<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH 31, 1999
--------------
[ ] 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
incorporation or organization) Identification No.)
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 number of shares outstanding of the registrant's common stock, par value
$0.01 per share, as of May 12, 1999, the latest practicable date, was
10,375,000.
<PAGE> 2
CARRIZO OIL & GAS, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Condensed Balance Sheets
- As of March 31, 1999 and December 31, 1998 2
Condensed Statements of Operations
- For the three-month periods ended March 31, 1998
and 1999 3
Condensed Statements of Cash Flows
- For the three-month periods ended March 31, 1998
and 1999 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Items 1-6. 16
SIGNATURES 18
</TABLE>
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CARRIZO OIL & GAS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,187,656 $ 1,834,437
Accounts receivable 4,227,365 3,927,229
Advances to operators 1,192,079 836,099
Other current assets 117,614 117,614
------------ ------------
Total current assets 6,724,714 6,715,379
PROPERTY AND EQUIPMENT, net (full-cost method of accounting for oil and
gas properties) 57,878,191 59,097,733
OTHER ASSETS 385,127 306,883
------------ ------------
$ 64,988,032 $ 66,119,995
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $ 10,003,376 $ 9,052,949
Dividends payable 720,360 736,568
Other current liabilities 275,116 231,101
Current maturities of long-term debt 930,000 4,828,445
------------ ------------
Total current liabilities 11,928,852 14,849,063
LONG-TERM DEBT (Note 4) 11,126,000 9,844,405
DEFERRED INCOME TAXES -- --
MANDATORILY REDEEMABLE PREFERRED STOCK (10,000,000 shares
authorized with 320,110.53 and 327,286.69 issued and outstanding at December
31, 1998 and March 31, 1999, respectively) (Note 5) 30,730,695 31,503,330
SHAREHOLDERS' EQUITY:
Warrants (Note 5) 300,000 300,000
Common Stock (40,000,000 shares authorized with 10,375,000 issued and
Outstanding at December 31, 1998 and March 31, 1999, respectively) 103,750 103,750
Additional paid-in capital 32,845,727 32,845,727
Retained earnings (deficit) (21,907,082) (23,326,280)
Deferred compensation (139,910) --
------------ ------------
11,202,485 9,923,197
------------ ------------
$ 64,988,032 $ 66,119,995
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 4
CARRIZO OIL & GAS, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three
Months Ended
March 31,
--------------------------------
1998 1999
------------ ------------
<S> <C> <C>
OIL AND NATURAL GAS REVENUES $ 2,338,882 $ 1,842,314
COSTS AND EXPENSES:
Oil and natural gas operating expenses 629,446 743,704
Depreciation, depletion and amortization 759,504 943,191
General and administrative 834,352 707,525
------------ ------------
Total costs and expenses 2,223,302 2,394,420
------------ ------------
OPERATING INCOME (LOSS) 115,580 (552,106)
OTHER INCOME AND EXPENSES:
Interest income
193,503 6,485
Interest expense (57,731) (260,382)
Capitalized interest 54,646 260,382
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 305,998 (545,621)
INCOME TAXES 120,463 7,002
------------ ------------
NET INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 185,535 (552,623)
CUMULATIVE EFFECT OF CHANGE IN METHOD OF
REPORTING COSTS OF START-UP ACTIVITIES (Note 6) -- 77,731
------------ ------------
NET INCOME (LOSS) $ 185,535 $ (630,354)
============ ============
LESS: DIVIDENDS AND ACCRETION ON PREFERRED SHARES (670,494) (788,843)
------------ ------------
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS $ (484,959) $ (1,419,197)
============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (Note 3)
$ (.05) $ (.13)
BASIC AND DILUTED LOSS PER COMMON SHARE OF CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (Notes 3 and 6) -- (.01)
------------ ------------
BASIC AND DILUTED LOSS PER COMMON SHARE (Note 3) $ (.05) $ (.14)
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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CARRIZO OIL & GAS, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three
Months Ended
March 31,
--------------------------------
1998 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 185,535 $ (630,354)
Adjustment to reconcile net income (loss) to net cash provided by
operating activities-
Depreciation, depletion and amortization 759,504 943,191
Deferred income taxes 99,903 --
Cumulative effect of change in accounting principle -- 77,731
Changes in assets and liabilities-
Accounts receivable 535,122 300,136
Other assets (7,980) (86,378)
Accounts payable, trade (5,013,493) (1,119,729)
Other current liabilities (13,197) (44,015)
------------ ------------
Net cash used in
operating activities (3,454,606) (559,418)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, accrual basis (8,918,344) (1,935,933)
Adjustment to cash basis 734,773 169,302
Advance to operators (96,856) 355,980
------------ ------------
Net cash used in
investing activities (8,280,427) (1,410,651)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of preferred stock 28,810,431 --
Proceeds from long-term debt -- 2,616,850
Debt repayments (7,950,000) --
------------ ------------
Net cash provided by financing activities 20,860,431 2,616,850
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 9,125,398 646,781
CASH AND CASH EQUIVALENTS, beginning of period 2,674,837 1,187,656
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 11,800,235 $ 1,834,437
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest (net of amounts capitalized) $ -- $ --
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 6
CARRIZO OIL & GAS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND PRINCIPLES OF COMBINATION:
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, 1998, 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, 1998.
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. GOING CONCERN:
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Due principally to depressed oil and
gas prices, the Company's operating cash flows have decreased significantly in
1998 and through the first quarter of 1999. The Company projects that, after
considering advances and borrowing base adjustments obtained during the first
quarter of 1999, and without further increases in borrowing base capacity under
its existing revolving credit facility, debt repayments totaling approximately
$4,828,445 will be required in the 12 months ended March 31, 1999. The Company
raised $2 million in additional financing under its existing credit facility in
March 1999; however, it is anticipated that these proceeds will be utilized to
fund the Company's ongoing drilling program and for working capital. The Company
must find additional oil and gas reserves in order to significantly increase the
financing available through its existing revolving credit facility.
The Company projects that its cash sources will exceed its planned needs for
cash in 1999. Such cash sources include additional borrowings subject to
borrowing availability, cash flows from currently producing properties along
with those nearing completion or pending pipeline hookup and projected net cash
flows from wells to be drilled. Cash needs in 1999 include debt requirements,
working capital, drilling expenditures, lease bonus payments, geological and
geophysical costs on its active exploration projects and cash general and
administrative costs. The Company also has specific plans which involve, among
other things, cost reductions, hedging activities to lock in higher prices and
the drilling of high probability exploration and development prospects that it
believes will generate the necessary borrowing capacity and cash flow to fund
its 1999 obligations. There are no assurances, however, that the Company will be
able to generate cash flows sufficient to pay all of its 1999 obligations as
they become due because of the sensitivity of such cash flow projections to
factors such as oil and natural gas sales price volatility, production levels,
operating cost fluctuations, and other variables inherent in the oil and gas
industry. The current uncertainties surrounding the sufficiency of its future
cash flows and the lack of firm commitments for additional capital raise
substantial doubt about the ability of the Company to continue as a going
concern. The accompanying financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
As of March 31, 1999 and December 31, 1998, respectively, the Company had
$37,432,153 and $37,060,418 of investment in unevaluated properties. In order to
fully realize this investment through the exploration and development of these
properties, additional capital resources above the amount currently available
from the borrowing base and net cash flow from operations will be necessary to
fund such capital expenditures. The Company is continuing to seek additional
financing from a variety of sources, including new common or preferred equity
investors and additional debt financing. No assurance can be given that
additional financing will be available by these or other means on terms
acceptable to the Company. Without a continued increase in commodity prices,
successful drilling or raising additional capital, the Company anticipates that
it will be required to limit or defer its planned oil and gas exploration and
development program, which could adversely affect the recoverability and
ultimate value of the Company's oil and gas properties. The Company has the
ability to control the pace of drilling in projects where it has a 100 percent
working interest. In other projects where the Company only has a partial
ownership, the Company generally has the right, but not the obligation, to
participate for its percentage interest in drilling wells and can decline to
participate if it does not have sufficient capital resources at the time such
drilling operations commence. The Company may also transfer its right to
participate in drilling wells in exchange for cash, a reversionary interest, or
some combination thereof or may seek to sell or transfer all or a portion of its
interest in undeveloped properties.
3. EARNINGS PER COMMON SHARE:
Supplemental earning per share information is provided below:
<TABLE>
<CAPTION>
For the Three Months Ended March 31,1998
----------------------------------------------------
Per-Share
Income Shares Amount
------------ ---------- ------------
<S> <C> <C> <C>
Net Income $ 185,535
Less: Dividends and accretion on preferred stock (670,494)
------------
Basic Earnings per Share
Net Loss available to common shareholders $ (484,959) 10,375,000 $ (0.05)
============
Stock Options -- 112,769
------------ ------------
Diluted Earnings per Share
Net Loss available to common
shareholders plus assumed conversions $ (484,959) 10,487,769 $ (0.05)
============ ============ ============
</TABLE>
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<PAGE> 8
<TABLE>
<CAPTION>
For the Three Months Ended March 31,1999
----------------------------------------------------
Per-Share
Income Shares Amount
------------ ---------- ------------
<S> <C> <C> <C>
Net Loss before cumulative effect of change in accounting
principle $ (552,623)
Less: Dividends and accretion on preferred stock (788,843)
------------
Basic Earnings per Share before cumulative change in
accounting principle
Net Loss available to common shareholders $ (1,341,466) 10,375,000 $ (0.13)
============
Stock Options -- --
------------ ------------
Diluted Earnings per Share before cumulative effect of change
in accounting principle Net Loss available to common
shareholders plus assumed conversions $ (1,341,466) 10,375,000 $ (0.13)
============ ============ ============
Cumulative effect of change in accounting
principle $ (77,731)
Basic Earnings per Share of cumulative effect of change in
accounting principle
Net Loss available to common shareholders $ (77,731) 10,375,000 $ (0.01)
============ ========== ============
Stock Options -- --
------------ ------------
Diluted Earnings per Share of cumulative effect of change in
accounting principle Net Loss available to common
shareholders plus assumed conversions $ (77,731) 10,375,000 $ (0.01)
============ ============ ============
Net Loss $ (630,354)
Less: Dividends and accretion on preferred stock (788,843)
------------
Basic Earnings per Share
Net Loss available to common shareholders $ (1,419,197) 10,375,000 $ (0.14)
============
Stock Options -- --
------------ ------------
Diluted Earnings per Share
Net Loss available to common shareholders plus
assumed conversions $ (1,419,197) 10,375,000 $ (0.14)
============ ============ ============
</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. The Company had outstanding 250,000 and 443,500 stock
options and 1,000,000 warrants, during the three months ended March 31, 1998 and
1999, respectively, which were antidilutive and were not included in the
calculation because the exercise price of these instruments exceeded the
underlying market value of the options and warrants.
