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UNITED STATES
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 June 30, 2004
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
(Address of principal executive offices) (Zip Code)
(281) 874-2700
(Registrant's telephone number, including area code)
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
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 27,947,350 Shares
($.01 Par Value) (Outstanding at July 31, 2004)
(Class of Stock)
1
SWIFT ENERGY COMPANY
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets
- June 30, 2004 and December 31, 2003 3
Consolidated Statement of Income
- For the Three-month and Six-month periods ended
June 30, 2004 and 2003 4
Consolidated Statements of Stockholders' Equity
- For theSix-month period ended June 30, 2004 and
year ended December 31, 2003 5
Consolidated Statements of Cash Flows
- For the Six-month periods ended June 30, 2004 and 2003 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 30
Item 4. Controls and Procedures 32
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 33
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information 33
Item 6. Exhibit and Reports on Form 8-K 33
SIGNATURES 35
2
CONSOLIDATED BALANCE SHEETS
SWIFT ENERGY COMPANY
June 30, 2004 December 31, 2003
------------------------- ---------------------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents.................................. $ 86,879,237 $ 1,066,280
Accounts receivable - .....................................
Oil and gas sales........................................ 28,715,142 26,082,650
Joint interest owners.................................... 1,280,003 1,350,707
Other current assets....................................... 8,271,903 4,957,647
------------------------- ---------------------------
Total Current Assets................................... 125,146,285 33,457,284
------------------------- ---------------------------
Property and Equipment:
Oil and gas, using full-cost accounting
Proved properties being amortized........................ 1,371,533,116 1,305,763,355
Unproved properties not being amortized.................. 68,570,079 67,557,969
------------------------- ---------------------------
1,440,103,195 1,373,321,324
Furniture, fixtures, and other equipment................... 11,303,233 10,602,786
------------------------- ---------------------------
1,451,406,428 1,383,924,110
Less-Accumulated depreciation, depletion,
and amortization...................................... (605,343,453) (567,464,334)
------------------------- ---------------------------
846,062,975 816,459,776
------------------------- ---------------------------
Other Assets:
Deferred income taxes...................................... 2,805,904 1,905,909
Debt issuance costs........................................ 11,304,599 8,015,575
------------------------- ---------------------------
14,110,503 9,921,484
------------------------- ---------------------------
$ 985,319,763 $ 859,838,544
========================= ===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities................... $ 19,988,733 $ 26,247,477
Accrued capital costs...................................... 15,737,355 29,417,542
Accrued interest........................................... 7,448,478 8,748,656
Current portion of long-term debt.......................... 92,477,213 ---
Undistributed oil and gas revenues......................... 6,387,622 4,939,667
------------------------- ---------------------------
Total Current Liabilities.............................. 142,039,401 69,353,342
------------------------- ---------------------------
Long-Term Debt............................................... 350,000,000 340,254,783
Deferred Income Taxes........................................ 54,697,197 43,498,682
Asset Retirement Obligation.................................. 8,957,941 9,340,473
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized, none outstanding...................... --- ---
Common stock, $.01 par value, 85,000,000 share authorized,
28,392,853 and 28,011,109 shares issued, and 27,911,985
and 27,484,091 shares outstanding, respectively.......... 283,929 280,111
Additional paid-in capital................................. 338,816,308 334,865,204
Treasury stock held, at cost, 480,868 and
527,018 shares, respectively............................. (6,896,245) (7,558,093)
Retained earnings.......................................... 97,559,165 70,073,384
Other comprehensive loss, net of taxes..................... (137,933) (269,342)
------------------------- ---------------------------
429,625,224 397,391,264
------------------------- ---------------------------
$ 985,319,763 $ 859,838,544
========================= ===========================
See accompanying notes to consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF INCOME
SWIFT ENERGY COMPANY
(Unaudited)
Three Months Ended Six Months Ended
------------------------------- ----------------------------------
06/30/04 06/30/03 06/30/04 06/30/03
--------------- -------------- ----------------- ---------------
Revenues:
Oil and gas sales.................................. $ 71,824,789 $ 50,909,250 $ 137,778,559 $ 105,759,549
Price-risk management and other, net............... (781,054) (191,721) (1,379,094) (1,542,027)
--------------- -------------- ----------------- ---------------
71,043,735 50,717,529 136,399,465 104,217,522
--------------- -------------- ----------------- ---------------
Costs and Expenses:
General and administrative, net.................... 4,175,559 3,337,995 8,205,233 6,894,543
Depreciation, depletion and amortization........... 19,509,056 15,676,549 37,804,740 30,588,312
Accretion of asset retirement obligation 160,259 201,903 330,735 417,286
............
Lease operating costs.............................. 10,435,813 9,171,687 20,061,793 16,484,791
Severance and other taxes.......................... 6,927,269 4,582,724 13,173,828 9,177,273
Interest expense, net.............................. 7,143,389 6,672,867 14,044,564 13,357,769
Debt retirement cost............................... 2,691,243 --- 2,691,243 ---
--------------- -------------- ----------------- ---------------
51,042,588 39,643,725 96,312,136 76,919,974
--------------- -------------- ----------------- ---------------
Income Before Income Taxes and Cumulative
Effect of Change in Accounting Principle....... 20,001,147 11,073,804 40,087,329 27,297,548
Provision for Income Taxes........................... 7,103,220 3,852,378 12,601,548 9,591,185
-------------- -------------- ----------------- ---------------
Income Before Cumulative Effect of Change
in Accounting Principle............................ 12,897,927 7,221,426 27,485,781 17,706,363
Cumulative Effect of Change in Accounting
Principle (net of taxes)........................... --- --- --- 4,376,852
--------------- -------------- ----------------- ---------------
Net Income................................. $ 12,897,927 $ 7,221,426 $ 27,485,781 $ 13,329,511
=============== ============== ================= ===============
Per share amounts
Basic:
Income Before Cumulative Effect of
Change in Accounting Principle ....... $ 0.46 $ 0.26 $ 0.99 $ 0.65
Cumulative Effect of Change in
Accounting Principle.................. --- --- --- (0.16)
--------------- -------------- ----------------- ---------------
Net Income............................... $ 0.46 $ 0.26 $ 0.99 $ 0.49
=============== ============== ================= ===============
Diluted:
Income Before Cumulative Effect of
Change in Accounting Principle ....... $ 0.46 $ 0.26 $ 0.98 $ 0.65
Cumulative Effect of Change in
Accounting Principle.................. --- --- --- (0.16)
--------------- -------------- ----------------- ---------------
Net Income......................... $ 0.46 $ 0.26 $ 0.98 $ 0.49
=============== ============== ================= ===============
Weighted Average Shares Outstanding.................. 27,742,444 27,311,170 27,647,636 27,277,156
=============== ============== ================= ===============
See accompanying notes to consolidated financial statements
4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SWIFT ENERGY COMPANY
(Unaudited)
Accumulated
Additional Other
Common Paid-in Treasury Retained Comprehensive
Stock (1) Capital Stock Earnings Loss Total
----------- ------------- ------------- -------------- -------------- -------------
Balance, December 31, 2002 $ 278,116 $ 333,543,471 $ (8,749,922)$ 40,179,572 $ (178,053) $ 365,073,184
Stock issued for benefit plans
(83,201 shares).................... 1 (408,178) 1,191,829 - - 783,652
Stock options exercised
(142,807 shares)................... 1,428 1,315,964 - - - 1,317,392
Employee stock purchase plan
(56,574 shares).................... 566 413,947 - - - 414,513
Comprehensive income:
Net income............................ - - - 29,893,812 - 29,893,812
Change in fair value of cash flow
hedges, net of income tax ......... - - - - (91,289) (91,289)
-------------
Total comprehensive income........... 29,802,523
----------- ------------- ------------- -------------- -------------- -------------
Balance, December 31, 2003 $ 280,111 $ 334,865,204 $ (7,558,093)$ 70,073,384 $ (269,342) $ 397,391,264
=========== ============= ============= ============== ============== =============
Stock issued for benefit plans
(46,150 shares).................... - 166,298 661,848 - - 828,146
Stock options exercised
(331,999 shares)................... 3,321 3,289,406 - - - 3,292,727
Employee stock purchase plan
(49,745 shares).................... 497 495,400 - - - 495,897
Comprehensive income:
Net income............................ - - - 27,485,781 - 27,485,781
Change in fair value of cash flow
hedges, net of income tax.......... - - - - 131,409 131,409
-------------
Total comprehensive income............ 27,617,190
----------- ------------- ------------- -------------- -------------- -------------
Balance, June 30, 2004.................. $ 283,929 $ 338,816,308 $ (6,896,245)$ 97,559,165 $ (137,933) $ 429,625,224
=========== ============= ============= ============== ============== =============
(1)$.01 par value
See accompanying notes to consolidated financial statements.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
SWIFT ENERGY COMPANY
(Unaudited)
Period Ended June 30,
------------------------------------------------
2004 2003
--------------------- ---------------------
Cash Flows From Operating Activities:
Net income.................................................... $ 27,485,781 $ 13,329,511
Adjustments to reconcile net income to net cash provided
by operating activities -
Cumulative effect of change in accounting principle......... --- 4,376,852
Depreciation, depletion, and amortization................... 37,804,740 30,588,312
Accretion of asset retirement obligation.................... 330,735 417,286
Deferred income taxes....................................... 12,195,548 9,460,394
Debt retirement cost........................................ 899,226 ---
Other....................................................... 363,958 211,966
Change in assets and liabilities -
Increase in accounts receivable........................... (3,445,623) (5,375,296)
Increase in accounts payable and accrued liabilities...... 962,744 530,896
Decrease in accrued interest.............................. (1,300,178) (18,080)
--------------------- ---------------------
Net Cash Provided by Operating Activities........... 75,296,931 53,521,841
--------------------- ---------------------
Cash Flows From Investing Activities:
Additions to property and equipment........................... (85,926,359) (62,260,796)
Proceeds from the sale of property and equipment.............. 1,274,935 755,450
Net cash distributed as operator of
oil and gas properties...................................... (5,781,399) (1,956,188)
Net cash received (distributed) as operator of partnerships
and joint ventures.......................................... 224,482 (254,929)
Other......................................................... (17,607) (86,372)
--------------------- ---------------------
Net Cash Used in Investing Activities............... (90,225,948) (63,802,835)
--------------------- ---------------------
Cash Flows From Financing Activities:
Proceeds from long-term debt.................................. 150,000,000 ---
Payments of long-term debt.................................... (32,076,000) ---
Net proceeds from (payments of) bank borrowings............... (15,900,000) 7,500,000
Net proceeds from issuances of common stock................... 2,923,516 1,090,996
Payments of debt issuance costs............................... (4,205,542) ---
--------------------- ---------------------
Net Cash Provided by Financing Activities........... 100,741,974 8,590,996
--------------------- ---------------------
Net Increase (Decrease) in Cash and Cash Equivalents............ 85,812,957 (1,689,998)
Cash and Cash Equivalents at Beginning of Period................ 1,066,280 3,816,107
--------------------- ---------------------
Cash and Cash Equivalents at End of Period...................... $ 86,879,237 $ 2,126,109
===================== =====================
Supplemental disclosures of cash flows information:
Cash paid during period for interest, net of amounts
Capitalized................................................... $ 14,774,142 $ 12,831,097
Cash paid during period for income taxes........................ $ 406,000 $ 130,791
See accompanying notes to consolidated financial statements.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SWIFT ENERGY COMPANY
(1) General Information
The consolidated financial statements included herein have been
prepared by Swift Energy Company and are unaudited, except for the
consolidated balance sheet at December 31, 2003 and consolidated statement
of stockholders' equity for the year ended December 31, 2003, which have
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 our management necessary for a
fair presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission. We believe that the disclosures presented are adequate to
allow the information presented not to be misleading. Certain
reclassifications have been made to prior period financial information to
conform to the current period presentation. The 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.
(2) Summary Of Significant Accounting Policies
Oil and Gas Properties
We follow 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 exploration, development, and
acquisition of oil and gas reserves are capitalized. Such costs may be
incurred both prior to and after the acquisition of a property and include
lease acquisitions, geological and geophysical services, drilling,
completion, and equipment. Internal costs incurred that are directly
identified with exploration, development, and acquisition activities
undertaken by us for our own account, and which are not related to
production, general corporate overhead, or similar activities, are also
capitalized. For the six months ended June 30, 2004 and 2003, such
internal costs capitalized totaled $6.2 million in each period. Interest
costs are also capitalized to unproved oil and gas properties. For the six
months ended June 30, 2004 and 2003, capitalized interest on our unproved
properties totaled $3.2 million and $3.5 million, respectively. Interest
not capitalized and 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 involving a significant amount
of reserves or where the proceeds from the sale of oil and gas properties
would significantly alter the relationship between capitalized costs and
proved reserves of oil and gas attributable to a cost center. Internal
costs associated with selling properties are expensed as incurred.
Future development costs are estimated property-by-property based on
current economic conditions and are amortized to expense as our
capitalized oil and gas property costs are amortized.
We compute the provision for depreciation, depletion, and amortization
of oil and gas properties by the unit-of-production method. Under this
method, we compute the provision by multiplying the total unamortized
costs of oil and gas properties --including future development costs, gas
processing facilities and capitalized asset retirement obligations, 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 at the beginning
of the period. This calculation is done on a country-by-country basis.
Furniture, fixtures, and other equipment are depreciated by the
straight-line method at rates based on the estimated useful lives of the
property. Repairs and maintenance are charged to expense as incurred.
Renewals and betterments are capitalized.
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
SWIFT ENERGY COMPANY
Geological and geophysical (G&G) costs incurred on developed properties
are recorded in Proved Property and therefore subject to amortization. In
exploration areas, G&G costs are capitalized in Unproved Property and
evaluated as part of the total capitalized costs associated with a
prospect.
The cost of unproved properties not being amortized is assessed
quarterly, on a country-by-country basis, to determine whether such
properties have been impaired. In determining whether such costs should be
impaired, we evaluate current drilling results, lease expiration dates,
current oil and gas industry conditions, international economic
conditions, capital availability, foreign currency exchange rates, the
political stability in the countries in which we have an investment, and
available geological and geophysical information. Any impairment assessed
is added to the cost of proved properties being amortized. To the extent
costs accumulate in countries where there are no proved reserves, any
costs determined by management to be impaired are charged to expense.
Full-Cost Ceiling Test. At the end of each quarterly reporting period,
the unamortized cost of oil and gas properties, including gas processing
facilities and capitalized asset retirement obligations, net of related
salvage values and deferred income taxes, and excluding the asset
retirement obligation liability is limited to the sum of the estimated
future net revenues from proved properties, excluding cash outflows from
asset retirement obligations, using period-end prices, adjusted for the
effects of hedging, discounted at 10%, and the lower of cost or fair value
of unproved properties, adjusted for related income tax effects ("Ceiling
Test"). Our hedges at June 30, 2004 consisted of natural gas price floors,
crude oil price floors and crude oil collars with strike prices lower than
the period end price and thus did not affect prices used in this
calculation. This calculation is done on a country-by-country basis for
those countries with proved reserves.
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.
Given the volatility of oil and gas prices, it is reasonably possible
that our estimate of discounted future net cash flows from proved oil and
gas reserves could change in the near term. If oil and gas prices decline
from our period-end prices used in the Ceiling Test, even if only for a
short period, it is possible that non-cash write-downs of oil and gas
properties could occur in the future.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of Swift Energy Company and our wholly owned subsidiaries, which are
engaged in the exploration, development, acquisition, and operation of oil
and natural gas properties, with a focus on onshore and inland waters oil
and natural gas reserves in Texas and Louisiana, as well as onshore oil
and natural gas reserves in New Zealand. Our investments in affiliated oil
and gas partnerships and other ventures are accounted for using the
proportionate consolidation method, whereby our proportionate share of
assets, liabilities, revenues, and expenses are included in the
appropriate classifications in the consolidated financial statements.
Intercompany balances and transactions have been eliminated in preparing
the consolidated financial statements.
Accounts Receivable
Included in the "Accounts receivable" balance, which totaled $30.0
million and $27.4 million at June 30, 2004 and December 31, 2003,
respectively, on the accompanying consolidated balance sheets, is
approximately $2.3 million of receivables related to hydrocarbon volumes
produced during 2001 and 2002 that have been disputed since early 2003.
Accordingly, we did not record a receivable with regard to 2003 disputed
volumes.
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
SWIFT ENERGY COMPANY
We continually assess the collectibility of trade and other
receivables, and based on our judgment, we establish a reserve when we
believe a receivable may not be collected. At both June 30, 2004 and
December 31, 2003, we had an allowance for doubtful accounts of $0.8
million. These allowances for doubtful accounts have been deducted from
the total "Accounts receivable" balances on the accompanying consolidated
balance sheets.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from estimates. Significant estimates include proved reserve
volumes, DD&A, and deferred income taxes.
Income Taxes
Income tax expense in the first six months of 2004 includes a reduction
from the U.S. statutory rate, primarily from the result of the currency
exchange rate effect on the New Zealand deferred tax, along with a
reduction in tax expense primarily attributable to an adjustment of the
tax basis of the TAWN properties acquired in 2002.
Earnings Per Share
Basic earnings per share ("Basic EPS") have been computed using the
weighted average number of common shares outstanding during the respective
periods. Diluted earnings per share ("Diluted EPS") for all periods also
assume, as of the beginning of the period, exercise of stock options using
the treasury stock method. Certain of our stock options that would
potentially dilute Basic EPS in the future were antidilutive for the three
months and six months ended June 30, 2004 and 2003 were excluded. The
following is a reconciliation of the numerators and denominators used in
the calculation of Basic and Diluted EPS (before cumulative effect of
change in accounting principle) for the three-month and six-month periods
ended June 30, 2004 and 2003:
Three Months Ended June 30,
--------------------------------------------------------------------------------
2004 2003
-------------------------------------- ----------------------------------------
Net Per Share Net Per Share
Income Shares Amount Income Shares Amount
------------- ------------ ---------- -------------- ------------ ----------
Basic EPS:
Net Income Before Cumulative
Effect of Change in Accounting
Principle and Share Amounts.... $12,897,927 27,742,444 $.46 $7,221,426 27,311,170 $.26
Stock Options.................... --- 555,300 --- 108,323
------------- ------------ -------------- ------------
Diluted EPS:
Net Income Before Cumulative
Effect of Change in Accounting
Principle and Assumed Share
Conversions.................... $12,897,927 28,297,744 $.46 $7,221,426 27,419,493 $.26
------------- ------------ -------------- ------------
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
SWIFT ENERGY COMPANY
Six Months Ended June 30,
--------------------------------------------------------------------------------
2004 2003
-------------------------------------- ----------------------------------------
Net Per Share Net Per Share
Income Shares Amount Income Shares Amount
-------------- ----------- ---------- -------------- ------------ ----------
Basic EPS:
Net Income Before Cumulative
Effect of Change in Accounting
Principle and Share Amounts $27,485,781 27,647,636 $.99 $17,706,363 27,277,156 $.65
Stock Options.................... --- 504,626 --- 85,976
------------- ------------ -------------- ------------
Diluted EPS:
Net Income Before Cumulative
Effect of Change in Accounting
Principle and Assumed Share
Conversions.................... $27,485,781 28,152,262 $.98 $17,706,363 27,363,132 $.65
------------- ------------ -------------- ------------
Options to purchase approximately 2.9 million shares of common stock,
at an average exercise price of $17.37 were outstanding at June 30, 2004,
and options to purchase approximately 2.9 million shares of common stock,
at an average price of $16.66 were outstanding at June 30, 2003.
Approximately 0.9 million and 1.6 million options to purchase shares were
not included in the computation of Diluted EPS for the three-month periods
ended June 30, 2004 and 2003, respectively, and approximately 1.0 million
and 1.7 million options to purchase shares were not included in the
computation of Diluted EPS for the six-month periods ended June 30, 2004
and 2003, respectively, because the options were antidilutive, given that
the option price was greater than the average closing market price of the
common shares during those periods.
Other Comprehensive Loss
In addition to net income, comprehensive income or loss includes all
changes to equity during a period, except those resulting from investments
and distributions to the owners of the Company. At June 30, 2004, we
recorded $137,933, net of taxes of $77,588, of derivative losses in "Other
comprehensive loss" on the accompanying balance sheet. The components of
accumulated other comprehensive loss and related tax effects for the
six-month period ended June 30, 2004 were as follows:
Gross Value Tax Effect Net of Tax Value
---------------- --------------- ----------------
Balance at December 31, 2003................ $ 420,847 $ 151,505 $ 269,342
Change in fair value of cash flow hedges ... 869,010 312,844 556,166
Effect of cash flow hedges settled
during the period........................ (1,074,336) (386,761) (687,575)
---------------- --------------- ----------------
Balance at June 30, 2004.................... $ 215,521 $ 77,588 $ 137,933
================ =============== ================
For the six-month periods ended June 30, 2004 and 2003, total
comprehensive income was $27.6 million and $13.1 million, respectively.
For the three-month periods ended June 30, 2004 and 2003, total
comprehensive income was $13.0 million and $7.1 million, respectively.
Stock Based Compensation
We account for three stock-based compensation plans under the
recognition and measurement principles of APB Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. No
stock-based employee compensation cost is reflected in net income, as all
options granted under those plans had an exercise price equal to the
market value of the underlying common stock on the date of the grant; or
in the case of the employee stock purchase plan, the purchase price is 85%
of the lower of the closing price of our common stock as quoted on the New
York Stock Exchange at the beginning or end of the plan year or a date
during the year chosen by the participant. Had compensation expense for
these plans been determined based on the fair value of the options
consistent with SFAS No. 123, "Accounting for Stock-Based Compensation,"
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
SWIFT ENERGY COMPANY
our net income and earnings per share would have been adjusted to the
following pro forma amounts:
Three Months Ended June 30,
-----------------------------------------------
2004 2003
---------------------- -------------------
Net Income: As Reported............................................ $12,897,927 $7,221,426
Stock-based employee compensation expense
determined under fair value method for
all awards, net of tax............................... (1,088,520) (1,041,376)
---------------------- -------------------
Pro Forma.............................................. $11,809,407 $6,180,050
Basic EPS: As Reported............................................ $.46 $.26
Pro Forma.............................................. $.43 $.23
Diluted EPS: As Reported............................................ $.46 $.26
Pro Forma.............................................. $.42 $.23
Six Months Ended June 30,
-----------------------------------------------
2004 2003
---------------------- -------------------
Net Income: As Reported............................................ $27,485,781 $13,329,511
Stock-based employee compensation expense
determined under fair value method for
all awards, net of tax............................... (2,110,826) (2,023,318)
---------------------- -------------------
Pro Forma.............................................. $25,374,955 $11,306,193
Basic EPS: As Reported............................................ $.99 $.49
Pro Forma.............................................. $.92 $.41
Diluted EPS: As Reported............................................ $.98 $.49
Pro Forma.............................................. $.90 $.41
Pro forma compensation cost reflected above may not be representative
of the cost to be expected in future periods. The fair value of each
option grant is estimated on the date of grant using the Black-Scholes
option-pricing model.
Price-Risk Management Activities
Changes in the derivative's fair value are recognized currently in
earnings unless specific hedge accounting criteria are met. The statement
also establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded
in other contracts) be recorded in the balance sheet as either an asset or
a liability measured at its fair value. Hedge accounting for qualifying
hedges allows the gains and losses on derivatives to offset related
results on the hedged item in the income statements and requires that a
company formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting. Hedges that do not meet the
criteria for hedge accounting are accounted for under mark to market
accounting.
We have a price-risk management policy to use derivative instruments to
protect against declines in oil and gas prices, mainly through the
purchase of price floors and collars. During the second quarters of 2004
and 2003, we recognized net losses of $0.5 million and $0.4 million,
respectively, relating to our derivative activities. During the first six
months of 2004 and 2003, we recognized net losses of $1.1 million and $1.8
million, respectively, relating to our derivative activities. This
activity is recorded in "Price-risk management and other, net" on the
accompanying statements of income. At June 30, 2004, we had recorded $0.1
million, net of taxes of $0.1 million, of derivative losses in "Other
comprehensive loss" on the accompanying balance sheet. This amount
represents the change in fair value for the effective portion of our
hedging transactions that
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
SWIFT ENERGY COMPANY
were qualified as cash flow hedges. The ineffectiveness reported in
"Price-risk management and other, net" for the first six months of 2004
and 2003 was not material. We expect to reclassify all amounts currently
held in "Other comprehensive loss" into the statement of income within the
next six months when the forecasted sale of hedged production occurs.
As of June 30, 2004, we had in place natural gas price floors in effect
for the July 2004 contract month through the December 2004 contract month,
which cover a portion of our domestic natural gas production for July 2004
to December 2004. The natural gas price floors cover notional volumes of
2,160,000 Mmbtu with a weighted average floor price of $5.60 per Mmbtu.
Our natural gas hedges in place at June 30, 2004 are expected to cover
approximately 50% to 55% of our domestic natural gas production from July
2004 to September 2004, and approximately 10% to 15% of our domestic
natural gas production from October 2004 to December 2004. As of June 30,
2004, we also had crude oil price floors and a crude oil "collar"
financial transaction in effect for the July 2004 contract month through
the September 2004 contract month, which cover a portion of our domestic
crude oil production for July 2004 through September 2004. The crude oil
price floors cover notional volumes of 225,000 barrels with a weighted
average floor price of $31.40 per barrel. The crude oil collar covers
notional volumes for the month of September 2004 of 75,000 barrels for the
price floor and 30,000 barrels for the price ceiling, with a floor price
of $31 per barrel and a ceiling price of $42.50 per barrel. Our crude oil
floors and collar in place at June 30, 2004 are expected to cover
approximately 25% to 30% of our domestic crude oil production from July
2004 to September 2004.
When we entered into these transactions, they were designated as a
hedge of the variability in cash flows associated with the forecasted sale
of natural gas and crude oil production. Changes in the fair value of a
hedge that is highly effective and is designated and documented and
qualifies as a cash flow hedge, to the extent that the hedge is effective,
are recorded in "Other comprehensive income (loss)." When the hedged
transactions are recorded upon the actual sale of oil and natural gas,
these gains or losses are reclassified from "Other comprehensive income
(loss)" and recorded in "Price-risk management and other, net" on the
consolidated statement of income. The fair value of our derivatives are
computed using the Black-Scholes option pricing model and are periodically
verified against quotes from brokers. The fair value of these instruments
at June 30, 2004, was $0.2 million and is recognized on the balance sheet
in "Other current assets."
Asset Retirement Obligation
In June 2001, the Financial Accounting Standards Board issued SFAS No.
143, "Accounting for Asset Retirement Obligations." The statement requires
entities to record the fair value of a liability for legal obligations
associated with the retirement obligations of tangible long-lived assets
in the period in which it is incurred. When the liability is initially
recorded, the carrying amount of the related long-lived asset is
increased. The liability is discounted from the year the well is expected
to deplete. Over time, accretion of the liability is recognized each
period, and the capitalized cost is depreciated on a unit of production
basis over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount
or incurs a gain or loss upon settlement. This standard requires us to
record a liability for the fair value of our dismantlement and abandonment
costs, excluding salvage values. SFAS No. 143 was adopted by us effective
January 1, 2003. Upon adoption of SFAS No. 143 effective January 1, 2003,
we recorded an asset retirement obligation of $8.9 million, an addition to
oil and gas properties of $2.0 million and a non-cash charge of $4.4
million (net of $2.5 million of deferred taxes), which is recorded as a
Cumulative Effect of Change in Accounting Principle. The cumulative charge
to earnings took into consideration the impact of adopting SFAS No. 143 on
previous full-cost ceiling tests. SFAS No. 143 is silent with respect to
whether prior period ceiling tests should be reflected in the
implementation entry calculation; however, management believes that any
impairment on the properties should be reflected in the historical
periods. Had we not considered the impact of adopting SFAS No. 143 on
previous full-cost ceiling tests, the charge recognized would have been
reduced. Excluding the Cumulative Effect of Change in Accounting
Principle, the adoption of SFAS No. 143 reduced our net income for the
three months and six months ended June 30, 2003 by approximately $0.2
million and $0.3 million, respectively, or less than $0.01 per diluted
share in each of the 2003 periods. The following is a roll-forward of our
asset retirement obligation:
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
SWIFT ENERGY COMPANY
2004 2003
----------------- ----------------
Asset Retirement Obligation recorded as of January 1................. $ 10,137,473 $ 8,934,320
Accretion expense for the six months ended June 30................. 330,735 417,286
Liabilities incurred for new wells and facilities construction..... 191,491 387,073
Reductions due to sold, or plugged and abandoned wells............. (216,484) (219,068)
Increase due to currency exchange rate fluctuations................ (14,274) ---
----------------- ----------------
Asset Retirement Obligation as of June 30............................ $ 10,428,941 $ 9,519,611
----------------- ----------------
At June 30, 2004 and December 31, 2003, approximately $1.5 million and
$0.7 million, respectively, of our asset retirement obligation is
classified as a current liability in "Accounts payable and accrued
liabilities" on the accompanying consolidated balance sheets.
New Accounting Principles
In March 2004, the FASB issued an exposure draft that would amend SFAS
No. 123 "Accounting for Stock Based Compensation" and SFAS No. 95
"Statement of Cash Flows." This exposure draft was issued to improve
existing accounting rules and provide more complete, higher quality
information for investors on employee stock compensation matters. The
comment period for the exposure draft ended June 30, 2004. The exposure
draft covers a wide range of equity-based arrangements including stock
options. Under the FASB's proposal, share-based payments to employees,
including stock options, would be treated the same as other forms of
compensation by recognizing the related cost in the income statement. The
expense of the award would generally be measured at fair value at the
grant date. Current accounting guidance allows that the expense relating
to employee stock options to only be disclosed in the footnotes of the
financial statements. We are evaluating the effects that will result from
future adoption of this proposed statement.
In January 2003, the FASB issued Interpretation No. 46 (Revised
December 2003), Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No. 51 Consolidated
Financial Statements (the "Interpretation"). The Interpretation
significantly changes whether entities included in its scope are
consolidated by their sponsors, transferors, or investors. The
Interpretation introduces a new consolidation model - the variable
interest model; which determines control (and consolidation) based on
potential variability in gains and losses of the entity being evaluated
for consolidation. The Interpretation provides guidance for determining
whether an entity lacks sufficient equity or its equity holders lack
adequate decision-making ability. These variable interest entities
("VIEs") are covered by the Interpretation and are to be evaluated for
consolidation based on their variable interests. These provisions applied
immediately to variable interests in VIEs created after January 31, 2003,
and to variable interests in special purpose entities for periods ending
after December 15, 2003. The provisions apply for all other types of
variable interests in VIEs for periods ending after March 15, 2004. We
have no variable interests in VIEs, nor do we have variable interests in
special purpose entities. The adoption of this interpretation had no
impact on our financial position or results of operations.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations,"
and SFAS No. 142, "Goodwill and Intangible Assets." We adopted these
statements on July 1, 2001 and January 1, 2002, respectively. SFAS No. 141
requires that all business combinations initiated after June 30, 2001, be
accounted for using the purchase method and that intangible assets be
disaggregated and reported separately from goodwill. SFAS No. 142
establishes new guidelines for accounting for goodwill and other
intangible assets. Under SFAS No. 142, goodwill and other indefinite lived
intangible assets are not amortized but reviewed annually for impairment.
An issue, EITF Issue 04-2, had arisen for companies engaged in oil and
gas exploration and production regarding the application of SFAS No. 141
and SFAS No. 142 as they relate to mineral rights held under lease or
other contractual arrangements, and as to whether costs associated with
these rights should be classified as intangible assets on the balance
sheet, apart from other capitalized oil and gas property costs, and to
provide
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
SWIFT ENERGY COMPANY
specific footnote disclosure. In March 2004, the Emerging Issues Task
Force of the FASB reached a consensus that mineral rights are tangible
assets. In April 2004, the FASB ratified the EITF's consensus by issuing
FASB Staff Position (FSP) 141-1 and 142-1, which amend SFAS No. 141 and
SFAS No. 142 to address the inconsistency between the EITF consensus on
EITF Issue No. 04-02 and SFAS No. 141 and SFAS No. 142. The FSP is
effective for reporting periods beginning after April 29, 2004 and defines
mineral rights as tangible assets. The comment period on the FSP extends
until August 17, 2004. These staff positions will have no impact on our
consolidated financial statements.
(3) Long-Term Debt
Our long-term debt, including the current portion, as of June 30, 2004
and December 31, 2003, was as follows:
June 30, December 31,
2004 2003
------------------ -------------------
Bank Borrowings........................... $ --- $ 15,900,000
Senior Subordinated Notes due 2009... 92,477,213 124,354,783
Senior Notes due 2011..................... 150,000,000 ---
Senior Subordinated Notes due 2012... 200,000,000 200,000,000
------------------ -------------------
Long-Term Debt................... $ 442,477,213 $ 340,254,783
------------------ -------------------
The unamortized discount on the Senior Subordinated Notes due 2009 was
$0.4 million at June 30, 2004 and $0.6 million at December 31, 2003,
respectively. The balance of our Senior Subordinated Notes due 2009 is
classified as a current liability in "Current portion of long-term debt"
on the accompanying consolidated balance sheets as these were redeemed on
August 1, 2004.
Bank Borrowings
At June 30, 2004, we had no outstanding borrowings under our $400.0
million credit facility with a syndicate of ten banks that has a borrowing
base of $250.0 million and expires in October 2008. At December 31, 2003,
we had $15.9 million in outstanding borrowings under our credit facility.
The interest rate is either (a) the lead bank's prime rate (4.25% at June
30, 2004) or (b) the adjusted London Interbank Offered Rate ("LIBOR") plus
the applicable margin depending on the level of outstanding debt. The
applicable margin is based on the ratio of the outstanding balance to the
last calculated borrowing base. In June 2004, we increased, renewed and
extended this credit facility, increasing the facility to $400 million
from $300 million and extending its expiration to October 1, 2008 from
October 1, 2005. The other terms of the credit facility, such as the
borrowing base amount and commitment amount, stayed largely the same.
