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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[Mark One]
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-10526
ALEXANDER ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
OKLAHOMA 73-1088777
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
701 CEDAR LAKE BOULEVARD 73114-7800
OKLAHOMA CITY, OKLAHOMA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:(405) 478-8686
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: NONE Name of each exchange on
which registered: N/A
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.03 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K.
[ ]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT, COMPUTED BY USING THE CLOSING SALE PRICE OF THE REGISTRANT'S
COMMON STOCK AS OF MAY 6, 1996, WAS $43,970,111.
The number of shares outstanding of each of the registrant's classes of common
stock, as of May 6, 1996, was:
12,461,058 SHARES OF COMMON STOCK, PAR VALUE $.03.
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TABLE OF CONTENTS
PART I
Item Page
- ---- ----
1. BUSINESS............................................. 1
1A. EXECUTIVE OFFICERS OF THE REGISTRANT ................ 6
2. PROPERTIES........................................... 7
3. LEGAL PROCEEDINGS.................................... 11
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS... 12
PART II
5. MARKETS FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS................................... 13
6. SELECTED FINANCIAL DATA............................... 14
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................... 15
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........... 20
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................... 21
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.... 21
11. EXECUTIVE COMPENSATION................................ 22
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT........................................ 24
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........ 24
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K........................................... 25
SIGNATURES.................................................. 28
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PART I
ITEM 1. BUSINESS
THE COMPANY
Alexander Energy Corporation, an independent energy company engaged in the
acquisition, exploration, development, production and marketing of natural gas
and crude oil, was organized as an Oklahoma corporation in 1980 by a group of
executive, professional and technical personnel who had previously been
employees of Reserve Oil and Gas Company prior to its acquisition by Getty
Petroleum. The Company was initially organized to provide technical and
operating services to another independent oil and natural gas company, but it
commenced independent operations after its initial public offering in 1981.
Beginning in 1985, the Company participated in two drilling partnerships with
John Hancock Mutual Life Insurance Company and Midwest Capital Group, Inc., a
wholly-owned subsidiary of an Iowa-based public utility holding company. These
partnerships invested over $37.6 million to acquire and develop properties,
drilling a total of 176 wells. In March 1993, the Company completed a second
offering of its common stock. Proceeds of such offering, along with the
Company's cash flow and a bank credit facility, were used to finance its
drilling, exploitation and acquisition program. Since completion of the 1993
offering of common stock, the Company has drilled 60 wells, with an average
working interest of 40%, resulting in 50 completions for a successful
completion rate of 83%. Unless the context otherwise requires, all references
to "Alexander" or the "Company" are to Alexander Energy Corporation and its
subsidiaries, and all information herein has been restated to give effect to
the Company's merger with American Natural Energy Corporation ("ANEC") in July
1994.
In June 1995, the Company merged ANEC, Bradmar Petroleum Corporation
("Bradmar") and Edwards & Leach Oil Company, former subsidiaries, into itself.
The mergers were accomplished in order to attain accounting and other
efficiencies. After giving effect to this merger, none of the Company's
remaining subsidiaries, individually or in the aggregate, has significant
assets, indebtedness, revenues or cash flow.
In November 1994, the Company received two unsolicited acquisition offers.
Subsequent to the offers, the Company hired Prudential Securities in November
1994 as its investment banker and commenced an orderly process of evaluating
possible merger partners. Of the two initially interested companies neither
(i) confirmed financing arrangements, (ii) signed a confidentiality agreement
nor (iii) visited the Company's data room as established to provide information
to interested parties. On March 10, 1995, the Company entered into an
exclusive agreement with Abraxas Petroleum Corporation ("Abraxas") to conduct
negotiations for a possible merger. This agreement was later extended until May
9, 1995. Negotiations with Abraxas by mutual agreement were terminated on May
11, 1995. During the summer of 1995, the Company initiated an offering of
senior notes through private placement (the "Senior Note Offering"). Due to
many factors, including a sharp decline in natural gas prices, an increase in
interest rates on the proposed Senior Note Offering and the filing of a lawsuit
by a stockholder against the Company and its directors (see ITEM 3. LEGAL
PROCEEDINGS), the Senior Note Offering was postponed. In December 1995,
National Energy Group, Inc. ("NEG"), one of the two companies initially
indicating an interest to merge, reinitiated negotiations. The Company and NEG
executed a letter of intent on December 29, 1995, wherein both companies agreed
in principal to an exchange of one share of Alexander stock for 1.8 shares of
NEG stock; however, if the average price of NEG stock was below $2.40 per share
or above $3.60 per share, the parties were under no obligation to consummate
the merger. On March 25, 1996, the letter of intent was amended to provide for
an exchange ratio of 1.7. On May 6, 1996, the Company announced that the
Company and NEG had not reached agreement on the terms of a definitive merger
agreement by the April 30, 1996 standstill deadline; however, both companies
are continuing to negotiate.
BUSINESS STRATEGY
Since 1984, Alexander has increased its proved reserves, production and
operating cash flow by executing its strategy of (i) acquiring mid-continent
reserves that are predominantly natural gas and have significant development
potential; (ii) increasing reserves and production by enhancing and exploiting
its reserves through low risk development drilling and improved operating
practices and recovery techniques including workovers, redrills, compression
adjustments and renegotiating natural gas sales contracts; (iii) controlling
operating costs and obtaining reimbursement for overhead expenses; and (iv)
engaging in controlled exploratory drilling.
Acquisitions. In the past ten years, the Company has made acquisitions
directly or indirectly through limited partnerships formed with institutional
partners. During this period, the Company has completed six acquisitions of
approximately 128.6 billion cubic feet of natural gas equivalents ("Bcfe") of
proved reserves with an aggregate cost of approximately $99.4 million or $0.77
per Mcfe. Two significant acquisitions in the Company's core areas of
operations were consummated in 1994.
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The Company actively pursues property acquisitions. Since 1984, the
Company has continually evaluated potential acquisitions of producing and
nonproducing properties, with an emphasis on producing properties with the
following objectives: (i) established production histories, (ii) existing
reserve estimates, (iii) potential opportunities to increase reserves through
additional recovery or enhancement techniques, (iv) close proximity to the
Company's existing operations, (v) the possibility of reducing expenses
associated with the properties and (vi) control of operations. The Company
relies upon advanced technology, as well as its trained and experienced
personnel, to determine whether a property meets the Company's acquisition
objectives.
In July 1994, the Company acquired ANEC in a transaction accounted for as
a pooling of interests. The ANEC merger added approximately 400 gross wells,
200 of which are now operated by the Company, and nearly doubled the Company's
reserves. The ANEC properties are concentrated in the central Oklahoma portion
of the Anadarko Basin and in the Cotton Valley Trend in eastern Texas where
ANEC experienced success drilling infill wells since 1985. Subsequent to the
merger, the Company conducted workovers on the Cotton Valley Trend properties.
In November 1994, the Company acquired 78 natural gas properties located
in the Arkoma Basin in Oklahoma and Arkansas from JMC Exploration, Inc. ("JMC")
for total consideration of $18.2 million. The 78 properties, one-half of which
are operated by the Company, initially contributed an estimated 21.4 billion
cubic feet ("Bcf") of natural gas to the Company's reserves. The JMC properties
reestablished the Company in the Arkoma Basin, a significant area of
development for the Company in its early years, with a strong position of
proved reserves, 26% of which remain to be developed. Planned exploitation
efforts and expected development of proved undeveloped reserves ("PUD") are
expected to add to the ultimate value of the acquisition.
The acquisitions of ANEC and the JMC properties greatly increased the
Company's proved reserves, production and cash flow. As a result of these
acquisitions, the Company's proved reserves increased 38% from 81.7 Bcfe at
December 31, 1993 to 112.9 Bcfe at December 31, 1995. The natural gas component
of the Company's reserves increased from 77% at December 31, 1993 to 88% at
December 31, 1995. In addition, approximately 34% of the Company's reserves are
proved undeveloped, providing the Company with an inventory of low risk
development drilling opportunities. These transactions increased the Company's
production from 13.4 million cubic feet of natural gas equivalents ("Mmcfe")
per day in 1993 to 27.8 MMcfe per day in 1995.
In additional to the acquisitions of ANEC and JMC properties, since its
inception the Company has increased its producing capabilities through the
acquisitions of (i) Bradmar in 1992; (ii) producing oil and gas properties in
Oklahoma in 1990 (the "MFS Properties"); (iii) leasehold interests in Oklahoma
and Texas through a joint venture in 1990 (the "Zilkha Properties"); and (iv)
oil and gas wells formerly owned by Brooks Hall Energy Corporation in 1984 (the
"Brooks Hall Properties").
Development of Acquisitions. When evaluating possible acquisitions, the
Company's geologists and engineers analyze various means by which production
may be increased or related operating expenses may be decreased. In addition,
the Company's personnel will attempt to identify the existence of any
previously unreported proved undeveloped reserves. For example, Bradmar did not
report proved undeveloped reserves with respect to its properties primarily
because it lacked sufficient capital to identify and develop these reserves;
accordingly, proved undeveloped reserves were not included in the estimated
proved reserves identified at the time of execution of the Bradmar acquisition
agreement. However, the Company's familiarity with the areas in which Bradmar
operated allowed the Company to assume in its acquisition analysis that an
unspecified quantity of proved undeveloped reserves existed.
Drilling and Development Program. The Company's development program
includes (i) identifying and drilling development prospects, (ii) drilling
increased density locations, (iii) adding production equipment and (iv)
renegotiating natural gas contracts. The impact of these programs on the
Company's six major acquisitions completed since 1984 has been significant.
Approximately 34% of the Company's reserves were classified as proved
undeveloped at December 31, 1995. At that date, the Company had identified 80
proved undeveloped locations on its properties with estimated proved
undeveloped reserves of 38.9 Bcfe, which will require approximately $22.5
million of capital costs to develop. Subject to further study and drilling
results, the Company believes that there are numerous potential drilling
locations on the Company's existing properties that should result in additional
proved reserves.
The Company has tentatively budgeted approximately $13 million for its
1996 drilling and development program, substantially all of which relates to
proved undeveloped locations. The actual capital expenditures will be subject
to cash flow from operations, after required debt service, and the Company's
ability to complete one or a combination of financing alternatives. Proceeds
from the financing alternatives will have to be sufficient in amount to also
retire the Company's term note with a bank. See Note 4 of Notes to
Consolidated Financial Statements. As of March 1996, the Company has
commitments to drill $1.6 million of such properties. Any properties not
drilled in 1996 may be deferred until future periods; however, if these
properties are not drilled in 1996 and the Company does not complete
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a significant acquisition, there is no assurance that the Company will be
successful in replacing reserves expected to be produced in 1996. See
Management's Discussion and Analysis of financial Condition and Results of
Operations - Liquidity and Capital Resources.
Controlled Exploration Opportunities. The Company conducts a controlled
exploration program which is designed to provide exposure to selected higher
risk, higher potential rate of return prospects. The Company manages its
exploration risks by limiting its exploration expenditures to approximately 5%
to 15% of its overall capital budget and applying advanced technology to
identifying prospects. Since completion of the 1993 public offering of common
stock, the Company has drilled four exploratory wells at an aggregate cost of
$1.3 million.
Operating and Administrative Expenses. The Company owns working interests
in 768 wells, of which it operates 391 wells representing approximately 86% of
the Present Value (as defined herein) of its proved reserves. By serving as
operator, the Company is able to maintain efficiencies in operations and obtain
operator and management fees which offset the majority of its general and
administrative expenses. Operator and management fees offset 69%, 65% and 77%
of general and administrative expenses in 1993, 1994 and 1995, respectively.
Also, Alexander has pursued a strategy of selling marginal and non-strategic
properties to reduce well operating expenses, both on an absolute and on a
per-unit-of-production basis.
MARKETS AND CUSTOMERS
The Company operates exclusively in the oil and gas industry. Its
revenues are derived from its proportionate interest in domestic oil and gas
producing properties. The Company does not consider its business seasonal;
however, market demand (and the resulting prices received for crude oil and
natural gas) can be affected by weather conditions, economic conditions, import
quotas, the availability and cost of alternative fuels, the proximity to, and
capacity of, natural gas pipelines and other systems of transportation, the
effect of state regulation of production, and federal regulation of oil and gas
sold in intrastate and interstate commerce. All of these factors are beyond
the control of the Company.
The Company sells its crude oil at posted field prices in effect in the
producing fields within which its operations are conducted. During the years
ended December 31, 1994 and 1995, the price for the Company's oil ranged from
$10.65 per 42 U.S. gallon barrel ("Bbl") to $20.59 per Bbl and from $15.25 per
Bbl to $18.58 per Bbl, respectively. Because of restrictions on flaring
natural gas, wells which produce both oil and gas may be shut-in when there is
not a market for the gas, even though a market is otherwise available for the
oil.
Natural gas production of the Company is sold under long-term and spot
market contracts to intrastate and interstate pipeline companies and natural
gas marketing companies. Prices received by the Company for natural gas
production during the years ended December 31, 1994 and 1995 varied from $0.65
per thousand cubic feet ("Mcf") to $4.90 per Mcf and from $0.60 per Mcf to
$4.37 per Mcf, respectively.
Approximately 46% of the Company's natural gas is sold on the spot market
or under short-term contracts (one year or less) providing for variable or
"market-sensitive" prices. Approximately 54% of the Company's natural gas is
marketed under various long-term contracts which dedicate the natural gas to a
purchaser for an extended period of time, but which still involve variable or
market-sensitive pricing of the Company's natural gas.
The Company's natural gas production is sold under contracts with various
purchasers. Natural gas sales to GPM Gas Corporation ("GPM") and Cowboy
Pipeline Service Company ("Cowboy") individually accounted for 12% and 13% of
total revenues for the years ended December 31, 1993 and 1994. During 1995,
natural gas sales to GPM accounted for 13%of total revenues.
The Company does not believe that the loss of any of its existing
customers would have a material adverse effect on the results of operations of
the Company.
REGULATION
General. The oil and natural gas industry is extensively regulated by
federal, state and local authorities. Legislation affecting the oil and natural
gas industry is under constant review for amendment or expansion. In October
1992, comprehensive national energy legislation was enacted which focuses on
electric power, renewable energy sources and conservation. The legislation,
among other things, guarantees equal treatment of domestic and imported natural
gas supplies, mandates expanded use of natural gas and other alternative fuel
vehicles, funds natural gas research and development, permits continued
offshore drilling and use of natural gas for electric generation and adopts
various conservation measures designed to reduce consumption of imported oil.
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Numerous governmental departments and agencies, both federal and state,
have issued rules and regulations binding on the oil and natural gas industry
and its individual members, some of which carry substantial penalties for the
failure to comply. The regulatory burden on the oil and natural gas industry
increases its cost of doing business and, consequently, affects its
profitability. Inasmuch as such laws and regulations are frequently amended or
reinterpreted, the Company is unable to predict the future cost or impact of
complying with such regulations.
Exploration and Production. The Company's exploration and development
operations are subject to various types of regulation at the federal, state and
local levels. Such regulation includes requiring permits for the drilling of
wells; maintaining bonding requirements in order to drill or operate wells; and
regulating the location of wells, the method of drilling and casing wells, the
surface use and restoration of properties upon which wells are drilled and the
plugging and abandoning of wells. The Company's operations are also subject to
various conservation matters and rules to protect the correlative rights of
subsurface owners. These include the regulation of the size of drilling and
spacing units or proration units and the density of wells which may be drilled
and the unitization or pooling of oil and natural gas properties. In this
regard, some states allow the forced pooling or integration of tracts to
facilitate exploration while other states rely on voluntary pooling of land and
leases. In addition, state conservation laws establish maximum rates of
production from oil and natural gas wells, generally prohibit the venting or
flaring of natural gas and impose certain requirements regarding the ratability
of production. The effect of these regulations is to limit the amounts of oil
and natural gas the Company can produce from its wells and to limit the number
of wells or the locations at which the Company can drill. Recently enacted
legislation in Oklahoma and regulatory action in Texas modifies the methodology
by which the regulatory agencies establish permissible monthly production
allowables. Such action has generated substantial controversy, especially at
the federal level, and has been labeled as being intended to reduce the total
production of natural gas in order to increase natural gas prices. A recent
attempt to enact a federal prohibition of these recent state proration rule
initiatives was defeated, but various members of Congress and some federal
regulators have declared an intent to monitor the states' actions very
carefully. The Company cannot predict what effect these new prorationing
regulations will have on its production and sales of natural gas.
Certain of the Company's oil and natural gas leases are granted by the
federal government and administered by various federal agencies. Such leases
require compliance with detailed federal regulations and orders which regulate,
among other matters, drilling and operations on these leases and calculation
and disbursement of royalty payments to the federal government. The Mineral
Lands Leasing Act of 1920 (the "MLLA") places limitations on the number of
acres under federal leases that may be owned in any one state. Additionally,
the MLLA and related regulations also may restrict a corporation from holding
federal onshore oil and natural gas leases if stock of such corporation is
owned by citizens of foreign countries which are not deemed reciprocal under
the MLLA. Reciprocity depends, in large part, on whether the laws of the
foreign jurisdiction discriminate against a United States citizen's ownership
of rights to minerals in such jurisdiction. The purchase of shares in the
Company by citizens of foreign countries with laws which are not deemed to be
reciprocal under the MLLA could have an impact on the Company's ownership of
federal leases.
Environmental and Occupational Regulations. The Company has an engineer
who also serves as an environmental compliance officer with the responsibility
to implement an environmental compliance program and to monitor environmental
compliance and potential environmental liabilities of the Company. Operations
of the Company are subject to numerous laws and regulations governing the
discharge of materials into the environment or otherwise relating to
environmental protection. These laws and regulations may require the
acquisition of a permit before drilling commences, limit or prohibit drilling
activities on certain lands lying within wilderness or wetlands and other
protected areas and impose substantial liabilities for pollution resulting from
drilling operations. Such laws and regulations may also restrict air or other
pollution resulting from the Company's operations. Moreover, many commentators
believe that the state and federal environmental laws and regulations will
become more stringent in the future. For instance, legislation has been
proposed in Congress in connection with the pending reauthorization of the
federal Resource Conservation and Recovery Act ("RCRA"), which would amend RCRA
to reclassify oil and natural gas production wastes as "hazardous waste." If
such legislation were to be enacted, it could have a significant impact on the
operating costs of the Company, as well as the oil and natural gas industry in
general. State initiatives to further regulate the disposal of oil and natural
gas wastes are also pending in certain states and these various initiatives
could have a similar impact on the Company. Management believes that compliance
with current applicable environmental laws and regulations will not have a
material adverse impact on the Company. However, many of these laws and
regulations increase the Company's overall operating expenses, and future
changes to environmental laws and regulations could have a material adverse
impact on the Company.
The Company is also subject to laws and regulations concerning
occupational safety and health. While it is not anticipated that the Company
will be required in the near future to expend amounts that are material in the
aggregate to the Company's overall operations by reason of occupational safety
and health laws and regulations, the Company is unable to predict the ultimate
cost of compliance.
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Marketing and Transportation. Historically, the transportation and sale
for resale of natural gas in interstate commerce have been regulated pursuant
to the Natural Gas Act of 1938, the Natural Gas Policy Act of 1978 (the
"NGPA"), and the regulations promulgated thereunder by the Federal Energy
Regulatory Commission (the "FERC"). From 1978 until January 1, 1993, maximum
selling prices of certain categories of natural gas sold in "first sales,"
whether sold in interstate or intrastate commerce, were regulated pursuant to
the NGPA. The NGPA established various categories of natural gas and provided
for graduated deregulation of price controls of several categories of natural
gas and the deregulation of sales of certain categories of natural gas.
Several major regulatory changes have been implemented by FERC from 1985
to the present that affect the economics of natural gas production,
transportation and sales. In addition, FERC continues to promulgate revisions
to various aspects of the rules and regulations affecting those segments of the
natural gas industry, most notably interstate natural gas transmission
companies, which remain subject to FERC's jurisdiction. These initiatives may
also affect the intrastate transportation of natural gas under certain
circumstances. The stated purposes of many of these regulatory changes is to
promote competition among the various sectors of the natural gas industry. The
ultimate impact of these complex and overlapping rules and regulations, many of
which are repeatedly subjected to judicial challenge and interpretation, cannot
be predicted.
Various rules, regulations and orders, as well as statutory provisions,
may affect the price of natural gas production and the transportation and
marketing of natural gas.
No Price Controls on Liquid Hydrocarbons. In the past there have been
regulations of the sales price of liquid hydrocarbons, however, there are
currently no price controls on crude oil, condensate or natural gas liquids.
OPERATIONAL HAZARDS AND INSURANCE
The Company's operations are subject to the usual hazards incident to the
exploration for and production of oil and natural gas, such as blowouts,
cratering, abnormally pressured formations, explosions, uncontrollable flows of
oil, natural gas or well fluids into the environment, fires, pollution,
releases of toxic gas and other environmental hazards and risks. These hazards
can result in substantial losses to the Company due to personal injury and loss
of life, severe damage to and destruction of property and equipment, pollution
or environmental damage or suspension of operations.
The Company maintains insurance of various types customary in the industry
to cover its operations. The Company's insurance does not cover every potential
risk associated with the drilling and production of oil and natural gas. In
particular, coverage is not obtainable for certain types of environmental
hazards. The occurrence of a significant adverse event, the risks of which are
not fully covered by insurance, could have a material adverse effect on the
Company's financial condition and results of operations. Moreover, no assurance
can be given that the Company will be able to maintain adequate insurance in
the future at rates it considers reasonable.
The Company maintains levels of insurance customary in the industry to
limit its financial exposure in the event of a substantial environmental claim
resulting from sudden and accidental discharges; however, 100% coverage is not
maintained. Unreimbursed expenditures in 1993, 1994 and 1995 were immaterial.
COMPETITION
The Company operates in a highly competitive environment, particularly
with respect to the acquisition of producing properties and proved undeveloped
acreage. A number of the Company's competitors, however, have financial
resources and exploration and development budgets that substantially exceed
those of the Company, and may be able to pay more for desirable leases and to
evaluate, bid for and purchase a greater number of properties or prospects than
the financial or personnel resources of the Company permit.
