<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q SB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-9933
-----------------------------
AMERAC ENERGY CORPORATION
(Exact name of Registrant as specified in its charter)
STATE OF DELAWARE 75-2181442
(State or other incorporation) (I.R.S. Employer
Identification No.)
1201 LOUISIANA, SUITE 3350
HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 308-5250
Indicate by check mark whether the registrant (1) has filed all reports
required by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The number of shares of Common Stock, $.05 par value, outstanding on
November 1, 1996 was 42,530,252.
================================================================================
<PAGE>
AMERAC ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
-------------- --------------
(unaudited)
<S> <C> <C>
A S S E T S
Current Assets
Cash and cash equivalents $ 144,000 $ 100,000
Receivables
Receivable from property sale 1,005,000 ---
Trade receivables 1,104,000 2,035,000
------------- -------------
Total current assets 2,253,000 2,135,000
------------- -------------
Property and Equipment (using successful efforts accounting)
Oil and gas properties at cost 20,614,000 33,442,000
Less accumulated depreciation, depletion and amortization (12,020,000) (13,055,000)
------------- -------------
Net property and equipment 8,594,000 20,387,000
------------- -------------
Other Assets 347,000 583,000
------------- -------------
TOTAL ASSETS $ 11,194,000 $ 23,105,000
============= =============
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
Current Liabilities
Accrued liabilities and payables $ 606,000 $ 1,038,000
Current portion of notes payable banks --- 3,849,000
------------- -------------
Total current liabilities 606,000 4,887,000
------------- -------------
Long-term Liabilities
Notes payable banks 3,547,000 8,650,000
Contract obligation 641,000 174,000
Other long-term liabilities 406,000 323,000
------------- -------------
Total long-term liabilities 4,594,000 9,147,000
------------- -------------
Contingencies (Note 6)
Stockholders' Equity
Preferred stock, $1 par value 10,000,000 shares authorized:
$4.00 Senior Preferred, 1,786,347 outstanding at December 31, 1995
and zero outstanding at September 30, 1996. 1,786,000 ---
Common Stock, $.05 par value; 50,000,000 shares authorized;
outstanding 20,629,416 shares at December 31, 1995 and
42,530,252 at September 30, 1996 1,031,000 2,126,000
Additional paid-in capital 142,211,000 144,507,000
Accumulated deficit (139,034,000) (137,562,000)
------------- -------------
Stockholders' equity 5,994,000 9,071,000
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,194,000 $ 23,105,000
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
AMERAC ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1995 1996 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE
Oil and gas $ 953,000 $ 2,584,000 $ 2,780,000 $ 7,432,000
Other 46,000 (4,000) 65,000 42,000
----------- ----------- ----------- -----------
999,000 2,580,000 2,845,000 7,474,000
----------- ----------- ----------- -----------
EXPENSES
Lease operating 230,000 597,000 761,000 1,577,000
Exploration 26,000 22,000 241,000 29,000
Depreciation, depletion and amortization 286,000 699,000 811,000 1,693,000
General and administrative 452,000 627,000 1,182,000 1,749,000
Interest Expense 16,000 245,000 159,000 662,000
(Gain) Loss on sale of properties and other --- --- (111,000) (124,000)
----------- ----------- ----------- -----------
1,010,000 2,190,000 3,043,000 5,586,000
----------- ----------- ----------- -----------
Income (loss) before taxes (11,000) 390,000 (198,000) 1,888,000
Provision for taxes --- (5,000) --- (5,000)
----------- ----------- ----------- -----------
NET INCOME (Loss) $ (11,000) $ 385,000 $ (198,000) $ 1,883,000
Preferred dividends (204,000) --- (597,000) (411,000)
----------- ----------- ----------- -----------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ (215,000) $ 385,000 $ (795,000) $ 1,472,000
=========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON STOCK $ (.01) $ .01 $ (.04) $ .05
=========== =========== =========== ===========
Weighted average Common Stock outstanding 20,471,000 42,420,000 19,230,000 30,465,000
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
AMERAC ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1995 1996
----------- ------------
<S> <C> <C>
CASH FLOW FROM OPERATING:
Net Income (Loss) $ (198,000) $ 1,883,000
Adjustments needed to reconcile to net cash flows:
Depreciation, depletion and amortization 811,000 1,693,000
Amortization of discount 22,000 ---
Exploration expenses 241,000 29,000
Stock issued for compensation 15,000 180,000
Gain on sale of properties (111,000) (124,000)
Recognition of deferred revenue (263,000) (105,000)
Changes in current items relating to operations:
Accounts receivables and other 92,000 (931,000)
Accounts payables (5,000) 72,000
Accrued and other long-term-liabilities (170,000) (84,000)
----------- ------------
NET CASH FLOW PROVIDED BY OPERATIONS 434,000 2,613,000
----------- ------------
CASH FLOW FROM INVESTING:
Oil and gas expenditures (4,124,000) (12,995,000)
Proceeds from sale of assets 136,000 1,281,000
Other property and equipment --- (268,000)
----------- ------------
NET CASH FLOW PROVIDED BY INVESTING (3,988,000) (11,982,000)
----------- ------------
CASH FLOW FROM FINANCING:
Debt repayments (1,929,000) (1,930,000)
Bank borrowings 2,447,000 10,881,000
Sales of Common Stock --- 364,000
Other (139,000) 10,000
----------- ------------
NET CASH FLOW PROVIDED BY FINANCING 379,000 9,325,000
----------- ------------
NET INCREASE(DECREASE)IN CASH AND EQUIVALENTS (3,175,000) (44,000)
Cash and equivalents at beginning of period 3,437,000 144,000
----------- ------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 262,000 $ 100,000
=========== ============
SUPPLEMENTAL DISCLOSURE:
Interest paid during the period $ 153,000 $ 662,000
=========== ============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING:
Paid dividends in-kind on the Senior Preferred Stock $ 597,000 $ 411,000
Paid compensation in Common Stock $ 15,000 $ 180,000
Common Stock issued in Fremont Acquisition $ --- $ 640,000
Conversion of Senior Preferred Stock to Common Stock $ --- $ ---
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
AMERAC ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
DECEMBER 31, 1995 TO SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
$4.00 SENIOR COMMON SHARES
PREFERRED STOCK ($.05 PAR VALUE) ADDITIONAL
------------------------ ------------------------ PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- ----------- ---------- ---------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE -
December 31, 1995 1,786,347 $ 1,786,000 20,629,416 $1,031,000 $142,211,000 $(139,034,000) $5,994,000
---------- ----------- ---------- ---------- ------------ ------------- ----------
Fremont Acquisition --- --- 3,293,310 165,000 475,000 --- 640,000
Stock issued for
Compensation
and other --- --- 714,373 36,000 154,000 --- 190,000
$4.00 Senior Preferred:
Stock Dividend 81,237 82,000 --- --- 329,000 (411,000) ---
Conversion (1,867,584) (1,868,000) 16,808,256 840,000 1,028,000 --- ---
Sale of Common Stock --- --- 1,084,897 54,000 310,000 --- 364,000
Net Income --- --- --- --- --- 1,883,000 1,883,000
---------- ----------- ---------- ---------- ------------ ------------- ----------
BALANCE -
September 30, 1996 $ --- $ --- 42,530,252 $2,126,000 $144,507,000 $(137,562,000) $9,071,000
========== =========== ========== ========== ============ ============= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
AMERAC ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND NATURE OF BUSINESS
Amerac Energy Corporation, ("Amerac" or the "Company") was formed in 1969
and is headquartered in Houston, Texas. The Company is engaged in the
acquisition, development and enhancement of oil and gas properties in the
United States.
2. SUMMARY OF SIGNIFICATION ACCOUNTING POLICIES
The results of operations for the interim periods shown in this report are
not necessarily indicative of results to be expected for the year. In the
opinion of management, the accompanying unaudited financial statements
contain all adjustments necessary to present fairly the financial position as
of September 30, 1996, and the results of operations for the three months and
nine months ended September 30, 1995 and 1996, and cash flow for the nine
months ended September 30, 1995 and 1996. These financial statements and the
notes thereto should be read in conjunction with the Company's annual report
on Form 10-K for the year ended December 31, 1995.
Net income (loss) per share is computed by dividing the net income or loss
attributable to common shareholders by the weighted average number of shares
of Common Stock outstanding. In determining the net income (loss) attributable
per share for the periods shown other than for the three months ended
September 30, 1996, the Company decreased income by the preferred stock
dividend and accretion of discount. The stock options are not material or are
anti-dilutive and are not included in the average shares outstanding during
the periods presented.
From 1991 until 1996, the Company has accounted for its investment in
Petroleum Financial Inc. ("PFI") on the cost method of accounting. PFI
performs certain financial, accounting, tax, administrative, land, computer
operations and shareholder relations activities for Amerac. In July 1995, the
Company's interest in PFI increased from 15% to 26%; thus, commencing in
1996, the Company began accounting for its investment in PFI on the equity
method of accounting.
3. INDEBTEDNESS
On August 15, 1996, the Company amended its revolving line of credit
agreement with Bank One, Texas National Association ("Bank Credit
Agreement"). The amendment, among other things, increases the Company's line
of credit from $15 to $30 million and extended the due date to May 31, 1998.
In addition, the Company also executed a $1 million bridge loan agreement
("Bridge Loan") a portion of which the Company has used to fund acquisitions
and development expenditures. The Bridge Loan must be repaid on the earlier
of the date of receipt of any funds from any equity offerings or February 16,
1997 and bears interest at the Bank One Texas Base Rate plus two and one-half
percent which is currently 10.75%. Both of these agreements are secured by
all of the Company's oil and gas properties, and contain various covenants
which may, if not met, cause the Company to be in default or reduce its
access to additional borrowings. At November 1, 1996, there was $849,000
outstanding under the bridge loan facility and $11.7 million was outstanding
under the Bank Credit Agreement. The Company's borrowing base was $11.7
million at November 1, 1996 with a mandatory reduction of $250,000 each
month. The Bank Credit Agreement bears interest at the Bank One Texas Base
Rate plus three quarter percent (9%) at September 30, 1996.
4. SHAREHOLDER'S EQUITY
COMMON STOCK
The Company has called a Special Meeting of Stockholders for November 20,
1996, for the purpose of approving an amendment to the Company's Certificate
of Incorporation (the "Amendment"). The Amendment would provide for a one-
for-fifteen reverse split of Common Stock. If this Amendment is approved,
the outstanding stock will be reduced from 42,530,252 at November 1, 1996 to
2,835,350.
6
<PAGE>
AMERAC ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)
(UNAUDITED)
At the Company's annual meeting of Shareholders on July 11, 1996, the
Shareholders approved an amendment to convert each share of $4.00 Senior
Preferred Stock (the "Senior Preferred") outstanding to nine (9) shares of
Common Stock thus eliminating the Senior Preferred Stock. The Shareholders also
approved an amendment to the Certificate of Incorporation that increased the
authorized Common Stock to 100 million shares. In June 1996, the Company
completed a private sale of approximately 1.08 million restricted shares of
Common Stock at an average price of $.34 per share.
Supplemental Pro Forma Earning (Loss) Per Share would have been $.00 for the
three months ended September 30, 1995 and $(.01) for the nine months ended
September 30, 1995, if the Senior Preferred Stock conversion occurred on January
1, 1995. The Supplemental Pro Forma Earning Per Share would have been unchanged
at $.01 for the three months ended September 30, 1996 and $.05 for the nine
months ended September 30, 1996.
As a result of the conversion of the Senior Preferred Stock the utilization
of the Net Operating Tax Loss Carryforward of approximately $200 million will be
limited to an annual utilization of approximately $300,000 per year. The
Company's statutory depletion carryforwards will not be limited as a result of
the Senior Preferred Stock Conversion.
5. ACQUISITION ACTIVITIES
Effective January 1, 1996, the Company acquired the Common Stock of Fremont
Energy Corporation ("Fremont"), an Oklahoma-based oil and gas company, for $7
million paid in cash and 3.3 million shares of Common Stock of the Company.
Fremont has 131 wells located predominately in central Oklahoma and Kansas
concentrated in three major fields. Fremont's estimated net proved reserves at
December 31, 1995, totaled approximately 13.4 billion cubic feet equivalent
("BCFE").
The Company acquired on August 16, 1996 a majority interest in sixteen gas
wells in the Texan Gardens Field, located in Hidalgo County, Texas. The field,
situated in the heart of the Vicksburg Trend of the Texas Gulf Coast region,
produces gas from multiple sands between depths of 7,700 feet to 9,400 feet. The
Company's average working interest in these properties approximates 58%, with a
net revenue interest averaging 40%. Based on a March 1, 1996 effective date, the
Company estimated that proved reserves associated with this $1.8 million
acquisition totaled 4.4 BCFE, of which seventy percent are behind pipe.
The Company acquired on August 19, 1996 a majority non-operated interest in
22 producing wells from numerous working interest owners on the McLemore-
Drummonds Ranch and the Sloan X's Ranch in Shackelford, Stephens, Throckmorton,
and Haskell Counties of Central Texas (The "Throckmorton" acquisition).
Production in this acreage is predominantly from the Mississippian at
approximately 4,800 feet and the Caddo at approximately 2,800 feet. Amerac's
working interest in the McLemore-Drummonds Ranch and the Sloan X's Ranch
approximates 76% and 82%, respectively. The net revenue interests in the two
ranches are 57% and 65%, respectively. Based on a June 1, 1996 effective date,
the company estimated that proved reserves associated with the $1.1 million
acquisitions totaled 224,700 barrels of oil equivalent ("BOE"), of which one
hundred percent are producing.
The Company also acquired in August 1996, a producing lease on the east flank
of the Cosden Field for approximately $190,000. Based on a July 1, 1996
effective date, the Company estimated the proved reserves associated with this
acquisition totaled 679 MMCFE. In addition to the production associated with a
deep well on this new lease, the leasehold interests that come with the
acquisition include rights to a behind pipe zone in a currently inactive well
already owned by the Company. The Company intends to recomplete this inactive
well in the behind pipe zone.
7
<PAGE>
AMERAC ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)
(UNAUDITED)
These acquisitions are accounted for under purchase accounting and results of
operations will be consolidated from the date of the respective consummation.
The pro forma impact of the Fremont acquisition, the Texan Gardens Field
acquisition, the 1995 Cosden acquisition, and the December 1995 sale of N.W.
Arapahoe, assuming the transactions had occurred at January 1, 1995, would have
been as follows for the nine months ended September 30, 1996 and September 30,
1995. The 1996 Throckmorton acquisition and the 1996 Cosden acquisition would
not have a material impact on the Pro Forma Statement of Operations, and, thus
have not been included.
