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 September 30, 1998
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 Drive, Suite 400
Houston, Texas 77060
(281) 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 and 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.
Common Stock 16,301,243 Shares
($.01 Par Value) (Outstanding at October 31, 1998)
(Class of Stock)
<PAGE>
SWIFT ENERGY COMPANY
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
- September 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Income
- For the Three-month and Nine-month
periods ended September 30, 1998 and 1997 5
Condensed Consolidated Statements of Stockholders' Equity
- September 30, 1998 and December 31, 1997 6
Condensed Consolidated Statements of Cash Flows
- For the Nine-month periods ended September 30, 1998 and 1997 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk. - None
PART II. OTHER INFORMATION
Items 1-5 - None. 26
Item 6. - Exhibits and Reports on Form 8-K 26
SIGNATURES 28
</TABLE>
2
<PAGE>
SWIFT ENERGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------------ ------------------------
(Unaudited) (Note 1)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,651,516 $ 2,047,332
Accounts receivable -
Oil and gas sales 18,841,255 11,143,033
Associated limited partnerships
and joint ventures 6,792,279 8,498,702
Joint interest owners 3,519,552 7,357,660
Other current assets 664,275 935,059
------------------------ -------------------------
Total Current Assets 31,468,877 29,981,786
------------------------ ------------------------
Property and Equipment:
Oil and gas, using full-cost accounting
Proved properties being amortized 470,065,856 326,836,431
Unproved properties not being amortized 54,501,809 41,839,809
------------------------ ------------------------
524,567,665 368,676,240
Furniture, fixtures, and other equipment 6,954,853 6,242,927
------------------------ ------------------------
531,522,518 374,919,167
Less-Accumulated depreciation, depletion,
and amortization (175,119,217) (70,700,240)
------------------------ ------------------------
356,403,301 304,218,927
------------------------ ------------------------
Other Assets:
Receivables from associated limited
partnerships, net of current portion 2,545,144 433,444
Limited partnership formation and
marketing costs 705,176 297,219
Deferred income taxes 1,637,610 ---
Deferred charges 4,442,497 4,184,014
------------------------ ------------------------
9,330,427 4,914,677
------------------------ ------------------------
$ 397,202,605 $ 339,115,390
======================== ========================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
SWIFT ENERGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
---------------------- ----------------------
(Unaudited) (Note 1)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 14,084,125 $ 16,518,240
Payable to associated limited partnerships 287,331 3,245,445
Undistributed oil and gas revenues 8,041,887 8,753,979
---------------------- ----------------------
Total Current Liabilities 22,413,343 28,517,664
---------------------- ----------------------
Convertible Notes 115,000,000 115,000,000
Bank Borrowings 151,500,000 7,915,000
Deferred Revenues 1,977,166 2,927,656
Deferred Income Taxes --- 25,354,150
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, 16,972,517 and 16,846,956
shares issued, and 16,326,243 and 16,459,156
shares outstanding, respectively 169,725 168,470
Additional paid-in capital 148,692,156 147,542,977
Treasury stock held, at cost, 646,274 and
387,800 shares, respectively (11,570,124) (8,519,665)
Unearned ESOP compensation (33,463) (150,055)
Retained earnings (30,946,198) 20,359,193
---------------------- ----------------------
106,312,096 159,400,920
---------------------- ----------------------
$ 397,202,605 $ 339,115,390
====================== ======================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
SWIFT ENERGY COMPANY
Condensed Consolidated Statements of Income
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
------------------------------------- -------------------------------------
1998 1997 1998 1997
----------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $ 23,859,065 $ 16,411,619 $ 55,341,980 $ 48,852,796
Fees from limited partnerships
and joint ventures 93,062 379,340 297,941 643,443
Interest income 32,636 414,698 95,511 2,164,874
Other, net 572,790 690,322 1,638,080 1,885,446
---------------- ----------------- ----------------- ----------------
24,557,553 17,895,979 57,373,512 53,546,559
---------------- ----------------- ----------------- ----------------
Costs and Expenses:
General and administrative, net of
reimbursement 1,058,652 932,734 2,939,076 2,741,164
Depreciation, depletion, and amortization 13,347,786 6,386,620 27,333,026 17,495,161
Oil and gas production 4,045,160 2,190,174 8,920,157 6,361,956
Interest expense, net 2,385,626 1,361,927 5,355,269 3,755,235
Write down of oil and gas properties 90,772,628 --- 90,772,628 ---
---------------- ----------------- ----------------- ----------------
111,609,852 10,871,455 135,320,156 30,353,516
---------------- ----------------- ----------------- ----------------
Income before Income Taxes (87,052,299) 7,024,524 (77,946,644) 23,193,043
Provision (Benefit) for Income Taxes (29,621,284) 2,338,835 (26,641,714) 7,624,402
---------------- ------------------ ------------------- ----------------
Net Income (Loss) $ (57,431,015) $ 4,685,689 $ (51,304,930) $ 15,568,641
================ ================= ================= ================
Per Share Amounts -
Basic: $ (3.50) $ 0.29 $ (3.11) $ 0.94
================ ================= ================= ================
Diluted: $ (3.50) $ 0.27 $ (3.11) $ 0.88
================ ================= ================= ================
Weighted Average Shares Outstanding 16,419,022 16,418,385 16,481,382 16,507,694
================ ================= ================= ================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
SWIFT ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Unearned
Common Paid-In Treasury ESOP Retained
Stock(1) Capital Stock Compensation Earnings Total
-------------- ------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 151,764 $ 102,018,861 $ --- $ (521,354) $ 41,112,339 $ 142,761,610
Stock issued for benefit
plans (12,227 shares) 122 371,359 --- --- --- 371,481
Stock options exercised
(137,155 shares) 1,372 1,613,071 --- --- --- 1,614,443
Employee stock purchase
plan (26,551 shares) 266 403,145 --- --- --- 403,411
10% stock dividend
(1,494,606 shares) 14,946 43,048,389 --- --- (43,063,335)
Allocation of ESOP shares --- 88,152 --- 371,299 --- 459,451
Purchase of 387,800 shares
as treasury stock --- --- (8,519,665) --- --- (8,519,665)
Net income --- --- --- --- 22,310,189 22,310,189
------------ ------------- -------------- -------------- -------------- --------------
Balance, December 31, 1997 $ 168,470 $ 147,542,977 $ (8,519,665) $ (150,055) $ 20,359,193 $ 159,400,920
============ ============= ============== ============== ============== ==============
Stock issued for benefit
plans(20,032 shares) (2) 200 367,058 --- --- --- 367,258
Stock options exercised
(84,757 shares) (2) 847 507,158 --- --- --- 508,005
Employee stock purchase
plan(20,756 shares) (2) 208 317,340 --- --- --- 317,548
10/97 stock dividend
adjustment(16 shares) (2) --- 461 --- --- (461) ---
Allocation of ESOP shares (2) --- (42,838) --- 116,592 --- 73,754
Purchase of 258,474 shares
as treasury stock (2) --- --- (3,050,459) --- --- (3,050,459)
Net income (loss) (2) --- --- --- --- (51,304,930) (51,304,930)
------------ ------------- -------------- -------------- ---------------- --------------
Balance, September 30, 1998 (2) $ 169,725 $ 148,692,156 $ (11,570,124) $ (33,463) $ (30,946,198) $ 106,312,096
============ ============= ============== ============== ============== ==============
(1) $.01 Par Value
(2) Unaudited
</TABLE>
See accompanying notes to condensed financial statements.
6
<PAGE>
SWIFT ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Period Ended September 30,
-------------------------------------------------
1998 1997
------------------- ----------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ (51,304,930) $ 15,568,641
Adjustments to reconcile net income to net cash provided
by operating activities -
Depreciation, depletion, and amortization 27,333,026 17,495,161
Write down of oil and gas properties 90,772,628 ---
Deferred income taxes (26,991,760) 6,849,013
Deferred revenue amortization related to
production payment (948,040) (1,106,448)
Other 355,942 787,074
Change in assets and liabilities -
(Increase) decrease in accounts receivable (4,170,800) 1,389,727
Increase in accounts payable and accrued
liabilities, excluding income taxes payable 2,713,583 1,304,110
Increase in income taxes payable 313,860 792,517
------------------- ----------------------
Net Cash Provided by Operating Activities 38,073,509 43,079,795
------------------- ----------------------
Cash Flows From Investing Activities:
Additions to property and equipment (170,942,213) (100,907,542)
Proceeds from the sale of property and equipment 1,294,383 1,655,621
Net cash received (distributed) as operator
of oil and gas properties (11,210,890) 744,226
Net cash received (distributed) as operator
of partnerships and joint ventures 1,706,423 1,328,156
Limited partnership formation and marketing costs (407,957) ---
Other (95,752) (202,084)
------------------- ----------------------
Net Cash Used in Investing Activities (179,656,006) (97,381,623)
------------------- ----------------------
Cash Flows From Financing Activities:
Net proceeds from bank borrowings 143,585,000 ---
Net proceeds from issuances of common stock 1,192,811 1,631,167
Purchase of treasury stock (3,050,459) (8,417,228)
Payments of debt issuance costs (540,671) ---
------------------- ----------------------
Net Cash Provided by (Used in) Financing Activities 141,186,681 (6,786,061)
------------------- ----------------------
Net Decrease in Cash and Cash Equivalents (395,816) (61,087,889)
Cash and Cash Equivalents at Beginning of Period 2,047,332 77,794,974
------------------- ----------------------
Cash and Cash Equivalents at End of Period $ 1,651,516 $ 16,707,085
=================== ======================
Supplemental disclosures of cash flows information:
Cash paid during period for interest, net of amounts
capitalized $ 3,292,789 $ 1,516,863
Cash paid during period for income taxes $ 36,186 $ 225,000
See accompanying notes to condensed financial statements.
</TABLE>
7
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATEDS FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997
(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, 1997, 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.
In the second quarter of 1998, the Company began netting supervision
fees against general and administrative expenses and oil and gas
production costs. This reclassification has been made to all periods
presented. Certain other reclassifications have also been made to prior
year amounts 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. Under the full-cost method of accounting, such costs may
be incurred both prior to or after the acquisition of a property and
include lease acquisitions, geological and geophysical services, drilling,
completion, equipment, and certain general and administrative costs
directly associated with acquisition, exploration, and development
activities. The Company's management believes this capitalization of such
costs is appropriate under full-cost accounting rules. 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.
8
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
SEPTEMBER 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997
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 costs 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. This calculation
is done on a country by country basis for those countries with oil and gas
production. The Company currently has production in the United States
only.
The cost of unproved properties not being amortized is assessed
quarterly, on a country by country basis, to determine whether the value
has been impaired below the capitalized cost. Domestically, any impairment
assessed is added to the cost of proved properties being amortized. To the
extent costs accumulated in the Company's international initiatives are
determined by management to be costs that will not result in the addition
of proved reserves, any impairment is charged to income. In determining
whether such costs should be impaired, the Company's management evaluates,
among other factors, current oil and gas industry conditions,
international economic conditions, capital availability, foreign currency
exchange rates, the political stability in the countries in which the
Company has an investment, and available geological and geophysical
information.
Domestic Properties. 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 period-end prices, discounted at 10%, and
the lower of cost or fair value of unproved properties, adjusted for
related income tax effects ("ceiling test"). This calculation is done on a
country by country basis for those countries with proved reserves.
Currently the Company has proved reserves in the United States only.
The calculation of the ceiling test and provision for depreciation,
depletion, and amortization is based on estimates of proved reserves.
There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing,
and plan of development. The accuracy of any reserves estimate is a
function of the quality of available data and of engineering and
geological interpretation and judgment. Results of drilling, testing, and
production subsequent to the date of the estimate may justify revision of
such estimate. Accordingly, reserves estimates are often different from
the quantities of oil and gas that are ultimately recovered.
As a result of low oil and gas prices at the end of September 1998, the
Company reported a non-cash write down on a before-tax basis of $77.2
million ($50.9 million after tax) of its domestic properties. This is the
first time in the Company's history that a full-cost ceiling write down
was necessitated.
International Properties. In addition, during the third quarter of
1998, as it does every reporting period, the Company evaluated all of its
foreign unevaluated properties (a detailed description of which is
included in Note 6 to the Company's condensed consolidated financial
statements), especially in light of the increased volatility in the oil
and gas markets, international economic uncertainty, and turmoil in the
world capital markets. Based on a detailed evaluation of foreign
activities, the Company impaired the entire balance of accumulated
unevaluated costs in both Venezuela and Russia.
9
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
SEPTEMBER 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997
The increased volatility in the oil and gas markets has affected the
Company's cash flows available for further exploration and has forced the
Company to scale back its capital expenditures budget. All of this has
been further accentuated in Venezuela by the economic crisis there, the
results of which have been to diminish the availability of financing in
international markets for Venezuelan projects and to worsen Venezuelan
currency problems. Petroleos de Venezuela, S.A. layoffs, threatened oil
worker strikes, reduced OPEC production allocations and other third
quarter 1998 events highlight the problems that the oil and gas industry
is encountering in Venezuela. As a result of all these and other factors,
the Company decided to impair in the third quarter of 1998 all $2.8
million of costs related to its Venezuelan oil and gas exploration
activities.
In addition, the Company determined, in the third quarter of 1998 to
impair all $10.8 million of costs relating to its Russian activities. This
impairment is attributed to not only the volatility in the oil and gas
markets and the severe tightening of international credit markets as
discussed above, but also to the increased political instability in Russia
and the August 1998 collapse of the Russian currency. The Company believes
that the economic and political situation will result in a lack of capital
necessary to develop these reserves underlying the Company's net profits
interest in the near term. Although the Company continues to believe that
its net profits interest is legally enforceable under international law,
for all of these reasons the Company currently does not believe that
realistically it will be able to recover its investment in Russia in the
foreseeable future. Because of this, the Company believes that it
currently does not have a reasonable basis to continue capitalization of
the costs in its Russia cost center.
The combination of the full-cost ceiling test and foreign activities
impairment charges reduced before-tax earnings by $90.8 million ($59.9
million after tax).
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 own and its limited partnerships' oil and gas production. Costs and
any benefits derived from these price floors are accordingly recorded as a
reduction or increase, as applicable, in oil and gas sales revenue and
were not significant for any period presented. The costs to purchase put
options are amortized over the option period. The costs related to 1998
hedging activities through September 30, totaled approximately $377,000
with benefits of approximately $101,000 being received, resulting in a net
cash outlay of approximately $276,000 or $0.019 per Mcfe. The Company had
no open contracts at September 30, 1998.
Income Per Share
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings per Share," which establishes new standards for
computing and presenting earnings per share. Basic income per share has
been computed using the weighted average number of common shares
outstanding during the respective periods. Basic income per share has been
retroactively restated in all periods presented to give recognition to the
adoption of SFAS No. 128, as well as to give recognition to an equivalent
change in capital structure as a result of a 10% stock dividend declared
in October 1997 that resulted in an additional 1,494,622 shares being
issued.
10
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
SEPTEMBER 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997
The calculation of diluted income per share assumes conversion of the
Company's Convertible Notes as of the beginning of the respective periods
and the elimination of the related after-tax interest expense and assumes,
as of the beginning of the period, exercise of stock options and warrants
(using the treasury stock method). Diluted income per share has also been
retroactively restated for all periods presented to give effect to the
adoption of SFAS No. 128 and the 10% stock dividend. The original
conversion price of the Convertible Notes of $34.6875 was revised to
$31.534 to reflect the October 1997 stock dividend declared.
The following is a reconciliation of the calculation of basic and
diluted earnings per share for the nine months ended September 30, 1998,
and 1997:
<TABLE>
<CAPTION>
Three Months Ended September 30,
-------------------------------------------------------------------------------
1998 1997
------------------------------------- ----------------------------------------
Per Per
Net Share Net Share
Income Shares Amount Income Shares Amount
------------ ------------ -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net Income (Loss) and Share
Amounts $(57,431,015) 16,419,022 $ (3.50) $ 4,685,689 16,418,385 $ 0.29
Dilutive Securities:
Convertible Notes (1) -- -- 846,005 3,646,847
Stock Options (1) -- -- -- 475,479
------------ ------------ ------------- ------------
Diluted EPS:
Net Income (Loss) and Assumed
Share Conversions $(57,431,015) 16,419,022 $ (3.50) $ 5,531,694 20,540,711 $ 0.27
------------ ------------ --------- ------------- ------------ ---------
Nine Months Ended September 30,
-------------------------------------------------------------------------------
1998 1997
------------------------------------- --------------------------------------
Per Per
Net Share Net Share
Income Shares Amount Income Shares Amount
------------ ------------ -------- ------------- ------------ --------
Basic EPS:
Net Income (Loss) and Share
Amounts $(51,304,930) 16,481,382 $ (3.11) $ 15,568,641 16,507,694 $ 0.94
Dilutive Securities:
Convertible Notes (1) -- -- 2,665,253 3,646,847
Stock Options (1) -- -- -- 475,479
------------ ------------ ------------- ------------
Diluted EPS:
Net Income (Loss) and Assumed
Share Conversions $(51,304,930) 16,481,382 $ (3.11) $ 18,233,894 20,630,020 $ 0.88
------------ ------------ --------- ------------- ------------ --------
</TABLE>
(1) The Convertible Notes and the stock options are antidilutive in the
1998 periods.
11
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
SEPTEMBER 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997
(3) BANK BORROWINGS
In August 1998, the Company closed its new $250.0 million revolving
credit facility with a syndicate of ten banks (the "New Credit Facility").