The terms of our credit facility include, among other restrictions, a
limitation on the level of cash dividends (not to exceed $5.0 million in
any fiscal year), a remaining aggregate limitation on purchases of our
stock of $15.0 million, requirements as to maintenance of certain minimum
financial ratios (principally pertaining to working capital and EBITDAX
ratios), and limitations on incurring other debt or repurchasing our
Senior Subordinated Notes due 2011 or Senior Notes due 2012. Since
inception, no cash dividends have been declared on our common stock. We
are currently in compliance with the provisions of this agreement. The
credit facility is secured by our domestic oil and gas properties. We have
also pledged 65% of the stock in our two active New Zealand subsidiaries
as collateral for this credit facility. The borrowing base is
re-determined at least every six months and was reaffirmed by our bank
group at $250.0 million effective May 1, 2004. We requested that the
commitment amount with our bank group be reduced to $150.0 million
effective May 9, 2003. Under the terms of the credit facility, we can
increase this commitment amount back to the total amount of the borrowing
base at our discretion, subject to the terms of the credit agreement. The
next borrowing base review is scheduled for November 2004.
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
SWIFT ENERGY COMPANY
Senior Subordinated Notes Due 2009
These notes consisted of $125.0 million of 10 1/4% Senior Subordinated
Notes due August 2009, which were issued at 99.236% of the principal
amount on August 4, 1999, and were to mature on August 1, 2009. These
notes were unsecured senior subordinated obligations. Interest on these
notes had been payable semi-annually on February 1 and August 1. In June
2004, we repurchased $32.1 million of these notes pursuant to a tender
offer. In the second quarter of 2004, we recorded a charge of $2.7 million
related to the repurchase of these notes, which is recorded in "Debt
retirement costs" on the consolidated statement of income. The costs were
comprised of approximately $1.8 million of premiums paid to repurchase the
notes, $0.6 million to write-off unamortized debt issuance costs, $0.2
million to write-off unamortized debt discount and approximately $0.1
million of other costs. In July 2004, we repurchased approximately $0.5
million of these notes, and as of August 1, 2004, we redeemed the
remaining $92.5 million in outstanding notes. In the third quarter of
2004, we will record approximately $6.9 million of debt retirement costs
related to the redemption of these remaining notes. The balance of the
remaining notes at June 30, 2004, has been classified as "Current portion
of long-term debt" on the accompanying consolidated balance sheets.
Senior Notes Due 2011
These notes consist of $150.0 million of 7 5/8% Senior Notes due 2011,
which were issued on June 23, 2004 at 100% of the principal amount and
will mature on July 15, 2011. The notes are senior unsecured obligations
that rank equally with all of our existing and future senior unsecured
indebtedness, are effectively subordinated to all our existing and future
secured indebtedness to the extent of the value of the collateral securing
such indebtedness, including borrowing under our bank credit facility, and
rank senior to all of our existing and future subordinated indebtedness.
Interest on the Senior Notes is payable semi-annually on January 15 and
July 15, and commences on January 15, 2005. On or after July 15, 2008, we
may redeem some or all of the Senior Notes, with certain restrictions, at
a redemption price, plus accrued and unpaid interest, of 103.813% of
principal, declining to 100% in 2010 and thereafter. In addition, prior to
July 15, 2007, we may redeem up to 35% of the Senior Notes with the net
proceeds of qualified offerings of our equity at a redemption price of
107.625% of the principal amount of the Senior Notes, plus accrued and
unpaid interest. We incurred approximately $3.9 million of debt issuance
costs related to these notes, which is included in "Debt issuance costs"
on the accompanying consolidated balance sheets and will be amortized to
interest expense over the life of the notes using the effective interest
method. Upon certain changes in control of Swift Energy, each holder of
Senior Notes will have the right to require us to repurchase all or any
part of the Senior Notes at a purchase price in cash equal to 101% of the
principal amount, plus accrued and unpaid interest to the date of
purchase. The terms of these Senior Notes include, among other
restrictions, a limitation on how much of our own common stock we may
repurchase. We are currently in compliance with the provisions of the
indenture governing these Senior Notes due 2011.
Senior Subordinated Notes Due 2012
These notes consist of $200.0 million of 9 3/8% Senior Subordinated
Notes due 2012, which were issued on April 16, 2002 at 100% of the
principal amount, and will mature on May 1, 2012. The notes are unsecured
senior subordinated obligations and are subordinated in right of payment
to all our existing and future senior debt, including borrowings under our
bank credit facility. Interest on these notes is payable semi-annually on
May 1 and November 1. On or after May 1, 2007, we may redeem these notes,
with certain restrictions, at a redemption price, plus accrued and unpaid
interest, of 104.688% of principal, declining to 100% in 2010. In
addition, prior to May 1, 2005, we may redeem up to 33.33% of these notes
with the net proceeds of qualified offerings of our equity at 109.375% of
the principal amount of the notes, plus accrued and unpaid interest. Upon
certain changes in control of Swift Energy, each holder of these notes
will have the right to require us to repurchase the Senior Subordinated
Notes at a purchase price in cash equal to 101% of the principal amount,
plus accrued and unpaid interest to the date of purchase. The terms of
these notes include, among other restrictions, a limitation on how much of
our own common stock we may repurchase. We are currently in compliance
with the provisions of the indenture governing these Senior Subordinated
Notes due 2012.
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
SWIFT ENERGY COMPANY
The aggregate maturities on our long-term debt are $92.9 million in
2004, $0 in 2005, 2006, 2007, 2008 and $350.0 million thereafter,
respectively.
(4) Foreign Activities
As of June 30, 2004, our gross capitalized oil and gas property costs
in New Zealand totaled approximately $222.6 million. Approximately $187.9
million has been included in the proved properties portion of our oil and
gas properties, while $34.7 million is included as unproved properties.
Our functional currency in New Zealand is the U.S. dollar.
(5) Segment Information
The Company has two reportable segments, one domestic and one foreign,
which are in the business of crude oil and natural gas exploration and
production. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. The Company
evaluates performance based on profit or loss from oil and gas operations
before price-risk management and other, general and administrative
expenses, interest expense, net and debt retirement costs. The Company's
reportable segments are managed separately based on their geographic
locations. Financial information by operating segment is presented below:
Three Months Ended June 30,
----------------------------------------------------------------------------------
2004 2003
--------------------------------------- -----------------------------------------
New New
Domestic Zealand Total Domestic Zealand Total
------------ ------------ ------------- ------------- ------------- -------------
Oil and gas sales............................... $ 59,755,056 $ 12,069,733 $ 71,824,789 $ 39,977,699 $ 10,931,551 $ 50,909,250
Costs and Expenses:
Depreciation, depletion and amortization ... 14,903,238 4,605,818 19,509,056 11,065,738 4,610,811 15,676,549
Accretion of asset retirement obligation ... 119,699 40,560 160,259 148,082 53,821 201,903
Lease operating costs....................... 7,935,048 2,500,764 10,435,812 6,430,837 2,740,850 9,171,687
Severance and other taxes................... 6,062,585 864,685 6,927,270 3,668,249 914,475 4,582,724
------------ ------------ ------------ ------------- ------------- -------------
Income from oil and gas operations.............. $ 30,734,486 $ 4,057,906 $ 34,792,392 $ 18,664,793 $ 2,611,594 $ 21,276,387
Price-risk management and other, net ....... (781,054) (191,721)
General and administrative, net............. 4,175,559 3,337,995
Interest expense, net....................... 7,143,389 6,672,867
Debt retirement cost........................ 2,691,243 ---
------------- -------------
Income before income taxes and cumulative
effect of change in accounting principle ... $ 20,001,147 $ 11,073,804
============= =============
16
Six Months Ended June 30,
----------------------------------------------------------------------------------
2004 2003
--------------------------------------- -----------------------------------------
New New
Domestic Zealand Total Domestic Zealand Total
------------ ------------ ------------- ------------- ------------- -------------
Oil and gas sales............................... $114,421,220 $ 23,357,339 $ 137,778,559 $ 83,718,875 $ 22,040,674 $ 105,759,549
Costs and Expenses:
Depreciation, depletion and amortization ... 29,421,187 8,383,553 37,804,740 20,862,718 9,725,594 30,588,312
Accretion of asset retirement obligation ... 250,247 80,488 330,735 297,523 119,763 417,286
Lease operating costs....................... 14,854,330 5,207,463 20,061,793 11,947,290 4,537,501 16,484,791
Severance and other taxes................... 11,481,465 1,692,363 13,173,828 7,324,615 1,852,658 9,177,273
------------ ------------ ------------- ------------- ------------- -------------
Income from oil and gas operations.............. $ 58,413,991 $ 7,993,472 $ 66,407,463 $ 43,286,729 $ 5,805,158 $ 49,091,887
Price-risk management and other, net ....... (1,379,094) (1,542,027)
General and administrative, net............. 8,205,233 6,894,543
Interest expense, net....................... 14,044,564 13,357,769
Debt retirement cost........................ 2,691,243 ---
------------- -------------
Income before income taxes and cumulative
effect of change in accounting principle ... $ 40,087,329 $ 27,297,548
============= =============
Property, plant and equipment, net.............. $662,588,304 $183,474,671 $ 846,062,975 $ 591,373,155 $ 167,176,684 $ 758,549,839
============ ============ ============= ============= ============= =============
(6) Subsequent Event
In July 2004, we repurchased approximately $0.5 million of Senior
Subordinated Notes due 2009 pursuant to a tender offer we initiated in
June 2004. Effective August 1, 2004, we repurchased the remaining $92.5
million of these notes. In the third quarter of 2004, we will record
approximately $6.9 million of debt retirement costs related to the
repurchase of these remaining notes.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SWIFT ENERGY COMPANY
You should read the following discussion and analysis in conjunction
with our financial information and our consolidated financial statements
and notes thereto included in this report. The following information
contains forward-looking statements. For a discussion of limitations
inherent in forward-looking statements, see "Forward-Looking Statements"
on page 29 of this report.
Overview
For the first six months of 2004, we had revenues of $136.4 million and
production of 28.5 Bcfe. Our revenues were bolstered by oil and gas prices
remaining strong during this period and our domestic production for the
first six months of 2004 increasing by 27% to 20.6 Bcfe compared to the
same period in 2003. We continued to focus our efforts and capital
throughout the second quarter on infrastructure improvements, increased
production and the development of longer life reserves in the Lake
Washington and AWP Olmos areas. In the first six months of 2004, we
produced approximately 11,800 net barrels of oil equivalent per day in
Lake Washington, compared to approximately 5,400 net barrels of oil
equivalent per day in the same period of 2003. During 2004, we also
allocated capital to development in our three other domestic core areas.
New Zealand accounted for 7.9 Bcfe of production in the first six months
of 2004, a 21% decrease from production in the same period in 2003.
Natural gas production in New Zealand declined primarily due to minimum
takes from the gas purchaser at TAWN. Increased use of hydroelectricity in
New Zealand has contributed to a short-term reduction in market demand for
natural gas, which is expected to continue throughout 2004. While our
fields at TAWN have been able to meet minimum contracted volumes to date,
it is anticipated that these fields will not be able to meet the
contracted volumes beginning in the second half of this year without
additional development, and we have plans to drill a development well in
the Tariki field in the second half of this year. There is no penalty if
the fields are unable to produce these minimum contracted volumes. New
Zealand natural gas and NGL contracts are denominated in the New Zealand
dollar, which have significantly strengthened during the last several
years against the U.S. Dollar.
Our production costs were up in the first six months of 2004
predominately due to increased production and facility repairs in Lake
Washington, increased severance taxes, currency exchange rates and
maintenance activities in New Zealand. Our general and administrative
expenses increased in the first six months of 2004 primarily due an
increase in franchise tax expense, increased costs related to our
corporate governance activities and compliance with the Sarbanes-Oxley
Act, as well as higher costs in our New Zealand operations due to currency
exchange rates. We are working to reduce our controllable production and
general and administrative costs on a per unit produced basis for the
remainder of 2004.
Our debt to PV-10 ratio increased to 26% at June 30, 2004 compared to
22% at December 31, 2003, due to the issuance in the second quarter of
2004 of our 7 5/8% Senior Notes due 2011 and partial repurchase of our
Senior Subordinated Notes due 2009. Our debt to capitalization ratio
increased to 51% at June 30, 2004 compared to 46% at year-end 2003, also
due to the issuance of Senior Notes in the second quarter of 2004 and
partial repurchase of our Senior Subordinated Notes due 2009. In June
2004, we repurchased $32.1 million of our 10 1/4% Senior Subordinated
Notes due 2009 through a tender offer. We recorded a charge of $2.7
million related to the tender offer, which is recorded in "Debt retirement
costs" on the consolidated statement of income. In July 2004, we
repurchased $0.5 million in Senior Subordinated Notes due 2009 at the
close of the tender offer. On August 1, 2004, we redeemed the remaining
$92.5 million of these notes in accordance with our redemption rights
under the indenture governing these notes. In the third quarter of 2004,
we will record approximately $6.9 million of debt retirement costs related
to the repurchase of these remaining notes. The redemption of our Senior
Subordinated Notes due 2009 will lower our effective interest rate going
forward.
We will continue to look for opportunities in 2004 to improve our
balance sheet and liquidity, but expect our capital expenditures to
continue to equal or modestly exceed our cash flow for the near term.
Our 2004 capital expenditure budget was increased by approximately 20%
in July 2004, and is now $160 to $175 million. The budget still assumes
increased drilling activity, when compared to 2003 levels, in all domestic
core areas except Lake Washington. In Lake Washington, the increased 2004
budget still assumes
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
SWIFT ENERGY COMPANY
reduced drilling activity from 2003 levels and is estimated at 27 to 32
wells, accompanied by the on-going extensive three-dimensional seismic
survey, together with the analysis of the resulting data, to enhance our
drilling program in the area for years to come. We plan to drill 15 to 18
wells in AWP Olmos, with the objective of maintaining production levels in
that area. Additionally, we expect to have ongoing exploratory efforts in
our South Texas Garcia Ranch properties. In New Zealand, we plan to drill
10 to 14 wells. For the long-term, we continue to see a tightening natural
gas market and strengthening gas prices in New Zealand. Based on results
for the first half of 2004 and on current operating conditions, we
estimate that 2004 production levels will increase over 2003 levels in the
range of 11% to 15%, which is lower than the previously estimated range of
11% to 17%. We continue to believe that commodity prices will remain
strong for the remainder of 2004 and that we are positioned for reserve
growth of 5% to 8% for 2004 from 2003.
Results of Operations - Three Months Ended June 30, 2004 and 2003
Revenues. Our revenues in the second quarter of 2004 increased by 40%
compared to revenues in the same period in 2003, due primarily to an
increase in commodity prices and production from our Lake Washington and
Rimu/Kauri areas. Revenues from our oil and gas sales comprised
substantially all of net revenues for the second quarter of 2004 and 2003.
In the second quarter of 2004, oil production made up 48% of total
production, natural gas made up 41% and NGL contributed 11%. In the second
quarter of 2003, natural gas production made up 53% of total production,
oil production made up 37% and NGL contributed 10%.
The following table provides additional information regarding the
changes in the sources of our oil and gas sales and volumes from our four
domestic core areas and two New Zealand core areas:
Three Months Ended June 30,
---------------------------
Area Oil and Gas Sales (In Millions) Net Oil and Gas Sales Volumes (Bcfe)
- ---- --------------------------------------- -----------------------------------------
2004 2003 2004 2003
---- ---- ---- ----
AWP Olmos.................... $ 12.5 $ 11.7 2.1 2.1
Brookeland................... 4.7 4.1 0.9 1.1
Lake Washington.............. 32.8 12.7 5.5 2.7
Masters Creek................ 5.4 6.3 1.0 1.5
Other........................ 4.4 5.2 0.7 1.1
------------------ ------------------- ----------------- -----------------------
Total Domestic....... $ 59.8 $ 40.0 10.2 8.5
------------------ ------------------- ----------------- -----------------------
Rimu/Kauri................... 5.2 1.7 1.2 0.5
TAWN......................... 6.8 9.2 2.9 4.3
------------------ ------------------- ----------------- -----------------------
Total New Zealand.... $ 12.0 $ 10.9 4.1 4.8
------------------ ------------------- ----------------- -----------------------
Total........ $ 71.8 $ 50.9 14.3 13.3
================== =================== ================= =======================
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
SWIFT ENERGY COMPANY
The following table provides additional information regarding our oil,
NGL and gas sales:
Net Sales Volume Average Sales Price
---------------- -------------------
Oil NGL Gas Combined Oil NGL Gas
(MBbl) (MBbl) (Bcf) (Bcfe) (Bbl) (Bbl) (Mcf)
------------ ----------- ----------- ------------- ------------ ----------- -----------
2004
- ----
Three Months Ended June 30:
Domestic................. 1,021 179 3.0 10.2 $37.22 $19.42 $6.09
New Zealand.............. 122 90 2.8 4.1 $37.37 $17.69 $2.13
------------ ----------- ----------- -------------
Total.............. 1,142 269 5.8 14.3 $37.24 $18.84 $4.19
============ =========== =========== =============
2003
- ----
Three Months Ended June 30:
Domestic................. 676 140 3.6 8.5 $28.25 $17.07 $5.15
New Zealand.............. 146 71 3.5 4.8 $26.68 $13.36 $1.75
------------ ----------- ----------- -------------
Total.............. 822 211 7.1 13.3 $27.97 $15.81 $3.47
============ =========== =========== =============
Oil and gas sales in the second quarter of 2004 increased by 41%, or
$20.9 million, from the level of those revenues for the same period in
2003. The increase in production volumes during the second quarter of 2004
was primarily from our Lake Washington area domestically, and the
Rimu/Kauri area in New Zealand.
In the second quarter of 2004, our $20.9 million increase in oil, NGL,
and gas sales resulted from:
oPrice variances that had a $15.5 million favorable impact on sales, of
which $10.6 million was attributable to the 33% increase in average
oil prices received, $4.1 million was attributable to the 21% increase
in average gas prices received, and $0.8 million was attributable to
the 19% increase in average NGL prices received; and
oVolume variances that had a $5.4 million favorable impact on sales,
with $9.0 million of increases coming from the 321,000 Bbl increase in
oil sales volumes, $0.9 million of increases due to the 57,000 Bbl
increase in NGL sales volumes, partially offset by a $4.5 million
decrease attributable to the 1.3 Bcf decrease in gas sales volumes.
Costs and Expenses. Our total expenses in the second quarter of 2004
increased $11.4 million, or 29%, compared to expenses in the same period
in 2003. The majority of the increase was due to the $3.8 million increase
in depreciation, depletion and amortization, a $2.3 million increase in
severance taxes, and $1.3 million in lease operating costs, all of which
increased as our production volumes increased in the 2004 period, pricing
increases also contributed to an increase in severance taxes. We also
incurred $2.7 million of debt retirement costs in the second quarter of
2004 related to the repurchase of a portion of our Senior Subordinated
Notes due 2009 pursuant to a tender offer.
Our second quarter of 2004 general and administrative expenses, net,
increased $0.8 million, or 25%, from the level of such expenses in the
same 2003 period. This increase was due primarily to an increase in
franchise tax expense, increased costs related to our corporate governance
activities and compliance with the Sarbanes-Oxley Act, as well as higher
costs in our New Zealand operations due to the increased currency exchange
rate of the New Zealand dollar as compared to the U.S. dollar. Our general
and administrative expenses per Mcfe produced were $0.29 per Mcfe in the
second quarter of 2004 and $0.25 in the 2003 period. The portion of
supervision fees recorded as a reduction of general and administrative
expenses was $1.2 million for the second quarter of 2004 and $0.7 million
for the same period in 2003.
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
SWIFT ENERGY COMPANY
Depreciation, depletion, and amortization of our oil and gas
properties, or DD&A, increased $3.8 million, or 24%, in the second quarter
of 2004 from 2003 levels. Domestically, DD&A increased $3.8 million in the
2004 period, mainly due to higher production in the period and the DD&A
rate per Mcfe of production increased to $1.46 from $1.30 in the
comparable 2003 period mainly due to increases in future development costs
and oil and gas property additions, which increased our full cost pool
balance. In New Zealand, DD&A remained flat at $4.6 million in both the
2004 and 2003 period, the DD&A rate per Mcfe of production increased to
$1.14 from $0.96 in the 2003 period mainly due to increases in future
development costs and oil and gas property additions, which increased our
full cost pool balance. Our overall DD&A rate per Mcfe of production was
$1.37 in the second quarter of 2004 and $1.18 in the comparable 2003
period.
We recorded $0.2 million of accretion on our asset retirement
obligation in both the second quarter of 2004 and 2003.
Our lease operating costs per Mcfe produced were $0.73 in the second
quarter of 2004 and $0.69 in the same period of 2003. There were no
supervision fees recorded as a reduction to production costs for the
second quarter of 2004 and $0.5 million for the same 2003 period. Our
lease operating costs in the second quarter of 2004 increased $1.3
million, or 14%, over the level of such expenses in the comparable 2003
period. Approximately $1.5 million of the increase in lease operating
costs during the second quarter of 2004 was related to our domestic
operations, which increased due to higher production and facility repairs
in our Lake Washington area in that period. In New Zealand, production
costs decreased by $0.2 million in the second quarter of 2004 mainly due
to the decrease in production from our New Zealand properties in the 2004
period, offset by plant maintenance costs.
Severance and other taxes in the second quarter of 2004 increased $2.3
million, or 51%, over the level of such expenses in the comparable 2003
period. The increase is mainly due to higher commodity prices and
increased Lake Washington production in the second quarter of 2004.
Severance taxes on oil in Louisiana are 12% of oil sales, so as the
percentage of our oil production, which comes from Lake Washington
increases, the overall percentage of severance costs to sales will
increase. Severance and other taxes, as a percentage of oil and gas sales,
were approximately 10% and 9% in the second quarters of 2004 and 2003,
respectively.
Interest expense on our Senior Subordinated Notes due 2012, including
amortization of debt issuance costs, totaled $4.8 million in the second
quarter of both 2004 and 2003. Interest expense on our Senior Subordinated
Notes due 2009, including amortization of debt issuance costs, totaled
$3.3 million in the second quarter of both 2004 and 2003. Interest expense
on our bank credit facility, including commitment fees and amortization of
debt issuance costs, totaled $0.5 million in the second quarter of 2004
and $0.3 million in the same 2003 period. Interest expense on our Senior
Notes due 2011, issued in June 2004, was $0.2 million in the second
quarter of 2004. The total interest cost in the second quarter of 2004 was
$8.8 million, of which $1.6 million was capitalized. The total interest
cost in the second quarter of 2003 was $8.4 million, of which $1.7 million
was capitalized.
In the second quarter of 2004, we incurred $2.7 of debt retirement
costs related to the repurchase of a portion of our Senior Subordinated
Notes due 2009 pursuant to a tender offer. The costs were comprised of
approximately $1.8 million of premiums paid to repurchase the notes, $0.6
million to write-off unamortized debt issuance costs, $0.2 million to
write-off unamortized debt discount and approximately $0.1 million of
other costs.
Income tax expense in the second quarter of 2004 includes a reduction
from the U.S. statutory rate, primarily from the result of the currency
exchange rate effect on the New Zealand deferred tax.
Net Income. Our net income in the second quarter of 2004 of $12.9
million was 79% higher, and Basic EPS of $0.46 was 76% higher, than our
second quarter of 2003 net income of $7.2 million and Basic EPS of $0.26.
Our Diluted EPS in the second quarter of 2004 of $0.46 was 73% higher than
our 2003 Diluted EPS of $0.26. These amounts increased in the 2004 period
as oil and gas revenues increased due to higher commodity prices and
increased domestic production.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
SWIFT ENERGY COMPANY
Results of Operations - Six Months Ended June 30, 2004 and 2003
Revenues. Our revenues in the first six months of 2004 increased by 31%
compared to revenues in the same period in 2003, due primarily to
increases in oil prices and production from our Lake Washington and AWP
areas domestically and our Rimu/Kauri area in New Zealand. Substantially
all of our net revenues for the first six months of 2004 and 2003 were
from oil and gas sales. In the first six months of 2004, oil production
made up 48% of total production, natural gas made up 41% and NGL
contributed 11%. In the first half of 2003, natural gas production made up
56% of total production, oil production made up 35% and NGL contributed
9%.
The following table provides additional information regarding the
changes in the sources of our oil and gas sales and volumes from our four
domestic core areas and two New Zealand core areas:
Six Months Ended June 30,
Area Oil and Gas Sales (In Millions) Net Oil and Gas Sales Volumes (Bcfe)
- ---- --------------------------------------- -----------------------------------------
2004 2003 2004 2003
---- ---- ---- ----
AWP Olmos..................... $ 24.3 $ 24.2 4.8 4.2
Brookeland.................... 9.3 9.4 1.9 2.0
Lake Washington............... 61.6 23.9 10.6 4.8
Masters Creek................. 10.6 14.7 2.0 3.1
Other......................... 8.6 11.6 1.3 2.1
------------------ ------------------- ----------------- -----------------------
Total Domestic........ $ 114.4 $ 83.8 20.6 16.2
------------------ ------------------- ----------------- -----------------------
Rimu/Kauri.................... 9.5 3.2 2.2 1.0
TAWN.......................... 13.8 18.8 5.7 8.9
------------------ ------------------- ----------------- -----------------------
Total New Zealand.... $ 23.4 $ 22.0 7.9 9.9
------------------ ------------------- ----------------- -----------------------
Total.......... $ 137.8 $ 105.8 28.5 26.1
================== =================== ================= =======================
The following table provides additional information regarding our oil,
NGL and gas sales:
Net Sales Volume Average Sales Price
---------------- -------------------
Oil NGL Gas Combined Oil NGL Gas
(MBbl) (MBbl) (Bcf) (Bcfe) (Bbl) (Bbl) (Mcf)
------------ ----------- ----------- ------------- ------------ ----------- -----------
2004
- ----
Six Months Ended June 30:
Domestic................. 2,039 390 6.1 20.6 $35.59 $22.06 $5.49
New Zealand.............. 228 157 5.6 7.9 $36.74 $16.97 $2.20
------------ ----------- ----------- -------------
Total.............. 2,267 547 11.7 28.5 $35.70 $20.60 $3.91
============ =========== =========== =============
2003
- ----
Six Months Ended June 30:
Domestic................. 1,253 240 7.3 16.2 $30.35 $21.83 $5.59
New Zealand.............. 258 145 7.5 9.9 $29.15 $13.12 $1.68
------------ ----------- ----------- -------------
Total.............. 1,511 385 14.8 26.1 $30.14 $18.55 $3.60
============ =========== =========== =============
Oil and gas sales in the first six months of 2004 increased by 30%, or
$32.0 million, from the level of those revenues for the same period in
2003. The increase in production volumes during the first six months of
2004 was primarily from our Lake Washington and AWP Olmos areas
domestically, and the Rimu/Kauri area in
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
SWIFT ENERGY COMPANY
New Zealand.
In the first six months of 2004, our $32.0 million increase in oil,
NGL, and gas sales resulted from:
oPrice variances that had a $17.4 million favorable impact on sales, of
which $12.6 million was attributable to the 18% increase in average
oil prices received, $3.7 million was attributable to the 9% increase
in average gas prices received and $1.1 million was attributable to
the 11% increase in average NGL prices received; and
oVolume variances that had a $14.6 million favorable impact on sales,
with $22.8 million of increases coming from the 755,000 Bbl increase
in oil sales volumes, $3.0 million of increases due to the 162,000 Bbl
increase in NGL sales volumes, partially offset by $11.2 million in
decreases attributable to the 3.1 Bcf decrease in gas sales volumes.
Costs and Expenses. Our total expenses in the first six months of 2004
increased $19.4 million, or 25%, compared to expenses in the same period
in 2003. The majority of the increase was due to a $7.2 million increase
in depreciation, depletion and amortization, a $4.0 million increase in
severance taxes, and a $3.6 million increase in lease operating costs, all
of which increased as our production volumes increased in the 2004 period.
Pricing increases also contributed to an increase in severance taxes. We
also incurred $2.7 million of debt retirement costs in the first half of
2004 related to the repurchase of a portion of our Senior Subordinated
Notes due 2009 pursuant to a tender offer.
As discussed in Note 1 to the Consolidated Financial Statements, we
adopted SFAS No. 143 on January 1, 2003. Our adoption of SFAS No. 143
resulted in a one-time net of taxes charge of $4.4 million, which is
recorded as a "Cumulative Effect of Change in Accounting Principle" in the
2003 consolidated statement of income.
Our first six months of 2004 general and administrative expenses, net,
increased $1.3 million, or 19%, from the level of such expenses in the
same 2003 period. This increase is due primarily to an increase in
franchise tax expense, increased costs related to our corporate governance
activities and compliance with the Sarbanes-Oxley Act, as well as higher
costs in our New Zealand operations due to the increased currency exchange
rate of the New Zealand dollar as compared to the U.S. dollar. Our general
and administrative expenses per Mcfe produced were $0.29 per Mcfe in the
first six months of 2004 and $0.26 in the same 2003 period. The portion of
supervision fees recorded as a reduction of general and administrative
expenses was $2.4 million for the first six months of 2004 and $1.4
million for the same 2003 period.
Depreciation, depletion, and amortization of our oil and gas
properties, or DD&A, increased $7.2 million, or 24%, in the first six
months of 2004 from 2003 levels for the same period. Domestically, DD&A
increased $8.6 million in the first six months of 2004, mainly due to
higher production in the period and the DD&A rate per Mcfe of production
increased to $1.43 from $1.29 in the comparable 2003 period mainly due to
increases in future development costs and oil and gas property additions,
which increased our full cost pool balance. In New Zealand, DD&A decreased
by $1.3 million in the 2004 period due to decreased production in the
period and the DD&A per Mcfe of production increased to $1.06 from $0.98
mainly due to increases in future development costs and oil and gas
property additions, which increased our full cost pool balance. Our
overall DD&A rate per Mcfe of production was $1.32 in the first six months
of 2004 and $1.17 in the comparable 2003 period.
We recorded $0.3 million of accretion on our asset retirement
obligation in the first six months of 2004 and $0.4 million in the
comparable 2003 period.
Our lease operating costs per Mcfe produced were $0.70 in the first six
months of 2004 and $0.63 in the same period of 2003. There were no
supervision fees recorded as a reduction to production costs for the first
six months of 2004 and $1.0 million for the same 2003 period. Our lease
operating costs in the first six months of 2004 increased $3.6 million, or
22%, over the level of such expenses in the comparable 2003 period.
23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
SWIFT ENERGY COMPANY
Approximately $2.9 million of the increase in lease operating costs during
the first six months of 2004 was related to our domestic operations, which
increased due to higher production from our Lake Washington and AWP Olmos
areas in that period, along with increased facility repair costs in Lake
Washington. In New Zealand, production costs increased by $0.7 million in
the first six months of 2004 mainly due to the increase in currency
exchange rates, and scheduled plant maintenance activities in the six
months of 2004.
Severance and other taxes in the first six months of 2004 increased
$4.0 million, or 44%, over the level of such expenses in the comparable
2003 period. The increase was due primarily to higher commodity prices and
increased Lake Washington, AWP and Rimu/Kauri production. Severance taxes
on oil in Louisiana are 12% of oil sales, so as the percentage of our oil
production, which comes from Lake Washington increases, the overall
percentage of severance costs to sales will increase. Severance and other
taxes, as a percentage of oil and gas sales, were approximately 10% and 9%
in the first half of 2004 and 2003, respectively.
Interest expense on our Senior Subordinated Notes due 2012, including
amortization of debt issuance costs, totaled $9.6 million in the first six
months of both 2004 and 2003. Interest expense on our Senior Subordinated
Notes due 2009, including amortization of debt issuance costs, totaled
$6.6 million in the first six months of both 2004 and 2003. Interest
expense on our bank credit facility, including commitment fees and
amortization of debt issuance costs, totaled $0.9 million in the first six
months of 2004 and $0.7 million in the same 2003 period. Interest expense
on our Senior Notes due 2011, issued in June 2004, was $0.2 million in the
first half of 2004. The total interest cost in the first six months of
2004 was $17.3 million, of which $3.2 million was capitalized. The total
interest cost in the first six months of 2003 was $16.9 million, of which
$3.5 million was capitalized.
In the first six months of 2004, we incurred $2.7 million of debt
retirement costs related to the repurchase of a portion of our Senior
Subordinated Notes due 2009 pursuant to a tender offer. The costs were
comprised of approximately $1.8 million of premiums paid to repurchase the
notes, $0.6 million to write-off unamortized debt issuance costs, $0.2
million to write-off unamortized debt discount and approximately $0.1
million of other costs.
Income tax expense in the first six months of 2004 includes a reduction
from the U.S. statutory rate, primarily from the result of the currency
exchange rate effect on the New Zealand deferred tax, along with a
reduction in tax expense primarily attributable to an adjustment of the
tax basis of the TAWN properties acquired in 2002.
Net Income. Our net income in the first six months of 2004 of $27.5
million was 106% higher, and Basic EPS of $0.99 was 103% higher, than our
first six months of 2003 net income of $13.3 million and Basic EPS of
$0.49. Our Diluted EPS in the first six months of 2004 of $0.98 was 100%
higher than our 2003 Diluted EPS of $0.49. These amounts increased in the
2004 period as oil and gas revenues increased due to higher commodity
prices, increased domestic production, and the effect of the cumulative
effect of change in accounting principle recognized in the first half of
2003.