4. FINANCING ARRANGEMENTS:
In connection with the Offering, the Company entered into an amended revolving
credit agreement with Compass Bank (the "Company Credit Facility"), to provide
for a maximum loan amount of $25 million, subject to borrowing base limitations.
The maximum loan amount was amended to $10 million in April, 1999. Under the
Company Credit Facility, the principal outstanding is due and payable upon
maturity in June 2000 with interest due monthly. The Company Credit Facility was
subsequently amended in September 1998 to provide for a term loan under the
facility (the "Term Loan") in addition to the revolving credit facility limited
by the Company's borrowing base. The Term Loan was initially due and payable
upon maturity in September 1999. The interest rate for borrowings is calculated
at a floating rate based on the
<PAGE> 9
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. As of March 31, 1999 and
December 31, 1998, respectively, the borrowing base was $6,171,738 and
$6,076,000 and borrowings outstanding were $5,351,000 and $5,056,000.
Proceeds from the Borrowing Base portions of this credit facility have been used
to provide funding for exploration and development activity. Substantially all
of Carrizo's oil and natural gas property and equipment is pledged as collateral
under this facility. At March 31, 1999 and December 31, 1998, borrowings under
this facility totaled $5,351,000 and $5,056,000, respectively, with an
additional $521,738 and $1,020,000, respectively, available for future
borrowings. Borrowings outstanding under the Term Loan portion of the facility
were $9,000,000 and $7,000,000 at March 31, 1999 and December 31, 1998,
respectively. The facility was also available for letters of credit, two and one
of which have been issued for $299,000 and $224,000 at March 31, 1999 and
December 31, 1998, respectively. The term loan is guaranteed by certain members
of the Board of Directors.
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 March 1999, the
Company Credit Facility was amended to decrease the required specified tangible
net worth covenant.
In March 1999, the Company borrowed an additional $2 million on the term loan
portion of the Company Credit Facility increasing the total outstanding
borrowing under the Term Loan to $9 million. Certain members of the Board of
Directors have guaranteed the Term Loan. The maturity date of the Term Loan was
amended to provide for twelve monthly installments of $750,000 beginning January
1, 2000. The Company also received a deferral of principal payments due under
the borrowing base facility until July 1, 1999. At such time, the available
borrowing base portion of the loan will be reviewed and is expected to begin to
reduce ratably at $325,000 per month with any difference between the available
borrowing base and amounts outstanding being currently due. Should the Company
be able to add sufficient value to its borrowing base through drilling
activities, the required principal payments would be reduced. Certain members of
the Board of Directors have provided $2 million in collateral primarily in the
form of marketable securities to secure the borrowing base facility.
5. MANDATORILY REDEEMABLE PREFERRED STOCK:
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 and were used primarily for oil and natural gas
exploration and development activities in Texas and Louisiana and to repay
related indebtedness. 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. The
Company expects to continue payment in kind dividends due in 1999. Dividend
payments for the three months ended March 31, 1999 were made by the issuance of
an additional 7,337.02 shares of Preferred Stock. As of April 15, 1999 there
were 334,623.71 shares of Preferred Stock outstanding.
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 the following events: (a) the Company has failed at
any point in time to declare and pay any two dividends in the amount then due
and payable on or before the date the second of such dividends is due and such
dividends remain unpaid at such time, (b) the Company breaches certain other
covenants concerning the payment of dividends or other distributions on or
redemption or acquisition of shares of its capital stock ranking at parity with
or junior 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 in respect to the Preferred Stock, (d) the
Company fails to pay certain amounts due on indebtedness for borrowed money or
there has otherwise been an acceleration of such indebtedness for borrowed
money, (e) there is a
-8-
<PAGE> 10
violation of the Shareholders' Agreement that is not waived or (f) the Company
sells, leases, exchanges or otherwise disposes of all or substantially all of
its property and assets which transaction does not provide for the redemption of
the Series A 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 refinancing, but
including prepayments (other than in connection with refinancing) which would
otherwise be due under such indebtedness within a 60-day period following the
date of such prepayment). 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 March 31,
1999 was less than the amount of the dividends accrued with respect to the
Preferred Stock for such period. There can be no assurance as to whether the
Company's Cash Flow for the three months ended June 30, 1999 will exceed the
amount of the dividends to be accrued with respect to the Preferred Stock.
6. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE:
On January 1, 1999, the Company adopted the American Institute of Certified
Public Accountants Statement of Position 98-5, which provides guidance on the
accounting for start up costs and organization costs that required the recording
of the cumulative effect of a change in accounting principle to write off
unamortized organization costs of $77,731.
7. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board ("FASB") 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.
-9-
<PAGE> 11
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, 1998 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 53 wells in 1998 and five wells
through the three months ended March 31, 1999. The Company has budgeted to drill
a total of 18 to 44 gross wells (4.6 to 17.5 net) in 1999. Accordingly,
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 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 from time to
time. The Company entered in hedging transactions covering 660 Mmcf and 180 Mmcf
at an average price (Houston Ship Channel) of $2.13 and $2.99 resulting in a net
gain of $117,000 and $150,000 for the first quarters of 1999 and 1998,
respectively. The Company had outstanding hedge positions as of March 31, 1999
and 1998, respectively, covering 1,080 Mmcf for April-December 1999 and 488 Mmcf
for April-July 1998 at an average price of $1.93 and $2.15 (Houston Ship
Channel). The Company also had outstanding hedge positions as of March 31, 1999
covering 54,000 Bbls for April-December 1999 at an average price of $15.45. The
fair market value of the hedge positions as March 31, 1999 is approximately
$(30,000).
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
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<PAGE> 12
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. A ceiling test write-down
was not required for the three months ended March 31, 1999 and 1998. Once
incurred, a write-down of oil and gas properties is not reversible at a later
date.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1999,
Compared to the Three Months Ended March 31, 1998
Oil and natural gas revenues for the three months ended March 31, 1999 decreased
21 percent to $1,842,000 from $2,339,000 for the same period in 1998. Production
volumes for natural gas during the three months ended March 31, 1999 were
703,694 Mcf, essentially unchanged from 707,171 Mcf for the same period in 1998.
Average gas prices decreased 27 percent to $1.92 per Mcf in the first quarter of
1999 from $2.64 per Mcf in the same period in 1998. Production volumes for oil
in the first quarter of 1999 increased 44 percent to 47,759 Bbls from 33,175
Bbls for the same period in 1998. Average oil prices decreased 27 percent to
$10.33 per barrel in the first quarter of 1999 from $14.19 per barrel in the
same period in 1998. The increase in oil production was due primarily to the
Jones Branch acquisition during the fourth quarter of 1998. Natural gas
production remained substantially unchanged primarily as a result of the
increased production due to the Jones Branch acquisition offset by the natural
decline of existing 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 March 31, 1998 and 1999:
<TABLE>
<CAPTION>
1999 Period
Compared to 1998 Period
--------------------------------
March 31 Increase % Increase
1998 1999 (Decrease) (Decrease)
------------ ------------ ------------ ---------
<S> <C> <C> <C> <C>
Production volumes-
Oil and condensate (Bbls) 33,175 47,759 14,584 44%
Natural gas (Mcf) 707,171 703,694 (3,477) 0%
Average sales prices-(1)
Oil and condensate (per Bbl) $ 14.19 $ 10.33 $ (3.86) (27)%
Natural gas (per Mcf) 2.64 1.92 (.72) (27)%
Operating revenues-
Oil and condensate $ 470,689 $ 493,436 $ 22,747 5%
Natural gas 1,868,193 1,348,878 (519,315) (28)%
------------ ------------ ------------
Total $ 2,338,882 $ 1,842,314 $ (496,568) (21)%
============ ============ ============
</TABLE>
- ---------
(1) Includes impact of hedging activities.
Oil and natural gas operating expenses for the three months ended March 31, 1999
increased 18 percent to $744,000 from $629,000 for the same period in 1998
primarily due to the addition of new production offset by a reduction in costs
on older producing fields. Operating expenses per equivalent unit increased to
$.75 per Mcfe in the first quarter of 1999 from $.69 per Mcfe in the same period
in 1998 as a result of the natural decrease in production of natural gas on
older wells offset by cost control measures implemented in certain oil producing
fields.
Depreciation, depletion and amortization (DD&A) expense for the three months
ended March 31, 1999 increased 24 percent to $943,000 from $760,000 for the same
period in 1998. This increase was due to increased amortization of deferred loan
costs, increased production and additional seismic and drilling costs offset by
the lower asset base resulting from the ceiling test write-down in the fourth
quarter of 1998. General and administrative expense for the three months ended
March 31, 1999 decreased 15 percent to $708,000 from $834,000 for the same
period in 1998 primarily as a result of cost control measures implemented in the
first quarter of 1999.
Interest income for the three months ended March 31, 1999 decreased to $6,000
from $194,000 in the first quarter of 1998 as a result of declining cash
balances Net interest expense for the three months ended March 31, 1999,
decreased to zero from $3,000 from in the same period in 1998. Capitalized
interest increased to $260,000 in the first quarter of 1999 from $55,000 in the
first quarter of 1998 reflecting higher debt levels in the 1999 quarter.
-11-
<PAGE> 13
Income (loss) before income taxes for the three months ended March 31, 1999
decreased to a loss of $546,000 from income of $306,000 in the same period in
1998. Net income (loss) for the three months ended March 31, 1999 decreased to a
loss of $630,000 from income of $186,000 for the same period in 1998 primarily
as a result of the factors described above and the charge of $78,000 for the
cumulative effect of change in method of reporting costs of start-up activities.
LIQUIDITY AND CAPITAL RESOURCES
Note 2 to the Financial Statements notes that the financial statements have been
prepared assuming the Company will continue as a going concern but also notes
the uncertainties about the Company's future ability to pay its obligations when
they become due and the lack of firm commitments for additional capital raised
substantial doubt about the ability of the Company to continue as a going
concern. As stated in that note, the financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern. See Note 2 in the Notes to
the Company's Financial Statements.
The Company has made and will be required to make oil and gas capital
expenditures substantially in excess of its net cash flow from operations in
order to complete the exploration and development of its existing properties.
The Company will require additional sources of financing to fund drilling
expenditures on properties currently owned by the Company and to fund leasehold
costs and geological and geophysical cost on its active exploration projects.
Management of the Company continues to seek financing for its capital program
from a variety of sources. The Company is seeking common or preferred equity
investors. The Company is also seeking additional debt financing, although it
has no additional borrowings currently available under its credit agreement. No
assurance can be given that the Company will be able to obtain additional
financing by these or other means on terms that would be acceptable to the
Company. The Company's inability to obtain additional financing would have a
material adverse effect on the Company. Without raising additional capital, the
Company anticipates that it will be required to limit or defer its planned oil
and gas exploration and development program, which could adversely affect the
recoverability and ultimate value of the Company's oil and gas properties. The
Company may also be required to pursue other financial alternatives, which could
include sales of assets or a sale or merger of the Company.
