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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For Fiscal Year Ended December 31, 1995
Commission file number 33-58631
GOODRICH PETROLEUM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0466913
(STATE OF INCORPORATION) (I.R.S. IDENTIFICATION NO.)
5847 SAN FELIPE, SUITE 700
HOUSTON, TEXAS 77057
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
Registrant's telephone number, including area code is (713) 780-9494
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -----------------------
<S> <C>
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.20 par value..................... New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Series A Preferred Stock, $1.00 par value......... NASDAQ
</TABLE>
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. [_]
At March 15, 1996, there were 41,804,510 shares of Goodrich Petroleum
Corporation common stock outstanding. The aggregate market value of shares of
common stock held by non-affiliates of the registrant as of March 15, 1996 was
approximately $24,490,000 based on a closing price of $.8125 per share on the
New York Stock Exchange on such date.
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1
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DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
DOCUMENT PART/ITEM OF INCORPORATION
-------- --------------------------
<C> <S>
Proxy Statement for the Part III, Item 10, 11, 12, 13
1996 Annual Meeting of Shareholders
</TABLE>
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES.
General
Goodrich Petroleum Corporation and subsidiaries (Goodrich) is an independent
oil and gas company engaged in the exploration, development, production and
acquisition of oil and natural gas in the onshore portions of the United
States, primarily the states of Louisiana and Texas. In addition to its oil
and gas activities, Goodrich owns a 20% non-operated interest in a natural gas
pipeline joint venture and an equity interest in Marcum Natural Gas Services
(Marcum), a publicly held diversified provider of products and services to the
natural gas industry.
Goodrich and its subsidiaries are the result of a business combination on
August 15, 1995 between La/Cal Energy Partners (La/Cal) and Patrick Petroleum
Company and subsidiaries (Patrick). La/Cal was a privately held independent
oil and gas partnership formed in July 1993 and engaged in the development,
production and acquisition of, oil and natural gas primarily in Southern
Louisiana. Patrick was a publicly traded independent oil and gas company
engaged in the acquisition of producing properties and the exploration,
development and production of oil and gas in the continental United States.
Patrick's oil and gas operations and properties were primarily located in West
Texas and Michigan at the time of the combination, with additional operations
and properties in certain western states.
The combination transactions were accounted for as a purchase business
combination in accordance with Accounting Principles Board Opinion No 16,
Business Combinations whereby La/Cal was deemed to be the acquiror and Patrick
the acquiree. Accordingly, the consolidated financial statements and other
operating data presented herein reflect the operations of La/Cal on a stand
alone basis for periods prior to August 15, 1995, whereas such information
reflects the operations of the combined entities for periods subsequent to
August 15, 1995.
The Company's principal executive offices are located at 5847 San Felipe,
Suite 700 Houston, Texas 77057. The Company also has offices in Shreveport,
Louisiana. At March 1, 1996, the Company had 11 employees.
Oil and Gas Operations and Properties
At December 31, 1995, Goodrich had estimated proved reserves of
approximately 940.15 Mbbls of oil and condensate and 18.88 Bcf of natural gas,
or an aggregate of 24.52 Bcfe with a pre-tax present value of future net
revenues, discounted at 10% of $30.4 million, of which approximately 85% are
classified as proved developed.
The Company owns working and overriding royalty interests in 81 oil and gas
wells located in 41 active fields in 9 states.
Louisiana
Substantially all of the Company's proved natural gas reserves are in the
Southern Louisiana producing region. The Southern Louisiana producing region
refers to the geographic area which covers the onshore and in-land waters of
South Louisiana lying in the southern one-half of the state of Louisiana.
The South Louisiana producing region is one of the world's most prolific oil
and natural gas producing sedimentary basins. The region generally contains
sedimentary sandstones which are of high qualities of porosity and
permeabilities. There are a myriad of types of reservoir traps found in the
region. These traps are generally formed by faulting, folding and subsurface
salt movement or a combination of one or more of these. Salt movement has
resulted in a large number of shallow piercement salt domes as well as deeper
movements, which have resulted in both large and small anticlinal structures.
2
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The formations found in the South Louisiana producing region range in depth
from 1,000 feet to 20,000 feet below the surface. These formations range from
the Sparta and Frio formations in the Northern part of the region to Miocene
and Pleistocene in the Southern part of the region. The Company's production
comes predominately from Miocene and Frio age formations.
Pecan Lake Field. The Pecan Lake field was discovered in 1944 by the
Superior Oil Company. Geologically, the field is comprised of a relatively low
relief four-way closure and multiple stacked pay sands. The Pecan Lake field
comprises approximately 870 gross leased acres in Cameron Parish, Louisiana,
approximately 42 miles southeast of Lake Charles, Louisiana. The field has
produced from over 15 Miocene sands ranging in depths from 7,500 to 11,800
feet, which have been predominately gas and gas condensate reservoirs. These
sand reservoirs are characterized by generally widespread development and
strong waterdrive production mechanisms. The field has produced in excess of
343 Bcf of gas and 590,000 barrels of condensate. All the field production to
date has come from reservoirs which are of normal pressure.
In May 1992, La/Cal entered the Pecan Lake field under a farmout arrangement
with Mobil, whereby Mobil retained a one-eighth overriding interest in the
prospectively developed wells subject to the farmout. In April 1993, La/Cal
leased an additional 133.24 gross acres in the Pecan Lake field from Miami
Corp. for approximately $62,000. In March 1994, La/Cal acquired (i) all of
Mobil's interest in La/Cal's actual and prospectively drilled wells, (ii) a
43.10% working interest in Mobil's Miami Corp. S13, B15 and B16 wells, and
(iii) a 2.26% overriding royalty interest in Mobil's Cutler #1 wells for
approximately $2.11 million. Pecan Lake consists of seven well completions
through six well bores. The Company's working interests range from
approximately 43.11% to 47.38%. The Company's average daily production at
Pecan Lake was 37.02 Bbls of oil and and/or condensate and 3.14 Mmcf of
natural gas during 1995. As of January 1, 1996, the Company's interests in the
Pecan Lake field had proved reserves of 104.66 Mbbls of oil and condensate and
9.97 Bcf of natural gas.
Lake Charles Field. The Lake Charles field was discovered by the California
Company (Chevron) in 1959. Geologically, the field consists of an upthrown
structural closure that is bounded to the South by an East-West trending down
to the South fault. The Lake Charles field currently consists of three
producing wells located on approximately 443 gross leased acres in Calcasieu
Parish, Louisiana, and adjacent to the City of Lake Charles, Louisiana. The
field has produced from five different formations which are all Frio age
sandstones. These formations range in depth from 7,500 feet to 9,100 feet. The
field has produced from reservoirs which have had both waterdrive and pressure
depletion mechanisms. The Lake Charles field has produced, in excess of 17.3
Bcf of gas and 366,000 barrels of condensate from seven different wells. All
of the production to date has come from normally pressured reservoirs.
La/Cal acquired a working interest in the Glasscock-Chapman #1 well and
leased additional acreage outside the Glasscock-Chapman #1 unit from Chevron
and two smaller working interest owners for $105,483 in February 1992. Since
then, La/Cal has leased an additional 206 gross acres from several smaller
landowners for approximately $155,000. On December 1, 1993, La/Cal acquired a
50% working interest from Foster-Brown Company in the Nickerson Fee well and
an additional 2.73% working interest in the City of Lake Charles #1 well for
$1,250,000. Currently, the Company owns working interests that range from
29.24% to 50.00% in the five producing wells in the Lake Charles field. The
Company's average total daily production at the Lake Charles field was 36.06
Bbls of oil and condensate and 2.11 Mmcf of natural gas during 1995. As of
January 1, 1996, the Company's interest in the Lake Charles field had proved
developed reserves of 149.96 Mbbls of oil and 2.08 Bcf of natural gas.
Other. The Company maintains ownership interests in acreage and wells in
several additional fields, including the (i) Opelousas field, located in St.
Landry Parish, Louisiana (ii) Ada field, located in Bienville Parish,
Louisiana, and (iii) Calhoun field, located in Ouachita Parish, Louisiana.
Texas
Goodrich has oil and gas properties in West Texas as a result of former
Patrick holdings and operations.
3
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Patrick's primary exploration focus in this area was toward the development
of economic drilling targets using three dimensional ("3-D") seismic
technology. Recent industry advances in high-resolution 3-D seismic technology
have facilitated an improvement in the success rate for exploration of smaller
but prolific reefs. This has been accomplished by 3-D imaging the optimum
drilling locations on these prospects, therefore minimizing edge and marginal
well completions and improving the overall recoveries per well. Patrick
participated in over 375 squares miles of 3-D seismic acquisition in West
Texas, and drilled Pennsylvanian ("Penn") Reef and Fusselman prospects
generated by this technology. The Company owns two Geoquest work stations,
which are being utilized to interpret and map its 3-D data.
The Company's most significant West Texas producing properties are located
in Sean Andrew Field, Dawson County, Texas. The Company's average net daily
production at Sean Andrew Field was 419.10 Bbls of oil and .18 Mmcf of natural
gas from August 15, 1995 through December 31, 1995. The Sean Andrew Field has
produced in excess of 325,000 Bbls of oil and .12 Bcf of gas gross to the
working interest owners.
In addition to the West Texas interests, the Company maintains ownership
interests in acreage and wells in several additional fields including the (i)
North Rich Ranch field, located in Liberty County, Texas, (ii) North Bammel
field, located in Harris County, Texas, (iii) Carthage (Bethany) field,
located in Panola County, Texas and (iv) Oakhurst field, located in San
Jacinto County, Texas.
Oil and Natural Gas Reserves
The following table sets forth summary information with respect to the
Company's proved reserves as of January 1, 1996, as estimated by the Company
by compiling the reserve information prepared by several engineering firms and
the Company internally.
<TABLE>
<CAPTION>
NET RESERVES
----------------------
PRESENT
VALUE OF
FUTURE
NET
OIL GAS REVENUES
CATEGORY (MBBLS) (BCF) BCFE (1) (IN MILLIONS)
-------- ------- ----- -------- -------------
<S> <C> <C> <C> <C>
Proved Developed Producing (Pre-tax)...... 725.06 10.27 14.62 $ 21.67
Proved Developed Non-Producing (Pre-tax).. 195.50 3.54 4.71 4.03
Proved Undeveloped (Pre-tax).............. 19.59 5.07 5.19 4.66
------ ----- ----- -------
Total Proved (Pre-tax)................ 940.15 18.88 24.52 $ 30.36
====== ===== ===== =======
Standardized Measure of Discounted Future
Net Cash Flows............................ $ 26.88
=======
</TABLE>
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(1)Estimated by the Company using a conversion ratio of 1.0 Bbl/6.0 Mcf.
There are numerous uncertainties inherent in estimating quantities of proved
reserves and in projecting future rates of production and timing of
development expenditures, including many factors beyond the control of the
Company. Reserve engineering is a subjective process of estimating underground
accumulations of crude oil, condensate and natural gas that cannot be measured
in an exact manner, and the accuracy of any reserve estimate is a function of
the quality of available data and of engineering and geological interpretation
and judgment. The quantities of oil and natural gas that are ultimately
recovered, production and operating costs, the amount and timing of future
development expenditures and future oil and natural gas sales prices may all
differ from those assumed in these estimates. Therefore, the Present Value of
Future Net Revenues amounts shown above should not be construed as the current
market value of the estimated oil and natural gas reserves attributable to the
Company's properties.
In accordance with the Commission's guidelines, the engineers' estimates of
future net revenues from the Company's properties and the Present Value of
Future Net Revenues thereof are made using oil and natural gas sales prices in
effect as of the dates of such estimates and are held constant throughout the
life of the properties
4
<PAGE>
except where such guidelines permit alternate treatment, including the use of
fixed and determinable contractual price escalations. The weighted average
prices as of December 31, 1995 used in such estimates were $2.01 per Mcf of
natural gas and 17.90 per Bbl of crude oil/condensate.
Productive Wells
The following table sets forth the number of active well bores in which the
Company maintains ownership interests as of December 31, 1995:
<TABLE>
<CAPTION>
GROSS (1) NET (2)
--------- ------
<S> <C> <C>
Louisiana--Pecan Lake................................... 7.00 3.15
Louisiana--Lake Charles................................. 3.00 1.06
Texas--Sean Andrew...................................... 6.00 2.24
Other................................................... 60.00 9.70
----- -----
Total Productive Wells.............................. 76.00 16.15
===== =====
</TABLE>
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(1)Does not include royalty or overriding royalty interests.
(2)Net working interest.
Productive wells consist of producing wells and wells capable of production,
including gas wells awaiting pipeline connections. A gross well is a well in
which the Company maintains an ownership interest, while a net well is deemed
to exist when the sum of the fractional working interests owned by the Company
equals one.
Acreage
The following table summarizes the Company's gross and net developed and
undeveloped natural gas and oil acreage under lease as of December 31, 1995.
Acreage in which the Company's interest is limited to royalty or overriding
royalty interest is excluded from the table.
<TABLE>
<CAPTION>
GROSS NET
----- ---
<S> <C> <C>
Developed acreage
Louisiana--Pecan Lake Field.......................... 870.63 400.10
Louisiana--Lake Charles Field........................ 443.00 182.70
Texas--Sean Andrew Field............................. 240.00 89.77
Other................................................ 3,557.02 969.31
Undeveloped acreage.................................... 12,153.37 3,159.78
--------- --------
Total.............................................. 17,264.02 4,801.66
========= ========
</TABLE>
Undeveloped acreage is considered to be those lease acres on which wells
have not been drilled or completed to a point that would permit the production
of commercial quantities of natural gas and oil, regardless of whether or not
such acreage contains proved reserves. As is customary in the oil and gas
industry, the Company can retain its interest in undeveloped acreage by
drilling activity that establishes commercial production sufficient to
maintain the leases, or by payment of delay rentals during the remaining
primary term of such a lease. The natural gas and oil leases in which the
Company has an interest are for varying primary terms; however, most of the
Company's lease acreage is beyond the primary term and is held by producing
natural gas and/or oil wells.
The Company participated in several farmout agreements with other owners of
natural gas and oil leases and is actively leasing acreage in Louisiana and
Texas.
Operator Activities
Goodrich Petroleum is the operator of record of every producing well in the
Pecan Lake field except the Cutler #1 well. Goodrich Petroleum is the operator
of the J.C. Nickerson #1 and Ursla Bracey #1 wells, while Samson Resources
Company operates the remainder of the wells in the Lake Charles field.
5
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Goodrich Petroleum operates a majority in value of the Company's producing
properties, and will seek to become the operator of record concerning
properties it drills or acquires in the future.
Drilling Activities
The following table sets forth the drilling activity of the Company since
1992. This information reflects La/Cal's operations on a stand alone basis
prior to August 15, 1995. (As denoted in the following table, "Gross" wells
refers to wells in which a working interest is owned, while a "net" well is
deemed to exist when the sum of fractional ownership working interests in
gross wells equals one.)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------
1992 1993 1994 1995
--------- --------- --------- ----------
GROSS NET GROSS NET GROSS NET GROSS NET
----- --- ----- --- ----- --- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Development Wells:
Productive........................... 8.0 2.6 2.0 .87 1.0 .43 1.0 .38
Non-Productive....................... 0.0 0.0 1.0 .08 1.0 .43 0.0 .00
--- --- --- --- --- --- --- ----
Total.............................. 8.0 2.6 3.0 .95 2.0 .86 1.0 .38
=== === === === === === === ====
Exploratory Wells:
Productive........................... 0.0 0.0 0.0 0.0 0.0 0.0 1.0 .25
Non-Productive....................... 0.0 0.0 0.0 0.0 0.0 0.0 2.0 .68
--- --- --- --- --- --- --- ----
Total.............................. 0.0 0.0 0.0 0.0 0.0 0.0 3.0 .93
=== === === === === === === ====
Total Wells:
Productive........................... 8.0 2.6 2.0 .87 1.0 .43 2.0 .63
Non-Productive....................... 0.0 0.0 1.0 0.8 1.0 .43 2.0 .68
--- --- --- --- --- --- --- ----
Total.............................. 8.0 2.6 3.0 .95 2.0 .86 4.0 1.31
=== === === === === === === ====
</TABLE>
Information prior to July 15, 1993 reflects pre-La/Cal formation drilling
activity.
During the periods 1993, 1994 and up to the business combination August 15,
1995. La/Cal was engaged in limited developmental drilling in the Pecan Lake
and Lake Charles Fields. La/Cal did not drill any exploratory wells during the
periods set forth above. The Company intends to maintain a more active
exploratory and developmental drilling
Net Production, Unit Prices and Costs
The following table presents certain information with respect to oil, gas
and condensate production attributable to the Company's interests in all of
its fields, the revenue derived from the sale of such production, average
sales prices received and average production costs during each of the years
ended December 31, 1995, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
1995 1994 1993(1) 1992(1)
--------- --------- ------- -------
<S> <C> <C> <C> <C>
Net Production:
Natural Gas (Mcf)...................... 2,213,923 2,386,130 933,435 417,482
Oil.................................... 102,731 36,487 7,319 4,347
Natural gas equivalents (Mcfe)......... 2,830,309 2,605,050 977,348 443,564
Average Net Daily Production:
Natural gas (Mcf)...................... 6,065 6,537 2,557 1,144
Oil (Bbls)............................. 281 100 20 12
Natural gas equivalents (Mcfe)......... 7,754 7,137 2,678 1,215
Average Sales Price Per Unit:
Natural Gas (per Mcf).................. 1.72 1.85 2.02 1.94
Oil (per Bbl).......................... 16.27 15.99 16.65 19.80
Other Data:
Lease operating expense (per Mcfe)..... .22 .15 .23 .25
Depreciation, depletion and
amortization (per Mcfe)............... .48 .40 .33 .65
</TABLE>
- --------
(1) La/Cal ownership interest applied to pre La/Cal formation production.
6
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Marketing
Pecan Lake Field. Goodrich Petroleum's natural gas production is transported
through various field gathering lines to a central facility in the field. The
gathering lines, and the central facility, are owned proportionately by the
working interest owners in the Pecan Lake field wells, which include Goodrich.
From the central facility, Goodrich's gas production is delivered into a gas
transmission line owned by Superior Offshore Pipeline Company ("SOPCO"). The
gas production is then transported under a transportation agreement, between
the operator and SOPCO, to the Trident N.G.L. Inc. plant ("Trident"). The gas
production is then either processed by Trident, or bypassed to the Trident
distribution point. This activity is covered by a processing agreement between
the plant and the operator. This agreement provides in-part, that the plant
can elect to process the operator's gas, but is required to deliver a volume
of gas to the plant's distribution point, which is equal to the volume
delivered by SOPCO at the plant inlet. This is referred to as a "keep-whole"
agreement. At the plant tailgate, Goodrich's gas is delivered to one of the
several pipeline interconnects available at the plant distribution point.
These spot sales, or market-sensitive sales, are arranged by Seaber
Corporation of Louisiana ("Seaber").
In addition to the transmission lines available at the plant tailgate, there
is also a line owned by SOPCO that provides access to Columbia Gulf Pipeline
Company ("Columbia Gulf") and Texas Gas Transmission Company ("Texas Gas"). If
the operator elects to access these pipelines, the transportation is covered
under agreements between the operator and SOPCO for transportation to either
Columbia Gulf or Texas Gas.
From the central facility in Pecan Lake, Goodrich's gas condensate is
delivered into a low pressure pipeline which is owned by Grand Lake Liquids
Company ("Grand Lake"). The gas condensate is transported to the Grand Lake
tank farm under an agreement between Goodrich and Grand Lake Liquids.
Goodrich's gas condensate is sold to Mobil Oil Trading & Transportation
Company at the Grand Lake tank farm. Pricing for the condensate is based on
current market prices referred to as posted prices. Goodrich's contract with
Mobil is a 30-day rollover agreement.
Lake Charles Field. Goodrich's natural gas production is transported through
a gathering line of approximately 2 miles in length to an interconnect with
Koch Gateway Pipeline ("Koch"). This gathering line is owned proportionately
by the working interest owners in the Lake Charles Field, which includes
Goodrich. The gas is sold at the Koch pipeline interconnect, to various
markets arranged by Seaber. Transportation on the Koch pipeline is arranged by
the individual markets. Pricing for the condensate is based on current market
prices referred to as posted price. The operators' contract with Seaber is
based on a 30-day, rollover agreement.
Sean Andrew Field Goodrich's oil production is gathered by pipeline and
purchased by Mobil at a premium over the posted price. The gas is purchased by
Pride Petroleum on a thirty day spot basis.
Remaining Fields. Goodrich's natural gas production in its remaining fields
is sold under spot or market-sensitive contracts and to various gas purchasers
on short-term contracts. Goodrich's natural gas condensate in its remaining
fields is sold under short-term rollover agreements based on current market
prices.
Customers. From July 15, 1993 through December 31, 1993 and during the year
ended December 31, 1994, Tenneco Gas purchased 70% and 41%, respectively of
La/Cal's oil and gas sales. During 1994, Seaber purchased 48% of La/Cal's oil
and gas sales. During 1995, Seaber purchased 90% of the Company's gas sales
and Mobil purchased 59% of the Company's oil sales.
The Company has entered into an agreement with Natural Gas Ventures, L.L.C.
("NGV"), a Louisiana limited liability company, that affiliates of Goodrich
Oil Company formed in August 1994, to operate as an agent for the purpose of
marketing Goodrich Oil Company's and its contracting parties' natural gas. The
Company and other contracting parties contribute natural gas to NGV, which NGV
then markets to gas purchasers, pursuant to the Joint Venture Agreement
between NGV and Seaber (described below). The Company can terminate this
agreement on 60-days advance notice. The Company and the other contracting
parties are entitled to participate, on a pro rata basis, in any net profits
or equity benefits received by NGV under its Joint Venture
7
<PAGE>
Agreement with Seaber, provided the Company and the other contracting parties
have not terminated the agreement and are delivering gas under the agreement
at the time the net profits and equity interest are earned. The Company
believes its contract with NGV allows it to realize higher prices for its
contributed gas because of the greater market power associated with larger
volumes of gas than the Company would have for sale on a stand-alone basis.
NGV has entered into a natural gas marketing joint venture agreement (the
"Joint Venture Agreement") with Seaber whereby Seaber acts as agent for NGV in
its gas marketing efforts. Pursuant to the Joint Venture Agreement, Seaber
arranges short-term gas sales contracts on behalf of NGV with gas purchasers,
and NGV delivers to Seaber sufficient gas quantities to fulfill NGV's
contractual obligations. NGV can terminate the Joint Venture Agreement on a
60-days advance notice. During the term of the Joint Venture Agreement, on a
calendar year basis, NGV has the option to share in 50 percent of all
Seaber's' net profits provided that NGV meets certain scheduled delivery
requirements. Each year, twenty-five percent of NGV's share of Seaber net
profits is retained by Seaber as an account payable, which Seaber uses as
additional working capital. At the end of the term of the Joint Venture
Agreement, and subject to delivering scheduled volumes of gas, NGV can elect
to convert its cumulative accounts payable into fifty percent of the
outstanding Seaber common stock or can choose to receive the payable in cash.
As set forth above, provided certain conditions are met, NGV will distribute
the Seaber net profits and equity interests if any, to its contracting parties
on a pro rata basis.
Natural Gas Pipeline Joint Venture
Pecos Pipeline & Producing Company ("Pecos"), one of the Company's
subsidiaries, has a 20% interest in a joint venture with Ferguson Crossing
Pipeline Company, now Southwestern Gas Gathering, Inc. ("Southwestern") a
subsidiary of Mitchell Energy and Development Company, relating to an
intrastate pipeline. Pecos and its related facilities are located in Leon and
Madison Counties, Texas. The pipeline and related facilities are referred to
as the "Pecos Pipeline Systems". Southwestern acts as the manager of the joint
venture and the net proceeds are distributed to the venturers on a monthly
basis, subject to the retention of one month of working capital.
In September, 1993, the same parties created another joint venture for the
purpose of separating the gas contract from the physical pipeline. The joint
venture participants are National Marketing Company, which is a subsidiary of
the Company, and Mitchell Marketing Company. This joint venture is known as
"Madison Gas Marketing Services" ("Madison Gas").
The joint ventures were established for the purposes of buying and/or
transporting gas from producers and other pipelines under various contracts at
various receipt points and delivering or reselling the gas to Lone Star Gas
Company ("Lone Star") under the terms and conditions of a premium priced/fixed
volume 20-year contract dated October 1, 1981. On August 31, 1994, effective
November 1, 1994, Madison Gas entered into a settlement agreement for the
remaining term of the contract providing for (i) a total fixed contract
quantity of 23,826,560 Mmbtu, (ii) a monthly average daily contract quantity
not to exceed 18,000 Mmbtu during the months of November through March, (iii)
a monthly average daily contact quantity not to exceed 7,000 Mmbtu during the
months of April through October, (iv) an average annual gross profit margin of
$1.74 per Mmbtu less operating expenses and (v) six additional delivery
points. The Lone Star contract terminates at some time between May and
October, 2001 depending upon the monthly average daily contract quantities
taken under the settlement agreement.
Investment in Marcum Natural Gas Services
The Company presently owns 675,200 shares of the common stock of Marcum, or
approximately 5.8% of the Marcum common stock outstanding. The Company also
owned 1,260,000 Marcum common stock purchase warrants exercisable at a price
of $4.00 per share. The warrants expired on February 13, 1996.
8
<PAGE>
Competition
The oil and gas industry is highly competitive. Major and independent oil
and gas companies, drilling and production acquisition programs and individual
producers and operators are active bidders for desirable oil and gas
properties, as well as the equipment and labor required to operate those
properties. Many competitors have financial resources substantially greater
than those the Company has, and staffs and facilities substantially larger
than those of the Company. The availability of a ready market for the oil and
gas production of the Company will depend in part on the cost and availability
of alternative fuels, the level of consumer demand, the extent of other
domestic production of oil and gas, the extent of importation of foreign oil
and gas, the cost of and proximity to pipelines and other transportation
facilities, regulations by state and federal authorities and the cost of
complying with applicable environmental regulations.
Regulations
The availability of a ready market for any natural gas and oil production
depends upon numerous factors beyond the Company's control. These factors
include regulation of natural gas and oil production, federal and state
regulations governing environmental quality and pollution control, state
limits on allowable rates of production by a well or proration unit, the
amount of natural gas and oil available for sale, the availability of adequate
pipeline and other transportation and processing facilities and the marketing
of competitive fuels. For example, a productive natural gas well may be "shut-
in" because of an oversupply of natural gas or the lack of an available
natural gas pipeline in the areas in which the Company may conduct operations.
State and federal regulations generally are intended to prevent waste of
natural gas and oil, protect rights to produce natural gas and oil between
owners in a common reservoir, control the amount of natural gas and oil
produced by assigning allowable rates of production and control contamination
of the environment. Pipelines are subject to the jurisdiction of various
federal, state and local agencies as well.
Federal Regulation of Natural Gas
The Federal Energy Regulatory Commission ("FERC") regulates the
transportation and resale of natural gas in interstate commerce pursuant to
the Natural Gas Act of 1938 (the "NGA"). Since 1978, the Natural Gas Policy
Act of 1978 (the "NGPA") has regulated maximum selling prices of certain
categories of gas in either interstate or intrastate commerce. FERC also
administers the NGPA. Under the Natural Gas Wellhead Decontrol Act of 1989,
however, most regulation and control of natural gas have been eliminated. None
of the remaining areas of regulation under the NGA and NGPA have a direct
effect on the Company's operations. There can be no assurance, however, that
the Company's production of natural gas will not be subject to federal
regulation in the future.
In April 1992, subsequently as amended, FERC issued Order 636, a rule which
restructures the interstate natural gas transportation and marketing system to
ensure that direct sales of gas by producers or marketers receive pipeline
service comparable to pipeline gas sales. FERC Order 636 is intended to
provide "open access" to producers for transportation of gas on ten interstate
pipeline systems.
Environmental Regulation
Various federal, state and local laws and regulations covering the discharge
of materials into the environment, or otherwise relating to the protection of
the environment, may affect the Company's operations and costs as a result of
their effect on oil and gas development, exploration and production
operations. It is not anticipated that the Company will be required in the
near future to expend amounts that are material in relation to its total
capital expenditures program by reason of environmental laws and regulations
but, inasmuch as such laws and regulations are frequently changed by both
federal and state agencies, the Company is unable to predict the ultimate cost
of continued compliance. Additionally, see existing EPA matters discussed in
Item 3--Legal Proceedings.
9
<PAGE>
State Regulation of Oil and Gas Production
State statutes and regulations require permits for drilling operations,
drilling bonds and reports concerning operations. In addition, there are state
statutes, rules and regulations governing conservation matters, including the
unitization or pooling of oil and gas properties, establishment of maximum
rates of production from oil and gas wells and the spacing, plugging and
abandonment of such wells. Such statutes and regulations may limit the rate at
which oil and gas could otherwise be produced from the Company's properties
and may restrict the number of wells that may be drilled on a particular lease
or in a particular field. (There are currently discussions in several states
relating to the imposition of limitations on annual natural gas productions
rates.)
ITEM 3. LEGAL PROCEEDINGS.
The U. S. Environmental Protection Agency ("EPA") has identified the Company
as a potentially responsible party ("PRP") for the cost of clean-up of
"hazardous substances" at an oil field waste disposal site in Vermilion
Parish, Louisiana. The EPA has estimated that the total cost of long-term
clean-up of the site will be approximately $15.4 million, with the Company's
percentage of responsibility to be approximately 3.09%. As of December 31,
1995, the Company has accrued approximately $400,000 for this liability. The
EPA and the PRPs will continue to evaluate the site and revise estimates for
the long-term clean-up of the site. There can be no assurance that the cost of
clean-up and the Company's percentage responsibility will not be higher than
currently estimated by the EPA. In addition, under the federal environmental
laws, the liability costs for the clean-up of the site is joint and several
among all PRPs. Therefore, the ultimate cost of the cleanup to the Company
could be significantly higher than the amount presently accrued for this
liability.
The Company is party to additional lawsuits arising out of the normal course
of business. However, the Company has defended and intends to continue to
defend these actions vigorously and believes, based on currently available
information, that adverse results or judgments if any, in excess of insurance
coverage or amounts already provided, will not be material to the financial
position or results of operations of the Company and its consolidated
subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
10
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is traded on the New York Stock Exchange.
At March 22, 1996, the number of holders of record of the Company's common
stock without determination of the number of individual participants in
security position was 3,837 with 41,804,510 shares outstanding. High and low
sales prices for the Company's common stock for each quarter during the
calendar years 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
------------- --------
QUARTER ENDED HIGH LOW HIGH LOW
------------- ---- ----- ---- ---
<S> <C> <C> <C> <C>
March 31............................................ N/A N/A N/A N/A
June 30............................................. N/A N/A N/A N/A
September 30........................................ 1 3/8 15/16 N/A N/A
December 31......................................... 1 1/4 3/4 N/A N/A
</TABLE>
Prices from periods prior to the business combination (August 15, 1995) are
not applicable due to La/Cal being a privately held partnership.
The Company has not paid a cash dividend on its Common Stock and does not
intend to pay such a dividend in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
Selected Statement of Operations Data:
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
YEAR ENDED JULY 15, 1993 JANUARY 1, 1993 YEAR ENDED
DECEMBER 31, THROUGH THROUGH DECEMBER 31,
---------------------- DECEMBER 31, JULY 14, ---------------
1995 1994 1993 1993(A) 1992(A) 1991(A)
----------- ---------- ------------- --------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................ $ 6,174,412 5,013,446 1,068,404 947,000 896,000 244,000
Costs and Expenses.............. 5,037,101 2,998,628 574,220 137,000 173,000 55,000
Income Before Extraordinary
Item........................... 1,137,311 2,014,818 494,184
Extraordinary Item--
Early Extinguishment of Debt.. 482,906 -- --
Net Income...................... $ 654,405 2,014,818 494,184
Selected Balance Sheet Data:
<CAPTION>
DECEMBER 31,
-------------------------------------
1995 1994 1993
----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Total Assets.................... $22,382,716 8,230,496 5,371,000
Long-Term Debt.................. 9,750,000 8,250,000 4,700,000
Stockholders' Equity (Deficit).. $ 9,662,812 (2,081,217) (989,000)
</TABLE>
- --------
(a) La/Cal Energy Partners was organized on July 15, 1993. Statement of
operations data, other than revenues and costs and expenses for the years
ended December 31, 1992 and 1991 and for the period from January 1, 1993
through July 14, 1993, is not presented as the properties for which such
revenues and expenses relate were not maintained as a separate business
unit and assets, liabilities or indirect operating costs applicable to the
properties were not segregated by the owners prior to the formation of
La/Cal. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Background of Business Combination and Basis of Presentation
On August 15, 1995, the transactions contemplated by the Agreement and Plan
of Merger among Patrick Petroleum Company ("Patrick"), La/Cal Energy Partners
("La/Cal"), Goodrich Petroleum Corporation (the "Company"), and Goodrich
Acquisition, Inc. were completed. The Agreement provided for a combination of
Patrick and La/Cal, as a result of which the businesses previously conducted
by Patrick and La/Cal are now conducted by the Company, which is a Delaware
corporation formed for the purpose of consummating such transactions, and its
subsidiaries. The combination of Patrick and La/Cal was effected primarily by
two concurrent transactions: (a) the contribution by La/Cal of all of its
assets and liabilities (excluding cash and accounts receivable accrued prior
to March 1, 1995, and interest thereon) to the Company in exchange for
19,765,226 shares of the Company's common stock (the "Common Stock") and (b)
the merger of Goodrich Acquisition with and into Patrick (the "Merger")
whereby (i) each outstanding share of Patrick common stock ("Patrick Common
Stock") was converted into one share of Common Stock; (ii) each outstanding
share of Patrick Series B Convertible Preferred Stock was converted into one
share of the Company's Series A Convertible Preferred Stock (except for 76,290
shares for which appraisal rights were preserved) and (iii) Patrick, the
surviving corporation in the Merger, became a wholly-owned subsidiary of the
Company. Effective January 31, 1996, the preferred shares under appraisal
rights were reinstated.
The combination transactions were accounted for as a purchase business
combination in accordance with Accounting Principles Board Opinion No. 16,
Business Combinations whereby La/Cal was deemed to be the acquiror and Patrick
the acquiree. Accordingly, on August 15, 1995, the Company recorded the assets
and liabilities of Patrick at fair value, whereas the assets and liabilities
of La/Cal are reflected at historical book value. The consolidated financial
statements reflect the operations solely of La/Cal for periods prior to August
15, 1995, whereas such financial statements reflect the operations of the
combined entities for periods subsequent to August 15, 1995. As a result,
comparison of the current and prior period financial statements presented are
significantly impacted by the combination transactions and, accordingly, are
not necessarily indicative of future operating results.
Prior to the combination transactions, La/Cal was a privately owned
Louisiana general partnership which was formed on July 15, 1993, by the
contribution of certain oil and gas properties owned by the partners.
Changes in Financial Condition (December 31, 1995 versus December 31, 1994)
As noted above, the balance sheet presented as of December 31, 1994 reflects
the assets and liabilities of La/Cal only whereas the balance sheet as of
December 31, 1995 reflects the assets and liabilities of the combined
entities. Variances in significant asset, liability and equity accounts are
addressed in the following paragraphs.
The December 31, 1995 balance sheet reflects the Company's investment in
marketable equity securities and investment in a pipeline joint venture which
were assets held by Patrick. Property and equipment reflects an increase of
approximately $9,000,000, substantially due to the addition of oil and gas
properties of Patrick which were recorded at their fair value on August 15,
1995, the acquisition date. December 31, 1995 amounts for accounts receivable
and prepaid expenses are the result of the activities of the Company
subsequent to the business combination. The reduction in deferred charges
primarily represents the charge for the early extinguishment of La/Cal's debt
as more fully discussed below.
Included in the December 31, 1995 amount for accrued liabilities is $400,000
which is related to possible future amounts payable in the Company's role as a
potentially responsible party for the cost of clean-up of "hazardous
substances" at an oil field waste disposal site. This liability was a Patrick
liability and was recorded by the Company as a part of the combination
transactions.
The December 31, 1995 balance sheet reflects $387,000 included accrued
liabilities and $573,000 in other liabilities representing the current and
long-term portions of the Company's obligation under consulting
12
<PAGE>
agreements with Patrick's former chairman and his son, a former employee of
Patrick. Other changes in accrued expenses and accounts payable are the result
of activities of the Company subsequent to the business combination.
Long term debt as of December 31, 1995 represents the outstanding balance
under the Company's credit facility with a bank. The original amount drawn
under the facility immediately following the business combination was
$21,000,000 but was reduced by $10,000,000 in September, 1995 primarily due to
proceeds from the sale of the investment in the Penske Corporation (see Note G
to the consolidated financial statements). This debt was further reduced
during the fourth quarter of 1995 by $1,250,000 from proceeds from the sale of
certain properties located in Michigan, Montana and North Dakota. Debt
outstanding as of December 31, 1994 reflected amounts issued under La/Cal's
10% Senior Secured General Obligation Notes. This debt was paid off in
connection with the combination.
Due to La/Cal being a partnership and its recorded liabilities exceeding its
assets, the December 31, 1994 balance sheet reflects an amount for partners'
deficit of $2,081,217. The December 31, 1995 balance sheet reflects
stockholder equity accounts of the Company, a corporation. Convertible
preferred stock of Patrick was assumed as preferred stock of Goodrich and
recorded at its par value of $1,098,710 in the business combination. This
amount was reduced by $363,851 as the result of the October 1995 conversion of
certain shares of preferred stock to common. Common stock reflects 39,530,452
shares issued in the business combination transactions at $.20 per share par
value plus 2,274,058 shares as a result of the preferred stock conversion. The
December 31, 1995, additional paid in capital balance is the result of the
effects of the combination transactions, primarily the elimination of
partners' deficit of La/Cal, issuance of the Company's common and preferred
stock, and the recording of Patrick's assets and liabilities at fair value.
Accumulated deficit at December 31, 1995 reflects only the operations less
preferred stock dividends of the Company since August 15, 1995, the date of
the combination transactions.
Results of Operations
As noted above, the consolidated statements of operations for the year ended
December 31, 1994 and the period from July 15, 1993 through December 31, 1993
reflect the operations of La/Cal only, whereas the statement of operations for
the year ended December 31, 1995 reflect the operations solely of La/Cal prior
to the combination date (August 15, 1995) and the operations of the combined
entities subsequent to the combination date. The consolidated statement of
operations for the period from July 15, 1993 through December 31, 1993
reflects the income information for La/Cal for 1993 subsequent to its
formation on July 15,1993. The statement of revenues and direct operating
expenses of "Properties Contributed to La/Cal Energy Partners" presents the
revenues and direct operating expenses of the properties contributed to La/Cal
prior to its formation.
Year ended December 31, 1995 versus year ended December 31, 1994--Revenues
in 1995 amounted to $6,174,000 and were $1,161,000 (23%) higher than 1994 due
to the inclusion of the combined entities subsequent to August 15, 1995, which
produced higher oil and gas sales. This was primarily due to higher volumes of
oil production for the period slightly offset by lower gas production and
prices (see volume and price table below). Additionally, 1995 includes the
revenues from the pipeline joint venture which was acquired from Patrick and
contributed $573,000 in the period.
<TABLE>
<CAPTION>
1995 1994
------------------------ ------------------------
PRODUCTION AVERAGE PRICE PRODUCTION AVERAGE PRICE
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Gas (MCF)............... 2,213,923 $ 1.72 2,386,130 $ 1.85
Oil (BBLS).............. 102,731 $16.27 36,487 $15.99
</TABLE>
Lease operating expense and production taxes were $345,000 or 50% higher due
to the higher production volumes and depletion, depreciation and amortization
was $603,000 or 52% higher than 1994 due to the addition of the Patrick
properties subsequent to August 15, 1995, including the amortization of the
pipeline joint venture.
13
<PAGE>
The Company recorded an impairment from the adoption of Financial Accounting
Standards Board Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of in the fourth quarter of
1995 in the amount of $157,000. Additionally, the Company incurred $193,000 of
exploration expense in 1995, whereas the 1994 amount was only $4,000 due to
La/Cal having virtually no exploration activities.
The large variance ($658,000) in general and administrative expenses is due
to the fact that La/Cal was provided substantially all of its general and
administrative expenses at no cost by an affiliate whereas the Company
provides its own general and administrative services. Additionally, as a
public company, the Company incurs a higher level of general and
administrative expenses than as a privately held company. However, based on
the Company's current and anticipated future level of operations on a combined
basis, such expenses were, and are anticipated to be less than the combined
historical general and administrative expenses of La/Cal and Patrick.
Interest expense was $60,000 (6%) higher in 1995 due to the Company (from
August 15, 1995 through December 31, 1995) and La/Cal (from January 1, 1995
through August 14, 1995) having slightly higher average debt outstanding in
1995 than La/Cal in 1994. A partial offsetting factor to this was the
Company's lower effective interest rate from August 15, 1995 to December 31,
1995.
The statements of operations reflect no income taxes due to: 1) the
individual partners of La/Cal being responsible for such taxes for the periods
containing the operations of La/Cal only and 2) the Company incurring a loss
for the period from August 15, 1995, through December 31, 1995, as a result of
the extraordinary item.
In connection with the combination transactions, the Company paid off
La/Cal's General Obligation Notes and the related unamortized debt financing
costs of $482,906 were charged to operations as an extraordinary item in the
third quarter of 1995.
