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SAGE ENERGY COMPANY
10101 Reunion Place, Suite 800
San Antonio, Texas 78216-4158
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QUARTERLY REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
FORM 10-Q
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PART I
FINANCIAL INFORMATION
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SAGE ENERGY COMPANY
Balance Sheets
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
--------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 6,428 $ 5,192
Accounts receivable:
Trade 2,651 1,788
Oil and gas sales 3,743 5,602
Federal income tax receivable 244 13
Inventories - well and production
equipment, at cost 1,433 1,197
Prepaid expenses 156 63
--------- ---------
Total current assets 14,655 13,855
--------- ---------
Property, plant and equipment, at cost:
Producing oil and gas properties
(successful efforts method) 116,296 116,740
Undeveloped properties 4,624 2,515
Drilling equipment 8,524 17,378
Other 4,316 4,395
--------- ---------
133,760 141,028
Less accumulated depreciation and
depletion (105,517) (111,714)
--------- ---------
28,243 29,314
--------- ---------
Other assets, at cost, net of accumulated
amortization 294 317
--------- ---------
$ 43,192 $ 43,486
========= =========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
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SAGE ENERGY COMPANY
Balance Sheets
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
--------- --------
<S> <C> <C>
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable, trade $ 1,123 $ 1,783
Accrued liabilities 4,992 4,875
State income taxes payable 341 103
------- -------
Total current liabilities 6,456 6,761
Bonds payable 18,580 18,580
Deferred income taxes 4,062 5,263
------- -------
Total liabilities 29,098 30,604
------- -------
Stockholder's equity:
Common stock, $.01 par value; authorized
12,000 shares; issued 1,399 shares - -
Additional paid-in capital 14 14
Retained earnings 14,080 12,868
------- -------
Total stockholder's equity 14,094 12,882
Contingent liabilities
------- -------
$43,192 $43,486
======= =======
</TABLE>
The accompanying notes are an integral part
of these financial statements.
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SAGE ENERGY COMPANY
Statements of Income and Retained Earnings
(In Thousands, Except per Share and Share Data)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 31, March 31,
---------------------------------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $19,271 $22,766 $ 5,871 $ 6,685
Contract drilling 1,340 1,512 522 469
Interest and other income 1,541 365 991 109
------- ------- ------- -------
Total revenues 22,152 24,643 7,384 7,263
------- ------- ------- -------
Costs and expenses:
oil and gas operations:
Production taxes 977 997 294 324
Production costs 4,995 6,380 1,559 2,237
Nonproductive exploration
and property abandonment costs 1,684 1,276 1,228 218
------- ------- ------- -------
7,656 8,653 3,081 2,779
Contract drilling direct costs 1,038 993 416 252
Depreciation, depletion and
amortization 6,218 8,925 1,949 2,717
Geological and geophysical 1,206 803 551 277
General and administrative 2,483 3,113 637 645
Interest 1,184 1,354 394 438
------- ------- ------- -------
Total costs and expenses 19,785 23,841 7,028 7,108
------- ------- ------- -------
Income from operations before income taxes 2,367 802 356 155
Income tax expense (benefit):
Federal - current 1,798 (170) 1,113 (170)
State - current 238 58 149 22
Deferred (1,201) 290 (1,070) 140
------- ------- ------- -------
835 178 192 (8)
------- ------- ------- -------
Income before cumulative effect of
change in accounting 1,532 624 164 163
Cumulative effect of change in accounting - 4,250 - -
------- ------- ------- -------
Net income 1,532 4,874 164 163
Retained earnings:
Beginning 12,868 7,927 13,916 12,318
Dividend (320) (320) - -
------- ------- ------- -------
Ending $14,080 $12,481 $14,080 $12,481
======= ======= ======= =======
Net income per common share:
Income before cumulative effect of
change in accounting $ 1,095 $ 446 $ 117 $ 117
Cumulative effect of change in accounting - 3,038 - -
------- ------- ------- -------
$ 1,095 $ 3,484 $ 117 $ 117
======= ======= ======= =======
Weighted average number of shares 1,399 1,399 1,399 1,399
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE> 5
SAGE ENERGY COMPANY
Statements of Cash Flows
(In Thousands)
<TABLE>
<CAPTION>
Nine months ended
March 31,
-----------------------------
1995 1994
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,532 $ 4,874
------- -------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and
amortization 6,218 8,925
Loss on disposition of assets 211 726
Deferred income taxes (1,201) (3,960)
Changes in current assets and
liabilities:
Accounts receivable 996 1,971
Federal income tax receivable (231) (670)
Inventories (236) 12
Prepaid expenses (93) (411)
Accounts payable (660) (1,109)
Accrued liabilities 117 (891)
State income taxes payable 238 60
------- -------
Total adjustments 5,359 4,653
------- -------
Net cash provided by
operating activities 6,891 9,527
------- -------
Cash flows from investing activities:
Proceeds from sales of assets 2,153 786
Capital expenditures (7,488) (8,786)
------- -------
Net cash used in investing
activities (5,335) (8,000)
------- -------
Cash flows from financing activities:
Bank debt repayments - (3,583)
Dividends (320) (320)
------- -------
Net cash used in
financing activities (320) (3,903)
------- -------
Net increase (decrease) in cash and cash equivalents 1,236 (2,376)
Cash and cash equivalents:
Beginning of period 5,192 6,123
------- -------
End of period $ 6,428 $ 3,747
======= =======
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE> 6
SAGE ENERGY COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
NOTE 1
In the opinion of management of the Company, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as of
March 31, 1995, and the results of operations and cash flows for the nine
months then ended. The results of operations for the nine-month period and
three-month period ended March 31, 1995 are not necessarily indicative of the
results to be expected for the full fiscal year.
NOTE 2
Borrowings under the Credit Agreement which was amended and restated as of
March 9, 1992 to form the Second Amended and Restated Credit Agreement were
repaid as of March 31, 1994. In addition, the Second Amended and Restated
Credit Agreement provides a revolving credit facility under which the Company
may borrow from time to time an amount referenced to the Company's "borrowing
base," but not to exceed $10,000,000. The borrowing base is generally
determined by the value of the Company's oil and gas properties. As of March
31, 1995, there was no outstanding term loan and there were no borrowings
outstanding with respect to the revolving credit facility. Effective May 9,
1995, the Company entered into a Second Amendment to the Second Amended and
Restated Credit Agreement. The Amendment extends the Company's ability to
borrow funds under the revolving credit facility until June 30, 1997 and
reduces the "borrowing base" to $3,000,000.
NOTE 3
Effective July 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income
Taxes," which requires a change from the deferred method under APB Opinion 11
to the asset and liability method of accounting for income taxes. Under the
asset and liability method of FAS 109, deferred income taxes are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under FAS
109, the effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date.
The adoption of FAS 109 has reduced the net deferred tax liability by
approximately $4,250,000 and this amount has been reported separately as the
cumulative effect of the change in the method of accounting for income taxes in
the statement of income for the nine-month period ended March 31, 1994.
<PAGE> 7
SAGE ENERGY COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
Total income tax expense attributable to earnings before the cumulative effect
of change in accounting for the nine-month period ended March 31, 1995 was
$835,000 of which $2,036,000 was attributable to current income tax expense and
$1,201,000 was attributable to deferred income tax benefit.
NOTE 4
On March 28, 1994, the Company entered into the Commodity Floor Transaction
(the "Floor Agreement") with Chemical Bank. The Agreement commenced on April
1, 1994 and ended on December 31, 1994. The Company effectively received a
price associated with the New York Mercantile Exchange price of no lower than
$13.00 per barrel with respect to 40,000 barrels of production per month. The
Company paid $72,000 for the Agreement which was amortized over the life of the
Agreement.
NOTE 5
During the nine-month period ended March 31, 1995, the Company sold nine of its
drilling rigs for an aggregate consideration of approximately $1,760,000. This
sale resulted in a gain of approximately $1,059,000 before income tax effect.
NOTE 6
The Company declared bonuses to four of its officers and directors of
approximately $400,000 in December 1994. Bonuses of approximately $480,000
were paid in December 1993. The Company declared dividends of approximately
$320,000 in December 1994 and 1993.
NOTE 7
The Company is involved in various claims and legal actions arising in the
ordinary course of business. Management believes the ultimate disposition of
these matters will have no material adverse effect on the financial condition
of the Company.
NOTE 8
Subsequent to March 31, 995, the Company purchased a 50% interest in certain
oil and gas properties, two drilling rigs, two vehicles and pipe inventory from
Blanco Oil Company for approximately $3,050,000. Jesse Minor, Rex Amini, Ron
Amini and Michael Amini purchased the remaining 50% interest in certain oil and
gas properties as well as two other drilling rigs for $2,450,000. The owner of
Blanco Oil Company, K. K. Amini, is the father of Rex, Ron and Michael Amini
and the father-in-law of Jesse Minor, managing directors of the Company. The
Company has received appraisals from third parties indicating that the purchase
price for the Blanco Oil Company assets (such appraisals did not include the
pipe inventory and vehicles) was at least at the fair market value thereof.
<PAGE> 8
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Position
March 31, 1995 and June 30, 1994
The Company's current ratio was 2.27 to 1 at March 31, 1995 as
compared to the fiscal year ended June 30, 1994 current ratio of 2.05 to 1.
Cash on hand was $6,428,000 at March 31, 1995 and was $5,192,000 at the end of
fiscal 1994.
During the quarter ended March 31, 1995, the Company used cash from
operations to, among other things, drill and rework wells, acquire leases and
related properties for drilling, to pay a dividend to its sole shareholder and
bonuses to certain officers and directors. Specifically, the Company utilized
approximately $1,751,000 for capital expenditures as described below.
The Company's net fixed assets decreased during the third quarter of
fiscal 1995 primarily as a result of the write off of various nonproductive
exploration and property abandonment costs of $1,007,000 and from the sale of
several of the Company's drilling rigs as well as depreciation and depletion
charges of $1,949,000. This decrease was partially offset by additions to the
Company's producing oil and gas properties which resulted from drilling and
recompletion work, and from acquisitions of leases. These additions amounted
to approximately $1,694,000 (See discussion under the heading "Liquidity and
Capital Resources"). Only one of the Company's drilling rigs was readily
available for service during the third quarter of fiscal 1995; however, it was
not active during the quarter. The Company sold several of its drilling rigs
in the third quarter as described in Results of Operations below.
Statement of Financial Accounting Standards No. 109 (FAS 109),
"Accounting for Income Taxes", requires a change from the deferred method under
APB Opinion 11 to the asset and liability method of accounting for income
taxes. Under the asset and liability method of FAS 109, deferred income taxes
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under FAS 109, the effect on deferred taxes of a change
in tax rates is recognized in income in the period that includes the enactment
date. The Company has applied the provisions of FAS 109 in fiscal 1994 without
restating prior years' financial statements. The adoption of FAS 109 in fiscal
1994 reduced the net deferred tax liability by approximately $4,250,000; this
amount was reported separately as the cumulative effect of the change in the
method of accounting for income taxes in the statement of operations for the
quarter ending September 30, 1993.
The Company does not provide post retirement benefits to its employees
and as a result, Statement of Accounting Standards No. 106, "Employers
Accounting for Post Retirement Benefits Other Than Pensions" and Statement of
Financial Accounting Standards No. 112, "Employer's Accounting for Post
Retirement Benefits" are not applicable to the Company and will not affect the
financial statements of the Company.
