<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-20100
BELDEN & BLAKE CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 34-1686642
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
5200 STONEHAM ROAD
NORTH CANTON, OHIO 44720
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 499-1660
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, WITHOUT PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
---
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of February 29, 1996 was $178,426,675.
The number of shares outstanding of registrant's common stock, without
par value, as of February 29, 1996 was 11,162,581.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement to be filed pursuant to
Regulation 14A with respect to the Annual Meeting of Shareholders to be held on
or about May 23, 1996 are incorporated in Part III of this Form.
<PAGE> 2
PART I
------
ITEM 1. BUSINESS
--------
GENERAL
Belden & Blake Corporation, an Ohio corporation (the "Company"), is
primarily engaged in producing oil and natural gas, acquiring and enhancing the
economic performance of producing oil and gas properties, exploring for and
developing natural gas and oil reserves and gathering and marketing natural
gas. Until 1995, the Company conducted business exclusively in the Appalachian
Basin where it has operated since 1942 through several predecessor entities.
It is now one of the largest exploration and production companies operating in
the Appalachian Basin in terms of reserves, production, acreage held and wells
operated. In early 1995, the Company commenced operations in the Michigan
Basin through the acquisition of Ward Lake Drilling, Inc., an exploration and
production company which owns and operates oil and gas properties in Michigan's
lower peninsula. See "Significant Events."
At December 31, 1995, the Company owned interests in 7,380 gross (6,162
net) productive gas and oil wells in Ohio, West Virginia, Pennsylvania, New
York and Michigan with proved reserves totaling 239.4 Bcf (billion cubic feet)
of gas and 6.3 MMBbl (million barrels) of oil. The estimated future net
revenues from these reserves had a present value before income taxes of
approximately $214.3 million at December 31, 1995. At that date, the Company
held leases on 1,029,000 gross (941,000 net) acres, including 545,000 gross
(496,000 net) undeveloped acres.
At December 31, 1995, the Company operated approximately 7,500 wells,
including wells operated for third parties. The Company owned and operated
approximately 2,600 miles of gas gathering systems with access to the
commercial and industrial gas markets of the northeastern United States at
December 31, 1995. At December 31, 1995, the Company's net production was
approximately 68 MMcf (million cubic feet) of gas and 1,900 Bbls of oil per
day. At that date, the Company was marketing approximately 150 MMcf of gas per
day, consisting of its own production and gas purchased from third parties.
The Company was formed through the combination of a group of companies
and assets owned by Henry S. Belden IV (the "Belden Interests") with Belden &
Blake Energy Company (the "Partnership"), a master limited partnership listed
on the American Stock Exchange, and Belden & Blake International Limited
("BBI"), a Bermuda corporation listed on the Luxembourg Stock Exchange. The
transactions combining these entities were effected on March 31, 1992. The
Company's succession to the Belden Interests was recorded on the basis of
historical cost in a manner similar to a pooling of interests and the
consolidation of the Partnership and BBI (the "Consolidation") was accounted
for as a purchase. Accordingly, prior to March 31, 1992, the Consolidated
Financial Statements of the Company reflect only the historical results of the
Belden Interests and do not include the results of operations of the
Partnership or BBI prior to that date.
The Company has grown principally through the acquisition of producing
properties and related gas gathering facilities and exploration and development
of its own acreage. From its formation in 1992 through December 31, 1995, the
Company has acquired producing properties for $125.3 million with 185.7 Bcfe
(billion cubic feet of natural gas equivalent) of proved developed reserves at
an average cost of $.67 per Mcfe (thousand cubic feet of natural gas
equivalent) and spent $19.3 million to acquire and develop additional gas
gathering facilities. During the period from 1992 through 1995, the Company
drilled 340 gross (249.2 net) wells at an aggregate cost of approximately $43.4
million for the net wells.
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This drilling added 41.8 Bcfe to the Company's proved reserves. During 1995,
the Company drilled 155 gross (117.9 net) wells at a cost of approximately
$20.4 million for the net wells. The 1995 drilling activity added 23.7 Bcfe of
proved reserves, or approximately 117% of 1995 production at an average cost of
$.86 per Mcfe.
The Company maintains its corporate offices at 5200 Stoneham Road,
North Canton, Ohio 44720. Its telephone number at that location is (330)
499-1660. Unless the context otherwise requires, all references herein to the
"Company" are to Belden & Blake Corporation, its subsidiaries and predecessor
entities.
SIGNIFICANT EVENTS
In January 1995, the Company purchased Ward Lake Drilling, Inc. ("Ward
Lake"), a privately-held exploration and production company headquartered in
Gaylord, Michigan, for $15.1 million and commenced operations in the Michigan
Basin. Ward Lake held production payment and working interests averaging 13.6%
in approximately 500 Antrim Shale gas wells operated by Ward Lake in Michigan's
lower peninsula. The purchase also included approximately 5,500 undeveloped
leasehold acres that Ward Lake owned in Michigan. At December 31, 1994, the
wells had estimated proved developed natural gas reserves totaling 98 Bcf (14
Bcf net to the Company's interest). Approximately one-half of the purchase
price represented payment for proved reserves, with the balance associated with
other oil and gas and corporate assets.
Through December 31, 1995, the Company purchased additional working
interests averaging 24% in the wells operated by Ward Lake for approximately $12
million. The interests acquired had estimated proved developed reserves of 16
Bcf at December 31, 1994. The interests acquired also qualify for
nonconventional fuel source tax credits through 2002.
In July 1995, the Company purchased from Quaker State Corporation most
of its oil and gas properties and related assets in the Appalachian Basin (the
"Quaker State Properties") for approximately $50 million. The Quaker State
Properties included approximately 1,460 gross (1,100 net) wells with estimated
proved reserves of 46.8 Bcf of gas and 2.2 MMBbl of oil at December 31, 1994,
approximately 250 miles of gas gathering systems, undeveloped oil and gas
leases and fee mineral interests covering approximately 250,000 acres, an
extensive geologic and geophysical database and other assets.
In August 1995, the Company sold 4,025,000 shares of common stock at
$14.75 per share ($13.82 net after underwriting commissions and discounts).
Net proceeds, after deducting underwriting discounts and expenses, totaled
approximately $55.6 million. Proceeds from the offering were used to fund the
purchase of the Quaker State Properties and to reduce the outstanding balance
of the Company's revolving credit facility.
In September 1995, the Company purchased from Savoy Oil & Gas, Inc., a
privately owned independent energy company headquartered in Traverse City,
Michigan, oil and gas properties in northwestern Michigan with estimated proved
developed reserves, associated with 24 Antrim Shale wells, of 11 Bcf of natural
gas net to the Company's interest. These wells extended the Antrim Shale play
to northwestern Michigan. The Company's average working interest in these
wells is 78% and accounts for approximately one-half of the purchase price of
$11.3 million. The remainder of the purchase price is associated with the
Company's 94% working interest in undeveloped Antrim Shale locations on
approximately 17,000 leasehold acres.
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In addition, during 1995 the Company acquired in three separate
transactions for approximately $17.9 million working interests in 1,139 gross
(919 net) oil and gas wells in Ohio, Pennsylvania and New York and drilling
rights on more than 250,000 acres in Ohio adjacent to properties operated by
the Company. Estimated proved developed reserves associated with the wells
total 21 Bcf of natural gas and .5 MMBbl of oil net to the Company's interest
at December 31, 1994.
RECENT DEVELOPMENTS
In February 1996, the Company sold or agreed to sell certain interests
that qualify for the nonconventional fuel source tax credit. The interests
were sold for approximately $750,000 in cash and a volumetric production
payment under which 100% of the cash flow from the properties will go to the
Company until approximately 11.7 Bcf of gas has been produced and sold. In
addition to receiving 100% of the cash flow from the properties, the Company
will receive quarterly payments based on production from the interests. The
Company has the option to repurchase the interests at a future date.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company operates in two industry segments: (1) oil and gas
production and distribution and (2) oilfield sales and services. Oilfield
sales are generated by its wholly-owned subsidiary, Target Oilfield Pipe and
Supply Company, and oilfield services are provided by its Arrow Oilfield
Services division. The financial information with respect to the Company's
industry segments is presented in Note 14 to the Consolidated Financial
Statements.
During September 1995, the Company announced plans to sell Engine
Power Systems, Inc. ("EPS"), its wholly-owned subsidiary engaged in engine
sales and system packaging for power generation and compression applications,
and exit the line of business served by EPS. The Company is actively seeking a
buyer for EPS and expects to complete the sale of this business in 1996. The
financial information with respect to discontinued operations is presented in
Note 16 to the Consolidated Financial Statements.
DESCRIPTION OF BUSINESS
OVERVIEW
The Company, founded in 1942, is actively engaged in the acquisition,
exploration, development, production, gathering and marketing of oil and gas in
the Appalachian and Michigan Basins, where it is now one of the largest oil and
gas companies in terms of reserves, production, acreage held and wells
operated.
The Appalachian Basin is the oldest and geographically one of the
largest oil and gas producing regions in the United States. Although the
Appalachian Basin has sedimentary formations indicating the potential for oil
and gas reservoirs to depths of 30,000 feet or more, oil and gas is currently
produced primarily from shallow blanket formations at depths of 1,000 to 5,500
feet. Drilling success rates of the Company and others drilling in these
formations historically have exceeded 90% with production generally lasting
longer than 20 years.
The combination of long-lived production and high drilling success
rates at these shallower depths has resulted in a highly fragmented,
extensively drilled, low technology operating environment in
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the Appalachian Basin. As of December 31, 1995, there were over 10,000
independent operators of record and approximately 180,000 producing oil and gas
wells in Ohio, West Virginia, Pennsylvania and New York. There has been only
limited testing or development of the formations below the existing shallow
production in the Appalachian Basin. Fewer than 1,500 wells have been drilled
to a depth greater than 7,500 feet, and fewer than 100 wells have been drilled
to depth greater than 12,500 feet in the entire Appalachian Basin. As a
result, the Company believes that there are significant exploration and
development opportunities in these less developed formations for those
operators with the capital, technical expertise and ability to assemble the
large acreage positions needed to justify the use of advanced exploration and
production technologies.
The Company's rationale for entering the Michigan Basin was based on
its geologic and operational similarities to the Appalachian Basin and its
geographic proximity to the Company's operations in the Appalachian Basin.
Geologically, the Michigan Basin resembles the Appalachian Basin with shallow
blanket formations and deeper formations with greater reserve potential.
Operationally, economies of scale and cost containment are essential to
operating profitability. The Michigan Basin's operating environment is also
highly fragmented with substantial acquisition opportunities. The Company's
management has had prior experience operating in the Michigan Basin in that the
Company's President and Chief Operating Officer was in charge of Shell Oil
Company's drilling and producing operations in Michigan from August 1, 1977 to
July 31, 1981. The Company's primary objective in acquiring Ward Lake was to
allow the Company to pursue opportunities in the Michigan Basin with an
established operating company that provided the necessary critical mass to
operate efficiently.
Most of the Company's production in the Michigan Basin is derived from
the shallow (700 to 1,700 feet) blanket Antrim Shale formation. Success rates
for companies drilling to this formation have exceeded 90%, with production
often lasting as long as 20 years. The Michigan Basin also contains deeper
formations with greater reserve potential (primarily the Niagaran Carbonate).
The Company has also established production from certain of these deeper
formations. The Michigan Basin has over 250 operators of record, most of which
are private companies, and more than 8,100 producing wells. Because the
production rate from Antrim Shale wells is relatively low, cost containment is
a crucial aspect of operations. In contrast to the shallow blanket formations
in the Appalachian Basin, the operating environment in the Antrim Shale is more
capital intensive because of the low natural pressures and the high water
content of the formation. In addition, there are more major oil and gas
companies active in the Michigan Basin than in the Appalachian Basin.
The proximity of the Appalachian and Michigan Basins to large
commercial and industrial natural gas markets has generally resulted in
wellhead gas prices that since 1985 have ranged from $.22 to $1.66 per Mcf
above national wellhead prices. In 1995, wellhead prices in the Appalachian
and Michigan Basins averaged $.47 per Mcf above national wellhead prices. The
Company's average wellhead gas price was $.28 per Mcf above the average
Appalachian and Michigan basins wellhead price.
BUSINESS STRATEGY
The Company's primary operating objective is to utilize its sizeable
acreage position, technical capability and financial resources to become a
dominant oil and gas producer and natural gas marketer in the Appalachian and
Michigan Basins. To accomplish this objective, the Company's specific business
strategy is to:
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o make strategic acquisitions of producing oil and gas
properties;
o expand production and reserves through a balanced portfolio of
developmental and exploratory drilling;
o improve profitability on production from existing and acquired
properties; and
o expand its gas gathering and marketing activities.
This strategy is intended to enable the Company to take advantage of
(i) the availability of producing properties for sale in the Appalachian and
Michigan Basins as capital constrained operators seek liquidity or operating
capital and (ii) the significant exploration and development opportunities in
the deeper and potentially more productive formations in the Appalachian and
Michigan Basins.
ACQUISITION OF PRODUCING PROPERTIES
The Company's acquisition strategy focuses on producing properties
that (i) the Company already owns an interest in and operates or that are
strategically located in relation to its existing operations, (ii) can be
increased in value through operating cost reductions, advanced production
technology, mechanical improvements, recompleting or reworking wells and/or the
use of enhanced and secondary recovery techniques, (iii) provide development
drilling opportunities or enhance the Company's acreage position, (iv) have the
potential for increased revenues from gas production through the Company's gas
marketing capabilities or (v) are of sufficient size to allow the Company to
operate efficiently in new areas. Using these criteria, the Company employs a
disciplined approach to acquisition analysis that requires input and approval
from all key areas of the Company. These areas include field operations,
exploration and production, finance, gas marketing, land management and
environmental compliance. Although the Company often reviews in excess of 50
acquisition opportunities per year, this disciplined approach can result in
uneven annual spending on acquisitions. The following table sets forth
information pertaining to acquisitions completed during the period 1992 through
1995.
<TABLE>
<CAPTION>
Proved Developed Reserves
-------------------------------------
Number of Purchase Oil Gas Combined Cost
Period Transactions Price (1) (MBbl) (MMcf) (MMcfe) Per Mcfe
- ------- ---------------- ---------- --------- ------------ ---------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
1992 5 $23,733 466 41,477 44,241 $ 0.54
1993 8 3,883 119 4,121 4,835 0.80
1994 11 20,274 223 26,877 28,215 0.72
1995 6 77,388 1,850 97,314 108,416 0.71
_______________
<FN>
(1) Represents portion of purchase price allocated to proved developed
reserves.
</TABLE>
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OIL AND GAS OPERATIONS AND PRODUCTION
Operations. The Company serves as the operator of substantially all
of the wells in which it holds working interests. The Company seeks to
maximize the value of its properties through operating efficiencies associated
with economies of scale and through operating cost reductions, advanced
production technology, mechanical improvements and/or the use of enhanced and
secondary recovery techniques.
Through its production field offices in Ohio, West Virginia,
Pennsylvania, New York and Michigan, the Company continuously reviews its
properties, especially recently acquired properties, to determine what action
can be taken to reduce operating costs and/or improve production. The Company
has reduced field level costs through improved operating practices such as
computerized production scheduling and the use of hand-held computers to
gather field data. On acquired properties, further efficiencies may be
realized through improvements in production scheduling and reductions in
oilfield labor. Actions that may be taken to improve production include
modifying surface facilities and redesigning down-hole equipment. In 1989 and
1990, the Company participated in the development of an advanced plunger lift
system (the "JetStar"), a tool that is designed to improve production on
certain low-volume gas wells. As of December 31, 1995, a total of 190 JetStar
systems were operating on Company operated wells at a cost of approximately
$5,500 per well, resulting in an average net increase in production to the
Company of 7 Mcf per well per day during the first year following installation.
The Company may also implement enhanced and secondary recovery
techniques. Enhanced recovery techniques include the repressurization of a
productive field by injecting gases into formations that have significant
remaining reserves in place but which are no longer producing at satisfactory
levels. The Company initiated a series of pilot repressurization field
projects in 1993 which were completed in 1995. Four wells were tested
utilizing natural gas "huff and puff" cycles to improve oil recovery from wells
drilled more than 15 years ago. Each well was repressured with natural gas and
then gas and oil were withdrawn from the same well bore. This process resulted
in incremental oil recovery averaging 500 barrels per well. This gas injection
process may be used in conjunction with infill drilling to recover the large
amount of oil remaining in the geological formation after primary recovery when
wells are drilled in accordance with state mandated 40-acre spacing.
Reservoir modeling studies of certain of the Company's producing
properties performed at the University of Houston and Los Alamos National
Laboratory have indicated that less than 10 percent of the oil in place is
currently being recovered, leaving over 90 percent yet to be produced. Several
infill wells are planned to be drilled in 1996 in combination with the gas
injection tests to determine the economic viability of the process for
expansion to field-wide development.
Secondary recovery methods typically involve all methods of oil
extraction in which extrinsic energy sources are applied to extract additional
reserves. The principal secondary recovery technique used by the Company is
waterflooding, which the Company has used in Ohio and Pennsylvania.
Production. The following table sets forth certain information
regarding oil and gas production from the Company's properties:
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<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------------------------
1992 1993 1994 1995
-------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Production
Oil (thousands of Bbls) 351 453 496 556
Gas (Bcf) 3.7 7.4 9.6 17.0
Average Sales Price
Oil (per Bbl) $ 19.27 $ 17.15 $ 15.98 $ 16.78
Gas (per Mcf) $ 2.22 $ 2.55 $ 2.58 $ 2.21
Average production costs per
Mcfe (including production taxes) $ 0.92 $ 0.71 $ 0.74 $ 0.69
Total Oil and Gas Revenues
(in thousands) $ 15,046 $ 26,631 $ 32,574 $ 46,853
Total Production Expenses
(in thousands) $ 5,362 $ 7,190 $ 9,292 $ 13,979
</TABLE>
EXPLORATION AND DEVELOPMENT
The Company's exploration and development activities include development
drilling in shallow blanket formations and development and exploratory
drilling in the deeper formations of the Appalachian and Michigan Basins. The
Company's strategy is to develop a balanced portfolio of drilling prospects that
includes lower risk wells with a high probability of success and higher risk
wells with greater economic potential. The Company has an extensive inventory
of acreage on which to conduct its exploration and development activities.
In 1995, the Company drilled 110 gross (95.7 net) wells to shallow
blanket formations in its five state operating area at a cost of approximately
$15.1 million for the net wells. The Company also drilled 45 gross (22.2 net)
wells to less developed and deeper formations in 1995 at a cost of
approximately $5.3 million for the net wells. The results of this drilling
activity are shown in the tables on page 12.
The Company believes that its diversified portfolio approach to its
drilling activities results in more consistent and predictable economic results
than might be experienced with a less diversified or higher risk drilling
program profile.
Shallow Blanket Formations. In general, the shallow blanket
formations found in the Appalachian and Michigan Basins are widespread in
extent, and hydrocarbon accumulations are not dependent upon local
stratigraphic or structural trapping. Drilling success rates exceed 90%. The
principal risk of such wells is uneconomic recoverable reserves.
The shallow blanket formations in the Appalachian Basin are relatively
tight reservoirs that produce 20% to 30% of their recoverable reserves in the
first year and 40% to 50% of their total recoverable reserves in the first
three years, with steady declines in subsequent years. Average well lives
range from 15 years to 25 years or more.
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The Antrim Shale formation, the principal shallow blanket formation in
the Michigan Basin, is characterized by high formation water production in the
early years of a well's productive life, with water production decreasing over
time. Antrim Shale wells typically produce at rates of 100 Mcf to 125 Mcf per
day for several years, with modest declines thereafter. Gas production often
increases in the early years as the producing formation becomes less water
saturated. Average well lives are 20 years or more.
Certain typical characteristics of the shallow blanket formations
drilled by the Company in 1995 are described below:
<TABLE>
<CAPTION>
Range of or Range of or
Average Drilling Average Gross
Range of and Completion Reserves
Location Well Depths Costs per Well per Well
-------- ----------- ---------------- --------------
(In feet) (In thousands) (In MMcfe)
<S> <C> <C> <C>
Ohio 3,000-5,500 $110-140 130
West Virginia 1,500-6,000 135-155 200
Pennsylvania
Clarendon 1,100-1,500 35 30
Medina 5,000-6,200 170 230
New York 3,000-6,000 100-200 75-300
Michigan 700-1,700 250-300 450
</TABLE>
Less Developed Formations. The Appalachian Basin has productive and
potentially productive sedimentary formations to depths of 30,000 feet or more,
but the combination of long-lived production and high drilling success rates in
the shallow formations has curbed the development of the deeper formations in
the basin. The Company believes it possesses the technological expertise and
the acreage position needed to explore the deeper formations in a cost
effective manner.
The less developed formations in the Appalachian Basin include the
Knox sequence of sandstones and dolomites which includes the Rose Run,
Beekmantown and Trempeleau productive zones, at depths ranging from 3,000 feet
to 8,000 feet. The geographical boundaries of the Knox sequence, which lies
approximately 2,000 feet below the blanket Clinton Sandstone, are generally
well defined in Ohio with less definition in New York. Nevertheless, the Knox
group has been only lightly explored, with fewer than 1,500 wells drilled to
this sequence of formations during the past 10 years.
The Company began testing the Knox sequence in 1989 by selecting
certain wells that were targeted to be completed to the Clinton formation and
drilling them an additional 2,000 feet to 2,500 feet to test the Knox
formations. In 1991, the Company began using seismic analysis and other
geophysical tools to select drilling locations specifically targeting the Knox
formations. Since 1991, the Company has added substantially to its technical
staff to enhance its ability to develop drilling prospects in the Knox and
other less developed formations in the Appalachian Basin and the deeper
formations in the Michigan Basin. The following table shows the Company's
drilling results in the Knox sequence.
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<TABLE>
<CAPTION>
Drilling Results in the Knox Formations
------------------------------------------------------------------------------
Average Gross
Reserves per Well
Wells Drilled Wells Completed (1) (MMcfe) (2)
------------------- -------------------- ---------------------
Period Gross Net Gross Net
- ----------- --------- ----- ------- ------
<S> <C> <C> <C> <C> <C>
1989-1990 18 14.5 5 4.0 465
1991 11 10.3 5 4.7 170
1992 15 12.5 8 6.4 285
1993 30 20.2 16 8.8 360
1994 25 14.2 17 9.8 389
1995 34 16.3 18 8.8 343
- ---------------
<FN>
(1) Completed as producing wells in the Knox formations. Of the 16 gross
wells in 1995 that were not commercially productive in the Knox
formations, 2 were completed as producing wells in the shallower
Clinton Sandstone formation.
(2) Average reserves per well reflect production through December 31, 1995
plus estimated proved developed reserves at that date.
</TABLE>
The Company's historical experience is that the average Knox well
produces 20% to 25% of its recoverable reserves in the first year of production
and approximately 50% of its recoverable reserves in the first three years with
a steady decline thereafter. Wells in the Knox formations have an expected
productive life ranging from 15 to 25 years.
As shown in the following table, the Company's production from Knox
formation wells has increased steadily as additional wells have been drilled.
<TABLE>
<CAPTION>
Wells and Production in the Knox Formations
------------------------------------------------------------
1992 1993 1994 1995
------------ --------- --------- ---------
<S> <C> <C> <C> <C>
Number of Wells in Production:
Gross 16 23 41 66
Net 13.7 20.6 29.7 41.5
Annual Production (net):
Oil (MBbl) 4.7 13.9 67.1 74.9
Gas (MMcf) 340 731 1,041 1,624
Combined (MMcfe) 368 814 1,444 2,074
</TABLE>
Productive Knox wells represented 0.9% of the Company's total
productive wells at December 31, 1995. Production from Knox wells in 1995,
however, equaled 10.2% of the Company's total production on an Mcfe basis.
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The Company is well positioned to exploit the undeveloped potential of
the Knox formations in the future. At December 31, 1995, it held leases on
approximately 422,000 net acres overlying potential Knox drilling locations.
The Company plans to drill or participate in joint ventures to drill
34 wells to the Knox formations in 1996.
In addition, the Company has also tested the Dundee Carbonate,
Niagaran Carbonate, Onondaga Limestone and Oriskany Sandstone formations.
Certain typical characteristics of the deeper formations drilled by the Company
in 1995 are described below:
<TABLE>
<CAPTION>
Average Drilling Costs Average
Range of or ------------------------ Gross
Average Dry Completed Reserves
Formation Location Well Depth Hole Well Per Well
- ------------ ----------- ----------- ----- ------ -----------
(In feet) (In thousands) (In MMcfe)
<S> <C> <C> <C> <C> <C>
Knox Formations OH, NY 2,500-8,000 $130 $220 350
Dundee Carbonate MI 3,200 320 400 1,200
Niagaran Carbonate MI 4,500 250 525 1,200
Onondaga Limestone PA 4,100-5,500 100 175 400
Oriskany Sandstone PA, NY 5,500-9,000 250 500 1,500
</TABLE>
Drilling Results. The following table sets forth drilling results
with respect to wells drilled during the past four years.
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<TABLE>
<CAPTION>
Less Developed and
Shallow Blanket Formations (1) Deeper Formations (2)
----------------------------------------- -------------------------------------
1992 1993 1994 1995 1992 1993 1994 1995
--------- ------ ------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Productive
Gross 4 42 58 106 8 16(3) 22(4) 23(5)
Net 4 31.4 45.6 92.5 6.4 8.8 12.7 11.5
Dry
Gross 0 2 2 4 7 14 10 22
Net 0 0.7 0.4 3.2 5.1 11.4 4.8 10.7
Reserves
discovered-
net (MMcfe) 97 3,019 4,813 18,474 1,821 3,173 5,196 5,194
Approximate
cost - net (in $170 $4,847 $5,762 $15,079 $3,343 $3,413 $5,509 $5,284
thousands)
- ----------------
<FN>
(1) Consists of wells drilled to the Berea and Clinton Sandstone
formations in Ohio, the Berea Sandstone, Devonian Brown Shale,
Ravencliff Sandstone and Big Lime Limestone formations in West
Virginia, the Clarendon and Medina Sandstone formations in Pennsylvania
and the Medina Sandstone formations in New York.
(2) Consists of wells drilled to the Trenton Limestone and Knox formations
in Ohio, the Niagaran and Dundee Carbonates in Michigan, the Oriskany
Sandstone and Onondaga Limestone formations in Pennsylvania and the
Oriskany Sandstone, Onondaga Limestone and Knox formations in New
York.
(3) Two additional wells which were dry in the Knox formations were
subsequently completed in the shallower Clinton formation.
(4) One additional well which was dry in the Knox formations was
subsequently completed in the shallower Clinton formation.
(5) Two additional wells which were dry in the Knox formations were
subsequently completed in the shallower Clinton formation. One
additional well which was dry in the Oriskany formation was
subsequently completed in the shallower Berea/Shale formation.
</TABLE>
GAS GATHERING AND MARKETING
Gas Gathering. The Company operates approximately 2,600 miles of
natural gas gathering lines in Ohio, West Virginia, Pennsylvania, New York and
Michigan which are tied directly to various interstate natural gas transmission
systems. The interconnections with these interstate pipelines afford the
Company potential marketing access to most East Coast gas markets. The Company
earned gathering revenues of $4.6 million in 1995. Direct costs associated
with gas gathering in 1995 totaled approximately $1.2 million.
12
<PAGE> 13
Gas Marketing. The major industrial centers of Akron, Buffalo,
Canton, Chicago, Cleveland, Detroit and Pittsburgh are all located in close
proximity to the Company's operations and provide a large potential market for
direct natural gas sales. At present, the Company markets directly to
approximately 200 customers in a five-state area. The Company focuses its gas
marketing efforts on small to mid-sized industrial customers that require more
service and have the potential to generate higher margins per Mcf than large
industrial users.
The Company sells the gas it produces to its commercial and industrial
customers, local distribution companies and on the spot market. In addition to
its own production, the Company buys gas from other producers and third parties
and resells it. At December 31, 1995, the Company marketed approximately 150
MMcf of gas per day of which approximately 45% consisted of its own production.
Gas sold to end users is usually sold pursuant to contracts which extend for
periods of one to three years at fixed prices. Gas sold to local distribution
companies is generally sold under one-year or longer contracts either at fixed
prices or prices indexed to the cost of gas for local distribution companies.
Approximately 50% of the gas marketed by the Company is at fixed prices and 50%
at market sensitive prices. The following table shows the type of buyer for
gas marketed by the Company at December 31, 1995.
<TABLE>
<CAPTION>
Marketed Gas
---------------------------
MMcf Percent
Purchaser Per Day of Total
- ----------------------------- --------- ----------
<S> <C> <C>
End Users 41.7 27.9%
Local Distribution Companies 61.8 41.3%
Spot Markets 46.1 30.8%
------ -------
Total 149.6 100.0%
===== ======
</TABLE>
OILFIELD SUPPLIES AND SERVICES
The Company has provided its own oilfield services for more than 30
years in order to assure quality control and operational and administrative
support to its exploration and production operations. In 1992, Arrow Oilfield
Service Company ("Arrow"), a separate service division, was organized which
provides the Company and third party customers with necessary oilfield services
such as well workovers, well completions, JetStar conversions, brine hauling
and disposal and oil trucking. In 1995, more than 50% of Arrow's revenues were
generated by sales to third parties. During the last half of 1994, the Company
acquired for $3.1 million substantially all the assets of two Ohio-based
oilfield servicing companies and a brine hauling and disposal company operating
primarily in Ohio. These acquisitions made Arrow the largest oilfield service
company in Ohio. In June 1995, the Company acquired the assets and assumed the
operations of Antrim Services, Inc., an oilfield service company headquartered
in Gaylord, Michigan, in order to provide adequate oilfield services to its
expanding Michigan operations.
