EXHIBIT 4.6
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AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF
DECEMBER 12, 2002
BY AND AMONG
CARRIZO OIL & GAS, INC.,
A TEXAS CORPORATION
AS BORROWER
CCBM, INC.,
A DELAWARE CORPORATION
AS GUARANTOR
AND
HIBERNIA NATIONAL BANK
AS LENDER
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TABLE OF CONTENTS
<Table>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS............................................1
Section 1.1. Defined Terms...............................................1
Section 1.2. Accounting Terms............................................15
ARTICLE II
COMMITMENT .................................................................15
Section 2.1. The Revolving Line of Credit................................15
Section 2.2. The Borrowing Base Amount...................................15
Section 2.3. Revolving Loans.............................................16
ARTICLE III
NOTES EVIDENCING THE LOANS..................................................18
Section 3.1. Revolving Note..............................................18
ARTICLE IV
INTEREST RATES..............................................................18
Section 4.1. Options.....................................................18
Section 4.2. Interest Rate Determination.................................19
Section 4.3. Conversion Option...........................................19
ARTICLE V
CHANGE OF CIRCUMSTANCES.....................................................20
Section 5.1. Unavailability of Funds or Inadequacy of Pricing............20
Section 5.2. Change in Laws..............................................20
Section 5.3. Increased Cost or Reduced Return............................20
Section 5.4. Breakage Costs..............................................22
</Table>
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<Table>
ARTICLE VI
FEES........................................................................23
Section 6.1. Facility Fee................................................23
Section 6.2. Unused Fee..................................................23
Section 6.3. Letter of Credit Fee........................................24
Section 6.4. Engineering Fee.............................................24
ARTICLE VII
CERTAIN GENERAL PROVISIONS..................................................24
Section 7.1. Payments to the Lender......................................24
Section 7.2. No Offset, etc..............................................24
Section 7.3. Principal Amount of Revolving Note..........................24
Section 7.4. Rate Management Transactions................................25
Section 7.5. Calculation of Fees.........................................25
ARTICLE VIII
PREPAYMENTS.................................................................25
Section 8.1. Voluntary Prepayments.......................................25
Section 8.2. Mandatory Prepayment Resulting from a Quarterly Reduction...25
Section 8.3. Mandatory Prepayment Resulting from Overadvances............25
ARTICLE IX
SECURITY FOR THE INDEBTEDNESS...............................................26
Section 9.1. Security....................................................26
ARTICLE X
CONDITIONS PRECEDENT........................................................26
Section 10.1. Conditions Precedent to all Revolving Loans................26
</Table>
ii
<Table>
ARTICLE XI
REPRESENTATIONS AND WARRANTIES..............................................28
Section 11.1. Corporate Authority of the Borrower........................28
Section 11.2. Financial Statements.......................................28
Section 11.3. Title to Mortgaged Properties..............................29
Section 11.4. Litigation.................................................30
Section 11.5. Approvals..................................................30
Section 11.6. Required Insurance.........................................30
Section 11.7. Licenses...................................................30
Section 11.8. Adverse Agreements.........................................30
Section 11.9. Default or Event of Default................................30
Section 11.10. Employee Benefit Plans....................................30
Section 11.11. Investment Company Act....................................31
Section 11.12. Public Utility Holding Company Act........................31
Section 11.13. Regulations X, T and U....................................31
Section 11.14. Location of Offices and Records...........................31
Section 11.15. Information...............................................31
Section 11.16. Environmental Matters.....................................31
Section 11.17. Solvency of the Borrower..................................33
Section 11.18. Governmental Requirements.................................33
Section 11.19. Corporate Authority of the Guarantor......................33
Section 11.20. Chase Purchase Agreement..................................34
Section 11.21. Security Agreement........................................34
</Table>
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<Table>
Section 11.22. Survival of Representations and Warranties................34
ARTICLE XII
AFFIRMATIVE COVENANTS.......................................................34
Section 12.1. Financial Statements; Other Reporting Requirements.........34
Section 12.2. Notice of Default; Litigation; ERISA Matters...............36
Section 12.3. Maintenance of Existence, Properties and Liens.............36
Section 12.4. Taxes......................................................36
Section 12.5. Intentionally Deleted......................................36
Section 12.6. Compliance with Environmental Laws.........................36
Section 12.7. Further Assurances.........................................38
Section 12.8. Financial Covenants........................................38
Section 12.9. Operations.................................................39
Section 12.10. Change of Location........................................39
Section 12.11. Employee Benefit Plans....................................39
Section 12.12. Deposit and Operating Accounts............................39
Section 12.13. Production Proceeds.......................................39
Section 12.14. Field Audits; Other Information...........................39
Section 12.15. Insurance.................................................39
Section 12.16. Subsidiaries..............................................40
Section 12.17 Post Closing Requirements..................................40
ARTICLE XIII
NEGATIVE COVENANTS..........................................................40
Section 13.1. Limitations on Fundamental Changes.........................40
Section 13.2. Disposition of Assets......................................40
</Table>
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<Table>
Section 13.3. Repurchase of Stock; Restricted Payments...................41
Section 13.4. Encumbrances; Negative Pledge..............................41
Section 13.5. Debts, Guaranties and Other Obligations....................43
Section 13.6. Investments, Loan and Advances.............................44
Section 13.7. Other Agreements...........................................46
Section 13.8. Transactions with Affiliates...............................46
Section 13.9. Use of Revolving Loan Proceeds.............................46
Section 13.10. Commodity Transactions....................................47
Section 13.11. Intentionally Deleted.....................................47
Section 13.12. Payments on Permitted Subordinated Debt...................47
ARTICLE XIV
EVENTS OF DEFAULT...........................................................47
Section 14.1. Events of Default..........................................47
Section 14.2. Waivers....................................................49
Section 14.3. Notice to Delta Farms Lessors..............................50
ARTICLE XV
MISCELLANEOUS...............................................................50
Section 15.1. No Waiver; Modification in Writing.........................50
Section 15.2. Addresses for Notices......................................50
Section 15.3. Fees and Expenses..........................................51
Section 15.4. Security Interest and Right of Set-off.....................51
Section 15.5. Waiver of Marshaling.......................................52
Section 15.6. Governing Law..............................................52
</Table>
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<Table>
Section 15.7. Consent to Loan Participation..............................52
Section 15.8. Consent to Syndication.....................................52
Section 15.9. Indemnity..................................................52
Section 15.10. Maximum Interest Rate.....................................53
Section 15.11. Waiver of Jury Trial; Submission to Jurisdiction..........54
Section 15.12. Severability..............................................54
Section 15.13. Headings..................................................55
Section 15.14. Confidentiality...........................................55
SCHEDULES
Schedule 10.1 No Material Adverse Effect
Schedule 11.1 No Violation
Schedule 11.3 Exceptions to Title
Schedule 11.4 Litigation
Schedule 13.4 Encumbrances
Schedule 13.5 Existing Indebtedness
Schedule 13.8 Transactions with Affiliates
</Table>
vi
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT (the "Agreement") dated as of
December 12, 2002, by and among CARRIZO OIL & GAS, INC., a Texas corporation
(the "Borrower"), CCBM, INC., a Delaware corporation (the "Guarantor") and
HIBERNIA NATIONAL BANK, a national banking association (the "Lender").
R E C I T A L S:
1. The Borrower, the Guarantor, and the Lender are the parties to that
certain Credit Agreement dated as of May 24, 2002, as amended by that certain
First Amendment to Credit Agreement dated as of July 9, 2002 (as so amended, the
"Original Agreement"), wherein the Lender extended to the Borrower a revolving
line of credit in the maximum aggregate principal amount of $30,000,000.00.
2. The Borrower has requested that the Lender provide two (2) separate
credit facilities under the Commitment (as such term is defined in the Original
Agreement).
3. The Lender, subject to the terms and conditions of this Agreement, has
agreed to provide the separate credit facilities under the Commitment. It is the
intention of the parties that this Agreement shall amend and restate the
Original Agreement in its entirety. Novation is not intended.
NOW, THEREFORE, in consideration of the mutual covenants hereunder set
forth, the Borrower, the Guarantor, and Lender do hereby amend and restate the
Original Agreement and covenant, agree, and obligate themselves as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. DEFINED TERMS. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"ADVANCE OR ADVANCES" shall mean a Loan or Loans by the Lender hereunder.
"AGREEMENT" shall mean this Amended and Restated Credit Agreement, as the
same may from time to time be amended, modified, supplemented, or restated
and in effect from time to time.
"BASE RATE" shall mean the base rate of interest established from time to
time by The Wall Street Journal, as the "prime" lending rate on corporate
loans posted by at least seventy-five percent (75%) of the nation's thirty
largest banks, and which is not necessarily the lowest rate charged by the
Lender, such rate to be adjusted automatically on and as of the effective
date of any change in such Base Rate.
Page 1 of 56
"BASE RATE INTEREST PERIOD" shall mean, with respect to any Base Rate Loan,
the period ending on the last day of each month, provided, however, that
(i) if any Base Rate Interest Period would end on a day which is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day, (ii) in the case of an Advance under Facility A, if any Base
Rate Interest Period would otherwise end after the Facility A Termination
Date, such Interest Period shall end on the Facility A Termination Date,
and (iii) in the case of an Advance under Facility B, if any Base Rate
Interest Period would otherwise end after the Facility B Termination Date,
such Interest Period shall end on the Facility B Termination Date.
"BASE RATE LOANS" shall mean any Loan during any period which bears
interest based upon the Base Rate.
"BASE RATE MARGIN" shall mean, with respect to each Base Rate Loan under
Facility A:
(i) 0.375% whenever the Facility A Borrowing Base Usage under the
Revolving Line of Credit is greater than or equal to 90%; or
(ii) 0.000% whenever the Facility A Borrowing Base Usage under the
Revolving Line of Credit is less than 90%.
"BORROWER" shall mean Carrizo Oil & Gas, Inc., a Texas corporation,
together with its successors and assigns.
"BORROWING DATE" means the date elected by Borrower pursuant to Section
2.3.4. hereof for an Advance.
"BUSINESS DAY" means a day other than a Saturday, Sunday or legal holiday
for commercial banks under the laws of the State of Louisiana or a day on
which national banks are authorized to be closed in Lafayette, Louisiana.
"CAPITAL LEASE OBLIGATIONS" means any Debt represented by obligations under
a lease that is required to be capitalized for financial reporting purposes
in accordance with GAAP.
"CHASE PURCHASE AGREEMENT" means that certain Securities Purchase Agreement
dated as of December 15, 1999 among the Borrower, CB Capital Investors,
L.P., Mellon Ventures, L.P., Douglas A. P. Hamilton, Paul B. Loyd, Jr., and
Steven A. Webster, as amended from time to time.
"COLLATERAL" shall mean the Mortgaged Properties and any interest in any
kind of property or assets pledged, mortgaged or otherwise subject to an
Encumbrance in favor of the Lender pursuant to the Collateral Documents.
"COLLATERAL DOCUMENTS" shall collectively refer to the Mortgage, the
Security Agreement, the Guaranty, and any and all other documents now or
hereafter in which an Encumbrance is created on any property of the
Borrower or of any other Person to secure
Page 2 of 56
payment of the Indebtedness (or any part thereof) of the Borrower to the
Lender under this Agreement and the Revolving Note.
"COMMITMENT" shall mean the Lender's agreement to extend the Revolving Line
of Credit as set forth in the Agreement.
"COMPASS" shall mean Compass Bank, an Alabama state chartered banking
institution.
"CONSOLIDATED CURRENT ASSETS" shall mean the total of the Borrower's
consolidated current assets, including the amounts available for borrowing
under the Facility A Borrowing Base Amount and the Facility B Borrowing
Base Amount, determined in accordance with GAAP. Current assets will not
include the effects, if any, of marking to market Hedging Agreements
pursuant to SFAS No. 133.
"CONSOLIDATED CURRENT LIABILITIES" shall mean the total of the Borrower's
consolidated current liabilities, excluding outstanding principal amounts
due under the Commitment, determined in accordance with GAAP. Current
liabilities will not include (i) the effects, if any, of Hedging Agreements
pursuant to SFAS No. 133 and (ii) the Borrower's obligations under and in
connection with the Series B Preferred Stock issued by Borrower and the
Subordinated Promissory Notes.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, at any time, the
shareholder's equity of the Borrower on a consolidated basis, determined in
accordance with GAAP, less all unamortized Debt discount and expense,
unamortized deferred charges, goodwill, patents, trademarks, service marks,
trade names, copyrights and organization expense.
"CURRENT RATIO" shall mean the ratio of Consolidated Current Assets to
Consolidated Current Liabilities.
"DEBT" shall mean without duplication: (i) indebtedness for borrowed money;
(ii) the face amounts of all outstanding standby and commercial letters of
credit and bankers acceptances, matured or unmatured, issued on behalf of
Borrower; (iii) guaranties of the Debt of any other Person, whether direct
or indirect, whether by agreement to purchase the indebtedness of any other
Person or by agreement for the furnishing of funds to any other Person
through the purchase or lease of goods, supplies or services (or by way of
stock purchase, capital contribution, advance or loan) in each case for the
purpose of paying or discharging the Debt of any other Person; and (iv) the
present value of all obligations for the payment of rent or hire of
property of any kind (real or personal) under leases or lease agreements
required to be capitalized under GAAP; provided that in no event shall the
Borrower's obligations under and in connection with the Series B Preferred
Stock issued by Borrower constitute Debt.
"DEFAULT" shall mean an event which with the giving of notice or the lapse
of time (or both) would constitute an Event of Default hereunder.
"DEFENSIBLE TITLE" shall mean, with respect to the assets of the Borrower
(i) the title of the Borrower to such assets is free and clear of all
Encumbrances of any kind whatsoever
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(except to the extent permitted by the Loan Documents), and (ii) as to
those wells for which a "working interest" and a "net revenue interest" are
set forth on Schedule 11.3 (except to the extent disposed of or abandoned
in accordance with the Loan Documents), the Borrower is entitled to receive
the percentage of all hydrocarbons produced, saved and marketed from such
wells in an amount not less than the net revenue interest set forth
therein, without reduction, suspension or termination throughout the
duration of the productive life of such wells, and the Borrower is
obligated to bear the percentage of costs and expenses related to the
maintenance, development and operation of such wells in an amount not
greater than the working interest set forth on such Schedule, without
increase throughout the productive life of such wells, except increases
that also result in a proportionate increase in net revenue interest and as
set forth on such Schedule.
"DESIGNATED TITLE EXCEPTIONS" has the meaning given to such term in Section
11.3.
"DOLLARS" and "$" shall mean lawful money of the United States of America.
"EBITDA" means the Borrower's consolidated earnings before interest
expense, income taxes, depreciation, amortization, depletion, oil and gas
asset impairment write downs, lease impairment expense, gains and losses
from the sale of capital assets, and other non-cash charges.
"ENCUMBRANCES" shall mean any interest in property securing an obligation
owed to, or a claim by, a Person other than the owner of the Property,
whether such interest is based on common law, statute or contract. The term
"Encumbrance" shall also include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and
other title exceptions and encumbrances affecting property. For the purpose
of the Agreement, the Borrower shall be deemed to be the owner of any
property which it has acquired or holds subject to a conditional sale
agreement or other arrangements pursuant to which title to the property has
been retained by or vested in some other Person for security purposes;
provided, however, that the term "Encumbrance" shall not include a trust or
similar arrangement established for the purpose of defeasing any
indebtedness pursuant to the terms evidencing or providing for the issuance
of such indebtedness but only to the extent that such defeasance is
permitted under this Agreement.
"ENVIRONMENTAL LAWS" shall mean any federal, state, local or tribal
statute, law, rule, regulation, ordinance, code, permit, consent, approval,
license, written policy or rule of common law now or hereafter in effect
and in each case as amended, and any judicial or administrative
interpretation thereof, including any judicial or administrative order,
injunction, consent decree or judgment, or other authorization or
requirement whenever promulgated, issued or modified, including the
requirement to register underground storage tanks, well plugging and
abandonment requirements, and oil and gas waste disposal requirements
relating to:
(i) emissions, discharges, spills, migration, movement, releases or
threatened releases of pollutants, contaminants, Hazardous Materials, or
hazardous or toxic materials
Page 4 of 56
or wastes into or onto soil, land, ambient air, surface water, ground
water, watercourses, publicly owned treatment works, drains, sewer systems,
wetlands or septic systems;
(ii) the use, treatment, storage, disposal, handling, manufacturing,
transportation, or shipment of Hazardous Materials or hazardous and/or
toxic wastes, material, products or by-products containing Hazardous
Materials (or of equipment or apparatus containing Hazardous Materials); or
(iii) otherwise relating to pollution or the protection of human
health or the environment, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C.
Sections 9601 et seq., as amended, the Resource Conservation and Recovery
Act, 42 U.S.C. Sections 6901 et seq., as amended, the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801 et seq., as amended, the Clean
Water Act, 33 U.S.C. Sections 1251 et seq., as amended, the Toxic
Substances Control Act, 15 U.S.C. Sections 2601 et seq., as amended, the
Clean Air Act, 42 U.S.C. Sections 7401 et seq., as amended, the federal
Water Pollution Control Act, 33 U.S.C. Section 1251 et seq., as amended,
the Safe Drinking Water Act, 42 U.S.C. Sections 300f et seq., as amended,
the Atomic Energy Act, 42 U.S.C. Sections 2011 et seq., as amended, the
Natural Gas Pipeline Safety Act of 1968, 49 U.S.C. Section 1671 et seq., as
amended, the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.C.S.
Sections 136 et seq., as amended, and the Occupational Safety and Health
Act, 29 U.S.C. Sections 651 et seq., as amended, and all comparable
statutes of the States of Louisiana and Texas, and all comparable local
Governmental Requirements in such states, and other environmental,
conservation or protection laws in effect in any jurisdiction where any of
the Mortgaged Properties of the Borrower are located.
"ENVIRONMENTAL LIABILITIES" means with respect to any Person, any and all
liabilities, responsibilities, losses, sums paid in settlement of claims,
obligations, charges, actions (formal or informal), claims (including,
without limitation, claims for personal injury or for property damage),
liens, administrative proceedings, damages (including, without limitation,
loss or damage resulting from the occurrence of an Event of Default),
punitive damages, consequential damages, treble damages, penalties, fines,
monetary sanctions, interest, court costs, response and remediation costs,
stabilization costs, encapsulation costs, treatment, storage, or disposal
costs, groundwater monitoring or environmental sampling costs, other causes
of action and any other costs and expenses (including, without limitation,
reasonable attorneys', experts', and consultants' fees, costs of
investigation and feasibility studies and disbursements in connection with
any investigative, administrative or judicial proceeding), whether direct
or indirect, known or unknown, absolute or contingent, past, present or
future arising under, pursuant to or in connection with any Environmental
Law, or any other binding obligation of such Person requiring abatement of
pollution or protection of human health and the environment.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental Authority
for (i) any liability under Environmental Laws or (ii) damages arising
from, or costs incurred by
Page 5 of 56
such Governmental Authority in response to, a Release or threatened Release
of a Hazardous Materials into the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EURODOLLAR BUSINESS DAY" shall mean any date other than Saturday, Sunday
or a day on which banking institutions are generally authorized or
obligated by law or executive order to close in the City of London,
England.