Results of Operations
Three Months Ended March 31, 1995 and March 31, 1994
The Company's oil and gas revenues were lower in the third quarter of
fiscal 1995 than the prior comparable quarter primarily as a result of lower
oil production and lower gas prices. As compared to the prior comparable
quarter, lower oil production had a negative effect on revenue by approximately
$1,039,000, lower gas prices approximately $836,000. However, average oil
prices were higher than the prior comparable quarter a year ago, $17.36 vs
$13.55, which amounts to an approximate $1,112,000 offset to the above
decreases. The Company sold one of its drilling rigs for $251,625 in February
1995 reflecting a gain of $158,428 (before income tax effect) which has been
included in interest and other income. Additionally, in March 1995 the Company
sold by auction seven other of its drilling rigs for approximately $1,224,000
generating a gain before income tax of $703,600. Such gains have been included
in interest and other
7
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income.
Production costs were less than the prior comparable period primarily
due to lower production. Nonproductive exploration and property abandonment
costs increased as compared to the same quarter a year ago due primarily to the
increased write-offs of nonproductive exploration, property abandonment costs
and expired leases.
Interest expense decreased by approximately $44,000 as compared to the
prior comparable quarter due primarily to decreased debt. The Company made a
final payment on March 31, 1994 of $1,382,703 on its bank debt thereby
eliminating its debt at such time. The Company also reacquired and cancelled
$1,234,000 in principal amount of Debentures in fiscal 1994 thus decreasing the
annual interest expense attributable to the Debentures by $104,890. The
Company may incur additional indebtedness under its revolving line of credit
described below.
The Company will incur ongoing interest expense related to its
outstanding indebtedness presently comprised of its outstanding 8 1/2%
subordinated debentures. Should the Company incur additional bank indebtedness
to finance its exploration, development, and possible property acquisition
activities, interest expense will further increase during the periods in which
such indebtedness is incurred and outstanding.
Expenses related to depreciation, depletion, and amortization costs
decreased from the prior comparable quarter as a result of, among other things,
lower production and a lower depletable base along with increased reserves.
Geological and geophysical costs increased due to the Company's increased
exploration activities and 3-D seismic activities.
The Company completed three (3) new producing wells as operator in the
third quarter of fiscal 1995 and reentered, recompleted, reworked or
participated in a number of others. Substantially all of the Company's
revenues and cash derived from operations came from oil and gas sales. The
Company's profitability depends in large part on its ability to find or
purchase and efficiently produce oil and gas reserves. In addition,
profitability is heavily affected by oil and gas prices.
Results of Operations
Nine Months Ended March 31, 1995 and March 31, 1994
A comparison of the Company's operations from the nine-month periods
ended March 31, 1995 and March 31, 1994 can generally be made on the same basis
as the comparison of the three-month periods discussed above. The reasons for
the operating income and the factors affecting profitability are generally the
same, except that the Company sold one of its drilling rigs in October 1994 for
$285,000 reflecting a gain of $197,000 before income tax effect. In September
1993, the cumulative effect of change in accounting principle of $4,250,000
relating to the adoption of FAS 109 was reported. No such item occurred in the
current nine- month period. (See prior discussion under "Financial Position").
Liquidity and Capital Resources
The Company's long-term debt at March 31, 1995 consists of its
convertible debenture issue, which bears interest at 8-1/2%, is due in 2005
(the "Debentures") and presently has an outstanding balance of $18,580,000.
To date, the Company has reacquired $11,420,000 of the original $30,000,000
face amount of Debentures. The Debentures are convertible into cash at the
rate of $260 per every $1,000 in principal amount of Debentures.
The term facility provided under the Company's loan agreement
(referred to herein as the "Credit Agreement") with Texas Commerce Bank
National Association (the "Bank") was fully repaid in March 1994. The Credit
Agreement also provided for a revolving credit facility pursuant to which the
Company could borrow from time to time an amount determined by reference to the
Company's "borrowing base", but in no event more than $10,000,000. Effective
May 9, 1995, the Company entered into a Second Amendment to Second Amended and
Restated Credit Agreement (the "Amendment"). The Amendment generally provides
an extension of the Company's ability to borrow funds under the revolving
credit facility (until June 30, 1997) (the "Termination Date"). The
8
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Amendment also decreases the amount that the Company may borrow down to
$3,000,000 under the revolving credit facility. On the Termination Date
(subject to acceleration for certain events), any outstanding balance under the
Credit Agreement is scheduled to be fully paid. However, such repayment may be
accelerated by the Company based upon availability of cash or other appropriate
uses of cash, and other factors in its discretion. As of May 12, 1995, the
Company had not drawn funds under the Credit Agreement.
The Company entered into the Amendment for the primary purpose of
providing the Company with available funds following the acquisition of certain
properties and assets from Blanco Oil Company which occurred subsequent to
March 31, 1995. In the Blanco Oil transaction, the Company purchased a 50%
interest in certain west Texas oil and gas properties for $1,750,000 and two
drilling rigs for approximately $1,149,000. The Company also obtained two
vehicles and pipe inventory in the transaction for an approximate aggregate of
$151,000. In the same transaction, Messrs. Rex Amini, Ronald Amini, Michael
Amini and Jesse Minor purchased the remaining 50% of the oil and gas properties
from Blanco Oil Company for the same purchase price and two other drilling rigs
for $700,000. Blanco Oil Company is owned by K.K. Amini, the father of Rex,
Michael, and Ron Amini and Sue Amini Minor (the wife of Jesse Minor). The
Company has received appraisals from third parties indicating that the purchase
price for the Blanco Oil assets was at least at the fair market value thereof.
Such appraisals excluded the pipe inventory and vehicles.
The Company consummated the acquisition of oil and gas properties from
Blanco to generally increase the portfolio for longer life reserves. Although
management of the Company continues to deem it important to acquire additional
properties with longer life reserves at suitable prices, the Company may also
consider further sales of properties. The proceeds from any such sales could
be used for a variety of purposes, including property acquisitions,
acquisitions of outstanding debentures, and repayment of bank debt.
In March 1995, the Company sold, by auction, seven of its drilling
rigs for approximately $1,224,000. The Company had previously sold two of its
drilling rigs in the second and third quarter of fiscal 1995. The two rigs
acquired from Blanco are generally of higher quality than those sold by the
Company. The Company also recently announced that it has terminated its
program to use up to $2 million to repurchase certain of its outstanding
Debentures in the open market or in privately negotiated transactions. There
were no other purchases by the Company of its Debentures under this program.
For approximately the last three fiscal years, the Company has
aggressively pursued exploration and development activities (particularly
horizontal drilling activities) and incurred expenditures attendant thereto.
At the time such expanded activities are undertaken, they may result in a
short-term negative impact on capital resources and liquidity even if they are
ultimately successful.
Revenues can be expected to decline due to the decrease in prices as
well as from a decrease in production resulting from decreased drilling
activities and the natural decline in the Austin Chalk Trend area where a
majority of the Company's horizontal drilling takes place. Wells in the Austin
Chalk Trend area have traditionally exhibited significant initial production
followed by a more rapid decline than other areas. In addition, reservoir
characteristics make extrapolating future production and revenues from wells in
this area difficult. Production costs may also decline as a result of decreased
production.
The Company intends to continue on a modified basis its exploration
and development activities in the Austin Chalk and in other areas. Such
activity will in large part be based upon availability of capital and economic
prospects and with consideration for continued volatility in oil and gas
prices. The Company will also continue to seek undeveloped leasehold acreage
and to consider various proposals for the acquisition of producing properties
within such parameters. Further, the Company will expend funds to implement
various enhanced recovery techniques within such parameters and continue its
horizontal drilling activities with industry partners and on its own. The
Company has also begun to pursue exploration opportunities which it has
identified through the use of computer technology and 3-D seismic.
Specifically, the Company has undertaken significant exploration activities in
North Dakota. The Company anticipates that its increased exploration
activities will continue to have a negative impact on
9
<PAGE> 11
its liquidity. The Company anticipates utilizing internally generated funds
and, if necessary and available, funds under the Restated Credit Agreement to
continue such activities.
The Company is required to make estimated payments of Federal income
taxes for the fiscal year ending June 30, 1995 and has paid $2,005,000 during
the first three quarters of fiscal 1995.
On December 6, 1994 the Company declared a cash dividend to its sole
shareholder of $228.73 per share (or an aggregate of $320,000). The Company's
sole shareholder is owned by and controlled by Michael Amini, Rex Amini, Ronald
Amini, and Jesse Minor. The Company may consider the payment of cash dividends
(in accordance with applicable law and the provisions of the Restated Credit
Agreement as the same may be modified or amended from time to time) in the
future. The payment of such dividends will be determined by the Company as
general business conditions, the development of the Company's business, the
financial condition of the Company, and other factors may warrant. Any such
payment of dividends would adversely affect capital resources and liquidity.
In December 1994, the Company also determined to pay bonuses to four of its
officers and directors aggregating $400,000.
In addition, the Company elected not to make a sinking fund payment
(which would ordinarily have been due at least one business day before October
15, 1994) for the purpose of setting aside funds to retire its outstanding
Debentures. The Company is not required to make such payment, which would
ordinarily be a sum in cash sufficient to retire by redemption $1,500,000
principal amount of the Debentures, because it reacquired and cancelled a
sufficient number of Debentures to eliminate the sinking fund payment required
on such date. The Company has reacquired and cancelled Debentures in the face
amount of $11,420,000, which could, if the Company so elects, result in the
deferral of sinking fund payments until 1997. The Company reacquired and
cancelled an aggregate of $1,234,000 in principal amount of Debentures in
fiscal 1994 for an aggregate purchase price of $999,540 which resulted in an
extraordinary gain of approximately $141,000, net of tax effect. The reacquired
Debentures were cancelled.
The Company maintains an internal compliance program to monitor its
compliance with environmental laws and employs an independent consulting firm
to inspect its wellsites to determine whether the Company has any clean-up
obligations.
Liquidity is heavily affected by oil and gas prices. Oil prices
generally evidenced substantial declines during the prior fiscal year.
Additionally, natural gas prices are at low levels. The Company cannot predict
with accuracy the volatility or parameters of future oil or gas prices.
Further, should the value of the Company's assets decrease (as a result of
declines in oil and gas prices or other factors), any future bank borrowings
may be subject to mandatory prepayment.
Although certain of the transactions described herein may have
adversely affected liquidity and capital resources, management of the Company
currently believes that (based on present pricing scenarios) its liquidity and
capital resources are generally adequate. However, as a result of the
exploration and development activities and the possible acquisition of
properties with long-life reserves, it is possible that the Company will
utilize other borrowings under the revolving credit facility to finance its
activities.
10
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(i) Exhibit 10.1 Second Amendment to the Second Amended and
Restated Credit Agreement dated as of May 9, 1995 among
Sage Energy Company and Texas Commerce Bank National
Association.
Exhibit 27.1 Financial Data Schedule
11
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has only caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Sage Energy Company
-------------------
(Registrant)
Date: May 15, 1995 By: /s/ Jesse Minor
-------------------------------
Jesse Minor
President
Date: May 15, 1995 By:/s/ Stanley A. Paris, Jr.
-------------------------------
Stanley A. Paris, Jr.