At September 30, 1998, the Company had outstanding borrowings of $151.5
million under its New Credit Facility. At December 31, 1997, the Company
had outstanding borrowings of $7.9 million under its borrowing
arrangements. At September 30, 1998, the New Credit Facility consisted of
a $250.0 million revolving line of credit with a $170.0 million borrowing
base. The interest rate is either (i) the lead bank's prime rate (8.5% at
September 30, 1998) or (ii) adjusted LIBOR (a weighted average of 6.96% at
September 30, 1998) plus the applicable margin depending on the level of
outstanding debt. The applicable margin is based on the Company's ratio of
outstanding balance on the New Credit Facility to the last calculated
borrowing base. Of the $151.5 million borrowed at September 30, 1998,
$147.0 million was borrowed at the LIBOR rate.
The terms of the New Credit Facility include, among other restrictions,
a limitation on the level of cash dividends (not to exceed $2.0 million 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 is currently in compliance with the provisions of this agreement.
The New Credit Facility will extend until August 2002.
Previously, the Company's credit facilities consisted of a $100.0
million revolving line of credit with a $80.0 million borrowing base and a
$7.0 million revolving line of credit with a $5.1 million borrowing base.
These facilities were with a two bank-group. Depending on the level of
outstanding debt, the interest rate on the $100.0 million revolving line
of credit was (i) either the bank's base rate or the bank's base rate plus
0.25% or (ii) the LIBOR rate plus 1% to plus 1.5%. The interest rate on
the $7.0 million revolving line of credit was the bank's base rate less
0.25%
(4) NEW ACCOUNTING PRONOUNCEMENTS
In the first quarter of 1998, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income," which requires the display of
comprehensive income and its components in the financial statements.
Comprehensive income represents all changes in equity during the reporting
period, including net income and charges directly to equity which are
excluded from net income. The adoption of this statement does not have a
material impact on the Company or its financial disclosures, as the
Company has not historically and currently does not enter into
transactions which result in charges (or credits) directly to equity (such
as additional minimum pension liability changes, currency translation
adjustments, and unrealized gains and losses on available for sale
securities).
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities," which requires costs of start-up activities to be expensed as
incurred. The statement is effective for financial statements beginning
after December 15, 1998. The adoption of this standard is not expected to
have a significant effect on the Company's financial position or results
of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." The
Statement establishes accounting and reporting standards requiring that
every derivative instrument (including certain derivative instruments
12
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
SEPTEMBER 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997
embedded in other contracts) be recorded in the balance sheet as either an
asset or liability measured at its fair value. SFAS No. 133 requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allow the gains and losses on derivatives to offset
related results on the hedged item in the income statements, and requires
that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15,
1999. A company may also implement SFAS No. 133 as of the beginning of any
fiscal quarter after issuance (that is, fiscal quarters beginning June 16,
1998 and thereafter). SFAS No. 133 cannot be applied retroactively. SFAS
No. 133 must be applied to (a) derivative instruments and (b) certain
derivative instruments embedded in hybrid contracts that were issued,
acquired, or substantively modified after December 31, 1997 (and, at a
company's election, before January 1, 1998).
The Company has not yet quantified the impacts of adopting SFAS No. 133
on its financial statements and has not determined the timing of or method
of its adoption of SFAS No.133.
(5) ACQUISITION OF PROPERTIES
On July 2, 1998, the Company entered into a purchase agreement to
acquire from Sonat Exploration Company ("Sonat"), a subsidiary of Sonat
Inc., effective April 1, 1998, certain producing oil and gas properties
(the "Toledo Bend Properties") located in Texas and Louisiana in the
vicinity of Toledo Bend Lake for approximately $86.1 million in cash, with
a majority ($70.8 million) of the estimated purchase price at closing
being allocated to proved properties, with the remaining ($15.3 million)
being allocated to unproved properties. Post-closing purchase price
adjustments are still being determined, but management does not expect
that these adjustments will be material to the Company's financial
statements. The acquisition closed August 26, 1998.
As of April 1, 1998, estimated proved reserves for the Toledo Bend
Properties were 91.1 Bcfe, of which approximately 56% was natural gas,
with 1997 production of 22.0 Bcfe, of which approximately 51% was natural
gas. The properties include 156 producing oil and natural gas wells in the
Brookeland Field in Southeast Texas and the Masters Creek Field in Western
Louisiana, 21 saltwater disposal wells, a 20% interest in two natural gas
plants, associated production facilities and working interests in
approximately 200,000 undeveloped net acres containing more than 50
drilling locations. The Company has become operator of 113 of the 156
wells. The two gas plants are operated by a third party and have combined
capacity of 250 Mmcfe per day, and in 1997 had operating cash flow of $2.8
million.
The Toledo Bend Properties extend one of the Company's core areas by
adding producing reserves that the Company believes will significantly
increase its production on a short-term basis. Furthermore, as a result of
the Company's extensive experience in other parts of the Austin Chalk
trend, the Company believes that it can successfully exploit incremental
drilling opportunities in the future.
13
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
SEPTEMBER 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997
This acquisition was accounted for by the purchase method and was
incorporated into the Company's results of operations during the third
quarter. The following unaudited pro forma supplemental information
presents consolidated results of operations as if this acquisition had
occurred on January 1, 1997 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------------------
1998 1997
--------------- ---------------
(unaudited)
<S> <C> <C>
Revenue $ 90,299 $ 96,649
Net Income Before Non-Cash Charge $ 16,017 $ 24,758
Net Income (Loss) $ (43,893) $ 24,758
Per Share Amounts-
Basic $ (2.66) $ 1.50
Diluted $ (2.66) $ 1.32
</TABLE>
(6) FOREIGN ACTIVITIES
Since October 1995, the Company has been issued two Petroleum
Exploration Permits by the New Zealand Minister of Energy. The first
permit covered approximately 65,000 acres in the Onshore Taranaki Basin of
New Zealand's North Island, and the second covered approximately 69,300
adjacent acres. The Company formed a wholly-owned subsidiary, Swift Energy
New Zealand Limited, for the purpose of conducting its New Zealand
activities and assigned its interest in the permits to that subsidiary
during the third quarter of 1997. In March 1998, the Company surrendered
approximately 46,400 acres covered in the first permit and the remaining
acreage has been included as an extension of the area covered in the
second permit. Under the terms of the expanded permit, the Company is
obligated to drill one exploratory well prior to August 12, 1999. All
other obligations under the permit have been fulfilled, including the
reinterpretation of existing seismic data and the acquisition and
processing of new seismic data. At September 30, 1998, the Company's
investment in New Zealand was approximately $4.5 million and is included
in the unproved properties portion of oil and gas properties.
On October 23, 1998, the Company entered into separate agreements with
Marabella Enterprises Ltd. (Marabella), a subsidiary of Bligh Oil &
Minerals N.L., an Australian company, to obtain from Marabella a 25%
working interest in another New Zealand Petroleum Exploration Permit and
for Marabella to become a 5% participant in the Company's Permit. An
exploration well on the Marabella permit commenced drilling on October 16,
1998. The Company has also agreed in principle to participate in an
additional Marabella permit as a 25% working interest owner.
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. The agreement
provided the Company with a minimum 5% net profits interest from the sale
of hydrocarbon products from the fields in exchange for the Company's
managerial, technical, and financial support to Senega. Additionally, the
Company purchased a 1% net profits interest from Senega for $0.3 million.
14
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
SEPTEMBER 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997
On December 10, 1997, the Company amended and restated the
Participation Agreement with Senega that it originally entered into in
1995. Under the amended and restated Participation Agreement, the Company
retains its 6% net profits interest in the Samburg Field and has agreed to
assist Senega in obtaining investments necessary to develop the field.
Senega is charged with the management and control of the field
development. At September 30, 1998, the Company's investment in Russia,
prior to its impairment, was approximately $10.8 million and was
previously included in the unproved properties portion of oil and gas
properties. However, the economic and political uncertainty and currency
concerns that arose during the third quarter in Russia, combined with the
price volatility and severe tightening of international capital markets,
caused the Company to reevaluate the timing of the recovery of its
capitalized costs in that country. See Note 2 to the Company's condensed
consolidated financial statements for a more detailed discussion of the
impairment.
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. Although the
Company did not win the bid, from 1994 to 1997, the Company continued to
gather information relating to reserve and geological and geophysical data
in Venezuela, and continued to pursue cooperative ventures involving other
fields and opportunities in Venezuela. The Company evaluated a number of
blocks being offered by Petroleos de Venezuela, S. A. under the Third
Operating Agreement Round in 1997, but decided against submitting any bid
on these blocks. The Company has entered into an agreement with
Tecnoconsult, S. A., a Venezuelan company, to jointly formulate and submit
a proposal to Petroleos de Venezuela, S. A. for the construction and
operation of a methane pipeline. Currently, the technical and economic
feasibility of the project is under study. At September 30, 1998, the
Company's investment in Venezuela, prior to its impairment, was
approximately $2.8 million and was previously included in the unproved
properties portion of oil and gas properties. However, the economic
uncertainty and currency concerns in Venezuela, combined with the price
volatility and severe tightening of international capital markets, caused
the Company to reevaluate its prospects of participating in further
Venezuelan exploration activities in the foreseeable near-term future and
the recovery of its capitalized costs in that country. See Note 2 to the
Company's condensed consolidated financial statements for a more detailed
discussion of the impairment.
15
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's principal corporate objectives are the accumulation of
crude oil and natural gas reserves for production and sale and the
enhancement of the net present value of those reserves. The Company was
formed in 1979 and, from 1985 to 1991, grew primarily through the
acquisition of producing properties funded through limited partnership
financing. Commencing in 1991, the Company began to emphasize the addition
of reserves through increased development and exploration drilling
activity. This emphasis on development and exploration drilling has led to
additions of increasing quantities of reserves in each of the years 1995
through 1997, and in the first nine months of 1998. The Company's revenues
are primarily comprised of oil and gas sales attributable to properties in
which the Company owns a direct or indirect interest.
The statements contained in this Quarterly Report on Form 10-Q
("Quarterly Report") that are not historical facts are forward-looking
statements as that term is defined in Section 21E of the Securities and
Exchange Act of 1934, as amended, and therefore involve a number of risks
and uncertainties. Such forward-looking statements may be or may concern,
among other things, capital expenditures, drilling activity, development
activities, cost savings, production efforts and volumes, hydrocarbon
reserves, hydrocarbon prices, liquidity, regulatory matters and
competition. Such forward-looking statements generally are accompanied by
words such as "plan," "estimate," "expect," "predict," "anticipate,"
"projected," "should," "believe" or other words that convey the
uncertainty of future events or outcomes. Such forward-looking information
is based upon management's current plans, expectations, estimates and
assumptions and is subject to a number of risks and uncertainties that
could significantly affect current plans, anticipated actions, the timing
of such actions and the Company's financial condition and results of
operations. As a consequence, actual results may differ materially from
expectations, estimates or assumptions expressed in or implied by any
forward-looking statements made by or on behalf of the Company, including
those regarding the Company's financial results, levels of oil and gas
production or revenues, capital expenditures, and capital resource
activities. Among the factors that could cause actual results to differ
materially are: fluctuations of the prices received or demand for the
Company's oil and natural gas, the uncertainty of drilling results and
reserve estimates, operating hazards, requirements for capital, general
economic conditions, competition and government regulations, as well as
the risks and uncertainties discussed in this Quarterly Report, including,
without limitation, the portions referenced above, and the 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.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1998, the Company relied upon its
internally generated cash flow, along with $143.6 million of bank
borrowings to fund its capital expenditures, including $86.1 million for
the Toledo Bend Properties acquisition. Cash and working capital for the
remainder of 1998 are expected to be provided through internally generated
cash flows and bank borrowings. During 1997, the Company relied upon net
proceeds from the sale of its $115.0 million of Convertible Notes and its
internally generated cash flows, along with $7.9 million of bank
borrowings to fund capital expenditures.
16
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CONTINUED
Net Cash Provided by Operating Activities
For the nine month period ended September 30, 1998, net cash provided
by operating activities decreased by 12% to $38.1 million, as compared to
$43.1 million during the first nine months of 1997. The 1998 decrease of
$5.0 million was primarily due to the $2.1 million decrease in interest
income and the $1.6 million increase in interest expense, a result of
having expended all the net proceeds of the $115.0 million Convertible
Notes offering during 1997 and increased bank borrowings during 1998.
Sale of Convertible Subordinated Notes
In November 1996, the Company issued $115.0 million of the Convertible
Notes in a public offering. Proceeds of the offering were used to repay
all of the Company's bank borrowings ($33.1 million on November 25, 1996)
and, together with internally generated cash flows, to fund capital
expenditures and working capital needs through 1997.
Existing Credit Facilities
At September 30, 1998, the Company had outstanding borrowings of $151.5
million under its New Credit Facility. At September 30, 1997, the Company
had no outstanding balances under its borrowing arrangements, since the
balance of those borrowings was repaid in November 1996 with proceeds from
the sale of the Company's $115.0 million of Convertible Notes. Currently,
the New Credit Facility consists of a $250.0 million revolving line of
credit with a $170.0 million borrowing base. The Company closed on its new
$250.0 million revolving credit facility in August 1998 with a syndicate
of ten banks. The terms of the New Credit Facility include, among other
restrictions, a limitation on the level of cash dividends (not to exceed
$2.0 million 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 is currently in compliance with the
provisions of this agreement.
The interest rate is either (i) the lead bank's prime rate or (ii)
adjusted LIBOR plus the applicable margin depending on the level of
outstanding debt. The applicable margin is based on the Company's ratio of
outstanding balance on the New Credit Facility to the last calculated
borrowing base. The New Credit Facility will extend until August 2002.
Debt Maturities
Borrowings under the Company's New Credit Facility mature on August 18,
2002. The Company's $115.0 million Convertible Notes mature November 15,
2006.
Recent Developments
The Company believes that the recent declines in prices for oil and
natural gas created an opportunity for it to increase its reserve base
through an economically attractive acquisition. The Company targets proved
producing properties that it believes have the potential to increase cash
flows through subsequent drilling activities and the application of
improved drilling techniques.
17
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CONTINUED
Toledo Bend Properties Acquisition. On July 2, 1998, the Company
entered into a purchase agreement to acquire from Sonat Exploration
Company, a subsidiary of Sonat Inc., effective April 1, 1998, the Toledo
Bend Properties located in Texas and Louisiana in the vicinity of Toledo
Bend Lake for approximately $86.1 million in cash, with a majority of the
purchase price being allocated to proved reserves. As of April 1, 1998,
estimated proved reserves for the Toledo Bend Properties were 91.1 Bcfe,
of which approximately 56% was natural gas, with 1997 production of 22.0
Bcfe, of which approximately 51% was natural gas. The properties include
156 producing oil and natural gas wells in the Brookeland Field in
Southeast Texas and the Masters Creek Field in Western Louisiana, 21
saltwater disposal wells, a 20% interest in two natural gas plants,
associated production facilities and working interests in approximately
200,000 undeveloped net acres containing more than 50 drilling locations.
The Company has become operator of 113 of the 156 wells. The two gas
plants are outside operated and have combined capacity of 250 Mmcfe per
day, and in 1997 had operating cash flow of $2.8 million. The acquisition
closed August 26, 1998.
The Toledo Bend Properties extend one of the Company's core areas by
adding producing reserves that the Company believes will significantly
increase its production on a short-term basis. Furthermore, as a result of
the Company's extensive experience in other parts of the Austin Chalk
trend, the Company believes that it can successfully exploit incremental
drilling opportunities in the future.
Partnership Properties Acquisition. In October 1998, the Company
notified investors in 63 Swift-managed production partnerships formed
between 1986 and 1994 that it has delayed calling investor meetings to
consider its purchase of all of the oil and gas properties owned by these
partnerships which was proposed in March 1998. This decision principally
reflected significant market changes which had occurred during the long
period necessary for regulatory review of soliciting materials, the age of
the third party appraisals of these partnership properties, along with the
much publicized weakness in both the equity and debt markets for energy
companies. During the last several months, the volatility of the oil and
gas markets has increased markedly, creating further concern over the
appropriateness of using these particular appraisals as an assessment of
current market conditions. The Company expects to continue to re-evaluate
the status and operation of these partnerships, whether to propose sale of
partnership properties, and if so when, and in what form of transaction.
Working Capital
The Company's working capital increased over the last nine months from
$1.5 million at December 31, 1997, to $9.1 million at September 30, 1998.
This increase is primarily the result of an increase in oil and gas sales
receivables resulting from the Company's increase in production primarily
relating to its recent Toledo Bend Properties acquisition, as well as
decreases in accounts payables primarily related to the Company's deferral
of drilling activity during the period in direct response to the Company's
decision to instead use 1998 capital to make the Toledo Bend Properties
acquisition.
Due to the nature of the Company's business highlighted above, the
individual components of its working capital fluctuate considerably from
period to period. The Company incurs significant working capital
requirements in connection with its role as operator of approximately 825
wells, its drilling programs, 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>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CONTINUED
Common Stock Repurchase Program
In March 1997, the Company's Board of Directors approved a common stock
repurchase program for up to $20.0 million of the Company's common stock,
which terminated June 30, 1998. Under this program, the Company used
approximately $9.4 million of working capital to acquire 435,274 shares in
the open market at an average cost of $21.47 per share. The Board of
Directors approved a new repurchase program on July 21, 1998 for up to
$10.0 million of the Company's common stock. Subsequently, the Company used
approximately $2.2 million of working capital to acquire another 211,000
shares for an average cost of $10.54 per share. Through September 30, 1998,
$11.6 million had been spent to acquire 646,274 shares at an average cost
of $17.90 per share.
Common Stock Dividend
In October 1997, the Company declared a 10% stock dividend. The
transaction was valued based on the closing price ($28.8125) of the
Company's common stock on the New York Stock Exchange on October 1, 1997.