<TABLE>
<CAPTION>
September 30, 1996 September 30,1995
------------------ ------------------
<S> <C> <C>
Revenues $7,829,000 $5,367,000
Net Income (Loss) $1,811,000 $ ---
Net Income (Loss) applicable
to Common Shareholder $1,400,000 $ (1,000)
Net Income (Loss) per share $ .05 $ (.03)
</TABLE>
6. CONTINGENCIES
The Company's Shurly Ranch Properties were the subject of litigation related
to the proper settlement of a take-or-pay payment received by the Company from
El Paso Natural Gas Company ("El Paso"). The Company is obligated under a
settlement agreement dated January 8, 1994, to allow El Paso to recover the
prepayment by delivering 65% of the monthly gas production volumes at an imputed
price of $3.25 per MMBTU through February 1997. Beginning in March 1997, the
Company has the option of (1) continuing to deliver gas until it is unable to
meet the minimum delivery requirement or (2) paying the remaining unrecovered
balance, not to exceed $360,000. Due to the uncertainty of El Paso's gas
requirements, the Company has reviewed, in conjunction with the annual year end
reserve analysis prepared by an independent petroleum engineering firm, the
current economic reserve life and production capabilities of the properties to
determine their ability to deliver the volumes necessary to satisfy the
remaining prepayment. The Company believes that its current contract obligation
of $534,000 is sufficient to cover any remaining obligation under the settlement
agreement at September 30, 1996. The Company has classified the maximum
unrecovered balance of $360,000 as a current obligation as of September 30,
1996.
The Company is subject to various contingencies which arise primarily from
interpretation of federal and state laws, and regulations affecting the oil and
gas industry. Such contingencies include differing interpretations as to the
prices at which oil and gas sales may be made, the prices at which royalty
owners may be paid for production from their leases and other matters. Although
management believes it has complied with the various laws and regulations,
administrative rulings and interpretations thereof, adjustment could be required
as new interpretations and regulations are issued. In addition, production
rates, marketing and environmental matters are subject to regulation by various
federal and state agencies.
8
<PAGE>
AMERAC ENERGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
STRATEGY
The Company focuses on acquisitions where a substantial portion of the value
is in proved developed producing reserves which are currently generating cash
flow. Management is relatively impartial as to the acquisition of gas versus
oil. Although management would prefer operatorship of the properties, the
Company does not pass up any opportunities for that reason. At this point, the
Company has not restricted itself to seeking acquisitions in specific
geographical regions.
Along with the acquisition of properties, the Company looks for ways to
exploit existing and acquired reserves by increasing production rates,
accelerating reserve recoveries and, improving and extending the economic
viability of the properties. Exploitation activities may include workovers,
recompletions, new stimulation technology, development drilling, horizontal
drilling, pressure maintenance projects, and other methods of enhanced recovery.
Although the Company does not participate in rank exploration, it may
participate in exploratory drilling on leases associated with existing or
acquired producing properties.
While the Company is actively pursuing these avenues, there can be no
assurance that it will have successful results in its acquisition, exploitation
and exploration efforts. There is a tremendous amount of competition in the
industry and the prices paid for in-place reserves make it difficult to achieve
attractive rates of return.
ACQUISITION AND DIVESTITURE ACTIVITIES
The Company has closed four acquisitions in 1996. See Note 5.
The Company is in discussion with a third party concerning the sale of its
short lived South Timbalier 198 property. South Timbalier 198 is the Company's
only offshore property and is the last remaining significant property not
acquired under the strategy being executed by current management. There is no
assurance that a sale will take place.
DEVELOPMENT ACTIVITIES
With the completion of two new wells on the Throckmorton property, located in
Throckmorton County, the Company has successfully completed nine development
wells since it changed its focus in mid 1994 to acquisitions. All of these
development wells have been drilled on properties acquired by the Company since
mid 1994. The Company plans additional development activities to take place
primarily in 1997.
9
<PAGE>
AMERAC ENERGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1995 compared with Nine Months Ended
September 30, 1996
Oil and gas revenues increased from $2.8 million in the first nine months of
1995 to $7.4 million during the comparable period in 1996 as a result of an
increase in oil and gas production as due to acquisitions and improved prices.
Gas production for the nine months increased from approximately 3.1 MMCF per day
in the first nine months of 1995 to approximately 7 MMCF per day for the
comparable period in 1996. Oil production increased from 302 barrels per day to
487 barrels per day in 1996. The average prices received for gas increased from
$1.50 per Mcf for the first nine months of 1995 production to $2.37 per Mcf for
the first nine months of 1996, the average price received for oil production
increased from $16.82 per Bbl during the first nine months of 1995 to $19.96 per
Bbl during the comparable period in 1996.
Lease operating expenses increased from $761,000 in the first nine months of
1995 to $1.6 million for the comparable period in 1996, as a result of the
additional wells added through the acquisitions and development drilling.
Depreciation and amortization expense also increased from $811,000 during the
first nine months of 1995 to $1.7 million for the comparable period in 1996 as a
result of an increase in asset growth from acquisition and production, and a
decline in gas reserves from the Company's offshore properties.
Administrative expenses increased from $1.2 million for the first nine months
of 1995 to $1.7 million for the comparable period in 1996, due to the
acquisition activities and related increases in overhead, as well as the cost of
conversion of the Preferred Stock and related Shareholder costs.
Interest expense increased from $159,000 in the first nine months of 1995 to
$662,000 for the comparable period in 1996 as a result of additional bank
indebtedness incurred for the acquisitions.
Three Months Ended September 30, 1995 compared with Three Months Ended
September 30, 1996
Oil and gas revenues increased from $953,000 in the third quarter of 1995 to
$2.6 million during the comparable period in 1996 due to an increase in oil and
gas production as a result of acquisitions and improved prices. Gas production
increased from approximately 3.4 MMCF per day in the third quarter of 1995 to
approximately 7.9 MMCF per day for the comparable period in 1996. Oil production
increased from 306 barrels per day in 1995 to 505 barrels per day. The average
prices received for gas increased from $1.48 per Mcf for the third quarter of
1995 production to an average of $2.37 per Mcf for the third quarter of 1996,
the average price received for oil production increased for oil from $16.87 per
Bbl during the third quarter of 1995 to $20.42 per Bbl during the comparable
period in 1996.
Lease operating expenses increased from $230,000 in the third quarter of 1995
to $597,000 in the comparable period in 1996 as a result of the additional wells
added through the acquisitions and development drilling. Depreciation and
amortization expense also increased from $286,000 during the third quarter of
1995 to $699,000 for the comparable period in 1996 as result of an increase in
asset growth from acquisition and production, and a decline in gas reserves from
the Company's offshore properties.
Administrative expenses increased from $452,000 for the third quarter of 1995
to $627,000 for the comparable period in 1996 due to the acquisition activities
and related increases in overhead as well as the cost of conversion of the
Preferred Stock and related Shareholder costs.
Interest expense increased from $16,000 in the third quarter of $245,000 for
the comparable period in 1996 as result of additional bank indebtedness incurred
for the acquisitions.
10
<PAGE>
AMERAC ENERGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company has improved its overall financial condition in the last three
years through restructuring its equity and its financing arrangements with its
bank. The Company however, must continually seek additional sources of financing
in order to support its acquisition and exploitation activities. The Company has
financed these acquisitions, including the Fremont acquisition, through the use
of working capital, bank borrowings and equity. The Company has financed the
acquisition of Texan Gardens and Cosden with increased bank borrowings based on
increases in its reserve base resulting from such acquisitions and the Bridge
Loan. The Company currently plans to utilize internally generated cash flows and
bank financing to support future acquisitions together with other types of
financing, which may be more expensive, such as mezzanine, production payments
and additional equity financing. However, there is no assurance that the Company
will be successful in obtaining such additional financing. In June 1996, the
Company completed a private sale of approximately 1.08 million restricted shares
of Common Stock at an average price of $.34 per share. At November 1, 1996, the
Company has essentially fully utilized its bank financing capabilities and,
therefore, future bank borrowings will be limited by its additions to its
borrowing base and Bridge Loan. The Company has revised its Bank Credit
Agreement (see note 3). The Company intends to repay the current portion of Bank
Debt from cash flow provided by operations and additional funds raised through
the private placement of equity.
The Company is currently negotiating with private investors regarding a
potential private placement of approximately $4 million of equity. Certain of
these private investors are also considering investing approximately $1.25
million in an exploitation project on the Eastern Shelf of the Permian Basin
with the Company. There is no assurance that either of these private placements
will take place.
NEW ACCOUNTING STANDARDS
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets for the Long-Lived Assets to be Disposed Of" ("SFAS 121"),
which is effective for fiscal years beginning after December 15, 1995. Effective
January 1, 1996, the Company adopted SFAS 121 which requires that long-lived
assets (i.e., property, plant and equipment) held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the net book value of the asset may not be recoverable. The Company did not
have a material impact upon adoption of SFAS 121.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 6 - The Condensed Consolidated Financial Statements.
ITEM 6. REPORTS ON FORM 8-K DURING THE THIRD QUARTER OF 1996
None
EXHIBITS
- --------
10-(13) Credit Agreement between Amerac Energy Corporation and Bank One dated
August, 15, 1996.
10-(14) First Amendment to Amended and Restated Credit Agreement dated January
16, 1996.
10-(15) Second Amendment to Amended and Restated Credit Agreement dated August
15, 1996.
12
<PAGE>
SIGNATURE
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
undersigned thereunto duly authorized.
AMERAC ENERGY CORPORATION
(Registrant)
By: /s/ JEFFREY L. STEVENS
------------------------------------
Jeffrey L. Stevens
Senior Vice President and Chief
Financial Officer
Date: November 14, 1996
13
<PAGE>
EXHIBIT 10.13
CREDIT AGREEMENT
by and between
AMERAC ENERGY CORPORATION
and
BANK ONE, TEXAS, NATIONAL ASSOCIATION
Dated as of August 15, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE 1 - DEFINITIONS AND ACCOUNTING TERMS.......................... 1
1.1 Defined Terms............................................... 1
-------------
1.2 Accounting Terms............................................ 10
----------------
1.3 Number and Gender of Words.................................. 10
--------------------------
ARTICLE 2 - TERMS OF FACILITY......................................... 10
2.1 Advancing Commitment........................................ 10
--------------------
2.2 Advances and Payments Under the Note........................ 11
------------------------------------
2.3 Repayment Provisions........................................ 11
--------------------
2.4 Interest Rates.............................................. 12
--------------
2.5 Commitment Fee.............................................. 12
--------------
2.6 Facility Fee................................................ 13
------------
2.7 General Provisions Relating to Interest..................... 13
---------------------------------------
2.8 Loans to Satisfy Obligations................................ 14
----------------------------
2.9 Voluntary Prepayment........................................ 14
--------------------
2.10 Yield Protection............................................ 14
----------------
2.11 Automatic Debit Authority................................... 15
-------------------------
2.12 Security Interests in Deposits.............................. 15
------------------------------
ARTICLE 3 - CONDITIONS PRECEDENT...................................... 15
3.1 Conditions to Initial Advance............................... 15
-----------------------------
3.2 Further Conditions to Each Additional Advance............... 17
---------------------------------------------
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES............................ 18
4.1 Existence and Good Standing................................. 18
---------------------------
4.2 Due Authorization........................................... 18
-----------------
4.3 Valid and Binding Obligations............................... 18
-----------------------------
4.4 Scope and Accuracy of Financial Statements.................. 18
------------------------------------------
4.5 Liabilities and Litigation.................................. 19
--------------------------
4.6 Title to Assets............................................. 19
---------------
4.7 Authorizations and Consents................................. 19
---------------------------
4.8 Compliance with Laws........................................ 19
--------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.9 Proper Filing of Tax Returns and Payment of Taxes Due........ 19
-----------------------------------------------------
4.10 ERISA Compliance............................................. 20
----------------
4.11 Investment Company Act Compliance............................ 20
---------------------------------
4.12 Public Utility Holding Company Act Compliance................ 20
---------------------------------------------
4.13 Lien Priority................................................ 20
-------------
4.14 Use of Proceeds.............................................. 20
---------------
4.15 Full Disclosure.............................................. 20
---------------
4.16 Places of Business........................................... 21
------------------
4.17 Subsidiaries................................................. 21
------------
ARTICLE 5 - AFFIRMATIVE COVENANTS...................................... 21
5.1 Maintenance and Access to Records............................ 21
---------------------------------
5.2 Financial Statements......................................... 21
--------------------
5.3 Annual Financial Statements.................................. 21
---------------------------
5.4 Compliance Certificates...................................... 22
-----------------------
5.5 Statement of Material Adverse Effect......................... 22
------------------------------------
5.6 Title Defects................................................ 22
-------------
5.7 Additional Information....................................... 22
----------------------
5.8 Compliance with Laws and Payment of Taxes.................... 22
-----------------------------------------
5.9 Maintenance of Existence and Good Standing................... 22
------------------------------------------
5.10 Further Assurances........................................... 22
------------------
5.11 Initial Expenses of the Lender............................... 23
------------------------------
5.12 Subsequent Expenses of the Lender............................ 23
---------------------------------
5.13 Maintenance of Tangible Property............................. 23
--------------------------------
5.14 Maintenance of Insurance..................................... 24
------------------------
5.15 Right of Inspection.......................................... 24
-------------------
5.16 Compliance with ERISA........................................ 24
---------------------
5.17 Notice....................................................... 24
------
ARTICLE 6 - NEGATIVE COVENANTS......................................... 25
6.1 Other Debt of Borrower....................................... 25
----------------------
6.2 Guaranty of Payment or Performance........................... 25
----------------------------------
6.3 Investments.................................................. 25
-----------
6.4 Mortgages or Pledges of Assets............................... 25
------------------------------
6.5 Cancellation of Insurance.................................... 25
-------------------------
6.6 Sales of Mortgaged Properties................................ 25
-----------------------------
6.7 Sale and Leaseback........................................... 25
------------------
6.8 Dividends and Distributions.................................. 26
---------------------------
6.9 Changes in Corporate Structure............................... 26
------------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
6.10 Payment of Accounts Payable................................ 26
---------------------------
6.11 Transactions with Affiliates............................... 26
----------------------------
6.12 Limitation on Negative Pledge Clauses...................... 27
-------------------------------------
6.13 Nature of Business......................................... 27
------------------
6.14 No Subsidiaries............................................ 27
---------------
6.15 Hedge Agreements........................................... 27
----------------
ARTICLE 7 - EVENTS OF DEFAULT........................................ 27
7.1 Events of Default.......................................... 27
-----------------
7.2 Rights Upon Occurrence of Unmatured Event of Default....... 29
----------------------------------------------------
7.3 Rights Upon Occurrence of an Event of Default.............. 30
---------------------------------------------
ARTICLE 8 - MISCELLANEOUS............................................ 31
8.1 Notices.................................................... 31
-------
8.2 Amendments and Waivers..................................... 31
----------------------
8.3 Invalidity................................................. 31
----------
8.4 Survival of Agreements..................................... 32
----------------------
8.5 Successors and Assigns..................................... 32
----------------------
8.6 Renewal, Extension or Rearrangement........................ 32
-----------------------------------
8.7 Waivers.................................................... 32
-------
8.8 Cumulative Rights.......................................... 32
-----------------
8.9 Taxes, Etc................................................. 32
----------
8.10 Exhibits; Conflicts........................................ 32
-------------------
8.11 Titles of Articles, Sections and Subsections............... 33
--------------------------------------------
8.12 Jurisdiction............................................... 33
------------
8.13 Counterparts............................................... 33
------------
8.14 Effectiveness.............................................. 33
-------------
8.15 Documents.................................................. 33
---------
8.16 Rights of Third Person..................................... 34
----------------------
8.17 GOVERNING LAW.............................................. 34
-------------
</TABLE>
EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Compliance Certificate
iii
<PAGE>
CREDIT AGREEMENT
----------------
This Credit Agreement, dated as of August 15, 1996, is by and between
AMERAC ENERGY CORPORATION, a Delaware corporation (the "Borrower"), and BANK
--------
ONE, TEXAS, NATIONAL ASSOCIATION, a national banking association (the "Lender").
