<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30 1998
-----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission File Number 000-22915.
CARRIZO OIL & GAS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0415919
----- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
14811 ST. MARY'S LANE, SUITE 148, HOUSTON, TEXAS 77079
- ------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(281) 496-1352
--------------
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X* No
--- ---
* The registrant became subject to the reporting requirements of Section 13 of
the Securities Act of 1933 on August 5, 1997.
The number of shares outstanding of the registrant's common stock, par value
$0.01 per share, as of November 10, 1998, the latest practicable date, was
10,375,000.
<PAGE> 2
CARRIZO OIL & GAS, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
Item 1. Condensed Balance Sheets
- As of September 30, 1998 and December 31, 1997 2
Condensed Statements of Operations
- For the three-month and nine-month periods ended
September 30, 1998 and 1997 3
Condensed Statements of Cash Flows
- For the nine-month periods ended September 30, 1998
and 1997 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Items 1-6. 13
SIGNATURES 16
</TABLE>
<PAGE> 3
CARRIZO OIL & GAS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,674,837 $ 3,435,197
Accounts receivable 3,635,504 4,584,359
Advances to operators 1,817,990 1,425,986
Other current assets 108,633 581,503
------------ ------------
Total current assets 8,236,964 10,027,045
PROPERTY AND EQUIPMENT, net (full-cost method of accounting for oil and
gas properties) 45,082,833 71,003,122
OTHER ASSETS 338,638 394,210
------------ ------------
$ 53,658,435 $ 81,424,377
============ ============
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Bank loan (Note 3) $ -- $ 3,500,000
Accounts payable, trade 10,433,479 10,023,455
Dividends payable -- 704,509
Other current liabilities 79,328 155,626
------------ ------------
Total current liabilities 10,512,807 14,383,590
LONG-TERM DEBT (Note 3) 7,950,000 4,100,000
DEFERRED INCOME TAXES 2,300,267 2,076,036
MANDATORILY REDEEMABLE PREFERRED STOCK (10,000,000 shares
authorized with none and 313,091.72 issued and outstanding at December 31,
1997 and September 30, 1998, respectively) (Note 4) -- 29,974,454
SHAREHOLDERS' EQUITY:
Warrants (Note 4) -- 300,000
Common Stock (40,000,000 shares authorized with 10,375,000 issued and
outstanding at December 31, 1997 and September 30, 1998) 103,750 103,750
Additional paid-in capital 32,845,727 32,845,727
Retained earnings (deficit) 365,690 (2,219,270)
Deferred compensation (419,806) (139,910)
------------ ------------
32,895,364 30,890,297
------------ ------------
$ 53,658,435 $ 81,424,377
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE> 4
CARRIZO OIL & GAS, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
---------------------------- ----------------------------
1997 1998 1997 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OIL AND NATURAL GAS REVENUES $ 2,069,237 $ 1,508,897 $ 6,234,261 $ 5,696,543
COSTS AND EXPENSES:
Oil and natural gas operating expenses 583,361 732,208 1,779,154 2,015,017
Depreciation, depletion and amortization 647,295 862,998 1,635,319 2,483,365
General and administrative 388,227 661,608 992,988 2,054,240
----------- ----------- ----------- -----------
Total costs and expenses 1,618,883 2,256,814 4,407,461 6,552,622
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) 450,354 (747,917) 1,826,800 (856,079)
OTHER INCOME AND EXPENSES:
Interest income 43,784 12,150 43,784 285,687
Interest expense (172,261) (46,564) (641,921) (49,649)
Interest expense, related parties (51,664) -- (137,067) --
Capitalized interest 162,767 41,062 627,547 41,062
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 432,980 (741,269) 1,719,143 (578,979)
TAX EXPENSE (BENEFIT) 151,543 (246,080) 2,086,115 (162,551)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 281,437 $ (495,189) $ (366,972) $ (416,428)
=========== =========== =========== ===========
LESS: DIVIDENDS AND ACCRETION ON PREFERRED SHARES -- (756,595) -- (2,168,533)
----------- ----------- ----------- -----------
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $ 281,437 $(1,251,784) $ (366,972) $(2,584,961)
=========== =========== =========== ===========
BASIC EARNINGS (LOSS) PER COMMON SHARE (Note 2) $ .04 $ (.12) $ (.05) $ (.25)
=========== =========== =========== ===========
DILUTED EARNINGS (LOSS) PER COMMON SHARE (Note 2) $ .04 $ (.12) $ (.05) $ (.25)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 5
CARRIZO OIL & GAS, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine
Months Ended
September 30,
------------------------------
1997 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (366,972) $ (416,428)
Adjustment to reconcile net income (loss) to net cash provided by
operating activities-
Depreciation, depletion and amortization 1,635,319 2,483,365
Deferred income taxes 2,086,115 (224,231)
Changes in assets and liabilities-
Accounts receivable (860,949) (948,855)
Other current assets (96,461) (472,870)
Other assets -- (163,519)
Accounts payable, trade (618,303) (1,180,837)
Interest payable to related parties and other current liabilities (259,242) 76,298
------------ ------------
Net cash provided by (used in)
operating activities 1,519,507 (847,077)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, accrual basis (21,951,646) (28,015,811)
Adjustment to cash basis 4,862,620 770,813
Advance to operators (1,618,929) 392,004
------------ ------------
Net cash used in
investing activities (18,707,955) (26,852,994)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of stock 28,243,054 --
Net proceeds from sale of preferred stock -- 28,810,431
Proceeds from bank loan -- 3,500,000
Proceeds from long-term debt 10,594,454 4,100,000
Debt repayments (20,408,934) (7,950,000)
Proceeds from related-party notes payable 130,545 --
Distributions (90,000) --
------------ ------------
Net cash provided by
financing activities 18,469,119 28,460,431
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,280,671 760,360
CASH AND CASH EQUIVALENTS, beginning of period 1,492,603 2,674,837
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 2,773,274 $ 3,435,197
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest (net of amounts capitalized) $ 151,441 $ 8,587
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 6
CARRIZO OIL & GAS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. NATURE OF OPERATIONS, COMBINATION
AND OFFERING:
The condensed financial statements included herein have been prepared by Carrizo
Oil & Gas, Inc. (the Company), and are unaudited, except for the balance sheet
at December 31, 1997, which has been prepared from the audited financial
statements at that date. The financial statements reflect necessary adjustments,
all of which were of a recurring nature, and are in the opinion of management
necessary for a fair presentation. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). The Company
believes that the disclosures presented are adequate to allow the information
presented not to be misleading. The condensed financial statements included
herein should be read in conjunction with the audited financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
The Company was formed in 1993 and is the surviving entity after a series of
combination transactions (the Combination). The Combination included the
following transactions: (a) Carrizo Production, Inc. (a Texas corporation and an
affiliated entity with ownership substantially the same as Carrizo), was merged
into Carrizo and the outstanding shares of capital stock of Carrizo Production,
Inc., were exchanged for an aggregate of 343,000 shares of common stock of
Carrizo; (b) Carrizo acquired Encinitas Partners Ltd. (a Texas limited
partnership of which Carrizo Production, Inc., served as the general partner) as
follows: Carrizo acquired from the shareholders who serve as directors of
Carrizo their limited partner interests in Encinitas Partners Ltd. for an
aggregate consideration of 468,533 shares of common stock and, on the same date,
Encinitas Partners Ltd. was merged into Carrizo and the outstanding limited
partner interests in Encinitas Partners Ltd. were exchanged for an aggregate of
860,699 shares of common stock; (c) La Rosa Partners Ltd. (a Texas limited
partnership of which Carrizo served as the general partner) was merged into
Carrizo and the outstanding limited partner interests in La Rosa Partners Ltd.
were exchanged for an aggregate of 48,700 shares of common stock; and (d)
Carrizo Partners Ltd. (a Texas limited partnership of which Carrizo served as
the general partner) was merged into Carrizo and the outstanding limited partner
interests in Carrizo Partners Ltd. were exchanged for an aggregate of 569,068
shares of common stock.
Simultaneous with the Combination, the Company completed its initial public
offering (the Offering) of 2,875,000 shares of its common stock at a public
offering price of $11.00 per share. The Offering provided the Company with
proceeds of approximately $28.1 million, net of expenses.
The Combination was accounted for as a reorganization of entities as prescribed
by Securities and Exchange Commission (SEC) Staff Accounting Bulletin 47 because
of the high degree of common ownership among, and the common control of, the
combining entities. Accordingly, the accompanying financial statements have been
prepared using the historical costs and results of operations of the affiliated
entities. There were no significant differences in accounting methods or their
application among the combining entities. All intercompany balances have been
eliminated. Certain reclassifications have been made to prior period amounts to
conform to the current period's financial statement presentation.
-5-
<PAGE> 7
2. EARNINGS PER COMMON SHARE:
Supplemental earnings per share information is provided below:
<TABLE>
<CAPTION>
For the Three Months Ended September 30
-----------------------------------------------------------------------------------------
Income (Loss) Shares Per-Share Amount
1997 1998 1997 1998 1997 1998
------------- ------------- ------------- ------------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Income (loss) $ 281,437 $ (495,189)
Less: Dividends and
accretion on preferred
stock (756,595)
-------------
Basic Earnings per Share
Net Income (loss)
available to common
shareholders 281,437 (1,251,784) 7,500,000 10,375,000 $ .04 $(.12)
====== =====
Stock Options -- -- 222,120 28,270
------------- ------------- ------------- -------------
Diluted Earnings per Share
Net Income (loss)
available to common
shareholders plus
assumed conversions $ 281,437 $ (1,251,784) 7,722,120 10,403,270 $ .04 $(.12)
============= ============= ============= ============= ====== =====
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended September 30
-----------------------------------------------------------------------------------------
Income (Loss) Shares Per-Share Amount
1997 1998 1997 1998 1997 1998
------------- ------------- ------------- ------------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Income (loss) $ (366,972) $ (416,428)
Less: Dividends and
accretion on preferred
stock -- (2,168,533)
------------- -------------
Basic Earnings per Share
Net Income (loss)
available to common
shareholders (366,972) (2,584,961) 7,500,000 10,375,000 $ (.05) $ (.25)
====== ======
Stock Options -- -- 222,120 76,732
------------- ------------- ------------- -------------
Diluted Earnings per Share
Net Income (loss)
available to common
shareholders plus
assumed conversions $ (366,972) $ (2,584,961) 7,722,120 10,451,732 $ (.05) $ (.25)
============= ============= ============= ============= ====== ======
</TABLE>
Net income (loss) per common share has been computed by dividing net income
(loss) by the weighted average number of shares of common stock outstanding
during the periods. During the nine months ended September 30, 1998, the Company
had outstanding 250,000 stock options and warrants to purchase 1,000,000 shares
of common stock, which were antidilutive and were not included in the
calculation as the exercise price exceeded the market value. The Company adopted
SFAS No. 128, "Earnings per Share," effective December 31, 1997. This accounting
change had no effect on previously reported earnings per share (EPS) data.
3. FINANCING ARRANGEMENTS
In connection with the Initial Public Offering, the Company entered into an
amended revolving credit agreement with Compass Bank, (the "Company Credit
Facility"), which provides for a maximum loan amount of $25 million, subject to
borrowing base limitations. Prior to the Offering, the Company utilized various
credit facilities as well as borrowings from certain directors and officers of
the Company. Except for the Company Credit Facility, all of these facilities
and borrowings were terminated with the close of the Offering. Under the
Company Credit Facility, the principal outstanding is due and payable upon
maturity in June 1999 with interest due monthly. The interest rate for
borrowings is calculated at a floating rate based on the Compass index rate or
LIBOR plus 2 percent. The Company's obligations are secured by certain of its
oil and gas properties and cash or cash equivalents included in the borrowing
base.
Under the Company Credit Facility, Compass, in its sole discretion, will make
semiannual borrowing base determinations based upon the proved oil and natural
gas properties of the Company. Compass may redetermine the borrowing base and
the monthly borrowing base reduction at any time and from time to time. The
Company may also request borrowing base redeterminations in addition to its
required semiannual reviews at the Company's cost. At September 30, 1998, the
borrowing base amounted to $5,750,000 with $4.1 million outstanding.
The Company is subject to certain covenants under the terms of the Company
Credit Facility, including, but not limited to, (a) maintenance of specified
tangible net worth and (b) maintenance of a ratio of quarterly cash flow (net
income plus depreciation and other noncash charges, less noncash income) to
quarterly debt service (payments made for principal in connection with the
credit facility plus payments made for principal other than in connection with
such credit facility) of no less than 1.25 to 1.00. The Company Credit Facility
also places restrictions on, among other things, (a) incurring additional
indebtedness, loans and liens, (b) changing the nature of business or business
structure, (c) selling assets and (d) paying dividends.
In December 1997, the Company and Compass entered into an amendment to the
Company Credit Facility that provided for a term loan of $3 million. Interest
for borrowings under the term loan was calculated at a floating rate based on
the Compass index rate plus 2 percent. The amount outstanding under the term
loan as of December 31, 1997 was $3 million. Amounts outstanding under the term
loan were repaid in January 1998.
In September 1998, the Company and Compass Bank entered into an amendment for
the Company Credit Facility that provides for a term loan of $7 million, which
is due on the earlier of (i) the date of closing of the sale by the Company of
convertible subordinated debt or of equity of the Company, (ii) the repayment
of the Company Credit Facility and (iii) September 30, 1999. Interest for
borrowings under the term loan is calculated at a floating rate based on the
Compass index rate plus 2 percent. The amount outstanding under the term loan
as of September 30, 1998 was $3.5 million, and the Company's ability to borrow
additional amounts under the term loan terminates on December 31, 1998. This
loan is guaranteed by certain members of the Board of Directors.
4. SALES OF PREFERRED STOCK AND WARRANTS:
In January 1998, the Company consummated the sale of 300,000 shares of Preferred
Stock and Warrants to purchase 1,000,000 shares of Common Stock to affiliates of
Enron Corp. The net proceeds received by the Company from this transaction were
approximately $28.8 million. A portion of the proceeds were used to repay
indebtedness of $7.95 million.
-6-
<PAGE> 8
The remaining proceeds are being used primarily for oil and natural gas
exploration and development activities in Texas and Louisiana. The Preferred
Stock provides for annual cumulative dividends of $9.00 per share, payable
quarterly in cash or, at the option of the Company until January 15, 2002, in
additional shares of Preferred Stock. Payments for the three and nine months
ended September 30, 1998 were made by the issuance of an additional 7,018.81 and
20,110.53 shares of Preferred Stock, respectively. As of October 15, 1998, there
were 320,110.53 shares of Preferred Stock outstanding. The Warrants, which had a
fair value at issuance of $.30 per share, will be accreted through the term of
the Preferred Stock.
The Preferred Stock is required to be redeemed by the Company (i) on January 8,
2005, or (ii) after a request for redemption from the holders of at least 30,000
shares of the Preferred Stock (or, if fewer than such number of shares of
Preferred Stock are outstanding, all of the outstanding shares of Preferred
Stock) and the occurrence of certain events. Included among those events is for
two consecutive fiscal quarterly periods the quarterly Cash Flow (as defined
below) of the Company is less than the amount of the dividends accrued with
respect to the Preferred Stock. "Cash Flow" means net income prior to preferred
dividends and accretion (i) plus (to the extent included in net income prior to
preferred dividends and accretion) depreciation, depletion and amortization and
other non-cash charges and losses on the sale of property (ii) minus non-cash
income items and required principal payments on indebtedness for borrowed money
with a maturity from the original date of incurrence of such indebtedness of
six months or greater (excluding voluntary prepayments and refinancings, but
including prepayments (other than in connection with refinancings) which would
otherwise be due under such indebtedness within a 60-day period following the
date of such prepayments). The Preferred Stock also may be redeemed at the
option of the Company at any time in whole or in part. All redemptions are at a
price per share, together with dividends accumulated and unpaid to the date of
redemption, decreasing over time from an initial rate of $104.50 per share to
$100 per share. The Warrants (i) enable the holders to purchase 1,000,000 share
of Common Stock at a price of $11.50 per share (payable in cash, by "cashless
exercise" and certain other methods), subject to adjustments, (ii) expire after
a seven-year term, and (iii) are exercisable after one year. If the Company
fails to meet its redemption obligations, the holders of the Preferred Stock
will generally have the right, voting as a class, to elect additional
directors, which in most cases will constitute a majority of the board.