24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
SWIFT ENERGY COMPANY
Contractual Commitments and Obligations
Our contractual commitments for the remainder of 2004 and the next five
years and thereafter as of June 30, 2004 are as follows:
Last half
of 2004 2005 2006 2007 2008 2009 Thereafter Total
------------------------------------------------------------------------------
(In thousands)
Non-cancelable operating lease (1).............. $1,072 $2,430 $2,484 $2,482 $2,450 $2,339 $13,025 $26,282
Capital commitments due to pipeline operators .. 34 --- --- --- --- --- --- 34
Asset Retirement Obligation (2)................. 403 3,743 99 229 30 219 5,706 10,429
Drilling Rig and Seismic........................ 5,632 --- --- --- --- --- --- 5,632
Senior Subordinated Notes due 2009 (3)(4)....... 92,924 --- --- --- --- --- --- 92,924
Senior Notes due 2011 (4)....................... --- --- --- --- --- --- 150,000 150,000
Senior Subordinated Notes due 2012 (4).......... --- --- --- --- --- --- 200,000 200,000
Credit Facility (5)............................. --- --- --- --- --- --- --- ---
------------------------------------------------------------------------------
Total...................................... $100,065 $6,173 $2,583 $2,711 $2,480 $2,558 $368,731 $485,301
==============================================================================
(1)Our office lease in Houston, Texas extends until 2015.
(2)Amounts shown by year are the fair values at June 30, 2004.
(3) We repurchased the remaining Senior Subordinated Notes due 2009 in July and
August 2004.
(4)These amounts do not include the interest obligation, which is paid
semi-annually.
(5)The credit facility expires in October 2009 and these amounts exclude a $0.8
million standby letter of credit outstanding under this facility.
Commodity Price Trends and Uncertainties
Oil and natural gas prices historically have been volatile and are
expected to continue to be volatile in the future. The price of oil
increased significantly in the first six months of 2004 when compared to
longer-term historical prices. Factors such as worldwide supply
disruptions, worldwide economic conditions, fluctuating currency exchange
rates, and actions taken by OPEC can cause wide fluctuations in the price
of oil. Domestic natural gas prices continue to remain high when compared
to longer-term historical prices. North American and New Zealand weather
conditions, the industrial and consumer demand for natural gas, storage
levels of natural gas, and the availability and accessibility of natural
gas deposits in North America and New Zealand can cause significant
fluctuations in the price of natural gas. Such factors are beyond our
control.
Liquidity and Capital Resources
During the first six months of 2004, we largely relied upon our net
cash provided by operating activities of $75.3 million and net proceeds
from the offering of our Senior Notes due 2011 of $150.0 million to fund
capital expenditures of $85.9 million, repurchase $32.1 million of our
Senior Subordinated Notes due 2009, and repay all outstanding indebtedness
under our bank credit facility. During the first six months of 2003, we
relied upon our net cash provided by operating activities of $53.5 million
and proceeds from borrowings under our bank credit facility of $7.5
million to fund capital expenditures of $62.3 million.
25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
SWIFT ENERGY COMPANY
Net Cash Provided by Operating Activities. For the first six months of
2004, net cash provided by operating activities was $75.3 million,
representing a 41% increase as compared to $53.5 million generated during
the first six months of 2003. The $21.8 million increase was primarily due
to an increase of $32.0 million in oil and gas sales for the 2004 period,
attributable to higher commodity prices and production, offset in part by
lease operating cost increases due to higher domestic production and
severance taxes due to higher commodity prices and debt retirement costs
incurred in the first six months of 2004.
Accounts Receivable. Included in the "Accounts receivable" balance,
which totaled $30.0 million and $27.4 million at June 30, 2004 and
December 31, 2003, respectively, on the accompanying balance sheets, is
approximately $2.3 million of receivables related to hydrocarbon volumes
produced from 2001 and 2002 that have been disputed since early 2003.
Accordingly, we did not record a receivable with regard to 2003 disputed
volumes.
We assess the collectibility of trade and other receivables, and based
on our judgment, we accrue a reserve when we believe a receivable may not
be collected. At June 30, 2004 and December 31, 2003, we had an allowance
for doubtful accounts of $0.8 million. These allowances for doubtful
accounts have been deducted from the total "Accounts receivable" balances
on the accompanying consolidated balance sheets.
Bank Credit Facility. We had no borrowings under our bank credit
facility at June 30, 2004, and $15.9 million in outstanding borrowings at
December 31, 2003. Our bank credit facility at June 30, 2004 consisted of
a $400.0 million revolving line of credit with a $250.0 million borrowing
base. The borrowing base is re-determined at least every six months and
was reaffirmed by our bank group at $250.0 million, effective May 1, 2004.
In June 2004, we renewed this credit facility, increasing the facility
amount to $400 million from $300 million and extending its expiration to
October 1, 2008 from October 1, 2005. We maintained the commitment amount
at $150.0 million, which amount was set at our request effective May 9,
2003. Under the terms of our bank credit facility, we can increase this
commitment amount to the total amount of the borrowing base at our
discretion, subject to the terms of the credit agreement. Our revolving
credit facility includes, among other restrictions, requirements to
maintain certain minimum financial ratios (principally pertaining to
working capital and EBITDAX), and limitations on incurring other debt. We
are in compliance with the provisions of this agreement.
Repurchase of Senior Subordinated Notes due 2009. In June 2004, we
repurchased $32.1 million of our Senior Subordinated Notes due 2009
pursuant to a tender offer, and recorded debt retirement costs of $2.7
million related to this repurchase. In July 2004, we repurchased
approximately $0.5 million of these notes, and as of August 1, 2004, we
redeemed the remaining $92.5 million of these notes. In the third quarter
of 2004, we will record approximately $6.9 million of debt retirement
costs related to the redemption.
Debt Maturities. Our credit facility extends until October 1, 2008. The
remaining $92.5 million Senior Subordinated Notes mature August 1, 2009
but were repurchased in July and August 2004. Our $150.0 million Senior
Notes mature July 15, 2011, and our $200.0 million Senior Notes mature May
1, 2012.
Working Capital. Our working capital improved from a deficit of $35.9
million at December 31, 2003, to a deficit of $16.9 million at June 30,
2004. The improvement was primarily due to the issuance of our Senior
Notes due 2011 in the second quarter of 2004, which contributed to an
increase in our cash balance at June 30, 2004, offset by the inclusion of
the remaining Senior Subordinated Notes due 2009 in current liabilities as
these notes were repurchased in July and August 2004.
26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
SWIFT ENERGY COMPANY
Capital Expenditures. During the first six months of 2004, we used
$85.9 million to fund capital expenditures for property, plant, and
equipment. These capital expenditures included:
Domestic activities of $69.6 million as follows:
o $55.5 million for drilling and developmental activity costs;
o $6.9 million on prospect costs, principally prospect leasehold and
geological costs of unproved prospects;
o $5.2 million of seismic costs, mainly in the Lake Washington area;
o $1.3 million relating to costs directly associated with evaluating
potential producing property acquisitions; and
o $0.7 million primarily for computer equipment, software, furniture,
and fixtures.
New Zealand activities of $16.3 million as follows:
o $13.1 million for drilling and developmental activity costs;
o $3.1 million on prospect costs and geological costs of unproved
prospects;
o $0.1 million for fixed assets.
We have spent considerable time and capital in 2003 and the first six
months of 2004, on significant facility capacity upgrades in the Lake
Washington area to increase facility capacity to approximately 20,000
barrels per day for crude oil, up from 9,000 barrels per day capacity in
the first quarter of 2003. We have upgraded three production platforms,
added new compression for the gas lift system, and installed a new oil
delivery system and permanent barge loading facility.
We drilled or participated in drilling 23 domestic development wells
and four domestic exploratory wells in the first half of 2004. Thirteen of
the development wells and one exploratory well were in the Lake Washington
area. Nine of the development wells were in the AWP area. One domestic
exploratory well and 20 of the domestic development wells were completed.
In New Zealand, the Kauri-E3 and Kauri-E4 wells were completed, five
development Manutahi wells were drilled and completed and one exploratory
Manutahi well was unsuccessful.
For the remaining six months of 2004, we expect to make capital
expenditures of approximately $74 to $89 million. We recently increased
our estimated total capital expenditures for 2004 by 20% to approximately
$160.0 to $175.0 million, excluding acquisition costs and net of
approximately $3.0 million to $13.0 million in non-core property
dispositions. Capital expenditures for 2003 were $144.5 million. The
budget for 2004, is dependent upon operational performance and commodity
pricing levels during the remaining six months of the year.
We believe that the anticipated internally generated cash flows for
2004, together with bank borrowings under our bank credit facility, will
be sufficient to finance the costs associated with our currently budgeted
2004 capital expenditures. If producing property acquisitions become
attractive during the latter part of 2004, we will explore the use of debt
and/or equity offerings to fund such activity.
During the last six months of 2004, we anticipate drilling or
participating in the drilling of up to an additional 14 to 19 wells in our
Lake Washington area, an additional 6 to 9 wells in our AWP Olmos area,
and
27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
SWIFT ENERGY COMPANY
several additional wells, with varying working interest percentages,
mainly in our South Texas areas. In addition, we plan on drilling two
Kauri wells and a Tariki well in New Zealand.
Our 2004 capital expenditures continue to be focused on developing and
producing long-lived reserves in our Lake Washington, AWP and Rimu/Kauri
area. This focus should help lessen our overall production decline curve,
which would extend our average reserve life. We expect our 2004 total
production to increase over 2003 levels, primarily from the Lake
Washington, AWP and Rimu/Kauri areas. We expect production in our other
core areas to decrease as limited new drilling is currently budgeted to
offset the natural production decline of these properties.
New Accounting Principles
In March 2004, the FASB issued an exposure draft that would amend SFAS
No. 123 "Accounting for Stock Based Compensation" and SFAS No. 95
"Statement of Cash Flows." This exposure draft was issued to improve
existing accounting rules and provide more complete, higher quality
information for investors on employee stock compensation matters. The
comment period for the exposure draft ended June 30, 2004. The exposure
draft covers a wide range of equity-based arrangements including stock
options. Under the FASB's proposal, share-based payments to employees,
including stock options, would be treated the same as other forms of
compensation by recognizing the related cost in the income statement. The
expense of the award would generally be measured at fair value at the
grant date. Current accounting guidance allows that the expense relating
to employee stock options to only be disclosed in the footnotes of the
financial statements. We are evaluating the effects that will result from
future adoption of this proposed statement.
In January 2003, the FASB issued Interpretation No. 46 (Revised
December 2003), Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No. 51 Consolidated
Financial Statements (the "Interpretation"). The Interpretation
significantly changes whether entities included in its scope are
consolidated by their sponsors, transferors, or investors. The
Interpretation introduces a new consolidation model - the variable
interest model; which determines control (and consolidation) based on
potential variability in gains and losses of the entity being evaluated
for consolidation. The Interpretation provides guidance for determining
whether an entity lacks sufficient equity or its equity holders lack
adequate decision-making ability. These variable interest entities
("VIEs") are covered by the Interpretation and are to be evaluated for
consolidation based on their variable interests. These provisions applied
immediately to variable interests in VIEs created after January 31, 2003,
and to variable interests in special purpose entities for periods ending
after December 15, 2003. The provisions apply for all other types of
variable interests in VIEs for periods ending after March 15, 2004. We
have no variable interests in VIEs, nor do we have variable interests in
special purpose entities. The adoption of this interpretation had no
impact on our financial position or results of operations.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations,"
and SFAS No. 142, "Goodwill and Intangible Assets." We adopted these
statements on July 1, 2001 and January 1, 2002, respectively. SFAS No. 141
requires that all business combinations initiated after June 30, 2001, be
accounted for using the purchase method and that intangible assets be
disaggregated and reported separately from goodwill. SFAS No. 142
establishes new guidelines for accounting for goodwill and other
intangible assets. Under SFAS No. 142, goodwill and other indefinite lived
intangible assets are not amortized but reviewed annually for impairment.
An issue, EITF Issue 04-2, had arisen for companies engaged in oil and
gas exploration and production regarding the application of SFAS No. 141
and SFAS No. 142 as they relate to mineral rights held under lease or
other contractual arrangements, and as to whether costs associated with
these rights should be classified as intangible assets on the balance
sheet, apart from other capitalized oil and gas property costs, and to
provide specific footnote disclosure. In March 2004, the Emerging Issues
Task Force of the FASB reached a consensus that mineral rights are
tangible assets. In April 2004, the FASB ratified the EITF's consensus by
issuing FASB Staff Position (FSP) 141-1 and 142-1, which amend SFAS No.
141 and SFAS No. 142 to address the inconsistency between the EITF
consensus on EITF Issue No. 04-02 and SFAS No. 141 and SFAS
28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
SWIFT ENERGY COMPANY
No. 142. The FSP is effective for reporting periods beginning after April
29, 2004 and defines mineral rights as tangible assets. The comment period
on the FSP extends until August 17, 2004. These staff positions will have
no impact on our consolidated financial statements.
Forward Looking Statements
The statements contained in this 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. Such forward-looking
statements may pertain to, among other things, financial results, 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," "future,"
"estimate," "expect," "budget," "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, upon
current market conditions, and upon engineering and geologic information
available at this time, and is subject to change and to a number of risks
and uncertainties, and therefore, actual results may differ materially.
Among the factors that could cause actual results to differ materially
are: volatility in oil and gas prices; fluctuations of the prices received
or demand for our oil and natural gas; the uncertainty of drilling results
and reserve estimates; operating hazards; requirements for capital;
general economic conditions; changes in geologic or engineering
information; changes in market conditions; competition and government
regulations; as well as the risks and uncertainties discussed herein, and
set forth from time to time in our 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.
29
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Commodity Risk
Our major market risk exposure is the commodity pricing applicable to
our oil and natural gas production. Realized commodity prices received for
such production are primarily driven by the prevailing worldwide price for
crude oil and spot prices applicable to natural gas. The effects of such
pricing volatility are expected to continue.
Our price-risk management policy permits the utilization of derivative
instruments (such as futures, forward contracts, swaps, and option
contracts such as floors and collars) to mitigate price risk associated
with fluctuations in oil and natural gas prices. Below is a description of
the derivative instruments we have utilized to hedge our exposure to price
risk.
oPrice Floors - At June 30, 2004, we had in place price floors in effect
through the December 2004 contract month for natural gas, these cover our
domestic natural gas production for July 2004 to December 2004. The
natural gas price floors cover notional volumes of 2,160,000 MMBtu, with a
weighted average floor price of $5.60 per MMBtu. Our natural gas hedges in
place at June 30, 2004 are expected to cover approximately 50% to 55% of
our domestic natural gas production from July 2004 to September 2004, and
10% to 15% of our domestic natural gas production from October 2004 to
December 2004. At June 30, 2004, we also had in place price floors in
effect through the September 2004 contract month for crude oil, these
cover our domestic crude oil production for July 2004 to September 2004.
The crude oil price floors cover notional volumes of 225,000 barrels, with
a weighted average floor price of $31.40 per barrel.
oCollar Transactions - At June 30, 2004, we had in place crude oil "collar"
financial transactions in for the September 2004 contract month, these
cover our domestic crude oil production for September 2004. The crude oil
collar covers notional volumes for the month of September 2004 of 75,000
barrels for the price floor and 30,000 barrels for the price ceiling, with
a floor price of $31 per barrel and a ceiling price of $42.50 per barrel.
Our crude oil floors and collars in place at June 30, 2004 are expected to
cover approximately 25% to 30% of our domestic crude oil production from
July 2004 to September 2004.
oNew Zealand Gas Contracts - All of our gas production in New Zealand is
sold under long-term, fixed-price contracts denominated in New Zealand
dollars. These contracts protect against price volatility, and our revenue
from these contracts will vary only due to production fluctuations and
foreign exchange rates.
Customer Credit Risk
We are exposed to the risk of financial non-performance by customers.
Our ability to collect on sales to our customers is dependent on the
liquidity of our customer base. To manage customer credit risk, we monitor
credit ratings of customers and seek to minimize exposure to any one
customer where other customers are readily available. Due to availability
of other purchasers, we do not believe that the loss of any single oil or
gas customer would have a material adverse effect on our results of
operations.
Foreign Currency Risk
We are exposed to the risk of fluctuations in foreign currencies, most
notably the New Zealand dollar. Fluctuations in rates between the New
Zealand dollar and U.S. dollar may impact our financial results from our
New Zealand subsidiaries since we have receivables, liabilities and
natural gas and NGL sales contracts denominated in New Zealand dollars.
30
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS (Continued)
Interest Rate Risk
Our Senior Notes due 2011 and Senior Subordinated Notes due 2012 have
fixed interest rates, consequently we are not exposed to cash flow risk
from market interest rate changes on these notes. However, there is a risk
that market rates will decline and the required interest payments on our
Senior Notes and Senior Subordinated Notes may exceed those payments based
on the current market rate. At June 30, 2004, we had no borrowings under
our credit facility, which is subject to floating rates and therefore
susceptible to interest rate fluctuations. The result of a 10% fluctuation
in the bank's base rate would constitute 43 basis points and would not
have a material adverse effect on our 2004 cash flows based on this same
level or a modest level of borrowing.
31
CONTROLS AND PROCEDURES
Our chief executive officer and chief financial officer have evaluated
our disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 as of the end of the
period covered by the report. Based on that evaluation, they have
concluded that such disclosure controls and procedures are effective in
alerting them on a timely basis to material information relating to Swift
Energy as required under the Exchange Act to be disclosed in this report.
There were no significant changes in our internal controls that could
significantly affect such controls subsequent to the date of their
evaluation.
32
SWIFT ENERGY COMPANY
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
No material legal proceedings are pending other than ordinary, routine
litigation incidental to the Company's business.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities - N/A
Item 3. Defaults Upon Senior Securities - N/A
Item 4. Submission of Matters to a Vote of Security Holders - N/A
Our annual meeting of shareholders was held on May 11, 2004. At the record date,
27,621,356 shares of common stock were outstanding and entitled to one vote per
share upon all matters submitted at the meeting. At the annual meeting, three
nominees were elected to serve as Directors of Swift for three year terms to
expire at the 2007 annual meeting of shareholders and one nominee was elected to
serve as Director of Swift for a one year term to expire at the 2005 annual
meeting of shareholders:
FOR WITHHELD
--- --------
NOMINEES FOR DIRECTORS
----------------------
A. Earl Swift 25,083,039 1,232,704
Greg Matiuk 26,188,995 126,749
Henry C. Montgomery 24,123,335 2,192,409
Deanna L. Cannon 26,188,405 127,339
The terms of directors Virgil N. Swift and G. Robert Evans expire at the 2005
annual meeting and the terms of Raymond E. Galvin, Clyde W. Smith, Jr., Terry E.
Swift expire at the 2006 annual meeting.
Item 5. Other Information
Our Insider Trading Policy allows directors and officers covered under the
policy to establish stock trading plans under specified circumstances pursuant
to Rule 10b5-1 established by the SEC under the Securities Exchange Act of 1934
to provide a safe harbor under certain provisions of that act. In July of 2004,
one of our directors, Virgil N. Swift, established a Rule 10b5-1 sales plan
which specifies for future periods the trading period, the number of shares of
common stock to be sold, and prices and conditions under which such shares may
be sold. Under the trading plan, Mr. Swift may sell up to an aggregate of 20,000
shares, during the period beginning August 16, 2004 and ending on December 31,
2004. Under the trading plan, an independent broker will execute the trades
pursuant to specific selling instructions provided by Mr. Swift at the time the
plan was established. Other directors or officers may establish Rule 10b5-1
trading plans in the future.
Item 6. Exhibits & Reports on Form 8-K -
(a) Documents filed as part of the report
(3) Exhibits
4.1 Indenture between Swift Energy Company and Wells
Fargo Bank, National Association, as trustee, dated
June 23, 2004 (incorporated by reference as Exhibit
4.1 of the Registrant's Form 8-K filed with the SEC
on June 25, 2004).
33
4.2 First Supplemental Indenture for $150 million in
aggregate principal amount of 7 5/8% Senior Notes
Due 2011 between Swift Energy Company and Wells
Fargo Bank, National Association, as trustee, dated
June 23, 2004 (incorporated by reference as Exhibit
4.2 of the Registrant's Form 8-K filed with the SEC
on June 25, 2004).
10.1 Eighth Amendment to Lease Agreement between
Greenspoint Plaza Limited Partnership and Swift
Energy Company.
10.2 First Amended and Restated Credit Agreement,
effective June 29, 2004 among Swift Energy Company,
as Borrower, Bank One, NA as Administrative Agent,
Banc One Capital Markets, Inc. as Sole Lead Arranger
and Sole Book Runner, Wells Fargo Bank, National
Association as Syndication Agent, BNP Paribas as
Syndication Agent, Calyon as Documentation Agent and
Societe Generale as Documentation Agent.
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K filed during the quarter ended June 30, 2004,
which are incorporated herein by reference:
On May 5, 2004, the Company filed a Current Report on Form 8-K
that reported under Item 7, "Financial Statements, Pro Forma
Financial Information and Exhibits" and Item 12, "Results of
Operations and Financial Conditions" relating to the press
release announcement of first quarter 2004 earnings.
On June 25, 2004, the Company filed a Current Report on Form
8-K that reported under Item 5, "Other Events" and Item 7,
"Financial Statements, Pro Forma Financial Information and
Exhibits" relating to the public sale of $150 million in
aggregate principal amount of 7 5/8% Senior Notes due 2011 and
the repurchase of a portion of its outstanding $125 million 10
1/4% Senior Subordinated Notes.
34
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: August 6, 2004 By: (original signed by)
------------------------- ------------------------------------
Alton D. Heckaman, Jr.
Senior Vice President
Chief Financial Officer
Date: August 6, 2004 By: (original signed by)
------------------------- ------------------------------------
David W. Wesson
Controller and Principal Accounting
Officer
35
Exhibit 10.1
EIGHTH AMENDMENT TO LEASE AGREEMENT
THIS EIGHTH AMENDMENT TO LEASE AGREEMENT (this "Eighth
Amendment") is made and entered into as of the ___ day of June, 2004 (the
"Effective Date"), by and between GREENSPOINT PLAZA LIMITED PARTNERSHIP, a Texas
limited partnership ("Landlord"), and SWIFT ENERGY COMPANY, a Texas corporation
("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into that certain Lease
Agreement dated March 1, 1995, with respect to the lease (the "Original Lease")
of approximately 73,055 square feet of Net Rentable Area of Office Space and
approximately 2,362 square feet of Net Rentable Area of Storage Space (the
"Original Leased Premises") in the building located in Houston, Texas and
commonly referred to as Two Greenspoint Plaza (the "Building"), which Lease
Agreement was amended by that certain First Amendment to Lease Agreement ("First
Amendment") dated as of June 12, 1996; that certain Second Amendment to Lease
Agreement ("Second Amendment") dated effective as of February 6, 1997; that
certain Letter canceling the First Amendment ("Letter Agreement") dated as of
July 29, 1998; that certain Third Amendment to Lease Agreement ("Third
Amendment") dated as of May 21, 2001; that certain Fourth Amendment to Lease
Agreement ("Fourth Amendment") dated as of December 28, 2001; that certain Fifth
Amendment to Lease Agreement ("Fifth Amendment") dated as of October 1, 2002;
that certain Sixth Amendment to Lease Agreement (the "Sixth Amendment") dated as
of March 19, 2003; that certain Seventh Amendment to Lease Agreement (the
"Seventh Amendment") dated as of October 2, 2003; and that certain letter
agreement amending the Seventh Amendment (the "Seventh Amendment Letter
Agreement") dated effective as of April 14, 2004 (the Original Lease, as amended
by the First Amendment, Second Amendment, Letter Agreement, Third Amendment,
Fourth Amendment, Fifth Amendment, Sixth Amendment, Seventh Amendment and
Seventh Amendment Letter Agreement shall be referred to herein as the "Lease");
WHEREAS, the Third Amendment expanded the Original Leased
Premises by an additional 5,298 square feet of Net Rentable Area of Office
Space; the Fourth Amendment further expanded the Original Leased Premises by an
additional 9,972 square feet of Net Rentable Area of Office Space; the Fifth
Amendment further expanded the Original Leased Premises by an additional 2,692
square feet of Net Rentable Area of Office Space; and the Seventh Amendment
further expanded the Original Leased Premises by an additional 10,612 square
feet of Net Rentable Area of Office Space (the Original Leased Premises, as so
expanded, shall be referred to herein as the "Leased Premises"); and
WHEREAS, Landlord and Tenant mutually desire to amend the
Lease to renew the Term of the Lease with respect to the Leased Premises and to
otherwise amend the Lease as hereinafter set forth.
NOW THEREFORE, for and in consideration of Ten Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged and confessed, Landlord and Tenant, intending
to be and being legally bound, do hereby agree as follows:
1
1. Defined Terms. All capitalized terms utilized herein and
not defined herein shall have the meanings ascribed thereto in the Lease.
2. Leased Premises.
(a) Landlord and Tenant hereby stipulate and agree that, as
of the Effective Date of this Eighth Amendment, for all purposes
under the Lease (as amended hereby), the Leased Premises (as
described in Section 1.1 of the Original Lease) contains a total of
(i) 101,629 square feet of Net Rentable Area of Office Space on
Floors 3, 4, 5, 6 and 7 of the Building (of which 19,854 square feet
of Net Rentable Area is on Floor 3) (the "Office Space") and (ii)
2,362 square feet of Net Rentable Area of Storage Space in the
basement of the Building (the "Basement Storage Space").
(b) Tenant shall have the right, at any time and from time
to time during the Term, to increase or decrease the Net Rentable
Area of the Basement Storage Space in any increment desired by
Tenant so long as the Net Rentable Area of the Basement Storage
Space is never more than 1,500 square feet above or less than 1,500
square feet below the Net Rentable Area of the Basement Storage
Space on the Effective Date. To exercise this right, Tenant shall
deliver at least sixty (60) days prior notice to Landlord.
Notwithstanding the foregoing, Landlord shall only have the
obligation to deliver any additional space requested pursuant to
this Paragraph 2(b) if such space is then available.
3. Renewal Term for Leased Premises. Pursuant to Tenant's
exercise of its option to renew the Term of the Lease for the First Renewal Term
and the Second Renewal Term under Section 5.27 of the Original Lease, the Term
of the Lease with respect to the Leased Premises is hereby renewed for a period
of ten (10) years (the "First Renewal Term"), which renewal term shall commence
on March 1, 2005 (the "First Renewal Term Commencement Date") and shall expire
on February 28, 2015, unless earlier terminated in accordance with the
provisions of the Lease (as amended hereby). Landlord and Tenant hereby
acknowledge and agree (i) that said First Renewal Term constitutes the First
Renewal Term and the Second Renewal Term under Section 5.27 of the Original
Lease (as such terms are defined therein), (ii) that the renewal of the Term as
herein provided fully satisfies the exercise of, and the terms and conditions
of, Tenant's existing renewal options under Section 5.27 of the Original Lease
and (iii) that, accordingly, Tenant shall have no option to further renew the
Term of the Lease except as expressly set forth in Paragraph 21 of this Eighth
Amendment. As used herein, "Term" means the initial Term of the Lease as
extended by the First Renewal Term (as herein provided).
4. Base Rental.
(a) During the First Renewal Term, Tenant shall pay Base
Rental for the Office Space portion of the Leased Premises in an
amount equal to the number of square feet of Net Rentable Area
contained in the Office Space, multiplied by the rates per square
foot of Net Rentable Area of the Office Space, for the indicated
periods of the First Renewal Term as follows:
2
Office Space
Period Base Rental Rate
----------- -----------
March 1, 2005 through February 28, 2010 $22.88
March 1, 2010 through February 28, 2015 $24.87
(b) The above Base Rental Rates are based on a Base Year of
calendar year 2004 and a corresponding projected Basic Costs number
of $9.91 per square foot of Net Rentable Area. Should the actual
Basic Costs for calendar year 2004 increase or decrease, then the
above rates will increase or decrease accordingly. If the Basic
Costs for any calendar year during the First Renewal Term is less
than the Basic Costs for calendar year 2004, Tenant will receive a
dollar for dollar credit against the then applicable Base Rental
Rate.
(c) During the First Renewal Term, Tenant shall continue to
pay Rent for the Basement Storage Space portion of the Leased
Premises in accordance with the Lease.
5. Tenant's Proportionate Share of Basic Costs. During the
First Renewal Term, Tenant shall also pay Tenant's Proportionate Share and
Additional Rent for the Leased Premises in accordance with the Lease (as amended
hereby); provided, however, that the Base Year for the Leased Premises shall be
the calendar year 2004.
6. Space As-Is. Subject to the terms of this Paragraph 6,
Tenant agrees to accept, and shall accept, the Leased Premises on the First
Renewal Term Commencement Date "AS IS", "WHERE IS", without warranty of any
kind, express or implied except to the extent expressly set forth herein, to the
extent permitted by applicable law. Except for the Base Construction Allowance
and Additional Construction Allowance set forth in Paragraph 7 hereof and the
Mid-Term Refurbishment Allowance described in Paragraph 9 hereof, Landlord shall
not be obligated to provide any additions, alterations, or improvements, nor any
credits or allowances therefor, with respect to the Leased Premises. Landlord
represents and warrants that Landlord has no knowledge of any violation of
applicable laws, codes or ordinances with respect to the base building systems
within the Leased Premises (including, without limitation, the Floor 3 Must-Take
Expansion Space, as defined in Paragraph 12 hereof), and Landlord shall repair
any such violations discovered in the Leased Premises (including, without
limitation, the Floor 3 Must-Take Expansion Space), so long as such violations
are not the result of the Tenant Improvement Work or other alterations in the
Leased Premises or the Floor 3 Must-Take Expansion Space undertaken by Tenant.
Tenant shall have full use of all currently existing materials, improvements,
and equipment located in the Leased Premises. No Tenant Improvement Work (as
defined in Paragraph 7(a) hereof) may be done in the Leased Premises without
Landlord's prior reasonable approval of all the plans and specifications for
such work, which approval shall not be unreasonably withheld. All Tenant
Improvement Work in the Leased Premises shall be constructed in accordance with
the terms and conditions of the Lease (as amended hereby).
3
7. Tenant Improvement Work; Construction Allowance.
(a) As used herein, the term "Tenant Improvement Work"
means the tenant improvement work approved by Landlord and
undertaken by or on behalf of Tenant in the Office Space following
the Effective Date of this Eighth Amendment. The Tenant Improvement
Work shall be performed and completed by Tenant pursuant to and in
accordance with the terms and conditions of the Lease (as amended
hereby), including the tenant improvement work schedule attached
hereto as Exhibit B.
(b) As used herein, the term "TI Costs" means,
collectively, all costs and expenses incurred by Tenant in the
construction of the Tenant Improvement Work, including such costs
and expenses associated with space planning, preparation of all
required design and construction documents, architectural,
mechanical, electrical, plumbing, and structural plans and design
fees, construction management fees, general contracting fees and
construction costs, telephone and computer cabling installation
costs, security installations, internal relocation and migration of
all existing furnishings as needed, and Tenant's relocation costs in
connection with its use of the Floor 3 "swing floor" space (as
described in Paragraph 10 hereof) for "phased" construction of the
Tenant Improvement Work.
(c) Tenant shall be responsible for all TI Costs. However,
Landlord shall contribute an amount equal to Twenty and No/100
Dollars ($20.00) per square foot of Net Rentable Area of the
Construction Allowance Space (as defined in Paragraph 7(e) hereof)
(the "Base Construction Allowance") toward TI Costs. In the event
the TI Costs exceed the Base Construction Allowance, Landlord shall,
upon at least thirty (30) days prior written request from Tenant,
provide an amount not to exceed Five and No/100 Dollars ($5.00) per
square foot of Net Rentable Area of Construction Allowance Space
(the "Additional Construction Allowance") toward TI Costs which
exceed the Base Construction Allowance. In no event shall Landlord
be obligated to pay any TI Costs that exceed the aggregate amount of
the Base Construction Allowance and, if any, the Additional
Construction Allowance requested by Tenant. If any such Additional
Construction Allowance is paid by Landlord, then Base Rental for the
Leased Premises shall be increased over the First Renewal Term by an
amount sufficient to amortize such Additional Construction Allowance
over the First Renewal Term, at a rate of ten percent (10%) per
annum. Promptly upon Landlord's request, Tenant will execute an
amendment to the Lease setting forth the increases to Base Rental
resulting from amortizing such Additional Construction Allowance. If
prior to the expiration of the First Renewal Term the Lease is
terminated or Tenant's right to possession of the Leased Premises is
terminated for any reason whatsoever (including, without limitation,
a default by Tenant beyond all applicable cure periods, but
excluding termination of the Lease or Tenant's right to possession
due to casualty, condemnation or Landlord's default), then, in
addition to all other amounts owing by Tenant to Landlord, Tenant
shall pay to Landlord the then-remaining unamortized portion of the
Additional Construction Allowance (if any).
(d) From and after June 1, 2004, Landlord shall, following
Landlord's receipt (on a monthly basis) of documentation reasonably
satisfactory to Landlord evidencing TI Costs and construction
progress with respect to the Tenant Improvement
4
Work and provided that Tenant is not in default under the Lease (as
amended hereby) beyond all applicable cure periods, pay to Tenant
(on a cumulative monthly basis) the Base Construction Allowance and
any Additional Construction Allowance at a "draw down" rate not
exceeding Two and 25/100 Dollars ($2.25) per square foot of Net
Rentable Area of the Construction Allowance Space per month;
provided, however, any and all such "draw downs" shall be applied
first to the then-outstanding balance of the Base Construction
Allowance until such Base Construction Allowance balance is
exhausted, and thereafter to the Additional Construction Allowance
(if any). Landlord shall make payment to Tenant from the Base
Construction Allowance within twenty (20) calendar days of receipt
of Tenant's monthly written requests for TI Costs, along with copies
of the applicable invoices with respect to such TI Costs, related
lien releases and any further information Landlord shall reasonably
request. The monthly "draw down" total shall be treated cumulatively
such that any amount not requested in any given month shall be added
to the "draw down" amount available for the following month(s). For
example, if Tenant does not request a "draw down" amount for a
month, the following month, Tenant shall have the right to "draw
down" up to $4.50 per square foot of Net Rentable Area of the
Construction Allowance Space.
(e) As used herein, the term "Construction Allowance Space" means
the Office Space exclusive of Floor 3.
8. Tenant Improvement Work Schedule. Effective as of the
Effective Date of this Eighth Amendment, Exhibit B attached to the Original
Lease is hereby deleted in its entirety and Exhibit B attached to this Eighth
Amendment is hereby substituted therefor.