Vice President-Finance
Principal Accounting Officer
12
<PAGE> 14
INDEX TO EXHIBITS
Exhibit
Number
10.1 Exhibit 10.1 Second Amendment to Second Amended and Restated
Credit Agreement dated as of May 9, 1995 among Sage Energy
Company and Texas Commerce Bank National Association.
27.1 Exhibit 27.1 Financial Data Schedule for Nine months Ended
March 31, 1995. (Pursuant to Item 601(c)(iv) of Regulation S-X,
the Financial Data Schedule is not deemed to be "filed" for
purposes of Section 11 of the Securities Act of 1933, as amended,
or Section 18 of the Securities Exchange Act of 1934, as
amended.)
13
<PAGE> 1
EXHIBIT 10.1
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(this Second Amendment"), dated as of May 9, 1995 is made and entered into
between SAGE ENERGY COMPANY, a Delaware corporation (the "Borrower"), the banks
and other financial institutions from time to time set forth on Exhibit 1.1 to
the Credit Agreement (as hereinafter defined)(herein collectively called the
"Banks", and individually a "Bank"), and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association ("TCB"), as administrative agent
for the ratable benefit of the Banks (herein in such capacity, together with
any successor(s) thereto in such capacity, called the "Administrative Agent").
WHEREAS, the Borrower, the Administrative Agent and the Banks and
Texas Commerce Bank-San Antonio, N.A. ("TCBSA" and together with TCB, the
"Original Banks") entered into a Second Amended and Restated Credit Agreement
dated as of March 9, 1992 (the "Prior Credit Agreement") providing for, among
other things, (i) revolving credit loans to be made by the Banks to the
Borrower in a principal amount not to exceed $10,000,000.00 in the aggregate at
any time outstanding and (ii) a term loan to be made by the Banks to the
Borrower in the principal amount of $14,325,000.00 on the terms and subject to
the conditions therein set forth;
WHEREAS, the Borrower, the Administrative Agent and the Original Banks
entered into a First Amendment to Second Amended and Restated Credit Agreement
dated as of June 30, 1993 (the "First Amendment") to amend the Prior Credit
Agreement in certain respects (the Prior Credit Agreement as amended through
the First Amendment is hereinafter referred to as the "Credit Agreement");
WHEREAS, TCBSA was merged into, and became a branch bank of TCB;
WHEREAS, the Borrower reduced the Revolving Credit Commitment from
$10,000,000 to $500,000;
WHEREAS, the Borrower has repaid the Term Loan in full; and
WHEREAS, the parties desire to increase the Revolving Credit
Commitment from $500,000 to $3,000,000, extend the maturity of the Revolving
Credit Commitment from June 30, 1995 until June 30, 1997 and to further amend
the Credit Agreement in certain respects.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and warranties herein set forth, and for other good
and valuable consideration, the parties hereto agree as follows:
1. MODIFICATION OF SECTION 1.1.
1.1. Section 1.1 of the Credit Agreement is hereby amended
by changing the definitions therein of "Agreement", "Commitment", "Loan
Documents", "Mortgage Amendments", "Revolving Credit Commitment" and
"Termination Date" to read in their entirety as set forth below:
"Agreement" - shall mean the Second Amended and Restated
Credit Agreement as amended through the First Amendment and as amended
through the Second Amendment and as
<PAGE> 2
same may from time to time be further amended, modified, supplemented
or extended.
"Commitment" - shall mean, with respect to each Bank, such
Bank's Revolving Credit Commitment, which subject to the provisions
ofSections 2.1 and 7.2 hereof, shall be the amounts set forth under
the name of such Bank on Exhibit 1.1 hereto, reduced by the amount of
any permanent reduction(s) in such amount made pursuant to Section 2.6
hereof.
"Loan Documents" - shall mean (a) this Agreement, (b) the
Revolving Credit Note, (c) the Current Mortgages, (e) if and when
executed and delivered pursuant to Section 5.14 hereof, each
Additional Mortgage and (f) any other document executed by the
Borrower to secure obligations of the Borrower hereunder or
thereunder.
"Mortgage Amendments" - shall mean, collectively, (i) those
certain first amendments to the Original Mortgages, each dated as of
January 9, 1990, executed by the Borrower and the Administrative Agent
and described in Exhibit 1.2, hereto, (ii) those certain second
amendments to the Original Mortgages, each dated as of August 17,
1990, executed by the Borrower and the Administrative Agent and
described in Exhibit 1.2 hereto, (iii) those certain third amendments
to the Original Mortgages, each dated as of March 9, 1992, executed by
the Borrower and the Administrative Agent and described in Exhibit 1.2
hereto, and (iv) those certain fourth amendments to the Original
Mortgages, each dated as of May 9, 1995, executed by the Borrower and
the Administrative Agent and described in Exhibit 1.2 hereto.
"Revolving Credit Commitment" - shall mean, at any time, with
respect to each Bank, the face amount of the Revolving Credit Note
payable to the order of such Bank and in the aggregate for all Banks,
$3,000,000, as each such amount may be permanently terminated or
reduced from time to time pursuant to Sections 2.6 or 7.2(a).
"Termination Date" - shall mean June 30, 1997, or the earlier
date of termination in whole of the Total Commitment pursuant to
Section 2.6 or Section 7.2.
1.2. Section 1.1 of the Credit Agreement is hereby further
amended by adding the following new definition of "First Amendment" immediately
after the definition therein of "Federal Funds Effective Rate":
"First Amendment" - shall mean that certain First Amendment to
Second Amended and Restated Credit Agreement dated as of the June 30,
1993 by and between the Borrower, the Banks, and the Administrative
Agent.
1.3. Section 1.1 of the Credit Agreement is hereby further
amended by adding the following new definitions of "Prior Revolving Loans", and
"Prior Revolving Notes" immediately after the definition therein of "Prime
Rate":
"Prior Revolving Loans" - shall mean the "Revolving Credit
Loans" evidenced by the Prior Revolving Notes and outstanding on the
Second Amendment Effective Date.
"Prior Revolving Notes" - shall mean collectively, (i) the
promissory note of the Borrower dated March 9, 1992, payable to the
order of TCB in the original principal sum of up
-2-
<PAGE> 3
to $9,000,000 evidencing the Prior Revolving Loans made by TCB under
the Agreement and (ii) the promissory note of the Borrower dated March
9, 1992, payable to the order of Texas Commerce Bank - San Antonio,
N.A. (predecessor-in-interest to TCB) in the original principal sum of
up to $1,000,000 evidencing the Prior Revolving Loans made by Texas
Commerce Bank - San Antonio, N.A. (predecessor-in-interest to TCB)
under the Agreement.
1.4. Section 1.1 of the Credit Agreement is hereby further
amended by adding the following new definitions of "Second Amendment", and
"Second Amendment Effective Date" immediately after the definition therein of
"Revolving Credit Note":
"Second Amendment" - shall mean that certain Second Amendment
to Second Amended and Restated Credit Agreement dated as of the Second
Amendment Effective Date by and between the Borrower, the Banks, and
the Administrative Agent.
"Second Amendment Effective Date" - shall have the meaning
assigned to that term in the Second Amendment.
1.5. Section 1.1 of the Credit Agreement is hereby further
amended by deleting the definitions therein of "Co-Agents", "Revolving Credit
Borrowing Base", and "TCBSA".
2. MODIFICATION OF SECTION 2.
2.1. MODIFICATION OF SECTION 2.1. Section 2.1 of the Credit
Agreement is hereby amended to read in its entirety as follows:
"SECTION 2.1. Revolving Credit Commitment. Subject to
the terms and conditions and relying upon the representations
and warranties herein set forth, each Bank severally and for
itself alone, agrees, to make revolving credit loans (the
"Revolving Credit Loans") to the Borrower, at any time and
from time to time on and after the Effective Date and up to,
but excluding, the Termination Date in an aggregate amount
outstanding for such Bank not to exceed at any time an amount
equal to the lesser of (i) such Bank's Revolving Credit
Commitment and (ii) an amount equal to such Bank's Percentage
times the Borrowing Base then in effect. Notwithstanding the
foregoing, (i) a Bank's Percentage share of the aggregate
amount of all Revolving Credit Loans outstanding at any one
time shall not exceed such Bank's Revolving Credit Commitment
and (ii) the aggregate amount of all Revolving Credit Loans
outstanding at any time shall not exceed the lesser of (x) the
Total Revolving Credit Commitment and (y) the Borrowing Base
as at such time. Within the foregoing limits and subject to
the other terms and conditions of this Agreement, the Borrower
may borrow, repay, prepay and reborrow hereunder, on and after
the Effective Date and prior to the Termination Date.
2.2. MODIFICATION OF SECTION 2.3(C). Section 2.3(c) of the
Credit Agreement is hereby amended to read in its entirety as follows:
"(c) The "Borrowing Base" from time to time in effect
hereunder shall be the lesser of (i) the maximum aggregate
amount of credit which the Banks have determined to be
available pursuant to the Total Revolving Credit Commitment
(the "Banks' Borrowing Base") and (ii) the amount requested
by the Borrower to be available pursuant
-3-
<PAGE> 4
to the Total Revolving Credit Commitment. The determination
of such maximum aggregate amount of credit shall be made
unanimously and in good faith by all the Banks, in the
exercise of their sole discretion and in accordance with their
respective customary practices and standards for oil and gas
loans. In connection with the redetermination of the Borrowing
Base and upon receipt of each Reserve Report each Bank shall
submit to the Administrative Agent on or before March 21 or
September 21, as the case may be, such Bank's determination of
the maximum aggregate amount of credit which such Bank has
determined should be available to the Borrower pursuant to the
Total Revolving Credit Commitment as of the next succeeding
October 1 or April 1, as the case may be (each such date being
a "Redetermination Date". If by any Redetermination Date the
Banks are unable to agree upon a Borrowing Base, until the
next Redetermination Date the Borrowing Base shall be the
lowest determination of any Bank. The Administrative Agent
shall notify the Borrower in writing within two (2) Business
Days of any such redetermination and in any event not later
than the Redetermination Date of the determination of the
Banks' Borrowing Base. If on any Redetermination Date the
Borrower requests an amount which is less than the Banks'
Borrowing Base on said Redetermination Date, the Borrower may
increase the Borrowing Base at any time between said
Redetermination Date and the next succeeding Redetermination
Date (a "Borrowing Base Period") to an amount which is equal
to or less than the Banks' Borrowing Base; provided, however,
that the commitment fees shall be calculated as if the Banks'
Borrowing Base had been in effect for the entire Borrowing
Base Period. Until the first Redetermination Date (October 1,
1995) the amount of the Borrowing Base shall be $3,000,000,
less any reductions thereof required by Section 2.3(d) hereof."
