requisition of taking of Property or cancellation of
contracts, permits or concessions by any Governmental Authority, riot,
activities of armed forces or acts of God.
4.14 Locations of Business and Offices. The principal place of
business and chief executive office of the Borrower is located at the address
for the Borrower set forth in Section 8.3 or at such other location as the
Borrower may have, with prior written notice, advised the Lender.
4.15 Environmental Compliance. Except as has been disclosed to the
Lender in writing prior to the Closing Date:
(a) no Property of any of the Borrower, its Subsidiaries
or the Partnerships is currently on, or, to the best
knowledge of the Borrower after due inquiry made in
accordance with good commercial practices, has ever been on,
any federal or state list of Superfund Sites;
(b) except in compliance with all applicable Requirements
of Law, no Hazardous Substances have been generated,
transported and/or disposed of by any of the Borrower, its
Subsidiaries or the Partnerships at a site which was, at the
time of such generation, transportation and/or disposal, or
has since become, a Superfund Site;
(c) no Release of Hazardous Substances by any of the
Borrower, its Subsidiaries or the Partnerships or, to the
best knowledge of the Borrower after due inquiry made in
accordance with good commercial practices, from, affecting or
related to any Property of any of the Borrower, its
Subsidiaries or the Partnerships has occurred; and
(d) no Environmental Complaint has been received by the
any of the Borrower, its Subsidiaries or the Partnerships.
4.16 Investment Company Act Compliance. The Borrower is not an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
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4.17 Public Utility Holding Company Act Compliance. The Borrower is
not a "holding company," or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
4.18 No Material Misstatements. No information, exhibit or report
prepared by or at the direction or with the supervision of the Borrower and
furnished to the Lender in connection with the negotiation and preparation of
this Agreement or any Loan Document contains any material misstatements of fact
or omits to state a material fact necessary to make the statements contained
therein not misleading as of the date made or deemed made.
4.19 Subsidiaries. As of the date hereof, except as set forth on
Exhibit VII, the Borrower has no Subsidiaries and none of the Borrower or its
Subsidiaries is a partner or participant in any partnership or joint venture.
The percentage ownership by the Borrower of outstanding common stock of each
Subsidiary and the partnership interest of the Borrower in each Partnership is
as set forth on Exhibit VII.
4.20 Defaults. None of the Borrower, its Subsidiaries or the
Partnerships is in default, nor has any event or circumstance occurred which,
but for the passage of time or the giving of notice, or both, would constitute a
default, under any loan or credit agreement, indenture, mortgage, deed of trust,
security agreement or other instrument or agreement evidencing or pertaining to
any Indebtedness of the Borrower or such Subsidiary or Partnership, as the case
may be, or under any other material agreement or instrument to which the
Borrower or such Subsidiary or Partnership is a party or by which any of them or
the Property of any of them is bound, including agreements and instruments
relating to the Oil and Gas Properties. No Default or Event of Default exists.
4.21 Maintenance of Properties. Each of the Borrower, its
Subsidiaries and the Partnerships has maintained its Properties in good and
workable condition, ordinary wear and tear excepted, and in compliance in all
material respects with all applicable Requirements of Law.
ARTICLE 5
AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrower shall:
5.1 Maintenance and Access to Records. Keep, and cause each of its
Subsidiaries and the Partnerships to keep, adequate records in accordance with
GAAP, of all of its transactions so that at any time, and from time to time, its
financial condition may be readily determined and, at the reasonable request of
the Lender, make such records available for inspection and permit the Lender to
make and take away copies thereof.
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5.2 Quarterly Financial Statements. Deliver to the Lender, on or
before the 60th day after the end of each of the first three fiscal quarters of
the Borrower, the unaudited consolidated and consolidating Financial Statements
of the Borrower and its Subsidiaries, as at the end of such period and from the
beginning of such fiscal year to the end of such period, as applicable, which
Financial Statements shall be certified by the chief financial officer of the
Borrower as having been prepared in accordance with GAAP, consistently applied,
and as a fair presentation of the condition of the Borrower and its
Subsidiaries, subject to changes resulting from normal year-end audit
adjustments.
5.3 Annual Financial Statements. Deliver to the Lender, as soon as
available but not later than the 120th day after the close of each fiscal year
of the Borrower, a copy of the annual audited consolidated and consolidating
Financial Statements of the Borrower and its Subsidiaries.
5.4 Compliance Certificates. Concurrently with the furnishing of the
Financial Statements submitted pursuant to Sections 5.2 and 5.3, provide the
Lender a Compliance Certificate; and concurrently with the furnishing of the
Financial Statements submitted pursuant to Section 5.3 if requested by the
Lender, provide the Lender a certificate in customary form from the independent
certified public accountants for the Borrower stating that their audit has not
disclosed the existence of any Default or Event of Default or, if their audit
has disclosed the existence of any Default or Event of Default, specifying the
nature, period of existence and status thereof.
5.5 SEC and Other Reports. Deliver to the Lender, within five days
after any material report (other than financial statements) or other
communication is sent by any of the Borrower, its Subsidiaries or the
Partnerships to its stockholders or partners or is filed by any of the Borrower,
its Subsidiaries or the Partnerships with the Securities and Exchange Commission
or any successor or analogous Governmental Authority, copies of such report or
communication.
5.6 Aging Reports; Borrowing Base Certificates. Deliver to the
Lender, (a) as soon as available but not later than the 45th day after the end
of each calendar quarter, a statement in form and substance satisfactory to the
Lender reflecting the aging of the accounts receivable and accounts payable of
the Borrower, and (b) as soon as available but not later than the 45th day after
the end of each calendar month, a Borrowing Base Certificate.