The Company's Cash Flow (as defined above) for the three months ended September
30, 1998 was less than the amount of the dividends accrued with respect to the
Preferred Stock. There can be no assurance that the Company's Cash Flow for the
three months ended December 31, 1998 will exceed the amount of the dividends to
be accrued with respect to the Preferred Stock.
5. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 130, "Reporting Comprehensive Income" ("Statement No. 130") and
Statement No. 131, "Disclosures About Segments of an Enterprise and Related
Information ("Statement No. 131"). In February 1998, the FASB issued Statement
No. 132 "Employers' Disclosure About Pension and Other Post-retirement
Benefits" ("Statement No. 132") that revised disclosure requirements for
pension and other post-retirement benefits. Statement No. 132 does not impact
Carrizo's disclosure or reporting. During the first quarter of 1998, the
Accounting Standards Executive Committee of the American Institute of Certified
Public Accounts issued two Statements of Position ("SOP"), SOP 98-5 "Reporting
on the Costs of Start-up Activities" and SOP 98-1 "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use".
Statement No. 130 established standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. This standard does not currently alter the Company's
reporting or disclosure.
Statement No. 131 established standards for the way public enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also established standards
for related disclosure about products and services, geographic areas and major
customers. Statement No. 131 will not currently impact the Company's disclosure
or reporting.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The Statement establishes accounting and reporting
standards requiring that every derivative instrument, including certain
derivative instruments embedded in other contracts, be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting.
Statement No. 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance. Statement No. 133 cannot be applied retroactively.
Statement No. 133 must be applied to (a) derivative instruments and (b) certain
derivative instruments embedded in hybrid contracts that were issued, acquired,
or substantively modified after December 31, 1997 and, at the company's
election, before January 1, 1998. The Company routinely enters into financial
instrument contracts to hedge price risks associated with the sale of crude oil
and natural gas. Statement No. 133 amends, modifies and supercedes significantly
all of the authoritative literature governing the accounting for and disclosure
of derivative financial instruments and hedging activities. As a result,
adoption of Statement No. 133 will impact the accounting for and disclosure of
the Company's operations. The Company is assessing the impact Statement No. 133
will have on its financial accounting and disclosures and intends to adopt the
provisions of such statement in accordance with the requirements provided by the
statement.
SOP 98-1 establishes guidance on the accounting for the costs of computer
software developed or obtained for internal use. The Company's current
accounting policies adhere to the provisions of the SOP. SOP 98-5 provides
guidance on the accounting for start up costs and organization costs, and must
be adopted for fiscal years beginning after December 15, 1998. At adoption, the
Company will be required to record the cumulative effect of a change in
accounting principle to write off any unamortized start up or organization costs
remaining on the balance sheet. The Company plans to adopt the SOP in the first
quarter of 1999.
-7-
<PAGE> 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors that have affected certain aspects of the Company's financial position
and results of operations during the periods included in the accompanying
unaudited condensed financial statements. This discussion should be read in
conjunction with the discussion under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the annual financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and the unaudited condensed financial statements
included elsewhere herein. Unless otherwise indicated by the context, references
herein to "Carrizo" or "Company" mean Carrizo Oil & Gas, Inc., a Texas
corporation that is the registrant.
GENERAL OVERVIEW
The Company began operations in September 1993 and initially focused on the
acquisition of producing properties. As a result of the increasing availability
of economic onshore 3-D seismic surveys, the Company began to obtain 3-D
seismic data and options to lease substantial acreage in 1995 and began to
drill its 3-D based prospects in 1996. The Company drilled 70 wells in 1997. As
a result of unexpected delays in settling certain land issues, lower than
expected commodity prices, poor weather, and delays of other parties in
non-operated areas, the Company drilled 49 gross wells in the nine months ended
September 30, 1998 which is fewer than number contemplated in the initial
budget. During the fourth quarter, the Company plans to drill between 10
and 20 gross wells, however, the actual number of which may vary depending
upon weather delays and other factors. Depreciation, depletion and
amortization, oil and gas operating expenses and production are expected to
increase. The Company has typically retained the majority of its interests in
shallow, normally pressured prospects and sold a portion of its interests in
deeper, overpressured prospects.
The financial statements are prepared on the basis of a combination of Carrizo
and the entities that were a party to the Combination Transactions. Carrizo and
the entities combined with it in the Combination Transactions were not required
to pay federal income taxes due to their status as partnerships or Subchapter S
corporations, which are not subject to federal income taxation. Instead, taxes
for such periods were paid by the shareholders and partners of such entities. On
May 16, 1997, Carrizo terminated its status as an S corporation and thereafter
became subject to federal income taxes. In accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
the Company established a deferred tax liability in the second quarter of 1997
which resulted in a noncash charge to income of approximately $1.6 million.
The Company has primarily grown through the internal development of properties
within its exploration project areas, although the Company acquired properties
with existing production in the Camp Hill Project in late 1993, the Encinitas
Project in early 1995 and the La Rosa Project in 1996. The Company made these
acquisitions through the use of limited partnerships with Carrizo or Carrizo
Production, Inc. as the general partner. However, as operations have expanded,
the Company has increasingly funded its activities through bank borrowings and
cash flow from operations in order to retain a greater portion of the interests
it develops.
The Company's revenues, profitability, future growth and ability to borrow funds
or obtain additional capital, and the carrying value of its properties are
substantially dependent on the success of the Company's exploration program and
the prevailing prices of oil and natural gas. It is impossible to predict future
oil and natural gas price movements with certainty. Declines in prices received
for oil and natural gas may have an adverse effect on the Company's financial
condition, liquidity, ability to finance capital expenditures, and results of
operations. Lower prices may also impact the amount of reserves that can be
produced economically by the Company.
Due to the instability of oil and natural gas prices, in 1995 the Company began
utilizing, from time to time, certain hedging instruments (e.g., NYMEX futures
contracts) for a portion of its oil and gas production to achieve a more
predictable cash flow, as well as to reduce the exposure to price fluctuations.
The Company's hedging arrangements apply to only a portion of its production,
provide only partial price protection against declines in oil and natural gas
prices and limit potential gains from future increases in prices. Such hedging
arrangements may expose the Company to risk of financial loss in certain
circumstances, including instances where production is less than expected, the
Company's customers fail to purchase contracted quantities of oil or natural
gas, or a sudden unexpected event materially impacts oil or natural gas prices.
The Company accounts for all these transactions as hedging activities and,
accordingly, gains and losses from hedging activities are included in oil and
gas revenues during the period the hedged transactions occur. Historically,
gains and losses from hedging activities have not been material. The Company
expects that the amount of hedges that it has in place will vary
-8-
<PAGE> 10
from time to time. The Company had outstanding hedge positions as of
September 30, 1998 covering 1,092 Mmcf for October 1998 through March 1999 at
an average price of $2.27 (Houston Ship Channel).
The Company uses the full-cost method of accounting for its oil and gas
properties. Under this method, all acquisition, exploration and development
costs, including any general and administrative costs that are directly
attributable to the Company's acquisition, exploration and development
activities, are capitalized in a "full-cost pool" as incurred. The Company
records depletion of its full-cost pool using the unit-of-production method. To
the extent that such capitalized costs in the full-cost pool (net of
depreciation, depletion and amortization and related deferred taxes) exceed the
present value (using a 10 percent discount rate) of estimated future net
after-tax cash flows from proved oil and gas reserves, such excess costs are
charged to operations. The Company has not been required to make any such
write-downs. Once incurred, a write-down of oil and gas properties is not
reversible at a later date. The ceiling test for many full cost companies,
including Carrizo, could be negatively impacted by prolonged unfavorable oil
and gas prices, potentially resulting in the Company recording a non-cash
charge to earnings related to its oil and gas properties during 1998.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1998,
Compared to the Three Months Ended September 30, 1997
Oil and natural gas revenues for the three months ended September 30, 1998
decreased 27 percent to $1,509,000 from $2,069,000 for the same period in 1997.
Production volumes for natural gas during the three months ended September 30,
1998 decreased 13 percent to 604,860 Mcf from 694,873 Mcf for the same period
in 1997. Average gas prices decreased 15 percent to $1.81 per Mcf in the third
quarter of 1998 from $2.14 per Mcf in the same period in 1997. Production
volumes for oil in the third quarter of 1998 decreased 5 percent to 31,317 Bbls
from 33,104 Bbls for the same period in 1997. Average oil prices decreased 25
percent to $13.31 per barrel in the third quarter of 1998 from $17.66 per
barrel in the same period in 1997. The decrease in natural gas production was
due primarily to the curtailment of production as a result of regulatory action
from the Company's Wheeler wells and declines in production from the Company's
Encinitas wells combined with the delay in commencement of production from
several wells drilled during the second quarter of 1998. The decrease in oil
production was due primarily to normal declines in existing wells partially
offset by production from new wells.
The following table summarizes production volumes, average sales prices and
operating revenues for the Company's oil and natural gas operations for the
three months ended September 30, 1997 and 1998:
<TABLE>
<CAPTION>
1998 Period
Compared to 1997 Period
September 30 --------------------------
------------------------- Increase % Increase
1997 1998 (Decrease) (Decrease)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Production volumes-
Oil and condensate (Bbls) 33,104 31,317 (1,787) (5%)
Natural gas (Mcf) 694,873 604,860 (90,013) (13%)
Average sales prices-(1)
Oil and condensate (per Bbl) $ 17.66 $ 13.31 $ (4.35) (25%)
Natural gas (per Mcf) 2.14 1.81 (.33) (15%)
Operating revenues-
Oil and condensate $ 584,457 $ 416,767 $ (167,690) (29%)
Natural gas 1,484,780 1,092,130 (392,650) (26%)
---------- ---------- ----------
Total $2,069,237 $1,508,897 $ (560,340) (27%)
========== ========== ==========
</TABLE>
- -----------------
(1) Includes impact of hedging activities.
Oil and natural gas operating expenses for the three months ended September 30,
1998 increased 26 percent to $732,000 from $583,000 for the same period in
1997. Operating expenses per equivalent unit increased to $.92 per Mcfe in the
third quarter of 1998 from $.65 per in the same period in 1997 primarily
as a result of decreased production of natural gas.
-9-
<PAGE> 11
Depreciation, depletion and amortization (DD&A) expense for the three months
ended September 30, 1998 increased 33 percent to $863,000 from $647,000 for the
same period in 1997. This increase was due to additional seismic and drilling
costs and depreciation on 3-D computer equipment and related software. General
and administrative expense for the three months ended September 30, 1998
increased 70 percent to $662,000 from $388,000 for the same period in 1997 as a
result of increases in the number of employees and related benefits and
increased office space as well as other costs related to being a public company.
Interest income for the three months ended September 30, 1998 decreased to
$12,000 from $44,000 in the third quarter of 1997. Net interest expense for the
three months ended September 30, 1998, decreased to $6,000 from $61,000 in the
same period in 1997. Capitalized interest decreased to $41,000 in the third
quarter of 1998 from $163,000 in the third quarter of 1997.
Income (loss) before income taxes for the three months ended September 30, 1998
decreased 271 percent to a loss of $741,000 from income of $433,000 in the same
period in 1997. Net income (loss) for the three months ended September 30, 1998
decreased to a loss of $495,000 from income of $281,000 for the same period in
1997 primarily as a result of decreased revenue and increased DD&A and general
and administrative expense.
Nine Months Ended September 30, 1998,
Compared to the Nine Months Ended September 30, 1997
Oil and natural gas revenues for the nine months ended September 30, 1998
decreased 9 percent to $5,697,000 from $6,234,000 for the same period in 1997.
Production volumes for natural gas during the nine months ended September 30,
1998 decreased 9 percent to 1,936,029 Mcf from 2,123,056 Mcf for the same period
in 1997. Average gas prices increased 2 percent to $2.26 per Mcf for the nine
months ended September 30, 1998 from $2.21 per Mcf in the same period in 1997.
Production volumes for oil for the nine months ended September 30, 1998
increased 24 percent to 101,131 Bbls from 81,654 Bbls for the same period in
1997. Average oil prices decreased 31 percent to $13.02 per barrel for the nine
months ended September 30, 1998 from $18.97 per barrel in the same period in
1997. The increase in oil production was due primarily to production from new
wells drilled and completed during 1997 and 1998.
The following table summarizes production volumes, average sales prices and
operating revenues for the Company's oil and natural gas operations for the nine
months ended September 30, 1997 and 1998:
<TABLE>
<CAPTION>
1998 Period
Compared to 1997 Period
September 30 --------------------------
------------------------- Increase % Increase
1997 1998 (Decrease) (Decrease)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Production volumes-
Oil and condensate (Bbls) 81,654 101,131 19,477 24%
Natural gas (Mcf) 2,123,056 1,936,029 (187,027) (9%)
Average sales prices-(1)
Oil and condensate (per Bbl) $ 18.97 $ 13.02 $ (5.95) (31%)
Natural gas (per Mcf) 2.21 2.26 .05 2%
Operating revenues-
Oil and condensate $1,549,056 $1,316,453 $ (232,603) (15%)
Natural gas 4,685,205 4,380,090 (305,115) (7%)
---------- ---------- ----------
Total $6,234,261 $5,696,543 $ (537,718) (9%)
========== ========== ==========
</TABLE>
- ----------
(1) Includes impact of hedging activities.
Oil and natural gas operating expenses for the nine months ended September 30,
1998 increased 13 percent to $2,015,000 from $1,779,000 for the same period in
1997 primarily due to the addition of new wells offset by a reduction in costs
on older producing fields. Operating expenses per equivalent unit increased to
$.79 per Mcfe for the nine months ended September 30, 1998 from $.68 per Mcfe in
the same period in 1997 reflecting the cost of operating more wells and as a
result of declining production of natural gas.
Depreciation, depletion and amortization (DD&A) expense for the nine months
ended September 30, 1998 increased 52 percent to $2,483,000 from $1,635,000 for
the same period in 1997. This increase was due to additional seismic and
drilling costs. General and administrative expense for the nine months ended
September 30, 1998 increased 107 percent to $2,054,000 from $993,000 for the
same period in 1997 as a result of increases in the number of employees and
related benefits and increased office space.
-10-
<PAGE> 12
Interest income for the nine months ended September 30, 1998 increased to
$286,000 from $44,000 for the same period in 1997. Net interest expense for the
nine months ended September 30, 1998, decreased to $9,000 from $151,000 in the
same period in 1997. Capitalized interest decreased to $41,000 for the nine
months ended September 30, 1998 from $628,000 for the same period in 1997 as
total interest paid decreased as a result of debt retirement using proceeds from
the Initial Public Offering and the Preferred Stock and Warrants sale.
Income (loss) before income taxes for the nine months ended September 30, 1998
decreased 134 percent to a loss of $579,000 from income of $1,719,000 in the
same period in 1997. Net loss for the nine months ended September 30, 1998
increased to $416,000 from $367,000 for the same period in 1997 primarily as a
result of decreased production and oil prices and increased DD&A and general and
administrative expense. The 1997 period also included a one-time charge for
income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity have included proceeds for the
Offering and from the sale of shares of Preferred Stock and the Warrants (each
as defined below), funds generated by operations, equity capital contributions
and borrowings, primarily under revolving credit facilities.
Cash flows provided by (used in) operations (after changes in working capital)
were $1,520,000 and $(847,000) for the nine months ended September 30, 1997
and 1998, respectively. The decrease in cash flows provided by operations in
1998 as compared to 1997 was due primarily to decreases in trade accounts
payable.
The Company has continued to reinvest a substantial portion of its cash flows
into increasing its 3-D prospect portfolio, improving its 3-D seismic
interpretation technology and funding its drilling program. Oil and gas capital
expenditures were $28.3 million for the nine months ended September 30, 1998.
The Company's drilling efforts resulted in the successful completion of 46 gross
wells (17.5 net) during the year ended December 31, 1997 and 30 gross wells (9.5
net) during the nine months ended September 30, 1998. During the fourth quarter,
the Company plans to drill between 10 and 20 wells, however, the actual number
of wells may vary depending upon weather delays and other factors.