------
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
The Borrower has requested the Lender to extend credit to the Borrower
to enable it to borrow from time to time on or before February 16, 1997 sums not
in excess of the cumulative principal amount of $1,000,000.00 to be used for the
acquisition of oil and gas producing properties and for developmental drilling.
The Lender agrees to extend such credit to the Borrower upon the terms and
subject to the conditions hereinafter set forth.
Now, therefore, in consideration of the mutual covenants and
agreements herein contained and of the loans and commitment hereinafter referred
to, the Borrower and the Lender agree as follows:
ARTICLE 1
---------
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
1.1 Defined Terms. As used in this Agreement, the following terms have
-------------
the following meanings:
"Advance" means a direct advance of immediately available funds by the
-------
Lender to the Borrower pursuant to Section 2.1 of this Agreement.
"Advancing Rate" means a varying rate of interest per annum equal to
--------------
the Base Rate, from time to time in effect, plus two and one-half percent
(2 1/2%).
"Affiliate" means any Person controlling, controlled by, or under
---------
common control with, any other Person. For purposes of this definition,
"control" (including "controlled by" and "under common control with") means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities or otherwise.
<PAGE>
"Agreement" means this Credit Agreement and all exhibits and schedules
---------
hereto, as the same may be amended, supplemented, restated or otherwise
modified from time to time according to the terms hereof.
"Bank One Texas Base Rate" means at any time the rate of interest per
------------------------
annum then most recently established by the Lender as its Bank One Texas
Base Rate.
"Base Rate" means, for any day, a rate per annum (rounded upwards to
---------
the nearest one-eighth of one percent (1/8%)) equal to the greater of (a)
the Bank One Texas Base Rate in effect on such day or (b) the sum of (i)
the Federal Funds Rate in effect for such day plus (ii) one-fourth of one
percent ( 1/4%). If for any reason the Lender shall have determined (which
determination shall be conclusive and binding, absent manifest error) that
it is unable to ascertain the Federal Funds Rate for any reason, including,
without limitation, the inability or failure of the Lender to obtain
sufficient bids or publications in accordance with the terms hereof, the
Base Rate shall be the Bank One Texas Base Rate until the circumstances
giving rise to such inability no longer exist. For purposes of this
Agreement, any change in the Base Rate due to a change in the Bank One
Texas Base Rate shall be effective on the effective date of such change in
the Bank One Texas Base Rate and any change in the Base Rate due to a
change in the Federal Funds Rate shall be effective on the effective date
of such change in the Federal Funds Rate, all without notice to the
Borrower.
"Borrower" has the meaning indicated in the opening paragraph hereof.
--------
"Borrowing Request" means a written application by the Borrower for an
-----------------
Advance. Each such Borrowing Request shall specify the requested amount of
such Advance and the requested date of such Advance.
"Business Day" means a day other than a Saturday, Sunday or legal
------------
holiday for commercial banks in the State of Texas.
"Closing Date" means the date when all the conditions precedent set
------------
forth in Section 3.1 of this Agreement have been fulfilled.
"Collateral" means the Property now or at any time hereafter securing
----------
the Obligations.
2
<PAGE>
"Commitment" means the obligation of the Lender, through the
----------
Termination Date, to extend credit to the Borrower by means of Advances,
provided, however, that such Advances shall not exceed either singularly or
cumulatively $1,000,000.00.
"Compliance Certificates" means the certificates of the president,
-----------------------
chief executive officer or chief financial or accounting officer of the
Borrower submitted to the Lender from time to time pursuant to this
Agreement, which certificates shall be substantially in the form attached
hereto as Exhibit B.
"Contested in Good Faith" means contested in good faith by appropriate
-----------------------
and lawful proceedings diligently conducted, reasonably satisfactory to the
Lender, (a) in which foreclosure, distraint, sale, forfeiture, levy,
execution or other similar proceedings have not been initiated or have been
stayed and continue to be stayed, (b) in which a good faith contest will
not materially detract from the value of the Collateral, jeopardize the
Rights of the Lender with respect to the Collateral, interfere in any
material respect with the operation by the Borrower of its business, or
otherwise have a Material Adverse Effect, and (c) for which matter a
reserve or other appropriate provision has been established to the extent
required in accordance with GAAP.
"Debt" of any Person means, to the extent of such Person's liability,
----
(a) all items of indebtedness for borrowed money, obligations, and
liabilities (whether matured or unmatured, liquidated or unliquidated,
direct or indirect, joint or several, contingent or otherwise), which in
accordance with GAAP should be classified upon such Person's balance sheet
as liabilities, but in any event including liabilities secured by any Lien
existing on Property of such Person or a Subsidiary of such Person, (b) the
deferred purchase price of Property or services and direct and contingent
obligations incurred in connection with letters of credit and similar
agreements and obligations as a lessee under leases which have been, or
which in accordance with GAAP should be, capitalized for financial
reporting purposes, (c) all guaranties, endorsements (other than for
collection or deposit in the ordinary course of business), and other
contingent obligations of such Person with respect to obligations of other
Persons of the types described in clauses (a) and/or (b) of this
definition, (d) liabilities for unfunded vested benefits under any Plan,
and (e) all obligations to supply funds to, invest in or maintain working
capital or equity capital of any other Person, or otherwise to maintain the
net worth or solvency or any balance sheet condition of any other Person.
3
<PAGE>
"Debtor Relief Laws" means the Bankruptcy Code of the United States of
------------------
America, as amended from time to time, and all other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, or similar debtor relief Laws or
general equitable principles from time to time in effect affecting the
Rights of creditors generally.
"Default Rate" means a per annum rate of interest equal to the Base
------------
Rate plus five percent (5%), but in no event to exceed the Highest Lawful
Rate.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) which together with the Borrower would be treated as a single
employer under Section 4001 of ERISA.
"Event of Default" means any of the events specified in Section 7.1,
----------------
provided that the requirements, if any, for the giving of notice, the lapse
of time, or both, or any other condition specified in Section 7.1 have been
satisfied.
"Federal Funds Rate" means at any time a fluctuating interest rate per
------------------
annum equal for each day to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Lender from three Federal funds
brokers of recognized standing selected by it.
"Financial Statements" means statements of financial condition, as at
--------------------
the point in time and for the period indicated, and consisting of at least
a balance sheet and related statements of operations, stockholders' equity
and cash flows, and, when audited, accompanied by the certification of
independent certified public accountants, and footnotes to any of the
foregoing.
4
<PAGE>
"GAAP" means generally accepted accounting principles established by
----
the Financial Accounting Standards Board and in effect in the United States
from time to time during the term of this Agreement and applied on a basis
consistent with that adopted in the Financial Statements.
"Highest Lawful Rate" means the maximum rate (or, if the context so
-------------------
permits or requires, an amount calculated at such rate) of interest (if
any) that, at the time in question, would not cause the interest charged on
the Obligations owed to the Lender to exceed the maximum amount that the
Lender would be allowed to contract for, charge, take, reserve or receive
under applicable Law after taking into account, to the extent required by
applicable Law, all relevant payments and charges under the Loan Documents.
"Investment" in any Person means any stock, bond, note or other
----------
evidence of Debt or any other security (other than current trade and
customer accounts) of, investment or partnership interest in or loan to,
such Person.
"Laws" means all applicable statutes, laws, ordinances, rules,
----
rulings, interpretations, regulations, judgments, requirements,
governmental authorizations (including licenses, permits, franchises and
other governmental consents necessary for the ownership or operation of
Property), orders, writs, injunctions or decrees (or interpretations of any
of the foregoing) of any political subdivision, state, commonwealth,
nation, country, territory, possession, county, parish, municipality or
Tribunal.
"Lender" has the meaning indicated in the opening paragraph hereof.
------
"Lien" means any lien, charge, claim, restriction, mortgage,
----
mechanic's lien, materialmen's lien, pledge, hypothecation, inchoate lien,
assignment, deposit arrangement, conditional sale or other title retention
agreement, financing lease, security interest, security agreement or other
encumbrance, whether arising by contract or under Law, and includes
reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, leases and other title exceptions and the filing of
any financing statement under the Uniform Commercial Code of the State of
Texas or comparable Law of any jurisdiction.
"Limitation Period" means any period during which the calculation of
-----------------
interest as provided in any of the Loan Documents would result in interest
exceeding the Highest Lawful Rate.
5
<PAGE>
"Liquid Investments" means Investments in (a) United States government
------------------
issued securities, obligations of the United States government or any
agency thereof and any obligations guaranteed by the United States
government with maturities of no more than one year, (b) certificates of
deposit or repurchase agreements issued by the Lender, (c) certificates of
deposit, in an aggregate amount not to exceed $100,000.00 at any one time
as to any one issuer, issued by other banks or financial institutions
organized under the Laws of the United States or any state thereof, having
capital surplus and undivided profits aggregating at least $100,000,000.00
and with deposits insured by the Federal Deposit Insurance Corporation, and
(d) commercial paper with a rating by Moody's Investor Service, Inc. of no
less than A and with maturities of no more than nine months from the date
of acquisition thereof.
"Litigation" means any proceeding, claim, lawsuit, and/or
----------
investigation conducted, or threatened and known to the Person in question,
by or before any Tribunal.
"Loan Documents" means this Agreement, the Note, the Security
--------------
Documents and all other notes, deeds of trust, restatements, ratifications
and amendments of deeds of trust, financing statements, guaranties,
security agreements, pledge agreements, documents, instruments and other
agreements now or hereafter delivered pursuant to the terms of, or in
connection with, this Agreement, the Obligations and/or the Collateral, and
all renewals, extensions and restatements of, and amendments and
supplements to any or all of the foregoing.
"Loans" means the loans and extensions of credit by the Lender to or
-----
for the account of the Borrower pursuant to this Agreement.
"Material Adverse Effect" means any material and adverse effect on (a)
-----------------------
the assets, liabilities, financial condition, business or operations of the
Borrower that are material to the business or financial condition of the
Borrower, or (b) the ability of the Borrower to meet its Obligations under
any of the Loan Documents on a timely basis as provided herein or therein.
"Mortgaged Properties" has the meaning given such term in the
--------------------
Revolving Credit Agreement.
"Multi-employer Plan" means a Plan described in Section 4001(9)(3) of
-------------------
ERISA which covers employees of the Borrower or any ERISA Affiliate.
6
<PAGE>
"Note" means that certain promissory note in the face amount of
----
$1,000,000.00 dated of even date herewith made by the Borrower to the order
of the Lender, in the form attached hereto as Exhibit A, together with all
deferrals, renewals or extensions thereof, which promissory note shall
evidence the Advances made to the Borrower by the Lender pursuant to
Section 2.1 and funds advanced and applied pursuant to Section 2.8.
"Obligations" means all present and future loans, advances,
-----------
indebtedness, obligations, covenants and liabilities, and all renewals for
any period, increases and extensions thereof, or any part thereof, now or
hereafter owing to the Lender by the Borrower arising from or pursuant to
any of the Loan Documents, together with all interest accruing thereon, and
costs, expenses, and attorneys' fees incurred in the enforcement or
collection thereof, whether such indebtedness, obligations, and liabilities
are direct, indirect, fixed, contingent, liquidated, unliquidated, joint,
several, or joint and several, and all other indebtedness or obligations of
any type whatsoever now or hereafter owing to the Lender by the Borrower,
whether or not in connection with any of the Loan Documents.
"Oil and Gas Properties" means fee, leasehold or other interests in or
----------------------
under mineral estates or oil, gas and other liquid or gaseous hydrocarbon
leases with respect to properties situated in the United States, including,
without limitation, overriding royalty and royalty interests, leasehold
estate interests, net profits interests, production payment interests and
mineral fee interests, together with contracts executed in connection
therewith and all tenements, hereditaments, appurtenances and properties,
real or personal, appertaining, belonging, affixed or incidental thereto.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
----
successor thereof, established pursuant to Subtitle A of Title IV of ERISA.
"Permitted Liens" means: (a) Liens for Taxes, not yet due or which are
---------------
being Contested in Good Faith; (b) Liens in connection with workers'
compensation, unemployment insurance or other social security (other than
Liens created by Section 4068 of ERISA), old age pension or public
liability obligations which are not yet due or which are being Contested in
Good Faith; (c) vendors', carriers', warehousemen's, repairmen's,
mechanics', workmen's, materialmen's, construction or other similar Liens
arising by operation of Law in the ordinary course of business or incident
to the construction or improvement of any Property in respect of
obligations which are not yet due or which are being Contested in Good
Faith; (d) Liens to operators and non-
7
<PAGE>
operators under joint operating agreements arising in the ordinary course
of business to secure amounts owing, which amounts are not yet due or are
being Contested in Good Faith; (e) Liens under production sales agreements,
division orders, operating agreements and other agreements customary in the
oil and gas business for processing, producing and selling hydrocarbons;
(f) Liens created in favor of the Lender securing Obligations hereunder or
other Debt of the Borrower owed the Lender and other Liens expressly
permitted under the Security Documents; (g) easements, rights-of-way,
restrictions and other similar encumbrances, and minor defects in the chain
of title which are customarily accepted in the oil and gas financing
industry, none of which interfere with the ordinary conduct of the business
of the owner of the Property or materially detract from the value or use of
the Property to which they apply; (h) Liens of record under terms and
provisions of the leases, unit agreements, assignments and other transfer
of title documents in the chain of title under which the owner of the
relevant Property acquired such Property; and (i) Liens securing the
purchase price or existing under conditional sale contracts, title
retention contracts or lease agreements for equipment purchased or leased
in the normal course of business of the Borrower, provided that such Lien
shall not extend to or cover any other Property of the Borrower.