5.7 Notices. Deliver to the Lender, promptly upon any officer of the
Borrower having knowledge of the occurrence of any of the following events or
circumstances, a written statement with respect thereto, signed by the chief
financial officer of the Borrower, or other authorized representative of the
Borrower designated from time to time pursuant to written designation by the
Borrower delivered to the Lender, advising the Lender of the occurrence of such
event or circumstance and the steps, if any, being taken by the Borrower with
respect thereto:
(a) any Default or Event of Default;
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(b) any default or event of default under any contractual
obligation of the Borrower, or any litigation, investigation
or proceeding between any of the Borrower, its Subsidiaries
or the Partnerships and any Governmental Authority which, in
either case, if not cured or if adversely determined, as the
case may be, could reasonably be expected to have a Material
Adverse Effect;
(c) any litigation or proceeding involving any of the
Borrower, its Subsidiaries or the Partnerships as a defendant
or in which any Property of any of the Borrower, its
Subsidiaries or the Partnerships is subject to a claim and in
which the amount involved is $1,000,000 or more and which
is not covered by insurance or in which injunctive or
similar relief is sought;
(d) the receipt by any of the Borrower, its Subsidiaries
or the Partnerships of any Environmental Complaint or any
formal request from any Governmental Authority or other
Person for information (other than requirements for
compliance reports) regarding any Release of Hazardous
Substances by any of the Borrower, its Subsidiaries or the
Partnerships or from, affecting or related to any Property of
any of the Borrower, its Subsidiaries or the Partnerships or
adjacent to any Property of any of the Borrower, its
Subsidiaries or the Partnerships;
(e) any actual, proposed or threatened testing or other
investigation by any Governmental Authority or other Person
concerning the environmental condition of, or relating to,
any Property of any of the Borrower, its Subsidiaries or the
Partnerships or adjacent to any Property of any of the
Borrower, its Subsidiaries or the Partnerships following any
allegation of a violation of any Requirement of Law;
(f) any Release of Hazardous Substances by any of the
Borrower, its Subsidiaries or the Partnerships or from,
affecting or related to any Property of any of the Borrower,
its Subsidiaries or the Partnerships or adjacent to any
Property of any of the Borrower, its Subsidiaries or the
Partnerships;
(g) the violation of any Environmental Law or the
revocation, suspension or forfeiture of or failure to renew,
any permit, license, registration, approval or authorization
which could reasonably be expected to have a Material Adverse
Effect;
(h) the institution by the Borrower or any of its
Affiliates of any Multi-employer Plan or the withdrawal or
partial withdrawal by the Borrower or any of its Affiliates
from any Multi-employer Plan;
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(i) the sale or other transfer of any Oil and Gas
Properties or any interest therein to any Partnership;
(j) the incurrence of any Contingent Obligation permitted
by Section 6.1(i), the making of any loan or advance
permitted by Section 6.2(g), or the acquisition or making of
any Investment permitted by Section 6.8(h) which causes the
aggregate of all such Contingent Obligations, loans,
advances, and Investments to exceed $10,000,000; and
(k) any other event or condition which could reasonably be expected
to have a Material Adverse Effect.
5.8 Additional Information. Furnish to the Lender, promptly upon the
request of the Lender, such additional financial or other information concerning
the assets, liabilities, operations and transactions of the Borrower, its
Subsidiaries and the Partnerships as the Lender may from time to time reasonably
request, including copies of the Partnership Agreements and all amendments
thereto, certified as being true and correct by the secretary or assistant
secretary of the Borrower.
5.9 Payment of Assessments and Charges. Pay, and cause each of its
Subsidiaries and the Partnerships to pay, all taxes, assessments, governmental
charges, claims for labor, supplies, rent and other obligations which, if
unpaid, might become a Lien against any of its Property, except any of the
foregoing being contested in good faith and as to which adequate reserves in
accordance with GAAP have been established or unless failure to pay would not
have a Material Adverse Effect.
5.10 Compliance with Laws. Comply, and cause each of its
Subsidiaries and the Partnerships to comply, with all Requirements of Law,
including (a) the Natural Gas Policy Act of 1978, as amended, (b) Environmental
Laws, and (c) all permits, licenses, registrations, approvals and authorizations
(i) related to any natural or environmental resource or media located on, above,
within, in the vicinity of, related to or affected by any of its Property, (ii)
required for the performance or conduct of its operations, or (iii) applicable
to the use, generation, handling, storage, treatment, transport or disposal of
Hazardous Substances; and cause all of its employees, agents, contractors,
subcontractors and future lessees (pursuant to appropriate lease provisions),
while such Persons are acting within the scope of their relationship with the
Borrower, such Subsidiary or Partnership, as the case may be, to comply with all
applicable Requirements of Law as may be necessary or appropriate to enable the
Borrower or such Subsidiary or Partnership, as the case may be, to so comply.
5.11 ERISA Information and Compliance. Furnish to the Lender upon
request, copies of each annual and other report with respect to each Plan or any
trust created thereunder filed with the United States Secretary of Labor or the
Pension Benefit Guaranty Corporation; fund, and cause each of its Subsidiaries
and the Partnerships to fund, all current service pension liabilities as they
are incurred under the provisions of all Plans and Multi-employer Plans; and
comply, and cause each of its Subsidiaries and the Partnerships to comply, with
all applicable provisions of ERISA.