Target Oilfield Pipe & Supply Company ("TOPS"), a subsidiary of the
Company, operates retail sales outlets in the Appalachian and Michigan Basins
from which it sells a broad range of equipment, including pipe, tanks,
fittings, valves, pumping units and JetStar plunger lift systems. The Company
originally entered the oilfield supply business to ensure the quality and
availability of supplies for its own operations. In 1995, more than 60% of
TOPS' revenues were generated by sales to third parties. In
13
<PAGE> 14
August 1995, TOPS acquired the assets and assumed the operations of COFSCO,
Inc., a distributor of oilfield supplies, and Precision Processing, Inc., an
oilfield pipe threading business, for $4.4 million.
The Company plans to expand its oilfield service and supplies business
through continued growth in its five state market area.
EMPLOYEES
As of February 29, 1996, the Company had 576 full-time employees,
including 223 oilfield services and sales employees, 268 oil and gas production
employees, 20 petroleum engineers, 11 geologists and 2 geophysicists.
COMPETITION AND CUSTOMERS
The oil and gas industry is highly competitive. Competition is
particularly intense with respect to the acquisition of producing properties
and the sale of oil and gas production. There is competition among oil and gas
producers as well as with other industries in supplying energy and fuel to
users.
The competitors of the Company in oil and gas exploration,
development, production and marketing include major integrated oil and gas
companies as well as numerous independent oil and gas companies, individual
proprietors, natural gas pipelines and their affiliates and natural gas
marketers and brokers. Many of these competitors possess and employ financial
and personnel resources substantially in excess of those available to the
Company. Such competitors may be able to pay more for desirable prospects or
producing properties and to evaluate, bid for and purchase a greater number of
properties or prospects than the financial or personnel resources of the
Company will permit. The ability of the Company to add to its reserves in the
future will be dependent on its ability to exploit its current developed and
undeveloped lease holdings and its ability to select and acquire suitable
producing properties and prospects for future exploration and development.
The only customer which accounted for 10% or more of the Company's
consolidated revenues during the year ended December 31, 1995 was The East Ohio
Gas Company with purchases of $11,111,822. The only customer which accounted
for 10% or more of the Company's consolidated revenues during the years ended
December 31, 1993 and 1994 was Ravenswood Aluminum Corporation ("RAC"), sales
to which totaled $8,616,069 and $9,600,612, respectively. The Company's
contract with RAC, its principal gas purchaser in West Virginia, requires it to
deliver 10 billion Btus (approximately 8.9 MMcf) of gas per day through 1998.
At present, the Company is supplying this contract requirement by delivering
approximately 6.1 billion Btus of its own gas production, 3.2 billion Btus of
production from royalty and joint working interest owners in wells in which the
Company holds an interest and .7 billion Btus of gas purchased from third
parties.
The contract price at which gas is delivered to this customer for 1996
is $3.72 per MMBtu. The RAC contract also provides for a discount from the
contract price if gas is available under the same terms and conditions from an
arms-length third party at a price of less than 70% of the contract price. The
discount is equal to one-half of the difference between the lower available
price and the contract price and applies to volumes of gas for plant
requirements in excess of 6,000 MMBtus per day. RAC unilaterally took
discounts totaling $397,000 and $863,000 in 1994 and 1995, respectively. The
Company has contested RAC's interpretation of the contract and may initiate
legal action to recover part or all of the discounts taken.
14
<PAGE> 15
To protect itself against an interruption or reduction in the income
stream under the RAC contract, the Company required the seller of the
properties subject to the RAC contract to partially secure the delivered gas
price the Company would receive under the contract with a declining letter of
credit issued by Citibank, N.A. and Chase Manhattan Bank, N.A. in the original
amount of $10.7 million, approximately $5.1 million of which is available for
drawing in 1996. The Company is entitled to draw against the letter of credit
annually if it receives less than a specified minimum average delivered price
on gas delivered to RAC under the contract. Under the terms of the letter of
credit, the Company was reimbursed approximately $165,000 directly by the
seller for the 1994 discounts and expects to be reimbursed for a significant
portion of the discount taken in 1995.
REGULATION
Regulation of Production. In all states in which the Company is
engaged in oil and gas exploration and production, its activities are subject
to regulation. Such regulations may extend to requiring drilling permits,
spacing of wells, the prevention of waste and pollution, the conservation of
natural gas and oil, and other matters. Such regulations may impose
restrictions on the production of natural gas and oil by reducing the rate of
flow from individual wells below their actual capacity to produce which could
adversely affect the amount or timing of the Company's revenues from such
wells. Moreover, future changes in local, state or federal laws and
regulations could adversely affect the operations of the Company.
Environmental Regulation. The Company's operations are subject to
numerous laws and regulations governing the discharge of materials into the
environment or otherwise relating to environmental protection. These laws and
regulations may require the acquisition of a permit before drilling commences,
restrict the types, quantities and concentration of various substances that can
be released into the environment in connection with drilling and production
activities, limit or prohibit drilling activities on certain lands lying within
wilderness, wetlands and other protected areas, and impose substantial
liabilities for pollution resulting from the Company's operations. Management
believes the Company is in substantial compliance with current applicable
environmental laws and regulations and that continued compliance with existing
requirements will not have a material adverse impact on the Company.
Regulation of Sales and Transportation. The Federal Energy Regulatory
Commission (the "FERC") regulates the transportation and sale for resale of
natural gas in interstate commerce pursuant to the Natural Gas Act of 1938 (the
"NGA") and the Natural Gas Policy Act of 1978 (the "NGPA"). In the past, the
federal government has regulated the prices at which oil and gas could be sold.
Currently, sales by producers of natural gas and all sales of crude oil and
condensate can be made at uncontrolled market prices.
15
<PAGE> 16
ITEM 2. PROPERTIES
----------
OIL AND GAS RESERVES
The following table sets forth the Company's proved oil and gas
reserves as of December 31, 1993, 1994 and 1995 determined in accordance with
the rules and regulations of the Securities and Exchange Commission. Proved
reserves are the estimated quantities of oil and gas which geological and
engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and operating
conditions.
<TABLE>
<CAPTION>
December 31
---------------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Estimated Proved Reserves
Gas (billion cubic feet) 94.3 123.0 239.4
Oil (thousands of barrels) 3,533 4,113 6,283
</TABLE>
See Note 13 to the Consolidated Financial Statements for more detailed
information regarding the Company's oil and gas reserves. The following table
sets forth the estimated future net revenues from the proved reserves of the
Company and the present value of such future net revenues as of December 31,
1995 determined in accordance with the rules and regulations of the Securities
and Exchange Commission.
<TABLE>
Estimated future net revenues (before income taxes)
attributable to estimated production during
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,602,107
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,277,802
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,462,612
1999 and thereafter . . . . . . . . . . . . . . . . . . . . . 270,343,049
-------------
Total $385,685,570
=============
Present value before income taxes
(discounted at 10% per annum) . . . . . . . . . . . . . . . . . $214,250,131
============
Present value after income taxes
(discounted at 10% per annum) . . . . . . . . . . . . . . . . . $170,916,733
============
</TABLE>
Estimated future net revenues represent estimated future gross
revenues from the production and sale of proved reserves, net of estimated
production costs (including production taxes, ad valorem taxes, operating
costs) and development costs. Estimated future net revenues were calculated on
the basis of prices and costs estimated to be in effect at December 31, 1995
without escalation, except where changes in prices were fixed and readily
determinable under existing contracts.
16
<PAGE> 17
PRODUCING WELL DATA
The following table summarizes by state the Company's productive wells
at December 31, 1995:
<TABLE>
<CAPTION>
December 31, 1995
------------------------------------------------------------------------
Oil Wells Gas Wells Total
------------------ ------------------ ---------------------
State Gross Net Gross Net Gross Net
- ---------------- ------ ------ ------ ----- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Ohio 2,137 1,903 1,656 1,445 3,793 3,348
West Virginia 381 377 859 622 1,240 999
Pennsylvania 290 284 471 287 761 571
New York 7 6 1,031 992 1,038 998
Michigan 1 1 547 245 548 246
----- ----- ----- ----- ----- -----
2,816 2,571 4,564 3,591 7,380 6,162
===== ===== ===== ===== ===== =====
</TABLE>
ACREAGE DATA
The following table summarizes by state the Company's gross and net
developed and undeveloped leasehold acreage at December 31, 1995:
<TABLE>
<CAPTION>
December 31, 1995
---------------------------------------------------------------------------
Developed Acreage Undeveloped Acreage Total Acreage
-------------------- --------------------- -----------------------
State Gross Net Gross Net Gross Net
--------------- -------- -------- -------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Ohio 272,000 258,000 278,000 245,000 550,000 503,000
West Virginia 62,000 59,000 22,000 19,000 84,000 78,000
Pennsylvania 33,000 24,000 187,000 180,000 220,000 204,000
New York 97,000 95,000 35,000 30,000 132,000 125,000
Michigan 20,000 9,000 23,000 22,000 43,000 31,000
-------- -------- ------- ------- -------- --------
484,000 445,000 545,000 496,000 1,029,000 941,000
======== ======== ======= ======= ========= ========
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
-----------------
The complaint filed by the Estate of Judith C. Bookman against the
Company and Harold D. Miller, Inc. seeking the recovery of $5,110,000 in
compensatory damages and $2,000,000 in punitive damages for the death of Judith
C. Bookman in an automobile accident was dismissed as against the Company by
the Court of Common Pleas of Portage County, Ohio, which granted the Company's
motion for summary judgment.
On January 2, 1996, Karen J. Volgstadt, individually and as
administrator of the Estate of George A. Volgstadt, filed a complaint in the
Supreme Court of Chautauqua County, New York against the Company seeking the
recovery of $6,000,000 in compensatory damages for the death of George A.
Volgstadt in an accident which occurred during the course of his employment
with the Company. While
17
<PAGE> 18
the Company believes that this action is barred by the Workers' Compensation
laws of New York and intends to move for its dismissal, any liability of the
Company with respect to this action would be covered by insurance.
The Company is involved in several other lawsuits arising in the
ordinary course of business. The Company believes that the result of such
proceedings, individually or in the aggregate, will not have a material adverse
effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Executive officers of the Company as of February 29, 1996 were as
follows:
Name Age Position
---- --- --------
<S> <C> <C>
Henry S. Belden, IV 56 Chairman of the Board and Chief Executive Officer
Max L. Mardick 61 President and Chief Operating Officer and Director
Ronald E. Huff 40 Senior Vice President and Chief Financial Officer and Director
Joseph M. Vitale 54 Senior Vice President Legal, General Counsel, Secretary and Director
Ronald L. Clements 53 Senior Vice President Exploration and Production
L. Edward Parker 49 Senior Vice President Energy Marketing
Leo A. Schrider 57 Senior Vice President Technical Development
Dennis D. Belden 50 Vice President Supply and Service
Charles P. Faber 54 Vice President Corporate Development
Tommy L. Knowles 45 Vice President Production
Donald A. Rutishauser 39 Vice President and Treasurer
Dean A. Swift 43 Vice President, Assistant General Counsel and Assistant Secretary
</TABLE>
All executive officers of the Company serve at the pleasure of its
Board of Directors. None of the executive officers of the Company is related
to any other executive officer or director, except that Henry S. Belden, IV and
Dennis D. Belden are brothers. The business experience of each executive
officer is summarized below.
18
<PAGE> 19
HENRY S. BELDEN, IV has been Chairman and Chief Executive Officer of
the Company since 1982. Mr. Belden has been involved in oil and gas production
since 1955 and associated with Belden & Blake since 1967. Prior to joining
Belden & Blake, he was employed by Ashland Oil & Refining Company and
Halliburton Services, Incorporated.
Mr. Belden attended Florida State University and the University of
Akron and is a member of the Society of Petroleum Engineers, the Mid-Continent
Oil & Gas Association and the Board of Trustees of the Ohio Oil and Gas
Association. He is also a member of the Regional Advisory Board of the
Independent Petroleum Association of America and a director and a member of the
Executive Committee of the Pennsylvania Grade Crude Oil Association. He is a
member of the Interstate Oil Compact Commission. Other professional
memberships include the World Business Council and the Association of Ohio
Commodores.
MAX L. MARDICK has been President and Chief Operating Officer of the
Company since 1990, a director since 1992 and a director of predecessor
companies from 1988 to 1992. He previously served as Executive Vice President
and Chief Operating Officer from 1988 to 1990. Mr. Mardick is a Petroleum
Engineer with more than 35 years of experience in domestic and international
production, engineering, drilling operations and property evaluation. Prior to
joining Belden & Blake, he was employed for more than 30 years by Shell Oil
Company in various engineering, supervisory and senior management positions,
including: Manager, Property Acquisitions and Business Development (1986-1988);
Production Manager for Shell's Onshore and Eastern Divisions (1981-1986);
Production Manager of Shell's Rocky Mountain Division (1980-1981); Operations
Manager (1977-1980); and Engineering Manager (1975-1977).
Mr. Mardick holds a BS degree in Petroleum Engineering from the
University of Kansas. He is a member of the Society of Petroleum Engineers and
the Ohio Oil and Gas Association. He has served as Vice Chairman of the
Alabama - Mississippi section of the Mid-Continent Oil and Gas Association.
RONALD E. HUFF has been Senior Vice President and Chief Financial
Officer of the Company since 1989, having previously served as its Senior
Controller from 1986 to 1989. Mr. Huff has been a director of Belden & Blake
since 1991. He is a Certified Public Accountant with nearly 20 years of
experience in oil and gas finance and accounting. From 1983 to 1986, Mr. Huff
served as Vice President and Chief Accounting Officer of Towner Petroleum
Company. From 1980 to 1983 he worked for Sonat Exploration Company as Manager
of Financial Accounting; and from 1977 to 1980 he served as Corporate
Accounting Supervisor for Transco Companies, Incorporated. Mr. Huff received a
BS degree in Accounting from the University of Wyoming. He is a member of the
Ohio Petroleum Accountants Society and the Financial Executives
Institute-Northeast Ohio Chapter.
JOSEPH M. VITALE has been Senior Vice President Legal of the Company
since 1989 and has served as its General Counsel since 1974. He has been a
director of the Company since 1991. Prior to joining Belden & Blake, Mr.
Vitale served for four years in the Army Judge Advocate General's Corps. He
holds a BS degree from John Carroll University and a JD degree from Case
Western Reserve Law School. He is a member of the Ohio Oil and Gas
Association, the Stark County, Ohio State and American Bar Associations, and
the Interstate Oil Compact Commission. Mr. Vitale is a past Chairman of the
Natural Resources Law Committee of the Ohio State Bar Association.
RONALD L. CLEMENTS has been Senior Vice President of Exploration and
Production of the Company since 1993 and manages the Company's Exploration and
Production Division. He joined Belden & Blake in 1990 and served as Vice
President of Producing Operations until appointment to his
19
<PAGE> 20
current position in 1993. He has more than 30 years of petroleum engineering
and production experience. Prior to joining Belden & Blake he served as Vice
President and District Manager of TXO Production Corporation in Corpus Christi,
Texas. From 1967 to 1982, Mr. Clements held various operational management
positions with Shell Oil Company in Texas and Louisiana.
Mr. Clements received a BS degree in Electrical Engineering from the
University of North Dakota and a MS degree in Petroleum Engineering from the
University of Tulsa. He is a member of the Society of Petroleum Engineers and
the Ohio Oil and Gas Association.
L. EDWARD PARKER has been Senior Vice President of Energy Marketing of
the Company since January of 1996. He has 24 years of experience in the oil
and gas industry. Prior to joining Belden & Blake, Mr. Parker served as
Executive Vice President of Marketing at Meridian Oil Inc. in Houston, Texas.
From 1985 to 1988 he worked for Burlington Northern, Inc. as Vice
President-Strategic Planning & Budgeting and from 1971 to 1985 he held various
management positions with El Paso Natural Gas Company, including Vice
President-Planning & Economics.
Mr. Parker received a BA degree in Chemistry and a MBA degree from the
University of Dallas. He is a member of the Natural Gas Association of
Houston.
LEO A. SCHRIDER has been Senior Vice President of Technical
Development since 1993. He previously served as Senior Vice President of
Exploration, Drilling and Engineering for the Company since 1986. Mr. Schrider
is a Petroleum Engineer with 35 years of experience in oil and gas production,
principally in the Appalachian Basin. Prior to joining Belden & Blake in 1981,
he served as Assistant and Deputy Director of Morgantown Energy Technology
Center from 1976 to 1980. From 1973 to 1976, Mr. Schrider served as Project
Manager of the Laramie Energy Research Center. He has also held various
research positions with the U.S. Department of Energy in Wyoming and West
Virginia.
Mr. Schrider received his BS degree from the University of Pittsburgh
in 1961 and did graduate work at West Virginia University. He has published
more than 35 technical papers on oil and gas production. He was an Adjunct
Professor at West Virginia University and also served as a member of the
International Board of Directors of the Society of Petroleum Engineers. In
1994, Mr. Schrider was elected to the Board of Directors of the Petroleum
Technology Transfer Council and is chairman of the product advisory group
representing the Appalachian region.
DENNIS D. BELDEN has served as Vice President of Supply and Service
for the Company since 1989 and has managed the Oilfield Supply and Service
Division since 1992. He joined Belden & Blake in 1980 and served as the
Company's land manager from 1980 to 1989. From 1976 to 1980 he was employed by
Wilmot Mining Company as Special Projects Manager; from 1974 to 1976 he was
Treasurer and General Manager of Cabbages & Kings Restaurant of Ohio; and from
1972 to 1974 he was employed by T & M Fuel as General Supervisor. Mr. Belden
attended Kent State University. He is a member of the Ohio Oil and Gas
Association.
CHARLES P. FABER has been Vice President of Corporate Development for
the Company since 1993. He previously served as Senior Vice President of
Capital Markets from 1988 to 1993. Prior to joining Belden & Blake, Mr. Faber
was employed as Senior Vice President of Marketing for Heritage Asset
Management from 1986 to 1988. From 1983 to 1986 he served as President and
Chief Executive Officer of Samson Properties, Incorporated. Mr. Faber holds a
BA degree in Marketing and an MBA in Finance from the University of Wisconsin.
20
<PAGE> 21
TOMMY L. KNOWLES has been Vice President of Production of the Company
since January of 1996. He has 23 years of petroleum engineering and production
experience. Prior to joining Belden & Blake, Mr. Knowles served as President
of FWA Drilling Company, a subsidiary of Texas Oil & Gas Corporation. From
1982 to 1988 he worked for TXO Production Corporation in Sacramento,
California, serving in various management positions including Vice President;
from 1979 to 1982 he held the position of Drilling and Production Manager for
Texas Oil & Gas Corporation; and, from 1973 to 1979 he held various
engineering, supervisory and management positions with Exxon Corporation.
Mr. Knowles holds a BS degree in Mechanical Engineering from the
University of Texas at Austin where he graduated with honors. He is a member
of the Society of Petroleum Engineers, the American Petroleum Institute and the
Independent Association of Drilling Contractors.
DONALD A. RUTISHAUSER has been Vice President and Treasurer of the
Company since 1989, having previously served as Senior Financial Analyst from
1987 to 1989. Prior to joining Belden & Blake, he was employed by Grace Energy
Corporation as Financial Project Manager. Mr. Rutishauser received a BA
degree in Economics from Dartmouth College and an MBA in Accounting and Finance
from the University of Michigan.
DEAN A. SWIFT has served as Vice President, Assistant General Counsel
and Assistant Secretary of the Company since 1989. He served as Assistant
General Counsel of the Company from 1981 to 1989. From 1978 to 1981 he was
associated with the law firm of Hahn, Loeser and Parks in Cleveland, Ohio. Mr.
Swift received a BA degree from the University of the South and a JD degree
from the University of Virginia. He is a member of the Stark County, Ohio
State and American Bar Associations.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
-----------------------------------------------------------------
MATTERS
-------
The Company's Common Stock has been traded on The Nasdaq Stock Market
under the symbol "BELD" since March 31, 1992.
21
<PAGE> 22
The following table sets forth the high and low sales prices for the
Common Stock of the Company for the periods indicated as reported by The Nasdaq
Stock Market.
<TABLE>
<CAPTION>
Sale Price
-------------------------
Average Daily
High Low Volume
------- ------- ---------------
<S> <C> <C> <C>
1993
----------------
First Quarter $11.75 $ 9.75 7,801
Second Quarter 15.00 11.00 42,784
Third Quarter 14.75 10.00 42,174
Fourth Quarter 14.75 9.75 30,691
1994
----------------
First Quarter $13.25 $ 9.75 22,567
Second Quarter 13.00 12.00 14,376
Third Quarter 14.75 11.50 18,909
Fourth Quarter 15.00 13.25 26,388
1995
----------------
First Quarter $14.25 $11.50 16,892
Second Quarter 17.00 13.75 16,316
Third Quarter 19.25 14.50 46,982
Fourth Quarter 19.25 14.50 74,242
1996
----------------
First Quarter (through
February 29, 1996) $18.75 $15.75 39,884
</TABLE>
The approximate number of record holders of the Company's equity
securities at February 29, 1996 was as follows:
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------------------- --------------
<S> <C>
Common Stock 1,925
Class II Serial Preferred Stock
$7.50 Series A 1
</TABLE>
22
<PAGE> 23
DIVIDENDS
No dividends have been paid on the Company's Common Stock and none are
expected to be paid in the foreseeable future. The Class II Serial Preferred
Stock $7.50 Series A is entitled to cumulative quarterly dividends at the
annual rate of $7.50 per share.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
<TABLE>
<CAPTION>
BELDEN & BLAKE CORPORATION(1)
As of or for the Year Ended December 31
---------------------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Operations
Revenues $49,871 $52,550 $72,874 $79,362 $110,064
Depreciation, depletion
and amortization 1,748 4,853 9,693 11,886 19,717
Income (loss) from
continuing operations (709) 1,139 3,265 4,180 6,260
Income (loss) from
continuing operations
per common share -- .48 .55 .57 .69
Preferred dividends
paid/cash withdrawals 1,541 -- 180 180 180
Balance sheet data
Working capital (4,563) 1,465 28,850 13,611 17,359
(deficit)
Oil and gas properties
and gathering systems, 8,713 82,751 86,192 106,710 211,142
net
Total assets 20,399 102,253 135,174 148,173 297,298
Long-term liabilities,
less current portion 8,551 59,311 43,516 47,858 110,523
Preferred stock -- 2,400 2,400 2,400 2,400
Total owners' equity
(deficit) (787) 29,023 76,857 81,142 142,291
</TABLE>
_______________
[FN]
(1) Operating data for periods prior to March 31, 1992 and balance sheet
data for years prior to 1992 are for the Belden Interests, the
acquisition of which was accounted for in a manner similar to a
pooling of interests.
Financial results reflect the discontinuance of EPS as disclosed in
Note 16 to the Consolidated Financial Statements.
23
<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
The following discussion should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto and the Selected
Financial Information included elsewhere in this report.
GENERAL
On March 31, 1992, the Company succeeded to the Belden Interests. The
transaction was accounted for on the basis of historical cost in a manner
similar to a pooling of interests. As a result, the consolidated financial
statements of the Company reflect the combined historical results of operations
of only the Belden Interests prior to March 31, 1992.
Also on March 31, 1992, the Company acquired the assets and assumed
the liabilities of the Partnership and BBI in exchange for shares of common
stock pursuant to the Consolidation. The Consolidation was accounted for as a
purchase, and the results of operations of the Partnership and BBI have been
included from that date.
Prior to March 31, 1992, the Company was engaged principally in
managing the assets and business activities of the Partnership, BBI and
non-affiliated entities and in gas gathering and marketing. Accordingly, a
significant portion of the Company's income was derived from transactions with
the Partnership and BBI, including well operating fees, sales of oilfield
supplies and services at fixed mark-ups over cost and fees for accounting and
related services. Since March 31, 1992, the Company's principal business has
been the acquisition, development and production of, and exploration for, oil
and gas reserves, principally in Ohio, West Virginia, Pennsylvania, Michigan
and New York, and the gathering and marketing of natural gas. Consequently,
the historical statements of operations prior to the Consolidation do not
reflect the Company's current or planned business activities.
The Company utilizes the "successful efforts" method of accounting for
its oil and gas properties. Under this method, property acquisition and
development costs and productive exploration costs are capitalized while
non-productive exploration costs, which include certain geological and
geophysical costs, dry holes, expired leases and delay rentals, are expensed as
incurred. Capitalized costs related to proved properties are depleted using
the unit-of-production method. No gains or losses are recognized upon the
disposition of oil and gas properties except in extraordinary transactions.
Sales proceeds are credited to the carrying value of the properties.
Maintenance and repairs are expensed, and expenditures which enhance the value
of properties are capitalized.
The Company's gas gathering and marketing operations consist of
purchasing gas at the wellhead and from interstate pipelines and selling gas to
industrial customers and local gas distribution companies. The cost of gas
purchased from the Company is the wellhead price stipulated by the well
operating or gas purchase agreements relating to the wells and is included in
"Cost of gas and gathering expense."
The Company provides oilfield sales and services to its own operations
and to third parties. Oilfield sales and service provided to the Company's own
operations are provided at cost and all intercompany revenues and expenses are
eliminated in consolidation. Prior to the Consolidation, revenues from
oilfield sales and service provided to the Partnership and BBI were accounted
for as third-party revenues.
24
<PAGE> 25
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
OIL AND GAS SALES. Oil and gas sales increased $14.3 million (44%) in
1995 compared to 1994 due primarily to an increase in oil and gas volumes sold
and a higher average price paid for the Company's oil. These increases more
than offset a lower average price paid for the Company's natural gas.
Oil volumes increased 60,000 Bbls (12%) from 496,000 Bbls in 1994 to
556,000 Bbls in 1995 resulting in an increase in oil sales of approximately
$1.0 million. Gas volumes increased 7.4 Bcf (77%) from 9.6 Bcf in 1994 to 17.0
Bcf in 1995 resulting in an increase in gas sales of approximately $19.1
million. These volume increases were primarily due to production from the
Company's 1995 acquisitions and from wells drilled in 1994 and 1995. Gas
volumes produced in 1995 were less than the Company's full production potential
as a result of the Company's decision to curtail gas production due to low spot
market gas prices. Interstate pipeline repairs and construction in Michigan and
West Virginia also reduced potential production volumes.
The average price paid for the Company's oil increased from $15.98 per
barrel in 1994 to $16.78 per barrel in 1995 which increased oil sales by
approximately $450,000. The average price paid for the Company's natural gas
decreased $.37 per Mcf to $2.21 per Mcf in 1995 compared to 1994 resulting in
decreased gas sales of approximately $6.3 million.
GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering
revenue increased $7.3 million (22%) from $33.1 million in 1994 to $40.4
million in 1995 primarily due to the Company's 1995 acquisitions. Increased
volumes of gas purchased from third parties and resold were offset by a lower
average selling price .
OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service
revenue increased $6.9 million (53%) from $13.2 million in 1994 to $20.1
million in 1995. This increase was primarily due to the sales generated by the
three oilfield service companies acquired by the Company in September and
October of 1994 and three oilfield sales and service companies acquired in
1995.
INTEREST AND OTHER REVENUE. Interest and other revenue increased $2.1
million (385%) from $559,000 in 1994 to $2.7 million in 1995 primarily due to
the recognition of $1.3 million in anticipated proceeds from contract rejection
claims that have been filed in the bankruptcy proceedings of Columbia Gas
Transmission Corporation (see Note 11) and the recognition of income in 1995
from an incentive production payment associated with certain properties
operated by Ward Lake.
PRODUCTION EXPENSE. Production expense increased $4.0 million (50%)
from $7.9 million in 1994 to $11.9 million in 1995. This increase was
primarily due to the increased production volumes discussed above. The average
production cost per equivalent Mcf of natural gas decreased from $.63 per Mcfe
in 1994 to $.59 per Mcfe in 1995.
PRODUCTION TAXES. Production taxes increased $703,000 (52%) from $1.4
million in 1994 to $2.1 million in 1995. This increase was primarily due to
the increased production volumes discussed above.
25
<PAGE> 26
COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense
increased $5.0 million (17%) from $29.1 million in 1994 to $34.1 million in
1995 primarily due to the Company's 1995 acquisitions. Increased volumes of
gas purchased from third parties and resold were offset by a lower average
purchase price.
OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service
expense increased $6.1 million (50%) from $12.3 million in 1994 to $18.4
million in 1995 primarily as a result of the increased cost of goods sold
associated with increased sales resulting from the acquisitions described
above.
EXPLORATION EXPENSE. Exploration expense increased $2.1 million (76%)
from $2.8 million in 1994 to $4.9 million in 1995 primarily due to higher
levels of geological and geophysical activity and increases in the size of the
technical staff.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative
expense increased $498,000 (13%) from $4.0 million in 1994 to $4.5 million in
1995 primarily due to increases in employee compensation and benefits.
Included in general and administrative expense are franchise and property taxes
which increased $183,000 from $459,000 in 1994 to $642,000 in 1995.
INTEREST EXPENSE. Interest expense increased $2.6 million (73%) from
$3.5 million in 1994 to $6.1 million in 1995. This increase was primarily due
to higher average debt balances incurred to finance the 1995 acquisitions (Note
3 - "Acquisitions").