The Company assumed Patrick's Convertible Preferred Stock and has incurred
related dividends of $255,000 from August 15, 1995 to December 31, 1995.
Year ended December 31, 1994 versus year ended December 31, 1993--For
purposes of this discussion, references to La/Cal's 1993 operations include
the sum of the operations of the properties contributed prior to La/Cal's
formation and its operations subsequent to its formation. Revenues were
$5,013,000 in 1994 and were $2,998,000 (149%) higher than 1993. This was due
to the higher volumes of production (see table below) resulting from
significant well development and acquisition of producing properties by La/Cal
in December, 1993 and February, 1994, offset by somewhat lower prices.
<TABLE>
<CAPTION>
1994 1993
------------------------ ------------------------
PRODUCTION AVERAGE PRICE PRODUCTION AVERAGE PRICE
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Gas (MCF)............... 2,386,130 $ 1.85 933,435 $ 2.02
Oil (BBLS).............. 36,487 $15.99 7,319 $16.65
</TABLE>
Lease operating expenses and production taxes increased to $684,000 in 1994
compared to $331,000 in 1993. This increase is largely the result of increased
production and the acquisition of producing properties and development
activity in the Pecan Lake and Lake Charles fields. Depreciation, depletion
and amortization expense was substantially higher for the year 1994 compared
to the period from July 15, 1993 through December 31, 1993 due to the
significant increase in capitalized costs and production volumes.
Interest expense of $1,072,000 in 1994 was significantly higher than the
$199,000 incurred for the period from July 15, 1993 through December 31, 1993
due to the financing of substantially all property acquisitions and
development activity with advances under La/Cal's loan agreement with an
institutional lender. Such acquisitions and development activity took place in
late 1993 and throughout 1994.
14
<PAGE>
Liquidity and Capital Resources
Net cash provided by operating activities was $3,579,000 in 1995 compared to
$2,823,000 in 1994 and $479,000 from July 15, 1993, through December 31, 1993.
The Company's accompanying consolidated statements of cash flows identify
major differences between net income and net cash provided by operating
activities for each of the periods presented.
Net cash provided by investing activities amounted to $8,877,000 in 1995
compared to net cash used of $3,720,000 in 1994 and $1,968,000 from July 15,
1993, through December 31, 1993. The year ended December 31, 1995, reflects
the receipt by the Company of $9,600,000 cash in September from the sale of
the investment in the Penske Corporation as well as $1,514,000 from the sale
of certain properties in Michigan, Montana and North Dakota in the fourth
quarter. This was offset by the payment by the Company of $1,088,000 in
connection with the business combination and $650,000 for capital
expenditures. The 1994 and 1993 periods reflect $3,720,000 and $1,968,000 in
capital expenditures, respectively due to extensive drilling and completion
activities and acquisition of producing properties by La/Cal during those
periods.
Net cash used by financing activities in 1995 total $12,553,000 compared to
net cash provided by financing activities of $856,000 in 1994 and $2,241,000
from July 15, 1993, through December 31, 1993. The 1995 amount included the
borrowing of $21,000,000 by the Company which was used primarily to pay off
the La/Cal debt ($9,151,000) and the debt assumed from Patrick ($10,626,000).
The remainder of the loan proceeds were used to provide working capital and
pay accrued interest. The year ended December 31, 1995 also reflects debt
paydowns as follows: 1) $915,000 by La/Cal on its General Obligation Notes
prior to August 15, 1995; 2) $9,500,000 by the Company on its credit facility
in September from the Penske sale proceeds; 3) $500,000 by the Company on its
credit facility from operations/working capital 4) $1,250,000 by the Company
in the fourth quarter from the sale of certain oil and gas properties. The
1995 amount also includes partnership distributions by La/Cal of $1,133,000
prior to August 15, 1995 and the Company's preferred stock dividends
subsequent to the business combination in the amount of $363,000. The 1994 and
1993 amounts consist of La/Cal borrowings used to partially fund the
significant capital expenditures mentioned above. This was offset by
partnership distributions of $3,107,000 and $4,073,000, respectively.
Additionally, the amounts include subsequent payments of $1,757,000 and
$407,000 on the borrowings.
The Company has a credit facility with a bank which provides for a total
borrowing base determined by the bank every six months in part, based on the
Company's oil and gas reserve information. Any and all amounts drawn are due
and payable on June 1, 1997. Interest on related borrowings is based on either
of two methods at the option of the Company: the bank's prime lending rate or
LIBOR plus 2%. Interest rates are set on specific draws for one, two, three or
six month periods, also at the option of the Company.
The original borrowing base of $22,000,000 was reduced to $15,000,000 after
the sale of the Company's investment in the Penske Corporation (see Note G to
the consolidated financial statements), in accordance with the specific
provisions of the credit facility. The amount drawn by the Company as of
December 31, 1995 was $9,750,000.
The Company plans to incur capital expenditures in the amount of
approximately $7,000,000 in calendar 1996. The Company plans to finance such
expenditures from operating cash flow and draws on its bank credit facility.
The Company's business strategy is to explore and develop drilling prospects
along the Gulf Coast and in West Texas and pursue strategic acquisitions of
oil and gas properties that offer additional development drilling
opportunities. It is anticipated that such acquisitions would be financed with
bank or other institutional borrowings.
Newly Issued Accounting Pronouncements
During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of.
15
<PAGE>
Under SFAS No. 121, an impairment is determined to have occurred and a loss is
recognized when the net of future cash inflows expected to be generated by an
identifiable long-lived asset and cash outflows expected to be required to
obtain those cash inflows is less than the carrying value of the asset. The
Company performs this comparison for its oil and gas properties on a field-by-
field basis. The Company adopted this accounting standard during the fourth
quarter of 1995 and recorded an impairment amounting to $157,000.
During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 123, Accounting for Stock Based
Compensation. This statement encourages companies to recognize compensation
expense for certain equity instrument issuances in accordance with new fair
value accounting guidelines. The Company has decided not to adopt the
recognition provisions of the Statement and will adopt the disclosure
provisions of the Statement in 1996.
16
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Goodrich Petroleum Corporation:
We have audited the accompanying consolidated balance sheets of Goodrich
Petroleum Corporation and Subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the years ended December 31, 1995 and 1994, and the period from
July 15, 1993 (inception) through December 31, 1993. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Goodrich
Petroleum Corporation and Subsidiaries as of December 31, 1995 and 1994, and
the results of their operations and their cash flows for the years ended
December 31, 1995 and 1994, and the period from July 15, 1993 (inception)
through December 31, 1993, in conformity with generally accepted accounting
principles.
As discussed in Note D to the consolidated financial statements, in 1995,
the Company adopted the provisions of Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of.
KPMG PEAT MARWICK LLP
Shreveport, Louisiana
March 26, 1996
17
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
ASSETS 1995 1994
------ ------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.......................... $ 613,450 $ 710,762
Marketable equity securities....................... 759,600 --
Accounts receivable
Trade and other, net of allowance................ 170,593 --
Accrued oil and gas revenue...................... 1,545,501 934,910
Prepaid insurance.................................. 302,113 --
Other.............................................. 33,532 --
----------- -----------
Total current assets........................... $ 3,424,789 1,645,672
----------- -----------
PROPERTY AND EQUIPMENT
Oil and gas properties............................. 16,262,033 7,271,549
Furniture, fixtures and equipment.................. 101,333 --
----------- -----------
16,363,366 7,271,549
Less accumulated depletion, depreciation and
amortization...................................... (2,217,425) (1,309,866)
----------- -----------
Total property and equipment..................... 14,145,941 5,961,683
----------- -----------
OTHER ASSETS
Investment in pipeline joint venture, net.......... 4,676,500 --
Deferred charges................................... 135,486 623,141
----------- -----------
4,811,986 623,141
----------- -----------
TOTAL ASSETS................................... $22,382,716 $ 8,230,496
=========== ===========
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------------------------------ ------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long term debt...................... $ -- $ 1,816,723
Accounts payable....................................... 656,886 135,916
Accrued liabilities.................................... 1,740,028 109,074
------------ -----------
Total current liabilities............................ 2,396,914 2,061,713
------------ -----------
LONG TERM DEBT........................................... 9,750,000 8,250,000
OTHER LIABILITIES........................................ 572,990 --
STOCKHOLDERS' EQUITY (DEFICIT)
Partners' capital (deficit)............................ -- (2,081,217)
Preferred stock, par value $1.00 per share; authorized
10,000,000 shares; issued 734,859 at December 31, 1995
(liquidating preference $10 per share, aggregating to
$7,348,590)........................................... 734,859 --
Common stock, par value--$0.20 per share; authorized
100,000,000 shares; issued and outstanding 41,804,510
at December 31, 1995.................................. 8,360,902 --
Additional paid-in capital............................... 1,200,140 --
Accumulated deficit...................................... (633,089) --
------------ -----------
Total stockholders' equity (deficit)................. 9,662,812 (2,081,217)
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......... $ 22,382,716 $ 8,230,496
============ ===========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
JULY 15, 1993
YEAR ENDED (INCEPTION)
DECEMBER 31, THROUGH
---------------------- DECEMBER 31,
1995 1994 1993
---------- ---------- -------------
<S> <C> <C> <C>
REVENUES
Oil and gas sales....................... $5,477,208 4,995,663 1,059,882
Pipeline joint venture.................. 573,393 -- --
Other, net.............................. 123,811 17,783 8,522
---------- ---------- ----------
Total revenues........................ 6,174,412 5,013,446 1,068,404
---------- ---------- ----------
COSTS AND EXPENSES
Lease operating expense and production
taxes.................................. 1,029,501 684,131 194,054
Depletion, depreciation and
amortization........................... 1,785,502 1,156,624 179,476
Exploration............................. 193,159 4,240 --
Impairment of oil and gas properties.... 157,000 -- --
Interest expense........................ 1,132,488 1,072,098 199,389
General and administrative.............. 739,451 81,535 1,301
---------- ---------- ----------
Total costs and expenses.............. 5,037,101 2,998,628 574,220
---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM
AND INCOME TAXES......................... 1,137,311 2,014,818 494,184
========== ==========
Income Taxes............................ --
----------
INCOME BEFORE EXTRAORDINARY ITEM.......... 1,137,311
Extraordinary item--early extinguishment
of debt................................ (482,906)
----------
NET INCOME................................ 654,405
Preferred stock dividends............... 254,932
----------
EARNINGS AVAILABLE TO COMMON STOCK........ $ 399,473
==========
PRO FORMA INFORMATION (UNAUDITED):
Income before extraordinary item and
income taxes............................. $1,137,311 2,014,818 494,184
Pro forma income taxes*................... 402,698 785,779 192,732
---------- ---------- ----------
734,613 1,229,039 301,452
Extraordinary item--early extinguishment
of debt................................ (482,906) -- --
---------- ---------- ----------
Pro forma net income...................... 251,707 1,229,039 301,452
Preferred stock dividends............... 254,932 -- --
---------- ---------- ----------
Pro forma earnings available to common
stock.................................... $ (3,225) 1,229,039 301,452
========== ========== ==========
Pro forma income before extraordinary item
per average common share................. $ .02 .06 .02
Pro forma extraordinary item per average
common share............................. (.02) -- --
---------- ---------- ----------
Pro forma earnings per average common
share.................................... $ -- .06 .02
========== ========== ==========
Pro forma weighted average common shares
outstanding**............................ 27,722,543 19,765,226 19,765,226
========== ========== ==========
</TABLE>
- --------
* As described in Note D, no provision for income taxes is included in the
consolidated statements of operations for the periods ended December 31,
1994 and 1993, for the operations of La/Cal Energy Partners (predecessor
company), due to La/Cal being a partnership and income taxes were the
responsibility of the individual partners of La/Cal. Certain unaudited pro
forma information relating to the Company's results of operations had
La/Cal been a corporation, is shown here.
** For purposes of this presentation the number of pro forma shares used for
periods prior to August 15, 1995, is 19,765,226 shares, the number issued
by the Company in exchange for La/Cal's net assets contributed.
See notes to consolidated financial statements.
20
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JULY 15, 1993
YEAR ENDED DECEMBER 31, (INCEPTION) THROUGH
------------------------- DECEMBER 31,
1995 1994 1993
------------ ----------- -------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................... $ 654,405 2,014,818 494,184
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depletion, depreciation and
amortization............... 1,785,502 1,156,624 179,476
Amortization of deferred
debt financing costs....... 101,531 112,530 29,598
Extraordinary item--early
extinguishment of debt..... 482,906 -- --
Exploration costs charged to
income..................... 193,159 4,240 --
Impairment of oil and gas
properties................. 157,000 -- --
Payment of other
liabilities................ (130,010) -- --
(Increase) decrease in:
Accounts receivable....... (28,773) (454,610) (480,300)
Prepaid insurance and
other.................... (322,900) -- --
(Decrease) increase in
Accounts payable.......... 493,343 (72,846) 208,762
Accrued liabilities....... 188,905 61,831 47,243
Other....................... 3,857 -- --
------------ ----------- ----------
Net cash provided by
operating activities... 3,578,925 2,822,587 478,963
------------ ----------- ----------
INVESTING ACTIVITIES
Sale of investment............ 9,600,000 -- --
Proceeds from sales of oil and
gas properties............... 1,514,336 -- --
Cash paid in connection with
business combination......... (1,088,432) -- --
Overdraft bank balances
assumed in business
combination.................. (451,414) -- --
Capital expenditures.......... (649,604) (3,719,782) (1,967,989)
Other......................... (47,883) -- --
------------ ----------- ----------
Net cash provided by
(used in) investing
activities............. 8,877,003 (3,719,782) (1,967,989)
------------ ----------- ----------
FINANCING ACTIVITIES
Proceeds from bank borrowings. 21,000,000 5,719,933 6,510,580
Principal payments of bank
borrowings................... (31,942,841) (1,756,856) (406,934)
Partnership contributions..... -- -- 300,647
Partnership distributions..... (1,132,735) (3,107,258) (4,073,185)
Payment of debt financing
costs........................ (114,771) -- --
Preferred stock dividends..... (362,893) -- --
Organizational costs incurred. -- -- (89,944)
------------ ----------- ----------
Net cash provided by
(used in) financing
activities............. (12,553,240) 855,819 2,241,164
------------ ----------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS........... (97,312) (41,376) 752,138
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............ 710,762 752,138 --
------------ ----------- ----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD...................... $ 613,450 710,762 752,138
============ =========== ==========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994 AND PERIOD FROM JULY 15, 1993
(INCEPTION) THROUGH DECEMBER 31, 1993
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
-------------------- ----------------------
PARTNER'S ADDITIONAL TOTAL
CAPITAL NUMBER NUMBER PAID-IN ACCUMULATED STOCKHOLDERS'
(DEFICIT) OF SHARES PAR VALUE OF SHARES PAR VALUE CAPITAL DEFICIT EQUITY (DEFICIT)
---------- --------- --------- ---------- ----------- ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JULY 15,
1993................... $ -- -- $ -- -- $ -- -- -- --
Partnership
contributions.......... 2,590,224 -- -- -- -- -- -- 2,590,224
Partnership
distributions.......... (4,073,185) -- -- -- -- -- -- (4,073,185)
Net income.............. 494,184 -- -- -- -- -- -- 494,184
---------- --------- --------- ---------- ----------- --------- -------- ----------
BALANCE AT DECEMBER 31,
1993................... (988,777) -- -- -- -- -- -- (988,777)
Partnership
distributions.......... (3,107,258) -- -- -- -- -- -- (3,107,258)
Net Income.............. 2,014,818 -- -- -- -- -- -- 2,014,818
---------- --------- --------- ---------- ----------- --------- -------- ----------
BALANCE AT DECEMBER 31,
1994................... (2,081,217) -- -- -- -- -- -- (2,081,217)
Partnership
distributions.......... (1,229,344) ---- ---- ---- ---- ---- ---- (1,229,344)
Business Combination.... 3,310,561 1,098,710 1,098,710 39,530,452 7,906,090 258,539 -- 12,573,900
Conversion of preferred
stock.................. -- (363,851) (363,851) 2,274,058 454,812 (90,961) -- --
Preferred stock
dividends.............. -- -- -- -- -- -- (254,932) (254,932)
Net income.............. -- -- -- -- -- 1,032,562 (378,157) 654,405
---------- --------- --------- ---------- ----------- --------- -------- ----------
BALANCE AT DECEMBER 31,
1995................... $ -- 734,859 $ 734,859 41,804,510 $ 8,360,902 1,200,140 (633,089) 9,662,812
========== ========= ========= ========== =========== ========= ======== ==========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE A--BUSINESS COMBINATION
On August 15, 1995, the transactions contemplated by the Agreement and Plan
of Merger among Patrick Petroleum Company ("Patrick"), La/Cal Energy Partners
("La/Cal"), Goodrich Petroleum Corporation (the "Company"), and Goodrich
Acquisition, Inc. were completed. The Agreement provided for a combination of
Patrick and La/Cal, as a result of which the businesses previously conducted
by Patrick and La/Cal are now conducted by the Company, which is a Delaware
corporation formed for the purpose of consummating such transactions, and its
subsidiaries. The combination of Patrick and La/Cal was effected primarily by
two concurrent transactions: (a) the contribution by La/Cal of all of its
assets and liabilities (excluding cash and accounts receivable accrued prior
to March 1, 1995, and interest thereon) to the Company in exchange for
19,765,226 shares of the Company's common stock (the "Common Stock") and (b)
the merger of Goodrich Acquisition with and into Patrick (the "Merger")
whereby (i) each outstanding share of Patrick common stock ("Patrick Common
Stock") was converted into one share of Common Stock; (ii) each outstanding
share of Patrick Series B Convertible Preferred Stock was converted into one
share of the Company's Series A Convertible Preferred Stock (except for 76,290
shares for which appraisal rights were preserved) and (iii) Patrick, the
surviving corporation in the Merger, became a wholly-owned subsidiary of the
Company.
La/Cal was formed, by the contribution of certain oil and gas properties
owned by the partners, on July 15, 1993, pursuant to the provisions of the
State of Louisiana, for the purpose of engaging in the domestic exploration
for oil and gas reserves primarily in the States of Louisiana and Texas. Under
the provisions of the Agreement of Partnership, the business of La/Cal was to
acquire interests in leases within a defined program area in Louisiana and
certain railroad districts in East Texas (as amended from time to time) and
drill primarily development wells. La/Cal also engaged in the development,
production, and sale of any commercial accumulations of oil and gas
discovered. Profits, losses, and distributable cash were allocated to the
individual partners as defined in the Partnership Agreement.
NOTE B--BASIS OF PRESENTATION
The combination transactions were accounted for as a purchase business
combination in accordance with Accounting Principles Board Opinion No. 16,
Business Combinations whereby La/Cal was deemed to be the acquiror and Patrick
the acquiree. Accordingly, on August 15, 1995, the Company recorded the assets
and liabilities of Patrick at fair value, whereas the assets and liabilities
of La/Cal are reflected at historical book value. The consolidated financial
statements reflect the operations solely of La/Cal for periods prior to August
15, 1995, whereas such financial statements reflect the operations of the
combined entities for periods subsequent to August 15, 1995.
NOTE C--DESCRIPTION OF BUSINESS
The Company is in the primary business of the exploration and production of
crude oil and natural gas. The Subsidiaries have interests in such operations
in eight states, primarily in Louisiana and Texas. The Company's subsidiaries
also have a minority interest in a natural gas pipeline joint venture located
in the state of Texas.
NOTE D--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property and Equipment--The Company uses the successful efforts method of
accounting for exploration and development expenditures.
Leasehold acquisition costs are capitalized. When proved reserves are found
on an undeveloped property, leasehold cost is reclassified to proved
properties. Significant undeveloped leases are reviewed periodically, and a
valuation allowance is provided for any estimated decline in value. Cost of
all other undeveloped leases is amortized over the estimated average holding
period of the leases.
23
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
Costs of exploratory drilling are initially capitalized, but if proved
reserves are not found, the costs are subsequently expensed. All other
exploratory costs are charged to expense as incurred. Development costs are
capitalized, including the cost of unsuccessful development wells.
During the fourth quarter of 1995, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Under SFAS
No. 121, an impairment is determined to have occurred and a loss is recognized
when the net of future cash inflows expected to be generated by an
identifiable long-lived asset and cash outflows expected to be required to
obtain those cash inflows is less than the carrying value of the asset. The
Company performs this comparison for its oil and gas properties on a field-by-
field basis. The Company recorded such an impairment in the fourth quarter of
1995 in the amount of $157,000.
Prior to the adoption of SFAS 121, undiscounted future net revenues were
compared annually to net capitalized cost of all oil and gas properties to
determine if an impairment had occurred in the amount capitalized.
Depreciation and depletion of producing oil and gas properties are provided
under the unit-of-production method. Proved developed reserves are used to
compute unit rates for unamortized tangible and intangible development costs,
and proved reserves are used for unamortized leasehold costs. Estimated
dismantlement, abandonment, and site restoration costs, net of salvage value,
are considered in determining depreciation and depletion provisions.
Gains and losses on disposals or retirements that are significant or include
an entire depreciable or depletable property unit are included in income. All
other dispositions, retirements, or abandonments are reflected in accumulated
depreciation, depletion, and amortization.
Cash and Cash Equivalents--Cash and cash equivalents include cash on hand,
demand deposit accounts and temporary cash investments with maturities of
ninety days or less at date of purchase.
Marketable Equity Securities--In accordance with Statement of Financial
Accounting Standards No. 115, the Company has classified its investment in
marketable equity securities as available for sale. Accordingly, unrealized
holding gains and losses are excluded from earnings and are reported as a
separate component of stockholders' equity until realized.
Investment in Pipeline Joint Venture--The Company's investment consists of a
20% interest in an intrastate natural gas pipeline joint venture. The
Company's carrying basis in the investment was established at August 15, 1995
(fair value) and is being amortized on a basis which matches the amortization
with the monthly maximum average contract quantities over the remaining term
of the joint venture which is estimated to terminate in 2000. Amortization for
the year ended December 31, 1995 amounted to $403,254. The Company records its
equity in joint venture earnings as revenues on the statement of operations.
Income Taxes--The federal income tax effect of La/Cal's activities (prior to
August 15, 1995) is not reflected in the financial statements since such taxes
were the responsibility of the individual partners of La/Cal. The Company
became subject to income taxes as of August 15, 1995, as a result of the
business combination.
The Company follows the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes which requires income taxes be
accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected
24
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Earnings Per Share--As discussed previously, La/Cal's activities prior to
the business combination were conducted in the form of a partnership and the
Company was established in corporate form on August 15, 1995. Earnings per
share information has been presented on a pro forma basis to reflect such
information as if La/Cal had been operated as a corporation for the periods
presented.
Commitments and Contingencies--Liabilities for loss contingencies, including
environmental remediation costs, arising from claims, assessments, litigation,
fines and penalties, and other sources are recorded when it is probable that a
liability has been incurred and the amount of the assessment and/or
remediation can be reasonably estimated. Recoveries from third parties which
are probable of realization are separately recorded, and are not offset
against the related environmental liability.
Use of Estimates--Management of the Company has made a number of estimates
and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
NOTE E--FAIR VALUE OF FINANCIAL INSTRUMENTS
The following presents the carrying amounts and estimated fair values of the
Company's financial instruments at December 31, 1995. FASB Statement No. 107,
Disclosures about Fair Value of Financial Instruments, defines the fair value
of a financial instrument as the amount at which the instrument could be
exchanged in a current transaction between willing parties.
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
--------- ---------
<S> <C> <C>
Financial asset--
Marketable equity securities........................ $ 759,600 759,600
Financial liabilities--
Other liabilities................................... 572,990 482,575
Long-term debt (including current maturities)....... 9,750,000 8,770,098
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and cash equivalents, accounts receivable, accounts payables and
accrued liabilities: The carrying amounts approximate fair value because of
the short maturity of those instruments. Therefore, these instruments were not
presented in the table above.
Marketable equity securities: Fair value is based on bid prices published in
financial media.
Other liabilities and Long-term debt: The fair value is estimated by
discounting the future cash flows of each instrument at rates currently
offered to the Company for similar debt instruments of comparable maturities
by the Company's bankers.
25
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
NOTE F--PATRICK ASSETS AND LIABILITIES ACQUIRED
On August 15, 1995, the Company recorded the combination transactions which
effect was primarily the recording of the assets and liabilities of Patrick at
their fair value. Such amounts were as follows:
<TABLE>
<S> <C>
Cash overdraft............................................. $ (451,414)
Marketable equity securities............................... 759,600
Accounts receivable........................................ 676,040
Prepaid expenses and other current assets.................. 12,745
Investment in Penske Corporation........................... 9,600,000
Investment in pipeline joint venture....................... 5,079,754
Property and equipment..................................... 10,780,422
Accounts payable........................................... (27,627)
Accrued liabilities........................................ (1,438,070)
Long term debt............................................. (10,626,118)
Other liabilities.......................................... (703,000)
------------
$ 13,662,332
============
</TABLE>
The former common shareholders of Patrick received 19,765,226 shares of the
Company's common stock and the former preferred shareholders of Patrick
effectively received 1,098,710 shares of the Company's preferred stock in the
business combination. As reflected in the consolidated statements of
stockholders' equity, the issuance of such shares resulted in an increase in
stockholders' equity of $12,573,900.
NOTE G--SALE OF INVESTMENT IN PENSKE CORPORATION
On September 18, 1995, the Company received $9,600,000 cash as redemption of
its investment in the Penske Corporation. The proceeds were used to pay down
the company's long term debt along with related accrued interest. No gain or
loss resulted from the transaction.
NOTE H--LONG TERM DEBT
Long-term debt at December 31, 1995 and 1994 consists of the following:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Borrowings under credit facility, interest, at prime or
LIBOR plus 2% (see below) (weighted average rate at
December 31, 1995--7.89%); principal due
June 1, 1997........................................... $ 9,750,000 --
10% senior secured general obligation notes............. -- 10,066,723
----------- ----------
Total long-term debt.................................... 9,750,000 10,066,723
Less current portion.................................... -- 1,816,723
----------- ----------
Long-term debt, excluding current portion............... $ 9,750,000 8,250,000
=========== ==========
</TABLE>
Long-term debt recorded on the December 31, 1994 balance sheet represented
La/Cal's 10% Senior Secured General Obligation Notes ("the General Obligation
Notes"). This debt was paid off with proceeds from the Company's credit
facility.
The Company has a credit facility with a bank which provides for a total
borrowing base determined by the bank every six months in part, based on the
Company's oil and gas reserves. Any and all amounts drawn are due and payable
on June 1, 1997. Interest on related borrowings is based on either of two
methods at the option of the Company: the bank's prime lending rate or LIBOR
plus 2%. Interest rates are set on specific draws for one, two, three or six
month periods, also at the option of the Company.
26
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
The original borrowing base of $22,000,000 was reduced to $15,000,000 after
the sale of the Company's investment in the Penske Corporation (see Note G
above), in accordance with the specific provisions of the credit facility.
The credit facility requires minimum net worth and debt service ratios be
maintained by the Company. On March 26, 1995, the bank amended the minimum net
worth covenant which lowered the minimum net worth requirement to $8,500,000
plus 50% of net income subsequent to September 30, 1995 effective December 1,
1995. Giving effect to such amendment, the Company had $1,027,326, available
for the payment of dividends at December 31, 1995.
Substantially all of the Company's assets are pledged to secure this credit
facility.
Interest paid during 1995, 1994 and the period from July 15, 1993 (inception
of La/Cal) through December 31, 1993 amounted to $968,190, $1,051,927 and
$194,738 respectively.
NOTE I--EXTRAORDINARY ITEM-EARLY EXTINGUISHMENT OF DEBT
La/Cal's General Obligation Notes were paid off in connection with the
business combination and the related unamortized debt financing costs in the
amount of $482,906 were charged to operations as an extraordinary item, in the
third quarter of 1995.
NOTE J--ACCRUED LIABILITIES
Accrued liabilities as of December 31, 1995 and 1994 consisted of the
following:
<TABLE>
<CAPTION>
1995 1994
----------- -------
<S> <C> <C>
Environmental contingency............................. $ 400,000 --
Current portion--consulting agreement contracts....... 387,000 --
Prior years' state income and franchise taxes......... 200,000 --
Taxes other than income............................... 160,000 --
Other................................................. 593,028 109,074
----------- -------
$ 1,740,028 109,074
=========== =======
</TABLE>
NOTE K--PRO FORMA FINANCIAL RESULTS OF OPERATIONS (UNAUDITED)
Selected results of operations on a pro forma basis as if the combination
transactions had occurred on January 1, 1995 and January 1, 1994,
respectively, are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
-----------------------
1995 1994
----------- -----------
(UNAUDITED)
<S> <C> <C>
Revenues......................................... $11,588,318 $15,836,988
Income before extraordinary item................. 2,510,494 3,780,094
Net income....................................... 2,027,588 3,780,094
Income applicable to common stock................ 1,377,588 2,840,094
Income before extraordinary item per average
common share.................................... .04 .07
Income per average common share.................. $ .03 $ .07
</TABLE>
27
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
The pro forma operations for the year ended December 31, 1995 contain a net
gain on the sale of an investment which accounted for $1,563,762 of net income
and $ .04 income per share. The operations information for the year ended
December 31, 1994 contains a net gain on sale of investments which accounted
for $6,447,102 of net income and $ .16 income per share. Also the operations
for the year ended December 31, 1994 has been adjusted to eliminate operations
related to certain oil and gas properties sold by Patrick in December, 1994 in
order to present comparable amounts.
NOTE L--COMMITMENTS AND CONTINGENCIES
The U.S. Environmental Protection Agency ("EPA") has identified the Company
as a potentially responsible party ("PRP") for the cost of clean-up of
"hazardous substances" at an oil field waste disposal site in Vermilion
Parish, Louisiana. The EPA has estimated that the total cost of long-term
clean-up of the site will be approximately $15.4 million with the Company's
percentage of responsibility to be approximately 3.09%. As of December 31,
1995, the Company has paid approximately $115,000 in costs related to this
matter and accrued an additional $400,000 for the remaining liability. The EPA
and PRPs will continue to evaluate the site and revise estimates for the long-
term clean-up of the site. There can be no assurance that the cost of clean-up
and the Company's percentage responsibility will not be higher than currently
estimated by the EPA. In addition, under the federal environmental laws, the
liability costs for the clean-up of the site is joint and several among all
PRPs. Therefore, the ultimate cost of the clean-up to the Company could be
significantly higher than the amount presently accrued for this liability.
Additionally, the Company is party to a number of lawsuits arising in the
normal course of business. The Company has defended and intends to continue to
defend these actions vigorously and believes, based on currently available
information, that adverse results or settlements, if any, in excess of
insurance coverage or amounts already provided, will not be material to its
financial position or results of operations.
NOTE M--INCOME TAXES
Income tax expense for the period from August 15, 1995 through December 31,
1995 consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- -------- -----
<S> <C> <C> <C>
U.S. Federal...................................... $ 25,000 (25,000) --
State and local................................... -- -- --
-------- ------- -----
$ 25,000 (25,000) --
======== ======= =====
</TABLE>
Following is a reconciliation of the U.S. statutory income tax rate to the
Company's effective rate on loss before income taxes for the period from
August 15, 1995 through December 31, 1995:
<TABLE>
<S> <C>
U.S. Statutory Income Tax Rate.................................. (35.0)%
Increase in deductible temporary differences for which no
benefit recorded............................................... 28.2
Nondeductible expenses.......................................... 6.8
-----
--
=====
</TABLE>
28
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
The significant components of deferred income tax expense for the period
from August 15, 1995 through December 31, 1995 are as follows:
<TABLE>
<S> <C>
Deferred tax benefit (exclusive of utilization of net
operating loss carryforwards)............................... 657,938
Utilization of net operating loss carryforward............... 632,938
---------
$ (25,000)
=========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liability at December 31,
1995 are presented below.
Deferred tax assets:
Differences between book and tax basis of:
<TABLE>
<S> <C>
Property and equipment.......................................... $ 307,025
Marketable equity securities.................................... 140,156
Contingent liabilities.......................................... 254,962
Consulting agreement contracts.................................. 335,997
Other........................................................... 70,306
AMT Tax credit carryforward....................................... 1,392,176
Statutory depletion carryforward.................................. 4,943,209
Investment tax credit carryforward................................ 1,242,725
Operating loss carryforward....................................... 12,364,772
------------
Total gross deferred tax assets................................... 21,051,328
Less valuation allowance.......................................... (19,461,294)
------------
Net deferred tax assets........................................... 1,590,034
------------
</TABLE>
Deferred tax liability:
<TABLE>
<S> <C>
Differences between book and tax basis of investment in Pecos
pipeline........................................................ (1,565,034)
------------
Total gross deferred liability................................... (1,565,034)
------------
Net deferred tax asset........................................... $ 25,000
============
</TABLE>
The valuation allowance for deferred tax assets increased $658,000 for the
period from August 15, 1995 through December 31, 1995 which substantially
offset the change in certain deferred tax assets. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. Based primarily upon the level
of projections for future taxable income generated primarily by the reversal
of future taxable temporary differences over the periods which the deferred
tax assets are deductible, management believes it is more likely than not the
Company will realize the benefits of these deductible differences, net of the
existing valuation allowance at December 31, 1995. The amount of deferred tax
assets considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are reduced.
29
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
The following table summarizes the amounts and expiration dates of operating
loss and investment tax credit carryforwards:
<TABLE>
<S> <C> <C> <C>
OPERATING LOSS CARRYFORWARDS INVESTMENT TAX CREDIT CARRYFORWARDS
--------------------------------- --------------------------------------
AMOUNT EXPIRES AMOUNT EXPIRES
----------------- ------------ ------------------- -------
$ 511,282 2001 $ 193,346 1996
2,994,824 2003 302,001 1997
4,801,898 2004 558,042 1998
1,551,278 2005 22,591 1999
7,564,329 2006 68,171 2000
9,331,128 2007 96,466 2001
4,756,252 2008 2,108 2002
3,695,445 2009
121,484 2010
----------------- -------------------
$ 35,327,920 $ 1,242,725
================= ===================
</TABLE>
As a result of the business combination, the Company's annual utilization of
its net operating and statutory depletion carryforwards are limited under
Internal Revenue Code Section 382. Such annual limitation is estimated to be
approximately $1,600,000 plus any built in gains at the date of the business
combination.
The Company's statutory depletion carryforwards and AMT credit carryovers
have no expiration date.
As described in Note D, no provision for income taxes for La/Cal was
included in the statements of operations prior to August 15, 1995 due to the
tax effect of Partnership activities being the responsibility of the
individual Partners.
At December 31, 1994, the book basis of La/Cal's net assets exceeded their
tax basis by $3,798,000 which would have resulted in a deferred income tax
liability of approximately $1,374,000 if La/Cal had been a taxable entity. The
pro forma tax effects of the temporary differences comprising this amount are
as follows at December 31, 1994:
<TABLE>
<S> <C>
Property and equipment--principally due to accumulated
depletion and depreciation................................. $ 1,105,000
Cash to accrual differences................................. 269,000
-----------
$ 1,374,000
===========
</TABLE>
30
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
NOTE N--STOCKHOLDERS' EQUITY
Common Stock--At December 31, 1995, unissued shares of Goodrich common stock
were reserved in the amount of 2,447,080 shares for the conversion of
convertible preferred stock and 2,675,602 shares for stock option plans.
Preferred Stock--In accordance with the terms of the combination
transactions, all of the outstanding shares of Patrick's Series B Convertible
Preferred Stock were converted into Goodrich Series A Convertible Preferred
Stock except for 76,290 shares for which appraisal rights had been preserved.
The Preferred Stock has a par value of $1.00 per share with a liquidation
preference of $10.00 per share, is convertible at the option of the holder at
any time, unless earlier redeemed, into shares of Common Stock of the Company
at an initial conversion rate of 3.33 shares of Common stock per share of
Preferred. The Preferred Stock also will automatically convert to Common Stock
if the closing price for the Preferred Stock exceeds $15.00 per share for ten
consecutive trading days. Upon any conversion of a share of Preferred Stock
prior to the close of business on September 15, 1997, the stockholder will
receive one Common Stock purchase warrant to purchase one share of Common
Stock at $5.00 per share, subject to adjustment in certain events. Any
outstanding warrants can be called on thirty days notice for $4.25 per warrant
and will expire on September 15, 1997.
The Preferred Stock is redeemable in whole or in part, at $12.00 per share,
plus accrued and unpaid dividends. Dividends on the Preferred Stock accrue at
an annual rate of 8%.
As a result of the combination transactions, the Company was required to
offer a special conversion right to all holders of the Preferred Stock for a
period of 61 days beginning August 18, 1995. On October 18, 1995, holders of
363,851 shares of the Company's preferred stock elected to convert their
shares to Common Stock at an exchange rate of 6.25 to 1. This conversion
resulted in the Company issuing an additional 2,274,058 shares of Common Stock
and resulted in 734,859 preferred shares outstanding as of December 31, 1995.
Effective January 1, 1996, the preferred shares under appraisal rights were
reinstated, resulting in outstanding shares of 811,149.
Stock Option and Incentive Programs--Goodrich currently has two plans which
provide for stock option and other incentive awards for the Company's key
employees and consultants and its directors. The Goodrich Petroleum
Corporation 1995 Stock Option Plan allows the Board of Directors, through its
Compensation Committee, to grant stock options, restricted stock awards, stock
appreciation rights, long-term incentive awards, and phantom stock awards, or
any combination thereof to key employees and consultants. The Goodrich
Petroleum Corporation 1995 Nonemployee Director Stock Option Plan provides for
the grant of options to each director who is not and has never been an
employee of the Company.
Additionally, Goodrich assumed certain outstanding stock options of Patrick
as a result of the business combination.
31
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
Stock option transactions during 1995 were as follows:
<TABLE>
<CAPTION>
NUMBER OF AVERAGE
OPTIONS PRICE
--------- -------
--------- -------
<S> <C> <C>
Outstanding January 1, 1995.................................. -- --
Assumed from Patrick....................................... 1,670,602 $ 2.32
Granted--1995 Stock Option Plan............................ 880,000 1.02
Granted--1995 Non Employee Director Stock Option Plan...... 220,000 0.97
Expiration of Options...................................... (95,000) 2.25
--------- ------
Outstanding December 31, 1995................................ 2,675,602 1.78
========= ======
Excercisable December 31, 1995............................... 1,890,602 $ 2.16
========= ======
</TABLE>
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been
recognized for its stock option plans. During 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standard No. 123,
Accounting for Stock Based Compensation. This statement encourages companies
to recognize compensation expense for certain equity instrument issuances in
accordance with new fair value accounting guidelines. The Company has decided
not to adopt the recognition provisions of the Statement and will adopt the
disclosure provisions of the Statement in 1996.
NOTE O--PATRICK PETROLEUM EMPLOYEE BENEFIT PLANS
Patrick maintained several employee benefit plans prior to the business
combination. In accordance with the business combination, each of these plans
has been or is in the process of being terminated. Accordingly, the only
activities of these plans subsequent to August 15, 1995 were related to their
termination. At December 31, 1995, the Patrick Petroleum Corporation of
Michigan Defined Benefit Plan and Trust held assets of $1,731,000. The Plan is
fully funded and these assets are expected to be distributed to the
participants during 1996.
NOTE P--NATURAL GAS AND CRUDE OIL COST DATA AND RESULTS OF OPERATIONS.
The following reflects the Company's capitalized costs related to natural
gas and oil activities at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
----------- ---------
<S> <C> <C>
Proved properties................................... $15,271,879 7,271,549
Unproved properties................................. 990,154 --
----------- ---------
16,262,033 7,271,549
Less accumulated depreciation and depletion......... 2,209,924 1,309,866
----------- ---------
Net property and equipment........................ $14,052,109 5,961,683
=========== =========
</TABLE>
32
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
The following table reflects certain data with respect to natural gas and
oil property acquisitions, exploration and development activities:
<TABLE>
<CAPTION>
PERIOD FROM
JULY 15, 1993
YEAR ENDED DECEMBER 31, THROUGH
---------------------------DECEMBER 31,
1995 1994 1993
------------ ------------------------
<S> <C> <C> <C>
Acquisition of proved
properties..................... 10,680,422(a) 2,112,308 1,250,000
Exploration costs............... 193,159 4,240 --
Development costs............... 514,431 1,600,235 717,989
- --------
(a) Properties acquired from Patrick.
Results of operations for natural gas and oil producing activities follow:
<CAPTION>
PERIOD FROM
JULY 15, 1993
YEAR ENDED DECEMBER 31, THROUGH
---------------------------DECEMBER 31,
1994 1994 1993
------------ ------------------------
<S> <C> <C> <C>
Sales to unaffiliated customers. 5,477,208 4,995,663 1,059,882
Production costs (lease
operating expense and taxes)... 1,029,501 684,131 194,054
Exploration expenses............ 193,159 4,240 --
Impairment of Oil and Gas
Properties..................... 157,000 -- --
Depreciation, depletion and
amortization................... 1,356,060 1,138,635 171,231
------------ ---------- ---------
2,735,720 1,827,006 365,285
------------ ---------- ---------
Results of operations before pro
forma income taxes............. 2,741,488 3,168,657 694,597
Pro forma income taxes
(Unaudited).................... 970,703 1,235,776 270,893
------------ ---------- ---------
Pro forma results of operations
(Unaudited).................... $ 1,770,785 1,932,881 423,704
============ ========== =========
</TABLE>
La/Cal operated as a partnership since its formation to the date of the
business combination (August 15, 1995) and, accordingly, did not directly pay
income taxes. Pro forma income tax expense and the results of oil and gas
operations as adjusted for pro forma income taxes is reflected above for that
period in order to reflect the impact of income taxes as if La/Cal had been
organized as a corporation.