The Company's primary sources of liquidity have included proceeds from the
Offering and from the sale of shares of Preferred Stock and the Warrants, funds
generated by operations, equity capital contributions and borrowings, primarily
under revolving credit facilities.
Cash flows used in operations (after changes in working capital) were $3,454,606
and $559,418 for the three months ended March 31, 1998 and 1999, respectively.
The decrease in cash flows used in operations in 1999 as compared to 1998 was
due primarily to decreases in trade accounts payable in 1998.
The Company has budgeted capital expenditures in 1999 of approximately $2.2
million to $9.5 million of which $500,000 is expected to be used to fund 3-D
seismic surveys and land acquisitions and $1.7 million to $ 9.0 million of which
is expected to be used for drilling activities in the Company's project areas.
The Company has budgeted to drill approximately 18 to 44 gross wells (4.6 to
17.8 net) in 1999. The actual number of wells drilled and capital expended is
dependent upon available financing and cash flow. This decrease in planned
drilling activity resulted primarily from the lack of availability of capital
resources.
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 $1.9 million for the three months ended March 31, 1999. The
Company's drilling efforts resulted in the successful completion of 31 gross
wells (10.3 net) during the year ended December 31, 1998 and five gross wells
(0.7 net) during the three months ended March 31, 1999.
-12-
<PAGE> 14
FINANCING ARRANGEMENTS
In connection with the Offering, the Company entered into an amended revolving
credit agreement with Compass Bank (the "Company Credit Facility"), to provide
for a maximum loan amount of $25 million, subject to borrowing base limitations.
The maximum borrowing base loan amount was amended to $10 million in April,
1999. Under the Company Credit Facility, the principal outstanding is due and
payable upon maturity in June 2000 with interest due monthly. The Company Credit
Facility was subsequently amended in September 1998 to provide for a term loan
under the facility (the "Term Loan") in addition to the revolving credit
facility limited by the Company's borrowing base. The Term Loan was initially
due and payable upon maturity in September 1999. 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. As of March 31, 1999 and
December 31, 1998, respectively, the borrowing base was $5,790,925 and
$6,076,000 and borrowings outstanding were $6,171,738 and $5,056,000.
Proceeds from the Borrowing Base portions of this credit facility have been used
to provide funding for exploration and development activity. Substantially all
of Carrizo's oil and natural gas property and equipment is pledged as collateral
under this facility. At March 31, 1999 and December 31, 1998 borrowings under
this facility totaled $5,351,000 and $5,056,000, respectively, with and an
additional $521,738 and $1,020,000, respectively, available for future
borrowings. Borrowings outstanding under the Term Loan portion of the facility
were $9,000,000 and $7,000,000 at March 31, 1999 and December 31, 1998,
respectively. The facility was also available for letters of credit, two and one
of which have been issued for $299,000 and $224,000 at March 31, 1999 and
December 31, 1998, respectively. The term loan is guaranteed by certain members
of the Board of Directors.
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 March 1999, the
Company Credit Facility was amended to decrease the required specified tangible
net worth covenant.
In March 1999, the Company borrowed an additional $2 million on the term loan
portion of the Company Credit Facility increasing the total outstanding
borrowing under the Term Loan to $9 million. Certain members of the Board of
Directors have guaranteed the Term Loan. The maturity date of the Term Loan was
amended to provide for twelve monthly installments of $750,000 beginning January
1, 2000. The Company also received a deferral of principal payments due under
the borrowing base facility until July 1, 1999. At such time, the available
borrowing base portion of the loan will be reviewed and is expected to begin to
reduce ratably at $325,000 per month with any difference between the available
borrowing base and amounts outstanding being currently due. Should the Company
be able to add sufficient value to its borrowing base through drilling
activities, the required principal payments would be reduced. Certain members of
the Board of Directors have provided $2 million in collateral primarily in the
form of marketable securities to secure the borrowing base facility.
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 and were used primarily for oil and natural gas
exploration and development activities in Texas and Louisiana and to repay
related indebtedness. 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. The
Company expects to continue payment in kind dividends due in 1999. Dividend
payments for the three months ended December 31, 1999 were made by the issuance
of an additional 7,337.02 shares of Preferred Stock. As of April 15, 1999 there
were 334,623.71 shares of Preferred Stock outstanding.
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 the following
-13-
<PAGE> 15
events: (a) the Company has failed at any point in time to declare and pay any
two dividends in the amount then due and payable on or before the date the
second of such dividends is due and such dividends remain unpaid at such time,
(b) the Company breaches certain other covenants concerning the payment of
dividends or other distributions on or redemption or acquisition of shares of
its capital stock ranking at parity with or junior 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 in
respect to the Preferred Stock, (d) the Company fails to pay certain amounts due
on indebtedness for borrowed money or there has otherwise been an acceleration
of such indebtedness for borrowed money, (e) there is a violation of the
Shareholders' Agreement that is not waived or (f) the Company sells, leases,
exchanges or otherwise disposes of all or substantially all of its property and
assets which transaction does not provide for the redemption of the Series A
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 refinancing, but including
prepayments (other than in connection with refinancing) which would otherwise be
due under such indebtedness within a 60-day period following the date of such
prepayment). 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 March 31,
1999 was less than the amount of the dividends accrued with respect to the
Preferred Stock for such period. There can be no assurance as to whether the
Company's Cash Flow for the three months ended June 30, 1999 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.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") 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.
YEAR 2000
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
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<PAGE> 16
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.
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 has not identified any non-information technology systems that use
embedded technology on which it relies and which it believes is likely to have a
Year 2000 problem; however such assessment is expected to continue through 1999.
Like every other business enterprise, the Company is at risk from Year 2000
failures on the part of its major business counterparts, including suppliers and
service providers, as well as potential failures in public and private
infrastructure services, including electricity, water, gas, transportation and
communications.
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.
The Company's assessment of its Year 2000 issues involves many assumptions.
There can be no assurance that the Company's assumptions will prove accurate,
and actual results could differ significantly from the assumptions. In
conducting 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 affects the
Company's business, financial condition or results of operations. The Company is
unlikely to be insured for Year 2000 losses should they occur. 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.
-15-
<PAGE> 17
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.
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<PAGE> 18
+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 -- Fifth Amended, Restated, and Combined Loan Agreement
between the Company and Compass Bank dated May 22, 1999.
4.2 -- Amended and Restated Limited Guaranty, Douglas A. P.
Hamilton dated May 22, 1999.
4.3 -- Stock Pledge Agreement, Steven A. Webster dated
May 22, 1999.
4.4 -- Sixth Amendment to First Amended, Restated and Combined
Loan Agreement by and between Carrizo Oil & Gas, Inc. and
Compass Bank dated April 23, 1999.
4.5 -- Amended and Restated Limited Guaranty, Paul B. Loyd, Jr.
dated May 22, 1999.
27.1 -- Financial Data Schedule.
+ Incorporated herein by reference as indicated.
Reports on Form 8-K
On February 23, 1999, the Company filed a Form 8-K/A that included
financial statements and pro forma financial information with respect to its
acquisition of certain oil and gas producing properties in Wharton County,
Texas, along with certain rights to participate in certain exploration prospects
and associated rights of access to certain seismic data and related information
and certain other related assets from Hall-Houston Oil Company and others. This
acquisition was originally reported on a Form 8-K, filed on December 28, 1998.
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<PAGE> 19
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: May 17, 1999 By: /s/ S. P. Johnson, IV
--------------------------------------------
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 17, 1999 By: /s/ Frank A. Wojtek
--------------------------------------------
Chief Financial Officer
(Principal Financial and Accounting Officer)
-18-
<PAGE> 20
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 -- Fifth Amended, Restated, and Combined Loan Agreement
between the Company and Compass Bank dated March 22, 1999.
4.2 -- Amended and Restated Limited Guaranty, Douglas A. P.
Hamilton dated March 22, 1999.
4.3 -- Stock Pledge Agreement, Steven A. Webster dated
March 22, 1999.
4.4 -- Sixth Amendment to First Amended, Restated and Combined
Loan Agreement by and between Carrizo Oil & Gas, Inc. and
Compass Bank dated April 23, 1999.
4.5 -- Amended and Restated Limited Guaranty, Paul B. Loyd, Jr.
dated March 22, 1999.
27.1 -- Financial Data Schedule.
</TABLE>
+ Incorporated herein by reference as indicated.
<PAGE> 1
EXHIBIT 4.1
FIFTH AMENDMENT
TO
FIRST AMENDED, RESTATED, AND COMBINED LOAN AGREEMENT
BY AND BETWEEN CARRIZO OIL & GAS, INC.
AND COMPASS BANK
This Fifth Amendment to the Loan Agreement (this "Fifth 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 effective on
the 22nd day of March 1999, 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 Combined
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 thereto dated July 30, 1998 and the Fourth Amendment thereto
dated September 24, 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 increase the existing term loan to
Borrower by $2,000,000.00 up to a principal amount of $9,000,000.00, extend the
maturity date of the term loan and modify the Borrowing Base supporting the
Revolving Loan, 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:
"Borrowing Base Properties" means the Borrowing Base Oil and
Gas Properties, the Borrowing Base Cash, and the Borrowing Base
Securities.
"Cash Equivalent" means certificates of deposit issued by the
Bank, other certificates of deposit approved by the Bank in its sole
discretion and Collateral Letters of Credit
"Notes" means, collectively, the Note and the Second Term Note
and any extension, renewal, rearrangement of, or substitute for either
of such Notes. All references to the
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defined term, "Note," throughout this Agreement, as it existed prior to
the Second Amendment, shall be construed to refer to both of the Notes,
with the exception of the references to the term, "Note," in the
definitions of Loan Excess, and 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.
"Subsidiary" means, with respect to Borrower and Guarantor,
respectively, (a) any corporation in which Borrower or Guarantor,
directly or indirectly through its Subsidiaries, owns more than fifty
percent (50%) of the stock of any class or classes having by the terms
thereof the ordinary voting power to elect a majority of the directors
of such corporation; and (b) any partnership, association, joint
venture, or other entity in which Borrower or Guarantor, respectively,
directly or indirectly through its Subsidiaries, has more than a fifty
percent (50%) equity interest at the time.
Article I of the Loan Agreement is hereby amended by adding the
following definitions thereto:
"Borrowing Base Securities" means Eligible Marketable
Securities of Borrower that are added to the Borrowing Base Properties
pursuant to Section 2.14.
"Certificate of Liquidity" shall have the meaning set forth in
Section 5.28.