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5.12 Hazardous Substances Indemnification. INDEMNIFY AND HOLD THE
LENDER AND ALL OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND
AFFILIATES OF THE LENDER HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES,
DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND JUDICIAL
PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND
ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN
CONNECTION THEREWITH (INCLUDING ATTORNEYS' FEES AND EXPENSES), ARISING DIRECTLY
OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE PRESENCE OF ANY HAZARDOUS
SUBSTANCE ON, UNDER OR FROM THE PROPERTY OF ANY OF THE BORROWER, ITS
SUBSIDIARIES OR THE PARTNERSHIPS, WHETHER PRIOR TO OR DURING THE TERM HEREOF,
(B) ANY ACTIVITY CARRIED ON OR UNDERTAKEN ON OR OFF THE PROPERTY OF ANY OF THE
BORROWER, ITS SUBSIDIARIES OR THE PARTNERSHIPS, WHETHER PRIOR TO OR DURING THE
TERM HEREOF, AND WHETHER BY ANY OF THE BORROWER, ITS SUBSIDIARIES OR THE
PARTNERSHIPS OR ANY PREDECESSOR IN TITLE OR ANY EMPLOYEES, AGENTS, CONTRACTORS
OR SUB-CONTRACTORS OF ANY OF THE BORROWER, ITS SUBSIDIARIES OR THE PARTNERSHIPS
OR ANY PREDECESSOR IN TITLE, OR ANY THIRD PERSONS AT ANY TIME OCCUPYING OR
PRESENT ON SUCH PROPERTIES, IN CONNECTION WITH THE HANDLING, TREATMENT, REMOVAL,
STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS
SUBSTANCE AT ANY TIME LOCATED OR PRESENT ON OR UNDER SUCH PROPERTY, (C) ANY
RESIDUAL CONTAMINATION ON OR UNDER THE PROPERTY OF ANY OF THE BORROWER, ITS
SUBSIDIARIES OR THE PARTNERSHIPS, OR (D) ANY CONTAMINATION OF ANY PROPERTY OR
NATURAL RESOURCES ARISING IN CONNECTION WITH OR RESULTING FROM THE GENERATION,
USE, HANDLING, STORAGE, TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCE BY
ANY OF THE BORROWER, ITS SUBSIDIARIES OR THE PARTNERSHIPS OR ANY EMPLOYEE,
AGENT, CONTRACTOR OR SUBCONTRACTOR OF ANY OF THE BORROWER, ITS SUBSIDIARIES OR
THE PARTNERSHIPS WHILE SUCH PERSONS ARE ACTING WITHIN THE SCOPE OF THEIR
RELATIONSHIP WITH THE BORROWER, SUCH SUBSIDIARY OR PARTNERSHIP, AS THE CASE MAY
BE, IRRESPECTIVE OF WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN
ACCORDANCE WITH REQUIREMENTS OF LAW, INCLUDING ANY OF THE FOREGOING ARISING FROM
NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE LENDER OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS IN FACT AND AFFILIATES. THE FOREGOING
INDEMNITY SHALL SURVIVE SATISFACTION OF ALL OBLIGATIONS AND THE TERMINATION OF
THIS AGREEMENT.
5.13 Further Assurances. Promptly cure any defects, errors, or
omissions in the execution and delivery of any of the Loan Documents and all
agreements contemplated thereby, and upon notice, promptly execute and deliver
to the Lender all such other assurances and instruments as shall, in the opinion
of the Lender, be necessary to fulfill the terms of the Loan Documents.
5.14 Fees and Expenses of Lender. Upon request, promptly reimburse
the Lender for all amounts reasonably expended, advanced or incurred by the
Lender in connection with the development, preparation and execution of this
Agreement and the other Loan Documents and all amendments, restatements,
supplements and modifications hereto and thereto and the consummation of the
transactions contemplated hereby and thereby and to collect the Note and enforce
the rights of the Lender under this Agreement and the other Loan Documents,
which amounts shall be deemed compensatory in nature and liquidated as to amount
upon notice
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to the Borrower by the Lender and which amounts will include, but not be limited
to, (a) attorneys' fees, (b) all court costs, (c) fees of auditors and
accountants, (d) investigation expenses, (e) fees and expenses incurred in
connection with the participation of the Lender as a member of the creditors'
committee in a case commenced under Title 11 of the United States Code or other
similar law of the United States, the State of Texas or any other jurisdiction,
incurred by the Lender in connection with the collection of the Obligations, and
(f) any and all search, registration, recording and filing fees and any and all
liabilities with respect to stamp, excise and other taxes, together with
interest at the Floating Rate, calculated on the basis of a year of 365 or 366
days, as the case may be, on each such amount from the date of notification to
the Borrower that the same was expended, advanced or incurred by the Lender
until the date it is repaid to the Lender. The obligations of the Borrower
under this Section shall survive the nonassumption of this Agreement in a case
commenced under Title 11 of the United States Code or other similar law of the
United States, the State of Texas or any other jurisdiction and be binding upon
the Borrower and any trustee, receiver or liquidator of the Borrower appointed
in any such case.