No income taxes have been reflected for the Company since the business
combination due to its estimate that net operating loss and statutory
depletion loss carryforwards will be utilized to offset future taxable income.
NOTE Q--RELATED PARTY TRANSACTIONS.
La/Cal did not have any employees and was dependent on Goodrich Oil Company
to provide substantially all management of oil and gas operations and
administrative functions. La/Cal was not required to pay Goodrich Oil Company
for such services. Goodrich Oil Company was the operator of record of the
majority of the oil and gas properties in which La/Cal had an interest and
owned joint interests in such properties.
The Company entered into additional transactions with Goodrich Oil Company
subsequent to the business combination as more fully described below. Goodrich
Oil Company is owned by Henry Goodrich who is the chairman of the Company and
the father of Walter G. Goodrich, the Company's President and Chief Executive
Officer.
33
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
Goodrich Oil Company continues to be the operator of record of certain oil
and gas properties in which the Company has an interest and Goodrich Oil
Company owns joint interests in such properties.
The Company is a party to a Joint Participation Agreement with Goodrich Oil
Company pursuant to which the Company and Goodrich Oil Company agree to offer
to the other a 50% participation interest in such company's share of all
drilling prospects and acquisitions of producing properties.
Included in accounts payable is $67,906 payable to Goodrich Oil Company at
December 31, 1995.
During 1995, the Company paid Goodrich Oil Company $222,530 for the
repayment of advances for business combination expenses and $50,132 for
general and administrative expenses.
The Company sold an airplane hangar and certain furniture and fixtures to
U.E. Patrick, Patrick's former chairman. Mr. Patrick paid the Company $137,329
for such items. The Company paid $118,750 during 1995 to Mr. Patrick under the
terms of a three-year consulting agreement expiring in August, 1998.
The Company paid $58,250 to Henry Goodrich during 1995 under a consulting
agreement which expires in August, 2000.
In connection with the business combination, Mr. Leo E. Bromberg, a partner
and member of the management committee of La/Cal received a finder's fee paid
in the form of 494,131 shares of the Company's common stock. Such shares were
included in the 19,765,226 shares of the Company's common stock received by
the La/Cal Partners in connection with the transactions.
NOTE R--CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Due to the nature of the industry the Company sells its oil and natural gas
production to a limited number of purchasers and accordingly amounts
receivable from such purchasers could be significant. Additionally, the
Company receives net monthly payments from its partner, Mitchell Marketing
Company, in its pipeline joint venture. Revenues from these sources as a
percent of total revenues for the periods presented were as follows:
<TABLE>
<CAPTION>
PERIOD FROM
JULY 15, 1993
YEAR ENDED DECEMBER 31, THROUGH
----------------------- DECEMBER 31,
1995 1994 1993
----------- ----------- -------------
<S> <C> <C> <C>
Tenneco Gas Marketing Company.. -- 41% 70%
Seaber Corporation of
Louisiana..................... 55% 48% --
Mobil Oil Corporation.......... 16% -- --
Mitchell Marketing Company..... 9% -- --
</TABLE>
NOTE S--SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED)
The supplemental oil and gas reserve information that follows is presented
in accordance with Statement of Financial Accounting Standards No. 69 (SFAS
No. 69), Disclosures about Oil and Gas Producing Activities. The schedules
provide users with a common base for preparing estimates of future cash flows
and comparing reserves among companies. Additional background information
follows concerning the schedules.
34
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
The supplemental oil and gas reserve information that follows relates to the
properties contributed to La/Cal by its Partners prior to its formation
(period from January 1, 1993 through July 14, 1993), properties owned by
La/Cal subsequent to formation but prior to the business combination with
Patrick (period from July 15, 1993 through December 31, 1993, year ended
December 31, 1994 and period form January 1, 1995 through August 14, 1995) and
properties of the combined entities (period from August 15, 1995 through
December 31, 1995. Therefore, the supplemental oil and gas information for
1993 is presented on a combined basis to include the properties contributed to
La/Cal prior to its inception. All of the subject reserves are located in the
continental United States.
Schedules 1 and 2--Estimated Net Proved Oil and Gas Reserves
The Company's reserve information related to crude oil, condensate, and
natural gas liquids and natural gas was compiled based on evaluations
performed by several engineering firms and the Company internally for all
years presented.
Many assumptions and judgmental decisions are required to estimate reserves.
Quantities reported are considered reasonable, but they are subject to future
revisions, some of which may be substantial, as additional information becomes
available. Such additional knowledge may be gained as the result of reservoir
performance, new geological and geophysical data, additional drilling,
technological advancements, price changes, and other factors.
Regulations published by the Securities and Exchange Commission define
proved reserves as those volumes of crude oil, condensate, and natural gas
liquids and natural gas that geological and engineering data demonstrate with
reasonable certainty are recoverable from known reservoirs under existing
economic and operating conditions. Proved developed reserves are those volumes
expected to be recovered through existing wells with existing equipment and
operating methods. Proved undeveloped reserves are those volumes expected to
be recovered as a result of making additional investment by drilling new wells
on acreage offsetting productive units or recompleting existing wells.
Schedule 3--Standardized Measure of Discounted Future Net Cash Flows to
Proved Oil and Gas Reserves
SFAS No. 69 requires calculation of future net cash flows using a ten
percent annual discount factor and year end prices, costs, and statutory tax
rates, except for known future changes such as contracted prices and
legislated tax rates.
The calculated value of proved reserves is not necessarily indicative of
either fair market value or present value of future cash flows because prices,
costs, and governmental policies do not remain static; appropriate discount
rates may vary; and extensive judgment is required to estimate the timing of
production. Other logical assumptions would likely have resulted in
significantly different amounts. Average crude oil prices received for oil and
the average price received by well for natural gas, effective at the end of
the year, were used for this calculation, and were $17.90 per Bbl and $2.01
per Mcf, respectively.
No income tax effect has been provided in the amounts below as of December
31, 1994 and 1993 due to the fact La/Cal was a partnership with all income
taxes being the responsibility of the partners themselves.
Schedule 3 also presents a summary of the principal reasons for change in
the standard measure of discounted future net cash flows for each of the three
years in the period ended December 31, 1995.
35
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
SCHEDULE 1--ESTIMATED NET PROVED GAS RESERVES (MCF)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Proved:
Balance, beginning of period............. 21,983,004 17,550,038 9,313,693
Revisions of previous estimates.......... (5,727,528) (702,870) (653,255)
Purchase of minerals in place............ 5,324,607 4,380,429 3,769,789
Extensions, discoveries, and other
additions............................... 375,800 3,141,537 6,041,157
Production............................... (2,213,923) (2,386,130) (921,346)
Sales of minerals in place............... (854,771) -- --
---------- ---------- ----------
Balance, end of period..................... 18,887,189 21,983,004 17,550,038
========== ========== ==========
Proved developed:
Beginning of period...................... 18,839,882 13,729,911 8,026,445
End of period............................ 13,815,905 18,839,882 13,729,911
SCHEDULE 2--ESTIMATED NET PROVED OIL RESERVES (BARRELS)
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Proved:
Balance, beginning of period............. 523,722 209,941 68,796
Revisions of previous estimates.......... (236,934) (23,246) 51,806
Purchase of minerals in place............ 938,465 47,482 37,106
Extensions, discoveries, and other
additions............................... 3,389 326,033 59,463
Production............................... (102,731) (36,488) (7,230)
Sale of minerals in place................ (185,764) -- --
---------- ---------- ----------
Balance, end of period................... 940,147 523,722 209,941
---------- ---------- ----------
Proved, developed:
Beginning of period...................... 504,908 174,641 30,179
End of period............................ 920,557 504,908 174,641
SCHEDULE 3--STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATED TO
PROVED OIL AND GAS RESERVES
<CAPTION>
DECEMBER 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Future cash inflows........................ $ 51,615 44,878 38,098
Future production and development cost..... (8,267) (3,803) (2,765)
Future income tax expense.................. (4,150) -- --
---------- ---------- ----------
Future net cash flows before income tax
expense................................... 39,198 41,075 35,333
10% annual discount for estimated timing of
cash flows................................ (12,316) (13,559) (13,900)
---------- ---------- ----------
Standardized measure of discounted future
net cash flows............................ $ 26,882 27,516 21,433
========== ========== ==========
</TABLE>
36
<PAGE>
GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1995
Principal sources of change in the standardized measure of discounted net
cash flows for the years shown:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net changes in prices and production cost,
including excise taxes.......................... $ 829 $(2,978) $ 840
Sales and transfers of oil and gas produced, net
of production costs............................. (4,448) (4,312) (1,676)
Net change due to revisions, extensions, and
discoveries..................................... (8,327) 4,662 6,899
Net change due to purchase and sales of minerals-
in-place........................................ 11,090 5,105 4,549
Development cost incurred during the period...... 531 1,600 718
Net change in income taxes....................... (3,475) -- --
Accretion of discount............................ 2,752 2,143 931
Change in production rates (timing) and other.... 414 (137) (141)
------- ------- -------
$ (634) $ 6,083 $12,120
======= ======= =======
</TABLE>
37
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE PARTNERS OF LA/CAL ENERGY PARTNERS:
We have audited the accompanying statement of revenues and direct operating
expenses of the Properties Contributed to La/Cal Energy Partners for the
period from January 1, 1993 through July 14, 1993. This financial statement is
the responsibility of the management of the owners of the properties. Our
responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of revenues and direct
operating expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall presentation of the statement. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenues and direct operating expenses was
prepared for the purpose of complying with certain rules and regulations of
the Securities and Exchange Commission and are not intended to be a complete
financial presentation of the Properties Contributed to La/Cal Energy
Partners.
In our opinion, such statement of revenues and direct operating expenses
presents fairly, in all material respects, the revenues and direct operating
expenses of the Properties Contributed to La/Cal Energy Partners as described
in the note to the statement for the period from January 1, 1993 through July
14, 1993, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Shreveport, Louisiana
March 31, 1995
38
<PAGE>
PROPERTIES CONTRIBUTED TO LA/CAL ENERGY PARTNERS
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1993
THROUGH
JULY 14,
1993
-----------
<S> <C>
Revenues--oil and gas sales.................................. $ 946,939
Direct operating expenses--lease operating expenses and
production and property taxes............................... 136,808
---------
Excess of revenues over direct operating expenses............ $ 810,331
=========
</TABLE>
BASIS OF PRESENTATION
The statement of revenues and direct operating expenses ("Statement") was
prepared from historical accounting records related to the properties. The
revenues and direct operating expenses relate to the net working interest in
the properties of their owners who ultimately contributed such properties to
La/Cal Energy Partners on July 15, 1993. Lease operating expenses include
labor, repairs and maintenance, fuel consumed and supplies utilized to operate
and maintain the wells and related equipment and facilities. The Statement
does not include general and administrative expenses, interest or provisions
for depreciation, depletion, amortization and dismantlement costs, or income
taxes.
Complete financial statements, including balance sheets, are not presented
as the properties were not maintained as a separate business unit and assets,
liabilities or indirect operating costs applicable to the properties were not
segregated. It is not practicable to identify all assets, liabilities, or
indirect operating costs applicable to the properties.
39
<PAGE>
GOODRICH PETROLEUM CORPORATION
CONSOLIDATED QUARTERLY INCOME INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1995 QUARTER QUARTER QUARTER QUARTER TOTAL
- ---- ---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Revenues................. $1,133,420 1,047,620 1,549,524 2,443,848 6,174,412
Costs and expenses....... 675,368 568,837 1,295,987 2,496,909 5,037,101
Income (loss) before
extraordinary item and
income taxes............ 458,052 478,783 253,537 (53,061) 1,137,311
Extraordinary item--early
extinguishment of debt.. -- -- 482,906 -- 482,906
Net income (loss)........ 458,052 478,783 (229,369) (53,061) 654,405
Earnings per average
common share............. * * * $ -- *
<CAPTION>
1994
- ----
<S> <C> <C> <C> <C> <C>
Revenues................. $ 881,912 1,115,823 1,637,786 1,377,925 5,013,446
Costs and expenses....... 539,017 631,418 888,803 939,390 2,998,628
Net income............... 342,895 484,405 748,983 438,535 2,014,818
Earnings per average
share common share....... * * * * *
</TABLE>
- --------
* Earnings per share information not presented due to the entity not being a
taxable entity during the applicable periods. See pro forma presentation of
earnings per share.
As noted in Note B to the consolidated financial statements, the Company's
operational financial results reflect the operations solely of La/Cal for the
periods prior to August 15, 1995, whereas such results reflect the operations
of the combined entities for the periods subsequent to August 15, 1995.
Accordingly, the fourth quarter of 1995 amounts for revenues and costs and
expenses reflect the operations of the combined entities whereas such amounts
for the third quarter of 1995 reflect the operations solely of La/Cal from
July 1 through August 14, 1995 plus the operations of the combined entities
from August 15, 1995 through September 30, 1995.
The fourth quarter 1995 cost and expense amount contains 1) a charge for
impairment of oil and gas properties of $157,000, 2) a provision for state
franchise taxes of approximately $60,000 and 3) dry hole costs of
approximately $50,000.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
40
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
*
ITEM 11. EXECUTIVE COMPENSATION.
*
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
*
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
*
*Reference is made to information under the captions "Election of Directors",
"Executive Compensation and Other Information", "Security Ownership of Certain
Beneficial Owners and Management", and "Certain Relationships and Other
Transactions", in the Company's Proxy Statement for the 1996 Annual Meeting of
Stockholders.
41
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
PAGE
-----
<C> <C> <S> <C>
(a) 1. Financial Statements
The following consolidated financial statements of Goodrich
Petroleum Corporation are included in Part II, Item 8:
Independent Auditors' Report................................... 17
Consolidated Balance Sheets--December 31, 1995 and 1994........ 18-19
Consolidated Statements of Operations--Years ended December 31,
1995 and 1994, and period from July 15, 1993 (inception)
through December 31, 1993..................................... 20
Consolidated Statements of Cash Flows--Years ended December 31,
1995, 1994 and period from July 15, 1993 (inception) through
December 31, 1993............................................. 21
Consolidated Statements of Stockholders' Equity--Years ended
December 31, 1995 and 1994 and period from July 15, 1993
(inception) through December 31, 1993......................... 22
Notes to Consolidated Financial Statements--Years ended
December 31, 1995, 1994 and 1993.............................. 23-37
Independent Auditor's Report--Properties Contributed to La/Cal
Energy Partners............................................... 38
Statement of Revenues and Direct Operating Expenses--Period
from January 1, 1993 through July 14, 1993--Properties
Contributed to La/Cal Energy Partners......................... 39
Consolidated Quarterly Income Information (Unaudited).......... 40
2. Financial Statement Schedules
The schedules for which provision is made in Regulation S-X are not
required under the instructions contained therein, are inapplicable,
or the information is included in the footnotes to the financial
statements.
(b) Reports on Form 8-K
During the fourth quarter 1995 the Company filed a Form 8-K dated October
18, 1995 reporting the conversion of 363,851 shares of its Series A
Convertible Preferred Stock into 2,252,496 shares of its common stock.
(c) Exhibits
</TABLE>
<TABLE>
<C> <S>
3. (i) Amended and Restated Certificate of Incorporation of the Company
dated August 15, 1995, and filed with the Secretary of State of the
State of Delaware on August 15, 1995 (Incorporated by reference to
Exhibit 3.1 of the Company's Quarterly Report filed on Form 10-Q for
the three months ended September 30, 1995).
(ii) Bylaws of the Company, as amended and restated (Incorporated by
reference to Exhibit 3.2 of the Company's Quarterly Report filed on
Form 10-Q for the three months ended September 30, 1995).
4.1 Credit Agreement Between Goodrich Petroleum Company of Louisiana and
Compass Bank-Houston dated August 15, 1995 and Amendment thereto dated
December 15, 1995.
4.2 Specimen Common Stock Certificate. (Incorporated by reference to
Exhibit 4.6 of the Company's Registration Statement No. 33-01077 filed
February 20, 1996 on Form S-8).
10.1 Goodrich Petroleum Corporation 1995 Stock Option Plan (Incorporated by
reference to
Exhibit 10.21 to the Company' Registration Statement filed June 13,
1995 on Form S-4 (File
No. 33-58631)).
10.2 Goodrich Petroleum Corporation 1995 Nonemployee Director Stock Option
Plan (Incorporated by reference to Exhibit 10.22 to the Company's
Registration Statement filed June 13, 1995 on Form S-4 (File No. 33-
58631)).
</TABLE>
42
<PAGE>
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<C> <S>
10.3 Patrick Petroleum Company 1993 Stock Option Plan (Incorporated by
reference to Exhibit 10.11 to the Company's Registration Statement
filed June 13, 1995 on Form S-4 (File No. 33-58631)).
10.4 Form of Joint Participation Agreement between the Company and Goodrich
Oil Company (Incorporated by reference to Exhibit 10.18 to the
Company's Registration Statement filed June 13, 1993 on Form S-4 (No.
33-58631)).
10.5 Form of Marketing Agreement between the Company and Natural Gas
Ventures, L.L.C. (Incorporated by reference to Exhibit 10.19 to the
Company's Registration Statement filed June 13, 1993 on Form S-4 (No.
33-58631)).
10.6 Natural Gas Marketing Joint Venture Agreement between Seaber
Corporation and Natural Gas Ventures, L.L.C. (Incorporated by
reference to Exhibit 10.20 to the Company's Registration Statement
filed June 13, 1993 on Form S-4 (No. 33-58631)).
10.7 Form of Consulting Services Agreement between the Company and Henry
Goodrich (Incorporated by reference to Exhibit 10.23 to the Company's
Registration Statement filed June 13, 1993 on Form S-4 (No. 33-
58631)).
10.8 Form of Employment Agreement between the Company and Walter G.
Goodrich (Incorporated by reference to Exhibit 10.24 to the Company's
Registration Statement filed June 13, 1993 on Form S-4 (No. 33-
58631)).
10.9 Consulting Agreement with U.E. Patrick (Incorporated by reference to
Exhibit 10.25 to the Company's Registration Statement filed June 13,
1993 on Form S-4 (No. 33-58631)).
10.10 Consulting Services Agreement between Leo E. Bromberg and Goodrich
Petroleum Corporation (Incorporated by reference to Exhibit 10.1 to
the Company's Quarterly Report filed on Form 10-Q for the three months
ended September 30, 1995.)
21 Subsidiaries of the Registrant
Goodrich Petroleum Company of Louisiana--incorporated in state of
Nevada
Subsidiaries of Goodrich Petroleum Company of Louisiana
Drilling & Workover Company, Inc.--incorporated in state of
Louisiana
LECE, Inc.--incorporated in the state of Texas
National Market Company--incorporated in state of Delaware
Pecos Pipeline & Producing Company--incorporated in the state of
Texas
23 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule, included elsewhere herein
</TABLE>
43
<PAGE>
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.
GOODRICH PETROLEUM CORPORATION
(Registrant)
Date: March 28, 1996 /s/ Walter G. Goodrich
By: _________________________________
Walter G. Goodrich, President,
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:
Date: March 28, 1996
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<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Walter G. Goodrich
- -------------------------------------------
Walter G. Goodrich President, Chief Executive Officer and
Director (Principal Executive Officer)
/s/ Roland L. Frautschi
- -------------------------------------------
Roland L. Frautschi Senior Vice President, Treasurer and Chief
Financial Officer (Principal Financial
Officer)
/s/ Glynn E. Williams, Jr.
- -------------------------------------------
Glynn E. Williams, Jr. Vice President (Principal Accounting
Officer)
</TABLE>
<TABLE>
<S> <C>
/s/ Sheldon Appel
- -------------------------------------------
Sheldon Appel Director
/s/ Jeff H. Benhard
- -------------------------------------------
Jeff H. Benhard Director
/s/ Basil M. Briggs
- -------------------------------------------
Basil M. Briggs Director
/s/ Benjamin F. Edwards, II
- -------------------------------------------
Benjamin F. Edwards, II Director
/s/ Henry Goodrich
- -------------------------------------------
Henry Goodrich Director
/s/ James R. Jenkins
- -------------------------------------------
James R. Jenkins Director
/s/ Wayne G. Kees
- -------------------------------------------
Wayne G. Kees Director
- -------------------------------------------
John C. Napley Director
/s/ Arthur A. Seeligson, III
- -------------------------------------------
Arthur A. Seeligson, III Director
/s/ J. Michael Watts
- -------------------------------------------
J. Michael Watts Director
</TABLE>
44
<PAGE>
CREDIT AGREEMENT
BETWEEN
PATRICK PETROLEUM CORPORATION
OF MICHIGAN
AND
COMPASS BANK - HOUSTON
August 16, 1995
REVOLVING LINE OF CREDIT
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<C> <S> <C>
ARTICLE I DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above...................................... 1
1.2 Additional Defined Terms................................. 1
1.3 Undefined Financial Accounting Terms..................... 15
1.4 References............................................... 15
1.5 Articles and Sections.................................... 15
1.6 Number and Gender........................................ 16
1.7 Incorporation of Exhibits................................ 16
ARTICLE II TERMS OF FACILITY
2.1 Revolving Line of Credit................................. 16
2.2 Use of Loan Proceeds..................................... 17
2.3 Interest................................................. 17
2.4 Repayment of Loans and Interest.......................... 17
2.5 Outstanding Amounts...................................... 18
2.6 Time, Place, and Method of Payments...................... 18
2.7 Borrowing Base Determinations............................ 18
2.8 Mandatory Prepayments.................................... 19
2.9 Voluntary Prepayments and Conversions of Loans........... 19
2.10 Facility Fee............................................. 19
2.11 Engineering Fee.......................................... 19
2.12 Commitment Fee; Reduction of Commitment Amount........... 20
2.13 Loans to Satisfy Obligations of Borrower................. 20
2.14 Security Interest in Accounts; Right of Offset........... 20
2.15 General Provisions Relating to Interest.................. 20
2.16 Yield Protection......................................... 21
2.17 Limitation on Types of Loans............................. 23
2.18 Illegality............................................... 23
2.19 Regulatory Change........................................ 24
2.20 Limitations on Interest Periods.......................... 24
2.21 Letters in Lieu of Transfer Orders....................... 24
2.22 Power of Attorney........................................ 24
ARTICLE III CONDITIONS
3.1 Receipt of Loan Documents and Other Items................ 25
3.2 Each Loan................................................ 28
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ARTICLE IV REPRESENTATIONS AND WARRANTIES
4.1 Due Authorization........................................ 29
4.2 Corporate Existence...................................... 29
4.3 Valid and Binding Obligations............................ 29
4.4 Security Instruments..................................... 30
4.5 Title to Assets.......................................... 30
4.6 Scope and Accuracy of Financial Statements............... 30
4.7 No Material Misstatements................................ 30
4.8 Liabilities, Litigation, and Restrictions................ 30
4.9 Authorizations; Consents................................. 30
4.10 Compliance with Laws..................................... 30
4.11 ERISA.................................................... 31
4.12 Environmental Laws....................................... 31
4.13 Compliance with Federal Reserve Regulations.............. 31
4.14 Investment Company Act Compliance........................ 32
4.15 Public Utility Holding Company Act Compliance............ 32
4.16 Proper Filing of Tax Returns; Payment of Taxes Due....... 32
4.17 Refunds.................................................. 32
4.18 Gas Contracts............................................ 32
4.19 Intellectual Property.................................... 32
4.20 Casualties or Taking of Property......................... 32
4.21 Locations of Borrower.................................... 33
4.22 Subsidiaries............................................. 33
4.23 Existing Indebtedness; No Defenses....................... 33
ARTICLE V AFFIRMATIVE COVENANTS
5.1 Maintenance and Access to Records........................ 33
5.2 Quarterly Financial Statements; Compliance Certificates.. 33
5.3 Annual Financial Statements; Compliance Certificates..... 34
5.4 Oil and Gas Reserve Reports.............................. 34
5.5 Title Opinions; Title Defects............................ 34
5.6 Notices of Certain Events................................ 35
5.7 Letters in Lieu of Transfer Orders; Division Orders...... 36
5.8 Additional Information................................... 36
5.9 Compliance with Laws..................................... 36
5.10 Payment of Assessments and Charges....................... 37
5.11 Maintenance of Corporate Existence and Good Standing..... 37
5.12 Further Assurances....................................... 37
5.13 Fees and Expenses........................................ 37
5.14 Operation of Oil and Gas Properties...................... 38
5.15 Maintenance and Inspection of Properties................. 38
5.16 Maintenance of Insurance................................. 38
5.17 Maintenance of Operating Accounts........................ 38
</TABLE>
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5.18 Indemnification.......................................... 38
5.19 Puts to Penske Corporation............................... 39
ARTICLE VI NEGATIVE COVENANTS
6.1 Indebtedness; Contingent Obligations..................... 40
6.2 Liens.................................................... 40
6.3 Sales of Assets.......................................... 40
6.4 Leasebacks............................................... 41
6.5 Loans; Advances; Investments............................. 41
6.6 Changes in Corporate Structure........................... 41
6.7 Dividends and Distributions.............................. 42
6.8 Transactions with Affiliates............................. 42
6.9 Lines of Business........................................ 42
6.10 ERISA Compliance......................................... 42
6.11 Consolidated Tangible Net Worth.......................... 42
6.12 Debt Service Ratio....................................... 42
ARTICLE VII EVENTS OF DEFAULT
7.1 Enumeration of Events of Default......................... 42
7.2 Remedies................................................. 44
ARTICLE VIII MISCELLANEOUS
8.1 Transfers; Participations................................ 45
8.2 Survival of Representations, Warranties, and Covenants... 46
8.3 Notices and Other Communications......................... 46
8.4 Parties in Interest...................................... 47
8.5 Rights of Third Parties.................................. 47
8.6 No Waiver; Rights Cumulative............................. 47
8.7 Survival Upon Unenforceability........................... 47
8.8 Amendments; Waivers...................................... 47
8.9 Controlling Agreement.................................... 48
8.10 Release by Borrower...................................... 48
8.11 Governing Law............................................ 48
8.12 Jurisdiction and Venue................................... 48
8.13 Waiver of Rights to Jury Trial........................... 48
8.14 Entire Agreement......................................... 48
8.15 Counterparts............................................. 49
</TABLE>
-iii-
<PAGE>
LIST OF EXHIBITS
Exhibit I - Form of Note
Exhibit II - Form of Borrowing Request
Exhibit III - Form of Compliance Certificate
Exhibit IV - Form of Opinion of Counsel
Exhibit V - Disclosures
Exhibit VI - Description of NorthEastern Sale Properties
-iv-
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and entered into this 16th day of August,
1995, by and between PATRICK PETROLEUM CORPORATION OF MICHIGAN, a Michigan
corporation (the "Borrower"), and COMPASS BANK - HOUSTON, a state chartered
Texas banking corporation (the "Lender"), and is joined in for the limited
purpose of making the representations, warranties, and covenants set forth in
Articles IV, V, and VI only by GOODRICH PETROLEUM CORPORATION, a Delaware
corporation ("Goodrich"), and PATRICK PETROLEUM COMPANY, a Delaware corporation
("Patrick of Delaware").
W I T N E S S E T H:
-------------------
In consideration of the mutual covenants and agreements herein contained,
the Borrower and the Lender hereby agree as follows, amending and restating in
its entirety the Credit Agreement dated as of April 27, 1995, by and between the
Borrower and First Union National Bank of North Carolina (the "Existing
Lender"), as heretofore amended, restated, or supplemented (the "Existing Credit
Agreement"):
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. As used in this Credit Agreement, the terms
"Borrower," "Existing Credit Agreement," "Existing Lender," "Goodrich,"
"Lender," and "Patrick of Delaware" shall have the meaning assigned to them
hereinabove.
1.2 Additional Defined Terms. As used in this Credit Agreement, each of
the following terms shall have the meaning assigned thereto in this Section,
unless the context otherwise requires:
"Acquisition Subsidiary" shall mean any Subsidiary of Goodrich formed
for the purpose of acquiring Oil and Gas Properties with Non-Recourse Debt.
"Additional Costs" shall mean costs which the Lender reasonably
determines are attributable to its obligation to make or its making or
maintaining any LIBO Rate Loan, or any reduction in any amount receivable
by the Lender in respect of any such obligation or any LIBO Rate Loan,
resulting from any Regulatory Change which (a) changes the basis of
taxation of any amounts payable to the Lender under this Agreement or the
Note in respect of any LIBO Rate Loan (other than taxes imposed on the
overall net income of the Lender), (b) imposes or modifies any reserve,
special deposit, minimum capital, capital
<PAGE>
rates, or similar requirements relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, the Lender
(including LIBO Rate Loans and Dollar deposits in the London interbank
market in connection with LIBO Rate Loans), or any commitments of the
Lender hereunder, or (c) imposes any other condition affecting this
Agreement or any of such extensions of credit, liabilities, or commitments.
"Affiliate" shall mean any Person directly or indirectly controlling,
or under common control with, the Borrower and includes any Subsidiary of
the Borrower and any "affiliate" of the Borrower within the meaning of Reg.
(S)240.12b-2 of the Securities Exchange Act of 1934, as amended, with
"control," as used in this definition, meaning possession, directly or
indirectly, of the power to direct or cause the direction of management,
policies or action through ownership of voting securities, contract, voting
trust, or membership in management or in the group appointing or electing
management or otherwise through formal or informal arrangements or business
relationships.
"Agreement" shall mean this Credit Agreement, as it may be amended,
supplemented, or restated from time to time.
"ANPC Stock" shall mean 100% of the stock of American National
Petroleum Company, a Nevada corporation, which stock is owned by Patrick of
Delaware.
"Applicable Lending Office" shall mean, for each type of Loan, the
lending office of the Lender (or an affiliate of the Lender) designated for
such type of Loan on the signature pages hereof or such other office of the
Lender (or an affiliate of the Lender) as the Lender may from time to time
specify to the Borrower as the office by which Loans of such type are to be
made and maintained.
"Applicable LIBO Rate" shall mean, for any Interest Period for any
LIBO Rate Loan, an interest rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) determined by the Lender to be equal to the sum
of the LIBO Rate for such Interest Period for such Loan plus the Applicable
Margin for LIBO Rate Loans, but in no event shall such rate exceed the
Highest Lawful Rate.
"Applicable Margin" shall mean, as to each Floating Rate Loan, zero
percent (0%), and as to each LIBO Rate Loan, two percent (2%).
"Assignment" shall mean the Assignment of Notes, Liens, Security
Interests, and Other Rights, in form and substance satisfactory to the
Lender, executed by the Existing Lender, assigning to the Lender the
Existing Notes, the indebtedness evidenced thereby, the Liens securing the
Existing Notes, and the
2
<PAGE>
rights of the Existing Lender under the Existing Loan Documents, and
financing statement changes constituent thereto.
"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 Loan Balance at such
time.
"Borrowing Base" shall mean, at any time, the amount determined by the
Lender in accordance with Section 2.7 and then in effect.
"Borrowing Request" shall mean each written request, in substantially
the form attached hereto as Exhibit II, by the Borrower to the Lender for a
borrowing, conversion, or prepayment pursuant to Sections 2.1 or 2.9, each
of which shall:
(a) be signed by a Responsible Officer of the Borrower;
(b) specify the amount and type of Loan requested, and, as
applicable, the Loan to be converted or prepaid and the date of the
borrowing, conversion, or prepayment (which shall be a Business Day);
(c) when requesting a Floating Rate Loan, be delivered to the
Lender no later than 10:00 a.m., Central Standard or Daylight Savings
Time, as the case may be, on the Business Day of the requested
borrowing, conversion, or prepayment; and
(d) when requesting a LIBO Rate Loan, be delivered to the Lender
no later than 10:00 a.m., Central Standard or Daylight Savings Time,
as the case may be, the second Business Day preceding the requested
borrowing, conversion, or prepayment and designate the Interest Period
requested with respect to such Loan.
"Business Day" shall mean a day other than a day when commercial banks
are authorized or required to close in the State of Texas and, with respect
to all requests, notices, and determinations in connection with, and
payments of principal and interest on, LIBO Rate Loans, which is a day for
trading by and between banks in Dollar deposits in the London interbank
market.
"Cash Flow" shall mean, for any period, (a) Consolidated Net Income
for such period plus (b) depreciation, amortization, depletion, and other
non-cash expenses for such period deducted in the determination of
Consolidated Net Income minus (c) non-cash income for such period included
in the determination of Consolidated Net Income.
3
<PAGE>
"Closing Date" shall mean August 16, 1995.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall mean the Mortgaged Properties, the Marcum Stock,
the Marcum Warrants, the Penske Stock, the rights of Patrick of Delaware
under the Penske Option Agreement, the PPCM Stock, the ANPC Stock, and any
other Property now or at any time used or intended as security for the
payment or performance of all or any portion of the Obligations.
"Commitment" shall mean the obligation of the Lender, subject to
applicable provisions of this Agreement, to make Loans to or for the
benefit of the Borrower pursuant to Sections 2.1.
"Commitment Amount" shall mean $22,000,000.
"Commitment Period" shall mean the period from and including the
Closing Date to but not including the Commitment Termination Date.
"Commitment Termination Date" shall mean June 1, 1997.
"Commonly Controlled Entity" shall mean any Person which is under
common control with the Borrower or any Guarantor within the meaning of
Section 4001 of ERISA.
"Compliance Certificate" shall mean each certificate, substantially in
the form attached hereto as Exhibit III, executed by a Responsible Officer
of the Borrower and the Guarantors and furnished to the Lender from time to
time in accordance with the terms hereof.
"Consolidated Net Income" shall mean, for any period, the net income
of Goodrich and its Subsidiaries, on a consolidated basis, for such period,
determined in accordance with GAAP and before payment of dividends on
preferred stock.
"Consolidated Tangible Net Worth" shall mean (a) total assets, as
would, in accordance with GAAP, be reflected on a consolidated balance
sheet of Goodrich and its Subsidiaries, exclusive of Intellectual Property,
experimental or organization expenses, franchises, licenses, permits, and
other intangible assets, treasury stock, unamortized underwriters' debt
discount and expenses, and goodwill and the amount of advances or capital
contributions to Acquisition Subsidiaries included therein minus (b) total
liabilities, as would, in accordance with GAAP, be reflected on a
consolidated balance sheet of Goodrich and its Subsidiaries.
4
<PAGE>
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends, or other obligations of any other Person (for purposes
of this definition, a "primary obligation") in any manner, whether directly
or indirectly, including, without limitation, any obligation of such
Person, regardless of whether such obligation is contingent, (a) to
purchase any primary obligation or any Property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any primary obligation, or (ii) to maintain working
or equity capital of any other Person in respect of any primary obligation,
or otherwise to maintain the net worth or solvency of any other Person, (c)
to purchase Property, securities or services primarily for the purpose of
assuring the owner of any primary obligation of the ability of the Person
primarily liable for such primary obligation to make payment thereof, or
(d) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof, with the amount of any
Contingent Obligation being deemed to be equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined
by such Person in good faith.
"Debt Service" shall mean, for any period and with respect to
Indebtedness of Goodrich on a consolidated basis, the sum of (a) all
principal payments made during such period other than with respect to the
Obligations plus (b) 1/16 of the Loan Balance as of the end of such period.
"Default" shall mean any event or occurrence which with the lapse of
time or the giving of notice or both would become an Event of Default.
"Default Rate" shall mean a per annum interest rate equal to the Index
Rate from time to time in effect plus five percent (5%), but in no event
exceeding the Highest Lawful Rate.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Environmental Complaint" shall mean any written or oral complaint,
order, directive, claim, citation, notice of environmental report or
investigation, or other notice by any Governmental Authority or any other
Person with respect to (a) air emissions, (b) spills, releases, or
discharges to soils, any improvements located thereon, surface water,
groundwater, or the sewer, septic, waste treatment, storage, or disposal
systems servicing any Property of any Related Party, (c) solid or liquid
waste disposal, (d) the use, generation, storage, transportation, or
disposal of any Hazardous Substance, or (e) other environmental, health, or
safety matters affecting any Property of any Related Party or the business
conducted thereon.
5
<PAGE>
"Environmental Laws" shall mean (a) the following federal laws as they
may be cited, referenced, and amended from time to time: the Clean Air
Act, the Clean Water Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Endangered Species Act, the Hazardous
Materials Transportation Act of 1986, the Occupational Safety and Health
Act, the Oil Pollution Act of 1990, the Resource Conservation and Recovery
Act of 1976, the Safe Drinking Water Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (b) any and all
equivalent environmental statutes of any state, as they may be cited,
referenced and amended from time to time; (c) any rules or regulations
promulgated under or adopted pursuant to the above federal and state laws;
and (d) any other equivalent federal, state, or local statute or any
requirement, rule, regulation, code, ordinance, or order adopted pursuant
thereto, including, without limitation, those relating to the generation,
transportation, treatment, storage, recycling, disposal, handling, or
release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations thereunder and
interpretations thereof.
"Event of Default" shall mean any of the events specified in
Section 7.1.
"Existing Notes" shall mean the Notes, as such term is defined in the
Existing Credit Agreement, in existence on the Closing Date immediately
prior to the Assignment.
"Existing Loan Documents" shall mean the Loan Documents, as such term
is defined in the Existing Credit Agreement, in existence on the Closing
Date immediately prior to the Assignment.
"Existing Security Instruments" shall mean the Security Instruments,
as such term is defined in the Existing Credit Agreement.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers on
such day, as published by the Federal Reserve Bank of Dallas, Texas, on the
Business Day next succeeding such day, provided that (a) if the day for
which such rate is to be determined is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day,
and (b) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate charged to the Lender on such
day on such transactions as determined by the Lender.
6
<PAGE>
"Financial Statements" shall mean statements of the financial
condition as at the point in time and for the period indicated and
consisting of at least a balance sheet and related statements of
operations, common stock and other stockholders' equity, and cash flows
and, when required by applicable provisions of this Agreement to be
audited, accompanied by the unqualified certification of a nationally-
recognized firm of independent certified public accountants or other
independent certified public accountants acceptable to the Lender and
footnotes to any of the foregoing, all of which shall be prepared in
accordance with GAAP consistently applied and in comparative form with
respect to the corresponding period of the preceding fiscal period.
"Floating Rate" shall mean an interest rate per annum equal to the
greater of (a) the Index Rate from time to time in effect plus the
Applicable Margin for Floating Rate Loans or (b) the Federal Funds Rate
from time to time in effect plus one-half of one percent (1/2%), but in no
event exceeding the Highest Lawful Rate.
"Floating Rate Loan" shall mean any Loan and any portion of the Loan
Balance which the Borrower has requested, in the initial Borrowing Request
for such Loan or a subsequent Borrowing Request for such portion of the
Loan Balance, bear interest at the Floating Rate, or which pursuant to the
terms hereof is otherwise required to bear interest at the Floating Rate.
"GAAP" shall mean generally accepted accounting principles established
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants and in effect in the United States from time
to time.
"Governmental Authority" shall mean any nation, country, commonwealth,
territory, government, state, county, parish, municipality, or other
political subdivision and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
"Guaranties" shall mean, collectively, the Guaranty of each Guarantor
dated the Closing Date, in each case guaranteeing the payment and
performance of the Obligations as provided therein, as each may be
ratified, amended, restated, or supplemented from time to time.
"Guarantors" shall mean, collectively, Goodrich and Patrick of
Delaware.
"Hazardous Substances" shall mean flammables, explosives, radioactive
materials, hazardous wastes, asbestos, or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or related materials,
petroleum, petroleum products, associated oil or natural gas exploration,
production, and development wastes, or any substances defined as "hazardous
substances," "hazardous materials," "hazardous wastes," or "toxic
substances"
7
<PAGE>
under the Comprehensive Environmental Response, Compensation and Liability
Act, as amended, the Superfund Amendments and Reauthorization Act, as
amended, the Hazardous Materials Transportation Act, as amended, the
Resource Conservation and Recovery Act, as amended, the Toxic Substances
Control Act, as amended, or any other Requirement of Law.
"Hedging Agreement" shall mean (a) any interest rate or currency swap,
rate cap, rate floor, rate collar, forward agreement, or other exchange or
rate protection agreement or any option with respect to any such
transaction and (b) any swap agreement, cap, floor, collar, exchange
transaction, forward agreement, or other exchange or protection agreement
relating to hydrocarbons or any option with respect to any such
transaction.
"Highest Lawful Rate" shall mean the maximum non-usurious interest
rate, if any (or, if the context so requires, an amount calculated at such
rate), that at any time or from time to time may be contracted for, taken,
reserved, charged, or received under applicable laws of the State of Texas
or the United States of America, whichever authorizes the greater rate, as
such laws are presently in effect or, to the extent allowed by applicable
law, as such laws may hereafter be in effect and which allow a higher
maximum non-usurious interest rate than such laws now allow.
"Indebtedness" shall mean, as to any Person, without duplication, (a)
all liabilities (excluding reserves for deferred income taxes, deferred
compensation liabilities, and other deferred liabilities and credits) which
in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet, (b) all obligations of
such Person evidenced by bonds, debentures, promissory notes, or similar
evidences of indebtedness, (c) all other indebtedness of such Person for
borrowed money and capitalized leases, and (d) all obligations of others,
to the extent any such obligation is secured by a Lien on the assets of
such Person (whether or not such Person has assumed or become liable for
the obligation secured by such Lien).
