SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 1-8490
ALAMCO, INC.
(Exact name of registrant as specified in its charter)
Delaware 55-0615701
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
200 West Main Street, Clarksburg, WV 26301
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (304) 623-6671
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
The number of shares outstanding of each of the registrant's classes of
common stock as of November 1, 1995, is set forth below:
Class of Stock Number of Shares Outstanding
Common Stock, $.10 par value 4,694,106
PART I. Financial Information Pages
Item 1. Financial Statements
Condensed Consolidated Statement of Income . . . . . . . . . . 3
for the three and nine months ended September 30, 1995 and 1994
Condensed Consolidated Balance Sheet as of . . . . . . . . . 4 - 5
September 30, 1995 and December 31, 1994
Condensed Consolidated Statement of Cash Flows . . . . . . . . 6
for the nine months ended September 30, 1995 and 1994
Condensed Consolidated Statement of Stockholders' . . . . . . 7
Equity for the nine months ended September 30, 1995 and 1994
Notes to the Condensed Consolidated Financial . . . . . . . 8 - 9
Statements
Item 2. Management's Discussion and Analysis of . . . . . . . . . . 10 - 13
Financial Condition and Results of Operations
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 14
Signature Page . . . . . . . . . . . . . . . . . . . . . . . 15
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ----------------
1995 1994 1995 1994
---- ---- ---- ----
Revenues:
Gas and oil sales $2,668 $3,131 $8,727 $8,789
Well tending income 275 175 811 999
Other 206 158 601 254
------ ------ ------ ------
Total revenues 3,149 3,464 10,139 10,042
------ ------ ------ ------
Expenses:
Operating 1,692 1,388 4,862 3,990
General & administrative 754 697 2,312 2,030
Depreciation, depletion &
amortization 1,065 915 3,110 2,416
Interest 185 61 816 80
------ ------ ------ ------
Total expenses 3,696 3,061 11,100 8,516
------ ------ ------ ------
Income (loss)
from operations (547) 403 (961) 1,526
Other nonoperating income,
net 31 30 145 127
------ ------ ------ ------
Income (loss) before
income taxes (516) 433 (816) 1,653
Income tax (benefit)
provision (164) 80 (287) 517
------ ------ ------ -------
Net income (loss) ($352) $ 353 ($529) $1,136
====== ====== ====== ======
Net income (loss) per share ($0.08) $0.08 ($0.11) $0.24
====== ====== ====== ======
Weighted average number of
shares outstanding 4,690,556 4,648,073 4,673,868 4,643,709
========= ========= ========= =========
September 30, December 31,
1995 1994
---- ----
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,868 $ 2,632
Accounts receivable 2,092 2,693
Due from partnerships and programs 225 140
Inventories and other current assets 427 428
------ ------
Total current assets 4,612 5,893
------ ------
Property and equipment:
Gas and oil producing properties
(Successful Efforts Method) 75,008 71,782
Other property and equipment 5,525 5,270
------ -------
80,533 77,052
Less accumulated depreciation,
depletion and amortization 31,162 28,487
------- -------
49,371 48,565
Other assets 1,419 1,600
------- -------
Total assets $55,402 $56,058
======= =======
(Continued)
September 30, December 31,
1995 1994
---- ----
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and
capital lease obligations $ 46 $ 106
Accounts payable 1,239 1,325
Accrued expenses and other 1,256 1,398
Due working interest and royalty owners
920 1,064
Deferred revenue 564 1,165
------- -------
Total current liabilities 4,025 5,058
------- -------
Long-term debt and capital lease obligations 14,793 12,889
Due working interest and royalty owners 404 888
Deferred revenue 30 333
Deferred taxes 7,666 8,011
Other long-term liabilities 373 404
------- -------
Total liabilities 27,291 27,583
------- -------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $1.00 per share;
1,000,000 shares authorized; none issued
Common stock, par value $.10 per share;
15,000,000 and 7,500,000 shares
authorized, respectively;
4,749,998 and 4,712,713 shares
issued and outstanding, respectively
475 471
Additional paid-in capital
31,212 31,039
Accumulated deficit (3,376) (2,847)
-------- -------
28,311 28,663
Less: Treasury stock, at cost,
59,392 and 63,360 shares of
common stock, respectively 200 188
------- -------
Total stockholders' equity 28,111 28,475
-------- -------
Total liabilities and stockholders' equity $55,402 $56,058
======= =======
Nine Months Ended
September 30,
-----------------
1995 1994
---- ----
Cash flows from operating activities:
