EXHIBIT 10.1
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
September 30, 2004
By and Among
CARRIZO OIL & GAS, INC.,
a Texas corporation
as Borrower
CCBM, INC.,
a Delaware corporation
as Guarantor
and
HIBERNIA NATIONAL BANK,
as Agent
UNION BANK OF CALIFORNIA, N.A.,
as Co-Agent
and
HIBERNIA NATIONAL BANK
and
UNION BANK OF CALIFORNIA, N.A.
as Lenders
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Table of Contents
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS..........................................................................1
Section 1.1. Defined Terms.......................................................................1
Section 1.2. Accounting Terms....................................................................18
ARTICLE II
LINE OF CREDIT LOAN COMMITMENT............................................................................18
Section 2.1. The Line of Credit..................................................................18
Section 2.2. The Borrowing Base Amounts..........................................................18
Section 2.3. Facility Loans......................................................................19
Section 2.4. Hedge Commitment....................................................................21
ARTICLE III
NOTES EVIDENCING THE LOANS................................................................................23
Section 3.1. Notes...............................................................................23
ARTICLE IV
INTEREST RATES............................................................................................25
Section 4.1. Options.............................................................................25
Section 4.2. Interest Rate Determination.........................................................26
Section 4.3. Conversion Option...................................................................26
ARTICLE V
CHANGE OF CIRCUMSTANCES...................................................................................26
Section 5.1. Unavailability of Funds or Inadequacy of Pricing....................................26
Section 5.2. Change in Laws......................................................................26
Section 5.3. Increased Cost or Reduced Return....................................................27
Section 5.4. Breakage Costs......................................................................28
Section 5.5. Discretion of Lender as to Manner of Funding........................................29
ARTICLE VI
FEES .................................................................................................29
Section 6.1. Facility Fees.......................................................................29
Section 6.2. Unused Fees.........................................................................30
Section 6.3. Letter of Credit Fee................................................................30
Section 6.4. Engineering Fee.....................................................................30
ARTICLE VII
CERTAIN GENERAL PROVISIONS................................................................................30
Section 7.1. Payments............................................................................30
Section 7.2. No Offset, etc......................................................................30
Section 7.3. Principal Amount of Each Note.......................................................31
Section 7.4. Rate Management Transactions........................................................31
Section 7.5. Calculation of Fees.................................................................31
ARTICLE VIII
PREPAYMENTS...............................................................................................31
Section 8.1. Voluntary Prepayments...............................................................31
Section 8.2. Mandatory Prepayment Resulting from a Quarterly Reduction...........................31
Section 8.3. Mandatory Prepayment Resulting from Overadvances....................................31
ARTICLE IX
SECURITY FOR THE INDEBTEDNESS.............................................................................32
Section 9.1. Security............................................................................32
ARTICLE X
CONDITIONS PRECEDENT......................................................................................32
Section 10.1. Conditions Precedent to all Facility Loans.........................................32
Section 10.2. Condition Precedent Concerning Secured Subordinated Debt...........................34
Section 10.3. Condition Precedent to Effectiveness of this Agreement.............................34
ARTICLE XI
REPRESENTATIONS AND WARRANTIES............................................................................34
Section 11.1. Corporate Authority of the Borrower................................................34
Section 11.2. Financial Statements...............................................................35
Section 11.3. Title to Mortgaged Properties......................................................35
Section 11.4. Litigation.........................................................................36
Section 11.5. Approvals..........................................................................36
Section 11.6. Required Insurance.................................................................37
Section 11.7. Licenses...........................................................................37
Section 11.8. Adverse Agreements.................................................................37
Section 11.9. Default or Event of Default........................................................37
Section 11.10. Employee Benefit Plans............................................................37
Section 11.11. Investment Company Act............................................................37
Section 11.12. Public Utility Holding Company Act................................................37
Section 11.13. Regulations X, T and U............................................................37
Section 11.14. Location of Offices and Records...................................................37
Section 11.15. Information.......................................................................37
Section 11.16. Environmental Matters.............................................................38
Section 11.17. Solvency of the Borrower..........................................................40
Section 11.18. Governmental Requirements.........................................................40
Section 11.19. Corporate Authority of the Guarantor..............................................40
Section 11.20. Securities Purchase Agreement.....................................................40
Section 11.21. Security Agreement................................................................41
Section 11.22. Securities Purchase Agreement...................................................41
Section 11.23. Survival of Representations and Warranties........................................41
ARTICLE XII
AFFIRMATIVE COVENANTS.....................................................................................41
Section 12.1. Financial Statements; Other Reporting Requirements.................................41
Section 12.2. Notice of Default; Litigation; ERISA Matters.......................................42
Section 12.3. Maintenance of Existence, Properties and Liens.....................................43
Section 12.4. Taxes..............................................................................43
Section 12.5. Intentionally Deleted..............................................................43
Section 12.6. Compliance with Environmental Laws.................................................43
Section 12.7. Further Assurances.................................................................44
Section 12.8. Financial Covenants................................................................44
Section 12.9. Operations.........................................................................45
Section 12.10. Change of Location................................................................46
Section 12.11. Employee Benefit Plans............................................................46
Section 12.12. Deposit and Operating Accounts....................................................46
Section 12.13. Production Proceeds...............................................................46
Section 12.14. Field Audits; Other Information...................................................46
Section 12.15. Insurance.........................................................................46
Section 12.16. Subsidiaries......................................................................47
Section 12.17. Post Closing Requirements.........................................................47
ARTICLE XIII
NEGATIVE COVENANTS........................................................................................47
Section 13.1. Limitations on Fundamental Changes.................................................47
Section 13.2. Disposition of Assets..............................................................47
Section 13.3. Repurchase of Stock; Restricted Payments...........................................48
Section 13.4. Encumbrances; Negative Pledge......................................................48
Section 13.5. Debts..............................................................................50
Section 13.6. Investments, Loan and Advances.....................................................52
Section 13.7. Other Agreements...................................................................53
Section 13.8. Transactions with Affiliates.......................................................53
Section 13.9. Use of Facility Loan Proceeds......................................................54
Section 13.10. Commodity Transactions............................................................54
Section 13.11. Payments on Secured Subordinated Debt.............................................54
Section 13.12. Payments on Permitted Subordinated Promissory Notes ..............................54
ARTICLE XIV
EVENTS OF DEFAULT.........................................................................................55
Section 14.1. Events of Default..................................................................55
Section 14.2. Waivers............................................................................57
Section 14.3. Notice to Delta Farms Lessors......................................................57
ARTICLE XV
THE AGENT AND THE LENDERS.................................................................................58
Section 15.1. Appointment and Authorization......................................................58
Section 15.2. Note Holders.......................................................................59
Section 15.3. Consultation with Counsel..........................................................59
Section 15.4. Documents..........................................................................59
Section 15.5. Resignation or Removal of Agent....................................................59
Section 15.6. Responsibility of Agent............................................................59
Section 15.7. Independent Investigation..........................................................61
Section 15.8. Indemnification....................................................................61
Section 15.9. Benefit of Article XV..............................................................61
Section 15.10. Pro Rata Treatment................................................................61
Section 15.11. Assumption as to Payments.........................................................62
Section 15.12. Other Financings..................................................................62
Section 15.13. Interests of the Lenders..........................................................62
Section 15.14. Investments.......................................................................62
ARTICLE XVI
MISCELLANEOUS.............................................................................................63
Section 16.1. No Waiver; Modification in Writing.................................................63
Section 16.2. Addresses for Notices..............................................................63
Section 16.3. Fees and Expenses..................................................................64
Section 16.4. Security Interest and Right of Set-off.............................................65
Section 16.5. Waiver of Marshaling...............................................................65
Section 16.6. Governing Law......................................................................65
Section 16.7. Consent to Loan Participation......................................................65
Section 16.8. Consent to Syndication.............................................................65
Section 16.9. Permitted Assignment...............................................................66
Section 16.10. Indemnity.........................................................................66
Section 16.11. Maximum Interest Rate.............................................................67
Section 16.12. Waiver of Jury Trial; Submission to Jurisdiction..................................68
Section 16.13. Severability......................................................................68
Section 16.14. Headings..........................................................................69
Section 16.15. Confidentiality...................................................................69
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
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT (the "Agreement") dated
as of September 30, 2004, is by and among CARRIZO OIL & GAS, INC., a Texas
corporation (the "Borrower"), CCBM, INC., a Delaware corporation (the
"Guarantor"), the LENDERS, HIBERNIA NATIONAL BANK, a national banking
association, individually as a Lender and as Administrative Agent, and UNION
BANK OF CALIFORNIA, N.A., a national banking association, as Co-Agent.
R E C I T A L S:
1. The Borrower, the Guarantor, and Hibernia National Bank are the parties
to that certain Amended and Restated Credit Agreement dated as of December 12,
2002, as amended by that certain First Amendment thereto dated as of June 13,
2003, and by that certain Second Amendment dated as of June 11, 2004 (as so
amended, the "Original Agreement"), wherein Hibernia extended to the Borrower a
Revolving Line of Credit in the maximum aggregate principal amount of
$30,000,000.00.
2. Hibernia National Bank, with the consent of the Borrower and the
Guarantor, has syndicated, increased, and restructured the credit facilities
provided for in the Original Agreement.
3. The Lenders, the Borrower, and the Guarantor, subject to the terms and
conditions of this Agreement, have agreed to 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, the Agent, and the Lenders 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 each of the
Lenders hereunder.
"AGENT" shall mean Hibernia National Bank in its capacity as
contractual, administrative, and collateral representative of the
Lenders pursuant to Article XV, and not in its individual capacity as
a Lender, and any successor Agent appointed pursuant to Article XV.
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"AGREEMENT" shall mean this Second 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 any of the Lenders, such rate to be adjusted
automatically on and as of the effective date of any change in such
Base Rate.
"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
Line of Credit is greater than or equal to 90%; or
(ii) 0.000% whenever the Facility A Borrowing Base Usage under
the 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.
"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.
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"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 payment of the Indebtedness
(or any part thereof) of the Borrower to the Lenders under this
Agreement and the Notes.
"COMMITMENTS" shall mean collectively the Line of Credit Loan
Commitment of each Lender.
"COMMITMENT PERCENTAGE" shall mean for each Lender the percentage set
beside its name below or specified in connection with an assignment
made pursuant to Section 16.9 hereof.
"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 (excluding assets of Unrestricted
Subsidiaries), 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 non-cash 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 liabilities of
Unrestricted Subsidiaries), excluding outstanding principal amounts
due under the Commitments, determined in accordance with GAAP. Current
liabilities will not include (i) the effects, if any, of Hedging
Agreements pursuant to SFAS No. 133, (ii) outstanding principal
amounts due under the Line of Credit, and (iii) the non-cash effects,
if any, of the non-cash stock option re-pricing accrual.
"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.
3
"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.
"DEFAULTING LENDER" is used herein as defined in Section 3.1.4 hereof.
"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 (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 (excluding
earnings of Unrestricted Subsidiaries) 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. EBITDA
shall not include the non-cash effects, if any, of the non-cash stock
option re-pricing expense.
"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.
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"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 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. ss.ss. 9601 et seq., as amended, the Resource
Conservation and Recovery Act, 42 U.S.C. ss.ss. 6901 et seq., as
amended, the Hazardous Materials Transportation Act, 49 U.S.C. ss.ss.
1801 et seq., as amended, the Clean Water Act, 33 U.S.C. ss.ss. 1251
et seq., as amended, the Toxic Substances Control Act, 15 U.S.C.
ss.ss. 2601 et seq., as amended, the Clean Air Act, 42 U.S.C. ss.ss.
7401 et seq., as amended, the federal Water Pollution Control Act, 33
U.S.C. ss. 1251 et seq., as amended, the Safe Drinking Water Act, 42
U.S.C. ss.ss. 300f et seq., as amended, the Atomic Energy Act, 42
U.S.C. ss.ss. 2011 et seq., as amended, the Natural Gas Pipeline
Safety Act of 1968, 49 U.S.C. ss. 1671 et seq., as amended, the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.C.S. ss.ss.