2.3. MODIFICATION OF SECTION 2.4. Section 2.4 of the
Credit Agreement is hereby amended to read in its entirety as follows:
"SECTION 2.4. The Notes. The Revolving Credit Loans
made by each Bank shall be evidenced by a single Revolving
Credit Note of the Borrower (together with all renewals,
extensions, modifications and replacements thereof and
substitutions therefor, the "Revolving Credit Note") in
substantially the form of Exhibit 2.4-A hereto, dated the
Second Amendment Effective Date, payable to the order of such
Bank on or before the Termination Date in a principal amount
equal to the Revolving Credit Commitment of such Bank, and
otherwise duly completed. The Borrower shall pay interest on
the Loans as provided in Section 2.8 hereof and shall pay
principal on the Loans as provided in Section 2.6 and Section
2.10 hereof. Each Bank shall use its best efforts to keep a
record of the Revolving Credit Loans made by it and the
payments received by it with respect to its Revolving Credit
Note and the aggregate unpaid principal amount so recorded
shall be rebuttable presumptive evidence of the principal
amount owing and unpaid on such Revolving Credit Note. The
failure so to record any such amount or any error in so
recording any such amount shall not, however, limit or
otherwise affect the obligations of the Borrower hereunder or
under any Revolving Credit Note to repay the outstanding
principal amount of the Revolving Credit Loans together with
all interest accruing thereon in accordance with the
terms of the Revolving Credit Notes and this Agreement."
2.4. MODIFICATION OF SECTION 2.7. Section 2.7 of the
Credit Agreement is hereby amended to read in its entirety as follows:
-4-
<PAGE> 5
"SECTION 2.7. Conversions or Continuation of Borrowings. (a)
Subject to the other provisions of the Agreement, Borrower may elect
from time to time to convert (i) all or any part of Eurodollar Loans
or CD Rate Loans which comprise part of the same Borrowing to a
Borrowing comprised of Floating Rate Loans, (ii) all or any part of
Eurodollar Loans or Floating Rate Loans which comprise part of the
same Borrowing to a Borrowing comprised of CD Rate Loans and (iii) all
or any part of CD Rate Loans or Floating Rate Loans which comprise
part of the same Borrowing to a Borrowing comprised of Eurodollar
Loans, provided, however, in each case that any such conversion of
Loans comprising a CD Rate Borrowing or a Eurodollar Borrowing shall,
subject to the second following sentence, only be made on the last day
of an Interest Period with respect thereto. If the last day of an
Interest Period with respect to a CD Rate Borrowing that is to be
converted into an Eurodollar Borrowing or a Eurodollar Borrowing that
is to be converted into a CD Rate Borrowing, is not a Business Day,
then such conversion shall be made on the next succeeding Business
Day, and during the period from the last day of such Interest Period
to the next succeeding Business Day, the Loans comprising such
Borrowing shall bear interest as if they were Floating Rate Loans.
All or any part of a Borrowing may be converted as provided herein,
provided that no Borrowing may be converted into a CD Rate Borrowing
or a Eurodollar Borrowing when any Default or Event of Default has
occurred and is continuing.
(b) Any CD Rate Borrowing or Eurodollar Borrowing may be
continued as such effective upon the expiration of the Interest Period
with respect thereto; provided, that no Eurodollar Borrowing or CD
Rate Borrowing may be continued as such when any Default or Event of
Default has occurred and is continuing, but shall be automatically
converted to a Floating Rate Borrowing on the last day of the then
current Interest Period with respect thereto.
(c) In order to elect to convert or continue a
Borrowing, or any portion thereof, under this Section 2.7, Borrower
shall deliver an irrevocable Notice of Conversion or Continuation to
the Administrative Agent not later than 10:00 a.m., Houston, Texas
time, (i) at least three (3) Business Days in advance of the proposed
conversion or continuation date in the case of a conversion to, or
continuation of, a Eurodollar Borrowing, (ii) at least one (1)
Business Day in advance of the proposed conversion or continuation
date in the case of a conversion to, or continuation of, a CD Rate
Borrowing and (iii) at least one (1) Business Day in advance of the
proposed conversion date in the case of a conversion to a Floating
Rate Borrowing. Each such Notice of Conversion or Continuation shall
be by telecopy (confirmed thereafter by a delivery of the original of
such Notice of Conversion or Continuation by United States mail or a
reputable courier) and shall specify (w) the date of the requested
conversion or continuation (which shall be a Business Day), (x) the
amount and the Borrowing to be converted or continued, (y) whether a
conversion or continuation is requested, and, if a conversion, into
what Type of Borrowing and (z) in the case of a conversion to, or a
continuation of, a Eurodollar Borrowing or a CD Rate Borrowing, the
requested Interest Period. Promptly after receipt of a Notice of
Conversion or Continuation under this Section 2.7, the Administrative
Agent shall provide each Bank with a copy thereof.
(d) If Borrower shall fail to deliver a timely Notice of
Conversion or Continuation with respect to any CD Rate Borrowing or
Eurodollar Borrowing, Borrower shall be deemed to have elected to
convert such Borrowing to a Floating Rate Borrowing on the last day of
the Interest Period with respect to such Borrowing."
-5-
<PAGE> 6
3. ADDITION OF NEW SECTION 2.26. The Credit Agreement is hereby
amended by adding the following Section 2.26 immediately after Section 2.25:
"SECTION 2.26. Indebtedness Evidenced by the Prior Revolving
Notes. On the Second Amendment Effective Date, the Floating Rate
Loans, the CD Rate Loans and the Eurodollar Loans due to the Banks and
evidenced by the Prior Revolving Notes shall be deemed to be the
initial Floating Rate Loans, CD Rate Loans and/or Eurodollar Loans, as
the case may be, made by the Banks under the Banks' Revolving Credit
Notes, it being the intention of the parties hereto that (i) all
indebtedness evidenced by the Prior Revolving Notes on the Second
Amendment Effective Date shall thereafter be solely evidenced by the
Revolving Credit Notes, and (ii) the liens created by the Current
Mortgages shall be carried forward and continued in full force and
effect for the purpose of securing the Revolving Credit Notes. Upon
receipt of its Revolving Credit Note, each Bank will mark its Prior
Revolving Note "Repaid through Renewal" and return its Prior Revolving
Note to the Borrower as soon as practicable."
4. MODIFICATION OF EXHIBIT 1.1. Exhibit 1.1 attached to the
Credit Agreement is hereby amended to read in its entirety as set forth in
Annex A attached hereto and made a part hereof.
5. MODIFICATION OF EXHIBIT 1.2. Exhibit 1.2 attached to the
Credit Agreement is hereby amended to read in its entirety as set forth in
Annex B attached hereto and made a part hereof.
6. MODIFICATION OF EXHIBIT 1.3(A) AND 1.3(B). Exhibits 1.3(A)
and 1.3(B) attached to the Credit Agreement are hereby amended to read in their
entirety as set forth in Annex C attached hereto and made a part hereof.
7. MODIFICATION OF EXHIBIT 2.4-A. Exhibit 2.4-A attached to
the Credit Agreement is hereby amended to read in its entirety as set forth in
Annex D attached hereto and made a part hereof.
8. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower hereby represents and warrants that (a) the Borrower has the corporate
power, authority and legal right to execute and deliver this Second Amendment,
the Revolving Credit Notes in the form of Annex C attached hereto and the
Fourth Amendment to Mortgage, Deed of Trust, Assignment of Production and
Security Agreement in the form of Annex E attached hereto, and to perform the
Credit Agreement as amended through the Second Amendment, the Revolving Credit
Notes, and the Original Mortgages as amended through the Fourth Amendment to
Mortgage, Deed of Trust, Assignment of Production and Security Agreement and
has taken all necessary corporate action to authorize the execution and
delivery of this Second Amendment, the Revolving Credit Notes and the Fourth
Amendment to Mortgage, Deed of Trust, Assignment of Production and Security
Agreement and the performance of the Credit Agreement as amended through this
Second Amendment, the Revolving Credit Notes, and the Original Mortgages as
amended through the Fourth Amendment to Mortgage, Deed of Trust, Assignment of
Production and Security Agreement, (b) this Second Amendment, the Revolving
Credit Notes and the Fourth Amendment to Mortgage, Deed of Trust, Assignment of
Production and Security Agreement have been duly authorized, executed and
delivered on behalf of the Borrower, (c) each of the Credit Agreement as
amended through this Second Amendment, the Revolving Credit Notes and the
Original Mortgages as amended through the Fourth Amendment to Mortgage, Deed of
Trust, Assignment of Production and Security Agreement constitutes a valid and
legally binding agreement enforceable against the Borrower in accordance with
its terms, except as such enforceability may be limited by the effect of any
applicable bankruptcy, insolvency, reorganization or other similar law
affecting the same, (d) the representations
-8-
<PAGE> 7
and warranties contained in Section 4 of the Credit Agreement as amended through
this Second Amendment are true and correct in all material respects on and as
of the date hereof as though made on and as of the date hereof except those
which specifically relate to a prior date and except as otherwise specifically
disclosed to the Administrative Agent and (e) no Event of Default or Default
(as such terms are defined in the Credit Agreement as amended through this
Second Amendment) has occurred and is continuing.
9. EFFECTIVENESS. This Second Amendment shall become effective
on the date when each of the following conditions shall have been fulfilled
(the "Second Amendment Effective Date"):
(a) this Second Amendment shall have been duly executed
and delivered by the Borrower, the Administrative Agent and each of
the Banks;
(b) a Revolving Credit Note in the form of Annex C to
this Second Amendment shall have been duly executed and delivered by
the Borrower to each of the Banks;
(c) a Fourth Amendment to Mortgage, Deed of Trust,
Assignment of Production and Security Agreement the in the form
of Annex E to this Second Amendment shall have been duly executed and
delivered by the Borrower, the Administrative Agent and the Trustee;
(d) the Administrative Agent shall have received a
certificate, in form and substance satisfactory to the Administrative
Agent and dated as of the date hereof, from the Secretary or Assistant
Secretary of the Borrower as to (i) the election, incumbency and
signatures of the officer(s) of the Borrower executing this Second
Amendment, the Revolving Credit Note and the Fourth Amendment to
Mortgage, Deed of Trust, Assignment of Production and Security
Agreement, (ii) the resolutions (attaching a copy of same) of the
Board of Directors or shareholders of the Borrower authorizing this
Second Amendment, the Revolving Credit Notes and the Fourth Amendment
to Mortgage, Deed of Trust, Assignment of Production and Security
Agreement and (iii) no amendments, modifications, changes or
alterations to, or revocation, repeal or supersession of, (x) its
Certificate of Incorporation since March 9, 1992, and (y) its Bylaws
since March 9, 1992;
(e) the Administrative Agent shall have received (i) a
certificate from the Secretary of State of Delaware as to the
incorporation, existence and good standing of the Borrower and (ii) a
certificate from the Secretary of State of the States of Texas,
Oklahoma and New Mexico as to the qualification and good standing of
the Borrower; and
(f) the Company shall have executed and delivered, or
caused to be executed and delivered, such other documents and
instruments and taken such other actions as the Bank may reasonably
request in connection with this Second Amendment or the matters
referred to herein.
10. RATIFICATION. Except as amended and modified by this Second
Amendment, the Credit Agreement shall continue in full force and effect. The
Credit Agreement, the First Amendment and this Second Amendment shall be read,
taken and construed as one and the same instrument.
11. COUNTERPARTS. This Second Amendment may be signed in any
number of counterparts, and by different parties on separate counterparts, each
of which shall be construed as an original, but all of which together shall
constitute one and the same instrument.
-7-
<PAGE> 8
12. CERTAIN DEFINED TERMS. Capitalized terms used herein without
definition shall have the meaning assigned to them in the Credit Agreement.
The term "Credit Agreement" as defined and used in the other Loan Documents or
any other instrument, document or writing furnished to the Bank by the Borrower
in connection with the Credit Agreement shall mean the Credit Agreement as
amended through this Second Amendment. The term "TCBSA" as used in the Credit
Agreement as amended through this Second Amendment and in the other Loan
Documents shall be deemed to be a reference to TCB. The term "Co-Agents" as
used in the Credit Agreement as amended through this Second Amendment and in
the other Loan Documents shall be deemed to be a reference to the
Administrative Agent.