The Company has experienced and expects to continue to experience substantial
working capital requirements primarily due to the Company's active exploration
and development programs and, to a much lesser extent, its technology
enhancement programs. While the Company believes that the net proceeds from the
Offering, net proceeds for the sale of shares of Preferred Stock and the
Warrants, cash flow from operations and borrowings under the Company's credit
facilities should allow the Company to implement its current capital
commitments, the Company is exploring alternatives for additional financing to
ensure to the Company's continued growth, and fund its aggressive development
and exploration program and continued technological enhancement. In the event
such capital resources are not available to the Company, its exploration and
other activities may be curtailed.
FINANCING ARRANGEMENTS
In connection with the Offering, the Company entered into an amended revolving
credit agreement with Compass Bank, (the "Company Credit Facility"), which
provides for a maximum loan amount of $25 million, subject to borrowing base
limitations. Prior to the Offering, the Company utilized various credit
facilities as well as borrowings from certain directors and officers of the
Company. Except for the Company Credit Facility, all of these facilities and
borrowings were terminated with the close of the Offering. Under the Company
Credit Facility, the principal outstanding is due and payable upon maturity in
June 1999 with interest due monthly. The interest rate for borrowings is
calculated at a floating rate based on the Compass index rate or LIBOR plus 2
percent. The Company's obligations are secured by certain of its oil and gas
properties and cash or cash equivalents included in the borrowing base.
Under the Company Credit Facility, Compass, in its sole discretion, will make
semiannual borrowing base determinations based upon the proved oil and natural
gas properties of the Company. Compass may redetermine the borrowing base and
the monthly borrowing base reduction at any time and from time to time. The
Company may also request borrowing base redeterminations in addition to its
required semiannual reviews at the Company's cost. At September 30, 1998, the
borrowing base amounted to $5,750,000 with $4.1 million outstanding.
The Company is subject to certain covenants under the terms of the Company
Credit Facility, including, but not limited to, (a) maintenance of specified
tangible net worth and (b) maintenance of a ratio of quarterly cash flow (net
income plus depreciation and other noncash charges, less noncash income) to
quarterly debt service (payments made for principal in connection with the
credit facility plus payments made for principal other than in connection with
such credit facility) of no less than 1.25 to 1.00. The Company Credit Facility
also places restrictions on, among other things, (a) incurring additional
indebtedness, loans and liens, (b) changing the nature of business or business
structure, (c) selling assets and (d) paying dividends.
-11-
<PAGE> 13
In December 1997, the Company and Compass entered into an amendment to the
Company Credit Facility that provided for a term loan of $3 million. Interest
for borrowings under the term loan was calculated at a floating rate based on
the Compass index rate plus 2 percent. The amount outstanding under the term
loan as of December 31, 1997 was $3 million. Amounts outstanding under the term
loan were repaid in January 1998.
In September 1998, the Company and Compass Bank entered into an amendment for
the Company Credit Facility that provides for a term loan of $7 million, which
is due on the earlier of (i) the date of closing of the sale by the Company of
convertible subordinated debt or of equity of the Company, (ii) the repayment of
the Company Credit Facility and (iii) September 30, 1999. Interest for
borrowings under the term loan is calculated at a floating rated based on the
Compass index rate plus 2 percent. The amount outstanding under the term loan as
of September 30, 1998 was $3.5 million, and the Company's ability to borrow
additional amounts under the term loan terminates on December 31, 1998. This
loan is guaranteed by certain members of the Board of Directors.
In January 1998, the Company consummated the sale of 300,000 shares of Preferred
Stock and Warrants to purchase 1,000,000 shares of Common Stock to affiliates of
Enron Corp. The net proceeds received by the Company from this transaction were
approximately $28.8 million. A portion of the proceeds was used to repay
indebtedness, as described above. The remaining balance is expected to be used
primarily for oil and natural gas exploration and development activities in
Texas and Louisiana. The Preferred Stock provides annual cumulative dividends of
$9.00 per share, payable quarterly in cash, or, at the option of the Company
until January 15, 2002, in additional shares of Preferred Stock. Payments for
the three and nine months ended September 30, 1998 were made by the issuance of
an additional 7,018.81 and 20,110.53 shares of Preferred Stock, respectively. As
of October 15, 1998 there were 320,110.53 shares of Preferred Stock outstanding.
The Preferred Stock is required to be redeemed by the Company (i) on January 8,
2005, or (ii) after the occurrence of certain events, including (a) certain
failures to declare and pay any two dividends, (b) certain breaches of
provisions relating to the Preferred Stock, (c) for two consecutive fiscal
quarterly periods the quarterly Cash Flow (as defined below) of the Company is
less than the amount of the dividends accrued with respect to the Preferred
Stock, (d) certain failures to pay or accelerations with respect to indebtedness
for borrowed money, (e) certain violations of the shareholders' agreement
relating to the Preferred Stock and (f) certain sales or dispositions of
substantially all of the Company's assets. "Cash Flow" means net income prior to
preferred dividends and accretion (i) plus (to the extent included in net income
prior to preferred dividends and accretion) depreciation, depletion and
amortization and other non-cash charges and losses on the sale of property (ii)
minus non-cash income items and required principal payments on indebtedness for
borrowed money with a maturity from the original date of incurrence of such
indebtedness of six months or greater (excluding voluntary prepayments and
refinancings, but including prepayments (other than in connection with
refinancings) which would otherwise be due under such indebtedness within a
60-day period following the date of such prepayments). The Preferred Stock also
may be redeemed at the option of the Company at any time in whole or in part.
All redemptions are at a price per share, together with dividends accumulated
and unpaid to the date of redemption, decreasing over time from an initial rate
of $104.50 per share to $100.00 per share. If the Company fails to meet its
redemption obligations, the holders of the Preferred Stock will generally have
the right, voting separately as a class, to elect additional directors, which
in most cases will constitute a majority of the board.
The Company's Cash Flow (as defined above) for the three months ended September
30, 1998 was less than the amount of the dividends accrued with respect to the
Preferred Stock. There can be no assurance that the Company's Cash Flow for the
three months ended December 31, 1998 will exceed the amount of the dividends to
be accrued with respect to the Preferred Stock.
EFFECTS OF INFLATION AND CHANGES IN PRICE
The Company's results of operations and cash flows are affected by changing oil
and gas prices. If the price of oil and gas increases (decreases), there could
be a corresponding increase (decrease) in the operating cost that the Company is
required to bear for operations, as well as an increase (decrease) in revenues.
Inflation has had a minimal effect on the Company.
YEAR 2000 DISCLOSURE
The "Year 2000 Issue" is a general term used to refer to certain business
implications of the arrival of the new millennium. In simple terms, on January
1, 2000, all computerized systems that use the two-digit convention to identify
the applicable year, including both information technology systems and
non-information technology systems that use embedded technology could fail
completely or create erroneous data as a result of the system failing to
recognize the two digit internal date "00" as representing the year 2000.
-12-
<PAGE> 14
The Company has completed its initial assessment of Year 2000 compliance of its
internal information technology systems, which consist primarily of financial
and accounting systems and geological evaluation systems, and does not believe
that these systems have any material issues with respect to Year 2000
compliance. The Company's internal information technology systems are all new
and widely utilized. Its vendors have advised the Company that all of these
systems are either Year 2000 compliant or can be easily upgraded to be Year 2000
compliant. The Company anticipates that its Year 2000 remediation efforts for
information technology systems, consisting primarily of software upgrades, will
continue through 1999, and anticipates incurring less than $10,000 in connection
with these efforts. The Company is aware of its exposure to embedded technology
and assessment is ongoing.
The Company has not identified any non-information technology systems that use
embedded technology on which it relies, however such assessment is expected to
continue through 1999.
Through communications with industry partners and others, the Company is also
evaluating the risk presented by potential Year 2000 non-compliance of third
parties. Because such risks vary substantially, companies are being contacted
based on the estimated magnitude of the risk posed to the Company by their
potential Year 2000 non-compliance. The Company anticipates that these efforts
will continue through 1999 and will not result in significant costs to the
Company. At this time the Company is unaware of situations where material
disruptions of its business activities are likely to occur because of Year 2000
non-compliance by third parties.
The Company's assessment of its Year 2000 issues involves many assumptions
concerning future events. There can be no assurance that the Company's
assumptions will prove accurate, and actual results could differ significantly
from the assumptions. In conduction its Year 2000 compliance efforts, the
Company has relied primarily on vendor representations with respect to its
internal computerized systems and representations from third parties with which
the Company has business relationships and has not independently verified these
representations. There can be no assurance that these representations will prove
to be accurate. A Year 2000 failure could result in a business disruption that
adversely effects the Company's business, financial condition or results of
operations. Although it is not currently aware of any likely business
disruption, the Company is developing contingency plans to address Year 2000
failures and expects this work to continue through 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not required or not applicable.
-13-
<PAGE> 15
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
From time to time the Company is a party to various legal proceedings
arising in the ordinary course of business. The Company is not
currently a party to any litigation that it believes could have a
material adverse effect on the financial position of the Company.
Item 2 - Changes in Securities and Use of Proceeds
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
FORWARD LOOKING STATEMENTS
The statements contained in all parts of this document, including, but not
limited to, those relating to the Company's schedule, targets, estimates or
results of future drilling, budgeted wells, increases in wells, budgeted and
other future capital expenditures, use of offering proceeds, effects of
litigation, expected production or reserves, increases in reserves, acreage
working capital requirements, hedging activities, the ability of expected
sources of liquidity to implement its business strategy, and any other
statements regarding future operations, financial results, business plans and
cash needs and other statements that are not historical facts are forward
looking statements. When used in this document, the words "anticipate,"
"estimate," "expect," "may," "project," "believe" and similar expression are
intended to be among the statements that identify forward looking statements.
Such statements involve risks and uncertainties, including, but not limited to,
those relating to the Company's dependence on its exploratory drilling
activities, the volatility of oil and natural gas prices, the need to replace
reserves depleted by production, operating risks of oil and natural gas
operations, the Company's dependence on its key personnel, factors that affect
the Company's ability to manage its growth and achieve its business strategy,
risks relating to, limited operating history, technological changes, significant
capital requirements of the Company, the potential impact of government
regulations, litigation, competition, the uncertainty of reserve information and
future net revenue estimates, property acquisition risks and other factors
detailed in the Registration Statement and the Company's other filings with the
Securities and Exchange Commission. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual outcomes may vary materially from those indicated.
Item 6 - Exhibits and Reports on Form 8-K
Exhibits
Exhibit
Number Description
- ------- -----------
+2.1 -- Combination Agreement by and among the Company, Carrizo Production,
Inc., Encinitas Partners Ltd., La Rosa Partners Ltd., Carrizo Partners
Ltd., Paul B. Loyd, Jr., Steven A. Webster, S.P. Johnson IV, Douglas
A.P. Hamilton and Frank A. Wojtek dated as of June 6, 1997
(Incorporated herein by reference to Exhibit 2.1 to the Company's
Registration Statement on Form S-1 (Registration No. 333-29187)).
+3.1 -- Amended and Restated Articles of Incorporation of the Company
(Incorporated herein by reference to Exhibit 3.1 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997).
-14-
<PAGE> 16
+3.2 -- Statement of Resolution Establishing Series of Shares Designated 9%
Series A Preferred Stock (Incorporated herein by reference to Exhibit
3.2 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
+3.3 -- Amended and Restated Bylaws of the Company, as amended by Amendment
No. 1 (incorporated herein by reference to Exhibit 3.2 to the
Company's Registration Statement on Form 8-A (Registration No.
000-22915)).
4.1 -- Limited Guaranty by Douglas A. P. Hamilton for the benefit of Compass
Bank.
4.2 -- Notice of Final Agreement with respect to a term loan from Compass
Bank.
4.3 -- Limited Guaranty by Paul B. Loyd, Jr. for the benefit of Compass Bank.
4.4 -- Limited Guaranty by Steven A. Webster for the benefit of Compass Bank.
4.5 -- Fourth Amendment to First Amended, Restated, and Combined Loan
Agreement by and between Carrizo Oil & Gas, Inc. and Compass Bank.
27.1 -- Financial Data Schedule.
+ Incorporated herein by reference as indicated.
Reports on Form 8-K
The Company did not file any reports on a Form 8-K during the quarter
ended September 30, 1998.
-15-
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Carrizo Oil & Gas, Inc.
(Registrant)
Date: November 16, 1998 By: /s/ S. P. Johnson IV
------------------------
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 16, 1998 By: /s/ Frank A. Wojtek
-----------------------
Chief Financial Officer
(Principal Financial and
Accounting Officer)
-16-
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
+2.1 -- Combination Agreement by and among the Company, Carrizo Production,
Inc., Encinitas Partners Ltd., La Rosa Partners Ltd., Carrizo Partners
Ltd., Paul B. Loyd, Jr., Steven A. Webster, S.P. Johnson IV, Douglas
A.P. Hamilton and Frank A. Wojtek dated as of June 6, 1997
(Incorporated herein by reference to Exhibit 2.1 to the Company's
Registration Statement on Form S-1 (Registration No. 333-29187)).
+3.1 -- Amended and Restated Articles of Incorporation of the Company
(Incorporated herein by reference to Exhibit 3.1 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997).
+3.2 -- Statement of Resolution Establishing Series of Shares Designated 9%
Series A Preferred Stock (Incorporated herein by reference to Exhibit
3.2 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
+3.3 -- Amended and Restated Bylaws of the Company, as amended by Amendment
No. 1 (incorporated herein by reference to Exhibit 3.2 to the
Company's Registration Statement on Form 8-A (Registration No.
000-22915).
4.1 -- Limited Guaranty by Douglas A. P. Hamilton for the benefit of Compass
Bank.
4.2 -- Notice of Final Agreement with respect to a term loan from Compass
Bank.
4.3 -- Limited Guaranty by Paul B. Loyd, Jr. for the benefit of Compass Bank.
4.4 -- Limited Guaranty by Steven A. Webster for the benefit of Compass Bank.
4.5 -- Fourth Amendment to First Amended, Restated, and Combined Loan
Agreement by and between Carrizo Oil & Gas, Inc. and Compass Bank.
27.1 -- Financial Data Schedule.
</TABLE>
+ Incorporated herein by reference as indicated.
<PAGE> 1
EXHIBIT 4.1
LIMITED GUARANTY
THIS LIMITED GUARANTY ("Guaranty"), is made and entered into
as of September 24, 1998 by DOUGLAS A. P. HAMILTON ("Guarantor"), for the
benefit of COMPASS BANK, a Texas state chartered banking institution ("Bank").
W I T N E S S E T H:
WHEREAS, on the date hereof, Bank has advanced or will advance
certain funds to CARRIZO OIL & GAS, INC., a Texas corporation ("Borrower")
pursuant to the Fourth Amendment of even date herewith to that certain First
Amended and Restated Loan Agreement dated August 28, 1997, as amended by the
First Amendment thereto dated December 23, 1997, the Second Amendment thereto
dated December 30, 1997 and the Third Amendment thereto dated July 30, 1998
(the "Loan Agreement"), specifically including the indebtedness evidenced by
that certain term promissory note dated of even date herewith, executed by
Borrower and payable to Bank, in the principal amount of $7,000,000.00 and all
other notes given in substitution therefor or in modification, renewal or
extension thereof in whole or in part (the "Second Term Note");
WHEREAS, as a condition to Bank's entry into said Fourth
Amendment and its advance of funds to Borrower thereunder, Guarantor has agreed
to enter into this Guaranty of certain indebtedness owed or to be owed by
Borrower to Bank; and
WHEREAS, Guarantor will directly and indirectly benefit from
the Second Term Loan, as defined in the Loan Agreement, as amended by the
Fourth Amendment and evidenced by the Second Term Note.
NOW, THEREFORE, for and in consideration of the premises and
the extension of credit by Bank to Borrower pursuant to the Loan Agreement, and
for TEN AND NO/100 DOLLARS ($10.00) and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and to induce
Bank to execute the Fourth Amendment, Bank and Guarantor hereby agree as
follows:
1. Guarantor unconditionally guarantees the prompt
payment to Bank of the following (the "Guaranteed Indebtedness"):
(a) Any and all indebtedness, obligations (including reimbursement
obligations) and liabilities of Borrower to Bank now existing
or hereafter incurred in connection with or incident to the
Second Term Loan, under or arising out of or in connection
with any documents executed in connection with any
indebtedness of Borrower to Bank in connection with the Second
Term Loan
<PAGE> 2
or any promissory note or notes executed by Borrower at any
time in connection with the Second Term Loan, whether for
principal, interest, penalty interest, fees, expenses or
otherwise, including, without limitation, all sums, principal,
accrued interest and other amounts owing with respect to the
Second Term Note, together with any and all renewals,
extensions and/or rearrangements thereof, whether with or
without notice to Guarantor;
(b) All interest, charges, expenses, attorneys' or other fees and
any other sums payable to or incurred by the Bank in
connection with the execution, administration or enforcement
of the Bank's rights and remedies under the Second Term Note;
and
(c) All post-petition interest on the Guaranteed Indebtedness in
the event of a bankruptcy or insolvency of the Borrower.