"EURODOLLAR INTEREST PERIOD" shall mean, with respect to any Eurodollar
Loan (i) initially, the period commencing on the date such Eurodollar Loan
is made and ending one (1), two (2), three (3), or six (6) months
thereafter as selected by the Borrower pursuant to Section 3.1.2., and
thereafter, each period commencing on the day following the last day of the
next preceding Interest Period applicable to such Eurodollar Loan and
ending one (1), two (2), three (3) or six (6) months thereafter, as
selected by the Borrower pursuant to Section 4.1.2., provided, however,
that (a) if any Eurodollar Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day unless the result of such extension would be to
extend such Interest Period into the next calendar month, in which case
such Interest Period shall end on the immediately preceding Business Day,
(b) if any Eurodollar Interest Period begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) such Interest
Period shall end on the last Business Day of a calendar month, (c) in the
case of an Advance under Facility A, any Eurodollar Interest Period which
would otherwise expire after the Facility A Termination Date shall end on
the Facility A Termination Date, and (d) in the case of an Advance under
Facility B, any Eurodollar Interest Period which would otherwise expire
after the Facility B Termination Date shall end on the Facility B
Termination Date.
"EURODOLLAR LOAN" shall mean any Loan during any period which bears
interest at the Eurodollar Rate.
"EURODOLLAR MARGIN" shall mean, with respect to each Eurodollar Loan under
Facility A:
(i) 2.375% per annum whenever the Facility A Borrowing Base Usage
under the Revolving Line of Credit is greater than or equal to 90%;
(ii) 2.000% per annum whenever the Facility A Borrowing Base Usage
under the Revolving Line of Credit is greater than or equal to 50% but less
than 90%; or
(iii) 1.625% per annum whenever the Facility A Borrowing Base Usage
under the Revolving Line of Credit is less than 50%.
Page 6 of 56
"EURODOLLAR RATE" shall mean with respect to any Eurodollar Interest
Period, the offered rate for U.S. Dollar deposits of not less than
$1,000,000 as of 11:00 A.M. City of London, England time two (2) Eurodollar
Business Days prior to the first date of each Eurodollar Interest Period as
shown on the display designated as "British Bankers Assoc. Interest
Settlement Rates" on the Telerate system ("Telerate"), Page 3750 or Page
3740, or such other page or pages as may replace such pages on Telerate for
the purpose of displaying such rate, rounded upwards, if necessary to the
nearest 1/16% and adjusted for the maximum cost of reserves, if any.
Provided, however, that if such rate is not available on Telerate then such
offered rate shall be otherwise independently obtained by the Lender from
an alternate, substantially similar independent source available to the
Lender or shall be calculated by the Lender by substantially similar
methodology as that theretofore used to determine such offered rate in
Telerate.
"EVENT OF DEFAULT" shall mean individually, collectively and
interchangeably any of the Events of Default set forth below in Section
14.1. hereof.
"FACILITY A" shall mean a reducing revolving line of credit to the Borrower
under the Revolving Line of Credit, subject at all times to the Facility A
Borrowing Base Amount then in effect.
"FACILITY A BORROWING BASE AMOUNT" shall mean at any time the valuation of
the Borrower's Mortgaged Properties, projected oil and gas prices,
underwriting factors, and any other factors deemed relevant by the Lender
in its sole and complete discretion, all as evaluated and determined by the
Lender in its sole and complete discretion on a semi-annual basis on
October 31 and April 30. In addition, the Lender, in its sole and complete
discretion, may conduct one unscheduled Facility A Borrowing Base Amount
redetermination subsequent to each semi-annual redetermination, and the
Borrower, at its option may request (and the Lender shall promptly
thereafter perform) one Facility A Borrowing Base Amount redetermination
after each scheduled semi-annual redetermination by the Lender. The
Facility A Borrowing Base Amount also is subject to mandatory Quarterly
Reductions. The Lender is not obligated under any circumstances to
establish the Facility A Borrowing Base Amount based solely on oil and gas
valuation data for the Mortgaged Properties. The Facility A Borrowing Base
Amount, based on an effective date of December 12, 2002, is $13,000,000.00.
All such determinations and valuations shall be in accordance with the
Lender's normal practices and standards for oil and gas loans as may exist
at the particular time of determination and valuation. The sum of the
Facility A Borrowing Base Amount and the Facility B Borrowing Base Amount
shall never exceed $30,000,000.00.
"FACILITY A BORROWING BASE USAGE" shall mean the quotient of all amounts
outstanding pursuant to Advances under Facility A plus the face amount of
all outstanding Letters of Credit issued by the Lender under section 2.3.2.
hereof divided by the Facility A Borrowing Base Amount then in effect.
Page 7 of 56
"FACILITY A TERMINATION DATE" shall mean the earlier to occur of (i)
January 31, 2005 or (ii) the date of termination of the Commitment pursuant
to Article XIV hereof.
"FACILITY B" shall mean a revolving line of credit to the Borrower under
the Revolving Line of Credit, subject at all times to the Facility B
Borrowing Base Amount then in effect.
"FACILITY B BORROWING BASE AMOUNT" shall mean $2,500,000.00. The Lender is
not under any obligation to renew Facility B. However, in the event the
Lender elects to renew Facility B, the parties agree and understand that
the Facility B Borrowing Base Amount shall be determined and established by
the Lender in its sole and completion discretion. The sum of the Facility A
Borrowing Base Amount and the Facility B Borrowing Base Amount shall never
exceed $30,000,000.00.
"FACILITY B TERMINATION DATE" shall mean the earlier to occur of (i) April
30, 2003 or (ii) the date of termination of the Commitment pursuant to
Article XIV hereof.
"GAAP" shall mean, at any time, accounting principles generally accepted in
the United States as then in effect.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or
other political subdivision thereof, or entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GOVERNMENTAL REQUIREMENT" shall mean any applicable state, federal or
local law, statute, ordinance, code, rule, regulation, order or decree.
"GUARANTOR" means CCBM, Inc., a Delaware corporation, and its successors
and assigns.
"GUARANTY" means that certain Commercial Guaranty of even date with the
Original Agreement by the Guarantor in favor of the Lender, as amended
and/or restated from time to time and in effect.
"HAZARDOUS MATERIALS" means (1) hazardous materials, hazardous wastes, and
hazardous substances including, but not limited to, those substances,
materials and wastes listed in the United States Department of
Transportation Hazardous Materials Table, 49 C.F.R. Section 172.101, as
amended, or listed by the federal Environmental Protection Agency as
hazardous substances under or pursuant to 40 C.F.R. Part 302, as amended,
or substances, materials, contaminants or wastes which are or become
regulated under any Environmental Law, including without limitation, those
substances, materials, contaminants or wastes as defined in the following
statutes and their implementing regulations: the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq., as amended, the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., as
amended, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq., as amended, the Toxic
Substances Control Act, 15 U.S.C.
Page 8 of 56
Section 2601 et seq., as amended, the Clean Air Act, 42 U.S.C. Section 7401
et seq., as amended, the federal Water Pollution Control Act, 33 U.S.C.
Section 1251 et seq., as amended, the Occupational Safety and Health Act, 2
U.S.C. Section 651 et seq., as amended, the Safe Drinking Water Act, 42
U.S.C. Section 300f et seq., as amended and the Natural Gas Pipeline Safety
Act of 1968, 49 U.S.C. Section 1671 et seq., as amended; (2) all
substances, materials, contaminants or wastes listed in all comparable
statutes of the States of Louisiana and Texas and in comparable local
Requirements of Law in such states; (3) acid gas, sour water streams or
sour water vapor streams containing hydrogen sulfide or other forms of
sulphur, sodium hydrosulfide and ammonia; (4) Hydrocarbons; (5) natural
gas, synthetic gas, and any mixtures thereof; (6) asbestos and/or any
material which contains 1% or more, by weight, of any hydrated mineral
silicate, including but not limited to chrysotile, amosite, crocidolite,
tremolite, anthophylite and/or actinolite, whether friable or non-friable;
(7) PCB's, or PCB containing materials or fluids; (8) radon; (9) naturally
occurring radioactive material, radioactive substances or waste; (10) salt
water and other oil and gas wastes and (11) any other hazardous or noxious
substance, material, pollutant, emission, or solid, liquid or gaseous
waste.
"HEDGING AGREEMENT" means (a) any interest rate or currency swap, rate cap,
rate floor, rate collar, forward agreement, or other exchange or rate
protection agreement or any option with respect to any such transaction and
(b) any swap agreement, cap, floor, collar, exchange transaction, forward
agreement, or other exchange or protection agreement relating to
Hydrocarbons or any option with respect to any such transaction.
"HYDROCARBONS" means oil, gas, casing head gas, condensate, distillate,
liquid hydrocarbons, gaseous hydrocarbons and all products separated,
settled and dehydrated therefrom and all products refined therefrom,
including, without limitation, kerosene, liquefied petroleum gas, refined
lubricating oils, diesel fuel, drip gasoline, natural gasoline, helium,
sulphur and all other materials.
"INDEBTEDNESS" shall mean, at any time, all obligations, indebtedness, and
liabilities, whether now existing or arising in the future, of the Borrower
to the Lender pursuant to a Hedging Agreement or other commodity or price
management transaction, the Reimbursement Obligations, obligations of the
Borrower under Rate Management Transactions (including all renewals,
extensions, modifications, and substitution thereof and therefor) and all
cancellations, buy backs, reversals, terminations, or assignments of Rate
Management Transactions, and the indebtedness of the Borrower evidenced by
the Revolving Note (including Advances under Facility A and Facility B),
including principal, interest, costs, expenses and reasonable attorneys'
fees and all other fees and charges, together with all commitment fees and
other indebtedness and costs and expenses for which the Borrower is
responsible under this Agreement or under any of the Related Documents. In
addition, the word "Indebtedness" also includes, any and all other loans,
extensions of credit, obligations, debts and liabilities of the Borrower,
plus interest thereon, that may now and in the future be owed to or
incurred in favor of the Lender, as well as all claims by the Lender
against the Borrower, whether existing now or later; whether they are
voluntary or involuntary, due or to become due, direct or indirect or by
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way of assignment, determined or undetermined, absolute or contingent,
liquidated or unliquidated; whether the Borrower may be liable individually
or jointly with others, of every nature and kind whatsoever, in principal,
interest, costs, expenses and reasonable attorneys' fees and all other fees
and charges; whether the Borrower may be obligated as principal obligor,
guarantor, surety, accommodation party or otherwise.
"INTEREST PAYMENT DATE" shall mean (i) for a Base Rate Loan, the last
Business Day of each month such Loan is outstanding beginning June 30, 2002
and (ii) for a Eurodollar Loan, the last Eurodollar Business Day of each
Eurodollar Interest Period for such Loan, and during any Eurodollar
Interest Period of six (6) months, the Eurodollar Business Day occurring
three (3) months after the commencement of such Interest Period.
"INTEREST PERIOD" shall mean any Base Rate Interest Period or Eurodollar
Interest Period.
"LEASES" shall mean all present and future oil, gas and mineral leases or
interests therein now owned or hereafter acquired by the Borrower that form
part of the Mortgaged Properties.
"LENDER" means Hibernia National Bank, and its successors and assigns.
"LETTERS OF CREDIT" shall mean the letters of credit issued by the Lender
pursuant to Section 2.3.2. hereof.
"LIABILITIES" shall mean, as to any Person, all indebtedness, liabilities
and obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.
"LOANS" shall mean, collectively, the Revolving Loans.
"LOAN DOCUMENTS" shall mean this Agreement, the Revolving Note, the
Guaranty, the Collateral Documents and any other Related Documents.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to the Borrower and/or
the Guarantor, as the case may be, an event which causes a material adverse
effect on the business, assets, operations or condition (financial or
otherwise) of such Person.
"MAXIMUM RATE" shall mean, at any particular time in question, the maximum
non-usurious rate of interest which under applicable law may then be
charged on the Loans, the Reimbursement Obligations or any other
obligations hereunder. If such Maximum Rate changes after the date hereof,
the Maximum Rate shall be automatically increased or decreased, as the case
may be, without notice to Borrower from time to time as the effective date
of each change in such Maximum Rate.
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"MEMORANDUM" shall mean that certain Memorandum of Subordination Agreement
dated as of December 15, 1999, by and among the parties to the Chase
Purchase Agreement and Compass.
"MORTGAGE" shall mean (a) those certain mortgages, security agreements,
and/or deeds of trust by the Borrower in favor of Compass, as restated in
favor of the Lender pursuant to (i) Amended and Restated Mortgage,
Collateral Assignment, Security Agreement, and Financing Statement by
Borrower in favor of the Lender dated of even date with the Original
Agreement, as the same may be amended, supplemented, and/or restated from
time to time and in effect, and (ii) Deed of Trust, Mortgage, Security
Agreement, Fixture Filing, and Financing Statement by the Borrower in favor
of the Lender dated of even date with the Original Agreement, as the same
may be amended, supplemented and/or restated from time to time and in
effect, (b) that certain Mortgage, Collateral Assignment, Security
Agreement and Financing Statement by the Borrower in favor of the lender
dated December 12, 2002, as the same may be amended, supplemented, and/or
restated from time to time and in effect, and (c) that certain Deed of
Trust, Mortgage, Security Agreement, Fixture Filing, and Financing
Statement by the Borrower in favor of the Lender dated December 12, 2002,
as the same may be amended, supplemented and/or restated from time to time
and in effect.
"MORTGAGED PROPERTIES" shall mean the property and interests of the
Borrower encumbered by the Mortgage.
"NON-RECOURSE INDEBTEDNESS" shall mean Obligations owed by the Guarantor to
Rocky Mountain Gas, Inc., and Obligations of the Borrower and/or the
Guarantor for which the Borrower and/or the Guarantor, as the case may be,
are not personally liable for payment of the Obligations.
"NOTE" shall mean the Revolving Note as said promissory note may be renewed
or extended, together with all other promissory note or notes given in
renewal, substitution, or as a refinancing of any part of the indebtedness
evidenced thereby.
"OBLIGATIONS" of any Person means Liabilities in any of the following
categories: (a) Liabilities for borrowed money; (b) Liabilities
constituting an obligation to pay the deferred purchase price of property
or services; (c) Liabilities evidenced by a bond, debenture, note or
similar instrument; (d) Liabilities which (i) would under GAAP be shown on
such Person's balance sheet as a liability, and (ii) are payable more than
one year from the date of creation thereof (other than reserves for taxes
and reserves for contingent obligations); (e) Liabilities arising under
Hedging Agreements; (f) Liabilities constituting principal under leases
capitalized in accordance with GAAP, (g) Liabilities arising under
conditional sales or other title retention agreements; (h) Liabilities
owing under direct to indirect guaranties of Obligations of any other
Person or otherwise constituting obligations to purchase or acquire or to
otherwise protect or insure a creditor against loss in respect of
Obligations of any other Person (such as obligations under working capital
maintenance agreements, agreements to keep-well, or agreements to purchase
Obligations, assets, goods, securities or services), but excluding
endorsements
Page 11 of 56
in the ordinary course of business of negotiable instruments in the course
of collection; (i) Liabilities (for example, repurchase agreements and
sale/leaseback agreements) consisting of an obligation to purchase or lease
securities or other property, if such Liabilities arises out of or in
connection with the sale of the same or similar securities or property; (j)
Liabilities with respect to letters of credit or applications or
reimbursement agreements therefor; (k) Liabilities with respect to payments
received in consideration of oil, gas or other minerals yet to be acquired
or produced at the time of payment (including obligations under
"take-or-pay" contracts to deliver gas in return for payments already
received and the undischarged balance of any production payment created by
such Person or for the creation of which such Person directly or indirectly
received payment); or (l) Liabilities with respect to other obligations to
deliver goods or services in consideration of advance payments therefor;
provided, however, that the "Obligations" of any Person shall not include
Liabilities that were incurred by such Person on ordinary trade terms to
vendors, suppliers, or other Persons providing goods and services for use
by such Person in the ordinary course of its business, unless and until
such Liabilities are outstanding more than 120 days past original invoice
or billing date therefor.
"ORIGINAL AGREEMENT" shall mean that certain Credit Agreement dated as of
May 24, 2002 by and among the Borrower, the Guarantor, and the Lender, as
amended by First Amendment thereto dated as of July 9, 2002.
"PERMITTED ENCUMBRANCES" shall have the meaning ascribed to such term in
Section 13.4. hereof.
"PERSON" shall mean an individual or a corporation, partnership, trust,
joint venture, incorporated or unincorporated association, joint stock
company, government, or an agency or political subdivision thereof, or
other entity of any kind.
"PURCHASE MONEY INDEBTEDNESS" means Debt incurred to finance the
acquisition, construction or improvement of any fixed or capital assets,
including Debt assumed in connection with the acquisition of any such
assets or secured by an Encumbrance on any such assets prior to the
acquisition thereof, and any extension, renewal or replacement of any such
Debt.
"QUARTERLY REDUCTION" shall mean each quarterly reduction, if any, to the
Facility A Borrowing Base Amount on the last day of each July, October,
January, and April based upon Lender's redetermination of the Facility A
Borrowing Base Amount. All such determinations and valuations shall be in
accordance with the Lender's normal practices and standards for oil and gas
loans as may exist at the particular time of determination and valuation.
The Quarterly Reduction will be $1,750,000.00 beginning January 31, 2003.
Thereafter, the Lender will establish the Quarterly Reduction.
"RATE MANAGEMENT TRANSACTION" means any transaction (including an agreement
with respect thereto) now existing or hereafter entered into between the
Borrower and the Lender or affiliate thereof which is (i) an interest rate
protection agreement, foreign currency exchange agreement or other interest
or interest rate hedging agreement entered
Page 12 of 56
into in the ordinary course and not for speculative purposes or (ii) a
commodity price hedging agreement or arrangement entered into in the
ordinary course and not for speculative purposes.
"REIMBURSEMENT OBLIGATIONS" shall mean at any time, the obligations of
Borrower in respect of all Letters of Credit then outstanding to reimburse
amounts paid by the Lender in respect of any drawing or drawings under a
Letter of Credit.
"RELATED DOCUMENTS" shall mean and include individually, collectively,
interchangeably and without limitation all promissory notes, credit
agreements, loan agreements, guaranties, security agreements, mortgages,
collateral mortgages, deeds of trust, and all other instruments and
documents, whether now or hereafter existing, executed in connection with
the Indebtedness.
"RELEASE" means any release, spill, emission, leak, injection, deposit,
disposal, discharge, dispersal, leaching or migration of any Hazardous
Materials into the environment or into or out of any real property of
Borrower, including the movement of Hazardous Materials through or in the
air, soil, surface water, groundwater and/or land which could reasonably be
expected to form the basis of an Environmental Liability against Borrower.