"Person" means any individual, sole proprietorship, firm, corporation,
------
trust, association, institution, partnership, joint venture, limited
liability company, Tribunal or other entity.
"Plan" means any pension plan that is covered by Title IV of ERISA and
----
maintained by the Borrower or any such plan to which the Borrower is
required to contribute.
"Preferred Stock" means shares of the Borrower's $4.00 Senior
---------------
Preferred Stock more particularly described in and offered pursuant to that
certain Offering Circular and Consent Solicitation of the Borrower dated
February 3, 1995.
"Property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, tangible or intangible.
"Reportable Event" and "Prohibited Transaction" have the meanings
---------------- ----------------------
given to those terms under ERISA.
8
<PAGE>
"Revolving Credit Agreement" means that certain Amended and Restated
--------------------------
Credit Agreement dated May 12, 1995 as amended by that certain First
Amendment to Amended and Restated Credit Agreement dated January 16, 1996
and that certain Second Amendment to Amended and Restated Credit Agreement
dated August 15, 1996 by and between the Borrower and the Lender, as may be
further amended from time to time.
"Rights" means rights, remedies, powers and privileges.
------
"Section" or "Subsection" means a section or subsection in this
------- ----------
Agreement unless specified otherwise.
"Security Documents" means the documents described in Subsection
------------------
3.1(a)(5) of this Agreement and all other documents now or hereafter
existing which provide the Lender with Collateral, as the same may be
amended or restated from time to time.
"Subsidiary" of any Person means any corporation of which an aggregate
----------
of fifty percent (50%) or more of the stock of any class or classes is
owned of record or beneficially, directly or indirectly, by such Person, if
the holders of the stock of such class or classes are ordinarily entitled
to vote for the election of a majority of the directors (or individuals
performing similar functions) of such corporation (irrespective of whether,
at the time in question, stock of any other class or classes of such
corporation shall have or might have voting power by reason of the
happening of any contingency).
"Taxes" means all taxes, assessments, filing or other fees, levies,
-----
imposts, duties, deductions, withholdings, stamp taxes, interest
equalization taxes, capital transaction taxes, foreign exchange taxes or
charges, or other charges of any nature whatsoever from time to time or at
any time imposed by any Law or Tribunal.
"Termination Date" means February 16, 1997.
----------------
"Tribunal" means any court, governmental department or authority,
--------
commission, board, bureau, agency, arbitrator or instrumentality of any
state, political subdivision, commonwealth, nation, territory, county,
parish or municipality, whether now or hereafter existing, having
jurisdiction over the Lender, the Borrower or any of their respective
Property.
9
<PAGE>
"Unmatured Event of Default" means any event or occurrence which
--------------------------
solely with the lapse of time or the giving of notice or both will ripen
into an Event of Default.
"Unused Amount of the Commitment" means an amount calculated for each
-------------------------------
day the Commitment is in existence and which equals the difference between
(a) $1,000,000.00 and (b) the cumulative amount of all Advances evidenced
by the Note.
1.2 Accounting Terms. All accounting and financial terms used in any
----------------
of the Loan Documents and the compliance with each covenant contained in the
Loan Documents that relates to financial matters shall be determined in
accordance with GAAP, except to the extent that a deviation therefrom is
expressly stated in such Loan Documents.
1.3 Number and Gender of Words. Whenever the singular number is used
--------------------------
in any Loan Document, the same shall include the plural where appropriate, and
vice versa; words of any gender in any Loan Document shall include each other
- ---- -----
gender where appropriate; and the words "herein," "hereof," "hereunder" and
other words of similar import refer to the relevant Loan Document as a whole and
not to any particular part, section or subdivision thereof.
ARTICLE 2
---------
TERMS OF FACILITY
-----------------
2.1 Advancing Commitment. Subject to the terms and conditions
--------------------
(including, without limitation, the right of the Lender to terminate the
Commitment hereunder upon an Event of Default and suspend the Commitment upon an
Unmatured Event of Default) and relying on the representations and warranties
contained in this Agreement and the other Loan Documents, from time to time
until the Termination Date, the Lender agrees to make Advances to the Borrower
following receipt by the Lender of a Borrowing Request on or before 10:00 a.m.
Central Standard or Daylight Savings Time, as the case may be, one (1) Business
Day prior to the date of the requested Advance, in such amounts as the Borrower
may request, provided, however, that each Advance shall be in an amount not less
than $50,000.00 and such Advances shall not exceed either singularly or
cumulatively $1,000,000.00. The Borrower may transmit Borrowing Requests to the
Lender by mail, personal delivery, telefacsimile, telex or other method; but the
Lender shall not be obligated to make Advances on the requested date unless the
Lender has received, on or before 10:00 a.m. Central Standard or Daylight
Savings Time, as the case may be, one (1) Business Day prior to such date a
Borrowing Request.
10
<PAGE>
The Advances made by the Lender to the Borrower pursuant to the
Commitment shall be made at the office of the Lender at 910 Travis, Houston,
Texas 77002 and shall be evidenced by the Note.
2.2 Advances and Payments Under the Note. The Lender is authorized
------------------------------------
by the Borrower to attach to and to make a part of the Note a ledger (and
continuations thereto, if necessary) reflecting the amount of all Advances made
by the Lender and each payment made by the Borrower. Each time such an Advance
is made against or payment (including a prepayment) is made on the Note, the
Lender is authorized but not required to make a notation on the ledger forming a
part thereof reflecting the amount advanced or paid and the date thereof;
provided, however, that the failure of the Lender to do so shall not relieve the
Borrower of its liability hereunder or under the Note.
The aggregate unpaid amount of such Advances reflected by the
notations by the Lender on its records or the ledger sheets affixed to the Note
shall be deemed rebuttably presumptive evidence of the principal amounts owing
on the Note. The liability for payment of principal and interest evidenced by
the Note shall be limited to principal amounts actually advanced and outstanding
pursuant to this Agreement and the other Loan Documents and interest accrued on
such amounts calculated in accordance with this Agreement.
2.3 Repayment Provisions. All outstanding principal Debt for all
--------------------
Advances evidenced by the Note and made by the Lender shall be paid on the
Termination Date; provided, however, promptly upon each receipt of funds from
the $25.00 Preferred Stock issuance a prepayment in the amount of such funds
shall be due and payable and shall be applied first to accrued and unpaid
interest and then to the principal balance of the Note.
Interest as it accrues on principal amounts evidenced by the Note and
calculated as provided herein and in the Note shall be due and payable monthly
commencing on the last day of August, 1996, and continuing thereafter on the
last day of each succeeding calendar month while any amount remains owing on the
Note and upon the Termination Date, the interest payment in each instance to be
that which has been earned and remains unpaid.
All payments required pursuant to this Agreement or the Note shall be
made in immediately available funds; shall be deemed received by the Lender on
the next Business Day following receipt if such receipt is after 2:00 p.m. on
any Business Day; and shall be made at the offices of the Lender at 910 Travis,
Houston, Texas 77002, provided, however, the Lender may, upon notice to the
Borrower, designate a different place of payment.
11
<PAGE>
Certain of the Security Documents contain an assignment unto and in
favor of the Lender of all oil, gas and other minerals produced and to be
produced from or attributable to the Mortgaged Properties such Security
Documents encumber together with all of the revenues and proceeds attributable
to such production, and such Security Documents further provide that all such
revenues and proceeds which may be so collected by the Lender pursuant to such
assignment shall be applied to the payment of the Note and the satisfaction of
all other Debt to be secured by such Security Documents. The Lender and the
Borrower expressly acknowledge and agree that so long as no Event of Default
shall have occurred and be continuing, the Lender shall be entitled only to
payment on the Note as set forth in the preceding paragraphs of this Section
2.3, and the Borrower, to the extent of its rights apart from this Agreement,
shall be entitled to receive all proceeds of production directly from the
relevant purchasers or parties accounting for proceeds from the sale of
production. In connection with the rights of the Lender to all proceeds of
production upon the occurrence and continuation of an Event of Default, the
Borrower hereby grants the Lender a power of attorney, which power is coupled
with an interest and is irrevocable, to complete in all respects and deliver to
the addressee the letter transfer orders executed in connection with the
Security Documents upon the occurrence and continuance of an Event of Default.
2.4 Interest Rates. Principal amounts outstanding under the Note
--------------
shall bear interest at the Advancing Rate (but in no event greater than the
Highest Lawful Rate) per annum, calculated on a year of three hundred sixty-five
(365) or three hundred sixty-six (366) days, as the case may be, and counting
the actual number of days elapsed. Should default occur in the payment of the
Note and collection proceedings be instituted, all past due interest and
principal under the Note shall bear interest at the lesser of the Highest Lawful
Rate or the Default Rate per annum, calculated on a year of three hundred sixty-
five (365) or three hundred sixty-six (366) days, as the case may be, and
counting the actual number of days elapsed; and if no Highest Lawful Rate
exists, all past due interest and principal under the Note shall bear interest
at the Default Rate, calculated on a year of three hundred sixty-five (365) or
three hundred sixty-six (366) days, as the case may be, and counting the actual
number of days elapsed.
2.5 Commitment Fee. As consideration for the Commitment, the
--------------
Borrower shall pay to the Lender a commitment fee equal to one percent (1%) per
annum (computed on the basis of a year of three hundred sixty-five (365) or
three hundred sixty-six (366) days, as the case may be, and counting the actual
number of days elapsed) of the average daily Unused Amount of the Commitment
during the period of determination. This commitment fee shall commence to
accrue as of the date of this Agreement and shall cease to accrue on the earlier
of the Termination Date or the day the Commitment is otherwise terminated
hereunder. Accrued commitment fees under this Section 2.5 shall be payable on
September 1, 1996 and on the first day after the earlier of the Termination Date
or the day the Commitment is otherwise terminated hereunder and shall be
determined for each period from
12
<PAGE>
and inclusive of the date on which this Agreement was executed or the previous
payment date, as the case may be, but exclusive of the date of payment.
2.6 Facility Fee. As consideration for the Commitment, the Borrower
------------
shall pay to the Lender on the date on which this Agreement is executed by the
Borrower and the Lender a facility fee equal to $25,000.00.
2.7 General Provisions Relating to Interest. It is the intention of
---------------------------------------
the parties hereto to comply strictly with the applicable usury Laws as in
effect from time to time; and in this connection, there shall never be taken,
reserved, contracted for, collected, charged or received on any Loan or any
other Obligation interest in excess of that which would accrue at the Highest
Lawful Rate. For purposes of Article 5069-1.04, Vernon's Texas Civil Statutes,
--------------------
as amended, the Borrower agrees that the Highest Lawful Rate shall be the
"indicated rate ceiling" as defined in such article, provided that the Lender
may also rely, to the extent permitted by applicable Laws, on alternative
maximum rates of interest under such other applicable Laws, if greater.
Notwithstanding anything herein or in the Note or the other Loan
Documents to the contrary, if during any Limitation Period the calculation of
interest at the rate otherwise due to the Lender would result in interest in
excess of that which would accrue at the Highest Lawful Rate, then during such
Limitation Period, the interest rate to be charged on the Obligations shall be
the Highest Lawful Rate, and the requirement of the Borrower for the payment of
other amounts, if any, constituting interest, shall be suspended only to the
extent that such fees are, when added to interest accruing on the Note and other
Obligations, if any, in excess of the Highest Lawful Rate. During any period of
time following a Limitation Period, to the extent permitted by Laws applicable
to the Lender, the interest rate to be charged on the Obligations shall remain
at the Highest Lawful Rate until such time as there has been paid to the Lender:
(a) the amount of interest in excess of the amount accruing at the Highest
Lawful Rate that the Lender would have received during the Limitation Period if
the otherwise applicable rate had been in effect at all times and (b) all
interest and fees otherwise payable to the Lender hereunder as if the otherwise
applicable rate had been in effect at all times during such Limitation Period.
If under any circumstances the aggregate amount paid on the
Obligations includes amounts that are by Law deemed to be interest which exceed
the Highest Lawful Rate (the "excess interest"), the Borrower stipulates that
---------------
such payment and collection will have been and will be deemed to have been, to
the fullest extent permitted by applicable Laws, the result of mathematical
error on the part of the Borrower and the Lender, and the Lender shall promptly
credit the amount of such excess interest on the principal amount of the
outstanding Obligations, or if the principal amount of the Obligations shall
have been paid in full, refund the excess interest to the Borrower. In the
event that the maturity of the
13
<PAGE>
Note is accelerated by reason of an election of the Lender resulting from any
Event of Default or by reason of operation of Subsection 7.3(a), or in the event
of any prepayment, then such consideration that constitutes interest under Laws
applicable to the Lender may never exceed the Highest Lawful Rate, and excess
interest, if any, provided for in the Note, this Agreement or otherwise shall be
cancelled automatically by the Lender as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by the Lender on the
principal amount of the Obligations, or if the principal amount of the
Obligations shall have been paid in full, refunded by the Lender to the
Borrower.
All sums paid, or agreed to be paid, to the Lender for the use,
forbearance, and detention of the proceeds of the Loans shall, to the extent
permitted by applicable Law, be amortized, prorated, allocated, and spread
throughout the full term of the Obligations until paid in full so that the
actual rate of interest is uniform, but does not exceed the Highest Lawful Rate,
throughout the full term hereof.
2.8 Loans to Satisfy Obligations. The Lender may, but shall not be
----------------------------
obligated to, make Loans and apply proceeds thereof to the satisfaction of any
warranty, representation, covenant or other Obligation of the Borrower contained
in this Agreement or the other Loan Documents and which are necessary, in the
good faith opinion of the Lender, to enforce its Rights, protect or preserve the
Collateral or the Liens thereon in favor of the Lender and the priorities
thereof, or avoid a Material Adverse Effect, and contemporaneously with so
doing, the Lender shall furnish the Borrower written notice as to the amount and
date of any such Loan. The Lender shall not advance funds pursuant to this
Section without notifying the Borrower of the warranty, representation, covenant
or other Obligation to be satisfied by such proposed advance of funds and shall
give the Borrower fifteen (15) days from the date of such notice to satisfy such
warranty, representation, covenant or other Obligation. Any funds so advanced
and applied shall be evidenced by the Note, shall be payable on demand and shall
bear interest at the Default Rate from the time of the making of such Loan until
the time of repayment.
2.9 Voluntary Prepayment. The Borrower shall have the right and
--------------------
option to prepay, at any time without premium or penalty, all or any part of the
balance outstanding on the Note. Any such prepayments of Debt evidenced by the
Note shall be applied to the payment of accrued and unpaid interest and to the
reduction of principal as elected by the Borrower.