Provided, however, that Guarantor's obligation hereunder shall never exceed
$3,500,000.00. Guarantor shall at all times maintain at least $4,000,000 in
Liquid Assets. To evidence such maintenance of Liquid Assets, Guarantor shall
deliver to Bank, on or before the forty-fifth (45th) day after the end of each
calendar quarter, a Certificate of Liquidity in the form attached hereto as
Exhibit "A", certifying the value of such Guarantor's Liquid Assets effective
as of the end of each calendar quarter. "Liquid Assets" shall mean Cash on
hand and balances in checking accounts available for immediate withdrawal, the
value, from time to time, of short-term, highly liquid investments that are
readily convertible to Cash, such as treasury bills, commercial paper and money
market funds, and the value, from time to time, of unrestricted shares of stock
that are publicly traded on the New York Stock Exchange, the American Stock
Exchange, or NASDAQ, and otherwise acceptable to the Bank, but only to the
extent the foregoing are free from all liens, claims and encumbrances,
including liens or security interests in favor of the Bank. "Cash" shall mean
legal tender of the United States of America.
2. If the Guaranteed Indebtedness is not paid by
Guarantor when due, as required herein, and this Guaranty is placed in the
hands of an attorney for collection, or if this Guaranty is enforced by suit or
through the Bankruptcy Court or through any judicial proceedings, Guarantor
shall pay to Bank an amount equal to its reasonable attorneys' fees and
collection costs incurred by Bank in the collection of the Guaranteed
Indebtedness.
3. This is an absolute, complete and continuing
Guaranty, and no notice of the Guaranteed Indebtedness or any extension of
credit already or hereafter contracted by or extended to Borrower need be given
to Guarantor, nor shall anything herein contained be a limitation upon the
amount of credit which may be extended to Borrower, the numbers of transactions
with Borrower, repayments by Borrower to Bank, or the allocation by Bank of
repayment by Borrower, it being the understanding of the Guarantor that
Guarantor's liability shall continue hereunder so long as any of the Guaranteed
Indebtedness remains unpaid. Borrower and Bank may rearrange, increase,
decrease, extend and/or renew the Guaranteed Indebtedness without notice to
Guarantor and in such
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<PAGE> 3
event Guarantor will remain fully bound hereunder on the Guaranteed
Indebtedness. The obligations of Guarantor hereunder shall not be released,
impaired or diminished by any amendment, modification or alteration of the Loan
Agreement or the Second Term Note. Guarantor expressly waives all notices of
any kind, presentment for payment, demand for payment, protest, notice of
protest, notice of intent to accelerate, notice of acceleration, dishonor,
diligence, notice of any amendment of the Loan Agreement, notice of any adverse
change in the financial condition of Borrower, notice of any adjustment,
indulgence, forbearance or compromise that might be granted or given by Bank to
Borrower, and also notice of acceptance of this Guaranty, acceptance on the
part of Bank being conclusively presumed by its request for this Guaranty and
delivery of the same to it. The liability and obligations of Guarantor
hereunder shall not be affected or impaired by any action or inaction by Bank
in regard to any matter waived or notice of which is waived by Guarantor in
this paragraph or in any other paragraph of this Guaranty.
4. Guarantor authorizes Bank, without notice or demand
and without affecting Guarantor's liability hereunder, (a) to take and hold
security for the payment of this Guaranty and/or the Guaranteed Indebtedness,
and to exchange, enforce, waive and/or release any such security; (b) to apply
such security and direct the order or manner of sale thereof as Bank in its
discretion may determine; (c) to obtain a guaranty of the Guaranteed
Indebtedness from any one or more other persons, corporations or entities
whomsoever and to enforce, waive, rearrange, modify, limit or release at any
time or times such other persons, corporations or entities from their
obligations under such guaranties; (d) to waive or delay the exercise of any of
its rights or remedies against the Borrower or any other person or entity; (e)
to renew, extend, or modify the terms of any of the Guaranteed Indebtedness or
any instrument or agreement evidencing the same; and (f) to fully or partially
release at any time any Guarantor which executes this Guaranty whether with or
without consideration.
5. Guarantor waives any right to require Bank to (a)
proceed against, or make any effort at the collection of the Guaranteed
Indebtedness from Borrower or any other guarantor or party liable for the
Guaranteed Indebtedness; (b) proceed against or exhaust any collateral held by
Bank; or (c) pursue any other remedy in Bank's power whatsoever. Guarantor
further waives any and all rights and remedies which Guarantor may have or be
able to assert by reason of the provisions of Chapter 34 of the Texas Business
and Commerce Code. Guarantor waives any defense arising by reason of any
disability, lack of corporate authority or power, or other defense of Borrower
or any other guarantor of the Guaranteed Indebtedness, and Guarantor shall
remain liable under this Guaranty regardless of whether Borrower or any other
guarantor be found not liable on the Guaranteed Indebtedness for any reason
including, without limitation, insanity, minority, disability, bankruptcy,
insolvency, death or corporate dissolution, even though rendering the
Guaranteed Indebtedness void or unenforceable or uncollectible as against
Borrower or any other guarantor. This Guaranty shall continue to be effective
or be reinstated, as the case may be, if at any time any payment of any of the
Guaranteed Indebtedness is rescinded or must otherwise be returned by Bank upon
the insolvency, bankruptcy or reorganization of Borrower or otherwise, all as
though such payment had not been made and will, thereupon, guarantee payment of
such amount as to which refund or restitution has been made, together with
interest accruing thereon subsequent to the
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<PAGE> 4
date of refund or restitution at the applicable rate under the Loan Agreement
and collection costs and fees (including, without limitation, attorneys' fees)
applicable thereto, subject to the limitations set forth in Sections 1 and 10
hereof.
6. The liability and obligations of Guarantor hereunder
shall not be affected or impaired by (a) the failure of Bank or any other party
to exercise diligence or reasonable care in the preservation, protection or
other handling or treatment of all or any part of the collateral securing
payment of all or any part of the Guaranteed Indebtedness, (b) the failure of
any security interest or lien intended to be granted or created to secure the
Guaranteed Indebtedness to be properly perfected or created or the
unenforceability of any security interest or lien for any other reason, or (c)
the subordination of any such security interest or lien to any other security
interest or lien.
7. Bank may pursue any remedy without altering the
obligations of Guarantor hereunder and without liability to Guarantor, even
though Bank's pursuit of such remedy may result in Guarantor's loss of rights
of subrogation or to proceed against others for reimbursement or contribution
or any other right. In no event shall any payment by Guarantor entitle it, by
subrogation or otherwise, to any rights against Borrower or any right to
participate in any security now or hereafter held by Bank prior to payment in
full of all of the Guaranteed Indebtedness and, in any event, not until 367
days after the making of any payment and/or the granting of any security
interest by Borrower or any other guarantor to Bank in connection with the
Guaranteed Indebtedness.
8. Should the status of Borrower change in any way,
including, without limitation, as a result of any dissolution of Borrower, any
sale, lease or transfer of any or all of the assets of Borrower, any changes in
the shareholders of Borrower, or any reorganization of Borrower, this Guaranty
shall continue, and shall cover the Guaranteed Indebtedness under the new
status.
9. The liability of Guarantor for the payment of the
Guaranteed Indebtedness shall be primary and not secondary.
10. Guarantor is familiar with and has independently
reviewed the books and records regarding the financial condition of Borrower
and is familiar with the value of any and all collateral intended to be granted
as security for the payment of the Guaranteed Indebtedness; Guarantor is not,
however, relying on such financial condition or such collateral as an
inducement to enter into this Guaranty. As of the date hereof, and after
giving effect to this Guaranty and the contingent obligations evidenced hereby,
Guarantor is, and will be, solvent, and has and will have assets and property
which, valued fairly, exceed such Guarantor's obligations, debts and
liabilities, and has and will have assets and property sufficient to satisfy,
repay and discharge the same. Notwithstanding the definition of Guaranteed
Indebtedness herein, the liability of Guarantor hereunder is limited to (a) the
lowest amount that would render this Guaranty void against creditors or
creditors' representatives under any fraudulent conveyance or similar law or
under Sections 544 or 548 of the Bankruptcy Code of 1978, as revised, minus (b)
$1.00.
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<PAGE> 5
11. If Borrower shall at any time or times be or become
obligated to Bank for payment of any indebtedness other than the Guaranteed
Indebtedness, Bank (without in anywise impairing its rights hereunder or
diminishing Guarantor's liability) shall be at liberty at any time or times to
apply to such other indebtedness any amounts paid to or received by or coming
into the hands of Bank from or attributable to Borrower or any other person or
party liable for any of such other indebtedness or from or attributable to or
representing proceeds of any property or security held by Bank securing payment
of such other indebtedness or any credits, deposits or offsets due Borrower or
other party liable on any of such other indebtedness (whether or not the
Guaranteed Indebtedness or such other indebtedness are then due), it being
intended to give Bank the right to apply all payments, credits and offsets and
amounts becoming available for application on or credit against the
indebtedness of Borrower to Bank (now or hereafter existing) first toward
payment and satisfaction of the Borrower's indebtedness not hereby guaranteed,
before making application thereof on or against the Guaranteed Indebtedness.
12. Guarantor represents and warrants that this Guaranty
accurately and completely embodies the entire agreement between Guarantor and
Bank with respect to the respective rights, obligations and liabilities of
Guarantor and Bank hereunder, and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof. Guarantor
acknowledges that Guarantor is not relying on any representations (oral or
otherwise) of Bank, or any other party, other than as expressly described in
this Guaranty.
13. This Guaranty was reviewed by Guarantor, and
Guarantor acknowledges and agrees that Guarantor (a) understands fully all of
the terms of this Guaranty and the consequences and implications of Guarantor's
execution of this Guaranty, and (b) has been afforded an opportunity to have
this Guaranty reviewed by, and to discuss the terms, consequences and
implications of this Guaranty with an attorney or other such persons as
Guarantor may have desired.
14. This Guaranty is and shall be in every particular
available to the successors and assigns of Bank and is and shall always be
fully binding upon the heirs, executors, administrators, successors and assigns
of Guarantor. This Guaranty is intended for and shall inure to the benefit of
Bank and each and every other person who shall from time to time be or become
the owner or holder of any of the Guaranteed Indebtedness, and each and every
reference herein to "Bank" shall also include and refer to each and every
successor or assignee of Bank at any time holding or owning any part of or
interest in any part of the Guaranteed Indebtedness. This Guaranty shall be
transferable and negotiable, with the same force and effect and to the same
extent that the Guaranteed Indebtedness is transferable, it being understood
and stipulated that upon the assignment or transfer by Bank of any of the
Guaranteed Indebtedness the legal or beneficial owner of the Guaranteed
Indebtedness (or part thereof or interest therein thus transferred or assigned
by Bank) shall also, unless provided otherwise by Bank in its assignment, have
and may exercise all of the rights granted to Bank under this Guaranty to the
extent of the part of or interest in the Guaranteed Indebtedness thus assigned
or transferred to such person or entity. Guarantor expressly waives notice of
transfer or assignment of the Guaranteed Indebtedness, or any part thereof, or
of the rights of Bank hereunder.
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<PAGE> 6
15. All amounts becoming payable by Guarantor to Bank
under this Guaranty shall be payable at Bank's offices in the City of Houston,
Harris County, Texas.
16. Any notice hereunder to Guarantor shall be in
writing, duly stamped and addressed to Guarantor at the address shown below
Guarantor's signature hereto, or at such other address as Guarantor may by
written notice, received by Bank, have designated as Guarantor's address for
such purpose. Any notice provided for herein shall become effective upon the
earlier of (a) the first business day of Bank following the deposit in a
regularly maintained postal deposit box of the United States Postal Service, or
(b) the day of its receipt by Guarantor; but actual notice, however given or
received, shall always be effective. The preceding sentence shall not be
construed in anywise to affect or impair any waiver of notice or demand herein
provided or to require giving of notice or demand to or upon Guarantor in any
situation or for any reason.
17. It is the intention of the parties hereto to comply
strictly with all applicable usury laws; accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Guaranty, or in any
documents securing payment hereof or otherwise relating hereto, in no event
shall this Guaranty or such documents require the payment or permit the
collection of an aggregate amount of interest in excess of the maximum amount
permitted by such laws, including the laws of the State of Texas and the laws
of the United States of America. If any such excess of interest is contracted
for, charged or received under this Guaranty or under the terms of any
documents securing payment hereof or otherwise relating hereto, or if under any
circumstances, the amount of interest (including all amounts payable hereunder
which are not denominated as interest but which constitute interest under the
applicable laws) contracted for, charged or received under this Guaranty shall
exceed the maximum amount of interest permitted by the applicable usury laws,
then in any such event (a) the provisions of this paragraph shall govern and
control, (b) Guarantor shall not be obligated to pay the amount of such
interest to the extent that it is in excess of the maximum amount of interest
permitted by the applicable usury laws, (c) any such excess interest which may
have been collected shall be either applied as a credit against the then unpaid
Guaranteed Indebtedness or, if the Guaranteed Indebtedness shall have been paid
in full, refunded to Guarantor, and (d) the effective rate of interest shall be
automatically reduced to the maximum lawful contract rate allowed under the
applicable usury laws as now or hereafter construed by the courts having
jurisdiction thereof. It is further agreed that without limitation of the
foregoing, all calculations of the rate of interest contracted for, charged or
received under this Guaranty or under such other documents which are made for
the purpose of determining whether such rate exceeds the maximum lawful
contract rate, shall be made, to the extent permitted by applicable usury laws,
by amortizing, prorating, allocating and spreading in equal parts during the
full period during which this Guaranty is to be in effect, all interest at any
time contracted for, charged or received from Guarantor or otherwise by the
holder or holders hereof in connection with this Guaranty.
18. In case any of the provisions of this Guaranty shall
for any reason be held to be invalid, illegal, or unenforceable, such
invalidity, illegality, or unenforceability shall not affect
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<PAGE> 7
any other provisions hereof, and this Guaranty shall be construed as if such
invalid, illegal, or unenforceable provision had never been contained herein.
19. In all instances herein, the singular shall be
construed to include the plural and the masculine to include the feminine.
20. This Guaranty may be executed in multiple
counterparts each of which shall constitute an original, but all of which when
taken together shall constitute one and the same Guaranty.
21. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF
AMERICA. All actions or proceedings with respect to the Guaranteed
Indebtedness or this Guaranty may be instituted in the Courts of the State of
Texas located in Harris County, Texas, or the United States District Court for
the Southern District of Texas, and by execution and delivery of this Guaranty,
Guarantor irrevocably and unconditionally submits to the jurisdiction (both
subject matter and personal) of each such Court, and irrevocably and
unconditionally waives (a) any objection Guarantor may now or hereafter have to
the laying of venue in any such Courts, (b) any claim that any action or
proceeding brought in any of such Courts has been brought in an inconvenient
forum, and (c) any right to bring any action or proceeding with respect to the
Guaranteed Indebtedness or this Guaranty in any forum other than the courts of
the State of Texas located in Harris County, Texas, or the United States
District Court for the Southern District of Texas.
22. Guarantor represents and warrants to Bank that this
Guaranty is a valid, binding and enforceable obligation of Guarantor and does
not violate any provisions of any law, rule, regulation, contract or agreement
enforceable against Guarantor.
23. Guarantor hereby agrees that a counterpart of this
Guaranty bearing the signature of Guarantor may be effectively delivered to the
Bank by the delivery of an electronic facsimile sent via telecopier; and that
Guarantor shall be bound by his facsimile signature thereon.
EXECUTED this 24th day of September, 1998.
GUARANTOR:
----------------------------------------
DOUGLAS A. P. HAMILTON
Address: c/o Anatar Investments, Inc.