"REMEDIAL ACTION" means any action to (i) clean up, remove, treat or in any
other way address Hazardous Materials in the environment, (ii) prevent the
Release or threat of Release or minimize the further Release of Hazardous
Materials so they do not mitigate or endanger or threaten to endanger
public health or welfare or the environment or (iii) perform pre-remedial
studies and investigations and post-remedial monitoring and care.
"REQUEST FOR ADVANCE" shall mean the Borrower's request for a Revolving
Loan.
"REVOLVING LOANS" shall mean all loans under Facility A and Facility B made
by the Lender under the Revolving Note to the Borrower in accordance with
and subject to the terms of the Commitment.
"REVOLVING LINE OF CREDIT" shall mean a reducing revolving line of credit
to the Borrower pursuant to the Commitment by the Lender, subject at all
times to (i) the Facility A Borrowing Base Amount then in effect, in the
case of Advances under Facility A, or (ii) the Facility B Borrowing Base
Amount then in effect, in the case of Advances under Facility B.
"REVOLVING NOTE" means the Revolving Note dated May 24, 2002 in the
principal amount of $30,000,000.00 by Borrower payable to the order of
Lender, which was issued to Lender to evidence the indebtedness to the such
Lender arising by reason of Advances, together with all allonges thereto
and all modifications, renewals and extensions thereof or of any part
thereof.
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"SECURITY AGREEMENT" shall mean that certain Stock Pledge and Security
Agreement executed by the Borrower in favor of the Lender of even date with
the Original Agreement, affecting 100% of the outstanding stock of the
Guarantor, as the same may be amended, supplemented, and/or restated from
time to time and in effect.
"SOLVENT" shall mean, when used with respect to any Person on a particular
day, that on such date (i) the fair value of the property of such Person is
greater than the total amount of liabilities, including without limitation,
contingent liabilities, of such person, (ii) the present fair salable value
of the assets of such person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (iii) such Person is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and
other commitments as they mature in the ordinary course of business, (iv)
such Person does not intend to, and does not believe that it will, incur
debts and liabilities beyond such Person's ability to pay as such debts and
liabilities mature, and (v) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute unreasonably small capital
after giving due consideration to the prevailing practice in the industry
in which such person is engaged. In computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be
computed at the amount which, in light of all of the facts and
circumstances existing at such time, represents the amount that can be
reasonably expected to become an actual or matured liability.
"SUBJECT BUSINESS" shall mean the exploration, development, exploitation
and production of natural gas and crude oil.
"SUBORDINATED PROMISSORY NOTES" shall mean those certain promissory notes
dated December 15, 1999 executed by the Borrower pursuant to the Chase
Purchase Agreement, together with all modifications, renewals and
extensions thereof or any part thereof.
"SUBSIDIARIES" shall mean at any date with respect to any Person all the
corporations of which such Person at such date, directly or indirectly,
owns 50% or more of the outstanding capital stock (excluding directors'
qualifying shares), and "SUBSIDIARY" means any one of the Subsidiaries.
"TOTAL OUTSTANDINGS" shall mean as of any date, without duplication, the
sum of (i) the total principal balance outstanding on the Revolving Note,
plus (ii) the total face amount of all outstanding Letters of Credit plus
(iii) the total of all Reimbursement Obligations.
"TRANCHE" shall mean a Eurodollar Loan for a particular Interest Period
and/or a Base Rate Loan.
"UCC" shall mean the Uniform Commercial Code-Secured Transactions (La. R.S.
10:9-101 et seq.) in the State of Louisiana, as amended from time to time,
provided that if by reason of mandatory provisions of law, the perfection
or effect of perfection or
Page 14 of 56
non-perfection of the Lender's Encumbrances against the Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction
other than the State of Louisiana, then "UCC" means the Uniform Commercial
Code as the same may be amended from time to time and in effect in such
other jurisdiction.
SECTION 1.2. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data submitted pursuant to this Agreement shall be prepared in accordance with
GAAP.
ARTICLE II
COMMITMENT
SECTION 2.1. THE REVOLVING LINE OF CREDIT. Subject to the terms and
conditions of this Agreement, the Lender agrees (a) to extend credit to the
Borrower during the period from the date hereof until the Facility A Termination
Date, by making Revolving Loans under Facility A to the Borrower from time to
time, provided, however, that at no time shall the sum of the aggregate
principal amount of such Revolving Loans to the Borrower made under Facility A
at such time outstanding exceed the Facility A Borrowing Base Amount then in
effect, and (b) to extend credit to the Borrower during the period from the date
hereof until the Facility B Termination Date, by making Revolving Loans under
Facility B to the Borrower from time to time, provided, however, that at no time
shall the aggregate principal amount of such Revolving Loans made under Facility
B exceed the Facility B Borrowing Base Amount.
SECTION 2.2. THE BORROWING BASE AMOUNTS.
(A) The Facility A Borrowing Base Amount is hereby fixed at $13,000,000.00.
It is agreed and understood that the Lender will re-evaluate and re-establish
the Facility A Borrowing Base Amount on a semi-annual basis on each October 31
and April 30. The Facility A Borrowing Base Amount also is subject, in the
Lender's sole and complete discretion, to one (1) unscheduled redetermination of
the Facility A Borrowing Base Amount after each scheduled semi-annual
redetermination by the Lender. The Borrower, at its option, also may request
(and the Lender shall promptly thereafter perform) one (1) unscheduled Facility
A Borrowing Base Amount redetermination after each scheduled semi-annual
redetermination by the Lender. The parties agree and understand that the
Facility A Borrowing Base Amount is further subject to Quarterly Reductions
based upon the Lender's re-evaluation of the Facility A Borrowing Base Amount at
such time.
(B) The Facility B Borrowing Base Amount is hereby fixed at $2,500,000.00.
The Lender is not under any obligation to renew Facility B. However, in the
event the Lender elects to renew Facility B, the parties agree and understand
that the Facility B Borrowing Base Amount shall be determined and established by
the Lender in its sole and completion discretion.
Page 15 of 56
SECTION 2.3. REVOLVING LOANS.
SECTION 2.3.1. REVOLVING LOANS. Subject to the terms and conditions of this
Agreement, the Lender agrees to make Revolving Loans under Facility A and
Facility B to the Borrower from time to time under the Revolving Line of Credit
in accordance with the terms of this Agreement. Within the limits set forth
herein, the Borrower may borrow from the Lender hereunder, repay any and all
such Revolving Loans as hereinafter provided and reborrow hereunder; provided,
however, each Revolving Loan shall be in an amount not less than $250,000.00 The
Borrower's obligation to repay the Revolving Loans (under both Facility A and
Facility B) made by the Lender shall be evidenced by the Revolving Note.
Revolving Loans under Facility A shall bear interest, at Borrower's option, at
the Base Rate plus the Base Rate Margin or the Eurodollar Rate plus the
Eurodollar Margin. Revolving Loans under Facility B shall bear interest, at
Borrower's option at the Base Rate plus 1.375% or the Eurodollar Rate plus
3.375%. The total number of Tranches under the Revolving Line of Credit which
may be outstanding at any time hereunder shall never exceed five (5) Tranches,
whether such Tranches are under Facility A or Facility B, or are Base Rate
Loans, Eurodollar Loans, or a combination thereof.
SECTION 2.3.2. LETTERS OF CREDIT. On the terms and conditions hereinafter
set forth, the Lender shall from time to time during the period beginning on the
date of this Agreement and ending on the Facility A Termination Date upon
request of Borrower issue standby letters of credit for the account of the
Borrower for general corporate purposes in such amounts as the Borrower may
request but not to exceed in the aggregate face amount at any time outstanding
the sum of $5,000,000.00 (subject to the additional limitations on the amounts
thereof set forth in Section 2.3.3. below), each such letter of credit shall
have an expiry date no later than the earlier of one (1) year from the date of
issuance or the Facility A Termination Date, whichever occurs first (the
"Letters of Credit"). On each day during the period while any such Letter of
Credit is issued and outstanding in accordance with the provisions of this
Agreement, the sum of the face amount of each such outstanding Letter of Credit
shall be treated as an Advance under Facility A. Borrower hereby unconditionally
agrees to pay and reimburse the Lender for the amount of each payment under any
Letter of Credit that is in substantial compliance with the provisions of such
Letter of Credit at or prior to the date on which payment is made by the Lender
to the beneficiary thereunder, without presentment, demand, protest or other
formalities of any kind. Upon receipt from any beneficiary of any Letter of
Credit of any demand for payment under such Letter of Credit, the Lender shall
promptly notify the Borrower of the demand and the date upon which such payment
is to be made by the Lender to such beneficiary in respect of such demand.
Forthwith upon receipt of such notice from the Lender, Borrower shall advise the
Lender whether or not it intends to borrow under Facility A to finance its
obligations to reimburse the Lender, and if so, submit a Request for Advance as
provided in Section 2.3.4. hereof. The parties agree and understand that all
outstanding letters of credit issued by the Lender under the Original Agreement,
which outstanding letters of credit have a total face amount of $224,000.00,
shall be treated as issued Letters of Credit pursuant to the provisions of
Section 2.3 of this Agreement.
SECTION 2.3.3. PROCEDURE FOR OBTAINING LETTERS OF CREDIT. The amount and
date of issuance, renewal, extension or reissuance of a Letter of Credit
pursuant to the Section 2.3.2. shall be designated by the Borrower's written
request delivered to the Lender at least three (3) Business Days prior to the
date of such issuance, renewal, extension or reissuance. Concurrently
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with or promptly following the delivery of the request for a Letter of Credit,
the Borrower shall execute and deliver to the Lender an application and
agreement with respect to the Letter of Credit, said application and agreement
to be in the form customarily used by the Lender. The terms of this Agreement
shall control in case of any conflict between the terms of this Agreement and
the Lender's form of application and agreement with respect to Letters of
Credit. The Lender shall not be obligated to issue, renew, extend or reissue
such Letters of Credit if (i) the Lender does not approve the requested form of
the Letter of Credit or any of the terms thereof, such approval not to be
unreasonably withheld, (ii) the amount thereon when added to the amount of the
outstanding Letters of Credit exceeds $5,000,000.00, or (iii) the amount thereof
when added to the total outstanding Advances under Facility A would exceed the
Facility A Borrowing Base Amount then in effect. Borrower agrees to pay the
Lender a fee for the issuance of each Letter of Credit, which fee shall be due
and payable by the Borrower to the Lender upon issuance of each Letter of Credit
by the Lender and on each anniversary date of such issuance while such Letter of
Credit is outstanding. The said fee shall be a per annum fee in the amount equal
to the applicable Eurodollar Margin times the face amount of the Letter of
Credit for such period (calculated separately for each Letter of Credit).
SECTION 2.3.4. MANNER AND NOTICE OF BORROWING UNDER THE REVOLVING LINE OF
CREDIT. Requests For Advances under the Revolving Line of Credit may be made by
the Borrower, in writing (including facsimile transmission) to the Lender and
such requests shall be fully authorized by the Borrower if made by any one of
the persons designated by the Borrower in writing to the Lender. The form of
Request for Advance is attached hereto as Exhibit "B", and includes a
designation by Borrower of the Borrowing Date. The Lender shall have the right,
but not the obligation, to verify any telephone requests by calling the person
who made the request at the telephone number designated by the Borrower in
writing to the Lender. Requests For Advances must be received by not later than
11:00 a.m. (Central Time) (i) one (1) Business Day prior to the Borrowing Date
in the case of Base Rate Loans, or (ii) three (3) Business Days prior to any
proposed Borrowing Date in the case of Eurodollar Loans. Not later than 2:00
p.m., Lafayette, Louisiana time, on the Borrowing Date, the Lender shall make
available to Borrower the aggregate amount of such requested Advance by
crediting same to Borrower's checking account and mailing the resulting credit
advice to Borrower. The Lender shall not incur any liability to Borrower in
acting upon any Request for Advance referred to above which the Lender believes
in good faith to have been given by a duly authorized officer or other person
authorized to borrow on behalf of Borrower or for otherwise acting in good faith
under this Section 2.3.4. Upon funding of Advances by the Lender in accordance
with this Agreement, pursuant to any such Request for Advance, Borrower shall
have effected Advances hereunder. Each Request for Advance for a Revolving Loan
must specify whether such Loan is a Eurodollar Loan or a Base Rate Loan, and
whether such Loan is under Facility A or Facility B. The Lender's copy of such
credit advice indicating such deposit to the account of the Borrower shall be
deemed conclusive evidence of the Borrower's indebtedness to the Lender in
connection with such borrowing. The aggregate outstanding amount of principal
and interest due by the Borrower at any given time under the Commitment shall be
and constitute the indebtedness of the Borrower to the Lender under the
Revolving Note made by the Borrower. When each Advance is made by the Lender to
the Borrower hereunder, the Borrower shall be deemed to have renewed and
reissued the
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Revolving Note for the amount of the Advance plus all amounts due by the
Borrower to the Lender under the Commitment immediately prior to such advance.
SECTION 2.3.5. USE OF PROCEEDS. The Borrower shall use the proceeds of the
Revolving Loans to finance working capital requirements and for direct
investments in its oil and gas operations.
ARTICLE III
NOTE EVIDENCING THE LOANS
SECTION 3.1. REVOLVING NOTE.
SECTION 3.1.1. FORM OF REVOLVING NOTE. The Revolving Loans shall continue
to be evidenced by the Revolving Note. Notwithstanding the face amount of the
Note, the actual principal amount due from Borrower to the Lender on account of
the Revolving Note, as of any date of computation, shall be the sum of Advances
then and theretofore made on account thereof, less all principal payments
actually received by Lender in collected funds with respect thereto. Although
the Revolving Note is dated May 24, 2002, interest in respect thereof shall be
payable only for the period during which the loans evidenced thereby are
outstanding and, although the stated amount of the Revolving Note may be higher,
the Revolving Note shall be enforceable, with respect to Borrower's obligation
to pay the principal amount thereof, only to the extent of the unpaid principal
amount of the loans.
SECTION 3.1.2. PAYMENT OF THE REVOLVING NOTE. Subject to the requirements
of Article VIII below, interest on the unpaid principal balance of the Revolving
Note shall be payable on each Interest Payment Date and for Advances under
Facility A, on the Facility A Termination Date, and for Advances under Facility
B, on the Facility B Termination Date. Subject to the requirements of Article
VIII below, (i) the outstanding principal due under the Revolving Note resulting
from Advances under Facility A shall be due and payable on the Facility A
Termination Date, and (ii) the outstanding principal due under the Revolving
Note resulting from Advances under Facility B shall be due and payable on the
Facility B Termination Date.
ARTICLE IV
INTEREST RATES
SECTION 4.1. OPTIONS.
SECTION 4.1.1. BASE RATE LOANS. On Base Rate Loans, Borrower agrees to pay
interest calculated on the basis of a year consisting of 365/366 days with
respect to the unpaid principal amount of each Base Rate Loan from the date the
proceeds thereof are made available to Borrower until maturity (whether by
acceleration or otherwise), at a varying rate per annum equal
Page 18 of 56
to (A) for Advances under Facility A, the lesser of (i) the Maximum Rate and
(ii) the Base Rate plus the Base Rate Margin; and (B) for Advances under
Facility B, the lesser of (i) the Maximum Rate and (ii) the Base Rate plus
1.375%. Past due principal, to the extent permitted by law, shall bear interest,
payable upon demand, at the lesser of (i) the Maximum Rate and (ii) the default
rate specified in the Revolving Note.
SECTION 4.1.2. EURODOLLAR LOANS. On Eurodollar Loans, Borrower agrees to
pay interest calculated on the basis of a year consisting of 360 days with
respect to the unpaid principal amount of each Eurodollar Loan from the date the
proceeds thereof are made available to Borrower until maturity (whether by
acceleration or otherwise), at a varying rate per annum equal to (A) for
Advances under Facility A, the lesser of (i) the Maximum Rate and (ii) the
Eurodollar Rate plus the Eurodollar Margin; and (B) for Advances under Facility
B, the lesser of (i) the Maximum Rate and (ii) the Eurodollar Rate plus 3.375%.
Past due principal, to the extent permitted by law, shall bear interest, payable
on demand, at the lesser of (i) the Maximum Rate and (ii) the default rate
specified in the Revolving Note. Upon three (3) Business Days written notice
prior to the making by the Lender of any Eurodollar Loan (in the case of the
initial Interest Period therefor) or the expiration date of each succeeding
Interest Period (in the case of subsequent Interest Periods therefor), Borrower
shall have the option, subject to compliance by Borrower with all of the
provisions of this Agreement, as long as no Event of Default exists, to specify
whether the Interest Period commencing on any such date shall be a one (1), two
(2), three (3) or six (6) month period. If the Lender shall not have received
timely notice of a designation of such Interest Period as herein provided,
Borrower shall be deemed to have elected to convert all maturing Eurodollar
Loans to Base Rate Loans.
SECTION 4.2. INTEREST RATE DETERMINATION. The Lender shall determine each
interest rate applicable to any Base Rate Loan or Eurodollar Loan and its
determination shall be conclusive absent manifest error. The Lender shall notify
the Borrower of each interest rate determination within a reasonable time after
each such determination.
SECTION 4.3. CONVERSION OPTION. Borrower may elect from time to time (i) to
convert all or any part of its Eurodollar Loans to Base Rate Loans by giving the
Lender irrevocable notice of such election in writing prior to 10:00 a.m.
(Lafayette, Louisiana time) on the conversion date and such conversion shall be
made on the requested conversion date, provided that any such conversion of
Eurodollar Loan shall only be made on the last day of the Eurodollar Interest
Period with respect thereof, and (ii) to convert all or any part of its Base
Rate Loans to Eurodollar Loans by giving the Lender irrevocable written notice
of such election three (3) Business Days prior to the proposed conversion and
such conversion shall be made on the requested conversion date or, if such
requested conversion date is not a Business Day on the next succeeding Business
Day. Any such conversion shall not be deemed to be a prepayment of any of the
Loans for purposes of this Agreement on the Revolving Note.
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ARTICLE V
CHANGE OF CIRCUMSTANCES
SECTION 5.1. UNAVAILABILITY OF FUNDS OR INADEQUACY OF PRICING. In the event
that, in connection with any proposed Eurodollar Loan, the Lender determines,
which determination shall, absent manifest error, be final, conclusive and
binding upon all parties, due to changes in circumstances since the date hereof,
adequate and fair means do not exist for determining the Eurodollar Rate or such
rate will not accurately reflect the costs to the Lender of funding Eurodollar
Loans for such Eurodollar Interest Period, the Lender shall give notice of such
determination to the Borrower, whereupon, until the Lender notifies the Borrower
that the circumstances giving rise to such suspension no longer exist, the
obligation of the Lender to make, continue or convert Loans into Eurodollar
Loans shall be suspended, and all loans to Borrower shall be Base Rate Loans
during the period of suspension.