136 et seq., as amended, and the Occupational Safety and Health Act,
29 U.S.C. ss.ss. 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
5
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 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.
6
"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 Line of Credit is greater than or equal to 90%;
(ii) 2.000% per annum whenever the Facility A Borrowing Base
Usage under the 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 Line of Credit is less than 50%.
"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 Agent from an alternate,
substantially similar independent source available to the Agent or
shall be calculated by the Agent 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 senior secured reducing line of credit to
the Borrower under the Line of Credit, subject at all times to the
Facility A Borrowing Base Amount then in effect.
"FACILITY A BORROWING BASE AMOUNT" shall mean the amount available to
Borrower at any time based upon the valuation of the Mortgaged
Properties, projected oil and gas prices, underwriting factors, and
any other factors deemed relevant by the Required Lenders in their
sole and complete discretion, all as evaluated and determined by the
Required Lenders in their sole and complete discretion on a
semi-annual basis on November 1 and May 1. In addition, the Required
Lenders, in their 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 Required Lenders shall promptly
thereafter perform) one Facility A Borrowing Base Amount
redetermination after each scheduled semi-annual redetermination by
the Required Lenders. The Facility A Borrowing Base Amount also is
subject to mandatory Quarterly Reductions. The Required Lenders are
not obligated under any circumstances to establish the Facility A
Borrowing Base Amount based solely
7
on oil and gas valuation data for the Mortgaged Properties. The
Facility A Borrowing Base Amount as of the date of this Agreement is
$28,000,000.00. All of the foregoing determinations and valuations
shall be in accordance with the Lenders' normal practices and
standards for oil and gas loans as may exist at the particular time of
determination and valuation. The Facility A Borrowing Base Amount
shall never exceed $75,000,000.00, and the sum of the Facility A
Borrowing Base Amount and the Facility B Borrowing Base Amount shall
never exceed $100,000,000.00.
"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 Agent
under section 2.3.2. hereof divided by the Facility A Borrowing Base
Amount then in effect.
"FACILITY A NOTES" shall mean collectively (i) the promissory note of
even date herewith in the maximum principal amount of $45,000,000.00,
payable to the order of Hibernia, (ii) the promissory note of even
date herewith in the maximum principal amount of $30,000,000.00,
payable to the order of Union Bank, and (iii) any and all
modifications, renewals, and/or extension of any of the foregoing
promissory notes.
"FACILITY B NOTES" shall mean collectively the (i) the promissory note
of even date herewith in the maximum principal amount of
$15,000,000.00, payable to the order of Hibernia, (ii) the promissory
note of even date herewith in the maximum principal amount of
$10,000,000.00, payable to the order of Union Bank, and (iii) any and
all modifications, renewals, and/or extension of any of the foregoing
promissory notes
"FACILITY A TERMINATION DATE" shall mean the earlier to occur of (i)
September 30, 2007 or (ii) the date of termination of the Commitments
pursuant to Article XIV hereof.
"FACILITY B" shall mean a senior secured non- revolving line of credit
to the Borrower under the Line of Credit, subject at all times to the
Facility B Borrowing Base Amount then in effect.
"FACILITY B BORROWING BASE AMOUNT" shall mean the amount available to
Borrower under Facility B as determined by the Required Lenders in
their sole discretion. As of the date of this Agreement, the Facility
B Borrowing Base Amount is $0.00. The parties agree and understand
that the Facility B Borrowing Base Amount shall be determined and
established by the Required Lenders in their sole and completion
discretion. The Facility B Borrowing Base Amount shall never exceed
$25,000,000.00, and the sum of the Facility A Borrowing Base Amount
and the Facility B Borrowing Base Amount shall never exceed
$100,000,000.00.
"FACILITY B TERMINATION DATE" shall mean the earlier to occur of (i)
one year after the establishment of a Facility B Borrowing Base Amount
that exceeds $0.00 or (ii) the date of termination of the Commitments
pursuant to Article XIV hereof.
8
"FACILITY LOANS" shall mean all Advances under Facility A and Facility
B made by the Lenders under the Notes to the Borrower in accordance
with and subject to the terms of their respective Commitments.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum equal to
the weighted average of the rates on overnight federal funds
transaction with members of the Federal Reserve System arranged by
federal fund brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day, next succeeding such day;
provided, however, that (i) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the
next succeeding Business Day, and (ii) if no such rate is so published
on the next succeeding Business Day, the Federal Funds Rate for such
day shall be the average of quotations for such Business Day on such
transactions received by the Agent from three (3) federal funds
brokers of recognized standing selected by it. If, for any reason, the
Agent shall have determined (which determination shall be conclusive,
absent manifest error) that it is unable to ascertain the Federal
Funds Rate, including the inability or failure of the Agent to obtain
sufficient quotations in accordance with the terms hereof, the Base
Rate shall be determined without regard to clause (i) of the first
sentence of the definition of Base Rate until the circumstances giving
rise to such inability no longer exist.
"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 individually and collectively, CCBM, Inc., a
Delaware corporation, and its successors and assigns, and any
Subsidiary (excluding Unrestricted Subsidiaries) of Borrower that
executes a Guaranty.
"GUARANTY" means individually and collectively that certain Commercial
Guaranty of even date with this Agreement by CCBM, Inc. in favor of
the Agent for the ratable benefit of the Lenders, as amended and/or
restated from time to time and in effect, and any Commercial Guaranty
executed after the date of this Agreement by a Subsidiary in favor of
the Agent for the ratable benefit of the Lenders, as amended and/or
restated from time to time and in effect.
9
"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. ss.
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. ss.
1801 et seq., as amended, the Resource Conservation and Recovery Act,
42 U.S.C. ss. 6901 et seq., as amended, the ------- -------
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. ss. 9601 et seq., as amended, the Toxic ------- Substances
Control Act, 15 U.S.C. ss. 2601 et seq., as amended, the Clean Air
Act, 42 U.S.C. ss. 7401 et seq., as amended, the ------- -------
federal Water Pollution Control Act, 33 U.S.C. ss. 1251 et seq., as
amended, the Occupational Safety and Health Act, 2 U.S.C. ------- ss.
651 et seq., as amended, the Safe Drinking Water Act, 42 U.S.C.
ss.300f et seq., as amended and the Natural Gas Pipeline -------
------- Safety Act of 1968, 49 U.S.C. ss. 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.
"HEDGE COMMITMENT" shall mean the Lenders' agreement to extend the
Hedge L/C Line as set forth in this Agreement.
"HEDGE L/C LINE" shall mean the revolving line of credit in the
maximum aggregate principal amount of $5,000,000.00 as set forth in
Section 2.4 of this Agreement.
"HEDGE-RELATED LETTERS OF CREDIT" shall be as defined in Section 2.4
of this Agreement.
"HIBERNIA" means Hibernia National Bank in its individual capacity as
a Lender, and its successors and assigns.
10
"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 and/or any Guarantor to the Lenders or any of them (or in the
case of a Hedging Agreement or Rate Management Transaction, any
affiliate thereof) 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 Notes (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 and/or any
Guarantor 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 Agent and/or the
Lenders, as well as all claims by the Agent and/or the Lenders against
the Borrower and/or any Guarantor, whether existing now or later;
whether they are voluntary or involuntary, due or to become due,
direct or indirect or by 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 and/or any Guarantor 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
September 30, 2004 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.
11
"LENDERS" shall mean the lending institutions listed on the signature
page(s) of this Agreement, and their respective successors and
assigns.
"LETTERS OF CREDIT" shall mean the letters of credit issued by the
Agent pursuant to Section 2.3.2. hereof. The Letters of Credit do NOT
include Hedge-Related Letters of Credit.
"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.
"LINE OF CREDIT" shall mean a line of credit in the total maximum
aggregate principal amount of $100,000,000.00, which line of credit
shall be structured as two separate sub-facilities, namely: Facility A
and Facility B.
"LINE OF CREDIT LOAN COMMITMENT" shall mean (i) for all Lenders, the
lesser of $100,000,000.00 or the sum of the Facility A Borrowing Base
Amount and the Facility B Borrowing Base Amount; and (ii) as to any
Lender, its obligation to make Advances hereunder on its Pro Rata Part
of the Line of Credit and purchase its Pro Rata Part of participations
in Letters of Credit and/or Hedge Related Letters of Credit issued
hereunder by the Agent in amounts not exceeding an amount equal to its
Commitment Percentage times the Line of Credit Loan Commitment in
existence at the time of determination.
"LOANS" shall mean, collectively, the Facility Loans and all amounts
funded by Lenders under the Hedge-Related Letters of Credit issued by
Agent under the Hedge L/C Line.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, 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.
"MEMORANDUM" shall mean that certain Memorandum of Subordination
Agreement dated as of December 15, 1999, by and among the parties to
the Securities Purchase Agreement and Compass.
12
"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 Hibernia dated May 24,
2002, as amended by First Amendment thereto dated September 4, 2002,
by Second Amendment thereto dated of even date with this Agreement,
and 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 Hibernia dated May 24, 2002, as amended by First Amendment
thereto dated June 30, 2004, by Second Amendment thereto dated of even
date with this Agreement, and 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 Hibernia dated December 12,
2002, as amended by First Amendment thereto dated of even date with
this Agreement, and as the same may be amended, supplemented, and/or
restated from time to time and in effect, (c) that certain Deed of
Trust, Mortgage, Security Agreement, Fixture Filing, and Financing
Statement by the Borrower in favor of Hibernia dated December 12,
2002, as amended by First Amendment thereto dated June 30, 2004, by
Second Amendment thereto dated of even date with this Agreement, and
as the same may be amended, supplemented and/or restated from time to
time and in effect, (d) Deed of Trust, Mortgage Security Agreement
Fixture Filing, and Financing Statement dated of even date with this
Agreement by Borrower in favor of the Agent, as the same may be
amended, supplemented and/or restated form time to time and in effect,
and (e) any and all mortgages, security agreements, and/or deeds of
trust executed after the date of this Agreement by Borrower and/or any
Guarantor as security for the Indebtedness, 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 and/or any Guarantor that are 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 any Guarantor for which the Borrower and/or any Guarantor, as
the case may be, are not personally liable for payment of the
Obligations.
"NOTES" shall mean collectively (i) the Facility A Notes, (ii) the
Facility B Notes, and (iii) any and all modifications, renewals,
and/or extensions of any of the foregoing promissory notes.
"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
13
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 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 Amended and Restated
Credit Agreement dated as of December 12, 2002 by and among the
Borrower, the Guarantor, and Hibernia, as amended by First Amendment
thereto dated as of June 13, 2003, and as amended by Second Amendment
thereto dated as of June 11, 2004.
"OTHER FINANCING" is used herein as defined in Section 15.12. hereof.
"PAYOR" is used herein as defined in Section 3.1.6. hereof.
"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.
"PRO RATA" OR "PRO RATA PART" shall mean for each Lender, (i) for all
purposes where no Loan is outstanding, such Lender's Commitment
Percentage for matters relating to the Line of Credit Loan Commitment
and (ii) otherwise, the proportion which the portion of the
outstanding Loans owed to such Lender bears to the aggregate
outstanding Loans owed to Lenders at the time in question (calculated
separately for each Lender for Loans under the Line of Credit).
14
"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 first day of each
November, February, May, and August based upon Lenders'
redetermination of the Facility A Borrowing Base Amount. All such
determinations and valuations shall be in accordance with the Lenders'
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 $3,000,000.00 beginning October 31, 2004.
Thereafter, the Lenders 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 any 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
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 and Hedge-Related Letters
of Credit then outstanding to reimburse amounts paid by the Lenders
(or either of them) in respect of any drawing or drawings under a
Letter of Credit and/or a Hedge-Related 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.
15
"REQUEST FOR ADVANCE" shall mean the Borrower's request for a Facility
Loan.
"REQUIRED LENDERS" shall mean one hundred percent (100%) of the
Lenders.
"REQUIRED PAYMENT" is used herein as defined in Section 3.1.6 hereof.