Net income (loss) ($529) $ 1,136
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 3,110 2,416
Deferred taxes (345) 481
Gains on asset sales (22) (75)
Issuance of stock for employee benefits and
compensation expense 105 102
Other factors, net 6 9
Increase (decrease) in cash from changes in:
Accounts receivable 601 1,463
Due from partnerships and programs (85) 4
Due working interest and royalty owners (144) (1,168)
Inventories and other current assets 1 (109)
Accounts payable & accrued expenses (228) 770
Deferred revenue (601) 496
-------- -------
Net cash provided by operating activities 1,869 5,525
-------- -------
Cash flows from investing activities:
Proceeds from disposal of fixed assets 242 332
Capital expenditures (4,019) (6,978)
Payment for acquisition of producing properties -- (5,534)
Investment in limited partnership (6) (160)
Other assets 70 (755)
-------- -------
Net cash used in investing activities
(3,713) (13,095)
-------- -------
Cash flows from financing activities:
Borrowings under line of credit 2,400 9,300
Payments on line of credit (500) (1,000)
Additions to long-term debt 16 --
Principal payments on long-term debt and
capital lease obligations (78) (181)
Acquisition of treasury stock (46) (6)
Additional costs of public offering of common stock -- (20)
Proceeds from exercise of stock options 106 9
Other liabilities (818) (719)
------- -------
Net cash provided by financing activities 1,080 7,383
------- -------
Net decrease in cash and cash equivalents (764) (187)
Cash and cash equivalents - beginning of period 2,632 2,465
------- -------
Cash and cash equivalents - end of period $1,868 $ 2,278
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 928 $ 216
Income Taxes $ 57 $ 55
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Like-kind exchange of property -- $ 3,270
Additional
Common Paid-in Accumulated Treasury
Stock Capital Deficit Stock
------ ------ -------- ------
Balance December 31, 1993 $ 470 $30,981 ($4,493) $215
Issuance of treasury stock -- 36 -- (34)
Issuance of common stock -- 32 -- --
Acquisition of treasury stock -- -- -- 6
Exercise of stock options 1 8 -- --
Public stock offering additional
costs -- (20) -- --
Net income -- -- 1,136 --
---- ------- ------- ----
Balance September 30, 1994 $ 471 $31,037 ($3,357) $187
==== ======= ======= ====
Balance December 31, 1994 $471 $31,039 ($2,847) $188
Issuance of treasury stock -- 36 -- (34)
Issuance of common stock -- 35 -- --
Acquisition of treasury stock -- -- -- 46
Exercise of stock options 4 102 -- --
Net loss -- -- (529) --
---- ------- ------- ----
Balance September 30, 1995 $475 $31,212 ($3,376) $200
==== ======= ======= ====
1. Accounting Policies
Reference is hereby made to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, which includes additional information about
the Company, its operations and its consolidated financial statements, and
contains a summary of major accounting policies followed by the Company in
preparation of its consolidated financial statements. These policies were also
followed in preparing the quarterly financial statements included herein. The
year-end consolidated balance sheet data contained herein was derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles.
The management of the Company believes that all adjustments necessary to
make a fair statement of the results in these interim periods have been made.
All adjustments reflected in the financial statements are of a normal recurring
nature except as described in the Notes to Condensed Consolidated Financial
Statements. Net results for the nine month period ended September 30, 1995 are
not necessarily indicative of the results to be expected for the full year.
2. Cash and Cash Equivalents
Cash and cash equivalents totalled $1,868,000 at September 30, 1995. Of
this amount, approximately $1,209,000 was available for general corporate
purposes and the balance was held for third parties, including $280,000 in gas
and oil sales proceeds held for eventual distribution to outside working
interest and royalty owners, $218,000 representing the outside interest owners'
estimated share of cash prepaid by CNG Transmission Corporation ("CNG") for
future gas deliveries, and $161,000 withheld from outside working interest
owners' distributions to be utilized for future ad valorem tax payments (Note
3). The Company's cash balance at September 30, 1995 includes $1,616,000
invested in commercial paper, U.S. Government and Agency Securities and Bankers'
Acceptances having a current average annualized return of 5.6 percent.