EMPLOYEES
As of May 1, 1996, the Company employed 35 full-time employees, none of
which was subject to a collective bargaining agreement. The Company's
professional staff includes two landmen, four geologists, three engineers, five
accountants, two division order analysts and a marketing specialist. The
Company considers relations with its employees to be good.
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ITEM 1A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of the Company at March 29, 1996 are
identified below. The officers serve at the pleasure of the Board of Directors.
Roger G. Alexander is the son of Bob G. Alexander.
<TABLE>
<CAPTION>
Name Age Position Since
------------------ --- ------------------------------------- -----
<S> <C> <C> <C>
Bob G. Alexander 62 President, Chief Executive Officer 1980
and Director
David E. Grose 43 Vice President, Treasurer, Chief 1983
Financial Officer and Director
Jim L. David 56 Executive Vice President and Director 1980
Roger G. Alexander 41 Vice President (Land) and Director 1987
Phillip J. Lohmann 57 Vice President (Operations) 1996
Sue Barnard 51 Secretary 1982
Brian F. Egolf 46 Director 1992
Robert A. West 56 Director 1994
</TABLE>
Bob G. Alexander, a founder of the Company, has been a director and the
President and Chief Executive Officer of the Company since inception in 1980.
From 1976 to 1980, Mr. Alexander was Vice President and General Manager of the
Northern Division of Reserve Oil, Inc. and President of Basin Drilling Corp.
(subsidiaries of Reserve Oil and Gas Company). Mr. Alexander attended the
University of Oklahoma and graduated in 1959 with a bachelor of science degree
in geological engineering. He has extensive experience in exploration, drilling
and production in the Mid-Continent, West Texas and Gulf Coast regions and Utah
for major and independent oil and natural gas companies. Professional
memberships include the Independent Petroleum Association of America ("IPAA"),
of which he currently serves as a member of the Executive and Economic
Committees, and the Oklahoma Independent Petroleum Association ("OIPA"), of
which he serves as a director, treasurer and a member of the OIPA Federal
Energy Policy Task Force. He is former vice-chairman of the Natural Gas Task
Force of Oklahoma and former chairman of The Commission on Natural Gas Policy.
David E. Grose joined the Company at its inception in March 1980 as a
financial accountant and served as Assistant Treasurer from October 1983 until
his election in 1987 as a director and Vice President, Treasurer and Chief
Financial Officer. From 1977 to 1980, he held a position in the corporate
accounting department of Reserve Oil and Gas Company and was the rig accountant
for Basin Drilling Corporation. Mr. Grose received a bachelor of arts degree in
political science from Oklahoma State University in 1974 and a masters degree
in business administration from Central State University in 1977. Professional
memberships include the Petroleum Accountants Society of Oklahoma City and the
IPAA. Mr. Grose formerly served on the Tax Committee of the IPAA.
Jim L. David, a founder of the Company, has served as a director and Vice
President since its inception in March 1980. In August 1987, he was elected
Executive Vice President. Mr. David began his career in oil and gas exploration
with Mobil Oil Corporation as an exploration and development geologist. He
worked in this capacity in Shreveport, Louisiana; Corpus Christi, Texas; New
Orleans, Louisiana; Denver, Colorado; and Anchorage, Alaska. From October 1973
to October 1976, Mr. David served as Alaska chief geologist and senior staff
geologist for Texas International in Oklahoma City. Thereafter, he was employed
as exploration manager for Reserve Oil, Inc., Northern Division, in Oklahoma
City from January 1977 until formation of the Company. Mr. David graduated with
a bachelor of arts degree in geology from Louisiana Tech University in 1962 and
obtained a master of arts in geology from the University of Missouri in 1964.
Professional memberships include the American Association of Geologists and the
Oklahoma City Geological Society. Mr. David is a certified petroleum geologist.
Roger G. Alexander, a certified petroleum landman, has served as Vice
President (Land) and director of the Company since February 1987. Mr. Alexander
joined the Company as a landman in August 1983 and became senior landman in
August 1984. In July 1985, he was named land manager. He was employed as a
landman by Texas Oil & Gas Corporation in its West Texas District, Midland,
Texas, from June 1981 to August 1983. Mr. Alexander graduated with a bachelor
of business administration degree, with a major in petroleum land management,
from the
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University of Oklahoma in 1981. Professional memberships include the American
Association of Petroleum Landmen and the Oklahoma City Association of Petroleum
Landmen.
Phillip J. Lohmann was elected Vice President (Operations) in February
1996. Prior to joining the Company he served as President of Lohmann &
Associates, Inc., Norman, Oklahoma, a petroleum operating and engineering
consulting firm. From 1974 to 1979, Mr. Lohmann was Vice President of Jasper &
Lohmann Engineering, Inc. He held several engineering positions in Oklahoma
City and was the district Manager for McCulloch Oil Corporation in Bakersfield,
California, from 1972 to 1974. He has extensive experience in exploration,
drilling and production in the Mid-Continent, Texas and California. Mr.
Lohmann graduated from the University of Oklahoma in 1962 with a bachelor of
science degree in industrial engineering and is a member of the Society of
Petroleum Engineers.
Sue Barnard has served as Corporate Secretary since 1985 and director of
investor relations since June 1988. Additionally, since 1986 she has served the
Company in the capacities of Risk Manager and Manager of Human Resources. Ms.
Barnard joined the Company in June 1982 as assistant to the Vice President --
Administration and as Assistant Corporate Secretary. Professional memberships
include the American Society of Corporate Secretaries.
Brian F. Egolf received a bachelor of arts degree in political science
and history from Stanford University in 1970. Since graduation, Mr. Egolf has
had an extensive career in the oil and natural gas industry. He was a director
and the president of Bradmar from its inception in 1989 until the Company
acquired Bradmar in March 1992. Mr. Egolf has been a general partner of The
Egolf Company since its formation in 1979. The Egolf Company served as the
general partner of Bradmar's predecessor, Petroleum Investments, Ltd., and
served as the general partner of nine oil and natural gas drilling
partnerships.
Robert A. West, a 1961 graduate of The University of Tulsa, has had a
varied career in the energy business spanning more than 30 years. Since 1973,
Mr. West has owned and/or invested in various energy industry service companies
including Alexander Well Services, Inc. and Beacon Fluid Services (formerly
Beacon Well Services, Inc.). Since 1989, he has served as president and
majority stockholder of The West Group, Inc., a vacuum transport and completion
fluids service company. Mr. West's trade association memberships include the
Oklahoma Independent Petroleum Association. His civic contributions include
serving since 1988 in various capacities on the Board of Trustees of The
University of Tulsa.
ITEM 2. PROPERTIES
Alexander's properties are located primarily in the Anadarko Basin in
Oklahoma, the Cotton Valley Trend of eastern Texas and in the Arkoma Basin in
eastern Oklahoma and western Arkansas. The remainder of the Company's holdings
and operations are located in the Austin Chalk Trend of central Texas, the
Golden Trend of south central Oklahoma, and in Colorado, Kansas, Nebraska and
Wyoming. The Company's estimated proved reserves as of December 31, 1995
consisted of approximately 99 Bcf of natural gas and 2.3 MMBbls of crude oil
with an aggregate present value, before income taxes, of estimated future net
revenues discounted at 10% per annum ("Present Value") of approximately $85
million based on average prices of $1.95 per Mcf and $18.40 per Bbl. Net daily
production averaged 24,843 Mcf and 496 Bbls, or a total of 27,818 Mcfe in 1995,
up 8% from 1994. Approximately 88% of the Company's reserves are natural gas.
In 1995, the Company's proved reserves were estimated by Netherland Sewell
& Associates, independent petroleum engineers. Approximately 31 Bcfe was
reclassified from proved undeveloped to probable and possible at December 31,
1995. The Company believes this is the result of a more conservative
application of engineering assumptions than used previously. Additionally, in
1995 the Company experienced approximately 11 Bcfe of additional downward
reserve revisions. A significant portion of these revisions relates to certain
undeveloped locations which the Company now believes is being depleted through
existing proved producing properties, previously thought to be accessible only
through recompletions and /or additional development drilling. As a result of
these reclassifications and reserve adjustments, approximately 66% of the
Company's proved reserves are classified as proved developed, an increase of 8%
from 1994. See Note 14 of Notes to Consolidated Financial Statements.
7
<PAGE> 10
PRIMARY OPERATING AREAS
Proved reserves within the Company's primary operating areas are
summarized as follows:
<TABLE>
<CAPTION>
Natural Percent Number
Natural Gas of of PDNP
Oil Gas Equivalent Proved and PUD
Field (Mbbl) (Mmcf) (Mmcfe) Reserves Locations
- ------------------------ ------ ------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Anadarko Basin ........ 1,556 59,514 68,850 61% 73
Cotton Valley Trend ... 215 18,863 20,153 18% 20
Arkoma Basin .......... -- 16,807 16,807 15% 18
Other (1) ............. 537 3,886 7,108 6% 16
</TABLE>
(1) Consists of proved reserves of 4.0 Bcfe located in the Austin Chalk Trend
of central Texas, 2.8 Bcfe located in the Golden Trend Field in south
central Oklahoma and 0.3 Bcfe located throughout the Company's other
holdings.
The table above and all other discussion of reserves contained herein
excludes those reserves that are based on geologic and/or engineering data
similar to that used in estimating proved reserves, but technical, contractual,
economic or regulatory uncertainties preclude such reserves from being
classified as proved ("probable and possible"). As of December 31, 1995, the
Company had identified probable and possible locations that add another 31 Bcfe
to the Company's reserve base.
Anadarko Basin. Approximately 61% (68.9 Bcfe) of the Company's proved
reserves are located in the Anadarko Basin primarily in Canadian, Kingfisher,
Major and Logan counties of Oklahoma. Alexander has been operating in the
Anadarko Basin since its inception. The Anadarko Basin is considered a mature
natural gas producing area that is characterized by multiple producing
horizons. Wells in the Anadarko Basin are completed in rocks varying in age
from Pennsylvania through Cambro-Ordovician at depths ranging from 2,000 to
25,000 feet. The Company's Anadarko properties are generally spaced across 640
acres and Alexander has been actively engaged in increased density drilling in
the area. As of December 31, 1995, the Company had identified 31 proved
developed, nonproducing or behind pipe ("PDNP") and 42 PUD locations in the
Anadarko Basin with estimated proved reserves of 23.3 Bcfe. The typical well in
the Anadarko Basin inventory is expected to range from 7,500 to 15,000 feet and
cost approximately $680,000 (gross) to drill and complete and have
approximately 1.9 Bcfe of recoverable reserves.
Cotton Valley Trend. Approximately 18% (20.2 Bcfe) of the Company's proved
reserves are located in the Cotton Valley Trend in Harrison and Rusk counties
in eastern Texas. The Company acquired its properties in the Cotton Valley as a
result of the merger with ANEC, which had been operating in the area since
1985. The Cotton Valley producing formation is 1,500 to 2,000 feet thick, is
located at depths of 8,500 to 10,500 feet and consists of interbedded
sandstones and shales. Although the Cotton Valley consists of low permeability
sandstones, numerous wells have been successfully completed with the use of
hydraulic fracture stimulation. Original development in the Cotton Valley was
drilled on 640 acre spacing, but production performance has revealed that wells
drilled on this spacing are insufficient to adequately drain the reservoir. New
studies show developing these tight sands on 80 acre spacing is necessary to
recover all commercially producible reserves.
The lowermost zone of the Cotton Valley sands, known as the Taylor Sand,
was initially considered the best producing interval, having crossplot porosity
from 2% to in excess of 6% and a thickness of over 100 feet. Recent completions
of the upper and middle sections of the Cotton Valley formation have proved to
be as productive as the Taylor Sand. Intervals to be completed are determined
from a combination of electric log analysis and natural gas shows from mud
logs.
As of December 31, 1995, the Company had identified 8 PDNP and 12 PUD
locations in the Cotton Valley. The typical well in this inventory is expected
to cost approximately $900,000 (gross) to drill and complete and to have
approximately 1.6 Bcfe of recoverable reserves.
Arkoma Basin. Approximately 15% (16.8 Bcfe) of the Company's proved
reserves are located in the Arkoma Basin in eastern Oklahoma and western
Arkansas. This east-west trending basin consists of complexly faulted
anticlinal and synclinal folds with parallel complex fault systems,
crisscrossed by shallow Pennsylvanian age sandstone reservoirs. North-south
trending reservoir sands trapped against these faults and folds result in
commercial natural gas accumulations. Deep structures within the confines of
the producing "fairway" produce natural gas from massive carbonates, highly
fractured by structural movement.
8
<PAGE> 11
Natural gas is produced from several sandstone reservoirs and deep massive
carbonates along the south flank of the Arkoma Basin. Most of these channel
sands follow structural grain and are prolific natural gas producers when
trapped by faulting. Drilling ranges from 1,000 feet for shallow Pennsylvanian
age sands to over 15,000 feet for massive Arbuckle carbonates. Most of the
Company's production is from the Red Oak, Cromwell, Spiro and Wapanucka sands
with depths of 7,000 to 8,000 feet.
As of December 31, 1995, the Company had identified 3 PDNP and 15 PUD
locations in the Arkoma Basin. The Company has recently started to fully
evaluate the Arkoma properties acquired from JMC and anticipates that numerous
additional drill sites will be developed. The typical Arkoma Basin well in this
inventory is expected to cost approximately $350,000 (gross) to drill and
complete and have approximately 2.0 Bcfe of ultimate recoverable reserves.
OIL AND NATURAL GAS RESERVES
The following table sets forth estimated proved reserves, the estimated
future net revenues therefrom and the present value thereof as of December 31,
1995. The proved reserves are based upon the Estimate of Reserves and Future
Revenue to the Alexander Interest in Certain Oil and Gas Properties as of
December 31, 1995 of Netherland, Sewell & Associates, Inc. The calculations
used in preparation of such report was prepared using standard geological and
engineering methods generally accepted by the petroleum industry and in
accordance with SEC guidelines (as described in the notes below). These
correspond with the method used in presenting the supplemental information on
oil and gas operations in the Notes to the Consolidated Financial Statements of
the Company, except that income taxes otherwise attributable to such future net
revenues have been disregarded in the presentation below. For supplemental
disclosure of the estimated net quantities of oil and natural gas reserves, see
Note 14 of Notes to Consolidated Financial Statements of the Company.
<TABLE>
<CAPTION>
Natural Pretax
Natural Gas Future Net
Oil Gas Equivalent Revenue Present Value
(MBbls) (Bcf) (Bcfe) (M$) (1) (M$)
------- ------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Proved Reserves ............. 2,308 99.1 112.9 $142,983 $ 85,448
Proved Developed Reserves ... 1,216 66.7 74.0 $ 97,630 $ 61,374
</TABLE>
- ---------
(1) Estimated future net revenue represents estimated future gross revenues to
be generated from the production of proved reserves, net of estimated
production and future development costs, using costs and prices in effect
as of December 31, 1995. In certain circumstances, the actual natural gas
price received was less than the December 31, 1995 contract price, in
which case the lower actual price was used. These prices were not changed
except where different prices were fixed and determinable from applicable
contracts. These assumptions yield average prices of $1.95 per Mcf of
natural gas and $18.40 per Bbl of oil over the life of the properties. The
amounts shown do not give effect to non-property related expenses such as
general and administrative expenses, debt service and future income tax
expense or to depreciation, depletion and amortization.
No estimates of the Company's proved reserves have been included in
reports to any federal agency other than the Commission.
The prices used in calculating the estimated future net revenues
attributable to proved reserves do not necessarily reflect market prices for
oil and natural gas production subsequent to December 31, 1995. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Prices and Production Volumes." There
can be no assurance that all of the proved reserves will be produced and sold
within the periods indicated, that the assumed prices will be realized or that
existing contracts will be honored or judicially enforced.
The process of estimating oil and natural gas reserves contains numerous
inherent uncertainties and requires significant subjective decisions in the
evaluation of available geological, engineering and economic data for each
reservoir. The data for a given reservoir may change substantially over time as
a result of, among other things, additional development activity, production
history and viability of production under varying economic conditions.
Consequently, reserve estimates are often materially different from the
quantities of oil and natural gas that are ultimately recovered, and material
revisions to existing reserve estimates may occur in the future. See Note 14 of
Notes to Consolidated Financial Statements.
9
<PAGE> 12
PRODUCTION, PRICE AND COST HISTORY
The following tables set forth certain historical information concerning
the Company's oil and natural gas production and prices, net of all royalties,
overriding royalties, and other third party interests.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Average net daily production:
Oil (Bbls) ........................... 776 614 496
Natural gas (Mcf) .................... 17,348 22,057 24,843
Natural gas equivalent (Mcfe) ........ 22,004 25,741 27,818
Average sales price:
Oil (Per Bbl) ........................ $ 16.99 $ 15.44 $ 16.57
Natural gas (Per Mcf) ................ 2.04 1.73 1.50
Natural gas equivalent (Per Mcfe) .... 2.20 1.85 1.64
Average net production cost
per Mcfe(1) .......................... $ .66 $ .65 $ .60
</TABLE>
- ---------
(1) Production cost consists of lease operating expenses and production
taxes.
DRILLING ACTIVITIES
In each of the years ended December 31, 1993, 1994 and 1995, the Company
incurred net exploration and development costs of $11.3 million, $12.3 million
and $3.3 million, respectively. The following table sets forth the Company's
historical drilling activities for each of the years ended December 31, 1993,
1994 and 1995:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------
1993 1994 1995
--------------- ---------------- ---------------
Gross Net Gross Net Gross Net
----- ------ ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Development:
Oil ................. 12 3.431 7 .998 3 .714
Gas ................. 17 5.967 22 7.320 2 1.520
Non-productive ...... 1 1.000 4 2.155 3 1.823
-- ------ -- ------ - -----
Total .............. 30 10.398 33 10.473 8 4.057
Exploratory:
Oil ................. 1 .247 0 .000 0 .000
Gas ................. 0 .000 0 .000 0 .000
Non-productive ...... 0 .000 2 1.495 1 .978
-- ------ -- ------ - -----
Total .............. 1 .247 2 1.495 1 .978
</TABLE>
- ---------
The table above only reflects those interests attributable to the Company
either through direct working interests or through the Company's proportionate
share of its partnership's participation; i.e., the interests shown do not
include overriding royalty interests, carried working interests, reversionary
interests or partners' proportionate share of participation.
PRODUCTIVE WELLS AND ACREAGE
The following table reflects the wells and acreage in which the Company
owned a working interest, directly or indirectly, as of December 31, 1995. The
table shows producing oil (including casinghead natural gas) and natural gas
wells, including shut-in oil and natural gas wells capable of producing natural
gas which are (i) awaiting the construction or completion of natural gas plants
or gathering facilities, (ii) shut-in until sufficient reserves of natural gas
are established to justify construction of such facilities or (iii) shut-in due
to the absence of a market. The table does not include 84 gross wells in that
the Company has a revenue interest other than as a working interest owner. The
Company additionally owns overriding royalty interests or other revenue
interests in approximately 218 of the gross wells reflected below.
10
<PAGE> 13
<TABLE>
<CAPTION>
Producing Wells Shut-In Wells
------------------------------------------- ---------------------------------------------
Oil Gas Oil Gas
------------------- ---------------------- ---------------------- ---------------------
State Gross Net Gross Net Gross Net Gross Net
- ----- ----- ------------ ------------ -------- ----- --------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arkansas --- --- 35 11.5356 --- --- 8 2.6192
Colorado 8 .0094 --- --- --- --- --- ---
Kansas 6 3.2820 2 .0089 --- --- --- ---
Nebraska 3 .0116 --- --- --- --- --- ---
Oklahoma 243 96.3108 363 142.4220 25 12.8496 25 9.9334
Texas 15 4.4858 26 12.3947 --- --- 2 .1888
Wyoming 2 .0020 4 .0004 --- --- 1 .0001
----- -------- ------ -------- ----- ------- - --------
Totals 277 104.1016 430 166.3616 25 12.8496 36 12.7415
</TABLE>
<TABLE>
<CAPTION>
Developed Acreage Undeveloped Acreage
-------------------------- ----------------------------
State Gross Net Gross Net
- ----- ------------ ------------ --------------- -----------
<S> <C> <C> <C> <C>
Arkansas 18,431 6,281 1,144 68
Colorado 440 1 --- ---
Kansas 798 192 --- ---
Nebraska 360 1 --- ---
Oklahoma 206,633 68,057 9,559 5,121
Texas 12,585 5,120 1,275 810
Wyoming 440 1 ----- -----
------------ ------------ --------------- -----------
Totals 182,938 61,222 11,978 5,998
</TABLE>
Undeveloped acres are those on which wells have not been drilled or
completed to a point that would permit the production of commercial quantities
of oil and natural gas, regardless of whether or not such acreage contains
proved reserves. The amount of acreage held by the Company increases or
decreases in the normal course of business as interests in new acreage are
acquired (including acreage by pooling), as interests are sold or contributed
to others, as wells are drilled, as properties are abandoned (if determined not
to warrant exploration or development) or as leases expire. It is the Company's
policy to formulate drilling plans for the orderly development of undeveloped
acreage within the primary terms of the leases involved.
TITLE TO PROPERTIES
Substantially all of the Company's property interests are held pursuant to
leases from third parties. Title to properties is subject to royalty,
overriding royalty, carried, net profits, working and other similar interests
and contractual arrangements customary in the oil and natural gas industry,
liens incident to operating agreements, liens relating to amounts owed to the
operator, liens for current taxes not yet due and other encumbrances. The
Company believes that such burdens neither materially detract from the value of
such properties nor from the respective interests therein, or materially
interfere with their use in the operation of the business.
OFFICE FACILITIES
The Company owns a 19,000 square foot office building located at 701 Cedar
Lake Boulevard, Oklahoma City, Oklahoma where it maintains its corporate
headquarters. In August 1994, the Company purchased approximately 1.5 acres
adjacent to its corporate headquarters for $216,000.