"RESTRICTED PERSON" means the Guarantor, the Borrower, and each other
Subsidiary of the Borrower, excluding Unrestricted Subsidiaries.
"SECURED SUBORDINATED DEBT" shall mean indebtedness of the Borrower
(and any Subsidiary of Borrower that is a Guarantor) outside of the
Line of Credit, issued for total net proceeds not to exceed
$25,000,000.00, which indebtedness may bear stated cash interest
expense of up to 12% per annum (prior to default); provided that (i)
the documents governing the issuance thereof are entered into on or
before December 31, 2004, (ii) such indebtedness is secured by a
mortgage lien on the Mortgaged Properties that is subordinate and
inferior to the Agent's mortgage lien on the Mortgaged Properties, and
(iii) the Required Lenders have reviewed and approved the documents
governing said issuance.
"SECURITIES PURCHASE AGREEMENT" means that certain Securities Purchase
Agreement dated as of December 15, 1999, as amended by First Amendment
thereto dated as of June 7, 2004 among the Borrower, Steelhead
Investments Ltd., Mellon Ventures, L.P., Douglas A. P. Hamilton, Paul
B. Loyd, Jr., and Steven A. Webster, as further amended from time to
time.
"SECURITY AGREEMENT" shall mean that certain Amended and Restated
Stock Pledge and Security Agreement executed by the Borrower in favor
of the Agent for the ratable benefit of the Lenders, of even date with
the Agreement, affecting 100% of the outstanding stock of CCBM, Inc.,
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
16
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 that certain Amended and
Restated Note dated June 7, 2004 in the principal amount of
$27,702,426.55, executed by the Borrower pursuant to the Securities
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 more than 50% 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 Notes,
plus (ii) the total face amount of all outstanding Letters of Credit
and Hedge-Related Letters of Credit issued under Facility A 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 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.
"UNION BANK" shall mean Union National Bank of California, N.A., in
its capacity as a Lender hereunder, and its successors and assigns.
"UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary of Borrower
designated as an Unrestricted Subsidiary of Borrower by Borrower's
Board of Directors in compliance with the following sentence, and (b)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors
of Borrower may at any time and from time to time designate any
Subsidiary of Borrower (other than CCBM, Inc. or any other Guarantor)
as an Unrestricted Subsidiary provided that (i) no Default or Event of
Default has occurred or is continuing at the time of such designation
and after giving effect to such designation, (ii) immediately after
such designation, no Restricted Person has any Liability to pay any
Obligations of such Subsidiary, has in any way guaranteed any
Obligations of such Subsidiary, or has any assets or properties
(excluding a pledge of the equity interest in
17
such Subsidiary) which are subject to any Encumbrance securing any
Obligations of such Subsidiary, and (iii) notice of any such
designation is promptly given to the Agent in writing.
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
LINE OF CREDIT LOAN COMMITMENT
SECTION 2.1. THE LINE OF CREDIT. Subject to the terms and conditions of
this Agreement, each Lender agrees severally (a) to make its Pro Rata Part of
Advances to the Borrower during the period from the date hereof until the
Facility A Termination Date, by making Facility 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 Facility Loans to the Borrower made under
Facility A at such time outstanding exceed the Facility A Borrowing Base Amount
then in effect, and (b) in the event the Lenders establish a Facility B
Borrowing Base Amount in excess of $0.00, to make its Pro Rata Part of Advances
to the Borrower during the period from the date such Facility B Borrowing Base
Amount is established until the Facility B Termination Date, by making Facility
Loans under Facility B to the Borrower from time to time, provided, however,
that at no time shall the aggregate principal amount of such Facility Loans made
under Facility B exceed the Facility B Borrowing Base Amount. Notwithstanding
the foregoing, it is agreed and understood that each Lender's obligation to fund
Facility Loans is limited to such Lender's Line of Credit Loan Commitment less
its Pro Rata Part of the Total Outstandings.
SECTION 2.2. THE BORROWING BASE AMOUNTS.
SECTION 2.2.1. Facility A. The initial Facility A Borrowing Base Amount is
hereby fixed at $28,000,000.00. It is agreed and understood that the Required
Lenders will re-evaluate and re-establish the Facility A Borrowing Base Amount
on a semi-annual basis on each November 1 and May 1. The Facility A Borrowing
Base Amount also is subject, in the Required Lenders' sole and complete
discretion, to one (1) unscheduled redetermination of the Facility A Borrowing
Base Amount after each scheduled semi-annual redetermination by the Required
Lenders. The Borrower, at its option also may request (and the Required Lenders
shall promptly thereafter perform) one (1) unscheduled Facility A Borrowing Base
Amount redetermination after each scheduled semi-annual redetermination by the
Required Lenders. The parties agree and understand that the Facility A Borrowing
Base Amount is further subject to Quarterly Reductions based upon the Required
Lenders' re-evaluation of the Facility A Borrowing Base Amount at such time.
SECTION 2.2.2. FACILITY B. As of the date of this Agreement, the initial
Facility B Borrowing Base Amount is hereby fixed at $0.00.
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SECTION 2.3. FACILITY LOANS.
SECTION 2.3.1. FACILITY LOANS. Subject to the terms and conditions of this
Agreement, each Lender severally agrees to make Facility Loans under Facility A
and Facility B to the Borrower from time to time under the Line of Credit in
accordance with the terms of this Agreement. Within the limits set forth herein,
the Borrower may borrow from the Lenders hereunder, repay any and all such
Facility Loans as hereinafter provided, and with respect to Facility A, reborrow
thereunder; provided, however, each Facility Loan under Facility A, subject to
availability under the Facility A Borrowing Base Amount, shall be in an amount
not less than $250,000.00; and provided, further, that it is agreed and
understood that Facility B is NOT a revolving line of credit The Borrower's
obligation to repay the Facility Loans (under both Facility A and Facility B)
made by the Lenders shall be evidenced by the Notes. Facility 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. Facility
Loans under Facility B shall bear interest, at Borrower's option at the Base
Rate plus a margin amount (expressed as a percentage) as established by the
Lenders or the Eurodollar Rate plus a margin amount (expressed as a percentage)
as established by the Lenders. The total number of Tranches under the 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 Agent 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 or a Subsidiary that is a Guarantor 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 $7,500,000.00 (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.
The Line of Credit Loan Commitment of each Lender shall be deemed to be utilized
for all purposes hereof in an amount equal to such Lender's Commitment
Percentage of the undrawn face amount of such Letter of Credit. Each Lender
agrees that, upon issuance of any Letter of Credit hereunder, it shall
automatically acquire a participation in the Agent's liability under such Letter
of Credit in an amount equal to such Lender's Commitment Percentage of such
liability, and each Lender (other than Agent) thereby shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as surety,
and shall be unconditionally obligated to Agent to pay and discharge when due,
its Commitment Percentage of Agent's liability under such Letter of Credit,
provided such Letter of Credit was issued in accordance with the provisions of
this Agreement. Borrower hereby unconditionally agrees to pay and reimburse the
Agent 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 Agent to the beneficiary thereunder,
without presentment, demand, protest or other formalities of any kind. Upon
receipt from any beneficiary of any Letter
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of Credit of any demand for payment under such Letter of Credit, the Agent shall
promptly notify the Borrower of the demand and the date upon which such payment
is to be made by the Agent to such beneficiary in respect of such demand.
Forthwith upon receipt of such notice from the Agent, Borrower shall advise the
Agent whether or not it intends to borrow under Facility A to finance its
obligations to reimburse the Agent, and if so, submit a Request for Advance as
provided in Section 2.3.4. hereof. The parties agree and understand that as of
the date of this Agreement, there are no outstanding letters of credit issued by
Hibernia.
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 Agent at least three (3) Business Days prior to the
date of such issuance, renewal, extension or reissuance. Concurrently with or
promptly following the delivery of the request for a Letter of Credit, the
Borrower or Borrower's Subsidiary, if applicable, shall execute and deliver to
the Agent an application and agreement with respect to the Letter of Credit,
said application and agreement to be in the form customarily used by the Agent.
The terms of this Agreement shall control in case of any conflict between the
terms of this Agreement and the Agent's form of application and agreement with
respect to Letters of Credit. The Agent shall not be obligated to issue, renew,
extend or reissue such Letters of Credit if (i) the Agent 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 $7,500,000.00, 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 Agent a fee for the issuance of each Letter of Credit, which
fee shall be due and payable by the Borrower to the Agent upon issuance of each
Letter of Credit by the Agent 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 lesser of either (a) 1.5% per annum or (b) 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 LINE OF CREDIT.
Requests For Advances under the Line of Credit may be made by the Borrower, in
writing (including facsimile transmission) to the Agent 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 Agent. The form of Request for Advance is
attached hereto as Exhibit "B", and includes a designation by Borrower of the
Borrowing Date. The Agent 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 Agent. 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. Upon receipt of such Request for Advance, the Agent shall
advise each Lender thereof; provided, that if the Lenders have received at least
one (1) Business Day's notice of such Advance prior to funding of a Base Rate
Loan, or at least three (3) Business Days' notice of each advance prior to the
funding in the case of a Eurodollar Loan, each Lender shall provide the Agent at
its office at 313 Carondelet Street, New Orleans, Louisiana 70130, not
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later than 1:00 p.m., Central Time, on the Borrowing Date, in immediately
available funds, its Pro Rata share of the requested Advance, but the aggregate
of all such outstanding fundings by each Lender shall never exceed such Lender's
available Line of Credit Loan Commitment. Not later than 2:00 p.m., Central
Time, on the Borrowing Date, the Agent 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 Agent
and the Lenders shall not incur any liability to Borrower in acting upon any
Request for Advance referred to above which the Agent and the Lenders believe 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 Lenders in accordance
with this Agreement, pursuant to any such Request for Advance, Borrower shall
have effected Advances hereunder. Each Request for Advance for a Facility 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. A 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 such Lender in
connection with such borrowing. The aggregate outstanding amount of principal
and interest due by the Borrower at any given time under the Line of Credit
shall be and constitute the indebtedness of the Borrower to the Lenders under
the Notes made by the Borrower. When each Advance is made by the Lenders to the
Borrower hereunder, the Borrower shall be deemed to have renewed and reissued
the Notes for the amount of the Advance plus all amounts due by the Borrower to
the Lenders under the Line of Credit Loan Commitment immediately prior to such
advance.
SECTION 2.3.5. USE OF PROCEEDS. The Borrower shall use the proceeds of the
Facility Loans to finance working capital requirements and for direct
investments in its oil and gas operations.
SECTION 2.3.6. SEVERAL OBLIGATIONS. The obligations of the Lenders under
the Line of Credit Loan Commitment are several and not joint. The failure of any
Lender to make an Advance required to be made by it shall not relieve any other
Lender of its obligation to make its Advance, and no Lender shall be responsible
for the failure of any other Lender to make the Advance to be made by such other
Lender.