3. Plugging and Ad Valorem Tax Funds
The Company retains a portion of outside investors' monthly gas and oil
production proceeds to be utilized for anticipated future well plugging and
abandonment costs and ad valorem tax payments. The funds, totalling $566,000
at September 30, 1995, are invested in securities issued or guaranteed by the
United States Treasury at Bank One, Texas, N.A. ("Bank One") in accounts
segregated from those of the Company, of which $405,000 is included in other
assets. Interest earned on the funds accrues to the benefit of the working
interest owners. Corresponding amounts recorded in assets are included in
liabilities.
4. Income Taxes
Income taxes are provided for financial reporting purposes based on
management's best estimate of the effective tax rate expected to be
applicable for the full calendar year.
5. Common Stock Held In Treasury
The Company contributed 10,370 shares of its common stock held in treasury
to the Company's 401(k) Plan on both February 28, 1995 and January 19, 1994.
6. Well Swap
On March 31, 1994, the Company exchanged its interests in 141 gross wells
for outside investors' interests in 237 gross wells. The exchange was effective
March 1, 1994. The exchange has been treated as a like-kind exchange, and no
gain or loss has been recognized on this transaction.
7. Section 29 Tax Credits
Effective August 11, 1994, the Company, through a series of transactions,
formed a partnership with a major East Coast financial institution (the
"Institution"). The partnership is structured such that the Institution will be
allocated IRC Section 29 tax credits as a result of production from properties
contributed by the Company to the partnership. The institution initially paid
$1.0 million (reduced by $100,000 for certain expenses incurred by the
Institution), and will pay additional amounts, up to $4.0 million, in
installments prior to December 31, 2002, upon achieving certain production
minimums and satisfying other conditions. The amounts received are being
recognized as other operating income based on production from these properties.
In the first nine months of 1995, $488,000 of such income was recognized.
8. Common Stock Designation
On May 12, 1995, the Company's stockholders approved an amendment to the
Company's Certificate of Incorporation to increase the authorized capital of the
Company from 8,500,000 shares to 16,000,000 shares, of which the authorized
Common Stock of the Company was increased from 7,500,000 shares to 15,000,000
shares. The Capital Stock amendment did not change the authorized Preferred
Stock of the Company.
Management's discussion and analysis of changes in the Company's financial
condition, including results of operations and liquidity and capital resources
during the three and nine month periods ended September 30, 1995 and 1994,
respectively, are presented below.
Results of Operations
The Company recorded a net loss of $529,000 for the nine months ended
September 30, 1995, compared to net income of $1,136,000 for the same period of
1994. A loss from operations for the first nine months of 1995 totalled
$961,000 compared to income from operations of $1,526,000 for the first nine
months of 1994.
Total revenues of $10,139,000 in the first nine months of 1995 were $97,000
or 1 percent higher than total revenues of $10,042,000 in the first nine months
of 1994.
Gas and oil sales totalled $8,727,000 in the first nine months of 1995 and
represented a $62,000 decrease over the same period last year. Lower gas
prices resulted in a decrease of $2,220,000 which was substantially offset
by higher gas sales volumes, higher oil sales volumes and higher oil prices
of $1,875,000, $211,000 and $72,000, respectively, as compared to the first
nine months of 1994. Gas and oil sales volumes totalled 4,231,000
equivalent thousand cubic feet ("EMCF"), a 24 percent increase over the
3,419,000 EMCF sold during the nine month period ended September 30,
1994. The Company received on average $2.01 per MCF and $15.97 per
barrel ("BBL") for the nine month period ended September 30, 1995,
compared to $2.58 per MCF and $14.75 per BBL in the same period last
year.
Well tending income decreased $188,000 due principally to the reduction in
the number of wells the Company operates for outside investors because of a
well swap effective March 1, 1994 (Note 6).
Other operating revenue increased $347,000 due primarily to the recognition
of income relative to the transaction in which the Company formed a
partnership with an East Coast financial institution with respect to IRC
Section 29 tax credits (Note 7).