As a result of the issuance of 1,494,622 shares of the Company's common
stock as a dividend, retained earnings were reduced by $43.1 million, with
the common stock and additional paid-in capital accounts increased by the
same amount.
Capital Expenditures
Capital expenditures for property, plant, and equipment during the
first nine months of 1998 were $170.9 million. These capital expenditures
included: (a) $90.1 million on property acquisitions (principally the
Toledo Bend Properties), (b) $56.0 million of drilling costs, both
development and exploratory (primarily in the AWP Olmos Field and Austin
Chalk trend), (c) $18.9 million of domestic prospect costs (principally
prospect leasehold, seismic and geological costs of unproved prospects for
the Company's account), (d) $3.1 million invested in foreign business
opportunities, in New Zealand (approximately $2.1 million), Venezuela
(approximately $0.4 million), and Russia (approximately $0.6 million), and
(e) $2.1 million spent on field facilities and production equipment, with
the remaining $0.7 million spent primarily for computer equipment and
software and furniture and fixtures.
As discussed in Note 5 to the Company's condensed consolidated
financial statements, approximately $86.1 million of the $90.1 million in
property acquisition costs were incurred on the Toledo Bend Properties
acquired from Sonat. The allocation of this estimated purchase price at
the closing date was $70.8 million to proved properties and $15.3 million
to unproved properties. Post closing purchase price adjustments are still
being determined, but management does not expect that those adjustments
will be material to the Company's financial statements.
In the remaining three months of 1998, the Company expects capital
expenditures to be approximately $13.2 million, including investments in
all areas in which investments were made during the first nine months of
the year as described above, with the exception of additional acquisition
of producing properties. Through September 30, 1998, the Company had
participated in drilling 61 wells (49 development wells and 12 exploratory
with 42 development successes and 5 exploratory successes) at a capital
cost of approximately $56.0 million to the Company. The steady growth in
the Company's unproved property account which is not being amortized is
indicative of the Company's continued focus on drilling, as the Company
has acquired prospect acreage in or near its core areas and has pursued
its New Zealand activities.
19
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CONTINUED
The Company believes that 1998's anticipated internally generated cash
flows, together with bank borrowings, will be sufficient to finance the
costs associated with its currently budgeted remaining 1998 capital
expenditures.
RESULTS OF OPERATIONS
Comparison of Nine Months Ended September 30, 1998 and 1997
Revenues
The Company's revenues increased 7% during the first nine months of
1998 as compared to the same period in 1997, due primarily to the increase
in oil and gas sales, a result of the increase in production volumes,
offset somewhat by the lower commodity prices, and the decrease in
interest income, resulting from expenditure of the net proceeds from the
sale of the Company's Convertible Notes before year-end 1997.
Oil and Gas Sales
Oil and gas sales increased 13% to $55.3 million in the first nine
months of 1998, compared to $48.9 million for the comparable period in
1997. The 29% increase in natural gas production and the 120% increase in
oil production were primarily the result of production 16 from the recent
Toledo Bend Properties acquisition and from the Company's two core areas,
the Austin Chalk trend, and to a lesser extent, the AWP Olmos Field. The
Company's net sales volume (including the volumetric production payment
volumes) in the first nine months of 1998 increased by 43% or 8.0 Bcfe
(billion cubic feet equivalent) over volumes in the comparable 1997
period. The increases in volume were significantly offset by a 33%
decrease in oil prices and an 18% decrease in gas prices received between
the two periods, as highlighted in the table below.
The elements of the Company's $6.5 million increase in oil and gas
sales during the first nine months of 1998 included: (1) volume increases
that added $11.5 million of sales from a 4.5 Bcf increase in gas sales
volumes and $10.6 million of increased sales from the 590,520 barrel
increase in oil sales volumes and (2) price variances that had a $15.6
million unfavorable impact on sales due to the decrease in average gas
prices received ($9.1 million), and a decrease in average oil prices
received ($6.5 million). Oil and gas sales during the first nine months of
1998 from the Toledo Bend Properties (all in the third quarter) were $11.9
million (none in 1997) from 5.5 Bcfe of net sales volume, while sales from
the AWP Olmos Field were $25.7 million ($30.5 million in 1997) from 11.9
Bcfe of net sales volumes (11.6 Bcfe in 1997) for an increase of 0.3 Bcfe,
while the Austin Chalk trend generated oil and gas sales of $11.6 million
($8.4 million in 1997) from 5.5 Bcfe of net sales volume (3.3 Bcfe in
1997) for an increase of 2.2 Bcfe.
Revenues from oil and gas sales comprised 96% and 91%, respectively, of
total revenues for the first nine months of 1998 and 1997. The majority
(77% and 82%, respectively) of these revenues were derived from the sale
of the Company's gas production. The acquisition of the Toledo Bend
Properties, which have a high percentage of its production from oil, has
decreased somewhat the Company's predominate gas production mix. The
Company expects oil and gas production to continue to increase due to both
the addition of oil and gas reserves through the Company's drilling
activities and from the acquisition of proved properties as discussed
above.
20
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CONTINUED
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>
1997
3 Months Ended 03-31-97 166,240 4,903,206 $20.13 $3.06
3 Months Ended 06-30-97 160,341 5,142,947 $17.08 $2.20
3 Months Ended 09-30-97 163,672 5,560,395 $16.50 $2.47
--------- ----------
9 Months Ended 09-30-97 490,253 15,606,548 $17.92 $2.57
========= ==========
1998
3 Months Ended 03-31-98 195,114 5,858,509 $12.61 $2.28
3 Months Ended 06-30-98 190,225 6,159,255 $11.20 $2.20
3 Months Ended 09-30-98 695,434 8,076,988 $11.94 $1.93
--------- ----------
9 Months Ended 09-30-98 1,080,773 20,094,752 $11.93 $2.11
========= ==========
</TABLE>
Costs and Expenses
General and administrative expenses for the first nine months of 1998
increased by approximately $0.2 million, or 7%, when compared to the same
period in 1997. This increase in costs reflects the increase in the
Company's activities. However, the Company's general and administrative
expenses per Mcfe produced decreased by 25% from $0.15 per Mcfe produced
for the first nine months of 1997 to $0.11 per Mcfe produced for the
comparable period in 1998. Supervision fees netted from general and
administrative expenses for the first nine months of 1998 and 1997 were
$2.0 million and $1.9 million, respectively.
Depreciation, depletion, and amortization ("DD&A") increased 56%
(approximately $9.8 million) for the first nine months of 1998, primarily
due to the Company's reserves additions and associated costs and to the
related sale of increased quantities of oil and gas produced therefrom.
The Company's DD&A rate per Mcfe of production has increased from $0.94
per Mcfe produced in the 1997 period to $1.03 per Mcfe produced in the
1998 period, reflecting increases in the per unit cost of reserve
additions.
Production costs per Mcfe remained flat at $0.34 per Mcfe produced in
both the 1998 period and in the 1997 period. Primarily due to the 43%
increase in production volumes, oil and gas production costs increased by
40% (approximately $2.6 million) in the first nine months of 1998 when
compared to the first nine months of 1997. Supervision fees netted from
production costs for the first six months of 1998 and 1997 were $2.0
million and $1.9 million, respectively.
Interest expense in the first nine months of 1998 on the Convertible
Notes, including amortization of debt issuance costs, totaled $5.7 million
($5.6 million in the 1997 period), while interest expense on the existing
credit facilities, including commitment fees and amortization of debt
issuance costs, totaled $2.9 million ($39,000 in the 1997 period for
commitment fees alone) for total interest charges of $8.6 million (of
which $3.2 million was capitalized). In the first nine months of 1997,
these charges totaled $5.7 million (of which $1.9 million was
capitalized). The Company capitalizes that portion of interest related to
21
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CONTINUED
its exploration, partnership, and foreign business development activities.
The increase in interest expense in 1998 is attributable to the increase
in interest incurred on the amounts outstanding on its Existing Credit
Facilities.
A non-cash write down of oil and gas properties occurred during the
third quarter of 1998. As discussed in Note 2 to the Company's condensed
consolidated financial statements, the lower prices for both oil and
natural gas at the end of September 30, 1998 necessitated a domestic
full-cost ceiling test write down of $77.2 million. Concurrently as
discussed in Note 2 to the Company's condensed consolidated financial
statements, economical and political uncertainty that arose during the
third quarter in Russia caused the Company to reevaluate the timing of the
recovery of its capitalized unproved properties costs in that country
($10.8 million). In addition, the international economic uncertainty and
currency concerns in Venezuela, combined with the price volatility and
severe tightening of international credit markets, also caused the Company
to reevaluate its capitalized unproved properties costs in Venezuela ($2.8
million). The reevaluation of the unproved properties costs in these two
countries resulted in a separate non-cash charge to earnings of $13.6
million. The combination of the non-cash ceiling test charges and the
non-cash foreign impairment charges resulted in a combined non-cash charge
to earnings of $90.8 million ($59.9 million after tax).
Net Income
Net income of $8.6 million and basic earnings per share of $0.52 before
the non-cash write down of oil and gas properties for the first nine
months of 1998 were both 45% lower than net income of $15.6 million and
basic earnings per share of $0.94 in the same period for 1997. This
decrease primarily reflected the effect of the 33% and 18% decrease in oil
and gas prices while costs and expenses increased in relation to the 43%
increase in production volumes as discussed above.
Comparison of Three Months Ended September 30, 1998 and 1997
Revenues
The Company's revenues increased 37% during the third quarter of 1998
as compared to the same period in 1997, due primarily to the increase in
oil and gas sales. Higher oil and gas production volumes more than offset
lower commodity prices.
Oil and Gas Sales
Oil and gas sales increased 45% to $23.9 million in the third quarter
of 1998, compared to $16.4 million for the comparable period in 1997. The
45% increase in natural gas production and the 325% increase in oil
production were primarily the result of production from the recent Toledo
Bend Properties acquisition and from the Company's two core areas, the
Austin Chalk trend, and to a lesser extent, the AWP Olmos Field. The
Company's net sales volume (including the volumetric production payment
volumes) in the third quarter of 1998 increased by 87% or 5.7 Bcfe over
volumes in the comparable 1997 period. The increases in volume were
partially offset by a 28% decrease in oil prices and a 22% decrease in gas
prices received between the two periods.
The elements of the Company's $7.4 million increase in oil and gas
sales during the third quarter of 1998 included: (1) volume increases that
added $6.2 million of sales from a 2.5 Bcf increase in gas sales volumes
and $8.8 million of increased sales from the 531,762 barrel increase in
oil sales volumes and (2) price variances that had a $7.6 million
22
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CONTINUED
unfavorable impact on sales due to the decrease in average gas prices
received ($4.4 million), and to the decrease in average oil prices
received ($3.2 million). Oil and gas sales from the Toledo Bend Properties
generated third quarter 1998 sales of $11.9 million (none in 1997) from
5.5 Bcfe of net sales volume, while sales from the Austin Chalk trend
generated third quarter 1998 oil and gas sales of $2.7 million ($2.9
million in 1997) from 1.6 Bcfe of net sales volume (1.2 Bcfe in 1997) for
an increase of 0.4 Bcfe, while the AWP Olmos Field generated oil and gas
sales of $8.5 million ($10.3 in 1997) from 4.1 Bcfe of net sales volume
(4.0 Bcfe in 1997) for an increase of 0.1 Bcfe.
Revenues from oil and gas sales comprised 97% and 92%, respectively, of
total revenues for the third quarter of 1998 and 1997. The majority (65%
and 84%, respectively) of these revenues were derived from the sale of the
Company's gas production. As discussed above, the Toledo Bend Properties
acquisition, which has a substantial amount of oil production, decreased
the total proportion of the Company's production attributable to gas. The
Company expects oil and gas production to continue to increase due to both
the addition of oil and gas reserves through the Company's drilling
program and from the acquisition of proved properties as discussed above.
Costs and Expenses
General and administrative expenses for the third quarter of 1998
increased by approximately $125,000, or 13%, when compared to the same
period in 1997. This increase in costs reflects the increase in the
Company's activities. However, the Company's general and administrative
expenses per Mcfe produced decreased by 39% from $0.14 per Mcfe produced
for the first nine months of 1997 to $0.09 per Mcfe produced for the
comparable period in 1998. Supervision fees netted from general and
administrative expenses for the third quarter of 1998 and 1997 were $0.6
million and $0.7 million, respectively.
Depreciation, depletion, and amortization increased 109% (approximately
$7.0 million) for the third quarter of 1998, primarily due to the
Company's reserves additions and associated costs and to the related sale
of increased quantities of oil and gas produced therefrom. The Company's
DD&A rate per Mcfe of production has increased from $0.98 per Mcfe
produced in the 1997 period to $1.09 per Mcfe produced in the 1998 period,
reflecting increases in the per unit cost of reserve additions.
Production costs per Mcfe remained flat at $0.33 per Mcfe produced in
both the 1998 and in the 1997 period. Primarily due to the 87% increase in
production volumes, oil and gas production costs increased by 85%
(approximately $1.9 million) in the third quarter of 1998 when compared to
the third quarter of 1997. Supervision fees netted from production costs
for the second quarter of 1998 and 1997 were $0.6 million and $0.7
million, respectively.
Interest expense in the third quarter of 1998 on the Convertible Notes,
including amortization of debt issuance costs, totaled $1.9 million ($1.9
million in the 1997 period), while interest expense on the existing credit
facilities, including commitment fees, also totaled $1.9 million ($14,000
in the 1997 period for commitment fees alone) for total interest charges
of $3.8 million (of which $1.4 million was capitalized). In the third
quarter of 1997, these charges totaled $1.9 million (of which $0.5 million
was capitalized). The Company capitalizes that portion of interest related
to its exploration, partnership, and foreign business development
activities. The increase in interest expense in 1998 is 26 attributable to
the increase in interest incurred on the amounts outstanding on its
existing credit facilities.
23
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CONTINUED
A non-cash write down of oil and gas properties occurred during the
third quarter of 1998 as discussed above in the nine month comparison.
This non-cash charge to earnings amounted to $90.8 million ($59.9 million
after tax).
Net Income
Net income of $2.5 million and basic earnings per share of $0.15 before
the non-cash write down of oil and gas properties in the third quarter of
1998 were 47% and 48% lower, respectively, than net income of $4.7 million
and basic earnings per share of $0.29 in the third quarter of 1997. This
decrease in net income primarily reflected the effect of a 28% decrease in
oil prices and a 22% decrease in gas prices while costs and expenses
increased in relation to the 87% increase in production volumes.
Year 2000
The Year 2000 issue results from computer programs and embedded
computer chips with date fields that cannot distinguish between the year
1900 and 2000. The Company is currently implementing the steps necessary
to make the Company's operations Year 2000 compliant. These steps include
upgrading, testing and certifying its computer systems and field operation
services and obtaining Year 2000 compliance certification from all of the
Company's critical business suppliers. The Company formed a task force
during the year to address the Year 2000 issue to ensure that all of the
Company's business systems are Year 2000 compliant by mid-1999 with
mission critical systems projected to be compliant by the end of 1998.
The Company's business systems are almost entirely comprised of
off-the-shelf software. Most of the necessary changes in computer
instructional code can be made by upgrading this software. The Company is
currently in the process of either upgrading the off-the-shelf software or
receiving certification as to Year 2000 compliance from vendors or third
party consultants. A testing phase will be conducted as the software is
updated or certified and is expected to be complete by mid-1999.
The Company does not believe that costs incurred to address the Year
2000 issue with respect to its business systems will have a material
effect on the Company's results of operations, liquidity and financial
condition. The estimated total cost to address Year 2000 issues is
projected to be less than $150,000, most of which will be spent during the
testing phase in the next nine months.
The failure to correct a material Year 2000 problem could result in an
interruption, or a failure of, certain normal business activities or
operations. Based on activities to date, the Company believes that it will
be able to resolve any Year 2000 problems concerning its financial and
administrative systems. The Company is uncertain, however, as to the
impact that the Year 2000 issue will have on its field operations and
other non-information technology or as to how the Company will be
indirectly affected by the impact that the Year 2000 issue will have on
companies with which it conducts business and other third parties with
whom the Company maintains a material relationship, such as governmental
agencies, banking institutions, and tele-communication providers. Pipeline
operators to whom the Company sells natural gas, as well as other
customers and suppliers, could be prone to Year 2000 problems that could
not be assessed or detected by the Company. The Company plans to contact
its major purchasers, customers, suppliers, financial institutions and
others with whom it conducts business to determine whether they will be
Year 2000 compliant and whether they will be able to resolve in a timely
24
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CONTINUED
manner any Year 2000 problems directly affecting the Company. There can be
no assurance that such third parties will not fail to appropriately
address their Year 2000 issues or will not themselves suffer a Year 2000
disruption that could have a material adverse effect on the Company's
business, financial condition or operating results. Based upon these
responses and any problems that arise during the testing phase,
contingency plans or back-up systems would be determined and addressed.
The Company has utilized, and will continue to utilize, both internal and
external resources to complete tasks and perform testing necessary to
address the Year 2000 issue.
25
<PAGE>
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 8-K-
(a) Documents filed as part of the report
(3) Exhibits
10.1 Credit agreement among Swift Energy Company
and Bank One, Texas, National Association as
administrative agent, Bank of Montreal as
syndication agent, and Nationsbank, N.A. as
documentation agent and the lenders
signatory hereto dated August 18, 1998.
(b) Reports on Form 8-K.
(1) During the quarter ended September 30, 1998,
the Company filed a report on Form 8-K,
dated July 2, 1998, for the following event:
Item 2. Acquisition or Disposition of Assets
regarding the Company's agreement with Sonat
Exploration Company, a subsidiary of Sonat
Inc., to purchase producing oil and gas
properties (hereinafter referred to as the
Toledo Bend Properties).
