SCHEDULE
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14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment No. _)
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the Registrant /X/
Filed by a
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Check the
appropriate box:
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/ /
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ /
Definitive Proxy Statement
/ /
Definitive Additional Materials
/ /
Soliciting Materials Pursuant to §240.14a-12
AMEN
Properties, Inc.
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of Registrant as Specified In Its Charter)
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AMEN
Properties, Inc.
303
W. Wall Street, Suite 2300
Midland,
Texas 79701
November
1, 2008
Dear
Fellow
Shareholder:
You are
cordially invited to attend the 2008 Annual Meeting of Shareholders of AMEN
Properties, Inc. to be held at 303 W. Wall Street, Suite 2300, Midland, Texas
79701, at 8:30 a.m., local time, on Wednesday, December 17, 2008. The
information regarding matters to be voted upon at the Annual Meeting is set out
in the attached Notice of Annual Meeting of Shareholders and Proxy
Statement.
It is
important that your shares be represented at the Annual Meeting, regardless of
the number of shares you hold or whether you plan to attend the meeting in
person. I urge you to vote your shares as soon as
possible. The proxy card contains instructions on how to cast your
vote.
If you
have any questions, please contact Kris Oliver, Chief Financial Officer and
Secretary at (972) 664-1670.
Sincerely,
Eric L.
Oliver
Chairman
of the Board
AMEN
Properties, Inc.
AMEN
PROPERTIES, Inc.
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
Date:
December
17, 2008
Time:
8:30
AM Central Time
Place:
303 W. Wall Street, Suite 2300, Midland, Texas 79701
Proposals
:
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1.
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To
elect six directors to the Board of Directors of AMEN Properties, Inc.
(the “Company) to serve one-year terms expiring at the later of the annual
meeting shareholders in 2009 or upon a successor being elected and
qualified.
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2.
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To
approve and ratify the issuance of up to 450,000 shares of the Company's
common stock upon exercise of warrants issued in connection with the
Company’s investment in SFF Royalty, LLC and SFF Production,
LLC.
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3.
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To
transact such other business as may properly come before the meeting or
any adjournments or postponements
thereof.
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Record
Date
: October 27, 2008
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By
Order of the Board of Directors
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Eric
L. Oliver
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Chairman
of the Board
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AMEN
Properties, Inc.
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YOUR
VOTE IS IMPORTANT!
Whether
or not you plan to attend the meeting, please complete, date, sign and return
the accompanying proxy card promptly so that we can be assured of having a
quorum present at the meeting and so that your shares may be voted in accordance
with your wishes.
PROXY
STATEMENT
AMEN
Properties, Inc.
303
W. Wall Street, Suite 2300
Midland,
Texas 79701
Annual
Meeting of Shareholders of the Company to be held on December 17,
2008
Some
Questions You May Have Regarding this Proxy Statement
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Q:
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Why
am I receiving these materials?
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A:
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The
accompanying proxy is solicited on behalf of the Board of Directors of
AMEN Properties, Inc. (the "Company"). We are providing these
proxy materials to you in connection with our Annual Meeting of
Shareholders, to be held at 303 W. Wall Street, Suite 2300, Midland, Texas
79701, on December 17, 2008 at 8:30 a.m., local time. As a Company
shareholder, you are invited to attend the Annual Meeting and are entitled
and requested to vote on the proposals described in this proxy
statement.
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Q:
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Who may vote at the
meeting
?
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A:
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You
may vote all of the shares of our common stock that you owned at the close
of business on October 27, 2008, the record date. On the record date, AMEN
Properties, Inc. had 3,777,655 shares of common stock outstanding and
entitled to be voted at the meeting. You may cast one vote for
each share of common stock held by you (or deemed to be held by you due to
your ownership of preferred stock) on all matters presented at the
meeting.
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Q:
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What proposals will be voted on
at the meeting
?
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A:
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There
are two Company proposals to be considered and voted on at the meeting,
which are:
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1.
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To
elect six directors to the Board of Directors of the Company to serve
one-year terms expiring at the later of the annual meeting shareholders in
2009 or upon a successor being elected and
qualified.
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2.
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To
approve and ratify the issuance of up to 450,000 shares of the Company's
common stock upon exercise of warrants issued in connection with the
Company’s investment in SFF Royalty, LLC (“SFF Royalty”) and SFF
Production, LLC (“SFF Production”).
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Q:
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How does the Board of Directors
recommend I vote
?
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A:
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Please
see the information included in the proxy statement relating to the
proposals to be voted on. Our Board of Directors unanimously
recommends that you vote:
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1.
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“
FOR
: each of the
nominees to the Board of Directors
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2.
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“
FOR
” approval and
ratification of the issuance of up to 450,000 shares of the Company's
common stock upon exercise of warrants issued in connection with the
Company’s investment in SFF Royalty and SFF Production (the
“Warrants”).
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Q:
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What happens if additional
matters are presented at the annual
meeting
?
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A:
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Other
than the items of business described in this proxy statement, we are not
aware of any other business to be acted upon at the annual meeting. If you
grant a proxy, the persons named as proxy holders, Eric L. Oliver and Jon
Morgan, will have the discretion to vote your shares on certain additional
matters properly presented for a vote at the
meeting.
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A:
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If
your shares are registered directly in your name with our transfer agent,
American Stock Transfer, you are considered a shareholder of record with
respect to those shares and the proxy materials and proxy card are being
sent directly to you. Please carefully consider the information contained
in this proxy statement and, whether or not you plan to attend the
meeting, complete, date, sign and return the accompanying proxy card
promptly so that we can be assured of having a quorum present at the
meeting and so that your shares may be voted in accordance with your
wishes even if you later decide not to attend the annual meeting. If you
attend the meeting, you will be able to vote using a ballot provided at
the meeting or by bringing the enclosed proxy card, but we recommend that
you complete, sign and return the proxy card in case you later decide not
to attend the meeting.
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If
like most shareholders of the Company, you hold your shares in street name
through a stockbroker, bank or other nominee rather than directly in your
own name, you are considered the beneficial owner of shares, and the proxy
materials are being forwarded to you together with a voting instruction
card. Please carefully consider the information contained in this proxy
statement and, whether or not you plan to attend the meeting, complete,
date, sign and return the accompanying proxy card promptly as instructed
by your broker or nominee so that we can be assured of having a quorum
present at the meeting and so that your shares may be voted in accordance
with your wishes.
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Q:
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What constitutes a quorum and
why is a quorum required
?
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A:
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A
quorum is required for the Company shareholders to conduct business at the
meeting. The presence at the meeting, in person or by proxy, of the
holders of a majority of the shares entitled to vote on the record date
will constitute a quorum, permitting us to conduct the business of the
meeting. Proxies received but marked as abstentions, if any, will be
included in the calculation of the number of shares considered to be
present at the meeting for quorum
purposes.
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Q:
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What if I don’t vote or
abstain? How are broker non-votes
counted
?
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A:
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Abstentions
are included in the determination of shares present for quorum purposes.
Because abstentions represent shares entitled to vote, the effect of an
abstention will be the same as a vote against a proposal. However,
abstentions will have no effect on the election of
directors.
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Eric
L. Oliver and Jon Morgan are officers of the Company and were named by our
Board of Directors as proxy holders. They will vote all proxies, or record
an abstention or withholding, in accordance with the directions on the
proxy. If no contrary direction is given, the shares will be voted as
recommended by the Board of Directors. For beneficial shareholders, your
broker or nominee may not be permitted to exercise voting discretion with
respect to certain matters to be acted upon. If you do not give your
broker or nominee specific instructions, your shares may not be voted on
those matters and will not be considered as present and entitled to vote
with respect to those matters. Shares represented by such “broker
non-votes,” however, will be counted in determining whether there is a
quorum present.
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Q:
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If my shares are held in street
name by my broker, will my broker vote my shares for
me
?
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A:
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Your
broker will vote your shares only if the proposal is a matter on which
your broker has discretion to vote (such as the election of directors), or
if you provide instructions on how to vote by following the instructions
provided to you by your broker. Your broker likely does not
have discretion to vote on the issuance of shares upon exercise of the
Warrants, and therefore you will need to provide voting instructions to
your broker with respect to that
proposal.
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Q:
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Can I change my vote after I
have delivered my proxy
?
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A:
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Yes.
You may revoke your proxy at any time before its exercise. You may also
revoke your proxy by voting in person at the Annual Meeting. If you are a
beneficial shareholder, you must contact your brokerage firm or bank to
change your vote or obtain a proxy to vote your shares if you wish to cast
your vote in person at the meeting.
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Q:
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Who will count the
votes
?
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A:
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Stockholder
votes by proxy will be tabulated by ADP Investor Communication
Services.
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Q:
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Where can I find voting results
of the meeting
?
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A:
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We
will announce preliminary voting results at the meeting and publish final
results in our periodic report on Form 10-K for the fiscal year 2008 or in
an earlier filed Form 8-K.
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Q:
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Who will bear the cost for
soliciting votes for the
meeting
?
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A:
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We
will bear all expenses in conjunction with the solicitation of the
enclosed proxy, including the charges of brokerage houses and other
custodians, nominees or fiduciaries for forwarding documents to security
owners. We may hire a proxy solicitation firm at a standard industry
compensation rate. In addition, proxies may be solicited by mail, in
person, or by telephone or fax by certain of our officers, directors and
regular employees.
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Q:
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Whom should I call with other
questions
?
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A:
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If
you have additional questions about this proxy statement or the meeting or
would like additional copies of this document or our 2007 Annual Report on
Form 10-KSB, please contact: AMEN Properties, Inc. P. O. Box 835451,
Richardson, Texas 75083, Attention: Investor Relations Dept., Telephone:
(972) 664-1670.
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Q:
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What vote is required for
approval of the proposals
presented
?
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A:
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Directors
are elected by a plurality of votes cast in the election of
directors. The other proposals require the affirmative vote of
at least a majority of the votes present at the meeting and entitled to be
cast.
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Additional
Information
We are
subject to the informational requirements of the Securities Exchange Act of
1934, as amended ("Exchange Act") and are therefore required to file periodic
reports, proxy statements and other information with the Securities and Exchange
Commission (the “Commission”) related to our business, financial statements and
other matters. Such reports, proxy statements and other information
are available for inspection and copying at the Commission's principal office,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
where copies may be obtained upon payment of the fees prescribed by the
Commission from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. Such documents may also be
obtained through the Website maintained by the Commission at
http://www.sec.gov
.