SECTION 5.2. CHANGE IN LAWS. If at any time after the date hereof any new
law or any change in existing laws or in the interpretation by any governmental
authority, central bank, or comparable agency charged with the administration or
interpretation thereof, of any new or existing laws shall make it unlawful for
the Lender to make or continue to maintain or fund Eurodollar Loans hereunder,
then Lender shall promptly notify Borrower in writing of Lender's obligation to
make, continue or convert Loans into Eurodollar Loans under this Agreement shall
be suspended until it is no longer unlawful for Lender to make or maintain
Eurodollar Loans. Upon receipt of such notice, Borrower shall either repay the
outstanding Eurodollar Loans owed to the Lender, without penalty, on the last
day of the current Interest Periods (or, if Lender may not lawfully continue to
maintain and fund such Eurodollar Loans, immediately), or Borrower may convert
such Eurodollar Loans at such appropriate time to Base Rate Loans.
SECTION 5.3. INCREASED COST OR REDUCED RETURN.
(i) If, after the date hereof, the adoption of any applicable
law, rule, or regulation, or any change in any applicable law, rule, or
regulation, or any change in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender with any
request or directive (whether or not having the force of law) of any such
governmental authority, central bank, or comparable agency:
(A) shall subject Lender to any tax, duty, or other charge
with respect to any Eurodollar Loans, the Revolving Note, or its
obligation to make Eurodollar Loans, or change the basis of
taxation of any amounts payable to Lender under this Agreement,
or the Revolving Note, in respect of any Eurodollar Loans (other
than franchise taxes and taxes imposed on the overall net income
of Lender);
Page 20 of 56
(B) shall impose, modify, or deem applicable any reserve,
special deposit, assessment, or similar requirement (other than
reserve requirements, if any, taken into account in the
determination of the Eurodollar Rate) relating to any extensions
of credit or other assets of, or any deposits with or other
liabilities or commitments of, Lender, including the Commitment
of Lender hereunder; or
(C) shall impose on Lender or on the London interbank market
any other condition affecting this Agreement or the Revolving
Note or any of such extensions of credit or liabilities or
commitments;
and the result of any of the foregoing is to increase the cost to Lender of
making, converting into, continuing, or maintaining any Eurodollar Loans or to
reduce any sum received or receivable by Lender under this Agreement or the
Revolving Note with respect to any Eurodollar Loans, then pursuant to Section
5.3(v) Borrower shall pay to Lender such amount or amounts as will compensate
Lender for such increased cost or reduction. If Lender requests compensation by
Borrower under this Section 5.3., Borrower may, by notice to Lender, suspend the
obligation of Lender to make or continue Eurodollar Loans, or to convert all or
part of the Base Rate Loan owing to Lender to Eurodollar Loans, until the event
or condition giving rise to such request ceases to be in effect (in which case
the provisions of Section 5.3. shall be applicable); provided that such
suspension shall not affect the right of Lender to receive the compensation so
requested.
(ii) If, after the date hereof, Lender shall have determined that
the adoption of any applicable law, rule, or regulation regarding capital
adequacy or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of Lender or
any corporation controlling Lender as a consequence of Lender's obligations
hereunder to a level below that which Lender or such corporation could have
achieved but for such adoption, change, request, or directive (taking into
consideration its policies with respect to capital adequacy), then from time to
time pursuant to Section 5.3(v) Borrower shall pay to Lender such additional
amount or amounts as will compensate Lender for such reduction.
(iii) Lender shall promptly notify Borrower of any event of which
it has knowledge, occurring after the date hereof, which will entitle Lender to
compensation pursuant to this Section 5.3. will designate a separate lending
office, if applicable, if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of Lender, be
otherwise disadvantageous to it. If Lender claims compensation under this
Section 5.3., Lender shall simultaneously furnish to Borrower a statement
setting forth the additional amount or amounts to be paid to it hereunder which
shall be conclusive in the absence of manifest error. In determining such
amount, Lender may use any reasonable averaging and attribution methods.
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(iv) If Lender gives notice to the Borrower pursuant to Section
5.3. hereof, Lender shall simultaneously give to the Borrower a statement signed
by an officer of Lender setting forth in reasonable detail the basis for, and
the calculation of such additional cost, reduced payments or capital
requirements, as the case may be, and the additional amounts required to
compensate Lender therefor.
(v) Within fifteen (15) days after receipt by the Borrower of any
notice referred to in Section 5.3., the Borrower shall pay to Lender such
additional amounts as are required to compensate Lender for the increased cost,
reduce payments or increase capital requirements identified therein, as the case
may be; provided, that the Borrower shall not be obligated to compensate Lender
for any increased costs, reduced payments or increased capital requirements to
the extent that Lender incurs the same prior to a date six (6) months before
Lender gives the required notice.
SECTION 5.4. BREAKAGE COSTS. Without duplication under any other provision
hereof, if Lender incurs any actual loss, cost or expense (including, without
limitation, any loss of profit and loss, cost, expense or premium reasonably
incurred by reason of the liquidation or re-employment of deposits or other
funds acquired by Lender to fund or maintain any Eurodollar Loan or the
relending or reinvesting of such deposits or amounts paid or prepaid to the
Lender as a result of any of the following events other than any such occurrence
as a result in the change of circumstances described in Sections 5.1. and 5.2.:
(i) any payment, prepayment or conversion of a Eurodollar Loan on
a date other than the last day of its Eurodollar Interest Period
(whether by acceleration, prepayment or otherwise);
(ii) any failure to make a principal payment of a Eurodollar Loan
on the due date thereof; or
(iii) any failure by the Borrower to borrow, continue, prepay or
convert to a Eurodollar Loan on the dates specified in a notice given
pursuant to this Agreement.
then the Borrower shall within 15 days after demand pay to Lender such amount as
will reimburse Lender for such loss, cost or expense. If Lender makes such a
claim for compensation, it shall simultaneously furnish to Borrower a statement
setting forth the amount of such loss, cost or expense in reasonable detail
(including an explanation of the basis for and the computation of such loss,
cost or expense) and the amounts shown on such statement shall be conclusive and
binding absent manifest error.
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ARTICLE VI
FEES
SECTION 6.1. FACILITY FEES.
SECTION 6.1.1. FACILITY A FACILITY FEE. The Borrower shall pay to the
Lender the sum of five thousand dollars ($5,000.00), which amount represents
one-half percent (.50%) of the amount by which the Facility A Borrowing Base
Amount exceeds the highest Borrowing Base Amount that was in effect under the
Original Agreement prior to the execution of this Agreement. An additional
facility fee of one-half percent (.50%) of the incremental amount of any
increase to the Facility A Borrowing Base Amount shall be owed by Borrower to
the Lender, and such fee shall be payable by Borrower upon Borrower's acceptance
of said increase; provided, however, if the Facility A Borrowing Base Amount is
reduced and then reinstated to a higher amount, the additional facility fee will
be applicable only to the incremental amount, if any, by which the higher amount
exceeds the previous highest Facility A Borrowing Base Amount. The Borrower
hereby authorizes the Lender to debit its account maintained with the Lender for
collection of the foregoing facility fees.
SECTION 6.1.2. FACILITY B FACILITY FEE. The Borrower shall pay to the
Lender the sum of one percent (1%) of the Facility B Borrowing Base Amount. An
additional facility fee of one percent (1%) of any reinstatement or increase to
the Facility B Borrowing Base Amount shall be payable by Borrower upon its
acceptance of said reinstatement or increase. The Borrower hereby authorizes the
Lender to debit its account maintained with the Lender for collection of the
foregoing facility fees.
SECTION 6.2. UNUSED FEES.
SECTION 6.2.1. FACILITY A UNUSED FEE. The Borrower shall pay the Lender an
unused fee calculated on the unused portion of the Facility A Borrowing Base
Amount as follows: (i) if the Facility A Borrowing Base Usage is greater than or
equal to 90%, the unused fee is 0.50%; (ii) if the Facility A Borrowing Base
Usage is greater than or equal to 50% but less than 90%, the unused fee is
0.50%; and (iii) if the Facility A Borrowing Base Usage is less than 50%, the
unused fee is 0.375%. The unused fee will be payable quarterly in arrears on the
last day of each fiscal quarter, commencing December 31, 2002. The unused
portion of the Facility A Borrowing Base Amount shall be determined on a daily
basis by subtracting from the Facility A Borrowing Base Amount the Total
Outstandings under Facility A, and by averaging said daily amounts for the
period for which the fee is to be determined. The Borrower hereby authorizes the
Lender to debit its account maintained with the Lender for collection of the
unused fee.
SECTION 6.2.2. FACILITY B UNUSED FEE. The Borrower shall pay to the Lender
an unused fee of 0.50% based on the unused portion of the Facility B Borrowing
Base Amount. The unused fee will be payable quarterly in arrears on the last day
of each fiscal quarter, commencing December 31, 2002. The unused portion of the
Facility B Borrowing Base Amount shall be determined on a daily basis by
subtracting from the Facility B Borrowing Base Amount the Total Outstandings
under Facility B, and by averaging said daily amounts for the period for which
the
Page 23 of 56
fee is to be determined. The Borrower hereby authorizes the Lender to debit its
account maintained with the Lender for collection of the unused fee.
SECTION 6.3. LETTER OF CREDIT FEE. The Borrower shall pay to the Lender a
fee for each Letter of Credit as provided in Section 2.3.3. of this Agreement.
SECTION 6.4. ENGINEERING FEE. The Borrower shall pay to the Lender a fee of
$7,500.00 for each unscheduled determination of the Facility A Borrowing Base
Amount requested by Borrower. The Borrower hereby authorizes the Lender to debit
its account maintained with the Lender for collection of said fees.
ARTICLE VII
CERTAIN GENERAL PROVISIONS
SECTION 7.1. PAYMENTS TO THE LENDER. All payments of principal, interest,
fees and any other amounts due hereunder or under any of the other Related
Documents shall be made to the Lender at its office in New Orleans, Louisiana at
313 Carondelet Street, New Orleans, Louisiana 70130, or at such other location
that the Lender may from time to time designate in writing to the Borrower, in
each case in immediately available funds.
SECTION 7.2. NO OFFSET, ETC. All payments by the Borrower hereunder and
under any of the other Related Documents shall be made without setoff and free
and clear of and without deduction for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by any jurisdiction
or any political subdivision thereof or taxing or other authority therein unless
the Borrower is compelled by law to make such deduction or withholding. If any
such obligation is imposed upon the Borrower with respect to any amount payable
by it hereunder or under any of the other Loan Documents, the Borrower will pay
to the Lender, on the date on which such amount is due and payable hereunder or
under such other Related Document, such additional amount in Dollars as shall be
necessary to enable the Lender to receive the same net amount which the Lender
would have received on such due date had no such obligation been imposed upon
the Borrower. The Borrower will deliver promptly to the Lender certificates or
other valid vouchers for all taxes or other charges deducted from or paid with
respect to payments made by the Borrower hereunder or under such other Loan
Documents.
SECTION 7.3. PRINCIPAL AMOUNT OF REVOLVING NOTE. The Borrower acknowledges
and understands that notwithstanding the stated principal amount of the
Revolving Note, that the Lender's obligation to fund Advances under the
Revolving Note is limited for all purposes to the terms and conditions of this
Agreement, including but not limited to, availability under the Facility A
Borrowing Base Amount then in effect and the Facility B Borrowing Base Amount
then in effect, as the case may be. IN ADDITION, THE BORROWER UNDERSTANDS AND
AGREES THAT NOTWITHSTANDING ANY PROVISION IN THIS AGREEMENT OR THE REVOLVING
NOTE TO THE CONTRARY, THAT THE LENDER SHALL NOT BE OBLIGATED TO FUND ANY AMOUNT
IN EXCESS OF THE FACILITY A BORROWING
Page 24 of 56
BASE AMOUNT THEN IN EFFECT OR THE FACILITY B BORROWING BASE AMOUNT THEN IN
EFFECT, AS THE CASE MAY BE.
SECTION 7.4. RATE MANAGEMENT TRANSACTIONS. The Borrower is permitted to
enter into Rate Management Transactions with the Lender.
SECTION 7.5. CALCULATION OF FEES. The fees set forth in Article VI above
will be calculated on the basis of a year consisting of 360 days.
ARTICLE VIII
PREPAYMENTS
SECTION 8.1. VOLUNTARY PREPAYMENTS. Borrower may at any time and from time
to time, without premium or penalty, prepay Base Rate Loans. Borrower may at any
time and from time to time, without penalty or premium subject to Section 5.4.
hereof, prepay Eurodollar Loans outstanding upon at least three (3) Business
Day's notice to Lender.
SECTION 8.2. MANDATORY PREPAYMENT RESULTING FROM A QUARTERLY REDUCTION.
Subject to Section 5.4 above, in the event the outstanding principal amount of
all Loans under Facility A exceed, as a result of a Quarterly Reduction, the
Facility A Borrowing Base Amount then in effect, the Borrower shall make (on the
first Business Day of the month following the Quarterly Reduction) a mandatory
prepayment to the Lender of the excess amount and accrued, unpaid interest
(through the date of payment) on such excess amount.
SECTION 8.3. MANDATORY PREPAYMENT RESULTING FROM OVERADVANCES. Except as
otherwise required by Section 13.2, in the event the unpaid principal amount of
the Revolving Loans ever exceeds the sum of the Facility A Borrowing Base Amount
then in effect and the Facility B Borrowing Base Amount then in effect
(including any scheduled or unscheduled redeterminations thereof), the Borrower
(at its option) agrees, within thirty (30) days after notice from Lender of the
occurrence of such an excess amount (an "overadvance") to do the following
(individually or in combination): (a) make a lump sum payment to the Lender in
an amount equal to the overadvance; (b) grant to the Lender security interests
or mortgage liens on new collateral having, in the Lender's sole discretion an
incremental value at least equal to one hundred percent (100%) of such
overadvance; or (c) make the first of six (6) (or fewer) consecutive monthly
payments to the Lender, each in the amount equal to one-sixth (or such
corresponding lesser amount if fewer than six payments are made) of the
overadvance.
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ARTICLE IX
SECURITY FOR THE INDEBTEDNESS
SECTION 9.1. SECURITY. The Indebtedness of the Borrower to the Lender
under this Agreement and the Revolving Note shall be secured by the following:
(a) the Mortgage;
(b) the Security Agreement (and physical delivery to the Lender of the
stock certificates therein described);
(c) the Guaranty; and
(d) any additional Collateral Documents granted by any Person in favor of
Lender as security for the Indebtedness of the Borrower to the Lender under this
Agreement and the Revolving Note.
The Borrower understands and acknowledges that item (a) and (b) above
constitute first priority mortgage liens and security interests affecting the
Mortgaged Properties and 100% of the outstanding stock of the Guarantor in favor
of the Lender, subject only to Permitted Encumbrances and Designated Title
Exceptions as herein provided.
ARTICLE X
CONDITIONS PRECEDENT
SECTION 10.1. CONDITIONS PRECEDENT TO ALL REVOLVING LOANS. The obligation
of the Lender to make any Revolving Loan hereunder shall be subject to the
satisfaction and the continued satisfaction of the following conditions
precedent:
(a) On or prior to the date hereof, the Borrower shall have executed and
delivered to the Lender this Agreement, the Revolving Note, the Mortgage, the
Security Agreement, and all other documents required by this Agreement, all in
form and substance and in such number of counterparts as may be required by the
Lender;
(b) On or prior to the date hereof, the Guarantor shall have executed and
delivered to the Lender this Agreement, the Guaranty, and all other documents
required by this Agreement, all in form and substance and in such number of
counterparts as may be required by the Lender;
(c) The representations, warranties, and covenants of the Borrower as set
forth in this Agreement, or in any Related Document furnished to the Lender in
connection herewith, shall be and remain true and correct as of such date
(except to the extent specifically limited to a specified date);
Page 26 of 56
(d) On or prior to the date hereof, the Lender shall have received a
favorable legal opinion of counsel to the Borrower and the Guarantor covering
the transactions contemplated by this Agreement, in form, scope and substance
satisfactory to the Lender;
(e) The Lender shall have received certified resolutions of the Borrower
and the Guarantor authorizing the execution of all documents and instruments
contemplated by this Agreement;
(f) The Lender shall have received all fees, charges and expenses which are
due and payable as specified in this Agreement and any Related Documents;
(g) No Default or Event of Default shall exist or shall result from the
making of a Loan or the issuance of a Letter of Credit;
(h) The Borrower shall have provided the Lender with all financial
statements, reports and certificates required by this Agreement;
(i) On or prior to the date hereof, the Lender shall have received the
articles of incorporation and bylaws, as amended, and the Lender's counsel shall
have reviewed the foregoing documents and is satisfied with the validity, due
authorization and enforceability thereof and of all Related Documents;
(j) On or prior to the date hereof, the Lender shall have received evidence
acceptable to the Lender and their counsel that its Encumbrances affecting the
Collateral shall have a first priority position, subject only to Permitted
Encumbrances;
(k) The Borrower shall have complied with the procedure set forth in this
Agreement, for the making of a Revolving Loan;
(l) Except as disclosed on Schedule 10.1 attached hereto there shall have
occurred no Material Adverse Effect since the date of the most recent financial
statements delivered by Borrower to Lender hereunder;
(m) The Lender's reasonable satisfactory review prior to the date hereof of
all environmental matters related to the Mortgaged Properties;
(n) The Borrower must maintain insurance as required by Section 11.6, and
deliver to Lender evidence of such insurance coverage;
(o) To the extent requested by Lender and required by the Loan Documents,
the Borrower shall have executed and delivered to the Lender blank form letters
in lieu of division orders, in form and substance satisfactory to the Lender;
and
(p) On or prior to the date hereof, the Lender shall have received title
opinions from counsel to Borrower (or other title information reasonably
acceptable to the Lender) covering not
Page 27 of 56
less than eighty percent (80%) of the present value of the sum of the Facility A
Borrowing Base Amount and the Facility B Borrowing Base Amount, as determined by
the Lender, which opinions (or other title information reasonably acceptable to
the Lender) must satisfy (in the Lender's reasonable discretion) the first
sentence of Section 11.3.