2.10 Yield Protection. If at any time after the date hereof, and
----------------
from time to time, the Lender determines that the adoption or modification of
any Laws regarding the required levels of reserves of the Lender, deposit
insurance or capital (including any allocation of capital requirements or
conditions), or similar requirements, or any interpretation or administration
thereof by any Tribunal, central bank or comparable agency
14
<PAGE>
charged with the interpretation, administration or compliance of the Lender with
any of such requirements, has or would have the effect of (a) increasing the
costs of the Lender relating to the Obligations of the Borrower or (b) reducing
the yield or rate of return of the Lender on the Obligations of the Borrower to
a level below that which the Lender could have achieved but for the adoption or
modification of any such requirements, the Borrower shall, within fifteen (15)
days of any request by the Lender, pay to the Lender such additional amounts as
(in the good faith judgment of the Lender based on reasonable computation) will
compensate the Lender for such increase in costs or reduction in yield or rate
of return of the Lender. The request by the Lender to the Borrower for such
additional amounts shall also set forth the computation by the Lender of such
requested additional amounts. No failure by the Lender to demand immediate
payment of any additional amounts payable under this Section 2.10 shall
constitute a waiver of the right of the Lender to demand payment of such amounts
at any subsequent time. Nothing contained in this Section 2.10 shall be
construed or so operate as to require the Borrower to pay any interest, fees,
costs or charges greater than permitted by applicable Laws.
2.11 Automatic Debit Authority. The Borrower hereby grants to the
-------------------------
Lender the authority, without any obligation or liability to any Person,
including, without limitation, the Borrower, to debit automatically from the
operating accounts of the Borrower maintained at the Lender any and all
repayments of Debt due and payable hereunder or under the Note, fees due and
payable hereunder and costs and expenses of the Lender the Borrower is obligated
to reimburse hereunder.
2.12 Security Interests in Deposits. To secure the Debt of the
------------------------------
Borrower evidenced by the Note, the Borrower hereby grants to the Lender a
security interest against all funds or other Property of the Borrower now or
hereafter or from time to time on deposit with or in the possession of the
Lender, including, without limitation, all certificates of deposit and other
depository accounts whether such have matured or the exercise of such right of
the Lender results in loss of interest or other penalty on such deposits. Upon
any Event of Default the Borrower may exercise any and all remedies against such
funds or Property as a secured party under the Uniform Commercial Code as
adopted in the State of Texas. Nothing in this Section shall be construed to
limit any right of offset afforded the Lender.
ARTICLE 3
---------
CONDITIONS PRECEDENT
--------------------
3.1 Conditions to Initial Advance. The obligation of the Lender to
-----------------------------
make the initial Advance referred to in Section 2.1 is subject to the
fulfillment of the following
15
<PAGE>
conditions precedent, with all documents to be delivered to the Lender to be in
form and substance satisfactory to the Lender:
(a) The Lender shall have received the following documents,
appropriately executed and acknowledged and in multiple counterparts as
requested by the Lender, except as to the Note :
(1) This Agreement and the Note executed by the Borrower;
(2) A copy of the articles of incorporation and bylaws of the Borrower
and all amendments thereto, accompanied by a certificate issued by its
secretary or assistant secretary that such copies are correct and
complete;
(3) Certificate of incumbency and signatures of all officers of the
Borrower who will be authorized to execute the Loan Documents on its
behalf, executed by the president or vice president and the secretary
or an assistant secretary of the Borrower;
(4) A copy of the corporate resolutions of the Borrower approving the
Loan Documents and authorizing the transactions contemplated therein,
duly adopted by its board of directors and accompanied by a
certificate of the secretary or an assistant secretary of the Borrower
to the effect that such copy is a true and correct copy of resolutions
duly adopted by written consent or at a meeting of the board of
directors, that such resolutions constitute all the resolutions
adopted with respect to such transactions, and that such resolutions
have not been amended, modified or revoked in any respect, and are in
full force and effect as of the Closing Date;
(5) The following documents creating, evidencing and perfecting Liens
in favor or for the benefit of the Lender to secure the Obligations:
(i) all of the mortgages, deeds of trust, collateral mortgages,
security agreements and financing statements presently encumbering the
Mortgaged Properties to secure the Debt governed by the Revolving
Credit Agreement as amended to encumber the Mortgaged Property to
secure the Obligations; and
16
<PAGE>
(ii) transfer orders directed to the party remitting to the
Borrower proceeds from the sale of production from the Mortgaged
Properties and instructing that such proceeds be remitted to the
Lender for the account of the Borrower; and
(6) Such other agreements, documents, instruments, certificates,
waivers, consents and evidence as the Lender may reasonably request in
compliance with or to accomplish the terms and provisions of any of
the Loan Documents;
(b) The representations and warranties contained in Article 4 shall be
true and correct in all material respects on the date of execution of this
Agreement;
(c) No Event of Default or Unmatured Event of Default shall have
occurred and be continuing;
(d) All legal matters incident to the execution of this Agreement
shall be satisfactory to the firm of Henderson Hammon & Carp, L.L.P.,
special counsel for the Lender.
3.2 Further Conditions to Each Additional Advance. The obligation of
---------------------------------------------
the Lender to make each additional Advance pursuant to Section 2.1 is subject to
the fulfillment of the following further conditions precedent:
(a) The representations and warranties contained in Article 4 shall be
true and correct in all material respects as of the date of Advance;
(b) No Event of Default or Unmatured Event of Default shall have
occurred and be continuing or will have occurred at the completion of
making the Advance;
(c) No Material Adverse Effect shall have occurred since the Closing
Date;
(d) The Lender shall have received a Borrowing Request and Compliance
Certificate; and
(e) All legal matters incident to the consummation of such Loan shall
be satisfactory to the then special counsel for the Lender.
17
<PAGE>
ARTICLE 4
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Lender to enter into this Agreement and to make the
Loans hereunder, the Borrower represents and warrants to the Lender (which
representations and warranties shall survive the delivery of the Note and the
making of the Loans) that:
4.1 Existence and Good Standing. The Borrower is a corporation, duly
---------------------------
organized, legally existing and in good standing under the Laws of the State of
Delaware and is duly qualified and in good standing as a foreign corporation in
all jurisdictions wherein the Mortgaged Properties owned or the business
transacted by the Borrower makes such qualification necessary and where the
failure to so qualify would have a Material Adverse Effect.
4.2 Due Authorization. The execution and delivery by the Borrower of
-----------------
this Agreement and the borrowings hereunder, the execution and delivery by the
Borrower of the Note and the other Loan Documents, the repayment of the Loans
and interest and fees provided in the Note and this Agreement and the
performance of all Obligations of the Borrower under this Agreement and the
other Loan Documents, are within the corporate power of the Borrower, have been
duly authorized by all necessary corporate action on behalf of the Borrower and
do not (a) require the consent of any Tribunal or other Person which has not
been obtained, (b) contravene or conflict with any provision of applicable Law
or the charter or bylaws of the Borrower, (c) contravene, conflict with or
result in a default under any indenture, instrument, contract or other agreement
to which the Borrower is a party or by which its Properties may be presently
bound or encumbered, or (d) result in or require the creation or imposition of
any Lien upon any Property of the Borrower, other than Permitted Liens.
4.3 Valid and Binding Obligations. This Agreement and the other Loan
-----------------------------
Documents constitute valid and binding obligations of the Borrower, enforceable
in accordance with their respective terms, except as limited by Debtor Relief
Laws.
4.4 Scope and Accuracy of Financial Statements. The Financial
------------------------------------------
Statements of the Borrower as of December 31, 1995, including any schedules and
notes pertaining thereto, which have been delivered to the Lender have been
prepared in accordance with GAAP and fairly and accurately present the financial
condition and the results of the operations of the Borrower in all material
respects, as of the dates and for the periods stated therein.
18
<PAGE>
4.5 Liabilities and Litigation. Except for (a) liabilities shown in
--------------------------
the Financial Statements of the Borrower as of December 31, 1995 and furnished
to the Lender and (b) liabilities incurred in the ordinary course of business
since the date of such Financial Statements, the Borrower does not have any
material liabilities of any nature, direct or contingent; and the Borrower is
not in default with respect to any such material liabilities or any material
agreements by which it is bound.
There is no judgment against the Borrower, nor is there any Litigation
or other action of any nature pending before any Tribunal or, to the knowledge
of the Borrower, threatened against or affecting the Borrower or its Property
which, if determined adversely to the Borrower could reasonably be expected to
have a Material Adverse Effect.
4.6 Title to Assets. The Borrower has indefeasible title to all of
---------------
its Property, free and clear of all Liens, except for Permitted Liens and other
matters that could not reasonably be expected to have a Material Adverse Effect.
4.7 Authorizations and Consents. No authorization, consent,
---------------------------
approval, exemption, franchise, permit or license of, or filing (except for
filings required to perfect and maintain perfection of the Liens created by the
Security Documents) with, any Tribunal or any third Person is required to
authorize, or is otherwise required in connection with, the valid execution,
delivery and performance by the Borrower of this Agreement, the other Loan
Documents or any other agreement contemplated hereby or the repayment by the
Borrower of the Obligations.
4.8 Compliance with Laws. Neither the business nor any of the
--------------------
activities of the Borrower as presently conducted violates any applicable Law,
the result of which violation would have a Material Adverse Effect. The
Borrower possesses all licenses, approvals, registrations, permits and other
authorizations necessary to enable it to carry on its businesses in all material
respects as now conducted. All such licenses, approvals, registrations, permits
and other authorizations are in full force and effect. Furthermore, the
Borrower does not have any reason to believe that it will be unable to obtain
the renewal of any such licenses, approvals, registrations, permits and other
authorizations in due course. No transaction contemplated by this Agreement or
the other Loan Documents is in violation of any regulation promulgated by the
Board of Governors of the Federal Reserve System, including, without limitation,
Regulations G, U or X.
4.9 Proper Filing of Tax Returns and Payment of Taxes Due. The
------------------------------------------------------
Borrower has duly and properly filed or extended the date for filing all Tax
returns which are required to be filed by it and has paid all Taxes due pursuant
to such returns or pursuant to any assessment received, except such Taxes, if
any, as are being Contested in Good Faith. The charges and reserves on the
Borrower's books with respect to any Taxes are adequate, and
19
<PAGE>
the Borrower does not owe any deficiency or additional assessment in a material
amount in connection with Taxes.
4.10 ERISA Compliance. The Borrower does not currently contribute
----------------
to, or have any obligation to contribute to, and has not at any time contributed
to, or had an obligation to contribute to, any Multi-employer Plan. Since the
effective date of ERISA, no Reportable Event or Prohibited Transaction has
occurred with respect to any Plan of the Borrower. Each Plan established or
maintained by the Borrower meets the minimum funding standards of Section 302 of
ERISA and otherwise is in compliance with all applicable provisions of ERISA.
The Borrower has filed all reports required by ERISA and required to be filed by
it with respect to each Plan. The Borrower does not have any knowledge of any
event that could result in any material liability of the Borrower to the PBGC.
The Borrower has met all requirements with respect to funding the Plans imposed
on the Borrower by ERISA or the PBGC. Since the effective date of Title IV of
ERISA, there have not been any, nor are there now existing any, events or
conditions that would permit any Plan to be terminated under circumstances that
would cause the lien provided under Section 4068 of ERISA to attach to the
assets of the Borrower. The value of the Plans' benefits guaranteed under Title
IV of ERISA on the date hereof does not exceed the value of such Plans' assets
allocable to such benefits as of the date of this Agreement and shall not be
permitted to do so hereafter.
4.11 Investment Company Act Compliance. The Borrower is not an
---------------------------------
"investment company" or directly or indirectly controlled by or acting on behalf
of any Person which is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
4.12 Public Utility Holding Company Act Compliance. The Borrower is
---------------------------------------------
not subject to the provisions of the Public Utility Holding Company Act of 1935,
as amended.
4.13 Lien Priority. The Liens created in favor of the Lender under
-------------
the Security Documents constitute and shall remain first priority Liens to
secure the Obligations, subject only to Permitted Liens.
4.14 Use of Proceeds. All proceeds of Advances made pursuant to this
---------------
Agreement will be used to purchase producing Oil and Gas Properties or for
developmental drilling.
4.15 Full Disclosure. All of the Loan Documents and all written
---------------
statements furnished by the Borrower in connection with the consummation of the
transactions contemplated by this Agreement, when taken together, do not contain
any untrue statement
20
<PAGE>
of a material fact or omit to state a material fact necessary to make the
statements contained herein or therein not misleading as of the date made or
deemed made.
4.16 Places of Business. The chief executive office and principal
------------------
place of business of the Borrower is at 1201 Louisiana, Suite 3350, Houston,
Texas 77002. All records of the Borrower are maintained at such offices, 306
West 7th Street, Suite 1025, Fort Worth, Texas 76102, or such other address of
which the Borrower has provided advance written notice and with respect to which
the Borrower has executed all documents reasonably requested by the Lender.
4.17 Subsidiaries. The Borrower has no Subsidiaries as of the date of
------------
this Agreement.
ARTICLE 5
---------
AFFIRMATIVE COVENANTS
---------------------
So long as any Obligations remain unpaid or unsatisfied or the Lender
remains obligated to make Advances, and in absence of written consent of the
Lender to the contrary:
5.1 Maintenance and Access to Records. The Borrower will keep
---------------------------------
adequate records, in accordance with GAAP or other established industry
practices, of all of its material transactions so that at any time, and from
time to time, its true and complete financial condition may be readily
determined and, at the Lender's reasonable request, make all such records
available for the Lender's inspection and permit the Lender to make and take
away copies thereof.
5.2 Financial Statements. The Borrower will deliver to the Lender,
--------------------
as soon as available but in no event later than sixty (60) days after the end of
each of the first three fiscal quarters of the Borrower, the unaudited Financial
Statements of the Borrower reflecting the financial condition and results of
operations of the Borrower as at the end of such period and from the beginning
of such fiscal year to the end of such period, as applicable. Such Financial
Statements shall be certified by the president or the chief financial or
accounting officer of the Borrower as having been prepared in accordance with
GAAP and presenting fairly the financial condition and the results of the
operations of the Borrower subject to changes resulting from year-end audit
adjustments.
5.3 Annual Financial Statements. The Borrower will deliver to the
---------------------------
Lender, as soon as available but in no event later than one hundred twenty (120)
days after the close of each fiscal year of the Borrower, annual audited
Financial Statements of the Borrower reflecting the financial condition of the
Borrower, together with a report and opinion on such
21
<PAGE>
Financial Statements issued by a nationally recognized firm of independent
certified public accountants or another firm of independent certified public
accountants satisfactory to the Lender.
5.4 Compliance Certificates. The Borrower will deliver to the Lender
-----------------------
with the Financial Statements delivered pursuant to Sections 5.2 and 5.3 and
with each Borrowing Request a duly executed Compliance Certificate.
5.5 Statement of Material Adverse Effect. The Borrower will deliver
------------------------------------
to the Lender, promptly upon any officer of the Borrower having knowledge of any
Event of Default or event or condition (except for events or conditions as to
the economy of the United States as a whole or the oil and gas industry as a
whole) causing or likely to cause a Material Adverse Effect, a statement of the
president, chief executive officer or chief financial officer of the Borrower
setting forth the Event of Default or event or condition causing or likely to
cause a Material Adverse Effect and the steps being taken with respect thereto.