PROPOSAL
ONE--ELECTION OF MEMBERS OF THE BOARD OF DIRECTORS
Size
of Board of Directors
Our Board
of Directors currently consists of six members, all serving one-year terms
expiring at the Annual Meeting or until their successors are duly elected and
qualified. In addition, the holders of the Series D Preferred Stock,
voting separately, have the right to elect up to two additional directors based
upon the percentage of total capital stock of the Company represented by the
Series D Preferred, but have not exercised that right as of the date
hereof.
Current
Director Not a Nominee in This Election
As
announced in the 8-K filed on August 19, 2008, one of the Company’s current
Directors, Earl Gjelde has declined to stand for election to another
term. The Board has nominated Jesse Correll to replace
Mr. Gjelde, as described below.
Earl E. Gjelde
has served as
an AMEN director since April 1997. From 1989 through 1993, he was
Vice President of Chemical Waste Management, Inc. and from 1991 to 1993 was Vice
President of Waste Management Inc. (currently WMX Technologies,
Inc.). Since 1991, Mr. Gjelde has been Managing Director, Summit
Group International, Ltd., an energy and natural resource consulting firm with
Internet based security controlled document systems and Managing Director,
Summit Energy Group, Ltd., an energy development company and since 1996, a
partner in Pipeline Power Partners, LP, a natural gas services
company. From 1980 through 1989, Mr. Gjelde held various federal
government positions including Under Secretary and Chief Operating Officer of
the U.S. Department of Interior from 1985 through 1989 and Special Assistant to
the Secretary, Chief Operating Officer, U.S. Department of Energy from 1982
through 1985. He is a member of the Board of Directors of The United
States Energy Association, The World Energy Congress, the National Wilderness
Institute, Allied Technologies Group, Inc., and publicly held Electrosource,
Inc.
Current
Nominees
Eric L. Oliver
was appointed as a
director of AMEN in July 2001, and was appointed Chairman of the Board and Chief
Executive Officer on September 19, 2002. Mr. Oliver resigned as Chief
Executive Officer effective March 7, 2007. Since 1997, he has been
President of SoftSearch Investment, Inc., an investment firm in Abilene,
Texas. Since 1998, he has also served as President of Midland Map
Company LLC, a company that creates hand drafted ownership maps throughout the
Permian Basin. He is on the Board of Directors of the First National Bank of
Midland, and of Love and Care Ministries, an inner city homeless
initiative. Mr. Oliver is the brother of Kris Oliver, the Company’s
Chief Financial Officer.
Jon M. Morgan
was appointed as a
director of AMEN in October 2000, and was appointed President and Chief
Operating Officer on September 19, 2002. Mr. Morgan resigned as Chief
Operating Officer and was appointed Chief Executive Officer on March 7,
2007. Mr. Morgan has more than 19 years experience in launching and
managing successful businesses in both investment management services and in the
energy field. He is founder of several businesses including Morgan
Capital Group, Inc., the Packard Fund, and is President of J.M. Mineral &
Land Co.
Bruce E. Edgington
has been
director of AMEN since November 1995. From 1979 through 1988, Mr.
Edgington was a registered representative with Johnston Lemon & Co., a
securities broker-dealer, where his responsibilities included the management of
retail securities accounts and administration. In 1988 he founded and
continues to be an officer, director and stockholder of DiBiasio &
Edgington, a firm engaged in providing software to investment firms and money
managers.
Jesse T. Correll
is founder
and Chairman of the Board for First Southern Bancorp, Inc., parent company of
First Southern National Bank. Jess serves as Chairman and Chief Executive
Officer of UTG, a $400 million life insurance company headquartered in
Springfield, Ill. Jess and fellow First Southern executives’ passion for giving
back to the Kingdom helped to establish The River Foundation, where he serves as
President and Director as well as serving on the board of directors for Crown
Financial Ministries, Friends of the Good Samaritans, Generous Giving and the
National Christian Foundation.
Donald M. Blake, Jr
.
was appointed to the Board
of Directors on February 26, 2003. He is Executive Vice President and
Principal of Joseph J. Blake and Associates, Inc. (“Blake and Associates”), an
international commercial real estate due diligence firm. The company
founded by his grandfather specializes in the valuation of debt and equity and
assessment reports for engineering and environmental issues concerning real
property. Over the past 57 years, the firm has served the nation’s
leading investors, lenders and owners of real estate. Blake and
Associates maintains operations throughout the United States, Latin America and
Japan. Mr. Blake, Jr. is a Member of the Appraisal Institute and is
active with a variety of real estate organizations such as the Mortgage Bankers
Association, Pension Real Estate Association, The Commercial Mortgage
Securitization Association and the Urban Land Institute. Former
Governor Mario Cuomo of New York appointed Mr. Blake, Jr. to the charter
advisory board of the New York State Appraisal Certification
Board. The board developed the standards and ethical standards for
all licensing and certification for appraisers in accordance with state
legislation. He was also appointed to the real estate advisory board
of the business school of Babson College, Wellesley,
Massachusetts. Mr. Blake, Jr. received a BA from Hobart College,
Geneva, New York in 1979 and a MSM with a concentration in commercial real
estate finance from Florida International University, Miami, Florida in
1981.
G. Randy Nicholson
was
appointed to the Board of Directors on February 26, 2003. He
graduated from Abilene Christian College in 1959. From 1959 to 1971, Mr.
Nicholson was self-employed in Abilene as a CPA. In 1971, he
established E-Z Serve, Inc., a gasoline marketing company. Mr.
Nicholson has served as Chairman of the Board of Auto-Gas Systems, Inc. since
1987. AutoGas developed the pay-at-the pump technology processing
paperless credit and debit card transactions at the fuel
island. Headquartered in Abilene, Texas, AutoGas continues to
introduce innovative technological advancements in the automated fueling
industry, most recently with loyalty products such as DIGITAL REWARDS and
Quantum 360sm. He joined the Board of Trustees of Abilene Christian
University in 1981. Mr. Nicholson is a member of the Texas Society of
Certified Public Accountants and was recently named an honorary member of the
American Institute of Certified Public Accountants (AICPA) having been a member
for 40 years. He is presently serving as Chairman of the Technology
Committee for the City of Abilene.
If
elected, each director will hold office until the annual meeting of shareholders
in 2009 or until his successor is duly elected and qualified. The
election of directors will be decided by a plurality of the votes cast in such
election at the meeting by the shareholders, and accordingly, abstentions and
“broker non-votes” will have no effect on the election of
directors. Shareholders may not cumulate their votes in the
election of directors. All nominees have consented to be named in
this proxy statement and to serve if elected, but if any nominee becomes unable
to serve, the persons named as proxies may exercise their discretion to vote for
a substitute nominee. Management has no reason to believe that any of the
nominees will be unable to serve.
Current
Directors, Officers and Nominees
The table
below lists the current and nominated members of the Company’s Board of
Directors and Executive Officers, as well as their age and committee
responsibilities:
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Name
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Age
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Position(s)
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Committees
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Eric
L. Oliver
(1)
(Chairman)
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49
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Chairman
of the Board of Directors
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None
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Jon
M. Morgan
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49
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Director,
Chief
Executive Officer
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None
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Bruce
E. Edgington
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50
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Director
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Compensation,
Audit (Chair), Nominating
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Earl
E. Gjelde (
retiring
)
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63
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Director
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Compensation
(Chair), Nominating
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Jesse
T. Correll (
if
elected
)
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52
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Director
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Compensation
(Chair), Nominating
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Donald
M. Blake, Jr.
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52
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Director
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Audit,
Nominating (Chair)
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G.
Randy Nicholson
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70
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Director
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Compensation,
Audit
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Kris
Oliver
(1)
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42
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Chief
Financial Officer
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N/A
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(1)
Eric L.
Oliver and Kris Oliver are brothers.
Corporate
Governance
Board
Independence
Messrs.
Edgington, Gjelde, Blake and Nicholson are independent directors under the rules
of the NASDAQ Stock Market. If elected, Mr. Correll will be an
independent director under such rules. All of the Board’s standing
committees (described below) are comprised entirely of independent
directors.
Meeting
Attendance
AMEN’s
business is managed under the direction of the Board of Directors. The Board
meets during our fiscal year to review significant developments and to act on
matters requiring Board approval. The Board of Directors held five formal
meetings and acted by unanimous written consent on other occasions during the
fiscal year ended December 31, 2007. None of the Company’s directors attended
fewer than 75% of the aggregate of the total number of meetings of the Board of
Directors and their respective committee meetings held subsequent to their
election to the Board in 2007.
Board
Committees
The Board
of Directors has established an Audit Committee, a Compensation Committee, and a
Nominating Committee to devote attention to specific subjects and to assist the
Board in the discharge of its responsibilities. The Board committees are
currently comprised of independent directors in accordance with the NASDAQ
rules. The functions of these committees and their members as of the
date of the Annual Meeting are described below.
Audit
Committee
The Audit
Committee is comprised of Messrs. Edgington (Chair), Nicholson, and Blake, Jr.
all of whom are independent directors. The Audit Committee held four meetings
during 2007. The Audit Committee, among other things, oversees the
accounting and financial reporting practices of the Company and reviews the
annual audit with the Company’s independent accountants. In addition,
the Audit Committee has the sole authority and responsibility to select,
evaluate, and where appropriate, replace the independent
auditors. The general responsibilities of the Audit Committee are set
forth in the Audit Committee Charter, a copy of which can be seen on the
Company’s web site at http://www.amenproperties.com. The Board has
determined that no member of the Committee meets all of the criteria needed to
qualify as an “audit committee financial expert” as defined by the Commission
regulations. The Board believes that each of the current members of
the Committee has sufficient knowledge and experience in financial matters to
perform his duties on the Committee.
The Audit
Committee oversees our financial reporting, internal controls and audit
functions on behalf of the Board of Directors. In fulfilling its
oversight responsibilities, the Committee has reviewed the audited consolidated
financial statements in the Annual Report on Form 10-KSB with management
including discussions of accounting principles, reasonableness of judgments, and
the clarity of financial disclosures. The Committee also reviewed
with the independent auditors their assessment of financial statements and of
management’s judgments in deriving the financial statements. In
addition, the Committee has discussed with the independent auditors the matters
required by SAS 61 and the matters in the written disclosures required by the
Independence Standards Board and discussed with the independent accountant the
independent accountant’s independence. The Committee also met with
the independent auditors, with and without management present, to discuss their
examinations, evaluations of our internal controls and the overall quality of
our financial reporting.
Based on
the review and discussions referred to above, the Committee recommended to the
Board of Directors that the audited consolidated financial statements be
included in AMEN’s Annual Report on Form 10-KSB for filing with the
Commission.