9. Mid-Term Refurbishment Allowance. Landlord and Tenant
hereby agree that $195,315.39 is the outstanding balance, as of the Effective
Date of this Eighth Amendment of the Mid-Term Refurbishment Allowance and this
outstanding balance may, at Tenant's option, be applied (i) to the TI Costs or
(ii) to offset Base Rent and any Additional Rent next becoming due under the
Lease from and after the Effective Date of this Eighth Amendment.
10. Floor 3 Swing Floor Space. During the Swing Floor Period
(as hereinafter defined), Tenant shall be permitted to use all or any portion of
Floor 3 of the Office Space for the purpose of temporary "staging" space (i.e.,
as a "swing floor") in connection with the phased construction of the Tenant
Improvement Work. As used herein, the term "Swing Floor Period" means the period
(i) beginning on the date of commencement of construction of the Tenant
Improvement Work (but in no event earlier than June 1, 2004) and (ii) ending on
the date that is the earlier of (a) the date of Substantial Completion (as
defined in Exhibit B attached hereto) of the Tenant Improvement Work or (b) May
31, 2005 (but in no event later than the Contraction Date (as defined in
Paragraph 11(a) hereof), if any). So long as Tenant is attempting to use all or
a portion of Floor 3 as a "swing floor" during the Swing Floor Period, the Base
Rental with respect to the entire Floor 3 space, shall be abated during the
Swing Floor Period at a rate equal to Twelve and 97/100 Dollars ($12.97) per
square foot of Net Rentable Area of such "swing floor" space (such abatement
rate being the "net rent" component of Base Rental) (such aggregate abatement
amount being hereinafter referred to as the "Net Rent Abatement Amount"). The
Operating Expenses component of Base Rental (equal to $9.91 per square foot of
Net Rentable Area) (collectively, the "Other Rental Amounts") shall not be
abated with
5
respect to Floor 3 during the Swing Floor Period and Tenant shall pay all such
amounts during the Swing Floor Period.
11. Floor 3 Contraction Option.
(a) At any time during the period commencing on March 1,
2005 and ending on May 31, 2005 (the "Contraction Period"), provided
that Tenant is not in default under the Lease (as amended hereby)
beyond all applicable cure periods, as of the date of the
Contraction Notice and as of the Contraction Date (as such terms are
hereinafter defined), Tenant shall have a one (1) time option to
terminate the Lease with respect to all (and not less than all) of
Floor 3 of the Office Space (the "Contraction Option"), upon not
less than ninety (90) days prior written notice to Landlord (the
"Contraction Notice"). The effective date of such termination shall
be the date designated by Tenant in the Contraction Notice (the
"Contraction Date"); provided, however, such Contraction Date shall
be a date (i) that occurs during the Contraction Period and (ii)
that is no earlier than the date that is ninety (90) days following
Landlord's receipt of the Contraction Notice. Notwithstanding
anything to the contrary in Paragraph 10 hereof, the Swing Floor
Period, if not previously expired, shall expire on such Contraction
Date.
(b) If Tenant fails to timely exercise its Contraction
Option, Tenant shall be deemed to have waived its rights with
respect thereto and the Contraction Option shall thereupon
automatically terminate and be of no further force and effect (time
being of the essence with respect to Tenant's exercise thereof). In
such event, all of Floor 3 shall continue to constitute a portion of
the Office Space for all purposes under the Lease (as amended
hereby), and Tenant shall continue to be obligated to pay Rent with
respect to such Floor 3 space in accordance with the terms of the
Lease (as amended hereby), including Paragraphs 4 and 5 hereof. In
addition, Tenant shall have the right to receive the applicable
Floor 3 Base Construction Allowance and the applicable Floor 3
Additional Construction Allowance set forth in Paragraph 13 hereof
(as such terms are defined therein), pursuant to and in accordance
with the terms and conditions thereof.
(c) As consideration for Tenant's exercise of the
Contraction Option, Tenant agrees to pay, and shall pay, to Landlord
a contraction payment in an amount equal to Forty Nine Thousand
Three Hundred and 00/100 Dollars ($49,300.00) (the "Contraction
Payment"), which Landlord and Tenant stipulate and agree is the sum
of three (3) months of Other Rental Amounts with respect to Floor 3
of the Office Space (calculated on the basis of such Other Rental
Amounts that would have been owed by Tenant for the three (3) months
next following the Contraction Date had Tenant not so exercised the
Contraction Option). The Contraction Payment shall be paid by Tenant
to Landlord at the time that Tenant delivers its Contraction Notice
to Landlord and shall be in addition to, and not in lieu of, the
Rent payments otherwise becoming due and payable by Tenant through
the Contraction Date. If Tenant timely exercises the Contraction
Option in accordance with the foregoing provisions but fails to
timely pay the Contraction Payment, then Landlord shall have the
option, at its sole discretion, to either (i) cause Tenant's
exercise of the Contraction Option to be null and void (and in no
event shall Tenant have the right to once again exercise the
Contraction Option) and the Lease (as amended hereby) shall remain
in full force and effect with respect to Floor 3 of the
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Office Space after the Contraction Date (in which event Tenant shall
have the right to receive the applicable Floor 3 Base Construction
Allowance and the applicable Floor 3 Additional Construction
Allowance set forth in Paragraph 13 hereof, pursuant to and in
accordance with the terms and conditions thereof) or (ii) permit the
termination of the Lease (as amended hereby) with respect to Floor 3
of the Office Space to be effective on the Contraction Date (in
which event Tenant's obligation to pay the Contraction Payment shall
survive such termination and such Contraction Payment shall bear
interest, from the date such Contraction Payment became due until
paid, at the interest rate applicable to past due sums under the
Lease). Landlord will advise Tenant in writing of which option
Landlord elects to exercise within three (3) business days after the
date on which Landlord receives the Contraction Notice. Landlord's
failure to timely notify Tenant of which option Landlord exercises
will be deemed to constitute Landlord's election of option (i)
above.
12. Floor 3 Must-Take Expansion Space.
(a) If the Lease (as amended hereby) is terminated with
respect to Floor 3 of the Office Space pursuant to the provisions of
Paragraph 11 hereof, then, subject to Tenant's exercise of the Floor
3 Termination Option (as hereinafter defined) set forth in Paragraph
12(b) hereof, all of Floor 3 shall constitute expansion space that
Tenant shall be required to retake and add to the then-existing
Office Space (the "Floor 3 Must-Take Expansion Space") commencing as
of March 1, 2008 (the "Floor 3 Must-Take Expansion Space
Commencement Date") and expiring on the expiration of the
then-existing Term with respect to the remainder of the Leased
Premises (the "Floor 3 Must-Take Expansion Space Term"). In no event
shall the Floor 3 Must-Take Expansion Space Term for the Floor 3
Must-Take Expansion Space extend beyond the Term of the Lease for
the remainder of the Leased Premises.
(b) Provided that Tenant is not in default under the Lease
beyond all applicable cure periods (as amended hereby) as of the
date of the Floor 3 Termination Notice (as hereinafter defined),
Tenant shall have a one (1) time option to terminate the foregoing
requirement to retake the Floor 3 Must-Take Expansion Space (the
"Floor 3 Termination Option") by written notice to Landlord received
no later than May 31, 2007 (the "Floor 3 Termination Notice").
(c) As consideration for Tenant's exercise of the Floor 3
Termination Option, Tenant agrees to pay, and shall pay, to Landlord
a termination payment equal to the Net Rent Abatement Amount (the
"Floor 3 Termination Payment"). The Floor 3 Termination Payment
shall be paid by Tenant to Landlord at the time that Tenant delivers
its Floor 3 Termination Notice to Landlord. If Tenant timely
exercises the Floor 3 Termination Option in accordance with the
foregoing provisions but fails to timely pay the Floor 3 Termination
Payment, then Landlord shall have the option, at its sole
discretion, to either (i) cause Tenant's exercise of the Floor 3
Termination Option to be null and void (and in no event shall Tenant
have the right to once again exercise the Floor 3 Termination
Option) and Floor 3 Must-Take Expansion Space shall be added to the
Leased Premises on the Floor 3 Must-Take Expansion Space
Commencement Date (in which event Tenant shall have the right to
receive the applicable Floor 3 Base
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Construction Allowance and the applicable Floor 3 Additional
Construction Allowance set forth in Paragraph 13 hereof, pursuant to
and in accordance with the terms and conditions thereof) or (ii)
permit the termination of Tenant's requirement to retake the Floor 3
Must-Take Expansion Space (in which event Tenant's obligation to pay
the Floor 3 Termination Payment shall survive such termination and
such Floor 3 Termination Payment shall bear interest, from the date
such Floor 3 Termination Payment became due until paid, at the
interest rate applicable to past due sums under the Lease). Landlord
will advise Tenant in writing of which option Landlord elects to
exercise within three (3) business days after the date on which
Landlord receives the Floor 3 Termination Notice. Landlord's failure
to timely notify Tenant of which option Landlord exercises will be
deemed to constitute Landlord's election of option (i) above.
(d) If Tenant fails to timely exercise its Floor 3
Termination Option, Tenant shall be deemed to have waived its rights
with respect thereto and the Floor 3 Termination Option shall
thereupon automatically terminate and be of no further force and
effect (time being of the essence with respect to Tenant's exercise
thereof). In such event, all (and not less than all) of the Floor 3
Must-Take Expansion Space shall be added to the then-existing Office
Space portion of the Leased Premises (as hereinafter sometimes
referred to as the "Floor 3 Office Space") for all purposes under
the Lease (as amended hereby) upon the Floor 3 Must-Take Expansion
Space Commencement Date, and Tenant shall be obligated to pay Base
Rental for such Floor 3 Must-Take Expansion Space in an amount equal
to the number of square feet of Net Rentable Area contained in such
space, multiplied by the rates per square foot of Net Rentable Area
of such space for the indicated periods of the Floor 3 Must-Take
Expansion Space Term as follows:
Floor 3 Must-Take Expansion Space
---------------------------------
Period Rate
------ ----
March 1, 2008 through February 28, 2010 $22.59
March 1, 2010 through February 28, 2015 $24.58
During the Floor 3 Must-Take Expansion Space Term, Tenant shall also
pay Additional Rental for the Floor 3 Must-Take Expansion Space in
accordance with the Lease (as amended hereby); provided, however,
that the Base Year for the Floor 3 Must-Take Expansion Space shall
be calendar year 2004.
(e) Subject to the terms of this Paragraph 12(e), Tenant
agrees to accept, and shall accept, the Floor 3 Must-Take Expansion
Space on the Floor 3 Must-Take Expansion Space Commencement Date "AS
IS", "WHERE IS", without warranty of any kind, express or implied
except to the extent expressly set forth herein, to the extent
permitted by applicable law. Except for the applicable Floor 3 Base
Construction Allowance and the applicable Floor 3 Additional
Construction Allowance set forth in Paragraph 13 hereof, Landlord
shall not be obligated to provide any additions, alterations, or
improvements, nor any credits or allowances therefor, with respect
to the Floor 3 Must-Take Expansion Space. Tenant shall have full use
of all currently existing materials, improvements, and equipment
located in the Leased Premises. No Tenant Improvement Work may be
done in the Floor 3 Must-Take Expansion Space without
8
Landlord's prior reasonable approval of all the plans and
specifications for such work, which approval shall not be
unreasonably withheld. All Tenant Improvement Work in the Floor 3
Must-Take Expansion Space shall be constructed in accordance with
the terms and conditions of the Lease (as amended hereby).
13. Floor 3 Tenant Improvement Work; Floor 3 Construction
Allowance.
(a) As used herein, the term "Floor 3 Tenant Improvement
Work" means the Tenant Improvement Work reasonably approved by
Landlord and undertaken by or on behalf of Tenant in the Floor 3
Office Space (i) following the First Renewal Term Commencement Date
(if such space remains as part of the Leased Premises pursuant to
Paragraph 11 hereof) or (ii) following the Floor 3 Must-Take
Expansion Space Commencement Date (if such space is added to the
Leased Premises pursuant to Paragraph 12 hereof), as applicable. The
Floor 3 Tenant Improvement Work shall be performed and completed by
Tenant pursuant to and in accordance with the terms and conditions
of the Lease (as amended hereby), including the Tenant Improvement
Work schedule attached hereto as Exhibit B.
(b) As used herein, the term "Floor 3 TI Costs" means,
collectively, all costs and expenses incurred by Tenant in the
construction of the Floor 3 Tenant Improvement Work, including such
costs and expenses associated with space planning, preparation of
all required design and construction documents, architectural,
mechanical, electrical, plumbing, and structural plans and design
fees, construction management fees, general contracting fees and
construction costs, telephone and computer cabling installation
costs, security installations, internal relocation and migration of
all existing furnishings as needed, and all relocation costs.
(c) Tenant shall be responsible for all Floor 3 TI Costs.
However, Landlord shall contribute an amount toward Floor 3 TI
Costs, as follows: (i) an amount equal to Twenty and No/100 Dollars
($20.00) per square foot of Net Rentable Area of the Floor 3 Office
Space if such space remains as part of the Leased Premises pursuant
to Paragraph 11 hereof or (ii) an amount equal to Fourteen and
No/100 Dollars ($14.00) per square foot of Net Rentable Area of the
Floor 3 Office Space if such space is added to the Leased Premises
pursuant to Paragraph 12 hereof (as applicable, the "Floor 3 Base
Construction Allowance"). In the event the Floor 3 TI Costs exceed
the Floor 3 Base Construction Allowance, Landlord shall, upon at
least thirty (30) days prior written request from Tenant, provide an
additional amount toward Floor 3 TI Costs which exceed the Floor 3
Base Construction Allowance, as follows: (i) an amount not to exceed
Five and No/100 Dollars ($5.00) per square foot of Net Rentable Area
of the Floor 3 Office Space if such space remains as part of the
Leased Premises pursuant to Paragraph 11 hereof or (ii) an amount
equal to Three and 50/100 Dollars ($3.50) per square foot of Net
Rentable Area of the Floor 3 Office Space if such space is added to
the Leased Premises pursuant to Paragraph 12 hereof (as applicable,
the "Floor 3 Additional Construction Allowance"). In no event shall
Landlord be obligated to pay any Floor 3 TI Costs that exceed the
aggregate amount of the Floor 3 Base Construction Allowance and, if
any, the Floor 3 Additional Construction Allowance requested by
Tenant. If any such Floor 3 Additional Construction Allowance is
paid by Landlord, then Base Rental for the Leased
9
Premises shall be increased (i) over the First Renewal Term or (ii)
over the Floor 3 Must-Take Expansion Space Term, as applicable, by
an amount sufficient to amortize such Floor 3 Additional
Construction Allowance over the First Renewal Term or over the Floor
3 Must-Take Expansion Space Term, respectively, at a rate of ten
percent (10%) per annum. Promptly upon Landlord's request, Tenant
will execute an amendment to the Lease setting forth the increases
to Base Rental resulting from amortizing such Floor 3 Additional
Construction Allowance. If prior to the expiration of the First
Renewal Term or the Floor 3 Must-Take Expansion Space Term, as
applicable, the Lease is terminated or Tenant's right to possession
of the Floor 3 Office Space or the Leased Premises is terminated for
any reason whatsoever (including, without limitation, a default by
Tenant which default continues beyond all applicable cure periods,
but excluding termination of the Lease or Tenant's right to
possession due to casualty, condemnation or Landlord's default),
then, in addition to all other amounts owing by Tenant to Landlord,
Tenant shall pay to Landlord the then-remaining unamortized portion
of the Floor 3 Additional Construction Allowance (if any).
(d) As applicable, (i) from and after March 1, 2005 (if the
Floor 3 Office Space remains as part of the Leased Premises pursuant
to Paragraph 11 hereof) or (ii) from and after March 1, 2008 (if the
Floor 3 Office Space is added to the Leased Premises pursuant to
Paragraph 12 hereof), Landlord shall, following Landlord's receipt
(on a monthly basis) of documentation reasonably satisfactory to
Landlord evidencing Floor 3 TI Costs and construction progress with
respect to the Floor 3 Tenant Improvement Work and provided that
Tenant is not in default, which default continues beyond all
applicable cure periods, under the Lease (as amended hereby), pay to
Tenant the Floor 3 Base Construction Allowance and any Floor 3
Additional Construction Allowance at a "draw down" rate for (i) and
(ii) above, as applicable, equal to one-half (1/2) of the Floor 3
Base Construction Allowance and any Floor 3 Additional Construction
Allowance within twenty (20) calendar days after the date of
Landlord's receipt of Tenant's written request therefor, along with
copies of the applicable invoices with respect to such Floor 3 TI
Costs, related lien releases and any further information Landlord
shall reasonably request, and the remaining one-half (1/2) at
completion of Floor 3 Tenant Improvement Work upon Tenant's written
request therefor, along with copies of the applicable invoices with
respect to such Floor 3 TI Costs, related lien releases and any
further information Landlord shall reasonably request; provided,
however, any and all such "draw downs" shall be applied first to the
then-outstanding balance of the Floor 3 Base Construction Allowance
until such Floor 3 Base Construction Allowance amount is exhausted,
and thereafter to the Floor 3 Additional Construction Allowance (if
any). Landlord shall make the payments to Tenant from the Floor 3
Base Construction Allowance and any Floor 3 Additional Construction
Allowance within twenty (20) calendar days after the date of
Landlord's receipt of the Tenant's written request therefor, along
with copies of the applicable invoices with respect to such Floor 3
TI Costs, related lien releases and any further information Landlord
shall reasonably request.
14. Administrative Fee. In connection with any and all repair
work, tenant improvement work (including the Tenant Improvement Work and the
Floor 3 Tenant Improvement Work) and any above-standard Building services or
work provided or required
10
under the Lease (as amended hereby), whether provided by Landlord or its
contractors or by Tenant's Contractor, Tenant shall be obligated to pay to
Landlord, in each instance, an additional charge for overhead costs (an
"Administrative Fee") in an amount equal to (i) five percent (5%) of the first
$100,000.00 of the total cost of such work or services and (ii) one percent (1%)
of such cost in excess of $100,000.00. Notwithstanding the foregoing, if Tenant
applies any of the outstanding balance of the Mid-Term Refurbishment Allowance
to the TI Costs of the Tenant Improvement Work, then Tenant shall not be
obligated to pay an Administrative Fee on such portion of the TI Costs to which
the Mid-Term Refurbishment Allowance has been applied, but Tenant shall continue
to be obligated to pay an Administrative Fee in accordance with the foregoing
with respect to the TI Costs which exceed the amount of the Mid-Term
Refurbishment Allowance so applied. For avoidance of doubt (and as an
illustration and not as a limitation), if such total TI Costs are $500,000.00
and Tenant applies $100,000.00 of the outstanding balance of the Mid-Term
Refurbishment Allowance to such TI Costs, then Tenant shall be obligated to pay
an Administrative Fee as follows: (i) no Administrative Fee with respect to the
first $100,000.00 of the TI Costs, (ii) an Administrative Fee equal to 5% on the
next $100,000.00 of the TI Costs, and (iii) an Administrative Fee equal to 1% of
the remainder of the TI Costs.
15. Maximum Amount of Controllable Costs. The definition of
"Maximum Amount of Controllable Costs" in Section 2.4.5 of the Lease is deleted
in its entirety and replaced with the following: "The "Maximum Amount of
Controllable Costs" for the Base Year of calendar year 2004 shall be the actual
Controllable Costs for such year, and the Maximum Amount of Controllable Costs
for each year thereafter shall be 106% of the lesser of (i) the actual
Controllable Costs for the previous year or (ii) the Maximum Amount of
Controllable Costs for the previous year (provided that, as a special rule for
the calendar year 2009 and only such year, the Maximum Amount of Controllable
Costs for such year shall be equal to the actual Controllable Costs for such
year)."
16. Service Interruption. (a) The last paragraph of Section
3.1 of the Lease is deleted in its entirety and replaced with the following:
"To the extent permitted by applicable law, failure by
Landlord to any extent to furnish these defined services, or any
cessation thereof, shall not render Landlord liable in any respect for
damages to either person or property, nor be construed as an eviction
of Tenant, nor (except as provided in Section 3.2) work an abatement of
rent, nor relieve Tenant from fulfillment of any covenant or agreement
hereof. To the extent permitted by applicable law, should any of the
equipment or machinery break down, or for any cause cease to function
properly, Tenant shall have no claim for rebate of rent (except as
provided in Section 3.2) or damages on account of an interruption in
service occasioned thereby or resulting therefrom."
(b) All references to Section 3.2.1 occurring in Section 3.3
of the Lease are amended to be references to Section 3.3.
11
17. Electrical Capacity. The first sentence of Section 3.1.3
of the Lease and the succeeding parenthetical sentence are deleted in their
entirety and replaced with the following provisions:
"Sufficient electrical capacity distributed to a panel box
located at the core of each floor of the Leased Premises to operate (A)
typewriters, voice writers, calculating machines, personal computers,
servers, printers, photocopiers, telecopiers and other machines of
similar low electrical consumption (120/208 volts) to the extent that
the total design load of low electrical voltage within the Leased
Premises does not exceed five (5) watts per square foot of rentable
area, and (B) lighting and equipment of standard high voltage
electrical consumption (277/480 volt) to the extent that the total
design load of high electrical voltage within the Leased Premises does
not exceed five (5) watts per square foot of rentable area. (The intent
of the foregoing is that Landlord shall provide electrical capacity
capable of handling a design load of at least five (5) watts per square
foot of rentable area for low electrical consumption (120/208 volts)
and five (5) watts per square foot of rentable area for high voltage
electrical consumption (277/480 volts)."
18. Security Systems. Section 3.1.5 of the Lease is deleted in
its entirety and replaced with the following provisions:
"Computer card-access or similar security system for the
Building (the "Access System"), which restricts or limits persons
ability to gain access to the Building at all times other than the
Building standard hours set forth in Exhibit F to the Lease, unless
such persons are admitted by card key or similar access device.
Landlord shall supply, at Landlord's cost and expense, the initial
security card keys (or similar access devices) for the Access System to
Tenant; provided, that Landlord may impose a reasonable charge to
replace any lost, damaged or stolen card keys (or similar access
devices), in an amount not to exceed $20.00 per card key (or similar
access device). In addition to the Access System provided by Landlord,
Tenant shall have the right to install its own security system in the
Leased Premises and at doors to Building stairwells located in the
Leased Premises at Tenant's sole cost and expense and subject to
Landlord's review and approval thereof, which approval will not be
unreasonably withheld. If requested by Landlord, Tenant shall remove
any such security system upon the expiration or earlier termination of
this Lease. If Tenant elects to install a security card access system
in the Building stairwells pursuant to the preceding sentence, Tenant
may, at Tenant's sole cost and expense, upgrade the finishes and
lighting in the stairwells in compliance with applicable laws and after
obtaining Landlord's consent, which consent shall not be unreasonably
withheld. In addition, if Tenant's security system is compatible with
Landlord's Access System at the Building, Tenant shall have the right,
a Tenant's sole cost and expense (inclusive of any reasonable monthly
fee charged by Landlord), to connect Tenant's security system to
Landlord's Access System, provided such connection does not result in
increased costs or fees to Landlord; PROVIDED, HOWEVER, THAT LANDLORD
SHALL NOT BE LIABLE TO TENANT, ITS AGENTS, CONTRACTORS, CUSTOMERS,
EMPLOYEES, INVITEES, LICENSEES, SERVANTS OR VISITORS FOR ANY DAMAGES,
LOSSES, CLAIMS, OR CAUSES OF ACTION, ARISING OUT OF OR IN CONNECTION
WITH PERSONAL INJURY OR PROPERTY DAMAGE CAUSED BY OR DUE TO THEFT,
12
BURGLARY OR PERSONS GAINING ACCESS TO THE BUILDING, THE PROJECT OR THE
LEASED PREMISES UNLESS CAUSED BY THE NEGLIGENCE OF LANDLORD."
19. Third Party Services. A new Section 3.13 is hereby added
to the Lease, and reads as follows:
"3.13 THIRD PARTY SERVICES. If Tenant desires any service
which Landlord has not specifically agreed to provide in this Lease,
such as private security systems or telecommunications services
(including cable television) serving the Leased Premises, Tenant shall
procure such service directly from a reputable third party service
provider ("Provider") for Tenant's own account. Tenant shall require
each Provider to comply with the Building's rules and regulations, all
applicable laws, and Landlord's reasonable policies and practices for
the Building. Tenant acknowledges that, subject to applicable laws,
Landlord may require all Providers utilizing any area of the Building
outside the Leased Premises to be qualified by Landlord and to enter
into a written agreement acceptable to Landlord prior to gaining access
to, or making any installations in or through any area of the Building.
Accordingly, Tenant shall give Landlord advance written notice
sufficient for such purposes unless the Provider has been previously
approved by Landlord or in the event of a bona fide emergency (defined
as an unexpected and unforeseeable serious occurrence urgently
requiring immediate action to avoid or minimize substantial economic
loss and/or property damage, as determined by Tenant in the exercise of
its reasonable business judgment).
20. Sublease by Tenant. Section 4.5(1) of the Lease is amended
by deleting (iii) from Section 4.5(1). As amended, Section 4.5(1) reads as
follows:
"(1) to terminate this Lease as to the space so affected as of
the date so specified by Tenant, in which event Tenant will be relieved
of all further obligations under this Lease as to such space which
occur after the date of such termination (this item (1) to be available
as an option to Landlord, however, only if (i) the proposed assignment
or sublease is not to an Affiliate of Tenant; (ii) there is more than
five (5) years left in the term of this Lease at the time the request
to assign or sublet is made; and (iii) Tenant shall not have rescinded
its request by written notice to Landlord delivered within five (5)
days after Landlord shall have notified Tenant that it has elected this
item (1) in response to Tenant's request for approval;"
21. Renewal Options. Section 5.27 of the Lease is hereby
amended by deleting the first (1st) and second (2nd) paragraphs thereof in their
entirety and substituting the following therefor (it being understood that the
third (3rd) paragraph thereof shall remain in full force and effect):
"Section 5.27 RENEWAL OPTION. So long as Tenant is not in
default in the performance of its covenants and obligations under this
Lease beyond all applicable cure periods, Tenant is hereby granted the
option to renew the Term of this Lease for two (2) successive periods
of five (5) years each (each, a "Renewal Term"), the first such period
(the "Second Renewal Term") to commence at the expiration of the First
Renewal Term
13
and the second such period (the "Third Renewal Term") to commence at
the expiration of the Second Renewal Term.
Tenant shall exercise its option to renew by delivering
written notice of such election to Landlord not earlier than twelve
(12) months nor later than six (6) months prior to the expiration of
the First Renewal Term or the Second Renewal Term, as the case may be.
Failure by Tenant to give such notice timely to Landlord shall result
in such option being void and of no further force and effect unless
otherwise agreed in writing by Landlord. Any such renewal of this Lease
shall be upon the same terms and conditions of the Lease, except (a)
the Base Rental (1) during the Second Renewal Term shall be ninety
percent (90%) and (2) during the Third Renewal Term shall be one
hundred percent (100%), of the prevailing Market Base Rental Rate (as
defined in Section 5.27 of the Lease) for similar space in the Town
Center Area in Houston, Texas, at the time the applicable Renewal Term
commences, (b) Tenant shall have no option to renew this Lease beyond
the expiration of said Renewal Terms, (c) Tenant shall not have the
right to assign its renewal rights to any subtenant of the Leased
Premises or assignee of the Lease, nor may any such subtenant or
assignee exercise such renewal rights, and (d) the Leased Premises
shall be leased to Tenant during the applicable Renewal Term in an "AS
IS", "WHERE IS" condition, without warranty of any kind, express or
implied (to the extent permitted by applicable law), and with no
obligation on the part of Landlord to furnish, install or modify any
leasehold improvements therein or to provide an allowance or credit
therefor.
22. Preferential Right to Lease. Section 5.28 of the Lease is
hereby deleted in its entirety and the following is hereby substituted therefor:
"Section 5.28 PREFERENTIAL RIGHT TO LEASE. So long as Tenant
is not in default in the performance of its covenants or obligations
under this Lease beyond all applicable cure periods, Tenant shall have
a preferential right throughout the Term (including any future Renewal
Terms) (the "Preferential Option") to lease office space in the
Building not included in the Leased Premises (the "Preferential
Space"), subject to and upon the terms and conditions set forth in this
Section 5.28. The Preferential Option shall be continuous and
recurring, but shall be subject and subordinate to any renewal options,
expansion options or other preferential rights granted by Landlord to
ExxonMobil Corporation with respect to such Preferential Space (the
"Preferential Space Prior Rights Tenant").
During the period that the Preferential Right is in effect, if Landlord
intends to lease all or any portion of any Preferential Space to one or
more third parties (other than to the Preferential Space Prior Rights
Tenant), Landlord shall give written notice (the "Preferential Notice")
to Tenant of (i) Landlord's intent to lease such Preferential Space,
(ii) Landlord's determination of the then-prevailing Market Base Rental
Rate (as defined in Section 5.27 of the Lease) for such Preferential
Space, (iii) the date such Preferential Space is expected to be
available for delivery and (iv) any other relevant business terms for
the lease of such Preferential Space, including, but not limited, to
any market Tenant Improvement Allowance, Base Year expense component
for the year said Preferential Notice is provided to Tenant, and any
other market concession or inducements Landlord
14
is providing to third party prospect tenants. After receipt of a
Preferential Notice from Landlord, and provided this Lease and Tenant's
Preferential Right as to the space covered by the Preferential Notice
are then in full force and effect and Tenant is not in default in the
performance of its covenants or obligations under this Lease beyond all
applicable cure periods, Tenant shall have the right to include all
(but not part) of the applicable Preferential Space under this Lease
upon the following terms and conditions:
The base rental rate for the Preferential Space shall
be the then-prevailing Market Base Rental Rate (as defined in Section
5.27 of the Lease). The Base Rental for the Preferential Space shall
commence ninety (90) days after the date on which Landlord delivers the
Preferential Space to Tenant. Tenant shall also pay Additional Rental
with respect to such Preferential Space, as provided in this Lease.
The Preferential Space shall be provided in its
then-existing "AS IS", "WHERE IS" condition, without warranty of any
kind, express or implied (to the extent permitted by applicable law),
and with no obligation on the part of Landlord to furnish, install or
modify any leasehold improvements therein or to provide an allowance or
credit therefor.
The Preferential Space leased by Tenant pursuant to
this Section 5.28 shall be added to the Leased Premises on the date of
Landlord's delivery of the Preferential Space to Tenant.
Tenant shall exercise its Preferential Right, if at all, by
providing written notice (the "Preferential Option Exercise Notice") of
its interest in exercising to Landlord within seven (7) business days
after a Preferential Notice is given to Tenant. If Tenant fails to
timely deliver its Preferential Option Exercise Notice, or if Tenant
otherwise elects to not exercise its Preferential Right, then (i)
Tenant shall be deemed to have waived its preferential right to lease
the Preferential Space in question and (ii) Landlord shall be free to
lease all or any portion of the Preferential Space covered by such
Preferential Notice on similar terms and conditions as proposed by
Landlord to Tenant.
The term for any Preferential Space included in the Leased
Premises pursuant to Tenant's exercise of its Preferential Right shall
be coterminous with the then-existing Term for the remainder of the
Leased Premises (as such Term may be further extended in accordance
with this Lease). In no event shall this Lease continue in force and
effect as to any Preferential Space beyond the termination of this
Lease or of Tenant's right of possession to the Leased Premises.
Notwithstanding anything to the contrary contained in this
Lease, Tenant shall not have the right to assign the Preferential
Option to any assignee or subtenant, and no assignee or subtenant may
exercise such option. The exercise of the Preferential Option by Tenant
shall be irrevocable."
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23. Right of First Refusal. The Lease is hereby amended to add
the following as a new Section 5.30 thereto:
"Section 5.30 CONTINUING RIGHT OF FIRST REFUSAL. So long as
Tenant is not in default in the performance of its covenants or
obligations under this Lease beyond all applicable cure periods, Tenant
shall have a continuing and recurring right of first refusal throughout
the Term (including any future Renewal Terms) (the "ROFR") to lease
office space located on the lower elevator bank floors of the Building
and not included in the Leased Premises (the "ROFR Space"), subject to
and upon the terms and conditions set forth in this Section 5.30. The
ROFR shall be subject and subordinate to any renewal options, expansion
options or other preferential rights granted by Landlord to ExxonMobil
Corporation with respect to such ROFR Space (the "ROFR Prior Rights
Tenant").
In the event that (i) Landlord receives a bona fide offer from
a third party to lease any ROFR Space, which third party offer Landlord
is willing to accept (a "Third Party Offer"), and the ROFR Prior Rights
Tenant shall have relinquished its rights to such ROFR Space, Landlord
shall notify Tenant in writing of the portion of the ROFR Space as to
which Landlord has received a Third Party Offer, which notice shall
include a written summary of the economic terms of such Third Party
Offer. Thereafter, Tenant shall have seven (7) business days in which
to notify Landlord in writing of Tenant's intention to exercise the
ROFR as to all (but not part) of such ROFR Space so offered (the "ROFR
Exercise Notice").
If Tenant timely delivers its ROFR Exercise Notice, then the
applicable ROFR Space shall be added to the Leased Premises on the
following terms and conditions:
The base rental rate for the ROFR Space shall be
substantially the same as that included in the Third Party Offer
(taking into account all economic terms of the Third Party Offer), such
that the base rental rate determined is not materially inconsistent
with the then-prevailing Market Base Rental Rate (as defined in Section
5.27 of the Lease). Tenant shall also pay Additional Rental with
respect to such ROFR Space, as provided in this Lease.
The ROFR Space shall be provided in the same or
substantially similar condition as stipulated in the Third Party Offer,
including any allowances or improvements provided for in the Third
Party Offer.
The ROFR Space leased by Tenant pursuant to this
Section 5.30 shall be added to the Leased Premises as of the date it
was to be made available for occupancy by Landlord in the Third Party
Offer.