"Index Rate" shall mean, on any day, the prime rate as published in
The Wall Street Journal's "Money Rates" table for such day. If multiple
prime rates are quoted in such table, then the highest prime rate quoted
therein shall be the Index Rate. In the event that a prime rate is not
published in The Wall Street Journal's "Money Rates" table, the Lender will
choose a substitute Index Rate, for purposes of calculating the Floating
Rate, which is based on comparable information, until such time as a prime
rate is published in The Wall Street Journal's "Money Rates" tables.
"Insolvency Proceeding" shall mean application (whether voluntary or
instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian, or liquidator of any Person or
of all or a
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substantial part of the Property of such Person, or the filing of a
petition (whether voluntary or instituted by another Person) commencing a
case under Title 11 of the United States Code, seeking liquidation,
reorganization, or rearrangement or taking advantage of any bankruptcy,
insolvency, debtor's relief, or other similar law of the United States, the
State of Texas, or any other jurisdiction.
"Insolvent" or "Insolvency" shall mean, with respect to any
Multiemployer Plan, that such Plan is insolvent within the meaning of such
term as used in Section 4245 of ERISA.
"Intellectual Property" shall mean patents, patent applications,
trademarks, tradenames, copyrights, technology, know-how, and processes.
"Interest Period" shall mean, subject to the limitations set forth in
Section 2.20, with respect to any LIBO Rate Loan, a period commencing on
the date such Loan is made or converted from a Loan of another type
pursuant to this Agreement or the last day of the next preceding Interest
Period with respect to such Loan and ending on the numerically
corresponding day in the calendar month that is one, two, three, or,
subject to availability, six months thereafter, as the Borrower may request
in the Borrowing Request for such Loan.
"Investment" in any Person shall mean any stock, bond, note, or other
evidence of Indebtedness, or any other security of, or investment or
partnership interest in, such Person.
"La/Cal" shall mean La/Cal Energy Partners, a Louisiana general
partnership.
"LIBO Rate" shall mean, with respect to any Interest Period for any
LIBO Rate Loan, the rate for deposits in Dollars for a period equal to such
Interest Period which appears on the Telerate Page 3750 at approximately
11:00 a.m., London time, two Business Days prior to the commencement of
such Interest Period. If, for any reason, such rate is not available, then
"LIBO Rate" shall mean, with respect to any Interest Period, the rate per
annum determined by the Lender to be the arithmetic average (rounded
upwards, if necessary, to the nearest 1/16th of 1%) of the rate per annum
as quoted to Lender by leading reference banks at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period for settlement in immediately available funds by leading reference
banks in the London interbank market for a period equal to such Interest
Period and in the approximate amount of such LIBO Rate Loan.
"LIBO Rate Loan" shall mean any Loan and any portion of the Loan
Balance which the Borrower has requested, in the initial Borrowing Request
for such Loan or a subsequent Borrowing Request for such portion of the
Loan
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Balance, bear interest at the Applicable LIBO Rate and which is permitted
by the terms hereof to bear interest at the Applicable LIBO Rate.
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of such Property, whether
such interest is based on common law, statute, or contract, and including,
but not limited to, the lien or security interest arising from a mortgage,
ship mortgage, encumbrance, pledge, security agreement, conditional sale or
trust receipt, or a lease, consignment, or bailment for security purposes
(other than true leases or true consignments), liens of mechanics,
materialmen, and artisans, maritime liens and reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting
Property which secure an obligation owed to, or a claim by, a Person other
than the owner of such Property (for the purpose of this Agreement, any
Person shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement, financing lease,
or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes), and the
filing or recording of any financing statement or other security instrument
in any public office.
"Limitation Period" shall mean any period while any amount remains
owing on the Note and interest on such amount, calculated at the applicable
interest rate, plus any fees or other sums payable under any Loan Document
and deemed to be interest under applicable law, would exceed the amount of
interest which would accrue at the Highest Lawful Rate.
"Loan" shall mean any loan made by the Lender to or for the benefit of
the Borrower pursuant to this Agreement.
"Loan Balance" shall mean, at any time, the outstanding principal
balance of the Note at such time.
"Loan Documents" shall mean this Agreement, the Note, the Guaranties,
the Security Instruments, and all other documents and instruments now or
hereafter delivered pursuant to the terms of or in connection with this
Agreement, the Note, the Guaranties, or the Security Instruments, 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.
"Marcum" shall mean Marcum Natural Gas Services, Inc., a Delaware
corporation.
"Marcum Stock" shall mean 675,200 shares of common stock of Marcum
owned by the Borrower.
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"Marcum Warrants" shall mean warrants for the purchase of 1,260,000
shares of common stock of Marcum pursuant to the Second Warrant Agency
Agreement dated as of January 13, 1993, between Marcum and American
Securities Transfer, Inc., as amended, restated, or supplemented from time
to time.
"Material Adverse Effect" shall mean (a) any material adverse effect
on the business, operations, properties, condition (financial or
otherwise), or prospects of the Borrower or any Guarantor, (b) any adverse
effect upon the business operations, properties, condition (financial or
otherwise), or prospects of the Borrower or any Guarantor which increases
the risk that any of the Obligations will not be repaid as and when due, or
(c) any adverse effect upon the Collateral.
"Merger Transactions" shall mean the consummation of the transactions
contemplated by the Agreement and Plan of Merger dated as of March 10,
1995, among Patrick of Delaware, La/Cal, Goodrich, and Goodrich
Acquisition, Inc., a Delaware corporation, substantially upon the terms set
forth in such agreement as provided to the Lender prior to the Closing
Date.
"Mortgaged Properties" shall mean all Oil and Gas Properties of the
Borrower subject to a perfected first-priority Lien in favor of the Lender,
subject only to Permitted Liens, as security for the Obligations.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"Non-Recourse Debt" shall mean Indebtedness of any Acquisition
Subsidiary which (a) is incurred to finance the acquisition by such
Acquisition Subsidiary of Oil and Gas Properties, (b) is secured by such
Oil and Gas Properties, and (c) has no recourse to such Acquisition
Subsidiary or any other Person or to any Property of such Acquisition
Subsidiary or any other Person other than such Oil and Gas Properties.
"NorthEastern Sale Properties" shall mean the Properties sold or to be
sold by the Borrower to NorthEastern Energy Corporation and described on
Exhibit VI.
"Note" shall mean the promissory note of the Borrower in the form
attached hereto as Exhibit I, together with all renewals, extensions for
any period, increases, and rearrangements thereof.
"Obligations" shall mean, without duplication, (a) all Indebtedness
evidenced by the Note, (b) the obligation of the Borrower for the payment
of fees and expenses pursuant to the Loan Documents, (c) the obligations of
the
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Guarantors under the Guaranties, and (d) all other obligations and
liabilities of the Borrower or the Guarantors to the Lender, now existing
or hereafter incurred, under, arising out of or in connection with any Loan
Document, and to the extent that any of the foregoing 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.
"Oil and Gas Properties" shall mean fee, leasehold, or other interests
in or under mineral estates or oil, gas, and other liquid or gaseous
hydrocarbon leases with respect to Properties situated in the United States
or offshore from any State of the United States, including, without
limitation, overriding royalty and royalty interests, leasehold estate
interests, net profits interests, production payment interests, and mineral
fee interests, together with contracts executed in connection therewith and
all tenements, hereditaments, appurtenances, and Properties appertaining,
belonging, affixed, or incidental thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any entity succeeding to any
or all of its functions under ERISA.
"Penske Call" shall mean the right of Penske Corporation to call and
accelerate any or all outstanding put options of the Borrower and Patrick
of Delaware under the Penske Option Agreement.
"Penske Option Agreement" shall mean the Stock Purchase and Put Option
Agreement dated March 30, 1994, by and between Patrick of Delaware, the
Borrower, Penske Corporation, and Penske Transportation, Inc.
"Penske Stock" shall mean 151,584 shares of common stock of Penske
Corporation owned by Patrick of Delaware.
"Permitted Liens" shall mean (a) Liens for taxes, assessments, or
other governmental charges or levies not yet due or which (if foreclosure,
distraint, sale, or other similar proceedings shall not have been
initiated) are being contested in good faith by appropriate proceedings,
and such reserve as may be required by GAAP shall have been made therefor,
(b) Liens in connection with workers' compensation, unemployment insurance
or other social security (other than Liens created by Section 4068 of
ERISA), old-age pension, or public liability obligations which are not yet
due or which are being contested in good faith by appropriate proceedings,
if such reserve as may be required by GAAP shall have been made therefor,
(c) Liens in favor of vendors, carriers, warehousemen, repairmen,
mechanics, workmen, materialmen, construction, or similar Liens arising by
operation of law in the ordinary course of business in respect of
obligations which are not yet due or which are being contested in good
faith by appropriate proceedings, if such reserve as may be required by
GAAP shall have
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been made therefor, (d) Liens in favor of operators and non-operators under
joint operating agreements or similar contractual arrangements arising in
the ordinary course of the business to secure amounts owing, which amounts
are not yet due or are being contested in good faith by appropriate
proceedings, if such reserve as may be required by GAAP shall have been
made therefor, (e) Liens under production sales agreements, division
orders, operating agreements, and other agreements customary in the oil and
gas business for processing, producing, and selling hydrocarbons securing
obligations not constituting Indebtedness and provided that such Liens do
not secure obligations to deliver hydrocarbons at some future date without
receiving full payment therefor within 90 days of delivery, (f) easements,
rights of way, restrictions, and other similar encumbrances, and minor
defects in the chain of title which are customarily accepted in the oil and
gas financing industry, none of which interfere with the ordinary conduct
of the business of the owner of the relevant Property or materially detract
from the value or use of the Property to which they apply, (g) Liens
securing Indebtedness permitted pursuant to Section 6.1(c) incurred for the
purchase of Property acquired in the ordinary course of business provided
that such Liens cover only the acquired Property, (h) Liens on Oil and Gas
Properties of any Acquisition Subsidiary securing Non-Recourse Debt, and
(i) Liens assigned by the Existing Lender to the Lender pursuant to the
Assignment, other Liens in favor of the Lender, and other Liens expressly
permitted under the Security Instruments.
"Person" shall mean an individual, corporation, partnership, trust,
unincorporated organization, government, any agency or political
subdivision of any government, or any other form of entity.
"Plan" shall mean, at any time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower, any Guarantor, or
any Commonly Controlled Entity is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"PPCM Stock" shall mean 100% of the stock of the Borrower, which stock
is owned by Patrick of Delaware.
"Principal Office" shall mean the principal office of the Lender in
Houston, Texas, presently located at 24 Greenway Plaza, Suite 1401,
Houston, Texas 77046.
"Prohibited Transaction" shall have the meaning assigned to such term
in Section 4975 of the Code.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
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"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System, as the same may be amended or supplemented from
time to time.
"Regulatory Change" shall mean the passage, adoption, institution, or
modification of any federal, state, local, or foreign Requirement of Law
(including, without limitation, Regulation D), or any interpretation,
directive, or request (whether or not having the force of law) of any
Governmental Authority or monetary authority charged with the enforcement,
interpretation, or administration thereof, occurring after the Closing Date
and applying to a class of banks including the Lender or its Applicable
Lending Office.
"Related Party" shall mean any of the Borrower, the Guarantors, or the
Subsidiaries of Goodrich. "Related Parties" shall mean the Borrower, the
Guarantors, and all Subsidiaries of Goodrich.
"Release of Hazardous Substances" shall mean any emission, spill,
release, disposal, or discharge, except in accordance with a valid permit,
license, certificate, or approval of the relevant Governmental Authority,
of any Hazardous Substance into or upon (a) the air, (b) soils or any
improvements located thereon, (c) surface water or groundwater, or (d) the
sewer or septic system, or the waste treatment, storage, or disposal system
servicing any Property of the Borrower or any Guarantor.
"Reorganization" shall mean, with respect to any Multiemployer Plan,
that such Plan is in reorganization within the meaning of such term in
Section 4241 of ERISA.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty-day notice
period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC
Reg. (S)2615.
"Requirement of Law" shall mean, as to any Person, any applicable law,
treaty, ordinance, order, judgment, rule, decree, regulation, or
determination of an arbitrator, court, or other Governmental Authority,
including, without limitation, rules, regulations, orders, and requirements
for permits, licenses, registrations, approvals, or authorizations, in each
case as such now exist or may be hereafter amended and are applicable to or
binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
"Reserve Report" shall mean each report delivered to the Lender
pursuant to Section 5.4.
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"Responsible Officer" shall mean, as to any Person, its President or
chief financial officer.
"RIMCO Debt" shall mean the Indebtedness in an amount not exceeding
$9,204,064.87 of Goodrich, as successor to the interests of La/Cal pursuant
to the Merger Transactions, to RIMCO Partners, L.P. and RIMCO Partners,
L.P. IV.
"Security Instruments" shall mean the Existing Security Instruments,
the security instruments executed and delivered in satisfaction of the
condition set forth in Section 3.1(h), and all other documents and
instruments at any time executed as security for all or any portion of the
Obligations, as such instruments may be amended, restated, or supplemented
from time to time.
"Single Employer Plan" shall mean any Plan which is covered by Title
IV of ERISA, but which is not a Multiemployer Plan.
"Subsidiary" shall mean, as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation are at the
time owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
"Superfund Site" shall mean those sites listed on the Environmental
Protection Agency National Priority List and eligible for remedial action
or any comparable state registries or list in any state of the United
States.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the State of Texas.
1.3 Undefined Financial Accounting Terms. Undefined financial
accounting terms used in this Agreement shall be defined according to GAAP at
the time in effect.
1.4 References. References in this Agreement to Exhibit, Article, or
Section numbers shall be to Exhibits, Articles, or Sections of this Agreement,
unless expressly stated to the contrary. References in this Agreement to
"hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof,"
"hereunder" and words of similar import shall be to this Agreement in its
entirety and not only to the particular Exhibit, Article, or Section in which
such reference appears.
1.5 Articles and Sections. This Agreement, for convenience only, has
been divided into Articles and Sections; and it is understood that the rights
and other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard
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to the aforesaid division into Articles and Sections and without regard to
headings prefixed to such Articles or Sections.
1.6 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. Definitions
of terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. 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.
1.7 Incorporation of Exhibits. The Exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
ARTICLE II
TERMS OF FACILITY
2.1 Revolving Line of Credit. (a) Upon the terms and conditions and
relying on the representations and warranties contained in this Agreement, the
Lender agrees, during the Commitment Period, to make Loans to or for the benefit
of the Borrower. Loans shall be made in such amounts as the Borrower may
request; provided, however, no Loan shall be made in an amount exceeding the
then existing Available Commitment, and the Loan Balance shall not exceed at any
time the lesser of the Commitment Amount or the Borrowing Base then in effect.
Loans shall be made in immediately available funds at the Applicable Lending
Office or the Principal Office from time to time on any Business Day designated
by the Borrower in its Borrowing Request.
(b) Subject to the terms of this Agreement, during the Commitment
Period, the Borrower 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, conversion, and prepayment of principal of
Loans shall be in an amount at least equal to $250,000. 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 $1,000,000; 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 Applicable Lending
Office or the Principal Office and shall be evidenced by the Note.
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2.2 Use of Loan Proceeds. (a) As of the Closing Date, indebtedness
in the amount of $10,667,292.64 is outstanding under the Existing Credit
Agreement. The Lender shall use proceeds of the initial Loan to purchase such
indebtedness. Such indebtedness shall be renewed, extended, and rearranged
pursuant to the terms of this Agreement, the Note, and the relevant Borrowing
Request and shall for all purposes be deemed a borrowing hereunder. Proceeds of
all subsequent Loans shall be used solely for a loan by the Borrower to
Goodrich, proceeds of which shall be used to repay the RIMCO Debt, for the
acquisition and development by the Borrower of Oil and Gas Properties, and for
general corporate purposes of the Borrower and the Guarantors.
2.3 Interest. Subject to the terms of this Agreement (including,
without limitation, Section 2.15), interest on the Loans shall accrue and be
payable at a rate per annum equal to the Floating Rate for each Floating Rate
Loan and the Applicable LIBO Rate for each LIBO Rate Loan. Interest on all
Loans shall be computed on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day) during the period
for which payable. Notwithstanding the foregoing, interest on past-due
principal and, to the extent permitted by applicable law, past-due interest,
shall accrue at the Default Rate, computed on the basis of a year of 360 and
actual days elapsed (including the first day but excluding the last day) during
the period for which payable, and shall be payable upon demand at any time as to
all or any portion of such interest. In the event that the Borrower fails to
select the duration of any Interest Period for any LIBO Rate Loan within the
time period and otherwise as provided herein, such Loan (if outstanding as a
LIBO Rate Loan) will be automatically converted into a Floating Rate Loan on the
last day of the then current Interest Period for such Loan or (if outstanding as
a Floating Rate Loan) will remain as, or (if not then outstanding) will be made
as, a Floating Rate Loan. Interest provided for herein shall be calculated on
unpaid sums actually advanced and outstanding pursuant to the terms of this
Agreement and only for the period from the date or dates of such advances until
repayment.
2.4 Repayment of Loans and Interest. (a) Accrued and unpaid interest
on each outstanding Floating Rate Loan shall be due and payable monthly
commencing on the first day of September, 1995, and continuing on the first day
of each calendar month thereafter while any Floating Rate Loan remains
outstanding, the payment in each instance to be the amount of interest which has
accrued and remains unpaid in respect of the relevant Loan. Accrued and unpaid
interest on each outstanding LIBO Rate Loan shall be due and payable on the last
day of the Interest Period for such LIBO Rate Loan and, in the case of any
Interest Period in excess of three months, on the day of the third calendar
month following the commencement of such Interest Period corresponding to the
day of the calendar month on which such Interest Period commenced, the payment
in each instance to be the amount of interest which has accrued and remains
unpaid in respect of the relevant Loan. The Loan Balance, together with all
accrued and unpaid interest thereon, shall be due and payable on the Commitment
Termination Date.
(b) At the time of making each payment hereunder or under the Note,
the Borrower shall specify to the Lender the Loans or other amounts payable by
the Borrower hereunder to which such payment is to be applied. In the event the
Borrower fails to so specify,
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or if an Event of Default has occurred and is continuing, the Lender may apply
such payment as it may elect in its sole discretion.
2.5 Outstanding Amounts. The Lender is irrevocably authorized by the
Borrower to attach to and make a part of the Note a ledger reflecting amounts
advanced to or paid by the Borrower and to attach to and make a part of the Note
a continuation of any such schedule of advances and payments, as and when
required. All Loans and all payments and prepayments made on account of the
principal thereof and all conversions of Loans shall be reflected by an
appropriate notation on such ledger or any continuation thereof attached to the
Note; provided, however, the failure of the Lender to do so shall not relieve
the Borrower of its liability hereunder or under the Note or subject the
Borrower to additional liability hereunder or under the Note. The outstanding
principal balance of the Note reflected by the notations by the Lender on its
records or ledger sheets affixed to the Note shall be deemed rebuttably
presumptive evidence of the principal amount owing on the Note. The liability
for payment of principal and interest evidenced by the Note shall be limited to
principal amounts actually advanced and outstanding pursuant to this Agreement
and interest on such amounts calculated in accordance with this Agreement.
2.6 Time, Place, and Method of Payments. All payments required
pursuant to this Agreement, the Note, or any other Loan Document shall be made
in lawful money of the United States of America and in immediately available
funds, shall be deemed received by the Lender on the next Business Day following
receipt if such receipt is after 2:00 p.m., Houston, Texas, time on any Business
Day, and shall be made at the Principal Office. Except as provided to the
contrary herein, if the due date of any payment under any Loan Document would
otherwise fall on a day which is not a Business Day, such date shall be extended
to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
2.7 Borrowing Base Determinations. (a) The Borrowing Base as of July
24, 1995, is acknowledged by the Borrower and the Lender to be $22,000,000.
Commencing on September 1, 1995, and continuing thereafter on the first day of
each calendar month until the sale of the remaining Penske Stock pursuant to the
Penske Call, the amount of the Borrowing Base shall be reduced by, prior to the
sale of the NorthEastern Sale Properties, $275,000, or, after the sale of the
NorthEastern Sale Properties, $250,000. Upon the sale of the remaining Penske
Stock pursuant to the Penske Call, the Borrowing Base shall be reduced to
$15,000,000; and upon the sale of the NorthEastern Sale Properties if prior to
the sale of the remaining Penske Stock pursuant to the Penske Call, the
Borrowing Base shall be reduced by $1,000,000.
(b) The Borrowing Base shall be redetermined each June 1 and December
1 during the Commitment Period on the basis of information supplied by the
Borrower in compliance with the provisions of this Agreement, including, without
limitation, Reserve Reports, and all other information available to the Lender.
In addition, the Lender shall, in the normal course of business following a
request of the Borrower, redetermine the Borrowing Base; provided, however, the
Lender shall not be obligated to respond to more than two such requests during
any calendar year, and in no event shall the Lender be required to redetermine
the Borrowing
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Base more than once in any three-month period, including, without limitation,
each scheduled semi-annual redetermination provided for above. Notwithstanding
the foregoing, the Lender may at its discretion redetermine the Borrowing Base
at any time and from time to time.
(c) Upon each determination of the Borrowing Base by the Lender, the
Lender shall notify the Borrower orally (confirming such notice promptly in
writing) of such determination, and the Borrowing Base so communicated to the
Borrower shall become effective upon such oral notification and shall remain in
effect until the next subsequent determination of the Borrowing Base.
(d) The Borrowing Base shall represent the determination by the
Lender, in accordance with the applicable definitions and provisions herein
contained and its customary lending practices for loans of this nature, of the
value, for loan purposes, of the Mortgaged Properties, subject, in the case of
any increase in the Borrowing Base, to the approval of the Borrower and the
credit approval process of the Lender. Furthermore, the Borrower acknowledges
that the determination of the Borrowing Base contains an equity cushion (market
value in excess of loan value), which is acknowledged by the Borrower to be
essential for the adequate protection of the Lender.
2.8 Mandatory Prepayments. If at any time the Loan Balance exceeds
the lesser of the Commitment Amount or the Borrowing Base then in effect, the
Borrower shall, within 30 days of notice from the Lender of such occurrence, (a)
prepay, or make arrangements acceptable to the Lender for the prepayment of, the
amount of such excess for application on the Loan Balance, (b) provide
additional collateral, of character and value satisfactory to the Lender in its
sole discretion, to secure the Obligations by the execution and delivery to the
Lender of security instruments in form and substance satisfactory to the Lender,
or (c) effect any combination of the alternatives described in clauses (a) and
(b) of this Section and acceptable to the Lender in its sole discretion.
2.9 Voluntary Prepayments and Conversions of Loans. Subject to
applicable provisions of this Agreement, the Borrower shall have the right at
any time or from time to time to prepay Loans and to convert Loans of one type
or with one Interest Period into Loans of another type or with a different
Interest Period; provided, however, that (a) the Borrower shall give the Lender
notice of each such prepayment or conversion of all or any portion of a LIBO
Rate Loan no less than two Business Days prior to prepayment or conversion, (b)
any LIBO Rate Loan may be prepaid or converted only on the last day of an
Interest Period for such Loan, (c) the Borrower shall pay all accrued and unpaid
interest on the amounts prepaid or converted, and (d) no such prepayment or
conversion shall serve to postpone the repayment when due of any Obligation.
2.10 Facility Fee. In addition to other amounts payable hereunder,
the Borrower shall pay to the Lender on the Closing Date a facility fee in the
amount of $25,000.
2.11 Engineering Fee. To compensate the Lender for the costs of
evaluating the Mortgaged Properties and reviewing the Reserve Reports, the
Borrower shall pay to the
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Lender on the date of each regularly scheduled semi-annual redetermination of
the Borrowing Base and each redetermination of the Borrowing Base made at the
request of the Borrower, an engineering fee in the amount of $7500.
2.12 Commitment Fee; Reduction of Commitment Amount. To compensate
the Lender for maintaining funds available, the Borrower shall pay to the Lender
a commitment fee in the amount of one-half of one percent (1/2%) 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
Available Commitment. Such accrued commitment fees shall be due and payable on
the first day of October, 1995, the first day of each third calendar month
thereafter during the Commitment Period, and on the Commitment Termination Date.
The Borrower may, with 30 days' written notice to the Lender, reduce the
Commitment Amount, and subsequent thereto, provided that no Default or Event of
Default has occurred and is continuing, with five days' written notice to the
Lender and the payment of all Commitment Fees which would have accrued but for
such previous reduction, increase the Commitment Amount to its amount before
such reduction.
2.13 Loans to Satisfy Obligations of Borrower. The Lender may, but
shall not be obligated to, make Loans for the benefit of the Borrower and apply
proceeds thereof to the satisfaction of any condition, warranty, representation,
or covenant of the Borrower or any Guarantor contained in this Agreement or any
other Loan Document. Such Loans shall be evidenced by the Note, shall bear
interest at the Default Rate, and shall be payable upon demand.
2.14 Security Interest in Accounts; Right of Offset. As security for
the payment and performance of the Obligations, the Borrower hereby transfers,
assigns, and pledges to the Lender and grants to the Lender a security interest
in all funds of the Borrower now or hereafter or from time to time on deposit
with the Lender, with such interest of the Lender to be retransferred,
reassigned, and/or released by the Lender, as the case may be, at the expense of
the Borrower upon payment in full and complete performance of all Obligations.
All remedies as secured party or assignee of such funds shall be exercisable by
the Lender upon the occurrence of any Event of Default, regardless of whether
the exercise of any such remedy would result in any penalty or loss of interest
or profit with respect to any withdrawal of funds deposited in a time deposit
account prior to the maturity thereof. Furthermore, the Borrower hereby grants
to the Lender the right, exercisable at such time as any Obligation shall
mature, whether by acceleration of maturity or otherwise, of offset or banker's
lien against all funds of the Borrower now or hereafter or from time to time on
deposit with the Lender, regardless of whether the exercise of any such remedy
would result in any penalty or loss of interest or profit with respect to any
withdrawal of funds deposited in a time deposit account prior to the maturity
thereof.
2.15 General Provisions Relating to Interest. (a) It is the intention
of the parties hereto to comply strictly with all applicable usury laws. In
this connection, there shall never be collected, charged, or received on the
sums advanced hereunder interest in excess of that which would accrue at the
Highest Lawful Rate.
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(b) Notwithstanding anything herein or in the Note to the contrary,
during any Limitation Period, the interest rate to be charged on amounts
evidenced by the Note shall be the Highest Lawful Rate, and the obligation, if
any, of the Borrower for the payment of fees or other charges deemed to be
interest under applicable law shall be suspended. During any period of time
following a Limitation Period, to the extent permitted by applicable laws of the
State of Texas or the United States of America, the interest rate to be charged
hereunder shall remain at the Highest Lawful Rate until such time as there has
been paid to the Lender (i) the amount of interest in excess of that accruing at
the Highest Lawful Rate that the Lender would have received during the
Limitation Period had the interest rate remained at the otherwise applicable
rate, and (ii) all interest and fees otherwise payable to the Lender but for the
effect of such Limitation Period.
(c) If, under any circumstances, the aggregate amounts paid on the
Note or under this Agreement or any other Loan Document include amounts which by
law are deemed interest and which would exceed the amount permitted if the
Highest Lawful Rate were in effect, the Borrower stipulates that such payment
and collection will have been and will be deemed to have been, to the extent
permitted by applicable laws of the State of Texas or the United States of
America, the result of mathematical error on the part of the Borrower and the
Lender; and the Lender shall promptly refund the amount of such excess (to the
extent only of such interest payments in excess of that which would have accrued
and been payable on the basis of the Highest Lawful Rate) upon discovery of such
error by the Lender or notice thereof from the Borrower. In the event that the
maturity of any Obligation is accelerated, by reason of an election by the
Lender or otherwise, or in the event of any required or permitted prepayment,
then the consideration constituting interest under applicable laws may never
exceed the Highest Lawful Rate; and excess amounts paid to the Lender which by
law are deemed interest, if any, shall be credited by the Lender on the
principal amount of the Obligations, or if the principal amount of the
Obligations shall have been paid in full, refunded to the Borrower.
(d) All sums paid, or agreed to be paid, to the Lender for the use,
forbearance and detention of the proceeds of any advance hereunder shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full term hereof until paid in full so that the actual
rate of interest is uniform but does not exceed the Highest Lawful Rate
throughout the full term hereof.
2.16 Yield Protection. (a) Without limiting the effect of the other
provisions of this Section (but without duplication), the Borrower shall pay to
the Lender from time to time such amounts as the Lender may determine are
necessary to compensate it for any Additional Costs incurred by the Lender.
(b) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to the Lender from
time to time on request such amounts as the Lender may determine are necessary
to compensate the Lender for any costs attributable to the maintenance by the
Lender (or any Applicable Lending Office), pursuant to any Regulatory Change, of
capital in respect of the Commitment, such compensation to include, without
limitation, an amount equal to any reduction of the rate of return on assets or
equity of
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the Lender (or any Applicable Lending Office) to a level below that which the
Lender (or any Applicable Lending Office) could have achieved but for such
Regulatory Change.
(c) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to the Lender such
amounts as shall be sufficient in the reasonable opinion of the Lender to
compensate it for any loss, cost, or expense incurred by and as a result of:
(i) any payment, prepayment, or conversion by the Borrower of a
LIBO Rate Loan on a date other than the last day of an Interest Period
for such Loan; or
(ii) any failure by the Borrower to borrow a LIBO Rate Loan or
to convert a Floating Rate Loan into a LIBO Rate Loan on the date for
such borrowing or conversion specified in the relevant Borrowing
Request;
such compensation to include, without limitation, with respect to any LIBO Rate
Loan, an amount equal to the excess, if any, of (A) the amount of interest which
would have accrued on the principal amount so paid, prepaid, converted, or not
borrowed or converted for the period from the date of such payment, prepayment,
conversion, or failure to borrow or convert to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow or
convert, the Interest Period for such Loan which would have commenced on the
date of such failure to borrow or convert) at the applicable rate of interest
for such Loan provided for herein over (B) the interest component (as reasonably
determined by the Lender) of the amount (as reasonably determined by the Lender)
the Lender would have bid in the London interbank market for Dollar deposits of
amounts comparable to such principal amount and maturities comparable to such
period.
(d) Determinations by the Lender for purposes of this Section of the
effect of any Regulatory Change on capital maintained, its costs or rate of
return, maintaining Loans, its obligation to make Loans, or on amounts
receivable by it in respect of Loans or such obligations, and the additional
amounts required to compensate the Lender under this Section shall be
conclusive, absent manifest error, provided that such determinations are made on
a reasonable basis. The Lender shall furnish the Borrower with a certificate
setting forth in reasonable detail the basis and amount of increased costs
incurred or reduced amounts receivable as a result of any such event, and the
statements set forth therein shall be conclusive, absent manifest error. The
Lender shall (i) notify the Borrower, as promptly as practicable after the
Lender obtains knowledge of any Additional Costs or other sums payable pursuant
to this Section and determines to request compensation therefor, of any event
occurring after the Closing Date which will entitle the Lender to compensation
pursuant to this Section, and (ii) designate a different Applicable Lending
Office for the Loans of the Lender affected by such event if such designation
will avoid the need for or reduce the amount of such compensation and will not,
in the sole opinion of the Lender, be disadvantageous to the Lender. If the
Lender requests compensation from the Borrower under this Section, the Borrower
may, by notice to the Lender,
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require that the Loans by the Lender of the type with respect to which such
compensation is requested be converted into Floating Rate Loans in accordance
with Section 2.9. Any compensation requested by the Lender pursuant to this
Section shall be due and payable to the Lender within five days of delivery of
any such notice by the Lender to the Borrower.
(e) The Lender agrees that it shall not request, and the Borrower
shall not be obligated to pay, any Additional Costs or other sums payable
pursuant to this Section unless similar additional costs and other sums payable
are also generally assessed by the Lender against other customers of the Lender
similarly situated where such customers are subject to documents providing for
such assessment.
2.17 Limitation on Types of Loans. Anything herein to
the contrary notwithstanding, no more than three separate Loans shall be
outstanding at any one time, with, for purposes of this Section, all Floating
Rate Loans constituting one Loan, and all LIBO Rate Loans for the same Interest
Period constituting one Loan. Anything herein to the contrary notwithstanding,
if, on or prior to the determination of any interest rate for any LIBO Rate Loan
for any Interest Period therefor:
(a) the Lender determines (which determination shall be conclusive)
that quotations of interest rates for the deposits referred to in the
definition of "LIBO Rate" in Section 1.2 are not being provided in the
relevant amounts or for the relevant maturities for purposes of determining
the rate of interest for such Loan as provided in this Agreement; or
(b) the Lender determines (which determination shall be conclusive)
that the rates of interest referred to in the definition of "LIBO Rate" in
Section 1.2 upon the basis of which the rate of interest for such Loan for
such Interest Period is to be determined do not accurately reflect the cost
to the Lender of making or maintaining such Loan for such Interest Period,
then the Lender shall give the Borrower prompt notice thereof. So long as such
condition remains in effect, the Lender shall be under no obligation to make
LIBO Rate Loans or to convert Loans of any other type into LIBO Rate Loans; and
the Borrower shall, on the last day of the then current Interest Period for each
outstanding LIBO Rate Loan, either prepay such LIBO Rate Loan or convert such
Loan into another type of Loan in accordance with Section 2.9. Before giving
such notice pursuant to this Section, the Lender will designate a different
available Applicable Lending Office for LIBO Rate Loans or take such other
action as the Borrower may request if such designation or action will avoid the
need to suspend the obligation of the Lender to make LIBO Rate Loans hereunder
and will not, in the opinion of the Lender, be disadvantageous to the Lender.
2.18 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for the Lender or its
Applicable Lending Office to (a) honor its obligation to make LIBO Rate Loans
hereunder or (b) maintain LIBO Rate Loans hereunder, then the Lender shall
promptly notify the Borrower thereof; and the obligation of the Lender
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hereunder to make LIBO Rate Loans and to convert Floating Rate Loans into LIBO
Rate Loans shall be suspended until such time as the Lender may again make and
maintain LIBO Rate Loans, and the outstanding LIBO Rate Loans shall be converted
into Floating Rate Loans in accordance with Section 2.9. Before giving such
notice pursuant to this Section, the Lender will designate a different available
Applicable Lending Office for LIBO Rate Loans or take such other action as the
Borrower may request if such designation or action will avoid the need to
suspend the obligation of the Lender to make LIBO Rate Loans and will not, in
the opinion of the Lender, be disadvantageous to the Lender.
2.19 Regulatory Change. In the event that by reason of any Regulatory
Change, the Lender (a) incurs Additional Costs based on or measured by the
excess above a specified level of the amount of a category of deposits or other
liabilities of the Lender which includes deposits by reference to which the
interest rate on any LIBO Rate Loan is determined as provided in this Agreement
or a category of extensions of credit or other assets of such Lender which
includes any LIBO Rate Loan, or (b) becomes subject to restrictions on the
amount of such a category of liabilities or assets which it may hold, then, at
the election of the Lender with notice to the Borrower, the obligation of the
Lender to make LIBO Rate Loans and to convert Floating Rate Loans into LIBO Rate
Loans shall be suspended until such time as such Regulatory Change ceases to be
in effect, and all such outstanding LIBO Rate Loans shall be converted into
Floating Rate Loans in accordance with Section 2.9.
2.20 Limitations on Interest Periods. Each Interest Period selected
by the Borrower (a) which commences on the last Business Day of a calendar month
(or, with respect to any LIBO Rate Loan, any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month,
(b) which would otherwise end on a day which is not a Business Day shall end on
the next succeeding Business Day (or, if such next succeeding Business Day falls
in the next succeeding calendar month, on the next preceding Business Day), (c)
which would otherwise commence before and end after the Commitment Termination
Date shall end on the Commitment Termination Date, and (d) shall have a duration
of not less than one month, as to any LIBO Rate Loan, and, if any Interest
Period would otherwise be a shorter period, the relevant Loan shall be a
Floating Rate Loan during such period.
2.21 Letters in Lieu of Transfer Orders. The Lender agrees that none
of the letters in lieu of transfer or division orders provided by the Borrower
pursuant to Section 3.1(h) or Section 5.7 will be sent to the addressees thereof
and the Lender shall not otherwise direct any purchaser of production from the
Mortgaged Property to make payments with respect thereto to the Lender prior to
the occurrence and except during the occurrence of an Event of Default, at which
time the Lender may, at its option and in addition to the exercise of any of its
other rights and remedies, send any or all of such letters and direct purchasers
of production from the Mortgaged Property to make payments with respect thereto
to the Lender.
2.22 Power of Attorney. The Borrower hereby designates the Lender as
its agent and attorney-in-fact, to act in its name, place, and stead for the
purpose of completing and, upon the occurrence of an Event of Default,
delivering any and all of the letters in lieu of
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transfer orders delivered by the Borrower to the Lender pursuant to Section
3.1(h) or Section 5.7, including, without limitation, completing any blanks
contained in such letters and attaching exhibits thereto describing the relevant
Collateral. The Borrower hereby ratifies and confirms all that the Lender shall
lawfully do or cause to be done by virtue of this power of attorney and the
rights granted with respect to such power of attorney. This power of attorney
is coupled with the interests of the Lender in the Collateral, shall commence
and be in full force and effect as of the Closing Date and shall remain in full
force and effect and shall be irrevocable so long as any Obligation remains
outstanding or unpaid or any Commitment exists. The powers conferred on the
Lender by this appointment are solely to protect the interests of the Lender
under the Loan Documents and shall not impose any duty upon the Lender to
exercise any such powers. The Lender shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers and shall not be
responsible to the Borrower or any other Person for any act or failure to act
with respect to such powers, except for gross negligence or willful misconduct.
ARTICLE III
CONDITIONS
The obligations of the Lender to enter into this Agreement and to make
Loans are subject to the satisfaction of the following conditions precedent:
3.1 Receipt of Loan Documents and Other Items. The Lender shall have
no obligation under this Agreement unless and until the Merger Transactions
shall have been consummated and all matters incident to the consummation of the
transactions contemplated herein, including, without limitation, the review by
the Lender or its counsel of the title of the Borrower to its Oil and Gas
Properties, shall be satisfactory to the Lender, and the Lender shall have
received, reviewed, and approved the following documents and other items,
appropriately executed when necessary and, where applicable, acknowledged by one
or more authorized officers of the Borrower or the Guarantors, as the case may
be, all in form and substance satisfactory to the Lender and dated, where
applicable, of even date herewith or a date prior thereto and acceptable to the
Lender:
(a) multiple counterparts of this Agreement and the Assignment, as
requested by the Lender;
(b) the Existing Notes, endorsed payable to the Lender;
(c) the Note;
(d) the Guaranties;
(e) copies of the Articles of Incorporation or Certificate of
Incorporation and all amendments thereto and the bylaws and all amendments
thereto of the
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Borrower and each Guarantor, accompanied by a certificate issued by the
secretary or an assistant secretary of the Borrower or such Guarantor, as
the case may be, to the effect that each such copy is correct and complete;
(f) certificates of incumbency and signatures of all officers of the
Borrower and each Guarantor who are authorized to execute Loan Documents on
behalf of such entities, each such certificate being executed by the
secretary or an assistant secretary of the Borrower or such Guarantor, as
the case may be;
(g) copies of corporate resolutions approving the Loan Documents and
authorizing the transactions contemplated herein and therein, duly adopted
by the boards of directors of the Borrower and each Guarantor, accompanied
by certificates of the secretary or an assistant secretary of the Borrower
or such Guarantor, as the case may be, to the effect that such copies are
true and correct copies of resolutions duly adopted at a meeting or by
unanimous consent of the board of directors of the Borrower or such
Guarantor, as the case may be, and that such resolutions constitute all the
resolutions adopted with respect to such transactions, have not been
amended, modified, or revoked in any respect, and are in full force and
effect as of the date of such certificate;
(h) multiple counterparts, as requested by the Lender, of the
following documents ratifying, amending, and/or restating the Existing
Security Instruments and otherwise establishing Liens in favor of the
Lender in and to the Collateral:
(i) Ratification of and Amendment to Mortgage, Deed of Trust,
Indenture, Security Agreement, Assignment of Production, and Financing
Statement from the Borrower covering Oil and Gas Properties of the
Borrower covered by certain of the Existing Security Instruments;
(ii) Mortgage, Deed of Trust, Indenture, Security Agreement,
Assignment of Production, and Financing Statement from the Borrower
covering certain designated Oil and Gas Properties of the Borrower and
all improvements, personal property, and fixtures related thereto, and
Financing Statements constituent thereto;
(iii) Security Agreement (Stock Pledge) from the Borrower
covering the Marcum Stock, the Marcum Warrants, and related Property,
and Financing Statements constituent thereto;
(iv) Security Agreement (Stock Pledge) from Patrick of Delaware
covering the Penske Stock, the rights of Patrick of Delaware under the
Penske Option Agreement, and related Property, and Financing
Statements constituent thereto; and
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(v) undated letters, in form and substance satisfactory to the
Lender, from the Borrower to each purchaser of production and
disburser of the proceeds of production from or attributable to the
Mortgaged Properties, together with additional letters with the
addressees left blank, authorizing and directing the addressees to
make future payments attributable to production from the Mortgaged
Properties directly to the Lender;
(i) certificates evidencing the Marcum Stock and the Marcum Warrants,
with stock powers or transfer instruments, as the case may be, endorsed in
blank, and Federal Reserve Forms U-1 completed by the Borrower;
(j) certificates evidencing the Penske Stock, with stock powers
endorsed in blank;
(k) audited consolidated and consolidating Financial Statements of
Patrick of Delaware and La/Cal, each as of December 31, 1994;
(l) certificates dated as of a recent date from the Secretary of State
or other appropriate Governmental Authority evidencing the existence or
qualification and good standing of each of the Borrower and the Guarantors
in its jurisdiction of incorporation and in any other jurisdictions where
it does business;
(m) results of searches of the UCC Records of (i) the Secretary of
State of the States of Louisiana, Michigan, Montana, and Texas, in the name
of the Borrower, (ii) of the Secretary of State of the States of Michigan
and Texas in the name of Patrick of Delaware, and (iii) of the Secretary of
State of the States of Louisiana and Texas in the name of Goodrich and
La/Cal, each from a source acceptable to the Lender and reflecting no Liens
other than Permitted Liens and no Liens against any Collateral;
(n) confirmation, acceptable to the Lender, of the title of the
Borrower and Goodrich to the Mortgaged Properties, free and clear of Liens
other than Permitted Liens;
(o) all operating, lease, sublease, royalty, sales, exchange,
processing, farmout, bidding, pooling, unitization, communitization, and
other agreements relating to the Mortgaged Properties requested by the
Lender;
(p) engineering reports covering the Mortgaged Properties;
(q) the opinion of Hargrove, Pesnell & Wyatt, counsel to the Borrower
and the Guarantors, in the form attached hereto as Exhibit IV, with such
changes thereto as may be approved by the Lender;
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(r) certificates evidencing the insurance coverage required pursuant
to Section 5.16; and
(s) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Lender may reasonably
request.