Nominating
Committee
The
Nominating Committee is comprised of Messrs. Blake, Jr., (chair), Edgington and
Gjelde, all of whom are independent directors. The Nominating
Committee did not meet during 2007. The Nominating Committee operates
pursuant to a Nominating Committee Charter which can be seen on the Company’s
web site at http://www.amenproperties.com.
The
Nominating Committee identifies nominees for directors of the Company by first
evaluating the current members of the Board of Directors willing to continue in
service. If any Board member does not wish to continue in service, if
the Nominating Committee decides not to nominate a member for re-election or if
the Board desires to increase the size of the Board by adding new director
positions, then the Nominating Committee establishes a pool of potential
director candidates from recommendation from the Board, senior management and
shareholders, who are then evaluated through the review process outlined
below. All of the nominees named in this Proxy Statement are current
directors standing for re-election, except Mr. Correll who was recommended
as a nominee by Bruce Edgington.
The
Nominating Committee reviews the credentials of potential director candidates
(including potential candidates recommended by shareholders), conducts
interviews and makes formal nominations for the election of
directors. In making its nominations, the Nominating Committee
considers a variety of factors, including the following factors: integrity, high
level of education, skills, background, independence, financial expertise,
experience or knowledge with businesses relevant to the Company’s current and
future business plans, experience with business of similar size, all other
relevant experience, understanding of the Company’s business and industry
diversity, compatibility with existing Board members, and such other factors as
the Nominating Committee deems appropriate in the best interests of the Company
and its shareholders. Proposed nominees are not evaluated differently
depending upon who has made the proposal. The Company has not to date
paid any third party fee to assist in this process.
The
Company will consider proposed nominees whose names are submitted to the
Nominating Committee by shareholders. Proposals made by shareholders
for nominees to be considered by the Nominating Committee with respect to an
annual shareholders meeting must be in writing and received by the Company prior
to the end of the fiscal year preceding such annual meeting.
Compensation
Committee
The
Compensation Committee is comprised of Messrs. Gjelde (Chair), Edgington and
Nicholson, and did not meet during 2007. The Compensation Committee
was established to advise the Board and consult with management concerning the
salaries, incentives and other forms of compensation for the officers and other
employees of the Company. The committee also administers the
Company’s stock option plans. The Compensation Committee
operates pursuant to a Compensation Committee Charter which can be reviewed at
the Company’s website at http://www.amenproperties.com.
Shareholder
Communication
Shareholders
may send other communications to the Board of Directors, a committee thereof or
an individual Director. Any such communication should be sent in
writing addressed to the Board of Directors, the specific committee or
individual Director in care of the Company’s Secretary at the address on the
front of this Proxy Statement. The Company’s Secretary is responsible
for determining, in consultation with other officers of the Company, counsel and
other advisers, as appropriate, which stockholder-communications will be relayed
to the Board, committee or individual Director. The Secretary may
determine not to forward any letter to the Board, committee or individual
Director that does not relate to the business of the Company.
Annual
Reports / Code of Conduct and Ethics
The
Company makes available, free of charge, its Annual Report on Form 10-KSB,
Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(a) of the
Securities Exchange Act of 1934 as soon as reasonably practicable after we
electronically file or furnish them to the Securities and Exchange Commission
(the “SEC”). These reports may also be obtained directly from the SEC
via an Internet site (
http://www.sec.gov
)
and at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330.
The
Company will also provide to any person, free of charge, a copy of the Company’s
Code of Business Conduct and Ethics upon request made to the Company at 303 West
Wall St., Suite 2300, Midland, Texas 79701, attn: Mr. Kris Oliver.
Attendance
of Directors at Annual Shareholders Meeting
The
Corporation expects all Board members and nominees to attend the annual meeting
of shareholders, but from time to time, other commitments may prevent all
directors from attending each meeting. All directors attended the
most recent annual meeting of shareholders, which was held on May 30,
2007.
Board
of Directors Recommendation
THE
BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" EACH OF THE
NOMINEES FOR DIRECTOR SET FORTH IN THIS PROPOSAL.
PROPOSAL
TWO—APPROVAL AND RATIFICATION OF THE ISSUANCE OF UP TO 450,000
SHARES
OF THE COMPANY’S COMMON STOCK UPON EXERCISE OF WARRANTS
ISSUED
IN CONNECTION WITH THE COMPANY’S INVESTMENT IN SFF ROYALTY, LLC
AND
SFF PRODUCTION, LLC.
Background
Effective
December 17, 2007, the Company invested $7.6 million in SFF Royalty, LLC (“SFF
Royalty”) and $2.4 million in SFF Production, LLC (“SFF Production”) in exchange
for a one-third ownership interest in each entity. Also on December
17, 2007, SFF Royalty and SFF Production acquired the following properties (the
“Acquired Properties”) from Santa Fe Energy Trust (the “Trust”) and Devon Energy
Production Company, LP (“Devon”).
|
|
Acquired
from the Trust
|
|
Acquired
from Devon
|
|
|
|
|
|
Acquiring
Entity
|
Description
|
|
Purchase
Amount
|
|
Description
|
|
Purchase
Amount
|
|
|
Total
Purchase
|
|
|
SFF
Royalty
|
Net
profits
interests
in
royalty
interests
owned
by
Devon
|
|
$
|
21,077,688
|
|
Royalty
interests
subject
to Trust’s
net
profits
interests
|
|
$
|
2,254,662
|
|
|
$
|
23,332,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SFF
Production
|
Net
profits
interests
in
working
interests
owned
by Devon
|
|
|
6,072,125
|
|
Working
interests
subject
to Trust’s
net
profits
interests
|
|
|
649,531
|
|
|
|
6,721,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
$
|
27,149,813
|
|
|
|
$
|
2,904,193
|
|
|
$
|
30,054,006
|
|
To obtain
the $10 million required for its investments in SFF Royalty and SFF Production,
the Company secured stub financing and issued Preferred Stock, short-term
promissory notes and the Warrants for the purchase of shares of the Company’s
common stock.
Stub
Financing
In order
to secure the cash required for the Company’s contribution to SFF Royalty and
SFF Production on December 17, 2007, stub financing was arranged via the
execution of two promissory notes with SoftVest, LP totaling $3.5
million. These notes accrued interest at an annual rate of
8.5%. The Company repaid these notes on March 13, 2008 after
receiving its final distribution from the Trust based upon its ownership of
Trust securities.
As
discussed under “Certain Relationships and Related Transactions”, Mr.
Eric L. Oliver, the Company’s Chairman of the Board, is the Managing
Partner of SoftVest, LP.
Series
D Preferred Stock
429,100
shares of Series D Preferred Stock (“Preferred D”) were issued at a share price
of $10 for total proceeds of $4,291,000. Below is a summary of the
significant characteristics of the Preferred D:
·
Pays a
coupon of 8.5% annually.
·
Has
limited voting rights.
·
Is not
convertible into common stock.
·
Is
redeemable upon demand by the Company.
·
Holders
can elect up to two directors
Promissory
Notes
The
Company also signed promissory notes with the recipients of the Preferred D
totaling $2,709,000. Below is a summary of the significant
characteristics of the promissory notes:
·
Due and
payable on June 30, 2009.
·
Variable
interest rate of the Prime rate plus 1%.
Warrants
Holders of
the promissory notes were issued the Warrants to purchase a total of up to
450,000 shares of common stock of the Company at an exercise price of $6.02 per
share (subject to anti-dilution adjustments), which was the market value per
share at the time the transaction was agreed to. Under the rules of
the Nasdaq Stock Market, the issuance of Company common stock upon the exercise
of the Warrants requires stockholder approval, which is being requested in this
Proposal Two. The Company plans to use the proceeds from the exercise
of the Warrants, if approved by shareholders, to pay all or a portion of the
above-described promissory notes.
Related
Party Participation
Certain of
the Company’s Directors and nominees for director participated in this
transaction as shown below:
|
Director
|
|
#
Shares
Preferred
D
Purchased
|
|
|
Preferred
D
Purchase
Price
|
|
|
Promissory
Note
Amount
|
|
|
Warrants
Received
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric
L. Oliver
(1)
|
|
|
164,376
|
|
|
$
|
1,643,760
|
|
|
$
|
1,037,741
|
|
|
|
172,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce
E. Edgington
|
|
|
6,130
|
|
|
|
61,300
|
|
|
|
38,700
|
|
|
|
6,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jesse
Correll
(2)
(director
nominee)
|
|
|
147,938
|
|
|
|
933,966
|
|
|
|
933,966
|
|
|
|
155,144
|
|
________________________
(1)
Through
Mr. Oliver’s control of SoftVest, L.P.
(2)
Through
Mr. Correll’s control of Universal Guaranty Life Ins. Co.
Related
Financial Information
Audited
and pro forma financial statements for the Acquired Properties were disclosed by
the Company on Form 8-K on October 14, 2008. Those financial
statements are attached hereto as
Schedule A
and
Schedule B
and should
be reviewed by shareholders in evaluating this proposal.
Effects
on Shareholders
The
issuance of shares of common stock upon the exercise of the Warrants will result
in an increase in the total number of shares outstanding and an adjustment of
percentage ownership, and thus the voting power, of the shareholders at the time
of such issuance. Additionally, to the extent the exercise price of
$6.02 per share is less than the market price per share at the time of exercise,
the issuance may have a dilutive affect on the then existing
shareholders.
Proposal:
That the
Company’s shareholders approve the issuance of up to 450,000 shares of the
Company’s common stock upon exercise of the warrants issued in connection with
the Company’s purchase of interests in SFF Royalty and SFF
Production.
Board
of Directors Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
APPROVAL AND RATIFICATION OF THE ISSUANCE OF UP TO 450,000 SHARES OF THE
COMPANY’S COMMON STOCK UPON EXERCISE OF THE WARRANTS ISSUED IN CONNECTION WITH
THE COMPANY’S INVESTMENT IN SFF PRODUCTION AND SFF ROYALTY.