The Lender reserve the right, in its sole discretion, to waive any one or
more of the foregoing conditions precedent.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
SECTION 11.1. CORPORATE AUTHORITY OF THE BORROWER. The Borrower is a
corporation duly created, validly existing, and in good standing under the laws
of the state its incorporation, and is duly qualified and in good standing as
foreign corporation in Louisiana and all other jurisdictions where the failure
to qualify would have an adverse effect upon its ability to perform its
obligations under this Agreement and all Related Documents to which it is a
party. The Borrower has the corporate power to enter into this Agreement,
execute the Revolving Note, Mortgage, Security Agreement, and grant the liens
and security interests in the Collateral in the manner and for the purpose
contemplated by the Collateral Documents. The Borrower has the corporate power
to perform its obligations hereunder and under the Loan Documents and Related
Documents. The execution, delivery, and performance by the Borrower of the Loan
Documents and Related Documents have all been duly authorized by all necessary
corporate or company action, and do not and will not result in any violation by
the Borrower of any provision of any law, rule, regulation, order, writ,
judgment, decree, determination or award presently in effect having
applicability to the Borrower, or the articles of incorporation and bylaws of
the Borrower. Except as set forth in Schedule 11.1 attached hereto, the making
and performance by the Borrower of the Loan Documents and Related Documents do
not and will not result in a breach of or constitute a default under any
material indenture or loan or credit agreement or any other material agreement
or instrument to which the Borrower is a party or by which it may be bound or
affected, or result in, or require, the creation or imposition of any mortgage,
deed of trust, pledge, lien, security interest or other charge or encumbrance of
any nature (other than as contemplated by the Related Documents) upon or with
respect to any of the properties now owned or hereafter acquired by the
Borrower. Each of the Loan Documents and Related Documents to which the Borrower
is a party constitutes a legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms.
SECTION 11.2. FINANCIAL STATEMENTS. The most recent balance sheet of the
Borrower at the dates thereof, and the related statements of income and retained
earnings for the year then ended, copies of which have been delivered to the
Lender fairly present in all material respects the financial condition of the
Borrower as of the date or dates thereof. Each of said financial statements were
prepared in conformity with GAAP and, except as otherwise disclosed to Lender in
writing, applied on a basis consistent with the preceding year. No Material
Adverse Effect has
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occurred since said dates in the financial position or in the results of
operations of the Borrower in its business taken as a whole.
SECTION 11.3. TITLE TO MORTGAGED PROPERTIES. Except as set forth on
Schedule 11.3 attached hereto, the Borrower has Defensible Title to the
Mortgaged Properties at a book cost in excess of $200,000 (except to the extent
that (a) such assets have thereafter been disposed of in compliance with this
Agreement or (b) leases for such property have expired pursuant to their terms),
and, in each case free and clear of all Encumbrances except (other than
Permitted Encumbrances) (i) Encumbrances for taxes not yet due and payable or,
if payable, that are being contested in good faith in the ordinary course of
business, (ii) statutory Encumbrances (including materialmen's, mechanic's,
repairmen's, landlord's and other similar encumbrances) arising in the ordinary
course of business to secure payments not yet due and payable or, if payable,
that are being contested in good faith in the ordinary course of business, (iii)
easements, restrictions, reservations or other encumbrances, as well as such
imperfections or irregularities of title, if any, as are not material, (iv)
obligations or duties to any municipality or public authority with respect to
any franchise, grant, license or permit and all applicable laws, rules,
regulations and orders of any Governmental Authority, (v) all lessors'
royalties, overriding royalties, net profits interests, production payments,
carried interests, reversionary interests and other burdens on or deductions
from the proceeds of production, (vi) the terms and conditions of joint
operating agreements and other oil and gas contracts, (vii) all rights to
consent by, required notices to, and filings with or other actions by
governmental or tribal entities, if any, in connection with the change of
ownership or control of an interest in federal, state, tribal or other domestic
governmental oil and gas leases, if the same are customarily obtained subsequent
to such change of ownership or control, but only insofar as such consents,
notices, filings and other actions relate to the transactions contemplated by
this Agreement, (viii) any preferential purchase rights, (ix) required third
party consents to assignment, (x) conventional rights of reassignment prior to
abandonment and (xi) the terms and provisions of oil and gas leases, unit
agreements, pooling agreements, and other documents creating interests
comprising the oil and gas properties; provided, however, the exceptions
described in clauses (iv) through (xi) inclusive above are qualified to include
only those exceptions in each case which do not operate to (A) reduce the net
revenue interest of the Borrower below that set forth on Schedule 11.3, (B)
increase the proportionate share of costs and expenses of leasehold operations
attributable to or to be borne by the working interest of the Borrower above
that set forth on Schedule 11.3 without a proportionate increase in the net
revenue interest of the Borrower or (C) increase the working interest of the
Borrower above that set forth on Schedule 11.3 without a proportionate increase
in the net revenue interest of the Borrower, and, provided, further, that the
foregoing defects, limitations, liens and encumbrances, whether individually
material or not, do not in the aggregate create a Material Adverse Effect upon
the Borrower (the categories of exceptions in clauses (iv) through (xi), as so
qualified and as any such exceptions may exist from time to time, being referred
to as the "DESIGNATED TITLE EXCEPTIONS"). The Mortgage constitutes a legal,
valid and perfected first Encumbrance on the property interests covered thereby,
subject only to Designated Title Exceptions, Permitted Encumbrances, and matters
disclosed on Schedule 11.3. Further, as of the date hereof, the oil and gas
properties constituting not less than ninety percent (90%) of the present value
of the sum of the initial Facility A Borrowing Base Amount and Facility B
Borrowing Base Amount are Mortgaged Properties.
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SECTION 11.4. LITIGATION. Other than as set forth in Schedule 11.4 and as
may be disclosed to the Lender in writing after the date of this Agreement,
there are no legal actions, suits or proceedings pending or, to the best
knowledge of the Borrower, threatened against or affecting the Borrower, or any
of its properties before any court or administrative agency (federal, state or
local), which could reasonably be expected to constitute a Material Adverse
Effect, and there are no judgments or decrees affecting the Borrower, or its
property (including, without limitation, the Collateral) which are or could
reasonably be expected to become an Encumbrance against such property (other
than a Designated Title Exception or a Permitted Encumbrance), provided that no
breach of this Section 11.4 shall occur if the same is discharged within thirty
days after the date of entry thereof or an appeal or appropriate proceeding for
review thereof is taken within such period and a stay of execution pending such
appeal is obtained.
SECTION 11.5. APPROVALS. No authorization, consent, approval or formal
exemption of, nor any filing or registration with, any governmental body or
regulatory authority (federal, state or local), and no vote, consent or approval
of the shareholders of the Borrower is or will be required in connection with
the execution and delivery by the Borrower of the Related Documents or the
performance by the Borrower of its obligations hereunder and under the other
Related Documents, except to the extent obtained.
SECTION 11.6. REQUIRED INSURANCE. The Borrower maintains insurance with
insurance companies in such amounts and against such risks as is usually carried
by owners of similar businesses and properties in the same general areas in
which Borrower operates.
SECTION 11.7. LICENSES. The Borrower possesses adequate franchises,
licenses and permits to own its properties and to carry on its business as
presently conducted, except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
SECTION 11.8. ADVERSE AGREEMENTS. Except as described in Schedule 10.1, the
Borrower is not a party to any agreement or instrument, nor subject to any
charter or other restriction, materially and adversely affecting the business,
properties, assets, or operations of the Borrower or its condition (financial or
otherwise), and the Borrower is not in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument to which it is a party, which default would constitute a
Material Adverse Effect.
SECTION 11.9. DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default
hereunder has occurred and is continuing or will occur as a result of the giving
effect hereto.
SECTION 11.10. EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to
which the Borrower may have any liability complies in all material respects with
all applicable requirements of law and regulations, and (i) no Reportable Event
(as defined in ERISA) has occurred and is continuing with respect to any such
plan, (ii) the Borrower has not withdrawn from any such plan or initiated steps
to do so, and (iii) no steps have been taken to terminate any such plan.
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SECTION 11.11. INVESTMENT COMPANY ACT. The Borrower is not an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
SECTION 11.12. PUBLIC UTILITY HOLDING COMPANY ACT. The Borrower is not a
"holding company," or a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
SECTION 11.13. REGULATIONS X, T AND U. The Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations X, T and U of the Board of Governors of the Federal
Reserve System), and none of the proceeds of the Loans will be used for the
purpose of purchasing or carrying such margin stock.
SECTION 11.14. LOCATION OF OFFICES AND RECORDS. As of the date hereof, the
chief place of business of the Borrower, and the office where the Borrower keeps
all of its records concerning the Collateral, is 14701 St. Mary's Lane, Suite
800, Houston, Texas 77079.
SECTION 11.15. INFORMATION. All written information heretofore or
contemporaneously herewith furnished by the Borrower to the Lender for the
purposes of or in connection with this Agreement or any transaction contemplated
hereby (excluding projections, estimates, and engineering reports) is, and all
such information hereafter furnished by or on behalf of the Borrower to the
Lender will be, true and accurate in every material respect on the date as of
which such information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to make such
information not misleading as of such date, taken as a whole. To the best
knowledge of Borrower, the engineering reports delivered to the Lender in
connection with this Agreement do not contain any material inaccuracies and/or
omissions. The said engineering reports, however, are based upon professional
opinions, estimates and projections and the Borrower does not warrant that such
opinions, estimates and projections will ultimately prove to have been accurate.
All other projections and estimates by the Borrower delivered hereunder or in
connection herewith were prepared in good faith on the basis of the assumptions
believed by the Borrower in good faith to be reasonable in light of the then
current and foreseeable business conditions of the Borrower and its Subsidiaries
at the time of preparation thereof, it being understood by the Lender that
actual results may vary from projected results.
SECTION 11.16. ENVIRONMENTAL MATTERS. Except as previously disclosed to the
Lender in writing or as could not reasonably be expected to result in a Material
Adverse Effect:
(a) To the best of Borrower's knowledge and belief after due inquiry,
Borrower is in compliance with all applicable Environmental Laws;
(b) To the best of Borrower's knowledge and belief after due inquiry,
Borrower has obtained all consents and permits required under all applicable
Environmental Laws to operate its business as presently conducted or as proposed
to be conducted and all such consents and permits
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are in full force and effect and Borrower is in compliance with all terms and
conditions of such approvals;
(c) To the best of Borrower's knowledge and belief after due inquiry,
neither Borrower nor any of the present property or operations of Borrower is
subject to any order from or agreement with any Governmental Authority or
private party respecting (i) failure to comply with any Environmental Law or any
Remedial Action or (ii) any Environmental Liabilities arising from the Release
or threatened Release except those orders and agreements with which Borrower has
complied;
(d) To the best of Borrower's knowledge and belief after due inquiry, none
of the operations of Borrower is subject to any judicial or administrative
proceeding alleging a violation of, or liability under, any Environmental Law;
(e) None of the operations of Borrower, to its best knowledge after due
inquiry, is the subject of any investigation by any Governmental Authority
evaluating whether any Remedial Action is needed to respond to a Release or
threatened Release;
(f) Borrower has not been required to file any notice under any
Environmental Law indicating past or present treatment, storage or disposal of a
hazardous waste as defined by 40 CFR Part 261 or any state or local equivalent
which could reasonably be expected to have a Material Adverse Effect;
(g) Borrower has not been required to file any notice under any applicable
Environmental Law reporting a Release which could reasonably be expected to have
a Material Adverse Effect;
(h) There is not now, nor, to the best knowledge of Borrower, has there
ever been, on or in any property of Borrower:
(i) any unauthorized generation, treatment, recycling, storage or
disposal of any hazardous waste as defined by 40 CFR Part 261 or
any state or local equivalent,
(ii) any underground storage tanks or surface impoundments without
proper permits,
(iii) any asbestos - containing material, or
(iv) any polychlorinated biphenyls (PCBs) used in hydraulic oils,
electrical transformers or other equipment;
(i) There have been no written commitments or agreements involving Borrower
from or with any Governmental Authority or any private entity (including,
without limitation, the owner of the Mortgaged Properties or any portion
thereof) relating to the generation, storage,
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treatment, presence, Release, or threatened Release which could reasonably be
expected to have a Material Adverse Effect on or into any of the properties of
Borrower or the environment (including off-site disposal of Hazardous Materials)
or any Remedial Action with respect thereto in non-compliance or violation of
any Environmental Law;
(j) Borrower has not received any written notice or claim to the effect
that it is or may be liable to any Person as a result of the Release or
threatened Release which could reasonably be expected to have a Material Adverse
Effect;
(k) To the best of Borrower's knowledge and belief after due inquiry,
Borrower has no known liability in connection with any material Release or
material threatened Release which could reasonably be expected to have a
Material Adverse Effect;
(l) After due inquiry, no Environmental Lien has attached (and continues to
attach) to any properties of Borrower, provided that no breach of this Section
11.16(l) shall occur if the same is discharged within thirty days after the
attachment thereof or an appeal or other appropriate proceeding for review
thereof is taken within said thirty day period and/or a stay of execution
pending such appeal is obtained; and
(m) To the Borrower's best knowledge after due inquiry, there have been no
environmental investigations, studies, audits, tests, reviews or other analyses
conducted by or which are in the possession of Borrower in relation to any
violation of Environmental Laws which violation could reasonably be expected to
have a Material Adverse Effect in relation to any properties or facility now or
previously owned or leased by Borrower which have not been made available to
Lender.
SECTION 11.17. SOLVENCY OF THE BORROWER. The Borrower is and after
consummation of the transactions contemplated by this Agreement (including the
making of the Loans and the issuance of Letters of Credit), and after giving
effect to all obligations incurred by the Borrower in connection herewith, will
be, Solvent.
SECTION 11.18. GOVERNMENTAL REQUIREMENTS. The Collateral is in compliance
with all current governmental requirements affecting the said property, except
where failure could not reasonably be expected to have a Material Adverse
Effect.
SECTION 11.19. CORPORATE AUTHORITY OF THE GUARANTOR. The Guarantor is a
corporation duly created, validly existing, and in good standing under the laws
of the state of its incorporation, and is duly qualified and in good standing as
foreign corporation in all other jurisdictions where the failure to qualify
would have an adverse effect upon its ability to perform its obligations under
this Agreement and all Related Documents to which it is a party. The Guarantor
has the corporate power to enter into this Agreement and the Guaranty. The
Guarantor has the power to perform its obligations hereunder and under the Loan
Documents and Related Documents to which it is a party. The making and
performance by the Guarantor of the Loan Documents and Related Documents to
which it is a party have all been duly authorized by all necessary corporate or
company action, and do not and will not violate any provision of any law, rule,
regulation, order, writ, judgment, decree, determination or award presently in
effect having
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applicability to the Guarantor, or the articles of incorporation and bylaws of
the Guarantor. The making and performance by the Guarantor of the Loan Documents
and Related Documents to which it is a party do not and will not result in a
breach of or constitute a default under any material indenture or loan or credit
agreement or any other material agreement or instrument to which the Guarantor
is a party or by which it may be bound or affected, or result in, or require,
the creation or imposition of any mortgage, deed of trust, pledge, lien,
security interest or other charge or encumbrance of any nature (other than as
contemplated by the Related Documents) upon or with respect to any of the
properties now owned or hereafter acquired by the Guarantor, and the Guarantor
is not in default under or in violation of any such order, writ, judgment,
decree, determination, award, indenture, agreement or instrument to the extent
any such default or violation could reasonably be expected to have a Material
Adverse Effect. Each of the Loan Documents and Related Documents to which the
Guarantor is a party constitutes a legal, valid and binding obligation of the
Guarantor, enforceable in accordance with its terms.
SECTION 11.20. CHASE PURCHASE AGREEMENT. As of the date hereof (without
giving effect to any material modifications which may hereafter be made to this
Agreement), (i) the Indebtedness is entitled to the benefits accorded the Senior
Indebtedness (as such term is defined in the Chase Purchase Agreement) and (ii)
the consent of the Investors (as such term is defined in the Chase Purchase
Agreement) is not required for the Borrower's execution of and performance under
this Agreement.
SECTION 11.21. SECURITY AGREEMENT. The Security Agreement constitutes a
first priority security interest affecting one hundred percent (100%) of the
issued and outstanding stock of the Guarantor, and there are no other
Encumbrances affecting the said stock.
SECTION 11.22. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Borrower
understands and agrees that the Lender is relying upon the above representations
and warranties in making the Loans to the Borrower. The Borrower further agrees
that the foregoing representations and warranties shall be true and correct in
all material respects as of the date(s) made or deemed made and shall remain in
full force and effect until such time as the Indebtedness shall be paid in full,
or until this Agreement shall be terminated, whichever is the last to occur.
ARTICLE XII
AFFIRMATIVE COVENANTS
In addition to the covenants contained in the Collateral Documents, which
covenants are hereby ratified and confirmed by the Borrower, the Borrower
covenants and agrees as follows:
SECTION 12.1. FINANCIAL STATEMENTS; OTHER REPORTING REQUIREMENTS. The
Borrower will furnish or cause to be furnished to the Lender:
(a) as soon as available and in any event within one hundred twenty (120)
days following the close of fiscal year of the Borrower, audited
consolidated financial statements of the Borrower consisting of a
balance sheet as at the end of such
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fiscal year and statements of income, and statement of cash flow for
such fiscal year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, certified by
Ernst & Young or such other independent certified public accountants
of recognized standing acceptable to the Lender (such acceptance not
to be unreasonably withheld),
(b) as soon as available and in any event within forty-five (45) days
following the close of each calendar quarter, interim consolidated
financial statements of the Borrower, consisting of a balance sheet as
of the end of such quarter and statements of income and cash flow,
certified as true and correct by the Borrower's chief financial
officer as having been prepared in accordance with GAAP consistently
applied,
(c) upon each submission of the financial statements required by (a) and
(b) above, a compliance certificate signed by the chief financial
officer of the Borrower in the form attached hereto as Exhibit A,
certifying that he has reviewed this Agreement and to the best of his
knowledge no Default or Event of Default has occurred, or if such
Default or Event of Default has occurred, specifying the nature and
extent thereof, that all financial covenants in this Agreement have
been met, and providing a computation of all financial covenants
contained herein, and details of any waivers, amendments, or
modifications of any covenant contained in this Agreement, and said
certificate shall include a schedule of all Hedging Agreements,
(d) as soon as available and in any event within thirty (30) days after
filing, a copy of the Borrower's federal tax returns,
(e) by March 31st of each year, a third party engineering report (at
Borrower's expense) dated as of the preceding December 31 covering oil
and gas properties owned by the Borrower and included or to be
included in the Borrowing Base Amount, in form and substance
reasonably satisfactory to the Lender,
(f) as soon as available and in any event within forty five (45) days
after the end of each quarter, the following reports and data: reports
of production (attributable to oil and gas properties owned by the
Borrower and included or to be included in the Facility A Borrowing
Base Amount), commodity prices, sales revenues, operating expenses for
the Leases evaluated for determination of the Facility A Borrowing
Base Amount, and production taxes, in form and content reasonably
acceptable to the Lender,
(g) as soon as available and in any event by September 30th of each year,
an internally prepared engineering report covering oil and gas
properties owned by the Borrower and included or to be included in the
Facility A Borrowing Base Amount, and dated as of no earlier than the
preceding June 30, in form and content reasonably satisfactory to the
Lender, and
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(i) subject to Section 12.14, such other financial information or other
information concerning the Borrower as the Lender may reasonably
request from time to time.