Total expenses in the first nine months of 1995 were $11,100,000, an
increase of $2,584,000 or 30 percent over expenses in the first nine months of
1994 of $8,516,000.
Operating expenses were higher by $872,000 or 22 percent due primarily to
higher gas and oil operating expenses of $399,000, higher employee-related
expenses of $183,000 relative to additional employees and higher medical
expenses, and $137,000 in nonrecurring expenses primarily for the Company's
unsuccessful effort to purchase the oil and gas minerals underlying the
Coopers Rock State Forest in Monongalia County, West Virginia.
General and administrative expenses for the first nine months of 1995 were
higher by $282,000 or 14 percent as compared to last year due principally
to higher employee-related expenses of $211,000 as a result of higher
medical expenses, an employee settlement, and an employee bonus as compared
to last year, and higher property taxes of $88,000.
Depreciation, depletion and amortization expense was higher by $694,000 in
the first nine months of 1995 due to, among other things, higher depletion
expenses related to the increased drilling activity and acquisitions in
1994.
Interest expense for the first nine months of 1995 was $816,000, an
increase of $736,000 over the same period last year due primarily to higher
debt balances.
The Company reported a net loss of $352,000 for the three months ended
September 30, 1995, compared to net income of $353,000 for the three months
ended September 30, 1994. Loss from operations totalled $547,000 for the third
quarter of 1995, compared to income from operations of $403,000 for the same
period last year.
Third quarter 1995 revenues of $3,149,000 were lower by $315,000 or
9 percent compared to total revenues of $3,464,000 for the same period last
year.
Gas and oil sales decreased by $463,000 to $2,668,000 from third quarter
1994 gas and oil sales of $3,131,000 due primarily to lower gas and oil
prices of $473,000 and $14,000, respectively, and net of higher gas volumes
of $55,000. Revenues for the third quarter of 1995 were adversely impacted
by approximately 135,000 Mcf, or $235,000, due to shut-ins resulting from
maintenance on three different pipelines. All of the Company's wells are
currently, however, producing at unrestricted levels. Revenues for the
third quarter of 1994 were adversely impacted by approximately 60,000 Mcf,
or $138,000 due to two shut-ins. Lower oil volumes adversely affected
revenues by $31,000. Gas and oil sales volumes totalled 1,356,000 EMCF
and 1,343,500 EMCF for the third quarters of 1995 and 1994, respectively.
The Company received an average $1.92 per MCF and $15.20 per BBL for the
third quarter of 1995 compared to $2.30 per MCF and $16.02 per BBL last
year.
Well tending income of $275,000 for the three months ended September 30,
1995, was higher by $100,000 as a result of higher salt water hauling and
disposal and service machine income.
Other revenue increased $48,000 due principally to recognition of income
from IRC Section 29 credits.
Expenses in the three months ended September 30, 1995 totalled $3,696,000
and were $635,000 or 21 percent higher than the three months ended September 30,
1994.
Operating expenses of $1,692,000 for the quarter were $304,000 higher than
the third quarter last year due principally to higher gas and oil operating
expenses and higher production-based taxes as a result of the Company's
increased ownership in wells.
General and administrative expenses were $57,000 higher than the same
period last year due to, among other things, higher employee-related
expenses.
Depreciation, depletion and amortization expense was higher by $150,000 for
the same reason stated in the nine months results. Interest expense was
higher by $124,000 due to higher debt balances.
Liquidity and Capital Resources
Revolving Credit Facility. At September 30, 1995, the Company had a $25
million revolving credit facility with Bank One. As of that date, $10.3 million
was available for borrowing by the Company. Interest accrued and was paid
monthly at a rate of Bank One's prime rate plus three-quarters of one percent.
In November 1995, the Company and Bank One amended and restated the credit
agreement covering the revolving credit facility. The amended credit agreement
increased the facility amount to $30 million and the interest rate decreased to
Bank One's prime rate plus one-fourth of one percent.
Capital Expenditures and Commitments. In the first nine months of 1995,
the Company's capital expenditures totalled $4,019,000 including approximately
$3,600,000 spent on gas and oil investment activities.