45 Rockefeller Plaza
20th Floor
New York, NY 10111
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<PAGE> 8
STATE OF NEW YORK
COUNTY OF NEW YORK
We, ___________________________ and _________________________,
sign our names to this instrument as witnesses to the signature of DOUGLAS A. P.
HAMILTON (the "Signor"), and being duly sworn, do hereby declare to the
undersigned authority that we are personally acquainted with the Signor, that
we know the Signor to be the person that he purports to be through his
signature, that he has signed this instrument willingly, and that each of us,
in the presence and hearing of the Signor, the undersigned authority, and each
other, hereby execute this instrument as witnesses to the Signor's signing, and
that to the best of our knowledge, the Signor is twenty-one years of age or
older, of sound mind, and under no constraint or undue influence.
WITNESSES:
-----------------------------------
Printed Name:
-----------------------------------
Printed Name:
STATE OF NEW YORK
COUNTY OF NEW YORK
The foregoing instrument was subscribed, sworn to and
acknowledged before me by DOUGLAS A. P. HAMILTON the Signor, and was also
subscribed and sworn to before me by _________________________and _______
__________________, as witnesses, this ______ day of September, 1996.
------------------------
Notary Public in and for
The State of
-----------
[Notarial Seal or Stamp]
-8-
<PAGE> 1
EXHIBIT 4.2
NOTICE OF FINAL AGREEMENT
TO: CARRIZO OIL & GAS, INC.
14811 ST. MARY'S LANE, SUITE 148
HOUSTON, TEXAS 77079
ATTENTION: FRANK A. WOJTEK, VICE PRESIDENT
(COLLECTIVELY, WHETHER ONE OR MORE, "BORROWER")
As of the effective date of this Notice, Borrower and COMPASS BANK ("Bank") have
consummated a transaction pursuant to which Bank has agreed to make a loan or
loans to Borrower, or to renew and extend an existing loan or loans to Borrower,
which is comprised of a reducing revolving loan in the amount of up to
$75,000,000 and a term loan in the amount of $7,000,000.00 (collectively, the
"Loan").
In connection with the Loan, Borrower and Bank and the guarantors and other
obligors, if any (collectively, whether one or more, "Other Obligors") have
executed and delivered certain agreements, instruments and documents
(collectively hereinafter referred to as the "Written Loan Agreement").
It is the intention of Borrower, Bank and Other Obligors that this Notice be
incorporated by reference into each of the written agreements, instruments and
documents comprising the Written Loan Agreement. Borrower, Bank and Other
Obligors each warrants and represents that the entire agreement made and
existing by or among Borrower, Bank and Other Obligors with respect to the Loan
is contained within the Written Loan Agreement, as amended and supplemented
hereby, and that no agreements or promises have been made by, or exist by or
among, Borrower, Bank and Other Obligors that are not reflected in the Written
Loan Agreement.
THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Each party hereto acknowledges that this Agreement may be executed in several
counterparts by each party at different times and in different locations; that
each separate counterpart bearing the signature of any party may be effectively
delivered to the other parties by the delivery of an electronic facsimile sent
via telecopier; that each party so delivering any such counterpart shall be
bound by its facsimile signature thereon; and that the signature pages from
counterparts signed by each party may be collated into one or more copies of
this agreement, which shall constitute one and the same agreement among all
parties hereto.
Effective Date: September 24, 1998.
ACKNOWLEDGED AND AGREED
BORROWER: BANK:
CARRIZO OIL & GAS, INC. COMPASS BANK
By: By:
-------------------------------- --------------------------------
Frank A. Wojtek Kathleen J. Bowen
Vice President Vice President
GUARANTORS:
- ---------------------------------
Paul B. Loyd, Jr.
- ---------------------------------
Steven A. Webster
- ---------------------------------
Douglas A.P. Hamilton
<PAGE> 1
LIMITED GUARANTY
THIS LIMITED GUARANTY ("Guaranty"), is made and entered into
as of September 24, 1998 by PAUL B. LOYD, JR. ("Guarantor"), for the benefit of
COMPASS BANK, a Texas state chartered banking institution ("Bank").
W I T N E S S E T H:
WHEREAS, on the date hereof, Bank has advanced or will advance
certain funds to CARRIZO OIL & GAS, INC., a Texas corporation ("Borrower")
pursuant to the Fourth Amendment of even date herewith to that certain First
Amended and Restated Loan Agreement dated August 28, 1997, as amended by the
First Amendment thereto dated December 23, 1997, the Second Amendment thereto
dated December 30, 1997 and the Third Amendment thereto dated July 30, 1998 (the
"Loan Agreement"), specifically including the indebtedness evidenced by that
certain term promissory note dated of even date herewith, executed by Borrower
and payable to Bank, in the principal amount of $7,000,000.00 and all other
notes given in substitution therefor or in modification, renewal or extension
thereof in whole or in part (the "Second Term Note");
WHEREAS, as a condition to Bank's entry into said Fourth
Amendment and its advance of funds to Borrower thereunder, Guarantor has agreed
to enter into this Guaranty of certain indebtedness owed or to be owed by
Borrower to Bank; and
WHEREAS, Guarantor will directly and indirectly benefit from
the Second Term Loan, as defined in the Loan Agreement, as amended by the Fourth
Amendment and evidenced by the Second Term Note.
NOW, THEREFORE, for and in consideration of the premises and
the extension of credit by Bank to Borrower pursuant to the Loan Agreement, and
for TEN AND NO/100 DOLLARS ($10.00) and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and to induce Bank
to execute the Fourth Amendment, Bank and Guarantor hereby agree as follows:
1. Guarantor unconditionally guarantees the prompt payment to
Bank of the following (the "Guaranteed Indebtedness"):
(a) Any and all indebtedness, obligations (including reimbursement
obligations) and liabilities of Borrower to Bank now existing
or hereafter incurred in connection with or incident to the
Second Term Loan, under or arising out of or in connection
with any documents executed in connection with any
indebtedness of Borrower to Bank in connection with the Second
Term Loan
<PAGE> 2
or any promissory note or notes executed by Borrower at any
time in connection with the Second Term Loan, whether for
principal, interest, penalty interest, fees, expenses or
otherwise, including, without limitation, all sums, principal,
accrued interest and other amounts owing with respect to the
Second Term Note, together with any and all renewals,
extensions and/or rearrangements thereof, whether with or
without notice to Guarantor;
(b) All interest, charges, expenses, attorneys' or other fees and
any other sums payable to or incurred by the Bank in
connection with the execution, administration or enforcement
of the Bank's rights and remedies under the Second Term Note;
and
(c) All post-petition interest on the Guaranteed Indebtedness in
the event of a bankruptcy or insolvency of the Borrower.
Provided, however, that Guarantor's obligation hereunder shall never exceed
$3,500,000.00. Guarantor shall at all times maintain at least $4,000,000 in
Liquid Assets. To evidence such maintenance of Liquid Assets, Guarantor shall
deliver to Bank, on or before the forty-fifth (45th) day after the end of each
calendar quarter, a Certificate of Liquidity in the form attached hereto as
Exhibit "A", certifying the value of such Guarantor's Liquid Assets effective as
of the end of each calendar quarter. "Liquid Assets" shall mean Cash on hand and
balances in checking accounts available for immediate withdrawal, the value,
from time to time, of short-term, highly liquid investments that are readily
convertible to Cash, such as treasury bills, commercial paper and money market
funds, and the value, from time to time, of unrestricted shares of stock that
are publicly traded on the New York Stock Exchange, the American Stock Exchange,
or NASDAQ, and otherwise acceptable to the Bank, but only to the extent the
foregoing are free from all liens, claims and encumbrances, including liens or
security interests in favor of the Bank. "Cash" shall mean legal tender of the
United States of America.
2. If the Guaranteed Indebtedness is not paid by Guarantor
when due, as required herein, and this Guaranty is placed in the hands of an
attorney for collection, or if this Guaranty is enforced by suit or through the
Bankruptcy Court or through any judicial proceedings, Guarantor shall pay to
Bank an amount equal to its reasonable attorneys' fees and collection costs
incurred by Bank in the collection of the Guaranteed Indebtedness.
3. This is an absolute, complete and continuing Guaranty, and
no notice of the Guaranteed Indebtedness or any extension of credit already or
hereafter contracted by or extended to Borrower need be given to Guarantor, nor
shall anything herein contained be a limitation upon the amount of credit which
may be extended to Borrower, the numbers of transactions with Borrower,
repayments by Borrower to Bank, or the allocation by Bank of repayment by
Borrower, it being the understanding of the Guarantor that Guarantor's liability
shall continue hereunder so long as any of the Guaranteed Indebtedness remains
unpaid. Borrower and Bank may rearrange, increase, decrease, extend and/or renew
the Guaranteed Indebtedness without notice to Guarantor and in such
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<PAGE> 3
event Guarantor will remain fully bound hereunder on the Guaranteed
Indebtedness. The obligations of Guarantor hereunder shall not be released,
impaired or diminished by any amendment, modification or alteration of the Loan
Agreement or the Second Term Note. Guarantor expressly waives all notices of any
kind, presentment for payment, demand for payment, protest, notice of protest,
notice of intent to accelerate, notice of acceleration, dishonor, diligence,
notice of any amendment of the Loan Agreement, notice of any adverse change in
the financial condition of Borrower, notice of any adjustment, indulgence,
forbearance or compromise that might be granted or given by Bank to Borrower,
and also notice of acceptance of this Guaranty, acceptance on the part of Bank
being conclusively presumed by its request for this Guaranty and delivery of the
same to it. The liability and obligations of Guarantor hereunder shall not be
affected or impaired by any action or inaction by Bank in regard to any matter
waived or notice of which is waived by Guarantor in this paragraph or in any
other paragraph of this Guaranty.
4. Guarantor authorizes Bank, without notice or demand and
without affecting Guarantor's liability hereunder, (a) to take and hold security
for the payment of this Guaranty and/or the Guaranteed Indebtedness, and to
exchange, enforce, waive and/or release any such security; (b) to apply such
security and direct the order or manner of sale thereof as Bank in its
discretion may determine; (c) to obtain a guaranty of the Guaranteed
Indebtedness from any one or more other persons, corporations or entities
whomsoever and to enforce, waive, rearrange, modify, limit or release at any
time or times such other persons, corporations or entities from their
obligations under such guaranties; (d) to waive or delay the exercise of any of
its rights or remedies against the Borrower or any other person or entity; (e)
to renew, extend, or modify the terms of any of the Guaranteed Indebtedness or
any instrument or agreement evidencing the same; and (f) to fully or partially
release at any time any Guarantor which executes this Guaranty whether with or
without consideration.
5. Guarantor waives any right to require Bank to (a) proceed
against, or make any effort at the collection of the Guaranteed Indebtedness
from Borrower or any other guarantor or party liable for the Guaranteed
Indebtedness; (b) proceed against or exhaust any collateral held by Bank; or (c)
pursue any other remedy in Bank's power whatsoever. Guarantor further waives any
and all rights and remedies which Guarantor may have or be able to assert by
reason of the provisions of Chapter 34 of the Texas Business and Commerce Code.
Guarantor waives any defense arising by reason of any disability, lack of
corporate authority or power, or other defense of Borrower or any other
guarantor of the Guaranteed Indebtedness, and Guarantor shall remain liable
under this Guaranty regardless of whether Borrower or any other guarantor be
found not liable on the Guaranteed Indebtedness for any reason including,
without limitation, insanity, minority, disability, bankruptcy, insolvency,
death or corporate dissolution, even though rendering the Guaranteed
Indebtedness void or unenforceable or uncollectible as against Borrower or any
other guarantor. This Guaranty shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Guaranteed
Indebtedness is rescinded or must otherwise be returned by Bank upon the
insolvency, bankruptcy or reorganization of Borrower or otherwise, all as though
such payment had not been made and will, thereupon, guarantee payment of such
amount as to which refund or restitution has been made, together with interest
accruing thereon subsequent to the
-3-
<PAGE> 4
date of refund or restitution at the applicable rate under the Loan Agreement
and collection costs and fees (including, without limitation, attorneys' fees)
applicable thereto, subject to the limitations set forth in Sections 1 and 10
hereof.
6. The liability and obligations of Guarantor hereunder shall
not be affected or impaired by (a) the failure of Bank or any other party to
exercise diligence or reasonable care in the preservation, protection or other
handling or treatment of all or any part of the collateral securing payment of
all or any part of the Guaranteed Indebtedness, (b) the failure of any security
interest or lien intended to be granted or created to secure the Guaranteed
Indebtedness to be properly perfected or created or the unenforceability of any
security interest or lien for any other reason, or (c) the subordination of any
such security interest or lien to any other security interest or lien.
7. Bank may pursue any remedy without altering the obligations
of Guarantor hereunder and without liability to Guarantor, even though Bank's
pursuit of such remedy may result in Guarantor's loss of rights of subrogation
or to proceed against others for reimbursement or contribution or any other
right. In no event shall any payment by Guarantor entitle it, by subrogation or
otherwise, to any rights against Borrower or any right to participate in any
security now or hereafter held by Bank prior to payment in full of all of the
Guaranteed Indebtedness and, in any event, not until 367 days after the making
of any payment and/or the granting of any security interest by Borrower or any
other guarantor to Bank in connection with the Guaranteed Indebtedness.
8. Should the status of Borrower change in any way, including,
without limitation, as a result of any dissolution of Borrower, any sale, lease
or transfer of any or all of the assets of Borrower, any changes in the
shareholders of Borrower, or any reorganization of Borrower, this Guaranty shall
continue, and shall cover the Guaranteed Indebtedness under the new status.
9. The liability of Guarantor for the payment of the
Guaranteed Indebtedness shall be primary and not secondary.
10. Guarantor is familiar with and has independently reviewed
the books and records regarding the financial condition of Borrower and is
familiar with the value of any and all collateral intended to be granted as
security for the payment of the Guaranteed Indebtedness; Guarantor is not,
however, relying on such financial condition or such collateral as an inducement
to enter into this Guaranty. As of the date hereof, and after giving effect to
this Guaranty and the contingent obligations evidenced hereby, Guarantor is, and
will be, solvent, and has and will have assets and property which, valued
fairly, exceed such Guarantor's obligations, debts and liabilities, and has and
will have assets and property sufficient to satisfy, repay and discharge the
same. Notwithstanding the definition of Guaranteed Indebtedness herein, the
liability of Guarantor hereunder is limited to (a) the lowest amount that would
render this Guaranty void against creditors or creditors' representatives under
any fraudulent conveyance or similar law or under Sections 544 or 548 of the
Bankruptcy Code of 1978, as revised, minus (b) $1.00.
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<PAGE> 5
11. If Borrower shall at any time or times be or become
obligated to Bank for payment of any indebtedness other than the Guaranteed
Indebtedness, Bank (without in anywise impairing its rights hereunder or
diminishing Guarantor's liability) shall be at liberty at any time or times to
apply to such other indebtedness any amounts paid to or received by or coming
into the hands of Bank from or attributable to Borrower or any other person or
party liable for any of such other indebtedness or from or attributable to or
representing proceeds of any property or security held by Bank securing payment
of such other indebtedness or any credits, deposits or offsets due Borrower or
other party liable on any of such other indebtedness (whether or not the
Guaranteed Indebtedness or such other indebtedness are then due), it being
intended to give Bank the right to apply all payments, credits and offsets and
amounts becoming available for application on or credit against the indebtedness
of Borrower to Bank (now or hereafter existing) first toward payment and
satisfaction of the Borrower's indebtedness not hereby guaranteed, before making
application thereof on or against the Guaranteed Indebtedness.
12. Guarantor represents and warrants that this Guaranty
accurately and completely embodies the entire agreement between Guarantor and
Bank with respect to the respective rights, obligations and liabilities of
Guarantor and Bank hereunder, and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof. Guarantor
acknowledges that Guarantor is not relying on any representations (oral or
otherwise) of Bank, or any other party, other than as expressly described in
this Guaranty.
13. This Guaranty was reviewed by Guarantor, and Guarantor
acknowledges and agrees that Guarantor (a) understands fully all of the terms of
this Guaranty and the consequences and implications of Guarantor's execution of
this Guaranty, and (b) has been afforded an opportunity to have this Guaranty
reviewed by, and to discuss the terms, consequences and implications of this
Guaranty with an attorney or other such persons as Guarantor may have desired.