SECTION 2.4. HEDGE COMMITMENT. Subject to the terms and conditions of this
Agreement, the Agent agrees to extend the Hedge L/C Line to the Borrower, and
issue, for the account of the Borrower or a Subsidiary that is a Guarantor,
stand-by letters of credit up to a maximum aggregate principal amount of
$5,000,000.00, to beneficiaries that are acceptable to the Agent, in connection
with and as support for Borrower's or such Subsidiary's execution of Hedging
Agreements and/or other commodity price hedging agreements involving
Hydrocarbons that are part of the Mortgaged Properties (the "Hedge-Related
Letters of Credit"). Each such Hedge-Related 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. The Hedge Commitment and the Hedge L/C Line
shall terminate on the Facility A Termination Date. The Borrower hereby
unconditionally agrees to pay and reimburse the Agent for the amount of each
payment or funding by Agent under any Hedge-Related Letter of Credit that is in
substantial compliance with the requirements
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of such Hedge-Related Letter of Credit at or prior to the date on which payment
is made by the Agent to the beneficiary thereunder, without presentment, demand,
protest or other formalities of any kind. Upon receipt from any beneficiary of
any Hedge-Related Letter of Credit of any demand for payment under such
Hedge-Related Letter of Credit, the Agent shall promptly notify the Borrower of
the demand and the date upon which such payment is to be made by the Agent to
such beneficiary in respect of such demand. In the event such payment or funding
by the Agent is on a Hedge-Related Letter of Credit that was issued under
Facility A pursuant to Section 2.4.2 below, the Lenders shall be entitled to
reimbursement pursuant to an Advance under the Notes, and the Borrower agrees to
deliver to Agent a Request for Advance form to cover such Advance. In the event
such payment or funding by the Agent is on a Hedge-Related Letter of Credit that
was not issued under Facility A, then the Borrower is unconditionally obligated,
as provided above, to reimburse promptly the Agent. The default interest rate
applicable to such Reimbursement Obligation shall be 18% per annum. The Line of
Credit Loan Commitment of each Lender shall be deemed to be utilized for all
purposes hereof in an amount equal to such Lender's Commitment Percentage of the
undrawn face amount of such Hedge-Related Letter of Credit issued under Facility
A. Each Lender agrees that, upon issuance under Facility A of any Hedge-Related
Letter of Credit hereunder, it shall automatically acquire a participation in
the Agent's liability under such Hedge-Related Letter of Credit in an amount
equal to such Lender's Commitment Percentage of such liability, and each Lender
(other than Agent) thereby shall absolutely, unconditionally and irrevocably
assume, as primary obligor and not as surety, and shall be unconditionally
obligated to pay and discharge when due, its Commitment Percentage of Agent's
liability under such Hedge-Related Letter of Credit, provided such Hedge-Related
Letter of Credit was issued in accordance with the provisions of this Agreement.
SECTION 2.4.1. PROCEDURE FOR OBTAINING HEDGE-RELATED LETTERS OF CREDIT. The
amount and date of issuance, renewal, extension or reissuance of a Hedge-Related
Letter of Credit pursuant to Section 2.4 shall be designated by the Borrower's
written request delivered to the Agent at least three (3) Business Days prior to
the date of such issuance, renewal, extension or reissuance. Concurrently with
or promptly following the delivery of the request for a Hedge-Related Letter of
Credit, the Borrower or Borrower's Subsidiary, if applicable, shall execute and
deliver to the Agent an application and agreement with respect to the
Hedge-Related Letter of Credit, said application and agreement to be in the form
customarily used by the Agent. The terms of this Agreement shall control in case
of any conflict between the terms of this Agreement and the Agent's form of
application and agreement with respect to Hedge-Related Letters of Credit. The
Agent shall not be obligated to issue, renew, extend or reissue such
Hedge-Related Letters of Credit if (i) the Agent does not approve the designated
beneficiary, the requested form of the Hedge-Related 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 Hedge-Related Letters
of Credit exceeds $5,000,000.00, or (iii) the Borrower is not in compliance with
the terms and conditions of this Agreement (including Section 13.10). The
Borrower agrees to pay the Agent a fee for the issuance of each Hedge-Related
Letter of Credit, which fee shall be due and payable by the Borrower to the
Agent upon issuance of each Hedge-Related Letter of Credit by the Agent and on
each anniversary date of such issuance while such Hedge-Related Letter of
22
Credit is outstanding. The said fee shall be a per annum fee in the amount equal
to the lesser of either (a) the applicable Eurodollar Margin times the face
amount of the Hedge-Related Letter of Credit for such period or (b) 1.5% per
annum (calculated separately for each Hedge-Related Letter of Credit).
SECTION 2.4.2. HEDGE L/C LINE AND FACILITY A. Hedge-Related Letters of
Credit, at the Borrower's option, may be issued by Agent outside of the Facility
A Borrowing Base Amount. If Borrower exercises the foregoing option, the face
amount of each Hedge-Related Letter of Credit so issued, will not affect the
availability of funds under the Facility A Borrowing Base Amount. However, if
there are funds available under Facility A and the Borrower elects for a
Hedge-Related Letter of Credit to be issued under Facility A, then the face
amount of any such Hedge-Related Letter of Credit shall reduce on a
dollar-for-dollar basis the availability of funds under the Facility A Borrowing
Base Amount then in effect.
SECTION 2.4.3.SECURITY FOR REIMBURSEMENT OBLIGATIONS PERTAINING TO
HEDGE-RELATED LETTERS OF CREDIT. The parties acknowledge that Reimbursement
Obligations pertaining to Hedge-Related Letters of Credit are secured by the
Collateral Documents.
ARTICLE III
NOTES EVIDENCING THE FACILITY LOANS
SECTION 3.1. NOTES.
SECTION 3.1.1. FORM OF NOTES. The Facility Loans under Facility A shall be
evidenced by the Facility A Notes in the aggregate face amount of
$75,000,000.00. The Facility Loans under Facility B shall be evidenced by the
Facility B Notes in the aggregate face amount of $25,000,000.00. Notwithstanding
the face amount of the Notes, the actual principal amount due from Borrower to
the Lenders on account of the Notes, 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 Notes are dated of even date herewith, 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 Notes may be higher, the
Notes 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 Facility Loans.
SECTION 3.1.2. ISSUANCE OF ADDITIONAL NOTES From time to time new Notes may
be issued to other Lenders as such Lenders become parties to this Agreement.
Upon request from the Agent, Borrower shall execute and deliver to Agent any
such new or additional Notes. From time to time as new Notes are issued the
Agent shall require that each Lender exchange their Notes for newly issued Notes
to better reflect the extent of each Lender's Commitment hereunder. The Agent
shall, upon the written request of Borrower, cause the Lenders to return to
Borrower the Notes which have been replaced within a reasonable period of time
after
23
Borrower's request. Under no circumstances will the issuance of new Notes, or
the return of the Notes to the Borrower which have been replaced, constitute a
novation or other discharge of the outstanding indebtedness of Borrower to the
Lenders under the Line of Credit.
SECTION 3.1.3. PAYMENT OF THE NOTES. Subject to the requirements of Article
VIII below, interest on the unpaid principal balance of the Notes 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 Notes 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 Notes resulting from Advances under Facility
B shall be due and payable on the Facility B Termination Date.
SECTION 3.1.4. PAYMENT TO THE LENDERS. Each Lender's Pro Rata Part of
payment or prepayment of the Loans shall be directed by wire transfer to such
Lender by the Agent at the address provided to the Agent for such Lender for
payments no later than 2:00 p.m., Lafayette, Louisiana, time on the Business Day
such payments or prepayments are deemed hereunder to have been received by
Agent; provided, however, in the event that any Lender shall have failed to make
an Advance as contemplated under Article II hereof (a "Defaulting Bank") and the
Agent or another Lender or Lenders shall have made such Advance, payment
received by Agent for the account of such Defaulting Bank(s) shall not be
distributed to such Defaulting Bank(s) until such Advance or Advances shall have
been repaid in full to the Lender or Lenders who funded such Advance or
Advances. Any payment or prepayment received by the Agent at any time after
12:00 noon, Lafayette, Louisiana, time on a Business Day shall be deemed to have
been received on the next Business Day. Interest shall cease to accrue on any
principal as of the end of the day preceding the Business Day on which any such
payment or prepayment is deemed hereunder to have been received by the Agent. If
the Agent fails to transfer any principal amount to any Lender as provided
above, then the Agent shall promptly direct such principal amount by wire
transfer to such Lender.
SECTION 3.1.5. SHARING OF PAYMENTS, ETC. If any Lender shall obtain any
payment (whether voluntary, involuntary, or otherwise) on account of the Loans,
(including, without limitation, any set-off) which is in excess of its Pro Rata
Part of payments on the Loans, as the case may be, obtained by all Lenders, such
Lender shall purchase from the other Lenders such participation as shall be
necessary to cause such purchasing Lender to share the excess payment pro rata
with each of them; provided that, if all or any portion of such excess payment
is thereafter recovered from such purchasing Lender, the purchase shall be
rescinded and the purchase price restored to the extent of the recovery.
Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section may, to the fullest extent permitted by law,
exercise all of its rights of payment (including the right of offset) with
respect to such participation as fully as if such Lender were the direct
creditor of Borrower in the amount of such participation.
SECTION 3.1.6. NON-RECEIPT OF FUNDS BY THE AGENT Unless the Agent shall
have been notified by a Lender or Borrower (the "Payor") prior to the date on
which such Lender is to make payment to the Agent of the proceeds of a Facility
Loan to be made by it hereunder or Borrower
24
is to make a payment to the Agent for the account of one or more of the Lenders,
as the case may be (such payment being herein called the "Required Payment"),
which notice shall be effective upon receipt, that the Payor does not intend to
make the Required Payment to the Agent, the Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended recipient on
such date and, if the Payor has not in fact made the Required Payment to the
Agent, the recipient of such payment shall, on demand, pay to the Agent the
amount made available to it together with interest thereon in respect of the
period commencing on the date such amount was made available by the Agent until
the date the Agent recovers such amount at the rate applicable to such portion
of the applicable Facility Loan. Any payment due from any Lender to Agent
pursuant hereto shall bear interest at the Federal Funds Rate.
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 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 the margin amount
(expressed as a percentage) as established by Lenders. 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 Notes.
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 the
margin amount (expressed as a percentage) as established by Lenders. 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 Notes. Upon three (3) Business Days written notice prior to the
making by the Lenders 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 Agent 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.
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SECTION 4.2. INTEREST RATE DETERMINATION. The Agent shall determine each
interest rate applicable to any Base Rate Loan or Eurodollar Loan and its
determination shall be conclusive absent manifest error. The Agent 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
Agent 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 Agent 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 a prepayment of any Note or a prepayment of
any of the Loans for purposes of this Agreement.
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 Agent 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 Lenders of funding Eurodollar
Loans for such Eurodollar Interest Period, the Agent shall give notice of such
determination to the Borrower, whereupon, until the Agent notifies the Borrower
that the circumstances giving rise to such suspension no longer exist, the
obligation of the Lenders 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 such Lender to make or continue to maintain or fund Eurodollar Loans
hereunder, then such Lender shall promptly notify Borrower in writing of such
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 such
Lender to make or maintain Eurodollar Loans. Upon receipt of such notice,
Borrower shall either repay the outstanding Eurodollar Loans owed to the
Lenders, without penalty, on the last day of the current Interest Periods (or,
if any 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.
26
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 any 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 such Lender to any tax, duty, or
other charge with respect to any Eurodollar Loans, the
Notes, or its obligation to make Eurodollar Loans, or change
the basis of taxation of any amounts payable to such Lender
under this Agreement, or the Notes, in respect of any
Eurodollar Loans (other than franchise taxes and taxes
imposed on the overall net income of such Lender);
(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, such Lender,
including the Commitment of such Lender hereunder; or
(C) shall impose on such Lender or on the London
interbank market any other condition affecting this
Agreement or its Notes 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 such Lender of
making, converting into, continuing, or maintaining any Eurodollar Loans or to
reduce any sum received or receivable by such Lender under this Agreement or its
Note with respect to any Eurodollar Loans, then pursuant to Section 5.3(v)
Borrower shall pay to such Lender such amount or amounts as will compensate such
Lender for such increased cost or reduction. If such Lender requests
compensation by Borrower under this Section 5.3., Borrower may, by notice to
such Lender, suspend the obligation of such Lender to make or continue
Eurodollar Loans, or to convert all or part of the Base Rate Loan owing to such
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 such Lender to receive the compensation so requested.
27
(ii) If, after the date hereof, such 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 such Lender or any corporation controlling Lender as a consequence of
such Lender's obligations hereunder to a level below that which such 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 such Lender such additional amount or amounts as will compensate Lender for
such reduction.
(iii) Each Lender shall promptly notify Borrower of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such 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 such Lender, be otherwise disadvantageous to it. If such Lender
claims compensation under this Section 5.3., such 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, such Lender may use any reasonable averaging
and attribution methods.