5.6 Title Defects. Other than Permitted Liens, the Borrower will
-------------
clear any title defects to the Mortgaged Properties material in value, in the
sole reasonable opinion of the Lender, and, in the event any such title defects
are not cured in a timely manner, pay all related costs and fees incurred by the
Lender to do so.
5.7 Additional Information. The Borrower will furnish to the Lender,
----------------------
promptly upon the Lender's request from time to time, such additional financial
or other information concerning the assets, liabilities, operations and
transactions of the Borrower, as the Lender may reasonably request.
5.8 Compliance with Laws and Payment of Taxes. The Borrower will
-----------------------------------------
comply in all material respects with all Laws and pay all Taxes, claims for
labor, supplies, rent and other obligations which, if unpaid, might become a
Lien against any of the Mortgaged Properties, except any of the foregoing being
Contested in Good Faith.
5.9 Maintenance of Existence and Good Standing. The Borrower will
------------------------------------------
maintain its corporate existence or qualification and good standing in its
jurisdiction of incorporation and in all jurisdictions wherein the Mortgaged
Properties now owned or hereafter acquired or business now or hereafter
conducted necessitates same and where the failure to so qualify would have a
Material Adverse Effect.
5.10 Further Assurances. The Borrower will promptly cure any
------------------
defects, errors or omissions in the execution and delivery of the Loan Documents
and, upon notice, take such other action and immediately execute and deliver to
the Lender all such other and
22
<PAGE>
further instruments as may be reasonably required or desired by the Lender from
time to time in compliance with the covenants and agreements made in this
Agreement and the other Loan Documents, including, without limitation, taking
such action as may be reasonably required to create, perfect and maintain Liens
on the Collateral and all other Property intended as security for the
Obligations.
5.11 Initial Expenses of the Lender. The Borrower will pay all
------------------------------
reasonable third party fees and expenses of the Lender incurred in connection
with the preparation and negotiation of the Loan Documents, the satisfaction of
the conditions precedent set forth in Article 3 and the consummation for the
transactions contemplated herein, including attorneys' fees.
5.12 Subsequent Expenses of the Lender. Upon request, the Borrower
---------------------------------
will promptly reimburse the Lender for all amounts reasonably expended, advanced
or incurred by the Lender in connection with the preparation of any additional
Security Documents and any assignments of, renewals of and amendments to any of
the Loan Documents. Upon request, the Borrower will promptly reimburse the
Lender for all amounts reasonably expended, advanced or incurred by the Lender
to collect the Note or to enforce the Rights of the Lender under this Agreement
or any of the other Loan Documents, all of which amounts shall be deemed
compensatory in nature and liquidated as to amount upon notice to the Borrower
by the Lender and which amounts will include, but not be limited to, (i) all
court costs, (ii) attorneys' fees, (iii) fees of auditors and accountants, (iv)
investigation expenses, (v) fees and expenses incurred in connection with the
Lender's participation as a member of the creditors' committee in a case
commenced under any Debtor Relief Laws, (vi) fees and expenses incurred in
connection with lifting the automatic stay prescribed in 11 U.S.C. (S)362, and
(vii) fees and expenses incurred in connection with any action pursuant to 11
U.S.C. (S)1129 incurred by the Lender in connection with the collection of any
sums due under this Agreement or the other Loan Documents, together with
interest at the Default Rate, calculated on the basis of a year of three hundred
sixty-five (365) or three hundred sixty-six (366) days, as the case may be, on
each such amount from the date of notification to the Borrower that the same was
expended, advanced or incurred by the Lender to, but not including, the date it
is repaid to the Lender, with the Obligations under this Section surviving the
non-assumption of this Agreement in a case commenced under any Debtor Relief
Laws and being binding upon the Borrower, any guarantor or a trustee, receiver
or liquidator of any such party appointed in any such case.
5.13 Maintenance of Tangible Property. The Borrower will maintain
--------------------------------
all equipment situated on or used in the operation of the Borrowing Base
Properties in good repair and working order and make all necessary replacements
thereof and will operate the Borrowing Base Properties in a good and workmanlike
manner and in accordance with
23
<PAGE>
standard industry practices, unless the failure to do so would not have a
Material Adverse Effect.
5.14 Maintenance of Insurance. The Borrower will maintain insurance
------------------------
with respect to its Property and business against such liabilities, casualties,
risks and contingencies and in such amounts as are customarily maintained in the
industry, and furnish to the Lender, on the Closing Date and annually
thereafter, certificates evidencing such insurance.
5.15 Right of Inspection. The Borrower will permit any authorized
-------------------
representative of the Lender to visit and inspect, at the sole risk and expense
of the Lender, any Collateral and any other Property of the Borrower at such
reasonable times and as often as the Lender may request.
5.16 Compliance with ERISA. The Borrower will furnish to the Lender
---------------------
(a) promptly after the filing thereof with the United States Secretary of Labor
or the PBGC, copies of each annual and other report with respect to each Plan or
any trust created thereunder and (b) immediately upon becoming aware of the
occurrence of any Reportable Event or Prohibited Transaction in connection with
any Plan or any trust created thereunder, a written notice specifying the nature
thereof, what action is being taken or is proposed to be taken with respect
thereto, and, when known, any action taken by the Internal Revenue Service or
any other Tribunal with respect thereto. The Borrower will fund all current
service pension liabilities as they are incurred under the provisions of all
Plans from time to time in effect and timely file all reports required by ERISA
and required to be filed by the Borrower with respect to each Plan.
5.17 Notice. The Borrower will immediately notify the Lender of (a)
------
the receipt of any notice from, or the taking of any action by, the holder of
any promissory note or other evidence of Debt of the Borrower with respect to a
claimed default, together with a statement specifying the notice given or other
action taken by such holder and what action the Borrower is taking or proposes
to take with respect thereto; (b) any legal, judicial or regulatory proceedings
affecting the Borrower in which the amount involved is material and is not
covered by insurance or that would, if adversely determined, have a Material
Adverse Effect; (c) any dispute between the Borrower and any Tribunal or any
Person that would, if adversely determined, have a Material Adverse Effect; (d)
information that in any way relates to or affects the filing of any financing
statement or other security instrument for the purpose of perfecting or
continuing a Lien on the Collateral; (e) any event that materially and adversely
affects the Collateral or the Rights of the Lender with respect to such
Collateral; (f) the occurrence of any Event of Default; and (g) any event or
condition (except for events or conditions to the economy of the United States
as a whole or the oil and gas industry as a whole) which could reasonably be
expected to cause a Material Adverse Effect.
24
<PAGE>
ARTICLE 6
---------
NEGATIVE COVENANTS
------------------
So long as any Obligations remain unpaid or the Lender remains
obligated to make Advances, and in the absence of written consent of the Lender
to the contrary:
6.1 Other Debt of Borrower. The Borrower will not incur, create,
----------------------
assume or suffer to exist any Debt except: (a) Loans hereunder, (b) other Debt
owed the Lender, (c) unsecured current accounts payable incurred in the ordinary
course of business, provided such accounts are paid within sixty (60) days of
the invoice date or are being Contested in Good Faith, (d) Debt in the principal
amount of $100,000.00 owed to Union Pacific Resources Company, and (e) other
Debt not in excess of $100,000.00 at any one time.
6.2 Guaranty of Payment or Performance. The Borrower will not
----------------------------------
guarantee any contract or otherwise be or become liable in connection with any
obligation of any Person, except that the foregoing restriction shall not apply
to endorsements of instruments for collection in the ordinary course of
business.
6.3 Investments. The Borrower will not make or agree to make or
-----------
allow to remain outstanding any Investment, except (a) advances or extensions of
credit in the form of accounts receivable incurred in the ordinary course of
business and upon terms common in the industry for such accounts receivable, (b)
Liquid Investments, and (c) loans and advances made to employees in the normal
course of business.
6.4 Mortgages or Pledges of Assets. The Borrower will not create,
------------------------------
incur, assume or permit to exist any Lien on any of its Property (now owned or
hereafter acquired), except Permitted Liens.
6.5 Cancellation of Insurance. The Borrower will not allow any
-------------------------
insurance policy required to be carried hereunder to be terminated or lapse or
expire without provision for adequate renewal or replacement thereof.
6.6 Sales of Mortgaged Properties. The Borrower will not sell,
-----------------------------
transfer or otherwise dispose of any of the Mortgaged Properties; provided,
however, the foregoing restriction shall not apply to sales of oil, gas and
other minerals produced from or attributable to the Mortgaged Properties.
6.7 Sale and Leaseback. The Borrower will not enter into any
------------------
arrangement with any Person providing for the leasing by the Borrower of
Property which has been or is to be sold or transferred by the Borrower to such
Person or to any other Person to whom
25
<PAGE>
funds have been or are to be advanced by such Person on the security of such
Property or rental obligations of the Borrower.
6.8 Dividends and Distributions. Except for (a) dividends payable in
---------------------------
Preferred Stock on the Preferred Stock, (b) the redemption of the Preferred
Stock in connection with the issuance of nine (9) shares of common stock for
each such share of Preferred Stock, (c) dividends not to exceed eight and one-
half percent (8 1/2%) per annum with respect to the preferred stock described in
Section 6.9(c) and (d) the redemption of the preferred stock described in
Section 6.9(c) in connection with the issuance of its common stock, $.05 per
share, the Borrower will not declare, pay or make, whether in cash or other
Property, any dividend or distribution on, or purchase, redeem or otherwise
acquire for value, any share of any class of its capital stock.
6.9 Changes in Corporate Structure. The Borrower will not issue or
------------------------------
agree to issue additional shares of capital stock (provided, however, the
foregoing restriction shall not apply to (a) the issuance or exchange, as
consideration for Oil and Gas Properties, of shares of its common stock which do
not aggregate in excess of twenty percent (20%) of the outstanding common shares
from May 12, 1995, (b) the issuance, as bonus compensation to employees,
directors or consultants of the Borrower, of shares of its common stock, (c) the
contemplated issuance of up to 2,000,000 shares of its common stock, par value
$.05 per share, and $5,000,000.00 of its preferred stock, with a dividend not to
exceed eight and one-half percent (8 1/2%) per annum, pursuant to private
placement offerings, (d) the issuance of up to 17,000,000 shares of its common
stock, par value $.05 per share, in connection with the redemption of the
Preferred Stock or (e) the issuance of its common stock, par value of $.05 per
share, in connection with the conversion or redemption of the preferred stock
described in clause (c) above); enter into any transaction of consolidation,
merger or amalgamation; liquidate, wind up or dissolve (or suffer any
liquidation or dissolution); or convey, sell, lease, assign, transfer or
otherwise dispose of all or substantially all of its Property or business.
6.10 Payment of Accounts Payable. The Borrower will not allow any
---------------------------
account payable to be in excess of sixty (60) days past due, except such as are
being Contested in Good Faith.
6.11 Transactions with Affiliates. The Borrower will not directly or
----------------------------
indirectly, enter into any transaction (including the sale, lease or exchange of
Property or the rendering of service) with any of its Affiliates, other than
upon fair and reasonable terms no less favorable than could be obtained in an
arm's length transaction with a Person which was not an Affiliate.
26
<PAGE>
6.12 Limitation on Negative Pledge Clauses. The Borrower will not
-------------------------------------
enter into any agreement with any Person other than the Lender which prohibits
or limits the ability of the Borrower create, incur, assume or suffer to exist
any Lien upon any of its Property, whether now owned or hereafter acquired.
6.13 Nature of Business. The Borrower will not make any material
------------------
change in the character of its business as carried on at the date hereof.
6.14 No Subsidiaries. The Borrower will not own any Subsidiary other
---------------
than Fremont Energy Corporation and Ridgepointe Resources, Inc.
6.15 Hedge Agreements. The Borrower will not enter into any commodity
----------------
swap or hedge agreement.
ARTICLE 7
----------
EVENTS OF DEFAULT
-----------------
7.1 Events of Default. The occurrence of any of the following events
-----------------
shall constitute an Event of Default:
(a) The Borrower shall fail to pay when due any installment of
principal or interest on the Note or any fee payable under this Agreement
and, as to interest only, such failure to pay shall remain unremedied for
in excess of five (5) days;
(b) Default shall occur in the due observance or performance of any
affirmative covenant required in this Agreement, the Note, any of the
Security Documents or any of the other Loan Documents and such default
shall remain unremedied for in excess of ten (10) days after the earlier of
(i) written notice given by the Lender, or (ii) actual knowledge thereof by
the Borrower;
(c) Default shall occur in the due observance or performance of any
negative covenant required in this Agreement, the Note, any of the Security
Documents or any of the other Loan Documents;
(d) Any Financial Statement, representation, warranty or certificate
made or furnished by or on behalf of the Borrower to the Lender in
connection with this Agreement or any other Loan Document, or as an
inducement to the Lender to enter into this Agreement, or in any instrument
furnished in compliance with or in reference to this Agreement or any other
Loan
27
<PAGE>
Document, shall be materially false, incorrect, or incomplete at or as of
the time made with the result of a Material Adverse Effect;
(e) Default shall be made by the Borrower (as principal or guarantor
or other surety) in payment or performance of any bond, debenture, note or
other evidence of Debt for borrowed money having an outstanding principal
amount in excess of $50,000.00, or under any credit agreement, loan
agreement, indenture, promissory note or similar agreement or instrument
executed in connection with any of the foregoing, and such default shall
remain unremedied for in excess of the period of grace, if any, with
respect thereto, with the effect of accelerating the maturity of any such
Debt or establishing a right to accelerate the maturity of such Debt;
(f) The Borrower shall file a petition seeking relief for itself under
Debtor Relief Laws, or file an answer consenting to, admitting the material
allegations of or otherwise not controverting, or fail timely to controvert
a petition filed against it seeking relief under Debtor Relief Laws;
(g) An order for relief shall be entered against the Borrower under
any Debtor Relief Laws, which order is not stayed, or upon the entry of an
order, judgment or decree by operation of Law or by a court of competent
jurisdiction which is not stayed, ordering relief against the Borrower
under, or approving as properly filed, a petition seeking relief against
any such Person under the provisions of any Debtor Relief Laws, or
appointing a receiver, liquidator, assignee, sequestrator, trustee or
custodian of the Borrower or of any substantial part of its Property, or
ordering the reorganization, winding up or liquidation of any the
Borrower's affairs, or upon the expiration of ninety (90) days after the
filing of any involuntary petition against the Borrower seeking any of the
relief specified in the preceding Subsection or this Subsection without the
petition being dismissed prior to that time;
(h) The Borrower shall (i) make a general assignment for the benefit
of its creditors, (ii) consent to the appointment of or taking possession
by a receiver, liquidator, assignee, sequestrator, trustee or custodian of
the Borrower or any substantial part of its Property, (iii) admit
insolvency or inability to pay its debts generally as such debts become
due, (iv) fail generally to pay its debts as such debts become due, or (v)
take any action (or an action shall be taken by its directors or majority
stockholders) looking to the dissolution or liquidation of the Borrower;
28
<PAGE>
(i) Final judgment for the payment of money in excess of $50,000.00
shall be rendered against the Borrower and such judgment shall remain
undischarged for a period of thirty (30) days during which execution shall
not be effectively stayed;
(j) The Security Documents shall for any reason, except to the extent
permitted by the terms thereof, cease to be in full force and effect and
valid, binding and enforceable in accordance with their terms, cease to
create a valid Lien of the priority required thereby on any of the
Collateral purported to be covered thereby, or, upon perfection, cease to
be a perfected Lien on any of the Collateral purported to be covered
thereby, or the Borrower or any other Person who may have granted or
purported to grant such Lien shall so state in writing and such default
shall remain unremedied for in excess of ten (10) days after the earlier of
(i) written notice given by the Lender, or (ii) actual knowledge thereof by
the Borrower;
(k) A judgment creditor of the Borrower shall obtain possession of any
of the Collateral by any means, including, without limitation, levy,
attachment or self help;
(l) The validity or enforceability of any of the Loan Documents shall
be contested by the Borrower or the Borrower shall deny that it has any or
further liability or Obligation under any of the Loan Documents or allege
that any of the Loan Documents shall be construed or enforced other than in
accordance with their terms;
(m) The Borrower shall have concealed, removed, or permitted to be
concealed or removed, any part of its Property with the intent to hinder,
delay or defraud its creditors or any of them, or made or suffered a
transfer of any of its Property which is fraudulent under any Debtor Relief
Laws (except for such transfers in favor of the Lender); or shall have made
any transfer (other than in the ordinary course of business) of its
Property to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid; or
(n) The occurrence of an Event of Default as defined in the Revolving
Credit Agreement.