On August 19, 1998, the Company filed a
report on Form 8-K/A, amending the Company's
Form 8-K dated July 2, 1998, to include the
following item:
Item 7. Financial Statements, Pro Forma
Information and Exhibits to provide
information not available at the time the
Form 8-K was filed. The Form 8-K/A included
audited historical statements of revenues
and direct operating expenses pertaining to
the Toledo Bend Properties for years ended
December 31, 1997, 1996 and 1995, and
unaudited pro forma consolidated statements
of income of the Company for the year ended
December 31, 1997 and the three months ended
March 31, 1998 pertaining to the acquisition
of the Toledo Bend Properties and borrowing
under a New Credit Facility as if they had
been consummated on January 1, 1997, and a
pro forma balance sheet as of March 31, 1998
pertaining to the acquisition of the Toledo
Bend Properties and the borrowings under a
New Credit Facility as if they had been
consummated on march 31, 1998.
26
<PAGE>
SWIFT ENERGY COMPANY
PART II. - OTHER INFORMATION-CONTINUED
(2) During the quarter ended September 30, 1998,
the Company filed a report on Form 8-K,
dated August 18, 1998, for the following
event:
Item 7. Financial Statements and Exhibits
regarding the Company's filing of a
Registration Statement on Form S-4
(Registration No. 333-50637) relating to the
Company's proposal to purchase substantially
all of the assets of 63 partnerships of
which the Company is the Managing General
Partner. The Form 8-K included unaudited
financial statements for the quarter ended
June 30, 1998 for 24 of the 63 partnerships
which are not required to file reports
pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934, as
amended, so that such financial statements
anticipated to be sent to investors in the
partnerships in connection with proposals
made to those investors would be publicly
available.
27
<PAGE>
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: November 12, 1998 By: (Original Signed By)
------------------ ----------------------------------
John R. Alden
Sr. Vice President - Finance
Chief Financial Officer, Secretary
Date: November 12, 1998 By: (Original Signed By)
------------------ ----------------------------------
Alton D. Heckaman, Jr.
Vice President,
Controller and Principal
Accounting Officer
28
<PAGE>
Exhibit 10.1
29
<PAGE>
CREDIT AGREEMENT
AMONG
SWIFT ENERGY COMPANY,
AS BORROWER,
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AS ADMINISTRATIVE AGENT,
BANK OF MONTREAL
AS SYNDICATION AGENT, AND
NATIONSBANK, N.A.
AS DOCUMENTATION AGENT
AND
THE LENDERS SIGNATORY HERETO
August 18, 1998
.........
Revolving Line of Credit
Of up to $250,000,000
With Letter of Credit Subfacility
.........
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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.................................................................15
1.5 Articles and Sections......................................................15
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............................................18
2.4 Limitation on Types of Loans...............................................18
2.5 Use of Loan Proceeds and Letters of Credit.................................19
2.6 Interest...................................................................19
2.7 Repayment of Loans and Interest............................................19
2.8 General Terms..............................................................20
2.9 Time, Place, and Method of Payments........................................20
2.10 Pro Rata Treatment; Adjustments............................................20
2.11 Borrowing Base Determinations..............................................21
2.12 Mandatory Prepayments......................................................22
2.13 Voluntary Prepayments and Conversions of Loans.............................23
2.14 Commitment Fee.............................................................23
2.15 Letter of Credit Fee.......................................................23
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
ARTICLE 3 CONDITIONS..........................................................................30
3.1 Conditions Precedent to Initial Loan and Letter of Credit..................30
3.2 Conditions Precedent to Each Loan..........................................31
3.3 Conditions Precedent to Issuance of Letters of Credit......................32
ARTICLE 4 REPRESENTATIONS AND WARRANTIES......................................................33
i
<PAGE>
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................................................34
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....................................................................35
4.15 Casualties of Taking of Property...........................................36
4.16 Locations of Business and Offices..........................................36
4.17 Environmental Compliance...................................................36
4.18 Investment Company Act Compliance..........................................36
4.19 Public Utility Holding Company Act Compliance..............................36
4.20 No Material Misstatements..................................................37
4.21 Subsidiaries.............................................................. 37
4.22 Defaults ..................................................................37
4.23 Maintenance of Properties..................................................37
4.24 Borrower's Year 2000 Representations and Warranties........................37
ARTICLE 5 AFFIRMATIVE COVENTS.................................................................38
5.1 Maintenance an 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................................................39
5.6 SEC and Other Reports......................................................39
5.7 Notices....................................................................39
5.8 Additional Information.....................................................41
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
5.13 Further Assurances.........................................................42
5.14 Fees and Expenses of Administrative Agent..................................42
5.15 Indemnification of Lenders and Administrative Agent........................43
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............................................44
5.20 Payment of Notes and Performance of Obligations............................44
5.21 Operation of Oil and Gas Properties........................................44
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<PAGE>
5.22 Performance of Designated Contracts........................................44
5.23 Borrower's Year 2000 Compliance............................................44
ARTICLE 6 NEGATIVE COVENANTS..................................................................45
6.1 Indebtedness; Contingent Obligations.......................................45
6.2 Loans or Advance...........................................................45
6.3 Mortgages of Pledges of Assets.............................................46
6.4 Sales of Properties; Leasebacks............................................46
6.5 Dividends and Distributions................................................46
6.6 Changes in Corporate Structure.............................................46
6.7 Rental or Lease Agreements.................................................46
6.8 Investments................................................................47
6.9 Lines of Business; Subsidiaries............................................47
6.10 ERISA Compliance...........................................................47
6.11 Sales or Discount of Receivables...........................................47
6.12 Transactions With Affiliates...............................................47
6.13 Tangible Net Worth.........................................................48
6.14 Current Ratio..............................................................48
6.15 Debt Coverage Ratio .......................................................48
6.16 Total Liabilities to Tangible Net Worth....................................48
6.17 Amendment to Partnership Agreements........................................48
6.18 Subordinated Debt and Senior Subordinated Debt.............................48
6.19 Negative Pledges...........................................................48
6.20 Senior Subordinated Debt...................................................48
ARTICLE 7 EVENT OF DEFAULT....................................................................48
7.1 Enumeration of Events of Default...........................................48
7.2 Rights Upon Default.......................................................50
ARTICLE 8 THE ADMINISTRATIVE AGENT............................................................51
8.1 Appointment................................................................51
8.2 Delegation of Duties.......................................................51
8.3 Exculpatory Provisions.....................................................51
8.4 Reliance by Administrative Agent...........................................52
8.5 Notice of Default..........................................................52
8.6 Non-Reliance on Administrative Agent and Other Lenders.....................52
8.7 Indemnification............................................................53
8.8 Restitution................................................................54
8.9 Administrative Agent in Its Individual Capacity............................54
8.10 Successor Administrative Agent.............................................54
8.11 Applicable Parties.........................................................54
ARTICLE 9 MISCELLANEOUS.......................................................................55
9.1 Assignments; Participations................................................55
9.2 Amendments and Waivers.....................................................56
iii
<PAGE>
9.3 Survival of Representations, Warranties and Covenants......................56
9.4 Notices and Other Communications...........................................57
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......................................................58
9.10 Integration................................................................58
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
Exhibit IX Partnership Acquisition
</TABLE>
iv
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is made and entered
into as of August 18, 1998, 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, as Administrative Agent for the
Lenders (in such capacity, together with its successors in such capacity
pursuant to the terms hereof, the "Administrative Agent"), BANK OF MONTREAL, a
Canadian chartered bank as Syndication Agent, and NATIONSBANK, N.A., a national
banking association as Documentation Agent.
W I T N E S S E T H:
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein contained, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. As used in this Agreement, the terms
"Administrative Agent," "Agreement," "Borrower," "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 Administrative
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 Administrative 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 Administrative Agent or such Lender under
this Agreement or any Note in respect of any LIBO Rate Loan or Letter
of Credit (other than taxes imposed on the overall net income of the
Administrative Agent or such Lender or its Applicable Lending Office
for any such LIBO Rate Loan by the jurisdiction in which the
Administrative 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,
1
<PAGE>
the Administrative 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 Administrative 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 Administrative
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
Administrative Agent and the Borrower as the office by which its Loans
of such type are to be made and maintained.
"Applicable Margin" shall mean at any time for LIBO Rate Loans
and Floating Rate Loans an incremental rate of interest shall be
determined by the ratio of (i) the sum of the Loan Balance and L/C
Exposure to (ii) the last calculated Borrowing Base as set out below in
basis points:
<TABLE>
<CAPTION>
<S> <C> <C>
Floating LIBO
Ratio Rate Margin Margin
less than 50% 0.00 bps 87.50 bps
equal to or greater than 50% but 0.00 bps 112.50 bps
less than 75%
equal to or greater than 75% but 0.00 bps 137.50 bps
less than 90%
equal to or greater than 90% 0.00 bps 150.00 bps
</TABLE>
2
<PAGE>
"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.
"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 Distribution Shares and the Oil and Gas Properties, for
loan purposes, as determined by the Lenders from time to time in
accordance with Section 2.11.
"Borrowing Request" shall mean each written request, in
substantially the form attached hereto as Exhibit III, by the Borrower
to the Administrative 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);
(c) when requesting a Floating Rate Loan, be
delivered to the Administrative 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 Administrative Agent no later than 11:00 a.m., Central
Standard or Daylight Savings Time, as the case may be, the
third Business Day
3
<PAGE>
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 August 18, 1998.
"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 August 18, 2002.
"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 Administrative 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 Administrative 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, 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
4
<PAGE>
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, plus unused availability under this Agreement.
"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 the
aggregate amount of all Subordinated Debt, Senior Subordinated Debt,
amounts funded under this Agreement, and any other funded debt of the
Borrower and its Subsidiaries on a consolidated basis allowed by the
Lenders.
"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.
"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
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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.
"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 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
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be the average rate charged to the Lender serving as the Administrative
Agent on such day on such transactions as determined by the
Administrative Agent.
"Final Maturity" shall mean August 18, 2002.
"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 Administrative 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 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
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<PAGE>
"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 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
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<PAGE>
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 Administrative 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 Administrative 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 Administrative 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 Administrative 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 Administrative Agent to leading 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.
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"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
Administrative 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 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, 1997, 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.
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"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 and its Subsidiaries on a consolidated basis 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 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 Administrative 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 Administrative 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.
"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.
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"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 Acquisition" shall mean the acquisition by
Borrower of all of the partnership interests of the partnerships
described on Exhibit IX to be completed by December 31, 1998.
"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) the aggregate unpaid
purchase price secured by all such Liens shall not exceed $5,000,000;
(e) Liens on assets, excluding Oil and Gas Properties and production
and proceeds therefrom, in an aggregate amount not to exceed
$1,000,000; (f) Liens to operators and non-operators under joint
operating agreements arising in the ordinary course of business to
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secure amounts owing to operators, which amounts are not yet due or are
being contested in good faith by appropriate proceedings diligently
conducted; (g) 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; (h) the currently existing Liens described on Exhibit VI
under the heading "Liens"; and (i) 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
Administrative 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.
"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
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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 such 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.
"Senior Subordinated Debt" shall mean the Indebtedness of the
Borrower under the Senior Subordinated Notes in the amount of
$150,000,000 due 2008 issued or to be issued in accordance with the
terms of the Preliminary Offering Memorandum dated August 7, 1998
relating thereto.
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"Sonat Acquisition" shall mean the acquisition from Sonat
Exploration Company covering certain Oil and Gas Properties which
include, but are not limited to (i) Master Creek Field, Louisiana, (2)
Brookeland Field, Texas, (3) Fullerton Field, Louisiana, and (4) Pitkin
Field, Louisiana, which acquisition is to be closed by August 31, 1998.
"Subordinated Debt" shall mean the Indebtedness of the
Borrower under the 6.25% Convertible Subordinated Notes due November
15, 2006, in the maximum original principal amount of $115,000,000.
"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 and its subsidiaries
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.
"Year 2000 Compliance" shall mean, with regard to any entity,
that all software, embedded microchips, and other processing
capabilities utilized by, and material to the business operations or
financial condition of, such entity are able to interpret and
manipulate data on and involving all calendar dates correctly and
without causing any abnormal ending scenario, including in relation to
dates in and after the year 2000.
"Termination Date" shall have the meaning assigned to such
term in Section 2.23.
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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,
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,
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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.
(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 and multiples of $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
$1,000,000 with multiples of $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 Administrative 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 Administrative Agent, for the account of the Borrower.
The amount so received by the Administrative 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 Administrative 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
Administrative 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 $20,000,000.
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<PAGE>
(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
Administrative Agent with respect to the relevant Letter of Credit in the
obligation of the Administrative Agent, as the issuer of such Letter of Credit,
in an 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 Administrative Agent
in the obligation of the Borrower to reimburse the Administrative Agent, as the
issuer of such Letter of Credit, for any amounts payable, paid, or incurred by
the Administrative 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 Administrative 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 Administrative 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 Administrative Agent.
(d) EACH LENDER AGREES TO INDEMNIFY THE ADMINISTRATIVE AGENT,
AS THE ISSUER OF EACH LETTER OF CREDIT, AND THE OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES OF THE ADMINISTRATIVE 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 ADMINISTRATIVE 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 ADMINISTRATIVE 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 ADMINISTRATIVE 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 ADMINISTRATIVE 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
18
<PAGE>
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE ADMINISTRATIVE 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.
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, including eight LIBO
Rate 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 Administrative 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 Administrative 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 Administrative 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 to finance the exploration, development and/or acquisition
of Oil and Gas Properties and 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.
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<PAGE>
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 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 Administrative 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 monthly commencing
September 1, 1998, and continuing on the first day of each 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 Administrative
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 Administrative 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 Administrative 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 Administrative 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 Administrative 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 Administrative Agent, the
20
<PAGE>
Administrative 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 made the Required Payment
to the Administrative Agent, the recipient of such payment shall, on demand,
repay to the Administrative 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 Administrative
Agent until the date the Administrative 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 Administrative
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 Administrative 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
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<PAGE>
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 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 Administrative 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
$200,000,000 unless and until the Borrowing Base has been redetermined pursuant
to Section 2.11(b). Following the placement of the Senior Subordinated Debt the
Borrowing Base of $200,000,000 shall reduce to $150,000,000. $30,000,000 of such
Borrowing Base shall only be made available contemporaneously with the
Partnership Acquisition. In the event the Sonat Acquisition is not completed or
less than 100% of the Partnership Acquisition is completed, the Borrowing Base
will be subject to redetermination at the request of the Required Lenders.
(b) The Borrowing Base shall be redetermined by the
Administrative Agent with the consent of the Required Lenders each May 1 and
November 1, beginning May 1, 1999, 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 the event the Required Lenders cannot agree on the Borrowing Base,
the Borrowing Base shall be set on the basis of the weighted (based on the
Percentage Share of each Lender) arithmetic average of the Borrowing Base as
determined by each individual Lender. However, the amount of the Borrowing Base
cannot be increased at any time without consent of 100% of the Lenders. In
addition, the Administrative Agent with the consent of the Required Lenders
shall, in the normal course of business following a request of the Borrower,
redetermine the Borrowing Base; provided, however, the Administrative Agent and
the Lenders shall not be obligated to respond to more than two such requests
during any calendar year. Notwithstanding the foregoing, the Required 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 Administrative 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 Administrative Agent may request.
(c) Upon each determination of the Borrowing Base, the
Administrative 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
22
<PAGE>
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.
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 thirty days of
notice from the Administrative Agent of such occurrence, prepay the amount of
such excess for application on the Loan Balance. 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
Administrative Agent, deposit with the Administrative 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 Administrative Agent in
satisfaction of the requirement provided in this Section may be invested, at the
sole discretion of the Administrative 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 Administrative 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
Administrative Agent notice of each such prepayment or conversion of all or any
portion of a LIBO Rate Loan no less than three 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 $500,000, (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 Administrative
Agent for the account of the Lenders in proportion to their respective
Percentage Share, on the first day of October, 1998, and on the first day of
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each third calendar month thereafter and on the Commitment Termination Date, a
fee in the amount as determined by the ratio of (i) the sum of the Loan Balance
and the L/C. Exposure to (ii) the last calculated Borrowing Base, set forth
below in basis points, 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, as follows:
<TABLE>
<CAPTION>
<S> <C>
Ratio Commitment Fee
----- ---------------
less than 50% 22.50 bps
equal to or greater
than 50% but less
than 75% 25.00 bps
equal to or greater than
75% but less than 90% 25.00 bps
equal to or greater
than 90% 37.50 bps
</TABLE>
2.15 Letter of Credit Fee The Borrower shall pay to the
Administrative 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 $400 or
the Applicable Margin for LIBO Rate Loans, 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 Administrative 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. The Borrower shall pay to the Administrative Agent an additional fee of
0.125% per annum calculated on a basis of 360 days and actual days elapsed
(including the first day but excluding the last day).