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization increased by $7.8 million (66%) from $11.9 million in 1994 to $19.7
million in 1995. Depletion expense increased $6.0 million (66%) from $9.1
million in 1994 to $15.1 million in 1995. This increase was primarily due to
additional depletion expense associated with the increased production volumes
described above. Depletion per Mcfe increased from $.72 per Mcfe in 1994 to
$.74 per Mcfe in 1995.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES. Income from
continuing operations before income taxes increased $1.9 million (29%) from
$6.5 million in 1994 to $8.4 million in 1995. The operating income from the
oil and gas operations segment increased $3.3 million (37%) from $9.1 million
in 1994 to $12.4 million in 1995. The increase was attributable to the items
discussed above. The operating income from the oilfield sales and service
segment increased $323,000 (92%) from $350,000 in 1994 to $673,000 in 1995.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations
increased $2.1 million (50%) from $4.2 million in 1994 to $6.3 million in 1995.
This increase in net income from continuing operations was primarily the result
of the items discussed above. Provision for income taxes from continuing
operations decreased $180,000 (8%) from $2.3 million in 1994 to $2.2 million in
1995. This decrease was attributable to a decrease in the effective tax rate
partially offset by an increase in income from continuing operations before
income taxes. The effective tax rate decreased primarily due to the
utilization of nonconventional fuel source tax credits. Net income from
continuing operations on a per share basis increased from $.57 per share in
1994 to $.69 per share in 1995. This increase was primarily the result of the
factors discussed above.
LOSS FROM DISCONTINUED OPERATIONS. Loss from discontinued operations
was $1,761,000 ($1,139,000 net of tax benefit or $.13 per share) in 1995
compared to $509,000 ($337,000 net of tax benefit or $.05 per share) in 1994.
The loss in 1995 includes the write-down of various assets and
26
<PAGE> 27
inventories to estimated realizable value and a provision for estimated costs
of asset disposals and future losses related to the Company's decision to sell
EPS.
1994 COMPARED TO 1993
OIL AND GAS SALES. Oil and gas sales increased $5.9 million (22%) in
1994 compared to 1993 due primarily to an increase in oil and gas volumes sold
and a higher average price paid for the Company's natural gas. These increases
more than offset a lower average price paid for the Company's oil.
Oil volumes increased 43,000 Bbls (10%) from 453,000 Bbls to 496,000
Bbls in 1994 resulting in an increase in oil sales of approximately $740,000.
The increase in oil volumes sold in 1994 was primarily due to the success of
the 1994 drilling program and, to a lesser extent, 1994 acquisitions. Gas
volumes increased 2.2 Bcf (30%) from 7.4 Bcf in 1993 to 9.6 Bcf in 1994
resulting in an increase in gas sales of approximately $5.6 million. The gas
volume increase was primarily due to the Company's 1994 acquisitions.
The average price paid for the Company's oil decreased from $17.15 per
barrel in 1993 to $15.98 per barrel in 1994 which reduced oil sales by
approximately $580,000. The average price paid for the Company's natural gas
increased $.03 per Mcf to $2.58 per Mcf in 1994 compared to 1993 resulting in
increased gas sales of approximately $190,000.
GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering
revenue decreased 5% in 1994 compared with 1993 due to a decrease in volumes
and selling price of gas purchased from third parties and resold.
OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service
revenue increased $2.3 million (21%) from $10.9 million in 1993 to $13.2
million in 1994. This increase was primarily due to the sales generated by the
three oilfield service companies acquired by the Company in September and
October of 1994.
INTEREST AND OTHER REVENUE. Interest and other revenue decreased
$88,000 (14%) from $647,000 in 1993 to $559,000 in 1994 primarily because a
gain was recorded in 1993 on the sale of certain oil and gas properties and
related equipment in Pennsylvania and New York.
PRODUCTION EXPENSE. Production expense increased $2.0 million (33%)
from $5.9 million in 1993 to $7.9 million in 1994. The increase was primarily
due to the increased production discussed above. The average production cost
per equivalent Mcf of natural gas increased from $.59 in 1993 to $.63 in 1994.
This increase was primarily due to the recognition of initial workover expense
on recently acquired wells designed to maximize future production volume.
PRODUCTION TAXES. Production taxes increased $113,000 (9%) from $1.2
million in 1993 to $1.4 million in 1994. This increase was primarily due to
the increased production volumes discussed above.
COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense
decreased 5% in 1994 compared with 1993 due to a decrease in volumes of gas
purchased from third parties and resold.
OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service
expense increased $2.0 million (19%) from $10.3 million in 1993 to $12.3
million in 1994 primarily as a result of the sales generated by the 1994
acquisitions described above.
27
<PAGE> 28
EXPLORATION EXPENSE. Exploration expense increased $269,000 (11%)
from $2.5 million in 1993 to $2.8 million in 1994 primarily due to a lower
level of leasing activity resulting in less cost being capitalized in 1994.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative
expense increased less than 1% in 1994 compared with 1993, notwithstanding the
continued growth of the Company. Included in general and administrative
expense are franchise and property taxes which increased $86,000 from $373,000
in 1993 to $459,000 in 1994.
INTEREST EXPENSE. Interest expense increased $316,000 (10%) from $3.2
million in 1993 to $3.5 million in 1994 primarily due to higher average debt
balances in 1994 incurred to finance acquisitions.
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization increased by $2.2 million (23%) in 1994 compared to 1993.
Depletion expense increased $1.8 million (25%) from $7.3 million in 1993 to
$9.1 million in 1994. This increase was primarily due to additional depletion
expense associated with the increased production volumes described above.
Depletion per Mcfe remained consistent at $.72 per Mcfe in 1993 and 1994.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES. Income from
continuing operations before income taxes increased $1.2 million (24%) from
$5.3 million in 1993 to $6.5 million in 1994. The operating income from the
oil and gas operations segment increased $1.5 million (19%) from $7.6 million
in 1993 to $9.1 million in 1994. The increase was attributable to the items
discussed above. The operating income from the oilfield sales and service
segment increased $193,000 (123%) from $157,000 in 1993 to $350,000 in 1994.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations
increased $915,000 (28%) from $3.3 million in 1993 to $4.2 million in 1994.
This increase in net income from continuing operations was primarily the result
of the items discussed above. Provision for income taxes from continuing
operations increased $333,000 (17%) from $2.0 million in 1993 to $2.3 million
in 1994. This increase was due to the increase in income before income taxes
partially offset by a decrease in the effective tax rate. Net income from
continuing operations on a per share basis increased from $.55 per share in
1993 to $.57 per share in 1994. This increase was primarily the result of the
factors discussed above partially offset by the increase in the average number
of common shares outstanding from 5,674,638 in 1993 to 7,080,227 in 1994. The
average number of shares outstanding increased primarily as a result of the
Company's sale of 3.45 million common shares in May 1993.
LOSS FROM DISCONTINUED OPERATIONS. Loss from discontinued operations
was $509,000 ($337,000 net of tax benefit or $.05 per share) in 1994 compared
to $68,000 ($45,000 net of tax benefit or $.01 per share) in 1993. The
increase was attributable to operating losses from Magnolia Compression
Services, Inc., which was formed in 1993, and Engine Power Systems, Inc., which
was acquired in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital is closely related to and dependent on
the current prices paid for its oil and gas.
28
<PAGE> 29
The Company's current ratio at December 31, 1995 was 1.47 to 1.00.
During 1995, working capital increased $3.8 million from $13.6 million to $17.4
million. The increase was primarily due to increases in cash ($8.7 million),
accounts receivable ($15.0 million) and inventories ($2.6 million) related to
the Quaker State and other 1995 acquisitions, which was largely offset by an
increase in accounts payable and accrued expenses ($22.8 million) from these
same 1995 acquisitions. The Company's operating activities provided cash flow
of $21.9 million during 1995.
On May 25, 1995, the Company's bank group amended its revolving bank
facility. The facility was increased to $200 million, the maturity date was
extended to March 31, 1999, and the borrowing base was increased to $81
million. The borrowing base is calculated by the bank group and is based on
the cash flows generated by the Company's proved developed reserves, gas
gathering systems and other corporate assets. Generally, the Company can
expect to have the borrowing base increased by at least 50% of the present
value before income taxes (discounted at 10% per annum) of any proved developed
reserves added through acquisition or drilling.
Outstanding balances under the agreement incurred interest at the
Company's choice of either: (1) the one, two or three-month LIBOR + 2% (7.66%
for the three-month LIBOR interest rate option at December 31, 1995) or (2) the
bank's prime rate (8.50% at December 31, 1995). At December 31, 1995, the
Company had $67 million outstanding under this facility.
On February 16, 1996, the Company's bank group further amended its
revolving bank facility. The maturity date was extended to March 31, 2001 and
the LIBOR interest rate option was modified to decrease from LIBOR + 2% to a
range of LIBOR + 1-1/4% to LIBOR + 3/4% as outstanding balances decrease in
relation to the borrowing base.
When market conditions are favorable, the Company may enter into
interest rate swap arrangements, whereby a portion of the Company's floating
rate exposure is exchanged for a fixed interest rate. The Company had no such
derivative financial instruments at December 31, 1994 or 1995.
The amended agreement will continue to restrict the sale of assets to
no more than 15% of shareholders' equity in any one year and will require the
Company to maintain certain levels of net worth, working capital and debt
service coverage.
During 1993, the Company placed $35 million of 7% fixed-rate senior
notes with five insurance companies in a private placement. These notes, which
are interest-only for four years, mature on September 30, 2005. Equal annual
principal payments of $3,888,888 will be required on each September 30
commencing in 1997.
The senior note agreement limits the Company's senior debt to 50% of
the discounted present value (at 10%) of the Company's oil and gas reserves
plus the net book value of its gas gathering systems. Other terms and
covenants are substantially the same as those contained in the $200 million
revolving credit facility.
The Company issued 4,025,000 shares of common stock at a public
offering price of $14.75 per share pursuant to an underwriting agreement dated
July 26, 1995 with Johnson Rice & Company, McDonald & Company Securities, Inc.
and Southcoast Capital Corporation, as representatives of the underwriters.
Net proceeds were approximately $55.6 million and were used to purchase the
Quaker State Properties for approximately $50 million with the balance used to
reduce the outstanding balances under the Company's revolving bank facility.
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<PAGE> 30
The Company currently expects to spend approximately $27 million
during 1996 on its drilling activities and approximately $9.2 million for other
capital expenditures. The Company's acquisition program is expected to be
financed with any available cash flow over $36.2 million and with its available
bank credit line. The Company believes that its existing sources of working
capital are sufficient to satisfy all currently anticipated working capital
requirements.
The level of the Company's cash flow in the future will depend on a
number of factors including the demand and price levels for oil and gas, its
ability to acquire additional producing properties and the scope and success of
its drilling activities. The Company intends to finance such activities
principally through its available cash flow, through additional borrowings and,
to the extent necessary, the issuance of additional common or preferred stock.
INFLATION AND CHANGES IN PRICES
During 1993, the price paid for the Company's crude oil fell from a
high of $19.00 per barrel at the beginning of the year to a low of $13.50 per
barrel at year-end with an average price of $17.15 per barrel. During 1994,
the price paid for the Company's crude oil increased from $13.50 per barrel to
a high of $18.00 per barrel, then decreased to $15.50 per barrel at year-end,
with an average price of $15.98 per barrel. During 1995, the price paid for
the Company's crude oil increased from $15.50 per barrel to a high of $17.50
per barrel, then decreased to $16.50 per barrel at year-end, with an average
price for the year of $16.78 per barrel. The average price of the Company's
natural gas increased from $2.55 per Mcf in 1993 to $2.58 per Mcf in 1994 and
decreased to $2.21 per Mcf in 1995.
The price of oil and gas has a significant impact on the Company's
results of operations. Oil and gas prices fluctuate based on market conditions
and, accordingly, cannot be predicted. As a result of increased competition
among drilling contractors and suppliers and reduced levels of drilling, costs
to drill, complete, and service wells have remained relatively constant in
recent years.
Historically, a large portion of the Company's natural gas sales has
been under long-term fixed price contracts. As a result of recent
acquisitions, certain natural gas sales are currently based on indexed prices.
The Company may, from time to time, enter into hedging transactions with
financial institutions to reduce its exposure to variable commodity pricing.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Index to Consolidated Financial Statements and Schedules on page
F-1 sets forth the financial statements and supplementary schedules included in
this Annual Report on Form 10-K and their location herein. Schedules have been
omitted as not required or not applicable because the information required to
be presented is included in the financial statements and related notes.
The financial statements have been prepared by management in
conformity with generally accepted accounting principles. Management is
responsible for the fairness and reliability of the financial statements and
other financial data included in this report. In the preparation of the
financial statements, it is necessary to make informed estimates and judgments
based on currently available information on the effects of certain events and
transactions.
The Company maintains accounting and other controls which management
believes provide reasonable assurance that financial records are reliable,
assets are safeguarded, and that transactions are
30
<PAGE> 31
properly recorded. However, limitations exist in any system of internal
control based upon the recognition that the cost of the system should not
exceed benefits derived.
The Company's independent auditors, Ernst & Young LLP, are engaged to
audit the financial statements and to express an opinion thereon. Their audit
is conducted in accordance with generally accepted auditing standards to enable
them to report whether the financial statements present fairly, in all material
respects, the financial position and results of operations in accordance with
generally accepted accounting principles.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not applicable.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The information with respect to the directors of the Company set forth
under the caption "Election of Directors" in the Company's proxy statement to
be filed for the Annual Meeting of Shareholders to be held on or about May 23,
1996 is incorporated herein by reference. See pages 18 through 21 of this
report for information regarding executive officers.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The information with respect to executive compensation set forth under
the captions "Executive Compensation" and "Information about the Board of
Directors" in the Company's proxy statement to be filed for the Annual Meeting
of Shareholders to be held on or about May 23, 1996 is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The information with respect to security ownership of certain
beneficial owners and management set forth under the caption "Ownership of
Voting Securities" in the Company's proxy statement to be filed for the Annual
Meeting of Shareholders to be held on or about May 23, 1996 is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The information set forth under the caption "Certain Transactions" in
the Company's proxy statement to be filed for the Annual Meeting of
Shareholders on or about May 23, 1996 is incorporated by reference.
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<PAGE> 32
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
-----------------------------------------------------------------
(a) Documents filed as a part of this report:
1. Financial Statements
The financial statements listed in the accompanying Index to
Consolidated Financial Statements and Schedules are filed as part of this
Annual Report on Form 10-K.
2. Financial Statement Schedules
No financial statement schedules are required to be filed as part of
this Annual Report on Form 10-K.
3. Exhibits
<TABLE>
<CAPTION>
No. Description
--- -----------
<S> <C>
3.1 Articles of Incorporation of the Company--incorporated by reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-4 (Registration No. 33-43209)
3.2 Amended Articles of Incorporation of the Company--incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-4 (Registration No. 33-43209)
3.2(a) Amendment to Amended Articles of Incorporation of the Company--incorporated by reference to Exhibit 4 to the
Company's Current Report on Form 8-K dated December 30, 1992
3.3 Amended Code of Regulations of the Company--incorporated by reference to Exhibit 3.3 to the Company's
Registration Statement on Form S-4 (Registration No. 33-43209)
4.1 Amended and Restated Debenture Agreement between the Company and Petercam Securities--incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209)
4.2(a) Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc., Peake Operating Company,
Bank One, Texas, National Association and NBD Bank, N.A. dated November 1993--incorporated by reference to
Exhibit 4.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993
4.2(b)* First Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc.,
Bank One, Texas National Association and NBD Bank, N.A., effective as of August 1, 1994
</TABLE>
32
<PAGE> 33
<TABLE>
<S> <C>
4.2(c)* Second Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc., Ward
Lake Drilling, Inc., Bank One, Texas National Association and NBD Bank, N.A., effective as of March 29, 1995
4.2(d)* Third Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc., Ward
Lake Drilling, Inc., Bank One, Texas National Association and NBD Bank, effective as of May 25, 1995
4.2(e)* Fourth Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc., Ward
Lake Drilling, Inc., Bank One, Texas National Association and The First National Bank of Chicago, effective as
of February 15, 1996
4.3 Warrant Assumption Agreement between Belden & Blake Corporation and Belden & Blake Energy Company--incorporated
by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992
4.4 Note Purchase Agreement dated as of November 15, 1993 among the Company, The Canton Oil & Gas Company,
Peake Operating Company and Peake Energy, Inc. and the purchasers listed on Annex I thereto--incorporated by
reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993
4.5 None of the other instruments defining the rights of holders of long-term debt of the Company or its subsidiaries
involve long-term debt in an amount which exceeds ten percent of the total assets of the Company and its
subsidiaries on a consolidated basis. The Company agrees to furnish a copy of such other instruments to the
Commission upon request.
10.1 Employment Agreement between the Company and Henry S. Belden IV dated September 16, 1991--incorporated by
reference to Exhibit 10.3 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209)
10.2 Form of Severance Agreement between the Company and each of the officers of the Company (except Henry S. Belden
IV) officers--incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form S-4
(Registration No. 33-43209)
10.3 Stock Option Plan of the Company--incorporated by reference to Exhibit 10.7 to the Company's Registration
Statement on Form S-4 (Registration No. 33-43209)
10.3(a) Stock Option Plan of the Company (as amended)--incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-8 (Registration No. 33-62785)
10.4 Restricted Stock Grant Plan of The Canton Oil & Gas Company (formerly known as Belden & Blake Corporation)--
incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-4 (Registration No.
33-43209)
10.5 Belden & Blake Corporation Non-employee Director Stock Option Plan-- incorporated by reference to Exhibit 10.6 to
the Company's Annual Report on Form 10-K for the year ended December 31, 1993
10.6 Plan and Agreement of Consolidation dated as of October 10, 1991, as amended, among Belden & Blake Energy
Company, Henry S. Belden IV, Belden & Blake International Limited and the Company--incorporated by reference to
Exhibit 2.1 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209)
10.7 Stock Purchase Agreement dated as of December 7, 1992 between Presidio Exploration, Inc. and Belden & Blake
Acquisition, Inc. (a wholly-owned subsidiary of the Company)--incorporated by reference to Exhibit 2 to the
Company's Current Report on Form 8-K dated December 22, 1992
10.8 Amended and Restated Gas Sales and Purchase Contract between Peake Energy, Inc. and Kaiser Aluminum & Chemical
Corporation dated as of
</TABLE>
33
<PAGE> 34
<TABLE>
<S> <C>
August 27, 1987--incorporated by reference to Exhibit 10.11 to the Company's Registration Statement on Form S-1
(Registration No. 33-60228)
10.9 Agreement of Purchase and Sale between the Company and TGX Corporation dated December 17, 1993--incorporated by
reference to Exhibit 2 to the Company's Current Report on Form 8-K dated January 14, 1994.
10.10 Stock Purchase Agreement dated January 3, 1995 among Keith Hardin Gornick, R. David Briney, William F. Rolinski,
Charles Nelson and the Company--incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form
8-K dated February 10, 1995
10.10(a) Agreement of Amendment dated January 16, 1995 among Keith Hardin Gornick, R. David Briney, William F. Rolinski,
Charles Nelson and the Company--incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form
8-K dated February 10, 1995
10.10(b) Second Agreement of Amendment dated February 10, 1995 among Keith Hardin Gornick, R. David Briney, William F.
Rolinski, Charles Nelson and the Company--incorporated by reference to Exhibit 2.3 to the Company's Current
Report on Form 8-K dated February 10, 1995
10.11 Asset Purchase Agreement dated July 26, 1995 among Quaker State Corporation, QSE&P, Inc. and the Company--
incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K dated August 9, 1995.
21* Subsidiaries of the Registrant
23* Consent of Ernst & Young LLP
27* Financial Data Schedule
</TABLE>
*Filed herewith
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the last
quarter of the year covered by this report.
(c) Exhibits required by Item 601 of Regulation S-K
Exhibits required to be filed by the Company pursuant to Item
601 of Regulation S-K are contained in the Exhibits listed under Item 14(a)3.
(d) Financial Statement Schedules required by Regulation S-X
The items listed in the accompanying index to financial
statements are filed as part of this Annual Report on Form 10-K.
34
<PAGE> 35
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
BELDEN & BLAKE CORPORATION
March 13, 1996 By: /s/ HENRY S. BELDEN IV
- ---------------------------- -------------------------------
Date Henry S. Belden IV
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ HENRY S. BELDEN, IV Chairman of the Board, March 13, 1996
- ------------------------- Chief Executive Officer -----------------
Henry S. Belden, IV and Director Date
(Principal Executive Officer)
/s/ RONALD E. HUFF Senior Vice President, March 13, 1996
- -------------------------- Chief Financial Officer -----------------
Ronald E. Huff and Director Date
(Principal Financial and
Accounting Officer)
/s/ MAX L. MARDICK President, Chief Operating March 13, 1996
- -------------------------- Officer and Director -----------------
Max L. Mardick Date
/s/ JOSEPH M. VITALE Senior Vice President, Legal, March 13, 1996
- ------------------------- Secretary and Director -----------------
Joseph M. Vitale Date
Director
- --------------------------
Paul R. Bishop
</TABLE>
35
<PAGE> 36
<TABLE>
<S> <C> <C>
/s/ THEODORE V. BOYD
- ------------------------- Director March 13, 1996
Theodore V. Boyd -----------------
Date
- ------------------------- Director
Gary R. Petersen
- ------------------------- Director
David P. Quint
- ------------------------- Director
Raymond D. Saunders
/s/ GEORGE M. SMART
- ------------------------- Director March 13, 1996
George M. Smart -----------------
Date
*By:-------------------------
Attorney-in-Fact
</TABLE>
36
<PAGE> 37
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Location in
Sequentially
Numbered
No. Description Copy
- --- ----------- ---------------
<S> <C>
3.1 Articles of Incorporation of the Company--incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-4 (Registration No. 33-43209)
3.2 Amended Articles of Incorporation of the Company--incorporated by reference to Exhibit 3.2
to the Company's Registration Statement on Form S-4 (Registration No. 33-43209)
3.2(a) Amendment to Amended Articles of Incorporation of the Company--incorporated by reference
to Exhibit 4 to the Company's Current Report on Form 8-K dated December 30, 1992
3.3 Amended Code of Regulations of the Company--incorporated by reference to Exhibit 3.3 to the
Company's Registration Statement on Form S-4 (Registration No. 33-43209)
4.1 Amended and Restated Debenture Agreement between the Company and Petercam Securities--
incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form
S-4 (Registration No. 33-43209)
4.2(a) Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc.,
Peake Operating Company, Bank One, Texas, National Association and NBD Bank, N.A. dated
November 1993--incorporated by reference to Exhibit 4.2 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993
4.2(b)* First Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake
Energy, Inc., Bank One, Texas National Association and NBD Bank, N.A., effective as of
August 1, 1994
4.2(c)* Second Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake
Energy, Inc., Ward Lake Drilling, Inc., Bank One, Texas National Association and NBD Bank,
N.A., effective as of March 29, 1995
4.2(d)* Third Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake
Energy, Inc., Ward Lake Drilling, Inc., Bank One, Texas National Association and NBD Bank,
effective as of May 25, 1995
4.2(e)* Fourth Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake
Energy, Inc., Ward Lake Drilling, Inc., Bank One, Texas National Association and The First
National Bank of Chicago, effective as of February 15, 1996
4.3 Warrant Assumption Agreement between Belden & Blake Corporation and Belden & Blake Energy
Company--incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form
10-K for the year ended December 31, 1992
4.4 Note Purchase Agreement dated as of November 15, 1993 among the Company, The Canton Oil &
Gas Company, Peake Operating Company and Peake Energy, Inc. and the purchasers listed on
Annex I thereto--incorporated by reference to Exhibit 4.5 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1993
4.5 None of the other instruments defining the rights of holders of long-term debt of the
Company or its subsidiaries involve long-term debt in an amount which exceeds ten percent
of the total assets of
</TABLE>
<PAGE> 38
<TABLE>
<S> <C>
the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish
a copy of such other instruments to the Commission upon request.
10.1 Employment Agreement between the Company and Henry S. Belden IV dated September 16, 1991--
incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form
S-4 (Registration No. 33-43209)
10.2 Form of Severance Agreement between the Company and each of the officers of the Company
(except Henry S. Belden IV) officers--incorporated by reference to Exhibit 10.6 to the
Company's Registration Statement on Form S-4 (Registration No. 33-43209)
10.3 Stock Option Plan of the Company--incorporated by reference to Exhibit 10.7 to the Company's
Registration Statement on Form S-4 (Registration No. 33-43209)
10.3(a) Stock Option Plan of the Company (as amended)--incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-8 (Registration No. 33-62785)
10.4 Restricted Stock Grant Plan of The Canton Oil & Gas Company (formerly known as Belden &
Blake Corporation)--incorporated by reference to Exhibit 10.8 to the Company's Registration
Statement on Form S-4 (Registration No. 33-43209)
10.5 Belden & Blake Corporation Non-employee Director Stock Option Plan--incorporated by
reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993
10.6 Plan and Agreement of Consolidation dated as of October 10, 1991, as amended, among Belden
& Blake Energy Company, Henry S. Belden IV, Belden & Blake International Limited and the
Company--incorporated by reference to Exhibit 2.1 to the Company's Registration Statement on
Form S-4 (Registration No. 33-43209)
10.7 Stock Purchase Agreement dated as of December 7, 1992 between Presidio Exploration, Inc. and
Belden & Blake Acquisition, Inc. (a wholly-owned subsidiary of the Company)--incorporated by
reference to Exhibit 2 to the Company's Current Report on Form 8-K dated December 22, 1992
10.8 Amended and Restated Gas Sales and Purchase Contract between Peake Energy, Inc. and Kaiser
Aluminum & Chemical Corporation dated as of August 27, 1987--incorporated by reference to
Exhibit 10.11 to the Company's Registration Statement on Form S-1 (Registration No. 33-60228)
</TABLE>
<PAGE> 39
<TABLE>
<S> <C>
10.9 Agreement of Purchase and Sale between the Company and TGX Corporation dated December
17, 1993--incorporated by reference to Exhibit 2 to the Company's Current Report on Form
8-K dated January 14, 1994.
10.10 Stock Purchase Agreement dated January 3, 1995 among Keith Hardin Gornick, R. David Briney,
William F. Rolinski, Charles Nelson and the Company--incorporated by reference to Exhibit
2.1 to the Company's Current Report on Form 8-K dated February 10, 1995
10.10(a) Agreement of Amendment dated January 16, 1995 among Keith Hardin Gornick, R. David Briney,
William F. Rolinski, Charles Nelson and the Company--incorporated by reference to Exhibit
2.2 to the Company's Current Report on Form 8-K dated February 10, 1995
10.10(b) Second Agreement of Amendment dated February 10, 1995 among Keith Hardin Gornick, R. David
Briney, William F. Rolinski, Charles Nelson and the Company--incorporated by reference to
Exhibit 2.3 to the Company's Current Report on Form 8-K dated February 10, 1995
10.11 Asset Purchase Agreement dated July 26, 1995 among Quaker State Corporation, QSE&P, Inc.
and the Company--incorporated by reference to Exhibit 2 to the Company's Current Report
on Form 8-K dated August 9, 1995.
21* Subsidiaries of the Registrant
23* Consent of Ernst & Young LLP
27* Financial Data Schedule
</TABLE>
*Filed herewith
<PAGE> 40
BELDEN & BLAKE CORPORATION
INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS AND SCHEDULES
ITEM 14(a) (1) AND (2)
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets as of December 31, 1995 and 1994 . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . F-8
</TABLE>
All financial statement schedules have been omitted since the required
information is not present in amounts sufficient to require submission of the
schedule or because the information required is included in the financial
statements.