(iv) If any Lender gives notice to the Borrower (either by
Lender or through the Agent) pursuant to Section 5.3. hereof, Lender shall
simultaneously give to the Borrower a statement signed by an officer of such
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 such Lender
such additional amounts as are required to compensate such 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 such Lender for any increased costs, reduced payments or increased
capital requirements to the extent that such Lender incurs the same prior to a
date six (6) months before such Lender gives the required notice.
SECTION 5.4. BREAKAGE COSTS. Without duplication under any other provision
hereof, if any 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 such Lender to fund or maintain any Eurodollar Loan or
the relending or reinvesting of such deposits or amounts paid or prepaid to such
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.:
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(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 such Lender such
amount as will reimburse such Lender for such loss, cost or expense. If such
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.
SECTION 5.5. DISCRETION OF LENDER AS TO MANNER OF FUNDING. Notwithstanding
any provisions of this Agreement to the contrary, each Lender shall be entitled
to fund and maintain its funding of all or any part of its Facility Loans in any
manner it sees fit, it being understood, however, that for the purposes of this
Agreement all determinations hereunder, except as may otherwise be provided in
this Article V, shall be made as if each Lender had actually funded and
maintained each Eurodollar Loan through the purchase of deposits having a
maturity corresponding to the last day of the Eurodollar Interest Period
applicable to such Eurodollar Loan and bearing an interest rate to the
applicable interest rate for such Eurodollar Period.
ARTICLE VI
FEES
SECTION 6.1. FACILITY FEES.
SECTION 6.1.1. FACILITY FEE. The Borrower shall pay to the Agent for the
benefit of Union Bank a facility fee of one-half percent (0.50%) of Union Bank's
Pro Rata Part of $28,000,000.00. In addition, Borrower shall pay to Agent for
the Pro Rata benefit of the Lenders an additional facility fee of one-half
percent (0.50%) of the incremental amount of any increase to the Facility A
Borrowing Base Amount shall be owed by Borrower to the Agent, 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. In the event the Facility B Borrowing
Base Amount exceeds $0.00, the facility fee applicable thereto shall be as
negotiated by the Agent and the Borrower. The Borrower hereby authorizes the
Agent to debit its account maintained with Hibernia for collection of the
foregoing facility fees.
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SECTION 6.2. UNUSED FEES.
SECTION 6.2.1. FACILITY A UNUSED FEE. The Borrower shall pay to the Agent
(for the Pro Rata benefit of the Lenders) 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 50%, the unused fee is 0.50%;
and (ii) 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, 2004. 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 Agent to debit
its account maintained with the Hibernia for collection of the unused fee.
SECTION 6.3. LETTER OF CREDIT FEE. The Borrower shall pay to the Agent (for
the Pro Rata benefit of the Lenders) a fee for each Letter of Credit and
Hedge-Related Letter of Credit as provided in Sections 2.3.3. and 2.4.1. of this
Agreement.
SECTION 6.4. ENGINEERING FEE. The Borrower shall pay to each Lender a fee
of $5,000.00 for each unscheduled determination of the Facility A Borrowing Base
Amount requested by Borrower. The Borrower hereby authorizes the Agent to debit
its account maintained with Hibernia for collection of said fee.
ARTICLE VII
CERTAIN GENERAL PROVISIONS
SECTION 7.1. PAYMENTS. 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 Agent at its office in New Orleans, Louisiana at 313 Carondelet
Street, New Orleans, Louisiana 70130, or at such other location that the Agent
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 Agent, 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 Agent certificates or
other valid
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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 EACH NOTE. The Borrower and the Guarantor
acknowledge and understand that notwithstanding the stated principal amount of
each Note, that each Lender's obligation to fund Advances under its 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 NOTES TO THE CONTRARY,
THAT NO LENDER SHALL BE OBLIGATED TO FUND ANY AMOUNT IN EXCESS OF THE FACILITY A
BORROWING 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 Lenders.
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 the Agent.
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 Agent 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 Facility Loans ever exceeds the sum of the Facility A Borrowing Base Amount
then in effect (including any reduction of the Facility A Borrowing Base Amount
that results from a Quarterly Reduction) 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 Agent of the occurrence of such an excess amount (an "overadvance")
to do the
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following (individually or in combination): (a) make a lump sum payment to the
Agent in an amount equal to the overadvance; (b) grant to the Agent for the
ratable benefit of the Lenders security interests or mortgage liens on new
collateral having, in the Agent'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 Agent, each in the
amount equal to one-sixth (or such corresponding lesser amount if fewer than six
payments are made) of the overadvance.
ARTICLE IX
SECURITY FOR THE INDEBTEDNESS
SECTION 9.1. SECURITY. The Indebtedness (as defined in the Collateral
Documents) shall be secured by the following:
(a) the Mortgage;
(b) the Security Agreement (and physical delivery to the Agent of the stock
certificates therein described);
(c) the Guaranty; and
(d) any additional Collateral Documents granted by any Person in favor of
Agent for the ratable benefit of the Lenders as security for the Indebtedness
(as defined in the Collateral Documents).
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 Agent, subject only to Permitted Encumbrances and Designated Title
Exceptions as herein provided. The Borrower and Guarantor expressly acknowledge
that the mortgage liens and security interests granted, created, renewed, and/or
extended prior to the date of this Agreement in favor of Hibernia and/or in
favor of Compass and assigned to Hibernia are valid, that they subsist against
the collateral described therein, and that they are hereby renewed and extended
and carried forward in full force to secure payment of the Indebtedness. To the
extent necessary, Hibernia hereby assigns all of said mortgage liens and
security interests to the Agent for the ratable benefit of the Lenders.
ARTICLE X
CONDITIONS PRECEDENT
SECTION 10.1. CONDITIONS PRECEDENT TO ALL FACILITY LOANS. The obligation of
the Lenders to make any Facility Loan hereunder shall be subject to the
satisfaction and the continued satisfaction of the following conditions
precedent:
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(a) On or prior to the date hereof, the Borrower shall have executed and
delivered to the Agent this Agreement, the Notes, 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 Agent;
(b) On or prior to the date hereof, the Guarantor shall have executed and
delivered to the Agent 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 Agent;
(c) The representations, warranties, and covenants of the Borrower as set
forth in this Agreement, or in any Related Document furnished to the Agent
and/or any 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);
(d) On or prior to the date hereof, the Agent 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 Agent;
(e) The Agent 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 Facility Loan or the issuance of a Letter of Credit and/or a
Hedge-Related Letter of Credit;
(h) The Borrower shall have provided the Agent with all financial
statements, reports and certificates required by this Agreement;
(i) On or prior to the date hereof, the Agent shall have received the
articles of incorporation and bylaws, as amended, and the Agent '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 Agent shall have received evidence
acceptable to the Lenders 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 Facility Loan;
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(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 Agent under the Original Agreement;
(m) The Lenders' 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 Agent evidence of such insurance coverage;
(o) To the extent requested by Agent and required by the Loan Documents,
the Borrower shall have executed and delivered to the Agent blank form letters
in lieu of division orders, in form and substance satisfactory to the Agent; and
(p) On or prior to the date hereof, the Agent shall have received title
opinions from counsel to Borrower (or other title information reasonably
acceptable to the Agent) covering not less than eighty percent (80%) of the
present value of the sum of the Facility A Borrowing Base Amount, as determined
by the Agent, which opinions (or other title information reasonably acceptable
to the Agent) must satisfy (in the Agent's reasonable discretion) the first
sentence of Section 11.3.
The Agent and the Lenders reserve the right, in their sole discretion, to
waive any one or more of the foregoing conditions precedent.
SECTION 10.2. CONDITION PRECEDENT CONCERNING SECURED SUBORDINATED DEBT. The
satisfactory review by the Required Lenders of the documentation evidencing the
Secured Subordinated Debt is a condition precedent to the issuance by Borrower
of such Secured Subordinated Debt. In the event such issuance occurs prior to
said satisfactory review and approval, the Lenders' obligation to make any
further Facility Loans is terminated and such issuance shall constitute an Event
of Default hereunder.
SECTION 10.3. CONDITION PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT. The
condition precedent to the effectiveness of this Agreement is that on or prior
to the date hereof the Agent receives from each of the Lenders a signed, written
commitment for such Lender's Commitment Percentage.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and the Lenders 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,
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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 Notes, 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
Agent, 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 Agent in
writing, applied on a basis consistent with the preceding year. No Material
Adverse Effect has 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,
35
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 are Mortgaged
Properties.
SECTION 11.4. LITIGATION. Other than as set forth in Schedule 11.4 and as
may be disclosed to the Agent 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.
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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.
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 Agent and/or the
Lenders for the purposes of or in
37
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 Agent and/or the
Lenders 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 Agent and/or the
Lenders 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 Agent and the Lenders that actual results may vary from projected results.
SECTION 11.16. ENVIRONMENTAL MATTERS. Except as previously disclosed to the
Agent 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 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
38
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, 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
39
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
Agent.
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 Facility Loans and the issuance of Letters of Credit and/or
Hedge-Related 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 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. SECURITIES 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 existing as of the date hereof is
entitled to the benefits accorded the Senior Indebtedness (as such term is
defined in the Securities Purchase Agreement) and (ii) the consent of the
Investors (as such term is defined in the Securities Purchase Agreement) is not
required for the Borrower's execution of and performance under this Agreement.
40
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 except for a subordinated Encumbrance
granted or to be granted by Borrower as security for the Secured Subordinated
Debt.
SECTION 11.22. SECURITIES PURCHASE AGREEMENT. The Borrower represents and
warrants that it is not in default under the Securities Purchase Agreement, and
that no such default will occur as a result of Borrower's execution of this
Agreement, and its incurrence of obligations hereunder.
SECTION 11.23. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Borrower
understands and agrees that the Agent and the Lenders are 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 Agent:
(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 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 independent certified public
accountants of recognized standing acceptable to the Required Lenders
(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
41
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 included or to be included in any Borrowing Base
Amount, in form and substance reasonably satisfactory to the Agent,
(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 included or to
be included in any 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 Required
Lenders,
(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 included or to be included in any Borrowing Base Amount,
and dated as of no earlier than the preceding June 30, in form and
content reasonably satisfactory to the Required Lenders, and
(i) subject to Section 12.14, such other financial information or other
information concerning the Borrower as the Agent and/or the Lenders
may reasonably request from time to time.
SECTION 12.2. NOTICE OF DEFAULT; LITIGATION; ERISA MATTERS. The Borrower
will give written notice to the Agent 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.
42
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 Agent for the ratable benefit of the
Lenders 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 Agent 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 Agent. 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 Agent'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 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 Agent 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 Agent's request, to provide the Agent 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
43
such contest is made in good faith, appropriate reserves are established for the
payment for the cost of compliance therewith, and the Agent'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 Agent and/or the Lenders 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 Lenders 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 AGENT AND/OR THE LENDERS OR THEIR AGENTS OR
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 Agent, 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:
44
(a) MINIMUM CURRENT RATIO. The Borrower shall at all times maintain a
minimum Current Ratio of 1.0 to 1.0.
(b) MAXIMUM TOTAL RECOURSE DEBT TO EBITDA RATIO. The Borrower shall
maintain at all times a ratio of Total Recourse Debt to EBITDA of not
more than 3.00 to 1.0, calculated on a rolling four quarters basis.
For the purposes of this covenant, EBITDA shall not include the net
revenue attributable to assets pledged to secure Non-Recourse
Indebtedness. The term "Total Recourse Debt" shall mean Borrower's
consolidated Debt excluding Non-Recourse Indebtedness and Debt of an
Unrestricted Subsidiary.
(c) MINIMUM QUARTERLY DEBT SERVICE COVERAGE RATIO. The Borrower shall
maintain at the end of each quarter a Debt service coverage ratio
(excluding Non-Recourse Indebtedness of Unrestricted Subsidiaries) 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.