With respect to the term of the Lease with respect to
such ROFR Space added to the Leased Premises: (i) if the lease term
contained in the applicable Third Party Offer is shorter than the
then-existing remaining Term of this Lease for the Leased Premises,
then the term of the Lease for such ROFR Space shall be, at Tenant's
option, either (a) coterminous with such then-existing Term of this
Lease for the Leased
16
Premises or (b) for the Lease term contained in the applicable Third
Party Offer; provided that the length of the term for such ROFR Space
may affect the applicable base rental rate for the ROFR Space, or (ii)
if the lease term contained in the applicable Third Party Offer is
longer than the then-existing Term of this Lease for the Leased
Premises, then the term of this Lease for such ROFR Space shall be, at
Tenant's option, either (A) coterminous with the Term of this Lease for
the Leased Premises or (B) for the lease term contained in the
applicable Third Party Offer; (y) provided, however, if Tenant elects
option (B), then the then-existing Term of this Lease for the Leased
Premises shall be extended so as to make such Term of this Lease for
the Leased Premises coterminous with the term of this Lease for such
ROFR Space; and (z) provided further, however, if at the time Tenant
exercises the ROFR there is less than three (3) years remaining in the
then-existing Term of this Lease for the Leased Premises, then Tenant
shall be deemed to have elected option (B) set forth above and the
then-existing Term of this Lease for the Leased Premises shall be
extended in the manner set forth above.
If Tenant fails to timely deliver its ROFR Exercise Notice
within the seven (7)-business day period referenced above, then Tenant
shall be deemed to have elected not to exercise the ROFR and any and
all rights or interests of Tenant in and to the applicable ROFR Space
shall thereupon become null and void and of no further force or effect;
however, if Landlord fails to execute a binding lease agreement for the
ROFR Space with the third party identified in the Third Party Offer
within six (6) months after Tenant's waiver of its ROFR concerning the
ROFR Space, Tenant's ROFR shall reoccur and apply to the applicable
ROFR Space.
Notwithstanding anything to the contrary contained in this
Lease, Tenant shall not have the right to assign the ROFR to any
assignee or subtenant, and no assignee or subtenant may exercise such
option. The exercise of the ROFR by Tenant shall be irrevocable."
24. Parking. Effective as of the First Renewal Term
Commencement Date, Exhibit C to the Original Lease, Paragraph 5 of the Third
Amendment, Paragraph 8 of the Fourth Amendment and Paragraph 6 of the Seventh
Amendment shall be deleted in their entirety and Exhibit C attached to this
Eighth Amendment shall thereupon be substituted therefor.
25. Monument Signage. During the First Renewal Term (and any
applicable Renewal Terms thereafter), Landlord, at its cost and expense (but
with such cost and expense being chargeable as a reasonable Operating Expense),
shall maintain the existing exterior monument sign identifying Tenant. All
changes to Tenant's signage (if any) on such monument sign shall be at Tenant's
sole discretion, cost and expense, but subject to Landlord's approval, not to be
unreasonably withheld, conditioned or delayed. All the terms and provisions of
Section 3.5 of the Original Lease with respect to such monument sign, Tenant's
signage thereon and Tenant's rights thereto, are hereby ratified and confirmed
and remain in full force and effect.
26. SNDA. For a period of sixty (60) days following the
Effective Date of this Eighth Amendment, Landlord shall use commercially
reasonable efforts to obtain a subordination, non-disturbance and attornment
agreement (an "SNDA") in favor of Tenant from
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the current holder of the first lien mortgage on the Building, which SNDA (if
obtained) shall be on such mortgage holder's current form.
27. Compliance with Disability Laws. Landlord, at its cost and
expense (but with such cost and expense being chargeable as an Operating Expense
in accordance with Section 2.4.3 of the Lease) shall cause the Common Areas of
the Building, specifically including the restrooms on floors 3, 4, 5, 6, & 7, to
comply, in all material respects, with the Americans with Disabilities Act of
1990 and the Texas Architectural Barriers Act (as each has been or shall be
amended, promulgated by regulation and interpreted, collectively, the
"Disability Laws"). Tenant, at its cost and expense shall cause areas within the
Leased Premises to comply, in all material respects, with the Disability Laws.
28. Brokerage Commissions. Section 5.19 of the Lease is hereby
deleted in its entirety. Landlord and Tenant hereby represent and warrant to
each other that, except for The Staubach Company ("Tenant's Broker") with
respect to its representation of Tenant, no commission is due and payable to any
broker or leasing agent in connection with this Eighth Amendment as a result of
its own dealings with any such broker or leasing agent, and Landlord and Tenant
hereby agree to indemnify and hold each other harmless from and against all
loss, damage, cost and expense (including reasonable attorneys' fees) suffered
by the other party as a result of a breach of the foregoing representation and
warranty. Landlord agrees to pay a commission to Tenant's Broker in connection
with this Eighth Amendment in accordance with a separate agreement between
Landlord and Tenant's Broker to be agreed and fully executed by Landlord and
Tenant's Broker prior to the Effective Date of this Eighth Amendment.
29. Full Force and Effect. The Lease, as amended hereby,
remains in full force and effect without any further amendments, alterations, or
modifications thereto except as set forth herein, and Landlord and Tenant
expressly ratify and confirm the Lease as amended hereby. The Lease, as amended
hereby, constitutes the entire agreement between the parties hereto and no
further modification of the Lease shall be binding unless evidenced by an
agreement in writing signed by Landlord and Tenant.
30. Counterparts. This Eighth Amendment may be signed in
separate and multiple counterparts, each of which shall be considered an
original, but all of which taken together shall constitute one and the same
instrument.
31. Audit By Tenant. The second paragraph of Section 2.5 of
the Lease is deleted in its entirety and replaced with the following provisions:
"Within one hundred eighty (180) days after the expiration of
each calendar year, Landlord shall provide to Tenant in substantial
detail the calculations performed to determine the Project's Basic
Costs for the preceding calendar year in accordance with the applicable
provisions of the Lease. Landlord shall provide in reasonable detail
the calculation of Tenant's Proportionate Share of the Basic Costs for
the applicable calendar year. Landlord shall also provide Tenant with
the average Building occupancy for such calendar year.
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Tenant shall have the right, at its own cost and expense (of
which Tenant is not required to pay Landlord's costs of complying with
such audit provision), to audit or inspect Landlord's detailed records
each year with respect to Project Basic Costs, as well as all other
Additional Rental payable by Tenant pursuant to the Lease for any
calendar year for the purpose of confirming that the Project's Basic
Costs have been calculated in compliance with the Lease. Any such audit
shall be performed by Tenant's personnel or a third party auditor not
being compensated on a contingent fee basis. Landlord shall utilize,
and cause to be utilized, accounting records and procedures for each
calendar year conforming to generally accepted accounting principles
consistently applied with respect to all of the Project Basic Costs for
such calendar year, including without limitation, all payments for the
Project Basic Costs, to enable the audit or inspection by Tenant
pursuant to this clause to be conducted. Tenant must conduct any such
audit within one (1) year after the date Tenant receives Landlord's
statement regarding Basic Costs for a particular calendar year, Tenant
may only conduct one (1) audit within any calendar year, and Tenant
shall have no right to audit Landlord's records with respect to any
particular calendar year more than once. Pursuant to the foregoing,
Landlord shall be obligated to keep such records for all calendar years
associated with this Lease until two (2) years following the date
Landlord delivers its statement regarding Basic Costs for any
particular calendar year. Tenant shall give Landlord not less than ten
(10) business days prior written notice of its intention to conduct any
such audit. Landlord shall cooperate with Tenant during the course of
such audit, which shall be conducted during normal business hours in
the Building management office. Landlord agrees to make such personnel
available to Tenant as is reasonably necessary for Tenant, Tenant's
employees and agents, to conduct such audit. Tenant shall keep all
information obtained during any such audit confidential.
The result of such audit, as reasonably determined by both
parties, shall be binding upon Landlord and Tenant. If such audit
discloses that the amount paid by Tenant as Tenant's Proportionate
Share, or other Additional Rent payable pursuant to the Lease, has been
overstated by more than four percent (4%), then, in addition to
immediately repaying such overpayment and associated interest to
Tenant, Landlord shall also pay the reasonable costs incurred by Tenant
in connection with such audit."
32. Operating Expense Exclusions. Section 2.4.4 is amended by
adding the following exclusions from Basic Costs:
"2.4.23 Penalties incurred by Landlord as a result of
Landlord's failure to make payments due in connection with Landlord's
obligations respecting the Building and/or the Project (unless caused
by Tenant's failure to pay amounts due under this Lease when due) or
penalties incurred by Landlord as a result of Landlord's failure to
file any income tax or information returns when due;
2.4.24 Costs arising from Landlord's charitable or political
contributions;
2.4.25 Costs of rent credits, rent concessions, rent
abatements, and cost reimbursements to tenants (including Tenant)
pursuant to the express provisions of this Lease or another lease
covering space in the Building; and
19
2.4.26 Costs incurred in connection with the sale,
refinancing, mortgaging or changing in ownership of the Building
including brokerage commissions, legal and accounting fees directly
attributable to such activity, and closing costs."
33. Mitigation of Damages. Section 5.4 of the Lease is deleted
in its entirety and is replaced by the following paragraph:
"5.4 MITIGATION OF DAMAGES. Upon termination of Tenant's right
to possess the Leased Premises, Landlord shall, to the extent required
by applicable law, use commercially reasonable efforts to mitigate
damages by reletting the Leased Premises. Notwithstanding Landlord's
duty to mitigate its damages as provided herein, Landlord shall not be
obligated to give any priority to reletting Tenant's space in
connection with its leasing of space in the Building. This Section 5.4
shall not affect Landlord's remedies for Tenant's default set forth in
Section 5.10 hereof.
34. Default by Tenant. Section 5.10 is hereby amended by
changing the phrase "twenty (20) days" to "thirty (30) days".
35. Default by Landlord. A new Section 5.31 is added to the
Lease, which Section 5.31 provides as follows:
"5.31 LANDLORD DEFAULT. Landlord shall be in default under
this Lease in the event Landlord has not begun and pursued with
reasonable diligence the cure of any failure of Landlord to meet its
monetary obligations under this Lease within ten (10) days after the
receipt by Landlord of written notice from Tenant of Landlord's alleged
failure to perform or if Landlord has failed to meet its non-monetary
obligations within thirty (30) days after the receipt by Landlord of
such written notice from Tenant, except that if Landlord's failure to
perform cannot reasonably be cured within thirty (30) days, Landlord
shall be allowed additional time as is reasonably necessary to cure the
failure so long as Landlord commences to cure the failure within thirty
(30) days after receipt by Landlord of such written notice from Tenant
and diligently pursues such cure thereafter. In no event shall Tenant
have the right to terminate or rescind this Lease as a result of
Landlord's default, except as expressly provided in this Lease. Tenant
waives such remedies of termination or rescission (except as otherwise
specifically provided for in this Lease) and agrees that Tenant's
remedies for default under this Lease and for breach of any promise or
inducement are limited to a suit for damages and/or injunction. In
addition, Tenant shall prior to the exercise of any such remedies,
provide each Mortgagee (in each instance, only as to those Mortgagees
of which Tenant has received written notice of their interest) with
written notice and grant each Mortgagee a period of thirty (30) days
after receipt of such notice to cure any default by Landlord, provided,
however, that if more than thirty (30) days is reasonably required to
cure such default, such 30-day period shall be extended by such
reasonable period (including, if necessary to effectuate such cure, any
time period which may be needed to gain possession of the Project) if
such Mortgagee gives written notice of its intention to remedy such
default and thereafter diligently pursues such cure to completion."
20
36. No Waiver. A new Section 5.32 is added to the Lease, which
Section 5.32 provides as follows:
"5.32 NO WAIVER. Either party's failure to declare a default
immediately upon its occurrence, or delay in taking action for a
default shall not constitute a waiver of the default, nor shall it
constitute an estoppel. Either party's failure to enforce its rights
for a default shall not constitute a waiver of its rights regarding any
subsequent default.
37. No Warranties. Section 5.20 is hereby amended by adding
the phrase "TO THE EXTENT PERMITTED BY APPLICABLE LAW," to the beginning of such
paragraph.
38. Notices. Section 5.24 of the Lease is deleted in its
entirety and replaced with the following provisions:
"5.24 Notices. Any notice to be given or to be served upon any
party hereto in connection with this Lease must be in writing, and may
be given by regular mail, certified or registered mail, facsimile
transmission over the telephone (with a conforming copy delivered by
another method permitted hereunder), or delivery by courier. All
notices will be deemed to have been given when delivered to and
received by the party to whom it is addressed. Attempted delivery and
resulting refusal to accept delivery will constitute delivery of the
notice for purposes of this Section 5.24. Any party hereto may, at any
time by giving fifteen (15) days written notice to the other party
hereto, designate a new address or fax number in substitution of the
then existing address or fax number to which such notice must be
given."
[End of text]
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EXECUTED and effective as of the Effective Date.
LANDLORD:
GREENSPOINT PLAZA LIMITED PARTNERSHIP
By: Houston Town Center LLC,
a Texas limited liability company,
its general partner
By: Hines Acquisitions No. 1
Limited Partnership,
a Texas limited partnership,
its manager
By: Hines Interests Limited
Partnership, a Delaware
limited partnership,
its general partner
By: Hines Holdings, Inc.,
a Texas close corporation,
its general partner
By:
------------------------
E. Staman Ogilvie
Executive Vice President
TENANT:
SWIFT ENERGY COMPANY
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
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EXHIBIT B
TENANT IMPROVEMENT WORK SCHEDULE
The provisions of this Exhibit B shall apply to any and all alterations or
physical additions to the Office Space from and after the Effective Date of the
Eighth Amendment (herein called the "Tenant Work") and the Exhibit B in the
Lease is hereby deleted in its entirety.
Capitalized terms used herein that are not defined herein shall have the same
meaning given to such terms in the Lease.
ARTICLE I LANDLORD AND TENANT PRE-CONSTRUCTION OBLIGATIONS
1. Tenant Space Plan. Tenant will deliver to Landlord a detailed space
plan containing the information described in items 1, 2 - for location
only, 3, 4, 7 - for location only, 10 - for location only, and 16 - for
location only of Article III of this Exhibit B, together with other
relevant information and written instructions relating thereto (said
space plan and other information and instructions being herein called
the "Tenant Space Plan").
2. Landlord Review. Landlord will review the Tenant Space Plan to confirm
that the Tenant Work contemplated thereby (i) conforms with or exceeds
the reasonable standards of the Town Center and the requirements listed
in items 1, 2 - for location only, 3, 4, 7 - for location only, 10 for
location only, and 16 - for location only of Article III of this
Exhibit B, and (ii) will not impair the structural, mechanical,
electrical or plumbing integrity of the Town Center. Landlord shall
either approve or disapprove the Tenant Space Plan in writing within
ten (10) days after the date Landlord receives the Tenant Space Plan,
such approval not to be unreasonably withheld. If Landlord does not
approve the Tenant Space Plan, Landlord will inform Tenant in writing
of its objections and Tenant will revise the same and deliver a
corrected version to Landlord for its approval within five (5) days
after the date Tenant receives Landlord's disapproval notice. The
approval and revision process for the revised Tenant Space Plan shall
be the same as described in the previous two sentences until the Plans
are agreed to by the parties. Landlord understands the phased nature of
the Tenant Improvement Work and acknowledges and agrees that the Tenant
Space Plans may be submitted for Landlord's review based on the project
phases as they become complete.
3. Tenant Working Drawings. After the Tenant Space Plan has been approved
in writing by Landlord, Tenant shall cause working drawings (the
"Tenant Working Drawings") of the Tenant Work to be prepared and shall
deliver the same to Landlord for its approval within forty-five
calendar days (45) days after the date of Landlord's approval of the
Tenant Space Plans. The Tenant Working Drawings shall consist of
complete sets (at least three prints and one reproducible copy) of
plans and specifications, including detailed architectural, structural,
mechanical, electrical and plumbing plans for the Tenant Work. The
Tenant Working Drawings shall be substantially consistent with the
Tenant Space Plan and shall contain all information described in
Article III of this Exhibit B. The Tenant Working Drawings shall be
prepared at Tenant's expense by Gensler and engineers selected by
Tenant and reasonably approved by Landlord and shall be
B-1
consistent with and shall conform to the Building plans and
specifications and all applicable laws, regulations, rules, ordinances
and codes (which shall be the responsibility of Tenant). The approval
process for the Tenant Working Drawings shall be identical to the
approval process for the Tenant Space Plan described in paragraph 2 of
this Article I. Landlord understands the phased nature of the Tenant
Improvement Work and acknowledges and agrees that the Tenant Working
Drawings may be submitted for Landlord's review based on the project
phases as they become complete.
4. Tenant Project Manager. Tenant intends to retain The Staubach Company
("Staubach") as the Tenant Project Manager to manage Tenant's design
and construction processes for the Tenant Work. Staubach's duties in
connection with the Tenant Work will include such processes as
selection of the architect and contractor, management of information
gathering, design management, budgeting, scheduling, cost control, and
construction management.
ARTICLE II SELECTION OF A CONTRACTOR AND CONSTRUCTION OF TENANT WORK
1. Bid Letting. Tenant shall competitively bid for general contracting
services and shall solicit proposals from reputable contractors
selected by Tenant and reasonably agreed to by Landlord (the "Tenant
Contractor(s)"). Within twenty (20) days of the date Tenant submits the
bid proposals to the Tenant Contractor(s), Tenant shall review the bid
proposals and construction schedules received by such date.
2. Selection of Bid. Tenant may negotiate with the Tenant Contractor(s),
but in any event Tenant shall accept one (1) of the bids and enter into
a contract (which contract shall be AIA Document A101, 1997 Edition,
Standard Form of Agreement Between Owner and Contractor with
modifications made by Tenant) with the selected contractor (the "Tenant
Contractor"). Tenant agrees to notify Landlord promptly of its
decision.
3. Tenant Contractor - Construction Coordination. The Tenant Contractor
shall (and Tenant shall cause its contract with such Tenant Contractor
to so provide):
(a)conduct its work in such a manner so as not to unreasonably
interfere with other tenants, Town Center operations, Building
operations or any other construction occurring on or in the Town
Center, the Building or the Leased Premises;
(i) execute a set of and comply with the Contractor Rules and
Regulations attached hereto as Schedule I and comply with all
additional rules and regulations relating to construction
activities in or on the Project as may be reasonably promulgated
from time to time and uniformly enforced by Landlord or its
agents;
(ii)maintain such insurance in force and effect as may be
reasonably requested by Landlord or as required by applicable
law.
(iii) be responsible for reaching a reasonable agreement with
Landlord and its agents as to the terms and conditions for all
contractor items relating to the
B-2
conducting of its work including, but not limited to, those matters
relating to hoisting, systems interfacing, use of temporary
utilities, storage of materials, access to the Leased Premises and
the Project and the purchase of Building standard as well as other
reusable materials.
(b)Landlord shall have the right to reasonably approve all
subcontractors to be used by the Tenant Contractor, which approval
shall not be unreasonably withheld as long as such subcontractors
reasonably satisfy the requirements of this paragraph 3.
4. Tenant Contractor - HOLD HARMLESS. Tenant shall indemnify and hold
harmless Landlord, its agents, contractors and any mortgagee of
Landlord from and against any and all losses, damages, costs (including
costs of suit and attorneys' fees), liabilities or causes of action for
injury to, or death of, any person, for damage to any property and for
mechanic's, materialmen's or other liens or claims arising out of or in
connection with the work done by Tenant Contractor (and Tenant
Contractor's subcontractors and sub-subcontractors) under its contract
with Tenant.
5. Tenant Contractor - Mechanic's and Materialmen's Liens. Tenant shall
notify in writing all materialmen, contractors, artisans, mechanics,
laborers and other parties hereafter contracting with Tenant for the
furnishing of any labor, services, materials, supplies or equipment
with respect to any portion of the Leased Premises that they must look
solely to Tenant for payment for same and shall simultaneously send
copies of all such notifications to Landlord for its review. Should any
mechanic's or other liens be filed against any portion of the Project,
including the Leased Premises, by reason of Tenant's or Tenant
Contractor's acts or omissions or because of a claim against Tenant or
Tenant Contractor, Tenant shall inform Landlord of such lien
immediately and cause the same to be canceled or discharged of record
by bond or otherwise within thirty (30) days after receipt of written
notice by Tenant. If Tenant fails to cancel or discharge the lien
within said thirty (30) day period, Landlord may, at its sole option,
cancel or discharge the same and upon Landlord's demand, Tenant shall
promptly reimburse Landlord for all reasonable costs (including
attorneys' fees) incurred in canceling or discharging such liens.
6. Payment to Landlord. Tenant shall pay to Landlord all amounts payable
by Tenant pursuant to this Exhibit B within twenty (20) days after the
date of Tenant's receipt of the written billing by Landlord.
7. Default. The failure by Tenant to comply with the provisions of
paragraphs 3, 4, 5, 6 or 10 of this Article II shall constitute a
default by Tenant under the terms of Section 5.10 of the Lease and
Landlord shall have the benefit of all remedies provided for in the
Lease if such default by Tenant continues beyond all applicable cure
periods.
8. Change Orders. Tenant may authorize changes in the Tenant Work;
provided that any changes must meet the criteria set forth in Article I
of this Exhibit B. Tenant shall also be responsible for any delays or
additional costs caused by such change orders.
B-3
9. Substantial Completion. "Substantial Completion" shall mean the day on
which the Tenant Work has been completed in accordance with the Tenant
Working Drawings so that Tenant may receive the beneficial use of the
Leased Premises (i.e., when Tenant may use the Leased Premises for its
intended purpose), subject to a punch list of non-material items that
can be completed within thirty (30) days, all as reasonably determined
by Landlord, Tenant, and Tenant's Consultants in their reasonable
judgment. Tenant will strive to complete all such punchlist items
within sixty (60) days following the date of Substantial Completion.
Landlord understands the phased nature of the Tenant Improvement Work
and acknowledges and agrees that Substantial Completion for the project
will be achieved by the actual phases of the project.
10. Completion of Construction. Tenant shall cause construction of the
non-structural portions of the Tenant Work to be performed and
completed substantially in accordance with the Tenant Working Drawings
reasonably approved by Landlord, and shall cause all other portions of
the Tenant Work to be performed and completed in accordance with the
Tenant Working Drawings reasonably approved by Landlord.
11. As-Built Plans and Certificate of Occupancy. Within thirty (30) day of
completing the Tenant Work, Tenant shall deliver to Landlord (i)
complete CAD files of the as-built plans and specifications for the
Tenant Work and (ii), if required pursuant to applicable laws, codes,
rules and regulations, a permanent, unconditional certificate of
occupancy issued by the City of Houston with respect to the Tenant
Work. Upon receipt of such plans, Landlord will transfer same to
Landlord's master plans.
12. Life Safety System: Landlord shall provide a life safety control system
and building backbone for the entire Building at its cost and expense
that meets the minimum City of Houston code requirements. If life
safety devices installed in the Leased Premises by Tenant require
improvements or modifications in addition to the minimum referred to
above, such improvements and modifications shall be made at Tenant's
sole cost and expense.
13. Disclaimer of Warranty: LANDLORD SHALL MAKE NO, AND DOES NOT MAKE ANY,
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE TENANT WORK, TO THE
EXTENT PERMITTED BY APPLICABLE LAW. LANDLORD SHALL NOT BE RESPONSIBLE
FOR THE COMPLIANCE WITH, OR ENFORCEMENT OF ANY OF THE WARRANTIES OR
COVENANTS FROM ANY TENANT CONTRACTOR, BUT LANDLORD WILL, UPON WRITTEN
REQUEST BY TENANT, ASSIST TENANT IN ENFORCING SUCH WARRANTIES AND
COVENANTS FROM THE TENANT CONTRACTOR AT TENANT'S COST AND EXPENSE. TO
THE EXTENT PERMITTED BY APPLICABLE LAW, ALL IMPLIED WARRANTIES,
INCLUDING BUT NOT LIMITED TO THOSE OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ARE EXPRESSLY NEGATED AND WAIVED. WITHOUT LIMITING
THE FOREGOING, LANDLORD SHALL NOT BE RESPONSIBLE FOR FAILURE OF THE
TENANT WORK TO BE COMPLETED IN A TIMELY MANNER, TO BE COMPLETED IN
ACCORDANCE WITH THE TENANT WORKING DRAWINGS, OR OTHERWISE.
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14. Non-Responsibility Notice: LANDLORD WILL NOT BE RESPONSIBLE FOR, AND
WILL NOT HAVE CONTROL OR CHARGE OF, CONSTRUCTION MEANS, METHODS,
TECHNIQUES, SEQUENCES OR PROCEDURES OR FOR SAFETY PRECAUTIONS AND
PROGRAMS IN CONNECTION WITH THE TENANT WORK, AND IT WILL NOT BE
RESPONSIBLE FOR TENANT CONTRACTOR'S FAILURE TO CARRY OUT SUCH TENANT
WORK. LANDLORD WILL NOT BE RESPONSIBLE FOR, OR HAVE CONTROL OR CHARGE
OVER, THE ACTS OR OMISSIONS OF TENANT'S CONTRACTOR, OR ITS AGENTS OR
EMPLOYEES. LANDLORD IS ACTING SOLELY AS A CONSULTANT TO TENANT WITH
RESPECT TO ADMINISTERING THE TENANT WORK, BUT IS NOT ACTING AS A
CONTRACTOR, AND IS NOT GUARANTEEING THE PERFORMANCE OF THE TENANT WORK.
15. Remodeling of Restrooms: Landlord agrees that, at Landlord's cost and
expense, in addition to the Construction Allowance set forth in
Paragraph 7(c) of this Eighth Amendment, Landlord will, prior to the
First Renewal Term Commencement Date, make whatever alterations and
improvements are necessary to remodel the restrooms (the "Restrooms")
on Floors 3, 4, 5, 6 and 7 to cause them to comply with the Americans
With Disabilities Act, the Texas Architectural Barriers Act (Article
9102, Texas Revised Civil Statutes) and similar state and local laws
(herein collectively called "ADA Laws") and to make whatever
alterations and additions to the Common Areas of the Project to cause
them to comply with the ADA Laws (as an Operating Expense).
ARTICLE III MINIMUM INFORMATION REQUIRED OF TENANT SPACE PLAN
Tenant shall provide to Landlord a Tenant Space Plan that contains
architectural, mechanical, electrical and plumbing plans prepared and stamped by
a licensed architect or engineer, as the case may be, indicating changes or
modifications to the existing "As-Is" condition as it relates to:
1. Location and type of all partitions.
2. Location and types of all doors indicating hardware and
providing a keying schedule.
3. Location and type of glass partitions, windows, doors and
framing.
4. Location of telephone equipment room.
5. Critical dimensions necessary for construction.
6. Location, circuit number and specifications of all electrical
devices, outlets, switches, telephone outlets, etc.
7. Location and type of all lighting and access control systems.
8. Location and type of equipment that will require special
electrical requirements. Provide manufacturers' specifications
for use and operation.
B-5
9. A load analysis of all electrical devices.
10. Location, weight per square foot and description of any
exceptionally heavy equipment or filing system exceeding 50
psf live load.
11. Location, type and specifications of any new supplemental HVAC
distribution systems and controls.
12. Requirements for special air conditioning or ventilation.
13. Type and color of floor covering.
14. Location, type and color of wall covering.
15. Location, type and color of paint and/or finishes.
16. Location and type of plumbing, including special sprinklering
requirements.
17. Location and type of kitchen equipment.
Details Showing:
1. All millwork with verified dimensions and dimensions of all
equipment to be built-in.
2. Corridor entrances.
3. Bracing or support of special walls, glass partitions, etc.,
if desired. If not included with the Tenant Space Plan, the
Building architect will design, at Tenant's expense, all
support or bracing required.
B-6
Schedule I
Two Greenspoint Plaza
CONSTRUCTION RULES & REGULATIONS
I. PLANS
1. All plans must be reasonably approved by Landlord, through its manager,
Hines Interests Limited Partnership ("Hines Interests"), prior to
commencement of work.
2. Partition plan must detail all demolition and buildback.
3. Electrical plan must detail all electrical demolition and buildback. If
a new panel and/or transformer are added, the installation is to be
designed by Tenant's electrical engineer. Engineering fees will be
borne by the Tenant. The new panel and/or transformer will be metered
and any additional electrical use in excess of the electrical capacity
permitted pursuant to Section 3.1.3 of the Lease will be billed to the
Tenant on a monthly basis. Additional items that would require an
electrical meter may include air-cooled, self-contained air
conditioning units, above building standard office/computer equipment,
etc.
4. The mechanical/plumbing plan must detail all thermostat, troffer and
duct relocation, removal or addition. The addition of any independent
air conditioning units must be shown. The air-cooled units are to be
electrically metered as indicated above and a charge for heat
dissipation will be included as well. A BTU meter or a gallon
totalizing water meter is to be installed for each chilled water unit
along with a remote read-out at Tenant's cost. All meter charges will
be paid by the Tenant on a monthly basis, after being billed to Tenant
at Landlord's cost. All plumbing detail (deletion or addition) must be
shown.
5. A complete set of final, revised plans must be submitted to Hines
Interests upon completion of work. A second copy of the mechanical plan
will be required.
6. The Tenant will not be charged with the cost to transfer the partition,
mechanical, electrical and plumbing changes to Landlord's master plans.
7. All buildout plan reviews, ADA and/or TAS inspections must be performed
by the building approved RAS (Registered Accessibility Specialist) plan
review company and must be coordinated through the management office.
Tenant shall have the right to use an alternate RAS if it is determined
that the building approved RAS' fees are not competitive or market.
II. INSURANCE
The General Contractor and all subcontractors shall carry the
minimum statutory limits of workmen's compensation and quantities of general
liability insurance deemed reasonable by Landlord, through its manager, Hines
Interests, to be sufficient for the proposed tenant construction. Original
certificates of such insurance are to be submitted prior to the commencement of
work.
B-7
Specific requirements are as follows:
General Liability $1,000,000 per occurrence
combined single limit bodily injury and
property damage.
Auto Liability $1,000,000 per occurrence combined
single limit bodily injury and property
damage.
Workers Compensation as determined by statute.
Employers Liability $500,000 per accident.
Name as additional insured Greenspoint Plaza Limited Partnership
Hines Interests
The certificate holder must be Greenspoint Plaza Limited
Partnership and Hines Interests.
III. PERMITS
Permits and licenses necessary for the work shall be secured
and paid for by the General Contractor.
The permits are to be posted at a readily accessible area near
the construction site.
IV. CERTIFICATE OF OCCUPANCY
A certificate of occupancy must be provided to the Management
Office at the conclusion of the project.
V. GENERAL RULES
1. All materials used must meet City, State and Federal building codes.
2. Lien waivers from all contractors shall be furnished to Hines Interests
within thirty (30) days after completion of tenant construction.
3. The following work shall be performed only after normal working hours:
- All demolition, trash removal, laying tack strip, drilling/cutting
of the concrete slab or a concrete structural member, noisy or
vibration-causing buildback (screw guns, etc.) and material
stocking.
- All work resulting in offensive odors such as the use of latex
enamel paint, lacquer, glue used in tile floor installation, etc.
- All work which is the subject of any complaint from another tenant
regarding interference from the construction with such tenant's
use of its premises.
- All work requiring access to the ceiling on a floor below a lease
space being remodeled (which work must also be scheduled through
Hines Interests management office).
B-8
4. The General Contractor must notify the Hines Interests management
office prior to the commencement of any dusty work (demolition,
sheetrock cutting, sanding, extensive sweeping, etc.) so that
additional filtering capacity on the air handler distribution systems
can be provided.
5. At the end of construction, the Building staff will change out the
filters and clean the coils in both mechanical rooms on the remodel
floor. Tenant will be charged Landlord's actual cost for this service.
6. Only building standard locksets keyed to the Building's restricted
keyway may be used throughout lease spaces.
7. Reasonable amounts of water and electricity will be furnished to the
General Contractor without cost for use in lighting, operating portable
power tools, drinking water, etc. The General Contractor shall make all
connections, furnish any necessary extensions and remove same upon
completion of work.
8. Restroom facilities are not to be used for the cleaning of tools or
paint materials. Contractors shall utilize only those facilities
specifically designated by Hines Interests.
9. The General Contractors shall carefully protect all walls, carpet,
ceiling tiles, floors, furniture and fixtures in common and other
tenant areas and repair or replace any damaged property without cost to
Landlord.
10. All Contractors shall confine use of the premises to the designated
construction site so as not to disrupt other tenants.
11. At no time will abusive language or actions or loud radios be
tolerated.
12. A copy of these rules and regulations must be posted on the
construction site in a manner allowing easy access by all workers. It
is the General Contractor's responsibility to instruct his employees
and subcontractors to familiarize themselves with these rules and
regulations.
13. Notwithstanding anything to the contrary contained herein, Landlord and
Tenant agree that the following shall govern the construction of the
Tenant Improvements:
(a) No charges shall be borne by Tenant or its contractors for
heating, ventilation, air conditioning (except the cost for
after-hours use of such services), use of elevators, use of
personnel and material hoisting, chilled water, or any metered
utilities during construction, and Landlord shall provide heating,
air conditioning and ventilation to the Leased Premises during the
construction period;
(b) Tenant or its contractors shall be allowed to place a forty
cubic-yard dumpster in an area adjacent to the building during
construction, but such dumpster placement shall not interfere with
daily deliveries and truck dock use by Landlord or its other
Contractors in the Building;
B-9
(c) Tenant or its contractors shall be allowed to reasonably use,
along with Landlord's contractors, the freight elevator during the
construction period;
(d) There shall be no charge for contractor or subcontractor parking
and such parking shall at all times be in adjacent garage or
surface areas within the complex or reasonably close thereto which
is designated by Landlord (Landlord having the right to change
such designated area from time to time);
(e) There shall be no charge for after-hours contractor or
subcontractor access;
VI. ELEVATOR USAGE
1. The use of the freight elevators shall be scheduled by the Tenant with
the Hines Interests management office. Tenant may reserve an elevator
five (5) days per workweek, Monday through Friday, and on Saturday and
Sunday in advance, to be reasonably approved by Hines Interests
management office; provided, that if an elevator operator is required
due to after hours usage or other special uses, Tenant shall be
required to pay the cost of such operator. Freight elevators are
available for weekday use from 6 p.m. until 6 a.m. the following
morning. Tenant may reserve the freight elevator on the weekend for one
twelve (12) hour time slot per day (midnight to 3 p.m. or 3 p.m. to
midnight). Any time slots not reserved by Tenant or any other tenant
leasing space in the Building will be available for unrestricted
reservation "first come, first served" beginning at 9 a.m. on the
Friday of the week prior to the applicable week. Cancellations must be
in writing delivered to the management office or sent to the management
office via electronic mail.