3.2 Each Loan. In addition to the conditions precedent stated
elsewhere herein, the Lender shall not be obligated to make any Loan unless:
(a) the Borrower shall have delivered to the Lender a Borrowing
Request at least the requisite time prior to the requested date for the
relevant Loan; each statement or certification made in such Borrowing
Request shall be true and correct in all material respects on the requested
date for such Loan;
(b) no Event of Default or Default shall exist or will occur as a
result of the making of the requested Loan;
(c) if requested by the Lender, the Borrower shall have delivered
evidence satisfactory to the Lender substantiating any of the matters
contained in this Agreement which are necessary to enable the Borrower to
qualify for such Loan;
(d) the Lender shall have received, reviewed, and approved such
additional documents and items as described in Section 3.1 as may be
requested by the Lender with respect to such Loan;
(e) no event shall have occurred which, in the reasonable opinion of
the Lender, could have a Material Adverse Effect;
(f) each of the representations and warranties contained in this
Agreement shall be true and correct and shall be deemed to be repeated by
the Borrower as if made on the requested date for such Loan;
(g) the Guaranties and all of the Security Instruments shall be in
full force and effect and provide to the Lender the security intended
thereby;
(h) neither the consummation of the transactions contemplated hereby
nor the making of such Loan shall contravene, violate, or conflict with any
Requirement of Law;
(i) each of the Borrower and the Guarantors shall hold full legal
title to the Collateral pledged by such entity and be the sole beneficial
owner thereof;
(j) the Borrower shall have paid all fees and expenses payable by the
Borrower hereunder for which invoices have been presented as of or prior to
the date of the relevant Loan, including, without limitation, estimated
fees charged
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by filing officers and other public officials incurred or to be incurred in
connection with the filing and recordation of any Security Instruments, for
which invoices have been presented as of or prior to the date of the
requested Loan; and
(k) all matters incident to the consummation of the transactions
hereby contemplated shall be satisfactory to the Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and extend credit to
the Borrower, upon the consummation of the Merger Transactions, each of the
Borrower and the Guarantors represents and warrants to the Lender (which
representations and warranties shall survive the delivery of the Note) that:
4.1 Due Authorization. The execution and delivery by the Borrower of
this Agreement and the borrowings hereunder, the execution and delivery by the
Borrower of the Note, the repayment of the Note and interest and fees provided
for in the Note and this Agreement, the execution and delivery of the Security
Instruments by the Borrower and the performance of all obligations of the
Borrower under the Loan Documents are within the power of the Borrower, have
been duly authorized by all necessary corporate action by the Borrower, and do
not and will not (a) require the consent of any Governmental Authority, (b)
contravene or conflict with any Requirement of Law or the certificate or
articles of incorporation and bylaws or other organizational or governing
documents of the Borrower, (c) contravene or conflict with any indenture,
instrument, or other agreement to which the Borrower is a party or by which any
Property of the Borrower may be presently bound or encumbered, or (d) result in
or require the creation or imposition of any Lien in or upon any Property of the
Borrower other than as contemplated by the Loan Documents.
4.2 Corporate Existence. Each Related Party is a corporation duly
organized, legally existing, and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and is in good
standing in all jurisdictions wherein the ownership of Property or the operation
of its business necessitates same, other than those jurisdictions wherein the
failure to so qualify will not have a Material Adverse Effect.
4.3 Valid and Binding Obligations. All Loan Documents to which the
Borrower is a party, when duly executed and delivered by the Borrower, will be
the legal, valid, and binding obligations of such entity, enforceable against
the Borrower in accordance with their respective terms, subject, however, to the
effect of bankruptcy, insolvency, reorganization, moratorium, and similar laws
from time to time in effect relating to the rights and remedies of creditors and
to general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
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4.4 Security Instruments. The provisions of each Security Instrument
are effective to create in favor of the Lender, a legal, valid, and enforceable
Lien in the Collateral described therein, which Liens, assuming the possession
by the Lender of the certificates evidencing the Marcum Stock, the Marcum
Warrants, and the Penske Stock, and the accomplishment of recording and filing
in accordance with applicable laws prior to the intervention of rights of other
Persons, shall constitute fully perfected first-priority Liens.
4.5 Title to Assets. Each Related Party has good and indefeasible
title to all of its Properties, free and clear of all Liens except Permitted
Liens.
4.6 Scope and Accuracy of Financial Statements. The Financial
Statements of Patrick of Delaware and La/Cal as of December 31, 1994, provided
to the Lender present fairly the financial position and results of operations
and cash flows of Patrick of Delaware and its Subsidiaries and La/Cal,
respectively, in accordance with GAAP as at the relevant point in time or for
the period indicated, as applicable. No event or circumstance has occurred
since December 31, 1994, which could reasonably be expected to have a Material
Adverse Effect.
4.7 No Material Misstatements. No information, exhibit, statement,
or report furnished to the Lender by or at the direction of any Related Party in
connection with this Agreement contains any material misstatement of fact or
omits to state a material fact or any fact necessary to make the statements
contained therein not misleading as of the date made or deemed made.
4.8 Liabilities, Litigation, and Restrictions. Other than as listed
under the heading "Liabilities" on Exhibit V, no Related Party has any
liabilities, direct, or contingent, which may materially and adversely affect
its business or operations or its ownership of any Collateral. Except as set
forth under the heading "Litigation" on Exhibit V, no litigation or other action
of any nature affecting any Related Party is pending before any Governmental
Authority or, to the best knowledge of the Borrower, threatened against or
affecting any Related Party. No unusual or unduly burdensome restriction,
restraint or hazard exists by contract, Requirement of Law, or otherwise
relative to the business or operations of any Related Party or the ownership and
operation of its Property other than such as relate generally to Persons engaged
in business activities similar to those conducted by such Related Party.
4.9 Authorizations; Consents. Except as expressly contemplated by
this Agreement, no authorization, consent, approval, exemption, franchise,
permit, or license of, or filing with, any Governmental Authority or any other
Person is required to authorize or is otherwise required in connection with the
valid execution and delivery by the Borrower or any Guarantor of the Loan
Documents to which it is a party or any instrument contemplated hereby, the
repayment by the Borrower of the Note and interest and fees provided in the Note
and this Agreement, or the performance by the Borrower or any Guarantor of its
Obligations.
4.10 Compliance with Laws. Each Related Party and its Properties are
in compliance with all applicable Requirements of Law, including, without
limitation, Environmental Laws, the Natural Gas Policy Act of 1978, as amended,
and ERISA.
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4.11 ERISA. No Reportable Event has occurred with respect to any
Single Employer Plan, and each Single Employer Plan has complied with and been
administered in all material respects in accordance with applicable provisions
of ERISA and the Code. To the best knowledge of the Borrower, (a) no Reportable
Event has occurred with respect to any Multiemployer Plan, and (b) each
Multiemployer Plan has complied with and been administered in all material
respects with applicable provisions of ERISA and the Code. The present value of
all benefits vested under each Single Employer Plan (based on the assumptions
used to fund such Plan) did not, as of the last annual valuation date applicable
thereto, exceed the value of the assets of such Plan allocable to such vested
benefits. Neither the Borrower nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan for which there is
any withdrawal liability. As of the most recent valuation date applicable to
any Multiemployer Plan, neither the Borrower nor any Commonly Controlled Entity
would become subject to any liability under ERISA if the Borrower or such
Commonly Controlled Entity were to withdraw completely from such Multiemployer
Plan. Neither the Borrower nor any Commonly Controlled Entity has received
notice that any Multiemployer Plan is Insolvent or in Reorganization. To the
best knowledge of the Borrower, no such Insolvency or Reorganization is
reasonably likely to occur. Based upon GAAP existing as of the date of this
Agreement and current factual circumstances, the Borrower has no reason to
believe that the annual cost during the term of this Agreement to the Borrower
and all Commonly Controlled Entities for post-retirement benefits to be provided
to the current and former employees of the Borrower and all Commonly Controlled
Entities under Plans which are welfare benefit plans (as defined in Section 3(1)
of ERISA) will, in the aggregate, have a Material Adverse Effect.
4.12 Environmental Laws. Except as described on Exhibit V under the
heading "Environmental Matters:"
(a) no Property of any Related Party is currently on or has ever been
on, or is adjacent to any Property which is on or has ever been on, any
federal or state list of Superfund Sites;
(b) no Hazardous Substances have been generated, transported, and/or
disposed of by any Related Party at a site which was, at the time of such
generation, transportation, and/or disposal, or has since become, a
Superfund Site;
(c) no Release of Hazardous Substances by any Related Party or from,
affecting, or related to any Property of any Related Party or adjacent to
any Property of any Related Party has occurred; and
(d) no Environmental Complaint has been received by any Related Party.
4.13 Compliance with Federal Reserve Regulations. No transaction
contemplated by the Loan Documents is in violation of any regulations
promulgated by the Board of Governors of the Federal Reserve System, including,
without limitation, Regulations G, T, U, or X.
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4.14 Investment Company Act Compliance. No Related Party is or is
directly or indirectly controlled by or acting on behalf of any Person which is
an "investment company" or an "affiliated person" of an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
4.15 Public Utility Holding Company Act Compliance. No Related Party
is a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
4.16 Proper Filing of Tax Returns; Payment of Taxes Due. Each Related
Party has duly and properly filed its United States income tax return and all
other tax returns which are required to be filed and has paid all taxes due
except such as are being contested in good faith and as to which adequate
provisions and disclosures have been made. The respective charges and reserves
on the books of each Related Party with respect to taxes and other governmental
charges are adequate.
4.17 Refunds. Except as described on Exhibit V under the heading
"Refunds," no orders of, proceedings pending before, or other requirements of,
the Federal Energy Regulatory Commission, the Texas Railroad Commission, or any
Governmental Authority exist which could result in any Related Party being
required to refund any material portion of the proceeds received or to be
received from the sale of hydrocarbons from any of its Properties.
4.18 Gas Contracts. Except as described on Exhibit V under the
heading "Gas Contracts," no Related Party (a) is obligated in any material
respect by virtue of any prepayment made under any contract containing a "take-
or-pay" or "prepayment" provision or under any similar agreement to deliver
hydrocarbons produced from or allocated to any of its Properties at some future
date without receiving full payment therefor within 90 days of delivery, or (b)
is subject to or has produced gas, in any material amount, subject to, or owns
Properties subject to, balancing rights of third parties or balancing duties
under governmental requirements, except as to such matters for which such
Related Party has established monetary reserves adequate in amount to satisfy
such obligations and has segregated such reserves from other accounts.
4.19 Intellectual Property. Each Related Party owns or is licensed to
use all Intellectual Property necessary to conduct all business material to its
condition (financial or otherwise), business, or operations as such business is
currently conducted. No claim has been asserted or is pending by any Person
with the respect to the use of any such Intellectual Property or challenging or
questioning the validity or effectiveness of any such Intellectual Property; and
neither the Borrower nor any Guarantor knows of any valid basis for any such
claim. The use of such Intellectual Property by the relevant Related Party does
not infringe on the rights of any Person, except for such claims and
infringements as do not, in the aggregate, give rise to any material liability
on the part of any Related Party.
4.20 Casualties or Taking of Property. Except as disclosed on Exhibit
V under the heading "Casualties," since December 31, 1994, neither the business
nor any Property of
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any Related Party has been materially adversely affected as a result of any
fire, explosion, earthquake, flood, drought, windstorm, accident, strike or
other labor disturbance, embargo, requisition or taking of Property, or
cancellation of contracts, permits, or concessions by any Governmental
Authority, riot, activities of armed forces, or acts of God.
4.21 Locations of Borrower. The principal place of business and chief
executive office of the Borrower is located at 301 West Michigan Avenue,
Jackson, Michigan 49204-0747 or at such other location as the Borrower may have,
by proper written notice hereunder, advised the Lender, provided that such other
location is within a state in which appropriate financing statements from the
Borrower in favor of the Lender have been filed.
4.22 Subsidiaries. Goodrich has no Subsidiaries except those
described on Exhibit V under the heading "Subsidiaries of Goodrich," Patrick of
Delaware has no Subsidiaries except those described on Exhibit V under the
heading "Subsidiaries of Patrick of Delaware," and the Borrower has no
Subsidiaries except those described on Exhibit V under the heading "Subsidiaries
of Borrower."
4.23 Existing Indebtedness; No Defenses. As of the date hereof, (a)
the Borrower is indebted to the Existing Lender under the Existing Notes in the
aggregate principal amount of $10,626,117.89, and (b) the Borrower has no
defenses to, rights of setoff against, claims or counterclaims with respect to,
and no default exists under or with respect to, any of the Existing Loan
Documents or any Indebtedness or obligation of the Borrower to the Existing
Lender.
ARTICLE V
AFFIRMATIVE COVENANTS
Upon the consummation of the Merger Transactions and so long as any
Obligation remains outstanding or unpaid or any Commitment exists, the Borrower
shall, and, except with respect to Sections 5.13, 5.18, and 5.19, shall cause
each of its Subsidiaries to, and Goodrich shall, and, except with respect to
Sections 5.13, 5.18, and 5.19, shall cause each of its Subsidiaries, to:
5.1 Maintenance and Access to Records. Keep adequate records, in
accordance with GAAP, of all its transactions so that at any time, and from time
to time, its true and complete financial condition may be readily determined,
and promptly following the reasonable request of the Lender, make such records
available for inspection by the Lender and, at the expense of the Borrower,
allow the Lender to make and take away copies thereof.
5.2 Quarterly Financial Statements; Compliance Certificates. Deliver
to the Lender, on or before the 60th day after the close of each of the first
three quarterly periods of each fiscal year of Goodrich, (a) a copy of the
unaudited consolidated and consolidating Financial Statements of Goodrich as at
the close of such quarterly period and from the beginning
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of such fiscal year to the end of such period, such Financial Statements to be
certified by the chief financial officer of Goodrich as having been prepared in
accordance with GAAP consistently applied and as a fair presentation of the
condition of Goodrich and its Subsidiaries, subject to changes resulting from
normal year-end audit adjustments, and (b) a Compliance Certificate.
5.3 Annual Financial Statements; Compliance Certificates. Deliver to
the Lender, on or before the 120th day after the close of each fiscal year of
Goodrich, (a) a copy of the annual audited consolidated Financial Statements of
Goodrich, together with the audit report issued in connection therewith, (b) a
copy of the annual unaudited consolidating Financial Statements of Goodrich, and
(c) a Compliance Certificate.
5.4 Oil and Gas Reserve Reports. (a) Deliver to the Lender no later
than the last day of March of each year during the term of this Agreement,
engineering reports in form and substance satisfactory to the Lender, certified
by any nationally- or regionally-recognized independent consulting petroleum
engineers acceptable to the Lender as fairly and accurately setting forth (i)
the proven and producing, shut-in, behind-pipe, and undeveloped oil and gas
reserves (separately classified as such) attributable to the Oil and Gas
Properties of each of the Related Parties (designated by entity) as of January 1
of the year for which such reserve reports are furnished, (ii) the aggregate
present value of the future net income with respect to such Oil and Gas
Properties, discounted at a stated per annum discount rate of such reserves,
(iii) projections of the annual rate of production, gross income, and net income
with respect to such reserves, and (iv) information with respect to the "take-
or-pay," "prepayment," and gas-balancing liabilities of the Related Parties
(designated by entity).
(b) Deliver to the Lender no later than the last day of October of
each year during the term of this Agreement, engineering reports in form and
substance satisfactory to the Lender prepared by or under the supervision of the
chief petroleum engineer or geologist of the Borrower evaluating the Oil and Gas
Properties of the Related Parties (designated by entity) as of July 1 of the
year for which such reserve reports are furnished and updating the information
provided in the reports pursuant to Section 5.4(a).
(c) Each of the reports provided pursuant to this Section shall be
submitted to the Lender together with additional data concerning pricing,
quantities of production from the Oil and Gas Properties, volumes of production
sold, purchasers of production, gross revenues, expenses, and such other
information and engineering and geological data with respect thereto as the
Lender may reasonably request.
5.5 Title Opinions; Title Defects. Promptly upon the request of the
Lender, furnish to the Lender title opinions, in form and substance and by
counsel satisfactory to the Lender, or other confirmation of title acceptable to
the Lender, covering such Oil and Gas Properties of the Borrower as may be
requested by the Lender; and promptly, but in any event within 30 days after
notice by the Lender of any defect, material in the opinion of the Lender in
value, in the title of the Borrower to any of its Oil and Gas Properties, clear
such title
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defects, and, in the event any such title defects are not cured in a timely
manner, pay all related costs and fees incurred by the Lender to do so.
5.6 Notices of Certain Events. Deliver to the Lender, immediately
upon having knowledge of the occurrence of any of the following events or
circumstances, a written statement with respect thereto, signed by a Responsible
Officer of the Borrower or Goodrich and setting forth the relevant event or
circumstance and the steps being taken with respect to such event or
circumstance:
(a) any Default or Event of Default;
(b) any default or event of default under any contractual obligation
of any Related Party, or any litigation, investigation, or proceeding
between any Related Party and any Governmental Authority which, in either
case, if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding involving any Related Party as a
defendant or in which any Property of any Related Party is subject to a
claim and in which the amount involved is $500,000 or more and which is not
covered by insurance or in which injunctive or similar relief is sought;
(d) the receipt by any Related Party of any Environmental Complaint;
(e) any actual, proposed, or threatened testing or other investigation
by any Governmental Authority or other Person concerning the environmental
condition of, or relating to, any Property of any Related Party, or
adjacent to any Property of any Related Party following any allegation of a
violation of any Requirement of Law;
(f) any Release of Hazardous Substances by any Related Party or from,
affecting, or related to any Property of any Related Party, or adjacent to
any Property of any Related Party, or the violation of any Environmental
Law, or the revocation, suspension, or forfeiture of or failure to renew,
any permit, license, registration, approval, or authorization which could
reasonably be expected to have a Material Adverse Effect;
(g) any Reportable Event or imminently expected Reportable Event with
respect to any Plan; any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan; the institution of
proceedings or the taking of any other action by the PBGC, the Borrower or
any Commonly Controlled Entity or Multiemployer Plan with respect to the
withdrawal from, or the termination, Reorganization or Insolvency of, any
Single Employer Plan or Multiemployer Plan; or any Prohibited Transaction
in connection with any Plan
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or any trust created thereunder and the action being taken by the Internal
Revenue Service with respect thereto;
(h) the change in identity or address of any Person remitting to the
Borrower proceeds from the sale of hydrocarbon production from or
attributable to any Mortgaged Property;
(i) any change in the senior management of the Borrower or any
Guarantor; and
(j) any other event or condition which could reasonably be expected to
have a Material Adverse Effect.
5.7 Letters in Lieu of Transfer Orders; Division Orders. Promptly
upon request by the Lender at any time and from time to time, and without
limitation on the rights of the Lender pursuant to Sections 2.21 and 2.22,
execute such letters in lieu of transfer orders, in addition to the letters
signed by the Borrower and delivered to the Lender in satisfaction of the
condition set forth in Section 3.1(h) and/or division and/or transfer orders as
are necessary or appropriate to transfer and deliver to the Lender proceeds from
or attributable to any Mortgaged Property.
5.8 Additional Information. Furnish to the Lender, within five days
after any material report (other than financial statements) or other
communication is sent by any Related Party to its stockholders or filed by any
Related Party with the Securities and Exchange Commission or any successor or
analogous Governmental Authority, copies of such report or communication and,
promptly upon the request of the Lender, such additional financial or other
information concerning the assets, liabilities, operations, and transactions of
any Related Party as the Lender may from time to time request; and notify the
Lender not less than ten Business Days prior to the occurrence of any condition
or event that may change the proper location for the filing of any financing
statement or other public notice or recording for the purpose of perfecting a
Lien in any Collateral, including, without limitation, any change in name or the
location of the principal place of business or chief executive office of any
Related Party; and upon the request of the Lender, execute such additional
Security Instruments as may be necessary or appropriate in connection therewith.
5.9 Compliance with Laws. Comply with all applicable Requirements of
Law, including, without limitation, (a) the Natural Gas Policy Act of 1978, as
amended, (b) ERISA, (c) Environmental Laws, and (d) all permits, licenses,
registrations, approvals, and authorizations (i) related to any natural or
environmental resource or media located on, above, within, in the vicinity of,
related to or affected by any Property of any Related Party, (ii) required for
the performance of the operations of any Related Party, or (iii) applicable to
the use, generation, handling, storage, treatment, transport, or disposal of any
Hazardous Substances; and cause all employees, crew members, agents,
contractors, subcontractors, and future lessees (pursuant to appropriate lease
provisions) of each Related Party, while such Persons are acting within the
scope of their relationship with such Related Party, to comply with
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all such Requirements of Law as may be necessary or appropriate to enable such
Related Party to so comply.
5.10 Payment of Assessments and Charges. Pay all taxes, assessments,
governmental charges, rent, and other Indebtedness which, if unpaid, might
become a Lien against its Property, except any of the foregoing being contested
in good faith and as to which adequate reserve in accordance with GAAP has been
established or unless failure to pay would not have a Material Adverse Effect.
5.11 Maintenance of Corporate Existence and Good Standing. Maintain
its corporate existence or qualification and good standing in its jurisdictions
of incorporation and in all jurisdictions wherein the Property now owned or
hereafter acquired or business now or hereafter conducted necessitates same.
5.12 Further Assurances. Promptly cure any defects in the execution
and delivery of any of the Loan Documents and all agreements contemplated
thereby, and execute, acknowledge, and deliver such other assurances and
instruments as shall, in the opinion of the Lender, be necessary to fulfill the
terms of the Loan Documents.
5.13 Fees and Expenses. (a) Upon request by the Lender, promptly pay
all reasonable fees and expenses of the Lender in connection with the
preparation, negotiation, syndication, execution, delivery, administration, and
enforcement of this Agreement and the other Loan Documents and any amendments,
restatements, or supplements thereto, the satisfaction of the conditions
precedent set forth herein, the filing and recordation of Security Instruments,
and the consummation of the transactions contemplated in the Loan Documents,
including, without limitation, fees and expenses of legal counsel.
(b) Upon request by the Lender, promptly pay (to the fullest extent
permitted by law) for all amounts reasonably expended, advanced, or incurred by
or on behalf of the Lender to satisfy any obligation of the Borrower or any
Guarantor under any of the Loan Documents; to collect the Obligations; to
enforce the rights of the Lender under any of the Loan Documents; and to protect
the Properties or business of the Borrower and the Guarantors, including,
without limitation, the Collateral, which amounts shall be deemed compensatory
in nature and liquidated as to amount upon notice to the Borrower by the Lender
and which amounts shall include, but not be limited to (i) all court costs, (ii)
reasonable fees and expenses of legal counsel, auditors and accountants,
engineers, and environmental and insurance consultants, (iii) fees and expenses
incurred in connection with the participation by the Lender as a member of the
creditors' committee in a case commenced under any Insolvency Proceeding, (iv)
fees and expenses incurred in connection with lifting the automatic stay
prescribed in (S)362 Title 11 of the United States Code, and (v) fees and
expenses incurred in connection with any action pursuant to (S)1129 Title 11 of
the United States Code, all reasonably incurred by the Lender in connection with
the collection of any sums due under the Loan Documents, together with interest
at the per annum interest rate equal to the Default Rate, calculated on a basis
of a calendar year of 360 days, counting the actual number of days elapsed, on
each such amount from the date of notification that the same was expended,
advanced, or incurred by the Lender until the date it is repaid to
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the Lender, with the obligations under this Section surviving the non-assumption
of this Agreement in a case commenced under any Insolvency Proceeding and being
binding upon the Borrower and/or a trustee, receiver, custodian, or liquidator
of the Borrower appointed in any such case.
5.14 Operation of Oil and Gas Properties. Develop, maintain, and
operate its Oil and Gas Properties in a prudent and workmanlike manner in
accordance with industry standards.
5.15 Maintenance and Inspection of Properties. Maintain all of its
tangible Properties in good repair and condition, ordinary wear and tear
excepted; make all necessary replacements thereof and operate such Properties in
a good and workmanlike manner; and permit any authorized representative of the
Lender to visit and inspect, any tangible Property of any Related Party. So
long as no Event of Default shall have occurred and be continuing, such visits
and inspections shall be at the expense of the Lender. If an Event of Default
has occurred and is continuing, such visits and inspections shall be at the
expense of the Borrower.
5.16 Maintenance of Insurance. Maintain insurance with respect to its
Properties and businesses against such liabilities, casualties, risks, and
contingencies as is customary in the relevant industry and sufficient to prevent
a Material Adverse Effect, all such insurance to be in amounts and from insurers
acceptable to the Lender and, within 30 days of the Closing Date for property
damage insurance covering Collateral and business interruption insurance, if
any, maintained by Borrower, naming the Lender as loss payee, and, upon any
renewal of any such insurance and at other times upon request by the Lender,
furnish to the Lender evidence, satisfactory to the Lender, of the maintenance
of such insurance. The Lender shall have the right to collect, and the Borrower
hereby assigns to the Lender, any and all monies that may become payable under
any policies of insurance relating to business interruption or by reason of
damage, loss, or destruction of any of the Collateral. In the event of any
damage, loss, or destruction for which insurance proceeds relating to business
interruption or Collateral exceed $500,000, the Lender may, at its option, apply
all such sums or any part thereof received by it toward the payment of the
Obligations, whether matured or unmatured, application to be made first to
interest and then to principal, and shall deliver to the Borrower the balance,
if any, after such application has been made. In the event of any such damage,
loss, or destruction for which insurance proceeds are $500,000 or less, provided
that no Default or Event of Default has occurred and is continuing, the Lender
shall deliver any such proceeds received by it to the Borrower. In the event
the Lender receives insurance proceeds not attributable to Collateral or
business interruption, the Lender shall deliver any such proceeds to the
Borrower.
5.17 Maintenance of Operating Accounts. Maintain its primary
operating banking accounts with the Lender.
5.18 Indemnification. INDEMNIFY AND HOLD THE LENDER AND ITS
SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND
AFFILIATES AND EACH TRUSTEE FOR THE BENEFIT OF THE LENDER UNDER ANY SECURITY
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INSTRUMENT HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES,
LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND JUDICIAL PROCEEDINGS
AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND ENFORCEMENT ACTIONS OF
ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN CONNECTION THEREWITH
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND EXPENSES), ARISING DIRECTLY
OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE PRESENCE OF ANY HAZARDOUS
SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF ANY RELATED PARTY, WHETHER PRIOR
TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED ON OR UNDERTAKEN ON OR
OFF ANY PROPERTY OF ANY RELATED PARTY, WHETHER PRIOR TO OR DURING THE TERM
HEREOF, AND WHETHER BY ANY RELATED PARTY, OR ANY PREDECESSOR IN TITLE, EMPLOYEE,
AGENT, CONTRACTOR, OR SUBCONTRACTOR OF ANY RELATED PARTY OR ANY OTHER PERSON AT
ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN CONNECTION WITH THE HANDLING,
TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION, OR
DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR UNDER
SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER ANY PROPERTY OF ANY
RELATED PARTY, (D) ANY CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES
ARISING IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE,
TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY ANY RELATED PARTY, OR
ANY EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF ANY RELATED PARTY WHILE
SUCH PERSONS ARE ACTING WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH ANY RELATED
PARTY, IRRESPECTIVE OF WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN
IN ACCORDANCE WITH APPLICABLE REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND
ENFORCEMENT OF ANY LOAN DOCUMENT, OR ANY OTHER ACT OR OMISSION IN CONNECTION
WITH OR RELATED TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING, WITHOUT LIMITATION, ANY OF THE FOREGOING IN THIS SECTION ARISING FROM
NEGLIGENCE, WHETHER SOLE OR CONCURRENT, ON THE PART OF THE LENDER OR ANY OF ITS
SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR
AFFILIATES OR ANY TRUSTEE FOR THE BENEFIT OF THE LENDER UNDER ANY SECURITY
INSTRUMENT, BUT EXCLUDING ANY OCCURRENCE RESULTING FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH PERSONS; WITH THE FOREGOING INDEMNITY SURVIVING
SATISFACTION OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
5.19 Puts to Penske Corporation. Exercise all put options to Penske
Corporation pursuant to the Penske Option Agreement; and in connection
therewith, the Lender agrees to release its pledge of and security interest in
the necessary shares of the Penske Stock to permit the exercise of such options
and in the event of the exercise of the Penske Call.
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ARTICLE VI
NEGATIVE COVENANTS
Upon the consummation of the Merger Transactions and so long as any
Obligation remains outstanding or unpaid or any Commitment exists, the Borrower
will not, and will not permit any of its Subsidiaries to, and Goodrich will not,
and will not permit any of its Subsidiaries to:
6.1 Indebtedness; Contingent Obligations. Create, incur, assume, or
suffer to exist any Indebtedness or Contingent Obligation, whether by way of
loan or otherwise; provided, however, the foregoing restriction shall not apply
to (a) the Obligations, (b) unsecured accounts payable incurred in the ordinary
course of business, which are not unpaid in excess of 30 days beyond invoice
date or are being contested in good faith and as to which such reserve as is
required by GAAP has been made, (c) other Indebtedness not exceeding for all
Related Parties $100,000 in the aggregate at any time outstanding, (d)
performance guarantees and performance surety or other bonds provided in the
ordinary course of business, (e) Non-Recourse Debt, (f) Indebtedness with
respect to Hedging Agreements entered into with a Person acceptable to the
Lender, provided that such Hedging Agreements relating to hydrocarbons cover not
more than 75% of the projected monthly production from proved developed
producing Oil and Gas Properties of the Borrower and Goodrich, and provide for
strike prices which, at the time any such Hedging Agreement is entered into, are
not less than the energy product pricing guidelines of the Lender at such time,
(g) trade credit (including authorizations for expenditures with respect to Oil
and Gas Properties) incurred or operating leases entered into in the ordinary
course of business, (h) gas imbalances or other prepayments with respect to
hydrocarbons not exceeding for the Borrower and its Subsidiaries together the
lesser of $250,000 or 125 MCF of gas, (i) severance obligations to employees of
the Borrower and Patrick of Delaware in an amount not exceeding $380,000 in the
aggregate during the term hereof, (j) Indebtedness of Patrick of Delaware to U.
E. Patrick in the amount of $1,184,000, and (k) Indebtedness of Patrick of
Delaware to Mark Patrick in the amount of $130,000 plus the obligation to
provide health insurance for a two-year period.
6.2 Liens. Create, incur, assume, or suffer to exist any Lien on any
of its Properties, whether now owned or hereafter acquired; provided, however,
the foregoing restrictions shall not apply to Permitted Liens.
6.3 Sales of Assets. Without the prior written consent of the
Lender, sell, transfer, or otherwise dispose of, in one or any series of
transactions, any stock of any Subsidiary, any Collateral, or any other assets,
whether now owned or hereafter acquired, or enter into any agreement to do so;
provided, however, the foregoing restriction shall not apply to (a) the sale of
hydrocarbons or inventory in the ordinary course of business provided that no
contract for the sale of hydrocarbons shall obligate any Related Party to
deliver hydrocarbons produced from any Property at some future date without
receiving full payment therefor within 90 days of delivery, (b) the sale or
other disposition of Property destroyed, lost, worn out, damaged, or having only
salvage value or no longer used or useful in its business, (c) the exercise by
Patrick of Delaware of put options to Penske Corporation pursuant to the Penske
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Option Agreement or the exercise of the Penske Call, (d) the sale or other
disposition of other assets (excluding any stock of any Subsidiary) which are
not material to the operations of Goodrich and its Subsidiaries, taken as a
whole, or (e) the sale or other disposition of Mortgaged Properties constituting
not more than 10% of the Borrowing Base, as determined by the Lender, in the
aggregate during the term of this Agreement, in which event the Borrowing Base
shall be adjusted by the Lender, and provided that any mandatory prepayment
required as a result thereof is made at the time of such sale or disposition.
6.4 Leasebacks. Enter into any agreement to sell or transfer any
Property and thereafter rent or lease as lessee such Property or other Property
intended for the same use or purpose as the Property sold or transferred.
6.5 Loans; Advances; Investments. Make or agree to make or allow to
remain outstanding any loans or advances to or Investments in, or purchase or
otherwise acquire all or substantially all of the assets of any Person, or form
any new Subsidiaries; provided, however, the foregoing restrictions shall not
apply to (a) advances or extensions of credit in the form of accounts receivable
incurred in the ordinary course of business and upon terms common in the
industry for such accounts receivable, (b) advances to employees for the payment
of expenses in the ordinary course of business, (c) loans or advances to or
Investments in any Person not exceeding $100,000 in the aggregate during the
term hereof, (d) loans, advances, or Investments by any Related Party other than
the Borrower or any Guarantor to any other Related Party, (e) loans, advances,
or Investments by the Borrower to any other Related Party provided that no
Default or Event of Default exists or will occur as the result thereof, (f)
loans, advances, or Investments by any Guarantor to the Borrower and, provided
that no Default or Event of Default exists or will occur as the result thereof,
to any Related Party, (g) the formation of Acquisition Subsidiaries, (h)
Investments in the form of (i) debt securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof, with maturities of no more than one year, (ii)
commercial paper of a domestic issuer rated at the date of acquisition at least
P-2 by Moody's Investor Service, Inc. or A-2 by Standard & Poor's Corporation
and with maturities of no more than one year from the date of acquisition, or
(iii) repurchase agreements covering debt securities or commercial paper of the
type permitted in this Section, certificates of deposit, demand deposits,
eurodollar time deposits, overnight bank deposits and bankers' acceptances, with
maturities of no more than one year from the date of acquisition, issued by or
acquired from or through the Lender or any bank or trust company organized under
the laws of the United States or any state thereof and having capital surplus
and undivided profits aggregating at least $100,000,000, (i) other short-term
Investments similar in nature and degree of risk to those described in clause
(h) of this Section, (j) money-market funds, or (k) the Investments described on
Exhibit V under the heading "Investments."
6.6 Changes in Corporate Structure. Without the prior written
consent of the Lender, which will not be unreasonably withheld, enter into any
transaction of consolidation, merger, or amalgamation; liquidate, wind up, or
dissolve (or suffer any liquidation or dissolution); provided, however, the
foregoing restriction shall not apply to the Merger Transactions.
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6.7 Dividends and Distributions. Declare, pay, or make, whether in
cash or other Property, any dividend or distribution on, any share of any class
of its capital stock at any time that a Default or Event of Default exists or
would occur as the result thereof; provided, however, the foregoing restrictions
shall not apply to dividends or distributions by any Related Party other than
the Borrower or the Guarantors.
6.8 Transactions with Affiliates. Directly or indirectly, enter into
any transaction (including the sale, lease, or exchange of Property or the
rendering of service) with any of its Affiliates, other than upon fair and
reasonable terms no less favorable than could be obtained in an arm's length
transaction with a Person which was not an Affiliate.
6.9 Lines of Business. Expand, on its own or through any Subsidiary,
into any line of business other than those in which it is engaged as of the date
hereof.
6.10 ERISA Compliance. Permit any Plan maintained by it or any
Commonly Controlled Entity to (a) engage in any Prohibited Transaction, (b)
incur any "accumulated funding deficiency," as such term is defined in Section
302 of ERISA, or (c) terminate in a manner which could result in the imposition
of a Lien on any Property of any Related Party pursuant to Section 4068 of
ERISA; or assume an obligation to contribute to any Multiemployer Plan; or
acquire any Person or the assets of any Person which has now or has had at any
time an obligation to contribute to any Multiemployer Plan.
6.11 Consolidated Tangible Net Worth. Permit Consolidated Tangible
Net Worth at any time to be less than $15,000,000 plus, for all fiscal quarters
ending subsequent to December 31, 1994, 50% of positive Consolidated Net Income
and 100% of all cash equity proceeds, net of expenses incurred in connection
with the offering transaction.
6.12 Debt Service Ratio. Permit, as of the close of any fiscal
quarter ending after December 31, 1995, the ratio of (a) Cash Flow for such
fiscal quarter to (b) Debt Service for such fiscal quarter to be less than 1.25
to 1.00.
ARTICLE VII
EVENTS OF DEFAULT
7.1 Enumeration of Events of Default. Any of the following events
shall constitute an Event of Default:
(a) default shall be made in the payment when due of any installment
of principal or interest under this Agreement or the Note or in the payment
when due of any fee or other sum payable under any Loan Document and, with
respect to the payment of interest only, such default shall continue for
three days;
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(b) default shall be made by the Borrower or any Guarantor in the due
observance or performance of any of their respective obligations under the
Loan Documents, other than as described in Section 7.1(a), and with respect
to default in the observance or performance of obligations under Article V
only, such default shall continue for 30 days after the earlier of notice
thereof to the Borrower by the Lender or knowledge thereof by the Borrower
or any Guarantor;
(c) any representation or warranty made by the Borrower or any
Guarantor in any of the Loan Documents proves to have been untrue in any
material respect or any representation, statement (including Financial
Statements), certificate, or data furnished or made to the Lender in
connection herewith proves to have been untrue in any material respect as
of the date the facts therein set forth were stated or certified;
(d) default shall be made by any Related Party (as principal or
guarantor or other surety) in the payment or performance of any bond,
debenture, note, or other Indebtedness exceeding $100,000 other than Non-
Recourse Debt or under any credit agreement, loan agreement, indenture,
promissory note, or similar agreement or instrument executed in connection
with any of the foregoing, and such default shall remain unremedied for in
excess of the period of grace, if any, with respect thereto;
(e) the Borrower 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 Borrower to obtain a Loan, and such
inability shall continue for a period in excess of 30 days;
(f) any Related Party shall (i) apply for or consent to the
appointment of a receiver, trustee, or liquidator of it or all or a
substantial part of its assets, (ii) file a voluntary petition commencing
an Insolvency Proceeding, (iii) make a general assignment for the benefit
of creditors, (iv) be unable, or admit in writing its inability, to pay its
debts generally as they become due, or (v) file an answer admitting the
material allegations of a petition filed against it in any Insolvency
Proceeding;
(g) an order, judgment, or decree shall be entered against any Related
Party by any court of competent jurisdiction or by any other duly
authorized authority, on the petition of a creditor or otherwise, granting
relief in any Insolvency Proceeding or approving a petition seeking
reorganization or an arrangement of its debts or appointing a receiver,
trustee, conservator, custodian, or liquidator of it or all or any
substantial part of its assets, and such order, judgment, or decree shall
not be dismissed or stayed within 30 days;
(h) the levy against any significant portion of the Property of any
Related Party, or any execution, garnishment, attachment, sequestration, or
other writ or
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similar proceeding which is not permanently dismissed or discharged within
30 days after the levy;
(i) a final and non-appealable order, judgment, or decree shall be
entered against any Related Party for money damages and/or Indebtedness due
in an amount in excess of $500,000, and such order, judgment, or decree
shall not be dismissed or stayed within 30 days;
(j) any Related Party shall have (i) concealed, removed, or diverted,
or permitted to be concealed, removed, or diverted, any part of its
Property, with intent to hinder, delay, or defraud its creditors or any of
them, (ii) made any transfer of its Property to or for the benefit of a
creditor at a time when other creditors similarly situated have not been
paid, or (iii) shall have suffered or permitted, while insolvent, any
creditor to obtain a Lien upon any of its Property through legal
proceedings or distraint which is not vacated within 30 days from the date
thereof;
(k) any Guaranty shall for any reason cease to be in full force and
effect or any Security Instrument shall for any reason not, or cease to,
create valid and perfected first-priority Liens against the Collateral
purportedly covered thereby; or
(l) any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan; any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, shall exist with respect to any Plan for
which an excise tax is due or would be due in the absence of a waiver; a
Reportable Event shall occur with respect to, or proceedings shall commence
to have a trustee appointed, or a trustee shall be appointed, to administer
or to terminate, any Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Lender, likely to result in the termination of
such Plan for purposes of Title IV of ERISA; any Single Employer Plan shall
terminate for purposes of Title IV of ERISA; the Borrower or any Commonly
Controlled Entity shall incur, or in the reasonable opinion of the Lender,
be likely to incur any liability in connection with a withdrawal from, or
the Insolvency or Reorganization of, a Multiemployer Plan; or any other
event or condition shall occur or exist with respect to a Plan and the
result of such events or conditions referred to in this Section 7.1(l)
could subject the Borrower or any Commonly Controlled Entity to any tax
(other than an excise tax under Section 4980 of the Code), penalty or other
liabilities which taken in the aggregate would have a Material Adverse
Effect and any such circumstance shall exist for in excess of 30 days.