F-1
<PAGE> 41
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Belden & Blake Corporation
We have audited the accompanying consolidated balance sheets of Belden & Blake
Corporation as of December 31, 1995 and 1994, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Belden & Blake
Corporation at December 31, 1995 and 1994, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Cleveland, Ohio
February 29, 1996
F-2
<PAGE> 42
<TABLE>
BELDEN & BLAKE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<CAPTION>
DECEMBER 31
--------------------------
1995 1994
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 12,322 $ 3,649
Accounts receivable, net 28,123 13,069
Inventories 9,253 6,677
Deferred income taxes 2,254 1,741
Other current assets 2,198 957
----------- -----------
TOTAL CURRENT ASSETS 54,150 26,093
PROPERTY AND EQUIPMENT
Oil and gas properties (successful efforts method) 235,344 122,280
Gas gathering systems 25,416 18,120
Land, buildings, machinery and equipment 29,977 19,564
----------- -----------
290,737 159,964
Less accumulated depreciation, depletion
and amortization 59,209 40,789
----------- -----------
PROPERTY AND EQUIPMENT, NET 231,528 119,175
OTHER ASSETS 11,620 2,905
----------- -----------
$ 297,298 $ 148,173
=========== ===========
</TABLE>
F-3
<PAGE> 43
<TABLE>
BELDEN & BLAKE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
DECEMBER 31
-------------------
1995 1994
-------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 11,004 $ 4,885
Accrued expenses 23,811 7,149
Current portion of long-term liabilities 1,976 447
-------- --------
TOTAL CURRENT LIABILITIES 36,791 12,481
LONG-TERM LIABILITIES
Bank and other long-term debt 67,223 4,240
Senior notes 35,000 35,000
Convertible subordinated debentures 6,800 7,350
Other 1,500 1,268
-------- --------
TOTAL LONG-TERM LIABILITIES 110,523 47,858
DEFERRED INCOME TAXES 7,693 6,692
SHAREHOLDERS' EQUITY
Common stock without par value; $.10 stated value
per share; authorized 12,000,000 shares; issued
and outstanding 11,136,496 and 7,084,737 shares 1,114 709
Preferred stock without par value; $100 stated value
per share; authorized 8,000,000 shares;
issued and outstanding 24,000 shares 2,400 2,400
Paid in capital 126,063 70,379
Retained earnings 12,820 7,879
Unearned portion of restricted stock (106) (225)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 142,291 81,142
-------- --------
$297,298 $148,173
======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 44
<TABLE>
BELDEN & BLAKE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
REVENUES
Oil and gas sales $ 46,853 $32,574 $ 26,631
Gas marketing and gathering 40,436 33,072 34,709
Oilfield sales and service 20,066 13,157 10,887
Interest and other 2,709 559 647
-------- ------- --------
110,064 79,362 72,874
EXPENSES
Production expense 11,919 7,935 5,946
Production taxes 2,060 1,357 1,244
Cost of gas and gathering expense 34,079 29,134 30,721
Oilfield sales and service 18,404 12,264 10,343
Exploration expense 4,938 2,807 2,538
General and administrative expense 4,464 3,966 3,940
Interest expense 6,073 3,503 3,187
Depreciation, depletion and amortization 19,717 11,886 9,693
-------- ------- --------
101,654 72,852 67,612
-------- ------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 8,410 6,510 5,262
Provision for income taxes 2,150 2,330 1,997
-------- ------- --------
INCOME FROM CONTINUING OPERATIONS 6,260 4,180 3,265
LOSS FROM DISCONTINUED OPERATIONS (1,139) (337) (45)
-------- ------- --------
NET INCOME $ 5,121 $ 3,843 $ 3,220
======== ========= ========
PER COMMON SHARE:
CONTINUING OPERATIONS $ 0.69 $ 0.57 $ 0.55
DISCONTINUED OPERATIONS (0.13) (0.05) (0.01)
-------- --------- --------
NET INCOME $ 0.56 $ 0.52 $ 0.54
======== ========= ========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,785 7,080 5,675
======== ========= ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 45
BELDEN & BLAKE CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
UNEARNED
COMMON COMMON PREFERRED PAID IN RETAINED RESTRICTED
SHARES STOCK STOCK CAPITAL EARNINGS STOCK TOTAL
------ ------ --------- ------- -------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1993 3,355 $ 336 $ 2,400 $ 25,550 $ 1,176 $(440) $ 29,022
Stock issued 3,678 368 43,968 44,336
Net income 3,220 3,220
Preferred stock dividend (180) (180)
Employee stock bonus 22 2 238 240
Restricted stock vested 109 110 219
Other (2) -- -- --
- -------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1993 7,053 706 2,400 69,865 4,216 (330) 76,857
Stock issued 32 3 385 388
Net income 3,843 3,843
Preferred stock dividend (180) (180)
Restricted stock vested 129 105 234
- -------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1994 7,085 709 2,400 70,379 7,879 (225) 81,142
Stock issued 4,028 403 55,264 55,667
Net income 5,121 5,121
Preferred stock dividend (180) (180)
Stock options exercised 2 -- 25 25
Employee stock bonus 22 2 251 253
Restricted stock vested 144 119 263
- -------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1995 11,137 $ 1,114 $ 2,400 $126,063 $ 12,820 $(106) $ 142,291
=============================================================================================================
</TABLE>
See accompanying notes.
F-6
<PAGE> 46
BELDEN & BLAKE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1995 1994 1993
--------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,121 $ 3,843 $ 3,220
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 20,154 12,021 9,704
Loss (gain) on disposal of property and equipment 177 91 (118)
Deferred income taxes 488 1,570 1,552
Deferred compensation and stock grants 1,067 359 459
Change in operating assets and liabilities, net of
effects of acquisition of businesses:
Accounts receivable and other operating assets (14,485) (1,622) (5,951)
Inventories 469 (2,328) (1,393)
Accounts payable and accrued expenses 8,958 1,775 1,912
--------- -------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 21,949 15,709 9,385
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired (99,837) (17,968) (560)
Proceeds from property and equipment disposals 589 438 1,388
Additions to property and equipment (23,855) (19,844) (13,465)
(Increase) decrease in other assets (867) 88 (971)
--------- -------- ---------
NET CASH USED IN INVESTING ACTIVITIES (123,970) (37,286) (13,608)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit and long-term debt 73,000 6,100 5,025
Proceeds from senior note placement -- -- 35,000
Repayment of long-term debt and other obligations (17,818) (2,938) (59,349)
Preferred stock dividends (180) (180) (180)
Proceeds from sale of common stock 59,438 -- 46,223
Common stock placement cost (3,746) -- (3,563)
--------- -------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 110,694 2,982 23,156
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 8,673 (18,595) 18,933
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,649 22,244 3,311
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 12,322 $ 3,649 $ 22,244
========= ======== =========
</TABLE>
See accompanying notes.
F-7
<PAGE> 47
BELDEN & BLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
- --------
The Company operates primarily in the oil and gas industry. The
Company's principal business is the acquisition, exploration, development and
production of oil and gas reserves, and the gathering and marketing of natural
gas. Sales of oil and gas are ultimately made to refineries, gas utilities and
industrial consumers in Ohio, West Virginia, New York, Pennsylvania and
Michigan. The Company is also a distributor of a broad range of oilfield
equipment and supplies. Its customers include other independent oil and gas
companies, dealers and operators throughout Ohio, West Virginia, New York,
Pennsylvania and Michigan. The price of oil and gas has a significant impact
on the Company's working capital and results of operations.
PRINCIPLES OF CONSOLIDATION AND FINANCIAL PRESENTATION
- ------------------------------------------------------
The accompanying consolidated financial statements include the
financial statements of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS
- --------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts. Significant estimates used in
the preparation of the Company's financial statements which could be subject to
significant revision in the near term include estimated oil and gas reserves
and the estimated net realizable value of the assets of discontinued
operations. Although actual results could differ from these estimates,
significant adjustments to these estimates historically have not been required.
CASH EQUIVALENTS
- ----------------
For purposes of the statements of cash flows, cash equivalents are
defined as all highly liquid debt instruments purchased with an initial
maturity of three months or less.
CONCENTRATIONS OF CREDIT RISK
- -----------------------------
Credit limits, ongoing credit evaluation and account monitoring
procedures are utilized to minimize the risk of loss. Collateral is generally
not required. Expected losses are provided for currently and actual losses
have been within management's expectations.
INVENTORIES
- -----------
Inventories of material, pipe and supplies are valued at average cost.
Crude oil and natural gas inventories are stated at average cost.
PROPERTY AND EQUIPMENT
- ----------------------
The Company utilizes the "successful efforts" method of accounting for
its oil and gas properties. Under this method, property acquisition and
development costs and certain productive exploration costs are capitalized
while non-productive exploration costs, which include certain geological and
geophysical costs, dry holes, expired leases and delay rentals, are expensed as
incurred. Capitalized costs related to proved properties are depleted using
the unit-of-production method. Depreciation, depletion and amortization of
proved oil and gas properties is calculated on the basis of estimated
recoverable reserve quantities. These estimates can change based on economic or
other factors. No gains or losses are recognized upon the disposition of oil
and gas properties except in extraordinary
F-8
<PAGE> 48
transactions. Sales proceeds are credited to the carrying value of the
properties. Maintenance and repairs are expensed, and expenditures which
enhance the value of properties are capitalized.
Additional depreciation, depletion and amortization is recorded to the
extent that the aggregate net carrying value of producing oil and gas
properties exceeds the corresponding undiscounted future pretax net cash flows
relating to estimated proved oil and gas reserves computed in accordance with
the provisions of Statement of Financial Accounting Standards ("SFAS") No. 69,
"Disclosures About Oil and Gas Producing Activities".
Unproved oil and gas properties are stated at cost and consist of
undeveloped leases. These costs are assessed periodically to determine whether
their value has been impaired, and if impairment is indicated, the costs are
charged to expense.
Gas gathering systems are stated at cost. Depreciation expense is
computed using the straight-line method over 15 years.
Property, plant and equipment are stated at cost. Depreciation of
non-oil and gas properties is computed using the straight-line method over the
useful lives of the assets. When assets other than oil and gas properties are
retired or otherwise disposed of, the cost and related accumulated depreciation
are removed from the accounts, and any resulting gain or loss is reflected in
income for the period. The cost of maintenance and repairs is charged to
income as incurred, and significant renewals and betterments are capitalized.
NET INCOME PER COMMON SHARE
- ---------------------------
Net income per common share is computed by subtracting preferred
dividends from net income and dividing the difference by the weighted average
number of common and common equivalent shares outstanding. Outstanding options
and warrants are included in the computation of net income per common share
when their effect is dilutive.
REVENUE RECOGNITION
- -------------------
Oil and gas production revenue is recognized as production and
delivery take place. Oil and gas marketing revenues are recognized when title
passes. Oilfield sales and service revenues are recognized when the goods or
services have been provided.
STOCK-BASED COMPENSATION
- ------------------------
The Company accounts for stock-based compensation under the provisions
of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees".
INCOME TAXES
- ------------
The Company uses the liability method of accounting for income taxes.
Deferred income taxes are provided for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Deferred income taxes also are
recognized for operating losses that are available to offset future taxable
income and tax credits that are available to offset future federal income
taxes.
RECLASSIFICATIONS
- -----------------
Certain reclassifications have been made in 1994 and 1993 to conform
to the presentation in 1995.
F-9
<PAGE> 49
(2) CHANGE IN ACCOUNTING PRINCIPLE
In March 1995, the Financial Accounting Standards Board issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company is required to adopt Statement 121 in the first quarter of 1996 and,
based on current circumstances, does not believe the effect of adoption will be
material.
(3) ACQUISITIONS
The following acquisitions were accounted for as purchase business
combinations. Accordingly, the results of operations of the acquired
businesses are included in the Company's consolidated statements of operations
from the date of the respective aquisitions.
Effective in July 1995, the Company purchased from Quaker State
Corporation most of its oil and gas properties and related assets in the
Appalachian Basin (the "Quaker State Properties") for approximately $50
million. The Quaker State Properties included approximately 1,460 gross (1,100
net) wells with estimated proved reserves of 2.2 MMBbl (million barrels) of oil
and 46.8 Bcf of gas at December 31, 1994, approximately 250 miles of gas
gathering systems, undeveloped oil and gas leases and fee mineral interests
covering approximately 250,000 acres, an extensive geologic and geophysical
database and other assets.
In January 1995, the Company purchased Ward Lake Drilling, Inc. ("Ward
Lake"), a privately-held exploration and production company headquartered in
Gaylord, Michigan, for $15.1 million. Ward Lake operates and holds a
production payment interest and working interests averaging 13.6% in
approximately 500 Antrim Shale gas wells located in Michigan's lower peninsula.
The purchase also included approximately 5,500 undeveloped leasehold acres that
Ward Lake owns in Michigan. At December 31, 1994, the wells had estimated
proved developed natural gas reserves totaling 98 Bcf (14 Bcf net to the
Company's interest). Approximately one half of the purchase price represented
payment for the proved reserves, with the balance associated with other oil and
gas and corporate assets. Through the end of 1995, the Company purchased
additional working interests averaging 24% in the wells operated by Ward Lake
for approximately $12 million. The interests acquired had estimated proved
developed reserves of 16 Bcf at December 31, 1994. The production from certain
interests qualify for nonconventional fuel source tax credits.
In addition, during 1995 the Company in four separate transactions
acquired for approximately $29.2 million working interests in oil and gas wells
in Michigan, Ohio, Pennsylvania and New York and drilling rights on more than
250,000 acres in Ohio. Estimated proved developed reserves associated with the
wells totaled 35 Bcfe of natural gas net to the Company's interest at December
31, 1994.
In January 1994, the Company purchased substantially all of TGX
Corporation's Appalachian Basin assets for $15.5 million. The assets acquired
included 1,034 gross (910 net) gas and oil wells on approximately 121,000 acres
located in northeastern Ohio and southwestern New York and 15,000 undeveloped
acres and related inventory, real estate and oilfield equipment. At December
31, 1993, the properties acquired had estimated proved reserves of 22.0 Bcf of
natural gas and 28,700 Bbls of oil.
F-10
<PAGE> 50
The following table presents the unaudited pro forma results of
operations for the years ended December 31, 1995 and 1994 as if the
acquisitions above occurred at the beginning of each period presented.
<TABLE>
<CAPTION>
PRO FORMA
--------------------------
1995 1994
----------- -----------
(in thousands, except per share data)
<S> <C> <C>
Total revenues $ 124,854 $ 113,074
Net income 8,532 11,632
Net income per share $ .75 $ 1 .03
</TABLE>
(4) DETAILS OF BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------
1995 1994
---------- ---------
ACCOUNTS RECEIVABLE (IN THOUSANDS)
<S> <C> <C>
Accounts receivable $ 16,096 $ 7,399
Allowance for doubtful accounts (269) (170)
Oil and gas production receivable 11,610 5,710
Current portion of notes receivable 686 130
---------- ---------
$ 28,123 $ 13,069
========== =========
INVENTORIES
Oil $ 1,574 $ 1,187
Natural gas 170 1,375
Material, pipe and supplies 7,509 4,115
---------- ---------
$ 9,253 $ 6,677
========== =========
PROPERTY AND EQUIPMENT, GROSS
OIL AND GAS PROPERTIES
Producing properties $ 214,984 $117,222
Non-producing properties 11,286 5,058
Other 9,074 --
---------- ---------
$ 235,344 $122,280
========== =========
LAND, BUILDINGS, MACHINERY AND EQUIPMENT
Land, buildings and improvements $ 8,748 $ 5,633
Machinery and equipment 21,229 13,931
---------- ---------
$ 29,977 $ 19,564
========== =========
ACCRUED EXPENSES
Accrued expenses $ 9,924 $ 2,775
Accrued drilling and completion costs 4,902 --
Accrued income taxes 15 298
Ad valorem and other taxes 2,162 1,270
Compensation and related benefits 2,147 1,514
Undistributed production revenue 4,661 1,292
---------- ---------
$ 23,811 $ 7,149
========== =========
</TABLE>
F-11
<PAGE> 51
(5) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1995 1994
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
Revolving line of credit $ 67,000 $ 4,000
Senior notes 35,000 35,000
Convertible subordinated debentures 6,800 7,350
Other 1,871 346
----------- -----------
110,671 46,696
Less current portion 1,648 106
----------- -----------
Long term debt $ 109,023 $ 46,590
=========== ===========
</TABLE>
The Company has a $200 million unsecured revolving credit facility
with a group of banks that matures on March 31, 1999. Outstanding balances
under the facility incurred interest at the Company's choice of either: (1)
the one, two, or three-month LIBOR plus 2% (7.66% for the three-month LIBOR
interest rate option at December 31, 1995) or (2) the bank's prime rate (8.50%
at December 31, 1995). Borrowings under the credit agreement are limited to
the borrowing base as established semi-annually by the bank group. The
borrowing base at December 31, 1995 was $81 million.
When market conditions are favorable, the Company may enter into
interest rate swap arrangements, whereby a portion of the Company's floating
rate exposure is exchanged for a fixed interest rate. The Company had no such
derivative financial instruments at December 31, 1994 or 1995.
The Company has $35 million of 7% fixed-rate senior notes outstanding
with five insurance companies. These notes, which are interest-only through
1996, mature on September 30, 2005. Equal principal payments of $3,888,888
will be required on each September 30 commencing in 1997.
The convertible subordinated debentures have a fixed interest rate of
9.25% and mature on June 30, 2000. The debentures are currently convertible by
the debenture holders at the rate of one share of the Company's common stock
for each $20.15 of principal.
The debt agreements contain various covenants restricting payment
of dividends on common stock to $5 million plus 50% of cumulative net income,
restricting sales of assets to 15% of shareholders' equity in any one year and
requiring the maintenance of certain levels of net worth, working capital and
other financial ratios.
At December 31, 1995, the aggregate long-term debt maturing in the
next five years is as follows: $1,648,000 (1996); $3,918,000 (1997); $3,907,000
(1998); $70,907,000 (1999); $10,707,000 (2000) and $19,584,000 (2001 and
thereafter). The fair value of long-term debt approximated its carrying value
at December 31, 1995.
(6) LEASES
The Company leases certain computer equipment, vehicles and office
space under noncancelable agreements with lease periods of one to five years.
Rent expense amounted to approximately $1.4
F-12
<PAGE> 52
million, $742,000 and $1.1 million for the years ended December 31, 1995, 1994,
and 1993, respectively. Future commitments under leasing arrangements were not
significant at December 31, 1995.
(7) SHAREHOLDERS' EQUITY
In August 1995, the Company sold 4,025,000 shares of common stock.
Net proceeds, after deducting underwriting discounts and expenses, totaled
approximately $55.6 million. Approximately $50 million of the net proceeds
were used to purchase the Quaker State Properties, and the remaining proceeds
were used to reduce the outstanding balance under the Company's revolving
credit agreement.
In December 1995, the Company awarded 26,085 shares of common stock to
employees as profit sharing and bonuses. These shares were issued in January
1996.
Outstanding warrants for the purchase of 13,801 shares of the
Company's common stock at a price of $21.74 per share are exercisable by the
holder in whole or part any time prior to February 15, 1997.
On December 31, 1992, the Company issued 24,000 shares of Class II
Serial Preferred Stock with a stated value of $100 per share. In preference to
shares of common stock, each share is entitled to cumulative cash dividends of
$7.50 per year, payable quarterly. The Preferred Stock is subject to
redemption at $100 per share at any time by the Company and is convertible into
common stock, at the holder's election, at any time after five years from the
date of issuance at a conversion price of $15.00 per common share. Holders of
the Preferred Stock are entitled to one vote per preferred share.
The Company has reserved a total of 511,110 shares of common stock for
the conversion of the convertible subordinated debentures and the Class II
Serial Preferred Stock and the exercise of the outstanding warrants referred to
above.
In May 1993, the Company sold 3,450,000 shares of common stock in a
public offering. Net proceeds to the Company after underwriting discounts and
offering costs were approximately $42.2 million.
In August 1995, May 1994 and March 1993, non-statutory stock options
to purchase 250,000, 183,000 and 87,000 common shares, respectively, of the
Company's stock were granted to certain executive officers and employees under
the Company's Stock Option Plan. The exercise price of options may not be less
than the fair market value of a share of common stock on the date of grant.
Options expire on the tenth anniversary of the grant date unless cessation of
employment causes earlier termination. The options become exercisable in 25%
increments over a four-year period beginning one year from date of grant. As
of December 31, 1995, there were 551,000 shares available for grant under the
Plan.
On May 27, 1994, the shareholders approved the Non-Employee Directors
Stock Option Plan. In May 1995, May 1994 and March 1993 non-statutory stock
options to purchase 10,000, 10,000 and 8,000 common shares, respectively, of
the Company's stock were granted under the Plan. Additional options for 2,000
shares will be granted each year to each non-employee director. The exercise
price of options under the Plan is equal to the fair market value on the date
of grant. Options expire on the tenth anniversary of the grant date. The
options become exercisable on the anniversary of the grant date at a rate of
one third of the shares each year. As of December 31, 1995, there were 92,000
shares available for grant under the Plan.
F-13
<PAGE> 53
As of December 31, 1995, there were 544,750 options outstanding under
the two plans, of which 95,580 were exercisable at prices ranging from $10.00
to $16.375.
The Company's Articles of Incorporation include certain anti-takeover
provisions. The provisions grant the Board of Directors the authority to issue
and fix the terms of preferred stock as well as the ability to take certain
other actions that could have the effect of discouraging unsolicited takeover
attempts. In addition, the Company has entered into contracts with its
officers that provide for severance payments, in certain circumstances, in the
event that their employment is terminated following a change in control. The
senior notes may, at the noteholder's discretion, be accelerated and become due
and payable upon a change in control of the Company.
(8) RESTRICTED STOCK GRANT AND BONUS PLAN
In 1992, Henry S. Belden IV (HSB IV) contributed a total of 119,600
shares of the Company's common stock to fund the Company's Restricted Stock
Grant and Bonus Plan, as amended (the "Plan"). The shares contributed by HSB
IV were used to make restricted stock grant and bonus awards to employees of
the Company.
The shares of common stock awarded to an employee under the Plan are
fully paid and nonassessable and are represented by a certificate or
certificates registered in the employee's name. The employee has all the
rights of a shareholder with respect to such shares, including the right to
vote the shares and receive all dividends paid with respect to such shares.
Certain shares awarded are subject to forfeiture and to restrictions
prohibiting their sale, transfer, pledge or other disposition until the
restrictions are released. Such shares are released from such restrictions at
the rate of 25% for each full year of employment completed by the employee
after the date of the award and are fully vested after four full years of
continued employment, except that the shares will immediately vest and be
released from restrictions in the event of the death, retirement at normal
retirement age or permanent disability of the employee. The employee will
forfeit all rights to shares not previously released from restrictions in the
event of the termination of his or her employment with the Company for any
reason other than death, retirement at normal retirement age or permanent
disability or in the event of a change in control of the Company. The
ownership of all forfeited shares shall revert to HSB IV or his estate.
Unearned compensation was charged for the market value of the
restricted shares on the date of grant and is amortized over the restricted
period. The unamortized portion of unearned compensation is presented as a
reduction of shareholders' equity in the accompanying consolidated balance
sheet.
F-14
<PAGE> 54
(9) INCOME TAXES
The provision for income taxes on income from continuing operations in
the Consolidated Statements of Operations includes the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
CURRENT
Federal $ 1,103 $ 454 $ 276
State 111 190 159
------- ------- -------
1,214 644 435
DEFERRED
Federal 826 1,539 1,367
State 110 147 195
------- ------- -------
936 1,686 1,562
------- ------- -------
TOTAL $ 2,150 $ 2,330 $ 1,997
======= ======= =======
</TABLE>
The effective tax rate for continuing operations differs from the U.S.
federal statutory tax rate, as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Statutory federal income tax rate 34.0 % 34.0 % 34.0 %
Increases (reductions) in taxes
resulting from:
State income taxes, net of federal
tax benefit 1.7 3.4 4.4
Nonconventional fuel source tax credits (10.0) -- --
Statutory depletion (.3) (2.3) --
Other, net .2 .7 (.5)
-------- ------- --------
Effective income tax rate for the year 25.6 % 35.8 % 37.9 %
======== ======= ========
</TABLE>
F-15
<PAGE> 55
Significant components of the Company's deferred income tax liabilities
and assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------
1995 1994
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax liabilities:
Property and equipment, net $ 10,891 $ 9,860
Other, net 155 213
----------- ------------
Total deferred income tax liabilities 11,046 10,073
Deferred income tax assets:
Accrued expenses 1,984 1,559
Inventories 212 217
Net operating loss carryforwards 966 1,580
Tax credit carryforwards 2,263 1,356
Other, net 182 410
----------- ------------
Total deferred income tax assets 5,607 5,122
----------- ------------
Net deferred income tax liability $ 5,439 $ 4,951
=========== ============
Long-term liability $ 7,693 $ 6,692
Current asset (2,254) (1,741)
----------- ------------
Net deferred income tax liability $ 5,439 $ 4,951
=========== ============
</TABLE>
At December 31, 1995, the Company had approximately $2,600,000 of net
operating loss carryforwards available for federal income tax reporting
purposes. Substantially all of the net operating loss carryforwards are
limited as to their annual utilization as a result of prior ownership changes.
The net operating loss carryforwards, if unused, will expire from 2000 to 2009.
The Company has alternative minimum tax credit carryforwards of approximately
$2,263,000 which have no expiration date.
(10) RETIREMENT PLANS
The Company has a 401(k) salary reduction plan covering substantially
all of the employees of the Company. Under the plan, an amount equal to 2% of
participants' compensation is contributed by the Company to the plan each year.
Eligible employees may also make voluntary plan contributions which the Company
matches $.25 for every $1.00 contributed up to 6% of an employee's annual
compensation. Retirement plan expense for the years ended December 31, 1995,
1994 and 1993 was $372,213, $286,446 and $251,305, respectively.
The Company established non-qualified deferred compensation plans in
1994 which permit certain key employees and directors to elect to defer a
portion of their compensation.
(11) COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal actions arising in the normal
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the financial position
of the Company.
The Company has a claim in the Columbia Gas Transmission Corporation
("Columbia") bankruptcy reorganization proceedings arising from the rejection
of certain contracts for the purchase of
F-16
<PAGE> 56
natural gas. In Columbia's Amended Plan of Reorganization dated April 17,
1995, Columbia scheduled proposed allowed amounts for the Company of
approximately $2 million. The anticipated payout amount currently stated in
Columbia's reorganization plan is approximately sixty-eight (68%) of such
proposed allowed amount. In the third quarter of 1995 the Company recognized
$1.3 million of these anticipated proceeds. The amount is included in
"Interest and other" revenues. The Company believes that Columbia's proposed
allowed amount is inadequate and intends to pursue the recovery of a greater
amount from Columbia and anticipates hearings with respect to its claims to
take place during 1996, but the amount of any additional recovery is not
presently determinable.
(12) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1995 1994 1993
-------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH PAID DURING THE YEAR FOR:
Interest $ 5,592 $ 3,146 $ 3,207
Income taxes 1,296 90 776
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of assets in exchange for long-term
liabilities $ 8,460 $ 527 $ 1,006
Acquisition of assets in exchange for stock -- 388 1,680
Sale of assets in exchange for note receivable -- 689 --
</TABLE>
(13) SUPPLEMENTARY INFORMATION ON OIL AND GAS ACTIVITIES
The following disclosures of costs incurred related to oil and gas
activities are presented in accordance with SFAS No. 69.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------
1995 1994 1993
------------ ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Acquisition costs
Proved properties $ 79,464 $ 20,274 $ 3,883
Unproved properties 4,705 1,744 622
Developmental costs 19,906 9,142 6,365
Exploratory costs 4,968 2,130 1,895
</TABLE>
PROVED OIL AND GAS RESERVES (UNAUDITED)
The Company's proved developed and undeveloped reserves are all located
within the United States. Proved undeveloped reserves have been included
beginning in 1993. The Company cautions that there are many uncertainties
inherent in estimating proved reserve quantities and in projecting future
production rates and the timing of development expenditures. In addition,
estimates of new discoveries are more imprecise than those of properties with a
production history. Accordingly, these estimates are expected to change as
future information becomes available. Material revisions of reserve estimates
may occur in the future, development and production of the oil and gas reserves
may not occur in the periods assumed, and actual prices realized and actual
costs incurred may vary significantly from those used. Proved reserves represent
estimated quantities of natural gas, crude oil and condensate that geological
and engineering data demonstrate, with reasonable certainty, to be recoverable
in future years from known reservoirs under economic and operating conditions
existing at the time the estimates were made.
F-17
<PAGE> 57
Proved developed reserves are proved reserves expected to be recovered through
wells and equipment in place and under operating methods being utilized at the
time the estimates were made.
The estimates of proved developed reserves have been reviewed by
independent petroleum engineers. The estimates of proved undeveloped reserves
were prepared by the Company's petroleum engineers.
The following table sets forth changes in estimated proved and proved
developed reserves for the three years ended December 31, 1995.
<TABLE>
<CAPTION>
OIL GAS
(BBL) (MCF)
--------- -----------
<S> <C> <C>
DECEMBER 31, 1992 4,163,023 79,158,001
Inclusion of proved undeveloped reserves 388,342 19,687,024
Extensions and discoveries 182,957 5,198,126
Purchase of reserves in place 119,216 4,121,079
Sales of reserves in place (52,072) (9,557)
Revisions of previous estimates (815,743) (6,516,472)
Production (452,844) (7,373,252)
--------- -----------
DECEMBER 31, 1993 3,532,879 94,264,949
Extensions and discoveries 242,365 8,554,382
Purchase of reserves in place 222,981 26,876,534
Sale of reserves in place (11,178) (1,022,027)
Revisions of previous estimates 622,462 3,880,633
Production (496,039) (9,562,862)
--------- -----------
DECEMBER 31, 1994 4,113,470 122,991,609
Extensions and discoveries 229,957 22,287,564
Purchase of reserves in place 2,197,414 111,360,991
Sale of reserves in place (28,693) (278,013)
Revisions of previous estimates 326,771 (419)
Production (555,913) (16,961,424)
--------- -----------
DECEMBER 31, 1995 6,283,006 239,400,308
========= ===========
PROVED DEVELOPED RESERVES
December 31, 1993 3,144,537 74,577,925
========= ===========
December 31, 1994 3,714,671 101,355,451
========= ===========
December 31, 1995 5,592,579 206,998,924
========= ===========
</TABLE>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL
AND GAS RESERVES (UNAUDITED)
The following tables, which present a standardized measure of
discounted future net cash flows and changes therein relating to proved oil and
gas reserves, are presented pursuant to SFAS No. 69. In computing this data,
assumptions other than those required by the FASB could produce different
results. Accordingly, the data should not be construed as representative of
the fair market value of the Company's proved oil and gas reserves. The
following assumptions have been made:
- Future revenues were based on year-end oil and gas prices.
Future price changes were included only to the extent provided
by existing contractual agreements.
F-18
<PAGE> 58
- Production and development costs were computed using year-end
costs assuming no change in present economic conditions.
- Future net cash flows were discounted at an annual rate of 10%.
- Future income taxes were computed using the approximate
statutory tax rate and giving effect to available net
operating losses, tax credits and statutory depletion.