Most of the Company's capital spending is discretionary and the ultimate
level of spending is dependent on, among other things, the Company's assessment
of the gas and oil business environment, the number of gas and oil prospects
available to the Company, and gas and oil business opportunities in general.
The level of the Company's 1995 capital expenditures has been impacted to some
extent by the gas prices received by the Company. Based on low gas prices, the
Company limited 1995 drilling activities through August to those levels needed
to maintain leasehold positions, fulfill contractual commitments and defend
competitive drainage positions. However, due to expected gas price improvement
in the fourth quarter of 1995, the Company commenced exploratory drilling on
prospects in Kentucky and Tennessee and additional development drilling at the
South Burns Chapel Field in West Virginia. The Company will likely drill a
total of 15 to 20 wells in 1995. The Company remains committed to the
acquisition of producing properties at favorable prices.
Preliminary tests indicate favorable results from Company wells drilled in
its South Burns Chapel Field in northcentral West Virginia, South Key Rock
Prospect in southeastern Kentucky and its Carden Prospect in northeastern
Tennessee. Additionally, the Company has committed approximately $270,000 in
funds to install a pipeline from its Key Rock area south to a local distribution
company in order to sell the gas from this Prospect at more favorable prices
than it was previously receiving from existing wells in the same vicinity.
In early November 1995, the Company acquired from an industry partner for
$1.35 million in cash, interests in 47 gross (28.1 net) oil and gas wells and
the remaining 53 percent of the gas gathering system that it did not own in the
Company's Days Chapel field in Tennessee. This transaction increased the
Company's ownership of the wells in the field from 48.4 percent to 83.0
percent. The Company used funds available on its credit facility with Bank
One to complete the transaction.
Settlement of Columbia Litigation Claims. On June 8, 1992, the Company
settled its outstanding gas purchase contract claims against Columbia. Pursuant
to the settlement agreement, the Company, on behalf of itself and other interest
owners in the wells covered by the settlement, has an allowed claim in the
amount of $11,000,000 against Columbia, without security or priority, in
Columbia's bankruptcy reorganization proceedings. The Company's share of the
allowed claim at September 30, 1995 is estimated to be approximately 55 percent,
with the balance going to the other interest owners in the wells covered by the
settlement. The Company's current financial statements do not include any
benefits of the settlement. The timing and actual amount to be received by the
Company and other interest owners will be affected by the terms of Columbia's
reorganization plan and the amount of assets available to satisfy Columbia's
unsecured creditors. Columbia is seeking bankruptcy court approval of its
Second Amended Plan of Reorganization, As Further Amended Dated July 17, 1995
(the "Plan"). The Plan provides for an initial distribution to the Company of
68.875 percent of the allowed claim upon confirmation of the Plan, and a
potential additional distribution of up to 3.625 percent of the allowed claim in
the future depending upon various contingencies. The Plan remains subject to
bankruptcy court approval in accordance with the requirements for confirmation
of a bankruptcy plan of reorganization set forth in Chapter 11 of the United
States Bankruptcy Code. This is set for hearing beginning November 13, 1995,
but could be delayed until December 4, 1995.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Description Filing
---------- ----------- ------
10.1 Interim Employment Agreement by and Filed herewith
between Alamco, Inc. and Steven E. May
27 Financial Data Schedule. Filed herewith
(b) No current reports on Form 8-K were filed during the quarter ended
September 30, 1995.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the under-
signed thereunto duly authorized.
November 10, 1995 /s/ John L. Schwager
-------------------------------
John L. Schwager, President,
Chief Executive Officer, and
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This summary contains financial information extracted from the statement of
income and balance sheet and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,868
<SECURITIES> 0
<RECEIVABLES> 2,101
<ALLOWANCES> 9
<INVENTORY> 159
<CURRENT-ASSETS> 4,612
<PP&E> 80,533
<DEPRECIATION> 31,162
<TOTAL-ASSETS> 55,402
<CURRENT-LIABILITIES> 4,025
<BONDS> 14,793
<COMMON> 475
0
0
<OTHER-SE> 27,636
<TOTAL-LIABILITY-AND-EQUITY> 55,402
<SALES> 8,727
<TOTAL-REVENUES> 10,139
<CGS> 4,862
<TOTAL-COSTS> 7,972
<OTHER-EXPENSES> 2,312
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 816
<INCOME-PRETAX> (816)
<INCOME-TAX> (287)
<INCOME-CONTINUING> (529)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (529)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
This Agreement, made and entered into this 1st day of July, 1995, by
and between ALAMCO, INC., a Delaware corporation with its principal offices at
200 West Main Street, Clarksburg, West Virginia (the "Company"), and STEVEN E.
MAY, (the "Executive").