SECTION 12.2. NOTICE OF DEFAULT; LITIGATION; ERISA MATTERS. The Borrower
will give written notice to the Lender as soon as reasonably possible and in no
event more than five (5) Business Days of (i) the occurrence of any Default or
Event of Default hereunder of which it has knowledge, (ii) the filing of any
actions, suits or proceedings against the Borrower in any court or before any
governmental authority or tribunal of which it has knowledge, which could
reasonably be expected to cause a Material Adverse Effect with respect to the
Borrower, (iii) the occurrence of a reportable event under, or the institution
of steps by the Borrower to withdraw from, or the institution of any steps to
terminate, any employee benefit plan as to which the Borrower may have
liability, or (iv) the occurrence of any other action, event or condition of any
nature of which it has knowledge which could reasonably be expected to cause, or
lead to, or result in, any Material Adverse Effect to the Borrower.
SECTION 12.3. MAINTENANCE OF EXISTENCE, PROPERTIES AND LIENS. The Borrower
will (i) continue to engage in the Subject Business and other business
activities reasonably related to thereto; (ii) maintain its existence and good
standing in each jurisdiction in which it is required to be qualified; (iii)
keep and maintain all franchises, licenses and properties necessary in the
conduct of its business in good order and condition, except to the extent the
failure to do so could not reasonably be expected to cause a Material Adverse
Effect; (iv) duly observe and conform to all material requirements of any
governmental authorities relative to the conduct of its business or the
operation of its properties or assets, except to the extent the failure to do so
could not reasonably be expected to cause a Material Adverse Effect; and (v) the
Borrower will maintain in favor of the Lender a first perfected lien and
security interest in the Collateral, subject only to Permitted Encumbrances and
Designated Title Exceptions.
SECTION 12.4. TAXES. The Borrower shall pay or cause to be paid when due,
all taxes, local and special assessments, and governmental charges of every type
and description, that may from time to time be imposed, assessed and levied
against its properties. The Borrower further agrees to furnish the Lender with
evidence that such taxes, assessments, and governmental and other charges due by
the Borrower have been paid in full and in a timely manner, if such data is
requested by the Lender. Notwithstanding the foregoing, the Borrower may
withhold any such payment or elect to contest any lien if the Borrower is in
good faith conducting an appropriate proceeding to contest the obligation to pay
and so long as the Lender's interest in the Collateral is not jeopardized.
SECTION 12.5. INTENTIONALLY DELETED.
SECTION 12.6 COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower shall comply
with and shall use reasonable commercial efforts to cause all of its employees,
agents, invitees or sublessees (while such Persons are acting within the scope
of their relationship with the Borrower) to (i) comply with all Environmental
Laws with respect to the disposal of Hazardous Materials, (ii) pay immediately
when due the cost of removal of any such Hazardous Materials, and (iii) keep the
Borrower's properties free of any lien imposed pursuant to any Environmental
Laws, provided that no breach of this Section 12.6 shall occur if (a) the same
is discharged within
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thirty (30) days after the Borrower is notified of non-compliance or an appeal
or appropriate proceedings for review thereof is taken within such period and
Borrower is not obligated to comply pending such appeal or other appropriate
proceedings or (b) failure to do so could not reasonably be expected to have a
Material Adverse Effect.
The Borrower shall give notice to the Lender as soon as reasonably possible
and in no event more than five (5) days after it receives any compliance orders,
environmental citations, or other notices from any Governmental Authority
relating to any Environmental Liabilities relating to its properties or
elsewhere which may reasonably be expected to result in a Default of Event of
Default; the Borrower agrees to take any and all reasonable steps, and to
perform any and all reasonable actions necessary or appropriate to promptly
comply with any such citations, compliance orders or Environmental Laws
requiring the Borrower to remove, treat or dispose of such Hazardous Materials,
and, upon Lender's request, to provide the Lender with satisfactory evidence of
such compliance in excess of $500,000; provided, however, that nothing contained
herein shall preclude the Borrower from contesting any such compliance orders or
citations if such contest is made in good faith, appropriate reserves are
established for the payment for the cost of compliance therewith, and the
Lender's security interest in any such property affected thereby (or the
priority thereof) is not jeopardized.
Regardless of whether any Event of Default hereunder shall have occurred
and be continuing, the Borrower (i) releases and waives any present or future
claims against the Lender for indemnity or contribution in the event the
Borrower becomes liable for any Environmental Lien and/or Remedial Action, and
(ii) agrees to defend, indemnify and hold harmless the Lender from any and all
liabilities (including strict liability), actions, demands, penalties, losses,
costs or expenses (including, without limitation, reasonable attorneys fees and
remedial costs), suits, administrative orders, agency demand letters, costs of
any settlement or judgment and claims of any and every kind whatsoever which may
now or in the future (whether before or after the termination of this Agreement)
be paid, incurred, or suffered by, or asserted against the Lender by any person
or entity or governmental agency for, with respect to, or as a direct or
indirect result of, the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, or release from or onto the property of the
Borrower of any Hazardous Materials, regulated by any Environmental Laws,
contamination resulting therefrom, or arising out of, or resulting from, the
environmental condition of such property or the applicability of any
Environmental Laws relating to hazardous materials (including, without
limitation, CERCLA or any so called federal, state or local "super fund" or
"super lien" laws, statute, ordinance, code, rule, regulation, order or decree)
regardless of whether or not caused by or within the control of the Lender (the
costs and/or liabilities described in (i) and (ii) above being hereinafter
referred to as the "Environmental Liabilities"). THE COVENANTS AND INDEMNITIES
CONTAINED IN THIS SECTION 12.6 SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT,
BUT EXCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT ON THE PART OF ANY INDEMNIFIED PARTY; AND, PROVIDED, HOWEVER,
NO RELEASE, WAIVER, DEFENSE OR INDEMNITY SHALL BE AFFORDED UNDER THIS SECTION
12.6 IN RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM THE ACTS OR
OMISSIONS OF THE LENDER OR ITS AGENTS OR
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REPRESENTATIVES DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR
ASSIGNS, OR ITS AGENTS OR REPRESENTATIVES, SHALL HAVE OBTAINED OWNERSHIP,
OPERATION OR POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN LIEU
OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE). ANY CLAIMS UNDER THIS
SECTION 12.6 SHALL BE SUBJECT TO SECTION 15.9.
SECTION 12.7. FURTHER ASSURANCES. The Borrower will, at any time and from
time to time, execute and deliver such further instruments and take such further
action as may reasonably be requested by the Lender, in order to cure any
defects in the execution and delivery of, or to comply with or accomplish the
covenants and agreements contained in this Agreement or the Collateral
Documents.
SECTION 12.8. FINANCIAL COVENANTS. The Borrower shall comply with the
following covenants and ratios:
(a) MINIMUM CURRENT RATIO. The Borrower shall at all times maintain a
minimum Current Ratio of 1.0 to 1.0.
(b) MINIMUM TANGIBLE NET WORTH. The Borrower shall at all times maintain a
minimum Consolidated Tangible Net Worth of $56,000,000.00 plus 100% of
the any increase in shareholder's equity resulting from the sale or
issuance of preferred (to the extent such issuances increase
shareholders equity on a GAAP basis) and common stock in Borrower
subsequent to March 31, 2002, plus 50% of the Borrower's net income
(excluding losses) subsequent to March 31, 2002, excluding the effect
of any cumulative after-tax amounts of ceiling test write-downs
incurred pursuant to Regulation SX4.10 of the Securities and Exchange
Commission subsequent to December 31, 2001.
(c) MINIMUM QUARTERLY DEBT SERVICE COVERAGE RATIO. The Borrower shall
maintain at the end of each quarter a Debt service coverage ratio of
not less than 1.25 to 1.0. For purposes of this covenant, the non-cash
effects, if any, of Hedging Agreements pursuant to SFAS 133 will not
be included, nor will the effect, if any, of ceiling test write-downs
pursuant to Regulation SX4.10 of the Securities and Exchange
Commission be included. Debt service coverage shall be calculated
based on GAAP as follows: the ratio of (a) the difference of (i)
EBITDA for the quarter just ended (excluding EBITDA related to assets
pledged to secure Non-Recourse Indebtedness), minus (ii) permitted
cash dividends paid during the quarter just ended, divided by (b) the
sum of (i) required principal and interest paid in cash on the
Indebtedness during the quarter just ended, plus (ii) all principal
and interest paid in cash on Debt other than the Indebtedness during
the quarter just ended, plus (iii) the positive difference, if any, of
(x) principal and interest paid in cash on Non-Recourse Indebtedness
during the quarter just ended, minus (y) positive EBITDA related to
assets pledged to secure Non-Recourse Indebtedness during the quarter
just ended.
SECTION 12.9. OPERATIONS. The Borrower shall conduct its business affairs
in a reasonable and prudent manner and in compliance with all applicable
federal, state and municipal laws,
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ordinances, rules and regulations respecting its properties, charters,
businesses and operations, including compliance with all minimum funding
standards and other requirements of ERISA of 1974, and other laws applicable to
any employee benefit plans which they may have, except to the extent the failure
to do so could not reasonably be expected to cause a Material Adverse Effect.
SECTION 12.10. CHANGE OF LOCATION. The Borrower shall, within ten (10)
Business Days prior to any such change, notify the Lender in writing of any
proposed change in the location of its chief executive office.
SECTION 12.11. EMPLOYEE BENEFIT PLANS. The Borrower will maintain each
employee benefit plan as to which it may have any liability, in material
compliance with all applicable requirements of law and regulations.
SECTION 12.12. DEPOSIT AND OPERATING ACCOUNTS. The Borrower will maintain
its primary operating and savings accounts with the Lender.
SECTION 12.13. PRODUCTION PROCEEDS. Subject to the terms and conditions of
the Mortgage, the Borrower will cause all production proceeds and revenues
attributable to the Mortgaged Properties to be paid and deposited in the
Borrower's accounts maintained with Lender, and shall not redirect initial
deposit of such proceeds to any other accounts.
SECTION 12.14. FIELD AUDITS; OTHER INFORMATION. Upon reasonable prior
notice, the Borrower shall allow the Lender's employees and agents access to its
books and records and properties during normal business hours to perform field
audits from time to time. The Borrower shall pay all reasonable costs and
expenses associated with such field audits. The Borrower will provide the Lender
with such other information as the Lender may reasonably request from time to
time, subject in all cases to any confidentiality restrictions that may be
applicable to the Borrower and its Subsidiaries and to any confidentiality
restrictions that the Borrower reasonably imposes on the Persons receiving such
information; provided, however, that neither the Borrower nor any of its
Subsidiaries shall be required to disclose to Lender or any agents or
representatives thereof any information which is the subject of attorney-client
privilege or attorney's work product privilege properly asserted by the
applicable Person to prevent the loss of such privilege in connection with such
information; and provided, further, that the Borrower will use commercially
reasonable efforts to furnish such information (excluding information covered by
confidentiality restrictions in agreements relating to seismic, geologic or
geophysical data or similar technical and business matters relating to the
exploration for oil and gas), which requirement shall be satisfied if the Lender
is offered the opportunity to review such confidential information by executing
or otherwise becoming a party to the confidentiality restrictions on
substantially the same terms (including any standstill provisions) as are
applicable to the Borrower.
SECTION 12.15. INSURANCE. The Borrower shall maintain in effect all
insurance required by this Agreement and the Collateral Documents, and the
Borrower agrees to comply with the requirements of Section 11.6. above. The
Borrower agrees to provide the Lender with certificates or binders evidencing
such insurance coverage on an annual basis, and, if requested
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by the Lender, the Borrower further agrees to promptly furnish the Lender with
copies of all renewal notices and copies of receipts for paid premiums. The
Borrower shall provide the Lender with certificates or binders evidencing
insurance coverage pursuant to all renewal or replacement policies of insurance
no later than fifteen (15) days before any such existing policy or policies
should expire.
SECTION 12.16. SUBSIDIARIES. The Borrower agrees that any Subsidiary of the
Borrower formed by or behalf of the Borrower after the date of this Agreement
shall execute a guaranty of the Indebtedness (in a form substantially similar to
the Guaranty).
SECTION 12.17. POST CLOSING REQUIREMENTS. The Borrower agrees that within
ninety (90) days from the execution of this Agreement, the Borrower shall (i)
obtain marital status information for Jean E. Mitchell and Robert W. Irvine as
of June 12, 2000. If either were married on such date, Borrower agrees to obtain
ratification(s) from Jean E. Mitchell and/or Robert W. Irvine's spouse(s) of the
Oil, Gas and Mineral Lease dated June 1, 2002, recorded under Entry No. 920196,
records of Lafourche Parish, Louisiana, to file such ratification(s) in the
public records of Lafourche Parish, Louisiana and to provide certified copies of
the recorded ratifications to the Lender; (ii) obtain a ratification from the
spouse of Phil Bryant, Jr. of the July 23, 2002 assignment in favor of Borrower,
recorded under Entry No. 920198 records of Lafourche Parish, Louisiana; and
(iii) search the public records of Lafourche Parish Louisiana for the time
period March 31, 2002 through May 31, 2002 in the name of Patricia Jones
Edgerton, as Executrix of the Succession of Nettie Marie Jones and to submit any
documents filed of record within that time period to Lender.
ARTICLE XIII
NEGATIVE COVENANTS
In addition to the negative covenants contained in the Collateral
Documents, which covenants are hereby ratified and confirmed by the Borrower,
the Borrower covenants and agrees as follows:
SECTION 13.1. LIMITATIONS ON FUNDAMENTAL CHANGES. Without the prior written
consent of the Lender, the Borrower shall not form any Subsidiary that does not
execute a guaranty of the Indebtedness, nor shall the Borrower consummate any
transaction of merger or consolidation unless the Borrower is the surviving
entity, or liquidate or dissolve itself (or suffer any liquidation or
dissolution).
SECTION 13.2. DISPOSITION OF ASSETS. The Borrower shall not convey, sell,
lease, assign, transfer or otherwise dispose of, any of its property or assets
to which the Lender has included a value in the Facility A Borrowing Base Amount
(whether now owned or hereafter acquired) in excess of $500,000.00 in the
aggregate between any two scheduled semi-annual Facility A Borrowing Base Amount
redeterminations, without first obtaining the Lender's written consent, which
consent will not be withheld provided the Borrower pays in full such portion of
the Total
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Outstandings, if any, that exceeds the Facility A Borrowing Base Amount,
attributable to the proposed asset sale, as determined by Lender in its complete
and sole discretion based on its normal practices and standards for oil and gas
loans.
SECTION 13.3. REPURCHASE OF STOCK; RESTRICTED PAYMENTS. The Borrower shall
not (i) repurchase or redeem for cash any of its common or preferred stock or
(ii) pay any dividends or distributions, without the prior written consent of
the Lender; provided, however, that (a) the Borrower may pay dividends on its
existing Series B Convertible preferred stock and any additional shares of
Series B Convertible preferred stock issued after the date of this Agreement, so
long as no Event of Default exists hereunder at the time of such payment and/or
results from such payment, (b) the Borrower may declare and pay dividends
consisting entirely of capital stock of the Borrower, (c) the Borrower may make
cash payments in lieu of fractional shares in an aggregate amount not exceeding
$100,000, and (d) the Borrower may declare and pay distributions effecting
"poison pill" rights plans provided that any securities or rights so distributed
have a nominal fair market value at the time of declaration.
SECTION 13.4. ENCUMBRANCES; NEGATIVE PLEDGE. The Borrower shall not create,
incur, assume or permit to exist any Encumbrances on any of its property now
owned or hereafter acquired, except for the following (hereinafter referred to
as the "Permitted Encumbrances"):
(a) Encumbrances for taxes, assessments, or other governmental charges not
yet due or which are being contested in good faith by appropriate
action promptly initiated and diligently conducted, if such reserves
as shall be required by GAAP shall have been made therefor;
(b) Encumbrances of landlords, vendors, carriers, warehousemen, mechanics,
laborers, materialmen and other Encumbrances arising by law in the
ordinary course of business for sums either not yet due or being
contested in good faith by appropriate action promptly initiated and
diligently conducted, if such reserve as shall be required by GAAP
shall have been made therefor;
(c) Inchoate liens arising under ERISA to secure the contingent
liabilities, if any, permitted by this Agreement;
(d) Encumbrances created by the Collateral Documents and any other
Encumbrances in favor of the Lender to secure the Indebtedness;
(e) Subject to Section 13.11. below, Encumbrances granted prior to the
date of this Agreement to secure Non-Recourse Indebtedness, and/or
Encumbrances granted after the date of this Agreement to secure
Non-Recourse Indebtedness;
(f) Encumbrances existing on the date hereof and set forth in Schedule
13.4, provided that such Encumbrances shall secure only those
obligations which they secure on the date hereof;
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(g) Pledges and deposits made in the ordinary course of business in
compliance with workmen's compensation, unemployment insurance and
other social security laws or regulations;
(h) Deposits to secure the performance of bids, trade contracts (other
than for Indebtedness), leases (other than capital lease obligations),
statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of
business;
(i) Zoning restrictions, easements, licenses, covenants, conditions,
rights-of-way, restrictions on use of real property and other similar
encumbrances incurred in the ordinary course of business and minor
irregularities of title that, in the aggregate, are not substantial in
amount and do not materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of the business
of the Borrower or any of its Subsidiaries;
(j) Deposits, encumbrances or pledges to secure payments of workmen's
compensation and other payments, public liability, unemployment and
other insurance, old-age pensions or other social security
obligations, or the performance of bids, tenders, leases, contracts
(other than contracts for the payment of money), public or statutory
obligations, surety, stay or appeal bonds, or other similar
obligations arising in the ordinary course of business;
(k) Any Designated Title Exceptions which are incurred in the ordinary
course of business and would not materially adversely affect the
operations of the Borrower or otherwise in the aggregate have a
Material Adverse Effect;
(l) Any Encumbrance securing Purchase Money Debt, provided that, (i) such
security interest is incurred, and the Debt secured thereby is
created, within 180 days after the acquisition (or completion of
construction) of the property or assets subject thereto, (ii) the Debt
secured thereby does not include any other Debt that is not from the
same financing source, (iii) such security interest do not apply to
any other property or assets of the Borrower or any Subsidiary except
any such property or assets which are the subject of any Encumbrance
securing Debt from such financing source, and (iv) such Encumbrance
does not affect any of the Mortgaged Properties included in the
determination of the Facility A Borrowing Base Amount;
(m) Any Encumbrance existing on any property or asset (together with any
receivables, intangibles and proceeds related thereto) prior to the
acquisition thereof by the Borrower or any Subsidiary, provided that
(i) such Encumbrance is not created in contemplation of or in
connection with such acquisition and (ii) such Encumbrance does not
apply to any other property or assets of the Borrower or any
Subsidiary; and provided, further, that (x) such Encumbrances do not
secure any Debt or other obligation not permitted under this
Agreement, and (y)
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such Encumbrances do not affect any of the Mortgaged Properties
included in the determination of the Facility A Borrowing Base Amount;
(n) Encumbrances securing Purchase Money Debt and Capital Lease
Obligations in real property, improvements thereto or equipment
hereafter acquired (or, in the case of improvements, constructed) by
the Borrower or any Subsidiary (together with any receivables,
intangibles and proceeds related thereto), provided that (i) such
security interests secure Debt permitted by Section 13.5(l)(i), (ii)
such security interests are incurred, and the Debt secured thereby is
created, within 180 days after such acquisition (or completion of
construction), (iii) such security interests do not apply to any other
property or assets of the Borrower or any Subsidiary, and (iv) such
security interests do not affect any of the Mortgaged Properties
included in the determination of the Facility A Borrowing Base Amount;
(o) Encumbrances arising out of judgments or awards in respect of which
the Borrower shall in good faith be prosecuting an appeal or
proceedings for review and in respect of which it shall have secured a
subsisting stay of execution pending such appeal or proceedings for
review, provided the Borrower shall have set aside on its books
adequate reserves, in accordance with GAAP, with respect to such
judgment or award;
(p) Encumbrances on the property or assets of any Person existing at the
time such Person becomes a Subsidiary of the Borrower and not incurred
as a result of (or in connection with or in anticipation of) such
Person's becoming a Subsidiary of the Borrower, provided that such
Encumbrances do not extend to or cover any property or assets of the
Borrower or any of its Subsidiaries other than the property or assets
encumbered at the time such Person becomes a Subsidiary of the
Borrower, and provided, further, that (i) such Encumbrances do not
secure any Debt or other obligation not permitted under this
Agreement, and (ii) such Encumbrances do not affect any of the
Mortgaged Properties included in the determination of the Facility A
Borrowing Base Amount; and
(q) Encumbrances securing Debt permitted to be incurred under Section
13.5(j).