14. This Guaranty is and shall be in every particular
available to the successors and assigns of Bank and is and shall always be fully
binding upon the heirs, executors, administrators, successors and assigns of
Guarantor. This Guaranty is intended for and shall inure to the benefit of Bank
and each and every other person who shall from time to time be or become the
owner or holder of any of the Guaranteed Indebtedness, and each and every
reference herein to "Bank" shall also include and refer to each and every
successor or assignee of Bank at any time holding or owning any part of or
interest in any part of the Guaranteed Indebtedness. This Guaranty shall be
transferable and negotiable, with the same force and effect and to the same
extent that the Guaranteed Indebtedness is transferable, it being understood and
stipulated that upon the assignment or transfer by Bank of any of the Guaranteed
Indebtedness the legal or beneficial owner of the Guaranteed Indebtedness (or
part thereof or interest therein thus transferred or assigned by Bank) shall
also, unless provided otherwise by Bank in its assignment, have and may exercise
all of the rights granted to Bank under this Guaranty to the extent of the part
of or interest in the Guaranteed Indebtedness thus assigned or transferred to
such person or entity. Guarantor expressly waives notice of transfer or
assignment of the Guaranteed Indebtedness, or any part thereof, or of the rights
of Bank hereunder.
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<PAGE> 6
15. All amounts becoming payable by Guarantor to Bank under
this Guaranty shall be payable at Bank's offices in the City of Houston, Harris
County, Texas.
16. Any notice hereunder to Guarantor shall be in writing,
duly stamped and addressed to Guarantor at the address shown below Guarantor's
signature hereto, or at such other address as Guarantor may by written notice,
received by Bank, have designated as Guarantor's address for such purpose. Any
notice provided for herein shall become effective upon the earlier of (a) the
first business day of Bank following the deposit in a regularly maintained
postal deposit box of the United States Postal Service, or (b) the day of its
receipt by Guarantor; but actual notice, however given or received, shall always
be effective. The preceding sentence shall not be construed in anywise to affect
or impair any waiver of notice or demand herein provided or to require giving of
notice or demand to or upon Guarantor in any situation or for any reason.
17. It is the intention of the parties hereto to comply
strictly with all applicable usury laws; accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Guaranty, or in any
documents securing payment hereof or otherwise relating hereto, in no event
shall this Guaranty or such documents require the payment or permit the
collection of an aggregate amount of interest in excess of the maximum amount
permitted by such laws, including the laws of the State of Texas and the laws of
the United States of America. If any such excess of interest is contracted for,
charged or received under this Guaranty or under the terms of any documents
securing payment hereof or otherwise relating hereto, or if under any
circumstances, the amount of interest (including all amounts payable hereunder
which are not denominated as interest but which constitute interest under the
applicable laws) contracted for, charged or received under this Guaranty shall
exceed the maximum amount of interest permitted by the applicable usury laws,
then in any such event (a) the provisions of this paragraph shall govern and
control, (b) Guarantor shall not be obligated to pay the amount of such interest
to the extent that it is in excess of the maximum amount of interest permitted
by the applicable usury laws, (c) any such excess interest which may have been
collected shall be either applied as a credit against the then unpaid Guaranteed
Indebtedness or, if the Guaranteed Indebtedness shall have been paid in full,
refunded to Guarantor, and (d) the effective rate of interest shall be
automatically reduced to the maximum lawful contract rate allowed under the
applicable usury laws as now or hereafter construed by the courts having
jurisdiction thereof. It is further agreed that without limitation of the
foregoing, all calculations of the rate of interest contracted for, charged or
received under this Guaranty or under such other documents which are made for
the purpose of determining whether such rate exceeds the maximum lawful contract
rate, shall be made, to the extent permitted by applicable usury laws, by
amortizing, prorating, allocating and spreading in equal parts during the full
period during which this Guaranty is to be in effect, all interest at any time
contracted for, charged or received from Guarantor or otherwise by the holder or
holders hereof in connection with this Guaranty.
18. In case any of the provisions of this Guaranty shall for
any reason be held to be invalid, illegal, or unenforceable, such invalidity,
illegality, or unenforceability shall not affect
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<PAGE> 7
any other provisions hereof, and this Guaranty shall be construed as if such
invalid, illegal, or unenforceable provision had never been contained herein.
19. In all instances herein, the singular shall be construed
to include the plural and the masculine to include the feminine.
20. This Guaranty may be executed in multiple counterparts
each of which shall constitute an original, but all of which when taken together
shall constitute one and the same Guaranty.
21. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA.
All actions or proceedings with respect to the Guaranteed Indebtedness or this
Guaranty may be instituted in the Courts of the State of Texas located in Harris
County, Texas, or the United States District Court for the Southern District of
Texas, and by execution and delivery of this Guaranty, Guarantor irrevocably and
unconditionally submits to the jurisdiction (both subject matter and personal)
of each such Court, and irrevocably and unconditionally waives (a) any objection
Guarantor may now or hereafter have to the laying of venue in any such Courts,
(b) any claim that any action or proceeding brought in any of such Courts has
been brought in an inconvenient forum, and (c) any right to bring any action or
proceeding with respect to the Guaranteed Indebtedness or this Guaranty in any
forum other than the courts of the State of Texas located in Harris County,
Texas, or the United States District Court for the Southern District of Texas.
22. Guarantor represents and warrants to Bank that this
Guaranty is a valid, binding and enforceable obligation of Guarantor and does
not violate any provisions of any law, rule, regulation, contract or agreement
enforceable against Guarantor.
23. Guarantor hereby agrees that a counterpart of this
Guaranty bearing the signature of Guarantor may be effectively delivered to the
Bank by the delivery of an electronic facsimile sent via telecopier; and that
Guarantor shall be bound by his facsimile signature thereon.
EXECUTED this 24th day of September, 1998.
GUARANTOR:
--------------------------------------
PAUL B. LOYD, JR.
Address: 901 Threadneedle #200
Houston, TX 77079
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<PAGE> 8
STATE OF TEXAS
COUNTY OF HARRIS
We,________ and ________, sign our names to this instrument as
witnesses to the signature of PAUL B. LOYD, JR., (the "Signor"), and being duly
sworn, do hereby declare to the undersigned authority that we are personally
acquainted with the Signor, that we know the Signor to be the person that he
purports to be through his signature, that he has signed this instrument
willingly, and that each of us, in the presence and hearing of the Signor, the
undersigned authority, and each other, hereby execute this instrument as
witnesses to the Signor's signing, and that to the best of our knowledge, the
Signor is twenty-one years of age or older, of sound mind, and under no
constraint or undue influence.
WITNESSES:
-------------------------------------
Printed Name:
--------------------------------------
Printed Name:
STATE OF TEXAS
COUNTY OF HARRIS
The foregoing instrument was subscribed, sworn to and
acknowledged before me by PAUL B. LOYD, JR., the Signor, and was also subscribed
and sworn to before me by and, as witnesses, this day of September, 1996.
-------------------------------------
Notary Public in and for
The State of
[Notarial Seal or Stamp]
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<PAGE> 1
EXHIBIT 4.4
LIMITED GUARANTY
THIS LIMITED GUARANTY ("Guaranty"), is made and entered into as of
September 24, 1998 by STEVEN A. WEBSTER ("Guarantor"), for the benefit of
COMPASS BANK, a Texas state chartered banking institution ("Bank").
W I T N E S S E T H:
WHEREAS, on the date hereof, Bank has advanced or will advance certain
funds to CARRIZO OIL & GAS, INC., a Texas corporation ("Borrower") pursuant to
the Fourth Amendment of even date herewith to that certain First Amended and
Restated Loan Agreement dated August 28, 1997, as amended by the First Amendment
thereto dated December 23, 1997, the Second Amendment thereto dated December 30,
1997 and the Third Amendment thereto dated July 30, 1998 (the "Loan Agreement"),
specifically including the indebtedness evidenced by that certain term
promissory note dated of even date herewith, executed by Borrower and payable to
Bank, in the principal amount of $7,000,000.00 and all other notes given in
substitution therefor or in modification, renewal or extension thereof in whole
or in part (the "Second Term Note");
WHEREAS, as a condition to Bank's entry into said Fourth Amendment and
its advance of funds to Borrower thereunder, Guarantor has agreed to enter into
this Guaranty of certain indebtedness owed or to be owed by Borrower to Bank;
and
WHEREAS, Guarantor will directly and indirectly benefit from the
Second Term Loan, as defined in the Loan Agreement, as amended by the Fourth
Amendment and evidenced by the Second Term Note.
NOW, THEREFORE, for and in consideration of the premises and the
extension of credit by Bank to Borrower pursuant to the Loan Agreement, and for
TEN AND NO/100 DOLLARS ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and to induce Bank to
execute the Fourth Amendment, Bank and Guarantor hereby agree as follows:
1. Guarantor unconditionally guarantees the prompt payment to Bank of
the following (the "Guaranteed Indebtedness"):
(a) Any and all indebtedness, obligations (including reimbursement
obligations) and liabilities of Borrower to Bank now existing
or hereafter incurred in connection with or incident to the
Second Term Loan, under or arising out of or in connection with any
documents executed in connection with any indebtedness of Borrower
to Bank in connection with the Second Term Loan
<PAGE> 2
or any promissory note or notes executed by Borrower at any time in
connection with the Second Term Loan, whether for principal,
interest, penalty interest, fees, expenses or otherwise, including,
without limitation, all sums, principal, accrued interest and other
amounts owing with respect to the Second Term Note, together with any
and all renewals, extensions and/or rearrangements thereof, whether
with or without notice to Guarantor;
(b) All interest, charges, expenses, attorneys' or other fees and any
other sums payable to or incurred by the Bank in connection with the
execution, administration or enforcement of the Bank's rights and
remedies under the Second Term Note; and
(c) All post-petition interest on the Guaranteed Indebtedness in
the event of a bankruptcy or insolvency of the Borrower.
Provided, however, that Guarantor's obligation hereunder shall never exceed
$3,500,000.00. Guarantor shall at all times maintain at least $4,000,000 in
Liquid Assets. To evidence such maintenance of Liquid Assets, Guarantor shall
deliver to Bank, on or before the forty-fifth (45th) day after the end of each
calendar quarter, a Certificate of Liquidity in the form attached hereto as
Exhibit "A", certifying the value of such Guarantor's Liquid Assets effective as
of the end of each calendar quarter. "Liquid Assets" shall mean Cash on hand and
balances in checking accounts available for immediate withdrawal, the value,
from time to time, of short-term, highly liquid investments that are readily
convertible to Cash, such as treasury bills, commercial paper and money market
funds, and the value, from time to time, of unrestricted shares of stock that
are publicly traded on the New York Stock Exchange, the American Stock Exchange,
or NASDAQ, and otherwise acceptable to the Bank, but only to the extent the
foregoing are free from all liens, claims and encumbrances, including liens or
security interests in favor of the Bank. "Cash" shall mean legal tender of the
United States of America.
2. If the Guaranteed Indebtedness is not paid by Guarantor
when due, as required herein, and this Guaranty is placed in the hands of an
attorney for collection, or if this Guaranty is enforced by suit or through the
Bankruptcy Court or through any judicial proceedings, Guarantor shall pay to
Bank an amount equal to its reasonable attorneys' fees and collection costs
incurred by Bank in the collection of the Guaranteed Indebtedness.
3. This is an absolute, complete and continuing Guaranty, and
no notice of the Guaranteed Indebtedness or any extension of credit already or
hereafter contracted by or extended to Borrower need be given to Guarantor, nor
shall anything herein contained be a limitation upon the amount of credit which
may be extended to Borrower, the numbers of transactions with Borrower,
repayments by Borrower to Bank, or the allocation by Bank of repayment by
Borrower, it being the understanding of the Guarantor that Guarantor's liability
shall continue hereunder so long as any of the Guaranteed Indebtedness remains
unpaid. Borrower and Bank may rearrange, increase, decrease, extend and/or renew
the Guaranteed Indebtedness without notice to Guarantor and in such
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<PAGE> 3
event Guarantor will remain fully bound hereunder on the Guaranteed
Indebtedness. The obligations of Guarantor hereunder shall not be released,
impaired or diminished by any amendment, modification or alteration of the Loan
Agreement or the Second Term Note. Guarantor expressly waives all notices of any
kind, presentment for payment, demand for payment, protest, notice of protest,
notice of intent to accelerate, notice of acceleration, dishonor, diligence,
notice of any amendment of the Loan Agreement, notice of any adverse change in
the financial condition of Borrower, notice of any adjustment, indulgence,
forbearance or compromise that might be granted or given by Bank to Borrower,
and also notice of acceptance of this Guaranty, acceptance on the part of Bank
being conclusively presumed by its request for this Guaranty and delivery of the
same to it. The liability and obligations of Guarantor hereunder shall not be
affected or impaired by any action or inaction by Bank in regard to any matter
waived or notice of which is waived by Guarantor in this paragraph or in any
other paragraph of this Guaranty.
4. Guarantor authorizes Bank, without notice or demand and
without affecting Guarantor's liability hereunder, (a) to take and hold security
for the payment of this Guaranty and/or the Guaranteed Indebtedness, and to
exchange, enforce, waive and/or release any such security; (b) to apply such
security and direct the order or manner of sale thereof as Bank in its
discretion may determine; (c) to obtain a guaranty of the Guaranteed
Indebtedness from any one or more other persons, corporations or entities
whomsoever and to enforce, waive, rearrange, modify, limit or release at any
time or times such other persons, corporations or entities from their
obligations under such guaranties; (d) to waive or delay the exercise of any of
its rights or remedies against the Borrower or any other person or entity; (e)
to renew, extend, or modify the terms of any of the Guaranteed Indebtedness or
any instrument or agreement evidencing the same; and (f) to fully or partially
release at any time any Guarantor which executes this Guaranty whether with or
without consideration.
5. Guarantor waives any right to require Bank to (a) proceed
against, or make any effort at the collection of the Guaranteed Indebtedness
from Borrower or any other guarantor or party liable for the Guaranteed
Indebtedness; (b) proceed against or exhaust any collateral held by Bank; or (c)
pursue any other remedy in Bank's power whatsoever. Guarantor further waives any
and all rights and remedies which Guarantor may have or be able to assert by
reason of the provisions of Chapter 34 of the Texas Business and Commerce Code.
Guarantor waives any defense arising by reason of any disability, lack of
corporate authority or power, or other defense of Borrower or any other
guarantor of the Guaranteed Indebtedness, and Guarantor shall remain liable
under this Guaranty regardless of whether Borrower or any other guarantor be
found not liable on the Guaranteed Indebtedness for any reason including,
without limitation, insanity, minority, disability, bankruptcy, insolvency,
death or corporate dissolution, even though rendering the Guaranteed
Indebtedness void or unenforceable or uncollectible as against Borrower or any
other guarantor. This Guaranty shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Guaranteed
Indebtedness is rescinded or must otherwise be returned by Bank upon the
insolvency, bankruptcy or reorganization of Borrower or otherwise, all as though
such payment had not been made and will, thereupon, guarantee payment of such
amount as to which refund or restitution has been made, together with interest
accruing thereon subsequent to the
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<PAGE> 4
date of refund or restitution at the applicable rate under the Loan Agreement
and collection costs and fees (including, without limitation, attorneys' fees)
applicable thereto, subject to the limitations set forth in Sections 1 and 10
hereof.
6. The liability and obligations of Guarantor hereunder shall
not be affected or impaired by (a) the failure of Bank or any other party to
exercise diligence or reasonable care in the preservation, protection or other
handling or treatment of all or any part of the collateral securing payment of
all or any part of the Guaranteed Indebtedness, (b) the failure of any security
interest or lien intended to be granted or created to secure the Guaranteed
Indebtedness to be properly perfected or created or the unenforceability of any
security interest or lien for any other reason, or (c) the subordination of any
such security interest or lien to any other security interest or lien.
7. Bank may pursue any remedy without altering the obligations
of Guarantor hereunder and without liability to Guarantor, even though Bank's
pursuit of such remedy may result in Guarantor's loss of rights of subrogation
or to proceed against others for reimbursement or contribution or any other
right. In no event shall any payment by Guarantor entitle it, by subrogation or
otherwise, to any rights against Borrower or any right to participate in any
security now or hereafter held by Bank prior to payment in full of all of the
Guaranteed Indebtedness and, in any event, not until 367 days after the making
of any payment and/or the granting of any security interest by Borrower or any
other guarantor to Bank in connection with the Guaranteed Indebtedness.