ITEM 3. LEGAL PROCEEDINGS
A petition was filed in Oklahoma County District Court on July 25, 1995,
against the Company and its directors by Bill V. Dean and Elliott Associates,
L.P. ("Elliott"). The suit purported to be a derivative action on behalf of the
Company against the Board of Directors for breach of fiduciary duties in
enacting a share rights plan, approving certain severance contracts and policy,
and proposing the Senior Note Offering. No damages are being sought against the
Company. The suit asks that the Company's share rights plan and severance
contracts and policy be invalidated, seeks an injunction against the Company's
Senior Note Offering and requests damages to the Company from the directors in
excess of $10,000. In August 1995, the Company elected to defer its proposed
Senior Note Offering. The Company filed a motion to dismiss which was granted
by the court in 1995 dismissing Elliott as plaintiff. The court granted Elliott
leave to file an amended petition. Elliott declined to file an amended petition
and is appealing its dismissal to the Oklahoma Court of Appeals. The Company
and its directors have filed their answer
11
<PAGE> 14
denying all allegations. The suit is currently in discovery. The Company
believes the derivative action is without merit and will vigorously defend
against this action.
The Company and its subsidiaries are named defendants in lawsuits and are
involved from time to time in governmental proceedings, all arising in the
ordinary course of business. Although the outcome of these lawsuits and
proceedings cannot be predicted with certainty, management does not expect
these matters will have a material adverse effect on the financial position of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year.
12
<PAGE> 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the NASDAQ National Market System
under the symbol "AEOK." The following table sets forth the high and low
closing sales price for each of the periods indicated as quoted by NASDAQ.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
------------- ------- ------
<S> <C> <C>
1994
March 31 ......................................... 5 7/8 4 7/8
June 30 .......................................... 5 1/4 4 3/8
September 30 ..................................... 5 1/2 4 1/2
December 31 ..................................... 6 7/8 4 1/2
1995
March 31 ........................................ 6 3/4 4 3/8
June 30 ......................................... 5 5/16 3 5/8
September 30 .................................... 5 4
December 31 ...................................... 4 5/8 3 3/8
1996
March 31 ........................................ 4 13/16 3 3/8
</TABLE>
As of May 6, 1996, there were 1,939 stockholders of record.
DIVIDENDS
The Company has never paid cash dividends on its common stock and does not
expect to pay any cash dividends in the foreseeable future. It intends to
retain its earnings to provide funds for operations and expansion of its
business. Moreover, pursuant to the terms of certain of the Company's debt
agreements, the Company is prohibited from declaring or paying any cash
dividends on its common stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and Note 4 of Notes to Consolidated Financial Statements of the
Company.
13
<PAGE> 16
<TABLE>
<CAPTION>
Well
- ----
<S> <C>
Celsor 10-1
Celsor 10-2 0.03768520 0.02997890 0.02997890
Cimarron
Clinton 31-13 0.24129407 0.19147800
Clouse 5-2
</TABLE>
<PAGE> 17
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical financial data with
respect to the Company for each of the five years in the period ended December
31, 1995. The financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements and notes
thereto of the Company.
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------------
1991 1992(1) 1993 1994(2) 1995
------- ------- ------ ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Oil and natural gas sales ........................ $8,942 $13,107 $17,708 $17,390 $16,599
Well operator and management fees ................ 2,116 2,663 2,668 2,615 2,642
Marketing fees, interest and other ............... 554 247 1,533 678 371
Total revenues ................................... 11,612 16,017 21,909 20,683 19,612
Costs and expenses:
Oil and natural gas operating expenses ........... 3,493 4,617 5,299 6,135 6,107
Amortization and depreciation .................... 3,557 4,583 5,762 7,246 9,252
Provision for impairment of oil and gas properties --- --- --- --- 2,300
General and administrative expenses .............. 2,779 3,241 3,879 4,034 3,442
Interest expense ................................. 2,388 3,029 2,063 2,396 3,961
Nonrecurring expenses (3) ........................ --- --- --- 3,166 752
Provision (credit) for income taxes ............... 275 5 2,331 --- (1,744)
Income (loss) before discontinued operations,
extraordinary items and cumulative effect
of change in accounting for income taxes ........ (880) 542 2,575 (2,294) (4,459)
Net income (loss) applicable to common stock (4) .. (1,006) (300) 2,453 (1,242) (4,459)
Income (loss) before discontinued operations,
extraordinary items and cumulative effect of
change in accounting for income taxes per
common and common equivalent share ............... (.22) .07 .25 (.19) (.36)
Net income (loss) per common and
common equivalent share .......................... (.22) (.06) .24 (.10) (.36)
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1991 1992 1993 1994 1995
------- ------- -------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net properties and equipment ............ $43,639 $56,332 $66,504 $91,545 $84,156
Total assets ............................ 52,024 65,832 75,769 99,814 91,867
Current portion of long-term debt ....... 1,607 3,654 1,037 1,016 4,162
Long-term debt, net of current portion .. 23,034 24,194 16,764 46,514 44,354
Total stockholders' equity .............. 14,397 17,644 34,351 34,225 30,628
</TABLE>
- ---------
(1) Includes the acquisition of Bradmar, which was consummated on March
18, 1992.
(2) Includes the JMC acquisition which occurred in November 1994. See
Note 2 of Notes to Consolidated Financial Statements.
(3) Includes $2.4 million and $734,000 in 1994 of costs related to the
merger with ANEC and costs to settle litigation against ANEC, respectively, as
discussed in Notes 2 and 10 of Notes to Consolidated Financial Statements.
Includes $300,000 and $452,000 in 1995 of abandoned merger costs and terminated
Senior Note Offering expenses, respectively, as discussed in Note 10 of Notes
to Consolidated Financial Statements.
(4) Includes (a) a loss from discontinued operations of $681,000 in 1992,
(b) a loss from an extraordinary item of $510,000, net of income taxes
associated with the early extinguishment of debt in 1993, and (c) a gain from
an extraordinary item of $1.1 million associated with the extinguishment of a
long-term obligation in 1994. Also includes the cumulative effect of adopting
SFAS 109, "Accounting For Income Taxes," the effect of which was to increase
net income by $425,000 in 1993. See Notes 1 and 12 of Notes to Consolidated
Financial Statements.
14
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company follows the full cost method of accounting for its oil and
natural gas properties. Under such method, the net book value of such
properties, less related deferred income taxes, may not exceed a calculated
"ceiling." The ceiling is the estimated after-tax future net revenues from
proved oil and natural gas properties, discounted at 10% per annum plus the
lower of cost or fair market value of unproved properties. In calculating
future net revenues, prices and costs in effect at the time of the calculation
are held constant indefinitely, except for changes which are fixed and
determinable by existing contracts. The net book value is compared to the
ceiling on a quarterly basis. The excess, if any, of the net book value above
the ceiling is required to be written off as an expense. In the fourth quarter
of 1995, the Company recognized a writedown of its net book value of oil and
gas properties in excess of the ceiling of $2.3 million ($2.0 million, net of
the deferred tax credit). See Notes 1, 11 and 14 of Notes to Consolidated
Financial Statements. Under the Securities and Exchange Commission's full cost
accounting rules, any write-off recorded may not be reversed even though higher
oil and natural gas prices may increase the ceiling applicable to future
periods. There is no assurance that future oil and gas reserve volume or
product price decreases will not result in additional reductions in the net
book value of the oil and gas properties of the Company.
The Company records natural gas sales on the entitlement method,
recognizing only its net share of production as revenues. Any amount received
in excess of the Company's revenue interest is recorded as a natural gas
balancing liability and conversely any deficiency is recorded as a natural gas
balancing asset. The Company has also received non-interest bearing prepayments
on future natural gas production which provide for recoupment, most of which
are refundable upon the earlier of the end of the productive life of the
respective well or expiration of the natural gas purchase contract. The natural
gas prepayments will be recognized as revenue when, and if, the natural gas is
delivered.
Amortization of oil and natural gas properties is computed using a unit of
revenue method based on current gross revenues from production in relation to
estimated future gross revenues from production of proved oil and natural gas
reserves. The amortization rates for future periods will increase or decrease
corresponding with the fluctuations in oil and natural gas prices, reserve
volumes and production.
To manage its acquisition, exploitation and drilling activities, the
Company maintains a professional staff of geologists, engineers, landmen and
others. Although maintaining such staff increases general and administrative
expenses on an absolute basis, the Company's experienced technical staff has
been a key to its ability to generate sufficient drilling prospects and
exploitation opportunities to replace produced reserves. By managing operations
for a substantial number of its wells, the Company has been able to maintain
efficiencies in operations as well as obtain operator and management fees which
offset the majority of its general and administrative expenses.
RESULTS OF OPERATIONS
Total Revenues; Oil and Gas Sales. Total revenues decreased for 1995
compared to 1994. The decrease in total revenues was comprised of decreased oil
and natural gas sales, a slight increase in well operator reimbursements and
decreased other revenues. The decreased oil and natural gas sales are
attributable to lower oil production and a decrease in product price for
natural gas offset by increased oil prices and higher production volumes for
natural gas as a result of the wells drilled during 1994 and 1995 and the
producing gas properties acquired from the JMC Acquisition in November 1994.
Oil revenues decreased by 13% due to a 19% decrease in production
quantities partially offset by a 7% increase in the average price per Bbl of
production for the year ended December 31, 1995 as compared to 1994. Natural
gas revenues decreased by 2% due to a 13% decrease in the average price per Mcf
of natural gas produced for the year ended December 31, 1995 as compared to
1994, offset by a 13% increase in production quantities.
Total revenues decreased for 1994 compared to 1993. The decrease in total
revenues consisted of decreased oil and natural gas sales and a nonrecurring
item in other revenues in 1993 of approximately $1.25 million from the proceeds
of settlement of a lawsuit. The decrease in oil and natural gas sales was due
to lower product prices, partially offset by higher production volumes of
natural gas attributable to wells drilled in 1994.
Oil revenues decreased by 28% due to a 21% decrease in production
quantities and an 9% decrease in the average price per Bbl of production for
the year ended December 31, 1994 as compared to 1993. Natural gas revenues
increased by 8% due to a 27% increase in production quantities, offset by a 15%
decrease in the average price per Mcf of natural gas produced for the year
ended December 31, 1994 as compared to 1993.
15
<PAGE> 19
Well Operator and Management Fees. Well operator and management fees
reflect a slight increase for the year ended December 31, 1995 compared to the
same period in 1994. This slight increase is attributable to the inclusion of
the JMC Acquisition operated properties for a full year in 1995, as the JMC
Acquisition closed in mid November 1994, offset by the sale of certain operated
properties in the latter half of 1995. Included in the 1995 management fees
were reimbursements of overhead expense of $10,000 per month from each of the
AEJH 1987 and AEJH 1989 Limited Partnerships.
Well operator and management fees remained fairly constant for the year
ended December 31, 1994 compared to the same period in 1993. Included in the
management fees were reimbursements of overhead expense of $10,000 per month
from each of the AEJH 1987 and AEJH 1989 Limited Partnerships and an average of
$4,750 per month for six months from the AEJH 1987-A Limited Partnership, which
ceased operations during mid 1994.
Marketing Fees, Interest and Other Revenues. The 19% increase in interest
and other revenue (excluding the gains from the Company's sale of other
property and equipment of approximately $130,000 and the finalization and
termination of a take-or-pay contract of approximately $235,000 in 1994) during
the year ended December 31, 1995 compared to 1994 resulted from additional
interest income on invested cash and increased marketing fees for both oil and
natural gas.
The increase in interest and other revenue (excluding the settlement of a
lawsuit of approximately $1.25 million in 1993) during the year December 31,
1994 compared to 1993 resulted from gains on the sale of real estate and the
settlement of a take-or-pay contract recorded as deferred revenue in 1993.
Oil and Gas Prices. Oil prices received by the Company increased 7% during
1995, resulting in an average price of $16.57 per Bbl compared to the average
price per Bbl of $15.44 for 1994. Revenues and operating results for future
periods will continue to be impacted by price fluctuations which are largely
influenced by market conditions and the quantity of the oil sold by OPEC.
During 1995, the Company experienced a decrease in natural gas prices. In
recent years, the Company has sold much of its natural gas under short-term
(typically month-to-month) contracts. Natural gas prices received by the
Company decreased 13% during 1995, resulting in an average price of $1.50 per
Mcf compared to an average price per Mcf of $1.73 for 1994. Future sales prices
will be dependent upon the future supply and demand of natural gas in the
market and the quantities of gas sold under short-term contracts as opposed to
quantities sold under long-term contracts, which currently command higher
prices. The Company does however, expect an increase in the price of natural
gas for the first quarter and possibly the second quarter of 1996 compared to
comparable periods in 1995.
Oil prices received by the Company decreased 9% during 1994, resulting in
an average price of $15.44 per Bbl compared to the average price per Bbl of
$16.99 for 1993. Average gas price received by the Company during 1994 was
$1.73 per Mcf, a decrease of 15% compared to an average gas price received in
1993 of $2.04 per Mcf.
Oil and Gas Production. Production and average prices received per Bbl and
Mcf for each of the last three years are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Crude Oil:
Production (Bbls) ............ 283,190 224,230 181,022
Average price per Bbl ........ $16.99 $15.44 $16.57
Natural Gas:
Production (Mcf) ............. 6,332,015 8,050,688 9,067,588
Average price per Mcf ........ $2.04 $1.73 $1.50
</TABLE>
Oil and natural gas production volumes for 1995 on an Mcf equivalent
(Mcfe) basis exceeded such volumes for the same period in 1994 by 8% and oil
and natural gas production volumes for 1994 on an Mcfe equivalent basis
exceeded such volumes for 1993 by 17%. These increases in production were from
participation in new wells drilled over the past three years through the
Company and the AEJH 1985 and AEJH 1989 Limited Partnerships, from
recompletions in the Cotton Valley properties in 1994 by the Company and from
production on properties acquired in the JMC Acquisition after closing in mid
November 1994. Although the Company experienced some curtailments of gas
production, these curtailments have not been material. The curtailments were
primarily attributable to excess supply and price competitiveness with oil.
There can be no assurance that the Company will not experience future
curtailments.
16
<PAGE> 20
Oil and natural gas production volumes for the year ended December 31,
1996 are expected to be lower than 1995. This expected decrease is primarily
attributable to a decrease in development activities in 1995 compared to such
activities in 1993 and 1994.
Total Expenses; Oil and Gas Operating Expenses. Total costs and expenses
increased for 1995 compared to 1994 due in part to nonrecurring expenses, an
increase in interest expense, depreciation and amortization expense and a
provision for impairment of oil and gas properties. Oil and gas operating
expenses remained fairly constant for 1995 compared to 1994. The Company
recognized additional operating expenses attributable to a greater number of
producing wells and workovers in the first half of 1995, offset by reduced
operating expenses attributable to the sale of certain producing properties
during the third quarter of 1995 and reduced remedial workovers performed
during the latter half of the year. Oil and gas operating expenses continue to
decrease on an Mcfe basis to $.60 for 1995, compared to $.65 per Mcfe for 1994
and $.66 per Mcfe for 1993.
Oil and gas operating expenses increased for 1994 compared to 1993, due to
additional operating expenses attributable to a greater number of producing
wells, which were drilled and completed during 1994 and the latter part of 1993
and due to workover costs performed on certain properties in 1994.
Amortization and Depreciation. The oil and gas property amortization and
depreciation rate per dollar of oil and gas sales for 1995 increased to $.55
compared to $.41 for 1994. The increased rate for 1995 was due principally to
the decreased estimated future gross revenues resulting from the decreased oil
and gas reserve volumes in 1995 as a result of downward revisions to previous
reserve estimates. The amortization and depreciation rates for future periods
will increase or decrease corresponding with the fluctuations in oil and gas
prices, reserve volumes and production.
The oil and gas property amortization and depreciation rate per dollar of
oil and gas sales for 1994 increased to $.41 compared to $.32 for 1993. The
increased rate for 1994 was due to the decreased estimated future gross
revenues resulting from lower product prices in 1994.
Impairment of Oil and Gas Properties. As of December 31, 1995, the
Company's net book value of oil and gas properties exceeded the ceiling
limitations prescribed under the full cost method of accounting for oil and gas
properties. Accordingly, a provision was recognized in the fourth quarter of
1995 of $2.3 million ($2.0 million, net of the deferred tax credit). The
provision for impairment is primarily attributable to declines in estimated
reserves due to downward revisions to reserve estimates (see Note 14 of Notes
to Consolidated Financial Statements).
General and Administrative Expenses. General and administrative expenses
decreased 15% for 1995 compared to 1994. This decrease was primarily related to
fewer personnel for 1995 compared to 1994, as 1994 included personnel and other
general and administrative expenses of ANEC, most of which were not retained
following the merger in July 1994. Well operator and management fees offset 77%
of general and administrative expenses during 1995 compared to 65% during 1994.
General and administrative expenses increased for 1994 compared to 1993.
This increase was primarily related to management bonuses and increased
personnel costs associated with the Company's growth. Well operator and
management fees offset 65% of general and administrative expenses during 1994
compared to 69% during 1993.
Interest Expense. Interest expense increased for 1995 compared to 1994 due
to the amount of outstanding borrowings for the twelve-month period ended
December 31, 1995, as compared to 1994 due principally to the JMC Acquisition,
which closed mid November 1994. At December 31, 1995, the Company's credit
facility bore interest at LIBOR plus 1.5% (a rate of 7.3125%). As discussed
under Liquidity and Capital Resources --- Long Term Debt; the Company's
outstanding borrowings under certain long-term debt agreements will bear
interest at rates higher than the 1995 rates due to modifications to such
agreements in May 1996.
Interest expense increased for 1994 compared to 1993 due to an increase in
the outstanding borrowings associated with property development and the JMC
Acquisition.
Nonrecurring Expenses. On May 10, 1995, the Company announced the
termination of discussions regarding the possible outstanding merger with
Abraxas and, accordingly, expensed $300,000 of related costs. In August 1995,
the Company postponed the Senior Note Offering and subsequent thereto expensed
$452,000 of related costs.
In connection with the merger between the Company and ANEC, the Company
incurred nonrecurring charges to operations in 1994 of $2.4 million. These
costs include legal, accounting, investment banking, printing and other costs.
Litigation Settlement. In the fourth quarter of 1994, in an effort to
resolve ANEC's litigation with various parties which had been ongoing since
1992, the Company acquired certain creditor claims against the operator of a
well in which
17
<PAGE> 21
ANEC had an interest and agreed to mediation with the primary plaintiffs of the
outstanding litigation. Although management believed its actions against the
well operator were meritorious and believed the counterclaims of this party
were without merit, after having mediated this matter in December 1994,
management of the Company believe it was in the Company's best interest to
resolve such litigation and terminate the costs associated therewith.
Accordingly, in late December 1994, the Company agreed to a negotiated
settlement, the effect of which resulted in a charge to 1994 operations,
including legal fees, of approximately $734,000.
Taxes. As a result of the Company's and ANEC's secondary public offerings
in 1993, both entities had an ownership change pursuant to Section 382 of the
Internal Revenue Code. In 1995, the Company recorded a tax credit of $1.7
million on pretax loss of $6.2 million, an effective rate of 28%. This credit
was less than the combined statutory federal and state rates due to the
estimated timing of future taxable temporary differences and limitations on the
utilization of the company's net operating loss and statutory depletion
carryforwards as discussed below. In 1994, the Company's provision for income
taxes approximates statutory rates after considering permanent differences. In
1993, the Company sustained a nonrecurring non-cash charge to operations of
$1.2 million due to an increase in the valuation allowance associated with the
change in ownership in the first quarter of 1993 discussed above. The Company
also recorded a deferred tax provision of approximately $1.1 million on pretax
income of $4.9 million, representing an effective rate of 23%. The lower tax
rate for 1993 was primarily attributable to the reduction of a valuation
allowance previously established on pre-acquisition net operating loss
carryforwards of ANEC.
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes" ("SFAS 109"). The Company adopted SFAS 109 on January 1, 1993. Among
other changes, SFAS 109 relaxed the recognition and measurement criteria for
deferred tax assets and alternative minimum tax from that provided for under
its previous method of accounting for income taxes under Statement of Financial
Accounting Standards No. 96 ("SFAS 96"). Adoption of this standard resulted in
the elimination of deferred income taxes payable of $425,000, related entirely
to alternative minimum tax, which is reflected in the 1993 statement of
operations as the cumulative effect of a change in accounting principle.
LIQUIDITY AND CAPITAL RESOURCES
General. The Company's capital requirements relate primarily to
exploitation, development, exploration and acquisition activities. In general,
because the Company's oil and gas reserves are depleted by production, the
success of its business strategy is dependent upon a continuous exploitation,
development, exploration and acquisition program.
Historically, the Company has funded its capital requirements through cash
flow from operations, bank borrowings, various carried interest arrangements
(whereby other parties paid a portion of the Company's share of costs) and
equity sales. The Company's capital resources available to fund capital
requirements consist primarily of cash flow from operations, not otherwise used
to retire outstanding long-term debt. As of March 1996, the Company has capital
expenditure commitments of approximately $1.6 million, which the Company
believes can be funded through cash flow from operations. The Company's capital
expenditure budget for 1996 is approximately $13 million, substantially all of
which represents the development of Company proved undeveloped locations.
Substantially all of the budget amount in excess of that expected to be
available from operations, after debt service, will have to be funded through
various financing alternatives, including equity sales, debt offerings, and/or
non-key property sales. Proceeds from the financing alternatives will have to
be sufficient in amount to also retire the Company's outstanding term note with
a bank, which has a balance at December 31, 1995 of $11.0 million. See Note 4
of Notes to Consolidated Financial Statements. The Company believes it has the
capability of executing such financing alternatives on a timely basis; however,
there are no assurances of that. The Company may defer budgeted expenditures to
future periods. Deferral of the budgeted capital expenditures may cause a delay
in the realization of undeveloped oil and gas reserves.
Cash Flows. In 1995, the Company's net cash provided by operating
activities was $3.4 million, compared to $1.5 million for the year ended
December 31, 1994. This increase was primarily attributable to the decrease in
nonrecurring and litigation expenses of $2.4 million, reduced general and
administrative expenses of $592,000, an increase of $1.1 million due to net
changes in operating assets and liabilities, partially offset by reduced oil
and gas sales of $791,000 and increased interest expense of $1.6 million. The
changes in operating assets and liabilities were primarily attributable to the
reduced oil and gas property development at December 31, 1995 compared with
1994 and events in 1994, explained below, which did not recur in 1995. At
December 31, 1995, the Company had a $3.5 million net gas balancing and gas
prepayment liability attributable to 2.5 Bcf of natural gas production in
excess of the Company's entitled natural gas volumes. The majority of the
excess sales are from properties that have gas balancing agreements which
provide for recoupments by the underproduced owners from 25% of volumes
attributable to the Company's interest. Additionally, most gas prepayments are
refundable upon the end of the productive life of the respective wells. At
December 31, 1995, approximately $1.6 million are classified as due within one
year.