7.2 Remedies. (a) Upon the occurrence of an Event of Default
specified in Sections 7.1(f) or 7.1(g), immediately and without notice, (i) all
Obligations shall automatically
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become immediately due and payable, without presentment, demand, protest, notice
of protest, default, or dishonor, notice of intent to accelerate maturity,
notice of acceleration of maturity, or other notice of any kind, except as may
be provided to the contrary elsewhere herein, all of which are hereby expressly
waived by the Borrower; (ii) the Commitment shall immediately cease and
terminate unless and until reinstated by the Lender in writing; and (iii) the
Lender is hereby authorized at any time and from time to time, without notice to
the Borrower (any such notice being expressly waived by the Borrower), to set-
off and apply any and all deposits (general or special, time or demand,
provisional or final) held by the Lender and any and all other indebtedness at
any time owing by the Lender to or for the credit or account of the Borrower
against any and all of the Obligations.
(b) Upon the occurrence of any Event of Default other than those
specified in Sections 7.1(f) or 7.1, (i) the Lender may, by notice to the
Borrower, declare all Obligations immediately due and payable, without
presentment, demand, protest, notice of protest, default, or dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity, or other
notice of any kind, except as may be provided to the contrary elsewhere herein,
all of which are hereby expressly waived by the Borrower; (ii) the Commitment
shall immediately cease and terminate unless and until reinstated by the Lender
in writing; and (iii) the Lender is hereby authorized at any time and from time
to time, without notice to the Borrower (any such notice being expressly waived
by the Borrower), to set-off and apply any and all deposits (general or special,
time or demand, provisional or final) held by the Lender and any and all other
indebtedness at any time owing by the Lender to or for the credit or account of
the Borrower against any and all of the Obligations although such Obligations
may be unmatured.
(c) Upon the occurrence of any Event of Default, the Lender may, in
addition to the foregoing in this Section, exercise any or all of its rights and
remedies provided by law or pursuant to the Loan Documents.
ARTICLE VIII
MISCELLANEOUS
8.1 Transfers; Participations. (a) The Borrower may not assign any
of its rights or obligations under any Loan Document without the prior consent
of the Lender.
(b) The Lender may grant participations in the Obligations or any
portion thereof to any investment or commercial bank, savings and loan
institution, insurance company, trust company, or affiliate of the Lender (such
grantee, a "Participant"), provided that the Lender shall retain the exclusive
right and obligation to administer the Loans and the grant of any participation
shall not relieve the Lender of its obligations under this Agreement or under
any of the other Loan Documents. In addition, with the consent of the Borrower,
which will not be unreasonably withheld, the Lender may sell, transfer, or
assign the Obligations or any portion thereof to any financial institution (such
assignee, a "Transferee"). The Borrower agrees that each Transferee may
exercise all rights (including, without limitation, rights of set-off) with
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respect to the portion of the Obligations held by it as fully as if such
Transferee were the direct holder thereof, subject to any agreements between
such Transferee and the transferor to such Transferee, and the transferor to
such Transferee shall be relieved of its obligations under the Loan Documents to
the extent such obligations are assumed by such Transferee. The Lender may
forward to each Participant and Transferee and prospective Participant and
Transferee all documents and information relating to the Obligations, whether
furnished by the Borrower or otherwise obtained, as the Lender determines
necessary or desirable.
(c) Notwithstanding anything in this Section to the contrary, the
Lender may assign and pledge the Note or any interest therein to any Federal
Reserve Bank or the United States Treasury as collateral security pursuant to
Regulation A of the Board of Governors of the Federal Reserve System and any
operating circular issued by such Federal Reserve System and/or such Federal
Reserve Bank. No such assignment or pledge shall release the Lender from its
obligations hereunder.
(d) Notwithstanding any other provisions of this Section, no transfer
or assignment of the interests or obligations of any Lender or grant of
participations therein shall be permitted if such transfer, assignment, or grant
would require the Borrower to file a registration statement with the Securities
and Exchange Commission or any successor or analogous Governmental Authority or
qualify the Loans under the "Blue Sky" laws of any state.
8.2 Survival of Representations, Warranties, and Covenants. All
representations and warranties of the Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Note and the
Security Instruments and shall remain in force and effect so long as any
Obligation is outstanding or any Commitment exists.
8.3 Notices and Other Communications. Except as to oral notices
expressly authorized herein, which oral notices shall be confirmed in writing,
all notices, requests, and communications hereunder shall be in writing
(including by telecopy). Unless otherwise expressly provided herein, any such
notice, request, demand, or other communication shall be deemed to have been
duly given or made when delivered by hand, or, in the case of delivery by mail,
two Business Days after deposited in the mail, certified mail, return receipt
requested, postage prepaid, or, in the case of telecopy notice, when receipt
thereof is acknowledged orally or by written confirmation report, addressed as
follows:
(a) if to the Lender, to:
Compass Bank - Houston
24 Greenway Plaza, Suite 1401
Houston, Texas 77046
Attention: Dorothy Marchand Wilson
Telecopy: (713) 968-8222
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(b) if to the Borrower, to:
Patrick Petroleum Corporation of Michigan
333 Texas Street, Suite 1350
Shreveport, Louisiana 71101
Attention: Walter G. Goodrich
Telecopy: (318) 429-2339
Any party may, by proper written notice hereunder to the others,
change the individuals or addresses to which such notices to it shall thereafter
be sent.
8.4 Parties in Interest. All covenants and agreements herein
contained by or on behalf of the Borrower, any Guarantor, or the Lender shall be
binding upon the Borrower, such Guarantor, or the Lender, as the case may be,
and their respective legal representatives, successors, and assigns.
8.5 Rights of Third Parties. All provisions herein are imposed
solely and exclusively for the benefit of the Borrower and the Lender and their
successors and assigns. No other Person (including, without limitation, the
Guarantors) shall have any right, benefit, priority, or interest hereunder or as
a result hereof or have standing to require satisfaction of provisions hereof in
accordance with their terms.
8.6 No Waiver; Rights Cumulative. No course of dealing on the part
of the Lender, its officers or employees, nor any failure or delay by the Lender
with respect to exercising any of its rights under any Loan Document shall
operate as a waiver thereof. The rights of the Lender under the Loan Documents
shall be cumulative and the exercise or partial exercise of any such right shall
not preclude the exercise of any other right. The making of any Loan shall not
constitute a waiver of any of the covenants, warranties, or conditions of the
Borrower contained herein. In the event the Borrower is unable to satisfy any
such covenant, warranty, or condition, the making of any Loan shall not have the
effect of precluding the Lender from thereafter declaring such inability to be
an Event of Default as hereinabove provided.
8.7 Survival Upon Unenforceability. In the event any one or more of
the provisions contained in any of the Loan Documents or in any other instrument
referred to herein or executed in connection with the Obligations shall, for any
reason, be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
of any Loan Document or of any other instrument referred to herein or executed
in connection with such Obligations.
8.8 Amendments; Waivers. Neither this Agreement nor any provision
hereof may be amended, waived, discharged, or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
amendment, waiver, discharge, or termination is sought.
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8.9 Controlling Agreement. In the event of a conflict between the
provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall control.
8.10 Release by Borrower. Notwithstanding the assignment made and
evidenced by the Assignment and the assumption by the Lender of certain
obligations and liabilities of the Existing Lender pursuant thereto, the
Borrower hereby releases and discharges the Lender from all obligations, claims,
losses, causes of action, and liabilities, of whatsoever kind or nature, whether
heretofore or hereafter accruing, whether now known or unknown, arising under or
in connection with any Existing Loan Document or any act or omission by the
Existing Lender under or in connection with any Existing Loan Document;
provided, however, nothing set forth in this Section shall relieve the Lender
from its obligations and liabilities under the Loan Documents (other than the
Assignment) to which it is a party.
8.11 Governing Law. THIS AGREEMENT, THE NOTE, AND THE GUARANTIES AND
ALL ISSUES ARISING IN CONNECTION THEREWITH AND THE TRANSACTIONS CONTEMPLATED
THEREBY SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS, WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW; 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.
8.12 Jurisdiction and Venue. ALL ACTIONS OR PROCEEDINGS WITH RESPECT
TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR
FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE
DISCRETION AND ELECTION OF THE LENDER, IN COURTS HAVING SITUS IN HOUSTON, HARRIS
COUNTY, TEXAS. THE BORROWER 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 LENDER IN ACCORDANCE WITH THIS SECTION.
8.13 Waiver of Rights to Jury Trial. THE BORROWER AND THE LENDER
HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM,
OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE LENDER IN THE
ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF THIS SECTION
ARE A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT.
8.14 Entire Agreement. THIS AGREEMENT AMENDS, RESTATES, AND REPLACES
THE EXISTING CREDIT AGREEMENT AND CONSTITUTES THE ENTIRE AGREEMENT AMONG THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL
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SUPERSEDE ANY PRIOR AGREEMENT AMONG THE PARTIES HERETO, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT HEREOF, INCLUDING, WITHOUT LIMITATION, THE EXISTING
CREDIT AGREEMENT AND THE CORRESPONDENCE DATED MAY 26, 1995, FROM THE LENDER TO
GOODRICH AND THE TERM SHEET ENCLOSED THEREWITH. FURTHERMORE, IN THIS REGARD,
THIS 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 SUCH PARTIES.
8.15 Counterparts. For the convenience of the parties, this Agreement
may be executed in multiple counterparts and by different parties hereto in
separate counterparts, each of which for all purposes shall be deemed to be an
original and all of which together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
BORROWER:
PATRICK PETROLEUM CORPORATION
OF MICHIGAN
By: /s/ Walter G. Goodrich
Walter G. Goodrich
President
LENDER:
COMPASS BANK - HOUSTON
By: /s/ Dorothy Marchand Wilson
Dorothy Marchand Wilson
Vice President
Applicable Lending Office
for Floating Rate Loans
and LIBO Rate Loans:
24 Greenway Plaza, Suite 1401
Houston, Texas 77046
(Signatures Continued on Next Page)
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Joining in the execution hereof for the limited purpose of making the
representations, warranties, and covenants set forth in Articles IV, V, and VI
only:
GOODRICH PETROLEUM CORPORATION
By: /s/ Walter G. Goodrich
Walter G. Goodrich
President
PATRICK PETROLEUM COMPANY
By: /s/ Walter G. Goodrich
Walter G. Goodrich
President
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EXHIBIT I
[FORM OF NOTE]
PROMISSORY NOTE
$50,000,000 Houston, Texas ______________, 1995
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned ("Maker")
promises to pay to the order of COMPASS BANK -- HOUSTON ("Payee"), at its
banking quarters in Houston, Harris County, Texas, the sum of FIFTY MILLION
DOLLARS ($50,000,000), 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 and Payee (as amended, restated, or supplemented from time to time, the
"Credit Agreement"), together with interest at the rates and calculated as
provided in the Credit Agreement.
Reference is hereby 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 hereunder.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is the "Note" under, and is payable
as provided in the Credit Agreement. This Note evidences, in whole or in part,
the renewal, extension, and rearrangement of the Indebtedness evidenced by the
Existing Notes. Without being limited thereto or thereby, this Note is secured
by the Security Instruments.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING
TO CONFLICTS OF LAW; 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.
PATRICK PETROLEUM CORPORATION
OF MICHIGAN
By:
----------------------------
Printed Name:
------------------
Title:
-------------------------
I-i
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EXHIBIT II
[FORM OF BORROWING REQUEST]
Compass Bank - Houston
24 Greenway Plaza, Suite 1401
Houston, Texas 77046
Attention: Dorothy Marchand Wilson
Re: Credit Agreement dated as of August 16, 1995, by and between Patrick
Petroleum Corporation of Michigan and Compass Bank - Houston (as
amended, restated, or supplemented from time to time, the "Credit
Agreement")
Ladies and Gentlemen:
Pursuant to the Credit Agreement, the Borrower hereby makes the
requests indicated below:
/ / 1. Loans
(a) Amount of new Loan: $________________
(b) Requested funding date: _______________, 199___
(c) $________________ of such Loan is to be a Floating Rate Loan; and
$________________ of such Loan is to be a LIBO Rate Loan.
(d) Requested Interest Period for LIBO Rate Loan: ____ months.
/ / 2. Continuation or conversion of LIBO Rate Loan maturing on
_______________, 199___:
(a) Amount to be continued as a LIBO Rate Loan is $________________, with
an Interest Period of ____ months; and
(b) Amount to be converted to a Floating Rate Loan is $________________.
/ / 3. Conversion of Floating Rate Loan:
(a) Requested conversion date: _______________, 199___.
(b) Amount to be converted to a LIBO Rate Loan is $________________, with
an Interest Period of _____ months.
The undersigned certifies that [s]he is the [______________] of the
Borrower, has obtained all consents necessary, and as such is authorized to
execute this request on behalf of the Borrower. The undersigned further
certifies, represents, and warrants on behalf of the
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Borrower that no Default or Event of Default exists, and the Borrower is
entitled to receive the requested borrowing, continuation, or conversion under
the terms and conditions of the Credit Agreement.
Each capitalized term used but not defined herein shall have the
meaning assigned to such term in the Credit Agreement.
Very truly yours,
PATRICK PETROLEUM CORPORATION
OF MICHIGAN
By:
----------------------------
Printed Name:
------------------
Title:
-------------------------
II-ii
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EXHIBIT III
[FORM OF COMPLIANCE CERTIFICATE]
__________, 19__
Compass Bank - Houston
24 Greenway Plaza, Suite 1401
Houston, Texas 77046
Attention: Dorothy Marchand Wilson
Re: Credit Agreement dated as of August 16, 1995, by and between Patrick
Petroleum Corporation of Michigan and Compass Bank - Houston (as amended,
restated, or supplemented from time to time, the "Credit Agreement")
Ladies and Gentlemen:
Pursuant to applicable requirements of the Credit Agreement, the
undersigned, as Responsible Officers of the Borrower and the Guarantors, hereby
certify to you the following information as true and correct as of the date
hereof or for the period indicated, as the case may be:
[1. To the best of the knowledge of the undersigned, no Default or Event of
Default exists as of the date hereof or has occurred since the date of our
previous certification to you, if any.]
[1. To the best of the knowledge of the undersigned, the following Defaults
or Events of Default exist as of the date hereof or have occurred since
the date of our previous certification to you, if any, and the actions set
forth below are being taken to remedy such circumstances:]
2. The compliance of the Related Parties with the financial covenants of the
Credit Agreement, as of the close of business on ,
is evidenced by the following:
(a) Section 6.11: Consolidated Tangible Net Worth
Required Actual
Not less than $15,000,000
plus, after December 31, 1994,
50% of positive Consolidated
Net Income and 100% of cash
equity proceeds net of expenses $_______________
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(b) Section 6.12: Debt Service Ratio
Required Actual
-------- --------
Not less than 1.25 to 1.00 ______ to 1.0
3. No Material Adverse Effect has occurred since the date of the Financial
Statements dated as of _______________________.
Each capitalized term used but not defined herein shall have the meaning
assigned to such term in the Credit Agreement.
Very truly yours,
PATRICK PETROLEUM CORPORATION
OF MICHIGAN
By:
Printed Name:
Title:
GOODRICH PETROLEUM CORPORATION
By:
Printed Name:
Title:
PATRICK PETROLEUM COMPANY
By:
Printed Name:
Title:
III-ii
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EXHIBIT IV
[FORM OF OPINION OF COUNSEL]
[Closing Date]
Compass Bank - Houston
24 Greenway Plaza, Suite 1401
Houston, Texas 77046
Attention: Dorothy Marchand Wilson
Re: Credit Agreement dated as of ________________, 1995, by and between
Patrick Petroleum Corporation of Michigan and Compass Bank -- Houston
(the "Credit Agreement")
Ladies and Gentlemen:
We have acted as counsel to Patrick Petroleum Corporation of Michigan,
a Michigan corporation (the "Borrower"), Goodrich Petroleum Corporation, a
Delaware corporation ("Goodrich"), and Patrick Petroleum Company, a Delaware
corporation ("Patrick of Delaware") in connection with the transactions
contemplated in the Credit Agreement. This Opinion is delivered pursuant to
Section 3.1(__) of the Credit Agreement, and the Lender is hereby authorized to
rely upon this Opinion in connection with the transactions contemplated in the
Credit Agreement. Each capitalized term used but not defined herein shall have
the meaning assigned to such term in the Credit Agreement.
In our representation of the Borrower and the Guarantors (each, a
"Loan Party" and collectively, the "Loan Parties"), we have examined an executed
counterpart of each of the following (the "Loan Documents," with the documents
described in (e) through (m) below being the "Security Instruments"):
(a) the Credit Agreement;
(b) the Promissory Note dated of even date herewith in the amount of
$50,000,000 from the Borrower payable to the Lender;
(c) the Guaranty dated of even date herewith by Goodrich in favor of
the Lender;
(d) the Guaranty dated of even date herewith by Patrick of Delaware in
favor of the Lender;
IV-i
<PAGE>
(e) Assignment of Notes, Liens, Security Interests, and Other Rights
dated of even date herewith from First Union National Bank of North
Carolina (the "Existing Lender") to the Lender (the "Assignment");
(f) Non-Standard Assignment and Amendment of Financing Statements
constituent to the Assignment (the "Financing Statement Assignments");
(g) Ratification of and Amendment to Mortgage, Deed of Trust,
Indenture, Security Agreement, Assignment of Production, and Financing
Statement dated of even date herewith by and between the Borrower and the
Lender (the "Ratification");
(h) Mortgage, Deed of Trust, Indenture, Security Agreement, Assignment
of Production, and Financing Statement dated of even date herewith from the
Borrower in favor of the Lender (the "Borrower Mortgage");
(i) Non-Standard Financing Statement from the Borrower, as debtor,
constituent to the Borrower Mortgage (the "Borrower Financing Statement");
(j) Security Agreement (Stock Pledge) dated of even date herewith from
the Borrower in favor of the Lender (the "Borrower Stock Pledge");
(k) Non-Standard Financing Statement from the Borrower, as debtor,
constituent to the Marcum Stock Pledge;
(l) Security Agreement (Stock Pledge) dated of even date herewith from
Patrick of Delaware in favor of the Lender (the "Patrick of Delaware Stock
Pledge"); and
(m) Non-Standard Financing Statement from Patrick of Delaware, as
debtor, constituent to the Patrick of Delaware Stock Pledge.
We have also examined the originals, or copies certified to our
satisfaction, of such other records of the Loan Parties, certificates of public
officials and officers of the Loan Parties, agreements, instruments, and
documents as we have deemed necessary as a basis for the opinions hereinafter
expressed.
In making such examinations, we have, with your permission, assumed:
(a) the genuineness of all signatures to the Loan Documents other than
those of the Loan Parties;
(b) the authenticity of all documents submitted to us as originals and
the conformity with the originals of all documents submitted to us as
copies;
IV-ii
<PAGE>
(c) the Lender is authorized and has the power to enter into and
perform its obligations under the Credit Agreement;
(d) the due authorization, execution, and delivery of all Loan
Documents by each party thereto other than the Loan Parties; and
(e) each of the Loan Parties has title to all Property covered or
affected by any Security Instruments to which it is a party.
Based upon the foregoing and subject to the qualifications set forth
herein, we are of the opinion that:
1. The Loan Parties are corporations duly organized, legally
existing, and in good standing under the laws of their respective states of
incorporation. The Borrower and Patrick of Delaware are duly qualified as
foreign corporations and are in good standing in the States of Texas and
____________________. Goodrich is duly qualified as a foreign corporation
and is in good standing in the States of Texas and
___________________________.
2. The execution and delivery by each Loan Party of the Loan
Documents to which it is a party and the payment and performance of all
Obligations of such Loan Party thereunder are within the power of such Loan
Party, have been duly authorized by all necessary corporate action by such
Loan Party, and do not (a) require the consent of any Governmental
Authority, (b) contravene or conflict with any Requirement of Law or the
certificate or articles of incorporation and bylaws or other organizational
or governing documents of such Loan Party, (c) to our knowledge after due
inquiry, contravene or conflict with any indenture, instrument, or other
agreement to which such Loan Party is a party or by which any Property of
such Loan Party may be presently bound or encumbered, or (d) result in or
require the creation or imposition of any Lien upon any Property of such
Loan Party other than as contemplated by the Loan Documents.
3. The Assignment constitutes the legal, valid, and binding
obligations of the Existing Lender, enforceable against the Existing Lender
in accordance with its terms.
4. Each Loan Document constitutes the legal, valid, and binding
obligation of each Loan Party party thereto, enforceable against such Loan
Party in accordance with its terms.
5. The forms of the Assignment, the Financing Statement Amendments,
the Ratification, the Borrower Mortgage, the Borrower Financing Statement,
and the descriptions of the Mortgaged Property (as defined in the
Ratification, the "Previously Mortgaged Property"), and the Mortgaged
Property
IV-iii
<PAGE>
(as defined in the Borrower Mortgage, the "Borrower Newly Mortgaged
Property"), situated in the States of Texas or Louisiana satisfy all
applicable laws of such states and are legally sufficient under the laws of
such states to enable the Lender to realize the practical benefits
purported to be afforded by the Assignment, the Ratification, and the
Borrower Mortgage.
6. The Assignment and the Financing Statement Assignments,
collectively, transfer from the Existing Lender to the Lender the rights of
the Existing Lender under the Security Instruments (as such term is defined
in the Assignment and so used in this paragraph) listed in Exhibit A to the
Assignment as having been filed and/or recorded within the State of Texas
(the "Assigned Security Instruments").
7. The Ratification continues the liens and security interests under
the Security Instruments (as such term is defined in the Ratification and
so used in this paragraph) listed in Exhibit A to the Ratification as
having been filed and/or recorded within the State of Texas (the "Existing
Mortgages") to secure the Indebtedness (as defined in the Existing
Mortgages, as amended by the Ratification).
8. The Borrower Mortgage (a) creates a lien upon and a security
interest in all Borrower Newly Mortgaged Property situated in the State of
Texas to secure the Indebtedness (as such term is defined in the Borrower
Mortgage) and (b) provides for nonjudicial foreclosure remedies customarily
used in the State of Texas.
9. The Assignment, the Financing Statement Assignments, the Borrower
Mortgage, and the Borrower Financing Statement are in satisfactory form for
filing and recording in the offices described below.
10. The filing and/or recording, as the case may be, of (a) the
Assignment in each office in the State of Texas in which the Assigned
Security Instruments were filed, (b) the Financing Statement Assignments in
each office in the State of Texas in which the original financing
statements described therein were filed, and (c) the Ratification in each
office in the State of Texas in which the Existing Mortgages were filed are
the only recordings or filings in the State of Texas necessary (i) in
connection with the transfer of the liens, security interests, and other
rights transferred by the Assignment, (ii) to continue the liens and
security interests under the Existing Mortgage to secure the Indebtedness
(as defined in the Existing Mortgages, as amended by the Ratification), or
(iii) to permit the Lender to enforce in the State of Texas its rights
under the Existing Mortgages, as amended by the Ratification. No other
documents or instruments need be recorded, registered, or filed in any
public office in the State of Texas in connection with the transfer made by
the Assignment, for the validity and enforceability of the Assignment or
the Ratification, or to permit the Lender to
IV-iv
<PAGE>
enforce in the State of Texas its rights under the Assignment, the
Assignment Security Instruments, or the Existing Mortgages. No subsequent
filing, re-filing, recording, or re-recording will be required in the State
of Texas in order to continue the perfection of the liens and security
interests created by the Existing Mortgages or continued by the
Ratification.
11. The filing and/or recording, as the case may be, of (a) the
Borrower Mortgage in the office of the county clerk of each county in the
State of Texas in which any portion of the Borrower Newly Mortgaged
Property is located and as a financing statement in the office of the
Secretary of State of the State of Texas, and (b) the Borrower Financing
Statement in the Uniform Commercial Code records in each county in the
State of Texas in which any portion of the Borrower Newly Mortgaged
Property is located are the only recordings or filings in the State of
Texas necessary to perfect the liens and security interests in the Borrower
Newly Mortgaged Property created by the Borrower Mortgage or to permit the
Lender to enforce in the State of Texas its rights under the Borrower
Mortgage. No subsequent filing, re-filing, recording, or re-recording will
be required in the State of Texas in order to continue the perfection of
the liens and security interests created by the Borrower Mortgage except
that (a) a continuation statement must be filed with respect to the
Borrower Mortgage filed as a financing statement in the office of the
Secretary of State of the State of Texas and with respect to the Borrower
Financing Statement in the Uniform Commercial Code records in each county
in the State of Texas in which any portion of the Borrower Newly Mortgaged
Property is located, each within six months prior to the expiration of five
years from the date of the relevant initial financing statement filing, (b)
a subsequent continuation statement must be filed within six months prior
to the expiration of each subsequent five-year period from the date of each
initial financing statement filing, and (c) amendments or supplements to
the Borrower Mortgage filed as a financing statement and the Borrower
Financing Statement and/or additional financing statements may be required
to be filed in the event of a change in the name, identity, or structure of
the Borrower or in the event the financing statement filing otherwise
becomes inaccurate or incomplete.
12. Each of the Borrower Stock Pledge and the Patrick of Delaware
Stock Pledge (the "Stock Pledges") creates a valid security interest in
favor of the Lender in the Collateral (as defined in the respective Stock
Pledges) to the extent the UCC is applicable thereto as security for
payment of the Obligations. Each of the Non-Standard Financing Statements
constituent to the Stock Pledges is in an appropriate form for filing under
the UCC. The filing of (a) the Non-Standard Financing Statement
constituent to the Borrower Stock Pledge in the office of the Secretary of
State for the States of Michigan and Texas and (b) the Non-Standard
Financing Statement constituent to the Patrick of Delaware Stock Pledge in
the office of the Secretary of State for the States of Michigan and Texas
will result in the perfection of the security interests. No subsequent
filing, re-filing,
IV-v
<PAGE>
recording, or re-recording will be required in order to continue the
perfection of such security interests except that (a) a continuation
statement must be filed with respect to each of such financing statements
in such offices within six months prior to the expiration of five years
from the date of the relevant initial financing statement filing, (b) a
subsequent continuation statement must be filed within six months prior to
the expiration of each subsequent five-year period from the date of each
initial financing statement filing, and (c) amendments or supplements to
such financing statements and/or additional financing statements may be
required to be filed in the event of a change in the name, identity, or
structure of the debtor thereunder or in the event the financing statement
filing otherwise becomes inaccurate or incomplete.
13. To our knowledge after due inquiry, except as disclosed in
Exhibit V to the Credit Agreement, no litigation or other action of any
nature affecting any Loan Party is pending before any Governmental
Authority or threatened against any Loan Party. To our knowledge after due
inquiry, no unusual or unduly burdensome restriction, restraint, or hazard
exists by contract, Requirement of Law, or otherwise relative to the
business or operations of any Loan Party or the ownership and operation of
any Properties of any Loan Party other than such as relate generally to
Persons engaged in business activities similar to those conducted by such
Loan Party.
14. No authorization, consent, approval, exemption, franchise, permit
or license of, or filing (other than filing of Security Instruments in
appropriate filing offices) with, any Governmental Authority or any other
Person is required to authorize or is otherwise required in connection with
the valid execution and delivery by the Loan Parties of the Loan Documents
or any instrument contemplated thereby, or the payment performance by the
Loan Parties of their respective Obligations.
15. No transaction contemplated by the Loan Documents is in violation
of any regulations promulgated by the Board of Governors of the Federal
Reserve System, including, without limitation, Regulations G, T, U, or X.
16. The Borrower is not, nor is the Borrower directly or indirectly
controlled by or acting on behalf of any Person which is, an "investment
company" or an "affiliated person" of an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
17. The Borrower is not a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company,"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
IV-vi
<PAGE>
The opinions expressed herein are subject to the following qualifications
and limitations:
A. We are licensed to practice law only in the States of Texas and
Louisiana and other jurisdictions whose laws are not applicable to the
opinions expressed herein; accordingly, the foregoing opinions are limited
solely to the laws of the States of Texas and Louisiana, applicable United
States federal law, and the corporation laws of the States of Delaware,
Nevada, and Texas.
B. The validity, binding effect, and enforceability of the Loan
Documents may be limited or affected by bankruptcy, insolvency, moratorium,
reorganization, or other similar laws affecting rights of creditors
generally, including, without limitation, statutes or rules of law which
limit the effect of waivers of rights by a debtor or grantor; provided,
however, that the limitations and other effects of such statutes or rules
of law upon the validity and binding effect of the Loan Documents should
not differ materially from the limitations and other effects of such
statutes or rules of law upon the validity and binding effect of credit
agreements, promissory notes, guaranties, and security instruments
generally.
C. The enforceability of the respective obligations of the Loan
Parties under the Loan Documents is subject to general principles of equity
(whether such enforceability is considered in a suit in equity or at law).
This Opinion is furnished by us solely for the benefit of the Lender
in connection with the transactions contemplated by the Loan Documents and is
not to be quoted in whole or in part or otherwise referred to or disclosed in
any other transaction.
Very truly yours,
IV-vii
<PAGE>
EXHIBIT V
DISCLOSURES
Section 4.8 Liabilities
None
Litigation
See attached Schedule 1
Section 4.12 Environmental Matters
None, except as reflected on Schedule I
Section 4.17 Refunds
None
Section 4.18 Gas Contracts
None
Section 4.20 Casualties
None
Section 4.22 Subsidiaries of Goodrich
Name State of Incorporation
Patrick Petroleum Company Delaware
Patrick Petroleum Corporation
of Michigan Michigan
American National Petroleum Company Nevada
Pecos Pipeline & Producing Company Texas
National Marketing Company Delaware
<PAGE>
LECE, Inc. Texas
Drilling & Workover Company, Inc. Louisiana
Subsidiaries of Patrick of Delaware
Name State of Incorporation
Patrick Petroleum Corporation
of Michigan Michigan
American National Petroleum Company Nevada
Pecos Pipeline & Producing Company Texas
National Marketing Company Delaware
LECE, Inc. Texas
Drilling & Workover Company, Inc. Louisiana
Subsidiaries of Borrower
Name State of Incorporation
None
Section 6.5 Investments
Marcum Stock
Marcum Warrants and any stock acquired pursuant thereto
Penske Stock
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
================================================================================================================================
LEASEHOLD, WELL DATE PROBABLE
OR MONETARY CASE TRIAL PPC
CASE CAPTION LOCAL COUNSEL INTEREST AFFECTED FILED DATE CONTACT
================================================================================================================================
<C> <C> <C> <C> <C> <C>
Amarex, Inc. v. Patrick John K. Preston, Esq. Potential liability 12-18-84 Unknown John Brody
Petroleum Company Kirk & Chaney for $21,282
U.S. Bankruptcy Ct. 101 Park Avenue
Western District, OK Suite 1800
(In re: Amarex, Oklahoma City, OK
BK82-D2334[A], 73102-7202
Chapter 11), Adversary (405) 235-1333
Proceeding No. 84-0983
NATURE OF CASE
- --------------
Plaintiff seeks collection of joint interest billings in amount of $21,282.76, withheld by Patrick due to be Lien claims on
several wells. Oral agreement for case to be dismissed as part of settlement with reorganized debtor. Debtor's counsel
failed to respond to various inquiries.
- ---------------------------------------------------------------------------------------------------------------------------------
Federal Energy John P. Brody Hester Field 5-8-88 Patrick made John Brody
Regulatory Commission Kevin L. Sykes St. James Parish, Demand proposal in
Monterey Pipeline Company Ewens, Kegler, Louisiana June, 1990 but
Demand Letter Brown, Hill & $120,433.18 Monterey failed
Ritter Co., L.P.A. with additional to respond
65 East State Street interest accruing
Suite 1800
Columbus, OH 43215
(614) 462-5400
NATURE OF CASE
- --------------
Pursuant to Order 399, FERC demands reimbursement by Patrick to Monterey relating to calculation of BTU content of natural gas.
In 1985, Patrick originally paid adjusted claim as demanded but was never notified of any discrepancy giving rise to additional
amount allegedly due. Patrick contests the demand.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
LEASEHOLD, WELL DATE PROBABLE
OR MONETARY CASE TRIAL PPC
CASE CAPTION LOCAL COUNSEL INTEREST AFFECTED FILED DATE CONTACT
================================================================================================================================
<C> <C> <C> <C> <C> <C>
Gulf Coast Vacuum Services William Craig Wyman Rick Clark
Superfund Site Liskow & Lewis
One Shell Square, 50th Fl.
New Orleans, LA 70139
(504) 581-7979
NATURE OF CASE
- --------------
EPA seeking costs (ANPC's % is 3.92% of Gulf Coast Vacuum Services "Group" and 2.115% of EPA data base) of clean-up of "hazardous
substances" at an oil field waste disposal site in Louisiana. Total clean-up costs estimated to be $15.4 million for bioremediation
method and $30 million for incineration. ANPC agreed to pay 3.09% of costs up to $16.4 million, 1.94% of costs from $16.4 million to
$23 million and 1.37% of costs in excess of $23 million.
- ---------------------------------------------------------------------------------------------------------------------------------
OGTI, INC. & KATCO, Inc. Guy E. Wall 9/93 UNKNOWN Rick Clark
v. Coastal Oil and Gas, et al. Paul E. Bollington
Civil District Court Gordon, Arata, McCollum &
for the Parish of Orleans, Duplantis, L.L.P.
State of Louisiana No. 93-14243 Place St. Charles
201 St. Charles Avenue,
4th Floor
New Orleans, LA 70170-4000
(504) 582-1120
NATURE OF CASE
- --------------
OGTI/KATCO seeks damages from numerous defendants for environmental cleanup in an unstated amount. PPC may interplead PPC's
insurers.
- -----------------------------------------------------------------------------------------------------------------------------------
PAB Oil and Chemical Craig Wyman S. Mallard Bay N/A N/A Rick Clark
Services, Inc. (Superfund Liskow & Lewis
Site) One Shell Square
Vermilion Parish, 50th Floor
Louisiana New Orleans, LA 70139-5001
(504) 581-7979
NATURE OF CASE
- --------------
The USEPA issued notice to PPC demanding reimbursement costs for PAB Superfund Site. Patrick qualifies as de minimis potentially
responsible party because records reflects only 160 BBLS of waste attributable to PPC. Settlement discussions are ongoing with EPA
concerning two settlement proposals: (1) $201 per BBL total cashout; (2) $155 BBL with potential for EPA to demand more if cleanup
costs exceed $19 million. The two proposals would affect PPC as follows: (1) $32,160; (2) $24,800 (with potential for "reopener").
PPC accepted the $32,160 "de minimis" proposal and the final agreement in process of being approved.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT VI
----------
FIELD: BEAR LAKE
WELL NAME: WELLER #11-25
LOCATION: E/2NW/4 SECTION 25, T23N-R15W
INTERESTS: WORKING: 35.000% NET REVENUE: 27.05109%
STATE: : MICHIGAN
COUNTY/PARISH: : MANISTEE
PROSPECT: : TERRA 10 WELL PROGRAM
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000003941 00 EDWIN N HANNULA ET UX TERRA ENERGY LTD 09/20/1988 11/18/88
09/20/1990 511 816
----TOWNSHIP: 23N RANGE: 15W SECTION: 25 --------
W/2W/2SE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003942 00 DWAYNE LINDEMAN ET UX TERRA ENERGY LTD 11/06/1988 11/18/88
11/06/1991 511 820
----TOWNSHIP: 23N RANGE: 15W SECTION: 25 --------
E/2W/2SE/4NW/4
- ------------------------------------------------------------------------------------------------------------------------------
000003943-A 00 THOMAS N BRUNNER ET UX TERRA ENERGY LTD 12/01/1988 02/28/89
12/01/1990 515 831
----TOWNSHIP: 23N RANGE: 15W SECTION: 25 --------
W/2W/2E/2SE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003943-B 00 NORMAN C BRUNNER ET UX TERRA ENERGY LTD 12/01/1988 02/28/89
12/01/1990 515 833
----TOWNSHIP: 23N RANGE: 15W SECTION: 25 --------
W/2W/2E/2SE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003943-C 00 CRYSTAL VILLAGE, INC. TERRA ENERGY LTD 02/01/1989 02/10/89
ET UX 02/01/1991 515 308
----TOWNSHIP: 23N RANGE: 15W SECTION: 25 --------
W/2W/2E/2SE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003943-D 00 JOHN W BUCKNER ET UX TERRA ENERGY LTD 12/20/1988 02/10/89
12/01/1990 515 320
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FIELD: BEAR LAKE
WELL NAME: WELLER #11-25
LOCATION: E/2NW/4 SECTION 25, T23N-R15W
INTERESTS: WORKING: 35.000% NET REVENUE: 27.05109%
STATE : : MICHIGAN
COUNTY/PARISH: : MANISTEE
PROSPECT: : TERRA 10 WELL PROGRAM
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000003943-D 00 JOHN W BUCKNER ET UX TERRA ENERGY LTD (CONTINUED)
DESCRIPTION:
----TOWNSHIP: 23N RANGE: 15W SECTION: 25 --------
W/2W/2E/2SE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003943-E 00 CHARLES L LUXFORD TERRA ENERGY LTD 12/01/1988 02/10/89
ET UX 12/01/1990 515 322
----TOWNSHIP: 23N RANGE: 15W SECTION: 25 --------
W/2W/2E/2SE/4NW/4
- ------------------------------------------------------------------------------------------------------------------------------
000003943-F 00 TED A STRUBLE ET UX TERRA ENERGY LTD 12/01/1988 02/10/89
12/01/1990 515 324
----TOWNSHIP: 23N RANGE: 15W SECTION: 25 --------
W/2W/2E/2SE/4NW/4
- ------------------------------------------------------------------------------------------------------------------------------
000003943-G 00 WILLIAM WARREN
CORTEGGIANO ET UX TERRA ENERGY LTD 12/01/1988 02/10/89
12/01/1990 515 306
----TOWNSHIP: 23N RANGE: 15W SECTION: 25 --------
W/2W/2E/2SE/4NW/4
- ------------------------------------------------------------------------------------------------------------------------------
000003944 00 WILLIAM M HOAGLUND 09/20/1988 11/18/88
ET UX TERRA ENERGY LTD 09/20/1991 511 818
----TOWNSHIP: 23N RANGE: 15W SECTION: 25 --------
W/2E/2E/2SE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003945 00 WILLIAM J. ARGUE, II. TERRA ENERGY LTD 10/18/1988 11/18/88
ET UX 12/01/1991 511 812
----TOWNSHIP: 23N RANGE: 15W SECTION: 25 --------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FIELD: BEAR LAKE
WELL NAME: WELLER #11-25
LOCATION: E/2NW/4 SECTION 25, T23N-R15W
INTERESTS: WORKING: 35.000% NET REVENUE: 27.05109%
STATE : : MICHIGAN
COUNTY/PARISH: : MANISTEE
PROSPECT: : TERRA 10 WELL PROGRAM
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000003945 00 WILLIAM J. ARGUE, II. TERRA ENERGY LTD (CONTINUED)
ET UX DESCRIPTION:
E/2E/2E/2SE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003946-A 00 RAY N. WELLER TERRA ENERGY LTD 9/20/1988 11/18/88
9/20/1991 511 826
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003946-B 00 MILTON W WELLER ET UX TERRA ENERGY LTD 09/20/1988 11/18/88
09/20/1990 511 824
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003946-C 00 PATSY ANN RISSER TERRA ENERGY LTD 12/27/1988 02/01/89
12/27/1990 514 954
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003946-D 00 HENRY L WELLER ET UX TERRA ENERGY LTD 09/20/1988 11/18/88
09/20/1990 511 822
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003946-E 00 KENNETH R. CLOSSON TERRA ENERGY LTD 09/20/1988 11/18/88
ET UX 09/20/1991 511 814
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> FIELD: BEAR LAKE
WELL NAME: WELLER #11-25
LOCATION: E/2NW/4 SECTION 25, T23N-R15W
INTERESTS: WORKING: 35.000% NET REVENUE: 27.05109%
STATE: : MICHIGAN
COUNTY/PARISH: : MANISTEE
PROSPECT: : TERRA 10 WELL PROGRAM
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000003946-F 00 G. THOMAS BAIJ TERRA ENERGY LTD 12/01/1988 02/28/89
ET UX 12/01/1990 515 837
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003946-G 00 WILLIAM L MCCARTHY TERRA ENERGY LTD 12/01/1988 02/10/89
12/01/1990 515 316
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003946-H 00 H. BEN LOSETH ET UX TERRA ENERGY LTD 12/01/1988 02/10/89
12/01/1990 515 314
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003946-I 00 THOMAS CLARE ET UX TERRA ENERGY LTD 03/21/1989 04/20/89
03/21/1991 517 641
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003946-J 00 ROGER R CARD TERRA ENERGY LTD 12/01/1988 03/06/89
12/01/1990 515 954
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003946-K 00 BARRY SYLVAN LUBECK TERRA ENERGY LTD 12/01/1988 02/10/89
ET UX 12/01/1990 515 312
</TABLE>
<PAGE>
FIELD: BEAR LAKE
WELL NAME: WELLER #11-25
LOCATION: E/2NW/4 SECTION 25, T23N-R15W
INTERESTS: WORKING: 35.000% NET REVENUE: 27.05109%
STATE: : MICHIGAN
COUNTY/PARISH: : MANISTEE
PROSPECT: : TERRA 10 WELL PROGRAM
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000003946-K 00 BARRY SYLVAN LUBECK TERRA ENERGY LTD (CONTINUED)
ET UX DESCRIPTION:
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003946-L 00 COMERICA BANK OF MIDLAND, TERRA ENERGY LTD 12/01/1988 03/22/89
TRUSTEE 12/01/1990 516 407
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003946-M 00 RICHARD BEHRENS ET UX TERRA ENERGY LTD 12/01/1988 04/20/89
12/01/1990 517 645
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003946-N 00 WILLIAM CLARE ET UX TERRA ENERGY LTD 03/21/1989 04/20/89
03/21/1991 517 639
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003946-O 00 RUSSELL D OTTERBINE TERRA ENERGY LTD 12/01/1988 02/10/89
12/01/1990 515 310
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- ----------------------------------------------------------------------------------------------------------------------------
000003946-P OO C.M.V. PROPERTIES TERRA ENERGY LTD 12/01/1988 02/10/89
12/01/1990 515 318
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
</TABLE>
<PAGE>
FIELD: BEAR LAKE
WELL NAME: WELLER #11-25
LOCATION: E/2NW/4 SECTION 25, T23N-R15W
INTERESTS: WORKING: 35.000% NET REVENUE: 27.05109%
STATE: : MICHIGAN
COUNTY/PARISH: : MANISTEE
PROSPECT: : TERRA 10 WELL PROGRAM
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000003946-P 00 C.M.V. PROPERTIES TERRA ENERGY LTD (CONTINUED)
DESCRIPTION:
NE/4NW/4
- ------------------------------------------------------------------------------------------------------------------------------
000003946-Q 00 EDWARD FARBER ET UX TERRA ENERGY LTD 12/01/1988 04/20/89
12/01/1990 517 643
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- ------------------------------------------------------------------------------------------------------------------------------
000003946-R 00 RICHARD MAZUR ET UX TERRA ENERGY LTD 12/01/1988 02/10/89
12/01/1990 515 328
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- ------------------------------------------------------------------------------------------------------------------------------
000003946-S 00 GUY WATROUS ET UX TERRA ENERGY LTD 12/01/1988 02/28/89
12/01/1990 515 829
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- ------------------------------------------------------------------------------------------------------------------------------
000003946-T 00 ELAINE RAPANOS TERRA ENERGY LTD 12/01/1988 02/28/89
12/01/1990 515 841
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- ------------------------------------------------------------------------------------------------------------------------------
000003946-U 00 EDWARD D. OSOSKI TERRA ENERGY LTD 12/01/1988 03/22/89
ET UX 12/01/1990 516 405
TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FIELD: BEAR LAKE
WELL NAME: WELLER #11-25
LOCATION: E/2NW/4 SECTION 25, T23N-R15W
INTERESTS: WORKING: 35.000% NET REVENUE: 27.05109%
STATE : : MICHIGAN
COUNTY/PARISH: : MANISTEE
PROSPECT: : TERRA 10 WELL PROGRAM
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000003946-V 00 BYRON P GALLAGHER TERRA ENERGY LTD 03/21/1989 04/20/89
ET UX 03/21/1991 517 647
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- ----------------------------------------------------------------------------------------------------------------------------
000003946-W 00 FISHER OIL COMPANY TERRA ENERGY LTD 12/01/1988 02/10/89
12/01/1990 515 326
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- -----------------------------------------------------------------------------------------------------------------------------
000003946-X 00 JAMES N VAN DAM TERRA ENERGY LTD 03/01/1989 06/13/89
03/01/1991 519 408
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
NE/4NW/4
- ----------------------------------------------------------------------------------------------------------------------------
000003947 00 DOROTHY A MAIDENS TERRA ENERGY LTD 05/01/1990 05/29/90
05/01/1992 531 938
-----TOWNSHIP: 23N RANGE: 15W SECTION: 25 -----
E/2W/2E/2SE/4NW/4
</TABLE>
<PAGE>
FIELD: COLFAX
WELL NAMES: HUDSON #2-19
LOCATION: PARTIAL SECS. 17, 18, 19, 20. T15N-R9W
INTERESTS: WORKING: 23.94685% NET REVENUE: 21.01993%
STATE : : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000002871 *00 JAMES O MANEKE ET UX NORTHERN MICHIGAN 07/14/1987 07/31/87
EXPLORATION CO. 07/14/1992 453 261
-----TOWNSHIP: 15N RANGE: 9W SECTION: 20 -----
A PARCEL OF LAND IN THE NE/4 OF THE NW/4 OF SECTION 20. BEG
AT THE 1/4 CORNER BETWEEN SECTION 17 & 20 OF SAID COLFAX
TOWNSHIP TH N 89 DEG 30' W 300 FT TH S 2 DEG 31' E 383 FT TH
S 89 DEG 30' E 300 FT TH N 2 DEG 31' W 383 FT TO POB.