EXECUTIVE
COMPENSATION
The
following table includes information concerning compensation for the years 2006
and 2007 to the five members of the Executive Team and includes required
disclosure related to our CEO and the four most highly compensated officers of
the Company for the fiscal year ended December 31, 2007.
|
|
|
|
|
|
|
|
|
Name
/ Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
All
Other Comp (6)
|
Total
|
|
Eric
L. Oliver
(1)
Chairman
of the Board
|
2006
|
-
|
-
|
-
|
-
|
-
|
|
2007
|
-
|
-
|
-
|
-
|
-
|
|
Jon
M. Morgan
(2)
President
and Chief Executive Officer
|
2006
|
-
|
-
|
-
|
-
|
-
|
|
2007
|
-
|
-
|
-
|
-
|
-
|
|
Kevin
Yung
(3)
Chief
Operating Officer
|
2006
|
$150,000
|
$68,589
|
-
|
-
|
$218,589
|
|
2007
|
$150,000
|
$86,584
|
-
|
-
|
$236,584
|
|
Kris
Oliver
(3)(5)
Chief
Financial Officer and Secretary
|
2006
|
-
|
-
|
-
|
-
|
-
|
|
2007
|
$116,667
|
$71,894
|
$28,906
|
-
|
$217,467
|
|
Padraig
Ennis
(4)
Vice
President, Priority Power
|
2006
(7)
|
$103,333
|
$30,000
|
-
|
$50,000
|
$183,333
|
|
2007
|
$140,000
|
$25,145
|
$4,847
|
-
|
$169,992
|
|
John
Bick
(3)(4)
Managing
Principal,
Priority
Power
|
2006
(7)
|
$70,000
|
-
|
-
|
$71,495
|
$141,495
|
|
2007
|
$140,000
|
$24,424
|
$27,842
|
-
|
$192,266
|
|
(1)
|
Mr.
Oliver became the Company’s Chief Executive Officer on September 19,
2002. He did not receive any salary or bonus during 2006 or
2007, and is not currently paid a salary. He resigned the CEO
position effective March 7, 2007, at which point Jon M. Morgan became
CEO.
|
|
(2)
|
Mr.
Morgan served as the Company’s Chief Operating Officer from September 19,
2002 through March 7, 2007, at which time he assumed the role of Chief
Executive Officer and Mr. Yung became the Chief Operating
Officer. He did not receive any salary or bonus during 2006 or
2007, and is not currently paid a
salary.
|
|
(3)
|
The
employment agreements of Mr. Yung, Mr. Kris Oliver and Mr. Bick allow them
to receive their bonus payments in cash or in restricted shares of Company
stock, valued based on the average closing price for the last twenty days
of the measurement period. Messrs. Yung and Bick receive one
annual bonus payment and Mr. Kris Oliver receives his bonus payment in
semi-annual installments.
|
|
(4)
|
Messrs.
Ennis and Bick receive a portion of their salaries in restricted shares of
Company stock.
|
|
(5)
|
Kris
Oliver began working for the Company on March 7, 2007. The
2007 salary amount represents actual salary paid to Mr. Oliver in
2007. Mr. Oliver’s annual salary is
$140,000.
|
|
(6)
|
The
amounts in this column represent signing bonuses paid to Messrs. Bick and
Ennis related to the employment
agreements.
|
|
(7)
|
The
salary amounts for Messrs. Bick and Ennis in 2006 represent the portion of
their salary that was paid by the Company after the purchase of Priority
Power effective April 1, 2006. The annual salaries for
Mr. Bick and Mr. Ennis are
$140,000.
|
Employment
Agreements
Mr. Yung’s
employment agreement has an effective date of July 1, 2004 with an initial term
of three years, after which the agreement has renewed and will renew
automatically for successive one year periods unless terminated by either
party. Under the terms of the agreement, Mr. Yung receives an annual
salary of $150,000 and a bonus equal to 25% of the increase in the Company’s
shareholder equity attributable to the Company’s electricity-related
businesses. The bonus is payable either in cash or common stock of
the Company. During the term of the agreement and for a period of 18
months thereafter, Mr. Yung is subject to a non-compete agreement. If
Mr. Yung’s employment is terminated by Mr. Yung for good reason or upon a
change of control or by the Company for any reason other than cause, he is
entitled to severance payments equal to his then-current salary for a period of
one year or the remaining term of the non-compete agreement, whichever is
greater.
Mr. Kris
Oliver’s employment agreement has an effective date of March 1, 2007 with a term
of two years. Under the terms of the agreement, Mr. Oliver receives
an annual salary of $140,000 and a bonus based on the increase in the Company’s
Book Value per Share. The bonus is payable either in cash or common
stock of the Company. If Mr. Oliver’s employment is terminated by
Mr. Oliver for good reason or by the Company for any reason other than
cause, he is entitled to severance equal to 12 months of his then-current salary
plus any bonus to which he would have been entitled had he been employed for the
entire year.
Mr. Ennis’
employment agreement has an effective date of June 1, 2006 with a term of three
years. Under the terms of the agreement, Mr. Ennis receives an annual
salary of $140,000 and a bonus of either $30,000 or 2% of the net income of
Priority Power, whichever is greater. Mr. Ennis is paid a
portion of his salary in common stock of the Company. During the term
of the agreement and for 18 months thereafter, Mr. Ennis is subject to a
non-solicitation agreement. If Mr. Ennis’s employment is terminated
by Mr. Ennis for good reason or by the Company for any reason other than cause,
he is entitled to severance equal to 12 months of his then-current salary plus
any bonus to which he would have been entitled had he been employed for the
entire year.
Mr. Bick’s
employment agreement has an effective date of June 1, 2006 with a term of three
years. Under the terms of the agreement, Mr. Bick receives an annual
salary of $140,000 and a bonus which is determined by performance targets agreed
to each year. Mr. Bick is paid a portion of his salary in common
stock of the Company. During the term of the agreement and for a
period of three years thereafter, Mr. Bick is subject to a non-compete
agreement. If Mr. Bick is terminated by the Company for any reason
other than cause, he is entitled to severance payments equal to his then-current
salary for the remainder of the agreement term unless the Company releases him
from the non-compete agreement.
Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
(1)
The
following table sets forth information with respect to stock options held as of
December 31, 2007 by the executive officers named in the “Summary
Compensation Table”.
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
|
OPTION
AWARDS
|
|
Name
|
Option
Plan
|
Number
of Securities
Underlying
Unexercised
Options
Exercisable
|
Option
Exercise
Price
|
Option
Expiration Date
|
|
Eric
L. Oliver
|
B
|
1,671
|
$4.600
|
7/16/2011
|
|
B
|
3,523
|
5.120
|
2/12/2012
|
|
Jon
M. Morgan
|
A
|
2,901
|
4.252
|
10/24/2010
|
|
B
|
3,251
|
3.880
|
2/20/2011
|
|
B
|
3,342
|
5.120
|
2/12/2012
|
Since the
inception of the Company, various options have been granted by the Board of
Directors to founders, directors, employees, consultants and ministry partners.
In February 1997, the Company authorized 67,100 additional shares of common
stock to underlie additional options reserved for key employees and for future
compensation to members of the Board of Directors. The Board of
Directors also adopted and the Shareholders approved, the 1997 Stock Option Plan
(“1997 Plan”), which provides for the granting of either qualified or
non-qualified options to purchase an aggregate of up to 514,484 shares of common
stock, inclusive of the 67,100 shares mentioned above, and any and all options
or warrants granted in prior years by the Company.
The 1998
Stock Option Plan (“1998 Plan”) was approved by the Board of Directors in April
1998, with approved amendment in May 2000. The 1998 Plan gives the
Company the authority to issue 300,000 options to purchase AMEN common
stock. If any stock options granted under the 1998 Plan terminate,
expire or are canceled, new stock options may thereafter be granted covering
such shares. In addition, any shares purchased under the 1998 Plan
subsequently repurchased by the Company, if management elects, pursuant to the
terms hereof may again be granted under the 1998 Plan. The shares
issued upon exercise of stock options under the 1998 Plan may, in whole or in
part, be either authorized but unissued shares, or issued shares reacquired by
the Company.
Director
Compensation
All
non-officer directors receive reimbursement of reasonable expenses incurred in
attending Board and Committee meetings and were awarded options during the year
ended December 31, 2007 as shown in the table below:
|
Name
|
|
Option
Awards
(1)
|
|
|
Total
|
|
|
Bruce
E. Edgington
|
|
$
|
19,268
|
|
|
$
|
19,268
|
|
|
Earl
E. Gjelde
|
|
|
19,389
|
|
|
|
19,389
|
|
|
G.
Randy Nicholson
|
|
|
17,193
|
|
|
|
17,193
|
|
|
Donald
M. Blake, Jr.
|
|
|
19,389
|
|
|
|
19,389
|
|
(1)
The
above-named directors held options at December 31, 2007 for the following
number of shares: Mr. Edgington – 6913, Mr. Gjelde – 6957,
Mr. Nicholson – 6169, and Mr. Blake – 6957.
For
further information on the Company’s option plans, see descriptions provided
above.
EXTERNAL
AUDITOR INFORMATION
Effective
September 30, 2002, Johnson Miller & Co., CPA’s PC was engaged as the
independent accountant for the Company and has been selected as the Company’s
principal accountants for 2008. The decision to engage Johnson Miller
& Co., CPA’s PC was approved by the Audit Committee of the Board of
Directors. The Audit Committee has delegated authority for the
approval of non audit-related services to the Chairman of the
Committee.
Audit Fees:
The aggregate
fees paid to Johnson Miller & Co., CPA’s PC for the audit of the financial
statements on Form 10-KSB and for reviews on Form 10-QSB during 2006 was
$90,644, and for 2007 was $64,749.
Audit Related Fees
:
None.
Tax Fees
: During 2006 the
Company did not pay any fees for tax related matters. During 2007 the
Company paid its principal accountant $10,532 for tax related
matters.
All Other Fees
: The aggregate
other fees paid to Johnson Miller & Co., CPA’s PC during 2006 was
$22,263. The 2006 fees are primarily related to services rendered in
connection with the purchase of Priority Power and the disposition of TCTB
assets described below under “Certain Relationships and Related
Transactions”. The aggregate other fees paid to Johnson Miller &
Co., CPA’s PC during 2007 was $0.
The
Company expects that representatives of Johnson Miller & Co., CPA’s PC will
be present at the Annual Meeting to respond to appropriate questions and to make
a statement if they desire to do so.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Conversion
of Preferred Stock and Exercise of Warrants
On August
31, 2007, the holders of the Company’s Series A, B & C Preferred Stock
converted such preferred stock into Common Stock of the Company. As a
part of this conversion, Eric L. Oliver, Jon M. Morgan and
Bruce E. Edgington, officers and directors of the Company, received shares
of Common Stock in the amounts shown below:
|
|
|
Number
of
Preferred
C
Shares
|
|
|
Common
Stock Equivalent
|
|
|
Preferred
C
Voting
Equivalent
|
|
|
Purchase
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric
L. Oliver
|
|
|
14,063
|
|
|
|
56,252
|
|
|
|
52,877
|
|
|
$
|
225,008
|
|
|
Jon
M. Morgan
|
|
|
14,062
|
|
|
|
56,248
|
|
|
|
52,873
|
|
|
|
224,992
|
|
|
Bruce
E. Edgington
|
|
|
3,125
|
|
|
|
12,500
|
|
|
|
11,750
|
|
|
|
50,000
|
|
|
Total
|
|
|
31,250
|
|
|
|
125,000
|
|
|
|
117,500
|
|
|
$
|
500,000
|
|
Additionally,
Mr. Oliver purchased an additional 9,375 shares of common stock upon exercise of
warrants with an exercise price of $4.00 per share. Mr. Oliver
exercised additional warrants on March 7, 2008, for which he received an
additional 18,751 shares at a price of $4.00 per share.