8. Should the status of Borrower change in any way, including,
without limitation, as a result of any dissolution of Borrower, any sale, lease
or transfer of any or all of the assets of Borrower, any changes in the
shareholders of Borrower, or any reorganization of Borrower, this Guaranty shall
continue, and shall cover the Guaranteed Indebtedness under the new status.
9. The liability of Guarantor for the payment of the
Guaranteed Indebtedness shall be primary and not secondary.
10. Guarantor is familiar with and has independently reviewed
the books and records regarding the financial condition of Borrower and is
familiar with the value of any and all collateral intended to be granted as
security for the payment of the Guaranteed Indebtedness; Guarantor is not,
however, relying on such financial condition or such collateral as an inducement
to enter into this Guaranty. As of the date hereof, and after giving effect to
this Guaranty and the contingent obligations evidenced hereby, Guarantor is, and
will be, solvent, and has and will have assets and property which, valued
fairly, exceed such Guarantor's obligations, debts and liabilities, and has and
will have assets and property sufficient to satisfy, repay and discharge the
same. Notwithstanding the definition of Guaranteed Indebtedness herein, the
liability of Guarantor hereunder is limited to (a) the lowest amount that would
render this Guaranty void against creditors or creditors' representatives under
any fraudulent conveyance or similar law or under Sections 544 or 548 of the
Bankruptcy Code of 1978, as revised, minus (b) $1.00.
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<PAGE> 5
11. If Borrower shall at any time or times be or become
obligated to Bank for payment of any indebtedness other than the Guaranteed
Indebtedness, Bank (without in anywise impairing its rights hereunder or
diminishing Guarantor's liability) shall be at liberty at any time or times to
apply to such other indebtedness any amounts paid to or received by or coming
into the hands of Bank from or attributable to Borrower or any other person or
party liable for any of such other indebtedness or from or attributable to or
representing proceeds of any property or security held by Bank securing payment
of such other indebtedness or any credits, deposits or offsets due Borrower or
other party liable on any of such other indebtedness (whether or not the
Guaranteed Indebtedness or such other indebtedness are then due), it being
intended to give Bank the right to apply all payments, credits and offsets and
amounts becoming available for application on or credit against the indebtedness
of Borrower to Bank (now or hereafter existing) first toward payment and
satisfaction of the Borrower's indebtedness not hereby guaranteed, before making
application thereof on or against the Guaranteed Indebtedness.
12. Guarantor represents and warrants that this Guaranty
accurately and completely embodies the entire agreement between Guarantor and
Bank with respect to the respective rights, obligations and liabilities of
Guarantor and Bank hereunder, and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof. Guarantor
acknowledges that Guarantor is not relying on any representations (oral or
otherwise) of Bank, or any other party, other than as expressly described in
this Guaranty.
13. This Guaranty was reviewed by Guarantor, and Guarantor
acknowledges and agrees that Guarantor (a) understands fully all of the terms of
this Guaranty and the consequences and implications of Guarantor's execution of
this Guaranty, and (b) has been afforded an opportunity to have this Guaranty
reviewed by, and to discuss the terms, consequences and implications of this
Guaranty with an attorney or other such persons as Guarantor may have desired.
14. This Guaranty is and shall be in every particular
available to the successors and assigns of Bank and is and shall always be fully
binding upon the heirs, executors, administrators, successors and assigns of
Guarantor. This Guaranty is intended for and shall inure to the benefit of Bank
and each and every other person who shall from time to time be or become the
owner or holder of any of the Guaranteed Indebtedness, and each and every
reference herein to "Bank" shall also include and refer to each and every
successor or assignee of Bank at any time holding or owning any part of or
interest in any part of the Guaranteed Indebtedness. This Guaranty shall be
transferable and negotiable, with the same force and effect and to the same
extent that the Guaranteed Indebtedness is transferable, it being understood and
stipulated that upon the assignment or transfer by Bank of any of the Guaranteed
Indebtedness the legal or beneficial owner of the Guaranteed Indebtedness (or
part thereof or interest therein thus transferred or assigned by Bank) shall
also, unless provided otherwise by Bank in its assignment, have and may exercise
all of the rights granted to Bank under this Guaranty to the extent of the part
of or interest in the Guaranteed Indebtedness thus assigned or transferred to
such person or entity. Guarantor expressly waives notice of transfer or
assignment of the Guaranteed Indebtedness, or any part thereof, or of the rights
of Bank hereunder.
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<PAGE> 6
15. All amounts becoming payable by Guarantor to Bank under
this Guaranty shall be payable at Bank's offices in the City of Houston, Harris
County, Texas.
16. Any notice hereunder to Guarantor shall be in writing,
duly stamped and addressed to Guarantor at the address shown below Guarantor's
signature hereto, or at such other address as Guarantor may by written notice,
received by Bank, have designated as Guarantor's address for such purpose. Any
notice provided for herein shall become effective upon the earlier of (a) the
first business day of Bank following the deposit in a regularly maintained
postal deposit box of the United States Postal Service, or (b) the day of its
receipt by Guarantor; but actual notice, however given or received, shall always
be effective. The preceding sentence shall not be construed in anywise to affect
or impair any waiver of notice or demand herein provided or to require giving of
notice or demand to or upon Guarantor in any situation or for any reason.
17. It is the intention of the parties hereto to comply
strictly with all applicable usury laws; accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Guaranty, or in any
documents securing payment hereof or otherwise relating hereto, in no event
shall this Guaranty or such documents require the payment or permit the
collection of an aggregate amount of interest in excess of the maximum amount
permitted by such laws, including the laws of the State of Texas and the laws of
the United States of America. If any such excess of interest is contracted for,
charged or received under this Guaranty or under the terms of any documents
securing payment hereof or otherwise relating hereto, or if under any
circumstances, the amount of interest (including all amounts payable hereunder
which are not denominated as interest but which constitute interest under the
applicable laws) contracted for, charged or received under this Guaranty shall
exceed the maximum amount of interest permitted by the applicable usury laws,
then in any such event (a) the provisions of this paragraph shall govern and
control, (b) Guarantor shall not be obligated to pay the amount of such interest
to the extent that it is in excess of the maximum amount of interest permitted
by the applicable usury laws, (c) any such excess interest which may have been
collected shall be either applied as a credit against the then unpaid Guaranteed
Indebtedness or, if the Guaranteed Indebtedness shall have been paid in full,
refunded to Guarantor, and (d) the effective rate of interest shall be
automatically reduced to the maximum lawful contract rate allowed under the
applicable usury laws as now or hereafter construed by the courts having
jurisdiction thereof. It is further agreed that without limitation of the
foregoing, all calculations of the rate of interest contracted for, charged or
received under this Guaranty or under such other documents which are made for
the purpose of determining whether such rate exceeds the maximum lawful contract
rate, shall be made, to the extent permitted by applicable usury laws, by
amortizing, prorating, allocating and spreading in equal parts during the full
period during which this Guaranty is to be in effect, all interest at any time
contracted for, charged or received from Guarantor or otherwise by the holder or
holders hereof in connection with this Guaranty.
18. In case any of the provisions of this Guaranty shall for
any reason be held to be invalid, illegal, or unenforceable, such invalidity,
illegality, or unenforceability shall not affect
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<PAGE> 7
any other provisions hereof, and this Guaranty shall be construed as if such
invalid, illegal, or unenforceable provision had never been contained herein.
19. In all instances herein, the singular shall be construed
to include the plural and the masculine to include the feminine.
20. This Guaranty may be executed in multiple counterparts
each of which shall constitute an original, but all of which when taken together
shall constitute one and the same Guaranty.
21. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA.
All actions or proceedings with respect to the Guaranteed Indebtedness or this
Guaranty may be instituted in the Courts of the State of Texas located in Harris
County, Texas, or the United States District Court for the Southern District of
Texas, and by execution and delivery of this Guaranty, Guarantor irrevocably and
unconditionally submits to the jurisdiction (both subject matter and personal)
of each such Court, and irrevocably and unconditionally waives (a) any objection
Guarantor may now or hereafter have to the laying of venue in any such Courts,
(b) any claim that any action or proceeding brought in any of such Courts has
been brought in an inconvenient forum, and (c) any right to bring any action or
proceeding with respect to the Guaranteed Indebtedness or this Guaranty in any
forum other than the courts of the State of Texas located in Harris County,
Texas, or the United States District Court for the Southern District of Texas.
22. Guarantor represents and warrants to Bank that this
Guaranty is a valid, binding and enforceable obligation of Guarantor and does
not violate any provisions of any law, rule, regulation, contract or agreement
enforceable against Guarantor.
23. Guarantor hereby agrees that a counterpart of this
Guaranty bearing the signature of Guarantor may be effectively delivered to the
Bank by the delivery of an electronic facsimile sent via telecopier; and that
Guarantor shall be bound by his facsimile signature thereon.
EXECUTED this 24th day of September, 1998.
GUARANTOR:
-----------------------------------
STEVEN A. WEBSTER
Address: 901 Threadneedle #200
Houston, TX 77079
-7-
<PAGE> 8
STATE OF TEXAS
COUNTY OF HARRIS
We, _____________ and ______________, sign our names to this instrument
as witnesses to the signature of STEVEN A. WEBSTER (the "Signor"), and being
duly sworn, do hereby declare to the undersigned authority that we are
personally acquainted with the Signor, that we know the Signor to be the person
that he purports to be through his signature, that he has signed this instrument
willingly, and that each of us, in the presence and hearing of the Signor, the
undersigned authority, and each other, hereby execute this instrument as
witnesses to the Signor's signing, and that to the best of our knowledge, the
Signor is twenty-one years of age or older, of sound mind, and under no
constraint or undue influence.
WITNESSES:
---------------------------
Printed Name:
---------------------------
Printed Name:
STATE OF TEXAS
COUNTY OF HARRIS
The foregoing instrument was subscribed, sworn to and acknowledged
before me by STEVEN A. WEBSTER, the Signor, and was also subscribed and sworn to
before me by ___________ and ___________, as witnesses, this day of September,
1996.
----------------------------
Notary Public in and for
The State of _________
[Notarial Seal or Stamp]
-8-
<PAGE> 1
EXHIBIT 4.5
FOURTH AMENDMENT
TO
FIRST AMENDED, RESTATED, AND COMBINED LOAN AGREEMENT
BY AND BETWEEN CARRIZO OIL & GAS, INC.
AND COMPASS BANK
This Fourth Amendment to the Loan Agreement (this "Fourth Amendment")
by and between CARRIZO OIL & GAS, INC., a Texas corporation (the "Borrower"),
and COMPASS BANK, a Texas chartered bank (the "Bank"), is entered into on this
24th day of September 1998, and shall be effective as of that date for all
purposes.
W I T N E S S E T H:
Borrower and Bank entered into a First Amended, Restated, and Amended
Loan Agreement dated August 28, 1997, as amended by the First Amendment thereto
dated December 23, 1997, the Second Amendment thereto dated December 30, 1997
and the Third Amendment thereto dated July 30, 1998 (collectively, the "Loan
Agreement"). Capitalized terms used, but not defined herein, shall have the
meanings prescribed therefor in the Loan Agreement.
Borrower has requested that Bank provide a term loan to Borrower in the
amount of $7,000,000.00, and Bank has agreed to do so according to the terms set
forth herein, which shall be incorporated into the Loan Agreement.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged by Borrower and Bank, and each intending
to be legally bound hereby, the parties agree as follows:
I. Specific Amendments to Loan Agreement.
Article I of the Loan Agreement is hereby amended by revising the
following defined terms in their entirety to read as follows:
"Floating Rate" means: (a) with respect to the Revolving Loan
evidenced by the Note, the Index Rate in effect from time, and (b) with
respect to the Second Term Loan evidenced by the Second Term Note, the
Index Rate in effect from time to time plus two percent (2.00%).
"Notes" means, collectively, the Note, Term Note, and the
Second Term Note and any extension, renewal, rearrangement of, or
substitute for either of such Notes. All references to the defined
term, "Note," throughout this Agreement, as it existed prior to the
Second Amendment, shall be construed to refer to all three of the
Notes, with the exception of the references to the term, "Note," in the
definitions of Floating Rate, Loan Excess, and
1
<PAGE> 2
Note, and in Sections 2.01 through 2.03, 2.08, 2.09, 3.01, 3.04 and
Exhibit "B" of the Loan Agreement, all of which shall remain singular
and shall be construed to refer to the Note evidencing the Revolving
Loan.
Article I of the Loan Agreement is hereby amended by adding the
following definitions thereto:
"Borrower?s Additional Stock" has the meaning set forth in
Section 2.25.
"Convertible Subordinated Debt? has the meaning set forth in
Section 2.25.
"Fourth Amendment" means the Fourth Amendment to this
Agreement executed by Borrower and Bank on September 24, 1998.
"Second Term Loan" means that certain $7,000,000.00 term loan
made or to be made by Bank to Borrower pursuant to Section 2.22 hereof.
"Second Term Loan Maturity Date" means the earlier of: (1) the
date of closing of the issuance of Borrower's Additional Stock; (2) the
date of closing of the issuance of the Convertible Subordinate Debt;
(3) the date of repayment of the Revolving Loan; and (4) September 29,
1999.
"Second Term Note" means the promissory note in the original
face amount of $7,000,000.00 dated of even date herewith, made by
Borrower payable to the order of Bank, in substantially the form
attached to the Fourth Amendment as Exhibit "A," together with all
deferrals, renewals, extensions, amendments, modifications or
rearrangements thereof, which promissory note shall evidence the
advances to Borrower by Bank pursuant to Section 2.22 hereof.
Article II of the Loan Agreement is hereby amended by adding the
following sections thereto:
2.22 Second Term Loan. Subject to the terms and conditions and
relying on the representations and warranties contained in this
Agreement, Bank agrees to advance a minimum of $3,500,000 of the Second
Term Loan at the closing of the Fourth Amendment. Upon written request
from Borrower and provided that no Event of Default or Unmatured Event
of Default has occurred and is continuing and provided further that no
Event of Default or Unmatured Event of Default would result from such
advance, Bank agrees to advance the remaining balance of the Term Loan
to Borrower in a single advance prior to December 31, 1998.
2.23 Second Term Note. The obligation of Borrower to repay the
Second Term Loan shall be evidenced by the Second Term Note.
2
<PAGE> 3
2.24 Repayment of Second Term Loan. Interest on the Second
Term Note, calculated as aforesaid in Section 2.04, shall be repaid by
Borrower in monthly installments on the first day of each month
following the advance from Bank to Borrower pursuant to Section 2.22,
through and including the Second Term Loan Maturity Date, when the
entire unpaid balance of the Second Term Note, inclusive of principal
and interest, shall be paid in full.
2.25 Voluntary Prepayment of the Second Term Note. Borrower
shall have the right and option to prepay, at any time subject to the
contemporaneous payment of the prepayment fee prescribed below, the
entire balance outstanding on the Second Term Note, together with all
accrued, unpaid interest. No partial prepayments shall be permitted. If
Borrower prepays the indebtedness evidenced by the Second Term Note
prior to the Second Term Loan Maturity Date from a source other than
proceeds raised by Borrower from its issuance of convertible
subordinated debt (the "Convertible Subordinated Debt") or additional
equity of Borrower ("Borrower's Additional Stock") or from proceeds
drawn under the Revolving Loan, then as consideration for and as a
condition to such prepayment privilege, Borrower shall simultaneously
pay Bank a fee in the amount of $70,000.00.
Article III of the Loan Agreement is hereby amended by adding the
following Section 3.18.
3.18 Conditions Precedent in Connection With the Fourth
Amendment. The obligation of Bank to make the Second Term Loan referred
to in Section 2.22 of this Agreement is subject to satisfaction of the
following conditions precedent:
(a) Receipt of Second Term Note, Fourth Amendment and
Certificate of Compliance. Bank shall have received the Second Term
Note, multiple counterparts of the Fourth Amendment, as requested by
Bank, and the Certificate of Compliance duly executed by an authorized
officer for Borrower.