5.15 Indemnification. INDEMNIFY AND HOLD THE LENDER AND ALL OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES (EACH
SUCH PERSON AN "INDEMNITEE") HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING REASONABLE ATTORNEYS'
FEES AND DISBURSEMENTS) INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING
OUT OF, IN ANY WAY CONNECTED WITH, OR AS A RESULT OF (A) THE EXECUTION OR
DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, (B) THE PERFORMANCE BY
THE PARTIES TO THE LOAN DOCUMENTS OF THEIR RESPECTIVE OBLIGATIONS THEREUNDER OR
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, OR (C) THE
ENFORCEMENT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (ALL THE FOREGOING IN
THIS SECTION, COLLECTIVELY, THE "INDEMNIFIED LIABILITIES"), INCLUDING
INDEMNIFIED LIABILITIES ARISING FROM THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT,
OF ANY INDEMNITEE; PROVIDED THAT THE BORROWER SHALL HAVE NO OBLIGATION UNDER
THIS SECTION TO ANY INDEMNITEE WITH RESPECT TO INDEMNIFIED LIABILITIES THAT ARE
DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NON-APPEALABLE
JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SUCH INDEMNITEE OR FROM THE BREACH BY SUCH INDEMNITEE OF ITS OBLIGATIONS UNDER
ANY LOAN DOCUMENT. THE OBLIGATIONS OF THE BORROWER UNDER THIS SECTION SHALL
SURVIVE THE SATISFACTION OF ALL OBLIGATIONS, THE TERMINATION OF THIS AGREEMENT
AND THE NONASSUMPTION OF THIS AGREEMENT IN A CASE COMMENCED UNDER TITLE 11 OF
THE UNITED STATES CODE OR OTHER SIMILAR LAW OF THE UNITED STATES, THE STATE OF
TEXAS OR ANY OTHER JURISDICTION AND BE BINDING UPON THE BORROWER AND ANY
TRUSTEE, RECEIVER OR LIQUIDATOR OF THE BORROWER APPOINTED IN ANY SUCH CASE.
5.16 Maintenance of Existence and Good Standing. Maintain, and cause
each of its Subsidiaries and the Partnerships to maintain, its corporate or
partnership existence, as the case may be; and maintain, and cause each of its
Subsidiaries and the Partnerships to maintain, its qualification and good
standing in all jurisdictions wherein the Property now owned or hereafter
acquired or the business now or hereafter conducted necessitates same except
where
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the failure to so maintain such qualification and good standing would not
have a Material Adverse Effect.
5.17 Maintenance of Tangible Property. Maintain, and cause each of
its Subsidiaries and the Partnerships to maintain, all of its material tangible
Property in good repair and condition and make all necessary replacements
thereof and operate such Property in a good and workmanlike manner.
5.18 Maintenance of Insurance. Maintain, or cause to be maintained,
insurance with respect to the properties and business of each of the Borrower,
its Subsidiaries and the Partnerships against such liabilities, casualties,
risks and contingencies and in such amounts as is customary in the industry; and
furnish to the Lender, at the execution of this Agreement and at the request of
the Lender thereafter, certificates evidencing such insurance.
5.19 Inspection of Tangible Property. Permit any authorized
representative of the Lender, at the sole risk of the Lender and its authorized
representatives, to visit and inspect any tangible Property of any of the
Borrower, its Subsidiaries or the Partnerships.
5.20 Payment of Note and Performance of Obligations. Pay the Note
according to the reading, tenor and effect thereof, as modified by this
Agreement, and pay and perform all Obligations.
5.21 Operation of Oil and Gas Properties. Develop, maintain and
operate, and cause each of its Subsidiaries and the Partnerships to develop,
maintain and operate, its Oil and Gas Properties in a prudent and workmanlike
manner in accordance with industry standards.
5.22 Performance of Designated Contracts. Perform and observe in all
material respects all of its obligations under the Partnership Agreements and
perform and observe, and cause each of its Subsidiaries and the Partnerships to
perform and observe, in all material respects all of its obligations under all
material agreements and contracts of such Person.
5.23 Notice Letters. Promptly upon the request of the Lender,
execute such notice letters as are necessary or appropriate to transfer and
deliver proceeds from the Swift Receivables directly to the Lender.
ARTICLE 6
NEGATIVE COVENANTS
So long as any Obligation remains outstanding or any Commitment
exists, without the prior written consent of the Lender, the Borrower will not:
6.1 Indebtedness; Contingent Obligations. Create, incur, assume or
permit to exist any Indebtedness or Contingent Obligations, or permit any of its
Subsidiaries or the Partnerships to do so; provided, however, the foregoing
restrictions shall not apply to (a) the Obligations other than Hedging
Obligations; (b) unsecured accounts payable incurred in the
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ordinary course of business, which are not unpaid in excess of 60 days beyond
invoice date or are being contested in good faith and as to which such reserve
as is required by GAAP has been made; (c) Syndicated Debt; (d) performance
guarantees and performance surety or other bonds provided in the ordinary course
of business; (e) operating leases entered into in the ordinary course of
business or endorsements of instruments for collection in the ordinary course of
business; (f) purchase-money Indebtedness of the Borrower only incurred in
connection with the acquisition of equipment not exceeding $2,500,000 at any
time outstanding; (g) Subordinated Debt; (h) obligations with respect to Hedging
Agreements entered into with the Lender or any affiliate of the Lender or
another counterparty satisfactory to the Lender provided that (i) in the case of
hydrocarbon Hedging Agreements, such Hedging Agreements protect against actual
exposure to volatility in hydrocarbon prices and the aggregate of the notional
and contracted amounts of such Hedging Agreements in any form other than put
options do not cover at any time a volume of hydrocarbons exceeding 80% of the
projected production from the proved producing reserves as reflected on the
reserve report most recently provided pursuant to the Syndicated Credit
Agreement, and the aggregate of the notional and contracted amounts of all
Hedging Agreements do not cover at any time a volume of hydrocarbons exceeding
100% of the projected production from the proved producing reserves as reflected
on the reserve report most recently provided pursuant to the Syndicated Credit
Agreement, and (ii) the net mark-to-market exposure under such Hedging
Agreements does not exceed $2,500,000 in the aggregate for the Borrower, its
Subsidiaries, and the Partnerships, (i) Contingent Obligations with respect to
the oil and gas project of the Borrower in Russia, which, together with loans
and advances permitted by Section 6.2(g) and Investments permitted by Section
6.8(h) shall not exceed $10,000,000 or, so long as the Lender remains the agent
and a lender in the Syndicated Credit Agreement, $25,000,000, and (j) other
Indebtedness not exceeding $2,500,000 in the aggregate at any time outstanding
for the Borrower and its Subsidiaries.