Purchase
of Cogdill Enterprises
On
September 11, 2007 the Company announced the acquisition of 100% of Cogdill
Enterprises, Inc. (“CEI”), effective August 31, 2007 for an aggregate
consideration of $6,000 and an obligation to pay 95% of the total revenues
actually received by the Company each month directly as a result of the
contracts originated by Trenton Cogdill for and on behalf of the CEI prior to
the August 31, 2007. Trenton Cogdill is now an employee of Priority
Power.
Debt
Obligations
The
following table reflects the portion of the Company’s long-term debt payable to
related parties as of December 31, 2007:
|
|
|
Total
|
|
|
|
|
|
|
|
Eric
L. Oliver, Chairman of the Board
|
|
$
|
10,691
|
|
|
Jon
M. Morgan , CEO
|
|
|
477,561
|
|
|
Padraig
Ennis, VP of Priority Power
|
|
|
73,588
|
|
|
John
Bick, Managing Principal of Priority Power
|
|
|
190,669
|
|
|
Trenton
Cogdill, Priority Power
|
|
|
271,911
|
|
|
5%
Shareholders
|
|
|
869,120
|
|
|
Total
|
|
$
|
1,893,540
|
|
Sale
of Preferred D and Issuance of Warrants
The
Company issued Preferred D stock, promissory notes and the Warrants to finance
its investment in SFF Royalty and SFF Production. Certain of the
Company’s Directors and director nominees participated in this transaction as
shown below:
|
Director
|
|
#
Shares
Preferred
D
Purchased
|
|
|
Preferred
D
Purchase
Price
|
|
|
Promissory
Note
Amount
|
|
|
#
Warrants
Received
|
|
|
Eric
L. Oliver
(1)
|
|
|
164,376
|
|
|
$
|
1,643,760
|
|
|
$
|
1,037,741
|
|
|
|
172,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce
Edgington
|
|
|
6,130
|
|
|
|
61,300
|
|
|
|
38,700
|
|
|
|
6,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jesse
Correll
(2)
(director
nominee)
|
|
|
147,938
|
|
|
|
933,966
|
|
|
|
933,966
|
|
|
|
155,144
|
|
________________________
(1)
Through
Mr. Oliver’s control of SoftVest, L.P.
(2)
Through
Mr. Correll’s control of Universal Guaranty Life Ins. Co.
Stub
Financing
In order
to secure the cash required for the Company’s capital contribution to SFF
Royalty and SFF Production on December 17, 2007, stub financing was arranged via
the execution of two promissory notes with SoftVest, LP totaling $3.5
million. These notes accrued interest at an annual rate of
8.5%.
The
Company repaid these notes on March 13, 2008 after receiving its final
distribution from the Trust based upon its ownership of Trust
securities.
Other
We may in
the future enter into other transactions and agreements incident to our business
with directors, officers, principal shareholders and other affiliates. We intend
for all such transactions and agreements to be on terms no less favorable than
those obtainable from unaffiliated third parties on an arm's-length basis. In
addition, the approval of a majority of the AMEN directors will be required for
any such transactions or agreements.
OTHER
INFORMATION
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED
STOCKHOLDER MATTERS
Treatment
of Preferred Stock
As of
October 15, 2008, the only class of Preferred Stock that remained outstanding
was the Series D Preferred Stock that was issued in connection with the
Company’s investment in SFF Royalty and SFF Production. The Preferred
D has limited voting rights and is not convertible into shares of the Company’s
common stock. Consequently, ownership of Preferred D is not included
in the tables that follow.
General
Unless
otherwise noted, all persons named in the following ownership tables have sole
voting and sole investment power with respect to all shares of voting stock
beneficially owned by them, and no persons named in the table are acting as
nominees for any persons or otherwise under the control of any person or group
of persons. As used herein, the term "beneficial ownership" with
respect to a security means the sole or shared voting power (including the power
to vote and direct the vote) or sole or shared investment power (including the
power to dispose or direct the disposition) with respect to the security,
including a right to acquire any such power during a period of sixty (60) days
from October 15, 2008. Percentage of beneficial ownership is based
upon 3,777,655 shares of Common Stock outstanding as of October 15, 2008 and for
the purpose of computing the percentage ownership of certain persons or groups,
the shares of Common Stock that the person has the right to acquire (whether
upon exercise of vested stock options, exercise of warrants or otherwise), are
deemed to be outstanding as of that date.
Security
Ownership of Certain Beneficial Owners
The
following table and accompanying notes contain information about any person
(including any “group”) who is known by us to be the beneficial owner of more
than 5% of AMEN's Common Stock as of October 15, 2008, based upon copies of
Schedule 13Ds and Schedule 13Gs received by the Company but are not officers or
directors of the Company.
|
|
|
|
|
Name
and Address of Beneficial Owner
|
Amount
and Nature of
Beneficial
Ownership
|
Percent
of Class
|
|
Dodge
Jones Foundation
P.O.
Box 176
Abilene,
TX 79604
|
253,679
(1)
|
5.8%
|
(1)
Includes 27,321 shares issuable upon exercise of warrants, subject to
shareholder approval.
Security
Ownership of Management
The
following table and accompanying notes contain information about the beneficial
ownership of Common Stock as of October 15, 2008 by each of the Company’s (a)
directors and director nominees, and (b) executive officers as defined in Item
402(a)(2) of Regulation S-B, and (c) all of the Company’s executive officers,
directors and director nominees as a group.
|
|
|
|
|
Name
and Address of
Beneficial
Owner
|
Amount
and Nature of
Beneficial
Ownership
|
Percent
of Class
|
|
Eric
L. Oliver (Chairman)
400
Pine Street
Abilene,
TX 79601
|
543,993
(1)
|
12.5%
|
|
Jon M.
Morgan (President and CEO, Director)
303
W. Wall St., Ste. 2300
Midland,
TX 79701
|
311,645
(2)
|
7.2%
|
|
Bruce
E. Edgington (Director)
7857
Heritage Drive
Annandale,
VA 22003
|
201,112
(3)
|
4.6%
|
|
Jesse
Correll (Director Nominee)
5250
South Sixth Street
P.
O. Box 5147
Springfield,
Illinois 62705
|
155,144
(4)
|
3.6%
|
|
Earl
E. Gjelde (Director)
42
Bristlecone Court
Keystone,
CO 80435
|
63,787
(5)
|
1.5%
|
|
Donald
M. Blake, Jr. (Director)
298
Fifth Ave., 7
th
Floor
New
York, NY 10001
|
83,917
(6)
|
1.9%
|
|
G.
Randy Nicholson (Director)
1202
Estates Drive, Ste. D
Abilene,
TX 79602
|
19,731
(7)
|
*
|
|
Kevin
Yung (COO)
303
W. Wall St., Ste. 2300
Midland,
TX 79701
|
7,938
|
*
|
|
Kris
Oliver (CFO)
303
W. Wall St., Ste. 2300
Midland,
TX 79701
|
12,998
|
*
|
|
Padraig
Ennis
303
W. Wall St., Ste. 2300
Midland,
TX 79701
|
2,760
|
*
|
|
John
Bick
303
W. Wall St., Ste. 2300
Midland,
TX 79701
|
27,145
|
*
|
|
All
Current Directors and Officers as a Group
|
1,430,170
|
32.9%
|
*
- less than 1%
|
(1)
|
Includes
76,813 shares and 172,382 shares issuable upon the exercise of warrants,
the exercise of which is subject to shareholder approval, beneficially
owned by SoftVest, LP. Mr. Oliver is General Partner and lead
investment officer of SoftVest, LP. Includes 2,907 shares
beneficially owned by Lighthouse Partners, LP, of which Mr. Oliver is the
General Partner. Includes 142,837 shares beneficially owned by
SoftSearch Investments, LP, of which Mr. Oliver is the General
Partner. Includes 49,210 shares beneficially owned by
Mr. Oliver’s children. Includes 5,193 shares issuable upon
exercise of currently exercisable
options.
|
|
(2)
|
Includes
9,493 shares issuable upon exercise of currently exercisable stock
options.
|
|
(3)
|
Includes
34,672 shares issuable upon exercise of currently exercisable
options. Includes 6,429 shares issuable upon the exercise of
warrants, the exercise of which is subject to shareholder
approval.
|
|
(4)
|
Includes
155,144 shares issuable upon exercise of warrants, subject to shareholder
approval.
|
|
(5)
|
Includes
34,581 shares issuable upon exercise of currently exercisable stock
options.
|
|
(6)
|
Includes
21,870 shares issuable upon exercise of a currently exercisable stock
option.
|
|
|
|
|
(7)
|
Represents
shares issuable upon exercise of currently exercisable stock
options.
|
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires that our executive officers and directors and
persons who own more than ten percent of a registered class of AMEN's equity
securities (collectively, the "Reporting Persons") file reports of ownership and
changes in ownership with the Commission and to furnish the Company with copies
of these reports. The Company believes that all filings required to be made by
the Reporting Persons during the fiscal year ended December 31, 2007 were made
on a timely basis.
Shareholder
Proposals
All
stockholder proposals submitted for inclusion in the Company’s Proxy Statement
and form of proxy for the Annual Meeting of Stockholder of the Company to be
held in 2009 must be received at P. O. Box 835451, Richardson, Texas 75083,
Attention: Kris L. Oliver, a reasonable time before the Company begins to
prepare its proxy materials for such meeting. Such proposals must
also comply with the applicable regulations of the Securities and Exchange
Commission. Notice to the Company of all other stockholder proposals
(not submitted for inclusion in the Company’s Proxy Statement and form of proxy)
for the 2009 Annual Meeting will not be considered timely unless received at the
address set forth above a reasonable time before the Company begins to prepare
its proxy materials for such meeting.
Schedule
A
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Board of
Directors
AMEN
Properties, Inc.