The standardized measure of discounted future net cash flows relating
to proved oil and gas reserves is presented below:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------
1995 1994 1993
----------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Estimated future cash inflows (outflows)
Revenues from the sale of oil and gas $ 679,286 $ 395,610 $ 315,271
Production and development costs (293,601) (165,766) (132,314)
----------- ---------- ----------
Future net cash flows before income taxes 385,685 229,844 182,957
Future income taxes (80,715) (54,762) (39,956)
----------- ---------- ----------
Future net cash flows 304,970 175,082 143,001
10% timing discount (134,053) (85,228) (71,915)
----------- ---------- ----------
Standardized measure of discounted
future net cash flows $ 170,917 $ 89,854 $ 71,086
=========== ========== ==========
</TABLE>
The principal sources of changes in the standardized measure of future
net cash flows are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1995 1994 1993
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Beginning of year $ 89,854 $ 71,086 $ 76,540
Sale of oil and gas, net of
production costs (32,874) (23,287) (19,451)
Extensions and discoveries, less
related estimated future
development and production costs 24,441 14,317 9,668
Purchase of reserves in place less
estimated future production costs 104,270 20,715 4,807
Sale of reserves in place less
estimated future production costs (329) (635) (180)
Revisions of previous quantity estimates 1,129 4,972 (9,773)
Inclusion of proved undeveloped reserves -- -- 6,611
Net changes in prices and production
costs (4,723) 94 (2,564)
Change in income taxes (17,756) (8,852) (4,443)
Accretion of 10% timing discount 11,647 8,944 9,087
Changes in production rates (timing)
and other (4,742) 2,500 784
--------- -------- --------
End of year $ 170,917 $ 89,854 $ 71,086
========= ======== ========
</TABLE>
F-19
<PAGE> 59
(14) INDUSTRY SEGMENT FINANCIAL INFORMATION
The table below presents certain financial information regarding the
Company's industry segments of its continuing operations. Intersegment sales
are billed on an intercompany basis at prices for comparable third party goods
and services.
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Oil and gas operations $ 88,632 $ 65,646 $ 61,340
Oilfield sales and service 25,178 17,360 14,158
Intersegment sales (5,112) (4,203) (3,271)
----------- ---------- ----------
$ 108,698 $ 78,803 $ 72,227
=========== ========== ==========
OPERATING INCOME
Oil and gas operations $ 12,444 $ 9,104 $ 7,645
Oilfield sales and service 673 350 157
----------- ---------- ----------
$ 13,117 $ 9,454 $ 7,802
=========== ========== ==========
IDENTIFIABLE ASSETS
Oil and gas operations $ 274,021 $ 132,538 $ 128,353
Oilfield sales and service 20,348 12,408 6,821
----------- ---------- ----------
$ 294,369 $ 144,946 $ 135,174
=========== ========== ==========
DEPRECIATION, DEPLETION AND
AMORTIZATION EXPENSE
Oil and gas operations $ 18,729 $ 11,343 $ 9,316
Oilfield sales and service 988 543 377
----------- ---------- ----------
$ 19,717 $ 11,886 $ 9,693
=========== ========== ==========
CAPITAL EXPENDITURES
Oil and gas operations $ 129,219 $ 33,956 $ 15,977
Oilfield sales and service 4,735 3,391 1,015
----------- ---------- ----------
$ 133,954 $ 37,347 $ 16,992
=========== ========== ==========
</TABLE>
Oil and gas sales and gas marketing and gathering revenue from one
customer that exceeded 10% of total consolidated revenue during the year ended
December 31, 1995 amounted to $11,111,822. Oil and gas sales and gas marketing
and gathering revenue from one customer that exceeded 10% of total consolidated
revenue during the years ended December 31, 1994 and 1993 amounted to
$9,600,612 and $8,616,069, respectively.
F-20
<PAGE> 60
(15) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The results of operations for the four quarters of 1995 and 1994 are
shown below.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
------------ ---------- ---------- ----------
1995 (IN THOUSANDS, EXCEPT PER SHARE DATA)
-----
<S> <C> <C> <C> <C>
Sales and other operating $ 20,872 $ 22,063 $ 30,566 $ 35,197
revenues
Gross profit 3,250 3,865 5,178 5,288
Net income 739 916 1,155 2,311
Net income per common share .10 .12 .11 .20
1994
----
Sales and other operating
revenues $ 20,079 $ 19,311 $ 20,365 $ 19,048
Gross profit 3,074 3,829 3,415 3,102
Net income 807 1,105 1,080 851
Net income per common share .11 .15 .15 .11
</TABLE>
Income tax expense in the fourth quarter of 1995 was reduced by
approximately $600,000 to record the reduction of the effective tax rate for
the first nine months of 1995 as a result of the recognition of nonconventional
fuel source tax credits.
During the third quarter of 1995 the Company recorded a loss (net of
tax benefit) of approximately $678,000 from discontinued operations (see note
16). Sales and gross profit from all prior quarters presented have been
restated to reflect the discontinued operations.
(16) DISCONTINUED OPERATIONS
During September, 1995 the Company announced plans to sell Engine Power
Systems, Inc. (EPS), its wholly-owned subsidiary engaged in engine sales and
system packaging for power generation and compression applications. The
Company is actively seeking a buyer for EPS and expects to complete the sale of
this business in 1996. The results of operations of EPS have been presented as
discontinued operations in the accompanying financial statements for all
periods presented. Net revenues generated by EPS were approximately $4,173,000
in 1995, $3,742,000 in 1994 and $225,000 in 1993. The remaining net assets of
EPS were approximately $2,100,000 at December 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------
1995 1994 1993
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Loss from operations of discontinued $ (760) $ (509) $ (68)
business
Income tax benefit 268 172 23
-------- -------- -------
(492) (337) (45)
Estimated loss on disposal (1,001) -- --
Income tax benefit 354 -- --
-------- -------- -------
(647) -- --
-------- -------- -------
LOSS FROM DISCONTINUED OPERATIONS $ (1,139) $ (337) $ (45)
======== ======== =======
</TABLE>
F-21
<PAGE> 61
(17) SUBSEQUENT EVENTS
In February 1996, the Company sold or agreed to sell certain interests
that qualify for the nonconventional fuel source tax credit . The interests
were sold for approximately $750,000 in cash and a volumetric production
payment under which 100% of the cash flow from the properties will go to the
Company until approximately 11.7 Bcf of gas has been produced and sold. In
addition to receiving 100% of the cash flow from the properties, the Company
will receive quarterly payments based on production from the interests. The
Company has the option to repurchase the interests at a future date.
F-22
<PAGE> 1
FIRST AMENDMENT
TO
CREDIT AGREEMENT
AMONG
BELDEN & BLAKE CORPORATION,
THE CANTON OIL & GAS COMPANY,
PEAKE ENERGY, INC.,
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
NBD BANK, N.A.
EFFECTIVE AS OF AUGUST 1, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . 1
1.1 Terms Defined Above . . . . . . . . . . . . . . . . . . . 1
1.2 Terms Defined in Agreement . . . . . . . . . . . . . . . . 1
1.3 References . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Articles and Sections . . . . . . . . . . . . . . . . . . 2
1.5 Number and Gender . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II AMENDMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . 2
2.1 Amendment of Section 1.2 . . . . . . . . . . . . . . . . . 2
2.2 Amendment of Section 2.7(a) . . . . . . . . . . . . . . . 2
2.3 Amendment of Section 4.17 . . . . . . . . . . . . . . . . 3
2.4 Amendment of Section 9.3 . . . . . . . . . . . . . . . . . 3
2.5 Deletion of Peake Operating as Borrower . . . . . . . . . 3
ARTICLE III CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Receipt of Documents . . . . . . . . . . . . . . . . . . . 3
3.2 No Material Adverse Change . . . . . . . . . . . . . . . . 4
3.3 No Default or Event of Default . . . . . . . . . . . . . . 4
3.4 Accuracy of Representations and Warranties . . . . . . . . 4
3.5 Additional Matters . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 4
ARTICLE V RATIFICATION . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 5
6.1 Scope of Amendment . . . . . . . . . . . . . . . . . . . . 5
6.2 Agreement as Amended . . . . . . . . . . . . . . . . . . . 5
6.3 Successors and Assigns; Rights of Third Parties . . . . . 5
6.4 Further Assurances . . . . . . . . . . . . . . . . . . . . 5
6.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 5
6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS . . . . . . . . . . . 6
6.7 JURISDICTION AND VENUE . . . . . . . . . . . . . . . . . . 6
6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES . . . 6
</TABLE>
-i-
<PAGE> 3
FIRST AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "FIRST
AMENDMENT") is made and entered into effective as of August 1, 1994, by and
among BELDEN & BLAKE CORPORATION, an Ohio corporation ("BBC"), THE CANTON OIL &
GAS COMPANY, an Ohio corporation ("COG"), PEAKE ENERGY, INC., a Delaware
corporation ("PEAKE ENERGY;" with BBC and COG each a "BORROWER" and
collectively, the "BORROWERS"), BANK ONE, TEXAS, NATIONAL ASSOCIATION, a
national banking association ("BANK ONE"), and NBD BANK, N.A., a national
banking association ("NBD;" with Bank One, together with each financial
institution that becomes a party hereto or entitled to benefits and subject to
obligations hereunder subsequent to the date hereof, each a "LENDER" and
collectively, the "LENDERS"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION, as
agent for the Lenders (in such capacity and together with any successors
designated pursuant hereto, the "AGENT").
W I T N E S S E T H:
-------------------
WHEREAS, the above named parties did execute and exchange
counterparts of the Credit Agreement dated November 15, 1993 (the "AGREEMENT"),
pursuant to which the Lenders have extended credit to the Borrowers; and
WHEREAS, the parties to the Agreement desire to amend the
Agreement in the particulars hereinafter set forth;
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth in this First Amendment and the
Agreement, the parties hereto agree as follows:
ARTICLE I
---------
DEFINITIONS AND INTERPRETATION
------------------------------
1.1 TERMS DEFINED ABOVE. As used herein, each of the
terms "AGENT," "AGREEMENT," "BANK ONE," "BBC," "BORROWER," "BORROWERS," "COG,"
"FIRST AMENDMENT," "LENDER," "LENDERS," "NBD," and "PEAKE ENERGY" shall have
the meaning assigned to such term hereinabove.
1.2 TERMS DEFINED IN AGREEMENT. As used herein, each
term defined in the Agreement shall have the meaning assigned to such term in
the Agreement, unless expressly provided herein to the contrary.
1.3 REFERENCES. References in this First Amendment to
Article or Section numbers shall be to Articles and Sections of this First
Amendment, unless expressly stated to the contrary. References in this First
Amendment to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow,"
"hereof," and "hereunder"
<PAGE> 4
shall be to this First Amendment in its entirety and not only to the particular
Article or Section in which such reference appears.
1.4 ARTICLES AND SECTIONS. This First Amendment, for
convenience only, has been divided into Articles and Sections and it is
understood that the rights, powers, privileges, duties, and other legal
relations of the parties hereto shall be determined from this First Amendment
as an entirety and without regard to such division into Articles and Sections
and without regard to headings prefixed to such Articles and Sections.
1.5 NUMBER AND GENDER. Whenever the context requires,
reference herein made to the single number shall be understood to include the
plural and likewise the plural shall be understood to include the singular.
Words denoting sex shall be construed to include the masculine, feminine and
neuter, when such construction is appropriate, and specific enumeration shall
not exclude the general, but shall be construed as cumulative. Definitions of
terms defined in the singular and plural shall be equally applicable to the
plural or singular, as the case may be.
ARTICLE II
----------
AMENDMENT OF AGREEMENT
----------------------
Each of the Borrowers, the Lenders, and the Agent hereby amend
the Agreement in the following particulars, effective as of and after the
effective date of this First Amendment:
2.1 AMENDMENT OF SECTION 1.2. Terms defined in Section
1.1 are hereby incorporated into or substituted for, as the case may be, the
definitions contained in Section 1.2 of the Agreement. In addition, the
following definitions of Section 1.2 of the Agreement are hereby amended to
read as follows:
"COMMITMENT AMOUNT" shall mean the amount of $30,000,000 or
such higher amount as determined by the Lenders from time to time,
which higher amount shall become effective upon written notification
thereof to the Borrowers from the Lenders.
"COMMITMENT TERMINATION DATE" shall mean March 31, 1998.
2.2 AMENDMENT OF SECTION 2.7(a). Section 2.7(a) of the
Agreement is hereby amended to read as follows:
"(a) The Borrowing Base as of August 1, 1994 is
acknowledged by each Borrower and each Lender to be $65,000,000."
2
<PAGE> 5
2.3 AMENDMENT OF SECTION 4.17. The first and third
sentences of Section 4.17 of the Agreement are hereby amended to read as
follows:
"BBC has no Subsidiaries as of the date of the First Amendment
to this Agreement except for COG, Peake Energy, and Engine Power
Systems, Inc., an Ohio corporation." "Peake Energy has no
Subsidiaries as of the date of the First Amendment to this Agreement."
2.4 AMENDMENT OF SECTION 9.3. Section 9.3(a), (b), and
(c) are hereby amended to read as follows:
"(a) If to Bank One or the Agent, to:
BANK ONE, TEXAS, NATIONAL ASSOCIATION
910 Travis, 6th Floor
Houston, Texas 77002
Attention: Mr. Richard G. Sylvan
Telecopy: (713) 751-3544
(b) if to NBD, to:
NBD BANK, N.A.
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Mr. Joseph Giampetroni
Telecopy: (313) 225-2649
(c) if to any Borrower, to:
BELDEN & BLAKE CORPORATION
5200 Stoneham Road
North Canton, Ohio 44720-1543
Attention: J.M. Vitale
Telecopy: (216) 497-5463"
2.5 DELETION OF PEAKE OPERATING AS BORROWER. All
references in the Agreement to Peake Operating are hereby deleted.
ARTICLE III
-----------
CONDITIONS
----------
The obligations of the Lenders and the Agent to enter into
this First Amendment are subject to the fulfillment of the following conditions
precedent, with all documents to be delivered to the Agent to be in form and
substance satisfactory to the Lenders:
3.1 RECEIPT OF DOCUMENTS. The Agent shall have received
the following:
3
<PAGE> 6
(a) this First Amendment, duly executed by each Borrower;
(b) an extension fee, payable in immediately available
funds, in the amount of $75,000;
(c) a Notice of Final Agreement; and
(d) such other agreements, documents, items, instruments,
opinions, certificates, waivers, consents, and evidence as the Agent
may reasonably request on its own behalf or on behalf of any Lender.
3.2 NO MATERIAL ADVERSE CHANGE. In the opinion of the
Required Lenders, no material adverse change shall have occurred in the
property, business, operations, conditions (financial or otherwise) or
prospects of any Borrower since the date of the last Financial Statements
delivered to the Lenders.
3.3 NO DEFAULT OR EVENT OF DEFAULT. No Default or Event
of Default shall have occurred and be continuing.
3.4 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of
the representations and warranties contained in Article IV of the Agreement, as
amended hereby, and in any other Loan Document, as each has been supplemented,
if applicable, shall be true and correct in all material respects, except as
affected by the transactions contemplated in the Agreement and this First
Amendment.
3.5 ADDITIONAL MATTERS. All matters incident to the
consummation of the transactions contemplated hereby shall be satisfactory to
the Required Lenders.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
Each of the Borrowers hereby expressly remakes, in favor of
the Lenders and the Agent, all of the representations and warranties set forth
in Article IV of the Agreement, as amended hereby, and in any other Loan
Document, and represents and warrants that all such representations and
warranties, as each has been supplemented, if applicable, remain true and
unbreached in all material respects, except as affected by the transactions
contemplated in the Agreement and this First Amendment and except for such
representations and warranties which may be limited to the date made.
4
<PAGE> 7
ARTICLE V
---------
RATIFICATION
------------
Each of the parties hereto does hereby adopt, ratify, and
confirm the Agreement and each other Loan Document to which it is a party, in
all things in accordance with the terms and provisions thereof, as amended by
this First Amendment.
ARTICLE VI
----------
MISCELLANEOUS
-------------
6.1 SCOPE OF AMENDMENT. The scope of this First
Amendment is expressly limited to the matters addressed herein and this First
Amendment shall not operate as a waiver of any past, present, or future breach,
Default, or Event of Default under the Agreement, except to the extent, if any,
that any such breach, Default, or Event of Default is remedied by the effect of
this First Amendment.
6.2 AGREEMENT AS AMENDED. 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.
6.3 SUCCESSORS AND ASSIGNS; RIGHTS OF THIRD PARTIES. All
covenants and agreements by each of the Borrowers in this First Amendment shall
be binding upon such Borrower and its legal representatives, successors, and
assigns and shall inure to the benefit of the Agent and each of the Lenders and
their legal representatives, successors, and assigns. All provisions of this
First Amendment, the Agreement, and the other Loan Documents are imposed solely
and exclusively for the benefit of the Borrowers, the Agent, and the Lenders.
No other Person shall have standing to require satisfaction of such provisions
in accordance with their terms, and any or all of such provisions may, subject
to the provisions of Section 9.9 of the Agreement as to the rights of the
Lenders, be freely waived in whole or in part by the Agent at any time if in
its sole discretion it deems it advisable to do so.
6.4 FURTHER ASSURANCES. Each of the Borrowers shall
execute, acknowledge, and deliver, at any time as requested by the Agent, such
other documents and instruments as the Required Lenders shall deem necessary in
their sole discretion to fulfill the terms of the Agreement, as amended hereby,
including, without limitation, modifications of and amendments to any of the
Loan Documents.
6.5 GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).
5
<PAGE> 8
6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS. THIS FIRST
------------------------------------
AMENDMENT CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT HEREOF AND SUPERSEDES ANY PRIOR AGREEMENT, WHETHER
WRITTEN OR ORAL, BETWEEN SUCH PARTIES REGARDING THE SUBJECT HEREOF.
FURTHERMORE IN THIS REGARD, THIS WRITTEN FIRST AMENDMENT, THE AGREEMENT, AND
THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT
AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
6.7 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS
----------------------
WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF,
RELATED TO OR FROM THIS FIRST AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN
DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE AGENT, IN
COURTS HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. EACH OF THE BORROWERS
HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT
LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS AND HEREBY WAIVES ANY RIGHTS IT MAY
HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT
AGAINST IT BY THE AGENT IN ACCORDANCE WITH THIS SECTION.
6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES.
----------------------------------------------------
EACH OF THE BORROWERS, THE AGENT, AND EACH OF THE LENDERS HEREBY (A) KNOWINGLY,
VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR
ARISES OUT OF THIS FIRST AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT
OR THE ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER IN THE ENFORCEMENT OF ANY
OF THE TERMS OR PROVISIONS OF THIS FIRST AMENDMENT, THE AGREEMENT, OR ANY OTHER
LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO, (B) KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT
NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES, AND (C)
CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR
ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE
AGENT AND THE LENDERS ENTERING INTO THIS FIRST AMENDMENT.
6
<PAGE> 9
Executed effective as of the 1st day of August, 1994.
BORROWERS:
BELDEN & BLAKE CORPORATION
By: /s/ Ronald E. Huff
----------------------------------
Printed Name: Ronald E. Huff
------------------------
Title: Senior Vice President
-------------------------------
THE CANTON OIL & GAS COMPANY
By: /s/ Ronald E. Huff
----------------------------------
Printed Name: Ronald E. Huff
------------------------
Title: Senior Vice President
-------------------------------
PEAKE ENERGY, INC.
By: /s/ Ronald E. Huff
----------------------------------
Printed Name: Ronald E. Huff
------------------------
Title: Senior Vice President
-------------------------------
AGENT AND LENDER:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By: /s/ Beth Hunter
----------------------------------
Printed Name: Elizabeth Hunter
------------------------
Title: Vice President
-------------------------------
LENDER:
NBD BANK, N.A.
By: /s/ J.C. Giampetroni
----------------------------------
Printed Name: J.C. Giampetroni
------------------------
Title: Second Vice President
-------------------------------
7
<PAGE> 1
FIRST AMENDMENT
TO
CREDIT AGREEMENT
AMONG
BELDEN & BLAKE CORPORATION,
THE CANTON OIL & GAS COMPANY,
PEAKE ENERGY, INC.,
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
NBD BANK, N.A.
EFFECTIVE AS OF AUGUST 1, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . 1
1.1 Terms Defined Above . . . . . . . . . . . . . . . . . . . 1
1.2 Terms Defined in Agreement . . . . . . . . . . . . . . . . 1
1.3 References . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Articles and Sections . . . . . . . . . . . . . . . . . . 2
1.5 Number and Gender . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II AMENDMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . 2
2.1 Amendment of Section 1.2 . . . . . . . . . . . . . . . . . 2
2.2 Amendment of Section 2.7(a) . . . . . . . . . . . . . . . 2
2.3 Amendment of Section 4.17 . . . . . . . . . . . . . . . . 3
2.4 Amendment of Section 9.3 . . . . . . . . . . . . . . . . . 3
2.5 Deletion of Peake Operating as Borrower . . . . . . . . . 3
ARTICLE III CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Receipt of Documents . . . . . . . . . . . . . . . . . . . 3
3.2 No Material Adverse Change . . . . . . . . . . . . . . . . 4
3.3 No Default or Event of Default . . . . . . . . . . . . . . 4
3.4 Accuracy of Representations and Warranties . . . . . . . . 4
3.5 Additional Matters . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 4
ARTICLE V RATIFICATION . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 5
6.1 Scope of Amendment . . . . . . . . . . . . . . . . . . . . 5
6.2 Agreement as Amended . . . . . . . . . . . . . . . . . . . 5
6.3 Successors and Assigns; Rights of Third Parties . . . . . 5
6.4 Further Assurances . . . . . . . . . . . . . . . . . . . . 5
6.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 5
6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS . . . . . . . . . . . 6
6.7 JURISDICTION AND VENUE . . . . . . . . . . . . . . . . . . 6
6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES . . . 6
</TABLE>
-i-
<PAGE> 3
FIRST AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "FIRST
AMENDMENT") is made and entered into effective as of August 1, 1994, by and
among BELDEN & BLAKE CORPORATION, an Ohio corporation ("BBC"), THE CANTON OIL &
GAS COMPANY, an Ohio corporation ("COG"), PEAKE ENERGY, INC., a Delaware
corporation ("PEAKE ENERGY;" with BBC and COG each a "BORROWER" and
collectively, the "BORROWERS"), BANK ONE, TEXAS, NATIONAL ASSOCIATION, a
national banking association ("BANK ONE"), and NBD BANK, N.A., a national
banking association ("NBD;" with Bank One, together with each financial
institution that becomes a party hereto or entitled to benefits and subject to
obligations hereunder subsequent to the date hereof, each a "LENDER" and
collectively, the "LENDERS"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION, as
agent for the Lenders (in such capacity and together with any successors
designated pursuant hereto, the "AGENT").
W I T N E S S E T H:
-------------------
WHEREAS, the above named parties did execute and exchange
counterparts of the Credit Agreement dated November 15, 1993 (the "AGREEMENT"),
pursuant to which the Lenders have extended credit to the Borrowers; and
WHEREAS, the parties to the Agreement desire to amend the
Agreement in the particulars hereinafter set forth;
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth in this First Amendment and the
Agreement, the parties hereto agree as follows:
ARTICLE I
---------
DEFINITIONS AND INTERPRETATION
------------------------------
1.1 TERMS DEFINED ABOVE. As used herein, each of the
terms "AGENT," "AGREEMENT," "BANK ONE," "BBC," "BORROWER," "BORROWERS," "COG,"
"FIRST AMENDMENT," "LENDER," "LENDERS," "NBD," and "PEAKE ENERGY" shall have
the meaning assigned to such term hereinabove.
1.2 TERMS DEFINED IN AGREEMENT. As used herein, each
term defined in the Agreement shall have the meaning assigned to such term in
the Agreement, unless expressly provided herein to the contrary.
1.3 REFERENCES. References in this First Amendment to
Article or Section numbers shall be to Articles and Sections of this First
Amendment, unless expressly stated to the contrary. References in this First
Amendment to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow,"
"hereof," and "hereunder"
<PAGE> 4
shall be to this First Amendment in its entirety and not only to the particular
Article or Section in which such reference appears.
1.4 ARTICLES AND SECTIONS. This First Amendment, for
convenience only, has been divided into Articles and Sections and it is
understood that the rights, powers, privileges, duties, and other legal
relations of the parties hereto shall be determined from this First Amendment
as an entirety and without regard to such division into Articles and Sections
and without regard to headings prefixed to such Articles and Sections.
1.5 NUMBER AND GENDER. Whenever the context requires,
reference herein made to the single number shall be understood to include the
plural and likewise the plural shall be understood to include the singular.
Words denoting sex shall be construed to include the masculine, feminine and
neuter, when such construction is appropriate, and specific enumeration shall
not exclude the general, but shall be construed as cumulative. Definitions of
terms defined in the singular and plural shall be equally applicable to the
plural or singular, as the case may be.
ARTICLE II
----------
AMENDMENT OF AGREEMENT
----------------------
Each of the Borrowers, the Lenders, and the Agent hereby amend
the Agreement in the following particulars, effective as of and after the
effective date of this First Amendment:
2.1 AMENDMENT OF SECTION 1.2. Terms defined in Section
1.1 are hereby incorporated into or substituted for, as the case may be, the
definitions contained in Section 1.2 of the Agreement. In addition, the
following definitions of Section 1.2 of the Agreement are hereby amended to
read as follows:
"COMMITMENT AMOUNT" shall mean the amount of $30,000,000 or
such higher amount as determined by the Lenders from time to time,
which higher amount shall become effective upon written notification
thereof to the Borrowers from the Lenders.
"COMMITMENT TERMINATION DATE" shall mean March 31, 1998.
2.2 AMENDMENT OF SECTION 2.7(a). Section 2.7(a) of the
Agreement is hereby amended to read as follows:
"(a) The Borrowing Base as of August 1, 1994 is
acknowledged by each Borrower and each Lender to be $65,000,000."
2
<PAGE> 5
2.3 AMENDMENT OF SECTION 4.17. The first and third
sentences of Section 4.17 of the Agreement are hereby amended to read as
follows:
"BBC has no Subsidiaries as of the date of the First Amendment
to this Agreement except for COG, Peake Energy, and Engine Power
Systems, Inc., an Ohio corporation." "Peake Energy has no
Subsidiaries as of the date of the First Amendment to this Agreement."
2.4 AMENDMENT OF SECTION 9.3. Section 9.3(a), (b), and
(c) are hereby amended to read as follows:
"(a) If to Bank One or the Agent, to:
BANK ONE, TEXAS, NATIONAL ASSOCIATION
910 Travis, 6th Floor
Houston, Texas 77002
Attention: Mr. Richard G. Sylvan
Telecopy: (713) 751-3544
(b) if to NBD, to:
NBD BANK, N.A.
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Mr. Joseph Giampetroni
Telecopy: (313) 225-2649
(c) if to any Borrower, to:
BELDEN & BLAKE CORPORATION
5200 Stoneham Road
North Canton, Ohio 44720-1543
Attention: J.M. Vitale
Telecopy: (216) 497-5463"
2.5 DELETION OF PEAKE OPERATING AS BORROWER. All
references in the Agreement to Peake Operating are hereby deleted.
ARTICLE III
-----------
CONDITIONS
----------
The obligations of the Lenders and the Agent to enter into
this First Amendment are subject to the fulfillment of the following conditions
precedent, with all documents to be delivered to the Agent to be in form and
substance satisfactory to the Lenders:
3.1 RECEIPT OF DOCUMENTS. The Agent shall have received
the following:
3
<PAGE> 6
(a) this First Amendment, duly executed by each Borrower;
(b) an extension fee, payable in immediately available
funds, in the amount of $75,000;
(c) a Notice of Final Agreement; and
(d) such other agreements, documents, items, instruments,
opinions, certificates, waivers, consents, and evidence as the Agent
may reasonably request on its own behalf or on behalf of any Lender.
3.2 NO MATERIAL ADVERSE CHANGE. In the opinion of the
Required Lenders, no material adverse change shall have occurred in the
property, business, operations, conditions (financial or otherwise) or
prospects of any Borrower since the date of the last Financial Statements
delivered to the Lenders.
3.3 NO DEFAULT OR EVENT OF DEFAULT. No Default or Event
of Default shall have occurred and be continuing.
3.4 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of
the representations and warranties contained in Article IV of the Agreement, as
amended hereby, and in any other Loan Document, as each has been supplemented,
if applicable, shall be true and correct in all material respects, except as
affected by the transactions contemplated in the Agreement and this First
Amendment.
3.5 ADDITIONAL MATTERS. All matters incident to the
consummation of the transactions contemplated hereby shall be satisfactory to
the Required Lenders.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
Each of the Borrowers hereby expressly remakes, in favor of
the Lenders and the Agent, all of the representations and warranties set forth
in Article IV of the Agreement, as amended hereby, and in any other Loan
Document, and represents and warrants that all such representations and
warranties, as each has been supplemented, if applicable, remain true and
unbreached in all material respects, except as affected by the transactions
contemplated in the Agreement and this First Amendment and except for such
representations and warranties which may be limited to the date made.
4
<PAGE> 7
ARTICLE V
---------
RATIFICATION
------------
Each of the parties hereto does hereby adopt, ratify, and
confirm the Agreement and each other Loan Document to which it is a party, in
all things in accordance with the terms and provisions thereof, as amended by
this First Amendment.
ARTICLE VI
----------
MISCELLANEOUS
-------------
6.1 SCOPE OF AMENDMENT. The scope of this First
Amendment is expressly limited to the matters addressed herein and this First
Amendment shall not operate as a waiver of any past, present, or future breach,
Default, or Event of Default under the Agreement, except to the extent, if any,
that any such breach, Default, or Event of Default is remedied by the effect of
this First Amendment.