18
<PAGE> 22
Net cash used by investing activities in 1995 decreased by $28.1 million
to $4.2 million due primarily to reduced oil and gas property acquisitions and
development offset by reduced proceeds from property sales.
Net cash provided by financing activities in 1995 decreased by $28.9
million to $1.4 million due primarily to reduced long-term debt borrowings in
1995 compared to 1994.
In 1994, the Company's cash provided by operating activities was $1.5
million compared to $12.1 million for the year ended December 31, 1993. This
decrease was primarily attributable to $3.2 million of nonrecurring expenses
associated with the ANEC merger and the settlement of ANEC litigation, the
nonrecurrence of the 1993 $1.25 million gas contract settlement proceeds and
the net change in assets and liabilities resulting from operating activities of
$4.8 million. The $4.8 million net change in assets and liabilities resulting
from operating activities in 1994 is the result of reduced drilling activities,
the availability of additional borrowing capacity associated with the new
credit facility and the nonrecurrence of a natural gas prepayment agreement at
December 31, 1994, compared with December 31, 1993, all of which caused a
reduction in accounts payable, oil and gas proceeds due others and other
liabilities at December 31, 1994 compared with the related balances at December
31, 1993.
Net cash used by investing activities in 1994 increased approximately
$15.3 million to $32.3 million from $17.0 million in 1993. Additions to oil and
gas properties increased by approximately $18.1 million to $36.0 million due to
the JMC acquisition of $18.2 million and the continued redirection of
activities toward exploration and development of reserves after completing the
Secondary Public Offerings in 1993. The acquisition added 25 billion cubic feet
of natural gas reserves to the Company's asset base. The properties acquired
are located in the Arkoma Basin in Oklahoma and Arkansas. During 1994, the
Company also sold its interest in the MFS Properties for approximately $3.2
million which were acquired in 1990 for $3.0 million.
At December 31, 1995, the Company had a working capital deficit of $6.5
million and had no availability under its revolving line of credit. See
"General" above and "Long Term Debt" below.
Long Term Debt. At December 31, 1995, the Company had $44.0 million
outstanding under its revolving credit facility with a bank. Subsequent to
December 31, 1995, the lender reduced the borrowing base to $33.0 million,
effective to December 31, 1995, requiring the $11.0 million excess borrowings to
be converted to a term note. In May 1996, the Company amended the credit
agreement (the "Amended Agreement"). Under the Amended Agreement, the term note
requires, among other things, monthly payments of principal of $350,000 plus
interest, beginning effective April 1996, through its maturity date of April 1,
1997 at which time remaining unpaid principal and interest become due. The term
note will bear interest at the prime rate plus 3% (an aggregate rate of 11.25%
at March 31, 1996) through October 15, 1996 and the prime rate plus 4%
thereafter.
The borrowings associated with the revolving credit facility cannot exceed
the borrowing base, which relates to the Company's oil and gas reserve base. The
borrowing base is subject to semi annual redeterminations each April and October
until April 1, 1997, at which time the borrowing base is reduced quarterly by
1/16th through December 31, 2000. The revolving credit facility interest rate
(7.3125% at December 31, 1995) will also increase, under the Amended Agreement,
beginning effective April 1996. All of the borrowings outstanding with this
lender, under the Amended Agreement, are secured by a first and prior lien on
substantially all of the Company's assets.
In May 1996, the Company obtained a waiver from the lender for certain
events of noncompliance with the credit agreement. In connection with the
Amended Agreement, the lender also reduced the minimum requirements related to
certain financial covenants. The Company expects to be able to comply with the
amended financial requirements in future periods.
At December 31, 1995, the Company also had $3.0 million outstanding under a
term note with a stockholder which contains various financial covenants. In May
1996, the Company obtained a waiver through April 1, 1997 from the stockholder
for noncompliance with certain covenants. Under the waiver, the Company is
required to make its scheduled principal payment of $1.0 million in June 1996.
The Stockholder may, at its sole discretion, require the remaining $2 million of
unpaid principal and accumulated interest due anytime after April 1, 1997. The
Company also secured the stockholder loan on an equal basis with the bank debt
discussed above and agreed to liquidate and distribute the assets of the AEJH
1985, AEJH 1987 and AEJH 1989 Limited Partnerships. See Note 4 of Notes to
Consolidated Financial Statements.
Future Events. On January 2, 1996, the Company announced that it had signed
a letter of intent providing for a combination of National Energy Group, Inc.
("NEG") and the Company. Under terms of the letter of intent as extended, the
Company and NEG had until April 30, 1996 to complete their due diligence
investigations and attempt to reach a definitive agreement on the terms of a
transaction. On May 6, 1996 the Company announced that the Company and NEG had
not reached agreement on the terms of a definitive merger agreement by the April
30, 1996 standstill deadline; however, both companies are continuing to
negotiate. NEG is an independent oil and gas company with 1995 revenues of
approximately $7.9 million.
19
<PAGE> 23
The Company has recently focused its current efforts on the due diligence
process. Accordingly, the development of proved undeveloped locations in 1996
may be temporarily delayed due to the above-mentioned factors; however the
Company believes it can accomplish this development program, subject to
obtaining financing on a timely basis, in the last half of 1996 after a
determination is made whether or not to pursue the combination. See "General"
above.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE
----
ALEXANDER ENERGY CORPORATION
REPORTS OF INDEPENDENT AUDITORS ....................... F-1
CONSOLIDATED BALANCE SHEETS ........................... F-3
CONSOLIDATED STATEMENTS OF OPERATIONS ................. F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY ....... F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS ................. F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ............ F-8
20
<PAGE> 24
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Alexander Energy Corporation
We have audited the accompanying consolidated balance sheets of Alexander
Energy Corporation as of December 31, 1994 and 1995 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the 1994 and 1995 financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Alexander Energy Corporation at December 31, 1994 and 1995 and the
consolidated results of its operations and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.
We previously audited and reported on the consolidated statements of
operations, stockholders' equity, and cash flows of Alexander Energy
Corporation for the year ended December 31, 1993, prior to the 1994 restatement
for the pooling of interests as described in Note 2. The contribution of
Alexander Energy Corporation to total revenues and net income represented 65%
and 50% of the respective restated totals. Financial statements of the other
pooled company included in the 1993 restated consolidated statements were
audited and reported on separately by other auditors. We also have audited, as
to combination only, the consolidated statements of operations, stockholders'
equity and cash flows for the year ended December 31, 1993 after restatement
for the 1994 pooling of interests; in our opinion, such 1993 consolidated
financial statements have been properly combined on the basis described in Note
2 to the consolidated financial statements.
As discussed in Note 1 to the consolidated financial statements, in 1993 the
Company changed its method of accounting for income taxes.
ERNST & YOUNG LLP
Oklahoma City, Oklahoma
March 30, 1996, except Notes 4 and 13
for which the date is May 10, 1996
F-1
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
American Natural Energy Corporation
We have audited the consolidated balance sheet of American Natural Energy
Corporation and Subsidiaries as of December 31, 1993 (not included herein) and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the year ended December 31, 1993. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of American Natural Energy Corporation and Subsidiaries as of December 31, 1993
and the consolidated results of their operations and their cash flows for the
year ended December 31, 1993, in conformity with generally accepted accounting
principles.
As discussed in Notes 2 and 4 of the Company's 1993 financial statements,
the Company changed its method of accounting for its oil and gas properties and
income taxes.
COOPERS & LYBRAND
Tulsa, Oklahoma
February 22, 1994
F-2
<PAGE> 26
ALEXANDER ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
ASSETS (Note 4)
1994 1995
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................... $ 792,752 $ 1,451,983
Accounts receivable:
Joint interest operations and other:
Limited partnerships and other related parties (Note 3) ........... 271,617 299,374
Others ............................................................ 1,877,781 602,265
Oil and gas sales .................................................. 3,252,954 3,291,252
Supply inventories, at lower of cost or market ...................... 306,653 370,057
Prepaid expenses and other .......................................... 145,102 158,032
------------- -------------
Total current assets ............................................ 6,646,859 6,172,963
Properties and equipment, at cost (Note 11):
Oil and gas properties, based on full cost accounting:
Properties subject to amortization ................................ 126,490,676 130,833,467
Unproved properties not being amortized ........................... 991,652 734,757
------------- -------------
127,482,328 131,568,224
Other properties and equipment ...................................... 2,392,986 2,450,669
------------- -------------
129,875,314 134,018,893
Less accumulated amortization, depreciation and impairment ........ 38,330,143 49,863,075
------------- -------------
Net properties and equipment .................................... 91,545,171 84,155,818
Notes receivable from related parties, gas balancing receivables,
deferred charges and other assets, at cost (Note 3) ................. 1,622,105 1,537,917
------------- -------------
$ 99,814,135 $ 91,866,698
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade .............................................................. $ 6,589,976 $ 2,723,334
Limited partnerships and other related parties (Note 3) ............ 181,492 29,316
Gas balancing, deferred revenue and oil and gas proceeds:
Limited partnerships (Note 3) ...................................... 765,150 592,094
Others ............................................................. 3,675,130 5,160,770
Long-term debt due within one year (Note 4):
Stockholder ......................................................... 1,000,000 1,000,000
Others .............................................................. 16,253 3,162,475
------------- -------------
Total current liabilities ....................................... 12,228,001 12,667,989
Long-term debt due after one year (Note 4):
Stockholder ......................................................... 3,000,000 2,000,000
Others .............................................................. 42,588,280 41,426,018
Non-recourse debt (Note 5) ........................................... 925,452 924,967
Gas balancing and other noncurrent liabilities ....................... 4,047,859 3,163,282
Deferred income taxes (Note 6) ....................................... 2,800,000 1,056,000
Commitments and contingencies (Note 7)
Stockholders' equity (Notes 2, 4 and 8):
Preferred stock - $.01 par value; 2,000,000 shares authorized;
none issued and outstanding ........................................ -- --
Common stock - $.03 par value; 20,000,000 and 50,000,000 shares
authorized in 1994 and 1995, respectively;
issued -- 12,271,563 in 1994 and 12,451,605 in 1995 ................ 368,147 373,548
Paid-in capital ..................................................... 39,405,383 40,262,808
Accumulated deficit ................................................. (5,548,987) (10,007,914)
------------- -------------
Total stockholders' equity ...................................... 34,224,543 30,628,442
------------- -------------
$ 99,814,135 $ 91,866,698
============= =============
</TABLE>
See accompanying notes.
F-3
<PAGE> 27
ALEXANDER ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------------
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Oil and gas sales (Note 9) ...................................... $ 17,707,809 $ 17,389,814 $ 16,599,191
Well operator and management fees:
Related parties (Note 3) ....................................... 532,816 361,488 308,045
Others ......................................................... 2,135,315 2,253,853 2,334,257
Marketing fees, interest and other (Notes 3 and 10) ............. 1,532,800 677,401 370,235
------------ ------------ ------------
Total revenues ............................................. 21,908,740 20,682,556 19,611,728
Costs and expenses:
Direct lifting costs (Note 3) ................................... 4,129,383 4,959,323 5,030,648
Gross production and severance tax .............................. 1,170,109 1,175,680 1,076,841
Amortization and depreciation (Note 11) ......................... 5,762,107 7,246,329 9,252,410
Provision for impairment of oil and gas properties (Note 11) .... -- -- 2,300,000
General and administrative (Note 3) ............................. 3,878,892 4,033,984 3,441,701
Interest expense:
Stockholder .................................................... 713,852 550,211 447,172
Others ......................................................... 1,348,809 1,845,285 3,513,571
Nonrecurring expenses (Notes 2 and 10) ......................... -- 2,432,002 752,312
Litigation settlement (Note 10) ................................. -- 733,964 --
------------ ------------ ------------
Total costs and expenses ................................... 17,003,152 22,976,778 25,814,655
------------ ------------ ------------
Income (loss) before provision (credit) for income taxes,
extraordinary items and cumulative
effect of change in accounting for income taxes ................. 4,905,588 (2,294,222) (6,202,927)
Provision (credit) for deferred income taxes (Note 6):
Deferred tax .................................................... 1,131,000 -- (1,744,000)
Nonrecurring change in ownership ................................ 1,200,000 -- --
------------ ------------ ------------
2,331,000 -- (1,744,000)
------------ ------------ ------------
Income (loss) before extraordinary items and cumulative
effect of change in accounting for income taxes ................. 2,574,588 (2,294,222) (4,458,927)
Extraordinary items (Note 12):
Gain on extinguishment of long-term obligation .................. -- 1,051,760 --
Loss on early extinguishment of debt, net of income
tax benefit of $298,000 ....................................... (510,000) -- --
------------ ------------ ------------
Income (loss) before cumulative effect of change in
accounting for income taxes ...................................... 2,064,588 (1,242,462) (4,458,927)
Cumulative effect of change in accounting for
income taxes (Note 1) ........................................... 425,000 -- --
------------ ------------ ------------
Net income (loss) ................................................ $ 2,489,588 $ (1,242,462) $ (4,458,927)
============ ============ ============
Net income (loss) applicable to common stock ..................... $ 2,452,931 $ (1,242,462) $ (4,458,927)
============ ============ ============
Weighted average common and common
equivalent shares outstanding ................................... 10,148,552 12,168,172 12,344,767
============ ============ ============
Net income (loss) per common and common equivalent share:
Income (loss) before extraordinary items and cumulative
effect of change in accounting for income taxes ................ $ .25 $ (.19) $ (.36)
Extraordinary items ............................................. (.05) .09 --
Cumulative effect of change in accounting for
income taxes ................................................... .04 -- --
------------ ------------ ------------
Net income (loss) ............................................... $ .24 $ (.10) $ (.36)
============ ============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE> 28
ALEXANDER ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
Preferred Common Paid-in Accumulated Treasury
stock stock capital deficit stock Total
---------- -------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 .. $ 360,735 $198,456 $ 24,253,971 $ (6,709,457) $ (460,116) $ 17,643,589
Common stock issued and
conversion of preferred
stock, net of issuance costs (1,000) 134,575 13,167,456 -- 460,116 13,761,147
Issuance of common stock for
royalty interest ............ -- 6,755 187,843 -- -- 194,598
Retirement of Series B
preferred stock ............. (359,735) -- (40,265) -- -- (400,000)
Issuance of warrants ......... -- -- 65,099 -- -- 65,099
Issuance of common stock in
connection with exercise of
warrants .................... -- 10,935 624,065 -- -- 635,000
Exercise of employee stock
options and issuance of stock
awards, net of unearned
compensation ................ -- 744 48,157 -- -- 48,901
Net income ................... -- -- -- 2,489,588 -- 2,489,588
Dividends .................... -- -- -- (86,656) -- (86,656)
---------- -------- ------------ ------------ ------------ ------------
Balance at December 31, 1993 .. -- 351,465 38,306,326 (4,306,525) -- 34,351,266
Exercise of stock options and
issuance of stock awards, net
of unearned compensation .... -- 16,682 1,099,057 -- -- 1,115,739
Net loss ...................... -- -- -- (1,242,462) -- (1,242,462)
---------- -------- ------------ ------------ ------------ ------------
Balance at December 31, 1994 .. -- 368,147 39,405,383 (5,548,987) -- 34,224,543
Exercise of stock options and
vesting of stock awards, net
of unearned compensation .... -- 5,401 857,425 -- -- 862,826
Net loss ...................... -- -- -- (4,458,927) -- (4,458,927)
---------- -------- ------------ ------------ ------------ ------------
Balance at December 31, 1995 .. $ --- $373,548 $ 40,262,808 $(10,007,914) $ --- $ 30,628,442
========== ======== ============ ============ ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE> 29
ALEXANDER ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED ON NEXT PAGE)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------
1993 1994 1995
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ............................................. $ 2,489,588 $ (1,242,462) $(4,458,927)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Extraordinary loss (gain) before tax and after cash
payment ..................................................... 707,600 (1,131,100) --
Cumulative effect of change in accounting
for income taxes ............................................ (425,000) -- --
Amortization and depreciation ................................ 5,762,107 7,246,329 9,252,410
Provision for impairment of oil and gas properties ........... -- -- 2,300,000
Amortization of deferred compensation for stock awards ....... -- 68,615 405,744
Amortization of loan discount and issuance cost .............. 65,000 -- 97,381
Loss on disposal of other equipment .......................... 8,705 -- --
Accretion of imputed interest ................................ 361,534 220,500 149,500
Deferred income tax provision (credit) ....................... 2,033,000 -- (1,744,000)
Change in assets and liabilities as a result of operating
activities:
Decrease (increase) in accounts receivable .................. 395,167 (654,804) 1,196,268
Decrease (increase) in supply inventories,
prepaid expenses and other ................................. (251,243) 503,552 (76,334)
Increase (decrease) in accounts payable ..................... 1,478,546 (1,930,431) (4,018,818)
Increase (decrease) in gas balancing, natural gas
prepayments, oil and gas proceeds due others and
other noncurrent liabilities ............................... (560,211) (1,615,384) 278,507
------------ ------------ -----------
Net cash provided by operating activities ................ 12,064,793 1,464,815 3,381,731
Cash flows from investing activities:
Additions to oil and gas properties ........................... (17,940,203) (36,009,580) (5,880,605)
Additions to other properties and equipment ................... (351,001) (440,742) (74,683)
Change in deferred charges and other assets, net .............. 595,498 -- --
Proceeds from the sale of assets .............................. 694,007 4,163,219 1,792,231
------------ ------------ -----------
Net cash used by investing activities .................... (17,001,699) (32,287,103) (4,163,057)
</TABLE>
F-6
<PAGE> 30
ALEXANDER ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------
1993 1994 1995
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from long-term debt ............................ $ 18,488,572 $ 30,986,958 $ 2,000,000
Payments on long-term debt and for extinguishment of
long-term obligation ................................... (26,417,193) (2,358,639) (1,016,525)
Collection of stock subscription receivable ............. -- 645,000 --
Proceeds from sale of common, preferred stock and
treasury stock, net of offering costs .................. 13,761,246 -- --
Exercise of employee stock options ...................... 48,901 1,047,124 457,082
Payments to retire preferred stock ...................... (400,000) -- --
Payment of preferred stock dividend ..................... (136,656) -- --
------------ ------------ -----------
Net cash provided by financing activities ........... 5,344,870 30,320,443 1,440,557
------------ ------------ -----------
Net increase (decrease) in cash and cash equivalents
during the year ......................................... 407,964 (501,845) 659,231
Cash and cash equivalents at beginning of year ........... 886,633 1,294,597 792,752
------------ ------------ -----------
Cash and cash equivalents at end of year ................. $ 1,294,597 $ 792,752 $ 1,451,983
============ ============ ===========
</TABLE>
SUPPLEMENTAL INFORMATION:
Interest paid amounted to $1,701,127, $2,174,996 and $4,037,025 for the
years ended December 31, 1993, 1994 and 1995, respectively.
See accompanying notes.
F-7
<PAGE> 31
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation - The consolidated financial statements
include the accounts of Alexander Energy Corporation (the "Company"), its
wholly-owned subsidiaries which were merged with the Company on June 30, 1995
(Note 2), and the Company's proportionate share of the assets, liabilities,
revenues and costs and expenses of oil and gas limited partnerships in which
the Company acts as general partner.
Nature of operations - The Company's business activities include property
acquisitions and exploitation; geological and geophysical evaluation of
prospective acreage; selection, negotiation and purchase of oil and gas
prospects; participation in drilling exploratory and development wells; and
operation of producing oil and gas properties. The Company diversifies its
exploration efforts between oil and gas with particular emphasis in the Mid-
Continent region of the United States.
Oil and gas properties - The Company follows the full cost method of
accounting for oil and gas properties prescribed by the Securities and Exchange
Commission ("SEC"). Under the full cost method, all acquisition, exploration
and development costs are capitalized. The Company capitalizes internal costs
including: salaries and related fringe benefits of employees directly engaged
in the acquisition, exploration and development of oil and gas properties, as
well as other directly identifiable general and administrative costs associated
with such activities. Such capitalized internal costs were approximately
$885,000, $1,232,000, and $1,101,000, respectively, in each of the three years
in the period ended December 31, 1995.
The costs of unproved properties are excluded from costs to be amortized
pending a determination of the existence of proved reserves. Such unproved
properties are assessed periodically for impairment. The amount of impairment
is included in the costs to be amortized.
Under the full cost method, the net book value of oil and gas properties,
less related deferred income taxes, may not exceed a calculated "ceiling." The
ceiling is the estimated after-tax future net revenues from proved oil and gas
properties, discounted at 10% per annum plus the lower of cost or fair market
value of unproved properties. In calculating future net revenues, prices and
costs in effect at the time of the calculation are held constant indefinitely,
except for changes which are fixed and determinable by existing contracts. The
net book value is compared to the ceiling on a quarterly basis. The excess, if
any, of the net book value above the ceiling is required to be written off as
an expense. As described in Note 11, in 1995 the Company recognized a provision
for impairment of the carrying value of its oil and gas properties. Under the
SEC's full cost accounting rules, any write down recorded may not be reversed
even though higher oil and gas prices may increase the ceiling applicable to
future periods. There can be no assurance that future oil and gas reserve
volume or product price decreases will not result in additional reductions in
the net book value of the oil and gas properties.
Amortization and depreciation - Amortization of oil and gas properties is
computed using a unit of revenue method based on current gross revenues from
production in relation to estimated future gross revenues from production of
proved oil and gas reserves (Note 11).
Depreciation of other properties and equipment is computed on the
straight-line method over estimated useful lives of 3 to 40 years.
Capitalization of interest - Interest costs related to significant
exploratory oil and gas wells and unproved oil and gas leases not being
amortized are capitalized until such time as the properties are evaluated and
transferred to the full cost amortization base. For the years ended December
31, 1993, 1994 and 1995 total interest costs amounted to $2,077,890,
$2,423,496 and $3,995,743 with $15,229, $28,000 and $35,000 being capitalized,
respectively.