(d) MINIMUM SHAREHOLDER'S EQUITY. The Borrower shall maintain at all times
a minimum shareholder's equity of not less than $100,000,000.00, plus
(i) 100% of all common and preferred equity contributed by
shareholders of Borrower ("Equity Issuances") subsequent to June 30,
2004, plus (ii) 50% of all positive earnings occurring subsequent to
June 30, 2004, plus (iii) 180 days after Borrower's issuance of the
Secured Subordinated Debt (the "Secured Subordinated Debt Issue
Date"), an amount equal to the difference, if positive, of (a) 50% of
the net proceeds from the issuance of the Secured Subordinated Debt
less (b) 100% of all common and preferred equity contributed by
shareholders of Borrower from the date hereof to the Secured
Subordinated Debt Issue Date. For purposes of this covenant, the
calculation of Borrower's "shareholder's equity" will exclude the
effects, if any, of ceiling test write-downs pursuant to Regulation
SX4.10 of the Securities and Exchange Commission.
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, 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
45
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 Agent 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 Lenders (or one or more of
them).
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 a 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 Agent'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 Agent
with such other information as the Agent 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 Agent 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 Agent
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 Agent with certificates or binders evidencing
such insurance coverage on an annual basis, and, if requested by the Agent, the
Borrower further agrees to promptly furnish the Agent with copies of all renewal
notices and copies of receipts for paid premiums. The Borrower shall provide the
Agent with certificates or
46
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(excluding Unrestricted Subsidiaries, if any) 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 and record an assignment or other evidence of title satisfactory to
Lender from Sundown Energy, Inc. sufficient to convey or evidence of record that
all of Sundown Energy, Inc.'s interest in the Beach House #1 well is owned by
Borrower and the other participating working interest owners in said well in
their agreed proportions in accordance with the provisions of an Operating
Agreement dated February 15, 1999 and provide a certified copy of said
assignment or instrument to Lender, (ii) obtain a division order title opinion
covering the Hamill Gas Unit No. 2, the unit well for which is the BP America
#1, and provide a copy of said opinion to Lender, (iii) obtain and provide to
Lender a supplemental run sheet from the records of Webb County, Texas, from
December 28, 1982 to the present covering the lands covered by the December 30,
2003 Drilling Title Opinion by Schuster & Murray, (iv) obtain ratifications of
the King Gas Unit from all parties owning an interest in and to said Unit and
file for record an Amended Unit Designation executed by all working interest
owners that includes all leases within said Unit, (v) obtain and provide to
Lender a title opinion covering the Cole B-2H unit, (vi) obtain and provide to
Lender a report from Robert W. Pell & Associates, Inc. regarding the status of
outstanding curative requirements from the Division Order Title Opinion dated
June 29, 2004, by Looper Reed & McGraw, concerning land within four hundred
sixty-seven feet (467') of the bottom hole location, (vii) obtain and provide to
Lender title opinions on all tracts included in the MA-3 RE SUA unit, created by
Louisiana Office of Conservation Order No. 395-Z-5, effective August 10, 2004,
the unit well for which is the Carrizo Oil and Gas, Inc., Shadyside No. 1 well.
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 Agent, the Borrower shall not form any Subsidiary (excluding
Unrestricted Subsidiaries) 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 and the Guarantor shall
not convey, sell, lease, assign, transfer or otherwise dispose of, any of its
property or assets to which the
47
Lenders have 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 Required Lenders' written consent,
which consent will not be withheld provided the Borrower pays in full such
portion of the Total Outstandings, if any, that exceeds the Facility A Borrowing
Base Amount, attributable to the proposed asset sale, as determined by the
Required Lenders in their 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 stock or (ii) pay any
dividends or distributions, without the prior written consent of the Required
Lenders; provided, however, that (a) the Borrower may declare and pay dividends
consisting entirely of capital stock of the Borrower, (b) the Borrower may make
cash payments in lieu of fractional shares in an aggregate amount not exceeding
$100,000, and (c) 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 Agent and/or the Lenders to secure the
Indebtedness;
(e) 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;
48
(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(k)(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;
(q) Encumbrances securing Debt permitted to be incurred under Section
13.5(i);
(r) Encumbrances affecting all or part of the Collateral that secure
Secured Subordinated Debt that is subject to a written subordination
agreement executed by the Agent on behalf of the Lenders; and
(s) Encumbrances affecting the Borrower's equity interest in an
Unrestricted Subsidiary.
SECTION 13.5. DEBTS. The Borrower, without the prior written consent of the
Required Lenders, will not incur, create, assume or in any manner become or be
liable in respect of any Debt, except for:
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(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, provided that for any Non-Recourse Indebtedness incurred
by Borrower subsequent to the execution of this Agreement, the
Borrower must obtain the Required Lenders' prior written consent to
the relevant documentation establishing/evidencing the non-recourse
nature and amount of such Non-Recourse Indebtedness, which consent
will not be unreasonably withheld;
(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) Debt (excluding Non-Recourse Indebtedness) existing as of the date of
this Agreement as set forth in Schedule 13.5, together with extensions
or refinancings;
(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) Debt represented by Hedging Agreements permitted by this Agreement;
(j) Guaranties by the Borrower of Debt of any Subsidiary and by any
Subsidiary of Debt of the Borrower or any other Subsidiary;
(k) 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; and
(l) Subject to the provisions of Sections 10.2 and 13.4(r), the
indebtedness evidenced by the Secured Subordinated Debt and guarantees
executed by an Subsidiary of Borrower guaranteeing payment thereof.
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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;
(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;
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(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) (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 tangible assets of any Person and investments made in
connection with the purchase, lease or other acquisition of all or
substantially all of the business, 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, or between
Pinnacle Gas Resources, Inc. and the Borrower or a 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,
53
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 FACILITY LOAN PROCEEDS. The Borrower shall not use any
Facility Loan proceeds to finance investments in marketable securities.
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 eighty-five
percent (85%) of the total volume of such production projected in the most
recent independent engineering report delivered to the Agent pursuant to Section
12.1(e) or as projected in the most recent internally prepared engineering
report delivered to the Agent 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 that are not included in the most recently delivered
engineering report, Borrower agrees to obtain the Required Lenders' prior
written consent to such Hedging Agreements, which consent shall not be
unreasonably withheld.
SECTION 13.11. PAYMENTS ON SECURED SUBORDINATED DEBT. Subject to the terms
and conditions of the subordination agreement referenced in Section 10.2 above,
the Borrower agrees that the only scheduled payments on the Secured Subordinated
Debt will be scheduled interest payments on promissory notes evidencing Secured
Subordinated Debt so long as the Line of Credit is in effect. In addition, the
Borrower agrees to the extent it has the discretion to do so, to make said
interest payments by the issuance of debt or equity securities to the maximum
extent permitted by the documents evidencing the Secured Subordinated Debt.
SECTION 13.12. PAYMENTS ON PERMITTED SUBORDINATED PROMISSORY NOTES. The
Borrower and the Lenders agree that the Borrower is permitted to pay the
Subordinated Promissory Notes pursuant to the terms of the Securities 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
Securities Purchase Agreement. Further, the Borrower agrees to exercise (to the
maximum extent permitted by the Securities Purchase Agreement) its right to
defer all or any portion of the interest accrued on the Subordinated Promissory
Notes as provided by Section 3.3(a) of the Securities Purchase Agreement.
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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 Lenders, 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.
(d) OTHER DEFAULTS IN FAVOR OF THE LENDERS. Should the Borrower and/or the
Guarantor default under any other loan, extension of credit, security agreement,
or other obligation in favor of any of the Lenders 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 $250,000 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 $250,000 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
55
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 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 Agent and/or the Lenders 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 Line of Credit Loan
Commitment will, at the option of the Lenders, either terminate or be suspended
(including any obligation to make any further Facility Loans), and, at the
Lenders' option, the Notes 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. For any other Event of
Default, the Agent, upon request of the Required Lenders, shall by notice to
Borrower declare the principal of, and all interest then accrued on, the Notes
and any other liabilities hereunder to be forthwith due and payable, whereupon
the same shall forthwith become due and payable without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or other notice
of any kind, all of which Borrower and each Guarantor hereby expressly waive,
anything contained herein or in the Notes to the contrary notwithstanding. Upon
the occurrence of an Event of Default and upon the request of the Required
Lenders, the Agent shall exercise any and all rights and
56
remedies under the Loan Documents, or any of them, granted to Agent hereunder or
granted to Agent at law or in equity, including, without limitation, foreclosure
of the Collateral. Nothing contained in this Article 14 shall be construed to
limit or amend in any way the Events of Default enumerated in the Notes 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
Lenders are 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 Lenders to or for the credit or the account of Borrower
against any and all of the indebtedness of Borrower under the Notes and the Loan
Documents, including this Agreement, irrespective of whether or not the Lenders
shall have made any demand under the Loan Documents, including this Agreement or
the Notes and although such indebtedness may be unmatured. Any amount set-off by
the Lenders shall be applied against the indebtedness owed the Lenders by
Borrower pursuant to this Agreement and the Notes. The Lenders agree 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 Lenders under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which the Lenders 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
Agent for the benefit of the Lenders on which the Borrower and the Guarantor may
in any way be liable and hereby ratify and confirm whatever the Agent and/or the
Lenders may do in this regard, (ii) all rights to notice and a hearing prior to
the Agent's taking possession or control of, or to the Agent's replevy,
attachment or levy upon, the Collateral or any bond or security which might be
required by any court prior to allowing the Agent to exercise 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 Agent 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 Agent may
choose or be required to send to Borrower and/or Guarantor under the Agreement.
Borrower and Guarantor hereby release Agent and the Lenders and hold Agent and
the Lenders harmless from any liability occasioned by the giving of or the
failure to give any such notice, it being understood that Agent 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
57
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
THE AGENT AND THE LENDERS
SECTION 15.1. APPOINTMENT AND AUTHORIZATION. Each Lender hereby appoints
Agent as its nominee and agent, in its name and on its behalf: (i) to act as
nominee for and on behalf of such Lender in and under all Loan Documents; (ii)
to arrange the means whereby the funds of Lenders are to be made available to
Borrower under the Loan Documents; (iii) to take such action as may be requested
by any Lender under the Loan Documents (when such Lender is entitled to make
such request under the Loan Documents); (iv) to receive all documents and items
to be furnished to Lenders under the Loan Documents; (v) to be the secured
party, mortgagee, beneficiary, and similar party in respect of, and to receive,
as the case may be, any collateral for the benefit of Lenders; (vi) to promptly
distribute to each Lender all material information, requests, documents and
items received from Borrower under the Loan Documents; (vii) to promptly
distribute to each Lender such Lender's Pro Rata Part of each payment or
prepayment (whether voluntary, as proceeds of insurance thereon, or otherwise)
in accordance with the terms of the Loan Documents and (viii) to deliver to the
appropriate Persons requests, demands, approvals and consents received from
Lenders. Each Lender hereby authorizes Agent to take all actions and to exercise
such powers under the Loan Documents as are specifically delegated to such Agent
by the terms hereof or thereof, together with all other powers reasonably
incidental thereto. With respect to its commitments hereunder and the Notes
issued to it, Agent and any successor Agent shall have the same rights under the
Loan Documents as any other Lender and may exercise the same as though it were
not the Agent; and the term "Lender" or "Lenders" shall, unless otherwise
expressly indicated, include Agent and any successor Agent in its capacity as a
Lender. Agent and any successor Agent and its affiliates may accept deposits
from, lend money to, act as trustee under indentures of and generally engage in
any kind of business with Borrower, and any Person which may do business with
Borrower, all as if Agent and any successor Agent were not Agent hereunder and
without any duty to account therefor to the Lenders except where the actions of
Borrower in connection therewith would constitute a Default or Event of Default
under this Agreement or any other Loan Document; provided that, if any payments
in respect of any property (or the proceeds thereof) now or hereafter in the
possession or control of Agent which may be or become security for the
obligations of Borrower arising under the Loan Documents by reason of the
general description of indebtedness secured or of property contained in any
other agreements, documents or instruments related to any such other business
shall be applied to reduction of the obligations of Borrower arising under the
Loan Documents, then each Lender shall be entitled to share in such application
according to its Pro Rata part thereof. Each Lender, upon request of any other
Lender, shall disclose to all other Lenders all indebtedness and liabilities,
direct and contingent, of Borrower to such Lender as of the time of such
request.