13. GOVERNING LAW. THE CREDIT AGREEMENT AS AMENDED THROUGH THIS
SECOND AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF TEXAS AND OF THE UNITED STATES OF AMERICA.
14. FINAL AGREEMENT. THE CREDIT AGREEMENT AS AMENDED THROUGH THIS
SECOND AMENDMENT, THE REVOLVING CREDIT NOTES, THE ORIGINAL MORTGAGES AS AMENDED
THROUGH THE FOURTH AMENDMENT TO MORTGAGE, DEED OF TRUST, ASSIGNMENT OF
PRODUCTION AND SECURITY AGREEMENT, AND THE OTHER LOAN DOCUMENTS CONSTITUTE A
"LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(A) OF THE TEXAS BUSINESS AND
COMMERCE CODE, AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties have caused this Second Amendment to
be executed and delivered as of the date first above written.
SAGE ENERGY COMPANY
By: _____________________________________
Name: ___________________________________
Title: __________________________________
Address for Notices:
10101 Reunion Place, Suite 800
San Antonio, Texas 78216
Telecopy : (210) 340-3182
Attention: Jesse Minor
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: ____________________________________
Name: Scott H. Richardson
Title: Vice President
Address for Notices:
712 Main Street
Houston, Texas 77002
Telecopy: (713) 216-4117
Attention: Manager, Energy Group
-9-
<PAGE> 10
Exhibit 1.1
to Credit Agreement
ANNEX A TO SECOND AMENDMENT
NAME AND COMMITMENTS OF BANKS
<TABLE>
<CAPTION>
Amount of Revolving
Credit Amount of Total
Banks Commitment Commitment Percentage
----- ---------- ---------- ----------
<S> <C> <C> <C>
Texas Commerce Bank $3,000,000 $3,000,000 100%
National Association
</TABLE>
<PAGE> 11
Exhibit 1.2
Credit Agreement
ANNEX B TO SECOND AMENDMENT
MORTGAGE AMENDMENTS
1. First Amendment to Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement covering the Original
Mortgage described in Exhibit 1.3(A) hereto.
2. First Amendment to Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement covering the Original
Mortgage described in Exhibit 1.3(B) hereto.
3. Second Amendment to Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement covering the Original
Mortgage described in Exhibit 1.3(A) hereto.
4. Second Amendment to Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement covering the Original
Mortgage described in Exhibit 1.3(B) hereto.
5. Third Amendment to Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement covering the Original
Mortgage described in Exhibit 1.3(A) hereto.
6. Third Amendment to Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement covering the Original
Mortgage described in Exhibit 1.3(B) hereto.
7. Fourth Amendment to Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement covering the Original
Mortgage described in Exhibit 1.3(A) hereto.
8. Fourth Amendment to Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement covering the Original
Mortgage described in Exhibit 1.3(B) hereto.
<PAGE> 12
Exhibit 1.3(A) to
Credit Agreement
ANNEX C TO SECOND AMENDMENT
RECORDING DATA
SAGE ENERGY COMPANY (MORTGAGOR)
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AS ADMINISTRATIVE AGENT (MORTGAGEE)
<TABLE>
<CAPTION>
- - - - --------------------------------------------------------------------------------------------------------------
MORTGAGE NAME MORTGAGOR NAME AND LOCATION OF REC. DATE AND FILING DATE AND
AND ADDRESS ADDRESS FILING REC. NO. OF MORTGAGE REC. NO. OF UCC-1 F.S.
==============================================================================================================
<S> <C> <C> <C> <C>
Texas Commerce Sage Energy Company Real Property 05/18/89 05/18/89
Bank, National 10101 Reunion Place, Records County Bk. 816, Pg. 156 Bk. 816, Pg. 141
Association Suite 800 Clerk's Office 590241 590240
712 Main Street San Antonio, Texas Texas Co., Refiled on
Houston, Texas 78216 Oklahoma 01/17/92
77002 Bk. 0854, Pg. 202
- - - - --------------------------------------------------------------------------------------------------------------
Texas Commerce Sage Energy Company UCC Records 01/17/92 05/18/89
Bank, National 10101 Reunion Place, Oklahoma Co., NO0211 NO2225
Association Suite 800 Oklahoma
712 Main Street San Antonio, Texas
Houston, Texas 78216
77002
- - - - --------------------------------------------------------------------------------------------------------------
Texas Commerce Sage Energy Company UCC Records N/A 05/10/89
Bank, National 10101 Reunion Place, Sec. of State, 111930 and
Association Suite 800 Texas 11/06/90
712 Main Street San Antonio, Texas 010397
Houston, Texas 78216 (Brazos Co.)
77002
- - - - --------------------------------------------------------------------------------------------------------------
Texas Commerce Sage Energy Company UCC Records N/A 01/16/90
Bank, National 10101 Reunion Place, Sec. of State, 010397
Association Suite 800 Texas
712 Main Street San Antonio, Texas
Houston, Texas 78216
77002
- - - - --------------------------------------------------------------------------------------------------------------
Texas Commerce Sage Energy Company Real Property 05/18/89 05/18/89
Bank, National 10101 Reunion Place, Records County Bk.89674, Pg. 21 Bk.89674, Pg. 67
Association Suite 800 Clerk's Office 13876 13877
712 Main Street San Antonio, Texas Brazoria Co.,
Houston, Texas 78216 Texas
77002
- - - - --------------------------------------------------------------------------------------------------------------
Texas Commerce Sage Energy Company Real Property 01/16/90 03/06/90
Bank, National 10101 Reunion Place, Records County Vol.1162,Pg.657 Vol.1170, Pg.786
Association Suite 800 Clerk's Office 439136 441398
712 Main Street San Antonio, Texas Brazos Co., Texas
Houston, Texas 78216
77002
- - - - --------------------------------------------------------------------------------------------------------------
Texas Commerce Sage Energy Company Real Property 05/18/89 05/18/89
Bank, National 10101 Reunion Place, Records County Vol. 125, Pg.548 Vol.125,Pg.655
Association Suite 800 Clerk's Office 1535 1536
712 Main Street San Antonio, Texas Burleson Co.,
Houston, Texas 78216 Texas
77002
- - - - --------------------------------------------------------------------------------------------------------------
Texas Commerce Sage Energy Company Real Property 05/18/89 05/18/89
Bank, National 10101 Reunion Place, Records County Vol. 0162,Pg.656 Vol.0162, Pg.706
Association Suite 800 Clerk's Office 106074 106075
712 Main Street San Antonio, Texas Crockett Co.,
Houston, Texas 78216 Texas
77002
- - - - --------------------------------------------------------------------------------------------------------------
Texas Commerce Sage Energy Company Real Property 05/16/89 05/16/89
Bank, National 10101 Reunion Place, Records County Vol.868,Pg.343 Vol.868,Pg.395
Association Suite 800 Clerk's Office 6952 6953
712 Main Street San Antonio, Texas Ector Co., Texas
Houston, Texas 78216
77002
- - - - --------------------------------------------------------------------------------------------------------------
Texas Commerce Sage Energy Company Real Property 05/18/89 05/18/89
Bank, National 10101 Reunion Place, Records County Vol.781,Pg.746 Vol.781,Pg.819
Association Suite 800 Clerk's Office 2283 2284
712 Main Street San Antonio, Texas Fayette Co.,
Houston, Texas 78216 Texas
77002
- - - - --------------------------------------------------------------------------------------------------------------
Texas Commerce Sage Energy Company Real Property 05/18/89 05/18/89
Bank, National 10101 Reunion Place, Records County Vol.131, Pg.396 Vol.131, Pg.445
Association Suite 800 Clerk's Office 72147 72148
712 Main Street San Antonio, Texas Reagan Co., Texas
Houston, Texas 78216
77002
- - - - --------------------------------------------------------------------------------------------------------------
Texas Commerce Sage Energy Company Real Property 05/18/89 05/18/89
Bank, National 10101 Reunion Place, Records County Vol.123, Pg.412 Vol.123, Pg.467
Association Suite 800 Clerk's Office B40886 B40887
712 Main Street San Antonio, Texas Winkler Co.,
Houston, Texas 78216 Texas
77002
==============================================================================================================
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
- - - - -----------------------------------------------------------------------------------------------------
FILING DATE AND REC. FILING DATE AND REC. FILING DATE AND REC. FILING DATE AND
NO. OF 1ST AMEND. TO NO. OF 2ND AMEND. TO NO. OF 3RD AMEND. TO REC. NO. OF UCC-3
MORTGAGE MORTGAGE MORTGAGE F.S.
=====================================================================================================
<S> <C> <C> <C>
01/17/90 01/08/91 03/26/92 12/04/90
Bk.826, Pg.549 Bk.840, Pg.1 Bk. 0856, Pg.0754 109854 and
593368 598501 604080 Vol. 838, Pg.525
11/26/90
109853
- - - - -----------------------------------------------------------------------------------------------------
01/26/90 11/26/90 03/13/92 11/26/90
NO0394 NO4770 Bk.6266, Pg. 1469 NO4769 and
00027285 02/12/91
006840
- - - - -----------------------------------------------------------------------------------------------------
N/A N/A N/A 1. Partial Release
11/16/89
568685
2. Partial Release
02/26/90
612505
3. Amendment
11/21/90
111930
- - - - -----------------------------------------------------------------------------------------------------
N/A N/A N/A N/A
- - - - -----------------------------------------------------------------------------------------------------
01/12/90 11/26/90 03/17/92 N/A
Bk. 90748, Pg.880 Bk.90853, Pg.164 Bk. 921010, Pg. 164
1026 33199 8502
- - - - -----------------------------------------------------------------------------------------------------
01/17/90 11/28/90 03/17/92 N/A
Vol.1162, Pg.704 Vol.1223, Pg.510 Vol.1447, Pg.73
439137 455575 485056
- - - - -----------------------------------------------------------------------------------------------------
01/12/90 11/26/90 03/12/92 N/A
Vol.128, Pg.16 Vol.130,Pg.654 Vol.135, Pg.285
180 6395 1302
- - - - -----------------------------------------------------------------------------------------------------
01/12/90 11/26/90 03/13/92 N/A
Vol.0165, Pg.087 Vol.0168, Pg.714 Vol.476, Pg.290
107811 109982 113175
- - - - -----------------------------------------------------------------------------------------------------
01/12/90 11/26/90 03/17/92 N/A
Vol.881,Pg.598 Vol.899,Pg.277 Vol.927, Pg.668
563 16103 4128
- - - - -----------------------------------------------------------------------------------------------------
01/12/90 11/26/90 03/12/92 N/A
Vol.793,Pg.257 Vol.808,Pg.663 Vol.833, Pg.334
179 6445 2106
- - - - -----------------------------------------------------------------------------------------------------
01/12/90 11/26/90 03/09/92 N/A
Vol.137, Pg.216 Vol.142,Pg.45 Vol. 147, Pg.391
73432 75210 77706
- - - - -----------------------------------------------------------------------------------------------------
01/12/90 11/26/90 N/A N/A
Vol.125, Pg.21 Vol.126,Pg.778
B42754 B44833
=====================================================================================================
</TABLE>
<PAGE> 14
Exhibit 1.3(B) to
Credit Agreement
ANNEX C TO SECOND AMENDMENT
RECORDING DATA
SAGE ENERGY COMPANY (MORTGAGOR)
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AS ADMINISTRATIVE AGENT (MORTGAGEE)
<TABLE>
<CAPTION>
- - - - ---------------------------------------------------------------------------------------------------------------------
MORTGAGE NAME AND MORTGAGOR NAME AND LOCATION OF FILING REC. DATE AND REC. FILING DATE AND
ADDRESS ADDRESS NO. OF MORTGAGE REC. NO. OF UCC-1 F.S.