2. All construction materials, tools and trash are to be transferred to
and from the construction site via the freight elevators. The passenger
elevators are to be used to transport people only unless otherwise
reasonably approved by Landlord.
3. Situations may arise when the General Contractor may be required to
share the freight elevators with the Building crew or tenants. This
sharing shall be carried out in a professional manner.
4. Special elevator use such as access to the top of an elevator cab must
be scheduled through the Hines Interests management office. Sufficient
time should be allowed to arrange the provision of elevator personnel
to perform the requested service. Tenant will be responsible for any
charges incurred in these special arrangements.
VII. SECURITY, BUILDING ACCESS, LOADING DOCK AREA
1. Tenant will be responsible for providing the Tenant Contractor with
security clearance into the Building as well as access into the lease
space.
2. The loading dock area has a 30 minute parking limit during normal
working hours. Vehicles parked beyond that time period will be towed
away at the individual owner's expense. Arrangements must be made
through the Hines Interests management office for any extended parking
privileges in the loading dock area after normal working hours.
B-10
VIII. CONSTRUCTION
1. On multi-tenant floors, a demising partition must separate lease
spaces. If the adjoining space is vacant, the second side of the
demised partition must be taped, floated and painted. Any vacant space
shall remain unaltered.
2. If the Tenant desires wallcovering at exterior columns, it is advised
that a reveal be placed between the window mullions and the sheetrock.
This procedure should help keep condensate from bleeding on to the
fabric.
3. Should the remodel of a lease space affect the public corridor, it is
the Tenant's responsibility to duplicate the finishes in the hallway so
that the new construction is not visible.
4. It is recommended that the Tenant review the condition of all finishes
that will not be affected by the remodeling of its lease space (i.e.
exterior window mullions, doors, frames, head track, slot diffusers,
etc.) because the improvements in place are being provided in their
existing condition, on an "as is" basis.
IX. ELECTRICAL WORK
1. All additional circuits added to existing or new electrical panels must
be properly labeled or marked indicating the equipment serviced by each
new circuit.
2. All electrical panels, junction boxes and pull boxes which are opened
or removed for additional circuits or terminations shall be covered,
closed or replaced, with no exceptions.
3. During construction, provisions are to be made so that all lights can
be, and are, turned off each night.
4. Upon completion of work, all light fixtures in the work area are to be
working properly and fully lit and cleaned, including replacements of
tubes and ballasts as required. Prior to the commencement of Tenant
Improvement Work, Landlord shall make sure that all lamps are of the
same color and type, are burning, and ballasts are properly
functioning.
5. All new building equipment shall be building standard or approved by
Landlord, through its manager, Hines Interests. All light switches and
outlets are to be at building standard height.
6. All floor penetrations shall be caulked, cemented or filled with
materials which are fire-rated and match specifications of original
floor composition.
7. In remodeling of lease spaces involving 10,000 square feet or more, all
electrical wiring and cabling as well as telephone cabling that is not
to be reused is to be removed.
8. All electrical work is to be performed by an electrical contractor
approved by Hines Interests which approval shall not be unreasonably
withheld, conditioned or delayed.
B-11
X. MECHANICAL/PLUMBING WORK
1. The mechanical contractor will be responsible for securing and
temporarily relocating HVAC thermostats and relocating the thermostats
on the walls as indicated on the mechanical plans. If a replacement
thermostat is needed, Hines Interests can provide one at a cost to the
Tenant of $100.00 per thermostat.
2. All duct tap cut-outs not used on main ducts shall be covered with a
duct plate and insulation which will be secured to the main duct.
3. All new flex ducts shall be externally insulated.
4. The mechanical contractor shall verify air flow delivery against the
mechanical plan as per NEBB and TEBB procedures. Mechanical contractor
shall submit the air balance report to the Building Chief Engineer
along with a copy of his certification.
5. Upon completion of the mechanical work, the Tenant Contractor will
demonstrate to the Building Chief Engineer that all relocated or new
thermostats function correctly and are properly calibrated. Contractor
should contact the Building Chief Engineer at ______________ to
schedule the walk-through.
6. All new equipment shall be building standard or approved by Landlord,
through its manager, Hines Interests. All thermostats are to be at
building standard height.
7. All floor penetrations shall be caulked, cemented or filled with
materials which are fire-rated and match specifications of original
floor composition.
8. In remodels of lease space involving 10,000 square feet or more, all
duct and plumbing lines that are not to be reused are to be removed.
9. All new plumbing should be installed in such a way that it may be cut
off and repaired without affecting other lease spaces.
10. Auxiliary condensate overflow lines must terminate within the Leased
Premises.
XI. SAFETY REQUIREMENTS
1. Use of any welding or cutting torch must be approved by Hines
Interests. The Tenant Contractor must schedule the time the torch will
be used and he must have a fire extinguisher present while the torch is
in use.
2. Use of any varnishes, lacquers, glues or other combustible materials or
materials which may produce offensive odors must be approved and the
application thereof scheduled through Hines Interests.
3. Any work that will involve the draining of a sprinkler line must be
approved by Hines Interests. In all instances, the system will not be
left inoperable overnight.
B-12
4. Should any portion of a remodel interfere with the fire alarm system,
the work must be scheduled through Hines Interests in advance. Any
costs associated with false alarms that are caused by the Tenant
Contractor, its employees or subcontractors shall be absorbed by the
Tenant Contractor. Once the Fire Marshall has inspected the fire alarm
system such that a certificate of occupancy has been issued, if
Landlord elects, an additional fire alarm system inspection (speakers,
smoke/heat detectors, pull stations) will be conducted by FireSafe
Protection Services, Inc. at Landlord's expense when the Tenant Work
has been completed.
5. A Material Safety Data Sheet (MSDS) must be posted in any area where
any hazardous and/or harmful materials are in use. Strict adherence to
rules listed in this sheet is required.
6. Any fireproofing removed from the structural beams or columns to permit
welding of braces or other materials shall be replaced with the same
material or an acceptable equivalent.
XII. CLEAN UP
The Tenant Contractor shall keep the construction site free of
accumulation of debris and rubbish. Trash must be removed via the freight
elevators after normal working hours in a vehicle provided by Tenant Contractor.
Any dust or dirt outside the construction site is to be cleaned on a daily
basis. The Tenant Contractor should provide subcontractors with a floor mat to
prevent dust and dirt tracking into public corridors and elevators. Final
clean-up is the responsibility of the Tenant Contractor including vacuuming
(with contractor's equipment) after new carpet installation.
XIII. ASBESTOS
Effective September 1, 2001, prior to demolition or renovation
of any construction space an Asbestos survey is required per the Texas Asbestos
Health Protection Act, Article 4477-3a. Prior to construction the Tenant
Contractor is required to submit a list to building management identifying all
building materials that may be disturbed as part of the renovation or demolition
process. It is required to have an Asbestos survey performed by a qualified
person for all areas affected by the renovation or demolition. Tenant Contractor
will take whatever steps necessary in order to assure that no products
containing Asbestos are used in the construction process. Following construction
the Tenant Contractor must complete a material Asbestos survey and forward to
the Property Management Office.
Suspected Asbestos Containing Material List
Tenant Contractor's Verification of Non-asbestos Materials Used in Construction
Job Foreman
-------------------------------------------------
Job Name
-------------------------------------------------
Date of Job Completion
-------------------------------------------------
Person Completing This Form
-------------------------------------------------
B-13
The following materials were used in construction and do not contain asbestos:
Material Manufacturer Product Identifier Documentation Attached
-------- ------------ ------------------ ----------------------
Wallboard
Wall Texture
Joint Compound
Ceiling Texture
Fireproofing
Plaster
Floor Tile
Floor Tile Mastic
Sheet Flooring
Pipe Insulation
Equipment Insulation
Insulation Mastic
Ceiling Tile
Baseboard Mastic
Mirror Mastic
Carpet Mastic
Caulking
Mastic
XIV. INSPECTION
At or near the end of the project, Tenant Contractor will
schedule a walk-through with the Building Chief Engineer and Construction
Manager.
B-14
Non-compliance with these rules and regulations may result in
barring the responsible parties from future activities in the Building. Based on
a review of the Tenant Improvement Work by the Landlord, Tenant, and Tenant's
Consultants,, if construction is not performed in a manner that is equal to or
greater than what is considered standard in a first class building in the
Greenspoint Plaza area of Houston, Texas, then Tenant Contractor will correct
the noted issues within thirty (30) days of Tenant's notice of same. If Tenant
fails to do so, the Hines Interests construction group may correct such items at
Tenant's expense, plus fifteen percent (15%). These rules and regulations are
subject to change upon ten (10) days advance written notice to Tenant.
B15
EXHIBIT C
PARKING
Landlord shall make available to Tenant, upon Tenant's
request, at all times during the First Renewal Term and any Renewal Term
thereafter, three and one-half (3.5) permits per 1,000 square feet of Net
Rentable Area within the Office Space of the Leased Premises (the "Available
Parking Permits") to park vehicles in the Two Greenspoint Plaza garage (the
"Garage"); provided, however, of said Available Parking Permits, the following
amount shall be taken by Tenant, on a "must-take" basis, at all times during the
First Renewal Term and any Renewal Terms thereafter: two and one-half (2.5)
permits per 1,000 square feet of Net Rentable Area within the Office Space of
the Leased Premises (the "Must-Take Parking Permits"). Thirty (30) of said
Must-Take Parking Permits shall be for reserved parking spaces (the "Must-Take
Reserved Permits"), identified on Exhibit C-1, and the remainder of parking
permits taken by Tenant shall be for unreserved parking spaces. Except with
respect to the foregoing reserved parking spaces, no specific spaces in the
Garage are to be assigned to Tenant, but Landlord will issue to Tenant the
aforesaid number of unreserved parking stickers or tags, each of which will
authorize parking in the Garage of a vehicle on which the sticker or tag is
displayed, or Landlord will provide reasonable alternative means of identifying
and controlling vehicles authorized to be parked in the Garage, and Landlord
will provide sufficient spaces for such vehicles. Landlord may make, modify and
enforce reasonable rules and regulations relating to the parking of vehicles in
the Garage, and Tenant will abide by such rules and regulations. From time to
time, Landlord may, without notice to Tenant, open visitor parking into areas of
the Garage designated for Tenant's parking spaces.
The foregoing parking ratios with respect to the Available
Parking Permits and the Must-Take Parking Permits (3.5/2.5 per 1000 square feet
of Net Rentable Area) shall apply to any and all additional office space leased
by Tenant in the Building during the First Renewal Term and any other Renewal
Terms. At any time during the First Renewal Term and any Renewal Term
thereafter, up to sixty (60) of the Available Parking Permits (inclusive of the
Must-Take Reserved Permits) may be for reserved parking spaces. If Tenant
desires reserved parking spaces in addition to the Must-Take Reserved Permits,
Tenant shall notify Landlord in writing and Landlord shall have thirty (30) days
to provide such additional reserved parking spaces after receipt of such notice.
Tenant shall have the right to convert any reserved parking spaces in excess of
the Must-Take Reserved Permits back to unreserved parking permits at any time
during the Term, provided that, if Tenant again desires additional reserved
spaces in excess of the Must-Take Reserved Spaces, Tenant must notify Landlord
in writing and Landlord shall have thirty (30) days to provide such spaces as
aforesaid.
As the "Basic Parking Charge", Tenant covenants and agrees to
pay Landlord commencing on the first day of the sixty-first (61st) month of the
First Renewal Term, as Additional Rental hereunder, the sum of $50.00 per month,
plus applicable sales tax thereon, for each of the parking permits for
unreserved spaces issued by Landlord as herein provided, and $70.00 per month,
plus applicable sales tax thereon, for each of the parking permits for the
reserved spaces. Such sums to be payable monthly in advance on the first day of
each and every calendar month during the Term, and a pro rata portion of such
sum shall be payable for the first partial calendar month or last partial
calendar month in the event the Term commences or ends
C-1
on a date other than the
first day of a calendar month. Tenant's obligation to pay the Basic Parking
Charge, and applicable sales tax thereon, shall be considered an obligation to
pay rent for all purposes hereunder and shall be secured in like manner as is
Tenant's obligation to pay rent under the Lease. Default in payment of any
amounts due hereunder or failure by Tenant to comply with the rules and
regulations promulgated by Landlord or the operator of the Garage, a copy of
which will be delivered by Landlord to Tenant prior to the Effective Date, shall
be deemed a default under the Lease, subject to notice requirements and all
applicable cure periods under the Lease.
C-2
Exhibit 10.2
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
SWIFT ENERGY COMPANY,
AS BORROWER
BANK ONE, NA
AS ADMINISTRATIVE AGENT
WELLS FARGO BANK, NATIONAL ASSOCIATION
AS syndication AGENT
BNP PARIBAS
AS SYNDICATION AGENT
CAYLON
AS DOCUMENTATION AGENT
SOCIETE GENERALE
AS DOCUMENTATION AGENT
AND
THE LENDERS SIGNATORY HERETO
AND
BANC ONE CAPITAL MARKETS, INC.
AS SOLE LEAD ARRANGER AND SOLE BOOK RUNNER
June 29, 2004
-------------------------------------
Revolving Line of Credit
of up to $400,000,000
with Letter of Credit Subfacility
-------------------------------------
Table of Contents
Page
ARTICLE 1 DEFINITIONS AND INTERPRETATION..................................................................1
1.1 Terms Defined Above.............................................................................1
1.2 Additional Defined Terms........................................................................1
1.3 Undefined Financial Accounting Terms...........................................................15
1.4 References.....................................................................................15
1.5 Articles and Sections..........................................................................15
1.6 Number and Gender..............................................................................15
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 Amount..............................................................................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
2.25 Commitment Fee.................................................................................30
2.26 Increase of Commitments........................................................................30
ARTICLE 3 CONDITIONS.....................................................................................32
3.1 Conditions Precedent to Initial Loan and Letter of Credit......................................32
3.2 Conditions Precedent to Each Loan..............................................................34
-i-
Table of Contents
(continued)
Page
3.3 Conditions Precedent to Issuance of Letters of Credit..........................................35
ARTICLE 4 REPRESENTATIONS AND WARRANTIES.................................................................35
4.1 Existence of Borrower and Subsidiaries.........................................................35
4.2 Existence of Partnerships......................................................................35
4.3 Due Authorization..............................................................................36
4.4 Valid and Binding Obligations of Borrower......................................................36
4.5 Security Instruments...........................................................................36
4.6 Scope and Accuracy of Financial Statements.....................................................36
4.7 Liabilities, Litigation and Restrictions.......................................................36
4.8 Title to Properties............................................................................37
4.9 Compliance with Federal Reserve Regulations....................................................37
4.10 Authorizations and Consents....................................................................37
4.11 Compliance with Laws, Rules, Regulations and Orders............................................37
4.12 Proper Filing of Tax Returns and Payment of Taxes Due..........................................37
4.13 ERISA Compliance...............................................................................37
4.14 Take-or-Pay; Gas Imbalances....................................................................38
4.15 Refunds........................................................................................38
4.16 Casualties or Taking of Property...............................................................38
4.17 Locations of Business and Offices..............................................................38
4.18 Environmental Compliance.......................................................................38
4.19 Investment Company Act Compliance..............................................................39
4.20 Public Utility Holding Company Act Compliance..................................................39
4.21 No Material Misstatements......................................................................39
4.22 Subsidiaries...................................................................................39
4.23 Defaults.......................................................................................39
4.24 Maintenance of Properties......................................................................39
ARTICLE 5 AFFIRMATIVE COVENANTS..........................................................................40
5.1 Maintenance and Access to Records..............................................................40
5.2 Quarterly Financial Statements.................................................................40
5.3 Annual Financial Statements....................................................................40
5.4 Compliance Certificates........................................................................40
5.5 Oil and Gas Reserve Reports....................................................................40
5.6 SEC and Other Reports..........................................................................41
5.7 Notices........................................................................................41
5.8 Letters in Lieu of Transfer Orders; Division Orders............................................42
5.9 Additional Information.........................................................................42
5.10 Payment of Assessments and Charges.............................................................43
5.11 Compliance with Laws...........................................................................43
5.12 ERISA Information and Compliance...............................................................43
ii
Table of Contents
(continued)
Page
5.13 Hazardous Substances Indemnification...........................................................43
5.14 Further Assurances.............................................................................44
5.15 Fees and Expenses of Administrative Agent......................................................44
5.16 Indemnification of Lenders and Administrative Agent............................................45
5.17 Maintenance of Existence and Good Standing.....................................................45
5.18 Maintenance of Tangible Property...............................................................45
5.19 Maintenance of Insurance.......................................................................45
5.20 Inspection of Tangible Property................................................................45
5.21 Payment of Notes and Performance of Obligations................................................46
5.22 Operation of Oil and Gas Properties............................................................46
5.23 Performance of Designated Contracts............................................................46
5.24 Title Opinions; Title Defects..................................................................46
5.25 Level of Mortgage Coverage.....................................................................46
ARTICLE 6 NEGATIVE COVENANTS.............................................................................46
6.1 Indebtedness; Contingent Obligations...........................................................46
6.2 Loans or Advances..............................................................................47
6.3 Mortgages or Pledges of Assets.................................................................47
6.4 Sales of Properties; Leasebacks................................................................47
6.5 Dividends and Distributions....................................................................48
6.6 Changes in Corporate Structure.................................................................48
6.7 Rental or Lease Agreements.....................................................................48
6.8 Investments....................................................................................48
6.9 Lines of Business; Subsidiaries................................................................49
6.10 ERISA Compliance...............................................................................49
6.11 Sale or Discount of Receivables................................................................49
6.12 Transactions With Affiliates...................................................................49
6.13 Current Ratio..................................................................................49
6.14 Interest Coverage Ratio........................................................................49
6.15 Amendment of Partnership Agreements............................................................49
6.16 New Subordinated Debt, Senior Subordinated Debt and Senior Notes due 2011......................49
6.17 Negative Pledges...............................................................................50
6.18 Issuance of Stock in Swift Energy International, Inc...........................................50
6.19 Senior Notes Due 2011..........................................................................50
ARTICLE 7 EVENTS OF DEFAULT..............................................................................50
7.1 Enumeration of Events of Default...............................................................50
7.2 Rights Upon Default............................................................................52
ARTICLE 8 THE ADMINISTRATIVE AGENT.......................................................................53
8.1 Appointment....................................................................................53
iii
Table of Contents
(continued)
Page
8.2 Delegation of Duties...........................................................................53
8.3 Exculpatory Provisions.........................................................................53
8.4 Reliance by Administrative Agent...............................................................53
8.5 Notice of Default..............................................................................54
8.6 Non-Reliance on Administrative Agent and Other Lenders.........................................54
8.7 Indemnification................................................................................55
8.8 Restitution....................................................................................55
8.9 Administrative Agent in Its Individual Capacity................................................56
8.10 Successor Administrative Agent.................................................................56
8.11 Applicable Parties.............................................................................56
ARTICLE 9 MISCELLANEOUS..................................................................................57
9.1 Assignments; Participations....................................................................57
9.2 Amendments and Waivers.........................................................................58
9.3 Survival of Representations, Warranties and Covenants..........................................58
9.4 Notices and Other Communications...............................................................58
9.5 Parties in Interest............................................................................59
9.6 No Waiver; Rights Cumulative...................................................................59
9.7 Survival Upon Unenforceability.................................................................59
9.8 Rights of Third Parties........................................................................59
9.9 Controlling Agreement..........................................................................59
9.10 Confidentiality................................................................................59
9.11 Integration....................................................................................60
9.12 Jurisdiction and Venue.........................................................................60
9.13 Waiver of Rights to Jury Trial.................................................................60
9.14 Governing Law..................................................................................60
9.15 Counterparts...................................................................................60
EXHIBITS
Exhibit I Form of Notes I-i
Exhibit II Form of Assignment Agreement II-i
Exhibit III Form of Borrowing Request III-i
Exhibit IV Form of Compliance Certificate IV-i
Exhibit V Facility Amounts V-i
Exhibit VI Disclosures VI-i
Exhibit VII Form of Opinion of Counsel VII-i
Exhibit VIII Subsidiaries and Partnerships VIII-I
Exhibit IX Description of New Zealand Property IX-I
Exhibit X Pricing Schedule X-I
Exhibit XI Form of New Lender Agreement XI-I
Exhibit XII Form of Commitment XII-I
iv
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDED AND RESTATED CREDIT AGREEMENT (this
"Agreement") is made and entered into as of June 29, 2004, 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, NA, a national banking association (as successor by
merger to Bank One, Texas, National 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"), BANC ONE CAPITAL
MARKETS, INC. as Sole Lead Arranger and Sole Book Runner, WELLS FARGO BANK,
NATIONAL ASSOCIATION, as Syndication Agent, BNP PARIBAS, as Syndication Agent,
CALYON as Documentation Agent and SOCIETE GENERALE as Documentation Agent.
W I T N E S S E T H:
WHEREAS, the Borrower and the Lenders entered into an Amended
and Restated Credit Agreement dated September 28, 2001, as amended by First
Amendment dated effective as of January 25, 2002, and further amended by Second
Amendment dated effective as of April 5, 2003, and Letter Agreement dated as of
October 14, 2003.
WHEREAS, the parties thereto deserve to amend and restate such
Credit Agreement as amended;
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 Eurodollar 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 Eurodollar 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
1
such Lender under this Agreement or any Note in respect of any
Eurodollar 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 Eurodollar 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 Eurodollar Rate for such Loan)
relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, the Administrative Agent or such
Lender (including Eurodollar Rate Loans and Dollar deposits in the
London interbank market in connection with Eurodollar 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 Eurodollar Rate" shall mean, for any Interest Period
for any Eurodollar 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
Eurodollar Rate for such Interest Period for such Loan plus the
Applicable Margin for a Eurodollar 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.
"Alternative Base Rate" shall mean a fluctuating rate of
interest equal to the higher of (i) the Base Rate, or (ii) the sum of
the Federal Funds Rate most recently determined by the Administrative
Agent plus 1/2% per annum.
"Alternative Base 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
Alternative Base Rate, or which pursuant to the terms hereof are
otherwise required to bear interest at the Alternative Base Rate.
"Applicable Fee Rate" means, at any time, the percentage rate
per annum at which Commitment Fees are accruing on the unused portion
of the Commitment Amount at such time as set forth in the Pricing
Schedule.
"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
2
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 Eurodollar Rate
Loans and Alternative Base Rate Loans an incremental rate of interest
as set forth on the Pricing Schedule.
"Arranger" shall mean Banc One Capital Markets, Inc., a
Delaware corporation, and its successors, in its capacity as Lead
Arranger and Sole Book Runner.
"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 Commitment Amount minus (b)
the sum of the Loan Balance at such time plus the L/C Exposure at such
time.
"Bank One" shall mean Bank One, NA, a national banking
association having its principal office in Chicago, Illinois, in its
individual capacity, and its successors.
"Base Rate" shall mean a rate per annum equal to the corporate
base rate or prime rate of interest announced or published by Bank One
or its parent, Bank One Corporation, 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 Alternative Base Rate Loan, be
delivered to the Administrative Agent no later than 11:00
a.m.,
3
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 Eurodollar 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 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 or Chicago, Illinois and, with respect to all requests, notices,
and determinations in connection with, and payments of principal and
interest on, Eurodollar Rate Loans, which is also a day for trading by
and between banks in Dollar deposits in the London interbank market.
"Closing Date" shall mean June 29, 2004.
"Collateral" shall mean the Mortgaged Properties and any other
Property now or at any time used or intended as security for the
payment or performance of all or any portion of the Obligations.
"Commitment Amount" shall mean the lesser of the Maximum
Facility Amount or the Borrowing Base, unless the Borrower elects a
lesser amount as set forth in Section 2.14.
"Commitment Period" shall mean the period from and including
the Closing Date to but not including the Final Maturity.
"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
4
solvency of any other Person, (c) to purchase Property, securities or
services primarily for the purpose of assuring the owner of any primary
obligation of the ability of the Person primarily liable for such
primary obligation to make payment thereof, or (d) otherwise to assure
or hold harmless the owner of any such primary obligation against loss
in respect thereof, with the amount of any Contingent Obligation being
deemed to be equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by such Person in good
faith.
"Current Assets" shall mean all assets which would, in
accordance with GAAP, be included as current assets on a consolidated
balance sheet of the Borrower and its Subsidiaries as of the date of
calculation, 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.
"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 Alternative Base Rate from time to time in effect plus two percent
(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.
"EBITDAX" shall mean, for any period, operating earnings
determined in accordance with GAAP, excluding for such period,
interest, federal and state income taxes, depreciation, amortization,
and other non-cash expenses or non-cash gains and exploration expenses,
and excluding debt extinguishment costs not to exceed $15,000,000.
"Environmental Complaint" shall mean any written complaint,
order, directive, claim, citation, notice of investigation or other
notice by any Governmental Authority or any other Person with respect
to (a) air emissions, (b) spills, releases, or discharges to soils or
any improvements located thereon, surface water, groundwater
5
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.
"Eurodollar Base Rate" shall mean with respect to a Eurodollar
Advance for the relevant Interest Period, the applicable British
Bankers' Association Interest Settlement Rate for deposits in U.S.
dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period, and
having a maturity equal to such Interest Period, provided that, (i) if
Reuters Screen FRBD is not available to the Administrative Agent for
any reason, the applicable Eurodollar Base Rate for the relevant
Interest Period shall instead be the applicable British Bankers'
Association Interest Settlement Rate for deposits in U.S. dollars as
reported by any other generally recognized financial information
service as of 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period, and having a maturity equal to such
Interest Period, and (ii) if no such British Bankers' Association
Interest Settlement Rate is available to the Agent, the applicable
Eurodollar Base Rate for the relevant Interest Period shall instead be
the rate determined by the Agent to be the rate at which Bank One or
one of its Affiliate banks offers to place deposits in U.S. dollars
with first-class banks in the London interbank market at approximately
11:00 a.m. (London time) two Business Days prior to the first day of
such Interest Period, in the approximate amount of Bank One's relevant
Eurodollar Loan and having a maturity equal to such Interest Period.
"Eurodollar Rate" shall mean, with respect to a Eurodollar
Rate Loan for the relevant Interest Period, an interest rate equal to
the sum of (i) the quotient of (a) the
6
Eurodollar Base Rate applicable to such Interest Period, divided by (b)
one minus the Reserve Requirement (expressed as a decimal) applicable
to such Interest Period, plus (ii) the Applicable Margin.
"Eurodollar Rate Loan" shall mean a Loan which bears interest
at the applicable Eurodollar Rate.
"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
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 October 1, 2008.
"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.
"Future Net Investments in New Zealand" shall mean investments
by the Borrower, on a non-consolidated basis, beginning in the year
2002, in its Subsidiaries in New Zealand for the purpose of production
of oil, gas and other hydrocarbons in New Zealand which shall take into
consideration the amount of dollars invested and the amount of dollars
returned to the Borrower from such Subsidiaries to arrive at the sum
which will be the net investment for the Borrower in New Zealand.
7
"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
"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, (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), (e) Letters of Credit, and (f) Contingent Obligations.
8
"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 Expense" shall mean, for any period, the total
interest expense (including, without limitation, interest expense
attributable to capitalized leases) of the Borrower for such period,
determined in accordance with GAAP.
"Interest Period" shall mean, subject to the limitations set
forth in Section 2.3, with respect to any Eurodollar Rate Loan, a
period commencing on the date such Loan is made or converted from a
Loan of another type pursuant to this Agreement or the last day of the
next preceding Interest Period with respect to such Loan and ending on
the numerically corresponding day in the calendar month that is one,
two, three, or, subject to availability, six months thereafter, as the
Borrower may request in the Borrowing Request for such Loan.
"Investment" shall mean, as to any Person, any stock, bond,
note or other evidence of Indebtedness or any other security (other
than current trade and customer accounts) of, investment or partnership
interest in or loan to, such Person.
"L/C Exposure" shall mean, at any time, the maximum amount
available to be drawn under outstanding Letters of Credit at such time.
"LC Issuer" shall mean Bank One (or any subsidiary or
affiliate of Bank One designated by Bank One) in its capacity as Issuer
of Letters of Credit hereunder.
"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.
"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,
9
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, the Security
Instruments, 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 March 31,
2004, furnished to the Lenders or from the facts represented or
warranted in this Agreement or any other Loan Document, (b) the ability
of the Borrower individually, or the Borrower and its Subsidiaries on a
consolidated basis, or the Partnerships taken as a whole, to carry out
its or their business as at the date of this Agreement conducted, or
(c) the ability of the Borrower to meet its obligations generally, or
to meet its obligations under the Loan Documents on a timely basis as
provided therein.
"Maximum Facility Amount" shall mean the sum of the Facility
Amounts of all Lenders.
"Mortgaged Properties" shall mean all Oil and Gas Properties
of the Borrower subject to a perfected first-priority Lien in favor of
the Lender, subject only to Permitted Liens, as security for the
Obligations.
10
"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.
"New Subordinated Debt" shall mean the Indebtedness of the
Borrower under senior subordinated notes not to exceed $250,000,000 at
a rate not to exceed 10% with maturity of not less than seven (7) years
as described in a draft prospectus of April, 2002.
"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, (g) Rate Management Transaction, and (h) 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 New Zealand or offshore from any State of the United
States or New Zealand, including overriding royalty and royalty
interests, leasehold estate interests, net profits interests,
production payment interests and mineral fee interests, together with
contracts executed in connection therewith and all tenements,
hereditaments, appurtenances and Properties appertaining, belonging,
affixed or incidental thereto.
"Partners" shall mean all present and future general and
limited partners of the Partnerships.
"Partnerships" shall mean all partnerships, including joint
ventures, in which the Borrower is a limited or general partner,
including the general and limited drilling partnerships and income
funds now or hereafter existing in connection with the
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exploration and drilling or property acquisition and ownership programs
of the Borrower and with respect to which the Borrower is a general
partner or the managing general partner, and with respect to which a
Distributive Share is included in the Borrowing Base.
"Partnership Agreement" shall mean the partnership agreement
of any Partnership, as any such agreement may be amended, restated or
supplemented from time to time.
"Percentage Share" shall mean, as to any Lender, a fraction,
expressed as a percentage, the numerator of which is the Facility
Amount of such Lender and the denominator of which is the Maximum
Facility Amount.
"Permitted Liens" shall mean (a) Liens for taxes, assessments
or other governmental charges or levies not yet due or which (if
foreclosure, distraint, sale, or other similar proceedings shall not
have been initiated) are being contested in good faith by appropriate
proceedings diligently conducted, if such reserve as may be required by
GAAP shall have been made therefor; (b) Liens in connection with
workers' compensation, unemployment insurance or other social security
(other than Liens created by Section 4068 of ERISA), old age pension or
public liability obligations which are not yet due or which are being
contested in good faith by appropriate proceedings diligently
conducted, if such reserve as may be required by GAAP shall have been
made therefor; (c) Liens in favor of vendors, carriers, warehousemen,
repairmen, mechanics, workers, or materialmen, and construction or
other similar Liens arising by operation of law in the ordinary course
of business or incident to the construction or improvement of any
Property in respect of obligations which are not yet due or which are
being contested in good faith by appropriate proceedings diligently
conducted, if such reserve as may be required by GAAP shall have been
made therefor; (d) Liens securing the purchase price of equipment of
the Borrower, provided that (i) such Liens shall not extend to or cover
any other Property of the Borrower, and (ii) 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
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"; 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; (i)
Liens in favor of the Administrative Agent
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for the benefit of the Lenders; (j) any lien reserved in an Oil and Gas
lease by the Lessor to secure royalty payments under such lease without
limit as to amount; and (k) any lien securing Hedging Obligations.
"Permitted Refinancing Debt" shall mean the refinancing of the
Senior Subordinated Debt with up to $150,0000,000 of Senior Notes due
2011.
"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.
"Pricing Schedule" shall mean the schedule attached hereto as
Exhibit X.
"Principal Office" shall mean the principal office of the
Administrative Agent in Chicago, Illinois, presently located at One
Bank One Plaza.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal, or mixed, tangible or intangible.
"Rate Management Transactions" shall mean any transaction
(including an agreement with respect thereto) now existing or hereafter
entered into between Borrower and Lenders which is a rate swap, basis
swap, forward rate transaction, commodity swap, commodity option,
equity or equity index swap, equity or equity index option, bond
option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, forward
transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction
(including any option with respect to any of these transactions) or any
combination thereof, whether linked to one or more interest rates,
foreign currencies, commodity prices, equity prices or other financial
measures.
"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
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approval of the relevant Governmental Authority, of any reportable
quantity of Hazardous Substance into or upon (a) the air, (b) soils or
any improvements located thereon, (c) surface water or groundwater, or
(d) the sewer, septic system or waste treatment, storage or disposal
system servicing any Property of any of the Borrower, its Subsidiaries
or the Partnerships.
"Replacement Lenders" shall have the meaning assigned to such
term in Section 2.23.
"Required Lenders" shall mean 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 Eurodollar 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 Eurodollar Rate is to be
determined as provided herein in the definition of the term "Eurodollar
Rate" or (b) any category of extensions of credit or other assets which
include a Eurodollar Rate Loan.
"Responsible Officer" shall mean any Vice President, the
Treasurer or other authorized representative of the Borrower as
designated from time to time pursuant to written designation by the
Borrower.
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"Security Instruments" shall mean the security instruments
executed and delivered in satisfaction of the condition set forth in
Section 3.1(f), and all other documents and instruments at any time
executed as security for all or any portion of the Obligations, as such
instruments may be amended, restated, or supplemented from time to
time.