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SECTION 15.2. NOTE HOLDERS. From time to time as other Lenders become a
party to this Agreement after receiving the consent of Borrower, Agent shall
obtain execution by Borrower of additional Notes in amounts representing the
Commitments of each such new Lender. The obligation of such Lender shall be
governed by the provisions of this Agreement, including but not limited to, the
obligations specified in Article II hereof. From time to time, Agent may require
that the Lenders exchange their Notes for newly issued Notes to better reflect
the Commitments of the Lenders. Agent may treat the payee of any Note as the
holder thereof until written notice of transfer has been filed with it, signed
by such payee and in form reasonably satisfactory to Agent.
SECTION 15.3. CONSULTATION WITH COUNSEL. Lenders agree that Agent may
consult with legal counsel selected by Agent and shall not be liable for any
action taken or suffered in good faith by it in accordance with and in reliance
upon the advice of such counsel.
SECTION 15.4. DOCUMENTS. Agent shall not be under a duty to examine or pass
upon the validity, effectiveness, enforceability, genuineness or value of any of
the Loan Documents or any other instrument or document furnished pursuant
thereto or in connection therewith, and Agent shall be entitled to assume that
the same are valid, effective, enforceable and genuine and what they purport to
be.
SECTION 15.5. RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment
and acceptance of a successor Agent as provided below, Agent may resign at any
time by giving written notice thereof to Lenders and Borrower, and Agent may be
removed at any time with or without cause by Lenders. If no successor Agent has
been so appointed by Lenders (and approved by Borrower) and has accepted such
appointment within 30 days after the retiring Agent's giving of notice of
resignation or removal of the retiring Agent, then the retiring Agent may, on
behalf of Lenders, appoint a successor Agent. Any successor Agent must be
approved by Borrower, which approval will not be unreasonably withheld. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the rights
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder from and after the date on which the
successor Agent accepts its appointment. After any retiring Agent's resignation
or removal hereunder as Agent, the provisions of this Article XV shall continue
in effect for its benefit in respect to any actions taken or omitted to be taken
by it while it was acting as Agent.
SECTION 15.6. RESPONSIBILITY OF AGENT. It is expressly understood and
agreed that the obligations of Agent under the Loan Documents are only those
expressly set forth in the Loan Documents, or as may be imposed by applicable
law, and that Agent, as the case may be, shall be entitled to assume that no
Default or Event of Default has occurred and is continuing, unless Agent, as the
case may be, has actual knowledge of such fact or has received notice from a
Lender or Borrower that such Lender or Borrower consider that a Default or an
Event of Default has occurred and is continuing and specifying the nature
thereof. Neither Agent nor any of their directors, officers, attorneys or
employees shall be liable for any action taken or omitted to be taken by them
under or in connection with the Loan Documents, except for its or their own
gross negligence or willful misconduct. Agent shall incur no liability under or
in respect of any of the Loan Documents by acting upon any notice, consent,
certificate, warranty or other paper or
59
instrument believed by it to be genuine or authentic or to be signed by the
proper party or parties, or with respect to anything which it may do or refrain
from doing in the reasonable exercise of its judgment, or which may seem to it
to be necessary or desirable.
Agent shall not be responsible to Lenders for any of Borrower's or any
Guarantor's recitals, statements, representations or warranties contained in any
of the Loan Documents, or in any certificate or other document referred to or
provided for in, or received by any Lender under, the Loan Documents, or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of or
any of the Loan Documents or for any failure by Borrower or any Guarantor to
perform any of their obligations hereunder or thereunder. Agent may employ
agents and attorneys-in-fact and shall not be answerable, except as to money or
securities received by it or its authorized agents, for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care.
The relationship between Agent and each Lender is only that of agent and
principal and has no fiduciary aspects. Nothing in the Loan Documents or
elsewhere shall be construed to impose on Agent any duties or responsibilities
other than those for which express provision is therein made. In performing its
duties and functions hereunder, Agent does not assume and shall not be deemed to
have assumed, and hereby expressly disclaims, any obligation or responsibility
toward or any relationship of agency or trust with or for Borrower or any of its
beneficiaries or other creditors. As to any matters not expressly provided for
by the Loan Documents, Agent shall not be required to exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of all Lenders and such instructions shall be binding upon all
Lenders and all holders of the Notes; provided, however, that Agent shall not be
required to take any action which is contrary to the Loan Documents or
applicable law.
Agent shall have the right to exercise or refrain from exercising, without
notice or liability to the Lenders (except as otherwise provided for in this
Agreement or by applicable law), any and all rights afforded to Agent, as the
case may be, by the Loan Documents or which Agent may have as a matter of law;
provided, however, Agent shall not, without the consent of Lenders, take any
other action with regard to amending the Loan Documents, waiving any default
under the Loan Documents or taking any other action with respect to the Loan
Documents which requires consent of the Required Lenders. Provided further,
however, that no amendment, waiver, or other action shall be effected pursuant
to the preceding sentence without the consent of all Lenders which: (i) would
increase the Commitment amount of any Lender, (ii) would reduce any fees
hereunder, or the principal of, or the interest on, any Lender's Notes, (iii)
would postpone any date fixed for any payment of any fees hereunder, or any
principal or interest of any Lender's Notes, (iv) would increase any Lender's
obligations hereunder or would materially alter Agent's obligations to any
Lender hereunder, (v) would release Borrower from its obligation to pay any
Lender's Notes, (vi) would release the Guaranty and/or the Collateral, or (vii)
would amend this sentence. For purposes of this paragraph, a Lender shall be
deemed to have consented to any such action by Agent upon the passage of five
(5) Business Days after written notice thereof is given to such Lender in
accordance with Section 16.2. hereof, unless such Lender shall have previously
given Agent notice, complying with the provision of Section 16.2 hereof, to the
contrary. Agent shall not have liability to Lenders for failure or delay in
exercising any right or
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power possessed by Agent pursuant to the Loan Documents or otherwise unless such
failure or delay is caused by the gross negligence of the Agent.
SECTION 15.7. INDEPENDENT INVESTIGATION. Each Lender severally represents
and warrants to Agent that it has made its own independent investigation and
assessment of the financial condition and affairs of Borrower in connection with
the making and continuation of its participation hereunder and has not relied
exclusively on any information provided to such Lender by Agent in connection
herewith, and each Lender represents, warrants and undertakes to Agent that it
shall continue to make its own independent appraisal of the credit worthiness of
Borrower while the Notes are outstanding or its commitments hereunder are in
force. Agent shall not be required to keep itself informed as to the performance
or observance by Borrower of this Agreement or any other document referred to or
provided for herein or to inspect the properties or books of Borrower. Other
than as provided in this Agreement or any other Loan Document, Agent shall not
have any duty, responsibility or liability to provide any Lender with any credit
or other information concerning the affairs, financial condition or business of
Borrower which may come into the possession of Agent.
SECTION 15.8. INDEMNIFICATION. Lenders agree to indemnify Agent, ratably
according to their respective Line of Credit Loan Commitment on a Pro Rata
basis, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
proper and reasonable kind or nature whatsoever which may be imposed on,
incurred by or asserted against Agent in any way relating to or arising out of
the Loan Documents or any action taken or omitted by Agent under the Loan
Documents, provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Agent's gross negligence or
willful misconduct. Each Lender shall be entitled to be reimbursed by the Agent
for any amount such Lender paid to Agent under this Section 15.8. to the extent
the Agent has been reimbursed for such payments by Borrower or any other Person.
THE PARTIES INTEND FOR THE PROVISIONS OF THIS SECTION TO APPLY TO AND PROTECT
THE AGENT FROM THE CONSEQUENCES OF ANY LIABILITY INCLUDING STRICT LIABILITY
IMPOSED OR THREATENED TO BE IMPOSED ON AGENT AS WELL AS FROM THE CONSEQUENCES OF
ITS OWN NEGLIGENCE, WHETHER OR NOT THAT NEGLIGENCE IS THE SOLE, CONTRIBUTING OR
CONCURRING CAUSE OF ANY SUCH LIABILITY EXCLUDING, HOWEVER, GROSS NEGLIGENCE OF
AGENT.
SECTION 15.9. BENEFIT OF ARTICLE XV. The agreements contained in this
Article XV are solely for the benefit of Agent and the Lenders and are not for
the benefit of, or to be relied upon by, Borrower, any affiliate of Borrower or
any other person and shall not create any third-party beneficiary rights in
favor of any Person other than the Agent and the Lenders.
SECTION 15.10. PRO RATA TREATMENT. Subject to the provisions of this
Agreement, each payment (including each prepayment) by Borrower or any Guarantor
and collection by Lenders (including offsets) on account of the principal of and
interest on the Notes and fees provided for in this Agreement, payable by
Borrower or any Guarantor shall be made Pro Rata; provided, however, in the
event that any Defaulting Bank shall have failed to make an Advance as
contemplated in this Agreement hereof and Agent or another Lender or Lenders
shall have made such Advance, payment received by Agent for the account of such
Defaulting Bank(s) shall not
61
be distributed to such Defaulting Bank(s) until such Advance or Advances shall
have been repaid in full to the Lender or Lenders who funded such Advance or
Advances.
SECTION 15.11. ASSUMPTION AS TO PAYMENTS. Except as specifically provided
herein, unless Agent shall have received notice from Borrower prior to the date
on which any payment is due to Lenders hereunder that Borrower will not make
such payment in full, Agent may, but shall not be required to, assume that
Borrower has made such payment in full to Agent on such date and Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent Borrower shall not have so made such payment in full to Agent, each
Lender shall repay to Agent forthwith on demand such amount distributed to such
Lender together with interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays such amount to
Agent, at the interest rate applicable to such portion of the Revolving Loan.
Any payment due from any lender to Agent pursuant hereto shall bear interest at
the Federal Funds Rate
SECTION 15.12. OTHER FINANCINGS. Without limiting the rights to which any
Lender otherwise is or may become entitled, such Lender shall have no interest,
by virtue of this Agreement or the Loan Documents, in (a) any present or future
loans from, letters of credit issued by, or leasing or other financial
transactions by, any other Lender to, on behalf of, or with Borrower or any
Guarantor (collectively referred to herein as "Other Financings") other than the
obligations hereunder; (b) any present or future guarantees by or for the
account of Borrower or any Guarantor which are not contemplated by the Loan
Documents; (c) any present or future property taken as security for any such
Other Financings to the extent not also security for the Loans; or (d) any
property now or hereafter in the possession or control of any other Lender which
may be or become security for the obligations of Borrower or any Guarantor
arising under any loan document by reason of the general description of
indebtedness secured or property contained in any other agreements, documents or
instruments relating to any such Other Financings to the extent not also
security for the Loans.
SECTION 15.13. INTERESTS OF THE LENDERS. Nothing in this Agreement shall be
construed to create a partnership or joint venture between Lenders for any
purpose. Agent, Lenders and Borrower recognize that the respective obligations
of Lenders under the Revolving Loan Commitments shall be several and not joint
and that neither Agent, nor any of Lenders shall be responsible or liable to
perform any of the obligations of the other Lenders under this Agreement. Each
Lender is deemed to be the owner of an undivided interest in and to all rights,
titles, benefits and interests belonging and accruing to Agent under the
Security Instruments, including, without limitation, Liens and security
interests in any Collateral, fees and payments of principal and interest by
Borrower under the Revolving Loan Commitments on a Pro Rata basis. Each Lender
shall perform all duties and obligations of Lenders under this Agreement in the
same proportion as its ownership interest in the Loans outstanding at the date
of determination thereof.
SECTION 15.14. INVESTMENTS. Whenever Agent in good faith determines that it
is uncertain about how to distribute to Lenders any funds which it has received,
or whenever Agent in good faith determines that there is any dispute among the
Lenders about how such funds should be distributed, Agent may choose to defer
distribution of the funds which are the subject of such
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uncertainty or dispute. If Agent in good faith believes that the uncertainty or
dispute will not be promptly resolved, or if Agent is otherwise required to
invest funds pending distribution to the Lenders, Agent may invest such funds
pending distribution (at the risk of Borrower). All interest on any such
investment shall be distributed upon the distribution of such investment and in
the same proportions and to the same Persons as such investment. All monies
received by Agent for distribution to the Lenders (other than to the Person who
is Agent in its separate capacity as a Lender) shall be held by the Agent
pending such distribution solely as Agent for such Lenders, and Agent shall have
no equitable title to any portion thereof.