WHEREAS, the Company and the Executive were parties to that certain
Employment Agreement made as of July 1, 1991 (the "Prior Agreement") which was
terminated effective as of June 30, 1995 by letter dated March 27, 1995; and
WHEREAS, the Company and the Executive desire to extend, on a
temporary basis, employment with the Company under the terms and conditions
herein set forth.
NOW, THEREFORE, the parties hereto, intending to be legally and
mutually bound, do hereby agree as follows:
1. EMPLOYMENT
The Company does hereby agree to employ the Executive as its
Vice President and Controller, and the Executive agrees to be so employed, on
the terms and conditions set forth herein.
2. TERM
This Agreement shall commence on July 1, 1995 and shall extend
from month to month thereafter until terminated by either party as set forth in
this Agreement.
3. DUTIES
The Executive shall perform all of the duties commonly performed
by a controller for the Company, and shall be subject to such further instruc-
tions as may be issued from time to time within the general scope of those
duties by the Board of Directors of the Company, or its designated representa-
tive. The Executive shall devote all his time, energies, and skills to such
duties during the term hereof.
4. COMPENSATION
4.1 As consideration for the services to be rendered by the
Executive to the Company hereunder, the Company shall pay the Executive a
monthly salary of $6,583.34, prorated in accordance with the Company's standard
payroll schedules.
4.2 In addition to the foregoing, the Executive shall be
entitled to:
(a) participate and be included in the Company's health and
life insurance plans or policies maintained by the Company during the term of
this Agreement;
(b) participate in the Alamco, Inc. Employee Savings and
Protection Plan and the Company's Flexible Benefits Plan as may be in effect
during the term hereof, which benefits shall be determined in accordance with
the respective Plans;
(c) continue in effect the term of any stock options
currently held by the Executive until the earlier of the last payment made under
this Agreement, including severance payments, or the expiration date of the
Options;
(d) reimbursement of all expenses reasonably incurred by
the Executive in connection with the performance of his duties on behalf of the
Company, including, without limitation, travel, lodging, and reasonable business
entertainment expenses;
(e) vacation and sick leave and personal time benefits in
accordance with Company policies, and;
(f) the $3,000 balance of the Executive's bonus payment to
be paid on October 15, 1995.
4.3 In addition to the compensation set forth in Sections 4.1
and 4.2, the Executive shall be paid severance of $39,500.04, in equal monthly
installments of $6,583.34 commencing on July 31, 1995. The Executive agrees
that this severance pay shall fully and completely satisfy any and all obliga-
tions of the Company under the Prior Agreement.
5. TRADE SECRETS
5.1 The Executive acknowledges that he has heretofore acquired
and hereafter anticipates acquiring detailed knowledge of the Company's business
and affairs. In view of the nature of the services which the Executive is
capable of performing for the Company, the Executive also acknowledges that
those services will have peculiar value to the Company, the loss of which cannot
be adequately compensated by monetary damages.
5.2 The Executive therefore agrees that he shall not, during the
term of his employment hereunder or thereafter, divulge to any third party
information obtained in the course of his employment including, without limita-
tion, any information concerning the Company's business, operations, affairs,
rates, investors, customers, geological data, well logs, well locations,
acreage, reserves of gas or oil, finances, plans or policies to the extent the
same are not already matters of public knowledge.
5.3 All such information shall be regarded as secret, confiden-
tial, and proprietary to the Company and shall be used by the Executive for no
other purpose than to pursue the Company's business and affairs.