"Senior Subordinated Debt" shall mean the Indebtedness of
Borrower under the senior subordinated notes in the amount up to
$125,000,000 due 2009.
"Senior Notes Due 2011" shall mean the Indebtedness of
Borrower under notes in the amount of up to $150,000,000 due
2011.
"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.
"Taxes" shall have the meaning assigned to such term in
Section 2.22.
"Terminated Lender" shall have the meaning assigned to such
term in Section 2.23.
"Termination Date" shall have the meaning assigned to such
term in Section 2.23.
1.3 Undefined Financial Accounting Terms. Undefined financial
accounting terms used in this Agreement shall be defined according to GAAP at
the time in effect.
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
15
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
1.7 Incorporation of Exhibits. The Exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
ARTICLE 2
TERMS OF THE FACILITY
2.1 Revolving Line of Credit. (a) Upon the terms and
conditions and relying on the representations and warranties contained in this
Agreement, each Lender severally agrees to make Loans during the Commitment
Period to or for the benefit of the Borrower in an aggregate principal amount
not to exceed at any time outstanding the lesser of the Facility Amount of such
Lender or the Percentage Share of such Lender of the Borrowing Base then in
effect; provided, however, that (i) the Loan Balance plus the L/C Exposure shall
not exceed at any time the lesser of the Commitment 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 Commitment 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 Eurodollar 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
Eurodollar Rate Loans having the same Interest Period shall be at least equal to
$1,000,000 with multiples of $100,000; and if any Eurodollar Rate Loan would
otherwise be in a lesser principal amount for any period, such Loan shall be a
Alternative Base 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.
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(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 5 days prior to the
Final Maturity, 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 Final Maturity, (ii) the Loan Balance plus
the L/C Exposure shall not exceed at any time the lesser of the Commitment
Amount or the Borrowing Base, and (iii) the L/C Exposure shall not exceed at any
time $25,000,000.
(b) Prior to any Letter of Credit Payment in respect of any
Letter of Credit, each Lender shall be deemed to be a participant through the
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 Alternative Base 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 Alternative Base 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
17
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 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 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 Alternative Base 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
Eurodollar Rate Loans, shall be outstanding at any one time, with, for purposes
of this Section, all Alternative Base Rate Loans constituting one Loan, and all
Eurodollar 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 Eurodollar 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
"Eurodollar 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 "Eurodollar 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,
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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 Eurodollar Rate Loans or to convert
Alternative Base Rate Loans into Eurodollar Rate Loans, and the Borrower shall,
on the last day of the then current Interest Period for each outstanding
Eurodollar Rate Loan, either prepay such Eurodollar Rate Loan or convert such
Loan into a Alternative Base 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, to refinance the Senior Subordinated Debt
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.
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 Alternative Base Rate for each Alternative Base Rate
Loan and the Adjusted Eurodollar Rate for each Eurodollar Rate Loan as set forth
on Exhibit X Pricing Schedule. 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 Eurodollar Rate Loan within the time period and otherwise as
provided herein, such Loan (if outstanding as a Eurodollar Rate Loan) will be
automatically converted into a Alternative Base Rate Loan on the last day of the
then current Interest Period for such Loan or (if outstanding as a Alternative
Base Rate Loan) will remain as, or (if not then outstanding) will be made as, a
Alternative Base 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 Alternative Base Rate Loans shall be due and payable
monthly commencing July 1, 2004, and continuing on the first day of each
calendar month thereafter while any Alternative Base Rate Loan remains
outstanding, the payment in each instance to be the amount of interest which has
accrued and remains unpaid with respect to Alternative Base Rate Loans. Accrued
and unpaid interest on each outstanding Eurodollar Rate Loan shall be due and
payable on the last day of the Interest Period for such Eurodollar 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.
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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
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 Alternative Base 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
20
expenses due pursuant to the terms of this Agreement or any other Loan Document,
(ii) second, to accrued interest, (iii) third, to the Loan Balance, and (iv)
last, to any other Obligations.
(c) If any Lender (for purposes of this Section, a "Benefitted
Lender") shall at any time receive any payment of all or part of its portion of
the Obligations, or receive any collateral or other Property in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Sections 7.1 (e) or 7.1 (f), or
otherwise) in an amount greater than such Lender was entitled to receive
pursuant to the terms hereof, such Benefitted Lender shall purchase for cash
from the other Lenders such portion of the Obligations of such other Lenders, or
shall provide such other Lenders with the benefits of any such collateral or
other Property or the proceeds thereof, as shall be necessary to cause such
Benefitted Lender to share the excess payment or benefits of such collateral or
other Property or proceeds with each of the Lenders according to the terms
hereof. If all or any portion of such excess payment or benefits is thereafter
recovered from such Benefitted Lender, such purchase shall be rescinded and the
purchase price and benefits returned by such Lender, to the 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
$250,000,000. If the Borrower borrows under this facility to pay the Senior
Subordinated Debt, then when all of the Senior Subordinated Debt notes are
retired, the Borrower Base shall increase to $285,000,000.
(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 November 1, 2004, 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. Each year during the term of this Agreement at the Borrower's request,
and with the approval of Required Lenders, the Borrowing Base shall be
determined only annually. 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. The Borrower shall have the right to request one unscheduled
determination of the Borrowing Base between each scheduled Borrowing Base
determination. 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
21
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
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. The Administrative Agent and the Lenders
have no obligation to agree upon or determine the Borrowing Base at any
particular amount, whether in relation to the Commitment Amount or otherwise. If
the Required Lenders cannot agree on the Borrowing Base, the Borrowing Base
shall be set on the basis of the weighted arithmetic average of the Borrowing
Base as determined by each individual Lender.
(e) Upon the issuance of subordinated debt (other than
Permitted Refinancing Debt), the Borrowing Base will be automatically reduced by
an amount equal to 30% of the subordinated debt issued. Equity offerings will
not reduce the Borrowing Base.
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, (a) prepay the amount
of such excess for application on the Loan Balance, (b) provide additional
collateral, of character and value satisfactory to the Lenders in their sole
discretion, to secure the Obligations by the execution and delivery to the
Lenders of security instruments in form and substance satisfactory to the
Administrative Agent, or (c) effect any combination of the alternatives
described in clauses (a) and (b) of this Section and acceptable to the Lenders
in their sole discretion. In the event that a mandatory prepayment is required
under this Section and the Loan Balance is less than the amount required to be
prepaid, the Borrower shall repay the entire Loan Balance and, in accordance
with the provisions of the relevant Letter of Credit Applications executed by
the Borrower or otherwise to the satisfaction of the 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
22
(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.
If at any time and from time to time, there are no outstanding
amounts due and owing under this Agreement, Borrower shall be entitled to sell
Oil and Gas Properties which are part of the Borrowing Base and retain the sales
proceeds therefrom without the consent of the Lenders, but subject to a
reduction in the then existing Borrowing Base by the amount of the Release Price
(as hereinafter defined) for such properties. Upon the sale of any Oil and Gas
Properties which are part of the Borrowing Base in excess of $25,000,000 during
any fiscal year while there are amounts due and owing under this Agreement (no
such sale will be permitted without the prior written consent of the Required
Lenders), the Borrower will immediately make a prepayment of principal on the
loans equal to, and the Borrowing Base will be automatically reduced by, an
amount equal to 100% of the Release Price of the sold properties. The term
"Release Price" means the price determined by the Required Lenders in their
discretion based upon the loan value of the Oil and Gas Properties being sold by
the Borrower that the Required Lenders in their discretion (using such
methodology, assumptions and discount rates as such Lender's customarily use in
assigning loan value to Oil and Gas Properties) assign to such oil and gas
properties as of the time in question.
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) each prepayment shall be in an
amount not less than $100,000 for Alternative Base Rate Loans, (b) the Borrower
shall give the Administrative Agent notice of each such prepayment or conversion
of all or any portion of a Eurodollar Rate Loan no less than three Business Days
prior to prepayment or conversion, (c) any Eurodollar Rate Loan may be prepaid
or converted, subject to funding indemnification, but without penalty or premium
in a minimum amount of $1,000,000 or any integral multiple thereof; (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 Amount. The initial Commitment Amount as
reflected on Exhibit V is $150,000,000. The Commitment Amount may be reduced by
the Borrower, in multiples of $10,000,000, upon three Business Days' prior
written notice to the Administrative Agent but not more than two times in any
fiscal year. At any time after the Closing Date, and so long as no Default or
Event of Default has occurred and is continuing, Borrower shall have the right
(without the consent of any Lender(s)) to increase the Commitment Amount to an
aggregate amount of up to the then current Borrowing Base, provided that (i)
each Lender shall be offered a pro rata share of any increase, (ii) no Lender's
commitment shall be increased without its consent, and (iii) if needed, other
eligible institutions may become Lenders to accommodate an increase.
2.15 Letter of Credit Fee. The Borrower shall pay to the
Administrative Agent for the account of the Lenders quarterly in arrears
commencing July 1, 2004, and continuing on the first day of October, January and
March, an issuing fee equal to the greater of $400 or the Applicable Margin for
Eurodollar Rate Loans (which percentage shall be increased by 2% per annum after
the occurrence of any Default), 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. Such fee will be paid
23
quarterly in arrears to the Administrative Agent for the ratable benefit of the
Lenders (including the Letter of Credit Issuer). 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
0.25% 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
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
24
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
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
25
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
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.
26
(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) anypayment, prepayment, or conversion by the Borrower
of a Eurodollar Rate Loan on a date other than the
last day of an Interest Period for such Loan; or
(ii) any failure by the Borrower to borrow a Eurodollar
Rate Loan or to convert a Alternative Base Rate Loan
into a Eurodollar Rate Loan on the date for such
borrowing or conversion specified in the relevant
Borrowing Request;
such compensation to include with respect to any Eurodollar 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 Alternative Base 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.
27
(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
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 Eurodollar Rate
Loans, or (b) maintain Eurodollar Rate Loans, then such Lender shall promptly
notify the Administrative Agent and the Borrower thereof. The obligation of such
Lender to make Eurodollar Rate Loans and convert Alternative Base Rate Loans
into Eurodollar Rate Loans shall then be suspended until such time as such
Lender may again make and maintain Eurodollar Rate Loans, and the outstanding
Eurodollar Rate Loans of such Lender shall be converted into Alternative Base
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
28
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 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 Amount 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
Amount of the Terminated Lender, the Borrower shall (i) obtain an agreement with
one or more Lenders to increase their Commitment Amounts 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 Amount; 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 Amount 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 Amount, and, if there will be more than one
Replacement Lender, the portion of the Terminated Lender's Commitment Amount 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
Amount 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 Amount to be assigned to each Replacement Lender) indicated
in the Notice of Termination and shall assign to the Replacement Lender or
Replacement Lenders its Loan (if any) then outstanding pro rata as aforesaid),
(ii) the Terminated Lender shall endorse its Note, payable without recourse,
representation or warranty to the order of the Replacement Lender or Replacement
Lenders (pro rata as aforesaid), (iii) the Replacement
29
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 Eurodollar 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 Eurodollar 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
Eurodollar Rate Loans and to convert Alternative Base Rate Loans into Eurodollar
Rate Loans shall be suspended until such time as such Regulatory Change or other
circumstance ceases to be in effect, and all such outstanding Eurodollar Rate
Loans shall be converted into Alternative Base Rate Loans in accordance with
Section 2.13.
2.25 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 July, 2004, and on the first
day of each third calendar month thereafter and on the Final Maturity Date, a
commitment fee in the annum rate equal to the Applicable Fee Rate, calculated 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), on the average
daily amount of the Available Commitment during the preceding quarterly period.
2.26 Increase of Commitments. (a) At any time after the
Closing Date, provided that no Default or Unmatured Default shall have occurred
and be continuing, the Borrower may request an increase of the aggregate
Commitments by notice to the Administrative Agent in writing of the amount (the
"Offered Increase Amount") of such proposed increase (such notice, a "Commitment
Increase Notice"). Any such Commitment Increase Notice must offer each Lender
the opportunity to subscribe for its pro rata share of the increased
Commitments. If any portion of the increased Commitments is not subscribed for
by the Lenders, the Borrower may, in its sole discretion, but with the consent
of the Administrative Agent as to any Person that is not at such time a Lender
(which consent shall not be unreasonably withheld), offer to any existing Lender
or to one or more additional banks or financial institutions the opportunity to
participate in all or a portion of such unsubscribed portion of the increased
Commitments pursuant to paragraph (b) or (c) below, as applicable.
(b) Any additional bank or financial institution that the
Borrower selects to offer participation in the increased Commitment
Amounts, and that elects to become a party to this Agreement and
obtain a Commitment Amount, shall execute a new Lender Agreement
with the Borrower and the Administrative Agent, substantially in the
form of Exhibit "XI" hereto E (a "New Lender Agreement"), whereupon
such bank or financial institution (a "New Lender") shall become a
30
Lender for all purposes and to the same extent as if originally a
party hereto and shall be bound by and entitled to the benefits of
this Agreement, and the signature pages hereof shall be deemed to be
amended to add the name and Commitment Amount of such New Lender,
provided that the Commitment Amount of any such New Lender shall be
in an amount not less than $10,000,000.
(c) Any Lender that accepts an offer to it by the Borrower to
increase its Commitment Amount pursuant to this Section 2.26 shall,
in each case, execute a Commitment Increase Agreement with the
Borrower and the Administrative Agent, substantially in the form of
Exhibit "XII" hereto (a "Commitment Increase Agreement"), whereupon
such Lender shall be bound by and entitled to the benefits of this
Agreement with respect to the full amount of its Commitment Amount
as so increased, and the signature pages hereof shall be deemed to
be amended to so increase the Commitment Amount of such Lender.
(d) The effectiveness of any new Lender Agreement or
Commitment Increase Agreement shall be contingent upon receipt by
the Administrative Age of such corporate resolutions of the Borrower
and legal opinions of counsel to the Borrower as the Administrative
Agent shall reasonably request with respect thereto, in each case,
in form and substance satisfactory to the Administrative Agent.
(e) If any bank or financial institution becomes a New Lender
pursuant to Section 2.26(b) or any lender's Commitment Amount is
increased pursuant to Section 2.26(c), additional Advances made on
or after the effectiveness thereof (the "Re-Allocation Date") shall
be made pro rata based on the Commitment Percentage in effect on and
after such Re-Allocation Date (except to the extent that any such
pro rata borrowings would result in any Lender making an aggregate
principal amount of Advances in excess of its Commitment Amount, in
which case such excess amount will be allocated to, and made by,
such New Lender and/or Lenders with such increased Commitment
Amounts to the extent of, and pro rata based on, their respective
Commitment Amounts), and continuations of Eurodollar Rate Advances
outstanding on such Re-Allocation Date shall be effected by
repayment of such Eurodollar Rate Advances on the last day of the
Interest Period applicable thereto and the making of new Eurodollar
Rate Advances pro rata based on such new Commitment Percentages. In
the event that on any such Re-Allocation Date there is an unpaid
principal amount of Base Rate Advances, the Borrower shall make
prepayments thereof and borrowings of Base Rate Advances so that,
after giving effect thereto, the Base Rate Advances outstanding are
held pro rata based on such new Commitment Percentages. In the event
that on any such Re-Allocation Date there is an unpaid principal
amount of Eurodollar Rate Advances, such Eurodollar Rate Advances
shall remain outstanding with the respective holders thereof until
the expiration of their respective holders thereof until the
expiration of their respective Interest Periods (unless the
applicable Borrower elects to prepay any thereof in accordance with
the applicable provisions of this Agreement), and interest on and
repayments of such Eurodollar Rate Advances will be paid thereon to
the respective Lenders holding such Eurodollar Rate Advances pro
rata based on the respective principal amounts thereof outstanding.
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(f) Notwithstanding anything to the contrary in this Section
2.26, (i) no Lender shall have any obligation to increase its
Commitment Amount unless it agrees to do so in its sole discretion,
and (ii) the aggregate amount by which the Commitment Amounts
hereunder are increased pursuant to this Section 2.26 shall not
exceed $400,000,000.
(g) The Borrower shall execute and deliver a Note to each new
bank or other financial institution becoming a Lender.
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;
(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;
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(f) multiple counterparts, as requested by the Administrative
Agent, of the following Security Instruments creating, evidencing,
perfecting, and otherwise establishing Liens in favor of the
Administrative Agent for the benefit of the Lenders in and to the
Collateral which must be furnished on or before the Closing Date.
(i) Amendment and Ratification of Mortgage, Deed of
Trust, Indenture, Security Agreement, Assignment of
Production, and Financing Statement from the Borrower
and its subsidiaries covering certain designated Oil
and Gas Properties of the Borrower and its
subsidiaries, having aggregate present worth
determined by the Administrative Agent equal to the
lesser of (i) 75% of the present worth of such Oil
and Gas Properties used in determining the Borrowing
Base, or (ii) 125% of the Commitment Amount and all
improvements, personal property, and fixtures related
thereto;
(ii) Financing Statements from the Borrower as debtor,
constituent to the instrument described in clause (i)
above; and
(iii) undated letters, in form and substance satisfactory
to the Lender, from the Borrower to each purchaser of
production and disburser of the proceeds of
production from or attributable to the Mortgaged
Properties, together with additional letters with the
addressees left blank, authorizing and directing the
addressees to make future payments attributable to
production from the Mortgaged Properties directly to
the Lender which letters shall only be used by the
Administrative Agent if there is a Default or Event
of Default;
(iv) Security Agreement from the Borrower together with a
Financing Statement;
(v) Security Agreement (Stock Pledge) dated December 18,
2001, by the Borrower of 65% of its common stock in
Swift Energy International, Inc., together with blank
stock powers;
(vi) Security Agreement (Stock Pledge) dated December 18,
2001, by Swift Energy International, Inc. of 65% of
its common stock in Swift Energy New Zealand Limited,
together with blank stock powers;
(g) unaudited Financial Statements of the Borrower as of March
31, 2004;
(h) 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;
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(i) 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;
(j) the opinion of counsel to the Borrower, in the form
attached hereto as Exhibit VII, with such changes thereto as may be
approved by the Administrative Agent;
(k) an upfront fee payable to the Lenders in an amount equal
to 20 basis points for commitments over $15,000,000 and 15 basis
points for commitments of $15,000,000 or less of the Commitment
Amount;
(l) 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
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
34
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
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;
(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; and
(d) all of the requirements of Section 3.2 have been met.
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
35
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.
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 Security Instruments. The provisions of each Security
Instrument are effective to create in favor of the Lender, a legal, valid, and
enforceable Lien in all right, title, and interest of the Borrower in the
Collateral described therein, which Liens, assuming the accomplishment of
recording and filing in accordance with applicable laws prior to the
intervention of rights of other Persons, shall constitute fully perfected
first-priority Liens on all right, title, and interest of the Borrower in the
Collateral described therein subject to the Permitted Liens.
4.6 Scope and Accuracy of Financial Statements. The Financial
Statements of the Borrower and its Subsidiaries as of March 31, 2004, 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
March 31, 2004, that has resulted or could reasonably be expected to result in a
Material Adverse Effect.
4.7 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
36
Persons engaged in the business activities similar to those conducted by the
Borrower or such Subsidiary or Partnership, as the case may be.
4.8 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.
4.9 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.
4.10 Authorizations and Consents. No authorization, consent,
approval, exemption, franchise, permit or license of, or filing with, any
Governmental Authority or other Person is required to authorize, or is otherwise
required in connection with, the valid execution and delivery by the Borrower of
this Agreement and the other Loan Documents or the repayment and performance by
the Borrower of the Obligations.
4.11 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.
4.12 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.
4.13 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
37
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.
4.14 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.
4.15 Refunds. No orders of, proceedings pending before, or
other requirements of, the Federal Energy Regulatory Commission, the Texas
Railroad Commission, the Oklahoma Corporation Commission, the Louisiana
Conservation Commission, or any other Governmental Authority exist which could
result in any of the Borrower, its Subsidiaries or the Partnerships being
required to refund any material portion of the proceeds received or to be
received from the sale of hydrocarbons constituting part of its Oil and Gas
Properties.
4.16 Casualties or Taking of Property. Except as disclosed to
the Lenders in writing prior to the Closing Date, since March 31, 2004, 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.
4.17 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.
4.18 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;
38
(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.
4.19 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.
4.20 Public Utility Holding Company Act Compliance. The
Borrower is not a "holding company," or a "subsidiary company" of a "holding
company" or an "affiliate" of either a "holding company" or a "subsidiary
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
4.21 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.
4.22 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.
4.23 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.
4.24 Maintenance of Properties. Each of the Borrower, its
Subsidiaries and the Partnerships has maintained its Properties in good and
workable condition, ordinary wear and tear excepted, and in compliance in all
material respects with all applicable Requirements of Law.
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ARTICLE 5
AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any
Commitment Amount 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 Certificates. Concurrently with the furnishing
of the Financial Statements submitted pursuant to Sections 5.2 and 5.3, provide
the 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.
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(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
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
41
related to any Property of any of the Borrower, its
Subsidiaries or the Partnerships or adjacent to any Property
of any of the Borrower, its Subsidiaries or the Partnerships;
(e) any actual, proposed or threatened testing or other
investigation by any Governmental Authority or other Person
concerning the environmental condition of, or relating to, any
Property of any of the Borrower, its Subsidiaries or the
Partnerships or adjacent to any Property of any of the
Borrower, its Subsidiaries or the Partnerships following any
allegation of a violation of any Requirement of Law;
(f) any Release of Hazardous Substances by any of the Borrower,
its Subsidiaries or the Partnerships or from, affecting or
related to any Property of any of the Borrower, its
Subsidiaries or the Partnerships or adjacent to any Property
of any of the Borrower, its Subsidiaries or the Partnerships;
(g) the violation of any Environmental Law or the revocation,
suspension or forfeiture of or failure to renew, any permit,
license, registration, approval or authorization which could
reasonably be expected to have a Material Adverse Effect;
(h) the institution by the Borrower or any of its Affiliates of
any Multi-employer Plan or the withdrawal or partial
withdrawal by the Borrower or any of its Affiliates from any
Multi-employer Plan;
(i) the sale or other transfer of any Oil and Gas Properties or
any interest therein to any Partnership;
(j) the incurrence of any Contingent Obligation permitted by
Section 6.1(i), the making of any loan or advance permitted by
Section 6.2(g), or the acquisition or making of any Investment
permitted by Section 6.8(h) which causes the aggregate of all
such Contingent Obligations, loans, advances, and Investments
to exceed $10,000,000; and
(k) any other event or condition which could reasonably be
expected to have a Material Adverse Effect.
5.8 Letters in Lieu of Transfer Orders; Division Orders.
Promptly upon request by the Lender at any time and from time to time, execute
such letters in lieu of transfer orders, in addition to the letters signed by
the Borrower and delivered to the Administrative Agent in satisfaction of the
condition set forth in Section 3.1(f)(iv) and/or division and/or transfer orders
as are necessary or appropriate to transfer and deliver to the Lender proceeds
from or attributable to any Mortgaged Property. The above shall only be used if
there is a Default or Event of Default.
5.9 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,
42
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.
5.10 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.
5.11 Compliance with Laws. Comply, and cause each of its
Subsidiaries and the Partnerships to comply, with all Requirements of Law,
including (a) the Natural Gas Policy Act of 1978, as amended, (b) Environmental
Laws, and (c) all permits, licenses, registrations, approvals and authorizations
(i) related to any natural or environmental resource or media located on, above,
within, in the vicinity of, related to or affected by any of its Property, (ii)
required for the performance or conduct of its operations, or (iii) applicable
to the use, generation, handling, storage, treatment, transport or disposal of
Hazardous Substances; and cause all of its employees, agents, contractors,
subcontractors and future lessees (pursuant to appropriate lease provisions),
while such Persons are acting within the scope of their relationship with the
Borrower, such Subsidiary or Partnership, as the case may be, to comply with all
applicable Requirements of Law as may be necessary or appropriate to enable the
Borrower or such Subsidiary or Partnership, as the case may be, to so comply.
5.12 ERISA Information and Compliance. Furnish to each Lender
upon request, copies of each annual and other report with respect to each Plan
or any trust created thereunder filed with the United States Secretary of Labor
or the Pension Benefit Guaranty Corporation; fund, and cause each of its
Subsidiaries and the Partnerships to fund, all current service pension
liabilities as they are incurred under the provisions of all Plans and
Multi-employer Plans; and comply, and cause each of its Subsidiaries and the
Partnerships to comply, with all applicable provisions of ERISA.
5.13 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,
43
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.
5.14 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.
5.15 Fees and Expenses of Administrative Agent. Upon request
by the Administration Agent, promptly reimburse the Administrative Agent for all
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 Alternative Base 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.
44
5.16 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
AND BE BINDING UPON THE BORROWER AND ANY TRUSTEE, RECEIVER OR LIQUIDATOR OF THE
BORROWER APPOINTED IN ANY SUCH CASE.
5.17 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.
5.18 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.
5.19 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.
5.20 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.
45
5.21 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.
5.22 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.
5.23 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.
5.24 Title Opinions; Title Defects. At closing and promptly
upon the request of the Administrative Agent, furnish to the Administrative
Agent title opinions, in form and substance and by counsel satisfactory to the
Administrative Agent, or other confirmation of title acceptable to the
Administrative Agent, covering Oil and Gas Properties constituting not less than
80% of the value, determined by the Administrative Agent in its sole discretion,
of the Mortgaged Properties; so long as the Mortgaged Properties with
satisfactory title opinions are not less than 115% of the Commitment Amount and
promptly, but in any event within 60 days after notice by the Administrative
Agent of any defect, material in the opinion of the Administrative Agent in
value, in the title of the Borrower to any of its Oil and Gas Properties, clear
such title defects, and, in the event any such title defects are not cured in a
timely manner, pay all related costs and fees incurred by the Administrative
Agent to do so.
5.25 Level of Mortgage Coverage. Borrower will grant to
Administrative Agent for the benefit of the Lenders (within 30 days of written
request by the Administrative Agent) additional Mortgages to maintain under
Mortgage at all times (i) 75% of the value of the Oil and Gas Properties used in
determining the Borrowing Base for properties situated in the United States, or
(ii) 125% of the Commitment Amount.
ARTICLE 6
NEGATIVE COVENANTS
So long as any Obligation remains outstanding or any
Commitment Amount 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
46
any time outstanding; (f) New 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 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 production from
the proved producing reserves as reflected on the Reserve Report most recently
provided to the Administrative Agent, and (i) debt incurred by Swift Energy New
Zealand Limited up to $5,000,000, which debt is non-recourse to the Borrower,
(j) other Indebtedness not exceeding $10,000,000 in the aggregate at any time
outstanding for the Borrower and its Subsidiaries, and (k) the Permitted
Refinancing Debt.
6.2 Loans or Advances. Make or agree to make or allow to
remain outstanding any loans or advances to any Person, or permit any of its
Subsidiaries or the Partnerships to do so; provided, however, the foregoing
restrictions shall not apply to (a) advances or extensions of credit in the form
of accounts receivable incurred in the ordinary course of business and upon
terms common in the industry for such accounts receivable, (b) accounts
receivable owed by the Partnerships to the Borrower with respect to general and
administrative and/or direct expenses and not outstanding for more than 60 days,
(c) loans, advances or extensions of credit to suppliers or contractors under
applicable contracts or agreements in connection with oil and gas development
activities of the Borrower or such Subsidiary or Partnership, (d) loans and
advances to employees of the Borrower or such Subsidiary in the ordinary course
of business not exceeding $1,000,000 in the aggregate at any time outstanding,
(e) loans or advances by the Borrower to any Partnership not outstanding for
more than 60 days and not exceeding the uncollected but accrued revenues payable
to the Borrower with respect to Oil and Gas Properties but attributable to such
Partnership, the aggregate of which for all Partnerships shall not exceed
$8,000,000 at any time outstanding, (f) loans or advances by the Borrower to
Swift Energy Marketing Company which, together with Investments permitted
pursuant to Section 6.8(g) shall not exceed $6,000,000, or (g) loans or advances
to wholly owned Subsidiaries for Oil and Gas related investments in an amount
not to exceed $5,000,000 in the aggregate unless such Subsidiary has provided a
guaranty hereunder.
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 and shall not
apply to any liens securing debt incurred by Swift Energy New Zealand limited
under Section 6.1(i).
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 $25,000,000 in the aggregate per fiscal year 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
47
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 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, (c) farmouts or similar agreements entered into in the
ordinary course of business; or (d) sales of Partnership interest, (e) any
proceeds received from the sale of the Russian Oil and Gas Property Interests,
and (f) any proceeds from the sale of the Chunchula property.
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 $5,000,000 in
any fiscal year, provided that both before and after giving effect to any such
distribution there shall exist no Default or Event of Default, 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 $2,000,000 in any calendar or
fiscal year or $10,000,000 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, (f) investments by the Borrower in the
48
Partnerships in amounts not to exceed those required as capital contributions
under the applicable Partnership Agreements; provided, however, at any time that
a Default or Event of Default exists, no investment may be made in any
partnership or joint venture in which the Borrower is not, at such time, a
partner or joint venturer other than those formed pursuant to Registration
Statement No. 33-37983 on Form S-1 filed by the Borrower with the Securities and
Exchange Commission on November 28, 1990 (Swift Depositary Interests I), (g)
Investments by the Borrower in Swift Energy Marketing Company which, together
with loans and advances permitted by Section 6.2(f) shall not exceed $6,000,000,
(h) Future Net Investments in New Zealand which may not exceed $15,000,000 per
year.
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 Current Ratio. Permit the ratio of Current Assets (plus
Available Commitment) to Current Liabilities to be at any time less than 1.0 to
1.0.
6.14 Interest Coverage Ratio. Permit the ratio of EBITDAX to
Interest Expense (calculated quarterly at the end of each fiscal quarter on a
rolling four quarter basis) to be less than 2.75 to 1.00.
6.15 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.
6.16 New Subordinated Debt, Senior Subordinated Debt and
Senior Notes due 2011. Amend, extend or modify any of the terms or provisions of
any documents, notes, or
49
agreements evidencing or governing the New Subordinated Debt, the Senior
Subordinated Debt and Senior Notes due 2011 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 New Subordinated Debt, the Senior
Subordinated Debt, and Senior Notes due 2011. The Borrower may not redeem any
part of the Senior Subordinated Debt, Senior Subordinated Debt and Senior Notes
due 2011 without the consent of the Required Lenders, except Senior Subordinated
Debt may be redeemed or repurchased with the proceeds of Senior Notes due 2011
or under this Agreement.
6.17 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 but shall not apply to any liens securing debt incurred
by Swift Energy New Zealand Limited under Section 6.1(i).
6.18 Issuance of Stock in Swift Energy International, Inc. and
Swift Energy New Zealand Limited. Borrower will not allow Swift Energy
International, Inc. and Swift Energy New Zealand Limited to issue any additional
shares of stock unless a 65% pledge is granted to the Lenders on these shares.
6.19 Senior Notes Due 2011. Senior Notes due 2011 shall not
deviate materially from the draft prospectus of May, 2004.
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
50
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
performance of any bond, debenture, note, security (as defined
in the Securities Act of 1933, as amended), or other evidence
of Indebtedness in excess of $10,000,000, 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 60 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;
51
(i) A final and non-appealable order, judgment, or decree shall be
entered against any of the Borrower, its Subsidiaries, or the
Partnerships for money damages and/or Indebtedness due in an
amount in excess of $10,000,000 and such order, judgment, or
decree shall not be dismissed or stayed within 60 days;
(j) The Borrower shall default in any of its material obligations
as a Partner under any Partnership Agreement; or
(k) If the Borrower has not executed the documents required by
Section 3.1(f) in the time prescribed therein, it shall be an
Event of Default.
7.2 Rights Upon Default. (a) Upon the occurrence of any Event
of Default specified in Sections 7.1 (e) or (f), immediately and without notice,
(i) all Obligations shall become due and payable, without presentment, demand,
protest, notice of protest or dishonor, notice of intent to accelerate maturity,
notice of acceleration of maturity or other notice of any kind, all of which are
expressly waived by the Borrower, (ii) the Commitment Amounts 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 Commitment Amounts terminated,
whereupon the Commitment Amounts 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.
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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 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
53
(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 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
54
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 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
55
payment all or a portion of which is required to be refunded originally
distributed to such Lender, if such percentage can be determined, or, if such
percentage cannot be determined, on the basis of the Percentage Share of such
Lender. The 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.
56
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 canceled 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
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.
57
(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 Final
Maturity, reduce or extend the time of payment of any fee payable to the Lenders
hereunder, reduce the principal amount of the Obligations, release any
Collateral in excess of that allowed by Section 6.4, 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 Amount exists.
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
58
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.
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 Confidentiality. Administrative Agent and Lenders agree
to maintain non-public information provided by Borrower to the Administrative
Agent and Lenders about Borrower and its business confidential and to treat such
confidential information with the standard care and
59
diligence that each utilizes in maintaining its own confidential information
subject to
customary permitted disclosures.
9.11 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.
9.12 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.
9.13 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.
9.14 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.
9.15 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.
60
IN WITNESS WHEREOF, this Agreement is executed effective as of
the date first above written.
BORROWER:
SWIFT ENERGY COMPANY
By:
------------------------------------
Alton D. Heckaman, Jr.
Senior Vice President
Chief Financial Officer
By:
------------------------------------
Adrian D. Shelley
Treasurer
Address for Notices:
Swift Energy Corporation
16825 Northchase Drive, Suite 400
Houston, Texas 77060
Attention: Alton D. Heckaman, Jr.