6.2 AGREEMENT AS AMENDED. 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.
6.3 SUCCESSORS AND ASSIGNS; RIGHTS OF THIRD PARTIES. All
covenants and agreements by each of the Borrowers in this First Amendment shall
be binding upon such Borrower and its legal representatives, successors, and
assigns and shall inure to the benefit of the Agent and each of the Lenders and
their legal representatives, successors, and assigns. All provisions of this
First Amendment, the Agreement, and the other Loan Documents are imposed solely
and exclusively for the benefit of the Borrowers, the Agent, and the Lenders.
No other Person shall have standing to require satisfaction of such provisions
in accordance with their terms, and any or all of such provisions may, subject
to the provisions of Section 9.9 of the Agreement as to the rights of the
Lenders, be freely waived in whole or in part by the Agent at any time if in
its sole discretion it deems it advisable to do so.
6.4 FURTHER ASSURANCES. Each of the Borrowers shall
execute, acknowledge, and deliver, at any time as requested by the Agent, such
other documents and instruments as the Required Lenders shall deem necessary in
their sole discretion to fulfill the terms of the Agreement, as amended hereby,
including, without limitation, modifications of and amendments to any of the
Loan Documents.
6.5 GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).
5
<PAGE> 8
6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS. THIS FIRST
------------------------------------
AMENDMENT CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT HEREOF AND SUPERSEDES ANY PRIOR AGREEMENT, WHETHER
WRITTEN OR ORAL, BETWEEN SUCH PARTIES REGARDING THE SUBJECT HEREOF.
FURTHERMORE IN THIS REGARD, THIS WRITTEN FIRST AMENDMENT, THE AGREEMENT, AND
THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT
AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
6.7 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS
----------------------
WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF,
RELATED TO OR FROM THIS FIRST AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN
DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE AGENT, IN
COURTS HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. EACH OF THE BORROWERS
HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT
LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS AND HEREBY WAIVES ANY RIGHTS IT MAY
HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT
AGAINST IT BY THE AGENT IN ACCORDANCE WITH THIS SECTION.
6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES.
----------------------------------------------------
EACH OF THE BORROWERS, THE AGENT, AND EACH OF THE LENDERS HEREBY (A) KNOWINGLY,
VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR
ARISES OUT OF THIS FIRST AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT
OR THE ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER IN THE ENFORCEMENT OF ANY
OF THE TERMS OR PROVISIONS OF THIS FIRST AMENDMENT, THE AGREEMENT, OR ANY OTHER
LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO, (B) KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT
NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES, AND (C)
CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR
ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE
AGENT AND THE LENDERS ENTERING INTO THIS FIRST AMENDMENT.
6
<PAGE> 9
Executed effective as of the 1st day of August, 1994.
BORROWERS:
BELDEN & BLAKE CORPORATION
By: /s/ Ronald E. Huff
----------------------------------
Printed Name: Ronald E. Huff
------------------------
Title: Senior Vice President
-------------------------------
THE CANTON OIL & GAS COMPANY
By: /s/ Ronald E. Huff
----------------------------------
Printed Name: Ronald E. Huff
------------------------
Title: Senior Vice President
-------------------------------
PEAKE ENERGY, INC.
By: /s/ Ronald E. Huff
----------------------------------
Printed Name: Ronald E. Huff
------------------------
Title: Senior Vice President
-------------------------------
AGENT AND LENDER:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By: /s/ Beth Hunter
----------------------------------
Printed Name: Elizabeth Hunter
------------------------
Title: Vice President
-------------------------------
LENDER:
NBD BANK, N.A.
By: /s/ J.C. Giampetroni
----------------------------------
Printed Name: J.C. Giampetroni
------------------------
Title: Second Vice President
-------------------------------
7
<PAGE> 10
- -------------------------------------------------------------------------------
SECOND AMENDMENT
TO
CREDIT AGREEMENT
AMONG
BELDEN & BLAKE CORPORATION,
THE CANTON OIL & GAS COMPANY,
PEAKE ENERGY, INC.,
WARD LAKE DRILLING, INC.,
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
NBD BANK, N.A.
EFFECTIVE AS OF MARCH 29, 1995
- -------------------------------------------------------------------------------
<PAGE> 11
TABLE OF CONTENTS
<TABLE>
<CAPTION> Page
<S> <C> <C>
ARTICLE I DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . . . . . . 1
1.1 Terms Defined Above . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Terms Defined in Agreement . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Articles and Sections . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II AMENDMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Amendment of Section 1.2 . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Amendment of Section 2.3 . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Amendment of Section 2.9 . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Amendment of Section 2.17 . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Addition of Section 2.22 . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Addition of Section 2.23 . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7 Addition of Section 2.24 . . . . . . . . . . . . . . . . . . . . . . . . 8
2.8 Addition of Section 3.3 . . . . . . . . . . . . . . . . . . . . . . . . 9
2.9 Amendment of Section 4.17 . . . . . . . . . . . . . . . . . . . . . . . 10
2.10 Addition of Section 5.16 . . . . . . . . . . . . . . . . . . . . . . . . 10
2.11 Amendment of Section 7.1 . . . . . . . . . . . . . . . . . . . . . . . . 11
2.12 Addition of Ward Lake . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE III CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1 Receipt of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 No Default or Event of Default . . . . . . . . . . . . . . . . . . . . . 12
3.4 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . 12
3.5 Additional Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V RATIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1 Scope of Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.2 Agreement as Amended . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.3 Successors and Assigns; Rights of Third Parties . . . . . . . . . . . . . 13
6.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS . . . . . . . . . . . . . . . . . . 14
6.7 JURISDICTION AND VENUE . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES . . . . . . . . . . 14
</TABLE>
-i-
<PAGE> 12
SECOND AMENDMENT TO CREDIT AGREEMENT
------------------------------------
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "SECOND
AMENDMENT") is made and entered into effective as of March 29, 1995, by and
among BELDEN & BLAKE CORPORATION, an Ohio corporation ("BBC"), THE CANTON OIL &
GAS COMPANY, an Ohio corporation ("COG"), PEAKE ENERGY, INC., a Delaware
corporation ("PEAKE ENERGY"), WARD LAKE DRILLING, INC., a Michigan corporation
("WARD LAKE;" with BBC, COG and Peake Energy each a "BORROWER" and
collectively, the "BORROWERS"), BANK ONE, TEXAS, NATIONAL ASSOCIATION, a
national banking association ("BANK ONE"), and NBD BANK, N.A., a national
banking association ("NBD;" with Bank One, together with each financial
institution that becomes a party hereto or entitled to benefits and subject to
obligations hereunder subsequent to the date hereof, each a "LENDER" and
collectively, the "LENDERS"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION, as
agent for the Lenders (in such capacity and together with any successors
designated pursuant hereto, the "AGENT").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, BBC, COG, Peake Energy, Peake Operating Company,
and the Lenders did execute and exchange counterparts of the Credit Agreement
dated November 15, 1993, as amended by the First Amendment to Credit Agreement
dated August 1, 1994, by and among BBC, COG, Peake Energy, and the Lenders
(collectively, the "AGREEMENT"), pursuant to which the Lenders have extended
credit to the Borrowers; and
WHEREAS, the parties to the Agreement desire to amend the
Agreement in the particulars hereinafter set forth;
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth in this Second Amendment and the
Agreement, the parties hereto agree as follows:
ARTICLE I
---------
DEFINITIONS AND INTERPRETATION
------------------------------
1.1 TERMS DEFINED ABOVE. As used herein, each of the terms
"AGENT," "AGREEMENT," "BANK ONE," "BBC," "BORROWER," "BORROWERS," "COG,"
"LENDER," "LENDERS," "NBD," "PEAKE ENERGY," "SECOND AMENDMENT," and "WARD LAKE"
shall have the meaning assigned to such term hereinabove.
1.2 TERMS DEFINED IN AGREEMENT. As used herein, each term
defined in the Agreement shall have the meaning assigned to such term in the
Agreement, unless expressly provided herein to the contrary.
<PAGE> 13
1.3 REFERENCES. References in this Second Amendment to Article
or Section numbers shall be to Articles and Sections of this Second Amendment,
unless expressly stated to the contrary. References in this Second Amendment
to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof,"
and "hereunder" shall be to this Second Amendment in its entirety and not only
to the particular Article or Section in which such reference appears.
1.4 ARTICLES AND SECTIONS. This Second Amendment, for
convenience only, has been divided into Articles and Sections and it is
understood that the rights, powers, privileges, duties, and other legal
relations of the parties hereto shall be determined from this Second Amendment
as an entirety and without regard to such division into Articles and Sections
and without regard to headings prefixed to such Articles and Sections.
1.5 NUMBER AND GENDER. Whenever the context requires,
reference herein made to the single number shall be understood to include the
plural and likewise the plural shall be understood to include the singular.
Words denoting sex shall be construed to include the masculine, feminine and
neuter, when such construction is appropriate, and specific enumeration shall
not exclude the general, but shall be construed as cumulative. Definitions of
terms defined in the singular and plural shall be equally applicable to the
plural or singular, as the case may be.
ARTICLE II
----------
AMENDMENT OF AGREEMENT
----------------------
Each of the Borrowers, the Lenders, and the Agent hereby
amend the Agreement in the following particulars, effective as of and after the
effective date of this Second Amendment:
2.1 AMENDMENT OF SECTION 1.2. Section 1.2 of the Agreement is
amended as follows:
(a) The following definitions are hereby amended to read as
follows:
"AVAILABLE COMMITMENT" shall mean, at any time, an amount
equal to the remainder, if any, of (a) the lesser of the
Commitment Amount or the Borrowing Base in effect at such
time MINUS (b) the sum of the Loan Balance at such time
plus the L/C Exposure at such time.
"COMMITMENT" shall mean the obligation of each Lender,
subject to applicable provisions of this Agreement, to make
Loans to or for the benefit of the Borrowers pursuant to
Section 2.1 in an amount up to the Commitment Percentage of
such Lender and the obligations
2
<PAGE> 14
of the Agent to issue and the Lenders to participate in
Letters of Credit pursuant to Section 2.22.
"LOAN" shall mean any loan made by any Lender to or for
the benefit of the Borrowers pursuant to this Agreement
and any Letter of Credit Payment.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, the
Intercreditor Agreement, the Letter of Credit Applications,
the Letters of Credit, and all other documents and
instruments now or hereafter delivered pursuant to the
terms of or in connection with this Agreement, the Notes,
the Intercreditor Agreement, the Letter of Credit
Applications, or the Letters of Credit, and all renewals
and extensions of, amendments and supplements to, and
restatements of, any or all of the foregoing from time to
time in effect.
"NOTES" shall mean the promissory notes of the Borrowers
to each Lender evidencing Indebtedness with respect to Loans
made by such Lender to the Borrowers, each in the form
attached to the Second Amendment to this Agreement as
Exhibit A, with appropriate insertions, together with any
and all renewals, extensions for any period, increases and
rearrangements thereof.
"OBLIGATIONS" shall mean, without duplication, (a) all
Indebtedness evidenced by the Notes, (b) the obligation of
the Borrowers to provide to or reimburse the Agent, as the
issuer of Letters of Credit, or the Lenders, as the case
may be, for, amounts payable, paid, or incurred with
respect to Letters of Credit, (c) the undrawn, unexpired
amount of all outstanding Letters of Credit, (d) the
obligation of the Borrowers for the payment of Commitment
Fees, Engineering Fees, and Facility Fees, and (e) all
other obligations and liabilities of the Borrowers to the
Agent and the Lenders, now existing or hereafter incurred,
under, arising out of or in connection with any Loan
Document, together with all interest accruing thereon and
costs, expenses, and attorneys' fees incurred in the
enforcement or collection thereof, whether such obligations
and liabilities are direct, indirect, fixed, contingent,
liquidated, unliquidated, joint, several, or joint and
3
<PAGE> 15
several, and with respect to any of the foregoing that
includes or refers to the payment of amounts deemed or
constituting interest, only so much thereof as shall have
accrued, been earned and which remains unpaid at each
relevant time of determination.
(b) The following definitions are hereby added to read as
follows:
"L/C EXPOSURE" shall mean, at any time, the aggregate
maximum amount available to be drawn under outstanding
Letters of Credit at such time.
"LETTER OF CREDIT" shall mean any standby letter of
credit issued for the account of any Borrower pursuant to
Section 2.22.
"LETTER OF CREDIT APPLICATION" shall mean the standard
letter of credit application employed by the Agent, as the
issuer of the Letters of Credit, from time to time in
connection with letters of credit.
"LETTER OF CREDIT PAYMENT" shall mean any payment made by
the Agent on behalf of the Lenders under a Letter of
Credit, to the extent that such payment has not been repaid
by the Borrowers.
2.2 AMENDMENT OF SECTION 2.3. Section 2.3 of the Agreement is
hereby amended to read as follows:
"2.3 USE OF LOAN PROCEEDS AND LETTERS OF CREDIT. (a)
Proceeds of all Loans shall be used by the Borrowers solely for the
acquisition and development of Oil and Gas Properties, the acquisition
of businesses or assets related to the oil and gas business of any
Borrower, and to provide general working capital.
(b) Letters of Credit shall be used solely for general
corporate purposes; provided, however, no Letter of Credit may be used
in lieu of or in support of stay or appeal bonds."
2.3 AMENDMENT OF SECTION 2.9. Section 2.9 of the Agreement is
hereby amended in its entirety to read as follows:
"2.9 MANDATORY PREPAYMENTS. If at any time (a) the sum of
the Loan Balance and the L/C Exposure exceeds the lesser of the
Commitment Amount or the Borrowing Base then in effect or (b) the sum
of the Loan Balance, the L/C Exposure, and the outstanding principal
balance of
4
<PAGE> 16
the Senior Notes exceeds the Borrowing Base then in effect, the
Borrowers shall, within 30 Business Days of notice from the Agent of
such occurrence, prepay, or make arrangements acceptable to the
Required Lenders for the prepayment of, the amount of such excess for
application on the Loan Balance. In the event that a mandatory
prepayment is required under this Section and the Loan Balance is less
than the amount required to be prepaid, the Borrowers shall repay the
entire Loan Balance and, in accordance with the provisions of the
relevant Letter of Credit Applications executed by the Borrowers or
otherwise to the satisfaction of the Agent, deposit with the Agent, as
additional collateral securing the Obligations, an amount of cash, in
immediately available funds, equal to the L/C Exposure minus the
lesser of the Commitment Amount or the Borrowing Base. The cash
deposited with the Agent in satisfaction of the requirement provided
in this Section may be invested, at the sole discretion of the Agent
and then only at the express direction of the Borrowers as to
investment vehicle and maturity (which shall be no later than the
latest expiry date of any then outstanding Letter of Credit), for the
account of the Borrowers in cash or cash equivalent investments
offered by or through the Agent."
2.4 AMENDMENT OF SECTION 2.17. Section 2.17 of the Agreement
is amended as follows:
(a) The first sentence of Section 2.17(d) is hereby amended
to read as follows:
"(d) Determinations by any Lender or the Agent, as
the case may be, for purposes of this Section of the
effect of any Regulatory Change on capital maintained, its
costs or rate of return, maintaining Loans, issuing Letters
of Credit, its obligation to make Loans and issue Letters
of Credit, or on amounts receivable by it in respect of
Loans, Letters of Credit, or such obligations, and the
additional amounts required to compensate such Lender or
the Agent under this Section shall be conclusive, absent
manifest error, provided that such determinations are made
on a reasonable basis."
(b) A new subsection (e) is hereby added to read as follows:
"(e) Without limiting the effect of the other
provisions of this Section (but without duplication), in
the event that any Requirement of Law or Regulatory Change
or the compliance by the Agent or any Lender
5
<PAGE> 17
therewith shall (i) impose, modify, or hold applicable any
reserve, special deposit, or similar requirement against
any Letter of Credit or obligation to issue Letters of
Credit, or (ii) impose upon the Agent or such Lender any
other condition regarding any Letter of Credit or
obligation to issue Letters of Credit, and the result of
any such event shall be to increase the cost to the Agent
or such Lender of issuing or maintaining any Letter of
Credit or obligation to issue Letters of Credit or any
liability with respect to Letter of Credit Payments, or to
reduce any amount receivable in connection therewith, then
upon demand by the Agent or such Lender, as the case may
be, the Borrowers shall pay to the Agent or such Lender,
from time to time as specified by the Agent or such Lender,
additional amounts which shall be sufficient to compensate
the Agent or such Lender for such increased cost or reduced
amount receivable."
2.5 ADDITION OF SECTION 2.22. A new Section 2.22 is hereby
added to the Agreement to read as follows:
"2.22 LETTER OF CREDIT FACILITY. (a) Upon the terms and
conditions and relying on the representations and warranties contained
in this Agreement, the Agent, as issuing bank for the Lenders, agrees,
from the date of this Agreement until the date which is thirty days
prior to the Commitment Termination Date, to issue on behalf of the
Lenders in their respective Commitment Percentages Letters of Credit
for the account of the Borrowers or any of them and to renew and
extend such Letters of Credit. Letters of Credit shall be issued,
renewed, or extended from time to time on any Business Day designated
by the applicable Borrower following the receipt in accordance with
the terms hereof by the Agent of the written (or oral, confirmed
promptly in writing) request by a Responsible Officer of such Borrower
therefor and a Letter of Credit Application. Letters of Credit shall
be issued in such amounts as such Borrower may request; provided,
however, that (i) no Letter of Credit shall have an expiration date
which is more than 24 months after the issuance thereof or subsequent
to five days prior to the Commitment Termination Date, (ii) the Loan
Balance plus the L/C Exposure shall not exceed at any time the lesser
of the Commitment Amount or the Borrowing Base, and (iii) the L/C
Exposure shall not exceed at any time $5,000,000.
(b) Prior to any Letter of Credit Payment in respect of
any Letter of Credit, each Lender shall be
6
<PAGE> 18
deemed to be a participant through the Agent with respect to the
relevant Letter of Credit in the obligation of the Agent, as the
issuer of such Letter of Credit, in an amount equal to the Percentage
Share of such Lender of the maximum amount which is or at any time may
become available to be drawn thereunder. Upon delivery by such Lender
of funds requested pursuant to Section 2.22(c), such Lender shall be
treated as having purchased a participating interest in an amount
equal to such funds delivered by such Lender to the Agent in the
obligation of the Borrowers to reimburse the Agent, as the issuer of
such Letter of Credit, for any amounts payable, paid, or incurred by
the Agent, as the issuer of such Letter of Credit, with respect to
such Letter of Credit.
(c) Each Lender shall be unconditionally and irrevocably
liable, without regard to the occurrence of any Default or Event of
Default, to the extent of the Commitment Percentage of such Lender at
the time of issuance of each Letter of Credit, to reimburse, on
demand, the Agent, as the issuer of such Letter of Credit, for the
amount of each Letter of Credit Payment under such Letter of Credit.
Each Letter of Credit Payment shall be deemed to be a Floating Rate
Loan by each Lender to the extent of funds delivered by such Lender to
the Agent with respect to such Letter of Credit Payment and shall to
such extent be deemed a Floating Rate Loan under and shall be
evidenced by the Note of such Lender and shall be payable by the
Borrowers upon demand by the Agent.
(d) EACH LENDER AGREES TO INDEMNIFY THE AGENT, AS THE
ISSUER OF EACH LETTER OF CREDIT, AND THE OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES OF THE AGENT (TO
THE EXTENT NOT REIMBURSED BY THE BORROWERS AND WITHOUT LIMITING THE
OBLIGATION OF THE BORROWERS TO DO SO), RATABLY ACCORDING TO THE
COMMITMENT PERCENTAGE SHARE OF SUCH LENDER AT THE TIME OF ISSUANCE OF
SUCH LETTER OF CREDIT, FROM AND AGAINST ANY AND ALL LIABILITIES,
CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER WHICH
MAY AT ANY TIME (INCLUDING, WITHOUT LIMITATION, ANY TIME FOLLOWING THE
PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT) BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT AS
THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY RELATING
TO OR ARISING OUT OF THIS AGREEMENT OR SUCH LETTER OF CREDIT OR ANY
ACTION TAKEN OR OMITTED BY THE AGENT AS THE ISSUER OF SUCH LETTER OF
CREDIT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR IN CONNECTION WITH ANY OF THE
FOREGOING, INCLUDING, WITHOUT LIMITATION,
7
<PAGE> 19
ANY LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS IMPOSED,
INCURRED OR ASSERTED AS A RESULT OF THE NEGLIGENCE, WHETHER SOLE OR
CONCURRENT, OF THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY
OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR
AFFILIATES; PROVIDED THAT NO LENDER (OTHER THAN THE AGENT AS THE
ISSUER OF A LETTER OF CREDIT) SHALL BE LIABLE FOR THE PAYMENT OF ANY
PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING
SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT AS
THE ISSUER OF A LETTER OF CREDIT. THE AGREEMENTS IN THIS SECTION
2.5(d) SHALL SURVIVE THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS
AND THE TERMINATION OF THIS AGREEMENT."
2.6 ADDITION OF SECTION 2.23. A new Section 2.23 is hereby
added to the Agreement to read as follows:
"2.23 LETTER OF CREDIT FEE. The Borrowers shall pay to the
Agent for the Ratable Benefit of the Lenders, in immediately available
funds, a letter of credit fee in the amount of the greater of (a) one
percent (1%) per annum, calculated on the basis of a year of 360 days
and actual days elapsed (including the first day but excluding the
last day), on the average daily amount of the L/C Exposure or (b)
$500.00. Accrued letter of credit fees shall be payable on the first
day of July, 1995, the first day of each third calendar month
thereafter during the Commitment Period, and on the Commitment
Termination Date. The Borrowers also agree to pay on demand to the
Agent for its own account as the issuer of the Letters of Credit its
customary letter of credit transactional fees, including, without
limitation, amendment fees, payable with respect to each Letter of
Credit."
2.7 ADDITION OF SECTION 2.24. A new Section 2.24 is hereby
added to the Agreement to read as follows:
"2.24 OBLIGATIONS ABSOLUTE. Subject to the further
provisions of this Section, the Obligations of the Borrowers under
this Article shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim, or
defense to payment or performance which the Borrowers or any of them
may have or have had against the Agent, any Lender, or any beneficiary
of any Letter of Credit. Each Borrower agrees that none of the Agent
or the Lenders shall be responsible for, nor shall the Obligations be
affected by, among other things, (a) the validity or genuineness of
documents or any endorsements thereon presented in connection with any
Letter of Credit, even if such
8
<PAGE> 20
documents shall in fact prove to be in any and all respects invalid,
fraudulent or forged, AND EVEN IF DUE TO THE NEGLIGENCE, WHETHER SOLE
OR CONCURRENT, OF THE AGENT OR ANY LENDER, so long as the Agent, as
the issuer of such Letter of Credit, has no actual knowledge of any
such invalidity, lack of genuineness, fraud, or forgery prior to the
presentment for payment of a corresponding Letter of Credit or any
draft thereunder; provided, however, with respect to the preceding
matters in this Section, the Agent, as the issuer of the Letters of
Credit, agrees to exercise ordinary care in examining each document
required to be presented pursuant to each Letter of Credit to
ascertain that each such document appears on its face to comply with
the terms thereof, or (b) any dispute between or among the Borrowers
or any of them and any beneficiary of any Letter of Credit or any
other party to which any Letter of Credit may be transferred, or any
claims whatsoever of the Borrowers or any of them against any
beneficiary of any Letter of Credit or any such transferee, EVEN IF
DUE TO THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT OR ANY
LENDER; provided, in all respects, that the Agent, as the issuer of
Letters of Credit, shall be liable to the Borrowers to the extent, but
only to the extent, of any direct, as opposed to consequential or
punitive, damages suffered by the Borrowers as a result of the willful
misconduct or gross negligence of the Agent as the issuer of Letters
of Credit in determining whether documents presented under a Letter of
Credit complied with the terms of such Letter of Credit that resulted
in either a wrongful payment under such Letter of Credit or a wrongful
dishonor of a claim or draft properly presented under such Letter of
Credit. In theabsence of gross negligence or willful misconduct by
the Agent as the issuer of Letters of Credit, the Agent shall not be
liable for any error, omission, interruption or delay, EVEN IF DUE TO
THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT, in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. The Agent, the
Lenders, and the Borrowers agree that any action taken or omitted by
the Agent, as issuer of any Letter of Credit, under or in connection
with any Letter of Credit or the related drafts or documents, EVEN IF
DUE TO THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT OR ANY
LENDER, if done in the absence of gross negligence or willful
misconduct, shall be binding as among the Agent, as issuer of such
Letter of Credit or otherwise, the Lenders, and the Borrowers and
shall not put the Agent, as issuer of such Letter of Credit or
otherwise, or any Lender under any liability to the Borrowers."
2.8 ADDITION OF SECTION 3.3. A new Section 3.3 is hereby added
to the Agreement to read as follows:
9
<PAGE> 21
"3.3 CONDITIONS PRECEDENT TO ISSUANCE OF LETTERS OF CREDIT. The
obligation of the Agent, as the issuer of the Letters of Credit, to issue,
renew, or extend any Letter of Credit is subject to the satisfaction of the
following additional conditions precedent:
(a) the Borrowers shall have delivered to the Agent a
written (or oral, confirmed promptly in writing) request for the
issuance, renewal, or extension of a Letter of Credit at least three
Business Days prior to the requested issuance, renewal, or extension
date and a Letter of Credit Application at least one Business Day
prior to the requested issuance date; and each statement or
certification made in such Letter of Credit Application shall be true
and correct in all material respects on the requested date for the
issuance of such Letter of Credit;
(b) no Default or Event of Default shall exist or will
occur as a result of the issuance, renewal, or extension of such
Letter of Credit; and
(c) the terms, provisions, and beneficiary of the Letter
of Credit or such renewal or extension shall be satisfactory to the
Agent, as the issuer of the Letters of Credit, in its sole
discretion."
2.9 AMENDMENT OF SECTION 4.17. Section 4.17 of the Agreement
is hereby amended in its entirety to read as follows:
"4.17 SUBSIDIARIES. As of the date of the Second Amendment
to this Agreement, (a) BBC has no Subsidiaries except for COG, Peake
Energy, Ward Lake, and Engine Power Systems, Inc., an Ohio
Corporation; (b) COG has no Subsidiaries except for Target Oilfield
Pipe & Supply Company, Belden & Blake (U.K.) Inc., and Belden & Blake
Securities, Inc., all Ohio corporations; and (c) neither Peake Energy
nor Ward Lake has any Subsidiaries. All Subsidiaries mentioned herein
are wholly-owned Subsidiaries of the relevant Person."
2.10 ADDITION OF SECTION 5.16. Section 5.16 of the Agreement is
hereby amended in its entirety to read as follows:
"5.16 INDEMNIFICATION OF LENDERS AND AGENT. INDEMNIFY AND
------------------------------------
HOLD EACH LENDER AND THE AGENT AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES (EACH
SUCH PERSON AN "INDEMNITEE") HARMLESS FROM ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
10
<PAGE> 22
JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR
NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, REASONABLE
ATTORNEYS' FEES AND DISBURSEMENTS) INCURRED BY OR ASSERTED AGAINST ANY
INDEMNITEE ARISING OUT OF, IN ANY WAY CONNECTED WITH, OR AS A RESULT
OF (A) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, (B) THE PERFORMANCE BY THE PARTIES TO THE LOAN DOCUMENTS OF
THEIR RESPECTIVE OBLIGATIONS THEREUNDER OR THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED THEREBY, (C) THE USE OF LOANS BY THE
BORROWERS, (D) ANY ALLEGATION BY ANY BENEFICIARY OF A LETTER OF CREDIT
OF A WRONGFUL DISHONOR BY THE AGENT OF A CLAIM OR DRAFT PRESENTED
THEREUNDER, OR (E) THE ENFORCEMENT OF THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY MATTER ARISING BY
REASON OF ANY DEFENSE, SET-OFF, COUNTERCLAIM, RECOUPMENT, OR REDUCTION
OF LIABILITY WHATSOEVER OF THE OBLIGOR UNDER ANY CONTRACT, AGREEMENT,
INTEREST, OR OBLIGATION WHICH GIVES RISE TO ANY ACCOUNT AS THE RESULT
OF A BREACH BY THE PERSON OF ANY OBLIGATION THEREUNDER OR OF ANY OTHER
AGREEMENT, INDEBTEDNESS, OR LIABILITY AT ANY TIME OWING TO OR IN FAVOR
OF ANY SUCH OBLIGOR FROM SUCH PERSON, SUCH OBLIGATIONS OF SUCH PERSON
BEING ENFORCEABLE AGAINST AND ONLY AGAINST SUCH PERSON AND NOT AGAINST
ANY LENDER OR THE AGENT (ALL THE FOREGOING IN THIS SECTION,
COLLECTIVELY, THE "INDEMNIFIED LIABILITIES"), INCLUDING, WITHOUT
LIMITATION, ANY OF THE FOREGOING IN THIS SECTION ARISING FROM
NEGLIGENCE, WHETHER SOLE OR CONCURRENT, ON THE PART OF THE AGENT OR
ANY LENDER OR ANY OF THEIR RESPECTIVE SHAREHOLDERS, OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR AFFILIATES;
PROVIDED THAT SUCH PERSON SHALL HAVE NO OBLIGATION UNDER THIS SECTION
TO ANY INDEMNITEE WITH RESPECT TO INDEMNIFIED LIABILITIES THAT ARE
DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND
NON-APPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR FROM THE BREACH BY SUCH
INDEMNITEE OF ITS OBLIGATIONS UNDER ANY LOAN DOCUMENT. THE
OBLIGATIONS OF EACH PERSON UNDER THIS SECTION SHALL SURVIVE THE
SATISFACTION OF ALL OBLIGATIONS, THE TERMINATION OF THE COMMITMENT,
AND THE NONASSUMPTION OF THIS AGREEMENT IN A CASE COMMENCED UNDER
TITLE 11 OF THE UNITED STATES CODE OR OTHER SIMILAR LAW OF THE UNITED
STATES, THE STATE OF TEXAS, OR ANY OTHER JURISDICTION AND BE BINDING
UPON SUCH PERSON AND ANY TRUSTEE, RECEIVER OR LIQUIDATOR OF SUCH
PERSON APPOINTED IN ANY SUCH CASE."