(b) Receipt of Certified Copy of Corporate Proceedings and
Certificate of Incumbency. Bank shall have received from Borrower
copies of the resolutions of its board of directors authorizing the
transactions set forth in the Fourth Amendment and the execution of the
Fourth Amendment and the Second Term Note, such copy or copies to be
certified by the secretary or an assistant secretary as being true and
correct and in full force and effect as of the date of such
certificate. In addition, Bank shall have received from Borrower a
certificate of incumbency signed by the secretary or an assistant
secretary setting forth (a) the names of the officers executing the
Fourth Amendment and the Second Term Note, (b) the office(s) to which
such Persons have been elected and in which they presently serve and
(c) an original specimen signature of each such person.
(c) Accuracy of Representations and Warranties and No Event of
Default. The representations and warranties contained in Article IV of
the Loan Agreement shall be true and correct in all material respects
on the date of the making of such Second Term Loan with the same effect
as though such representations and warranties had been made on such
date;
3
<PAGE> 4
and no Event of Default shall have occurred and be continuing or will
have occurred at the completion of the making of such Loan.
(d) Legal Matters Satisfactory to Special Counsel to Bank. All
legal matters incident to the consummation of the transactions
contemplated by the Fourth Amendment shall be satisfactory to the firm
of Porter & Hedges, L.L.P., special counsel for Bank.
(e) No Material Adverse Change. No material adverse change
shall have occurred since the date of this Agreement in the condition,
financial or otherwise, of Borrower.
(f) Facility Fee. Bank shall have received the Facility Fee in
the amount of $100,000.00 prior to or at closing of the Fourth
Amendment.
II. Reaffirmation of Representations and Warranties. To induce Bank to
enter into this Fourth Amendment, Borrower hereby reaffirms, as of the date
hereof, its representations and warranties contained in Article IV of the Loan
Agreement and in all other documents executed pursuant thereto, and additionally
represents and warrants as follows:
A. The execution and delivery of this Fourth Amendment and the
performance by Borrower of its obligations under this Fourth Amendment
are within Borrower's power, have been duly authorized by all necessary
corporate action, have received all necessary governmental approval (if
any shall be required), and do not and will not contravene or conflict
with any provision of law or of the charter or by-laws of Borrower or
of any agreement binding upon Borrower.
B. The Loan Agreement as amended by this Fourth Amendment,
represents the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with its terms, subject as
to enforcement only to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally.
C. No Event of Default or Unmatured Event of Default has
occurred and is continuing as of the date hereof.
III Defined Terms. Except as amended hereby, terms used herein that are
defined in the Loan Agreement shall have the same meanings herein.
IV Reaffirmation of Loan Agreement. This Fourth Amendment shall be
deemed to be an amendment to the Loan Agreement, and the Loan Agreement, as
further amended hereby, is hereby ratified, approved and confirmed in each and
every respect. All references to the Loan Agreement herein and in any other
document, instrument, agreement or writing shall hereafter be deemed to refer to
the Loan Agreement as amended hereby.
4
<PAGE> 5
V Entire Agreement. The Loan Agreement, as hereby further amended,
embodies the entire agreement between Borrower and Bank and supersedes all prior
proposals, agreements and understandings relating to the subject matter hereof.
Borrower certifies that it is relying on no representation, warranty, covenant
or agreement except for those set forth in the Loan Agreement as hereby further
amended and the other documents previously executed or executed of even date
herewith.
VI Governing Law. THIS FOURTH AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA. This Fourth Amendment has been entered
into in Harris County, Texas, and it shall be performable for all purposes in
Harris County, Texas. Courts within the State of Texas shall have jurisdiction
over any and all disputes between Borrower and Bank, whether in law or equity,
including, but not limited to, any and all disputes arising out of or relating
to this Fourth Amendment or any other Loan Document; and venue in any such
dispute whether in federal or state court shall be laid in Harris County, Texas.
VII Severability. Whenever possible each provision of this Fourth
Amendment shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Fourth Amendment shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Fourth Amendment.
VIII Execution in Counterparts. Each party hereto acknowledges that
this Agreement may be executed in several counterparts by each party at
different times and in different locations; that each separate counterpart
bearing the signature of any party may be effectively delivered to the other
parties by the delivery of an electronic facsimile sent via telecopier; that
each party so delivering any such counterpart shall be bound by its facsimile
signature thereon; and that the signature pages from counterparts signed by each
party may be collated into one or more copies of this agreement, which shall
constitute one and the same agreement among all parties hereto.
IX Section Captions. Section captions used in this Fourth Amendment are
for convenience of reference only, and shall not affect the construction of this
Fourth Amendment.
X Successors and Assigns. This Fourth Amendment shall be binding upon
Borrower and Bank and their respective successors and assigns, and shall inure
to the benefit of Borrower and Bank, and the respective successors and assigns
of Bank.
XI Non-Application of Chapter 346 of Texas Finance Codes. In no event
shall Chapter 346 of the Texas Finance Code (which regulates certain revolving
loan accounts and revolving tri-party accounts) apply to this Loan Agreement as
hereby further amended or any other Loan Documents or the transactions
contemplated hereby.
XII Notice. THIS FOURTH AMENDMENT TOGETHER WITH THE LOAN AGREEMENT, AND
THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
5
<PAGE> 6
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be duly executed as of the day and year first above written.
BANK BORROWER
COMPASS BANK CARRIZO OIL & GAS, INC.
By:___________________________ By:_____________________________
Kathleen J. Bowen Frank A. Wojtek
Vice President Vice President
7
<PAGE> 8
EXHIBIT "A"
NOTE
$7,000,000.00 Houston, Texas September 24, 1998
On the dates hereinafter prescribed, for value received, CARRIZO OIL &
GAS, INC., a Texas corporation (the "Borrower"), having an address at 14811 St.
Mary's Lane, Suite 148, Houston, Texas 77079, promises to pay to the order of
COMPASS BANK (herein called "Bank"), at its principal offices at 24 Greenway
Plaza, Fourteenth Floor, Houston, Harris County, Texas 77046, (i) the principal
amount of SEVEN MILLION AND NO/100 DOLLARS ($7,000,000.00), and (ii) interest on
the principal balance remaining unpaid from the date of the advance until
maturity at a rate of interest equal to lesser of (a) the "Floating Rate" (as
hereinafter defined), calculated on the basis of a year of 365 or 366 days, as
the case may be, and for the actual number of days elapsed (including the first
day but excluding the last day), or (b) the ?Maximum Rate? (as hereinafter
defined). Any increase or decrease in interest rate resulting from a change in
the Maximum Rate shall be effective immediately when such change becomes
effective, without notice to Borrower, unless Applicable Law (as defined below)
requires that such increase or decrease not be effective until a later time, in
which event such increase or decrease shall be effective at the earliest time
permitted under the provisions of such law.
Notwithstanding the foregoing, if during any period the Floating Rate
exceeds the Maximum Rate, the rate of interest in effect on this Note shall be
limited to the Maximum Rate during each such period, but at all times thereafter
the rate of interest in effect on this Note shall be the Maximum Rate until the
total amount of interest accrued on this Note equals the total amount of
interest which would have accrued hereon if the Floating Rate had at all times
been in effect.
All payments on this Note shall be applied first to accrued interest
and the balance, if any, to principal.
"Floating Rate" means a per annum interest rate equal to the Index Rate
(as defined below) in effect from time to time plus two percent (2.0%), provided
that at such time no Event of Default or Unmatured Event of Default (as defined
in the First Amended, Restated, and Amended Loan Agreement dated August 28,
1997, as amended by the First Amendment thereto dated December 23, 1997, the
Second Amendment thereto dated December 30, 1997, the Third Amendment dated July
30, 1998 and the Fourth Amendment dated of even date herewith, between Borrower
and Bank (the "Loan Agreement")) has occurred and is continuing; then
thereafter, "Floating Rate" shall mean a per annum interest rate equal to the
Index Rate in effect from time to time plus five percent (5%).
"Index Rate" means at any time, the prime rate established in The Wall
Street Journal's "Money Rates" or similar table. If multiple prime rates are
quoted in the table, then the highest prime rate will be the Index Rate. In the
event that the prime rate is no longer published by The Wall
-----------------
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Page 1 of 4 Identification
<PAGE> 9
Street Journal in the "Money Rates" or similar table, then Bank may select an
alternative published index based upon comparable information as a substitute
Index Rate. Upon the selection of a substitute Index Rate, the applicable
interest rate shall thereafter vary in relation to the substitute index. Such
substitute index shall be the same index that is generally used as a substitute
by Bank on all Index Rate loans. The Index Rate is eight and one-half percent
(8.50%) as of the date of this Agreement.
"Maximum Rate" means the Maximum Rate of non-usurious interest
permitted from day to day by Applicable Law.
"Applicable Law" means that law in effect from time to time and
applicable to this Term Note which lawfully permits the charging and collection
of the highest permissible lawful, non-usurious rate of interest on this Term
Note. To the extent federal law permits Lender to contract for, charge or
receive a greater amount of interest, Lender will rely on federal law instead of
the Texas Finance Code, as supplemented by Texas Credit Title, for the purpose
of determining the Maximum Rate. Additionally, to the maximum extent permitted
by applicable law now or hereafter in effect, Lender may, at its option and from
time to time, implement any other method of computing the Maximum Rate under the
Texas Finance Code, as supplemented by Texas Credit Title, or under other
applicable law, by giving notice, if required, to Borrower as provided by
applicable law now or hereafter in effect. Notwithstanding anything to the
contrary contained herein or in any of the other Loan Documents, it is not the
intention of Lender to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned interest at the
time of such acceleration.
"Business Day" shall mean any day on which banks are open for general
banking business in the State of Texas, other than a Saturday, a Sunday, a legal
holiday or any other day on which banks in the State of Texas are required or
authorized by law or executive order to close.
The principal sum and any accrued but unpaid interest of this Note
shall be due and payable on or before the earlier of: (1) the date of closing of
the issuance of Borrower's Additional Stock, as defined in the Loan Agreement;
(2) the date of closing of the issuance of the Convertible Subordinate Debt, as
defined in the Loan Agreement; (3) the date of repayment of the Revolving Loan;
and (4) September 29, 1999; interest to accrue upon the principal sum from time
to time owing and unpaid hereunder shall be due and payable in monthly
installments, as it accrues, with the first such monthly installment of interest
hereon being due and payable on the first day of November 1998, and with such
subsequent installments of interest being due and payable on the first day of
each succeeding month thereafter; provided, however, the final installment of
interest hereunder shall be due and payable not later than the maturity of the
principal sum hereof, howsoever such maturity may be brought about.
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<PAGE> 10
When the first (1st) day of a calendar month falls upon a Saturday,
Sunday or legal holiday, the payment of interest and principal, if any, due upon
such date shall be due and payable upon the next succeeding Business Day.
In no event shall the aggregate of the interest on this Note, plus any
other amounts paid in connection with the loan evidenced by this Note which
would under Applicable Law be deemed "interest," ever exceed the maximum amount
of interest which, under Applicable Law, could be lawfully charged on this Note.
Bank and Borrower specifically intend and agree to limit contractually the
interest payable on this Note to not more than an amount determined at the
Maximum Rate. Therefore, none of the terms of this Note or any other instruments
pertaining to or securing this Note shall ever be construed to create a contract
to pay interest at a rate in excess of the Maximum Rate, and neither Borrower
nor any other party liable herefor shall ever be liable for interest in excess
of that determined at the Maximum Rate, and the provisions of this paragraph
shall control over all provisions of this Note or of any other instruments
pertaining to or securing this Note. If any amount of interest taken or received
by Bank shall be in excess of the maximum amount of interest which, under
Applicable Law, could lawfully have been collected on this Note, then the excess
shall be deemed to have been the result of a mathematical error by the parties
hereto and shall be refunded promptly to Borrower. All amounts paid or agreed to
be paid in connection with the indebtedness evidenced by this Note which would
under Applicable Law be deemed "Interest" shall, to the extent permitted by
Applicable Law, be amortized, prorated, allocated and spread throughout the full
term of this Note.
This Note is secured by all security agreements, collateral
assignments, mortgages and lien instruments executed by Borrower (or by any
other party) in favor of Bank, including those executed simultaneously herewith,
those executed heretofore and those hereafter executed, and including
specifically and without limitation the "Security Instruments" described and
defined in the Loan Agreement.
This Note is the Second Term Note issued pursuant to the Fourth
Amendment to the Loan Agreement. Reference is hereby made to the Loan Agreement
for a statement of the rights and obligations of the holder of this Note and the
duties and obligations of Borrower in relation thereto; but neither this
reference to the Loan Agreement nor any provisions thereof shall affect or
impair the absolute and unconditional obligation of Borrower to pay any
outstanding and unpaid principal of and interest on this Note when due, in
accordance with the terms of the Loan Agreement.
In the event of default in the payment when due of any of the principal
of or any interest on this Note, or in the event of default under the terms of
the Loan Agreement or any of the Security Instruments, or if any event occurs or
condition exists which authorizes the acceleration of the maturity of this Note
under any agreement made by Borrower, Bank (or other holder of this Note) may,
at its option, without presentment or demand or any notice to Borrower or any
other person liable herefor, declare the unpaid principal balance of and accrued
interest on this Note to be immediately due and payable.
-----------------
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<PAGE> 11
If this Note is collected by suit or through the Probate or Bankruptcy
Court, or any judicial proceeding, or if this Note is not paid at maturity,
however such maturity may be brought about, and is placed in the hands of an
attorney for collection, then Borrower agrees to pay reasonable attorneys' fees,
not to exceed 10% of the full amount of principal and interest owing hereon at
the time this Note is placed in the hands of an attorney.
Borrower and all sureties, endorsers and guarantors of this Note waive
demand, presentment for payment, notice of nonpayment, protest, notice of
protest, notice of intent to accelerate maturity, notice of acceleration of
maturity, and all other notices, filing of suit and diligence in collecting this
Note or enforcing any of the security herefor, and agree to any substitution,
exchange or release of any such security or the release of any party primarily
or secondarily liable hereon and further agrees that it will not be necessary
for Bank, in order to enforce payment of this Note by them, to first institute
suit or exhaust its remedies against any Borrower or others liable herefor, or
to enforce its rights against any security herefor, and consent to any one or
more extensions or postponements of time of payment of this Note on any terms or
any other indulgences with respect hereto, without notice thereof to any of
them. Bank may transfer this Note, and the rights and privileges of Bank under
this Note shall inure to the benefit of Bank's representatives, successors or
assigns.
Executed this 24th day of September 1998.
CARRIZO OIL & GAS, INC.
By:
----------------------------
Frank A. Wojtek
Vice President
-----------------
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<PAGE> 12
COMPLIANCE CERTIFICATE
I, Frank A. Wojtek, Vice President of CARRIZO OIL & GAS, INC. (the
"Company"), pursuant to Section 3.18 of the First Amended, Restated, and
Combined Loan Agreement dated as of August 28, 1997, as amended, by and among
COMPASS BANK ("Bank") and the Company (the "Agreement") do hereby certify, as of
the date hereof, that to my knowledge:
1. No Event of Default (as defined in the Agreement) has occurred
and is continuing, and no Unmatured Event of Default (as
defined in the Agreement) has occurred and is continuing;
2. No material adverse change has occurred in the business
prospects, financial condition, or the results of operations
of the Company since the date of the previous Financial
Statements (as defined in the Agreement) provided to Bank;
3. Each of the representations and warranties of the Company
contained in Article IV of the Agreement is true and correct
in all respects.
This certificate is executed this 24th day of September 1998.
--------------------------
Frank A. Wojtek
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,435,197
<SECURITIES> 0
<RECEIVABLES> 4,584,359
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,027,045
<PP&E> 71,003,122
<DEPRECIATION> 0
<TOTAL-ASSETS> 81,424,377
<CURRENT-LIABILITIES> 14,383,590
<BONDS> 0
29,974,454
0
<COMMON> 103,750
<OTHER-SE> 30,879,927
<TOTAL-LIABILITY-AND-EQUITY> 81,424,377
<SALES> 5,696,543
<TOTAL-REVENUES> 5,696,543
<CGS> 4,498,382
<TOTAL-COSTS> 4,498,382
<OTHER-EXPENSES> 2,054,240
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,587
<INCOME-PRETAX> (578,979)
<INCOME-TAX> (162,551)
<INCOME-CONTINUING> (416,428)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (416,428)
<EPS-PRIMARY> (.25)
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