"Collateral Letter(s) of Credit" means any irrevocable,
standby letter of credit naming Bank as the beneficiary with a
termination date not sooner than thirty (30) days after the Maturity
Date or the Second Term Loan Maturity Date, whichever is later, issued
by another bank on terms and conditions satisfactory to Bank, in its
sole discretion, which may be drawn upon by the Bank's draft
accompanied by a certificate that an Event Default has occurred and is
continuing.
"Eligible Marketable Securities" means the unrestricted shares
of stock in R&B Falcon Corporation, and any other unrestricted shares
of stock that are approved by the Bank in its sole discretion.
"Fifth Amendment" means the Fifth Amendment to this Agreement
executed by Borrower and Bank effective on March 22, 1999.
"Guarantor" means, individually and collectively, Paul B.
Loyd, Jr., Steven A. Webster, and Douglas A.P. Hamilton.
"Guaranty" means the limited guaranty of Borrower's
Obligations to Bank with respect to the Second Term Loan, in form and
substance satisfactory to Bank, duly executed by each Guarantor.
"Liquid Assets" shall have the meaning ascribed to that term
in the Guaranty.
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"Pledge of Brokerage Account" means a pledge agreement in form
and substance satisfactory to Bank pursuant to which Borrower or any
Guarantor, as Debtor, pledges to Bank, as Secured Party, a brokerage
account of Borrower or such Guarantor, in which are deposited Cash,
Cash Equivalent, or Eligible Marketable Securities owned by such party.
"Second Term Loan" means that certain $9,000,000.00 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 additional equity of Borrower if the
proceeds of such issuance is sufficient to repay the Second Term Loan;
(2) the date of closing of the issuance of convertible subordinated
debt of Borrower if the proceeds of such issuance is sufficient to
repay the Second Term Loan; (3) the date of repayment of the Revolving
Loan; and (4) January 1, 2001.
"Second Term Note" means the promissory note in the original
face amount of $9,000,000.00 dated of even date herewith, made by
Borrower payable to the order of Bank, in substantially the form
attached to the Fifth Amendment as Exhibit "B," 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.
"Stock Pledge Agreement" means a pledge agreement in form and
substance satisfactory to Bank pursuant to which Borrower or any
Guarantor, as Debtor, pledges to Bank, as Secured Party, Eligible
Marketable Securities owned by such party.
Article II of the Loan Agreement is hereby amended by revising the
following sections as follows:
Section 2.09, Mandatory Prepayment of the Notes, is hereby amended by
replacing the number "thirty (30)" in the third line thereof with the number
"fifteen (15)" and by replacing the text: "Cash and/or Cash Equivalent of
Borrower" in the eighth and ninth lines thereof with the text: "Cash, Cash
Equivalent and/or Eligible Marketable Securities of Borrower or any Guarantor".
Section 2.10, Borrowing Base Determination, is hereby amended by
re-lettering paragraph "c. Equity Cushion" and paragraph "d. Unscheduled
Borrowing Base Redetermination" as paragraphs "d" and "e", respectively, and by
inserting the following paragraph "c":
c. Borrowing Base Securities. At each time that the Bank
redetermines the Borrowing Base attributable to the Borrowing Base Oil
and Gas Properties, as set forth in Section 2.10(a), it shall also
include in the Borrowing Base calculation seventy-five percent (75%) of
the market value of the Borrowing Base Securities that are either in
the Bank's possession and are subject to one or more of the applicable
Security Agreements, or are in a brokerage account that has been
pledged to Bank on terms and conditions satisfactory to Bank, in its
sole discretion, with the market value thereof to be determined based
on the announced value at which such securities were trading as of the
close of trading on the last
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trading day of the month preceding the month in which the Bank notifies
Borrower of the redetermination of the Borrowing Base.
Section 2.10, Borrowing Base Determination, is hereby further amended
with respect to paragraph "e", formerly paragraph "d", by inserting the
following text in the fourth line between the words "time" and "which":
and Bank intends to monitor the Borrowing Base value of the
Borrowing Base Securities on a weekly basis and redetermine
the Borrowing Base whenever Bank deems it prudent based on
changes in the weekly value of the Borrowing Base Securities,
Section 2.11, Assignment of Production, is hereby amended by replacing
the section references "3.17 and/or 3.19" in the third line from the end thereof
with the section references "3.14 and/or 3.16".
Section 2.14 Addition of Borrowing Base Properties is hereby amended by
replacing that section in its entirety with the following:
2.14 Addition of Borrowing Base Properties. Borrower may,
from time to time upon thirty (30) days prior written notice to Bank,
propose to add Oil and Gas Properties, Cash, Cash Equivalent, and/or
Eligible Marketable Securities of Borrower or any Guarantor to the
Borrowing Base Properties. Any such proposal to add Oil and Gas
Properties of Borrower or any Guarantor to the Borrowing Base
Properties shall be accompanied by an engineering report applicable to
such Oil and Gas Properties that conforms to the requirements of
Section 2.10, evidence sufficient to establish that Borrower and/or
such Guarantor, as applicable, has Marketable Title to such Oil and Gas
Properties, and such other data as Bank may reasonably request. Any
such proposal to add Eligible Marketable Securities of Borrower or any
Guarantor to the Borrowing Base properties shall be accompanied by
evidence sufficient to establish that Borrower or such Guarantor has
Marketable Title to such Eligible Marketable Securities, and such other
data as Bank may reasonably request. Any such additions shall become
effective at such time as: (a) Bank has made its determination in the
ordinary course of business of the amount by which the Borrowing Base
would be increased as the result of such addition and (b) the
conditions set forth in Article III hereof, to the extent they are
applicable to such additional Borrowing Base Properties of Borrower or
any Guarantor, have been satisfied.
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Article II of the Loan Agreement is hereby amended by replacing the
following sections in their entirety as follows:
2.22 Second Term Loan. Based on the terms and conditions and
relying on the representations and warranties contained in this
Agreement, (i) Bank has heretofore advanced $7,000,000.00 of the Second
Term Loan to Borrower, and (ii) subject to the terms and conditions and
relying on the representations and warranties contained in this
Agreement, Bank agrees to advance $2,000,000.00 of the Second Term Loan
at the closing of the Fifth Amendment.
2.23 Second Term Note. The obligation of Borrower to repay the
Second Term Loan shall be evidenced by the Second Term Note.
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 Term Loan Maturity Date. For the period
beginning on the date of the Fifth Amendment until December 1, 2000,
principal payments on the Second Term Loan evidenced by this Note shall
not be due, unless preceded by the Second Term Loan Maturity Date, when
the entire unpaid balance of this Note, inclusive of principal and
interest, shall be paid in full. Except as provided for in the
preceding sentence, the principal payments under the Second Term Loan
evidenced by the Second Term Note will be repaid in twelve (12) equal
consecutive monthly installments in the amount of $750,000.00 each,
beginning on January 1, 2000, and continuing on the first day of each
calendar month thereafter until 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 without penalty,
the entire balance outstanding on the Second Term Note, together with
all accrued, unpaid interest.
Article III of the Loan Agreement is hereby amended by replacing the
following sections in their entirety as follows:
3.14 Security Instruments. As security for the payment of the
Notes and the performance of the Obligations of Borrower under this
Agreement, Bank shall have received the Security Instruments, duly
executed by Borrower with respect to Borrowing Base properties owned by
Borrower and duly executed by the applicable Guarantor with respect to
Borrowing Base Properties owned by such Guarantor.
3.16 Documents Required for Subsequent Disbursements. As of
the time of funding any additional advances to Borrower that are made
in conjunction with the addition to the Borrowing Base Properties of
Oil and Gas Properties, Cash, Cash Equivalent, and/or Eligible
Marketable Securities owned by Borrower or any Guarantor, Borrower
shall have duly delivered or caused to be delivered to Bank: (i) the
Security Instruments that are
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necessary or appropriate, in the opinion of Bank, relating to such
additional Borrowing Base Properties, (ii) Transfer Order Letters
applicable to the production of oil and gas from any additional Oil and
Gas Properties added to the Borrowing Base Properties, and (iii)
possession of any such additional Borrowing Base Cash and Borrowing
Base Securities.
Article III of the Loan Agreement is hereby amended by adding the
following Section 3.19.
3.19 Conditions Precedent in Connection with the Fifth
Amendment. The obligation of Bank to make the $2,000,000.00
disbursement pursuant to 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, Fifth Amendment and
Certificate of Compliance. Bank shall have received the Second Term
Note, multiple counterparts of the Fifth Amendment, as requested by
Bank, and the Certificate of Compliance duly executed by an authorized
officer for Borrower.
(b) Receipt of Collateral Documents. As security for the
payment of the Notes and the performance of the obligations of Borrower
under this Agreement, Bank shall have received:
(i) a duly executed Guaranty from each Paul B. Loyd, Jr.,
Steven A. Webster, and Douglas A.P. Hamilton, as
Guarantors, of Borrower's Obligations to Bank with respect
to the Second Term Loan, in form and substance
satisfactory to Bank;
(ii) a duly executed Stock Pledge Agreement from Steven A.
Webster covering 143,800 shares of stock of R&B Falcon
Corporation owned by Steven A. Webster, along with a duly
executed corresponding stock power;
(iii) a duly executed Pledge of Brokerage Account from
Paul B. Loyd, Jr. covering Compass Brokerage, Inc.
Account No. 5AC-036699; and
(iv) satisfactory evidence that Douglas A.P. Hamilton has
obtained the issuance of a Collateral Letter of Credit
in the amount of $670,000.00.
(c) 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 Fifth Amendment and the execution of the
Fifth 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
Fifth 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.
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(d) 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; and no Event of Default shall have occurred and be continuing or
will have occurred at the completion of the making of such Loan.
(e) Legal Matters Satisfactory to Special Counsel to Bank. All
legal matters incident to the consummation of the transactions
contemplated by the Fifth Amendment shall be satisfactory to the firm
of Porter & Hedges, L.L.P., special counsel for Bank.
(f) 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.
(g) Facility Fee. Bank shall have received the Facility Fee in
the amount of $40,000.00 prior to or at closing of the Fifth Amendment.
Article IV of the Loan Agreement is hereby amended as follows:
References to Borrower's Representations and Warranties under Sections
4.03, 4.05, 4.12, 4.14, 4.15, 4.16, 4.18, and 4.20 shall also apply with equal
force and effect to each Guarantor under those sections.