Income taxes - On January 1, 1993, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes"
("SFAS 109"). Among other changes, SFAS 109 relaxed the recognition and
measurement criteria for deferred tax assets and alternative minimum tax from
that provided for under its previous method of accounting for income taxes
under SFAS No. 96. Adoption of this standard resulted in the
F-8
<PAGE> 32
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
elimination of deferred income taxes payable of $425,000, related entirely to
alternative minimum tax, which is reflected in the 1993 statement of operations
as the cumulative effect of a change in accounting principle.
Under SFAS 109, deferred income taxes are provided on the tax effect of
presently existing temporary differences, net of operating loss carryforwards
and statutory depletion carryforwards. The tax effect is measured using the
enacted marginal tax rates and laws that will be in effect when the differences
and carryforwards are expected to reverse or be utilized.
Net income (loss) per common and common equivalent share - Net income
(loss) per common and common equivalent share is computed on the basis of
weighted average shares of common stock, stock options and warrants outstanding
during each period, as applicable.
Stock-based compensation - In October 1995, the Financial Accounting
Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation,"
which establishes financial accounting and reporting standards for stock-based
employee compensation plans. Effective for fiscal years beginning after
December 15, 1995, the statement provides the option to continue under the
accounting provisions of APB Opinion 25, while requiring pro forma footnote
disclosures of the effects on net income and earnings per share, calculated as
if the new method had been implemented. The Company will adopt the financial
reporting provisions of SFAS 123 for 1996, but expects to elect to continue
under the accounting provisions of APB Opinion 25.
Gas balancing and natural gas prepayments - The Company records gas sales
on the entitlement method, recognizing only its net share of all production as
revenues. Any amount received in excess of the Company's revenue interest is
recorded as a gas balancing liability and, conversely, amounts not received for
the Company's entitled interest in gas produced are accrued as a gas balancing
receivable (collectively referred to as "net gas balancing liability"). The
Company has also received non-interest bearing prepayments on future natural
gas production which provide for recoupment, most of which are refundable upon
the earlier of the end of the productive life of each well or expiration of the
gas purchase contract. The natural gas prepayments will be recognized as
revenue when, and if, the gas is delivered. The portion of the net gas
balancing and natural gas prepayment liabilities that may be contractually
recouped during the next fiscal year is recorded as due within one year in the
accompanying balance sheets. As of December 31, 1994 and 1995 the Company has
net gas balancing and natural gas prepayment liabilities aggregating $3,457,000
and $3,528,000, respectively, of which $785,000 and $1,604,000 are classified
as due within one year.
Cash equivalents - Temporary investments with a maturity at the date of
acquisition of 90 days or less are considered to be cash equivalents.
Credit and market risk - The Company conducts the majority of its
operations in the states of Oklahoma, Texas and Arkansas and operates
exclusively in the oil and natural gas industry. The Company's joint interest
and oil and gas sales receivables are generally unsecured; however, the Company
has not experienced any significant losses in prior years and is not aware of
any significant uncollectible accounts at December 31, 1995.
Fair value of financial statements - Cash and cash equivalents, accounts
receivable, accounts payable and revenues payable are estimated to have a fair
value approximating the carrying amount due to the short maturity of these
instruments.
Due to the uncertainty of the timing of recoupment for net gas balancing
liabilities and gas prepayments management is unable to determine the fair
value of such instruments, however, based upon current product pricing and
expected reserve depletion management believes that the fair value is not
materially different than the carrying value.
The fair value of the unsecured revolving credit facility is believed to
approximate its carrying value due to variable interest rates on the
instruments. Fair values for fixed-rate borrowing approximate carrying values
inasmuch as management believes that the rates and terms approximate such terms
that could be obtained under similar instruments.
F-9
<PAGE> 33
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. BUSINESS COMBINATIONS
On June 30, 1995, a certificate of merger was filed with the State of
Oklahoma merging its wholly-owned subsidiaries, American Natural Energy
Corporation ("ANEC"), Edwards & Leach Oil Company and Bradmar Petroleum
Corporation ("Bradmar") into the Company as the surviving corporation. The
merger had no effect on the consolidated financial position or on the
consolidated results of operations for the periods presented.
In July 1994, the Company acquired ANEC, an Oklahoma corporation based in
Tulsa, Oklahoma, in a merger (the "Merger") accounted for as a pooling of
interests. Accordingly, in 1994 the Merger was given retroactive effect and
the Company's financial statements for periods prior to the Merger represent
the combined financial statements of the previously separate entities adjusted
to conform ANEC's accounting policies to those used by the Company. ANEC became
a wholly owned subsidiary of the Company and each issued and outstanding share
of ANEC's common stock was converted into the right to receive 1.62 shares of
the Company's common stock. In addition, the Company assumed all outstanding
options granted under the stock option plans maintained by ANEC. As a result
of the 1994 transaction, the Company issued approximately 5.8 million shares of
Company common stock.
In connection with the Merger, the Company incurred nonrecurring charges
to operations in 1994 of $2.4 million related to the combination of the Company
and ANEC. These costs include legal, accounting, investment banking, printing
and other costs.
In November 1994, the Company acquired certain producing gas properties,
located principally in Oklahoma and Arkansas, from JMC Exploration, Inc. (the
"JMC Acquisition") for a net purchase price of approximately $18.2 million,
including the assumption of a net gas balancing liability of $320,000. The
operations of the JMC Acquisition have been included in the accompanying
statements of operations and cash flows beginning November 15, 1994.
The following unaudited pro forma combined data gives effect to the JMC
Acquisition as if such transaction had been consummated as of January 1, 1993
and 1994. The pro forma information is based on the historical financial
statements of the Company and the JMC Acquisition, giving effect to the
transaction under the purchase method of accounting. The unaudited pro forma
combined data are presented for illustrative purposes and are not necessarily
indicative of the actual results that would have occurred had the acquisition
been consummated as of January 1, 1993 or 1994, respectively, or of future
results of the combined operations. The data reflect adjustments for (1)
amortization and depreciation of the JMC Acquisition's oil and gas properties,
(2) incremental general and administrative expenses of the JMC Acquisition, (3)
incremental interest expense resulting from the borrowings on the Company's
credit facility used to fund the cash requirements of the acquisition, and (4)
certain other pro forma adjustments.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1993 1994
------- --------
(in thousands, except per share data)
<S> <C> <C>
Revenues ................................................................ $30,046 $25,295
Income (loss) before discontinued operations, extraordinary items and
cumulative effect of change in accounting .............................. 4,170 (1,741)
Net income (loss) ....................................................... 4,085 (689)
Net income (loss) per common share and common equivalent share .......... $.40 $(.06)
</TABLE>
3. TRANSACTIONS WITH RELATED PARTIES
In June 1988, the Chief Executive Officer purchased 200,000 shares of the
Company's treasury stock for a sum aggregating $322,500. In connection with
this transaction the Company advanced the Chief Executive Officer $77,500
F-10
<PAGE> 34
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
bearing interest at 10% repayable in 10 annual installments. The remaining
balance of this advance aggregated $52,801 at December 31, 1993. In November
1994, the Board of Directors approved a resolution to forgive the outstanding
receivable from the Chief Executive Officer and also refund the principle and
interest previously paid to the Company, resulting in an aggregate charge to
1994 operations of approximately $190,000.
The Company has interests in three limited partnerships engaged in oil and
gas activities. The Company acts as general partner of these partnerships and
arranges for the exploration, development and subsequent operations of the
partnerships' properties. In return, the Company is entitled to receive
management fees, reimbursement for administrative overhead and share in the
partnerships' revenues and costs and expenses according to the respective
partnership agreements.
During June 1993, the Company acquired the limited partner's interest in
an oil and gas partnership for which the Company served as the general partner.
The purchase price of this acquisition was $1,350,000 and was accounted for
under the purchase method of accounting. The results of the acquisition is
included in the results of operations of the Company since the date of the
acquisition.
During the year ended December 31, 1993 and the eight months ended August
31, 1994, the Company sold approximately 20% and 16%, respectively, of its oil
production through an entity (IEM, Ltd.) in which the Company owned a limited
partner interest recorded on the equity method (Note 9). Net distributable
income of IEM, Ltd. was allocated 60% to the limited partners and 40% to the
general partner. For the year ended December 31, 1993 and the eight months
ended August 31, 1994, the Company received 100% of the amount allocable to the
limited partners. Effective August 31, 1994, the Company terminated its
marketing arrangement with IEM and thus, withdrew as a limited partner. As a
result, the Company's equity interests in IEM's operating profit or loss ceased
as of August 31, 1994. The Company received the highest posted price for all
such production, an indirect marketing fee from the ultimate purchaser and a
percentage of operating profit of IEM, if any. In 1993 and the eight-month
period ended August 31, 1994, the Company recorded pass-through marketing fees
of $96,000 each period and operating profits (losses) of $1,500 and $(9,700),
respectively. At December 31, 1994, the Company had an undistributed net
operating profit receivable associated with this interest of approximately
$84,000 (none in 1995).
The Company also purchases certain well operating chemicals and stimulants
from another entity in which the Company owns a limited partner interest. In
1993, 1994 and 1995 oil and gas operating expenses and property development
costs include approximately $521,000, $726,000 and $465,000, respectively,
related to purchases from this related party.
As a requirement of the 1992 acquisition of Bradmar, the Company entered
into consulting/non-compete agreements with two former officers and directors
of Bradmar, one of which presently serves on the board of directors of the
Company. The agreements required total payments of a minimum $1,320,000 to be
paid in monthly payments of $36,667 over a thirty-six-month period from the
date of the acquisition. During 1995, the Company paid the final installments
under these agreements in the amount of $91,624 ($440,000 in each of 1993 and
1994).
F-11
<PAGE> 35
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
December 31,
-------------------------
1994 1995
----------- -----------
<S> <C> <C>
Revolving credit facility (A) ....................................... $42,000,000 $33,000,000
Term note (A) ....................................................... -- 11,000,000
Notes to stockholder (B) ............................................ 4,000,000 3,000,000
Mortgage note payable, interest at 10.5%; principal and interest
due in monthly installments of $5,382, with the balance
due in December 1999; secured by real estate with a net
book value of $669,429 at December 31, 1995 ........................ 546,545 539,825
Other ............................................................... 57,988 48,668
----------- -----------
46,604,533 47,588,493
Less amounts due within one year .................................... 1,016,253 4,162,475
----------- -----------
Long-term debt due after one year ................................... $45,588,280 $43,426,018
=========== ===========
</TABLE>
- -------------
(A) At December 31, 1995, the Company had $44 million outstanding under its
revolving credit facility with a bank. Subsequent to December 31, 1995,
the lender reduced the borrowing base to $33 million, effective to
December 31, 1995, requiring the $11 million excess borrowings to be
converted to a term note. In May 1996, the Company amended the credit
agreement (the "Amended Agreement"). Under the Amended Agreement, the term
note requires monthly payments of principal of $350,000 plus interest,
effective beginning April 1996, through its maturity date of April 1, 1997
at which time the unpaid principal and interest become due. The Company
will also be required to make a principal payment of $750,000 in May 1996
representing proceeds from the sale of oil and gas properties completed in
January 1996. The Amended Agreement further requires that monthly cash
flow from operations, as defined, in excess of $700,000 and proceeds from
the sale of assets, common or preferred stock, debt placements or capital
from any other source to be applied first against the outstanding balance
of the term note. The term note will bear interest at the prime rate plus
3% (an aggregate rate of 11.25% at March 31, 1996) through October 15,
1996 and the prime rate plus 4% thereafter. The borrowings associated with
the revolving credit facility cannot exceed the borrowing base, which
relates to the Company's oil and gas reserve base. The borrowing base is
subject to semiannual redeterminations each April and October until April
1, 1997, at which time the borrowing base is reduced quarterly by 1/16th
through December 31, 2000. In addition to the forgoing semiannual
redeterminations, the lender has the right, at its sole discretion, to
redetermine the borrowing base, subject to certain limitations, any time
until maturity. Under the Amended Agreement, the revolving credit facility
interest rate will also increase beginning effective April 1996. Under the
revolving credit facility, the Company has the ability to choose the index
the interest rate is based on and can fix the rate for a term of up to six
months. At December 31, 1995, the Company had elected to use the one-month
London Interbank Offering Rate ("LIBOR") plus 1.5 % (an aggregate rate of
7.3125%), which will increase under the Amendment to LIBOR plus 2%.
The Amended Agreement requires, among other things, that the company
maintain minimum amounts of tangible net worth, a specified interest
coverage and current ratio, and places limitations on investments,
additional indebtedness, capital expenditures, mergers and liquidations,
consolidations, acquisitions, amounts of gas balancing liabilities and
payment of dividends. In May 1996, the Company obtained a waiver from the
lender for events of noncompliance. Also, in connection with the Amended
Agreement, the lender reduced the minimum requirements related to the
interest coverage and current ratio covenants, as defined, from 4 : 1 and
1 : 1 to 2.65 : 1 and .5 : 1, respectively, through April 1, 1997. The
Company expects to be able to comply with the amended financial
requirements in future periods. All of the borrowings outstanding with
this lender, under the Amended Agreement, are secured by a first and prior
lien on substantially all of the Company's assets.
(B) In June 1988, the Company entered into an agreement with a stockholder
whereby the Company issued 10% unsecured notes in the amount of
$5,000,000. This note agreement requires semiannual interest payments,
with
F-12
<PAGE> 36
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
annual principal payments of $1,000,000 beginning in June 1994 and
continuing through 1998. This note agreement requires principal
prepayments if less than 50% of the Company's consolidated cash flow is
not expended on indebtedness, as defined, and capital expenditures. It
also limits the sale or disposition of subsidiaries, partnerships or joint
ventures, the sale of Company assets, the incurrence of additional
indebtedness, declarations of dividends and requires the Company to
maintain cash flow each fiscal year equal to the greater of a) 200% of the
aggregate consolidated principal payments during such fiscal year, b) 200%
of the aggregate consolidated principal payments during the next
succeeding fiscal year, or c) discounted future net revenues equal to 225%
of the aggregate consolidated debt (as defined).
In May 1996, the Company obtained a waiver from the stockholder
through April 1, 1997, for noncompliance with certain covenants existing
as of December 31, 1995. Under the waiver, the Company will be required to
make its previously scheduled principal payment of $1.0 million plus
interest in June 1996. The stockholder may at its sole discretion, require
the remaining $2 million of unpaid principal and accumulated interest due
anytime after April 1, 1997. The Company also secured the stockholder loan
on an equal basis with the bank debt discussed in (A) above and agreed to
liquidate and distribute the assets of the AEJH 1985, AEJH 1987 and AEJH
1989 Limited Partnerships.
As of December 31, 1995, long-term debt, which excludes the non-recourse
debt maturities discussed in Note 5, maturing during the subsequent five years
and thereafter is as follows (based on the Company's borrowing base and
outstanding borrowings at December 31, 1995 and waivers received from lenders):
1996 - $4,162,475; 1997 - $16,050,700; 1998 - $8,263,110; 1999 - $8,257,600;
2000 - $10,320,300 and thereafter - $534,308.
5. NON-RECOURSE DEBT
In 1989, AEJH 1989 Limited Partnership ("AEJH 1989"), for which the
Company serves as general partner, entered into an agreement with a stockholder
of the Company (and limited partner of AEJH 1989), whereby AEJH 1989 issued
secured 10 1/2% notes payable in the amount of $2,185,276 ($1,092,638 net to
the Company's interest at the date of issuance) to acquire leasehold interests
in a group of producing oil and gas properties. These notes require monthly
principal and interest payments equal to 80.75% of net proceeds, as defined,
from the producing oil and gas properties. The lender may recover the
outstanding balance on the notes only from proceeds from the oil and gas
properties of AEJH 1989.
Inasmuch as the future payments on these notes will be paid only from net
proceeds from these producing oil and gas properties, no amounts are included
in current portion of long-term debt in the accompanying balance sheets.
F-13
<PAGE> 37
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INCOME TAXES
A reconciliation of the Company's income tax provision (credit) and the
amount computed by applying the statutory federal income tax rate of 35% to
income (loss) before income taxes, extraordinary items and cumulative effect of
change in accounting is as follows:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
1993 1994 1995
----------- --------- -----------
<S> <C> <C> <C>
Statutory rate applied to income (loss) before income
taxes, extraordinary items and cumulative effect of
change in accounting .................................... $ 1,717,000 $(803,000) $(2,171,000)
Increase (decrease) relating to:
Permanent differences, 1994 primarily related to
nondeductible merger costs ........................... -- 852,000 16,000
Statutory depletion ..................................... (79,000) (106,000) (75,000)
State income taxes, net of federal benefit .............. 112,000 -- (143,000)
Change in the valuation allowance on deferred tax
assets (2) ............................................ 641,000 57,000 635,000
Other ................................................... (60,000) -- (6,000)
----------- --------- -----------
Provision ( credit) for deferred income
taxes (1) ............................................. $ 2,331,000 $ --- $(1,744,000)
=========== ========= ===========
</TABLE>
(1) Includes $2,121,000 and $210,000 in 1993 and ($1,589,000) and ($155,000)
in 1995 for federal and state income taxes, respectively.
(2) The 1993 change relates primarily to the nonrecurring change in ownership.
The 1995 change is due to the change in the estimated timing of future
taxable temporary differences and the utilization of net operating loss
and statutory depletion carryforwards as a result of the provision for
impairment of oil and gas properties (Note 11).
Deferred tax assets and liabilities consist of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation and intangible drilling costs deducted
for tax in excess of financial ........................ $ 12,564,000 $ 12,324,000
Deferred tax assets:
Oil and gas revenues recognized for tax
before financial ...................................... 723,000 836,000
Net operating loss carryforwards ....................... 10,859,000 12,429,000
Statutory depletion carryforwards ...................... 1,354,000 1,429,000
Investment tax credit carryforwards .................... 201,000 201,000
Other .................................................. 45,000 89,000
------------ ------------
13,182,000 14,984,000
Valuation allowances (1) ............................... (3,418,000) (3,716,000)
------------ ------------
Net deferred tax assets ................................ 9,764,000 11,268,000
------------ ------------
Net deferred tax liabilities ........................... $ 2,800,000 $ 1,056,000
============ ============
</TABLE>
(1) The change in the valuation allowance primarily relates to the effect of
the provision for impairment of oil and gas properties as described above,
partially offset by the expiration of a net operating loss carryforward in
1995 which was included in the 1994 deferred tax assets and valuation
allowance.
F-14
<PAGE> 38
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the Offering in March 1993 (Note 8), the Company had an
ownership change pursuant to Section 382 of the Internal Revenue Code. The
Company sustained a nonrecurring non-cash charge to operations of approximately
$1.2 million during the three months ended March 31, 1993 due to an increase in
the valuation allowance. The increase in the valuation allowance represents the
effects of the annual limitations on the utilization of net operating loss
carryforwards resulting from the change in ownership. In addition, ANEC had an
ownership change in September 1993 as a result of its 1993 offering, which
resulted in a limitation on the utilization of its net operating loss
carryforwards.
At December 31, 1995, the Company has federal income tax net operating
loss ("NOL") carryforwards of approximately $33.3 million which begin to expire
in 1996. For federal income tax purposes, the Company also has investment tax
credit and statutory depletion carryforwards of approximately $201,000
(expiring from 1996 through 2001) and $3.8 million, respectively. The actual
utilization of net operating loss and other carryforwards may differ from the
estimated usage of such tax assets for purposes of estimating the valuation
allowance. As a result, such changes could result in subsequent changes to the
valuation allowance and could have a material impact on the results of
operations and the Company's financial position. Quarterly, management of the
Company evaluates the realizability of its deferred tax assets by assessing the
need for additional valuation allowances.
7. COMMITMENTS AND CONTINGENCIES
In December 1994, the Company executed employment agreements, special
severance agreements and implemented a corporate separation policy for its
management, technical support staff and other employees, respectively, which
become effective upon a change in control of ownership, as defined. As of
December 31, 1995, severance benefits under such agreements, assuming a change
in control, would aggregate approximately $4.1 million. A provision for these
benefits will not be made until a change in control is probable. See Note 13.
A petition was filed in Oklahoma County District Court on July 25, 1995,
against the Company and its directors by Bill V. Dean and Elliott Associates,
L.P. ("Elliott"). The suit purported to be a derivative action on behalf of the
Company against the Board of Directors for breach of fiduciary duties in
enacting a share rights plan, approving certain severance contracts and policy,
and proposing the Senior Note Offering. No damages are being sought against the
Company. The suit asks that the Company's share rights plan and severance
contracts and policy be invalidated, seeks an injunction against the Company's
Senior Note Offering and requests damages to the Company from the directors in
excess of $10,000. In August 1995, the Company elected to defer its proposed
Senior Note Offering. The Company filed a motion to dismiss which was granted
by the court in 1995 dismissing Elliott as plaintiff. The court granted Elliott
leave to file an amended petition. Elliott declined to file an amended petition
and is appealing its dismissal to the Oklahoma Court of Appeals. The Company
and its directors have filed their answer denying all allegations. The suit is
currently in discovery. The Company believes the derivative action is without
merit and will vigorously defend against this action.
The Company is involved in various legal actions arising in the normal
course of business. In the opinion of management, the Company's liability, if
any, in these pending actions would not have a material effect on the Company's
financial position or the results of operations.
8. PREFERRED AND COMMON STOCK
In April 1990, stockholders authorized the Board of Directors of the
Company to issue up to 2,000,000 shares of $.01 par value preferred stock with
preferences, qualifications, limitations and designations as deemed
appropriate.
On May 30, 1990, the Company issued 100,000 shares of 5% Series A
cumulative convertible preferred stock, $.01 par value, to MWR Investments,
Inc., a wholly owned subsidiary of Midwest Capital Group, Inc., ("MWR") for
$1,000,000. The preferred stock was converted into common stock of the Company
in March 1993 at a conversion rate of 1 share of preferred for 3.33 shares of
common.
F-15
<PAGE> 39
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 1993, dividends of $.50 per share ($60,273; $50,000 of which was in
arrears at December 31, 1992) and $.20 per share ($26,383) were paid on the
Company's Series A preferred stock and ANEC's Series B preferred stock,
respectively.
In December 1994, the Board of Directors authorized the Company to reserve
300,000 shares of Series A Junior Participating Preferred Stock in connection
with establishing a rights plan providing shareholders one right for each share
of common stock held. Each right entitles its holder to purchase 1/100 of a
share of Series A Junior Participating Preferred Stock for $25.00, subject to
adjustment. The rights become exercisable and separately transferable ten
business days after a) an announcement that a person has acquired or obtained
the right to acquire 20% or more of the common stock or b) commencement of a
tender offer that could result in a person owning 20% or more of the common
stock. See Note 7.