SECTION 13.5. DEBTS. The Borrower, without the prior written consent of the
Lender, will not incur, create, assume or in any manner become or be liable in
respect of any Debt, except for:
(a) The Indebtedness;
(b) Trade payables or operating and facility leases from time to time
incurred in the ordinary course of business;
(c) Non-Recourse Indebtedness not to exceed $25,000,000.00 at any time
outstanding;
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(d) Taxes, assessments or other government charges which are not yet due
or are being contested in good faith by appropriate action promptly
initiated and diligently conducted, if such reserve as shall be
required by generally accepted accounting principles shall have been
made therefore;
(e) The indebtedness evidenced by the Subordinated Promissory Notes and
guaranties executed by any Subsidiary of the Borrower guaranteeing
payment thereof;
(f) Indebtedness existing as of the date of this Agreement as set forth in
Schedule 13.5;
(g) Indebtedness arising under any performance bond, or letter of credit
obtained for similar purposes, or any reimbursement obligations in
respect thereof, entered into in the ordinary course of business;
(h) Debt of the Borrower to any wholly owned Subsidiary of the Borrower
and Debt of any wholly owned Subsidiary of the Borrower to the
Borrower or any other wholly owned Subsidiary of the Borrower;
(i) Contingent liability in the aggregate amount of $5,000,000.00
representing the Guarantor's proportionate share of costs and expenses
to be incurred in the performance of RMG's drilling program, as said
drilling program is described in Section 2.1 of the Purchase and Sale
Agreement dated June 29, 2001 between the Guarantor, as Purchaser, and
RMG, as Seller;
(j) Debt represented by Hedging Agreements permitted by this Agreement;
(k) Guaranties by the Borrower of Debt of any Subsidiary and by any
Subsidiary of Debt of the Borrower or any other Subsidiary; and
(l) Subject to a maximum aggregate principal amount at any time
outstanding not in excess of $1,000,000.00, the following: (i)
Purchase Money Debt and Capitalized Lease Obligations; (ii) additional
unsecured Debt; and (iii) Debt of any Person that becomes a Subsidiary
after the date hereof; provided, that such Debt exists at the time
such Person becomes a Subsidiary and is not created in contemplation
of or in connection with such Person becoming a Subsidiary.
SECTION 13.6. INVESTMENTS, LOANS AND ADVANCES. The Borrower will not make
or permit to remain outstanding any loans or advances to or make investments or
acquire an equity interest in any Person, except for:
(a) Direct obligations of, or obligations the principal of and interest on
which are unconditionally guarantied by, the United States of America
(or by any agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America), in each
case maturing within one year from the date of acquisition thereof;
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(b) Investments in commercial paper maturing within 270 days from the date
of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from Standard & Poor's Ratings
Service or from Moody's Investors Service, Inc.;
(c) Investments in certificates of deposit, banker's acceptances,
repurchase agreements and time deposits maturing within one year from
the date of acquisition thereof issued or guaranteed by or placed
with, and money market deposit accounts issued or offered by, any
domestic office of any commercial bank organized under the laws of the
United States of America or any State thereof that has a combined
capital and surplus and undivided profits of not less than
$250,000.000;
(d) Shares of funds registered under the Investment Company Act of 1940,
as amended, that have assets of at least $100,000,000 and invest only
in obligations described in clauses (a) through (c) above to the
extent that such shares are rated by Moody's Investors Service, Inc.
or Standard & Poor's Ratings Service in one of the two highest rating
categories assigned by such agency for shares of such nature;
(e) Loans by the Borrower to the Guarantor and any other Subsidiary of
Borrower that is a guarantor of the Indebtedness and/or capital
contributions and/or investments by the Borrower in the Guarantor and
any other Subsidiary of Borrower that is a guarantor of the
Indebtedness;
(f) Loans or advances to employees in the ordinary course of business in
an aggregate amount to any single employee not in excess of $75,000
(or, if and to the extent such loans or advances shall be used by such
employee for relocation expenses, $100,000) and in an aggregate amount
for all employees of the Borrower and the Subsidiaries not in excess
of $500,000 at any one time outstanding;
(g) Trade credits and accounts arising in the ordinary course of business;
(h) Investments made as a result of the receipt of non-cash consideration
from an asset sale that was made pursuant to and in compliance with
this Agreement;
(i) Investments made in any debtor of the Borrower as a result of the
receipt of stock, obligations or securities in settlement of debts
created in the ordinary course of business and owing to the Borrower
or any of its Subsidiaries;
(j) Investments made pursuant to the requirements of farm-out, farm-in,
joint operating, joint venture or area of mutual interest agreements,
gathering systems, pipelines or other similar or customary
arrangements entered into in the ordinary course of business
(including, without limitation, advances to operators under operating
agreements entered into by Borrower in the ordinary course of
business)
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(provided that any such single investment in excess of $1,000,000
shall be approved by the Board of Directors of the Borrower);
(k) Investments made in connection with the purchase, lease or other
acquisition of all or substantially all of the business, property or
assets of any Person, or capital stock of any Person, or any division,
line of business or business unit of any Person (including, without
limitation, (i) by the merger or consolidation of such Person into the
Borrower or any of its Subsidiaries or by the merger of a Subsidiary
of the Borrower into such Person and (ii) the purchase of proved
reserves); and
(l) Any other investments in any Person having an aggregate fair market
value (measured on the date each such investment was made and without
giving effect to subsequent changes in value), when taken together
with all other investments made pursuant to this clause (l) not to
exceed $1,000,000.
SECTION 13.7. OTHER AGREEMENTS. The Borrower will not enter into any
agreement containing any provision which would be violated or breached by the
performance of its obligations hereunder or under any instrument or document
delivered or to be delivered by it hereunder or in connection herewith; provided
that the Borrower may agree to the redemption or repurchase of its securities
upon a change of control or dissolution, winding-up or liquidation of, or the
merger or sale of substantially all the assets of, the Borrower (provided that
nothing in this Section 13.7 shall permit any action otherwise prohibited by
Sections 13.1 and 13.2 hereof.).
SECTION 13.8. TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
13.8 attached hereto, the Borrower shall not sell or transfer any property or
assets to, or purchase or acquire any property or assets from, or otherwise
engage in any other transactions with, any of its affiliates unless such
transaction is on terms that are no less favorable to the Borrower or such
Subsidiary, as the case may be, than those that could be obtained at the time of
such transaction on an arm's-length basis from a Person who is not an affiliate
and if such transaction involves an amount in excess of $500,000, such
transaction has been approved by a majority of the members of the Board of
Directors of the Borrower having no personal stake in such transaction;
provided, however, that this Section 13.8 (i) shall not apply to transactions
between a Subsidiary and the Borrower or any other Subsidiary, (ii) shall not
prohibit any person serving as an officer, director, employee or consultant of
the Borrower or any Subsidiary from (A) receiving reasonable compensation,
benefits or indemnification in connection with his or her services in such
capacity (except as otherwise included hereby), provided that any such
compensation, benefits or indemnification are approved by a majority of the
disinterested members of the Board of Directors of the Borrower or by the
Compensation Committee of the Borrower, (B) receiving advances for travel or
other business expenses made in the ordinary course of business or (C)
participating in any benefit or compensation plan; and (iii) shall not restrict
the Borrower from repaying to any director or its affiliates when due on its
scheduled maturity dates any indebtedness for borrowed money permitted to be
incurred in accordance with this Agreement.
SECTION 13.9. USE OF REVOLVING LOAN PROCEEDS. The Borrower shall not use
any Revolving Loan proceeds to finance investments in marketable securities.
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SECTION 13.10. COMMODITY TRANSACTIONS. The Borrower shall not enter into
any speculative commodity transactions of any type or Hedging Agreement relating
to the sale of aggregate Hydrocarbons production in excess of seventy-five
percent (75%) of the total volume of such production projected in the most
recent independent engineering report delivered to the Lender pursuant to
Section 12.1(e) or as projected in the most recent internally prepared
engineering report delivered to the Lender pursuant to Section 12.1(g),
whichever is more recent, to come from the Borrower's proved developed producing
reserves during the term of such Hedging Agreement. Notwithstanding the
foregoing, the maximum duration of any permitted Hedging Agreement shall not
exceed twenty-four (24) months. In addition, if Borrower desires to enter into
Hedging Agreements affecting new wells, Borrower agrees to obtain the Lender's
prior written consent to such Hedging Agreements, which consent shall not be
unreasonably withheld.
SECTION 13.11. INTENTIONALLY DELETED.
SECTION 13.12. PAYMENTS ON PERMITTED SUBORDINATED DEBT. The Borrower and
the Lender agree that the Borrower is permitted to pay the Subordinated
Promissory Notes pursuant to the terms of the Chase Purchase Agreement and the
Memorandum, and the Borrower agrees to observe all payment restrictions
applicable to the Subordinated Promissory Notes as set forth in the Chase
Purchase Agreement. Further, the Borrower agrees to exercise (to the maximum
extent permitted by the Chase Purchase Agreement) its right to defer 60% of the
interest accrued on the Subordinated Promissory Notes as provided by Section
3.3(a) of the Chase Purchase Agreement.
ARTICLE XIV
EVENTS OF DEFAULT
SECTION 14.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following shall constitute an Event of Default:
(a) DEFAULT UNDER THE INDEBTEDNESS. Should the Borrower default in the
payment of principal under the Indebtedness of the Borrower to the Lender, or
should the Borrower default in the payment of interest under the Indebtedness of
the Borrower to the Lender within ten (10) days after any such interest payment
is due.
(b) DEFAULT UNDER THIS AGREEMENT. Should the Borrower violate or fail to
comply fully with any of the terms and conditions of, or default under, this
Agreement, and such default not be cured within thirty (30) days of the
occurrence thereof (provided, however, that no cure period shall be available
for a default in the obligation to maintain insurance coverages required
hereby).
(c) DEFAULT UNDER OTHER AGREEMENTS. Should any event of default occur or
exist under any of the Related Documents or should the Borrower and/or the
Guarantor violate, or fail to comply fully with, any terms and conditions of any
of the Collateral Documents or Related Documents, and such default not be cured
within ten (10) days of the occurrence thereof.
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(d) OTHER DEFAULTS IN FAVOR OF THE LENDER. Should the Borrower and/or the
Guarantor default under any other loan, extension of credit, security agreement,
or other obligation in favor of the Lender and fail to cure same in accordance
with any applicable cure periods.
(e) DEFAULT IN FAVOR OF THIRD PARTIES. Should the Borrower or the Guarantor
(i) fail to pay Debt having a principal amount in excess of $100,000 in the
aggregate (other than the amounts referred to in Section 14.1(a)), or any
interest or premium thereon, when due (or, if permitted by the terms of the
relevant document, within any applicable grace period), whether such Debt shall
become due by scheduled maturity, by required prepayment, by acceleration, by
demand or otherwise; or (ii) fail to perform any term, covenant or condition on
its part to be performed under any agreement or instrument evidencing, securing
or relating to Debt having a principal amount in excess of $100,000 in the
aggregate, when required to be performed, and such failure shall continue after
the applicable grace period, if any, specified in such agreement or instrument,
if the effect of such failure is to accelerate, or to permit the holder or
holders of such Debt to accelerate, the maturity of such Debt.
(f) INSOLVENCY. The following occurrences, in addition to the failure or
suspension of the Borrower, shall constitute an Event of Default hereunder:
(i) Filing by the Borrower and/or the Guarantor of a voluntary petition or
any answer seeking reorganization, arrangement, readjustment of its
debts or for any other relief under any applicable bankruptcy act or
law, or under any other insolvency act or law, now or hereafter
existing, or any action by the Borrower and/or the Guarantor
consenting to, approving of, or acquiescing in, any such petition or
proceeding; the application by the Borrower and/or the Guarantor for,
or the appointment by consent or acquiescence of, a receiver or
trustee of the Borrower and/or the Guarantor for all or a substantial
part of the property of the Borrower and/or the Guarantor; the making
by the Borrower and/or the Guarantor, of an assignment for the benefit
of creditors; the inability of the Borrower and/or the Guarantor or
the admission by the Borrower and/or the Guarantor in writing, of its
inability to pay its debts as they mature (the term "acquiescence"
means the failure to file a petition or motion in opposition to such
petition or proceeding or to vacate or discharge any order, judgment
or decree providing for such appointment within sixty (60) days after
the appointment of a receiver or trustee); or
(ii) Filing of an involuntary petition against the Borrower and/or the
Guarantor in bankruptcy or seeking reorganization, arrangement,
readjustment of its debts or for any other relief under any applicable
bankruptcy act or law, or under any other insolvency act or law, now
or hereafter existing and such petition remains undismissed or
unanswered for a period of sixty (60) days from such filing; or the
insolvency appointment of a receiver or trustee of the Borrower and/or
the Guarantor for all or a substantial part of the property of the
Borrower and/or the Guarantor and such appointment remains unvacated
or unopposed for a period of sixty (60) days from such appointment,
execution or similar process against any substantial part of the
property of the Borrower and/or the Guarantor and such
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warrant remains unbonded or undismissed for a period of sixty (60)
days from notice to the Borrower or the Guarantor of its issuance.
(g) DISSOLUTION PROCEEDINGS. Should proceedings for the dissolution or
appointment of a liquidator of the Borrower and/or the Guarantor be commenced.
(h) FALSE STATEMENTS. Should any representation or warranty of the Borrower
made by the Borrower to the Lender in this Agreement or any other Loan Document
or in any certificate or statement furnished thereunder prove to be incorrect or
misleading in any material respect when made or reaffirmed.
Upon the occurrence of an Event of Default, the Commitment will, at the
option of the Lender, either terminate or be suspended (including any obligation
to make any further Revolving Loans), and, at the Lender's option, the Revolving
Note and all Indebtedness of the Borrower will become immediately due and
payable, all without notice of any kind to the Borrower, except that in the case
of type described in the "Insolvency" subsection above, such acceleration shall
be automatic and not optional. Nothing contained in this Article 14 shall be
construed to limit or amend in any way the Events of Default enumerated in the
Revolving Note or any other Loan Document, or any other document executed in
connection with the transaction contemplated herein.
Upon the occurrence and during the continuance of any Event of Default, the
Lender is hereby authorized at any time and from time to time, without notice to
Borrower or Guarantor (any such notice being expressly waived by Borrower and
Guarantor), to set-off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and other indebtedness at any
time owing by any of the Lender to or for the credit or the account of Borrower
against any and all of the indebtedness of Borrower under the Revolving Note and
the Loan Documents, including this Agreement, irrespective of whether or not the
Lender shall have made any demand under the Loan Documents, including this
Agreement or the Revolving Note and although such indebtedness may be unmatured.
Any amount set-off by the Lender shall be applied against the indebtedness owed
the Lender by Borrower pursuant to this Agreement and the Revolving Note. The
Lender agrees promptly to notify Borrower after any such setoff and application,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Lender under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Lender may have.
SECTION 14.2. WAIVERS. Except as otherwise provided for in this Agreement
and by applicable law, the Borrower and the Guarantor waive to the extent
permitted by applicable law (i) presentment, demand and protest and notice of
presentment, dishonor, notice of intent to accelerate, notice of acceleration,
protest, default, nonpayment, maturity, release, compromise, settlement,
extension or renewal of any or all commercial paper, accounts, contract rights,
documents, instruments, chattel paper and guaranties at any time held by the
Lender on which the Borrower and the Guarantor may in any way be liable and
hereby ratify and confirm whatever the Lender may do in this regard, (ii) all
rights to notice and a hearing prior to the Lender's taking possession or
control of, or to the Lender's replevy, attachment or levy upon, the Collateral
or any bond or security which might be required by any court prior to allowing
the Lender to exercise
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any of its remedies, and (iii) the benefit of all valuation, appraisal and
exemption laws. The Borrower and the Guarantor acknowledge that they have been
advised by counsel of their choice with respect to this Agreement, the other
Collateral Documents, and the transactions evidenced by this Agreement and other
Collateral Documents.
SECTION 14.3. NOTICE TO DELTA FARMS LESSORS. Borrower and Guarantor hereby
authorize and direct Lender to provide the lessors of the oil, gas and mineral
leases granted by Delta Farms to the Borrower (the "Delta Farms Lessors") with a
copy of any notice of the occurrence of any Event of Default which Lender may
choose or be required to send to Borrower and/or Guarantor under the Agreement.
Borrower and Guarantor hereby release Lender and hold Lender harmless from any
liability occasioned by the giving of or the failure to give any such notice, it
being understood that Lender shall use its best efforts to provide such notice
to the Delta Farms Lessors, but shall have no obligation or liability to Delta
Farms Lessors for its failure to do so. Under no circumstances shall Delta Farms
Lessors be considered as a third party beneficiary of this Agreement.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1. NO WAIVER; MODIFICATION IN WRITING. No failure or delay on
the part of the Lender in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. No amendment,
modification or waiver of any provision of this Agreement or of the Revolving
Note, nor consent to any departure by the Borrower therefrom, shall in any event
be effective unless the same shall be in writing signed by or on behalf of the
Lender and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No notice to or demand on
the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances.
SECTION 15.2. ADDRESSES FOR NOTICES. All notices and communications
provided for hereunder shall be in writing and, shall be mailed, by certified
mail, return receipt requested, or delivered as set forth below unless any
person named below shall notify the others in writing of another address, in
which case notices and communications shall be mailed, by certified mail, return
receipt requested, or delivered to such other address.