Section 4.11 Scope and Accuracy of Financial Statements of the Loan
Agreement is hereby amended by replacing the text of that section as follows:
4.11 Scope and Accuracy of Financial Statements. All Financial
Statements submitted and to be submitted to Bank hereunder, including,
without limitation, the Financial Statements of Borrower and Guarantor,
are and will be complete and correct in all material respects; with
respect to Borrower, are and will be prepared in accordance with GAAP
and practices consistently applied; with respect to Guarantor, are and
will be prepared on a cash accounting basis and tax accounting
practices consistently applied; and do and will fairly reflect the
financial condition and the results of the operations of Borrower and
Guarantor in all material respects as of the dates and for the period
stated therein (subject only to normal year-end audit adjustments with
respect to such unaudited interim statements of Borrower); and no
material adverse change has since occurred in the condition, financial
or otherwise, of Borrower or Guarantor, or their respective
Subsidiaries (taken as a whole).
Article V of the Loan Agreement is hereby amended as follows:
References to Borrower's Affirmative Covenants under Sections 5.08 and
5.16 shall also apply with equal force and effect to each Guarantor under those
sections.
Article V of the Loan Agreement is hereby amended by adding the
following new sections:
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5.26 Annual Unaudited Financial Statements of Guarantor.
Deliver or cause to be delivered to Bank, on or before the ninetieth
(90th) day after the close of each calendar year, unaudited personal
Financial Statements of Guarantor as at the end of such year, which
Financial Statements shall include cash flow and contingent liability
information, and shall be certified by the Guarantor as being true and
correct.
5.27 Guarantor's Tax Returns. Deliver or cause to be delivered
to Bank, on or before the forty-fifth (45th) day after each Guarantor's
annual personal tax return for the preceding tax year is filed with the
Internal Revenue Service, copies of the first two pages of such annual
personal tax return of such Guarantor for the such tax year, certified
by such Guarantor as being true and correct.
5.28 Liquidity of Certain Guarantors. Borrower shall cause
each of the Guarantors to deliver to Bank a Certificate of Liquidity
pursuant to and in the form attached to the Guaranty, certifying the
value of such Guarantor's Liquid Assets.
Article VI of the Loan Agreement is hereby amended as follows:
Section 6.06, Sales of Assets, of the Loan Agreement is hereby amended
by replacing the text of that section as follows:
6.06 Sales of Assets. Sell, lease, assign, transfer or
otherwise dispose of, in one or any series of related transactions, all
or any part of its assets, if such transfer is material to Borrower's
operations, nor enter into any arrangement, directly or indirectly,
with any Person to sell and rent or lease back such assets or any part
thereof which are intended to be used for substantially the same
purpose or purposes as the assets sold or transferred; provided,
however, that Bank will consent to sales, leases, assignments,
transfers or other dispositions of assets representing not more than
ten percent (10%), in the aggregate, of the net present value, as
calculated by Bank in its sole discretion, of the Oil and Gas
Properties that are included in the Borrowing Base Properties at any
time, subject to a contemporaneous reduction in the Borrowing Base, in
an amount determined by Bank in its sole discretion, as the result of
the removal of such Oil and Gas Properties from the Borrowing Base
Properties, and if a Loan Excess would result from such reduction in
the Borrowing Base, such Loan Excess shall be repaid contemporaneously
with the consummation of such sale.
Article VII of the Loan Agreement is hereby amended as follows:
Section 7.01 is hereby amended by adding thereto the following new
clause (j):
(j) Borrower shall fail to cause each of the Guarantors to
deliver a Certificate of Liquidity of such Guarantor by the date
specified in the Guaranty, or any such Certificate of Liquidity shall
be false or misleading in any material respect or shall disclose that
such Guarantor owns Liquid Assets valued at less than $5,000,000.00.
Section 8.03 is hereby amended by adding thereto the following at the
end of clause (b):
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with copies to:
Steven A. Webster Paul B. Loyd, Jr. Douglas A. P. Hamilton
901 Threadneedle, 901 Threadneedle c/o Anatar Investments, Inc.
Suite 200 Suite 200 485 Madison Ave.
Houston, Texas 77079 Houston, Texas 77079 23rd Floor
Fax: (281) 589-4440 Fax: (281) 496-1749 New York, NY 10022
Fax: (212) 584-2195
Exhibit "A" (Form of Note) attached to the Fourth Amendment is hereby
replaced with Exhibit "A" attached to this Fifth Amendment.
Exhibit "C" (Security Instruments) attached to the Loan Agreement is
hereby amended by replacing paragraph 4 therein with the following paragraph 4:
4. SECURITY AGREEMENT (PLEDGE) granting Bank a first priority security
interest in all of Borrower's or any Guarantor's Borrowing Base Cash and
Borrowing Base Securities that are held in Borrower's or such
Guarantor's name, and all products and proceeds thereof, if, as and when
Borrowing Base Cash and/or Borrowing Base Securities are added to the
Borrowing Base Properties.
Exhibit "C" (Security Instruments) attached to the Loan Agreement is
hereby further amended by renumbering paragraphs 5 through 7 thereof as
paragraphs 7 through 9, and by adding the following new paragraphs 5 and 6:
5. PLEDGE OF DEPOSIT ACCOUNT granting Bank a first priority security
interest in all of Borrower's or any Guarantor's Borrowing Base
Securities that are held in a brokerage account, and all products and
proceeds thereof, if, as and when Borrowing Base Securities held in a
brokerage account are added to the Borrowing Base Properties.
6. COLLATERAL LETTERS OF CREDIT naming Bank as beneficiary, if, as and
when Collateral Letters of Credit are added to the Borrowing Base
Properties.
Exhibit "E" (Form of Monthly Borrowing Base Certificate) attached to the
Loan Agreement is hereby replaced with Exhibit "B" attached to this Fifth
Amendment.
II Reaffirmation of Representations and Warranties. To induce Bank to
enter into this Fifth 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 Fifth Amendment and the
performance by Borrower of its obligations under this Fifth 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
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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 Fifth 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 in this Fifth
Amendment.
IV Reaffirmation of Loan Agreement. This Fifth 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.
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 FIFTH 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 Fifth 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
Fifth 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 Fifth
Amendment shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Fifth 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 Fifth 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
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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 Fifth Amendment are
for convenience of reference only, and shall not affect the construction of this
Fifth Amendment.
X Successors and Assigns. This Fifth 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 FIFTH AMENDMENT TOGETHER WITH THE LOAN AGREEMENT, AND
THE OTHER LOAN DOCUMENTS REPRESENT 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.
IN WITNESS WHEREOF, the parties hereto have caused this Fifth 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
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EXHIBIT "A"
AMENDED AND RESTATED TERM NOTE
$9,000,000.00 Houston, Texas March 22, 1999
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 NINE MILLION AND NO/100 DOLLARS ($9,000,000.00), 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 Combined 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, the Fourth Amendment dated September 24, 1998 and the Fifth Amendment
thereto 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 Street Journal in
the "Money Rates" or similar table, then Bank may select an alternative
published
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<PAGE> 13
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 seven and three-fourths percent (7.75%) 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 Note which lawfully permits the charging and collection of
the highest permissible lawful, non-usurious rate of interest on this 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 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 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.
Interest on this Note, calculated pursuant to Section 2.04 of the Loan
Agreement, 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 of the Loan Agreement, through and including the Term Loan Maturity Date.
For the period beginning on the date hereof until December 1, 2000, principal
payments on the Second Term Loan evidenced by this Note shall not be due, unless
preceded by the Second Term Loan Maturity Date (as defined in the Loan
Agreement), when the entire unpaid balance of this Note, inclusive of principal
and interest, shall be paid in full. Except as provided for in the preceding
sentence, the principal payments under the Second Term Loan shall be repaid in
twelve (12) equal consecutive monthly installments in the amount of $750,000.00
each, beginning on January 1, 2000, and continuing on the first day of each
calendar month thereafter until the Second Term Loan Maturity Date, when the
entire unpaid balance of this Note, inclusive of principal and interest, shall
be paid in full.
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.
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<PAGE> 14
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 Amended and Restated Second Term Note issued pursuant
to the Fifth Amendment to the Loan Agreement and it amends and restates, but
does not extinguish, the Term Note dated September 24, 1998 in the face amount
of $7,000,000.00, executed by Borrower and made payable to Bank. 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.
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
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<PAGE> 15
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 effective the 22nd day of March 1999.
CARRIZO OIL & GAS, INC.
By:
---------------------------------
Frank A. Wojtek
Vice President
4
<PAGE> 16
EXHIBIT "B"
FORM OF MONTHLY BORROWING BASE CERTIFICATE
I, the undersigned officer of CARRIZO OIL & GAS, INC. (the "Company"),
pursuant to Section 5.06 of the First Amended, Restated, and Combined Loan
Agreement dated as of August 28, 1997, as amended from time to time, by and
between COMPASS BANK (the "Bank") and the Company (the "Agreement"), do hereby
certify that:
The Borrowing Base, calculated in accordance with the Agreement as of
the last day of the month preceding the month in which this certificate
is executed and delivered to the Bank (the "Effective Date"), is
$_________________. Such Borrowing Base is the sum of the following
Borrowing Base components calculated as of the Effective Date:
a. Borrowing Base Cash (including Collateral Letters of Credit) in the
amount of $___________; plus
b. Borrowing Base Securities valued, for Borrowing Base purposes(1), at
$___________; plus
c. Borrowing Base Oil and Gas Properties valued, pursuant to Section
2.10 of the Agreement, at $_________________, inclusive of the Monthly Borrowing
Base Reduction most recently established by the Bank pursuant to Section 2.10.
This certificate is executed this ____ day of ___________, 199____.
CARRIZO OIL & GAS, INC.
By:
--------------------------------
Frank A. Wojtek
Vice President
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(1) The Borrowing Base value of Borrowing Base Securities equals 75% of the
announced value of such securities as of the close of trading on the last
trading day of the month in which the Effective Date occurs.
<PAGE> 17
EXHIBIT "C"
COMPLIANCE CERTIFICATE
I, Frank A. Wojtek, Vice President of CARRIZO OIL & GAS, INC.
(the "Company"), pursuant to Section 3.19 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 22nd day of March 1999.
----------------------------------
Frank A. Wojtek
<PAGE> 1
EXHIBIT 4.2
AMENDED AND RESTATED LIMITED GUARANTY
THIS AMENDED AND RESTATED LIMITED GUARANTY ("Guaranty"), is made and
entered into effective as of March 22, 1999 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
that certain Fifth Amendment dated effective March 22, 1999 (the "Fifth
Amendment") to the First Amended, Restated, and Combined 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
thereto dated July 30, 1998, the Fourth Amendment thereto dated September 24,
1998 and said Fifth Amendment (collectively, the "Loan Agreement"), specifically
including the indebtedness evidenced by that certain term promissory note dated
of even date with the Fifth Amendment, executed by Borrower and payable to Bank,
in the principal amount of $9,000,000.00 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 the Fifth 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;
WHEREAS, Guarantor is a senior executive and substantial shareholder of
Borrower; and
WHEREAS, Guarantor will directly and indirectly benefit from the Second
Term Loan, as defined in the Loan Agreement, 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 Fifth 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 or any promissory note or notes executed by Borrower
at any time in connection with the Second Term Loan, whether
for principal, interest,
<PAGE> 2
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
$4,500,000.00. Guarantor shall at all times maintain at least $5,000,000.00 in
Liquid Assets (defined below). 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 (defined below), 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 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
2
<PAGE> 3
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 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
3
<PAGE> 4
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.