2.11 AMENDMENT OF SECTION 7.1. Section 7.1(g) of the Agreement
is hereby amended in its entirety to read as follows:
"(g) the Borrowers shall be unable to satisfy any condition
or cure any circumstance specified in Article III, the satisfaction or
curing of which is precedent to the right of the Borrowers to receive
a Loan or the
11
<PAGE> 23
issuance of a Letter of Credit, and such inability shall continue for
a period in excess of 30 days."
2.12 ADDITION OF WARD LAKE. Ward Lake is hereby added for all
purposes as a Borrower under the Agreement and all references to a Borrower or
the Borrowers in any document heretofore or hereafter executed in connection
with the transactions contemplated in the Ageement shall be deemed to refer to
and include Ward Lake.
ARTICLE III
-----------
CONDITIONS
----------
The obligations of the Lenders and the Agent to enter into
this Second Amendment are subject to the fulfillment of the following
conditions precedent, with all documents to be delivered to the Agent to be in
form and substance satisfactory to the Lenders:
3.1 RECEIPT OF DOCUMENTS. The Agent shall have received the
following:
(a) this Second Amendment, duly executed by each Borrower;
(b) the Notes;
(c) a Letter of Credit Application and Letter of Credit Fees;
(d) a Notice of Final Agreement; and
(e) such other agreements, documents, items, instruments,
opinions, certificates, waivers, consents, and evidence as the Agent
may reasonably request on its own behalf or on behalf of any Lender.
3.2 NO MATERIAL ADVERSE CHANGE. In the opinion of the Required
Lenders, no material adverse change shall have occurred in the property,
business, operations, conditions (financial or otherwise) or prospects of any
Borrower since the date of the last Financial Statements delivered to the
Lenders.
3.3 NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of
Default shall have occurred and be continuing.
3.4 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties contained in Article IV of the Agreement, as
amended hereby, and in any other Loan Document, as each has been supplemented,
if applicable, shall be true and correct in all material respects, except as
affected by the transactions contemplated in the Agreement and this Second
Amendment.
12
<PAGE> 24
3.5 ADDITIONAL MATTERS. All matters incident to the
consummation of the transactions contemplated hereby shall be satisfactory to
the Required Lenders.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
Each of the Borrowers hereby expressly remakes, in favor of
the Lenders and the Agent, all of the representations and warranties set forth
in Article IV of the Agreement, as amended hereby, and in any other Loan
Document, and represents and warrants that all such representations and
warranties, as each has been supplemented, if applicable, remain true and
unbreached in all material respects, except as affected by the transactions
contemplated in the Agreement and this Second Amendment and except for such
representations and warranties which may be limited to the date made.
ARTICLE V
---------
RATIFICATION
------------
Each of the parties hereto does hereby adopt, ratify, and
confirm the Agreement and each other Loan Document to which it is a party, in
all things in accordance with the terms and provisions thereof, as amended by
this Second Amendment.
ARTICLE VI
----------
MISCELLANEOUS
-------------
6.1 SCOPE OF AMENDMENT. The scope of this Second Amendment is
expressly limited to the matters addressed herein and this Second Amendment
shall not operate as a waiver of any past, present, or future breach, Default,
or Event of Default under the Agreement, except to the extent, if any, that any
such breach, Default, or Event of Default is remedied by the effect of this
Second Amendment.
6.2 AGREEMENT AS AMENDED. 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.
6.3 SUCCESSORS AND ASSIGNS; RIGHTS OF THIRD PARTIES. All
covenants and agreements by each of the Borrowers in this Second Amendment
shall be binding upon such Borrower and its legal representatives, successors,
and assigns and shall inure to the benefit of the Agent and each of the Lenders
and their legal representatives, successors, and assigns. All provisions of
this
13
<PAGE> 25
Second Amendment, the Agreement, and the other Loan Documents are imposed
solely and exclusively for the benefit of the Borrowers, the Agent, and the
Lenders. No other Person shall have standing to require satisfaction of such
provisions in accordance with their terms, and any or all of such provisions
may, subject to the provisions of Section 9.9 of the Agreement as to the rights
of the Lenders, be freely waived in whole or in part by the Agent at any time
if in its sole discretion it deems it advisable to do so.
6.4 FURTHER ASSURANCES. Each of the Borrowers shall execute,
acknowledge, and deliver, at any time as requested by the Agent, such other
documents and instruments as the Required Lenders shall deem necessary in their
sole discretion to fulfill the terms of the Agreement, as amended hereby,
including, without limitation, modifications of and amendments to any of the
Loan Documents.
6.5 GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE DEEMED TO BE
-------------
A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAW).
6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS. THIS SECOND
------------------------------------
AMENDMENT CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT HEREOF AND SUPERSEDES ANY PRIOR AGREEMENT, WHETHER
WRITTEN OR ORAL, BETWEEN SUCH PARTIES REGARDING THE SUBJECT HEREOF.
FURTHERMORE IN THIS REGARD, THIS WRITTEN SECOND AMENDMENT, THE AGREEMENT, AND
THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT
AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
6.7 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH
----------------------
RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED
TO OR FROM THIS SECOND AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT MAY
BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE AGENT, IN COURTS
HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. EACH OF THE BORROWERS HEREBY
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN
HOUSTON, HARRIS COUNTY, TEXAS AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO
TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST
IT BY THE AGENT IN ACCORDANCE WITH THIS SECTION.
6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES. EACH
---------------------------------------------------
OF THE BORROWERS, THE AGENT, AND EACH OF THE LENDERS HEREBY (A) KNOWINGLY,
VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR
ARISES OUT OF THIS SECOND AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT
OR THE ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER IN THE ENFORCEMENT OF ANY
OF THE TERMS OR PROVISIONS OF THIS SECOND AMENDMENT, THE
14
<PAGE> 26
AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO, (B)
KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES,
TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE, OR
CONSEQUENTIAL DAMAGES, AND (C) CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS. THE PROVISIONS OF THIS
SECTION ARE A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO
THIS SECOND AMENDMENT.
Executed effective as of the 29th day of March, 1995.
BORROWERS:
BELDEN & BLAKE CORPORATION
By: /s/ H.S. Belden IV
---------------------------------
Printed Name: H.S. Belden IV
-----------------------
Title: Chief Executive Officer
------------------------------
THE CANTON OIL & GAS COMPANY
By: /s/ H.S. Belden IV
---------------------------------
Printed Name: H.S. Belden IV
-----------------------
Title: Chief Executive Officer
------------------------------
PEAKE ENERGY, INC.
By: /s/ H.S. Belden IV
---------------------------------
Printed Name: H.S. Belden IV
-----------------------
Title: Chief Executive Officer
------------------------------
WARD LAKE DRILLING, INC.
By: /s/ R.L. Clements
---------------------------------
Printed Name: R.L. Clements
-----------------------
Title: Chief Executive Officer
------------------------------
(Signatures Continued on Next Page)
15
<PAGE> 27
AGENT AND LENDER:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By: /s/ Beth Hunter
---------------------------------
Printed Name: Elizabeth W. Hunter
-----------------------
Title: Vice President
------------------------------
LENDER:
NBD BANK, N.A.
By: /s/ Joseph C. Giempetroni
---------------------------------
Printed Name: Joseph C. Giempetroni
-----------------------
Title: Vice President
------------------------------
16
<PAGE> 28
EXHIBIT A
---------
FORM OF NOTES
-------------
$[__________] Houston, Texas March 29, 1995
FOR VALUE RECEIVED, the undersigned (whether one or more,
"MAKER") promise to pay to the order of [______________________________]
("PAYEE"), at its banking quarters in [_______], [______] County, [_____], the
sum of [_____] MILLION DOLLARS ($[_________]), or so much thereof as may be
advanced against this Note pursuant to the Credit Agreement dated of even date
herewith by and between Maker, Payee, and others (as amended, supplemented, or
restated from time to time, the "CREDIT AGREEMENT"), together with interest at
the rate and calculated as provided in the Credit Agreement. The indebtedness
evidenced by this Note, both principal and interest, is payable as provided in
the Credit Agreement.
Subject to compliance with applicable provisions of the Credit
Agreement, Maker may at any time pay the full amount or any part of this Note
without the payment of any premium or fee, but such payment shall not, until
this Note is fully paid and satisfied, excuse the payment as it becomes due of
any payment on this Note provided for in the Credit Agreement.
This Note is issued pursuant to, is a "Note" under, and is
entitled to all benefits of, the Credit Agreement; and reference is made to the
Credit Agreement for matters governed thereby, including, without limitation,
certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereon.
This Note is issued, in whole or in part, in renewal and
extension, but not in novation or discharge, of the remaining principal balance
of that certain Promissory Note dated November 15, 1993, in the original
principal amount of $[__________], executed by Belden & Blake Corporation, The
Canton Oil & Gas Company, Peake Energy, Inc., and Peake Operating Company and
payable to the order of Payee.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL
LAWS OF THE STATE OF TEXAS; PROVIDED, HOWEVER, THAT VERNON'S TEXAS CIVIL
----------------- -----------
STATUTES, ARTICLE 5069, CHAPTER 15 (WHICH REGULATES CERTAIN REVOLVING CREDIT
- ---------
LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
BELDEN & BLAKE CORPORATION
By:_______________________________
Printed Name:_____________________
Title:____________________________
A-i
<PAGE> 29
THE CANTON OIL & GAS COMPANY
By:_______________________________
Printed Name:_____________________
Title:____________________________
PEAKE ENERGY, INC.
By:_______________________________
Printed Name:_____________________
Title:____________________________
WARD LAKE DRILLING, INC.
By:_______________________________
Printed Name:_____________________
Title:____________________________
A-ii
<PAGE> 1
- --------------------------------------------------------------------------------
THIRD AMENDMENT
TO
CREDIT AGREEMENT
AMONG
BELDEN & BLAKE CORPORATION,
THE CANTON OIL & GAS COMPANY,
PEAKE ENERGY, INC.,
WARD LAKE DRILLING, INC.,
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
NBD BANK
EFFECTIVE AS OF MAY 25, 1995
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . 1
1.1 Terms Defined Above . . . . . . . . . . . . . . . . . . . 1
1.2 Terms Defined in Agreement . . . . . . . . . . . . . . . . 1
1.3 References . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Articles and Sections . . . . . . . . . . . . . . . . . . 2
1.5 Number and Gender . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II AMENDMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . 2
2.1 Amendment of Section 1.2 . . . . . . . . . . . . . . . . . 2
2.2 Amendment of Section 2.1 . . . . . . . . . . . . . . . . . 4
2.3 Amendment of Section 2.3 . . . . . . . . . . . . . . . . . 6
2.4 Amendment of Section 2.5 . . . . . . . . . . . . . . . . . 6
2.5 Amendment of Section 2.7 . . . . . . . . . . . . . . . . . 6
2.6 Amendment of Section 2.9 . . . . . . . . . . . . . . . . . 7
2.7 Amendment of Section 2.11 . . . . . . . . . . . . . . . . 8
2.8 Amendment of Section 2.13 . . . . . . . . . . . . . . . . 8
ARTICLE III CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Receipt of Documents . . . . . . . . . . . . . . . . . . . 9
3.2 No Material Adverse Change . . . . . . . . . . . . . . . . 9
3.3 No Default or Event of Default . . . . . . . . . . . . . . 9
3.4 Accuracy of Representations and Warranties . . . . . . . . 9
3.5 Additional Matters . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 10
ARTICLE V RATIFICATION . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 10
6.1 Scope of Amendment . . . . . . . . . . . . . . . . . . . . 10
6.2 Agreement as Amended . . . . . . . . . . . . . . . . . . . 10
6.3 Successors and Assigns; Rights of Third Parties . . . . . 10
6.4 Further Assurances . . . . . . . . . . . . . . . . . . . . 11
6.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 11
6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS . . . . . . . . . . . 11
6.7 JURISDICTION AND VENUE . . . . . . . . . . . . . . . . . . 11
6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES . . . 11
</TABLE>
-i-
<PAGE> 3
THIRD AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
This THIRD AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is
made and entered into effective as of May 25, 1995, by and among BELDEN & BLAKE
CORPORATION, an Ohio corporation ("BBC"), THE CANTON OIL & GAS COMPANY, an Ohio
corporation ("COG"), PEAKE ENERGY, INC., a Delaware corporation ("PEAKE
ENERGY"), WARD LAKE DRILLING, INC., a Michigan corporation ("WARD LAKE;" with
BBC, COG and Peake Energy each a "BORROWER" and collectively, the "BORROWERS"),
BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking association ("BANK
ONE"), and NBD BANK, a Michigan banking corporation, formerly known as NBD
Bank, N.A., a national banking association ("NBD;" with Bank One, together with
each financial institution that becomes a party hereto or entitled to benefits
and subject to obligations hereunder subsequent to the date hereof, each a
"LENDER" and collectively, the "LENDERS"), and BANK ONE, TEXAS, NATIONAL
ASSOCIATION, as agent for the Lenders (in such capacity and together with any
successors designated pursuant hereto, the "AGENT").
W I T N E S S E T H:
-------------------
WHEREAS, BBC, COG, Peake Energy, Peake Operating Company, and
the Lenders did execute and exchange counterparts of the Credit Agreement dated
November 15, 1993, as amended by the First Amendment to Credit Agreement dated
August 1, 1994, by and among BBC, COG, Peake Energy, and the Lenders and the
Second Amendment to Credit Agreement dated as of March 29, 1995, by and among
the parties hereto (collectively, the "AGREEMENT"), pursuant to which the
Lenders have extended credit to the Borrowers; and
WHEREAS, the parties to the Agreement desire to amend the
Agreement in the particulars hereinafter set forth;
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth in this Amendment and the Agreement,
the parties hereto agree as follows:
ARTICLE I
---------
DEFINITIONS AND INTERPRETATION
------------------------------
1.1 TERMS DEFINED ABOVE. As used herein, each of the
terms "AGENT," "AGREEMENT," "AMENDMENT," "BANK ONE," "BBC," "BORROWER,"
"BORROWERS," "COG," "LENDER," "LENDERS," "NBD," "PEAKE ENERGY," and "WARD LAKE"
shall have the meaning assigned to such term hereinabove.
1.2 TERMS DEFINED IN AGREEMENT. As used herein, each
term defined in the Agreement shall have the meaning assigned to such term in
the Agreement, unless expressly provided herein to the contrary.
<PAGE> 4
1.3 REFERENCES. References in this Amendment to Article
or Section numbers shall be to Articles and Sections of this Amendment, unless
expressly stated to the contrary. References in this Amendment to "hereby,"
"herein," "hereinafter," "hereinabove," "hereinbelow," "hereof," and
"hereunder" shall be to this Amendment in its entirety and not only to the
particular Article or Section in which such reference appears.
1.4 ARTICLES AND SECTIONS. This Amendment, for
convenience only, has been divided into Articles and Sections and it is
understood that the rights, powers, privileges, duties, and other legal
relations of the parties hereto shall be determined from this Amendment as an
entirety and without regard to such division into Articles and Sections and
without regard to headings prefixed to such Articles and Sections.
1.5 NUMBER AND GENDER. Whenever the context requires,
reference herein made to the single number shall be understood to include the
plural and likewise the plural shall be understood to include the singular.
Words denoting sex shall be construed to include the masculine, feminine and
neuter, when such construction is appropriate, and specific enumeration shall
not exclude the general, but shall be construed as cumulative. Definitions of
terms defined in the singular and plural shall be equally applicable to the
plural or singular, as the case may be.
ARTICLE II
----------
AMENDMENT OF AGREEMENT
----------------------
Each of the Borrowers, the Lenders, and the Agent hereby amend
the Agreement in the following particulars, effective as of and after the
effective date of this Amendment:
2.1 AMENDMENT OF SECTION 1.2. Section 1.2 of the
Agreement is amended as follows:
(a) The following definitions are hereby amended to read
as follows:
"ADJUSTED LIBO RATE" shall mean, for any LIBO Rate
Loan, an interest rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the sum of the
LIBO Rate for such Loan PLUS the Applicable Margin for such
Loan, but in no event exceeding the Highest Lawful Rate.
"BORROWING BASE" shall mean, at any time, the sum of
the Tranche A Borrowing Base then in effect and the Tranche B
Borrowing Base then in effect.
2
<PAGE> 5
"COMMITMENT AMOUNT" shall mean the sum of the Tranche
A Commitment Amount and the Tranche B Commitment Amount.
"COMMITMENT TERMINATION DATE" shall mean March 31,
1999.
"FLOATING RATE" shall mean, for any Floating Rate
Loan, an interest rate per annum equal to the Base Rate from
time to time in effect, plus the Applicable Margin for such
Loan, but in no event exceeding the Highest Lawful Rate.
"NOTES" shall mean the promissory notes of the
Borrowers to each Lender evidencing Indebtedness with respect
to Loans made by such Lender to the Borrowers, each in the
form attached to the Third Amendment to this Agreement as
Exhibit A, with appropriate insertions, together with any and
all renewals, extensions for any period, increases and
rearrangements thereof.
(b) The following definitions are hereby added to read as
follows:
"APPLICABLE MARGIN" shall mean (a) as to each
Floating Rate Loan which is (i) a Tranche A Loan, one-fourth
percent (1/4%), except (A) if any Indebtedness is outstanding
as a Tranche B Loan, the margin shall be one-half percent
(1/2%) and (B) if all Tranche B Loans have been repaid and/or
the Lenders have no further obligation to make Tranche B
Loans, the margin shall be zero or (ii) a Tranche B Loan, one
percent (1%) or (b) as to each LIBO Rate Loan which is (i) a
Tranche A Loan, two percent (2%), except that if any
Indebtedness is outstanding as a Tranche B Loan or the Lenders
have any obligation to make Tranche B Loans, the margin shall
be two and one-half percent (2-1/2%), or (ii) a Tranche B
Loan, three percent (3%).
"QUAKER STATE PROPERTIES" shall mean the Oil and Gas
Properties to be acquired by BBC pursuant to that certain
Purchase and Sale Agreement by and between BBC, Quaker State
Corporation and QSE&P, Inc. and located in Ohio, Pennsylvania,
New York and West Virginia.
3
<PAGE> 6
"TRANCHE A BORROWING BASE" shall mean at any time,
the amount determined by the Required Lenders in accordance
with Section 2.7 and then in effect pursuant to the terms of
Section 2.7.
"TRANCHE A COMMITMENT AMOUNT" shall mean (a) the
amount of $81,000,000, $21,000,000 of which will be available
upon and after the acquisition of the Quaker State Properties
but not prior thereto, or (b) such higher amount as determined
by the Lenders from time to time, which higher amount shall
become effective upon written notification thereof to the
Borrowers from the Lenders.
"TRANCHE A LOAN" shall mean any Loan made by any
Lender to the Borrowers pursuant to Section 2.1(a)(i).
"TRANCHE B BORROWING BASE" shall mean, at any time,
the amount determined by the Required Lenders in accordance
with Section 2.7 and then in effect pursuant to the terms of
Section 2.7.
"TRANCHE B COMMITMENT AMOUNT" shall mean (a) zero,
(b) upon and after the acquisition of the Quaker State
Properties, the amount of $22,000,000, as such amount is
reduced pursuant to Section 2.1(d), or (c) such higher amount
as determined by the Lenders from time to time, which higher
amount shall become effective upon written notification
thereof to the Borrowers from the Lenders.
"TRANCHE B LOAN" shall mean any Loan made by any
Lender to the Borrowers pursuant to Section 2.1(a)(ii).
2.2 AMENDMENT OF SECTION 2.1. Section 2.1 of the
Agreement is hereby amended to read as follows:
"2.1 REVOLVING LINE OF CREDIT. (a) Upon the terms
and conditions (including, without limitation, the right of the
Lenders to decline to make any Loan so long as any Default or Event of
Default exists) and relying on the representations and warranties
contained in this Agreement, each Lender, severally and not jointly,
agrees, (i) during the Commitment Period, to make Tranche A Loans, and
(ii) during the period from and including the date of the acquisition
of the Quaker State Properties to but not including October 15, 1997,
to make Tranche B Loans, in immediately available funds at the
4
<PAGE> 7
Principal Office, to the Borrowers from time to time on any Business
Day designated by the Borrowers following receipt by the Agent of a
Request for Advance in an amount equal to such Lender's Commitment
Percentage of the requested Loan; PROVIDED, HOWEVER, that (i) the Loan
Balance shall not exceed the lesser of the Commitment Amount or the
Borrowing Base then in effect, (ii) the Loan Balance plus the
outstanding principal balance of the Senior Notes shall not exceed the
Borrowing Base then in effect, (iii) the outstanding principal amount
of all Tranche A Loans shall not exceed the lesser of the Tranche A
Commitment Amount or the Tranche A Borrowing Base, (iv) the
outstanding principal amount of all Tranche B Loans shall not exceed
the lesser of the Tranche B Commitment Amount or the Tranche B
Borrowing Base, (v) the outstanding principal amount of all Loans by
any Lender to the Borrowers shall not exceed an amount equal to the
Commitment Percentage of such Lender multiplied by the lesser of the
Commitment Amount or the Borrowing Base then in effect, (vi) no Loan
shall exceed the then existing Available Commitment, (vii) no
borrowing, conversion, or prepayment of principal of Loans, except for
prepayments made pursuant to Section 2.9, shall be in an amount less
than $100,000 and (viii) if Tranche B is not drawn upon in connection
with the acquisition of the Quaker State Properties, the Commitment
with regard to the entire Tranche B shall terminate and be of no
further force and effect until such time, if at all, as it is
reinstated in writing, signed by all the parties hereto.
(b) Subject to the terms of this Agreement, the
Borrowers may borrow, repay, and reborrow and convert Loans of one
type or with one Interest Period into Loans of another type or with a
different Interest Period. Each borrowing, prepayment, or conversion
of or into a Loan of a different type or, in the case of a LIBO Rate
Loan, having a different Interest Period, shall be deemed a separate
borrowing, conversion, and prepayment for purposes of the foregoing,
one for each type of Loan or Interest Period. Anything in this
Agreement to the contrary notwithstanding, the aggregate principal
amount of LIBO Rate Loans having the same Interest Period shall be at
least equal to $100,000; and if any LIBO Rate Loan would otherwise be
in a lesser principal amount for any period, such Loan shall be a
Floating Rate Loan during such period.
(c) The Loans shall be made and maintained at the
Principal Office and shall be evidenced by the Notes.
(d) Commencing on September 1, 1995 and continuing
thereafter on the first day of each calendar month through October 1,
1997, the Tranche B Commitment
5
<PAGE> 8
Amount shall be reduced by the amount of $1,725,000; PROVIDED,
HOWEVER, the Lenders may at their discretion redetermine the amount by
which the Tranche B Commitment Amount shall be reduced each calendar
month in connection with each redetermination of the Tranche B
Borrowing Base or otherwise at any time and from time to time and such
redetermined reducing amount shall become effective upon verbal
notification thereof to the Borrowers (subsequently confirmed in
writing) and shall remain in effect until the next subsequent
redetermination.
(e) The Borrowers' obligation to pay, and the
Lenders' right to receive payment of the Tranche B Loans is expressly
subordinate and junior to the prior payment in full of all other
Obligations and the Senior Notes; PROVIDED, HOWEVER, so long as no
Default or Event of Default has occurred and is continuing, the
Borrowers may repay the Tranche B Loans according to the terms of this
Agreement."
2.3 AMENDMENT OF SECTION 2.3. Section 2.3 of the
Agreement is hereby amended to read as follows:
"2.3 USE OF LOAN PROCEEDS AND LETTERS OF CREDIT. (a)
Proceeds of Tranche A Loans shall be used by the Borrowers for the
acquisition and development of Oil and Gas Properties, the acquisition
of businesses or assets related to the oil and gas business of any
Borrower, and to provide general working capital.
(b) Proceeds of Tranche B Loans shall be used by the Borrowers
for the acquisition of the Quaker State Properties and any other
purpose set forth in subsection (a) above.
(c) Letters of Credit shall be used for general corporate
purposes; provided, however, no Letter of Credit may be used in lieu
of or in support of stay or appeal bonds."
2.4 AMENDMENT OF SECTION 2.5. The third sentence of
Section 2.5 of the Agreement is hereby amended to read as follows:
"The Loan Balance of each Note, together with all accrued and
unpaid interest thereon, shall be due and payable on the Commitment
Termination Date; PROVIDED, HOWEVER, the portion of the Loan Balance
evidencing Tranche B Loans, together with all accrued and unpaid
interest thereon, shall be due and payable on or before October 15,
1997."
2.5 AMENDMENT OF SECTION 2.7. Section 2.7 of the
Agreement is hereby amended in its entirety to read as follows:
6
<PAGE> 9
"2.7 BORROWING BASE DETERMINATIONS. (a) The Tranche A
Borrowing Base is acknowledged by each Borrower and each Lender to be
$95,000,000. The Tranche B Borrowing Base is acknowledged by each
Borrower and each Lender to be zero. Each Borrower and each Lender
acknowledge that, after the acquisition of the Quaker State
Properties, the Tranche A Borrowing Base shall be $116,000,000 and the
Tranche B Borrowing Base shall be $22,000,000.
(b) Each Borrowing Base shall be redetermined by the
Lenders semi-annually on the basis of information supplied by the
Borrowers in compliance with the provisions of this Agreement,
including, without limitation, Reserve Reports, Financial Statements,
and all other information available to the Lenders. Notwithstanding
the foregoing, any two Lenders may, in their discretion, require that
a redetermination of either Borrowing Base be made at any time and
from time to time. Upon such a requirement by any two Lenders, such
redetermination shall be made by the Lenders as otherwise provided in
this Section.
(c) Upon each determination of either Borrowing Base
as provided in this Section, the Agent shall notify the Borrowers
verbally (confirming such notice promptly in writing) of such
determination, and the Borrowing Base so communicated shall become
effective upon such verbal notification and shall remain in effect
until the next subsequent determination of such Borrowing Base.
(d) Each Borrowing Base shall represent the lowest
amount among the Lenders based upon the determination by each of the
Lenders, in its sole discretion and in accordance with its standard
engineering and lending policies and practices customary for loans of
this nature, of the value, for loan purposes, of the Oil and Gas
Properties of the Borrowers which are unencumbered by Liens other than
Liens existing at any time for the benefit of the Lenders.
Furthermore, each Borrower acknowledges that each determination of
either Borrowing Base reflects a margin or discount below market value
which may change from time to time, which is acknowledged by the
Borrowers to be essential for the adequate protection of the Lenders."
2.6 AMENDMENT OF SECTION 2.9. Section 2.9 of the
Agreement is hereby amended in its entirety to read as follows:
"2.9 MANDATORY PREPAYMENTS. If at any time (a) the Loan
Balance exceeds the lesser of the Commitment Amount or the Borrowing
Base then in effect, (b) the Loan Balance plus the outstanding
principal balance of the Senior Notes exceeds the Borrowing Base then
in effect,
7
<PAGE> 10
(c) the outstanding principal amount of all Tranche A Loans exceeds
the lesser of the Tranche A Commitment Amount or the Tranche A
Borrowing Base, or (d) the outstanding principal balance of all
Tranche B Loans exceeds the lesser of the Tranche B Commitment Amount
or the Tranche B Borrowing Base, the Borrowers shall, within 30
Business Days of notice from the Agent of such occurrence, prepay, or
make arrangements acceptable to the Required Lenders for the
prepayment of, the amount of such excess for application on the Loan
Balance."
2.7 AMENDMENT OF SECTION 2.11. Section 2.11 of the
Agreement is hereby amended in its entirety to read as follows:
"2.11 COMMITMENT FEES. In addition to interest on the
Notes as provided herein, the Facility Fees and the Engineering Fees
payable hereunder, and to compensate the Lenders for maintaining funds
available, the Borrowers shall pay to the Agent for the Ratable
Benefit of the Lenders, in immediately available funds, on the first
day of July, 1995, and on the first day of each third calendar month
thereafter, a fee in the amount of one-half of one percent (1/2%) per
annum, calculated on the basis of a year of 360 days, but counting the
actual days elapsed (including the first day but excluding the last
day), on the average daily amount of the Available Commitment during
the preceding three-month period."
2.8 AMENDMENT OF SECTION 2.13. Section 2.13 of the
Agreement is hereby amended in its entirety to read as follows:
"2.13 FACILITY FEES. In addition to interest on the Notes
as provided herein, the Commitment Fees and the Engineering Fees
payable hereunder, and to compensate the Lenders for the costs of the
extension of credit hereunder, the Borrowers shall pay to the Agent
for the Ratable Benefit of the Lenders, in immediately available
funds, (a) on the date of the acquisition of the Quaker State
Properties, a fee in the amount of $165,000, plus a fee in the amount
of the three-fourths of one percent (3/4%) of the difference between
$70,000,000 and the increased Commitment Amount for Tranche A Loans,
(b) on the date of the first Tranche B Loan, a fee in the amount of
$220,000, (c) on the date of each subsequent increase in the Tranche A
Commitment Amount, a fee in the amount of three-fourths of one percent
(3/4%) of the difference between the Tranche A Commitment Amount in
effect immediately preceding the Commitment Amount increase and the
new Tranche A Commitment Amount, and (d) on the date of each
subsequent increase in the Tranche B Commitment Amount, a fee in the
amount of three percent (3%) of the difference between the Tranche B
Commitment Amount in effect immediately preceding the Commitment
Amount increase and the new Tranche B Commitment Amount;
8
<PAGE> 11
PROVIDED, HOWEVER, in the event that the Commitment Amount should be
decreased at any time and thereafter increased there shall be no fee
due on the portion of such Commitment Amount increase which has
previously had a fee assessed against it hereunder."