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 Administrative Agent and each Lender (for
the pro rata benefit of all Lenders) and grants to the Administrative 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
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<PAGE>
Administrative Agent or such Lender, with such interest of the Administrative
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
Administrative 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 Administrative 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
Administrative 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 Tex. Fin. Code Ann. ss. 303.301
(Vernon's 1998), 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 Administrative 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 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 Administrative
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 Administrative
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 Administrative 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
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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 Administrative 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 Administrative
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 Administrative Agent, any Lender, or
any beneficiary of any Letter of Credit. The Borrower agrees that none of the
Administrative 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 ADMINISTRATIVE AGENT OR ANY LENDER, so long
as the Administrative 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 Administrative Agent, as the issuer of the Letters of Credit,
agrees to exercise ordinary care in examining each 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
ADMINISTRATIVE AGENT OR ANY LENDER; provided, in all respects, that the
Administrative 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 Administrative 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 Administrative Agent as the
issuer of Letters of Credit, the Administrative Agent shall not be liable for
any error, omission, interruption or delay, EVEN IF DUE TO THE NEGLIGENCE,
WHETHER SOLE OR CONCURRENT, OF THE ADMINISTRATIVE AGENT, in transmission,
dispatch or delivery of any message or advice, however transmitted, in
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connection with any Letter of Credit. The Administrative Agent, the Lenders, and
the Borrower agree that any action taken or omitted by the Administrative 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 ADMINISTRATIVE AGENT OR ANY LENDER, if done
in the absence of gross negligence or willful misconduct, shall be binding as
among the Administrative Agent, as issuer of such Letter of Credit or otherwise,
the Lenders, and the Borrower and shall not put the Administrative 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 Administrative Agent and each Lender from time to time such amounts
as the Administrative Agent or such Lender may determine are necessary to
compensate it for any Additional Costs incurred by the Administrative 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 Administrative 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 Administrative 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 Administrative Agent or such Lender of issuing or maintaining any
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 Administrative Agent or such
Lender, as the case may be, the Borrower shall pay to the Administrative Agent
or such Lender, from time to time as specified by the Administrative Agent or
such Lender, additional amounts which shall be sufficient to compensate the
Administrative 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
Administrative Agent and each Lender such amounts as shall be sufficient in the
reasonable opinion of the Administrative 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
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(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 Administrative 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 Administrative Agent or such Lender.
(e) Determinations by the Administrative 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 Administrative Agent and
such Lender under this Section shall be conclusive, absent manifest error,
provided that such determinations are made on a reasonable basis. The
Administrative 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
Administrative Agent or the relevant Lender shall (i) notify the Borrower, as
promptly as practicable after the Administrative 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 Administrative Agent or such Lender to
compensation pursuant to this Section; and (ii) designate a different 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 Administrative Agent or such Lender, be disadvantageous
to the Administrative 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 Administrative 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 Administrative
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 Administrative 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
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other sums payable are also generally assessed by the Administrative 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
Administrative 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 Administrative Agent and each Lender, net income
and franchise taxes imposed on the Administrative Agent or such Lender by the
jurisdiction under the laws of which the Administrative 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 Administrative Agent or any Lender hereunder or under any
other Loan Document, the amounts so payable to the Administrative Agent or such
Lender shall be increased to the extent necessary to yield to the Administrative
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
Administrative 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
Administrative Agent the required receipts or other required documentary
evidence, the Borrower shall indemnify the Administrative Agent and the Lenders
for any incremental taxes, interest or penalties that may become payable by the
Administrative 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 Administrative 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 Administrative Agent a Form 1001 or 4224 pursuant to the
preceding sentence further undertakes to deliver to the Borrower and the
Administrative Agent two further copies of such Form 1001 or 4224, or successor
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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 Administrative Agent) (the "Terminated
Lender") at any time upon five Business Days' prior written notice to the
Terminated Lender and the Administrative 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
Administrative 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.
(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
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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 Administrative
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
Administrative 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 Administrative
Agent, and the Administrative Agent 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 Administrative Agent and
dated, where applicable, of even date herewith or a date prior thereto and
acceptable to the Administrative Agent:
(a) multiple counterparts of this Agreement, as requested
by the Administrative Agent;
(b) the Notes;
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(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, 1997;
(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 Administrative Agent;
(i) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Administrative
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 Administrative
Agent a Borrowing Request at least the requisite time prior to the
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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 Administrative Agent or any Lender,
the Borrower shall have delivered evidence satisfactory to the
Administrative 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 Administrative Agent shall have received, reviewed,
and approved such additional documents and items as described in
Section 3.1 as may be requested by the Administrative 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 Administrative Agent and each Lender shall have
received the payment of all fees payable by the Borrower hereunder and
the Administrative Agent shall have received reimbursement from the
Borrower, or special legal counsel for the Administrative Agent shall
have received payment from the Borrower, for all reasonable fees and
expenses of counsel to the Administrative 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
Administrative Agent and each Lender.
3.3 Conditions Precedent to Issuance of Letters of Credit The
obligation of the Administrative 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 Administrative
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
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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
Administrative Agent, as the issuer of the Letters of Credit, in its
sole discretion.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter
into this Agreement and to extend credit to the Borrower, the Borrower
represents and warrants to the Administrative 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 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.
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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 and its Subsidiaries as of December 31, 1997,
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, and its Subsidiaries in all material respects as of
the dates and for the periods stated therein. No event or circumstance has
occurred since December 31, 1997, 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 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.
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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 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
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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, 1997,
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 Administrative 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 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
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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 Administrative 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.
4.24 Borrower's Year 2000 Representations and Warranties
(A) All devices, systems, machinery, information technology, computer software
and hardware, and other date sensitive technology (jointly and severally the
"Systems") necessary for Borrower to carry on its business as presently
conducted and as contemplated to be conducted in the future are Year 2000
Compliant or will be Year 2000 Compliant within a period of time calculated to
result in no material disruption of any of Borrower's business operations. For
purposes of these provisions, "Year 2000 Compliant" means that such Systems are
designed to be used prior to, during and after the Gregorian calendar year 2000
A.D. and will operate during each such time period without error relating to
date data, specifically including any error relating to, or the product of, date
data which represents or references different centuries or more than one
century.
(B) Borrower has: (1) undertaken a detailed inventory, review, and assessment of
all areas within its business and operations that could be adversely affected by
the failure of Borrower to be Year 2000 Compliant on a timely basis; (2)
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developed a detailed plan and time line for becoming Year 2000 Compliant on a
timely basis, and (3) to date, implemented that plan in accordance with that
timetable in all material respects.
(C) Borrower has made or will make written inquiry of each of its key suppliers,
vendors, and customers, and will attempt to obtain in writing confirmations from
all such persons, as to whether such persons have initiated programs to become
Year 2000 Compliant and on the basis of such confirmations, Borrower reasonably
believes that all such persons will be or become so compliant. For purposes
hereof, "key suppliers, vendors, and customers" refers to those suppliers,
vendors, and customers of Borrower whose business failure would, with reasonable
probability, result in a material adverse change in the business, properties,
condition (financial or otherwise), or prospects of Borrower. For purposes of
this paragraph, Administrative Agent, confirms to Borrower that Administrative
Agent has initiated its own corporate-wide Year 2000 program with respect to its
lending activities.
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 Administrative Agent or any Lender, make such records available
for inspection and permit the Administrative 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 Certificate Concurrently with the furnishing of
the Financial Statements submitted pursuant to Sections 5.2 and 5.3, provide the
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Administrative Agent 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 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) Deliver to each Lender no later than October 1 of each
year during the term of this Agreement, engineering reports in form and
substance satisfactory to the Lender prepared by or under the supervision of the
chief petroleum engineer of the Borrower evaluating the Oil and Gas Properties
of the Borrower, its Subsidiaries and the Partnerships as of July 1 of the year
for which such reserve reports and furnished and updating information provided
in the reports pursuant to Section 5.5(a).
(c) 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 Administrative Agent, 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
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designation by the Borrower delivered to the Administrative 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 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;
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(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;
(i) 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
(j) any other event or condition which could reasonably be
expected to have a Material Adverse Effect.
5.8 Additional Information. Furnish to the Administrative
Agent, promptly upon the request of the Administrative Agent, such additional
financial or other information concerning the assets, liabilities, operations
and transactions of the Borrower, its Subsidiaries and the Partnerships as the
Administrative 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 Administrative 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.
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
(v) 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, (vi)
required for the performance or conduct of its operations, or (vii) 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
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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 ADMINISTRATIVE AGENT AND ALL OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES OF EACH LENDER AND THE ADMINISTRATIVE
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 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 ADMINISTRATIVE 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 Administrative Agent all such other assurances and instruments as shall,
in the opinion of the Administrative Agent, be necessary to fulfill the terms of
the Loan Documents.
5.14 Fees and Expenses of Administrative Agent Upon request by
the Administration Agent, promptly reimburse the Administrative Agent for all
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amounts reasonably expended, advanced or incurred by the Administrative 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 all amounts reasonably expended, advanced or
incurred by the Administrative Agent or any Lender to collect the Notes and
enforce the rights of the Lenders and the Administrative 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 Administrative Agent or such Lender as applicable 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
Administrative 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
Administrative 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
Administrative Agent until the date it is repaid to the Administrative 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 Administrative Agent
INDEMNIFY AND HOLD EACH LENDER AND THE ADMINISTRATIVE AGENT AND ALL OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES OF EACH LENDER
AND THE ADMINISTRATIVE 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
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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 Administrative 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 Administrative 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.
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.
5.23 Borrower's Year 2000 Compliance.
(A) Furnish such additional information, statements and other reports with
respect to Borrower's activities, course of action and progress towards becoming
Year 2000 Compliant as Administrative Agent may request from time to time and
make these reports available to Lenders upon request.
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(B) In the event of any change in circumstances that causes or will likely cause
any of Borrower's representations and warranties with respect to its being or
becoming Year 2000 Compliant to no longer be true (hereinafter, referred to as a
"Change in Circumstances") then Borrower shall promptly, and in any event within
ten (10) days of receipt of information regarding a Change in Circumstances,
provide Administrative Agent with written notice (the "Notice") that describes
in reasonable detail the Change in Circumstances and how such Change in
Circumstances caused or will likely cause Borrower's representations and
warranties with respect to being or becoming Year 2000 Compliant to no longer be
true. Borrower shall, within ten (10) days of a request, also provide
Administrative Agent with any additional information Administrative Agent
requests of Borrower in connection with the Notice and/or a Change in
Circumstances.
(C) Give any representative of Administrative Agent access during all business
hours to, and permit such representative to examine, copy or make excerpts from,
any and all books, records and documents in the possession of Borrower and
relating to its affairs, and to inspect any of the properties and Systems of
Borrower, and to project test the Systems to determine if they are Year 2000
Compliant in an integrated environment, all at the sole cost and expense of
Administrative Agent.
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) performance guarantees and performance surety or other
bonds provided in the ordinary course of business; (d) operating leases entered
into in the ordinary course of business or endorsements of instruments for
collection in the ordinary course of business; (e) purchase-money Indebtedness
of the Borrower only incurred in connection with the acquisition of equipment
not exceeding $5,000,000 at any time outstanding; (f) Subordinated Debt; (g)
Senior 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 Administrative 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 Administrative 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
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production from the proved producing reserves as reflected on the Reserve Report
most recently provided to the Administrative 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, and
(i) other Indebtedness not exceeding $5,000,000 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, or (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.
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, in
excess of $10,000,000 in the aggregate through December 31, 1999, and $5,000,000
per fiscal year thereafter 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.
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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. Provided, however, the Borrower
may acquire of its common stock after the Closing Date having a fair market
value at the time of Acquisition not to exceed in the aggregate $15,000,000.
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) bonuses and rentals paid under oil, gas and
mineral leases, or (b) 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 Administrative 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
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November 28, 1990 (Swift Depositary Interests I), or (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.
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 $140,000,000 plus 75% of positive
Net Income and 100% of net proceeds from any equity offering for all fiscal
periods ending subsequent to June 30, 1998.
6.14 Current Ratio. Permit the ratio of Current Assets (plus
Available Commitment) to Current Liabilities to be at any time less than 1.1 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 Tangible Net Worth Permit the ratio
of total liabilities of the Borrower and its Subsidiaries on a consolidated
basis to Tangible Net Worth to be at any time greater than 2.25 to 1.0 through
June 30, 1999, and 2.0 to 1.0 as of September 30, 1999 and thereafter.
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 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.
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6.18 Subordinated Debt and Senior Subordinated Debt Amend,
extend or modify any of the terms or provisions of any documents, notes, or
agreements evidencing or governing the Subordinated Debt and Senior 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, 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.
6.20 Senior Subordinated Debt The terms of the Senior
Subordinated Debt shall not deviate materially from the Preliminary Offering
Memorandum dated August 7, 1998.
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 Administrative 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 Administrative 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;
(d) Default shall be made by any of the Borrower, its
Subsidiaries, or the Partnerships in the payment or
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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;
(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
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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 Administrative 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 Administrative
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 Administrative Agent and any
and all other indebtedness at any time owing by such Lender or the
Administrative 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
Administrative Agent may, or upon the request of the Required Lenders, the
Administrative 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 Administrative Agent may, or upon the request of the Required Lenders,
the Administrative Agent shall, declare the Commitments terminated, whereupon
the Commitments shall immediately terminate unless and until the Lenders and the
Administrative Agent shall reinstate the same in writing, and (iii) with the
oral consent of the Required Lenders (confirmed promptly in writing), the
Administrative 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 Administrative Agent
or such Lender and any and all other indebtedness at any time owing by the
Administrative 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 Administrative 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.
ARTICLE 8
THE ADMINISTRATIVE AGENT
8.1 Appointment Each Lender hereby designates and appoints the
Administrative Agent as the agent of such Lender under this Agreement and the
other Loan Documents. Each Lender authorizes the Administrative Agent, as the
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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 Administrative
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 Administrative 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
Administrative Agent shall be read into this Agreement or any other Loan
Document or otherwise exist against the Administrative Agent.
8.2 Delegation of Duties The Administrative 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 Administrative 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 Administrative 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 Administrative 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
Administrative 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 Administrative 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 Administrative 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 Administrative Agent The Administrative 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 (including counsel to the Borrower), independent
accountants and other experts selected by the Administrative Agent. The
Administrative 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 Administrative
Agent. The Administrative Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless it
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shall first receive such advice or concurrence of the Required Lenders or all
Lenders to the extent required by Section 9.2 as it deems appropriate and
contribution by each Lender of its Percentage Share of costs reasonably expected
by the Administrative Agent to be incurred in connection therewith. The
Administrative 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 or all Lenders to the extent
required by Section 9.2. 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 Administrative Agent be required to take any action
that exposes the Administrative Agent to personal liability or that is contrary
to any Loan Document or applicable Requirement of Law.
8.5 Notice of Default The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default unless the Administrative 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 Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof to the Lenders. The Administrative 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
Administrative Agent shall have received such directions, subject to the
provisions of Section 7.2, the Administrative 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 Administrative
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 Administrative Agent or such Lender, as the case may be,
shall use its good faith efforts to inform the other Lenders and/or the
Administrative 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 Administrative Agent or any Lender.
8.6 Non-Reliance on Administrative Agent and Other Lenders Each
Lender expressly acknowledges that neither the Administrative 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 Administrative 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 Administrative Agent or any
Lender to any other Lender. Each Lender represents to the Administrative Agent
that it has, independently and without reliance upon the Administrative 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 Administrative 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 and the other
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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 Administrative Agent hereunder,
the Administrative 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 Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
8.7 Indemnification EACH LENDER AGREES TO INDEMNIFY THE
ADMINISTRATIVE 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 ADMINISTRATIVE 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 ADMINISTRATIVE 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 ADMINISTRATIVE 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 ADMINISTRATIVE 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 Administrative 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 Administrative 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 Administrative 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 payment all or a portion of which is
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<PAGE>
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 Administrative Agent shall
forward such funds to the Borrower or to the Lender required to return such
funds. If any such amount due to the Administrative 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
Administrative 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 Administrative 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 Administrative Agent in Its Individual Capacity The
Administrative 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
Administrative Agent were not the agent hereunder. With respect to any Note
issued to the Lender serving as the Administrative Agent, the Administrative
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 Administrative
Agent. The terms "Lender" and "Lenders" shall include the Administrative Agent
in its individual capacity.
8.10 Successor Administrative Agent The Administrative Agent
may resign as Administrative Agent upon ten days' notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative 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 Administrative Agent. The term
"Administrative Agent" shall mean such successor agent effective upon its
appointment. The rights, powers and duties of the former Administrative Agent as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement or any holders of the Notes. After the removal or resignation of
any Administrative Agent hereunder as Administrative 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 Administrative 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 Administrative 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 Administrative 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.
The Documenting Agent and the Syndication Agent have no duties hereunder.
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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 Administrative Agent and all of the Lenders.
(b) With the consent of the Administrative 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
$10,000,000 (or any whole multiple of $1,000,000 in excess thereof). Any such
assignment shall become effective upon the execution and delivery to the
Administrative Agent of the Assignment Agreement and the consent of the
Administrative Agent. Promptly following receipt of an executed Assignment
Agreement, the Administrative 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 Administrative 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
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<PAGE>
and any operating circular issued by such Federal 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 Administrative 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 Administrative 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 or extend the time of payment of 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 Administrative Agent without the written
consent of the Administrative Agent, or (c) amend, modify or waive any provision
of Section 2.20 or the rights or obligations of the Administrative Agent as the
issuer of Letters of Credit without the written consent of the Administrative
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 Administrative Agent, and all future holders of the Notes. In the
event of any waiver, the Borrower, the Lenders, and the Administrative 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.
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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 Administrative 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 Administrative
Agent shall be binding upon and inure to the benefit of the Borrower, the
Lenders, or the Administrative 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 Administrative Agent or the officers or employees of
any Lender or the Administrative Agent, nor any failure or delay by any Lender
or the Administrative 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
Administrative 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
Administrative 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 Administrative 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 Administrative 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 Administrative 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 Administrative Agent at any time if in its sole
discretion it deems it advisable to do so.
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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. THIS AGREEMENT SUPERSEDES ANY
PRIOR AGREEMENT AMONG THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO
THE SUBJECT HEREOF. 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 ADMINISTRATIVE 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
ADMINISTRATIVE AGENT OR ANY LENDER IN ACCORDANCE WITH THIS SECTION.