If any person becomes the beneficial owner of 20% or more of the Company's
common stock, each right not beneficially owned by that person entitles its
holder to purchase, in lieu of Series A Junior Participating Preferred Stock,
Company common stock with a value equal to twice the exercise price of the
right, subject to adjustment to prevent dilution. In the event of certain
merger or asset sale transactions with another party or transactions which
would increase the equity ownership of a shareholder who then owned 20% or more
of the Company, each right will entitle its holder to purchase a similar value
of the merging or acquiring party's common stock. The rights, which have no
voting power, expire on December 15, 2004. The rights may be redeemed for $.01
per right until ten business days after a person has acquired 20% or more of
the common stock.
On December 31, 1992, ANEC issued 133,333 shares of Series B preferred
stock and 30,000 shares of ANEC's common stock (48,600 shares of the Company's
common stock) for $400,000. In September 1993, ANEC redeemed such preferred
stock for $400,000 out of the proceeds of a secondary public offering of equity
securities.
In March 1993, the Company registered 2,990,000 shares of the Company's
common stock (the "Offering"), of which the Company and a stockholder sold
2,556,667 and 433,333 shares, respectively. In conjunction with the Offering,
the Company issued to the underwriters warrants to purchase 75,000 shares of
common stock. The warrants are exercisable beginning March 1994 at an exercise
price of $5.10 per share and expire in March 1998. The exercise price and the
number of shares of common stock for which the warrants are exercisable are
subject to adjustment upon the occurrence of certain dilutive events.
In September 1993, ANEC sold 1,100,000 shares of ANEC's common stock
(1,782,000 shares of the Company's common stock) and received $4 million, net
of underwriters commissions and costs of the offering (the "ANEC Offering"). In
connection with this offering, ANEC issued purchase warrants to purchase 97,500
shares of ANEC's common stock (157,950 shares of the Company's common stock) at
$5.70 per share ($3.52 for the Company's common stock), expiring in September
1998.
In April 1993, ANEC issued 139,000 shares of ANEC's common stock (225,180
shares of the Company's common stock) in connection with the acquisition of a
7.5% overriding royalty interest in ANEC's oil and gas properties in connection
with the early termination of a credit agreement.
Also in April 1993, ANEC issued warrants to purchase 260,000 shares of
ANEC's common stock (421,200 shares of the Company's common stock) at $3.00 per
share ($1.85 for the Company's common stock), expiring in April 1996, in
connection with the issuance of subordinated notes, retired in September 1993
with proceeds from the ANEC Offering. In December 1993, ANEC issued 225,000
shares of common stock (364,500 shares of the Company's common stock) upon the
exercise of a like number of warrants in exchange for a stock subscription
receivable of $645,000 which was collected in January 1994. The remaining
35,000 warrants at December 31, 1993 were exercised during 1994 for 56,700
shares of the Company's common stock.
The Company initially reserved 66,666 shares of its common stock for
issuance to directors and key employees under a nonqualified stock option plan
(which terminated in 1991, except for outstanding options at the date of
termination). The plan is administered by the Compensation Committee (the
"Committee") of the Board of Directors. The exercise period of the options was
determined by the Committee at the date of grant, provided the exercise period
F-16
<PAGE> 40
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
is between one and ten years from the date of grant. These options provide for
accelerated vesting schedules upon a change in control, as defined (Note 13).
Information regarding the Company's nonqualified stock option plan is
summarized as follows:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------
1993 1994 1995
------- ------ ------
<S> <C> <C> <C>
Options outstanding at beginning of period ................. 14,660 9,245 7,413
Exercised .................................................. (250) -- (583)
Surrendered or forfeited ................................... (5,165) (1,832) (4,665)
------- ------ ------
Options outstanding at end of period ($1.50 to $1.65 per
share at December 31, 1995; all options are exercisable
at December 31, 1995) ..................................... 9,245 7,413 2,165
======= ====== ======
</TABLE>
The Company also has reserved 133,333 shares (10,022 available for future
grants at December 31, 1995) of its common stock for issuance to directors and
key employees under an incentive stock option plan (the "Plan"). The Plan is
administered by the Committee and, with the exception of a time period under
which options can be issued, contains similar provisions to the nonqualified
stock option plan.
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1993 1994 1995
-------- -------- -------
<S> <C> <C> <C>
Options outstanding at beginning of period ............ 120,393 103,348 86,016
Exercised ............................................. (17,045) (7,333) (9,080)
Surrendered or forfeited .............................. -- (9,999) --
-------- -------- -------
Options outstanding at end of period
($1.50 to $4.125 per share at December 31, 1995;
all options are exercisable at December 31, 1995) .... 103,348 86,016 76,936
======== ======== =======
</TABLE>
The Company also has reserved 250,000 (157,964 available for future grants
at December 31, 1995) shares of its common stock for issuance to directors and
key employees under a stock option plan approved at the 1993 annual
stockholders' meeting authorizing grants of both nonqualified and incentive
stock options (the "1993 Plan"). The 1993 Plan is administered by the Committee
and, with the exception of a time period under which options can be issued,
contains similar provisions to the nonqualified and incentive stock option
plans discussed above. During 1993, ANEC granted options for 51,000 shares
(exercise price of $3.25 per share) of its common stock under a plan similar to
the Company's 1993 Plan. As a result of the Merger, those options were
converted to options to acquire shares of the Company's common stock, under the
1993 Plan.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1993 1994 1995
------- -------- --------
<S> <C> <C>
Options outstanding at beginning of period ............... -- 121,920 116,660
Granted (1993 - $2.01 to $5.00 per share;
1994 - $4.625 per share 121,920) ........................ 121,920 35,000 --
Exercised ................................................ -- (3,316) (8,879)
Surrendered or forfeited ................................. -- (36,944) (27,940)
------- -------- --------
Options outstanding at end of period
($2.01 to $5.00 per share at December 31, 1995
41,096 options are exercisable at December 31, 1995) .... 121,920 116,660 79,841
======= ======== ========
</TABLE>
F-17
<PAGE> 41
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company also has reserved 500,000 shares of its common stock for
awards to directors and key employees under a restricted stock award plan
approved at the 1993 annual stockholders' meeting (the "Award Plan"). The Award
Plan is administered by the Committee. Stock is awarded, issued and held by an
escrow agent until such time as a vesting period, which period is determined by
the Committee, has been satisfied. Voting rights commence at the time of award.
In the fourth quarter of 1993 and 1994, the Company granted 7,500 and 100,000
shares, respectively, under the Award Plan (none in 1995). The market value, at
the award date, was $38,000 and $603,000, respectively, for the 1993 and 1994
awards. Unearned compensation ($113,000, net of forfeitures, at December 31,
1995) is being amortized over the three-year vesting period. Such amortization
amounted to $2,200, $69,000, and $406,000 in 1993, 1994 and 1995 respectively.
These awards provide for accelerated vesting schedules upon a change in
control, as defined (Note 13).
In 1993, ANEC issued options to purchase 51,000 shares of ANEC common
stock (82,620 shares of the Company's common stock) to three business advisors
at $3.00 per share, all of which were exercised during 1994.
In 1993, ANEC granted options to certain members of management to purchase
287,500 shares of ANEC's common stock (465,750 shares of the Company's common
stock), at prices ranging from $3.25 to $5.00 per share ($2.01 to $3.09 for the
Company's shares). These options provided for accelerated vesting schedules
upon change in control. In 1994, immediately prior to and in connection with
the Merger, options were exercised for 187,500 shares of ANEC common stock
(303,750 of the Company's common stock) at prices of $5.00 and $3.25 ($2.01 and
$3.09 for the Company's common stock). In 1995, the remaining options for
162,000 shares of the Company's common stock were exercised at a price of $2.01
(81,000 shares) and $3.09 (81,000 shares).
9. MAJOR PURCHASERS
The Company's oil and gas production is sold under contracts with various
purchasers (Note 3). Gas sales to two purchasers individually approximated 12%
and 13% of total oil and gas revenues for the years ended December 31, 1993 and
1994, respectively. Gas sales to one purchaser approximated 13% of total oil
and gas revenues for the year ended December 31, 1995.
10. OTHER REVENUES, LITIGATION SETTLEMENT, AND OTHER NONRECURRING EXPENSES
In May 1993, the Company settled a lawsuit over the prices received by
Bradmar under certain gas contracts. The Company included approximately $1.25
million of proceeds from the settlement in 1993 revenues.
In the fourth quarter of 1994, in an effort to resolve ANEC's litigation
with Unit Drilling Company ("Unit") and Midwest Energy Corporation ("MEC"), the
Company acquired Unit's claim against MEC and in late December, agreed to
mediation with MEC. On December 22, 1994, the Company agreed to a negotiated
settlement with MEC, the effect of which was a release of the Company's claim
against MEC, the exchange of certain interests in oil and gas properties and a
net payment to MEC of $625,000. The aggregate effect of this negotiated
settlement resulted in a charge to 1994 operations, including legal fees, of
approximately $734,000.
During 1995, the Company incurred aggregate costs of $752,000 related to a
proposed merger and a subsequent senior note offering. As a result of
terminating such merger and debt offering activities, the Company expensed such
costs.
11. AMORTIZATION AND IMPAIRMENT OF OIL AND GAS PROPERTIES
Oil and gas properties amortization expense, excluding impairment, per
dollar of oil and gas revenue for the years ended December 31, 1993, 1994 and
1995 was $.32, $.41 and $.55, respectively. Accumulated amortization and
impairment relating to oil and gas producing activities at December 31, 1994
and 1995 amounted to $37,374,264 and $48,804,474, respectively.
F-18
<PAGE> 42
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the fourth quarter of 1995, the Company recorded approximately $660,000
of incremental amortization on oil and gas properties over that recorded in
each of the previous three quarters. The increase is attributable to the
downward revisions in oil and gas reserve estimates (Note 14).
As of December 31, 1995, the Company's net book value of oil and gas
properties exceeded the ceiling (Note 1). The ceiling has been reduced for the
effect of the oil and gas properties sold in January 1996 of approximately $1.9
million and the timing of development cost expenditures of approximately $1.1
million. Accordingly, a provision for impairment was recognized in the fourth
quarter of 1995 of $2.3 million ($2.0 million, net of the deferred tax
benefit). The provision for impairment is primarily attributable to declines in
estimated reserves due to downward revisions to reserve estimates as described
in Note 14 and is highly dependent upon the development of proved undeveloped
reserves consistent with the timing projected in the reserve studies and the
prevailing market prices of oil and gas at each measurement date. Also, see
Note 4.
12. EXTRAORDINARY ITEMS
During April 1993, ANEC terminated a lending agreement with Endowment
Energy Partners, L.P. and repaid the outstanding indebtedness. The action
resulted in an early extinguishment of debt and an extraordinary loss of
$510,000, net of applicable income taxes.
In November 1994, the Company settled a dispute with a stockholder to whom
the Company had issued unsecured notes payable and warrants (the "Stock
Purchase Warrants") to purchase 223,333 shares of the Company's common stock,
resulting in a gain of approximately $1.1 million. In anticipation of the
lender exercising the Stock Purchase Warrants and a related warrant put option,
the Company had accrued $2,231,100 as of December 31, 1993; however, the
Company alleged that the lender failed to exercise the Stock Purchase Warrants,
and failed to properly exercise its warrant put option. After litigating this
matter, through the Federal Court, the Company settled this dispute, resulting
in a $1.1 million reduction of the $2.2 million liability previously recorded
and cancellation of the Stock Purchase Warrants.
13. SUBSEQUENT EVENT
On January 2, 1996, the Company announced that it had signed a letter of
intent providing for a combination of National Energy Group, Inc. ("NEG") and
the Company. Under terms of the letter of intent as extended, the Company and
NEG had until April 30, 1996 to complete their due diligence investigations and
attempt to reach a definitive agreement on the terms of a transaction. On May
6, 1996, the Company announced that the Company and NEG had not reached
agreement on the terms of a definitive merger agreement by the April 30, 1996
standstill deadline; however, both companies are continuing to negotiate. NEG
is an independent oil and gas company with 1995 revenues of approximately $7.9
million.
14. SUPPLEMENTARY OIL AND GAS INFORMATION
FINANCIAL DATA
All of the oil and gas producing activities of the Company are located in
the United States and represent substantially all of the business activities of
the Company. The following costs include all such costs incurred during each
period, except for depreciation and amortization of costs capitalized:
F-19
<PAGE> 43
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COSTS INCURRED IN OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES:
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------
1993 1994 1995
----------- ----------- ----------
<S> <C> <C> <C>
Acquisition of properties:
Proved (2) .................. $3,971,549 $19,303,678 $331,571
Unproved (1) ................ 493,886 647,269 416,392
----------- ----------- ----------
4,465,435 19,950,947 747,963
Exploration costs ............ 20,977 302,098 569,576
Development costs (2) ........ 11,244,307 12,014,693 2,770,835
----------- ----------- ----------
Total costs incurred ......... $15,730,719 $32,267,738 $4,088,374
=========== =========== ==========
</TABLE>
- ---------
(1) Net of reimbursed costs and the excess of sales proceeds over cost of
properties transferred to the limited partnerships.
(2) Net of reimbursed costs and sales proceeds from properties sold.
CAPITALIZED COSTS:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1993 1994 1995
------------ ------------- -------------
<S> <C> <C> <C>
Proved and unproved properties being amortized .... $ 94,599,583 $ 126,490,676 130,833,467
Unproved properties not being amortized ........... 615,007 991,652 734,757
Less accumulated amortization and impairment ...... (30,291,574) (37,374,264) (48,804,474)
------------ ------------- -------------
Net capitalized costs ............................. $ 64,923,016 $ 90,108,064 $ 82,763,750
============ ============= =============
</TABLE>
UNPROVED PROPERTIES NOT BEING AMORTIZED:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1993 1994 1995
------------ ------------- -------------
<S> <C> <C> <C>
Property acquisition costs ........................ $ 533,673 $ 882,318 $ 624,953
Capitalized interest .............................. 81,334 109,334 109,804
------------ ------------- -------------
$ 615,007 $ 991,652 $ 734,757
============ ============= =============
</TABLE>
The costs of unproved properties not being amortized are related to
properties which are not individually significant and on which the evaluation
process has not been completed. When evaluated these costs will be transferred
to properties being amortized.
OIL AND GAS RESERVE DATA (UNAUDITED)
ESTIMATED QUANTITIES OF PROVED OIL AND GAS RESERVES:
The estimates of proved reserves of the Company were estimated by
independent petroleum engineers, Netherland, Sewell and Associates, Inc. for
1995 and by independent petroleum engineers, Edinger Engineering Inc. for the
1993 and 1994 proved producing reserves, except as noted below for ANEC. Proved
nonproducing and proved undeveloped reserves for 1993 and 1994 were estimated
by Company petroleum engineers and the 1994 reserves were reviewed by Edinger
Engineering Inc., as specified in their letter dated March 29, 1995 except as
noted below for ANEC. This review should not be construed to be an audit as
defined by the Society of Petroleum Engineers' audit guidelines. The estimated
proved reserves of ANEC were determined by ANEC petroleum engineers for 1993
and are combined with the Company below.
F-20
<PAGE> 44
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
All studies have been prepared in accordance with regulations prescribed
by the SEC. Proved reserves cannot be measured exactly because the estimation
of reserves involves numerous judgmental and arbitrary determinations.
Accordingly, reserve estimates must be continually revised as a result of new
information obtained from drilling and production history or as a result of
changes in economic conditions. It is reasonably possible that significant
revisions of end of the period reserves could occur in the near-term based on
the new information. Additionally, the 1995 reserve study estimates for proved
nonproducing and proved undeveloped reserves are based upon approximately $22.5
million of future capital expenditures, estimated to be incurred primarily over
the next three years. The Company believes it has the capability of executing
such expenditures on a timely basis; however, there can be no assurances of
such. Should the actual timing of such expenditures differ from the projected
timing, the differences could result in subsequent revisions to the discounted
future net revenues associated with such reserves. The majority of the
Company's reserves are located in Arkansas, Oklahoma and onshore Texas.
<TABLE>
<CAPTION>
Crude oil, condensate and
natural gas liquids (barrels) Natural gas (Mcf)
-------------------------------------- -------------------------------------------
Years ended December 31, Years ended December 31,
-------------------------------------- -------------------------------------------
1993 1994 1995 1993 1994 1995
---------- ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Proved developed and
undeveloped reserves:
Beginning of period ............ 3,967,994 3,939,915 3,931,981 101,510,640 121,920,500 145,202,568
Purchases of minerals-in-
place ......................... 371,201 43,344 20,657 4,142,156 28,610,484 359,755
Sales of
minerals-in-place ............. (47,759) (107,935) (373,568) (686,463) (6,293,000) (4,294,334)
Revisions of previous
estimates (A) ................. (262,482) (247,542) (1,167,618) (539,002) (13,971,181) (35,172,247)
Extensions, discoveries and
other additions ............... 194,151 528,429 77,542 23,825,184 22,986,453 2,042,021
Production ..................... (283,190) (224,230) (181,022) (6,332,015) (8,050,688) (9,067,588)
---------- ---------- ---------- ------------ ------------ ------------
End of period .................. 3,939,915 3,931,981 2,307,972 121,920,500 145,202,568 99,070,175
========== ========== ========== ============ ============ ============
</TABLE>
(A) In 1994, the Company's oil and gas reserves were revised downwards as a
result of declines in product prices which shortened the economic lives of
the properties. Additionally, gas reserves associated with one field were
revised downward by approximately 13 Bcf based upon the performance
history of the field (which had previously been estimated using the
volumetric method and the limited production data available at that time).
Revisions to this field were somewhat offset by other upward revisions
made to certain producing Oklahoma properties based on the performance
history of those properties.
In 1995, approximately 31 Bcfe was reclassified from proved
undeveloped to probable and possible. The Company believes this is the
result of a more conservative application of engineering assumptions than
used previously. Additionally, in 1995 the Company experienced
approximately 11 Bcfe of additional downward reserve revisions. A
significant portion of these revisions relates to certain undeveloped
locations which the company now believes is being depleted through
existing proved producing properties, previously thought to be accessible
only through recompletions and/or additional development drilling.
F-21
<PAGE> 45
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Crude oil, condensate and
natural gas liquids (barrels) Natural gas (Mcf)
--------------------------------- ------------------------------------
Years ended December 31, Years ended December 31,
--------------------------------- ------------------------------------
1993 1994 1995 1993 1994 1995
--------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Proved developed reserves:
Beginning of period ........... 1,819,924 1,797,023 1,754,840 47,289,039 65,068,990 86,085,662
========= ========= ========= ========== ========== ==========
End of period ................. 1,797,023 1,754,820 1,215,916 65,068,990 86,085,662 66,697,746
========= ========= ========= ========== ========== ==========
</TABLE>
Reserves of wells which have performance history were estimated through
analysis of production trends and other appropriate performance relationships.
Where production and reservoir data was limited, the volumetric method was used
and it is more susceptible to subsequent revisions.
OIL AND GAS RESERVE DATA (UNAUDITED)
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS:
Future net cash inflows are based on the future production of proved
reserves of crude oil, condensate, natural gas and natural gas liquids as
estimated by petroleum engineers by applying current prices of oil and gas
(with consideration of price changes only to the extent fixed and determinable
and with consideration of the timing of gas sales under existing contracts or
spot market sales) to estimated future production of proved reserves. Prices
used in determining future cash inflows for oil and natural gas for the periods
ended December 31, 1993, 1994 and 1995 were as follows: 1993 - $12.75, $2.20;
1994 - $16.25, $1.62; and 1995 - $18.40, $1.95, respectively. Future net cash
flows are then calculated by reducing such estimated cash inflows by the
estimated future expenditures (based on current costs) to be incurred in
developing and producing the proved reserves and by the estimated future income
taxes. Estimated future income taxes are computed by applying the appropriate
year-end tax rate to the future pretax net cash flows relating to the Company's
estimated proved oil and gas reserves. The estimated future income taxes give
effect to permanent differences and tax credits and allowances.
The standardized measure of discounted future net cash flows is based on
criteria established by Financial Accounting Standards Statement No. 69,
"Accounting for Oil and Gas Producing Activities" and is not intended to be a
"best estimate" of the fair value of the Company's oil and gas properties. For
this to be the case, forecasts of future economic conditions, varying price and
cost estimates, varying discount rates and consideration of other than proved
reserves (i.e., probable reserves) would have to be incorporated into the
valuations.
The following table sets forth the Company's estimated standardized
measure of discounted future net cash flows (in thousands):
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Future cash inflows ............................... $ 318,762 $ 298,771 $ 236,825
Future development costs .......................... (35,797) (38,731) (22,528)
Future production costs ........................... (78,793) (70,993) (71,314)
Future income taxes ............................... (55,291) (38,127) (22,193)
--------- --------- ---------
Future net cash flows ............................. 148,881 150,920 120,790
10% annual discount ............................... (54,216) (52,027) (36,742)
--------- --------- ---------
Standardized measure of discounted future net
cash flows ....................................... $ 94,665 $ 98,893 $ 84,048
========= ========= =========
</TABLE>
The standardized measure of estimated cash flows includes amounts related
to properties sold in January 1996. It also assumes development costs relating
to proved undeveloped reserves in 1996 of $11.6 million, substantially all of
which
F-22
<PAGE> 46
ALEXANDER ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
will have to be funded from various financing alternatives. Proceeds from the
financing alternative will have to be sufficient in amount to also retire the
Company's outstanding term note with a bank. See Notes 4 and 11.