6.2 Loans or Advances. Make or agree to make or allow to remain
outstanding any loans or advances to any Person, or permit any of its
Subsidiaries or the Partnerships to do so; provided, however, the foregoing
restrictions shall not apply to (a) advances or extensions of credit in the form
of accounts receivable incurred in the ordinary course of business and upon
terms common in the industry for such accounts receivable, (b) accounts
receivable owed by the Partnerships to the Borrower with respect to general and
administrative and/or direct expenses and not outstanding for more than 60 days,
(c) loans, advances or extensions of credit to suppliers or contractors under
applicable contracts or agreements in connection with oil and gas development
activities of the Borrower or such Subsidiary or Partnership, (d) loans and
advances to employees of the Borrower or such Subsidiary in the ordinary course
of business not exceeding $1,000,000 in the aggregate at any time outstanding,
(e) loans or advances by the Borrower to any Partnership not outstanding for
more than 60 days and not exceeding the uncollected but accrued revenues payable
to the Borrower with respect to Oil and Gas Properties but attributable to such
Partnership, the aggregate of which for all Partnerships shall not exceed
$8,000,000 at any time outstanding, (f) loans or advances by the Borrower to
Swift Energy Marketing Company which, together with Investments permitted
pursuant to Section 6.8(g) shall not exceed $6,000,000, or (g) loans or advances
by the Borrower to its oil and gas project in Russia, which, together with
Investments permitted by Section 6.8(h), shall not exceed $10,000,000.
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6.3 Mortgages or Pledges of Assets. Create, incur, assume or permit
to exist, any Lien on any of its Properties, or permit any of its Subsidiaries
or the Partnerships to do so; provided, however, the foregoing restriction in
this Section shall not apply to Permitted Liens.
6.4 Sales of Properties; Leasebacks. Sell, transfer or otherwise
dispose of, in any 12-month period, in one or any series of transactions, more
than ten percent in value (determined on the basis of the greater of market or
book value) of its Property, or enter into any arrangement to do so, or enter
into any arrangement to sell or transfer any Property and thereafter rent or
lease as lessee such Property or other Property intended for the same use or
purpose of the Property sold or transferred, or permit any of its Subsidiaries
or the Partnerships to do any of the foregoing in this Section; provided,
however, the foregoing restrictions shall not apply to (a) the sale of
hydrocarbons or inventory in the ordinary course of business at prices at least
substantially equivalent to the open market prices at the time of sale for
comparable hydrocarbons or inventory other than the sale of a production payment
and, provided that no contract for the sale of hydrocarbons shall obligate any
of the Borrower, its Subsidiaries or the Partnerships to deliver hydrocarbons at
some future date without receiving full payment therefor within 90 days of
delivery, (b) the transfer of Oil and Gas Property of the Borrower to the
Partnerships in the ordinary course of business upon terms customary in the
industry for sales of comparable nature, (c) the sale or other disposition of
Property destroyed, lost, worn out, damaged or having only salvage value or no
longer used or useful in the business of the Borrower, or (d) farmouts or
similar agreements entered into in the ordinary course of business.
6.5 Dividends and Distributions. Declare, pay or make, whether in
cash or other Property, any dividend or distribution on any share of any class
of its capital stock other than cash dividends not exceeding $2,000,000 in any
fiscal year and dividends paid in capital stock of the Borrower; or purchase,
redeem or otherwise acquire, directly or indirectly, for value or set apart in
any way for redemption, retirement or other acquisition, directly or indirectly,
any of its stock now or hereafter outstanding; return any capital to its
stockholders; or make any distribution (whether by reduction of capital or
otherwise) of its assets to its stockholders.
6.6 Changes in Corporate Structure. Enter into any transaction of
consolidation, merger or amalgamation unless the Borrower is the surviving
corporation of any such consolidation, merger or amalgamation and no Default or
Event of Default exists or will occur as a result thereof; or liquidate, wind up
or dissolve or suffer any liquidation or dissolution.
6.7 Rental or Lease Agreements. Enter into any contract to rent or
lease any Properties, real or personal, the aggregate of rental and lease
payments under which for the Borrower, its Subsidiaries and the Partnerships on
a consolidated basis will exceed $1,000,000 in any calendar or fiscal year or
$5,000,000 during the term of such leases; provided, however, the foregoing
restriction shall not apply to (a) leases entered into in the ordinary course of
business which have been or should be, in accordance with GAAP, recorded as
capital leases, (b) bonuses and rentals paid under oil, gas and mineral leases,
or (c) the lease covering the corporate office of the Borrower.