Midland,
Texas
We have
audited the accompanying Combined Statements of Revenues and Direct Operating
Expenses of the Oil and Gas Properties Purchased from Santa Fe Energy Trust (the
“Trust”) and Devon Energy Production Company, L. P. (“Devon”), as defined in
Note 1, by AMEN Properties, Inc. (the “Company”) on December 17, 2007, for each
of the two years in the period ended December 31, 2007. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We
conducted our audits in accordance with auditing standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the combined
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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.
As
disclosed in Note 2, the accompanying combined financial statements are prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission for inclusion in Form 8-K of AMEN Properties, Inc. and
are not intended to be a complete financial presentation of the results of
operations of the acquired oil and gas properties described above.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the revenues and direct operating expenses of the oil and gas
properties purchased from the Trust and Devon, for each of the two years in the
period ended December 31, 2007 in conformity with accounting principles
generally accepted in the United States of America.
/s/
Johnson Miller & Co., CPA’s PC
Midland,
Texas
October
14, 2008
|
AMEN
PROPERTIES, INC.
|
|
|
COMBINED
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
|
|
|
OF
THE OIL AND GAS PROPERTIES PURCHASED FROM
|
|
|
SANTA
FE ENERGY TRUST AND DEVON ENERGY PRODUCTION COMPANY, L.P.
|
|
|
FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
3,540,551
|
|
|
$
|
2,950,258
|
|
|
Direct
operating expenses
|
|
|
526,070
|
|
|
|
439,207
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess
of revenues over direct operating expenses
|
|
$
|
3,014,481
|
|
|
$
|
2,511,051
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
|
|
AMEN
PROPERTIES, INC.
NOTES
TO COMBINED STATEMENTS OF REVENUES AND
DIRECT
OPERATING EXPENSES OF THE
OIL
AND GAS PROPERTIES PURCHASED FROM
SANTA
FE ENERGY TRUST AND DEVON ENERGY PRODUCTION COMPANY, L.P.
On
November 8, 2007, AMEN Minerals, LLC, a wholly owned subsidiary of AMEN
Properties, Inc. (collectively, the “Company”), entered into Purchase Agreements
with Santa Fe Energy Trust (the “Trust”) and Devon Energy Production Company, L.
P. (“Devon”) to acquire the Trust’s net profits interests and Devon’s working
and royalty interests (collectively, the “Acquired Properties”) in oil and gas
properties in a number of different states effective October 1, 2007 for a total
purchase price of $56 million, subject to customary closing
adjustments. Subsequently, both the Trust Purchase Agreement and the
Devon Purchase Agreement were amended to add an independent third party (the
“Third Party”) as the purchaser of approximately one-half of the Trust’s net
profits interest and Devon’s royalty interests of the Acquired
Properties.
The
closing for the acquisition occurred on December 17, 2007. After all
closing adjustments were applied and $27 million was paid by the Third Party for
their portion of the Acquired Properties, the Company’s net purchase price for
its portion of the Acquired Properties was $30.1 million. The Company
instructed the Trust and Devon to convey its portion of the Acquired Properties
into two new entities: the royalty interests were conveyed to SFF Royalty, LLC
and the working interests were conveyed to SFF Production, LLC (collectively,
the “SFF Group”) . In exchange for contributing $10 million in capital, the
Company received a one third ownership interest in the SFF Group. The
remaining ownership in the SFF Group is divided amongst the acquisition
investment group proportionately based on the percentage of capital
provided. The investment group and management group of the new
entities includes two of the Company’s Directors, Eric Oliver and Jon
Morgan. Additionally, the two new entities have entered into a
management agreement with Anthem Oil and Gas, Inc. to manage the interests in
exchange for compensation equal to 5% of the gross proceeds. One of the
Company's directors, Jon Morgan, is the president of Anthem Oil and
Gas.
Further
detail on the assets conveyed into SFF Royalty and SFF Production is shown
below:
|
|
|
Acquired
from the Trust
|
|
Acquired
from Devon
|
|
|
|
|
|
Acquiring Entity
|
|
Description
|
|
Purchase
Amount
|
|
Description
|
|
Purchase
Amount
|
|
|
Total
Purchase
|
|
|
SFF
Royalty
|
|
Net
profits interests
in
royalty interests
owned
by Devon
|
|
$
|
21,077,688
|
|
Royalty
interests
subject
to Trust’s
net
profits interests
|
|
$
|
2,254,662
|
|
|
$
|
23,332,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SFF
Production
|
|
Net
profits interests
in
working interests
owned
by Devon
|
|
|
6,072,125
|
|
Working
interests
subject
to Trust’s
net
profits interests
|
|
|
649,531
|
|
|
|
6,721,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
|
$
|
27,149,813
|
|
|
|
$
|
2,904,193
|
|
|
$
|
30,054,006
|
|
(2)
BASIS
FOR PRESENTATION
The
Acquired Properties are owned by SFF Royalty and SFF Production and reflected in
the financial statements of those entities. The Company does not
control the SFF Group and has no direct ownership of the Acquired Properties and
does not consolidate the financial statements of the SFF Group into its
financial statements. Rather, the Company accounts for its investment
in the SFF Group using the equity method. The accompanying combined
statements of direct revenues and direct operating expenses reflect
approximately one-third of the Acquired Properties owned by the SFF Group, which
is representative of the Company’s ownership position in those
entities.
Prior to
the acquisition, the Trust properties were owned by Devon, subject to a 90% net
profits interest owned by the Trust. All Trust revenue and expenses
were accounted for by Devon. In accordance with SAB 47, the Trust’s
financial statements were prepared on a cash basis of
accounting. During the periods presented, the Devon acquired
interests were not accounted for or operated as a separate division. Certain
Devon costs, such as depreciation, depletion and amortization (“DD&A”),
general and administrative expenses and corporate income taxes were not
allocated to the Devon acquired properties. Devon accounts for its oil and
gas activities using the full cost method. Full separate financial statements
for the Acquired Properties prepared in accordance with accounting principles
generally accepted in the United States do not exist and are not practicable to
obtain in these circumstances. Accordingly, the accompanying statements include
only revenues and direct operating expenses applicable to the Acquired
Properties and are prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission for inclusion in Company’s
Form 8-K and are not intended to be a complete financial presentation of the
acquired oil and gas properties described in Note 1 above. The Company does not
have information for the financing and investing activities from the Acquired
Properties.
The
Company’s historical balance sheet for the year ended December 31, 2007 includes
the Company’s portion of the adjusted purchase price of $30.1
million. The Company’s Consolidated Statement of Operations for the
period ended December 31, 2007 included the Company’s share of the earnings
generated by the SFF Group’s ownership of the Acquired Properties from December
17 through December 31.
The
accompanying Combined Statements of Revenue and Direct Operating Expense are
presented on the accrual basis of accounting. Direct operating expenses include
lease operating expense, severances taxes and ad valorem taxes. DD&A,
general and administrative expenses and corporate income taxes have been
excluded for the reasons discussed above. The oil and gas industry, as with
other extractive industries, is a depleting one that is not always constant with
respect to production streams and each barrel of oil equivalent produced must be
replaced or the critical source of revenue and cash flows will shrink. Past
results are not necessarily
indicative of future results.
For reasons including those noted, the financial statements and other
information presented herein are not indicative of the financial condition or
results of operations of the Acquired Properties going forward or indicative of
results had the acquisition been consummated in the periods
presented.
(3)
OIL
AND GAS RESERVES - UNAUDITED
Proved
reserves are estimated quantities of oil and natural gas which geological and
engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and operating
conditions. Proved developed reserves are proved reserves that can reasonably be
expected to be recovered through existing wells with existing equipment and
operating methods. Proved oil and natural gas reserve quantities and the related
discounted future net cash flows before income taxes (see Standardized Measure)
for 2007 are based on estimates prepared by Ryder Scott Company. Such estimates
have been prepared in accordance with guidelines established by the Securities
and Exchange Commission. Reserve studies were not available for 2006,
and the reserve quantities and related discounted future net cash flows for that
period were estimated based on the Ryder Scott reserve estimates for 2007 and
historical production volumes obtained from Devon.
There are
numerous uncertainties inherent in estimating quantities of proved reserves and
projecting future rates of production. The following estimated quantities of
proved oil and natural gas reserves and changes in net proved reserves of the
Acquired Properties represent estimates only and should not be construed as
being exact.
|
|
|
Oil
(Bbls)
|
|
|
Gas
(Mcf)
|
|
|
|
|
(in
thousands)
|
|
|
Proved
Developed and Undeveloped Reserves
|
|
|
|
|
|
|
|
Balance,
January 1, 2006 (calculated)
|
|
|
228
|
|
|
|
1140
|
|
|
Production
|
|
|
(29
|
)
|
|
|
(250
|
)
|
|
Balance,
December 31, 2006 (calculated)
|
|
|
199
|
|
|
|
890
|
|
|
Production
|
|
|
(38
|
)
|
|
|
(276
|
)
|
|
Balance,
December 31, 2007 (from Ryder Scott estimate)
|
|
|
161
|
|
|
|
614
|
|
Standardized
Measure -
The Standardized Measure of Discounted Future Net Cash Flows
relating to the Acquired Properties’ ownership interests in the proved oil and
natural gas reserves for each of the two years ended December 31, 2006 and 2007
is shown below.
|
|
|
2007
|
|
|
2006
|
|
|
|
|
(in
thousands)
|
|
|
Future
Cash Flows
|
|
$
|
16,844
|
|
|
$
|
18,092
|
|
|
Future
Production Costs
|
|
|
(2,762
|
)
|
|
|
(2,967
|
)
|
|
Future
Net Cash Inflows
|
|
|
14,082
|
|
|
|
15,125
|
|
|
Discounted
at 10% For Timing
|
|
|
(5,493
|
)
|
|
|
(5,899
|
)
|
|
Discounted
Future Net Cash Inflows
|
|
$
|
8,589
|
|
|
$
|
9,226
|
|
Future
cash flows are computed by applying fiscal year-end prices of oil and natural
gas to year-end quantities of proved oil and natural gas reserves. For 2007,
future operating expenses and development costs were computed primarily by Ryder
Scott by estimating the expenditures to be incurred in developing and producing
the proved oil and natural gas reserves at the end of year, based on year-end
costs and assuming the continuation of existing economic
conditions.
A discount
factor of 10 percent was used to reflect the timing of future net cash flows.
The Standardized Measure of Discounted Future Net Cash Flows is not intended,
nor should it be interpreted, to represent the replacement cost or fair market
value of the Acquired Properties’ oil and natural gas reserves, anticipated
future changes in prices and costs, a discount factor more representative of the
time value of money and the risks inherent in reserve estimates of oil and
natural gas producing operations.