- -----------------------------------------------------------------------------------------------------------------------------
000002873 *00 WILLIAM W NEWMAN NORTHERN MICHIGAN 07/16/1987 07/31/87
ET UX EXPLORATION CO. 07/16/1992 453 257
-----TOWNSHIP: 15N RANGE: 9W SECTION: 20 -----
PART OF THE E/2 OF NW/4 BEG S 89 DEG 30' W 300 FT FROM THE
NE CORNER TH N 89 DEG 30' W 150 FT TH S 2 DEG 31' E 383 FT
TH S 89 DEG 30' E 150 FT TH N 2 DEG 31' W 383 FT TO POB.
- -----------------------------------------------------------------------------------------------------------------------------
000002875 *00 FLOYD J MOULTER NORTHERN MICHIGAN 07/16/1987 07/31/87
ET UX EXPLORATION CO 07/16/1992 453 253
-----TOWNSHIP: 15N RANGE: 9W SECTION: 18 -----
PART OF E/2 OF SE/4 BEG AT SE CORNER TH N 480 FT TH W 175 FT
TH SW TO A POINT 240 FT N AND 315 FT W OF POB TH S 240 FT TH
TH 3 315 FT TO POB.
- -----------------------------------------------------------------------------------------------------------------------------
000002876 *00 LOREN A STILES ET UX NORTHERN MICHIGAN 07/17/1987 07/31/87
EXPLORATION CO. 07/17/1992 453 251
-----TOWNSHIP: 15N RANGE: 9W SECTION: 19 -----
THAT PART OF THE NW/4 OF NE/4 DESCRIBED AS BEG AT A POINT ON
THE NORTH AND SOUTH 1/4 LINE OF SAID SECTION WHICH IS S 01
DEG 38" W 603.7 FT FROM N 1/4 POST OF SAID SECTION TH S 88
DEG 22" E 236.2 FT TH S 01 DEG 8" E 130.4 FT TH SOUTH 300 FT
* INSOFAR AND ONLY INSOFAR as said Oil and Gas Lease covers those formations from the surface of the earth down to and including
the base of the Cabot Head (a/k/a Clinton) formation, but reserving and retaining such lease insofar as it covers those formations
below the base of the Cabot Head (a/k/a Clinton) formation, together with the WELL BORE of the Hudson #1-19A Well, and also
reserving and retaining fifty percent (50%) of the interest of Mortgagor in and to the surface equipment and the production
facilities appurtenant thereto and/or in connection with, or as an incident to the operation of said wells.
</TABLE>
<PAGE>
FIELD: COLFAX
WELL NAME: HUDSON #2-19
LOCATION: PARTIAL SECS. 17, 18, 19, 20, T15N-R9W
INTERESTS: WORKING: 23.94685% NET REVENUE: 21.01993%
STATE : : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000002876 *00 LOREN A STILES ET UX NORTHERN MICHIGAN EXPLORATION CO. (CONTINUED)
DESCRIPTION:
TH WESTERLY TO A POINT BEING S 01 DEG 38" W 430.4 FT FROM
THE POB, TH N 01 DEG 38" E 430.4 FT TO THE POB.
- ----------------------------------------------------------------------------------------------------------------------------
000002886 *00 DARYL YOUNG ET UX NORTHERN MICHIGAN 07/21/1987 08/19/87
EXPLORATION CO. 07/21/1992 453 1451
-----TOWNSHIP: 15N RANGE: 9W SECTION: 20 -----
BEG AT THE NW CORNER OF THE W/2 W/2 OF NW/4 TH E 206 FT TH S
400 FT TH W 206 FT TH N 400 FT TO POB.
- ----------------------------------------------------------------------------------------------------------------------------
000002887 *00 RANDALL L PARK ET UX NORTHERN MICHIGAN 07/22/1987 08/19/87
EXPLORATION CO. 07/22/1992 453 1454
-----TOWNSHIP: 15N RANGE: 9W SECTION: 18 -----
PART OF THE E/2 OF SE/4 BEGINNING 287 FT E OF SW CORNER
THEREOF, TH N 581 FT TH E 140 FT TH S 581 FT TH W 140 FT TO
POB.
- -----------------------------------------------------------------------------------------------------------------------------
000002888-A *00 GAROLD E WIBLE ET AL NORTHERN MICHIGAN 07/21/1987 08/19/87
EXPLORATION CO 07/21/1992 453 1456
-----TOWNSHIP: 15N RANGE: 9W SECTION: 19 -----
THE S 170 FT OF THE W 250 FT OF THE NE/4.
- -----------------------------------------------------------------------------------------------------------------------------
000002888-B *00 EDWARD M. WIBLE ET UX NORTHERN MICHIGAN 10/21/1987 11/05/87
EXPLORATION CO 10/21/1992 456 1443
-----TOWNSHIP: 15N RANGE: 9W SECTION: 19 -----
THE S 170 FT OF THE W 250 FT OF THE NE/4.
* INSOFAR AND ONLY INSOFAR as said Oil and Gas Lease covers those formations from the surface of the earth down to and including the
base of the Cabot Head (a/k/a Clinton) formation, but reserving and retaining such lease insofar as it covers those formations below
the base of the Cabot Head (a/k/a Clinton) formation, together with the WELL BORE of the Hudson #1-19A Well, and also reserving and
retaining fifty percent (50%) of the interest of the Mortgagor in and to the surface equipment and the production facilities
appurtenant thereto and/or in connection with, or as an incident to the operations of said wells.
</TABLE>
<PAGE>
FIELD: COLFAX
WELL NAME: HUDSON #2-19
LOCATION: PARTIAL SECS. 17, 18, 19, 20, T15N-R9W
INTERESTS: WORKING: 23.94685% NET REVENUE: 21.01993%
STATE : : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000002889 *00 DOUGLAS W COVEY ET UX NORTHERN MICHIGAN 07/23/1987 08/19/87
EXPLORATION CO 07/23/1992 453 1458
-----TOWNSHIP: 15N RANGE: 9W SECTION: 19 -----
THAT PART OF THE NW/4 OF NE/4 DESCRIBED AS BEG AT A POINT ON
THE N LINE OF SAID SECTION WHICH IS 621 FT W OF E 1/8 POST
OF SAID SECTION TH S 330 FT TH W 104 FT TH N 330 FT TH E 104
FT TO THE POB.
- ----------------------------------------------------------------------------------------------------------------------------
000002896 *00 Carole L VanSyckle NORTHERN MICHIGAN 07/21/1987 08/19/87
EXPLORATION CO 07/21/1992 453 1472
-----TOWNSHIP: 15N RANGE: 9W SECTION: 19 -----
THE N 346 FT OF THE E 125 FT OF THE NE/4.
- ----------------------------------------------------------------------------------------------------------------------------
000003060-01 *00 JACK D PARK ET UX NORTHERN MICHIGAN 03/26/1987
EXPLORATION CO. 03/26/1992 448 1158
-----TOWNSHIP: 15N RANGE: 9W SECTION: 18 -----
THE E/2 OF THE SE/4 EXC BEG 300 FT SOUTH OF THE NW CORNER
THEREOF TH E 165 FT S 165 FT TH W 165 FT TH N 165 FT TO
THE POB. ALSO EXC BEG 875 FT N OF THE SW CORNER THEREOF TH
E 300 FT TH N 500 FT TH W 300 FT TH S 500 FT TO THE POB.
ALSO EXC BEG 287 FT E OF THE SW CORNER THEROF TH N 581 FT
TH E 290 FT TH S 281 FT TH E 200 FT TH S 300 FT TH W 490 FT
TO THE POB. ALSO EXC BEG AT THE SE CORNER THEROF TH N 480
FT TH W 175 FT TH SOUTHWESTERLY TO A POINT THAT IS 240 FT N
AND 315 FT W OF THE POB. TH S 240 FT TH E 315 FT TO THE POB.
- ----------------------------------------------------------------------------------------------------------------------------
000003060-02 *00 JACK D PARK ET UX NORTHERN MICHIGAN 03/26/1987
EXPLORATION CO 03/26/1992 448 1158
-----TOWNSHIP: 15N RANGE: 9W SECTION: 18 -----
* INSOFAR AND ONLY INSOFAR as said Oil and Gas Lease covers those formations from the surface of the earth down to and
including the base of the Cabot Head (a/k/a Clinton) formation, but reserving and retaining such lease insofar as it
covers those formations below the base of the Cabot Head (a/k/a Clinton) formation, together with the WELL BORE of
the Hudson #1-19A Well, and also reserving and retaining fifty percent (50%) of the interest of Mortgagor in and to
the surface equipment and the production facilities appurtenant thereto and/or in connection with, or as an incident
to the operations of said wells.
</TABLE>
<PAGE>
FIELD: COLFAX
WELL NAME: HUDSON #2-19
LOCATION: PARTIAL SECS. 17, 18, 19, 20, 5, T15N-RW
INTERESTS: WORKING: 23.94685% NET REVENUE: 21.01993%
STATE : : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000003060-02 *00 JACK D PARK ET UX NORTHERN MICHIGAN (CONTINUED)
EXPLORTAION CO
DESCRIPTION:
THE E/2 OF THE SE/4 EXC BEG 300 FT SOUTH OF THE NW CORNER
THEREOF TH E 165 FT S 165 FT W 165 FT TH NORTH 165 FT
TO THE POB. ALSO EXC BEG 875 FT NORTH OF THE SW CORNER
THEREOF TH E 300 FT TH N 500 FT W 300 FT TH SOUTH 500 FT
TO THE POB. ALSO EXC BEG 287 FT EAST OF THE SW CORNER
THEREOF TH N 581 FT TH E 290 FT TH SOUTH 281 FT TH EAST 200
FT TH SOUTH 300 FT TH WEST 490 FT TO THE POB. ALSO EXC BEG
AT THE SE CORNER THEREOF TH N 480 FT TH W 175 FT TH SOUTH-
WESTERLY TO A POINT THAT IS 240 FT NORTH AND 315 FT WEST OF
THE POB TH SOUTH 240 FT TH EAST 315 FT TO POB.
- -----------------------------------------------------------------------------------------------------------------------------
000003061-A *00 LAWRENCE L MORNINGSTAR NORTHERN MICHIGAN 03/27/1987
ET UX EXPLORATION CO 03/27/1992 448 1162
-----TOWNSHIP: 15N RANGE: 9W SECTION: 18 -----
W/2 SE/4
- -----------------------------------------------------------------------------------------------------------------------------
000003061-B *00 MICHAEL J FITZGERALD NORTHERN MICHIGAN 07/16/1987 07/31/87
ET UX EXPLORATION CO 07/16/1992 453 249
-----TOWNSHIP: 15N RANGE: 9W SECTION: 18 -----
PART OF THE W/2 OF SE/4 BEG 230 FT E OF SW CORNER THEREOF TH
E 300 FT TH N 300 FT TH W 300 FT TH S 300 FT TO POB.
ALSO PART OF THE W/2 OF SE/4 BEG AT SW CORNER THEREOF TH E 230 FT
TH N 300 FT TH W 230 FT TH S 300' FT TO POB.
- ----------------------------------------------------------------------------------------------------------------------------
000003071-A01 *00 ZELMA D HUDSON KEP ENERGY RESOURCES, 12/30/1980 01/09/81
L.L.C. 12/30/1990 397 367
CORRECTION LEASE 406 485
CORRECTION LEASE 464 387
-----TOWNSHIP: 15N RANGE: 9W SECTION: 19 -----
NE/4
* INSOFAR AND ONLY INSOFAR as said Oil and Gas Lease covers those formations from the surface of the earth down to and
including the base of the Cabot Head (a/k/a Clinton) formation, but reserving and retaining such lease insofar as it
covers those formations below the base of the Cabot Head (a/k/a Clinton) formation, together with the WELL BORE of
the Hudson #1-19A Well, and also reserving and retaining fifty percent (50%) of the interest of Mortgagor in and to
the surface equipment and the production facilities appurtenant thereto and/or in connection with, or as an incident
to the operations of said wells.
</TABLE>
<PAGE>
FIELD: COLFAX
WELL NAMES: HUDSON # 2-19
LOCATION: PARTIAL SECS. 17, 18, 19, 20, T15N-R9W
INTERESTS: WORKING: 23.94685% NET REVENUE: 21.01993%
STATE : : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
000003071-A02 *00 ZELMA D HUDSON KEP ENERGY RESOURCES, L.L.C. 09/20/1988 12/30/1980
12/30/1990 397 367
-----TOWNSHIP: 15N RANGE: 9W SECTION: 19 -----
NE/4
- -----------------------------------------------------------------------------------------------------------------------------
000003075-A *00 ZELMA D HUDSON NORTHERN MICHIGAN 11/03/1987 11/24/87
EXPLORATION CO 11/03/1992 457 1182
-----TOWNSHIP: 15N RANGE: 9W SECTION: 20 -----
BEG 209 FT S OF THE NE CORNER OF THE E/2 W/2 NW/4 TH S 209
FT TH W 209 FT TH N 209 FT TH E 209 FT TO POB.
- -----------------------------------------------------------------------------------------------------------------------------
000003082-A *00 ANN S WELTON NORTHERN MICHIGAN 08/14/1987 09/25/87
EXPLORATION CO 08/14/1992 455 597
-----TOWNSHIP: 15N RANGE: 9W SECTION: 17 -----
W/2 OF SW/4
- ----------------------------------------------------------------------------------------------------------------------------
000003082-B *00 SALLY S LETTMAN NORTHERN MICHIGAN 08/14/1987 08/14/87
EXPLORATION CO 08/14/1992 454 502
-----TOWNSHIP: 15N RANGE: 9W SECTION: 17 -----
W/2 OF SW/4
- ----------------------------------------------------------------------------------------------------------------------------
000003082-C *00 DAVID C RIDENOUR NORTHERN MICHIGAN 07/23/1987 08/19/87
ET UX EXPLORATION CO. 07/23/1992 453 1460
-----TOWNSHIP: 15N RANGE: 9W SECTION: 17 -----
THAT PART OF THE W/2 OF SW/4 BEG IN SW CORNER TH N 375.55 FT
TH S 85 DEG 51' E 335.4 FT TH S 4 DEG 39' W 373.69 FT TH N
86 DEG 5' W 311.35 FT TO POB.
* INSOFAR AND ONLY INSOFAR as said Oil and Gas Lease covers those formations from the surface of the earth down to and
including the base of the Cabot Head (a/k/a Clinton) formation, but reserving and retaining such lease insofar as it
covers those formations below the base of the Cabot Head (a/k/a Clinton) formation, together with the WELL BORE of
the Hudson #1-19A Well, and also reserving and retaining fifty percent (50%) of the interest of Mortgagor in and to
the surface equipment and the production facilities appurtenant thereto and/or in connection with, or as an incident
to the operations of said wells.
</TABLE>
<PAGE>
FIELD: COLFAX
WELL NAMES: HUDSON #2-19
LOCATION: PARTIAL SECS. 17, 18, 19, 20, T15N-R9W
INTERESTS: WORKING: 23.94685% NET REVENUE: 21.01993%
<TABLE>
<CAPTION>
RECORDED
LESSOR ORIGINAL LESSEE DATE BOOK PAGE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
* VIRGINIA M. MASSEY DOMINION EXPLORATION COMPANY 12/08/86 446 403
* RONALD J. MASSEY AND DOMINION EXPLORATION COMPANY 12/09/86 446 405
WIFE, SANDI MASSEY
* JOAN HUNTER DOMINION EXPLORATION COMAPNY 12/09/86 446 427
* ELIZABETH KETTNER DOMINION EXPLORATION COMPANY 12/09/86 446 1158
* ELLEN HITCH DOMINION EXPLORATION COMPANY 12/09/86 446 1160
* SCOTT N. WHITNEY AND DOMINION EXPLORATION COMPANY 12/09/86 446 407
WIFE, MARI-ANNE WHITNEY
* DONALD L. MORRIS AND DOMINION EXPLORATION COMPANY 10/16/87 457 1064
WIFE, SANDRA MORRIS
* CAROLE L. VAN SYCKLE DOMINION EXPLORATION COMPANY 02/01/88 459 1376
* BEVERLY A. WORTH DOMINION EXPLORATION COMPANY 02/02/88 459 1378
* RICHARD C. MANOR AND DOMINION EXPLORATION COMPANY 12/10/86 446 413
WIFE, ANNA M. MANOR
* PHILLIP A. ERLEWINE AND DOMINION EXPLORATION COMPANY 01/09/87 446 423
WIFE, CARLA S. ERLEWINE
* NORMAN A. PETERSON AND DOMINION EXPLORATION COMPANY 12/08/86 446 411
JEAN M. PETERSON
* HAROLD L. GRAMS AND DOMINION EXPLORATION COMPANY 02/05/88 460 184
WIFE, JANET S. GRAMS
* INSOFAR AND ONLY INSOFAR as said Oil and Gas Lease covers those formations from the surface of the earth down to and
including the base of the Cabot Head (a/k/a Clinton) formation, but reserving and retaining such lease insofar as it
covers those formations below the base of the Cabot Head (a/k/a Clinton) formation, together with the WELL BORE of the
Hudson #1-19A Well, and also reserving and retaining fifty percent (50%) of the interest of Mortgagor in and to the
surface equipment and the production facilities appurtenant thereto and/or used in connection with, or as an incident
to the operations of said wells.
</TABLE>
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT #1-32
LOCATION: SECS. 4, 5, T15N-R9W, SECS. 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE : : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
000002874 00 JOHN R GRUNST ET UX NORTHERN MICHIGAN 07/17/1987 07/31/87
EXPLORATION CO 07/17/1992 453 255
-----TOWNSHIP: 16N RANGE: 9W SECTION: 33 -----
THAT PART OF THE SW/4 OF SW/4 DESCRIBED AS LOT 1 OF PICKERAL
LAKE MANOR #1 AS RECORDED IN LIBER 5 OF PLATS AT PAGE 6.
SECTION 33, T16N-R9W.
- -----------------------------------------------------------------------------------------------------------------------------
000003054 00 JAMES G BRAND ET UX NORTHERN MICHIGAN 06/09/1988 06/23/88
EXPLORATION CO 12/10/1991 464 1119
Amendment 465 1308
-----TOWNSHIP: 15N RANGE: 9W SECTION: 4 -----
W/2 W/2 NW/4 LYING S OF COUNTY ROAD
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
A PARCEL OF LAND BEING PART OF THE SE/4 NE/4 OF SECTION 5 DESCRIBED
AS BEING THE E 33 FT OF THE N 722 FT OF THE SE/4 AND THE E 33 FT OF
THE S 50 FT OF THE NE/4.
- -----------------------------------------------------------------------------------------------------------------------------
000003055-01 00 PETER S VANDEMARK ET UX NORTHERN MICHIGAN 06/14/1988 06/14/88
EXPLORATION CO 12/10/1991 464 1415
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
E/2 NE/4 EXCEPT LAND LYING N OF COUNTY ROAD. ALSO EXCEPT A
PARCEL OF LAND BEING PART OF THE SE/4 NE/4 OF SECTION 5
DESCRIBED AS BEING THE EAST 33 FT OF THE N 722 FT OF THE
SE/4 AND THE 33 FT OF THE S 50 FT OF THE NE/4.
- -----------------------------------------------------------------------------------------------------------------------------
000003091-A01 00 C. R. DILLMAN NORTHERN MICHIGAN 07/29/1987 08/24/87
EXPLORATION CO 07/29/1990 454 181
Amendment 476 246
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
THE W/2 OF NE FRL 1/4 EXC TWO PARCELS OF LAND HERETOFORE
SOLD AS FOLLOWS: ONE PARCEL SOLD TO WILLIAM LUCHT BY
</TABLE>
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT # 1-32
LOCATION: SECS. 4, 5, T15N-R9W, SECS. 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE : : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
000003091-A01 00 C. R. DILLMAN NORTHERN MICHIGAN (CONTINUED)
EXPLORATION CO
DESCRIPTION:
WARRANTY DEED RECORDED IN LIBER 155 OF DEEDS AT PAGE 501 AND
ONE PARCEL SOLD BY WARRANTY DEED TO FRED H BUSH RECORDED IN
LIBER 155 OF DEEDS AT PAGE 327.
- ------------------------------------------------------------------------------------------------------------------------------
000003091-B01 00 JOHN E EDAHL NORTHERN MICHIGAN 07/30/1987 08/24/87
EXPLORATION CO 07/30/1990 454 183
Amendment 471 6
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
W/2 OF NE FRL 1/4 EXC TWO PARCELS OF LAND HERETOFORE SOLD AS
FOLLOWS: ONE PARCEL SOLD TO WILLIAM LUCHT BY WARRANTY DEED
RECORDED IN LIBER 155 OF DEEDS AT PAGE 501 AND ONE PARCEL SOLD
BY WARRANTY DEED TO FRED H BUSH RECORDED IN LIBER 155 OF DEEDS
AT PAGE 327.
- ------------------------------------------------------------------------------------------------------------------------------
000003091-C01 00 BERNICE B MORROW NORTHERN MICHIGAN 07/30/1987 08/24/87
EXPLORATION CO 07/30/1990 454 185
Amendment 470 1334
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
W/2 OF NE FRL 1/4 EXC TWO PARCELS OF LAND HERETOFORE SOLD AS
FOLLOWS: ONE PARCEL SOLD TO WILLIAM LUCHT BY WARRANTY DEED
RECORDED IN LIBER 155 OF DEEDS AT PAGE 501 AND ONE PARCEL
SOLD BY WARRANTY DEED TO FRED H BUSH RECORDED IN LIBER 155
OF DEEDS AT PAGE 327.
- ------------------------------------------------------------------------------------------------------------------------------
000003091-D01 00 H.J. CHOPARD NORTHERN MICHIGAN 07/30/1987 08/24/87
EXPLORATION CO 07/30/1990 454 187
Amendment 471 4
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
W/2 OF NE FRL 1/4 EXC TWO PARCELS OF LAND HERETOFORE SOLD AS
FOLLOWS: ONE PARCEL SOLD TO WILLIAM LUCHT BY WARRANTY DEED
RECORDED IN LIBER 155 OF DEEDS AT PAGE 501 AND ONE PARCEL
</TABLE>
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT #1-32
LOCATION: SECS 4, 5, T15N-R9W, SECS 32, 33, T16N-RW
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE : : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
000003091-D01 00 H.J. CHOPARD NORTHERN MICHIGAN (CONTINUED)
EXPLORATION CO.
DESCRIPTION:
SOLD BY WARRANTY DEED TO FRED H BUSH RECORDED IN LIBER 155
OF DEEDS AT PAGE 327.
- -------------------------------------------------------------------------------------------------------------------------------
000003091-E01 00 SHIRLEY DIETER ET AL NORTHERN MICHIGAN 08/05/1987 08/28/87
EXPLORATION CO 08/05/1990 454 590
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
W/2 OF NE/4 EXC TWO PARCELS OF LAND HERETOFORE SOLD, ONE
PARCEL SOLD TO WILLIAM LUCHT BY WARRANTY DEED RECORDED IN
LIBER 155 OF DEEDS AT PAGE 301 AND ONE PARCEL SOLD BY
WARRANTY DEED TO FRED H BUSH RECORDED IN LIBER 155 OF DEEDS
AT PAGE 327.
- ------------------------------------------------------------------------------------------------------------------------------
000003091-F01 00 ANNE L MARSH NORTHERN MICHIGAN 06/01/1988 06/16/88
EXPLORATION CO 06/01/1991 464 701
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
W/2 NE/4 EXC THE FOLLOWING PARCELS OF LAND COMMENCING ON THE
N & S QUARTER LINE OF SEC 5 WHERE RYAN CREEK, SO CALLED,
CROSSES SAID QUARTER SECTION LINE AT CENTER OF SAID CREEK
RUNNING TH E ALONG CENTER 10 RODS TH DUE NORTH 15 RODS
TH WEST 10 RODS TH SOUTH ALONG SAID QUARTER SEC LINE 15
RODS TO POB. ALSO EXC COMMENCING AT A POINT ON COUNTY HIGH-
WAY 80 RODS S OF N LINE OF TOWNSHIP TH S ALONG CTR LINE OF
SAID HIGHWAY 36 RODS TH W 9 RODS TH N PARALLEL TO SAID HIGH-
WAY 36 RODS TH E 9 RODS TO POB.
- --------------------------------------------------------------------------------------------------------------------------------
000003091-N01 00 MARIE L SCHALL NORTHERN MICHIGAN 08/21/1989 09/14/89
EXPLORATION CO 08/21/1991 478 1091
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
</TABLE>
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT # 1-32
LOCATION: SECS 4, 5, T15N-R9W, SECS 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851 NET REVENUE: 25.04098%
STATE : : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
000003091-N01 00 MARIE L SCHALL NORTHERN MICHIGAN EXPLORATION (CONTINUED)
CO
DESCRIPTION:
THE W/2 NE/4 FRL. EXC COM ON COUNTY HWY
1320 FT SOUTH OF NORTH TOWNSHIP LINE TH S ON HWY 594 FT TH W
148.5 FT TH N PARRALLEL TO SAID HWY 594 FT TH E 148.5 FT TO
POB AND EXC COM AT THE INTERSECTION OF THE NORTH AND SOUTH
1/4 LINE AND RYAN CREEK TH 165 FT EAST AND WEST BY 247.5 FT
NORTH AND SOUTH.
- ------------------------------------------------------------------------------------------------------------------------------
000003091-001 00 DAVID L HEINTZ ET UX NORTHERN MICHIGAN EXPLORATION 07/17/1989 08/04/89
CO 07/17/1991 447 688
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
THE W/2 NE/4 FRL EXC COM ON COUNTY HIGHWAY
1320 FT SOUTH OF NORTH TOWNSHIP LINE TH SOUTH ON HIGHWAY 594
FT TH WEST 148.5 FT TH NORTH PARALLEL TO SAID HIGHWAY 594 FT
TH EAST 148.5 FT TO POB, AND EXCEPT COM AT THE INTERSECTION
OF THE NORTH & SOUTH 1/4 LINE AND RYAN CREEK TH 165 FT EAST
& WEST BY 247.5 FT NORTH & SOUTH.
- -----------------------------------------------------------------------------------------------------------------------------
000003091-P01 00 DOLORES M CARROLL NORTHERN MICHIGAN EXPLORATION 07/19/1989 08/18/89
CO 07/19/1991 477 1374
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
THE W/2 NE/4 FRL EXC COM ON COUNTY HIGHWAY
1320 FT SOUTH OF NORTH TOWNSHIP LINE TH SOUTH ON HIGHWAY 594
FT TH WEST 148.5 FT TH NORTH PARALLEL TO SAID HIGHWAY 594
FT TH EAST 148.5 FT TO POB, AND EXCEPT COM AT THE INTERSECTION
OF THE NORTH & SOUTH 1/4 LINE AND RYAN CREEK TH 165 FT EAST
& WEST BY 247.5 FT NORTH & SOUTH.
- -----------------------------------------------------------------------------------------------------------------------------
000003091-Q 00 DONALD E. SEABORN ET UX DOMINION EXPLORATION COMPANY 08/12/1987 11/23/87
08/12/1989 457 1052
</TABLE>
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT #1-32
LOCATION: SECS 4, 5, T15N-R9W, SECS 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE: : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000003091-Q 00 DONALD E. SEABORN ET UX DOMINION EXPLORATION COMPANY (CONTINUED)
DESCRIPTION:
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
THE W/2NE/4 EXCEPT COMMENCING ON NORTH AND SOUTH 1/4 LINE
OF SECTION 5 WHERE RYAN CREEK CROSSES SD 1/4 SECTION LINE
AT CENTER OF CREEK, RUN THENCE EAST ALONG CENTER OF CREEK
10 RODS, THENCE DUE NORTH 15 RODS, THENCE WEST 10 RODS.
THENCE SOUTH ALONG SD 1/4 SECTION 15 RODS TO POINT OF
BEGINNING AND EXCEPT COMMENCING AT A POINT ON COUNTY
HIGHWAY 80 RODS SOUTH OF NORTH LINE OF TOWNSHIP, THENCE
SOUTH ALONG CENTER LINE OF SD HIGHWAY 36 RODS, THENCE WEST
9 RODS, THENCE NORTH PARALLEL TO SD HIGHWAY 36 RODS, THENCE
EAST 9 ROADS TO POINT OF BEGINNING, MECOSTA COUNTY, MICHIGAN.
- -----------------------------------------------------------------------------------------------------------------------------
000003091-R01 00 NANCY F. SARGENT DOMINION EXPLORATION COMPANY 10/08/1986 01/14/87
10/08/1991 446 399
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
W/2 OF NE FRL 1/4 EXC TWO PARCELS OF LAND HERETOFORE SOLD AS
FOLLOWS: ONE PARCEL SOLD BY WARRANTY DEED
RECORDED IN LIBER 151 OF DEEDS AT PAGE 301 AND ONE PARCEL
SOLD BY WARRANTY DEED RECORDED IN LIBER 155
OF DEEDS AT PAGE 327.
- -----------------------------------------------------------------------------------------------------------------------------
000003091-S01 00 EMILY B. ORR DOMINION EXPLORATION COMPANY 10/06/1986 11/03/86
10/06/1991 444 516
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
W/2 OF NE FRL 1/4 EXC TWO PARCELS OF LAND HERETOFORE SOLD AS
FOLLOWS: ONE PARCEL SOLD BY WARRANTY DEED
RECORDED IN LIBER 151 OF DEEDS AT PAGE 301 AND ONE PARCEL
SOLD BY WARRANTY DEED RECORDEDA IN LIBER 155
OF DEEDS AT PAGE 327.
</TABLE>
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT #1-32
LOCATION: SECS 4, 5, T15N-R9W, SECS 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE: : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000003091-T01 00 GLENN F. BISH DOMINION EXPLORATION COMPANY 10/07/1986 11/03/96
10/07/1991 444 518
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
W/2 OF NE FRL 1/4 EXC TWO PARCELS OF LAND HERETOFORE SOLD AS
FOLLOWS: ONE PARCEL SOLD BY WARRANTY DEED
RECORDED IN LIBER 151 OF DEEDS AT PAGE 301 AND ONE PARCEL
SOLD BY WARRANTY DEED RECORDED IN LIBER 155
OF DEEDS AT PAGE 327.
- -----------------------------------------------------------------------------------------------------------------------------
0000030191-U01 00 LINNFORD M JOHNSON DOMINION EXPLORATION COMPANY 10/06/1986 11/03/86
ET UX 10/06/1991 444 512
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
W/2 OF NE FRL 1/4 EXC TWO PARCELS OF LAND HERETOFORE SOLD AS
FOLLOWS: ONE PARCEL SOLD BY WARRANTY DEED
RECORDED IN LIBER 151 OF DEEDS AT PAGE 301 AND ONE PARCEL
SOLD BY WARRANTY DEED RECORDED IN LIBER 155
OF DEEDS AT PAGE 327.
- -----------------------------------------------------------------------------------------------------------------------------
000003143 00 ST-MI-17163 CROSS COUNTRY EXPLORATION 07/10/1983 10/22/84
07/10/1990 426 295
-----TOWNSHIP: 16N RANGE: 9W SECTION: 32 -----
GOV'T LOT 2 LYING N OF 1/8 LINE RUNNING THROUGH SAID LOT.
- -----------------------------------------------------------------------------------------------------------------------------
000003144 00 ST-MI-17166 CROSS COUNTRY EXPLORATION 07/10/1983 10/22/84
07/10/1990 426 95
-----TOWNSHIP: 16N RANGE: 9W SECTION: 3 -----
NE/4 OF SW/4 SUBJECT TO EXISTING EASEMENTS CONTAINING 40
ACRES, MORE OR LESS.
GOV'T LOT 1 LYING N AND W OF PICKEREL LAKE BRANCH OF RYAN
</TABLE>
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT #1-32
LOCATION: SECS 4, 5, T15N-R9W, SECS 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE: : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000003144 00 ST-MI-17166 CROSS COUNTRY EXPLORATION (CONTINUED)
DESCRIPTION:
CREEK CONTAINING 26.50 ACRES, MORE OR LESS.
GOV'T LOT 1 LYING S AND E OF PICKEREL LAKE BRANCH OF RYAN
CREEK EXC THE S 1320 FT CONTAINING 9.61 ACRES MORE OR LESS.
SE/4 OF SW/4 EXCEPT THAT PART DESCRIBED AS COMMENCING AT SW
CORNER OF E/2 OF SW/4 TH E 330 FT TH N 500 FT PARALLEL WITH
W 1/8 LINE TH W 330 FT TO W 1/8 LINE TH S ON W 1/8 LINE TO
BEGINNING. ALSO, A GRANT OF RIGHT OF WAY FOR INGRESS AND
EGRESS OVER THE S 2 RODS OF EXCEPTED PARCEL, SUBJECT TO
EXISTING EASEMENTS CONTAINING 36.21 ACRES MORE OR LESS.
- -----------------------------------------------------------------------------------------------------------------------------
000003739 00 ROBERT J. WILLIAMS DOMINION EXPLORATION COMPANY 07/15/1987 07/30/87
ET UX 07/15/1992 453 160
-----TOWNSHIP: 16N RANGE: 9W SECTION: 33 -----
THAT PART OF THE SW/4 OF SW/4 DESCRIBED AS LOTS 2 AND 3 OF
PICKEREL LAKE MANOR #1 RECORDED IN LIBER 5 OF PLATS AT PAGE
6, MECOSTA COUNTY, MICHIGAN.
- -----------------------------------------------------------------------------------------------------------------------------
000003741 00 ROBERT W. LOESCH DOMINION EXPLORATION COMPANY 07/10/1987 07/30/87
ET UX 07/10/1992 453 174
-----TOWNSHIP: 16N RANGE: 9W SECTION: 33 -----
THAT PART OF THE SW/4 OF SW/4 DESCRIBED AS LOTS 4 AND 5 OF
PICKEREL LAKE MANOR #1 RECORDED IN LIBER 5 OF PLATS AT PAGE
6, MECOSTA COUNTY, MICHIGAN.
- -----------------------------------------------------------------------------------------------------------------------------
000003742 00 JOSEPH E. OMNESS ET UX DOMINION EXPLORATION COMPANY 07/13/1987 07/30/87
07/13/1992 453 186
-----TOWNSHIP: 16N RANGE: 9W SECTION: 33 -----
THAT PART OF THE SW/4 OF SW/4 DESCRIBED AS LOT 6 AND THE
</TABLE>
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT #1-32
LOCATION: SECS 4, 5, T15N-R9W, SECS 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE: : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000003742 00 JOSEPH E. OMNESS ET UX DOMINION EXPLORATION COMPANY (CONTINUED)
DESCRIPTION:
S/2 OF LOT 7 OF PICKEREL LAKE MANOR #2 SUBDIVISION, MECOSTA
COUNTY, MICHIGAN.
- -----------------------------------------------------------------------------------------------------------------------------
000003743 00 DAVID A. MONTAGUE, ET AL DOMINION EXPLORATION COMPANY 07/15/1987 07/30/87
07/15/1992 453 162
-----TOWNSHIP: 16N RANGE: 9W SECTION: 33 -----
THAT PART OF THE SW/4SW/4 DESCRIBED AS THE N/2 OF LOT 7 AND
ALL OF LOT 8 OF PICKEREL LAKE MANOR #1 AS RECORDED IN LIBER
T OF PLATS AT PAGE 6, MECOSTA COUNTY, MICHIGAN.
- -----------------------------------------------------------------------------------------------------------------------------
000003744 00 PHILLIP L. RUSH, ET UX DOMINION EXPLORATION COMPANY 07/10/1987 07/30/87
07/10/1992 453 164
-----TOWNSHIP: 16N RANGE: 9W SECTION: 33 -----
THAT PART OF THE SW/4SW/4 DESCRIBED AS LOT 9 OF
PICKEREL LAKE MANOR #1 RECORDED IN LIBER 5 OF PLATS AT PAGE
6, MECOSTA COUNTY, MICHIGAN.
- -----------------------------------------------------------------------------------------------------------------------------
000003745 00 PAUL E. CRAVEN ET UX DOMINION EXPLORATION COMPANY 07/14/1987 07/30/87
07/14/1992 453 190
-----TOWNSHIP: 16N RANGE: 9W SECTION: 33 -----
THAT PART OF THE SW/4SW/4 DESCRIBED AS LOT 11, EXCEPT THE
SOUTH 30 FEET THEREOF; AND LOT 12 OF PICKEREL LAKE MANOR #2
SUBDIVISION AS PLATTED IN LIBER 5 OF PLATS AT PAGE
20, MECOSTA COUNTY, MICHIGAN.