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6.8 Investments. Acquire Investments in, or purchase or otherwise
acquire all or substantially all of the assets of, any Person, or permit any of
its Subsidiaries or the Partnerships to do so; provided, however, the foregoing
shall not apply to (a) investments in United States government-issued securities
with maturities of no more than one year or certificates of deposit or
repurchase agreements issued by (i) the Lender, (ii) Bank of Montreal, or (iii)
any bank or trust company organized under the laws of the United States or any
state thereof and having capital surplus and undivided profits aggregating at
least $250,000,000 and with maturities of no more than one year, (b) commercial
paper rated at least P-1 by Moody's Investor Service, Inc. or A-1 by Standard &
Poor's Corporation and with maturities of no more than nine months from the date
of acquisition thereof, (c) short-term investments in the Eurodollar market
through (i) the Lender, (ii) Bank of Montreal, (iii) any bank or trust company
organized under the laws of the United States or any state thereof and having
capital surplus and undivided profits aggregating at least $250,000,000, or (iv)
any other Person acceptable to the Lender, (d) short-term interest bearing
deposits with (i) the Lender, (ii) Bank of Montreal or (iii) any bank or trust
company organized under the laws of the United States or any state thereof and
having capital surplus and undivided profits aggregating at least $250,000,000,
(e) the purchase of Oil and Gas Properties or investments with respect to and
relating to the production of oil, gas and other liquid or gaseous hydrocarbons
from Oil and Gas Properties, (f) investments by the Borrower in the Partnerships
in amounts not to exceed those required as capital contributions under the
applicable Partnership Agreements; provided, however, at any time that a Default
or Event of Default exists, no investment may be made in any partnership or
joint venture in which the Borrower is not, at such time, a partner or joint
venturer other than those formed pursuant to Registration Statement No. 33-37983
on Form S-1 filed by the Borrower with the Securities and Exchange Commission on
November 28, 1990 (Swift Depositary Interests I), (g) Investments by the
Borrower in Swift Energy Marketing Company which, together with loans and
advances permitted by Section 6.2(f) shall not exceed $6,000,000, or (h)
Investments by the Borrower in its oil and gas project in Russia, which,
together with loans and advances permitted by Section 6.2(g), shall not exceed
$10,000,000.
6.9 Lines of Business; Subsidiaries. Expand, on its own or through a
Subsidiary, into any line of business other than (a) those in which the Borrower
or such Subsidiary is engaged as of the date hereof and (b) other lines of
business related to the production of oil, gas and other hydrocarbons; or permit
any material change to be made in the character of its business as conducted as
of the date hereof.
6.10 ERISA Compliance. Permit any Plan maintained by it or any
Partnership to (a) engage in any "prohibited transaction" as such term is
defined in Section 4975 of the Internal Revenue Code of 1954, as amended, (b)
incur any "accumulated funding deficiency," as such term is defined in Section
302 of ERISA, or (c) terminate in a manner which could result in the imposition
of a Lien on any Property of the Borrower pursuant to Section 4068 of ERISA;
assume an obligation to contribute to any Multi-employer Plan; or acquire any
Person or the assets of any Person which has now or has had at any time an
obligation to contribute to any Multi-employer Plan.
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6.11 Sale or Discount of Receivables. Except to minimize losses on
bona fide debts previously contracted, discount or sell with recourse, or sell
for less than the greater of the face or market value thereof, any of its notes
receivable or accounts receivable.
6.12 Transactions With Affiliates. Enter into any transaction
(including the sale, lease or exchange of Property or the rendering of service),
directly or indirectly, with any of its Affiliates other than upon fair and
reasonable terms no less favorable than the Borrower could obtain in an arm's
length transaction with a Person which was not an Affiliate.
6.13 Tangible Net Worth. Permit Tangible Net Worth as of the close
of any fiscal quarter to be less than $85,000,000 plus 75% of positive Net
Income for all fiscal periods ending subsequent to September 30, 1995.
6.14 Current Ratio. Permit the ratio of Current Assets to Current
Liabilities to be at any time less than 0.9 to 1.0.
6.15 Debt Coverage Ratio. Permit the ratio of Cash Flow for any
fiscal quarter to Debt Service determined as of the end of such fiscal quarter
to be less than 1.3 to 1.0.
6.16 Total Liabilities to Shareholders' Equity. Permit the ratio of
total liabilities of the Borrower to Shareholders' Equity to be at any time
greater than 2.0 to 1.0.
6.17 Subordinated Debt. Amend, extend or modify any of the terms or
provisions of any documents, notes, or agreements evidencing or governing the
Subordinated Debt or consent to any of the foregoing; or at any time following
the occurrence and during the continuance of any Default or Event of Default,
make any payment, whether in cash or other Property, on or with respect to the
Subordinated Debt.
6.18 Negative Pledges. Except pursuant to this Agreement and the
agreement governing the Syndicated Debt, enter into or permit to exist any
agreement which prohibits or restricts the granting, incurring, assuming, or
permitting to exist any Lien on any of its Properties or provides that any such
occurrence shall constitute a default or breach of such agreement.