9.12 Waiver of Rights to Jury Trial THE BORROWER, THE
ADMINISTRATIVE 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 ADMINISTRATIVE 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 ADMINISTRATIVE 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.
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.
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IN WITNESS WHEREOF, this Agreement is executed effective as of the date
first above written.
BORROWER:
SWIFT ENERGY COMPANY
By:
----------------------
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)
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ADMINISTRATIVE AGENT AND LENDER:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By:
------------------------------
Stephen Shatto
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: Steve Shatto
Telecopy: (713) 751-3544
(Signatures Continued on Next Page)
62
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LENDER:
BANK OF MONTREAL
By:
------------------------------
Robert L. Roberts
Director
Applicable Lending Office
for Floating Rate Loans and
LIBO Rate Loans:
115 S. LaSalle
11th Floor
Chicago, Illinois 60603
Attention: Charlo Chase
Address for Notices:
Bank of Montreal
700 Louisiana, Suite 4400
Houston, Texas 77002
Attention: Christa Hash
Telecopy: (713) 223-4007
(Signatures Continued on Next Page)
63
<PAGE>
LENDER:
BANK OF SCOTLAND
By:
------------------------------
Annie Chin Tat
Senior Vice President
Applicable Lending Office
for Floating Rate Loans and
LIBO Rate Loans:
565 Fifth Avenue
New York, New York 10017
Attention: Karen Workman
Address for Notices:
1200 Smith Street
Suite 1750
Houston, Texs 77002
Attention: Richard Butler
Telecopy: 713-651-5714
With a copy to:
Annie Chin Tat
565 Fifth Avenue
New York, New York 10017
(Signatures Continued on Next Page)
64
<PAGE>
LENDER:
NATIONSBANK, N.A.
By:
------------------------------
Mary Lou Allen
Vice President
Applicable Lending Office
for Floating Rate Loans and
LIBO Rate Loans:
901 Main Street, 14th Floor
Dallas, Texas 70202
Attention: Terri Smith
Address for Notices:
700 Louisiana
8th Floor
Houston, Texas 77002
Attention: Mary Lou Allen
Telecopy: 713-248-6432
(Signatures Continued on Next Page)
65
<PAGE>
LENDER:
THE SANWA BANK, LIMITED
By:
------------------------------
C. L. Murphy
Senior Vice President
Applicable Lending Office
for Floating Rate Loans and
LIBO Rate Loans:
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Attention: Wai Mei (Sandy) Lew
Address for Notices:
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055
Attention: Kentaro Yamagishi
Telecopy: 212-754-2360
(Signatures Continued on Next Page)
66
<PAGE>
LENDER:
CIBC INC.
By:
------------------------------
Name:
------------------------
Title:
------------------------
Applicable Lending Office
for Floating Rate Loans and
LIBO Rate Loans:
2727 Paces Ferry Road
Suite 1200
2 Paces West, Bldg. 2
Atlanta, Georgia 30339
Attention: Kathryn McGovern
Senior Associate
Address for Notices:
1600 Smith Street
Suite 3000
Houston, TX 77002
Attention: Mark H. Wolf
Telecopy: 713-650-2588
(Signatures Continued on Next Page)
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LENDER:
FIRST UNION NATIONAL BANK
By:
-----------------------------
Robert R. Wetteroff
Senior Vice President
Applicable Lending Office
for Floating Rate Loans and
LIBO Rate Loans:
1001 Fannin Street
Suite 2255
Houston, Texas 77002
Attention: Debbie Blank
Portfolio Administrator
Address for Notices:
1001 Fannin Street, Suite 2255
Attention: Paul N. Riddle
Telecopy: 713-650-6354
(Signatures Continued on Next Page)
68
<PAGE>
LENDER:
SOCIETY GENERALE
By:
------------------------------
Name:
-------------------------
Title:
------------------------
Applicable Lending Office
for Floating Rate Loans and
LIBO Rate Loans:
2001 Ross Avenue, Suite 4800
Dallas, Texas 75201
Attention: Stacie Row
Address for Notices:
1111 Bagby, Suite 2020
Houston, TX 77002
Attention: Elizabeth Hunter
Telecopy: 712-650-0824
(Signatures Continued on Next Page)
69
<PAGE>
LENDER:
CREDIT LYONNAIS NEW YORK BRANCH
By:
------------------------------
Pascal Poupelle
Senior Vice President
Applicable Lending Office
for Floating Rate Loans and
LIBO Rate Loans:
1301 Avenue of the Americas, 15th Floor
New York, New York 10019
Attn: Loan Administration Department
with a copy to:
1100 Louisiana, Suite 5360
Houston, Texas 77002
Attention: Bernadette Archie
Address for Notices:
1301 Avenue of the Americas, 15th Floor
New York, New York 10019
Attn: Loan Administration Department
with a copy to:
1000 Louisiana, Suite 5360
Houston, TX 77002
Attention: Jeff Baker
Telecopy: 713-751-0307
(Signatures Continued on Next Page)
70
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LENDER:
ABN-AMRO BANK N.V.
By:
------------------------------
Name: _______________________
Title: _______________________
By:
------------------------------
Name: _______________________
Title: _______________________
Applicable Lending Office
for Floating Rate Loans and
LIBO Rate Loans:
135 South LaSalle Street, Suite 625
Chicago, Illinois 60603
Attention: Loan Administration
Address for Notices:
135 South LaSalle Street, Suite 2805
Chicago, Illinois
Attention: Karen MacAllister
Telecopy: 312-904-8840
with copy to:
Three Riverway, Suite 1700
Houston, Texas 77056
Attention: Jamie Conn
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PROMISSORY NOTE
$37,500,000 Houston, Texas August 18, 1998
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of BANK ONE, TEXAS, NATIONAL ASSOCIATION
("Payee"), at the banking quarters of Bank One, Texas, National Association, in
Houston, Harris County, Texas, the sum of THIRTY-SEVEN MILLION FIVE HUNDRED
THOUSAND DOLLARS ($37,500,000), or so much thereof as may be advanced against
this Note pursuant to the Credit Agreement dated as of August 18, 1998, by and
among Maker, Bank One, Texas, National Association, as a Lender and as the
Administrative Agent, (as amended, restated or supplemented from time to time,
the "Credit Agreement"), together with interest at the rates and calculated as
provided in the Credit Agreement. The indebtedness evidenced by this Note, both
principal and interest, is payable as provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters
governed thereby, including, without limitation, certain events which will
entitle the Lenders to accelerate the maturity of all amounts due hereon.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is a "Note" under, and is
payable as provided in, the Credit Agreement.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE
STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW); PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE
(WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
SWIFT ENERGY COMPANY
By:
------------------------------
John R. Alden
Senior Vice President
<PAGE>
PROMISSORY NOTE
$30,000,000 Houston, Texas August 18, 1998
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of BANK OF MONTREAL ("Payee"), at the
banking quarters of Bank One, Texas, National Association, in Houston, Harris
County, Texas, the sum of THIRTY MILLION DOLLARS ($30,000,000), or so much
thereof as may be advanced against this Note pursuant to the Credit Agreement
dated as of August 18, 1998, by and among Maker, Bank One, Texas, National
Association, as a Lender and as the Administrative Agent, as a Lender (as
amended, restated or supplemented from time to time, the "Credit Agreement"),
together with interest at the rates and calculated as provided in the Credit
Agreement. The indebtedness evidenced by this Note, both principal and interest,
is payable as provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters
governed thereby, including, without limitation, certain events which will
entitle the Lenders to accelerate the maturity of all amounts due hereon.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is a "Note" under, and is
payable as provided in, the Credit Agreement.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE
STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW); PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE
(WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
SWIFT ENERGY COMPANY
By:
------------------------------
John R. Alden
Senior Vice President
<PAGE>
PROMISSORY NOTE
$30,000,000 Houston, Texas August 18, 1998
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of NATIONSBANK, N.A. ("Payee"), at the
banking quarters of Bank One, Texas, National Association, in Houston, Harris
County, Texas, the sum of THIRTY MILLION DOLLARS ($30,000,000), or so much
thereof as may be advanced against this Note pursuant to the Credit Agreement
dated as of August 18, 1998, by and among Maker, Bank One, Texas, National
Association, as a Lender and as the Administrative Agent, (as amended, restated
or supplemented from time to time, the "Credit Agreement"), together with
interest at the rates and calculated as provided in the Credit Agreement. The
indebtedness evidenced by this Note, both principal and interest, is payable as
provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters
governed thereby, including, without limitation, certain events which will
entitle the Lenders to accelerate the maturity of all amounts due hereon.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is a "Note" under, and is
payable as provided in, the Credit Agreement.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE
STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW); PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE
(WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
SWIFT ENERGY COMPANY
By:
------------------------------
John R. Alden
Senior Vice President
<PAGE>
PROMISSORY NOTE
$25,000,000 Houston, Texas August 18, 1998
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of CIBC INC. ("Payee"), at the banking
quarters of Bank One, Texas, National Association, in Houston, Harris County,
Texas, the sum of TWENTY-FIVE MILLION DOLLARS ($25,000,000), or so much thereof
as may be advanced against this Note pursuant to the Credit Agreement dated as
of August 18, 1998, by and among Maker, Bank One, Texas, National Association,
as a Lender and as the Administrative Agent, (as amended, restated or
supplemented from time to time, the "Credit Agreement"), together with interest
at the rates and calculated as provided in the Credit Agreement. The
indebtedness evidenced by this Note, both principal and interest, is payable as
provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters
governed thereby, including, without limitation, certain events which will
entitle the Lenders to accelerate the maturity of all amounts due hereon.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is a "Note" under, and is
payable as provided in, the Credit Agreement.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE
STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW); PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE
(WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
SWIFT ENERGY COMPANY
By:
------------------------------
John R. Alden
Senior Vice President
<PAGE>
PROMISSORY NOTE
$25,000,000 Houston, Texas August 18, 1998
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of FIRST UNION NATIONAL BANK ("Payee"),
at the banking quarters of Bank One, Texas, National Association, in Houston,
Harris County, Texas, the sum of TWENTY-FIVE MILLION DOLLARS ($25,000,000), or
so much thereof as may be advanced against this Note pursuant to the Credit
Agreement dated as of August 18, 1998, by and among Maker, Bank One, Texas,
National Association, as a Lender and as the Administrative Agent, (as amended,
restated or supplemented from time to time, the "Credit Agreement"), together
with interest at the rates and calculated as provided in the Credit Agreement.
The indebtedness evidenced by this Note, both principal and interest, is payable
as provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters
governed thereby, including, without limitation, certain events which will
entitle the Lenders to accelerate the maturity of all amounts due hereon.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is a "Note" under, and is
payable as provided in, the Credit Agreement.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE
STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW); PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE
(WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
SWIFT ENERGY COMPANY
By:
------------------------------
John R. Alden
Senior Vice President
<PAGE>
PROMISSORY NOTE
$25,000,000 Houston, Texas August 18, 1998
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of ABN-AMRO BANK N.V. ("Payee"), at the
banking quarters of Bank One, Texas, National Association, in Houston, Harris
County, Texas, the sum of TWENTY-FIVE MILLION DOLLARS ($25,000,000), or so much
thereof as may be advanced against this Note pursuant to the Credit Agreement
dated as of August 18, 1998, by and among Maker, Bank One, Texas, National
Association, as a Lender and as the Administrative Agent, (as amended, restated
or supplemented from time to time, the "Credit Agreement"), together with
interest at the rates and calculated as provided in the Credit Agreement. The
indebtedness evidenced by this Note, both principal and interest, is payable as
provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters
governed thereby, including, without limitation, certain events which will
entitle the Lenders to accelerate the maturity of all amounts due hereon.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is a "Note" under, and is
payable as provided in, the Credit Agreement.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE
STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW); PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE
(WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
SWIFT ENERGY COMPANY
By:
------------------------------
John R. Alden
Senior Vice President
<PAGE>
PROMISSORY NOTE
$25,000,000 Houston, Texas August 18, 1998
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of SOCIETE GENERALE ("Payee"), at the
banking quarters of Bank One, Texas, National Association, in Houston, Harris
County, Texas, the sum of TWENTY-FIVE MILLION DOLLARS ($25,000,000), or so much
thereof as may be advanced against this Note pursuant to the Credit Agreement
dated as of August 18, 1998, by and among Maker, Bank One, Texas, National
Association, as a Lender and as the Administrative Agent, (as amended, restated
or supplemented from time to time, the "Credit Agreement"), together with
interest at the rates and calculated as provided in the Credit Agreement. The
indebtedness evidenced by this Note, both principal and interest, is payable as
provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters
governed thereby, including, without limitation, certain events which will
entitle the Lenders to accelerate the maturity of all amounts due hereon.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is a "Note" under, and is
payable as provided in, the Credit Agreement.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE
STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW); PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE
(WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
SWIFT ENERGY COMPANY
By:
------------------------------
John R. Alden
Senior Vice President
<PAGE>
PROMISSORY NOTE
$17,500,000 Houston, Texas August 18, 1998
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of CREDIT LYONNAIS New York Branch
("Payee"), at the banking quarters of Bank One, Texas, National Association, in
Houston, Harris County, Texas, the sum of SEVENTEEN MILLION FIVE HUNDRED
THOUSAND DOLLARS ($17,500,000), or so much thereof as may be advanced against
this Note pursuant to the Credit Agreement dated as of August 18, 1998, by and
among Maker, Bank One, Texas, National Association, as a Lender and as the
Administrative Agent, (as amended, restated or supplemented from time to time,
the "Credit Agreement"), together with interest at the rates and calculated as
provided in the Credit Agreement. The indebtedness evidenced by this Note, both
principal and interest, is payable as provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters
governed thereby, including, without limitation, certain events which will
entitle the Lenders to accelerate the maturity of all amounts due hereon.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is a "Note" under, and is
payable as provided in, the Credit Agreement.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE
STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW); PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE
(WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
SWIFT ENERGY COMPANY
By:
------------------------------
John R. Alden
Senior Vice President
<PAGE>
PROMISSORY NOTE
$17,500,000 Houston, Texas August 18, 1998
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of BANK OF SCOTLAND ("Payee"), at the
banking quarters of Bank One, Texas, National Association, in Houston, Harris
County, Texas, the sum of SEVENTEEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($17,500,000), or so much thereof as may be advanced against this Note pursuant
to the Credit Agreement dated as of August 18, 1998, by and among Maker, Bank
One, Texas, National Association, as a Lender and as the Administrative Agent,
(as amended, restated or supplemented from time to time, the "Credit
Agreement"), together with interest at the rates and calculated as provided in
the Credit Agreement. The indebtedness evidenced by this Note, both principal
and interest, is payable as provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters
governed thereby, including, without limitation, certain events which will
entitle the Lenders to accelerate the maturity of all amounts due hereon.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is a "Note" under, and is
payable as provided in, the Credit Agreement.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE
STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW); PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE
(WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
SWIFT ENERGY COMPANY
By:
------------------------------
John R. Alden
Senior Vice President
<PAGE>
PROMISSORY NOTE
$17,500,000 Houston, Texas August 18, 1998
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of THE SANWA BANK, LIMITED ("Payee"), at
the banking quarters of Bank One, Texas, National Association, in Houston,
Harris County, Texas, the sum of SEVENTEEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($17,500,000), or so much thereof as may be advanced against this Note pursuant
to the Credit Agreement dated as of August 18, 1998, by and among Maker, Bank
One, Texas, National Association, as a Lender and as the Administrative Agent,
as a Lender (as amended, restated or supplemented from time to time, the "Credit
Agreement"), together with interest at the rates and calculated as provided in
the Credit Agreement. The indebtedness evidenced by this Note, both principal
and interest, is payable as provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters
governed thereby, including, without limitation, certain events which will
entitle the Lenders to accelerate the maturity of all amounts due hereon.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is a "Note" under, and is
payable as provided in, the Credit Agreement.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE
STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW); PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE
(WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
SWIFT ENERGY COMPANY
By:
------------------------------
John R. Alden
Senior Vice President
<PAGE>
EXHIBIT II
FORM OF
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT (this "Agreement") is dated as of , 199 ,
by and between (the "Assignor") and (the "Assignee").
---------------- --------
RECITALS
A. The Assignor is a party to the Credit Agreement dated as of August
__, 1998 (as amended, restated or supplemented from time to time, the "Credit
Agreement") by and among Swift Energy Company, a Texas corporation (the
"Borrower"), each of the lenders that is or becomes a party thereto as provided
in Section 9.1(b) of the Credit Agreement (individually, together with its
successors and assigns, a "Lender", and collectively, together with their
successors and assigns, the "Lenders"), and Bank One, Texas, National
Association, a national banking association (in its individual capacity, "Bank
One") and as agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Administrative Agent") and Bank of Montreal, a
Canadian chartered bank as Syndication Agent, and NationsBank, N.A., a national
banking association as Documentation Agent.
B. The Assignor proposes to sell, assign and transfer to the Assignee,
and the Assignee proposes to purchase and assume from the Assignor, [all][a
portion] of the Assignor's Facility Amount, its outstanding Loans and its
Percentage Share of the outstanding L/C Exposure, all on the terms and
conditions of this Agreement.
C. In consideration of the foregoing and the mutual agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. All capitalized terms used but not defined herein have
the respective meanings given to such terms in the Credit Agreement.