OIL AND GAS RESERVE DATA (UNAUDITED)
The following table sets forth changes in the standardized measure of
discounted future net cash flows as follows (in thousands):
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Standardized measure of discounted future cash flows -
beginning of period ..................................... $ 84,879 $ 94,665 $ 98,893
Net changes in sales prices and production costs ......... 557 (21,775) 7,337
Sales of oil and gas produced, net of operating
expenses ................................................ (12,358) (11,255) (10,492)
Purchases of minerals-in-place (A) ....................... 5,445 20,414 400
Sales of minerals-in-place ............................... (523) (7,233) (3,626)
Revisions of previous quantity estimates ................. (675) (11,558) (38,157)
Extensions, discoveries and improved recovery, less
related costs ........................................... 20,169 15,119 2,394
Previously estimated development costs incurred during
the year and change in future development costs ......... 4,195 9,347 14,567
Accretion of discount .................................... 6,207 7,715 7,140
Net change in income taxes ............................... (8,987) 12,931 7,896
Other (B) ................................................ (4,244) (9,477) (2,304)
-------- -------- --------
Standardized measure of discounted future cash flows -
end of period ........................................... $ 94,665 $ 98,893 $ 84,048
======== ======== ========
</TABLE>
(A) The purchases in 1994 consists primarily of the JMC Acquisition, which
includes proved developed and undeveloped reserves.
(B) The change included in the caption "Other" results principally from net
changes in the timing of production of oil and gas reserves and the change
in timing related to the development of proved undeveloped reserves.
F-23
<PAGE> 47
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information relating to the identification, business experience and
directorships of each director and executive officer of the Company required by
Item 401 of Regulation S-K is presented in Part I, Item 1A, "Executive Officers
of the Registrant."
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's common stock to file with the SEC
initial reports of ownership and reports of changes in ownership of common
stock and other equity securities of the Company. Such persons are required by
the SEC's regulations to furnish the Company with copies of all Section 16(a)
forms filed by such persons.
Based solely on the Company's review of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes that all filing requirements applicable to the Company's executive
officers, directors and more than 10% stockholders were complied with, except
for a statement of changes in beneficial ownership (Form 4) of Brian F. Egolf
to report a disposition of 3,607 shares that he sold in September 1995. A 1995
annual statement of changes in beneficial ownership (Form 5) was filed in
February 1996 on Mr. Egolf's behalf to report this disposition.
21
<PAGE> 48
ITEM 11. EXECUTIVE COMPENSATION
The following information is set forth with respect to the total cash
compensation paid to the Company's five executive officers (including the
Company's chief executive officer) whose cash compensation exceeded $100,000
during each of the three years ending December 31, 1995, 1994 and 1993. None of
the other executive officers' cash compensations for all services rendered in
all capacities to the Company and its subsidiaries exceeded $100,000 during
1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
Long-Term Compensation
Awards
Annual Compensation (1) -------------------------------
------------------------------------------------------ Restricted
Other Annual Stock
Fiscal Salary Bonus Compensation Award(s) Options
Name and Principal Position Year ($)(2) ($)(3) ($) ($)(4) (#)
- ------------------------------ ------ ------- -------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bob G. Alexander 1995 137,121 --- --- --- ---
President and Chief 1994 133,021 233,156(5) --- --- ---
Executive Officer 1993 122,424 69,553 --- --- ---
Jim L. David 1995 89,847 --- --- --- ---
Executive Vice President 1994 88,315 48,370 --- --- ---
1993 79,973 69,553 --- --- ---
David E. Grose 1995 79,778 --- --- --- ---
Vice President, Treasurer 1994 78,631 48,370 --- 189,250 4,000
and Chief Financial Officer 1993 71,308 69,553 --- 10,500 3,000
Roger G. Alexander 1995 78,708 --- --- --- ---
Vice President (Land) 1994 76,599 48,370 --- 189,250 4,000
1993 71,256 69,553 --- 10,500 3,000
James S. Wilson (6) 1995 79,383 --- --- --- ---
Vice President (Operations) 1994 76,881 48,370 --- 189,250 4,000
1993 71,308 69,553 --- 10,500 3,000
</TABLE>
- ---------
(1) Excludes the aggregate, incremental cost to the Company of perquisites
and other personal benefits, securities or property, the aggregate amount
of which, with respect to the named individual, does not exceed the lesser
of $50,000 or 10% of reported annual salary and bonus for such person.
(2) Includes amounts paid by the Company which were deferred pursuant to
Section 401(k) of the Internal Revenue Code and accrued during the years
ended December 31, 1995, 1994 and 1993.
(3) The Company has a policy whereby bonuses may be awarded only if the
Company has replaced produced reserves in the previous year. In those
years in which this occurs, 10% of the difference between internally
generated cash flow and the estimated finding cost for reserve replacement
may be awarded to key employees managing key corporate functions. Bonuses
were awarded equally among five executive officers of the Company in 1994
and 1993. No bonuses were paid in 1995. Included in the amount of bonus
awarded for 1993, $9,853 was paid as discretionary performance bonuses
for successful completion of the Company's second public offering of
common stock.
(4) For 1994, the values of the grants are based on $4.625 and $6.00, the
closing sale prices of the Company's common stock at October 5 and
December 8, the respective dates of grants of 2,000 and 30,000 shares,
respectively, to each of Messrs. Roger Alexander and Grose. Value for
1993 is based on $5.25, the closing sale price at November 30, the date of
grant. Restricted stock awards of 32,000 shares in 1994 and 2,000 shares
in 1993 to each of Messrs. Roger Alexander and Grose were made pursuant to
the Company's 1993 Restricted Stock Plan. The restricted stock awards
will automatically vest over a three-year period, assuming continued
employment by the recipient, at a vesting rate of 50% after the first
anniversary, 75% after the second anniversary, and 100% vesting on the
third anniversary of the date of grant. At December 31, 1995, there were
held in escrow for each of Messrs. Roger Alexander and Grose 16,500
restricted shares with a value of $75,281.
22
<PAGE> 49
(5) Includes $184,786 of debt forgiveness in the form of a one-time bonus. In
June 1988, Mr. Bob Alexander purchased 200,000 shares of the Company's
treasury stock for a sum aggregating $322,500. In connection with this
transaction, the Company advanced Mr. Bob Alexander $77,500 bearing
interest at 10% repayable in ten annual installments. In November 1994,
the Board of Directors approved a resolution to forgive the outstanding
receivable from Mr. Bob Alexander and to also refund the principle and
interest previously paid to the Company, resulting in an aggregate bonus
of $184,786.
(6) Mr. Wilson resigned his position with the Company on January 9, 1996.
Compensation of Directors. Through June 30, 1994, non-employee directors
of the Company were entitled to receive a fee of $500 for each meeting
attended. Effective July 1, 1994, non-employee directors receive a fee of
$2,000 for each meeting attended in person and $500 for each meeting attended
telephonically.
Option Exercises and Year End Option Values. The following information is
set forth with respect to each exercise of stock options during the year ended
December 31, 1995 by each of the Company's named executive officers, and the
year-end value of outstanding in-the-money options held by those executive
officers.
AGGREGATED OPTION EXERCISES FOR LAST FISCAL YEAR
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED IN-THE-
UNEXERCISED MONEY OPTIONS AT
OPTIONS AT FISCAL FISCAL YEAR-END
YEAR-END (#) ($) (1)
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME AND PRINCIPAL POSITION EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- --------------------------- ------------ ------------ ----------------- -------------------
<S> <C> <C> <C> <C>
Bob G. Alexander --- --- --- ---
Jim L. David --- --- --- ---
David E. Grose --- --- 33,665 / --- 63,567 / ---
Roger G. Alexander 3,333 896 5,833 / --- 29,638 / ---
James S. Wilson --- --- 20,665 / --- 34,300 / ---
</TABLE>
- ------------
(1) Based on the closing sale price of the Company's common stock on December
31, 1995 of $4.5625.
Option Grants in Last Fiscal Year. There were no stock options granted
during the year ended December 31, 1995.
TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
In December 1994, the Company executed employment agreements with its
executive officers. The employment agreements become effective only upon a
change in control or ownership. The agreements define "change in control" to
have occurred when (i) a person, entity or group acquires beneficial ownership
of (a) 30% or more of the outstanding shares of the common stock and the board
of directors deems the acquisition to be a change in control or (b) 40% or more
of the outstanding shares of common stock; (ii) either the directors who
constitute the Company's board of directors at the time of execution of the
employment agreements (the "Incumbent Board"), or the directors who are elected
by the Company's stockholders subsequent to execution of the employment
agreements and are approved by a majority of the Incumbent Board, cease to hold
at least a majority of the board of directors seats; or (iii) the stockholders
of the Company have approved a reorganization, share exchange, merger or
consolidation which results in the stockholders of the Company owning less than
50% of the combined voting power of the then outstanding voting securities, or
a liquidation or dissolution of the Company or the sale of all or substantially
all of the assets of the Company.
The employment agreements provide for an employment period ending on the
earlier to occur of (i) three years from the change in control or (ii) the
first day of the month next following the executive's attainment of age 65.
During such period, the executive is to receive a base salary at least equal to
the highest monthly base salary paid to the executive during the 36-month
period immediately preceding the month in which the change in control occurs.
In addition to base salary, the executive will be awarded for each fiscal year
an annual bonus in cash at least equal to the highest bonus paid by the Company
to the executive during the last five fiscal years immediately preceding the
fiscal year in which the change in control occurs. The Company estimates the
maximum severance obligation for management
23
<PAGE> 50
employees to be $2.9 million, occurring only in the event that all five of the
executives that are parties to the agreements are terminated during the
three-year period subsequent to change in control of the Company. See ITEM 3.
LEGAL PROCEEDINGS.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes thereto set forth, as of May 8, 1996, the
number of shares of common stock of the Company owned by those known by the
Company to own beneficially more than five percent (5%) of the outstanding
shares of the Company's common stock, as well as all shares beneficially owned
by each director, each named executive officer, and all directors and officers
of the Company as a group. Unless otherwise noted, the person named has sole
voting and investment power over the shares reflected opposite his name. The
Company has been provided such information by its directors and officers.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------------------------------------------- ------------- --------
<S> <C> <C>
Carl C. Icahn .................................... 1,193,000 (1) 9.57%
Elliott Associates, L.P. ......................... 1,136,843 (2) 9.12%
Bob G. Alexander** ............................... 294,584 (3) 2.36%
Jim L. David** ................................... 266,166 2.14%
David E. Grose** ................................. 81,915 (4) .66%
Roger G. Alexander** ............................. 73,448 (5) .59%
Robert A. West* .................................. 7,066 .06%
Brian F. Egolf* ................................. --- .00%
All Officers and Directors as a group (8 persons). 735,695 (6) 5.88%
</TABLE>
- ---------
* Director
** Director and Officer
(1) Reflects ownership as reported on Schedule 13D by High River L.P., a
Delaware limited partnership, Riverdale Investors Corp., Inc., a Delaware
corporation, and Carl C. Icahn, an individual (collectively referred to as
"Carl Icahn"). Riverdale is the general partner of High River and Mr.
Icahn is the sole stockholder of Riverdale. The corporate address for Mr.
Icahn is 114 West 47th Street, 19th Floor, New York, NY 10036.
(2) Reflects ownership as reported on Schedule 13D of the number of shares of
common stock of the Company held by Elliott (together with its affiliates
Westgate International, L.P. and Martley International, Inc.). The
address for Elliott is 712 Fifth Avenue, New York, NY 10019.
(3) The amount shown owned by Mr. Alexander includes 83,882 shares owned by
Mr. Alexander's wife, Donna Ports Alexander. Mr. Alexander disclaims any
beneficial interest in the shares owned by his wife.
(4) Includes the right to acquire 37,915 shares pursuant to stock options
which are presently exercisable, but which have not been exercised and
16,500 shares awarded under the 1993 Restricted Stock Plan, subject to
forfeiture, for which he has sole voting power.
(5) Includes the right to acquire 10,083 shares pursuant to stock options
which are presently exercisable, but which have not been exercised and
16,500 shares awarded under the 1993 Restricted Stock Plan, subject to
forfeiture, for which he has sole voting power.
(6) Includes the right to acquire 55,205 shares pursuant to employee stock
options which are presently exercisable, but which have not been exercised
and 33,625 shares awarded under 1993 Restricted Stock Plan, subject to
forfeiture, for which the recipients have sole voting power.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1992, the Company completed the acquisition of Bradmar. A
condition to closing the acquisition was that Petroleum Investments Securities
Corp. ("PISC") would enter into a consulting/noncompetitive agreement with the
Company. Brian F. Egolf, a non-employee director of the Company, is an
executive officer and director of PISC. Mr. Egolf was a principal stockholder,
executive officer and director of Bradmar prior to the acquisition. Since
consummation
24
<PAGE> 51
of the acquisition on March 19, 1992, he has served as a director of the
Company. The Company has paid PISC an amount equal to $440,000 per year for a
period of three years in accordance with the consulting agreement. The
consulting agreement expired on March 18, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Annual Report on
Form 10-K.
1. Financial Statements. See Financial Statements and Supplementary
Data under Item 8 for a list of all financial statements filed
as a part of this report.
All schedules have been omitted since the schedules are either not
required or the required information is not present or is not
present in amounts sufficient to require submission of the
schedule, or because the information required is included in the
consolidated financial statements and notes thereto.
3. Exhibits.
Exhibit
Number Description
- ------- -----------
2(a) Letter of intent to merge dated December 29, 1995 between the Registrant
and National Energy Group, Inc., as amended.
3(a) Certificate of Incorporation of the Registrant, and amendments thereto,
has been previously filed as Exhibit 3(a) to Form 10-K for the fiscal year
ended December 31, 1991, and such certificate is incorporated herein by
reference.
3(b) Certificate of Amendment of Certificate of Incorporation of the
Registrant as filed with the Oklahoma Secretary of State on May 18, 1993,
has been previously filed as Exhibit 3(b) to Form 10-K for the fiscal year
ended December 31, 1993, and such certificate is incorporated herein by
reference.
3(c) Certificate of Designation of Series A Junior Participating Preferred
Stock of the Registrant as filed with the Oklahoma Secretary of State on
December 15, 1994, has been previously filed as Exhibit 4.1 to Form 8-K
dated December 15, 1994, and such certificate is incorporated herein by
reference.
3(d) Restated Bylaws of the Registrant, effective November 1, 1987, has been
previously filed as Exhibit 3(d) to Form 10-K for the fiscal year ended
December 31, 1994, and such bylaws are incorporated herein by reference.
4(a) Share Rights Agreement by and between the Registrant and Liberty Bank and
Trust Company of Oklahoma City, N.A. dated December 15, 1994, has been
previously filed as Exhibit 4.2 to Form 8-K dated December 15, 1994, and
such agreement is incorporated herein by reference.
4(b) Note Agreement between the Registrant and John Hancock Mutual Life
Insurance Company ("Hancock") dated June 1, 1988, has been previously
filed as Exhibit 4(b) to Form 10-K for the fiscal year ended December 31,
1994, and such agreement is incorporated herein by reference.
4(c) Waiver and Amendment to Note Agreement entered into effective April 15,
1996 by and between the Registrant and Hancock.
4(d) Agreement Regarding Liquidation and Winding Up of Certain Partnerships
entered into effective April 15, 1996 by and among the Registrant, Hancock
and Canadian Imperial Bank of Commerce ("CIBC").
4(e) Note Agreement dated as of April 25, 1989, by and among AEJH 1989 Limited
Partnership, the Registrant and John Hancock Mutual Life Insurance
(10 1/2% Senior Secured Notes) has been previously filed as Exhibit 4(c) to
Form 10-K for the fiscal year ended December 31, 1994, and such agreement
is incorporated herein by reference.
4(f) Consent of Hancock dated effective as of April 15, 1996.
25
<PAGE> 52
10(a) Agreement and Plan of Merger by and among the Registrant, Alexander
Acquisition Company and American Natural Energy Corporation ("ANEC")
dated April 21, 1994, has previously been filed as Item 2 to Registration
Statement No. 33-78450 dated May 4, 1994, and such agreement is
incorporated herein by reference.
10(b) Amendment to Agreement and Plan of Merger by and among the Registrant,
Alexander Acquisition Company and ANEC dated June 10, 1994, has
previously been filed as Item 2.1 to Registration Statement No. 33-78450
dated June 14, 1994, and such amendment is incorporated herein by
reference.
10(c) Credit Agreement dated November 14, 1994 among the Registrant, certain
commercial lending institutions and CIBC, as Agent, has previously been
filed as Exhibit 10.1 to Form 8-K dated November 14, 1994, and such
agreement is incorporated herein by reference.
10(d) First Amendment to Credit Agreement dated as of July 14, 1995 by and
among the Registrant, various financial institutions as are or may become
parties to the Amendment and CIBC, as Agent.
10(e) Letter agreement dated November 20, 1995 among the Registrant, certain
commercial lending institutions and CIBC, as the Agent.
10(f) Second Amendment to Credit Agreement dated as of April 15, 1996 by and
among the Registrant, the various financial institutions as are or may
become parties thereto, and CIBC, acting through its New York Agency as
agent.
10(g) Secured Term Note of the Registrant in the principal amount of
$11,000,000 dated April 15, 1996 payable to CIBC.
10(h) Letter agreement dated April 29, 1996 regarding disposition of
hydrocarbons assigned by means of certain mortages, deeds of trust,
assignments, security agreements and financing statements.
10(i) Intercreditor Agreement dated as of April 15, 1996 by and among CIBC, as
agent for certain financial institutions as are or may become parties to
the Credit Agreement ("Lenders"), Hancock (together with its successors
and assigns), Barnett & Co., CIBC, as administrative agent for itself and
the Secured Persons, and CIBC Inc., a Delaware corporation, as collateral
agent for itself and the Secured Persons ("Collateral Agent").
10(j) Agreement and Consent entered into as of April 15, 1996 by and among the
Registrant, the Agent, the Lenders and the Collateral Agent.
10(k) Sale and Purchase Agreement dated September 26, 1994 by and among JMC
Exploration, Inc., Ted Bowman, Chris Webb and John Abrahamson and the
Registrant has previously been filed as Exhibit 2.1 to Form 8-K dated
November 14, 1994, and such agreement is incorporated herein by
reference.
10(l) First Amendment to Sale and Purchase Agreement dated October 26, 1994 by
and among JMC Exploration, Inc., Ted Bowman, Chris Webb and John
Abrahamson and the Registrant has previously been filed as Exhibit 2.2 to
Form 8-K dated November 14, 1994, and such amendment is incorporated
herein by reference.
10(m) Alexander Energy Corporation 1986 Incentive Stock Option Plan, as
amended, has previously been filed as Exhibit 4.2 to Registration
Statement No. 33-20425 dated March 22, 1988, and such plan is
incorporated herein by reference.
10(n) Alexander Energy Corporation 1993 Stock Option Plan has previously been
filed as Exhibit A to the Registrant's Proxy Statement for the 1993
Annual Meeting of Stockholders, and such plan is incorporated herein by
reference.
10(o) 1993 Restricted Stock Award Plan for Alexander Energy Corporation and
It's Subsidiaries has previously been filed as Exhibit B to the
Registrant's Proxy Statement for the 1993 Annual Meeting of Stockholders,
and such plan is incorporated herein by reference.
10(p) Agreement of Limited Partnership of AEJH 1985 Limited Partnership by and
between the Registrant and John Hancock Mutual Life Insurance Company,
together with all amendments thereto, has previously been filed as
Exhibit 10(e) to Form 10-K for the fiscal year ended December 31, 1991,
and such agreement is incorporated herein by reference.
26
<PAGE> 53
10(q) Agreement of Limited Partnership of AEJH 1987 Limited Partnership by and
between the Registrant and John Hancock Mutual Life Insurance Company,
together with all amendments thereto, has previously been filed as
Exhibit 10(g) to Form 10-K for the fiscal year ended December 31, 1991,
and such agreement is incorporated herein by reference.
10(r) Agreement of Limited Partnership of AEJH 1989 Limited Partnership by and
between the Registrant and John Hancock Mutual Life Insurance Company
dated April 25, 1989 has previously been filed as Exhibit 10(l) to
Form 10-K for the fiscal year ended December 31, 1994, and such
agreement is incorporated herein by reference.
10(s) Limited Partnership Agreement of Energy and Environmental Services
Limited Partnership dated May 15, 1991 by and between Energy and
Environmental Services, Inc., as general partner, and Alexander Energy
Corporation and REP, Inc., as limited partners, has previously been filed
as Exhibit 10(l) to Form 10-K for the fiscal year ended December 31,
1991, and such agreement is incorporated herein by reference.
10(t) Alexander Energy Corporation 1981 Non-Qualified Stock Option Plan has
previously been filed as Exhibit 10(w) to Registration Statement No.
33-45182 dated January 24, 1992, and such plan is incorporated herein by
reference.
10(u) Consulting Agreement dated March 19, 1992 between the Registrant and
Petroleum Investment Securities Corp. has previously been filed as
Exhibit 10(t) to Form 10-K for the fiscal year ended December 31, 1993,
and such agreement is incorporated herein by reference.
10(v) Warrant Purchase Agreement among the Registrant, Hanifen, Imhoff Inc. and
The Principal/Eppler, Guerin & Turner, Inc. has previously been filed as
Exhibit 10(u) to Amendment No. 1 to Registration Statement No. 33-57142
dated February 26, 1993, and such agreement is incorporated herein by
reference.
10(w) Purchase Option agreement (warrants) between ANEC and Gaines, Berland,
Inc. dated September 14, 1993 has previously been filed as Exhibit 10(u)
to Form 10-K for the fiscal year ended December 31, 1994, and such
agreement is incorporated herein by reference.
10(x) Alexander Energy Corporation Management Incentive Plan effective January
1, 1991 has previously been filed as Exhibit 10(v) to Registration
Statement No. 33-57142 dated January 19, 1993, and such agreement is
incorporated herein by reference.
10(y) Form of Employment Agreement between the Registrant and the executive
officers of the Registrant has previously been filed as Exhibit 10(dd) to
Form 10-K for the fiscal year ended December 31, 1994, and such agreement
is incorporated herein by reference.
10(z) Form of Special Severance Agreement between the Registrant and the
technical support staff of the Registrant has previously been filed as
Exhibit 10(ee) to Form 10-K for the fiscal year ended December 31, 1994,
and such agreement is incorporated herein by reference.
10(aa) Separation Policy of the Registrant dated December 8, 1994 has
previously been filed as Exhibit 10(ff) to Form 10-K for the fiscal year
ended December 31, 1994, and such agreement is incorporated herein by
reference.
10(bb) Letter of May 8, 1996 by and among CIBC, as agent, CIBC Inc., as Lender
and as Collateral Agent, and the Registrant referencing that certain
Agreement and Consent dated April 15, 1996.