ARTICLE 7
EVENTS OF DEFAULT
7.1 Enumeration of Events of Default. Any of the following events
shall be considered an Event of Default as that term is used herein:
(a) Default shall be made in the payment when due of any
installment of principal or interest under this Agreement or
the Note or any fees or other sums payable hereunder or under
any other Loan Document;
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(b) Default shall be made by the Borrower in the due
observance or performance of any covenant or agreement set
forth in any of Sections 5.2 through 5.7 and such default
shall continue for in excess of 15 days after the earlier of
notice thereof by the Lender to the Borrower or knowledge
thereof by the Borrower, or default shall be made by the
Borrower in the due observance or performance of any other
covenant or agreement set forth in this Agreement or any
other Loan Document;
(c) Any representation or warranty made by any of the
Borrower, its Subsidiaries, or the Partnerships in this
Agreement or any other Loan Document proves to have been
untrue in any material respect when made or deemed to have
been made, or any representation, warranty, statement
(including Financial Statements), certificate or data
furnished or made by any of the Borrower, its Subsidiaries,
or the Partnerships to the Lender in connection herewith
proves to have been untrue in any material respect as of the
date the facts therein set forth were stated or certified;
(d) Default shall be made by any of the Borrower, its
Subsidiaries, or the Partnerships in the payment or
performance of any bond, debenture, note, security (as
defined in the Securities Act of 1933, as amended), or other
evidence of Indebtedness, or under any credit agreement, loan
agreement, indenture, promissory note, or similar agreement
or instrument executed in connection with any of the
foregoing, and such default shall remain unremedied for in
excess of the period of grace, if any, with respect thereto,
and the effect of such default is to cause, or permit the
holders of such Indebtedness or security to cause, the
acceleration of the maturity of any such Indebtedness or to
permit a trustee or holder of any security to elect (whether
or not such trustee or holder does elect) a majority of the
directors on the board of directors of any of the Borrower or
its Subsidiaries;
(e) Any of the Borrower, its Subsidiaries, or the
Partnerships shall (i) apply for or consent to the
appointment of a receiver, trustee, or liquidator of it or
all or a substantial part of its assets, (ii) file a
voluntary petition commencing an Insolvency Proceeding, (iii)
make a general assignment for the benefit of creditors, (iv)
be unable, or admit in writing its inability, to pay its
debts generally as they become due, or (v) file an answer
admitting the material allegations of a petition filed
against it in any Insolvency Proceeding;
(f) An order, judgment or decree shall be entered against
any of the Borrower, its Subsidiaries, or the Partnerships by
any court of competent jurisdiction or by any other duly
authorized authority, on the petition of a creditor or
otherwise, granting relief in any Insolvency Proceeding or
approving a petition seeking reorganization or an arrangement
of its debts or appointing a receiver, trustee, conservator,
custodian, or liquidator of
35
<PAGE> 40
it or all or any substantial part of its assets, and such order,
judgment, or decree shall not be dismissed or stayed within 30 days;
(g) Any of the Borrower, its Subsidiaries, or the
Partnerships shall have (i) concealed, removed, or permitted
to be concealed or removed, any part of its Property, with
intent to hinder, delay, or defraud its creditors or any of
them, (ii) made or suffered a transfer of any of its Property
which may be fraudulent under any bankruptcy, fraudulent
conveyance, or similar law and not otherwise permitted under
the provisions of this Agreement, or (iii) made any transfer
of its Property to or for the benefit of a creditor at a time
when other creditors similarly situated have not been paid;
(h) The levy against any significant portion of the
Property of any of the Borrower, its Subsidiaries, or the
Partnerships or any execution, garnishment, attachment,
sequestration, or other writ or similar proceeding which is
not permanently dismissed or discharged within 60 days;
(i) A final and non-appealable order, judgment, or decree
shall be entered against any of the Borrower, its
Subsidiaries, or the Partnerships for money damages and/or
Indebtedness due in an amount in excess of $50,000 and such
order, judgment, or decree shall not be dismissed or stayed
within 60 days; or
(j) The Borrower shall default in any of its material
obligations as a Partner under any Partnership Agreement.
7.2 Rights Upon Default. (a) Upon the occurrence of any Event of
Default specified in Sections 7.1 (e) or (f), immediately and without notice,
(i) all Obligations shall become due and payable, without presentment, demand,
protest, notice of protest or dishonor, notice of intent to accelerate maturity,
notice of acceleration of maturity or other notice of any kind, all of which are
expressly waived by the Borrower, (ii) the Commitment shall immediately
terminate unless and until the Lender shall reinstate the same in writing, and
(iii) the Lender is hereby authorized at any time and from time to time, without
notice to the Borrower (any such notice being expressly waived by the Borrower),
to set-off and apply any and all deposits (general or special, time or demand,
provisional or final) held by the Lender and any and all other indebtedness at
any time owing by the Lender to or for the credit or account of the Borrower
against any and all Obligations.
(b) Upon the occurrence of any other Event of Default, (i) the
Lender may declare all Obligations immediately due and payable, without
presentment, demand, protest, notice of protest or dishonor, notice of intent to
accelerate maturity, notice of acceleration of maturity or other notice of any
kind, all of which are hereby expressly waived by the Borrower, (ii) the Lender
may declare the Commitment terminated, whereupon the Commitment shall
immediately terminate unless and until the Lender shall reinstate the same in
writing, and (iii) the Lender is hereby authorized at any time and from time to
time, without notice to the
36
<PAGE> 41
Borrower (any such notice being expressly waived by the Borrower), to set-off
and apply any and all deposits (general or special, time or demand, provisional
or final) held by the Lender and any and all other indebtedness at any time
owing by the Lender to or for the credit or account of the Borrower against any
and all Obligations.
(c) In addition to the foregoing, upon the occurrence of any
Event of Default, the Lender may exercise any or all of their rights and
remedies provided by law or pursuant to the Loan Documents.
ARTICLE 8
MISCELLANEOUS
8.1 Amendments and Waivers. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
8.2 Survival of Representations, Warranties and Covenants. All
representations and warranties of the Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Notes and this
Agreement and shall remain in force and effect so long as any Obligation remains
outstanding or any Commitment exists.
8.3 Notices and Other Communications. Except as to oral notices
expressly authorized herein, which oral notices shall be confirmed in writing,
all notices, requests, and communications hereunder shall be in writing
(including by telecopy). Unless otherwise expressly provided herein, any such
notice, request, demand, or other communication shall be deemed to have been
duly given or made when delivered by hand, or, in the case of delivery by mail,
two Business Days after deposited in the mail, certified mail, return receipt
requested, postage prepaid, or, in the case of telecopy notice, when receipt
thereof is acknowledged orally or by written confirmation report, addressed as
follows:
(a) If to the Lender, to:
Bank One, Texas, National Association
910 Travis
Houston,Texas 77002
Attention: Charles Kingswell-Smith
Telecopy: (713) 751-7894
37
<PAGE> 42
(b) If to the Borrower, to:
Swift Energy Corporation
16825 Northchase Drive, Suite 400
Houston, Texas 77060
Attention: John R. Alden
Telecopy: (713) 874-2701
provided, that notice, request or communication to or upon the Lender pursuant
to Section 2.1 shall not be effective until actually received. Any party may,
by proper written notice hereunder to the other, change the individuals or
addresses to which such notices to it shall thereafter be sent.