1.2 Other Definitions. As used herein, the following terms have the
following respective meanings:
"Assigned Interest" shall mean all of Assignor's (in its
capacity as a "Lender") rights and obligations (i) under the Credit
Agreement and the other Loan Documents in respect of [all][a portion]
of the Facility Amount of the Assignor in the principal amount equal to
$ , including, without limitation, any obligation to participate
-----
II-i
<PAGE>
pro rata in any L/C Exposure and (ii)to make Loans under its Commitment
up to the lesser of Facility Amount referenced above or the Borrowing
Base in effect from time to time and any right to receive payments for
the Loanscurrently outstanding under its Commitment in the principal
amount of $ (the "Loan Balance"), plus the interest and fees which will
accrue from and after the Assignment Date.
"Assignment Date" shall mean , 199 .
----------- --
ARTICLE II
SALE AND ASSIGNMENT
2.1 Sale and Assignment. On the terms and conditions set forth herein,
effective on and as of the Assignment Date, the Assignor hereby sells, assigns
and transfers to the Assignee, and the Assignee hereby purchases and assumes
from the Assignor, all of the right, title and interest of the Assignor in and
to, and all of the obligations of the Assignor in respect of, the Assigned
Interest. Such sale, assignment and transfer is without recourse and, except as
expressly provided in this Agreement, without representation or warranty.
2.2 Assumption of Obligations. The Assignee agrees with the Assignor
(for the express benefit of the Assignor and the Borrower) that the Assignee
will, from and after the Assignment Date, assume and perform all of the
obligations of the Assignor in respect of the Assigned Interest. From and after
the Assignment Date: (a) the Assignor shall be released from the Assignor's
obligations in respect of the Assigned Interest, and (b) the Assignee shall be
entitled to all of the Assignor's rights, powers and privileges under the Credit
Agreement and the other Loan Documents in respect of the Assigned Interest.
2.3 Consent by Administrative Agent. By executing this Agreement as
provided below, in accordance with Section 9.1(b) of the Credit Agreement, the
Administrative Agent hereby acknowledges notice of the transactions contemplated
by this Agreement and consents to such transactions.
ARTICLE III
PAYMENTS
3.1 Payments. As consideration for the sale, assignment and transfer
contemplated by Section 2.1 hereof, the Assignee shall, on the Assignment Date,
assume Assignor's obligations in respect of the Assigned Interest and pay to the
Assignor an amount equal to the Loan Balance, if any. An amount equal to all
accrued and unpaid interest and fees shall be paid to the Assignor as provided
in Section 3.2 (iii) below. Except as otherwise provided in this Agreement, all
payments hereunder shall be made in Dollars and in immediately available funds,
without setoff, deduction or counterclaim.
II-ii
<PAGE>
3.2 Allocation of Payments. The Assignor and the Assignee agree that
(i) the Assignor shall be entitled to any payments of principal with respect to
the Assigned Interest made prior to the Assignment Date, together with any
interest and fees with respect to the Assigned Interest accrued prior to the
Assignment Date, (ii) the Assignee shall be entitled to any payments of
principal with respect to the Assigned Interest made from and after the
Assignment Date, together with any and all interest and fees with respect to the
Assigned Interest accruing from and after the Assignment Date, and (iii) the
Administrative Agent is authorized and instructed to allocate payments received
by it for account of the Assignor and the Assignee as provided in the foregoing
clauses. Each party hereto agrees that it will hold any interest, fees or other
amounts that it may receive to which the other party hereto shall be entitled
pursuant to the preceding sentence for account of such other party and pay, in
like money and funds, any such amounts that it may receive to such other party
promptly upon receipt.
3.3 Delivery of Notes. Promptly following the receipt by the Assignor
of the consideration required to be paid under Section 3.1 hereof, the Assignor
shall, in the manner contemplated by Section 9.1(b) of the Credit Agreement, (i)
deliver to the Administrative Agent (or its counsel) the Note held by the
Assignor and (ii) notify the Administrative Agent to request that the Borrower
execute and deliver new Notes to the Assignor, if Assignor continues to be a
Lender, and the Assignee, dated the date of this Agreement in respective
principal amounts equal to the respective Facility Amounts of the Assignor (if
appropriate) and the Assignee after giving effect to the sale, assignment and
transfer contemplated hereby.
3.4 Further Assurances. The Assignor and the Assignee hereby agree to
execute and deliver such other instruments, and take such other actions, as
either party may reasonably request in connection with the transactions
contemplated by this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions Precedent. The effectiveness of the sale, assignment and
transfer contemplated hereby is subject to the satisfaction of each of the
following conditions precedent:
(a) the execution and delivery of this Agreement by the
Assignor and the Assignee;
(b) the receipt by the Assignor of the payments required
to be made under Section 3.1 hereof; and
(c) the acknowledgment and consent by the Administrative
Agent contemplated by Section 2.3 hereof.
II-iii
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Assignor. The Assignor
represents and warrants to the Assignee as follows:
(a) it has all requisite power and authority, and has taken
all action necessary to execute and deliver this Agreement and to
fulfill its obligations under, and consummate the transactions
contemplated by, this Agreement;
(b) the execution, delivery and compliance with the terms
hereof by Assignor and the delivery of all instruments required to be
delivered by it hereunder do not and will not violate any Requirement
of Law applicable to it;
(c) this Agreement has been duly executed and delivered by it
and constitutes the legal, valid and binding obligation of the
Assignor, enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with and
all actions by any Governmental Authority necessary for the validity or
enforceability of its obligations under this Agreement have been
obtained;
(e) the Assignor has good title to, and is the sole legal and
beneficial owner of, the Assigned Interest, free and clear of all
Liens, claims, participations or other charges of any nature
whatsoever; and
(f) the transactions contemplated by this Agreement are
commercial banking transactions entered into in the ordinary course of
the banking business of the Assignor.
5.2 Disclaimer. Except as expressly provided in Section 5.1 hereof, the
Assignor does not make any representation or warranty, nor shall it have any
responsibility to the Assignee, with respect to the accuracy of any recitals,
statements, representations or warranties contained in the Credit Agreement or
in any other Loan Document or for the value, validity, effectiveness,
genuineness, execution, legality, enforceability or sufficiency of the Credit
Agreement, the Notes or any other Loan Document or for any failure by the
Borrower or any other Person (other than Assignor) to perform any of its
obligations thereunder or for the existence, value, perfection or priority of
any collateral security or the financial or other condition of the Borrower or
any other Person, or any other matter relating to the Credit Agreement or any
other Loan Document or any extension of credit thereunder.
5.3 Representations and Warranties of the Assignee. The Assignee
represents and warrants to the Assignor as follows:
II-iv
<PAGE>
(a) it has all requisite power and authority, and has taken
all action necessary to execute and deliver this Agreement and to
fulfill its obligations under, and consummate the transactions
contemplated by, this Agreement;
(b) the execution, delivery and compliance with the terms
hereof by Assignee and the delivery of all instruments required to be
delivered by it hereunder do not and will not violate any Requirement
of Law applicable to it;
(c) this Agreement has been duly executed and delivered by it
and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with and
all actions by any Governmental Authority necessary for the validity or
enforceability of its obligations under this Agreement have been
obtained;
(e) the Assignee has fully reviewed the terms of the Credit
Agreement and the other Loan Documents and has independently and
without reliance upon the Assignor, and based on such information as
the Assignee has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement;
(f) if the Assignee is not incorporated under the laws of the
United Sates of America or a state thereof, the Assignee has
contemporaneously herewith delivered to the Administrative Agent and
the Borrower such documents as are required by Section 2.25(b) of the
Credit Agreement; and
(g) the transactions contemplated by this Agreement are
commercial banking transactions entered into in the ordinary course of
the banking business of the Assignee.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers, requests or
consents under, this Agreement) shall be given or made in writing (including,
without limitation, by telex or telecopy) to the intended recipient at its
"Address for Notices" specified below its name on the signature pages hereof or,
as to either party, at such other address as shall be designated by such party
in a notice to the other party.
6.2 Amendment, Modification or Waiver. No provision of this Agreement
may be amended, modified or waived except by an instrument in writing signed by
the Assignor and the Assignee, and consented to by the Administrative Agent.
II-v
<PAGE>
6.3 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. The representations and warranties made herein by the
Assignee are also made for the benefit of the Administrative Agent, and the
Assignee agrees that the Administrative Agent is entitled to rely upon such
representations and warranties.
6.4 Assignments. Neither party hereto may assign any of its rights or
obligations hereunder except in accordance with the terms of the Credit
Agreement.
6.5 Captions. The captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
6.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be identical and all of which, taken together,
shall constitute one and the same instrument, and each of the parties hereto may
execute this Agreement by signing any such counterpart.
6.7 Governing Law. THIS AGREEMENT (INCLUDING, BUT NOT LIMITED TO, THE
VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, OTHER THAN THE CONFLICT OF LAWS
RULES THEREOF.
6.8 Expenses. To the extent not paid by the Borrower pursuant to the
terms of the Credit Agreement, each party hereto shall bear its own expenses in
connection with the execution, delivery and performance of this Agreement.
6.9 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed and delivered as of the date first above written.
ASSIGNOR
----------------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
II-vi
<PAGE>
Address for Notices:
----------------------------------
----------------------------------
----------------------------------
Telecopier No.:
-------------------
Telephone No.:
--------------------
Attention:
------------------------
ASSIGNEE
----------------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Address for Notices:
----------------------------------
----------------------------------
----------------------------------
Telecopier No.:
-------------------
Telephone No.:
--------------------
Attention:
------------------------
ACKNOWLEDGED AND CONSENTED TO:
BANK ONE, TEXAS, NATIONAL ASSOCIATION,
as Administrative Agent
By:
--------------------------
Name:
------------------------
Title:
-----------------------
II-vii
<PAGE>
EXHIBIT III
FORM OF BORROWING REQUEST
, 199
------ --
(Date)
Bank One, Texas, National Association
910 Travis
Houston, Texas 77002
Attention: Charles Kingswell-Smith
Re: Credit Agreement dated as of August 18, 1998, among Swift
Energy Company, Bank One, Texas, National Association, as a
Lender and as the Administrative Agent, and the Lenders
signatory thereto (as amended, restated or supplemented from
time to time, the "Credit Agreement")
Ladies and Gentlemen:
The undersigned, being the duly authorized [Vice President]
[Treasurer] [ ] of the Borrower, hereby makes the requests
------------
indicated below:
1. Advances
(a) Aggregate amount of new Advances to be $ ;
--------------
(b) Requested funding date is , 199 ;
----------- ---
(c) $ of such borrowings is to be a Floating Rate
----------------
Advance;
$ of such borrowings is to be a LIBO Rate
----------------
Advance; and
(d) Length of Interest Period for LIBO Rate Advance is
months.
------
2. LIBO Rate Advance continuation for LIBO Rate Advance maturing
on :
---------------------------
(a) Aggregate amount to be continued as a LIBO Rate Advance is
$ ;
-----------------
(b) Aggregate amount to be converted to a Floating Rate Advance is
$ ;
------------------------------
(c) Length of Interest Period for continued LIBO Rate Advances is
months.
------
II-i
<PAGE>
3. Conversion of Floating Rate Advance to LIBO Rate Advance:
Convert $ of the Floating Rate Advance to a LIBO Rate
------
Advance on with an InterestPeriod of months.
----- ------
The undersigned certifies that [s]he is the of the Borrower
and that as such [s]he is authorized to execute this certificate on behalf of
the Borrower. The undersigned further certifies, represents and warrants on
behalf of the Borrower that (a) the Borrower is entitled to receive the
requested borrowing, continuation or conversion under the terms and conditions
of the Credit Agreement, (b) no Default or Event of Default exists as of the
date hereof or will occur as a result of the requested borrowing, continuation
or conversion, (c) the representations and warranties contained in the Loan
Documents are true and correct, and (d) the information set forth below is true
and correct:
(i) The Loan Balance as of the date hereof is $___________;
(ii) The L/C Exposure as of the date hereof is $___________;
and
(iii) The sum of the Loan Balance, the L/C Exposure, and
the amount of any new Loan requested herein is
$________________, and such sum represents ____% of
the Borrowing Base in effect as of the date hereof.
Each capitalized term used but not defined herein shall have
the meaning assigned to such term in the Credit Agreement.
Very truly yours,
SWIFT ENERGY COMPANY
By:
-------------------------------
Printed Name:
---------------------
Title:
----------------------------
III-ii
<PAGE>
EXHIBIT IV
FORM OF COMPLIANCE CERTIFICATE
, 199
----- ---
(Date)
Bank One, Texas, National Association, as Administrative Agent
910 Travis
Houston, Texas 77002
Attention: Charles Kingswell-Smith
Re: Credit Agreement dated as of August 18, 1998, among Swift
Energy Company, Bank One, Texas, National Association, as a
Lender and as the Administrative Agent, and the Lenders
signatory thereto (as amended, restated or supplemented from
time to time, the "Credit Agreement")
Ladies and Gentlemen:
Pursuant to applicable requirements of the Credit Agreement,
the undersigned, as the duly authorized [President] [Treasurer] [chief financial
officer] [chief accounting officer] of the Borrower, hereby certifies to you the
following information as true and correct as of the date hereof or for the
period indicated, as the case may be, to-wit:
1. A review of the activities of the Borrower has been made under my
supervision with a view to determining whether the Borrower has
fulfilled all of its obligations under the Credit Agreement and the
other Loan Documents.
[2.To the best knowledge of the undersigned, no Default or Event of
Default exists or has occurred since the date of our previous
certification, if any, to you.]
[2. To the best knowledge of the undersigned, the following Defaults or
Events of Default exist or have occurred since the date of our previous
certification, if any, to you, and the actions set forth below are
being taken to remedy such circumstances:]
3. The compliance of the Borrower with the financial covenants of the
Credit Agreement, as of the close of business on , is evidenced by the
following:
IV-i
<PAGE>
(a) Section 6.13: Tangible Net Worth
Required Actual
Not less than $140,000,000 plus 75% of
positive Net Income and 100% of net
proceeds from any equity offering $
(b) Section 6.14: Current Ratio
Required Actual
Not less than 1.1 to 1.0 for Borrower
and Subsidiaries to 1.0
-----
(c) Section 6.15: Debt Coverage Ratio
Required Actual
Not less than 1.3 to 1.0 to 1.0
-----
(d) Section 6.16: Total Liabilities toTangible Net Worth
Required Actual
Not greater than 2.25 to 1.0 through 6/30/99,
and 2.0 to 1.0 as 9/30/99 and thereafter to 1.0
------
4. No Material Adverse Effect has occurred since the date of the
Financial Statements dated as of .
Each capitalized term used but not defined herein shall have
the meaning assigned to such term in the Credit Agreement.
Very truly yours,
SWIFT ENERGY COMPANY
By:
-------------------------------
Printed Name:
---------------------
Title:
----------------------------
IV-ii
<PAGE>
EXHIBIT V
FACILITY AMOUNTS
<TABLE>
<CAPTION>
Facility
Name of Lender Amount
<S> <C>
Bank One, Texas, National Association $37,500,000
Bank of Montreal 30,000,000
NationsBank, N.A. 30,000,000
CIBC Inc. 25,000,000
First Union National Bank 25,000,000
ABN-AMRO Bank N.V. 25,000,000
Societe Generale 25,000,000
Credit Lyonnais 17,500,000
Bank of Scotland 17,500,000
The Sanwa Bank, Limited 17,500,000
</TABLE>
V-i
<PAGE>
EXHIBIT VI
DISCLOSURES
Section 1.2 Liens:
Liens perfected by the following financing statements as on file in the Office
of Secretary of State for the State of Texas:
Financing Statement No.
1. 3-195655 - Secured Party - First United Leasing - filed October 11, 1993.
2. 93-211680 - Secured Party - National Oilwell - filed November 3, 1993.
VI-i
<PAGE>
EXHIBIT VII
[FORM OF OPINION OF COUNSEL]
[Closing Date]
To each Lender party
to the Credit Agreement
referenced below and
Bank One, Texas, National Association,
as Administrative Agent
Re: Credit Agreement dated as of August 18, 1998, by and among
Swift Energy Company, Bank One, Texas, National Association,
as Administrative Agent, and the Lenders signatory thereto
from time to time (the "Credit Agreement")
Ladies and Gentlemen:
We have acted as counsel to Swift Energy Company (the
"Borrower") in connection with the transactions contemplated in the Credit
Agreement. This Opinion is delivered pursuant to Section 3.1(i) of the Credit
Agreement, and the Administrative Agent and the Lenders are hereby authorized to
rely upon this Opinion in connection with the transactions contemplated in the
Credit Agreement. Each capitalized term used but not defined herein shall have
the meaning assigned to such term in the Credit Agreement.
In our representation of the Borrower, we have examined an
executed counterpart of each of the following (the "Loan Documents"):
(1) the Credit Agreement;
(2) the Note dated as of even date herewith payable to
Bank One; and
(3) the Note dated as of even date herewith payable to
Bank of Montreal.
(4) the Note dated as of even date herewith payable
to NationsBank, N.A.
(5) the Note dated as of even date herewith payable
to NationsBank, N.A.
(6) CIB, Inc.
(7) First Union National Bank
(8) ABN-AMRO Bank N.V.
VII-i
<PAGE>
(9) Societe Generale
(10) Credit Lyonnais
(11) Bank of Scotland
(12) The Sanwa Bank, Limited
We have also examined the originals, or copies certified to
our satisfaction, of such other records of the Borrower, certificates of public
officials and officers of the Borrower, agreements, instruments, and documents
as we have deemed necessary as a basis for the opinions hereinafter expressed.
In making such examinations, we have, with your permission,
assumed:
a) the genuineness of all signatures to the Loan
Documents other than those of the Borrower;
b) the authenticity of all documents submitted
to us as originals and the conformity with the originals of
all documents submitted to us as copies;
c) the Administrative Agent and each Lender is
authorized and has the power to enter into and perform its
obligations under the Credit Agreement; and
d) the due authorization, execution, and delivery
of all Loan Documents by each party thereto other than the Borrower.