=====================================================================================================================
<S> <C> <C> <C> <C>
Texas Commerce Sage Energy Company Sec. of State, New N/A 05/18/89
Bank, National 10101 Reunion Place, Mexico 890518048
Association Suite 800
712 Main Street San Antonio, Texas
Houston, Texas 78216
77002
- - - - ---------------------------------------------------------------------------------------------------------------------
Texas Commerce Sage Energy Company Eddy Co., New 05/18/89 05/18/89
Bank, National 10101 Reunion Place, Mexico Bk.45, Pg.231 8900609
Association Suite 800 894537
712 Main Street San Antonio, Texas
Houston, Texas 78216
77002
- - - - ---------------------------------------------------------------------------------------------------------------------
Texas Commerce Sage Energy Company Lea Co., New Mexico 05/24/89 05/24/89
Bank, National 10101 Reunion Place, Bk.533, Pg.745 Bk.31, Pg.501
Association Suite 800 046624 046625
712 Main Street San Antonio, Texas
Houston, Texas 78216
77002
=====================================================================================================================
<CAPTION>
- - - - ------------------------------------------------------------------------------------------------
FILING DATE AND REC. FILING DATE AND REC. FILING DATE AND REC. FILING DATE AND
NO. OF 1ST AMEND. TO NO. OF 2ND AMEND. TO NO. OF 3RD AMEND. TO REC. NO. OF UCC-3
MORTGAGE MORTGAGE MORTGAGE F.S.
================================================================================================
<S> <C> <C> <C>
N/A N/A N/A 02/12/91
890518048
- - - - ------------------------------------------------------------------------------------------------
02/22/90 11/26/90 03/23/92 N/A
Bk.63, Pg.201 Bk.81, Pg.1115 Bk.118, Pg.1091
901686 9011030 923201
- - - - ------------------------------------------------------------------------------------------------
01/17/90 11/23/90 03/20/92 N/A
Bk.543, Pg.827 Bk. 557, Pg. 437 Mtg.574, Pg.620
57143 235 19708
================================================================================================
</TABLE>
<PAGE> 15
Exhibit 2.4-A
to Credit Agreement
ANNEX D TO SECOND AMENDMENT
FORM OF REVOLVING CREDIT NOTE
$3,000,000 May 9, 1995
FOR VALUE RECEIVED, in accordance with the terms and provisions of the
Credit Agreement (as hereinafter defined), and in any event on or before the
Termination Date, unless the maturity is earlier accelerated, the undersigned,
SAGE ENERGY COMPANY, a Delaware corporation (the "Borrower"), promises to pay
to the order of TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking
association (the "Payee") the lesser of THREE MILLION and NO/100 Dollars
($3,000,000.00) or the aggregate principal amount of Revolving Credit Loans
made by the Payee to the Borrower as shown either on the schedule attached
hereto (and any continuation thereof or in the records of the Payee as provided
in the Second Amended and Restated Credit Agreement dated March 9, 1992 among
the Borrower, the Administrative Agent, the Payee and the other Banks named
therein, as amended by First Amendment to Second Amended and Restated Credit
Agreement dated as of June 30, 1993 and by Second Amendment to Second Amended
and Restated Credit Agreement dated as of May 9, 1995 and as the same may from
time to time be amended or modified and in effect (the "Credit Agreement").
Defined terms used but not defined herein are used as defined in the Credit
Agreement.
The Borrower also promises to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, on the
dates and at the rates per annum as specified in the Credit Agreement
(whichever of such rates shall be in effect from time to time); provided,
however, that in no event shall the rate of interest per annum derived by
calculations considering all sums contracted for by, charged to, or received
from the Borrower in respect hereof or in relation hereto for the use,
forbearance or detention of the indebtedness evidenced hereby ever exceed the
Highest Lawful Rate. Interest shall accrue from the date Loan proceeds are
advanced to, but excluding, the date that payment in immediately available
funds is actually received by the Administrative Agent.
Payments of both principal and interest are to be made in lawful money
of the United States of America at the office of the Administrative Agent, 712
Main Street, Houston, Texas 77002 on the dates when due.
This Note is the Revolving Credit Note described in, and is subject to
the terms and provisions of, the Credit Agreement. The Credit Agreement
contains, among other things, provisions for the acceleration of the maturity
hereof upon the happening of certain stated events and for prepayments on
account of principal hereof prior to the maturity hereof upon the terms and
conditions therein specified, and further provisions to the effect that no
provision of the Credit Agreement, the Security Documents or this Note shall
require or permit the payment or collection of interest in excess of the
Highest Lawful Rate.
This Note is secured by the Security Documents, as amended, and the
collateral described therein, and reference is hereby made to the Credit
Agreement for a description of the Security Documents and
<PAGE> 16
such collateral.
In addition to, and not in limitation of, the foregoing and the
provisions of the Credit Agreement, the Borrower agrees, subject only to any
limitation imposed by applicable law, to pay all expenses, including reasonable
attorneys' fees and legal expenses, incurred by the holder of this Note in
endeavoring to collect any amounts payable hereunder which are not paid when
due, whether by acceleration or otherwise.
Except as otherwise expressly provided for in the Credit Agreement,
the Borrower and any and all endorsers, guarantors and sureties severally waive
grace, demand, presentment for payment, protest, notice (including, but not
limited to, notice of intent to accelerate and notice of acceleration) of any
kind, and the filing of suit for the purpose of fixing liability and consent
that the time of payment hereof may be extended and re-extended from time to
time without notice to them or any of them, and each agree that his, her or its
liability on or with respect to this Note shall not be affected by any release
of or change in any security at any time existing or by any failure to perfect
or to maintain perfection of any lien on or security interest in any such
security.
This note is issued in exchange for and includes, but not in
extinguishment of, the indebtedness evidenced by (i) that certain Prior
Revolving Note dated March 9, 1992, issued by Maker payable to the order of
Payee in the original principal amount of up to NINE MILLION AND NO/100 DOLLARS
($9,000,000) and (ii) that certain Prior Revolving Note dated March 9, 1992,
issued by Maker payable to the order of Texas Commerce Bank - San Antonio, N.A.
(predecessor-in-interest to Payee) in the original principal amount of up to
ONE MILLION AND NO/100 DOLLARS ($1,000,000).
This Note has been delivered in Houston, Texas and shall be deemed to
be a contract made under the laws of the State of Texas and for all purposes
shall be governed by and construed in accordance with the laws of the State of
Texas and the laws of the United States of America from time to time in effect.
SAGE ENERGY COMPANY
By:____________________________
Title:_________________________
<PAGE> 17
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- - - - ------------------------------------------------------------------------------------------------------------------------
Date Amount of Loan Type of Loan Amount of Maturity Notation
Principal Repaid Date Made By
========================================================================================================================
<S> <C> <C> <C> <C> <C>
- - - - ------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 18
Annex E to
Second Amendment
FOURTH AMENDMENT TO MORTGAGE,
DEED OF TRUST, ASSIGNMENT OF PRODUCTION
AND SECURITY AGREEMENT
This Fourth Amendment to Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement (this "Fourth Mortgage
Amendment") dated effective as of May 9, 1995 is made and entered into among
Sage Energy Company, a Delaware corporation and successor-in-interest through
merger to Sage Energy Company, a Texas corporation (herein called the
"Mortgagor"), James C. Nicholas, Houston, Texas as Trustee (herein called the
"Trustee") and Texas Commerce Bank National Association (herein called "TCB"),
as administrative agent for the ratable benefit of the Secured Parties, as
hereinafter defined (herein, in such capacity, together with any successor(s)
in such capacity, call the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, Sage Energy Company, a Texas corporation ("Texas Sage") and
Sage Acquisition Corporation, a Texas corporation ("Acquisition") entered into
that certain Credit Agreement dated as of May 16, 1989 (the "1989 Agreement")
with certain banks and other financial institutions named in the 1989
Agreement (the "Secured Parties"), Texas Commerce Bank - San Antonio, N.A.