ARTICLE III
-----------
CONDITIONS
----------
The obligations of the Lenders and the Agent to enter into
this Amendment are subject to the fulfillment of the following conditions
precedent, with all documents to be delivered to the Agent to be in form and
substance satisfactory to the Lenders:
3.1 RECEIPT OF DOCUMENTS. The Agent shall have received
the following:
(a) this Amendment, duly executed by each Borrower;
(b) the Notes;
(c) a Notice of Final Agreement; and
(d) such other agreements, documents, items, instruments,
opinions, certificates, waivers, consents, and evidence as the Agent
may reasonably request on its own behalf or on behalf of any Lender.
3.2 NO MATERIAL ADVERSE CHANGE. In the opinion of the
Required Lenders, no material adverse change shall have occurred in the
property, business, operations, conditions (financial or otherwise) or
prospects of any Borrower since the date of the last Financial Statements
delivered to the Lenders.
3.3 NO DEFAULT OR EVENT OF DEFAULT. No Default or Event
of Default shall have occurred and be continuing.
3.4 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of
the representations and warranties contained in Article IV of the Agreement, as
amended hereby, and in any other Loan Document, as each has been supplemented,
if applicable, shall be true and correct in all material respects, except as
affected by the transactions contemplated in the Agreement and this Amendment.
3.5 ADDITIONAL MATTERS. All matters incident to the
consummation of the transactions contemplated hereby shall be satisfactory to
the Required Lenders.
9
<PAGE> 12
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
Each of the Borrowers hereby expressly remakes, in favor of
the Lenders and the Agent, all of the representations and warranties set forth
in Article IV of the Agreement, as amended hereby, and in any other Loan
Document, and represents and warrants that all such representations and
warranties, as each has been supplemented, if applicable, remain true and
unbreached in all material respects, except as affected by the transactions
contemplated in the Agreement and this Amendment and except for such
representations and warranties which may be limited to the date made.
ARTICLE V
---------
RATIFICATION
------------
Each of the parties hereto does hereby adopt, ratify, and
confirm the Agreement and each other Loan Document to which it is a party, in
all things in accordance with the terms and provisions thereof, as amended by
this Amendment.
ARTICLE VI
----------
MISCELLANEOUS
-------------
6.1 SCOPE OF AMENDMENT. The scope of this Amendment is
expressly limited to the matters addressed herein and this Amendment shall not
operate as a waiver of any past, present, or future breach, Default, or Event
of Default under the Agreement, except to the extent, if any, that any such
breach, Default, or Event of Default is remedied by the effect of this
Amendment.
6.2 AGREEMENT AS AMENDED. 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 Amendment.
6.3 SUCCESSORS AND ASSIGNS; RIGHTS OF THIRD PARTIES. All
covenants and agreements by each of the Borrowers in this Amendment shall be
binding upon such Borrower and its legal representatives, successors, and
assigns and shall inure to the benefit of the Agent and each of the Lenders and
their legal representatives, successors, and assigns. All provisions of this
Amendment, the Agreement, and the other Loan Documents are imposed solely and
exclusively for the benefit of the Borrowers, the Agent, and the Lenders. No
other Person shall have standing to require satisfaction of such provisions in
accordance with their terms, and any or all of such provisions may, subject to
the provisions of Section 9.9 of the Agreement as to the rights of the Lenders,
be
10
<PAGE> 13
freely waived in whole or in part by the Agent at any time if in its sole
discretion it deems it advisable to do so.
6.4 FURTHER ASSURANCES. Each of the Borrowers shall
execute, acknowledge, and deliver, at any time as requested by the Agent, such
other documents and instruments as the Required Lenders shall deem necessary in
their sole discretion to fulfill the terms of the Agreement, as amended hereby,
including, without limitation, modifications of and amendments to any of the
Loan Documents.
6.5 GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO BE
-------------
A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAW).
6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS. THIS
-------------------------------------
AMENDMENT CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT HEREOF AND SUPERSEDES ANY PRIOR AGREEMENT, WHETHER
WRITTEN OR ORAL, BETWEEN SUCH PARTIES REGARDING THE SUBJECT HEREOF.
FURTHERMORE IN THIS REGARD, THIS WRITTEN AMENDMENT, THE AGREEMENT, AND THE
OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG
THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
6.7 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS
-----------------------
WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF,
RELATED TO OR FROM THIS AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT
MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE AGENT, IN COURTS
HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. EACH OF THE BORROWERS HEREBY
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN
HOUSTON, HARRIS COUNTY, TEXAS AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO
TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST
IT BY THE AGENT IN ACCORDANCE WITH THIS SECTION.
6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES.
----------------------------------------------------
EACH OF THE BORROWERS, THE AGENT, AND EACH OF THE LENDERS HEREBY (A) KNOWINGLY,
VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR
ARISES OUT OF THIS AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR THE
ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER IN THE ENFORCEMENT OF ANY OF THE
TERMS OR PROVISIONS OF THIS AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN
DOCUMENT OR OTHERWISE WITH RESPECT THERETO, (B) KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT
NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES, AND (C)
CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR
ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR
11
<PAGE> 14
OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVERS. THE PROVISIONS OF THIS SECTION ARE A
MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS
AMENDMENT.
Executed effective as of the 25th day of May, 1995.
BORROWERS:
BELDEN & BLAKE CORPORATION
By: /s/ H.S. Belden IV
-----------------------------------
Printed Name: H.S. Belden IV
-------------------------
Title: Chief Executive Officer
--------------------------------
THE CANTON OIL & GAS COMPANY
By: /s/ H.S. Belden IV
-----------------------------------
Printed Name: H.S. Belden IV
-------------------------
Title: Chief Executive Officer
--------------------------------
PEAKE ENERGY, INC.
By: /s/ H.S. Belden IV
-----------------------------------
Printed Name: H.S. Belden IV
-------------------------
Title: Chief Executive Officer
--------------------------------
WARD LAKE DRILLING, INC.
By: /s/ R.L. Clements
-----------------------------------
Printed Name: R.L. Clements
-------------------------
Title: Chief Executive Officer
--------------------------------
(Signatures Continued on Next Page)
12
<PAGE> 15
AGENT AND LENDER:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By: /s/ Elizabeth W. Hunter
-------------------------------------
Printed Name: Elizabeth W. Hunter
---------------------------
Title: Vice President
----------------------------------
LENDER:
NBD BANK
By: /s/ Joseph C. Giampetroni
-------------------------------------
Printed Name: Joseph C. Giampetroni
---------------------------
Title: Vice President
----------------------------------
13
<PAGE> 16
EXHIBIT A
FORM OF NOTES
$[__________] Houston, Texas
____________, 1995
FOR VALUE RECEIVED, the undersigned (whether one or more,
"MAKER") promise to pay to the order of [____________________________ __]
("PAYEE"), at its banking quarters in [_______], [______] County, [_____], the
sum of [_____] MILLION DOLLARS ($[_________]), or so much thereof as may be
advanced against this Note pursuant to the Credit Agreement dated of even date
herewith by and between Maker, Payee, and others (as amended, supplemented, or
restated from time to time, the "CREDIT AGREEMENT"), together with interest at
the rate and calculated as provided in the Credit Agreement. The indebtedness
evidenced by this Note, both principal and interest, is payable as provided in
the Credit Agreement.
Subject to compliance with applicable provisions of the Credit
Agreement, Maker may at any time pay the full amount or any part of this Note
without the payment of any premium or fee, but such payment shall not, until
this Note is fully paid and satisfied, excuse the payment as it becomes due of
any payment on this Note provided for in the Credit Agreement.
This Note is issued pursuant to, is a "Note" under, and is
entitled to all benefits of, the Credit Agreement; and reference is made to the
Credit Agreement for matters governed thereby, including, without limitation,
certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereon.
This Note is issued, in whole or in part, in renewal and
extension, but not in novation or discharge, of the remaining principal balance
of that certain Promissory Note dated March 29, 1995, in the original principal
amount of $[__________], executed by Maker and payable to the order of Payee.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL
LAWS OF THE STATE OF TEXAS; PROVIDED, HOWEVER, THAT VERNON'S TEXAS CIVIL
STATUTES, ARTICLE 5069, CHAPTER 15 (WHICH REGULATES CERTAIN REVOLVING CREDIT
LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
BELDEN & BLAKE CORPORATION
By:_______________________________
Printed Name:_____________________
Title:____________________________
A-i
<PAGE> 17
THE CANTON OIL & GAS COMPANY
By:_______________________________
Printed Name:_____________________
Title:____________________________
PEAKE ENERGY, INC.
By:_______________________________
Printed Name:_____________________
Title:____________________________
WARD LAKE DRILLING, INC.
By:_______________________________
Printed Name:_____________________
Title:____________________________
A-ii
<PAGE> 1
- ------------------------------------------------------------------------------
FOURTH AMENDMENT
TO
CREDIT AGREEMENT
AMONG
BELDEN & BLAKE CORPORATION,
THE CANTON OIL & GAS COMPANY,
PEAKE ENERGY, INC.,
WARD LAKE DRILLING, INC.,
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
THE FIRST NATIONAL BANK OF CHICAGO
EFFECTIVE AS OF FEBRUARY 15, 1996
- ------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Terms Defined Above . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Terms Defined in Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Articles and Sections . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II AMENDMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Amendment of Section 1.2 . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Amendment of Section 2.7 . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Amendment of Section 2.11 . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Amendment of Section 2.13 . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Amendment of Section 6.14 . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 Amendment of Section 9.3 . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Receipt of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 No Default or Event of Default . . . . . . . . . . . . . . . . . . . . . . . 6
3.4 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . 6
3.5 Additional Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V RATIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Scope of Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.2 Agreement as Amended . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.3 Successors and Assigns; Rights of Third Parties . . . . . . . . . . . . . . 7
6.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . 8
6.7 JURISDICTION AND VENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES . . . . . . . . . . . . 8
</TABLE>
i
<PAGE> 3
FOURTH AMENDMENT TO CREDIT AGREEMENT
------------------------------------
This FOURTH AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is made and
entered into effective as of February 15, 1996, by and among BELDEN & BLAKE
CORPORATION, an Ohio corporation ("BBC"), THE CANTON OIL & GAS COMPANY, an Ohio
corporation ("COG"), PEAKE ENERGY, INC., a Delaware corporation ("PEAKE
ENERGY"), WARD LAKE DRILLING, INC., a Michigan corporation ("WARD LAKE;" with
BBC, COG and Peake Energy each a "BORROWER" and collectively, the "BORROWERS"),
BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking association ("BANK
ONE"), and THE FIRST NATIONAL BANK OF CHICAGO, a national banking association,
as assignee of NBD Bank, a Michigan banking corporation ("FNBC;" with Bank One,
together with each financial institution that becomes a party hereto or
entitled to benefits and subject to obligations hereunder subsequent to the
date hereof, each a "LENDER" and collectively, the "LENDERS"), and BANK ONE,
TEXAS, NATIONAL ASSOCIATION, as agent for the Lenders (in such capacity and
together with any successors designated pursuant hereto, the "AGENT").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, BBC, COG, Peake Energy, Peake Operating Company, the Agent, and the
Lenders did execute and exchange counterparts of the Credit Agreement dated
November 15, 1993, as amended by the First Amendment to Credit Agreement dated
August 1, 1994, the Second Amendment to Credit Agreement dated as of March 29,
1995, and the Third Amendment to Credit Agreement dated as of May 25, 1995
(collectively, the "AGREEMENT"), pursuant to which the Lenders have extended
credit to the Borrowers; and
WHEREAS, the parties to the Agreement desire to amend the Agreement in the
particulars hereinafter set forth;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth in this Amendment and the Agreement, the parties
hereto agree as follows:
ARTICLE I
---------
DEFINITIONS AND INTERPRETATION
------------------------------
1.1 TERMS DEFINED ABOVE. As used herein, each of the terms "AGENT,"
"AGREEMENT," "AMENDMENT," "BANK ONE," "BBC," "BORROWER," "BORROWERS," "COG,"
"FNBC," "LENDER," "LENDERS," "PEAKE ENERGY," and "WARD LAKE" shall have the
meaning assigned to such term hereinabove.
1.2 TERMS DEFINED IN AGREEMENT. As used herein, each term defined in the
Agreement shall have the meaning assigned to such term in the Agreement, unless
expressly provided herein to the contrary.
<PAGE> 4
1.3 REFERENCES. References in this Amendment to Article or Section numbers
shall be to Articles and Sections of this Amendment, unless expressly stated to
the contrary. References in this Amendment to "hereby," "herein,"
"hereinafter," "hereinabove," "hereinbelow," "hereof," and "hereunder" shall be
to this Amendment in its entirety and not only to the particular Article or
Section in which such reference appears.
1.4 ARTICLES AND SECTIONS. This Amendment, for convenience only, has been
divided into Articles and Sections and it is understood that the rights,
powers, privileges, duties, and other legal relations of the parties hereto
shall be determined from this Amendment as an entirety and without regard to
such division into Articles and Sections and without regard to headings
prefixed to such Articles and Sections.
1.5 NUMBER AND GENDER. Whenever the context requires, reference herein made
to the single number shall be understood to include the plural and likewise the
plural shall be understood to include the singular. Words denoting sex shall
be construed to include the masculine, feminine and neuter, when such
construction is appropriate, and specific enumeration shall not exclude the
general, but shall be construed as cumulative. Definitions of terms defined in
the singular and plural shall be equally applicable to the plural or singular,
as the case may be.
ARTICLE II
----------
AMENDMENT OF AGREEMENT
----------------------
Each of the Borrowers, the Lenders, and the Agent hereby amend the Agreement
in the following particulars, effective as of and after the effective date of
this Amendment:
2.1 AMENDMENT OF SECTION 1.2. Section 1.2 of the Agreement is amended as
follows:
(a) The following definitions are hereby amended to read as follows:
"APPLICABLE MARGIN" shall mean (a) as to each Floating Rate Loan which is
a Tranche A Loan, the margin shall be zero, (b) as to each LIBO Rate Loan
which is a Tranche A Loan, (i) if Utilization is less than 50% of the
Borrowing Base, the margin shall be 0.75%; (ii) if Utilization is less than
75% of the Borrowing Base but more than or equal to 50% of the Borrowing
Base, the margin shall be 1.0%; and (iii) if Utilization is more than or
equal to 75% of the Borrowing Base, then the margin shall be 1.25%. There
is no Commitment as of the date of the Fourth Amendment to this
2
<PAGE> 5
Agreement to lend under Tranche B and in the event there is ever a Commitment
under Tranche B, the margin shall be mutually agreed upon by the parties
hereto.
"COMMITMENT TERMINATION DATE" shall mean March 31, 2001.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Intercreditor
Agreement, the Letter of Credit Applications, the Letters of Credit, the
Master Agreement, and all other documents and instruments now or hereafter
delivered pursuant to the terms of or in connection with this Agreement, the
Notes, the Intercreditor Agreement, the Letter of Credit Applications, the
Letters of Credit, or the Master Agreement, and all renewals and extensions
of, amendments and supplements to, and restatements of, any or all of the
foregoing from time to time in effect.
"OBLIGATIONS" shall mean, without duplication, (a) all Indebtedness
evidenced by the Notes, (b) the obligation of the Borrowers to provide to or
reimburse the Agent, as the issuer of Letters of Credit, or the Lenders, as
the case may be, for, amounts payable, paid, or incurred with respect to
Letters of Credit, (c) the undrawn, unexpired amount of all outstanding
Letters of Credit, (d) the obligation of the Borrowers for the payment of
Commitment Fees, Engineering Fees, and Facility Fees, (e) all amounts owing
or to be owing by BBC to Bank One under the Master Agreement, and (f) all
other obligations and liabilities of the Borrowers to the Agent and the
Lenders, now existing or hereafter incurred, under, arising out of or in
connection with any Loan Document, together with all interest accruing
thereon and costs, expenses, and attorneys' fees incurred in the enforcement
or collection thereof, whether such obligations and liabilities are direct,
indirect, fixed, contingent, liquidated, unliquidated, joint, several, or
joint and several, and with respect to any of the foregoing that includes or
refers to the payment of amounts deemed or constituting interest, only so
much thereof as shall have accrued, been earned and which remains unpaid at
each relevant time of determination.
3
<PAGE> 6
"TRANCHE A COMMITMENT AMOUNT" shall mean (a) the amount of $70,000,000, or
(b) such higher amount as determined by the Lenders from time to time, which
higher amount shall become effective upon written notification thereof to
the Borrowers from the Lenders.
"TRANCHE B COMMITMENT AMOUNT" shall mean (a) zero, or (b) such higher
amount as determined by the Lenders from time to time, which higher amount
shall become effective upon written notification thereof to the Borrowers
from the Lenders.
(b) The following definitions are hereby added to read as follows:
"MASTER AGREEMENT" shall mean the ISDA Master Agreement by and between the
Borrowers and Bank One dated of even date with the Fourth Amendment to this
Agreement, as it may be amended, supplemented, or restated from time to
time, and any option with respect to any transaction under such agreement.
"UTILIZATION" shall mean the Borrowing Base less the Available Commitment.
2.2 AMENDMENT OF SECTION 2.7. Section 2.7(a) of the Agreement is hereby
amended in its entirety to read as follows:
"(a) The Tranche A Borrowing Base is acknowledged by each Borrower and each
Lender to be $105,000,000. The Tranche B Borrowing Base is acknowledged by
each Borrower and each Lender to be zero."
2.3 AMENDMENT OF SECTION 2.11. Section 2.11 of the Agreement is hereby
amended in its entirety to read as follows:
"2.11 COMMITMENT FEES. In addition to interest on the Notes as provided
herein, the Facility Fees and the Engineering Fees payable hereunder, and to
compensate the Lenders for maintaining funds available, the Borrowers shall
pay to the Agent for the Ratable Benefit of the Lenders, in immediately
available funds, on the first day of April 1, 1996, and on the first day of
each third calendar month thereafter, a fee in the amount of three-eighths of
one percent (3/8%) per annum, calculated on the basis of a year of 360 days,
but counting the actual days elapsed (including the first day but excluding
the last day), on the average daily amount of the Available Commitment during
the preceding three-month period."
4
<PAGE> 7
2.4 AMENDMENT OF SECTION 2.13. Section 2.13 of the Agreement is hereby
amended in its entirety to read as follows:
"2.13 FACILITY FEES. In addition to interest on the Notes as provided
herein, the Commitment Fees and the Engineering Fees payable hereunder, and
to compensate the Lenders for the costs of the extension of credit hereunder,
the Borrowers shall pay to the Agent for the Ratable Benefit of the Lenders,
in immediately available funds, on the date of each increase in the Tranche A
Commitment Amount, a fee in the amount of one-half of one percent (1/2%) of
the difference between the Tranche A Commitment Amount in effect immediately
preceding the Commitment Amount increase and the new Tranche A Commitment
Amount; PROVIDED, HOWEVER, in any event that any Commitment Amount should be
decreased at any time and thereafter increased there shall be no fee due on
the portion of such Commitment Amount increase which has previously had a fee
assessed against it hereunder."
2.5 AMENDMENT OF SECTION 6.14. Subsection (c) of Section 6.14 of the
Agreement is hereby amended in its entirety to read as follows:
"(c) contracts entered into with the purpose and effect of fixing interest
rates on a principal amount of Indebtedness of the Borrowers that is accruing
interest at a variable rate, including, without limitation, the Master
Agreement, provided that (i) the aggregate notional amount of such contracts
never exceeds the greater of $60,000,000 or seventy-five percent (75%) of the
anticipated outstanding principal balance of the Indebtedness of the
Borrowers to be hedged by such contracts or an average of such principal
balances calculated using a generally accepted method of matching interest
swap contracts to declining principal balances, (ii) the floating rate index
of each such contract generally matches the index used to determine the
floating rates of interest on the corresponding Indebtedness of the Borrowers
to be hedged by such contract, and (iii) each such contract shall be with
Bank One or other counterparty or have a guarantor of the obligation of such
other counterparty who, at the time the contract is made, has long-term
obligations rated at least BBB+ or Baa1 or its equivalent by a Recognized
Rating Agency (or a successor credit rating agency)."
2.6 AMENDMENT OF SECTION 9.3. Subsection (b) of Section 9.3 of the
Agreement is hereby amended in its entirety to read as follows:
"(b) if to FNBC, to:
THE FIRST NATIONAL BANK OF CHICAGO
5
<PAGE> 8
One First National Plaza, Suite 0363
Chicago, Illinois 60670
Attention: Mr. William Laird
Telecopy: (312) 732-4840
with a copy to:
NBD BANK
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Mr. Joseph Giampetroni
Telecopy: (313) 225-2649"
ARTICLE III
-----------
CONDITIONS
----------
The obligations of the Lenders and the Agent to enter into this Amendment
are subject to the fulfillment of the following conditions precedent, with all
documents to be delivered to the Agent to be in form and substance satisfactory
to the Lenders:
3.1 RECEIPT OF DOCUMENTS. The Agent shall have received the following:
(a) this Amendment, duly executed by each Borrower;
(b) the Master Agreement, duly executed by each Borrower;
(c) a Notice of Final Agreement; and
(d) such other agreements, documents, items, instruments, opinions,
certificates, waivers, consents, and evidence as the Agent may reasonably
request on its own behalf or on behalf of any Lender.
3.2 NO MATERIAL ADVERSE CHANGE. In the opinion of the Required Lenders, no
material adverse change shall have occurred in the property, business,
operations, conditions (financial or otherwise) or prospects of any Borrower
since the date of the last Financial Statements delivered to the Lenders.
3.3 NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default shall
have occurred and be continuing.
3.4 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties contained in Article IV of the Agreement, as amended hereby, and
in any other Loan Document, as each has been supplemented, if applicable, shall
be true and correct in all material respects, except as affected by the
transactions contemplated in the Agreement and this Amendment.
6
<PAGE> 9
3.5 ADDITIONAL MATTERS. All matters incident to the consummation of the
transactions contemplated hereby shall be satisfactory to the Required Lenders.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
Each of the Borrowers hereby expressly remakes, in favor of the Lenders and
the Agent, all of the representations and warranties set forth in Article IV of
the Agreement, as amended hereby, and in any other Loan Document, and
represents and warrants that all such representations and warranties, as each
has been supplemented, if applicable, remain true and unbreached in all
material respects, except as affected by the transactions contemplated in the
Agreement and this Amendment and except for such representations and warranties
which may be limited to the date made.
ARTICLE V
---------
RATIFICATION
------------
Each of the parties hereto does hereby adopt, ratify, and confirm the
Agreement and each other Loan Document to which it is a party, in all things in
accordance with the terms and provisions thereof, as amended by this Amendment.
ARTICLE VI
----------
MISCELLANEOUS
-------------
6.1 SCOPE OF AMENDMENT. The scope of this Amendment is expressly limited to
the matters addressed herein and this Amendment shall not operate as a waiver
of any past, present, or future breach, Default, or Event of Default under the
Agreement, except to the extent, if any, that any such breach, Default, or
Event of Default is remedied by the effect of this Amendment.
6.2 AGREEMENT AS AMENDED. 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 Amendment.
6.3 SUCCESSORS AND ASSIGNS; RIGHTS OF THIRD PARTIES. All covenants and
agreements by each of the Borrowers in this Amendment shall be binding upon
such Borrower and its legal representatives, successors, and assigns and shall
inure to the benefit of the Agent and each of the Lenders and their legal
representatives, successors, and assigns. All provisions of this Amendment,
the Agreement, and the other Loan Documents are imposed solely and
7
<PAGE> 10
exclusively for the benefit of the Borrowers, the Agent, and the Lenders. No
other Person shall have standing to require satisfaction of such provisions in
accordance with their terms, and any or all of such provisions may, subject to
the provisions of Section 9.9 of the Agreement as to the rights of the Lenders,
be freely waived in whole or in part by the Agent at any time if in its sole
discretion it deems it advisable to do so.
6.4 FURTHER ASSURANCES. Each of the Borrowers shall execute, acknowledge,
and deliver, at any time as requested by the Agent, such other documents and
instruments as the Required Lenders shall deem necessary in their sole
discretion to fulfill the terms of the Agreement, as amended hereby, including,
without limitation, modifications of and amendments to any of the Loan
Documents.
6.5 GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE
--------------
UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW).
6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS. THIS AMENDMENT CONSTITUTES THE
-------------------------------------
ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF
AND SUPERSEDES ANY PRIOR AGREEMENT, WHETHER WRITTEN OR ORAL, BETWEEN SUCH
PARTIES REGARDING THE SUBJECT HEREOF. FURTHERMORE IN THIS REGARD, THIS WRITTEN
AMENDMENT, THE AGREEMENT, AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT,
COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
6.7 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
-----------------------
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM
THIS AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT
THE SOLE DISCRETION AND ELECTION OF THE AGENT, IN COURTS HAVING SITUS IN
HOUSTON, HARRIS COUNTY, TEXAS. EACH OF THE BORROWERS HEREBY SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS
COUNTY, TEXAS AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE
THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE AGENT IN
ACCORDANCE WITH THIS SECTION.
6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES. EACH OF THE
----------------------------------------------------
BORROWERS, THE AGENT, AND EACH OF THE LENDERS HEREBY (A) KNOWINGLY,
VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR
ARISES OUT OF THIS AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR THE
ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER IN THE ENFORCEMENT OF ANY OF THE
TERMS OR PROVISIONS OF THIS AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN
DOCUMENT OR OTHERWISE WITH RESPECT THERETO, (B) KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, IRREVOCABLY, AND
<PAGE> 11
UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY,
PUNITIVE, OR CONSEQUENTIAL DAMAGES, AND (C) CERTIFIES THAT NO PARTY HERETO NOR
ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS. THE PROVISIONS OF THIS
SECTION ARE A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO
THIS AMENDMENT.
Executed effective as of the 15th day of February, 1996.
BORROWERS:
BELDEN & BLAKE CORPORATION
By: /s/ Henry S. Belden IV
-----------------------------------
Printed Name: Henry S. Belden IV
-------------------------
Title: Chief Executive Officer
--------------------------------
THE CANTON OIL & GAS COMPANY
By: /s/ Henry S. Belden IV
-----------------------------------
Printed Name: Henry S. Belden IV
-------------------------
Title: Chief Executive Officer
--------------------------------
PEAKE ENERGY, INC.
By: /s/ Henry S. Belden IV
-----------------------------------
Printed Name: Henry S. Belden IV
-------------------------
Title: Chief Executive Officer
--------------------------------
WARD LAKE DRILLING, INC.
By: /s/ R.L. Clements
-----------------------------------
Printed Name: R.L. Clements
-------------------------
Title: Chief Executive Officer
--------------------------------
(Signatures Continued on Next Page)
9
<PAGE> 12
AGENT AND LENDER:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By: /s/ Richard G. Sylvan
-------------------------------------
Printed Name: Richard G. Sylvan
---------------------------
Title: Senior Vice President
----------------------------------
LENDER:
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Steven P. Capouch
-------------------------------------
Printed Name: Steven P. Capouch
---------------------------
Title: Vice President
----------------------------------
10
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY INCORPORATION
- ---------- -------------
<S> <C>
The Canton Oil & Gas Company Ohio
Target Oilfield Pipe & Supply Company Ohio
Ward Lake Drilling, Inc. Michigan
Peake Energy, Inc. Delaware
Engine Power Systems, Inc. Ohio
</TABLE>
As of December 31, 1995, the other subsidiaries included in the registrant's
consolidated financial statments, and all other subsidiaries considered in the
aggregate as a single subsidiary, did not constitute a significant subsidiary.
<PAGE> 1
EXHIBIT 23
Consent of Independent Auditors
To the Shareholders and Board of Directors
Belden & Blake Corporation
We consent to the incorporation by reference of our report dated February 29,
1996, with respect to the consolidated financial statements of Belden & Blake
Corporation included in this Annual Report (Form 10-K) for the year ended
December 31, 1995, in the following Registration Statements and related
Prospectuses:
Registration
Number Description of Registration Statement
---------------- --------------------------------------------------
33-62785 Non-Employee Director Stock Option Plan -- Form S-8
33-69802 Employees 401(K) Profit Sharing Plan -- Form S-8
ERNST & YOUNG LLP
Cleveland, Ohio
March 11, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000880114
<NAME> BELDEN & BLAKE CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 12,322
<SECURITIES> 0
<RECEIVABLES> 28,123
<ALLOWANCES> 0
<INVENTORY> 9,253
<CURRENT-ASSETS> 54,150
<PP&E> 290,737
<DEPRECIATION> 59,209
<TOTAL-ASSETS> 297,298
<CURRENT-LIABILITIES> 36,791
<BONDS> 110,523
<COMMON> 1,114
0
2,400
<OTHER-SE> 138,777
<TOTAL-LIABILITY-AND-EQUITY> 297,298
<SALES> 107,355
<TOTAL-REVENUES> 110,064
<CGS> 66,462
<TOTAL-COSTS> 66,462
<OTHER-EXPENSES> 29,119
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,073
<INCOME-PRETAX> 8,410
<INCOME-TAX> 2,150
<INCOME-CONTINUING> 6,260
<DISCONTINUED> (1,139)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,121
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
</TABLE>