Telecopy: (281) 874-2701
(Signatures Continued on Next Page)
61
ADMINISTRATIVE AGENT AND LENDER:
BANK ONE, NA (Main Office Chicago)
By:
-------------------------------------
Charles Kingswell-Smith
Director
Applicable Lending Office
for Alternative Base Rate Loans and
Eurodollar Rate Loans:
One Bank One Plaza
Chicago, Illinois 60670
Address for Notices:
Bank One, NA
910 Travis
Houston, Texas 77002
Attention: Charles Kingswell-Smith
Telecopy: (713) 751-3544
(Signatures Continued on Next Page)
62
LENDER:
BANK OF SCOTLAND
By:
-------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
Applicable Lending Office
for Alternative Base Rate Loans and
Eurodollar Rate Loans:
565 Fifth Avenue
New York, New York 10017
Attention: Karen Workman
Address for Notices:
1021 Main Street, Suite 1370
Suite 1750
Houston, Texas 77002
Attention: Richard Butler
Telecopy: 713-651-9714
With a copy to:
Annie Glynn
565 Fifth Avenue
New York, New York 10017
(Signatures Continued on Next Page)
63
LENDER:
NATEXIS BANQUES POPULAIRES
By:
-------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
Applicable Lending Office
for Alternative Base Rate Loans and
Eurodollar Rate Loans:
- ------------------------------------
- ------------------------------------
- ------------------------------------
Attention:
-------------------------
Address for Notices:
- ------------------------------------
- ------------------------------------
- ------------------------------------
Attention:
-------------------------
Telecopy:
--------------------------
64
LENDER:
UFJ BANK LIMITED
By:
-------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
Applicable Lending Office
for Alternative Base Rate Loans and
Eurodollar 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
with a copy to:
Mr. Clyde Redford
Vice President
UFJ Bank Limited
1200 Smith Suite 2670
Houston, Texas 77002
(Signatures Continued on Next Page)
65
DOCUMENTATION AGENT AND LENDER:
SOCIETE GENERALE
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
Applicable Lending Office
for Alternative Base Rate Loans and
Eurodollar Rate Loans:
560 Lexington Avenue
New York, New York 10022
Attention: Arlene Tellerman
Telephone: 212-278-6086
Telecopy: 212-278-7490
Address for Notices:
1111 Bagby, Suite 2020
Houston, TX 77002
Attention: Mr. Jason Henderson
Ms. Elena Robciuc
Telecopy: 713-650-0824
(Signatures Continued on Next Page)
66
DOCUMENTATION AGENT AND LENDER:
CALYON NEW YORK BRANCH
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
Applicable Lending Office
for Alternative Base Rate Loans and
Eurodollar 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: John Falbo
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: John Falbo
Telecopy: 713-751-0307
(Signatures Continued on Next Page)
67
SYNDICATION AGENT AND LENDER:
WELLS FARGO BANK, NATIONAL
ASSOCIATION
By:
--------------------------------------
Printed Name:
----------------------------
Title:
-----------------------------------
Applicable Lending Office
for Alternative Base Rate Loans and
Eurodollar Rate Loans:
1740 Broadway, 3rd Floor
Denver, CO 80274
Attention: Tanya Ivie
Address for Notices:
1000 Louisiana St., 3rd Floor
Houston, TX 77002
Attention: Carlos L. Quinteros
68
SYNDICATION AGENT AND LENDER:
BNP PARIBAS
By:
-------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
Applicable Lending Office
for Alternative Base Rate Loans and
Eurodollar Loans:
- ------------------------------------
- ------------------------------------
Attention:
-------------------------
Address for Notices:
- ------------------------------------
- ------------------------------------
Attention:
-------------------------
Telecopy:
--------------------------
69
LENDER:
WASHINGTON MUTUAL BANK, FA
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
Applicable Lending Office
for Alternative Base Rate Loans and
Eurodollar Rate Loans:
- ------------------------------------
- ------------------------------------
Attention:
-------------------------
Address for Notices:
- ------------------------------------
- ------------------------------------
Attention:
-------------------------
Telecopy:
--------------------------
70
LENDER:
SOUTHWEST BANK OF TEXAS, N.A.
By:
--------------------------------------
Printed Name:
----------------------------
Title:
-----------------------------------
Applicable Lending Office
for Alternative Base Rate Loans and
Eurodollar Rate Loans:
- ------------------------------------
- ------------------------------------
Attention:
-------------------------
Address for Notices:
- ------------------------------------
- ------------------------------------
Attention:
-------------------------
Telecopy:
--------------------------
71
EXHIBIT I
PROMISSORY NOTE
$53,292,929.45 Houston, Texas June 29, 2004
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of BANK ONE, NA ("Payee"), at the banking
quarters of Bank One, NA, in Houston, Harris County, Texas, the sum of
FIFTY-THREE MILLION, TWO HUNDRED AND NINETY-TWO THOUSAND, NINE HUNDRED AND
TWENTY-NINE DOLLARS AND FORTY-FIVE CENTS ($53,292,929.45), or so much thereof as
may be advanced against this Note pursuant to the First Amended and Restated
Credit Agreement dated as of June 29, 2004, by and among Maker, Bank One, NA, as
a Lender and as the Administrative Agent, Wells Fargo Bank, National
Association, as a Lender and as Syndication Agent, CALYON, as a Lender and as
Documentation Agent and Societe Generale as a Lender and Documentation Agent,
and the other Lenders signatory thereto (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:
--------------------------------------
Alton D. Heckaman, Jr.
Senior Vice President
Chief Financial Officer
By:
--------------------------------------
Adrian D. Shelley
Treasurer
I-i
EXHIBIT I
PROMISSORY NOTE
$53,292,929.45 Houston, Texas June 29, 2004
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of CALYON ("Payee"), at the banking
quarters of Bank One, NA, in Houston, Harris County, Texas, the sum of
FIFTY-THREE MILLION, TWO HUNDRED AND NINETY-TWO THOUSAND, NINE HUNDRED AND
TWENTY-NINE DOLLARS AND FORTY-FIVE CENTS ($53,292,929.45), or so much thereof as
may be advanced against this Note pursuant to the First Amended and Restated
Credit Agreement dated as of June 29, 2004, by and among Maker, Bank One, NA, as
a Lender and as the Administrative Agent, Wells Fargo Bank, National
Association, as a Lender and as Syndication Agent, CALYON, as a Lender and as
Documentation Agent and Societe Generale as a Lender and Documentation Agent,
and the other Lenders signatory thereto (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:
--------------------------------------
Alton D. Heckaman, Jr.
Senior Vice President
Chief Financial Officer
By:
--------------------------------------
Adrian D. Shelley
Treasurer
EXHIBIT I
PROMISSORY NOTE
$53,292,929.45 Houston, Texas June 29, 2004
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, NA, in Houston, Harris County, Texas, the sum of
FIFTY-THREE MILLION, TWO HUNDRED AND NINETY-TWO THOUSAND, NINE HUNDRED AND
TWENTY-NINE DOLLARS AND FORTY-FIVE CENTS ($53,292,929.45), or so much thereof as
may be advanced against this Note pursuant to the First Amended and Restated
Credit Agreement dated as of June 29, 2004, by and among Maker, Bank One, NA, as
a Lender and as the Administrative Agent, Wells Fargo Bank, National
Association, as a Lender and as Syndication Agent, CALYON, as a Lender and as
Documentation Agent and Societe Generale as a Lender and Documentation Agent,
and the other Lenders signatory thereto (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:
-------------------------------------
Alton D. Heckaman, Jr.
Senior Vice President
Chief Financial Officer
By:
-------------------------------------
Adrian D. Shelley
Treasurer
EXHIBIT I
PROMISSORY NOTE
$50,909,090.91 Houston, Texas June 29, 2004
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION
("Payee"), at the banking quarters of Bank One, NA, in Houston, Harris County,
Texas, the sum of FIFTY MILLION, NINE HUNDRED AND NINE THOUSAND, NINETY DOLLARS
AND NINETY-ONE CENTS ($50,909,090.91), or so much thereof as may be advanced
against this Note pursuant to the First Amended and Restated Credit Agreement
dated as of June 29, 2004, by and among Maker, Bank One, NA, as a Lender and as
the Administrative Agent, Wells Fargo Bank, National Association, as a Lender
and as Syndication Agent, CALYON, as a Lender and as Documentation Agent and
Societe Generale as a Lender and Documentation Agent, and the other Lenders
signatory thereto (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:
-------------------------------------
Alton D. Heckaman, Jr.
Senior Vice President
Chief Financial Officer
By:
-------------------------------------
Adrian D. Shelley
Treasurer
EXHIBIT I
PROMISSORY NOTE
$48,000,000.00 Houston, Texas June 29, 2004
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, NA, in Houston, Harris County, Texas, the sum of
FORTY-EIGHT MILLION DOLLARS ($48,000,000.00), or so much thereof as may be
advanced against this Note pursuant to the First Amended and Restated Credit
Agreement dated as of June 29, 2004, by and among Maker, Bank One, NA, as a
Lender and as the Administrative Agent, Wells Fargo Bank, National Association,
as a Lender and as Syndication Agent, CALYON, as a Lender and as Documentation
Agent and Societe Generale as a Lender and Documentation Agent, and the other
Lenders signatory thereto (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:
-------------------------------------
Alton D. Heckaman, Jr.
Senior Vice President
Chief Financial Officer
By:
-------------------------------------
Adrian D. Shelley
Treasurer
EXHIBIT I
PROMISSORY NOTE
$20,000,000.00 Houston, Texas June 29, 2004
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of NATEXIS BANQUES POPULAIRES ("Payee"),
at the banking quarters of Bank One, NA, in Houston, Harris County, Texas, the
sum of TWENTY MILLION DOLLARS ($20,000,000.00), or so much thereof as may be
advanced against this Note pursuant to the First Amended and Restated Credit
Agreement dated as of June 29, 2004, by and among Maker, Bank One, NA, as a
Lender and as the Administrative Agent, Wells Fargo Bank, National Association,
as a Lender and as Syndication Agent, CALYON, as a Lender and as Documentation
Agent and Societe Generale as a Lender and Documentation Agent, and the other
Lenders signatory thereto (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:
-------------------------------------
Alton D. Heckaman, Jr.
Senior Vice President
Chief Financial Officer
By:
-------------------------------------
Adrian D. Shelley
Treasurer
EXHIBIT I
PROMISSORY NOTE
$26,666,666.18 Houston, Texas June 29, 2004
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of UFJ BANK LIMITED ("Payee"), at the
banking quarters of Bank One, NA, in Houston, Harris County, Texas, the sum of
TWENTY-SIX MILLION, SIX HUNDRED AND SIXTY-SIX THOUSAND, SIX HUNDRED AND
SIXTY-SIX DOLLARS AND EIGHTEEN CENTS ($26,666,666.18), or so much thereof as may
be advanced against this Note pursuant to the First Amended and Restated Credit
Agreement dated as of June 29, 2004, by and among Maker, Bank One, NA, as a
Lender and as the Administrative Agent, Wells Fargo Bank, National Association,
as a Lender and as Syndication Agent, CALYON, as a Lender and as Documentation
Agent and Societe Generale as a Lender and Documentation Agent, and the other
Lenders signatory thereto (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:
------------------------------------
Alton D. Heckaman, Jr.
Senior Vice President
Chief Financial Officer
By:
------------------------------------
Adrian D. Shelley
Treasurer
EXHIBIT I
PROMISSORY NOTE
$43,636,363.54 Houston, Texas June 29, 2004
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of BNP PARIBAS ("Payee"), at the banking
quarters of Bank One, NA, in Houston, Harris County, Texas, the sum of
FORTY-THREE MILLION, SIX HUNDRED AND THIRTY-SIX THOUSAND, THREE HUNDRED AND
SIXTY-THREE DOLLARS AND FIFTY-FOUR CENTS ($43,636,363.54), or so much thereof as
may be advanced against this Note pursuant to the First Amended and Restated
Credit Agreement dated as of June 29, 2004, by and among Maker, Bank One, NA, as
a Lender and as the Administrative Agent, Wells Fargo Bank, National
Association, as a Lender and as Syndication Agent, CALYON, as a Lender and as
Documentation Agent and Societe Generale as a Lender and Documentation Agent,
and the other Lenders signatory thereto (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:
-------------------------------------
Alton D. Heckaman, Jr.
Senior Vice President
Chief Financial Officer
By:
-------------------------------------
Adrian D. Shelley
Treasurer
EXHIBIT I
PROMISSORY NOTE
$25,454,545.45 Houston, Texas June 29, 2004
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of WASHINGTON MUTUAL BANK, FA ("Payee"),
at the banking quarters of Bank One, NA, in Houston, Harris County, Texas, the
sum of TWENTY-FIVE MILLION, FOUR HUNDRED AND FIFTY-FOUR THOUSAND, FIVE HUNDRED
AND FORTY-FIVE DOLLARS AND FORTY-FIVE CENTS ($25,454,545.45), or so much thereof
as may be advanced against this Note pursuant to the First Amended and Restated
Credit Agreement dated as of June 29, 2004, by and among Maker, Bank One, NA, as
a Lender and as the Administrative Agent, Wells Fargo Bank, National
Association, as a Lender and as Syndication Agent, CALYON, as a Lender and as
Documentation Agent and Societe Generale as a Lender and Documentation Agent,
and the other Lenders signatory thereto (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:
--------------------------------------
Alton D. Heckaman, Jr.
Senior Vice President
Chief Financial Officer
By:
--------------------------------------
Adrian D. Shelley
Treasurer
EXHIBIT I
PROMISSORY NOTE
$25,454,545.45 Houston, Texas June 29, 2004
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of SOUTHWEST BANK OF TEXAS, N.A.
("Payee"), at the banking quarters of Bank One, NA, in Houston, Harris County,
Texas, the sum of TWENTY-FIVE MILLION, FOUR HUNDRED AND FIFTY-FOUR THOUSAND,
FIVE HUNDRED AND FORTY-FIVE DOLLARS AND FORTY-FIVE CENTS ($25,454,545.45), or so
much thereof as may be advanced against this Note pursuant to the First Amended
and Restated Credit Agreement dated as of June 29, 2004, by and among Maker,
Bank One, NA, as a Lender and as the Administrative Agent, Wells Fargo Bank,
National Association, as a Lender and as Syndication Agent, CALYON, as a Lender
and as Documentation Agent and Societe Generale as a Lender and Documentation
Agent, and the other Lenders signatory thereto (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:
--------------------------------------
Alton D. Heckaman, Jr.
Senior Vice President
Chief Financial Officer
By:
--------------------------------------
Adrian D. Shelley
Treasurer
EXHIBIT II
FORM OF
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT (this "Agreement") is dated as of
_______, 2000, by and between ______________ (the "Assignor") and _____________
(the "Assignee").
RECITALS
A. The Assignor is a party to the First Amended and Restated
Credit Agreement dated as of June 29, 2004 (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, NA, 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").
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 pro rata in any L/C
Exposure and (ii) to make Loans under its Commitment Amount 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 Loans currently outstanding under
its Commitment Amount in the principal amount of $____________ (the "Loan
Balance"), plus the interest and fees which will accrue from and after the
Assignment Date.
II-i
"Assignment Date" shall mean _______________, 20____.
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.
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
II-ii
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.
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;
II-iii
(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:
(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;
II-iv
(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.
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.
II-v
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:
--------------------------------------
Address for Notices:
Telecopier No.:
-----------------------------
Telephone No.:
------------------------------
Attention:
----------------------------------
ASSIGNEE
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address for Notices:
--------------------------------------------
--------------------------------------------
--------------------------------------------
II-vi
Telecopier No.:
-----------------------------
Telephone No.:
------------------------------
Attention:
----------------------------------
ACKNOWLEDGED AND CONSENTED TO:
BANK ONE, NA
as Administrative Agent
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
II-vii
EXHIBIT III
FORM OF BORROWING REQUEST
__________, 20___
(Date)
Bank One, NA
910 Travis
Houston, Texas 77002
Attention: Charles Kingswell-Smith
Re: First Amended and Restated Credit Agreement dated as of June
29, 2004, among Swift Energy Company, Bank One, NA, 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 _______________,20__;
(c) $_________ of such borrowings is to be a Alternative Base
Rate Advance;
$_________ of such borrowings is to be a Eurodollar Rate
Advance; and
(d) Length of Interest Period for Eurodollar Rate Advance is
_________ months.
2. Eurodollar Rate Advance continuation for Eurodollar Rate
Advance maturing on ________:
(a) Aggregate amount to be continued as a Eurodollar Rate Advance
is $_________;
(b) Aggregate amount to be converted to a Alternative Base Rate
Advance is $_________;
(c) Length of Interest Period for continued Eurodollar Rate
Advances is _________ months.
3. Conversion of Alternative Base Rate Advance to Eurodollar Rate
Advance:
Convert $_________ of the Alternative Base Rate Advance to a
Eurodollar Rate Advance on _________ with an Interest Period
of _________ months.
III-i
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
EXHIBIT IV
FORM OF COMPLIANCE CERTIFICATE
__________, 20
Bank One, NA, as Administrative Agent
910 Travis
Houston, Texas 77002
Attention: Charles Kingswell-Smith
Re: First Amended and Restated Credit Agreement dated as of June
29, 2004, among Swift Energy Company, Bank One, NA, 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. [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:
(a) Section 6.13: Current Ratio. Permit the ratio of Current Assets
(plus Available Commitment) to Current Liabilities to be at any time less than
1.0 to 1.0.
Actual
_____ to 1.0
IV-i
(b) Section 6.14: Interest Coverage Ratio: Permit the ratio of EBITDAX
to Interest Expense (calculated quarterly at the end of each fiscal quarter on a
rolling four quarter basis) to be less than 2.75 to 1.00.
Actual
_____ 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
EXHIBIT V
FACILITY AMOUNTS
- -------------------------------------------------------------------------------
Name of Lender Facility Borrowing Base Commitment Closing % Facility
Amount Amount %
Bank One, NA $53,292,929.45 $33,308,081 $19,984,848.55 13.32 13.32
Societe Generale $53,292,929.45 $33,308,081 $19,984,848.55 13.32 13.32
CALYON $53,292,929.45 $33,308,081 $19,984,848.55 13.32 13.32
Wells Fargo Bank, National $50,909,090.91 $31,818,182 $19,090,909.09 12.73 12.73
Association
Bank of Scotland $48,000,000.00 $30,000,000 $18,000,000.00 12.00 12.00
BNP Paribas $43,636,363.64 $27,272,727 $16,363,636.36 10.91 10.91
UFJ Bank $26,666,666.18 $16,666,666 $9,999,999.82 6.67 6.67
Washington Mutual Bank, $25,454,545.45 $15,909,091 $9,545,454.55 6.36 6.36
FA
Southwest Bank of Texas, $25,454,545.45 $15,909,091 $9,545,454.55 6.36 6.36
N.A.
Natexis Banques Populaires $20,000,000.00 $12,500,000 $7,500,000.00 5.00 5.00
=================== =================== ================== ============= ============
Facility Totals $400,000,000.00 $250,000,000 $150,000,000 100.00 100.00
- --------------------------------------------------------------------------------
V-i
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. 93-195655 - Secured Party - First United Leasing - filed October 11, 1993.
2. 93-211680 - Secured Party - National Oilwell - filed November 3, 1993.
VI-i
EXHIBIT VII
[FORM OF OPINION OF COUNSEL]
[Closing Date]
To each Lender party
to the Amended and Restated Credit Agreement
referenced below and
Bank One, NA,
as Administrative Agent
Re: First Amended and Restated Credit Agreement dated as of June
29, 2004 by and among Swift Energy Company, Bank One, NA, 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 Societe Generale
(4) the Note dated as of even date herewith payable to CALYON
(5) the Note dated as of even date herewith payable to Bank of Scotland
(6) the Note dated as of even date herewith payable to UFJ Bank Limited
(7) the Note dated as of even date herewith payable to Wells Fargo Bank
National Association
(8) the Note dated as of even date herewith payable to Washington
Mutual Bank
(9) the Note dated as of even date herewith payable to Southwest Bank
of Texas, N.A.
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,
VII-i
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
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
VII-ii
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 laws of the State of Texas, and applicable United States
federal law.
(ii) The validity, binding effect, and enforceability of the
Loan Documents may be limited or affected by bankruptcy, insolvency,
moratorium, reorganization, or other similar laws affecting rights of
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-iii
EXHIBIT VIII
SUBSIDIARIES AND PARTNERSHIPS
Percentage Ownership of
Outstanding Common Stock Place of Incorporation or
or Partnership Interest Jurisdiction of Formation Address of Principal
Name (Distributive Share) of Partnership Place of Business
---- -------------------- ------------ -----------------
Subsidiaries:
- ------------
GASRS, Inc. 100.00% TX 16825 Northchase Drive, Suite 400
Houston, Texas 77060
Swenco-Western, Inc. 100.00% TX 16825 Northchase Drive, Suite 400
Houston, Texas 77060
Swift Energy Marketing Co. 100.00% TX 16825 Northchase Drive, Suite 400
Houston, Texas 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
Swift Energy Canada, Ltd. 100.00% Canada 16823 Northchase Drive, Suite 400
Houston, Texas 77060
Swift Energy New Zealand Limited 100.00% New Zealand 16825 Northchase Drive, Suite 400
Houston, Texas 77060
Partnerships:
- -------------
Swift Energy Drilling Venture 20.00% TX c/o Swift Energy Company
1996-1, Ltd. 16825 Northchase
Houston, Texas 77060
VIII-i
Percentage Ownership of
Outstanding Common Stock Place of Incorporation or
or Partnership Interest Jurisdiction of Formation Address of Principal
Name (Distributive Share) of Partnership Place of Business
---- -------------------- ------------ -----------------
Subsidiaries:
- ------------
Swift Energy Drilling Venture 20.00% TX c/o Swift Energy Company
1997-1, Ltd. 16825 Northchase
Houston, Texas 77060
Swift Energy Drilling Venture 20.00% TX c/o Swift Energy Company
1997-2, Ltd. 16825 Northchase Drive, Suite 400
Houston, Texas 77060
Swift Energy Drilling Venture 20.00% TX c/o Swift Energy Company
1998-1, Ltd. 16825 Northchase Drive, Suite 400
Houston, Texas 77060
Swift Energy Development 40.00% TX c/o Swift Energy Company
Program 1996-A, Ltd. 16825 Northchase Drive, Suite 400
Houston, Texas 77060
Swift Energy Development 40.00% TX c/o Swift Energy Company
Program 1998, Ltd. 16825 Northchase Drive, Suite 400
Houston, Texas 77060
VIII-ii
EXHIBIT IX
[Description of New Zealand Property]
Any and all permits, contracts, property and other rights situated in New
Zealand, including, but not limited to, the permit areas known as PEP 38716,
38718, 38719 and 38730.
IX-i
EXHIBIT X
Pricing schedule
- -------------------------------------------- ------------------- ------------------ ----------------- ----------------
Level I Level II Level III Level IV
Status Status Status Status
- -------------------------------------------- ------------------- ------------------ ----------------- ----------------
Applicable Margin
- -------------------------------------------- ------------------- ------------------ ----------------- ----------------
Eurodollar Rate Loans 125 bps. 137.5 bps 162.5 bps 175 bps
- -------------------------------------------- ------------------- ------------------ ----------------- ----------------
Alternate Base Rate Loans 0.00% bps 0.00% bps 0.00% bps 0.00% bps
- -------------------------------------------- ------------------- ------------------ ----------------- ----------------
Applicable Fee Rate (*) 37.5 bps 37.5 bps 37.5 bps 37.5 bps
- -------------------------------------------- ------------------- ------------------ ----------------- ----------------
For the purposes of this Schedule, the following terms have the following
meanings subject to the final paragraph of this Schedule:
"Borrowing Base Usage" means, as of any date, the percent of the
Borrowing Base then in effect represented by the sum of (i) the aggregate
principal amount of all loans then outstanding under this Agreement, plus (ii)
the aggregate face amount of all Letters of Credit then outstanding under this
Agreement.
"Level I Status" exists at any date if the Borrowing Base Usage as of
such date is less than 50%.
"Level II Status" exists at any date if the Borrowing Base Usage as of
such date is less than 75%, but equal to or in excess of 50%.
"Level III Status" exists at any date if the Borrowing Base Usage as of
such date is less than 90%, but equal to or in excess of 75%.
"Level IV Status" exists at any date, if the Borrower has not qualified
for Level I Status, Level II Status, or Level III Status.
"Status" means Level I Status, Level II Status, Level III Status, or
Level IV Status.
Applicable Fee Rate determined in accordance with the pricing Schedule hereto on
the average daily unused (outstanding Letters of Credit will count as usage)
portion of the Commitment Amount, payable quarterly in arrears to the
Administrative Agent for the ratable benefit of the Lenders (including the
Administrative Agent) from closing until the Final Maturity.
The Applicable Margin and Applicable Fee Rate shall be determined by the
Administrative Agent from time to time in accordance with the foregoing table.
X-i
EXHIBIT XI
FORM OF NEW LENDER AGREEMENT
This New Lender Agreement dated as of ___________, ____ (this
"Agreement") is by and among (i) _____________, a ____________ corporation (the
"Borrower"), (ii) Bank One, NA (main office Chicago), in its capacity as
Administrative Agent (the "Administrative Agent") under the Credit Agreement
dated as of ____________, ____, as amended and restated as of ___________, ____
(as may be amended or otherwise modified from time to time, the "Credit
Agreement", capitalized terms that are defined in the Credit Agreement and not
defined herein are used herein as therein defined) among the Borrower, the
lenders party thereto, and the Administrative Agent, and (iii) _________ ("New
Lender").
Preliminary Statements
A. Pursuant to Section ____ of the Credit Agreement, the Borrower has
the right, subject to the terms and conditions thereof, to effectuate from time
to time an increase in the total Commitment Amounts under the Credit Agreement
by adding to the Credit Agreement one or more banks or other financial
institutions.
B. The Borrower has given notice to the Administrative Agent of its
intention to increase the total Commitment Amounts pursuant to such Section ___
by adding the New Lender to the Credit Agreement as a Lender with a Commitment
Amount of $___________, and the Administrative Agent is willing to consent
thereto.
Accordingly, the parties hereto agree as follows:
SECTION 1. Addition of New Lender. Pursuant to Section ___ of the
Credit Agreement, the New Lender is hereby added to the Credit Agreement as a
Lender with a Commitment Amount of $________________. The New Lender specifies
as its Domestic Lending Office and Eurodollar Lending Office the following:
Domestic Lending
Office Address: _________________
Attention: ______
Telephone: ___-___-____
Telecopy: ___-___-____
Eurodollar Lending
Office Address: _________________
Attention: ______
Telephone: ___-___-____
Telecopy: ___-___-____
SECTION 2. New Note. The Borrower agrees to promptly execute and
deliver to the New Lender a Note ("New Note").
SECTION 3. Consent. The Administrative Agent and the Borrower hereby
consent to the increase in the Commitment Amounts and addition of the New Lender
effectuated hereby.
XI-i
SECTION 4. Lender Credit Decision. The New Lender acknowledges that it
has, independently and without reliance upon the Administrative Agent or any
other Lender and based on the financial statements referred to in Section ____
of the Credit Agreement and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement and to agree to the various matters set forth herein. The New Lender
also acknowledges 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 decisions in taking or not taking action under the Credit Agreement.
SECTION 5. Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
(a) The execution, delivery and performance by the Borrower of this
Agreement and the New Note are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, and do not contravene (i) the
Borrower's certificate of incorporation or by-laws or (ii) law or any
contractual restriction binding on or affecting the Borrower.
(b) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Borrower of this Agreement or
the New Note which has not been duly made or obtained.
(c) This Agreement constitutes, and the New Note when delivered
hereunder shall constitute, legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors rights generally or by
general principles of equity.
(d) The aggregate amount by which the Commitment Amounts under the
Credit Agreement have been increased does not exceed $___,000,000.
(e) No event has occurred and is continuing which constitutes a Default
or Unmatured Default.
(f) Prior to the increase in Commitment Amount pursuant to this
Agreement, the Borrower has offered the Lenders the right to participate in such
increase by increasing their respective Commitment Amounts.
(g) Attached hereto are resolutions duly adopted by the Board of
Directors of the Borrower sufficient to authorize this Agreement and the New
Note, and such resolutions are in full force and effect.
SECTION 6. Default. Without limiting any other event that may
constitute a Default, in the event any representation or warranty set forth
herein shall prove to have been incorrect in any material respect when made,
such event shall constitute a "Default" under the Credit Agreement.
SECTION 7. Expenses. The Borrower agrees to pay on demand all costs and
expenses of the Administrative Agent in connection with the preparation,
negotiation, execution and delivery of this Agreement and the New Note,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Administrative Agent with respect thereto.
SECTION 8. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas.
SECTION 9. Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed
XI-ii
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
SECTION 10. Effectiveness. When, and only when, the Administrative
Agent shall have received counterparts of, or telecopied signature pages of,
this Agreement executed by the Borrower, the Administrative Agent and the New
Lender, this Agreement shall become effective as of the date first written
above.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
By:
----------------------------------------
Title:
-------------------------------------
ADMINISTRATIVE AGENT:
BANK ONE, NA,
as Administrative Agent
By:
----------------------------------------
Title:
-------------------------------------
NEW LENDER:
By:
----------------------------------------
Title:
-------------------------------------
XI-iii
EXHIBIT XII
FORM OF COMMITMENT
This Commitment Increase Agreement dated as of ___________, ____ (this
"Agreement") is by and among (i) _____________, a ____________ corporation (the
"Borrower"), (ii) Bank One, NA (main office Chicago), in its capacity as
Administrative Agent (the "Administrative Agent") under the Credit Agreement
dated as of ____________, ____, as amended and restated as of ___________, ____
(as may be amended or otherwise modified from time to time, the "Credit
Agreement", capitalized terms that are defined in the Credit Agreement and not
defined herein are used herein as therein defined) among the Borrower, the
lenders party thereto, and the Administrative Agent, and (iii) ________
("Increasing Lender").
Preliminary Statements
A. Pursuant to Section ____ of the Credit Agreement, the Borrower has
the right, subject to the terms and conditions thereof, to effectuate from time
to time an increase in the total Commitment Amounts under the Credit Agreement
by agreeing with a Lender to increase that Lender's Commitment Amount.
B. The Borrower has given notice to the Administrative Agent of its
intention to increase the total Commitment Amounts pursuant to such Section ___
by increasing the Commitment Amount of the Increasing Lender from $_______ to
$________, and the Administrative Agent is willing to consent thereto.
Accordingly, the parties hereto agree as follows:
SECTION 1. Increase of Commitment Amount. Pursuant to Section ____ of
the Credit Agreement, the Commitment Amount of the Increasing Lender is hereby
increased from $________ to $__________.
SECTION 2. Consent. The Administrative Agent hereby consents to the
increase in the Commitment Amount of the Increasing Lender effectuated hereby.
SECTION 3. Lender Credit Decision. The Increasing Lender acknowledges
that it has, independently and without reliance upon the Administrative Agent or
any other Lender and based on the financial statements referred to in Section
____ of the Credit Agreement and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement and to agree to the various matters set forth herein. The Increasing
Lender also acknowledges 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 decisions in taking or not taking action under the Credit Agreement.
SECTION 4. Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
(a) The execution, delivery and performance by the Borrower of this
Agreement are within the Borrower's corporate powers, have been duly authorized
by all necessary corporation action, and do not contravene (i) the Borrower's
certificate of incorporation or by-laws or (ii) law or any contractual
restriction binding on or affecting the Borrower.
XII-i
(b) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Borrower of this Agreement
which has not been duly made or obtained.
(c) This Agreement constitutes legal, valid and binding obligations of
the Borrower enforceable against the Borrower in accordance with their
respective terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors rights
generally or by general principles of equity.
(d) The aggregate amount by which the Commitment Amounts under the
Credit Agreement have been increased does not exceed $180,000,000.
(e) No event has occurred and is continuing which constitutes an Event
of Default.
(f) Attached hereto are resolutions duly adopted by the Board of
Directors of the Borrower sufficient to authorize this Agreement, and such
resolutions are in full force and effect.
SECTION 5. Default. Without limiting any other event that may
constitute an Event of Default, in the event any representation or warranty set
forth herein shall prove to have been incorrect in any material respect when
made, such event shall constitute an "Event of Default" under the Credit
Agreement.
SECTION 6. Expenses. The Borrower agrees to pay on demand all costs and
expenses of the Administrative Agent in connection with the preparation,
negotiation, execution and delivery of this Agreement, including, without
limitation, the reasonable fees and out-of- pocket expenses of counsel for the
Administrative Agent with respect thereto.
SECTION 7. Governing Law. This Agreement shall be governed by, and
construed in accordance with the laws of the State of Texas.
SECTION 8. Execution in Counterparts. This Agreement may be executed in
any number of 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 taken together shall constitute one and the same agreement.
SECTION 9. Effectiveness. When, and only when, the Administrative Agent
shall have received counterparts of, or telecopied signature pages of, this
Agreement executed by the Borrower, the Administrative Agent and the Increasing
Lender, this Agreement shall become effective as of the date first written
above.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
By:
----------------------------------------
Title:
-------------------------------------
XII-ii
ADMINISTRATIVE AGENT:
BANK ONE, NA,
as Administrative Agent
By:
----------------------------------------
Title:
-------------------------------------
INCREASING LENDER:
By:
----------------------------------------
Title:
-------------------------------------
XII-iii
Exhibit 31.1
CERTIFICATION
I, Terry E. Swift, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June
30, 2004, of Swift Energy Company;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: August 6, 2004
/s/ Terry E. Swift
----------------------------------------
Terry E. Swift
President and
Chief Executive Officer
36
Exhibit 31.2
CERTIFICATION
I, Alton D. Heckaman, Jr., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June
30, 2004, of Swift Energy Company;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: August 6, 2004
/s/ Alton D. Heckaman, Jr.
----------------------------------------
Alton D. Heckaman, Jr.
Senior Vice President - Finance
Chief Financial Officer
37
Exhibit 32
Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the accompanying Quarterly Report on Form 10-Q for the period
ended June 30, 2004 (the "Report") of Swift Energy Company ("Swift") as filed
with the Securities and Exchange Commission on August 6, 2004, the undersigned,
in his capacity as an officer of Swift, hereby certifies pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of Swift.
Dated: August 6, 2004
/s/ Alton D. Heckaman, Jr.
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Alton D. Heckaman, Jr.
Senior Vice President-Finance and
Chief Financial Officer
Dated: August 6, 2004
/s/ Terry E. Swift
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Terry E. Swift
President and Chief Executive Officer
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