- -----------------------------------------------------------------------------------------------------------------------------
000003746 00 JOHN M. POWERS ET UX DOMINION EXPLORATION COMPANY 07/12/1987 07/30/87
07/12/1992 453 170
</TABLE>
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT #1-32
LOCATION: SECS 4, 5, T15N-R9W, SECS 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE : : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
000003746 00 JOHN M. POWERS ET UX DOMINION EXPLORATION COMPANY (CONTINUED)
DESCRIPTION:
-----TOWNSHIP: 16N RANGE: 9W SECTION: 33 -----
THAT PART OF THE SW/4SW/4 DESCRIBED AS LOTS 13 AND 17 OF
PICKEREL LAKE MANOR #2 SUBDIVISION AS PLATTED IN LIBER 5 OF
PLATS AT PAGE 20, MECOSTA COUNTY, MICHIGAN
- ----------------------------------------------------------------------------------------------------------------------------
000003747 00 MARY L. HALL DOMINION EXPLORATION COMPANY 07/10/1987 07/30/87
07/10/1992 453 176
-----TOWNSHIP: 16N RANGE: 9W SECTION: 33 -----
LOTS 14, 18, 19, 20 AND ALSO LOT 22, EXCEPT A PARCEL 100
FEET NORTH AND SOUTH BY 25 FEET EAST AND WEST IN THE SE
CORNER OF SAID LOT 22, ALL LOCATED IN PICKEREL LAKE MANOR
SUBDIVISION, RECORDED IN LIBER 5 OF PLATS AT PAGE 6,
MECOSTA COUNTY, MICHIGAN
- ---------------------------------------------------------------------------------------------------------------------------
000003748 00 WILLIAM L. ZUIDEMA ET UX DOMINION EXPLORATION COMPANY 07/10/1987 07/30/87
07/10/1992 453 178
-----TOWNSHIP: 16N RANGE: 9W SECTION: 33 -----
THAT PART OF THE SW/4SW/4 DESCRIBED AS LOT 21 OF
PICKEREL LAKE MANOR #2 RECORDED IN LIBER 5 OF PLATS AT PAGE
6, MECOSTA COUNTY, MICHIGAN.
- --------------------------------------------------------------------------------------------------------------------------
000003749 00 JACK HILDEBRAND ET UX DOMINION EXPLORATION COMPANY 08/04/1987 11/23/87
08/04/1992 457 1048
-----TOWNSHIP: 16N RANGE: 9W SECTION: 33 -----
LOT 23 OF PICKEREL LAKE MANOR #2 SUBDIVISION AND THE EAST
25 FEET OF THE SOUTH 100 FEET OF LOT 22 OF PICKEREL LAKE
MANOR #2 SUBDIVISION, MECOSTA COUNTY, MICHIGAN
</TABLE>
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT #1-32
LOCATION: SECS 4, 5, T15N-R9W, SECS 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE : : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
000003750 00 RANDY F. STEPHAN ET UX DOMINION EXPLORATION COMPANY 07/14/1987 07/30/87
07/14/1992 453 182
-----TOWNSHIP: 16N RANGE: 9W SECTION: 33 -----
THAT PART OF GOVERNMENT LOT 1 DESCRIBED AS COMMENCING
1889.28 FEET WEST OF THE SOUTH 1/4 POST. THENCE NORTH 33
DEG. 45' EAST 151.28 FEET, THENCE WESTERLY 227.65 FEET TO
LAKE, THENCE SOUTHWESTERLY ALONG LAKE SHORE TO THE SOUTH
SECTION LINE. THENCE EASTERLY TO POINT OF BEGINNING,
MECOSTA COUNTY, MICHIGAN
- -----------------------------------------------------------------------------------------------------------------------------
000003753 00 RUTH E CARLSON DOMINION EXPLORATION COMPANY 01/25/1988 04/14/88
01/25/1993 462 452
-----TOWNSHIP: 16N RANGE: 9W SECTION: 32 -----
NW/4SE/4, SE/4SE/4
- -----------------------------------------------------------------------------------------------------------------------------
000003754 00 JAMES E. HELDENBRAND ET UX DOMINION EXPLORATION COMPANY 10/20/1988 11/15/88
10/20/1993 470 16
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
BEGINNING AT A POINT ON THE NORTH BOUNDARY OF SECTION 5 THAT
IS 2113.0 FEET EAST OF QUARTER CORNER ON THE NORTH SIDE OF
SAID SECTION, THENCE SOUTH 66 DEG. 44' EAST 524.64 FEET TO
A STAKE NEXT TO A CHERRY TREE, THENCE NORTH 57 DEG. 07'
EAST 118 FEET TO SHORE LINE OF PICKEREL LAKE, THENCE
FOLLOWING ALONG SHORE LINE OF PICKEREL LAKE IN A NORTHERLY
DIRECTION APPROXIMATELY 175 FEET TO NORTH SECTION LINE OF
SAID SECTION, THENCE WEST ALONG SAID NORTH SECTION LINE OF
SAID SECTION TO POINT OF BEGINNING, MECOSTA COUNTY, MICHIGAN
- ----------------------------------------------------------------------------------------------------------------------------
000003755 00 LYLE M. JORGENSEN DOMINION EXPLORATION COMPANY 07/11/1987 07/30/87
07/11/1992 453 172
</TABLE>
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT #1-32
LOCATION: SECS 4, 5, T15N-R9W, SECS 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE: : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
000003755 00 LYLE M. JORGENSEN DOMINION EXPLORATION COMPANY (CONTINUED)
DESCRIPTION
-----TOWNSHIP: 15N RANGE: 9W SECTION: 4 -----
W/2W/2NW/4 LYING SOUTH OF THE LAKE AND NORTH OF COUNTY
ROAD
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
A PARCEL IN THE NE/4 DESCRIBED AS COMMENCING AT THE NW
CORNER OF THE NE/4 THENCE EAST 2113.00 FEET. THENCE SOUTH
66 DEG. 44' EAST 197.70 FEET TO POINT OF BEGINNING. THENCE
SOUTH 45 DEG. 35' EAST TO EAST SECTION LINE. THENCE NORTH
TO LAKE. THENCE SOUTH 57 DEG. 7' WEST 118 FEET, THENCE
NORTH 66 DEG. 44' WEST 326.94 FEET TO POINT OF BEGINNING,
MECOSTA COUNTY, MICHIGAN
- ------------------------------------------------------------------------------------------------------------------------------------
000003757 00 WILLIAM H. LUCHT DOMINION EXPLORATION COMPANY 07/14/1989 07/24/89
07/14/1992 476 1409
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
PART OF W/2NE/4 FRL. COMMENCING AT INTERSECTION OF NORTH
AND SOUTH 1/4 LINE AND RYAN CREEK, 165 FEET EAST AND WEST
BY 247.5 FEET NORTH AND SOUTH, MECOSTA COUNTY, MICHIGAN
- ------------------------------------------------------------------------------------------------------------------------------------
000003758 00 MARIE M. BUSH DOMINION EXPLORATION COMPANY 07/14/1989 07/24/89
07/14/1992 476 1411
-----TOWNSHIP: 15N RANGE: 9W SECTION: 5 -----
COMMENCING ON COUNTY HIGHWAY 1320 FEET SOUTH OF NORTH
TOWNSHIP LINE, SOUTH ON CENTER OF HIGHWAY 594 FEET, WEST
148.5 FEET, NORTH PARALLEL TO SAID HIGHWAY 594 FEET, EAST
148.5 FEET TO POINT OF BEGINNING IN THE W/2NW/4NE/4, MECOSTA
COUNTY, MICHIGAN
</TABLE>
90
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT #1-32
LOCATION: SECS 4, 5, T15N-R9W, SECS 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE : : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
RECORDED
LEASE ORIGINAL LEASE/EXPIRE BOOK PAGE
NUMBER LESSOR LESSEE DATES ENTRY NUMBER
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
000003759 00 CHARLES J. LEMSON ET UX DOMINION EXPLORATION COMPANY 07/13/1987 07/30/87
07/13/1992 453 166
-----TOWNSHIP: 15N RANGE: 9W SECTION: 4 -----
THAT PART OF THE NW/4 DESCRIBED AS COMMENCING AT THE
INTERSECTION OF NORTH TOWNSHIP LINE AND EASTERLY SHORELINE
OF PICKEREL LAKE, THENCE EAST APPROXIMATELY 250 FEET TO
HIGHWAY, THENCE SOUTHERLY TO A POINT OF INTERSECT OF A LINE
PARALLEL WITH AND 75 FEET DUE SOUTH OF SAID TOWNSHIP LINE.
THENCE WESTERLY ALONG LINE PARALLEL WITH SAID TOWNHIP LINE
TO SHORE OF PICKEREL LAKE, THENCE NORTHERLY ALONG SHORE TO
POINT OF BEGINNING, MECOSTA COUNTY, MICHIGAN
- -----------------------------------------------------------------------------------------------------------------------------
000003760-A 00 HARRIET V. ULRICH DOMINION EXPLORATION COMPANY 10/23/1987 11/23/87
10/23/1992 457 1066
-----TOWNSHIP: 15N RANGE: 9W SECTION: 4 -----
INSOFAR AND ONLY INSOFAR AS LEASE COVERS THE E/2NW/4 AND
THE E/2W/2NW/4, MECOSTA COUNTY, MICHIGAN
- -----------------------------------------------------------------------------------------------------------------------------
000003760-B01 00 ALAN JEROME GREGORY PLUMB ENTERPRISES INC. 03/06/1987 03/12/87
ET UX 03/06/1992 447 1291
-----TOWNSHIP: 15N RANGE: 9W SECTION: 4 -----
THE E/2 OF THE NW/4 AND THE E/2 OF THE W/2 OF THE NW/4 LYING
SOUTH OF THE COUNTY ROAD BEING IN SECTION 4, T15N, R9W
COLFAX TOWNSHIP, MECOSTA COUNTY, MICHIGAN EXCEPT A PARCEL OF
LAND DESCRIBED AS BEGINNING AT THE SW CORNER OF THE E/2 OF
THE NW/4 OF THE NW/4 OF SECTION 4 WHICH POINT OF BEGINNING
IS 1320 FEET N 00 DEG 16' EAST AND 654.7 FT E OF THE QUARTER
COR BETWEEN SEC 4 AND 5; THE N 00 DEG 16' E 501.45 FT TO A
POINT IN THE CENTERLINE OF HIGHWAY RUNNING APPROXIMATELY E
AND W; TH S 79 DEG 42' E ALONG CENTERLINE OF SAID ROAD 465
</TABLE>
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT #1-32
LOCATION: SECS 4, 5, T15N-R9W, SECS 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE : : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
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- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
000003760-B01 00 ALAN JEROME GREGORY PLUMB ENTERPRISES INC. (CONTINUED)
ET UX DESCRIPTION:
FT TH S 16 DEG 00' W 600 FT TO AN IRON STAKE AT THE MARGIN
OF MUD LAKE CREEK AND TO THE THREAD OF SAID STREAM: TH
FOLLOWING SAID STREAM TO A POINT MARKED BY AN IRON STAKE ON
THE BANK OF SAID CREEK; TH N 00 DEG 16' E 66.55 FT TO POB.
ALSO EXC A PARCEL OF LAND DESCRIBED AS BEG AT A POINT ON THE
N SEC LINE OF SEC 4 THAT IS W 1774.33 FT FROM THE N 1/4 COR:
TH S 06 DEG 54' 35" W 883.79 FT; TH S 06 DEG 59' 20" W
173.62 FT; TH N 87 DEG 59' 15" W, 402.42 FT TH N 19 DEG 09'
50" E 145.50 FT; TH N 89 DEG 56' 43" E ALONG THE CENTERLINE
OF THE COUNTY ROAD 132.00 FT; TH ALONG THE CENTERLINE OF THE
COUNTY ROAD ALONG THE ARC OF A CURVE TO THE LEFT 152.86 FT
SAID CURVE HAVING A RADIUS OF 93.05 FT AT A CENTRAL ANGLE OF 94
DEG 07' 21" AND A LONG CHORD BEARING AND DISTANCE OF N 42
DEG 53' 02" E, 136.25 FT TH N 04 DEG 10' 38" W ALONG THE
CENTERLINE OF THE COUNTY ROAD 338.20 FT; TH NORTHERLY ALONG
THE CENTERLINE OF THE COUNTY ROAD TO POB. BEING SUBJECT TO
ALL EASEMENTS AND RIGHTS OF WAY OF RECORD.
- -----------------------------------------------------------------------------------------------------------------------------
000003760-C 00 ALBERT G. FATH III, DOMINION EXPLORATION COMPANY 08/11/1987 11/23/87
ET UX 08/11/1994 457 1050
-----TOWNSHIP: 15N RANGE: 9W SECTION 4 -----
PART OF E/2NW/4NW/4 COMMENCING AT THE SW CORNER, THENCE
NORTH 00 DEG. 16' EAST 501.45 FEET TO CENTER OF ROAD.
THENCE SOUTH 79 DEG. 42' EAST 465 FEET. THENCE SOUTH
16 DEG. WEST 600 FEET TO CREEK, THENCE NORTHWESTERLY ALONG
CREEK 441 FEET, THENCE NORTH 00 DEG. 16' EAST 66.55 FEET TO
POINT OF BEGINNING, MECOSTA COUNTY, MICHIGAN
- -----------------------------------------------------------------------------------------------------------------------------
000003760-D 00 ERNEST DALE TETZLAFF BALTIC ENERGY CORP 08/03/1989 10/25/89
ET UX 08/03/1994 479 1288
</TABLE>
ET UX
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT #1-32
LOCATION: SECS 4, 5, T15N-R9W, SECS 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE : : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
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- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
000003760-D 00 ERNEST DALE TETZLAFF BALTIC ENERGY CORP (CONTINUED)
ET UX DESCRIPTION:
-----TOWNSHIP: 15N RANGE: 9W SECTION: 4 -----
PART OF NW/4 NW/4 DESCRIBED AS FOLLOWS TO-WIT: COMMENCING AT
A POINT ON THE EASTERLY SHORE OF PICKEREL LAKE AT A POINT
WHERE A LINE DRAWN PARALLEL TO THE TOWNSHIP LINE BETWEEN
COLFAX AND GRANT TOWNSHIPS 75 FT SOUTH MEASURED AT RIGHT
ANGLES FROM SAID TOWNSHIP LINE WOULD INTERSECT THE EAST
SHORE OF SAID LAKE TH EAST ALONG A LINE PARALLEL WITH SAID
TOWNSHIP LINE TO THE HIGHWAY TH SOUTHERLY ALONG SAID HIGHWAY
TO A POINT WHERE A LINE DRAWN PARALLEL TO THE FIRST BOUNDARY
LINE 100 FT SOUTH THEREOF (MEASURED AT RIGHT ANGLES) WOULD
INTERSECT SAID HIGHWAY TH WEST PARALLEL WITH SAID TOWNSHIP
LINE TO THE EASTERLY SHORE OF SAID PICKEREL LAKE TH
NORTHERLLY ALONG THE SAID LAKE SHORE TO THE POB.
- -----------------------------------------------------------------------------------------------------------------------------
000003760-E 00 PAUL J GELDHOF ET UX BALTIC ENERGY CORP 07/31/1989 10/25/89
07/31/1994 479 1286
-----TOWNSHIP: 15N RANGE: 9W SECTION: 4 -----
A PARCEL OF LAND LOCATED IN THE E/2 W/2 NW/4 OF SEC 4; BEG
AT A POINT 1688.39 FT WEST AND 175.00 FT SOUTH OF THE 1/4
CORNER ON THE NORTH SIDE SAID SECTION 4; TH W A DISTANCE
OF 233.00 FT TO THE WATER'S EDGE OF PICKEREL LAKE; TH SOUTH
11 DEG 0' WEST ALONG THE WATER'S EDGE OF PICKEREL LAKE A
DISTANCE APPROXIMATELY 50.94 FT TH EAST (PARALLEL WITH THE
NORTH BOUNDARY AND 50 FT EQUIDISTANT THEREFROM) A DISTANCE
OF 207.73 FT TH NORTH 35 DEG O' EAST ALONG THE RIGHT OF WAY
OF A TOWNSHIP ROAD A DISTANCE APPROXIMATELY 61.039 FT TO THE
POB.
- -----------------------------------------------------------------------------------------------------------------------------
000003760-F 00 JAMES W. HURLESS ET UX DOMINION EXPLORATION COMPANY 07/16/1987 07/30/87
07/16/1992 453 188
</TABLE>
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT #1-32
LOCATION: SECS 4, 5, T15N-R9W, SECS 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE: : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
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- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000003760-F 00 JAMES W. HURLESS ET UX DOMINION EXPLORATION COMPANY (CONTINUED)
DESCRIPTION:
-----TOWNSHIP: 15N RANGE: 9W SECTION: 4 -----
THAT PART OF THE E/2W/2NW/4 COMMENCING 1723.38 FEET WEST AND
225 FEET SOUTH OF 1/4 POST, THENCE WEST 207.73 FEET TO
PICKEREL LAKE, THENCE SOUTH 11 DEG. WEST APPROXIMATELY
50.94 FEET, THENCE EAST PARALLEL TO NORTH BOUNDARY AND 50
FEET THEREFROM 180.46 FEET, THENCE NORTH 35 DEG. EAST
APPROXIMATELY 61.039 FEET TO POINT OF BEGINNING. ALSO ALL
LAND EAST OF THE ABOVE DESCRIBED LYING BETWEEN WEST RIGHT OF
WAY OF ABANDONED ROAD AND CENTERLINE OF RELOCATED ROAD,
MECOSTA COUNTY, MICHIGAN
- -----------------------------------------------------------------------------------------------------------------------------
000003760-G 00 ANTHONY D KOHLER ET EX BALTIC ENERGY CORP O8/07/1989 10/25/89
08/07/1994 479 1290
-----TOWNSHIP: 15N RANGE: 9W SECTION: 4 ----
A PARCEL OF LAND FRONTING PICKEREL LAKE DESCRIBED AS FOLLOWS
BEG AT A POINT 1758.37 FT WEST AND 275 FT SOUTH OF THE ONE-
QUARTER CORNER ON THE NORTH SIDE OF SEC 4, COLFAX TOWNSHIP;
TH WEST A DISTANCE OF 180.46 FT TO THE WATERS EDGE OF
PICKEREL LAKE TH S 11 DEG 00' W ALONG THE WATER EDGE OF
PICKEREL LAKE A DISTANCE OF 50.94 FT TH EAST A DISTANCE OF
155.39 FT TH N 35 DEG 00' E ALONG THE RIGHT OF WAY OF A
TOWNSHIP ROAD A DISTANCE OF 61.039 FT TO THE POB; AND ALL
THAT PIECE OF LAND ON THE EAST SIDE OF THE PROPERTY DEEDED
BY HERBERT E. TETZLAFF AND LOTTIE I TETZLAFF TO JOHN B SHAY
AND RUSSELL D SHAY AS JOINT TENANTS WITH FULL RIGHTS OF
SURVIVORSHIP AND NOT AS TENANTS IN COMMON BETWEEN THE WEST
RIGHT-OF-WAY OF THE ABANDONED PORTION OF THE COUNTY ROAD TO
THE CENTERLINE OF THE RELOCATED ROAD AND MORE PARTICULARLY
DESCRIBED AS: BEG AT A POINT 1758.37 FT WEST AND 275 FT S OF
THE QUARTER CORNER ON THE NORTH SIDE OF SEC 4 COLFAX TWP. TH
</TABLE>
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT #1-32
LOCATION: SECS 4, 5 T15N-R9W, SECS 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE: : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
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- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000003760-G O0 ANTHONY D KOHLER ET UX BALTIC ENERGY CORP (CONTINUED)
DESCRIPTION:
S 35 DEG W 61.039 FT TO A POINT TH EAST TO THE CENTERLINE OF
THE RELOCATED AND RECONSTRUCTED COUNTY ROAD TH NORTH ALONG
THE CENTERLINE OF SAID ROAD TO A POINT DUE EAST OF THE POB
TH WEST TO THE POB.
- -----------------------------------------------------------------------------------------------------------------------------
000003760-H 00 MICHAEL K. WYMAN ET UX DOMINION EXPLORATION COMPANY 07/12/1987 07/30/87
07/12/1992 453 168
-----TOWNSHIP: 15N RANGE: 9W SECTION: 4 -----
PART OF THE NW/4 COMMENCING AT A POINT ON THE CENTERLINE OF
18 MILE ROAD THAT IS 2059.35 FEET WEST, 325 FEET SOUTH AND
00 DEG. 21' EAST 135.91 FEET FROM NORTH 1/4 CORNER OF
SECTION 4, THENCE SOUTH 172 FEET ALONG CENTERLINE OF 18 MILE
ROAD, THENCE NORTH 89 DEG. 19' WEST 410.91 FEET, THENCE
NORTH 171.44 FEET ALONG WATERS EDGE OF PICKEREL LAKE.
THENCE SOUTH 89 DEG. 19' EAST 400.82 FEET TO POINT OF
BEGINNING RESERVING EASTERLY AND SOUTHERLY 33 FEET FOR ROAD
PURPOSES, MECOSTA COUNTY, MICHIGAN.
- -----------------------------------------------------------------------------------------------------------------------------
000003760-I 00 DONNA E. YOST DOMINION EXPLORATION COMPANY 07/14/1987 07/30/87
07/14/1992 453 180
-----TOWNSHIP: 15N RANGE: 9W SECTION: 4 -----
THAT PART OF NW/4 BEGINNING AT A POINT ON CENTERLINE OF 18
MILE ROAD THAT IS 2059.35 FEET WEST, 325 FEET SOUTH AND
01 DEG. 21' EAST 135.91 FEET AND SOUTH 04 DEG. 10' EAST
172 FEET FROM NORTH 1/4 CORNER OF SECTION 4, THENCE SOUTH 04
DEG. 10' EAST 166.20 FEET, THENCE ALONG A RIGHT CURVE 136.24
FEET, THENCE SOUTH 89 DEG. 56' WEST 175 FEET, THENCE NORTH
83 DEG. 05' WEST 126 FEET, THENCE NORTH 30 DEG. 58' EAST
131 FEET ALONG WATERS EDGE OF PICKEREL LAKE, THENCE NORTH
</TABLE>
<PAGE>
FIELD: GRANT 32
WELL NAME: STATE GRANT #1-32
LOCATION: SECS 4, 5 T15N-R9W, SECS 32, 33, T16N-R9W
INTERESTS: WORKING: 31.74851% NET REVENUE: 25.04098%
STATE: : MICHIGAN
COUNTY/PARISH: : MECOSTA
PROSPECT: : COLFAX
<TABLE>
<CAPTION>
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- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000003760-I 00 DONNA E. YOST DOMINION EXPLORATION COMPANY (CONTINUED)
DESCRIPTION:
34 DEG. 18' WEST 173 FEET ALONG WATERS EDGE OF PICKEREL
LAKE. THENCE SOUTH 89 DEG. 19' EAST 410.91 FEET TO POINT OF
BEGINNING, MECOSTA COUNTY, MICHIGAN.
- -----------------------------------------------------------------------------------------------------------------------------
000003760-J 00 STEVEN W. MICHAEL NOMECO OIL & GAS CO. 01/08/1991
01/08/1992 492 68
-----TOWNSHIP: 15N RANGE: 9W SECTION: 4 -----
PART OF THE NW FRL/4 DESCRIBED AS: BEGINNING AT A POINT
WHERE THE CENTERLINE OF 18 MILE ROAD INTERSECTS WITH THE
PROPERTY LINE BETWEEN THE LYLE JORGENSEN PROPERTY AND THE
HERBERT TETZLAFF PROPERTY ON THE SOUTH SIDE OF PICKEREL
LAKE, SAID POINT ALSO LYING APPROXIMATELY 897 FEET WEST AND
680 FEET SOUTH OF A CONCRETE MONUMENT KNOWN AS THE POINT
OF BEGINNING FOR THE PLAT OF PICKEREL LAKE MANOR AS
RECORDED IN LIBER 5 OF PLATS, PAGE 6 OF THE REGISTER OF
DEEDS OFFICE, BIG RAPIDS, MICHIGAN: THENCE S 69 DEG. 55'
EAST 96.00 FEET; THENCE N 17 DEG. 42' EAST 110.25 FEET;
THENCE N 05 DEG. 48' WEST 402.70 FEET; THENCE S 75 DEG.
32' WEST 85.60 FEET; THENCE SOUTH 451.00 FEET TO THE PLACE
OF BEGINNING.
- -----------------------------------------------------------------------------------------------------------------------------
000003779 00 JOSPEH O. BAUMUNK ET UX NOMECO OIL & GAS CO. 11/20/1990 11/21/90
11/20/1991 490 1049
-----TOWNSHIP: 16N RANGE: 9W SECTION: 33 -----
LOT #10 OF PICKEREL LAKE MANOR AND THE SOUTH 30 FEET OF LOT
11 OF PICKEREL LAKE MANOR #2, INCLUDING ANY SUBMERGED LANDS
UNDERLYING THE LAKE TO WHICH LESSORS MAY CLAIM OWNERSHIP
BECAUSE OF RIPARIAN RIGHTS OR OTHER RIGHTS.
</TABLE>
\
<PAGE>
FIELD: BOUNDARY
WELL NAME: HUFF #1-32
LOCATION: E/2E/2 SEC. 31. ALL SEC. 32, T25N-R8W
INTERESTS: WORKING: .93750% NET REVENUE: .78847%
STATE: : MICHIGAN
COUNTY/PARISH: : KALKASKA
PROSPECT: : BOUNDARY
<TABLE>
<CAPTION>
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- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
000001580-A 00 ANDREW VAN TOL ET UX W J STRICKLER O6/18/1980 12/18/80
06/18/1985 195 154
-----TOWNSHIP: 25N RANGE: 8W SECTION: 32 -----
W/2NE/4 BELOW THE BASE OF THE RICHFIELD FORMATION.
-----------------------------------------------------------------------------------------------------------------------------
000001580-B 00 OWEN H. KNACK JEM PETROLEUM CORPORATION 05/17/1982 05/18/82
05/17/1985 205 442
-----TOWNSHIP: 25N RANGE: 8W SECTION: 32 -----
W/2NE/4 BELOW THE BASE OF THE RICHFIELD FORMATION.
- -----------------------------------------------------------------------------------------------------------------------------
000001596 00 CONSUMERS POWER CO NORTHERN MICHIGAN EXPLORATION 04/15/1983 05/02/83
CO 04/15/1988 214 237
-----TOWNSHIP: 25N RANGE: 8W SECTION: 32 -----
E/2 NE/4 FROM BELOW THE BASE OF THE RICHFIELD FORMATION
DOWN TO AND INCLUDING THE BASE OF THE PRAIRIE DU CHEIN
FORMATION.
</TABLE>
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made
and entered into as of the 15th day of December, 1995, by and between GOODRICH
PETROLEUM COMPANY OF LOUISIANA, a Nevada corporation, formerly known as American
National Petroleum Company ("ANPC"), successor by merger to Patrick Petroleum
Corporation of Michigan, a Michigan corporation (the "Borrower"), GOODRICH
PETROLEUM CORPORATION, a Delaware corporation ("Goodrich"), and COMPASS BANK -
HOUSTON, a state chartered Texas banking corporation (the "Lender").
W I T N E S S E T H:
WHEREAS, Patrick Petroleum Corporation of Michigan ("PPCM"), the
Lender, Goodrich, and Patrick Petroleum Company ("Patrick of Delaware") have
heretofore executed the Credit Agreement dated August 16, 1995 (the
"Agreement"), pursuant to which the Lender has extended credit to PPCM, and
Goodrich and Patrick of Delaware have guaranteed the payment and performance of
certain indebtedness and other obligations of PPCM to the Lender;
WHEREAS, PPCM has merged with and into ANPC and ANPC, as successor by
merger to PPCM, has changed its name to Goodrich Petroleum Company of Louisiana;
WHEREAS, Patrick of Delaware has merged with and into Goodrich, with
Goodrich being the surviving entity; and
WHEREAS, the Lender has consented to the transactions described above
and the parties desire to amend the Agreement to reflect the foregoing and
otherwise as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in the Agreement and this Amendment, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. As used herein, each of the terms
"Agreement," "Amendment," "ANPC," "Borrower," "Goodrich," "Lender," "Patrick of
Delaware," and "PPCM" 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 thereto in the Agreement, unless
expressly provided herein to the contrary.
<PAGE>
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
AMENDMENTS TO AGREEMENT
The Agreement is hereby amended as follows:
2.1 References to Borrower. All references to the term "Borrower" in
the Agreement are hereby amended to refer to the Borrower as such term is
defined in this Amendment.
2.2 References to Guarantors. All references to the term "Guarantors"
in the Agreement are hereby amended to refer to the Guarantor.
2.3 References to Patrick of Delaware. All references to the term
"Patrick of Delaware" in the Agreement are hereby amended to refer to Goodrich.
2.4 Amendment of Section 1.2. Section 1.2 of the Agreement is hereby
amended as follows:
(a) The following definitions are hereby amended to read as follows:
"Collateral" shall mean the Mortgaged Properties, the Marcum Stock,
the Marcum Warrants, the GPCL Stock, and any other Property now or at any
time used or intended as security for the payment or performance of all or
any portion of the Obligations.
2
<PAGE>
"Guarantor" shall mean Goodrich.
"Note" shall mean the promissory note of the Borrower in the form
attached as Exhibit I to the First Amendment to Credit Agreement dated as
of December 8, 1995, by and among the Borrower, Goodrich, and the Lender,
together with all renewals, extensions for any period, increases, and
rearrangements thereof."
(b) The following definition is added to Section 1.2 of the Agreement:
"GPCL Stock" shall mean 100% of the stock of the Borrower, which
stock is owned by Goodrich."
2.5 Amendment of Section 4.4. Section 4.4 of the Agreement is hereby
amended to read as follows:
"4.4 Security Instruments. The provisions of each Security
Instrument are effective to create in favor of the Lender, a legal, valid,
and enforceable Lien in the Collateral described therein, which Liens,
assuming the possession by the Lender of the certificates evidencing the
Marcum Stock, the Marcum Warrants, and the GPCL Stock, and the
accomplishment of recording and filing in accordance with applicable laws
prior to the intervention of rights of other Persons, shall constitute
fully perfected first-priority Liens."
2.6 Amendment of Section 4.21. Section 4.21 of the Agreement is
hereby amended to read as follows:
"4.21 Locations of Borrower. The principal place of business and
chief executive office of the Borrower is located at 5847 San Felipe, Suite
700, Houston, Texas 77057, or at such other location as the Borrower may
have, by proper written notice hereunder, advised the Lender, provided that
such other location is within a state in which appropriate financing
statements from the Borrower in favor of the Lender have been filed."
2.7 Amendment of Section 4.22. Section 4.22 of the Agreement is
hereby amended to read as follows:
"4.22 Subsidiaries. Goodrich has no Subsidiaries except those
described on Exhibit V under the heading 'Subsidiaries of Goodrich,' and
the Borrower has no Subsidiaries except those described on Exhibit V under
the heading 'Subsidiaries of Borrower.'"
2.8 Amendment of Section 6.11. Section 6.11 of the Agreement is
hereby amended to read as follows:
3
<PAGE>
"6.11 Consolidated Tangible Net Worth. Permit Consolidated Tangible
Net Worth at any time to be less than $11,000,000 plus, for all fiscal
quarters ending subsequent to September 30, 1995, 50% of positive
Consolidated Net Income and 100% of all cash equity proceeds, net of
expenses incurred in connection with the offering transaction."
2.9 Amendment of Exhibit V. The disclosures made on Exhibit V of the
Agreement in connection with Section 4.22 of the Agreement are hereby amended to
read as set forth on Exhibit II attached hereto.
ARTICLE III
CONDITIONS
The obligation of the Lender to amend the Agreement as provided herein
is subject to the fulfillment of the following conditions precedent:
3.1 Receipt of Documents and Other Items. The Lender shall have
received, reviewed, and approved the following documents and other items,
appropriately executed when necessary and in form and substance satisfactory to
the Lender:
(a) multiple counterparts of this Amendment executed by the Borrower
and Goodrich, as requested by the Lender;
(b) the Note;
(c) Ratification and Assumption of and Amendment to Guaranties
executed by Goodrich;
(d) Ratification of and Amendment to Mortgage, Collateral Real Estate
Mortgage, Deed of Trust, Indenture, Security Agreement, Financing Statement
and Assignment of Production executed by the Borrower, and Financing
Statement Changes constituent thereto;
(e) Ratification and Assumption of and Amendment to Security
Agreement (Stock Pledge) executed by the Borrower, and Financing Statement
Changes constituent thereto;
(f) Ratification and Assumption of and Amendment to Security
Agreement (Stock Pledge) executed by Goodrich, and Financing Statement
Changes constituent thereto;
(g) Stock certificates, if any, issued in replacement of any of the
Marcum Stock, the Marcum Warrants, the PPCM Stock, or the ANPC Stock and
4
<PAGE>
stock powers or transfer instruments, as the case may be, endorsed in blank
in connection therewith;
(h) undated letters, in form and substance satisfactory to the
Lender, from the Borrower to each purchaser of production and disburser of
the proceeds of production from or attributable to the Mortgaged
Properties, together with additional letters with the addressees left
blank, authorizing and directing the addressees to make future payments
attributable to production from the Mortgaged Properties directly to the
Lender; and
(i) evidence of the merger of PPCM with and into ANPC and the change
of the name of ANPC to Goodrich Petroleum Company of Louisiana and evidence
of the merger of Patrick of Delaware with and into Goodrich.
3.2 Accuracy of Representations and Warranties. The representations and
warranties contained in Article IV of the Agreement and in any other Loan
Document shall be true and correct, except as affected by the transactions
contemplated in the Agreement and this Amendment.
3.3 Matters Satisfactory to Lender. All matters incident to the
consummation of the transactions contemplated hereby shall be satisfactory to
the Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each of the Borrower and Goodrich hereby expressly re-makes, in favor
of the Lender, all of the representations and warranties set forth in Article IV
of the Agreement and set forth in any other Loan Document to which it is a
party, and represents and warrants that all such representations and warranties
remain true and unbreached, except as affected by the transactions contemplated
in the Agreement and this Amendment.
ARTICLE V
ASSUMPTION AND RATIFICATION
The Borrower hereby assumes all liabilities and obligations of PPCM
under the Agreement and all other Loan Documents to which PPCM was a party.
Goodrich hereby assumes all liabilities and obligations of Patrick of Delaware
under the Agreement and all other Loan Documents to which Patrick of Delaware
was a party. In addition, each of the parties hereto does hereby adopt, ratify,
and confirm the Agreement and the other Loan Documents to which it is a party,
in all things in accordance with the terms and provisions thereof, as amended by
this Amendment and the documents executed in connection herewith.
5
<PAGE>
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 Parties in Interest. All provisions of this Amendment shall be
binding upon and shall inure to the benefit of the Borrower, the Lender,
Goodrich, and their respective successors and permitted assigns.
6.4 Rights of Third Parties. All provisions herein are imposed solely
and exclusively for the benefit of the parties hereto and their respective
successors and permitted assigns. 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 be freely waived in whole or in part by the Lender at any
time if in its sole discretion it deems it advisable to do so.
6.5 Entire Agreement. 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, AMONG SUCH PARTIES REGARDING THE
SUBJECT HEREOF. FURTHERMORE IN THIS REGARD, THIS 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 SUCH PARTIES.
6.6 Governing Law. THIS AMENDMENT AND ALL ISSUES ARISING IN CONNECTION
HEREWITH AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING
EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW.
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 LENDER, IN COURTS HAVING SITUS IN
HOUSTON, HARRIS COUNTY, TEXAS. EACH OF THE BORROWER AND GOODRICH HEREBY SUBMITS
TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT
6
<PAGE>
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 LENDER IN ACCORDANCE WITH THIS SECTION.
6.8 Waiver of Rights to Jury Trial. EACH OF THE BORROWER, GOODRICH,
AND THE LENDER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND
UNCONDITIONALLY WAIVES 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 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. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR
THE LENDER ENTERING INTO THIS AMENDMENT.
IN WITNESS WHEREOF, this Amendment is executed effective as of the
date first hereinabove written.
GOODRICH PETROLEUM COMPANY OF LOUISIANA
By: /s/ WALTER G. GOODRICH
----------------------------------
Walter G. Goodrich
President
GOODRICH PETROLEUM CORPORATION
By: /s/ WALTR G. GOODRICH
----------------------------------
Walter G. Goodrich
President
COMPASS BANK - HOUSTON
By: /s/ DOROTHY MARCHAND WILSON
----------------------------------
Dorothy Marchand Wilson
Vice President
7
<PAGE>
EXHIBIT I
[FORM OF NOTE]
PROMISSORY NOTE
$50,000,000 Houston, Texas ______________, 1995
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned ("Maker")
promises to pay to the order of COMPASS BANK - HOUSTON ("Payee"), at its banking
quarters in Houston, Harris County, Texas, the sum of FIFTY MILLION DOLLARS
($50,000,000), or so much thereof as may be advanced against this Note pursuant
to the Credit Agreement dated August 16, 1995, by and between Maker and Payee
(as amended, restated, or supplemented from time to time, the "Credit
Agreement"), together with interest at the rates and calculated as provided in
the Credit Agreement.
Reference is hereby 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 hereunder.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is the "Note" under, and is payable
as provided in the Credit Agreement. This Note evidences, in whole or in part,
the renewal, extension, and rearrangement of the Indebtedness evidenced by the
Promissory Note dated August 16, 1995, in the original principal amount of
$50,000,000, executed by Patrick Petroleum Corporation of Michigan and payable
to the order of Payee. Without being limited thereto or thereby, this Note is
secured by the Security Instruments.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING
TO CONFLICTS OF LAW; 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.
GOODRICH PETROLEUM COMPANY OF LOUISIANA,
formerly known as American National Petroleum
Company, successor by merger to Patrick
Petroleum Corporation of Michigan
By:
----------------------------------
Walter G. Goodrich
President
I-i
<PAGE>
EXHIBIT II
DISCLOSURES
Section 4.22
Subsidiaries of Goodrich
Name State of Incorporation
Goodrich Petroleum Company of Louisiana Nevada
Subsidiaries of Borrower
Name State of Incorporation
Pecos Pipeline & Producing Company Texas
National Marketing Company Delaware
LECE, Inc. Texas
Drilling & Workover Company, Inc. Louisiana
II-i
<PAGE>
March 26, 1996
Mr. Roland Frautschi
Chief Financial Officer
Goodrich Petroleum Corporation
333 Texas Street, Suite 1375
Shreveport, Louisiana 71101-5319
RE: Credit Agreement dated August 16, 1995 between Patrick Petroleum
Company of Michigan and Compass Bank
Dear Roland:
Effective as of December 1, 1995, Compass Bank agrees to amend Section 6.11 of
the above-referenced Credit Agreement to read as follows:
Consolidated Tangible Net Worth. Permit Consolidated Tangible Net Worth at
any time to be less than $8,500,000 plus, for all fiscal quarters ending
subsequent to September 30, 1995, 50% of positive Consolidated Net Income
and 100% of all cash equity proceeds, net of expenses incurred in
connection with the offering transaction.
Please acknowledge your agreement by signing below and returning to my
attention.
Sincerely,
Dorothy Marchand Wilson
Vice President
Acknowledged and Agreed:
GOODRICH PETROLEUM CORPORATION
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Date:
--------------------------
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Goodrich Petroleum Corporation
We consent to the incorporation by reference in the registration statement
(No 33-01077) on Form S-8 of Goodrich Petroleum Corporation of our report
dated March 26, 1996, relating to the consolidated balance sheets of Goodrich
Petroleum Corporation and subsidiaries as of December 31, 1995 and 1994 and
the related consolidated statements of operations, stockholders' equity and
cash flows for the years ended December 31, 1995 and 1994 and for the period
from July 15, 1993 through December 31, 1993, and to our report dated March
31, 1995 relating to the statement of revenues and direct operating expenses
of the Properties Contributed to La/Cal Energy Partners for the period from
January 1, 1993, through July 14, 1993 which reports appear in the December
31, 1995, annual report on Form 10-K of Goodrich Petroleum Corporation. Our
report dated March 26, 1996, refers to a change in 1995 in the method of
accounting for the impairment of long-lived assets.
KPMG Peat Marwick LLP
Shreveport, Louisiana
March 29, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 613,450
<SECURITIES> 759,600
<RECEIVABLES> 1,716,094
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,424,789
<PP&E> 16,363,366
<DEPRECIATION> 2,217,425
<TOTAL-ASSETS> 22,382,716
<CURRENT-LIABILITIES> 2,396,914
<BONDS> 9,750,000
0
734,859
<COMMON> 8,360,902
<OTHER-SE> 567,051
<TOTAL-LIABILITY-AND-EQUITY> 22,382,716
<SALES> 6,050,601
<TOTAL-REVENUES> 6,174,412
<CGS> 0
<TOTAL-COSTS> 3,008,162
<OTHER-EXPENSES> 896,451
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,132,488
<INCOME-PRETAX> 1,137,311
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,137,311
<DISCONTINUED> 0
<EXTRAORDINARY> 482,906
<CHANGES> 0
<NET-INCOME> 654,504
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