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 any way 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.
4
<PAGE> 5
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.
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 any way 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
5
<PAGE> 6
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 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.
6
<PAGE> 7
22. GUARANTOR HEREBY RELEASES AND AGREES TO INDEMNIFY AND HOLD BANK AND
ITS OFFICERS, EMPLOYEES, DIRECTORS, AGENTS AND ATTORNEYS (COLLECTIVELY THE "BANK
PARTIES") HARMLESS, FROM AND AGAINST ALL CLAIMS, DAMAGES, LIABILITIES AND
EXPENSES, KNOWN OR UNKNOWN, ACCRUED AND UNACCRUED, INCLUDING ANY OF THE
FOREGOING ALLEGED TO HAVE RESULTED FROM NEGLIGENCE OF ANY OF THE BANK PARTIES,
UNLESS ATTRIBUTABLE TO BANK PARTIES' OWN GROSS NEGLIGENCE OR WILFUL MISCONDUCT,
THAT MAY NOW OR HEREAFTER BE ASSERTED AGAINST ANY OF BANK PARTIES IN CONNECTION
WITH OR ARISING OUT OF ANY INVESTIGATION, LITIGATION OR PROCEEDING DIRECTLY OR
INDIRECTLY RELATING TO OR ARISING OUT OF ANY OF THE TRANSACTIONS CONTEMPLATED BY
THE LOAN AGREEMENT OR THIS GUARANTY.
23. 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.
24. 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.
25. This Guaranty amends, restates and replaces that certain Limited
Guaranty dated September 24, 1998 previously executed and delivered by Guarantor
in connection with the Loan Agreement.
EXECUTED this day of March, 1999.
GUARANTOR:
--------------------------------------------
DOUGLAS A. P. HAMILTON
Address: c/o Anatar Investments, Inc.
485 Madison Avenue
23rd Floor
New York, NY 10022
7
<PAGE> 8
STATE OF TEXAS
COUNTY OF HARRIS
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:
8
<PAGE> 9
STATE OF TEXAS
COUNTY OF HARRIS
The foregoing instrument was subscribed, sworn to and acknowledged
before me by DOUGLAS A. P. HAMILTON this 30th day of March, 1999.
--------------------------------------
Notary Public in and for
The State of Texas
[Notarial Seal or Stamp]
9
<PAGE> 1
EXHIBIT 4.3
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT (this "Agreement"), dated effective as of
March 22, 1999, is entered into between STEVEN A. WEBSTER ("Debtor") and COMPASS
BANK, a Texas chartered bank ("Secured Party"), with reference to the following:
WHEREAS, Debtor beneficially owns certain shares of common stock, as
more fully described on Schedule "A" attached hereto, of the corporation(s)
(herein called the "Issuers," whether one or more) identified under the column
entitled "Issuer" on Schedule "A";
WHEREAS, Carrizo Oil & Gas, Inc. ("Borrower"), Debtor and Secured Party
entered into the Loan Agreement (as hereinafter defined);
WHEREAS, Debtor has entered into a guaranty agreement (the "Guaranty
Agreement") dated effective March 22, 1999, pursuant to which Debtor has
guaranteed certain Obligations (as defined in the Loan Agreement) of Borrower to
Secured Party;
WHEREAS, to induce Secured Party to grant the extensions of credit and
other financial accommodations provided to Borrower pursuant to the Loan
Agreement, Debtor agreed to pledge, grant, transfer, and assign to Secured Party
a security interest in the Collateral (as hereinafter defined) as security for
the Obligations of Borrower under the Loan Agreement and as security for
Debtor's obligations under the Guaranty Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations, and warranties set forth herein and for other good and valuable
consideration, the parties hereto agree as follows:
1. Definitions and Construction.
(a) Definitions. As used in this Agreement:
"Agreement" shall mean this Stock Pledge Agreement.
"Bankruptcy Code" shall mean The Bankruptcy Reform Act of 1978
(11 U.S.C. ??101-1330), as amended or supplemented from time to time, and any
successor statute, and all of the rules issued or promulgated in connection
therewith.
"Borrower" shall have the meaning ascribed thereto in the
recitations to this Agreement.
<PAGE> 2
"Business Day" shall have the meaning ascribed thereto in the
Loan Agreement.
"Collateral" shall mean the Pledged Shares, the Future Rights,
and the Proceeds, collectively.
"Debtor" shall have the meaning ascribed thereto in the
preamble to this Agreement.
"Event of Default" shall have the meaning ascribed thereto in
the Loan Agreement.
"Future Rights" shall mean: (a) all shares of, all securities
convertible or exchangeable into, and all warrants, options or other rights to
purchase shares of stock of (i) the Issuers (other than the Pledged Shares), and
(ii) any Person which, after the date of this Agreement, becomes a direct
Subsidiary of Debtor and is incorporated under the laws of any state of the
United States from time to time held or acquired by Debtor in any manner; and
(b) the certificates or instruments representing such additional shares,
convertible or exchangeable securities, warrants, and other rights and all
dividends, cash, options, warrants, rights, instruments, and other property or
proceeds from time to time received, receivable, or otherwise distributed in
respect of or in exchange for any or all of such shares.
"Guaranty Agreement" shall have the meaning ascribed thereto in
the recitations to this Agreement.
"Holder" and "Holders" shall have the meanings ascribed thereto
in Section 3 of this Agreement.
"Issuers" shall have the meaning ascribed thereto in the
recitals to this Agreement and shall also mean any successors thereto, whether
by merger or otherwise.
"Lien" shall mean any lien, mortgage, pledge, assignment
(including any assignment of rights to receive payments of money), security
interest, charge, or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, or any
agreement to give any security interest).
"Loan Agreement" shall mean that certain First Amended,
Restated, and Combined 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 thereto dated July 30, 1998, the
Fourth Amendment dated September 24, 1998, and the Fifth Amendment dated of even
date herewith.
"Loan Documents" shall have the meaning ascribed thereto in the
Loan Agreement.
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<PAGE> 3
"Obligations" shall have the meaning ascribed thereto in the
Loan Agreement.
"Person" shall have the meaning ascribed thereto in the Loan
Agreement.
"Pledged Shares" shall have the meaning ascribed thereto in the
recitals to this Agreement.
"Proceeds" shall mean all proceeds (including proceeds of
proceeds) of the Pledged Shares and Future Rights including all: (a) rights,
benefits, distributions, premiums, profits, dividends, interest, cash,
instruments, documents of title, accounts, contract rights, inventory,
equipment, general intangibles, deposit accounts, chattel paper, and other
property from time to time received, receivable, or otherwise distributed in
respect of or in exchange for, or as a replacement of or a substitution for, any
of the Pledged Shares, Future Rights, or proceeds thereof (including any cash,
stock, or other securities or instruments issued after any recapitalization,
readjustment, reclassification, merger or consolidation with respect to the
Issuers and any claims against financial intermediaries; (b) proceeds of any
insurance, indemnity, warranty, or guaranty (including guaranties of delivery)
payable from time to time with respect to any of the Pledged Shares, Future
Rights, or proceeds thereof; (c) payments (in any form whatsoever) made or due
and payable to Debtor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Pledged Shares, Future Rights, or proceeds thereof; and (d) other amounts from
time to time paid or payable under or in connection with any of the Pledged
Shares, Future Rights, or proceeds thereof.
"Secured Party" shall have the meaning ascribed thereto in the
preamble to this Agreement.
"Securities Act" shall have the meaning ascribed thereto in
Section 9(b) of this Agreement.
"Subsidiary" shall have the meaning ascribed thereto in the
Loan Agreement.
All initially capitalized terms used herein and not otherwise defined shall have
the meaning ascribed thereto in the Loan Agreement.
(b) Construction.
(i) Unless the context of this Agreement clearly requires
otherwise, references to the plural includes the singular and to the singular
includes the plural, the part includes the whole, the term "including" is not
limiting, and the term "or" has, except where otherwise indicated, the inclusive
meaning represented by the phrase "and/or." The words "hereof," "herein,"
"hereby," "hereunder," and other similar terms in this Agreement refer to this
Agreement as a whole and not exclusively to any particular provision of this
Agreement. Article, section, subsection, exhibit, and schedule references are to
this Agreement unless otherwise specified. All of the exhibits or schedules
attached to this Agreement shall be deemed incorporated herein by reference. Any
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<PAGE> 4
reference to any of the following documents includes any and all alterations,
amendments, extensions, modifications, renewals, or supplements thereto or
thereof, as applicable: this Agreement, the Loan Agreement, and any of the other
Loan Documents.
(ii) Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against Secured Party or Debtor, whether
under any rule of construction or otherwise. On the contrary, this Agreement has
been reviewed by both of the parties and their respective counsel and shall be
construed and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of the parties hereto.
(iii) In the event of any direct conflict between the express
terms and provisions of this Agreement and of the Loan Agreement, the terms and
provisions of the Loan Agreement shall control.
2. Pledge. As security for the prompt payment and performance in full
of: (a) the Obligations of Borrower to Secured Party with respect to the Second
Term Loan only, and (b) the obligations of Debtor to Secured Party in the
Guaranty Agreement; when due, whether at stated maturity, by acceleration or
otherwise (including amounts that would become due but for the operation of the
automatic stay under ?362(a) of the Bankruptcy Code), Debtor hereby pledges,
grants, transfers, and assigns to Secured Party a security interest in all of
Debtor's right, title, and interest in and to the Collateral.
3. Delivery and Registration of Collateral.
(a) All certificates or instruments representing or evidencing the
Collateral shall be promptly delivered by Debtor to Secured Party or Secured
Party's designee pursuant hereto at a location designated by Secured Party and
shall be held by or on behalf of Secured Party pursuant hereto, and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Secured Party.
(b) Secured Party shall have the right, at any time in its
discretion and without notice to Debtor, to transfer to or to register on the
books of the Issuers (or of any other Person maintaining records with respect to
the Collateral) in the name of Secured Party or any of its nominees any or all
of the Collateral. In addition, Secured Party shall have the right at any time
to exchange certificates or instruments representing or evidencing Collateral
for certificates or instruments of smaller or larger denominations.