7.2 Rights Upon Occurrence of Unmatured Event of Default. At any time
----------------------------------------------------
that there exists an Unmatured Event of Default, any obligation of the Lender
hereunder to make Advances to or for the benefit of the Borrower shall be
suspended unless and until the
29
<PAGE>
Lender shall reinstate the same in writing, the Unmatured Event of Default shall
have been waived by the Lender or the relevant Unmatured Event of Default shall
have been remedied prior to ripening into an Event of Default.
7.3 Rights Upon Occurrence of an Event of Default.
---------------------------------------------
(a) Upon the occurrence of any Event of Default specified in
Subsections (f), (g) or (h) of Section 7.1, immediately and without notice,
(i) all Obligations shall immediately become due and payable without
presentment, demand, protest, notice of protest or dishonor, notice of
intent to accelerate, notice of acceleration or other notice of any kind,
all of which are expressly waived by the Borrower and (ii) all obligations
of the Lender, if any, under this Agreement shall immediately and
automatically cease and terminate unless and until the Lender shall
reinstate any such obligation in writing.
(b) Upon the occurrence and at any time during the continuance of any
other Event of Default, (i) all obligations of the Lender, if any, under
this Agreement shall immediately and automatically cease and terminate
unless and until the Lender shall reinstate any such obligation in writing
and (ii) the Lender may by written notice to the Borrower declare all
Obligations to be immediately due and payable without presentment, demand,
protest, notice of protest or dishonor, notice of intention to accelerate,
notice of acceleration or other notice of any kind, all of which are
expressly waived by the Borrower. The Borrower acknowledges and understands
that under the Laws of the State of Texas, unless waived, the Borrower has
the right to notice of the Lender's intent to accelerate the Obligations
evidenced by the Note, the right to notice of the actual acceleration of
the Obligations evidenced by the Note, and the right to presentment of the
Note by the Lender's demand for payment. The Borrower acknowledges that it
understands that it can waive these rights and by the Borrower's execution
of this Agreement it agrees to waive its right to notice of intent to
accelerate, its right to notice of acceleration, and its right to
presentment or other demand for payment.
(c) In addition to the foregoing, upon the occurrence of any Event of
Default, the Lender may exercise any or all of the Rights provided in any
or all of the Loan Documents.
30
<PAGE>
ARTICLE 8
---------
MISCELLANEOUS
-------------
8.1 Notices. Any notice required or permitted to be given under or
-------
in connection with this Agreement or any of the other Loan Documents (except as
may otherwise be expressly required therein) shall be in writing and shall be
mailed by certified mail, return receipt requested, postage prepaid, or sent by
telex, telegram, telecopy or other similar form of rapid transmission confirmed
by mailing (by certified mail, return receipt requested, postage prepaid)
written confirmation at substantially the same time as such rapid transmission,
or personally delivered to an officer of the receiving party. All such
communications shall be mailed, sent or delivered,
(a) if to the Borrower, to Amerac Energy Corporation, 1201 Louisiana,
Suite 3350, Houston, Texas 77002, Attn: Jeffrey B. Robinson, or to such
other address or to such individual's or department's attention as the
Borrower may have furnished the Lender in writing; or
(b) if to the Lender, to Bank One, Texas, National Association, 910
Travis, Houston, Texas 77002 (if personally delivered), or P.O. Box 2629,
Houston, Texas 77252 (if mailed), Attn: Mr. Jeffrey W. Baker, or to such
other address or to such individual's or department's attention as the
Lender may have furnished the Borrower in writing.
Any communication so addressed and mailed shall be deemed to be given when so
mailed, and any notice so sent by rapid transmission is acknowledged, and any
communication so delivered in person shall be deemed to be given when receipted
for or actually received by an authorized officer of the Borrower or the Lender,
as the case may be.
8.2 Amendments and Waivers. Any provision of this Agreement or any
----------------------
of the other Loan Documents may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the Lender
(and/or any other Person which is a party to any Loan Document being amended or
with respect to which a waiver is being obtained).
8.3 Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement or any of the other Loan Documents shall for any
reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or any other Loan Document.
31
<PAGE>
8.4 Survival of Agreements. All representations and warranties of
----------------------
the Borrower herein or in the other Loan Documents and all covenants and
agreements not fully performed before the effective date or dates of this
Agreement or the other Loan Documents shall survive such date or dates.
8.5 Successors and Assigns. All covenants and agreements by or on
----------------------
behalf of the Borrower in this Agreement and all of the other Loan Documents
shall bind its legal representatives, successors and assigns and shall inure to
the benefit of the Lender and its legal representatives, successors and assigns.
The Borrower may not assign its respective Rights or Obligations hereunder or
under the Note without the prior consent of the Lender.
8.6 Renewal, Extension or Rearrangement. All provisions of this
-----------------------------------
Agreement and of any other Loan Documents, as presently existing or as they may
hereafter be amended, relating to the Note or other Obligations shall apply with
equal force and effect to each and all promissory notes hereinafter executed
which in whole or in part represent a renewal, extension for any period,
increase or rearrangement of any part of the Obligations originally evidenced by
the Note or of any part of such other Obligations.
8.7 Waivers. No waiver by the Lender of any of its Rights under this
-------
Agreement, the other Loan Documents or otherwise shall be considered a waiver of
any other or subsequent Right. No course of dealing on the part of the Lender,
its officers, employees, consultants or agents, nor any failure or delay by the
Lender with respect to exercising any Right under any of the Loan Documents
shall operate as a waiver thereof.
8.8 Cumulative Rights. The Rights of the Lender under the Note, this
-----------------
Agreement and each other Loan Document shall be cumulative, and the exercise or
enforcement of any such Right shall not preclude the exercise or enforcement of
any other Right.
8.9 Taxes, Etc. Any assessments, filing fees, mortgage registration
-----------
tax, stamp tax or other charge in connection with the filing or recordation of
any of the Security Documents with any governmental authority shall be paid by
the Borrower.
8.10 Exhibits; Conflicts. The exhibits attached to this
-------------------
Agreement are incorporated herein and shall be considered a part of this
Agreement for the purposes stated herein. In the event of any direct conflict
between any of the provisions of such exhibits or any of the other Loan
Documents and the provisions of this Agreement, the provisions of this Agreement
shall prevail.
32
<PAGE>
8.11 Titles of Articles, Sections and Subsections. All titles or
--------------------------------------------
heading to articles, Sections, Subsections or other divisions of this Agreement
or the exhibits hereto are only for the convenience of the parties and shall not
be construed to have any effect or meaning with respect to the other content of
such articles, Sections, Subsections or other divisions, such other content
being controlling as to the agreement between the parties hereto.
8.12 Jurisdiction. All actions or proceedings with respect to
------------
the Note, this Agreement or any of the other Loan Documents may be instituted in
the courts of the State of Texas, the United States District Court for the
Southern District of Texas, or elsewhere to the extent that jurisdiction shall
exist apart from the provisions of this Section, as the Lender may elect. By
execution and delivery of this Agreement, the Borrower irrevocably and
unconditionally submits to the jurisdiction (both subject matter and personal)
of each such court, and irrevocably and unconditionally waives (a) any objection
it may now or hereafter have to the laying of venue in any of such courts and
(b) any claim that any action or proceeding brought in any of such courts has
been brought in an inconvenient forum. The Borrower hereby designates and
appoints C T Corporation System as its authorized agent in the State of Texas to
accept and acknowledge service of process in the State of Texas and agrees that
any service of process upon such agent shall be deemed in every respect
effective service. The Borrower agrees that so long as it shall be obligated to
the Lender under any of the Loan Documents, it shall maintain a duly appointed
agent satisfactory to the Lender for the service of process in the State of
Texas and shall keep the Lender advised in writing of the identity and location
of such agent. The failure of such agent to give notice to the Borrower of any
such service shall not impair or affect the validity of such service or of any
judgment rendered in any action or proceeding based thereon.
8.13 Counterparts. This Agreement may be executed in two or more
------------
counterparts and multiple originals of such counterparts, and it shall not be
necessary that the signatures of all parties hereto be contained on any one
counterpart hereof. Any executed Agreement or any counterpart thereof shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
8.14 Effectiveness. This Agreement shall not be effective until
-------------
delivered to, accepted and executed by the Lender and the Borrower.
8.15 Documents. All Loan Documents and any other certificate,
---------
agreement or other document provided or to be provided under the terms hereof
shall be in form and substance satisfactory to the Lender.
33
<PAGE>
8.16 Rights of Third Person. All provisions of this Agreement
----------------------
are imposed solely and exclusively for the benefit of the Lender and the
Borrower. No other Person shall have standing to require satisfaction for such
provisions in accordance with their terms or be entitled to assume that the
Lender will refuse to perform its obligations hereunder in the absence of strict
compliance with any or all thereof, and any or all of such provisions may be
freely waived in whole or in part by the Lender at any time if in its sole
discretion its deems it advisable to do so.
8.17 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
-------------
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE UNITED
STATES OF AMERICA AND THE STATE OF TEXAS (EXCEPT TO THE EXTENT THE LOCATION OR
NATURE OF THE COLLATERAL REQUIRES THE APPLICATION OF THE LAWS OF OTHER
JURISDICTIONS TO BE APPLIED AS TO MATTERS OF CREATION, PERFECTION AND PRIORITY
OF LIENS AND THE RIGHTS OF THE LENDERS OR THE AGENT UPON DEFAULT), PROVIDED,
HOWEVER, THAT THE PROVISIONS OF CHAPTER 15, TITLE 79 OF THE REVISED CIVIL
STATUTES OF TEXAS (ARTICLE 5069-15.01, ET SEQ., TEX. REV. CIV. STAT. ANN.) SHALL
-- ---
NOT APPLY TO ANY OF THE LOAN DOCUMENTS.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed effective as of the date first above written.
AMERAC ENERGY CORPORATION
By:
____________________________________
Jeffrey L. Stevens
Senior Vice President
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By:
____________________________________
Jeffrey W. Baker
Vice President
34
<PAGE>
EXHIBIT 10.14
FIRST AMENDMENT TO AMENDED
AND RESTATED CREDIT AGREEMENT
-----------------------------
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"First Amendment") made and entered into the 16th day of January, 1996, by and
---------------
between AMERAC ENERGY CORPORATION, a Delaware corporation, and BANK ONE, TEXAS,
NATIONAL ASSOCIATION, a national banking association.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the above named parties did execute and exchange counterparts
of that certain Amended and Restated Credit Agreement dated as of May 12, 1995
(the "Agreement") to which reference is here made for all purposes;
---------
WHEREAS, the above named parties are desirous of amending the Agreement
in the particulars hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants and agreements
of the parties to the Agreement and agreements of the parties hereto as set
forth in this First amendment, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
As used herein, each term defined in the Agreement shall have the
meaning assigned thereto in the Agreement and terms defined herein shall be
incorporated into the Agreement unless expressly provided to the contrary.
<PAGE>
ARTICLE II. AMENDMENTS
2.01 The Agreement is hereby amended to substitute for the
first paragraph of Section 2.4 the following:
Until redetermined by the Lender as set forth below in this
Section, as of January 16, 1996 the Borrowing Base is
$10,600,000.00 and will decrease (a) $185,000.00 on the first
day of each calendar month beginning on February 1, 1996 and (b)
$185,000.00 when that certain Mortgaged Property commonly known
as the Northwest Arapahoe Unit located in Cheyenne County,
Colorado is sold.
2.02 The Agreement is hereby amended to substitute for Section
5.20 of the Agreement the following:
5.20 Proceeds of Production. Direct all purchasers of production
----------------------
or disbursers of proceeds of production from the Borrowing Base
Properties to pay such proceeds directly to a lock-box
maintained by the Borrower and the Lender.
2.03 The Agreement is hereby amended to substitute for Section
5.23 of the Agreement the following:
5.23 Fixed Charge Coverage Ratio. The Borrower will maintain for
---------------------------
the one (1) fiscal quarter period ending March 31, 1996, a ratio
of (a) net cash flow from operations exclusive of working
capital changes to (b) twenty-five percent (25%) of an amount
equal to the quotient of (i) the Borrowing Base as of March 31,
1996 divided by (ii) five, of no less than 1.2 to 1.0.
The Borrower will maintain for the two (2) fiscal quarter period
ending June 30, 1996, a ratio of (a) net cash flow from
operations exclusive of working capital changes to (b) fifty
percent (50%) of an amount equal to the quotient of (i) the
Borrowing Base as of June 30, 1996 divided by (ii) five, of no
less than 1.2 to 1.0.
2
<PAGE>
The Borrower will maintain for the three (3) fiscal quarter
period ending September 30, 1996, a ratio of (a) net cash flow
from operations exclusive of working capital changes to (b)
seventy-five percent (75%) of an amount equal to the quotient of
(i) the Borrowing Base as of September 30, 1996 divided by (ii)
five, of no less than 1.2 to 1.0.