Since
reserve studies were not available for 2006, the Standardized Measure was
computed in the following manner:
|
·
|
To
compute Future Cash Flows, fiscal year-end prices of oil and natural gas
published by the United States Department of Energy were applied to
year-end quantities of proved oil and natural gas reserves calculated by
adding 2007 production volumes obtained from Devon to the December 31,
2007 reserve estimates prepared by Ryder
Scott.
|
|
·
|
Future
Production Costs were computed by applying the ratio of Future Production
Costs to Future Cash Flows found in the 2007 Ryder Scott estimate to
Future Cash Flows for 2006, the effect of which is to assume that
production costs were approximately the same at 12/31/06 as at
12/31/07.
|
|
·
|
The
10% Discount for Timing was computed by applying the discount factor used
in the 2007 Ryder Scott estimate to the Future Net Cash Inflows for
2006.
|
Changes in
Standardized Measure -
Changes in Standardized Measure of Discounted
Future Net Cash Flows relating to proved oil and gas reserves are summarized
below:
|
|
|
2007
|
|
|
2006
|
|
|
|
|
(in
thousands)
|
|
|
Balance beginning of the
year
|
|
$
|
15,125
|
|
|
$
|
20,277
|
|
|
Sales,
net of production costs and taxes
|
|
|
(3,014
|
)
|
|
|
(2,511
|
)
|
|
Changes
in prices
|
|
|
2,909
|
|
|
|
(2,106
|
)
|
|
Interest
Factor and Other
|
|
|
(938
|
)
|
|
|
(535
|
)
|
|
Balance
end of the year
|
|
$
|
14,082
|
|
|
$
|
15,125
|
|
|
|
|
|
|
|
|
|
|
|
Sales of
oil and natural gas, net of oil and natural gas operating expenses, are based on
historical results. Since reserve studies were not available for prior years,
Changes in Standardized Measure were estimated for those periods using reserve
quantities calculated as described above and commodity prices published by the
United States Department of Energy.
Schedule
B
AMEN
PROPERTIES, INC.
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS
Background
The
following unaudited pro forma condensed consolidated financial statements and
related notes have been prepared to show the effect of the acquisition of oil
and gas interests from Santa Fe Energy Trust (the “Trust”) and Devon Energy
Production Company, L. P. (“Devon”) and the financing thereof.
On
November 8, 2007, AMEN Minerals, LLC, a wholly owned subsidiary of AMEN
Properties, Inc. (collectively, the “Company”), entered into Purchase Agreements
with the Trust and Devon to acquire the Trust’s net profits interests and
Devon’s working and royalty interests (collectively, the “Acquired Properties”)
in oil and gas properties in a number of different states effective October 1,
2007 for a total purchase price of $56 million, subject to customary closing
adjustments (the “Acquisition”). Subsequently, both the Trust
Purchase Agreement and the Devon Purchase Agreement were amended to add an
independent third party (the “Third Party”) as the purchaser of approximately
one-half of the Trust’s net profits interests and Devon’s royalty interests of
the Acquired Properties.
The
closing for the Acquisition occurred on December 17, 2007. After all
closing adjustments were applied and $27 million was paid by the Third Party for
their portion of the Acquired Properties, the Company’s net purchase price for
its portion of the Acquired Properties was $30.1 million. The Company
instructed the Trust and Devon to convey its portion of the Acquired Properties
into two new entities: the royalty interests were conveyed to SFF Royalty, LLC
and the working interests were conveyed to SFF Production, LLC (collectively,
the “SFF Group”) . In exchange for contributing $10 million in capital, the
Company received a one third ownership interest in the SFF Group. The
remaining ownership of the SFF Group is divided amongst the Acquisition
investment group proportionately based on the percentage of capital
provided. The investment group and management group of the new
entities includes two of the Company’s Directors, Eric Oliver and Jon
Morgan. Additionally, the two new entities have entered into a
management agreement with Anthem Oil and Gas, Inc. to manage the Acquired
Properties in exchange for compensation equal to 5% of the gross proceeds. One
of the Company's directors, Jon Morgan, is the president of Anthem Oil and
Gas.
The
Company does not control the SFF Group and uses the equity method of accounting
to record its one third interest in the net income (loss) of the SFF
Group.
Further
detail on the assets conveyed into SFF Royalty and SFF Production is shown
below:
|
|
|
Acquired
from the Trust
|
|
Acquired
from Devon
|
|
|
|
|
|
Acquiring Entity
|
|
Description
|
|
Purchase
Amount
|
|
Description
|
|
Purchase
Amount
|
|
|
Total
Purchase
|
|
|
SFF
Royalty
|
|
Net
profits interests
in
royalty interests
owned
by Devon
|
|
$
|
21,077,688
|
|
Royalty
interests
subject
to Trust’s
net
profits interests
|
|
$
|
2,254,662
|
|
|
$
|
23,332,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SFF
Production
|
|
Net
profits interests
in
working interests
owned
by Devon
|
|
|
6,072,125
|
|
Working
interests
subject
to Trust’s
net
profits interests
|
|
|
649,531
|
|
|
|
6,721,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
|
$
|
27,149,813
|
|
|
|
$
|
2,904,193
|
|
|
$
|
30,054,006
|
|
To secure
the $10 million required for the investments in SFF Royalty and SFF Production,
the Company issued Preferred Stock, warrants and short-term promissory notes and
secured stub financing as described below.
Class D Preferred
Stock
429,100
shares of Class D Preferred Stock (“Preferred D”) were issued at a share price
of $10 for total proceeds of $4,291,000. Below is a summary of the
significant characteristics of the Preferred D:
|
·
|
Pays
a coupon of 8.5% annually.
|
|
·
|
Has
limited voting rights.
|
|
·
|
Is
not convertible into common stock.
|
|
·
|
Is
redeemable upon demand by the
Company.
|
|
·
|
Election
of up to two directors
|
Promissory
Notes
The
Company also signed promissory notes with the recipients of the Preferred D
totaling $2,709,000. Below is a summary of the significant
characteristics of the promissory notes:
|
•
|
Due
and payable on June 30, 2009.
|
|
•
|
Interest
rate of Prime plus 1% (6.00% at June 30,
2008).
|
Warrants
The
holders of the promissory notes were issued warrants to purchase a total of
450,000 shares of the Company’s common stock at a strike price of $6.02 per
share. These warrants expire on June 30, 2009 and the Company intends
to use the proceeds from their issuance to pay all or a portion of the balance
of the related promissory notes. No value has been assigned to these warrants as
shareholder approval is required before the warrants can be
exercised.
Stub
Financing
In order
to secure the cash required for the Company’s contribution to SFF Royalty and
SFF Production on December 17, 2007, stub financing was arranged via the
execution of two promissory notes with SoftVest, LP totaling $3.5 million. These
notes were paid on March 13, 2008. Mr. Eric Oliver, the Company’s
Chairman of the Board, is the Managing Partner of SoftVest, LP.
Certain of
the Company’s Directors participated in this transaction as shown
below:
|
Director
|
|
#
Shares
Preferred
D
Purchased
|
|
|
Preferred
D
Purchase
Price
|
|
|
Promissory
Note
Amount
|
|
|
#
Warrants
Received
@$6.02
Strike
Price
|
|
|
Eric
Oliver
|
|
|
164,376
|
|
|
$
|
1,643,760
|
|
|
$
|
1,037,741
|
|
|
|
172,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce
Edgington
|
|
|
6,130
|
|
|
|
61,300
|
|
|
|
38,700
|
|
|
|
6,429
|
|
Sources
of Information and Basis of Presentation
The
unaudited pro forma condensed consolidated statement of operations and condensed
consolidated balance sheet as of and for the year ended December 31, 2007 is
derived from the audited consolidated financial statements of AMEN Properties,
Inc. for the year ended December 31, 2007, the audited Combined Statement of
Revenues and Direct Operating Expenses for the Acquired Properties for the year
ended December 31, 2007 and the adjustments and assumptions described
below.
The
unaudited pro forma condensed consolidated financial statements should be read
in conjunction with the notes thereto, our Annual Report on Form 10-K for the
year ended December 31, 2007, and the Combined Statements of Revenues and Direct
Operating Expenses for the Acquired Properties included herein as Schedule A.
Pro forma data are based on assumptions and include adjustments as explained in
the notes to the unaudited pro forma condensed consolidated financial
statements. Certain information (including substantial footnote disclosures)
included in the annual historical financial statements has been excluded in
these condensed pro forma financial statements. The pro forma data presented is
not necessarily indicative of the financial results that would have been
attained had the Acquisition occurred on January 1, 2007, and should not be
viewed as indicative of operations in future periods.
How
the Pro Forma Financial Statements Were Prepared
The pro
forma condensed consolidated statement of operations for the year ended December
31, 2007 was prepared without audit assuming we completed the Acquisition on
January 1, 2007.
The
Acquired Properties were not accounted for or operated as a separate division by
Devon. Certain costs, such as depreciation, depletion and amortization
(“DD&A”), general and administrative expenses, and corporate income taxes
were not allocated to the individual properties comprising the Acquired
Properties. Full separate financial statements prepared in accordance with
accounting principles generally accepted in the United States do not exist for
the Acquired Properties and are not practicable to obtain in these
circumstances. Therefore, on a historical basis, the Company is presenting only
the revenues and direct operating expenses for the Acquired Properties. Certain
estimates and judgments were made in preparing the pro forma adjustments as
discussed in the notes. With these adjustments, the pro forma condensed
consolidated statement of operations represents only an estimate of combining
our historical results with our indirect interest in the Acquired Properties.
The statements do not consider nonrecurring items included in the historical
financial statements. The pro forma condensed consolidated balance sheet was
prepared without audit assuming we completed the Acquisition on January 1,
2007.
No
incremental general and administrative costs related to this acquisition have
been included, and general and administrative costs are expected to increase
only minimally, if at all, as a result of the Acquisition. As a result, a very
minimal amount of our internal resources will be used to oversee the Company’s
investment in the SFF Group (and their ownership of the Acquired Properties)
and, accordingly, we believe that the impact from the Acquisition on our total
general and administrative expenses will be minimal.
The
unaudited pro forma financial information is presented for illustrative purposes
and does not purport to present what the Company’s financial position or results
of operations would have been had we invested in the SFF Group (and it had owned
the Acquired Properties) on the dates indicated. In addition, such information
is not necessarily indicative of the Company’s future results of operations or
financial performance because of the exclusion of certain operating expenses,
changes in commodity prices and other circumstances that may change or arise in
the future. The unaudited pro forma financial information should be
read in conjunction with our historical financial statements and risk factor
disclosure, which are hereby incorporated by reference herein.