(c) If, at any time and from time to time, any Collateral (including
any certificate or instrument representing or evidencing any Collateral) is in
the possession of a Person other than Secured Party or Debtor (a "Holder"), then
Debtor shall immediately, at Secured Party's option, either cause such
Collateral to be delivered into Secured Party's possession, or execute and
deliver to such Holder a written notification/ instruction, and take all other
steps necessary to perfect the security interest of Secured Party in such
Collateral, including obtaining from such Holder a written acknowledgment that
such Holder holds such Collateral for Secured Party, all pursuant to the
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<PAGE> 5
applicable laws governing the perfection of Secured Party's security interest in
the Collateral in the possession of such Holder. Each such
notification/instruction and acknowledgment shall be in form and substance
satisfactory to Secured Party.
(d) Any and all Collateral (including dividends, interest, and other
cash distributions) at any time received or held by Debtor shall be so received
or held in trust for Secured Party, shall be segregated from other funds and
property of Debtor and shall be forthwith delivered to Secured Party in the same
form as so received or held, with any necessary endorsements.
(e) If at any time and from time to time any Collateral consists of
an uncertificated security or a security in book entry form, then Debtor shall
immediately cause such Collateral to be registered or entered, as the case may
be, in the name of Secured Party, or otherwise cause Secured Party's security
interest thereon to be perfected in accordance with applicable law.
4. Voting Rights and Dividends.
(a) So long as no Event of Default shall have occurred and be
continuing, Debtor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Collateral or any part thereof for any
purpose not inconsistent with the terms of the Loan Agreement and shall be
entitled to receive and retain any cash dividends or distributions paid in
respect of the Collateral.
(b) Upon the occurrence and during the continuance of an Event of
Default, all rights of Debtor to exercise the voting and other consensual rights
or receive and retain cash dividends or distributions which it would otherwise
be entitled to exercise or receive and retain, as applicable pursuant to Section
4(a) shall cease, and all such rights shall thereupon become vested in Secured
Party, who shall thereupon have the sole right to exercise such voting or other
consensual rights and to receive and retain such cash dividends and
distributions. Debtor shall execute and deliver (or cause to be executed and
delivered) to Secured Party all such proxies and other instruments as Secured
Party may request for the purpose of enabling Secured Party to exercise the
voting and other rights which it is entitled to exercise pursuant to this
subsection (b).
5. Representations and Warranties. Debtor represents, warrants, and
covenants as follows:
(a) Debtor has taken all steps it deems necessary or appropriate to
be informed on a continuing basis of changes or potential changes affecting the
Collateral (including rights of conversion and exchange, rights to subscribe,
payment of dividends, reorganizations or recapitalization, tender offers and
voting rights), and Debtor agrees that Secured Party shall have no
responsibility or liability for informing Debtor of any such changes or
potential changes or for taking any action or omitting to take any action with
respect thereto;
(b) All information herein or hereafter supplied to Secured Party by
or on behalf of Debtor in writing with respect to the Collateral is, or in the
case of information hereafter supplied will be, accurate and complete in all
material respects;
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<PAGE> 6
(c) Debtor is and will be the sole legal and beneficial owner of the
Collateral (including the Pledged Shares and all other Collateral acquired by
Debtor after the date hereof) free and clear of any adverse claim, Lien, or
other right, title, or interest of any party;
(d) This Agreement, and the delivery to Secured Party of the Pledged
Shares representing Collateral (or the delivery to all Holders of the Pledged
Shares representing Collateral of the notification/instruction referred to in
Section 3 of this Agreement), creates a valid, perfected, and first priority
security interest in one hundred percent (100%) of the Pledged Shares in favor
of Secured Party securing payment of the Obligations, and all actions necessary
to achieve such perfection have been duly taken;
(e) Schedule A to this Agreement is true and correct and complete in
all material respects; without limiting the generality of the foregoing: (i) all
the Pledged Shares are in certificated form, and, except to the extent
registered in the name of Secured Party or its nominee pursuant to the
provisions of this Agreement, are registered in the name of Debtor; and (ii) the
Pledged Shares as to each of the Issuers constitute at least the percentage of
all the fully diluted issued and outstanding shares of stock of such Issuer as
set forth in Schedule A to this Agreement (if any such percentages are set forth
on Schedule A);
(f) There are no presently existing Future Rights or Proceeds owned
by Debtor;
(g) The Pledged Shares have been duly authorized and validly issued
and are fully paid and nonassessable; and
(h) Neither the pledge of the Collateral pursuant to this Agreement
nor the extensions of credit represented by the Obligations violates Regulation
G, T, U or X of the Board of Governors of the Federal Reserve System.
6. Further Assurances.
(a) Debtor agrees that from time to time, at the expense of Debtor,
Debtor will promptly execute and deliver all further instruments and documents,
and take all further action that may be necessary or desirable, or that Secured
Party may request, in order to perfect and protect any security interest granted
or purported to be granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Debtor will: (i) at the
request of Secured Party, mark conspicuously each of its records pertaining to
the Collateral with a legend, in form and substance satisfactory to Secured
Party, indicating that such Collateral is subject to the security interest
granted hereby; (ii) execute and file such financing or continuation statements,
or amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as Secured Party may request, in order to perfect and
preserve the security interests granted or purported to be granted hereby; (iii)
as more fully set forth in the Loan Agreement, allow inspection of the
Collateral by Secured Party or Persons designated by Secured Party; and (iv)
appear in and defend any action or proceeding that may affect Debtor's title to
or Secured Party's security interest in the Collateral.
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<PAGE> 7
(b) Debtor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of Debtor where permitted by
law. A carbon, photographic, or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(c) Debtor will furnish to Secured Party, upon the request of
Secured Party: (1) a certificate executed by Debtor, and dated as of the date of
delivery to Secured Party, itemizing in such detail as Secured Party may
request, the Collateral which, as of the date of such certificate, has been
delivered to Secured Party by Debtor pursuant to the provisions of this
Agreement; and (ii) such statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as Secured Party may request.
7. Covenants of Debtor. Debtor shall:
(a) Perform each and every covenant in the Loan Agreement and in the
Guaranty Agreement applicable to Debtor;
(b) At all times keep at least one complete set of its records
concerning substantially all of the Collateral at the address set forth below
his signature on this Agreement, and not change the location of its office or
such records without giving Secured Party at least thirty (30) days prior
written notice thereof; and
(c) Upon receipt by Debtor of any material notice, report, or other
communication from any of the Issuers or any Holder relating to all or any part
of the Collateral, deliver such notice, report or other communication to Secured
Party as soon as possible, but in no event later than five (5) Business Days
following the receipt thereof by Debtor.
8. Secured Party as Debtor's Attorney-in-Fact.
(a) Debtor hereby irrevocably appoints Secured Party as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor, Secured Party or otherwise, from time to time at Secured
Party's discretion, to take any action and to execute any instrument that
Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including: (i) after the occurrence and during the continuance of an
Event of Default, to receive, endorse, and collect all instruments made payable
to Debtor representing any dividend, interest payment or other distribution in
respect of the Collateral or any part thereof to the extent permitted hereunder
and to give full discharge for the same and to execute and file governmental
notifications and reporting forms; (ii) to issue any notifications/instructions
Secured Party deems necessary pursuant to Section 3 of this Agreement; or (iii)
to arrange for the transfer of the Collateral on the books of the Issuers or any
other Person to the name of Secured Party or to the name of Secured Party's
nominee.
(b) In addition to the designation of Secured Party as Debtor's
attorney-in-fact in subsection (a), Debtor hereby irrevocably appoints Secured
Party as Debtor's agent and
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<PAGE> 8
attorney-in-fact to make, execute and deliver any and all documents and writings
which may be necessary or appropriate for approval of, or be required by, any
regulatory authority located in any city, county or state where Debtor or any of
the Issuers engages in business, in order to transfer or to more effectively
transfer any of the Pledged Shares or otherwise enforce Secured Party's rights
hereunder.
9. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default:
(a) Secured Party may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the Texas
Business and Commerce Code (the "Code") (irrespective of whether the Code
applies to the affected items of Collateral), and Secured Party may also without
notice (except as specified below) sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any exchange, broker's board
or at any of Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, at such time or times and at such price or prices and upon such
other terms as Secured Party may deem commercially reasonable, irrespective of
the impact of any such sales on the market price of the Collateral. To the
maximum extent permitted by applicable law, Secured Party may be the purchaser
of any or all of the Collateral at any such sale and shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply all or any part of the Obligations as a credit on account of the purchase
price of any Collateral payable at such sale. Each purchaser at any such sale
shall hold the property sold absolutely free from any claim or right on the part
of Debtor, and Debtor hereby waives (to the extent permitted by law) all rights
of redemption, stay, or appraisal that it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Debtor agrees that, to the extent notice of sale shall be required by law, at
least ten (10) calendar days notice to Debtor of the time and place of any
public sale or the time after which a private sale is to be made shall
constitute reasonable notification. Secured Party shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given. Secured
Party may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. To the maximum
extent permitted by law, Debtor hereby waives any claims against Secured Party
arising because the price at which any Collateral may have been sold at such a
private sale was less than the price that might have been obtained at a public
sale, even if Secured Party accepts the first offer received and does not offer
such Collateral to more than one offeree.
(b) Debtor hereby acknowledges that the sale by Secured Party of any
Collateral pursuant to the terms hereof in compliance with the Securities Act of
1933 as now in effect or as hereafter amended, or any similar statute hereafter
adopted with similar purpose or effect (the "Securities Act"), as well as
applicable "Blue Sky" or other state securities laws may require strict
limitations as to the manner in which Secured Party or any subsequent transferee
of the Collateral may dispose thereof. Debtor acknowledges and agrees that in
order to protect Secured Party's interest it may be necessary to sell the
Collateral at a price less than the maximum price attainable if a sale were
delayed or were made in another manner, such as a public offering under the
Securities
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<PAGE> 9
Act. Debtor has no objection to sale in such a manner and agrees that Secured
Party shall have no obligation to obtain the maximum possible price for the
Collateral. Without limiting the generality of the foregoing, Debtor agrees
that, upon the occurrence and during the continuation of an Event of Default,
Secured Party may, subject to applicable law, from time to time attempt to sell
all or any part of the Collateral by a private placement, restricting the
bidders and prospective purchasers to those who will represent and agree that
they are purchasing for investment only and not for distribution. In so doing,
Secured Party may solicit offers to buy the Collateral or any part thereof for
cash, from a limited number of investors deemed by Secured Party to be
institutional investors or other responsible parties who might be interested in
purchasing the Collateral. If Secured Party shall solicit such offers, then the
acceptance by Secured Party of one of the offers shall be deemed to be a
commercially reasonable method of disposition of the Collateral.