("TCBSA") and TCB as co-agents for the ratable benefit of the Secured Parties
(the "Co-Agents") and the Administrative Agent for the ratable benefit of the
Secured Parties, providing, among other things, for loans to be made by the
Secured Parties to Texas Sage on the terms and conditions therein set forth; and
WHEREAS, by Mortgage, Deed of Trust, Assignment of Production,
Security Agreement and Financing Statement dated as of May 16, 1989 (the
"Original Mortgage"), Texas Sage, in addition to the other matters set forth
therein, mortgaged to the Trustee, for the use and benefit of the
Administrative Agent, and to the Administrative Agent for the ratable benefit
of the Secured Parties, all right, title and interest of Texas Sage, whether
now owned or hereafter acquired, in all of the properties, rights and interests
set forth in Exhibit A to the Original Mortgage as security for the payment of
all amounts at any time owing and from time to time owing by Texas Sage to the
Secured Parties under the 1989 Agreement, counterparts of the Original Mortgage
being filed for record in the recorders' offices listed on Schedule I hereof
under the reference or file number(s) set forth thereon; and
WHEREAS, Texas Sage entered into that certain Amended and Restated
Credit Agreement dated as of January 9, 1990 with the Administrative Agent, the
Co-Agents and the Secured Parties amending the 1989 Agreement in certain
respects and as so amended restating the 1989 Agreement in its entirety (the
"1990 Agreement"); and
WHEREAS, by First Amendment and Supplement to Mortgage, Deed of Trust,
Assignment of Production and Security Agreement dated as of January 9, 1990
(the "First Mortgage Amendment") among Texas Sage, the Administrative Agent and
the Trustee, the Original Mortgage was amended in accordance with its terms to
reflect the execution and delivery of the 1990 Agreement and the changes
contained therein; counterparts of the First Mortgage Amendment being filed for
record in the recorders' offices listed on Schedule I hereof under the
reference or file number(s) set forth thereon; and
WHEREAS, Texas Sage entered into that certain First Amendment to
Amended and Restated
<PAGE> 19
Credit Agreement dated as of November 12, 1990 (the "First Amendment to 1990
Agreement") with the Administrative Agent, the Co-Agents and the Secured Parties
amending the 1990 Agreement in certain respects (the 1990 Agreement as amended
through the First Amendment to 1990 Agreement is herein referred as the "Amended
1990 Agreement"); and
WHEREAS, by Second Amendment and Supplement to Mortgage, Deed of
Trust, Assignment of Production and Security Agreement dated as of November 12,
1990 (the "Second Mortgage Amendment") among Texas Sage, the Administrative
Agent and the Trustee, the Original Mortgage was further amended in accordance
with its terms to reflect the execution and delivery of the First Amendment to
1990 Agreement and the changes contained therein; counterparts of the Second
Mortgage Amendment being filed for record in the recorders' offices listed on
Schedule I hereof under the reference or file number(s) set forth thereon; and
WHEREAS, by Agreement and Plan of Merger made and entered into as of
the 10th day of December, 1991, by and between Texas Sage and the Mortgagor,
Texas Sage was merged into the Mortgagor effective as of December 31, 1991 (the
"Merger"). As a result of the Merger, the Mortgagor became liable for all
liabilities and obligations of Texas Sage under the Amended 1990 Agreement and
the owner of the Mortgaged Property (as defined in the Original Mortgage as
amended through the Second Mortgage Amendment) subject to the Lien of the
Original Mortgage as amended through the Second Mortgage Amendment; and
WHEREAS, the Mortgagor entered into that certain Second Amended and
Restated Credit Agreement dated as of March 9, 1992 with the Administrative
Agent, the Co-Agents and the Secured Parties further amending the Amended 1990
Agreement to reflect the Merger, to increase the amount available to be
borrowed under the Amended 1990 Agreement by means of a revolving credit
facility and to effect certain other changes in the various provisions of the
Amended 1990 Agreement and as so amended restating the Amended 1990 Credit
Agreement in its entirety (the Amended 1990 Agreement as so amended and
restated is hereinafter called the "1992 Agreement"); and
WHEREAS, by Third Amendment and Supplement to Mortgage, Deed of Trust,
Assignment of Production and Security Agreement dated as of March 9, 1992 (the
"Third Mortgage Amendment") among Mortgagor, the Administrative Agent and the
Trustee, the Original Mortgage was further amended in accordance with its terms
to reflect the execution and delivery of the 1992 Agreement and the changes
contained therein; counterparts of the Third Mortgage Amendment being filed for
record in the recorders' offices listed on Schedule I hereof under the
reference or file number(s) set forth thereon; and
WHEREAS, the Original Mortgage as amended through the Third Mortgage
Amendment covers the Mortgaged Property described therein, including, without
limitation, (with respect to those jurisdictions that do not allow descriptions
of the Mortgaged Property solely by reference to the Original Mortgage as
amended through the Third Mortgage Amendment) the Mortgaged Property described
on Exhibit A attached hereto;
WHEREAS, the Original Mortgage as amended through the Third Mortgage
Amendment grants a lien on, and security interest in, the Mortgaged Property to
secure certain Indebtedness owing by Mortgagor to the Secured Parties;
WHEREAS, the Indebtedness secured by the Original Mortgage as amended
through the Third Mortgage Amendment includes, without limitation, all
indebtedness and other obligations of the Mortgagor arising under (i) two
certain restated promissory notes each dated March 9, 1992, in the original
aggregate principal amount of Ten Million and NO/100 Dollars ($10,000,000.00)
made by
<PAGE> 20
Mortgagor and payable to the order of each of the Secured Parties on or
before June 30, 1995 (the "Prior Notes");
WHEREAS, Texas Commerce Bank - San Antonio, N.A. was merged into Texas
Commerce Bank National Association;
WHEREAS, concurrently herewith the 1992 Agreement is being further
amended to, among other things, extend (i) the "Termination Date" from June 30,
1995 until June 30, 1997, and (ii) to increase the "Revolving Credit
Commitment" from $500,000.00 to $3,000,000 pursuant to a Second Amendment to
Second Amended and Restated Credit Agreement dated as of May 9, 1995 among the
Mortgagor, the Secured Parties, and the Administrative Agent (the "Amended
Credit Agreement");
WHEREAS, in connection with the execution and delivery of Amended
Credit Agreement, the Secured Parties, the Mortgagor and the Administrative
Agent for the Secured Parties desire to further amend the Original Mortgage in
certain respects;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the parties hereto do hereby agree as follows:
Section 1. Unless otherwise defined herein, all capitalized terms
used herein shall have the meaning assigned to that term in the Original
Mortgage as amended through this Fourth Mortgage Amendment.
Section 2. With respect to properties covered hereby located in the
State of Oklahoma, all references in this Fourth Mortgage Amendment to "Exhibit
A" or "Exhibit A to the Original Mortgage" shall mean Exhibit A attached
hereto.
Section 3. It is intended by the parties hereto that the Original
Mortgage as amended through this Fourth Mortgage Amendment shall cover and
affect Mortgagor's entire present and future interest in the Leases and the
Subject Interests and the Lands without regard to the proration unit or pooled
unit limitations or the listing of specific wells or units on Exhibit A. The
listing of the wells and the descriptions of the proration units or pooled
units with respect to a particular well is not intended to limit or restrict
the description of the Leases. The listing of the wells and the description of
proration units, pooled units and the Mortgagor's Unit Net Revenue Interest and
Unit Working Interest in Exhibit A is made for the sole purpose of giving
effect to the title warranties of Mortgagor contained in the Original Mortgage.
Section 4. The Mortgagor, for and in consideration of the premises
and of the debts and trusts contained herein or in the Original Mortgage as
amended through the Third Mortgage Amendment and for the advances of Revolving
Credit Loans under the Amended Credit Agreement (including future advances
pursuant to the provisions of the Amended Credit Agreement) and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, has granted, bargained, sold, warranted, mortgaged, assigned,
transferred and conveyed, and by these presents does hereby grant, bargain,
sell, warrant, mortgage, assign, transfer and convey unto Trustee, for the use
and benefit of the Administrative Agent for the ratable benefit of the Secured
Parties, and to the Administrative Agent for the ratable benefit of the Secured
Parties with power of sale, a security interest in, and a Lien on, all of
Mortgagor's rights, titles, interests and estates in, to, under, derived, from
or with respect to all of the following described real and personal property,
whether now owned or hereafter acquired, namely:
(a) the Subject Interests;
<PAGE> 21
(b) the Subject Minerals;
(c) the Production Sale Contracts;
(d) the Operating Equipment;
(e) all unitization, communitization, operating
agreements, pooling agreements and declarations of pooled units and
the properties covered and the units created thereby (including all
units formed under orders, regulations, rules or other official acts
of any federal, state or other governmental agency providing for
pooling or unitization, spacing orders or other well permits and other
instruments) which relate to or affect all or any portion of the
Subject Interests including, without limitation, those units which may
be specifically described or referred to in Exhibit A to the Original
Mortgage, as amended;
(f) all accounts receivable and other accounts, contract
rights, operating rights, general intangibles, chattel paper,
documents and instruments arising under the Production Sale Contracts;
(g) all accounts receivable and other accounts, contract
rights, general intangibles, documents and instruments arising under
the Bank Hedging Agreement(s);
(h) all oil and gas produced, and/or general intangibles,
accounts and other rights to payment under any and all contracts under
which the Mortgagor is entitled to share in the production from or the
proceeds of production from any oil and/or gas wells described in
Exhibit A to the Original Mortgage, as amended, operated by others and
producing from oil and gas leases the record title of which is not the
Mortgagor, including, without limitation, operating agreements,
revenue sharing agreements and other similar or dissimilar agreements;
(i) all subleases, farmout agreements, assignments of
interest, assignments of operating rights, contracts, operating
agreements, bidding agreements, advance payment agreements,
rights-of-way, surface leases, franchises, servitudes, privileges,
permits, licenses, easements, tenements, hereditaments, improvements,
appurtenances, and benefits now existing or in the future obtained and
incident and appurtenant to any of the foregoing;
(j) all Well Data which relates to any of the foregoing;
(k) any Liens and security interests in the Subject
Interests securing payment of proceeds from the sale of the Subject
Minerals including, but not limited to, those liens and security
interests provided for in Tex. Bus. & Com. Code Ann. Section 9.319
(Tex. UCC) (Vernon Supp. 1988) and in the Okla. Oil and Gas Owners'
Lien Act codified as 52 Okla. Stat. Sections 548-548.6;
(l) all other rights, titles and interests of Mortgagor
in, to and under or derived from the Lands, the Leases, the Production
Sale Contracts and other properties described in Exhibit A to the
Original Mortgage, as amended, even though the Mortgagor's interest
therein may be incorrectly or insufficiently described or referred to
in Exhibit A to the Original Mortgage, as amended;
(m) any property that may from time to time hereafter, by
delivery or by writing of any kind, be subjected to the Lien and
security interest hereof by Mortgagor or by anyone on
<PAGE> 22
Mortgagor's behalf, and the Administrative Agent and Trustee are hereby
authorized to receive the same as additional security for the ratable
benefit of the Secured Parties;
(n) all balances, credits, deposits, accounts and monies
of the Mortgagor with or in the possession of the Administrative Agent
or any Secured Party; and
(o) any and all proceeds, returns, rents, issues,
profits, products, revenues and other income arising from or by virtue
of the sale, lease or other disposition of, or from any insurance
payable with respect to damage, loss or destruction of, the items
described in subparagraphs(a) through (n) above;
together with any and all corrections or amendments to, or renewals,
extensions or ratifications of, any of the same, or of any instrument
relating thereto, all the aforesaid properties, rights and interests
which are hereby subjected to the Lien of this instrument, together
with any additions thereto which may be subjected to the Lien of this
instrument by means of supplements hereto, being hereinafter called
the "Mortgaged Property".
Subject, however, to (i) Permitted Encumbrances, (ii) the assignment
of production contained in Article VI of the Original Mortgage as
amended through this Fourth Mortgage Amendment and (iii) the condition
that neither the Trustee nor the Administrative Agent shall be liable
in any respect for the performance of any covenant or obligation of
the Mortgagor in respect of the Mortgaged Property.
TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee, the
Administrative Agent and their respective successors and assigns forever to
secure the payment of the Indebtedness and to secure the performance of the
covenants, agreements and obligations of Mortgagor contained in the Original
Mortgage as amended through this Fourth Mortgage Amendment, the Amended Credit
Agreement, the other Loan Documents or the Bank Hedging Agreements.
BUT IN TRUST, NEVERTHELESS, for the benefit and security of the
holders of the Indebtedness and upon the trusts and subject to the terms and
provisions set forth herein.
Section 5. The Mortgagor, in consideration of the premises and to
induce the Secured Parties to advance Revolving Credit Loans pursuant to the
terms of the Amended Credit Agreement and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged hereby
covenants and agrees with both the Trustee and the Administrative Agent for the
ratable and proportionate benefit of the Secured Parties as set forth in the
Original Mortgage as amended through this Fourth Mortgage Amendment.
Section 6. Without limiting any of the provisions of the Original
Mortgage as amended through this Fourth Mortgage Amendment, Mortgagor, for and
in consideration of the premises and of the debts and trusts mentioned herein
and in the Original Mortgage as amended through this Fourth Mortgage Amendment,
and to induce the Secured Parties to advance Revolving Credit Loans pursuant to
the terms of the Amended Credit Agreement and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, has
heretofore granted and does hereby grant unto the Administrative Agent for the
ratable benefit of the Secured Parties, a first Lien upon and a security
interest in all the Mortgaged Property insofar as such Mortgaged Property
consists of equipment, accounts, contract rights, instruments, general
intangibles, inventory, Hydrocarbons, fixtures and any and all other personal
property of any kind or character (including both those now and those hereafter
existing) to the full extent that such Mortgaged Property may be subject to the
Uniform Commercial Code
<PAGE> 23
of the State where such Mortgaged Property is located, including all products
and proceeds of such Mortgaged Property, subject only to Permitted Encumbrances,
as security for the payment of the Indebtedness and to secure the performance of
the covenants, agreements and obligations of Mortgagor contained in the Original
Mortgage as amended through this Fourth Mortgage Amendment, the Amended Credit
Agreement, the other Loan Documents and the Bank Hedging Agreement(s).