AMEN PROPERTIES, INC.
UNAUDITED
PRO FORMA CONDENSED
CONSOLIDATED
STATEMENT OF OPERATIONS
For
the Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amen
|
|
|
Pro
Forma
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Adjustments
|
|
|
|
Pro
Forma
|
|
|
OPERATING
REVENUE
|
|
|
|
|
|
|
|
|
|
|
|
Retail
Electricity Revenue
|
|
$
|
10,327,813
|
|
|
$
|
--
|
|
|
|
$
|
10,327,813
|
|
|
Energy
Management Fees
|
|
|
3,983,517
|
|
|
|
--
|
|
|
|
|
3,983,517
|
|
|
Total
Operating Revenue
|
|
|
14,311,330
|
|
|
|
--
|
|
|
|
|
14,311,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Goods and Services
|
|
|
9,560,893
|
|
|
|
--
|
|
|
|
|
9,560,893
|
|
|
General
and Administrative
|
|
|
3,042,256
|
|
|
|
--
|
|
|
|
|
3,042,256
|
|
|
Depreciation,
Amortization and Depletion
|
|
|
118,236
|
|
|
|
--
|
|
|
|
|
118,236
|
|
|
Corporate
Tithing
|
|
|
157,689
|
|
|
|
50,500
|
|
a
|
|
|
208,189
|
|
|
Total
Operating Expenses
|
|
|
12,879,074
|
|
|
|
50,500
|
|
|
|
|
12,929,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM OPERATIONS
|
|
|
1,432,256
|
|
|
|
(50,500
|
)
|
|
|
|
1,381,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
345,395
|
|
|
|
--
|
|
|
|
|
345,395
|
|
|
Interest
Expense
|
|
|
(339,780
|
)
|
|
|
(299,593
|
)
|
b
|
|
|
(639,373
|
)
|
|
Income
from Real Estate Investment
|
|
|
102,767
|
|
|
|
--
|
|
|
|
|
102,767
|
|
|
Income
from SFF Group Investment
|
|
|
22,389
|
|
|
|
875,546
|
|
c
|
|
|
897,935
|
|
|
Other
Income
|
|
|
96,746
|
|
|
|
--
|
|
|
|
|
96,746
|
|
|
Total
Other Income
|
|
|
227,517
|
|
|
|
575,953
|
|
|
|
|
803,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY
INTEREST
|
|
|
1,659,773
|
|
|
|
525,453
|
|
|
|
|
2,185,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Taxes
|
|
|
(52,812
|
)
|
|
|
(20,700
|
)
|
d
|
|
|
(73,512
|
)
|
|
Minority
Interest
|
|
|
901
|
|
|
|
--
|
|
|
|
|
901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM CONTINUING OPERATIONS
|
|
|
1,607,862
|
|
|
|
504,753
|
|
|
|
|
2,112,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM DISCONTINUED OPERATIONS
|
|
|
(311,351
|
)
|
|
|
--
|
|
|
|
|
(311,351
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
$
|
1,296,511
|
|
|
$
|
504,753
|
|
|
|
$
|
1,801,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income from Continuing Operations per Common Share (Basic)
|
|
$
|
.58
|
|
|
|
|
|
|
|
$
|
.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income from Continuing Operations per Common Share
(Diluted)
|
|
$
|
.43
|
|
|
|
|
|
|
|
$
|
.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income per Common Share (Basic)
|
|
$
|
.47
|
|
|
|
|
|
|
|
$
|
.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income per Common Share (Diluted)
|
|
$
|
.35
|
|
|
|
|
|
|
|
$
|
.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Number of Common Shares Outstanding - Basic
|
|
|
2,766,745
|
|
|
|
|
|
|
|
|
2,766,745
|
|
|
Weighted
Average Number of Common Shares Outstanding - Diluted
|
|
|
3,715,641
|
|
|
|
|
|
|
|
|
3,715,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes to unaudited pro forma condensed consolidated financial
statements are an integral part of these statements.
AMEN PROPERTIES, INC.
UNAUDITED
PRO FORMA CONDENSED
CONSOLIDATED
BALANCE SHEET
December
31, 2007
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amen
|
|
|
Pro
Forma
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Adjustments
|
|
|
|
Pro
Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
and CASH EQUIVALENTS
|
|
$
|
1,520,852
|
|
|
$
|
3,274,629
|
|
1
|
|
$
|
4,795,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
CURRENT ASSETS
|
|
|
5,720,756
|
|
|
|
(3,680,550
|
)
|
2
|
|
|
2,040,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RESTRICTED
CASH EQUIVALENTS
|
|
|
2,197,000
|
|
|
|
--
|
|
|
|
|
2,197,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT
|
|
|
177,771
|
|
|
|
--
|
|
|
|
|
177,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OIL
AND GAS INVESTMENTS IN SFF GROUP
|
|
|
10,022,389
|
|
|
|
(2,591,119
|
)
|
3
|
|
|
7,431,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT
IN REAL ESTATE
|
|
|
2,311,443
|
|
|
|
--
|
|
|
|
|
2,311,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROYALTY
INTERESTS
|
|
|
126,528
|
|
|
|
--
|
|
|
|
|
126,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM
INVESTMENTS
|
|
|
62,350
|
|
|
|
--
|
|
|
|
|
62,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
3,422,941
|
|
|
|
--
|
|
|
|
|
3,422,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
25,562,030
|
|
|
$
|
(2,997,040
|
)
|
|
|
$
|
22,564,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
$
|
8,274,367
|
|
|
$
|
(3,428,800
|
)
|
4
|
|
$
|
4,845,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM
OBLIGATIONS
|
|
|
2,624,085
|
|
|
|
--
|
|
|
|
|
2,624,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
14,663,578
|
|
|
|
431,760
|
|
5
|
|
|
15,095,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
25,562,030
|
|
|
$
|
(2,997,040
|
)
|
|
|
$
|
22,564,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes to unaudited pro forma condensed consolidated financial
statements are an integral part of these statements.
AMEN
PROPERTIES, INC.
NOTES
TO UNAUDITED PRO FORMA
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The
unaudited pro forma condensed consolidated statement of operations reflects the
following adjustments:
|
|
a.
|
Increased
tithing related to the increase in net equity earnings from SFF Group
investment. The Company tithes 10% of its net
earnings.
|
|
|
b.
|
Increased
interest expense to show the full year impact of interest on borrowings
related to SFF investment. Assumed stub financing was
outstanding for three months at stated interest rate of
8.5%. For SFF investment notes issued to Preferred D holders,
used interest rate of 9.08% for stated interest rate of Prime +
1%.
|
|
|
c.
|
Pro
forma estimate of Amen’s one-third interest in the equity earnings of SFF
Royalty and SFF Production. Based on direct revenues and
expenses adjusted for depletion
expense.
|
|
|
d.
|
Increase
in Texas Franchise Tax related to increase in equity net earnings from SFF
Group Investment.
|
The
unaudited pro forma condensed consolidated balance sheet reflects the following
adjustments:
|
|
1.
|
Increase
in cash from distributions from SFF Group (+$3.5 million) and liquidation
of investment in Santa Fe Energy Trust (+$4.0 million), net of repayment
of stub financing (-$3.5 million), Preferred D dividends (-$365 thousand)
and increased interest payments (-$300
thousand)
|
|
|
2.
|
Liquidation
of investment in Santa Fe Energy
Trust.
|
|
|
3.
|
Adjustments
for pro forma investment equity income from SFF Group (+$875 thousand) and
cash distributions from SFF Group (-$3.5
million)
|
|
|
4.
|
Repayment
of stub financing (-$3.5 million) and increase in accruals for tithing and
franchise taxes (+$71 thousand)
|
|
|
5.
|
Adjustment
for increased equity earnings from SFF Group investment, net of related
expenses such as interest and
dividends.
|
AMEN
Properties, Inc.
303
W. Wall Street, Suite 2300
Midland,
Texas 79701
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF AMEN PROPERTIES INC. FOR THE
ANNUAL MEETING OF SHAREHOLDERS ON DECEMBER 17, 2008
The
undersigned hereby constitutes and appoints Eric L. Oliver and Jon M. Morgan,
and each of them, his true and lawful agents and proxies with full power of
substitution in each, to represent the undersigned at the Annual Meeting of
Shareholders to be held at the 303 W. Wall Street, Suite 2300, Midland, TX
79701, at 8:30 a.m., local time, on Wednesday, December 17, 2008, and at any
adjournments thereof, on all matters coming before said meeting.
PLEASE
MARK YOUR VOTES AS IN THIS EXAMPLE: /
X
/
|
|
1.
|
ELECTION
OF, ERIC L. OLIVER, JON M. MORGAN, BRUCE E. EDGINGTON, JESSE T. CORRELL,
DONALD M. BLAKE, JR. AND G. RANDY NICHOLSON TO THE AMEN PROPERTIES,
INC. BOARD OF DIRECTORS.
|
IN FAVOR
OF ALL NOMINEES [ ]
WITHHOLD
AUTHORITY TO VOTE FOR ALL NOMINEES [ ]
IN FAVOR
OF ALL NOMINEES EXCEPT THE FOLLOWING: [ ]
Instruction:
To withhold authority to vote for any individual nominee, write that nominee’s
name in the space provided above.)
|
|
2.
|
APPROVAL
AND RATIFICATION OF THE ISSUANCE OF UP TO 450,000 SHARES OF COMMON STOCK
OF THE COMPANY UPON EXERCISE OF WARRANTS ISSUED IN CONNECTION WITH THE
COMPANY’S INVESTMENT IN SFF ROYALTY, LLC AND SFF PRODUCTION,
LLC.
|
|
|
3.
|
IN
THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING.
|
This
proxy, when properly executed, will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will
be voted IN FAVOR of the election of all of the directors named in this proxy
card and IN FAVOR of proposal 2 as set forth herein.
TO ASSURE
YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY
THE
UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE ACCOMPANYING NOTICE OF
ANNUAL
MEETING OF SHAREHOLDERS AND PROXY STATEMENT FOR THE
DECEMBER
17, 2008 ANNUAL MEETING OF SHAREHOLDERS AND THE COMPANY’S
ANNUAL
REPORT ON FORM 10-KSB
Stockholder
Signature(s):
_______________________ _________________________
Date:
_____________________________
Stockholder
Printed Name(s):
____________________ _________________________
Please
sign your name exactly as it appears hereon. Joint owners must each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
your full title as it appears thereon. If a corporation, please sign in full
corporate name as President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