Based upon the foregoing and subject to the qualifications set
forth herein, we are of the opinion that:
A. The Borrower is a corporation duly organized, legally
existing, and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and is in
good standing in all jurisdictions wherein the ownership of its
Property or the operation of its business necessitates same.
B. The execution and delivery by the Borrower of the Credit
Agreement and the borrowings thereunder, the execution and delivery by
the Borrower of the other Loan Documents, and the payment and
performance of all obligations of the Borrower thereunder are within
the power of the Borrower, have been duly authorized by all necessary
corporate action, and do 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) to our
knowledge after due inquiry, contravene or conflict with any
Partnership Agreement or any indenture, instrument, or other agreement
to which the Borrower is a party or by which any Property of the
Borrower may be presently bound or encumbered, or (d) result in or
VII-ii
<PAGE>
require the creation or imposition of any Lien upon any Property of the
Borrower other than as contemplated by the Loan Documents.
C. The Loan Documents constitute legal, valid, and binding
obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms.
D. To our knowledge after due inquiry, [except as disclosed on
Schedule I hereto,] no litigation or other action of any nature
affecting the Borrower is pending before any Governmental Authority or
threatened against or affecting the Borrower, which might reasonably be
expected to result in a Material Adverse Effect. To our knowledge after
due inquiry, no unusual or unduly burdensome restriction, restraint, or
hazard exists by contract, Requirement of Law, or otherwise relative to
the business or operations of the Borrower or the ownership and
operation of any material Properties of the Borrower other than such as
relate generally to Persons engaged in business activities similar to
those conducted by the Borrower.
E. No authorization, consent, approval, exemption, franchise,
permit or license of, or filing with, any Governmental Authority or any
other Person is required to authorize, or is otherwise required in
connection with, the valid execution and delivery by the Borrower of
the Loan Documents or any instrument contemplated thereby, or the
payment or performance by the Borrower of the Obligations.
F. 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, without limitation, Regulations
G, T, U, or X.
G. The Borrower is not, nor is the Borrower directly or
indirectly controlled by or acting on behalf of any Person which is, an
"investment company" or an "affiliated person" of an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
H. The Borrower is not a "holding company," or an "affiliate"
of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
The opinions expressed herein are subject to the following
qualifications and limitations:
(i) We are licensed to practice law only in the State of Texas
and other jurisdictions whose laws are not applicable to the opinions
expressed herein; accordingly, the foregoing opinions are limited
solely to the law.
creditors generally, including, without limitation, statutes or rules
of law which limit the effect of waivers of rights by a debtor or
grantor; provided, however, that the limitations and other effects of
such statutes or rules of law upon the validity and binding effect of
the Loan Documents should not differ materially from the limitations
and other effects of such statutes or rules of law upon the validity
and binding effect of credit agreements and promissory notes generally.
(iii) The enforceability of the obligations of the Borrower
under the Loan Documents is subject to general principles of equity
(whether such enforceability is considered in a suit in equity or at
law).
This Opinion is furnished by us solely for the benefit of the
Administrative Agent and the Lenders in connection with the transactions
contemplated by the Loan Documents and is not to be quoted in whole or in part
or otherwise referred to or disclosed in any other transaction.
Very truly yours,
VII-iv
<PAGE>
EXHIBIT VIII
SUBSIDIARIES AND PARTNERSHIPS
<TABLE>
<CAPTION>
Percentage Ownership
of Outstanding Common
Stock or Partnership Place of Incorporation Address of
Interest (Distributive or Jurisdiction of Forma- Principal Place
Name Share) tion of Partnership of Business
Subsidiaries:
<S> <C> <C> <C>
GASRS, Inc. 100.00% TX 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swenco-Western, Inc. 100.00% TX 1801 Broadway
Denver, CO 80202
Swift Energy Marketing
Co. 100.00% CA 16825 Northchase
Drive, Suite 700
Houston, TX 77060
Swift Depositary Company 100.00% TX 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy International, Inc. 100.00% TX 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy de Venezuela, C.A. 100.00% Venezuela 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Partnerships:
Taylor Gathering System 25.00% WV c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
VIII-i
<PAGE>
Percentage Ownership
of Outstanding Common
Stock or Partnership Place of Incorporation Address of
Interest (Distributive or Jurisdiction of Forma- Principal Place
Name Share) tion of Partnership of Business
Swift Energy Income
Partners 1986-D, Ltd. 9.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1987-A, Ltd. 9.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1987-B, Ltd. 9.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1987-C, Ltd. 9.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1987-D, Ltd. 9.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1988-A, Ltd. 9.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
VIII-ii
<PAGE>
Swift Energy Income 9.00% TX c/o Swift Energy
Partners 1988-B, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1988-C, Ltd. 9.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1988-D, Ltd. 9.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1989-A, Ltd. 9.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1989-B, Ltd. 9.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1989-C, Ltd. 9.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
VIII-iii
<PAGE>
Swift Energy Income
Partners 1989-D, Ltd. 9.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1990-A, Ltd. 9.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1990-B, Ltd. 9.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Managed
Pension Assets Partner- 9.00% TX c/o Swift Energy
ship 1988-A, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Managed 9.00% TX c/o Swift Energy
Pension Assets Partner- Company
ship 1988-B, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Managed 9.00% TX c/o Swift Energy
Pension Assets Partner- Company
ship 1988-C, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
VIII-iv
<PAGE>
Swift Energy Managed 9.00% TX c/o Swift Energy
Pension Assets Partner- Company
ship 1989-A, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Managed 9.00% TX c/o Swift Energy
Pension Assets Partner- Company
ship 1989-B, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Managed 9.00% TX c/o Swift Energy
Pension Assets Partner- Company
ship 1989-C, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Managed 9.00% TX c/o Swift Energy
Pension Assets Partner- Company
ship 1989-D, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Managed 9.00% TX c/o Swift Energy
Pension Assets Partner- Company
ship 1990-A, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Managed 9.00% TX c/o Swift Energy
Pension Assets Partner- Company
ship 1990-B, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy 14.25% TX c/o Swift Energy
Operating Partners Company
1991-C, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
VIII-v
<PAGE>
Swift Energy 14.25% TX c/o Swift Energy
Operating Partners Company
1992-A, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy 14.25% TX c/o Swift Energy
Operating Partners Company
1992-B, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy 14.25% TX c/o Swift Energy
Operating Partners Company
1992-C, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy 14.25% TX c/o Swift Energy
Operating Partners Company
1992-D, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy 14.25% TX c/o Swift Energy
Operating Partners Company
1993-A, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy [14.25%] TX c/o Swift Energy
Operating Partners Company
1993-B, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1988-1, Ltd. 9.50% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
VIII-vi
<PAGE>
Swift Energy Income
Partners 1988-2, Ltd. 9.50% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1988-3, Ltd. 9.50% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1989-1, Ltd. 9.50% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1989-2, Ltd. 9.50% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1989-3, Ltd. 9.50% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1989-4, Ltd. 9.50% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
VIII-vii
<PAGE>
Swift Energy Income
Partners 1990-1, Ltd. 5.50% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Income
Partners 1990-2, Ltd. 5.50% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Pension 14.25% TX c/o Swift Energy
Partners 1991-C, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Pension 14.25% TX c/o Swift Energy
Partners 1992-A, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Pension 14.25% TX c/o Swift Energy
Partners 1992-B, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Pension 14.25% TX c/o Swift Energy
Partners 1992-C, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Pension 14.25% TX c/o Swift Energy
Partners 1992-D, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
VIII-viii
<PAGE>
Swift Energy Pension 14.25% TX c/o Swift Energy
Partners 1993-A, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Managed 9.50% TX c/o Swift Energy
Pension Assets Partner- Company
ship 1988-1, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Managed 9.50% TX c/o Swift Energy
Pension Assets Partner- Company
ship 1988-2, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Managed 9.50% TX c/o Swift Energy
Pension Assets Partner- Company
ship 1989-1, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Managed 9.50% TX c/o Swift Energy
Pension Assets Partner- Company
ship 1989-2, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Drilling 20.00% TX c/o Swift Energy
Drilling Ventures Company
1993-1, Ltd. 16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Operating 14.25% TX c/o Swift Energy
Partners 1993-C, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
VIII-ix
<PAGE>
Swift Energy Operating 14.25% TX c/o Swift Energy
Partners 1993-D, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Operating 14.25% TX c/o Swift Energy
Partners 1994-A, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Operating 14.25% TX c/o Swift Energy
Partners 1994-B, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Operating 14.25% TX c/o Swift Energy
Partners 1994-C, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Operating 14.25% TX c/o Swift Energy
Partners 1994-D, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Operating 14.25% TX c/o Swift Energy
Partners 1995-A, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Operating 14.25% TX c/o Swift Energy
Partners 1995-B, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
VIII-x
<PAGE>
Swift Energy Pension 14.25% TX c/o Swift Energy
Partners 1993-B, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Pension 14.25% TX c/o Swift Energy
Partners 1993-C, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Pension 14.25% TX c/o Swift Energy
Partners 1993-D, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Pension 14.25% TX c/o Swift Energy
Partners 1994-A, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Pension 14.25% TX c/o Swift Energy
Partners 1994-B, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Pension 14.25% TX c/o Swift Energy
Partners 1994-C, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
VIII-xi
<PAGE>
Swift Energy Pension 14.25% TX c/o Swift Energy
Partners 1994-D, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Pension 14.25% TX c/o Swift Energy
Partners 1995-A, Ltd. Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Drilling 20.00% TX c/o Swift Energy
Venture 1997-1, Ltd. Company
16825 Northchase
Houston, Texas 77060
Swift Energy Drilling
Venture 1997-2, Ltd. 20.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Drilling
Venture 1998-1, Ltd. 20.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Development
Program 1996-A, Ltd. 40.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
Swift Energy Development
Program 1996-B, Ltd. 40.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
VIII-xii
<PAGE>
Swift Energy Development
Program 1997, Ltd. 40.00% TX c/o Swift Energy
Company
16825 Northchase
Drive, Suite 400
Houston, Texas 77060
</TABLE>
VIII-xiii
<PAGE>
EXHIBIT IX
PARTNERSHIP ACQUISITION
See following page.
IX-i
<PAGE>
<TABLE>
<CAPTION>
CAPITAL FORMATION
PSHP # PARTNERSHIP NAME CONTRIBUTIONS DATE
------ ---------------- ------------- ----------
- ------------------------------------------------------------------------------
PARTNERSHIPS TARGETED FOR LIQUIDATION IN 1999
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
061 SWIFT ENERGY INCOME PARTNERS 1986-D, LTD. $14,121,095 09-Jan-87
062 SWIFT ENERGY INCOME PARTNERS 1987-A, LTD. $15,071,792 06-Apr-87
063 SWIFT ENERGY INCOME PARTNERS 1987-B, LTD. $26,025,525 23-Jul-87
064 SWIFT ENERGY INCOME PARTNERS 1987-C, LTD. $19,156,787 29-Oct-87
065 SWIFT ENERGY INCOME PARTNERS 1987-D, LTD. $11,449,248 26-Jan-88
066 SWIFT ENERGY INCOME PARTNERS 1988-A, LTD. $10,739,606 25-Apr-88
067 SWIFT ENERGY INCOME PARTNERS 1988-B, LTD. $7,382,956 01-Jul-88
068 SWIFT ENERGY INCOME PARTNERS 1988-C, LTD. $5,109,057 03-Oct-88
069 SWIFT ENERGY INCOME PARTNERS 1988-D, LTD. $4,361,070 31-Dec-88
070 SWIFT ENERGY INCOME PARTNERS 1989-A, LTD. $5,179,281 31-Mar-89
071 SWIFT ENERGY INCOME PARTNERS 1989-B, LTD. $8,329,500 30-Jun-89
072 SWIFT ENERGY INCOME PARTNERS 1989-C, LTD. $4,089,900 30-Sep-89
073 SWIFT ENERGY INCOME PARTNERS 1989-D, LTD. $3,993,801 31-Dec-89
074 SWIFT ENERGY INCOME PARTNERS 1990-A, LTD. $5,738,400 17-Apr-90
075 SWIFT ENERGY INCOME PARTNERS 1990-B, LTD. $3,464,206 30-Jun-90
201 SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1988-A, LTD. $4,770,363 02-Jun-88
202 SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1988-B, LTD. $3,631,145 14-Sep-88
203 SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1988-C, LTD. $1,723,713 14-Dec-88
204 SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1989-A, LTD. $2,160,097 01-Mar-89
205 SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1989-B, LTD. $3,983,064 31-May-89
206 SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1989-C, LTD. $2,735,300 30-Sep-89
207 SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1989-D, LTD. $2,339,999 31-Dec-89
208 SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-A, LTD. $4,305,695 15-Apr-90
209 SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-B, LTD. $3,259,002 30-Jun-90
303 SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD. $4,453,469 30-Dec-91
304 SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD. $4,639,621 31-Mar-92
305 SWIFT ENERGY OPERATING PARTNERS 1992-B, LTD. $8,631,378 30-Jun-92
306 SWIFT ENERGY OPERATING PARTNERS 1992-C, LTD. $12,952,294 30-Sep-92
307 SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD. $3,431,267 28-Dec-92
308 SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD. $4,384,150 31-Mar-93
309 SWIFT ENERGY OPERATING PARTNERS 1993-B, LTD. $9,627,683 30-Jun-93
310 SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD. $5,810,456 30-Sep-93
311 SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD. $5,324,435 31-Dec-93
312 SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD. $4,487,431 20-Apr-94
313 SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD. $5,698,300 30-Jun-94
314 SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD. $5,125,411 30-Sep-94
315 SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD. $4,775,604 31-Dec-94
401 SWIFT ENERGY INCOME PARTNERS 1988-1, LTD. $1,864,300 09-Aug-88
402 SWIFT ENERGY INCOME PARTNERS 1988-2, LTD. $1,191,400 03-Oct-88
403 SWIFT ENERGY INCOME PARTNERS 1988-3, LTD. $1,665,200 06-Jan-89
404 SWIFT ENERGY INCOME PARTNERS 1989-1, LTD. $1,908,300 31-Mar-89
405 SWIFT ENERGY INCOME PARTNERS 1989-2, LTD. $3,651,200 30-Jun-89
406 SWIFT ENERGY INCOME PARTNERS 1989-3, LTD. $2,181,200 30-Sep-89
407 SWIFT ENERGY INCOME PARTNERS 1989-4, LTD. $1,515,800 31-Dec-89
408 SWIFT ENERGY INCOME PARTNERS 1990-1, LTD. $1,476,650 15-Apr-90
409 SWIFT ENERGY INCOME PARTNERS 1990-2, LTD. $1,026,500 30-Jun-90
503 SWIFT ENERGY PENSION PARTNERS 1991-C, LTD. $3,664,333 30-Dec-91
504 SWIFT ENERGY PENSION PARTNERS 1992-A, LTD. $4,172,824 31-Mar-92
505 SWIFT ENERGY PENSION PARTNERS 1992-B, LTD. $5,062,025 30-Jun-92
506 SWIFT ENERGY PENSION PARTNERS 1992-C, LTD. $7,073,471 30-Sep-92
507 SWIFT ENERGY PENSION PARTNERS 1992-D, LTD. $4,281,996 28-Dec-92
508 SWIFT ENERGY PENSION PARTNERS 1993-A, LTD. $3,934,670 31-Mar-93
509 SWIFT ENERGY PENSION PARTNERS 1993-B, LTD. $6,237,102 30-Jun-93
510 SWIFT ENERGY PENSION PARTNERS 1993-C, LTD. $4,115,977 30-Sep-93
511 SWIFT ENERGY PENSION PARTNERS 1993-D, LTD. $3,280,356 31-Dec-93
512 SWIFT ENERGY PENSION PARTNERS 1994-A, LTD. $2,635,723 20-Apr-94
513 SWIFT ENERGY PENSION PARTNERS 1994-B, LTD. $3,535,809 30-Jun-94
514 SWIFT ENERGY PENSION PARTNERS 1994-C, LTD. $2,783,562 30-Sep-94
515 SWIFT ENERGY PENSION PARTNERS 1994-D, LTD. $3,032,126 31-Dec-94
601 SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1988-1, LTD. $1,874,876 14-Sep-88
602 SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1988-2, LTD. $1,856,200 31-Jan-89
603 SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1989-1, LTD. $3,267,837 31-May-89
604 SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1989-2, LTD. $1,676,058 30-Sep-89
63 TOTAL PARTNERSHIPS $331,427,595
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Swift Energy
Company's financial statements contained in its quarterly report on Form 10-Q
for the period ended September 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,651,516
<SECURITIES> 0
<RECEIVABLES> 31,698,230
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,468,877
<PP&E> 531,522,518
<DEPRECIATION> (175,119,217)
<TOTAL-ASSETS> 397,202,605
<CURRENT-LIABILITIES> 22,413,343
<BONDS> 0
0
0
<COMMON> 169,725
<OTHER-SE> 106,142,371
<TOTAL-LIABILITY-AND-EQUITY> 397,202,605
<SALES> 55,341,980
<TOTAL-REVENUES> 57,373,512
<CGS> 0
<TOTAL-COSTS> 36,253,183<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,355,269
<INCOME-PRETAX> (77,946,644)
<INCOME-TAX> (26,641,714)
<INCOME-CONTINUING> (51,304,930)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (51,304,930)
<EPS-PRIMARY> (3.11)
<EPS-DILUTED> (3.11)
<FN>
<F1>Includes depreciation, depletion and amortization expense and oil and gas
production costs. Excludes general and administrative, interest expense, and
write down of oil and gas properties.
</FN>
</TABLE>