ARTICLE XVI
MISCELLANEOUS
SECTION 16.1. NO WAIVER; MODIFICATION IN WRITING. No failure or delay on
the part of the Agent and/or the Lenders 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 Notes, 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 Agent and the Required Lenders 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. Notwithstanding the foregoing, the parties
acknowledge that (i) the Consent Relating to Amended and Restated Credit
Agreement dated as of June 20, 2003 by and among Borrower, CCBM, Inc., and
Hibernia, and (ii) the Consent dated June ____, 2004 by and among Borrower,
CCBM, Inc., and Hibernia remain in full force and effect.
SECTION 16.2. 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 Agent and the Lenders
c/o the Agent:
Hibernia National Bank
313 Carondelet Street
New Orleans, LA 70130
Attn: David Reid
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If to the Lenders:
Hibernia National Bank
213 W. Vermilion Street
Lafayette, LA 70502
Attn: David Reid
Union Bank of California, N.A.
500 N. Akard, Suite 4200
Dallas, TX 75201
Attn: Damien Meiburger
If to the Borrower:
Carrizo Oil & Gas , Inc.
14701 St. Mary's Lane
Suite 800
Houston, TX 77079
Attn: Paul F. Boling
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: Paul F. Boling
SECTION 16.3. FEES AND EXPENSES. The Borrower agrees to pay all reasonable
out of pocket fees, costs and expenses of the Agent 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 Agent, and to pay all costs and expenses of the
Agent and the Lenders in connection with the enforcement of this Agreement, the
Notes or the other Related Documents, including reasonable legal fees and
64
disbursements arising in connection therewith. The Borrower also agrees to pay,
and to save the Agent and the Lenders 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
Notes, the other Related Documents, or any modification thereof.
SECTION 16.4. SECURITY INTEREST AND RIGHT OF SET-OFF. The Lenders 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 any Lender (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 Lenders
shall have a lien upon and a security interest in all property of the Borrower
in a Lender's possession or control which shall secure the Indebtedness of the
Borrower to the Lenders under this Agreement and the Notes.
SECTION 16.5. 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 Agent may execute or foreclose upon the Collateral in
such order and manner as the Agent, in its sole discretion, deems appropriate.
SECTION 16.6. GOVERNING LAW. This Agreement and the Notes 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 16.7. 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. Such Lender may provide, subject to the confidentiality
requirements of Section 16.15, 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 16.8. CONSENT TO SYNDICATION. The Borrower and the Guarantor
understand and acknowledge that Agent may syndicate the Loans to one or more
other lending institutions. The Borrower and the Guarantor consent, subject to
the confidentiality requirements of Section 16.14 below, to the Agent's
distribution to interested lending institutions of all financial information and
other data in Agent'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
Agent 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
65
Borrower's consent, which consent shall not be unreasonably withheld. In
addition, the Agent 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 16.9. PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary course
of its business and in accordance with applicable law, at any time assign to one
or more banks or other entities ("Purchasers") all or any part of its rights and
obligations under the Loan Documents. Such assignment shall be substantially in
the form of Exhibit C or in such other form as may be agreed to by the parties
thereto. The consent of the Borrower and the Agent shall be required prior to an
assignment becoming effective with respect to a Purchaser which is not a Lender
or an affiliate thereof; provided, however, that if a Default has occurred and
is continuing, the consent of the Borrower shall not be required. Such consent
shall not be unreasonably withheld or delayed. Each such assignment with respect
to a Purchaser which is not a Lender or an affiliate thereof shall (unless each
of the Borrower and the Agent otherwise consents) be in an amount not less than
the lesser of (i) $5,000,000.00 or (ii) the remaining amount of the assigning
Lender's Commitment (calculated as at the date of such assignment) or
outstanding Loans (if the applicable Commitment has been terminated). Upon (i)
delivery to the Agent of an assignment, together with any consents required by
this Section, and (ii) payment of a $3,500 fee to the Agent for processing such
assignment (unless such fee is waived by the Agent), such assignment shall
become effective on the effective date specified in such assignment. The
assignment shall contain a representation by the Purchaser to the effect that
none of the consideration used to make the purchase of the Commitment under the
applicable assignment agreement constitutes "plan assets" as defined under ERISA
and that the rights and interests of the Purchaser in and under the Loan
Documents will not be "plan assets" under ERISA. On and after the effective date
of such assignment, such Purchaser shall for all purposes be a Lender party to
this Agreement and any other Loan Document executed by or on behalf of the
Lenders and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto, and no
further consent or action by the Borrower, the Lenders or the Agent shall be
required to release the transferor Lender with respect such assignment. Upon the
consummation of any assignment to a Purchaser pursuant to this Section, the
transferor Lender, the Agent and the Borrower shall, if the transferor Lender or
the Purchaser desires that its Loans be evidenced by Notes, make appropriate
arrangements so that new Notes or, as appropriate, replacement Notes are issued
to such transferor Lender and new Notes or, as appropriate, replacement Notes,
are issued to such Purchaser, in each case in principal amounts reflecting their
respective Commitments, as adjusted pursuant to such assignment.
SECTION 16.10. 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 Agent and the Lenders and their respective 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 Agent and/or the Lenders, including all local counsel
hired by such counsel) ("Claim") incurred by the Agent and/or the Lenders in
investigating or preparing for, defending
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against, or providing evidence, producing documents or 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 Agent and/or the
Lenders hereunder or at common law or otherwise, and shall survive any
termination of this Agreement, the expiration of the Facility Loans and the
payment of all indebtedness of Borrower to the Lenders hereunder and under the
Notes, 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 16.10.
SECTION 16.11. MAXIMUM INTEREST RATE. Regardless of any provisions
contained in this Agreement or in any other documents and instruments referred
to herein, the Lenders shall never be deemed to have contracted for or be
entitled to receive, collect or apply as interest on the Notes any amount in
excess of the Maximum Rate, and in the event Lenders ever receives, collects or
applies as interest any such excess, of if an acceleration of the maturity of
the Notes 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 Notes for which such excess was received, collected or
67
applied, and, if the principal balance of the Notes are paid in full, any
remaining excess shall forthwith be paid to Borrower. All sums paid or agreed to
be paid to the Lenders for the use, forbearance or detention of the indebtedness
evidenced by the Notes 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 Lenders 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 Notes at the
Maximum Rate.
SECTION 16.12. WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION.
(a) THE BORROWER, THE GUARANTOR, THE AGENT AND THE LENDERS HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER, THE GUARANTOR,
THE AGENT AND THE LENDERS MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY
PERTAINING TO (i) THE NOTES, (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, THE AGENT AND THE LENDERS, AND THE BORROWER, THE AGENT,
AND THE LENDERS 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, THE AGENT AND THE
LENDERS 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 16.13. 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
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shall not render that provision invalid or unenforceable as to any other persons
or circumstances. 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 16.14. HEADINGS. Article and Section headings used in this
Agreement are for convenience only and shall not affect the construction of this
Agreement.
SECTION 16.15. CONFIDENTIALITY. For the purposes of this Section 16.15,
"CONFIDENTIAL INFORMATION" means information delivered to Agent and/or Lenders
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
Agent and/or the Lenders prior to the time of such disclosure, (b) subsequently
becomes publicly known through no act or omission by Agent and/or Lenders or any
Person acting on its behalf, or (c) otherwise becomes known to Agent and the
Lenders other than through disclosure by the Borrower or any Subsidiary. Agent
and the Lenders will maintain the confidentiality of such Confidential
Information in accordance with their standard procedures to protect confidential
information of third parties delivered to Agent and/or Lenders, 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 Notes, (iv) any Person
to which any Lender 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
16.15), (v) any federal or state regulatory authority having jurisdiction over
such 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 any
Lender, (x) in response to any subpoena or other legal process, (y) in
connection with any litigation to which such Lender is a party or an Event of
Default has occurred and is continuing, to the extent such 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 Notes or an interest therein,
by its acceptance of the Notes or an interest therein, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 16.15
as though it were a party to this Agreement.
(The remainder of this page was intentionally left blank.)
69
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: Paul F. Boling
Title: Vice President and
Chief Financial Officer
GUARANTOR:
CCBM, INC.
A DELAWARE CORPORATION
By:
---------------------------
Name: Paul F. Boling
Title: Vice President and
Chief Financial Officer
AGENT:
HIBERNIA NATIONAL BANK
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
CO-AGENT:
UNION BANK OF CALIFORNIA, N.A.
By:
------------------------------
Name: Scott Myatt
Title: Assistant Vice President
70
LENDERS:
HIBERNIA NATIONAL BANK
Percentage of Line of Credit By:
------------------------------
Loan Commitment: 60% Name:
----------------------------
Title:
---------------------------
UNION BANK OF CALIFORNIA, N.A.
Percentage of Line of Credit By:
------------------------------
Loan Commitment: 40% Name: Scott Myatt
Title: Assistant Vice President
71
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 Second Amended and Restated Credit Agreement (the "Credit
Agreement") dated September 30, 2004, by and among Carrizo Oil & Gas, Inc. (the
"Borrower"), CCBM, Inc. (the "Guarantor"), and Hibernia National Bank, as Agent,
and the Lenders that are signatory parties thereto.
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.
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 (i) the effects, if any, of
Hedging Agreements, pursuant to SFAS No. 13, and (ii) assets
of Unrestricted Subsidiaries)......................................................$
-----------
Total Consolidated Current Liabilities (excluding (i) principal
amounts due under the Line of Credit, (ii) the non-cash effects,
if any, of the non-cash stock option re-pricing accrual, and
(iii) liabilities of Unrestricted Subsidiaries))...................................$
-----------
Current Ratio........................................................................ to
-------- ---------
MINIMUM CURRENT RATIO REQUIRED.......................................................1.0 to 1.0
--- ---
1
II. MAXIMUM TOTAL RECOURSE DEBT TO EBITDA
(a) Total Recourse Debt..............................................................$
-----------
(b) EBITDA (excluding (i) net revenue related to assets
pledged to secure Non-Recourse Indebtedness,
(ii) earnings of Unrestricted Subsidiaries, and (iii) the
non-cash effects, if any, of the non-cash stock option
re-pricing expense+).............................................................$
-----------
(c) Ratio as of _______________________.............................................. ___ to ____
MAXIMUM RATIO PERMITTED.............................................................. 3.00 to 1.0
III. MINIMUM QUARTERLY DEBT SERVICE COVERAGE RATIO1
(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
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
IV. MINIMUM SHAREHOLDERS EQUITY2
(a) Shareholders Equity as of __________________.....................................$
-----------
(b) plus 100% of all common and preferred equity
contributed to Borrower after June 30, 2004......................................($ )
------------
(c) plus 50% of all positive earnings occurring
subsequent to 6-30-04............................................................$
-----------
(d) plus, on and after 180 days after issuance of
Secured Subordinated Debt, 50% of the
Secured Subordinated Debt........................................................$
-----------
Total (a+b+c+d)..................................................................$
-----------
AMOUNT REQUIRED.....................................................................$100,000,000.00
PLUS B+C+D
- ----------------------------
(2) For purposes of this covenant, the effects, if any, of ceiling test write
downs pursuant to Regulations SX4.10 of the SEC will not be included.
Sincerely,
CARRIZO OIL & GAS, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
3
EXHIBIT "B"
REQUEST FOR ADVANCE
TO: Hibernia National Bank, as Agent
ATTN: Mr. David Reid
RE: Second Amended and Restated Credit Agreement dated as of
September 30, 2004 among Carrizo Oil & Gas, Inc., CCBM, Inc., and
Hibernia National Bank, as Agent, and the Lenders party thereto
(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