8.4 Parties in Interest. All covenants and agreements herein
contained by or on behalf of the Borrower and the Lender shall be binding upon
and inure to the benefit of the Borrower and the Lender, as the case may be, and
their respective legal representatives, successors and assigns.
8.5 Transfers and Participations. The Lender may, at any time, sell,
transfer, assign or grant participations in the Obligations or any portion
thereof; and the Lender may forward to each transferee and prospective
transferee of all or any portion of or interest in the Obligations, all
documents and information relating to the Obligations, whether furnished by the
Borrower or otherwise obtained, as the Lender determines necessary or desirable.
The Borrower agrees that each such permitted transferee, regardless of the
nature of any transfer to it, may exercise all rights (including, without
limitation, rights of set-off) with respect to the portion of the Obligations
held by it as fully as if such transferee were the direct holder thereof,
subject to any agreements between such transferee and the transferor to such
transferee.
8.6 No Waiver; Rights Cumulative. No course of dealing on the part
of the Lender or the officers or employees of the Lender, nor any failure or
delay by the Lender with respect to exercising any of its rights, powers or
privileges under this Agreement or any other Loan Document shall operate as a
waiver thereof. The rights and remedies of the Lender under this Agreement and
the other Loan Documents shall be cumulative, and the exercise or partial
exercise of any such right or remedy shall not preclude the exercise of any
other right or remedy. No making of a Loan shall constitute a waiver of any of
the covenants or warranties of the Borrower contained herein or of any of the
conditions to the obligation of the Lender to make other Loans hereunder. In
the event the Borrower is unable to satisfy any such covenant, warranty or
condition, no such Loan shall have the effect of precluding the Lender from
thereafter declaring such inability to be an Event of Default as hereinabove
provided.
8.7 Survival Upon Unenforceability. In the event any one or more of
the provisions contained in this Agreement or any other Loan Document shall, for
any reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof or of any other Loan Document.
38
<PAGE> 43
8.8 Rights of Third Parties. All provisions herein are imposed
solely and exclusively for the benefit of the Lender and the Borrower; and no
other Person shall have standing to require satisfaction of such provisions in
accordance with their terms or be entitled to assume that the Lender will refuse
to make Loans in the absence of strict compliance with any or all of such
provisions; and any or all of such provisions may be freely waived in whole or
in part by the Lender at any time if in its sole discretion it deems it
advisable to do so.
8.9 Controlling Agreement. In the event of a conflict between the
provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall control.
8.10 Integration. THIS AGREEMENT AMENDS, RESTATES, AND REPLACES THE
EXISTING CREDIT AGREEMENT AND CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT HEREOF. ALL REFERENCES TO THE EXISTING
CREDIT AGREEMENT IN ANY DOCUMENT HERETOFORE OR HEREAFTER EXECUTED IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED HEREIN SHALL BE DEEMED TO REFER TO THIS
AGREEMENT. THIS AGREEMENT SUPERSEDES ANY PRIOR AGREEMENT AMONG THE PARTIES
HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF, INCLUDING THE
EXISTING CREDIT AGREEMENT AND THE TERM SHEET DATED FEBRUARY 15, 1996, FROM BANK
ONE TO THE BORROWER. THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS
REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
8.11 Jurisdiction and Venue. ALL ACTIONS OR PROCEEDINGS WITH RESPECT
TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR
FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE
DISCRETION AND ELECTION OF THE LENDER, IN COURTS HAVING SITUS IN HOUSTON, HARRIS
COUNTY, TEXAS. THE BORROWER HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS, AND HEREBY
WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF
ANY LITIGATION BROUGHT AGAINST IT BY THE LENDER IN ACCORDANCE WITH THIS SECTION.
8.12 Waiver of Rights to Jury Trial. THE BORROWER AND THE LENDER
HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM,
OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE LENDER IN THE
ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF THIS SECTION
ARE A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT.
39
<PAGE> 44
8.13 Governing Law. THIS AGREEMENT AND THE NOTE SHALL BE DEEMED TO
BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT VERNON'S TEXAS CIVIL
STATUTES, ARTICLE 5069, CHAPTER 15 (WHICH REGULATES CERTAIN REVOLVING CREDIT
LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY.
8.14 Counterparts. For the convenience of the parties, this
Agreement may be executed in multiple counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, this Agreement is executed effective as of
the date first above written.
SWIFT ENERGY COMPANY
By: John R. Alden
---------------------------
John R. Alden
Senior Vice President
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By: Charles Kingswell-Smith
---------------------------
Charles Kingswell-Smith
Vice President
40
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FINANCIAL STATEMENTS CONTAINED IN ITS QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,943,337
<SECURITIES> 0
<RECEIVABLES> 25,671,299
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,801,643
<PP&E> 169,174,156
<DEPRECIATION> 33,357,190
<TOTAL-ASSETS> 167,768,623
<CURRENT-LIABILITIES> 28,117,313
<BONDS> 0
<COMMON> 125,758
0
0
<OTHER-SE> 96,899,128
<TOTAL-LIABILITY-AND-EQUITY> 167,768,623
<SALES> 9,691,962
<TOTAL-REVENUES> 11,188,847
<CGS> 0
<TOTAL-COSTS> 5,117,698<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,118
<INCOME-PRETAX> 4,561,523
<INCOME-TAX> 1,479,142
<INCOME-CONTINUING> 3,082,381
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,082,381
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.22
<FN>
<F1>Includes depreciation, depletion and amortization and oil and gas production
costs. Excludes general and administrative and interest expenses.
</FN>
</TABLE>