5.4 In view of his unique skills and knowledge, the Executive
shall not, without the Company's express prior written consent, during the term
hereof or, unless otherwise agreed to in writing by the Board of Directors, for
a period of time equal to six (6) months following the expiration of this
Agreement, engage in any business (as proprietor, officer, director or share-
holder) which is competitive with the Company's gas and oil business; provided,
however, that the foregoing provision shall not prohibit the Executive from
investing in a publicly held company in which he owns less than one percent (1%)
of the equity.
5.5 If the Executive competes with the Company in violation of
Section 5.4 hereof or discloses or threatens to disclose any of the information
described in Section 5.2 concerning the Company, the Company shall be deemed to
be subject to irreparable injury and shall be entitled to immediate injunctive
or other similar equitable relief to restrain the Executive from so competing
with the Company or from so disclosing its proprietary information to a third
party, including any competitor of the Company. The foregoing relief shall be
in addition to any other remedies to which the Company may be entitled under
law.
6. TERMINATION
6.1 This Agreement may be terminated by either party by giving
written notice to the other party. The termination shall be effective ten days
after such notice is given.
7. DEATH OR DISABILITY
7.1 If the Executive shall have become permanently disabled or
if employment hereunder terminates by reason of the Executive's death, all
future obligations of the Company hereunder shall, at the Company's election,
cease; provided, however, that benefits and rights theretofore vested under any
pension, profit-sharing, or insurance plan of the Company shall remain unim-
paired thereby.
7.2 If the Executive's death shall have occurred after the
termination of employment hereunder and if, but for his death, the Executive
would have been entitled to receive additional payments hereunder in respect of
his employment, such payments shall thereafter be paid as directed by the
Executive in his last will and testament, or failing such direction, to the
estate of the Executive.
8. NO ASSIGNMENT
Except by order of a court of competent jurisdiction, action by
an administrative agency, or otherwise in accordance with applicable law, this
Agreement and the rights, interests and benefits hereunder shall not be as-
signed, transferred, pledged, or hypothecated in any way by the Executive or by
the Company and shall not be subject to execution, attachment, or similar
process. Any attempted assignment, transfer, pledge or hypothecation or the
levy of any execution, attachment or similar process thereon shall be null and
void and without effect.
9. SUCCESSORS AND ASSIGNS
This Agreement shall be binding on and inure to the benefits of
the parties hereto and their respective successors, heirs and assigns; provided,
however, that neither party may assign his or its rights hereunder without the
other's express prior written consent.
10. NOTICES
Any notice required to be given hereunder shall be sufficient if
in writing and submitted by first class mail, postage prepaid, if to the
Executive as follows:
Steven E. May
141 Ridgeway Drive
Bridgeport, WV 26330
and if to the Company, to it at the address first above written, attention Chief
Executive Officer.
11. EFFECT OF PRIOR AGREEMENTS
This Agreement contains the entire understanding between the
parties hereto and supersedes any prior employment agreement between the
Executive and the Company.
12. AMENDMENT
Any amendment or supplement hereto shall be in writing and
signed by the parties hereto.
13. SEVERABILITY
Any provision of this Agreement that is invalid, illegal, or
unenforceable in any respect in any jurisdiction shall be, as to such jurisdic-
tion, ineffective to the extent of such invalidity, illegality, or unenforce-
ability without affecting the remaining provisions hereof; and any such invalid-
ity, illegality, or unenforceability in any such jurisdiction shall not invali-
date or in any way affect the validity, legality or enforceability of such
provision in any other jurisdiction.
14. GOVERNING LAW
This Agreement shall be governed by, construed under, and
enforced in accordance with the laws of the State of West Virginia applicable to
contracts made in such state by residents thereof and to be performed entirely
within such state.
15. ARBITRATION
Any controversy or claim arising out of or relating to this
Agreement, shall be settled by arbitration in the City of Pittsburgh, Pennsylva-
nia. The arbitration shall be conducted in accordance with the rules of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
IN WITNESS WHEREOF, the parties hereto have hereunto affixed their
respective hands and seals the day and year first above written.
ATTEST:
(CORPORATE SEAL) ALAMCO, INC.
/s/ Jane Merandi By: /s/ John L. Schwager
- ---------------------------- ----------------------------------
Secretary President and
Chief Executive Officer
EXECUTIVE
/s/ Steven E. May
----------------------------------
Steven E. May