The Borrower will maintain for each four (4) fiscal quarter
period beginning with the four (4) fiscal quarter period ending
December 31, 1996, a ratio of (a) net cash flow from operations
exclusive of working capital changes to (b) an amount equal to
the quotient of (i) the Borrowing Base as of the last day of the
last fiscal quarter in such four fiscal quarter period divided
by (ii) five, of no less than 1.2 to 1.0.
2.04 The Agreement is hereby amended to substitute for Section
6.16 of the Agreement the following:
6.16 Overhead Expense. For each of the 1995 and 1996 fiscal
----------------
years of the Borrower, the Borrower will not incur general and
administrative expenses in excess of $1,600,000.00. For each
fiscal quarter of the Borrower after the 1996 fiscal year of the
Borrower, the Borrower will not incur general and administrative
expenses in excess of twenty-four percent (24%) of gross
revenues attributable to its oil and gas operations for any such
fiscal quarter.
2.05 The Agreement is hereby amended to add all of the Oil and
Gas Properties set forth on Exhibit A hereto (identified by their commonly known
names) to Exhibits C and D of the Credit Agreement.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Borrower hereby expressly remakes in favor of the Lender all
of the representations and warranties set forth in ARTICLE IV of the Agreement,
as amended
3
<PAGE>
hereby, and represents and warrants that all such representations and warranties
remain true and unbreached, except as affected by the transactions contemplated
in the Agreement.
ARTICLE IV. RATIFICATION
Each of the parties hereto does hereby adopt, ratify and confirm
the Agreement, in all things in accordance with the terms and provisions
thereof, as modified or amended by this First Amendment.
ARTICLE V. MISCELLANEOUS
5.01 All references to the Agreement in any document heretofore
or hereafter executed in connection with the transactions contemplated in the
Agreement shall be deemed to refer to the Agreement as amended by this First
Amendment.
5.02 THIS FIRST AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
TEXAS.
IN WITNESS WHEREOF, this First Amendment to Amended and Restated
Credit Agreement is executed as of the date first above written.
AMERAC ENERGY CORPORATION
BY:-------------------------------
Jeffrey B. Robinson
President and Chief Executive Officer
(Signatures continued on next page)
4
<PAGE>
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By:
-----------------------------
Melanie M. Ottens
Vice President
5
<PAGE>
EXHIBIT 10.15
SECOND AMENDMENT TO AMENDED
AND RESTATED CREDIT AGREEMENT
-----------------------------
THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the "Second
------
Amendment") made and entered into the 15th day of August, 1996, by and between
- ---------
AMERAC ENERGY CORPORATION, a Delaware corporation, and BANK ONE, TEXAS, NATIONAL
ASSOCIATION, a national banking association.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the above named parties did execute and exchange counterparts of
that certain Amended and Restated Credit Agreement dated as of May 12, 1995 as
amended by that certain First Amendment to Credit Agreement dated January 16,
1996 (collectively, the "Agreement") to which reference is here made for all
---------
purposes;
WHEREAS, the above named parties are desirous of amending the Agreement in
the particulars hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants and agreements of
the parties to the Agreement and agreements of the parties hereto as set forth
in this Second Amendment, the parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
As used herein, each term defined in the Agreement shall have the meaning
assigned thereto in the Agreement and terms defined herein shall be incorporated
into the Agreement unless expressly provided to the contrary.
ARTICLE II
AMENDMENTS
2.01 The Agreement is hereby amended to substitute for the definition of
"Commitment Limit" in Section 1.1 of the Agreement the following definition, to
wit:
"Commitment Limit" means the lesser of (a) $30,000,000.00 or (b) the
----------------
Borrowing Base.
2.02 The Agreement is hereby amended to substitute for the definition
of "Note" in Section 1.1 of the Agreement the following definition, to wit:
"Note" means that certain promissory note in the face amount of
----
$30,000,000.00 dated August 15, 1996 made by the Borrower to the order
of the Lender, together with all deferrals, renewals or extensions
thereof, which promissory note shall evidence the Advances made to the
Borrower by the Lender pursuant to Section 2.1 and funds advanced and
applied pursuant to Section 2.10.
2.03 The Agreement is hereby amended to substitute for clause (f) in
the definition of "Permitted Liens" in Section 1.1 of the Agreement the
following, to wit:
(f) Liens created in favor of the Lender securing Obligations
hereunder and other Debt of the Borrower owed the Lender and other
Liens expressly permitted under the Security Documents;
2
<PAGE>
2.04 The Agreement is hereby amended to substitute for the definition
of "Termination Date" in Section 1.1 of the Agreement the following definition,
to wit:
"Termination Date" means May 31, 1998.
----------------
2.05 The Agreement is hereby amended to substitute for the first
paragraph of Section 2.4 the following:
Until redetermined by the Lender as set forth below in this Section,
as of August 1, 1996 the Borrowing Base is $11,900,000.00 and will
decrease $250,000.00 on the first day of each calendar month beginning
on September 1, 1996.
2.06 The Agreement is hereby amended to change "commencing July 1,
1996" in the first sentence of the third paragraph of Section 2.4 of the
Agreement to "commencing July 1, 1997":
2.07 The Agreement is hereby amended to add the following paragraph to
the end of Section 2.8 of the Agreement:
At any time the Borrower requests the Lender to undertake a review of
the Borrowing Base other than at the two (2) semi-annual reviews set
forth in Section 2.4 because of the addition or proposed addition of
Oil and Gas Properties to the Borrowing Base, the Borrower shall pay
the Lender an additional engineering fee of $500.00 per new well to be
included in the additional review; provided, however, such additional
engineering fee shall not exceed $5,000.00 for any such additional
Borrowing Base review. Such fee shall be due and payable to the
Lender at the time such request is made by the Borrower.
2.08 The Agreement is hereby amended to delete Section 5.5 of the
Agreement in its entirety.
3
<PAGE>
2.09 The Agreement is hereby amended to substitute for Section 6.1 of
the Agreement the following:
6.1 Other Debt of Borrower. The Borrower will not incur, create,
----------------------
assume or suffer to exist any Debt except: (a) Loans hereunder, (b)
other Debt owed the Lender, (c) unsecured current accounts payable
incurred in the ordinary course of business, provided such accounts
are paid within sixty (60) days of the invoice date or are being
Contested in Good Faith, (d) Debt in the principal amount of
$100,000.00 owed to Union Pacific Resources Company, and (e) other
Debt not in excess of $100,000.00 at any one time.
2.10 The Agreement is hereby amended to substitute for Section 6.8 of
the Agreement the following:
Dividends and Distributions.Except for (a) dividends payable in
---------------------------
Preferred Stock on the Preferred Stock, (b) the redemption of the
Preferred Stock in connection with the issuance of nine (9) shares of
common stock for each such share of Preferred Stock, (c) dividends not
to exceed eight and one-half percent (8 1/2%) per annum with respect
to the preferred stock described in Section 6.9(c) and (d) the
redemption of the preferred stock described in Section 6.9(c) in
connection with the issuance of its common stock, $.05 per share, the
Borrower will not declare, pay or make, whether in cash or other
Property, any dividend or distribution on, or purchase, redeem or
otherwise acquire for value, any share of any class of its capital
stock.
2.11 The Agreement is hereby amended to substitute for Section 6.9 of
the Agreement the following:
6.9 Changes in Corporate Structure. The Borrower will not issue or
------------------------------
agree to issue additional shares of capital stock (provided, however,
the foregoing restriction shall not apply to (a) the issuance or
exchange, as consideration for Oil and Gas Properties, of shares of
its common stock which do not aggregate in excess of twenty percent
(20%) of the outstanding
4
<PAGE>
common shares from May 12, 1995, (b) the issuance, as bonus
compensation to employees, directors or consultants of the Borrower,
of shares of its common stock, (c) the contemplated issuance of up to
2,000,000 shares of its common stock, par value $.05 per share, and
$5,000,000.00 of its preferred stock, with a dividend not to exceed
eight and one-half percent (8 1/2%) per annum, pursuant to private
placement offerings, (d) the issuance of up to 17,000,000 shares of
its common stock, par value $.05 per share, in connection with the
redemption of the Preferred Stock or (e) the issuance of its common
stock, par value of $.05 per share, in connection with the conversion
or redemption of the preferred stock described in clause (c) above);
enter into any transaction of consolidation, merger or amalgamation;
liquidate, wind up or dissolve (or suffer any liquidation or
dissolution); or convey, sell, lease, assign, transfer or otherwise
dispose of all or substantially all of its Property or business.
2.12 The Agreement is hereby amended to substitute for Section 6.14 of
the Agreement the following:
6.14 No Subsidiaries. The Borrower will not own any Subsidiary other
---------------
than Fremont Energy Corporation and Ridgepointe Resources, Inc.
2.13 The Agreement is hereby amended to substitute for Section 6.16 of
the Agreement the following:
6.16 Overhead Expense. For each fiscal quarter of the Borrower
----------------
beginning with the 1996 fiscal year of the Borrower, the Borrower will
not incur general and administrative expenses (exclusive of the
issuance of stock to employees, directors or consultants of the
Borrower) in excess of twenty-two percent (22%) of gross revenues
attributable to its oil and gas operations for any such fiscal
quarter.
2.14 The Agreement is hereby amended to add the following Subsection
to Section 7.1 of the Agreement:
5
<PAGE>
(o) The occurrence of an Event of Default, as defined in that certain
Credit Agreement dated August 15, 1996 by and between the Borrower and
the Lender.
2.15 The Agreement is hereby amended to substitute for Subsection
7.3(a) of the Agreement the following:
(a) Upon the occurrence of any Event of Default specified in
Subsections (f), (g) or (h) of Section 7.1, immediately and without
notice, (i) all Obligations shall immediately become due and payable
without presentment, demand, protest, notice of protest or dishonor,
notice of intent to accelerate, notice of acceleration or other notice
of any kind, all of which are expressly waived by the Borrower and
(ii) all obligations of the Lender, if any, under this Agreement shall
immediately and automatically cease and terminate unless and until the
Lender shall reinstate any such obligation in writing.
2.16 The Agreement is hereby amended to add all of the Oil and Gas
Properties set forth on Exhibit A hereto (identified by their commonly known
names) to Exhibits C and D of the Agreement.
ARTICLE III
CONDITIONS PRECEDENT
The execution of this Second Amendment by the Lender is subject to the
condition precedent that the Lender shall have received all of the following,
each duly executed and in form and substance satisfactory to the Lender:
(a) the Note, in the form of Exhibit B attached hereto;
(b) this Second Amendment;
(c) as to the Mortgaged Properties located in Texas and previously
encumbered by the Lender in favor of the Borrower;
6
<PAGE>
(A) a Ratification of and Amendment to Deed of Trust,
Security Agreement, Financing Statement and Assignment of
Production between the Borrower and the Lender;
(d) as to the Mortgaged Properties located in Oklahoma and Kansas and
previously encumbered by the Lender in favor of the Borrower;
(A) a Ratification of and Amendment to Mortgage, Deed of
Trust, Security Agreement, Financing Statement and Assignment of
Production between the Borrower and the Lender; and
(e) as to the Mortgaged Properties located in Texas and not previously
encumbered by the Lender in favor of the Borrower;
(A) a Deed of Trust, Security Agreement, Financing Statement
and Assignment of Production from the Borrower in favor of the
trustee named therein for the benefit of the Lender; and
(B) a Non-Standard Financing Statement from the Borrower
covering accounts from the sale of oil and gas produced from such
Mortgaged Properties and equipment and other personal property
associated therewith;
(f) transfer orders directed to the party remitting to the Borrower
proceeds from the sale of production from the Mortgaged Properties
not previously encumbered by the Lender in favor of the Borrower;
(g) a copy of the corporate resolutions of the Borrower approving the
this Second Amendment, the Note and the other Loan Documents set
forth in this Second Amendment and authorizing the transactions
contemplated in the Second Amendment, duly adopted
7
<PAGE>
by its board of directors and accompanied by a certificate of the
secretary or an assistant secretary of the Borrower to the effect
that such copy is a true and correct copy of resolutions duly
adopted by written consent or at a meeting of the board of
directors, that such resolutions constitute all the resolutions
adopted with respect to such transactions, and that such
resolutions have not been amended, modified or revoked in any
respect, and are in full force and effect as of the date hereof;
and
(h) a copy of the articles of incorporation and by-laws of the
Borrower accompanied by a certificate of the secretary or
assistant secretary of the Borrower to the effect that such copies
are correct and complete.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower hereby expressly remakes in favor of the Lender all of
the representations and warranties set forth in ARTICLE 4 of the Agreement, as
amended hereby, and represents and warrants that all such representations and
warranties remain true and unbreached, except as affected by the transactions
contemplated in the Agreement.
ARTICLE V
RATIFICATION
Each of the parties hereto does hereby adopt, ratify and confirm the
Agreement, in all things in accordance with the terms and provisions thereof, as
modified or amended by this Second Amendment.
8
<PAGE>
ARTICLE VI
MISCELLANEOUS
6.01 All references to the Agreement in any document heretofore or
hereafter executed in connection with the transactions contemplated in the
Agreement shall be deemed to refer to the Agreement as amended by this Second
Amendment.
6.02 THIS SECOND AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
TEXAS.
IN WITNESS WHEREOF, this Second Amendment to Amended and Restated
Credit Agreement is executed as of the date first above written.
AMERAC ENERGY CORPORATION
By:
_______________________________
Jeffrey L. Stevens
Senior Vice President
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By:
_________________________________
Jeffrey W. Baker
Vice President
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1996 10QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> SEP-30-1995 SEP-30-1996
<CASH> 144,000 100,000
<SECURITIES> 0 0
<RECEIVABLES> 2,109,000 2,035,000
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,253,000 2,135,000
<PP&E> 20,614,000 33,442,000
<DEPRECIATION> (12,020,000) (13,055,000)
<TOTAL-ASSETS> 11,194,000 23,105,000
<CURRENT-LIABILITIES> 606,000 4,887,000
<BONDS> 4,594,000 9,147,000
0 0
1,786,000 0
<COMMON> 1,031,000 2,126,000
<OTHER-SE> 3,177,000 6,945,000
<TOTAL-LIABILITY-AND-EQUITY> 11,194,000 23,105,000
<SALES> 2,780,000 7,432,000
<TOTAL-REVENUES> 2,845,000 7,474,000
<CGS> 0 0
<TOTAL-COSTS> 2,884,000 4,924,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 159,000 662,000
<INCOME-PRETAX> (198,000) 1,888,000
<INCOME-TAX> 0 5,000
<INCOME-CONTINUING> (198,000) 1,883,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> (597,000) (411,000)
<NET-INCOME> (795,000) 1,472,000
<EPS-PRIMARY> (.04) .05
<EPS-DILUTED> 0 0
</TABLE>