Section 7.
7.1 Section 1.1 of the Original Mortgage is hereby amended by
changing the definition therein of "Credit Agreement" to read in its entirety
as follows:
"Credit Agreement shall mean that certain Second Amended and
Restated Credit Agreement dated as of March 9, 1992 by and
among Mortgagor, the banks party thereto, Texas Commerce Bank
National Association and Texas Commerce Bank - San Antonio,
N.A., as Co-Agents and the Administrative Agent for the
ratable benefit of the banks party thereto, as amended by that
certain First Amendment to Second Amended and Restated Credit
Agreement dated as of June 30, 1993 among Mortgagor, the banks
party thereto, Texas Commerce Bank National Association and
Texas Commerce Bank - San Antonio, N.A., as Co-Agents and the
Administrative Agent for the ratable benefit of the banks
party thereto and by that certain Second Amendment to Second
Amended and Restated Credit Agreement dated as of May 9, 1995
among Mortgagor, the banks party thereto, Texas Commerce Bank
National Association and Texas Commerce Bank - San Antonio,
N.A., as Co-Agents and the Administrative Agent for the
ratable benefit of the banks party thereto, and as same may
from time to time be further amended, modified, supplemented
and/or restated.
7.2 Section 1.1 of the Original Mortgage is hereby amended by
changing the definition of "Indebtedness" therein to read in its entirety as
follows:
"Indebtedness" shall mean and include at any particular time,
all loans, advances, reimbursement obligations, debts,
liabilities, obligations, covenants and duties owing to the
Administrative Agent, any Secured Party, any Bank
Counterparty(ies), any Affiliate of any of the foregoing or
any of their respective successors and assigns, from or
assumed by Mortgagor of any kind or nature, present or future
arising under the Credit Agreement, the Revolving Credit
Note(s), or under any other Loan Document or any Bank Hedging
Agreement(s) and all amendments, extensions or renewals or
restatements thereof, whether for principal, interest
(including, without, limitation, that, but for the filing of a
petition in bankruptcy with respect to the Mortgagor, would
accrue on such obligations), fees, expenses or otherwise,
whether now existing or hereafter arising, voluntary or
involuntary, whether or not jointly owned with others, direct
or indirect, absolute or contingent, liquidated or
unliquidated, and whether or not from time to time decreased
or extinguished and later increased, created or incurred and
all or any portion of such obligations that are paid, to the
extent all or any part of such payment is avoided or recovered
directly or indirectly from the Secured parties as a
preference, fraudulent transfer or otherwise and all
obligations or liabilities of every nature of Mortgagor now or
hereafter existing under this Mortgage (all such obligations
of Mortgagor being the "Indebtedness").
7.3 Section 1.1 of the Original Mortgage is hereby further amended
by amending the definition therein of "Revolving Notes and Revolving Note" to
read in its entirety as follows:
<PAGE> 24
"Revolving Credit Note(s)" shall mean that certain promissory
note dated May 9, 1995 issued by the Mortgagor in the
principal sum of Three Million and NO/100 Dollars ($3,000,000)
and payable to the order of Texas Commerce Bank National
Association bearing interest at the rates provided for in the
Credit Agreement and providing for the acceleration of
maturity as set forth in the Credit Agreement, and with a
present maturity date of June 30, 1997, all as more
particularly described therein or in the Credit Agreement.
Section 8. Mortgagor hereby represents and warrants that (a) the
representations and warranties contained in Article III of the Original
Mortgage as amended through this Fourth Mortgage Amendment are true and correct
in all material respects on and as of the date hereof as though made by
Mortgagor on and as of such date except for those which specifically relate to
a prior date, (b) no event has occurred and is continuing which upon the giving
of notice or the lapse of time or both would constitute an Event of Default
other than those effectively waived by the Secured Parties pursuant to the
terms of this Agreement and (c) this Fourth Mortgage Amendment has been duly
authorized, executed and delivered on its behalf and constitutes one of its
valid and legally binding agreements enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or moratorium of other similar laws relating to creditor's
rights.
Section 9. Except as expressly amended hereby, the Original Mortgage
as amended through this Fourth Mortgage Amendment shall remain in full force
and effect. Mortgagor hereby covenants and agrees, until all Indebtedness (as
defined in the Original Mortgage as amended through this Fourth Mortgage
Amendment) is paid in full, to perform for the benefit of the Secured Parties
all of the covenants of Mortgagor set forth in the Original Mortgage as amended
through this Fourth Mortgage Amendment. The Original Mortgage as amended
through this Fourth Mortgage Amendment, and all liens, rights and powers
created thereby or thereunder are in all respects hereby ratified and
confirmed, and the Original Mortgage as amended through this Fourth Mortgage
Amendment shall be read, taken and construed as one and the same instrument.
Nothing in this Fourth Mortgage Amendment releases any right, claim, lien,
security interest or entitlement of the Secured Parties or a Secured Party, the
Administrative Agent, or the Trustee created by or contained in the Original
Mortgage as amended through this Fourth Mortgage Amendment, nor is the
Mortgagor released from any warranty, representation or obligation created by
or contained in the Original Mortgage as amended through this Fourth Mortgage
Amendment.
Section 10. This Fourth Mortgage Amendment (a) shall be binding upon
and inure to the benefit of the Mortgagor, the Secured Parties, the Trustee,
and the Administrative Agent and their respective successors and assigns upon
the execution and delivery hereof by the Mortgagor, the Administrative Agent,
and the Trustee and (b) may be modified or amended only by a writing signed by
such of the parties to the Original Mortgage as are required by the provisions
of the Original Mortgage and the Amended Credit Agreement. This instrument may
be executed in any number of counterparts, and by different parties hereto in
separate counterparts, each of which when so executed shall for all purposes be
deemed to be an original, and all of which are identical except that, to
facilitate recordation, in any particular counterpart, portions of Exhibit A
which describe properties situated in counties other than the country in which
such counterpart is to be recorded may have been omitted. The headings herein
shall be accorded no significance in interpreting this Fourth Mortgage
Amendment.
Section 11. The Mortgagor hereby acknowledges the validity of the
Lien of the Original Mortgage as amended through this Fourth Mortgage
Amendment.
IN WITNESS WHEREOF, the Mortgagor has executed or caused to be
executed this Fourth
<PAGE> 25
Amendment of Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement in multiple originals effective as of the date
first written above.
MORTGAGOR:
The address of the Mortgagor/Debtor is:
SAGE ENERGY COMPANY
10101 Reunion Place, Suite 800
San Antonio, Texas 78216
By:
----------------------------------
Name: Jesse Minor
[SEAL] Title: President
ATTEST:
By:
--------------------------------
Name: Michael Amini
Title: Secretary
ADMINISTRATIVE AGENT:
The address of Mortgage/Secured
Party is: TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
712 Main Street As the Administrative Agent
Houston, Texas 77002
By:
----------------------------------
ATTEST: Name: Scott H. Richardson
Title: Vice President
By:
--------------------------------
Name: Michael O. Walker
Title: Cashier
<PAGE> 26
The address of Trustee is: TRUSTEE:
712 Main Street --------------------------------------
Houston, Texas 77002 James C. Nicholas, Trustee
<PAGE> 27
STATE OF TEXAS }
}
COUNTY OF BEXAR }
BE IT REMEMBERED that I _____________________________, a Notary Public
duly qualified, commissioned sworn and acting in and for the County and State
aforesaid, hereby certify that, on this ___ day of May, 1995, there appeared
before me severally each of the following persons, each being the designated
officer of the corporation set opposite his name, and said corporation being a
party to the foregoing instrument:
Jesse Minor, President and Michael Amini, Secretary of Sage Energy
Company, a Delaware corporation, whose address is 10101 Reunion Place, Suite
800, San Antonio, Texas 78216.
OKLAHOMA This instrument was acknowledged before me on this day by
Jesse Minor as President of Sage Energy Company a Delaware
corporation with his signature attested to by Michael Amini as
Secretary of Sage Energy Company, on behalf of said
corporation.
TEXAS Before me on this day personally appeared each such person,
each of whom is known to me to be the person whose name is
subscribed to the foregoing instrument, and known to me to be
the designated officer of the corporation set opposite his name
and each acknowledged to me that he executed said instrument
for the purposes and consideration therein expressed, and as
the act and deed of the corporation set opposite his name.
________________________________________
Notary Public
My Commission Expires: _________________
<PAGE> 28
STATE OF TEXAS }
}
COUNTY OF HARRIS }
BE IT REMEMBERED that I _____________________________, a Notary Public
duly qualified, commissioned sworn and acting in and for the County and State
aforesaid, hereby certify that, on this ____ day of May, 1995, there appeared
before me severally each of the following persons, each being the designated
officer of the association set opposite his name and such association being a
party to the foregoing instrument:
Scott H. Richardson, a Vice President and Michael O. Walker, a Cashier
of Texas Commerce Bank National Association, a national banking association,
whose address is 712 Main Street, Houston, Texas 77002.
OKLAHOMA AND TEXAS Before me on this day personally appeared each such
person, each of whom is known to me to be the person
whose name is subscribed to the foregoing instrument,
and known to me to be the designated officer of the
corporation set opposite his name and each
acknowledged to me that he executed said instrument
for the purposes and consideration therein expressed,
and as the act and deed of the corporation set
opposite his name.
_______________________________________
Notary Public
My Commission Expires: ________________
STATE OF TEXAS }
}
COUNTY OF HARRIS }
BE IT REMEMBERED that I _____________________________, a Notary Public
duly qualified, commissioned sworn and acting in and for the County and State
aforesaid, hereby certify that, on this ____ day of May, 1995, there appeared
James C. Nicholas, known to me to be the person whose name is subscribed to the
foregoing instrument, and known to me to be the Trustee of Texas Commerce Bank
National Association, a national banking association whose address is 712 Main
Street, Houston, Texas 77002 and who acknowledged to me that he executed said
instrument for the purposes and consideration therein expressed, and as the act
and deed of himself as Trustee for Texas Commerce Bank National Association.
________________________________________
Notary Public
My Commission Expires: ________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the form 10Q financial statements
filed for the period ending March 31, 1995 and is
qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000216991
<NAME> SAGE ENERGY COMPANY
<MULTIPLIER> 1
<CURRENCY> U.S DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 6,428
<SECURITIES> 0
<RECEIVABLES> 6,638
<ALLOWANCES> 0
<INVENTORY> 1,433
<CURRENT-ASSETS> 156
<PP&E> 133,760
<DEPRECIATION> 105,517
<TOTAL-ASSETS> 43,192
<CURRENT-LIABILITIES> 6,456
<BONDS> 18,580
<COMMON> 0
0
0
<OTHER-SE> 14,094
<TOTAL-LIABILITY-AND-EQUITY> 43,192
<SALES> 19,271
<TOTAL-REVENUES> 22,152
<CGS> 12,190
<TOTAL-COSTS> 1,038
<OTHER-EXPENSES> 5,373
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,184
<INCOME-PRETAX> 2,367
<INCOME-TAX> 835
<INCOME-CONTINUING> 1,532
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,532
<EPS-PRIMARY> 1,095
<EPS-DILUTED> 0
</TABLE>