(c) If Secured Party shall determine to exercise its right to sell
all or any portion of the Collateral pursuant to this Section, Debtor agrees
that upon request of Secured Party, Debtor will, at its own expense:
(i) execute and deliver, or cause the officers and directors of
the Issuers to execute and deliver, to any person, entity or governmental
authority as Secured Party may choose, any and all documents and writings which
may be necessary or appropriate for approval, or be required by, any regulatory
authority located in any city, county, state or country where Debtor or any of
the Issuers engage in business, in order to transfer or to more effectively
transfer the Pledged Shares or otherwise enforce Secured Party's rights
hereunder;
(ii) do or cause to be done all such other acts and things as
may be necessary to make such sale of the Collateral or any part thereof valid
and binding and in compliance with applicable law; and
(iii) with respect to any of the Collateral that is not
registered under the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto:
(a) use its best efforts to execute and deliver, and
cause the Borrower and the directors and officers thereof to execute and
deliver, all such instruments and documents, and to do or cause to be done
all such other acts and things, as may be necessary or, in the opinion of
Secured Party, advisable to register such Collateral under the provisions
of the Securities Act, and to cause the registration statement relating
thereto to become effective and to remain effective for such period as
prospectuses are required by law to be furnished, and to make all
amendments and supplements thereto and to the related prospectuses which,
in the opinion of Secured Party, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto;
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<PAGE> 10
(b) use its best efforts to qualify the Collateral under
the state securities laws or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Collateral, as requested by
Secured Party; and
(c) cause the Issuers to make available to its or their
security holders, as soon as practicable, an earnings statement which will
satisfy the provisions of Section II (a) of the Securities Act.
Debtor acknowledges that there is no adequate remedy at law for failure by it to
comply with the provisions of this Section and that such failure would not be
adequately compensable in damages, and therefore agrees that its agreements
contained in this Section may be specifically enforced.
10. Secured Party; Duties; Standard of Care. The powers conferred on
Secured Party hereunder are solely to protect its interests in the Collateral
and shall not impose on it any duty to exercise such powers.
11. CHOICE OF LAW; CONSENT TO JURISDICTION.
(a) THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO, SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF TEXAS.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND FEDERAL COURTS LOCATED IN THE COUNTY OF HARRIS, STATE OF TEXAS OR, AT THE
SOLE OPTION OF SECURED PARTY, IN ANY OTHER COURT IN WHICH SECURED PARTY SHALL
INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF DEBTOR AND SECURED PARTY
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 11.
12. Amendments; etc. No amendment or waiver of any provision of this
Agreement nor consent to any departure by Debtor herefrom, shall in any event be
effective unless the same shall be in writing and signed by Secured Party, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No failure on the part of Secured
Party to exercise, and no delay in exercising any right under this Agreement,
the Loan Agreement, or otherwise with respect to any of the Obligations, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right under this Agreement, the Loan Agreement, or otherwise with respect to any
of the Obligations preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided in this Agreement or
otherwise with respect to any of the Obligations are cumulative and not
exclusive of any remedies provided by law.
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13. Notices. Unless otherwise specifically provided herein, any notice
or other communication herein required or permitted to be given shall be given
in accordance with the terms of Section 8.03 of the Loan Agreement. Any such
notice to Borrower shall also be sent to Debtor as set forth in section 8.03 of
the Loan Agreement.
14. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Collateral and shall: (i) remain in full
force and effect until the indefeasible payment in full of the Obligations, and
the full and final termination of any commitment to extend any financial
accommodations under the Loan Agreement; (ii) be binding upon Debtor, its
successors and assigns; and (iii) inure to the benefit of Secured Party and its
successors, transferees, and assigns. Upon the indefeasible payment in full of
the Obligations, and the full and final termination of any commitment to extend
any financial accommodations under the Loan Agreement, the security interests
granted hereby shall automatically terminate and all rights to the Collateral
shall revert to Debtor. Upon any such termination, Secured Party will, at
Debtor's expense, execute and deliver to Debtor such documents as Debtor shall
reasonably request to evidence such termination. Such documents shall be
prepared by Debtor and shall be in form and substance satisfactory to Secured
Party.
15. Security Interest Absolute. To the maximum extent permitted by law,
all rights of Secured Party and security interests hereunder, and all
obligations of the Debtor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of any of the
Obligations or any other agreement or instrument relating thereto, including the
Loan Agreement or any of the other Loan Documents;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Loan Agreement or any of the
other Loan Documents, or any other agreement or instrument relating thereto;
(c) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty for all or any of the Obligations; or
(d) any other circumstances that might otherwise constitute a
defense available to, or a discharge of, Debtor.
To the maximum extent permitted by law, Debtor hereby waives any right to
require Secured Party to pursue any other remedy in Secured Party's power
whatsoever.
16. Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement or be given any substantive effect.
-11-
<PAGE> 12
17. Severability. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Agreement.
19. Waiver of Marshaling. Each of Debtor and Secured Party acknowledges
and agrees that in exercising any rights under or with respect to the
Collateral: (i) Secured Party is under no obligation to marshal any collateral
pledged to it; (ii) may, in its absolute discretion, realize upon such
Collateral in any order and in any manner it so elects; and (iii) may, in its
absolute discretion, apply the proceeds of any or all of such Collateral to the
obligations secured by the Collateral in any order and in any manner it so
elects.
-12-
<PAGE> 13
IN WITNESS WHEREOF, Debtor and Secured Party have caused this Agreement
to be duly executed and delivered as of the date first above written.
DEBTOR
----------------------------------
Steven A. Webster
Debtor's address:
901 Threadneedle, Suite 200
Houston, Texas 77079
SECURED PARTY
COMPASS BANK
By:
-------------------------------
Kathleen J. Bowen
Vice President
-13-
<PAGE> 14
SCHEDULE A
TO
STOCK PLEDGE AGREEMENT
Part A
<TABLE>
<CAPTION>
Pledged Shares
--------------
Number of Certificate Debtor's Percentage Jurisdiction of
Issuer Shares Class Number(s) Ownership Incorporation
- ---------------------- --------- ----- ----------- ------------------- ---------------
<S> <C> <C> <C> <C> <C>
R&B Falcon Corporation 143,800
</TABLE>
-1-
<PAGE> 1
EXHIBIT 4.4
SIXTH AMENDMENT
TO
FIRST AMENDED, RESTATED, AND COMBINED LOAN AGREEMENT
BY AND BETWEEN CARRIZO OIL & GAS, INC.
AND COMPASS BANK
This Sixth Amendment to the Loan Agreement (this "Sixth 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 23rd
day of April 1999, 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 Combined
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 thereto dated July 30, 1998, the Fourth Amendment thereto
dated September 24, 1998 and the Fifth Amendment thereto dated March 22, 1999
(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 waive non-compliance with and adjust a
certain covenant in 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 adding the
following definitions thereto:
"Sixth Amendment" means the Sixth Amendment to this Agreement
executed by Borrower and Bank on April 23, 1999.
Article III of the Loan Agreement is hereby amended by adding the
following Section 3.20.
3.20 Conditions Precedent in Connection with the Sixth
Amendment. The obligation of Bank to enter into the Sixth Amendment is
subject to satisfaction of the following conditions precedent:
1
<PAGE> 2
(a) Receipt of Sixth Amendment and Compliance Certificate.
Bank shall have received multiple counterparts of the Sixth Amendment,
as requested by Bank, and the Compliance Certificate duly executed by
an authorized officer for Borrower.
(b) 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 Sixth Amendment with the same effect as though such
representations and warranties had been made on such date; and no Event
of Default shall have occurred and be continuing or will have occurred
at the completion of the making of such Loan.
(c) Legal Matters Satisfactory to Special Counsel to Bank. All
legal matters incident to the consummation of the transactions
contemplated by the Sixth Amendment shall be satisfactory to the firm
of Porter & Hedges, L.L.P., special counsel for Bank.
(d) 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.
Article V of the Loan Agreement is hereby amended by revising the
following Section 5.19, as amended pursuant to the First Amendment, in its
entirety to read as follows:
5.19 Tangible Net Worth Requirement. Effective December 31,
1998, Borrower shall maintain a total Tangible Net Worth of not less
than $38,000,000.00, increasing by: (x) fifty percent (50%) of net
income (excluding losses) of Borrower subsequent to December 31, 1998,
and (y) one hundred percent (100%) of any increases in shareholders'
equity resulting from the sale or issuance of stock in Borrower
subsequent to December 31, 1998. For purposes of this Section,
shareholders' equity shall be deemed to include the consideration paid
to Borrower for its sale of the 300,000 shares of 9% Series A Preferred
Stock, par value $0.01 per share, pursuant to the ECT Transaction, as
well as any consideration paid to Borrower for the exercise of any of
the 1,000,000 warrants that are exercisable for the purchase of
1,000,000 shares of common stock of Carrizo Oil & Gas, Inc., par value
$0.01 per share, pursuant to the ECT Transaction, but shareholder's
equity shall exclude the value of any such 9% Series A Preferred Stock
that is subsequently redeemed by the issuance of common stock of
Borrower.
II. Reaffirmation of Representations and Warranties. To induce Bank to
enter into this Sixth 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 Sixth Amendment and the
performance by Borrower of its obligations under this Sixth 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
2
<PAGE> 3
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 Sixth 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 in this Sixth
Amendment.
IV. Reaffirmation of Loan Agreement. This Sixth 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.
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 SIXTH 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 Sixth 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
Sixth 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 Sixth
Amendment shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Sixth 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 Sixth Amendment.
3
<PAGE> 4
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 Sixth Amendment are
for convenience of reference only, and shall not affect the construction of this
Sixth Amendment.
X Successors and Assigns. This Sixth 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 SIXTH AMENDMENT TOGETHER WITH THE LOAN AGREEMENT, AND
THE OTHER LOAN DOCUMENTS REPRESENT 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.
IN WITNESS WHEREOF, the parties hereto have caused this Sixth 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
4
<PAGE> 5
COMPLIANCE CERTIFICATE
I, Frank A. Wojtek, Vice President of CARRIZO OIL & GAS, INC.
(the "Company"), pursuant to Section 3.20 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 23 day of April 1999.
----------------------------
Frank A. Wojtek
1
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,834,437
<SECURITIES> 0
<RECEIVABLES> 3,927,229
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,715,379
<PP&E> 59,097,733
<DEPRECIATION> 0
<TOTAL-ASSETS> 66,119,995
<CURRENT-LIABILITIES> 14,849,063
<BONDS> 0
31,503,330
0
<COMMON> 103,750
<OTHER-SE> 9,819,447
<TOTAL-LIABILITY-AND-EQUITY> 66,119,995
<SALES> 1,842,314
<TOTAL-REVENUES> 1,842,314
<CGS> 0
<TOTAL-COSTS> 1,686,895
<OTHER-EXPENSES> 707,525
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (545,621)
<INCOME-TAX> 7,002
<INCOME-CONTINUING> (552,623)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 77,731
<NET-INCOME> (630,354)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