If to the Lender
Hibernia National Bank
213 W. Vermilion Street
Lafayette, LA 70502
Attn: David Reid
If to the Borrower:
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Carrizo Oil & Gas , Inc.
14701 St. Mary's Lane
Suite 800
Houston, TX 77079
Attn: Frank A. Wojtek
With a copy of any notice of an Event of Default which is sent to Borrower
also being sent contemporaneously therewith to:
Patricia Jones Edgerton, et al
c/o Ethan A. Miller
202 East High Street
P.O. Box 1285
Charlottesville, VA 22902
If to the Guarantor:
CCBM, Inc.
14701 St. Mary's Lane
Suite 800
Houston, TX 77079
Attn: Frank A. Wojtek
SECTION 15.3. FEES AND EXPENSES. The Borrower agrees to pay all reasonable
out of pocket fees, costs and expenses of the Lender in connection with the
preparation, execution and delivery of this Agreement, and all Related Documents
to be executed in connection herewith and subsequent modifications or amendments
to any of the foregoing, including without limitation, the reasonable fees and
disbursements of counsel to the Lender, and to pay all costs and expenses of the
Lender in connection with the enforcement of this Agreement, the Revolving Note
or the other Related Documents, including reasonable legal fees and
disbursements arising in connection therewith. The Borrower also agrees to pay,
and to save the Lender harmless from any delay in paying stamp and other similar
taxes, if any, which may be payable or determined to be payable in connection
with the execution and delivery of this Agreement, the Revolving Note, the other
Related Documents, or any modification thereof.
SECTION 15.4. SECURITY INTEREST AND RIGHT OF SET-OFF. The Lender shall have
a continuing security interest in, as well as the right to set-off the
obligations of the Borrower hereunder against, all funds which the Borrower may
maintain on deposit with the Bank (with the exception of funds deposited in the
Borrower's accounts in trust for third parties or funds deposited in pension
accounts, IRA's, Keogh accounts and All Saver Certificates), and the Lender
shall have a lien upon and a security interest in all property of the Borrower
in the Lender's possession or control which shall secure the Indebtedness of the
Borrower to the Lender under this Agreement and the Revolving Note.
Page 51 of 56
SECTION 15.5. WAIVER OF MARSHALING. The Borrower and the Guarantor shall
not at any time hereafter assert any right under any law pertaining to
marshaling (whether of assets or liens) and the Borrower and the Guarantor
expressly agree that the Lender may execute or foreclose upon the Collateral in
such order and manner as the Lender, in its sole discretion, deems appropriate.
SECTION 15.6. GOVERNING LAW. This Agreement and the Revolving Note shall be
deemed to be contracts made under the laws of the State of Louisiana and for all
purposes shall be governed by and construed in accordance with the laws of said
State.
SECTION 15.7. CONSENT TO LOAN PARTICIPATION. The Borrower and the Guarantor
agree and consent to any Lender's sale or transfer, whether now or later, of one
or more participation interests in the Indebtedness of the Borrower arising
pursuant to this Agreement to one or more purchasers, whether related or
unrelated to the Lender. The Lender may provide, subject to the confidentiality
requirements of Section 15.14, to any one or more purchasers, or potential
purchasers, any information or knowledge such Lender may have about the
Borrower, the Guarantor or about any other matter relating to such Indebtedness.
The Borrower and the Guarantor also agree that the purchasers of any such
participation interest will be considered as the absolute owners of such
interests in such Indebtedness. In addition, any sale of a participation
interest in the Indebtedness prior to the occurrence of an Event of Default will
require the Borrower's consent, which consent shall not be unreasonably
withheld.
SECTION 15.8. CONSENT TO SYNDICATION. The Borrower and the Guarantor
understand and acknowledge that the Lender may syndicate the Loans to one or
more other lending institutions. The Borrower and the Guarantor consent, subject
to the confidentiality requirements of Section 15.14 below, to the Lender's
distribution to interested lending institutions of all financial information and
other data in Lender's possession concerning Borrower and the Guarantor,
including data prepared by or for Borrower and the Guarantor, so that the
interested lending institution(s) may evaluate the Loans and the Collateral. The
Lender will provide notice to the Borrower of the lending institutions that are
distributed financial data concerning Borrower and the Guarantor. The Borrower
and the Guarantor agree to enter into an amendment or restatement of this
Agreement and any of the Related Documents in order to facilitate such
syndication; provided, however, any syndication prior to the occurrence of an
Event of Default will require the Borrower's consent, which consent shall not be
unreasonably withheld. In addition, the Lender is expressly authorized to seek
additional lending institutions to become a lender hereunder to fund any
increase to the Facility A Borrowing Base Amount and/or the Facility B Borrowing
Base Amount.
SECTION 15.9. INDEMNITY.
(a) Subject to the limitations set forth in Section 12.6 as to matters
addressed therein, the Borrower and the Guarantor agree to indemnify and hold
harmless the Lender and its officers, employees, agents, attorneys and
representatives (singularly, an "Indemnified Party", and collectively, the
"Indemnified Parties") from and against any loss, cost, liability, damage or
expense (including the reasonable fees and out-of-pocket expenses of counsel to
the Lender, including all local counsel hired by such counsel) ("Claim")
incurred by the Lender in investigating or preparing for, defending against, or
providing evidence, producing documents or
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taking any other action in respect of any commenced or threatened litigation,
administrative proceeding or investigation under any federal securities law,
federal or state environmental law, or any other statute of any jurisdiction, or
any regulation, or at common law or otherwise, which is alleged to arise out of
or is based upon any acts, practices or omissions or alleged acts, practices or
omissions of Borrower and the Guarantor, or its or their agents or arises in
connection with the duties, obligations or performance of the Indemnified
Parties in negotiating, preparing, executing, accepting, keeping, completing,
countersigning, issuing, selling, delivering, releasing, assigning, handling,
certifying, processing or receiving or taking any other action with respect to
the Loan Documents and all documents, items and materials contemplated thereby
even if any of the foregoing arises out of an Indemnified Party's ordinary
negligence. The indemnity set forth herein shall be in addition to any other
obligations or liabilities of Borrower and the Guarantor to the Lender hereunder
or at common law or otherwise, and shall survive any termination of this
Agreement, the expiration of the Revolving Loans and the payment of all
indebtedness of Borrower to the Lender hereunder and under the Revolving Note,
provided that Borrower and the Guarantor shall have no obligation under this
Section to the Indemnified Parties with respect to any of the foregoing arising
out of the gross negligence or willful misconduct of the Indemnified Parties. If
any Claim is asserted against any Indemnified Party, the Indemnified Party shall
endeavor to notify Borrower and the Guarantor of such Claim (but failure to do
so shall not affect the indemnification herein made except to the extent of the
actual harm caused by such failure). The Indemnified Party shall have the right
to employ, at Borrower's expense, counsel of the Indemnified Parties' choosing
and to control the defense of the Claim. The Borrower or Guarantor may at
its/their own expense also participate in the defense of any Claim. Each
Indemnified Party may employ separate counsel in connection with any Claim to
the extent such Indemnified Party believes it reasonably prudent to protect such
Indemnified Party. THE PARTIES INTEND FOR THE PROVISIONS OF THIS SECTION TO
APPLY TO AND PROTECT EACH INDEMNIFIED PARTY FROM THE CONSEQUENCES OF ANY
LIABILITY INCLUDING STRICT LIABILITY IMPOSED OR THREATENED TO BE IMPOSED ON
INDEMNIFIED PARTY AS WELL AS FROM THE CONSEQUENCES OF ITS OWN NEGLIGENCE,
WHETHER OR NOT THAT NEGLIGENCE IS THE SOLE, CONTRIBUTING, OR CONCURRING CAUSE OF
ANY CLAIM.
(b) No Indemnified Party may settle any claim to be indemnified without the
consent of the indemnitor, such consent not to be unreasonably withheld;
provided, that the indemnitor may not reasonably withhold consent to any
settlement that an Indemnified Party proposes, if the indemnitor does not have
the financial ability to pay all its obligations outstanding and asserted
against the indemnitor at that time, including, without limitation, the maximum
potential claims pending or to the knowledge of the indemnitee threatened
against the Indemnified Party to be indemnified pursuant to this Section 15.9.
SECTION 15.10. MAXIMUM INTEREST RATE. Regardless of any provisions
contained in this Agreement or in any other documents and instruments referred
to herein, the Lender shall never be deemed to have contracted for or be
entitled to receive, collect or apply as interest on the Revolving Note any
amount in excess of the Maximum Rate, and in the event Lender ever receives,
collects or applies as interest any such excess, of if an acceleration of the
maturity of the Revolving Note or if any prepayment by Borrower results in
Borrower having paid any interest in excess of the Maximum Rate, such amount
which would be excessive interest shall be applied to the reduction of the
unpaid principal balance of the Revolving Note for which such excess was
Page 53 of 56
received, collected or applied, and, if the principal balance of the Revolving
Note is paid in full, any remaining excess shall forthwith be paid to Borrower.
All sums paid or agreed to be paid to the Lender for the use, forbearance or
detention of the indebtedness evidenced by the Revolving Note and/or this
Agreement shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
until payment in full so that the rate or amount of interest on account of such
indebtedness does not exceed the Maximum Rate. In determining whether or not the
interest paid or payable under any specific contingency exceeds the Maximum Rate
of interest permitted by law, Borrower and the Lender shall, to the maximum
extent permitted under applicable law, (i) characterize any non-principal
payment as an expense, fee or premium, rather than as interest; and (ii) exclude
voluntary prepayments and the effect thereof; and (iii) compare the total amount
of interest contracted for, charged or received with the total amount of
interest which could be contracted for, charged or received throughout the
entire contemplated term of the Revolving Note at the Maximum Rate.
SECTION 15.11. WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION.
(a) THE BORROWER, THE GUARANTOR, AND THE LENDER HEREBY WAIVE TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER, THE GUARANTOR, AND THE LENDER
MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (i) THE REVOLVING
NOTE, (ii) THIS AGREEMENT, (iii) THE COLLATERAL DOCUMENTS OR (iv) THE
COLLATERAL. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF
TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS,
INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS
WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWER, THE
GUARANTOR, AND THE LENDER, AND THE BORROWER AND THE LENDER HEREBY REPRESENT THAT
NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE
BORROWER, THE GUARANTOR, AND THE LENDER EACH FURTHER REPRESENT THAT IT HAS BEEN
REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD
THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
(b) THE BORROWER AND THE GUARANTOR HEREBY IRREVOCABLY CONSENT TO THE
JURISDICTION OF THE STATE COURTS OF LOUISIANA AND THE FEDERAL COURTS IN
LOUISIANA AND AGREES THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR BROUGHT TO
ENFORCE THE PROVISIONS OF THE REVOLVING NOTE, THIS AGREEMENT AND/OR THE
COLLATERAL DOCUMENTS MAY BE BROUGHT IN ANY COURT HAVING SUBJECT MATTER
JURISDICTION.
SECTION 15.12. SEVERABILITY. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances.
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If feasible, any such offending provision shall be deemed to be modified to be
within the limits of enforceability or validity; however, if the offending
provision cannot be so modified, it shall be stricken and all other provisions
of this Agreement in all other respects shall remain valid and enforceable.
SECTION 15.13. HEADINGS. Article and Section headings used in this
Agreement are for convenience only and shall not affect the construction of this
Agreement.
SECTION 15.14. CONFIDENTIALITY. For the purposes of this Section 15.14,
"CONFIDENTIAL INFORMATION" means information delivered to Lender by or on behalf
of the Borrower or any Subsidiary in connection with the transactions
contemplated by or otherwise pursuant to this Agreement (including, without
limitation, any information regarding the transactions contemplated hereby
provided prior to the date of this Agreement), provided that such term does not
include information that (a) was publicly known or otherwise known to Lender
prior to the time of such disclosure, (b) subsequently becomes publicly known
through no act or omission by Lender or any Person acting on its behalf, or (c)
otherwise becomes known to Lender other than through disclosure by the Borrower
or any Subsidiary. Lender will maintain the confidentiality of such Confidential
Information in accordance with Lender's standard procedures to protect
confidential information of third parties delivered to Lender, provided that
Lender may deliver or disclose Confidential Information to (i) its directors,
officers, employees, agents, attorneys and affiliates, (ii) its financial
advisors and other professional advisors who are made aware of the confidential
nature of such information, (iii) any other holder of the Note, (iv) any Person
to which Lenders sells or offers to sell the Notes or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this Section
15.14), (v) any federal or state regulatory authority having jurisdiction over
Lender, (vi) the National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires access to
information about its investment portfolio, or (vii) any other Person to which
such delivery or disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable to Lender, (x) in
response to any subpoena or other legal process, (y) in connection with any
litigation to which Lender is a party or an Event of Default has occurred and is
continuing, to the extent Lender may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or the protection
of the rights and remedies under this Agreement and the other Loan Documents.
Each holder of the Note or an interest therein, by its acceptance of the Note or
an interest therein, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 15.14 as though it were a party to this
Agreement.
(The remainder of this page was intentionally left blank.)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
CARRIZO OIL & GAS, INC.
A TEXAS CORPORATION
By:
-------------------------------------
Name: Frank Wojtek
Title: Vice President and Chief
Financial Officer
GUARANTOR:
CCBM, INC.
A DELAWARE CORPORATION
By:
-------------------------------------
Name: Frank Wojtek
Title: Vice President and Chief
Financial Officer
LENDER:
HIBERNIA NATIONAL BANK
By:
-------------------------------------
Name: David R. Reid
Title: Senior Vice President
Page 56 of 56
EXHIBIT A
COMPLIANCE CERTIFICATE
-----------------------------
Date
Mr. David Reid
Senior Vice President
Hibernia National Bank
P. O. Box 3847
Lafayette, LA 70502
Dear Mr. Reid:
This Compliance Certificate is submitted pursuant to the requirements of
that certain Amended and Restated Credit Agreement (the "Credit Agreement")
dated December 12, 2002, by and among Carrizo Oil & Gas, Inc. (the "Borrower"),
CCBM, Inc. (the "Guarantor"), and Hibernia National Bank (the "Lender").
Under the appropriate paragraphs of the Credit Agreement, we certify that,
to the best of our knowledge and belief, no condition, event, or act which, with
or without notice or lapse of time or both, would constitute an event of default
under the terms of the Credit Agreement, has occurred during the 3 month period
ending ______________________ (the "Reporting Period"). Also, to the best of our
knowledge, the Borrower has complied with all provisions of the Credit
Agreement.
Additionally, the Borrower submits the following financial information for
the Reporting Period in accordance with the financial covenants and ratios
contained in the Credit Agreement.
<Table>
I. MINIMUM CURRENT RATIO
Total Consolidated Current Assets (including
the available portion under the Facility A
Borrowing Base Amount and the Facility B
Borrowing Base Amount, but excluding the
effects, if any, of Hedging Agreements,
pursuant to SFAS No. 13)........................... $
----------
Total Consolidated Current Liabilities
(excluding principal amounts due under the
Commitment) ....................................... $
----------
Current Ratio........................................ to
-------- --------
MINIMUM CURRENT RATIO REQUIRED....................... 1.0 TO 1.0
-------- --------
</Table>
1
<Table>
II. MINIMUM CONSOLIDATED TANGIBLE NET WORTH
(a) Consolidated Shareholders' Equity (GAAP Basis).......................$
(b) Less Intangible Assets (net of depreciation and amortization).......($ )
--------------
(c) Actual Consolidated Tangible Net Worth (a minus b)...................$
(d) Required Base Amount.................................................$ 56,000,000.00
(e) + Plus 100% of any increase in shareholders' equity (GAAP basis)
resulting from sale of common and preferred stock
subsequent to 3-31-02................................................$
(f) + Plus 50% of net earnings (excluding losses) occurring subsequent
to 3-31-02...........................................................$
(g) Add back the cumulative after-tax amount of ceiling test
write downs incurred pursuant to Reg. SX4.10 of
the SEC subsequent to 12-31-01.......................................$
Required Consolidated Tangible Net Worth (d), plus (e) and (f) and (g)...$
--------------
III. MINIMUM QUARTERLY DEBT SERVICE COVERAGE RATIO(1)
(a) Consolidated EBITDA for the Reporting Period.........................$
--------------
(b) Less Amount of EBITDA related to assets pledged to
secure Non-Recourse Indebtedness....................................($ )
--------------
(c) Difference (a-b).....................................................$
--------------
(d) Less permitted cash dividends paid during the
Reporting Period.....................................................$
--------------
(e) Adjusted EBITDA-Difference (c) minus (d).............................$
==============
(f) Required principal and interest paid in cash on Indebtedness
during the Reporting Period..........................................$
--------------
(g) Principal and interest paid in cash on Debt (other than the
Indebtedness) during the Reporting Period............................$
--------------
(h) Positive difference, if any, of (x) principal and interest paid in cash on
Non-Recourse Indebtedness during the Reporting
Period ..........................................(x) $
--------------
minus (y) positive EBITDA related to assets pledged to secure
Non-Recourse Indebtedness during the Reporting
Period...........................................(y) $ ..$
-------------- --------------
(i) Adjusted Debt Service-Sum of (f) + (g) + (h).........................$
==============
Ratio (e) / (i).......................................................... to
--------------
MINIMUM QUARTERLY DEBT SERVICE COVERAGE RATIO REQUIRED................... 1.25 TO 1.0
------ ------
</Table>
Signature Page for Compliance Certificate.
- --------
(1) For purposes of this covenant, the non-cash effects, if any, of Hedging
Agreements pursuant to SFAS No. 133 will not be included, nor will the
effect, if any, of ceiling test write-downs pursuant to Reg. SX4.10 of the
SEC.
2
Sincerely,
CARRIZO OIL & GAS, INC.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
3
EXHIBIT "B"
REQUEST FOR ADVANCE
TO: Hibernia National Bank
ATTN: Mr. David Reid
RE: Amended and Restated Credit Agreement dated as of December
12, 2002 among Carrizo Oil & Gas, Inc., CCBM, Inc., and
Hibernia National Bank (the "Credit Agreement")
Pursuant to the Credit Agreement, Carrizo Oil & Gas, Inc. (the "Borrower")
hereby requests an Advance on the Commitment. Said Advance shall be in the
amount of $__________________. The borrowing date is ______________. The Advance
shall be (i) under Facility A _____ or under Facility B _____, and (ii) a Base
Rate Loan ____ or a Eurodollar Loan _____. (If Eurodollar Loan please state
requested Interest Period ______________ months).
The Borrower certifies that as of the date hereof: (a) the Borrower and the
Guarantor are in compliance with all conditions and requirements of the Credit
Agreement; and (b) no condition, event, or act exists which, with or without
notice or lapse of time or both, would constitute an Event of Default under the
Credit Agreement.
CARRIZO OIL & GAS, INC.,
a Texas corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
4