10(cc) Letter of May 7, 1996 referencing the Credit Agreement dated November 14,
1994, as amended, by and among the Registrant, the Lenders and CIBC, as
agent for the Lenders.
10(dd) Letter of May 10, 1996 referencing that certain Credit Agreement among
the Registrant, the Lenders and CIBC, as agent for the Lenders, dated as
of November 14, 1994, as amended.
11 Computation of Earnings (Loss) per share.
21 Subsidiaries of the Registrant
23(a) Consent of Ernst & Young LLP, Independent Auditors
23(b) Consent of Coopers & Lybrand L.L.P., Independent Accountants
27 Financial Data Schedules
(b) The Company filed no reports on Form 8-K during the quarter ended
December 31, 1995.
27
<PAGE> 54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on behalf of the undersigned, thereunto duly authorized.
ALEXANDER ENERGY CORPORATION
By /s/ BOB G. ALEXANDER
---------------------------
May 10, 1996 Bob G. Alexander
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
------------------ --------------------------- -------------
/s/ BOB G. ALEXANDER Chief Executive Officer
----------------------- and Director
Bob G. Alexander
/s/ DAVID E. GROSE Chief Financial Officer,
----------------------- Controller and Director
David E. Grose
/s/ JIM L DAVID Officer and Director
-----------------------
Jim L. David
/s/ ROGER G. ALEXANDER Officer and Director May 10, 1996
----------------------
Roger G. Alexander
/s/ BRIAN F. EGOLF Director
---------------------
Brian F. Egolf
/s/ ROBERT A. WEST Director
---------------------
Robert A. West
28
<PAGE> 55
INDEX TO EXHIBITS
TO FORM 10-K
<TABLE>
<CAPTION>
Exhibit
No.
- -------
<S> <C>
2(a) Letter of intent to merge dated December 29, 1995 between the
Registrant and National Energy Group, Inc., as amended.
3(a) Certificate of Incorporation of the Registrant, and amendments
thereto, has been previously filed as Exhibit 3(a) to Form 10-K for
the fiscal year ended December 31, 1991, and such certificate is
incorporated herein by reference.
3(b) Certificate of Amendment of Certificate of Incorporation of the
Registrant as filed with the Oklahoma Secretary of State on May 18,
1993, has been previously filed as Exhibit 3(b) to Form 10-K for the
fiscal year ended December 31, 1993, and such certificate is
incorporated herein by reference.
3(c) Certificate of Designation of Series A Junior Participating Preferred
Stock of the Registrant as filed with the Oklahoma Secretary of State
on December 15, 1994, has been previously filed as Exhibit 4.1 to Form
8-K dated December 15, 1994, and such certificate is incorporated
herein by reference.
3(d) Restated Bylaws of the Registrant, effective November 1, 1987, has
been previously filed as Exhibit 3(d) to Form 10-K for the fiscal year
ended December 31, 1994, and such bylaws are incorporated herein by
reference.
4(a) Share Rights Agreement by and between the Registrant and Liberty Bank
and Trust Company of Oklahoma City, N.A. dated December 15, 1994, has
been previously filed as Exhibit 4.2 to Form 8-K dated December 15,
1994, and such agreement is incorporated herein by reference.
4(b) Note Agreement between the Registrant and John Hancock Mutual Life
Insurance Company ("Hancock") dated June 1, 1988, has been previously
filed as Exhibit 4(b) to Form 10-K for the fiscal year ended December
31, 1994, and such agreement is incorporated herein by reference.
4(c) Waiver and Amendment to Note Agreement entered into effective April
15, 1996 by and between the Registrant and Hancock.
4(d) Agreement Regarding Liquidation and Winding Up of Certain Partnerships
entered into effective April 15, 1996 by and among the Registrant,
Hancock and Canadian Imperial Bank of Commerce ("CIBC").
4(e) Note Agreement dated as of April 25, 1989, by and among AEJH 1989
Limited Partnership, the Registrant and John Hancock Mutual Life
Insurance (10 1/2% Senior Secured Notes) has been previously filed as
Exhibit 4(c) to Form 10-K for the fiscal year ended December 31, 1994,
and such agreement is incorporated herein by reference.
4(f) Consent of Hancock dated effective as of April 15, 1996.
10(a) Agreement and Plan of Merger by and among the Registrant, Alexander
Acquisition Company and American Natural Energy Corporation ("ANEC")
dated April 21, 1994, has previously been filed as Item 2 to
Registration Statement No. 33-78450 dated May 4, 1994, and such
agreement is incorporated herein by reference.
10(b) Amendment to Agreement and Plan of Merger by and among the Registrant,
Alexander Acquisition Company and ANEC dated June 10, 1994, has
previously been filed as Item 2.1 to Registration Statement No.
33-78450 dated June 14, 1994, and such amendment is incorporated
herein by reference.
10(c) Credit Agreement dated November 14, 1994 among the Registrant, certain
commercial lending institutions and CIBC, as Agent, has previously
been filed as Exhibit 10.1 to Form 8-K dated November 14, 1994, and
such agreement is incorporated herein by reference.
</TABLE>
2
<PAGE> 56
<TABLE>
<S> <C>
10(d) First Amendment to Credit Agreement dated as of July 14, 1995 by and
among the Registrant, various financial institutions as are or may
become parties to the Amendment and CIBC, as Agent.
10(e) Letter agreement dated November 20, 1995 among the Registrant, certain
commercial lending institutions and CIBC, as the Agent.
10(f) Second Amendment to Credit Agreement dated as of April 15, 1996 by and
among the Registrant, the various financial institutions as are or may
become parties thereto, and CIBC, acting through its New York Agency
as agent.
10(g) Secured Term Note of the Registrant in the principal amount of
$11,000,000 dated April 15, 1996 payable to CIBC.
10(h) Letter agreement dated April 29, 1996 regarding disposition of
hydrocarbons assigned by means of certain mortgages, deeds of trust,
assignments, security agreements and financing statements.
10(i) Intercreditor Agreement dated as of April 15, 1996 by and among CIBC,
as agent for certain financial institutions as are or may become
parties to the Credit Agreement ("Lenders"), Hancock (together with
its successors and assigns), Barnett & Co., CIBC, as administrative
agent for itself and the Secured Persons, and CIBC Inc., a Delaware
corporation, as collateral agent for itself and the Secured Persons
("Collateral Agent").
10(j) Agreement and Consent entered into as of April 15, 1996 by and among
the Registrant, the Agent, the Lenders and the Collateral Agent.
10(k) Sale and Purchase Agreement dated September 26, 1994 by and among JMC
Exploration, Inc., Ted Bowman, Chris Webb and John Abrahamson and the
Registrant has previously been filed as Exhibit 2.1 to Form 8-K dated
November 14, 1994, and such agreement is incorporated herein by
reference.
10(l) First Amendment to Sale and Purchase Agreement dated October 26, 1994
by and among JMC Exploration, Inc., Ted Bowman, Chris Webb and John
Abrahamson and the Registrant has previously been filed as Exhibit 2.2
to Form 8-K dated November 14, 1994, and such amendment is
incorporated herein by reference.
10(m) Alexander Energy Corporation 1986 Incentive Stock Option Plan, as
amended, has previously been filed as Exhibit 4.2 to Registration
Statement No. 33-20425 dated March 22, 1988, and such plan is
incorporated herein by reference.
10(n) Alexander Energy Corporation 1993 Stock Option Plan has previously
been filed as Exhibit A to the Registrant's Proxy Statement for the
1993 Annual Meeting of Stockholders, and such plan is incorporated
herein by reference.
10(o) 1993 Restricted Stock Award Plan for Alexander Energy Corporation and
It's Subsidiaries has previously been filed as Exhibit B to the
Registrant's Proxy Statement for the 1993 Annual Meeting of
Stockholders, and such plan is incorporated herein by reference.
10(p) Agreement of Limited Partnership of AEJH 1985 Limited Partnership by
and between the Registrant and John Hancock Mutual Life Insurance
Company, together with all amendments thereto, has previously been
filed as Exhibit 10(e) to Form 10-K for the fiscal year ended December
31, 1991, and such agreement is incorporated herein by reference.
</TABLE>
3
<PAGE> 57
<TABLE>
<S> <C>
10(q) Agreement of Limited Partnership of AEJH 1987 Limited Partnership by
and between the Registrant and John Hancock Mutual Life Insurance
Company, together with all amendments thereto, has previously been
filed as Exhibit 10(g) to Form 10-K for the fiscal year ended December
31, 1991, and such agreement is incorporated herein by reference.
10(r) Agreement of Limited Partnership of AEJH 1989 Limited Partnership by
and between the Registrant and John Hancock Mutual Life Insurance
Company dated April 25, 1989 has previously been filed as Exhibit
10(l) to Form 10-K for the fiscal year ended December 31, 1994, and
such agreement is incorporated herein by reference.
10(s) Limited Partnership Agreement of Energy and Environmental Services
Limited Partnership dated May 15, 1991 by and between Energy and
Environmental Services, Inc., as general partner, and Alexander Energy
Corporation and REP, Inc., as limited partners, has previously been
filed as Exhibit 10(l) to Form 10-K for the fiscal year ended December
31, 1991, and such agreement is incorporated herein by reference.
10(t) Alexander Energy Corporation 1981 Non-Qualified Stock Option Plan has
previously been filed as Exhibit 10(w) to Registration Statement No.
33-45182 dated January 24, 1992, and such plan is incorporated herein
by reference.
10(u) Consulting Agreement dated March 19, 1992 between the Registrant and
Petroleum Investment Securities Corp. has previously been filed as
Exhibit 10(t) to Form 10-K for the fiscal year ended December 31,
1993, and such agreement is incorporated herein by reference.
10(v) Warrant Purchase Agreement among the Registrant, Hanifen, Imhoff Inc.
and The Principal/Eppler, Guerin & Turner, Inc. has previously been
filed as Exhibit 10(u) to Amendment No. 1 to Registration Statement
No. 33- 57142 dated February 26, 1993, and such agreement is
incorporated herein by reference.
10(w) Purchase Option agreement (warrants) between ANEC and Gaines, Berland,
Inc. dated September 14, 1993 has previously been filed as Exhibit
10(u) to Form 10-K for the fiscal year ended December 31, 1994, and
such agreement is incorporated herein by reference.
10(x) Alexander Energy Corporation Management Incentive Plan effective
January 1, 1991 has previously been filed as Exhibit 10(v) to
Registration Statement No. 33-57142 dated January 19, 1993, and such
agreement is incorporated herein by reference.
10(y) Form of Employment Agreement between the Registrant and the executive
officers of the Registrant has previously been filed as Exhibit 10(dd)
to Form 10-K for the fiscal year ended December 31, 1994, and such
agreement is incorporated herein by reference.
10(z) Form of Special Severance Agreement between the Registrant and the
technical support staff of the Registrant has previously been filed as
Exhibit 10(ee) to Form 10-K for the fiscal year ended December 31,
1994, and such agreement is incorporated herein by reference.
10(aa) Separation Policy of the Registrant dated December 8, 1994 has
previously been filed as Exhibit 10(ff) to Form 10-K for the fiscal
year ended December 31, 1994, and such agreement is incorporated
herein by reference.
10(bb) Letter of May 8, 1996 by and among CIBC, as agent, CIBC Inc., as
Lender and as Collateral Agent, and the Registrant referencing that
certain Agreement and Consent dated April 15, 1996.
10(cc) Letter of May 7, 1996 referencing the Credit Agreement dated November
14, 1994, as amended, by and among the Registrant, the Lenders and
CIBC, as agent for the Lenders.
10(dd) Letter of May 10, 1996 referencing that certain Credit Agreement among
the Registrant, the Lenders and CIBC, as agent for the Lenders, dated
as of November 14, 1994, as amended.
11 Computation of Earnings (Loss) per share.
21 Subsidiaries of the Registrant
23(a) Consent of Ernst & Young LLP, Independent Auditors
23(b) Consent of Coopers & Lybrand L.L.P., Independent Accountants
27 Financial Data Schedules
</TABLE>
4
<PAGE> 1
EXHIBIT 2(a)
[NATIONAL ENERGY GROUP, INC. LOGO]
December 29, 1995
Alexander Energy Corporation
701 Cedar Lake Blvd.
Oklahoma City, OK 73114-7800
Attention: Mr. Bob G. Alexander
President and Chief Executive Officer
Ladies and Gentlemen:
After considerable review, we would like to propose a combination
("Combination") of Alexander Energy Corporation ("Alexander") and National
Energy Group, Inc. ("NEG"). We believe that such a Combination would benefit the
stockholders of both companies by (1) providing a larger asset base with
expanded markets; (2) giving the companies financial critical mass which should
provide better access to the capital markets and lower costs of capital; and (3)
diversifying the companies' asset bases while retaining focused operations that
are natural gas oriented.
Subject to the approval of Alexander's Board of Directors and the matters
set forth herein, including the negotiation, execution and delivery of a
mutually satisfactory definitive agreement and the satisfactory completion of
due diligence, we propose that Alexander be merged with and into NEG or a wholly
owned subsidiary (the "Combination"). Based upon Alexander having no more than
12,850,000 shares of common stock, on a fully diluted basis, each share of
Alexander's common stock will be exchanged for one and eight tenths (1.8)
shares of NEG Class A Common Stock; provided, however, in the event the average
closing sales price for the NEG Class A Common Stock for the ten (10) trading
days immediately prior to closing is less than $3.25 per share, then additional
shares of NEG Class A Common Stock shall be issued such that each share of
Alexander common stock is converted into a number of shares of NEG Class A
Common Stock having an aggregate value of not less than $5.85; provided,
further, that NEG can terminate this agreement rather than issuing additional
shares pursuant to the preceding clause.
1
- --------------------------------------------------------------------------------
[NATIONAL ENERGY GROUP, INC. LETTERHEAD]
<PAGE> 2
1. Proposed Definitive Agreement. Although we are flexible as to specific
terms, we propose the following general principles to be incorporated into a
definitive agreement to be entered between us:
a. NEG will add three new directors to its board from the
existing Alexander board.
b. The parties would take action, consistent with the best
interests of the companies, to retain most of the executive
officers, other than Bob G. Alexander, of Alexander at
compensation amounts comparable to their current
arrangements, although it may be necessary to change certain
officers job duties to eliminate any duplication of
functions.
c. Bob G. Alexander has indicated a willingness to negotiate a
mutually acceptable consulting agreement.
d. A condition to consummation of the Combination will be the
dismissal with prejudice of the lawsuit filed against
Alexander and its directors by Bill V. Dean, Jr. and Elliot
Associates, L.P. in the District Court of Oklahoma County,
Oklahoma.
e. The definitive agreement will contain conditions,
representations and warranties customary in a transaction of
this nature, will permit all necessary due diligence to
continue (including environmental and other regulatory due
diligence), and will include all appropriate covenants,
including covenants as to both companies' good faith
reasonable efforts to complete the transaction (which do not
encompass the necessity to sell, hold separate or otherwise
lose the benefit of any segment of the business of either
company), to prepare and prosecute such documents and
otherwise comply with all procedures required by applicable
securities laws and regulations, to obtain all necessary
other regulatory approvals and necessary consents.
2. Standstill Agreement. Alexander represents that there are no contractual
obligations relating to the disposition, by merger or otherwise, of Alexander or
of any significant portion of Alexander's assets. Alexander agrees that
following the execution of this letter and until the earlier of the execution of
the definitive agreement (in which case the applicable provisions of the
definitive agreement shall control) or until February 15, 1996, Alexander will
not directly or indirectly solicit, initiate or participate in negotiations with
any person other than NEG with respect to any disposition of shares of common
stock in Alexander, or options to purchase the same, or disposition or merger of
Alexander, or any disposition of any of the assets of Alexander not in the
ordinary course of business, nor
2
<PAGE> 3
shall Alexander provide any information concerning Alexander with respect to the
possible disposition of shares of common stock in Alexander, or options to
purchase the same, or disposition or merger of Alexander or the disposition of
its assets, except as required to satisfy fiduciary duties of directors of
Alexander. In the event anyone should solicit, initiate negotiations or make
inquiries relative to the acquisition of shares of common stock in Alexander, or
options to purchase the same, or acquisition or merger of Alexander or a
significant portion of its assets, Alexander will immediately notify NEG. The
foregoing provisions of this paragraph 2 shall also apply to NEG as if NEG were
substituted for Alexander therein.
3. Confidentiality. Each party acknowledges that each party will be
providing the other with information that is nonpublic, confidential or
proprietary in nature. Our discussions relating to the proposed transactions
shall be deemed nonpublic information. Each party (and its affiliates,
representative, agents and employees) will keep such information received from
the other party confidential and will not, except as otherwise provided below,
disclose such information or use such information for any purpose other than the
evaluation and consummation of the transactions contemplated hereby or as
required by law. This paragraph 3 will not apply to information as to either
party that becomes generally available to the public absent any breach of this
paragraph 3, was available on a nonconfidential basis to the other party prior
to its disclosure pursuant to this letter, or becomes available on a
nonconfidential basis from a third party who is not bound to keep such
information confidential. Alexander and NEG will consult with each other and
agree on the terms and substance of all press release announcements, publicity
statements and other disclosures to the public and to the employees of Alexander
and NEG with respect to the proposed transaction. Upon termination of the
discussions, each party upon the written request of the other shall return all
written nonpublic information provided and retain no copies of such information.
4. Binding Effect. Except for paragraphs 2 and 3 which are intended to
create binding obligations, the parties hereto understand and agree that no
legal obligation or liability shall be created by this letter and that the
obligations and liabilities of the parties are to arise only upon the duly
authorized execution and delivery of the definitive agreement.
If the foregoing meets with your approval, please sign and return one copy
of this letter to us on or before the date and time indicated. Upon receipt, we
will request your counsel, McAfee & Taft, A Professional Corporation, to
commence preparation of the definitive agreement for review by us and our
counsel, as well as by you.
I hope that you are as excited as we are about this proposed Combination.
We believe that the Combination is an excellent way of taking our companies to
the next level and enhancing the value of our stockholders' investment.
3
<PAGE> 4
Very truly yours,
/s/ MILES D. BENDER
Miles D. Bender,
President and Chief Executive Officer
Agreed in principle:
ALEXANDER ENERGY CORPORATION
By /s/ BOB G. ALEXANDER
--------------------------
Bob G. Alexander,
President and Chief Executive Officer
MDB/gmb
4
<PAGE> 5
[ALEXANDER ENERGY CORPORATION LOGO]
BOB E. ALEXANDER
PRESIDENT
February 15, 1996
National Energy Group, Inc.
1400 One Energy Square
4925 Greenville Avenue
Dallas, Texas 75206
Attn: Miles D. Bender, President and
Chief Executive Officer
Gentlemen:
As we have discussed, our letter of intent dated December 29, 1995 and
accepted by Alexander Energy Corporation (""AEC'') on December 30, 1995,
expires February 15, 1996. For various reasons, including the fact that the
reports of independent engineers on the reserves of the respective companies
have not been completed, the parties have not completed negotiations towards
the execution of a definitive agreement providing for the combination of the
companies. Also, you are aware that AEC has been involved in discussions with
Canadian Imperial Bank of Commerce ("CIBC") concerning the terms of this credit
facility with CIBC. Accordingly, we suggest an extension of the letter of
intent on the terms set forth below.
The letter of intent will remain in full force and effect on the terms
thereof until April 10, 1996; provided, however, either party may immediately
terminate the letter of intent by written notice to the other party, if by
March 15, 1996, AEC has not received from CIBC, its principal lender, notice of
action by CIBC which will assure AEC's auditors that a substantial majority of
its indebtedness to CIBC will be treated as long term debt in accordance with
generally accepted accounting principles on AEC's balance sheet for the year
ending December 31, 1995 to be included in AEC's Form 10-K to be filed with the
Securities and Exchange Commission for such fiscal year.
This will also confirm that NEG has consented to AEC having discussions
with financial institutions concerning the possibility of obtaining additional
capital. No transaction would be consummated, of course, unless this letter of
intent is terminated without a combination or we have your prior consent. The
parties will keep each other advised of such discussions.
We hope that the foregoing is acceptable to you and that we can proceed
expeditiously towards a combination of NEG and AEC.
<PAGE> 6
February 15, 1996
National Energy Group
Page 2.
Please indicate your acceptance of the terms and conditions hereof by
executing a copy of this letter in the space provided below for NEG's signature
and returning an executed copy to us on or before February 15, 1996.
Very truly yours,
ALEXANDER ENERGY CORPORATION
By: /s/ BOB G. ALEXANDER
---------------------------------
Bob G. Alexander, President
AGREED UPON THIS 15TH DAY OF
FEBRUARY, 1996:
NATIONAL ENERGY GROUP, INC.
By: /s/ MILES D. BENDER
--------------------------------
Miles D. Bender, President
<PAGE> 7
[LOGO]
[ALEXANDER ENERGY CORPORATION LETTERHEAD]
BOB G. ALEXANDER
PRESIDENT
March 25,1995
National Energy Group, Inc.
Attn: Miles D. Bender, President
and Chief Executive Officer
1400 One Energy Square
4925 Greenville Avenue
Dallas, Texas 76206
Ladies and Gentlemen:
This will confirm our agreement to amend the Letter of Intent
dated December 29, 1995, between Alexander Energy Corporation
("Alexander") and National Energy Group, Inc. ("NEG"), (the "letter
of intent").
The letter of intent is amended so that the second paragraph
thereof reads in its entirety as follows:
"Subject to the approval of Alexander's Board of Directors and
the matters set forth herein, including the negotiation, execution and
delivery of a mutually satisfactory definitive agreement (the
"Agreement") and the satisfactory completion of due diligence, we
propose that Alexander be merged with and into NEG or a wholly owned
subsidiary (the"Combination"). Based upon Alexander having no more
than 12,850,000 shares of common stock, on a fully diluted basis, each
share of Alexander's common stock will be exchanged for one and seven
tenths (1.7) shares of NEG Class A Common Stock; provided, however, in
the event the average closing sales price for the NEG Class A Common
Stock for the ten (1O) trading days immediately prior to closing (the
"average price") is, less than $2.40 per share, Alexander shall have
the right to terminate the Agreement; provided further, in the event
the average price is greater than $3.60 per share, NEG may
terminate the Agreement."
Paragraph 2 of the letter of intent Is hereby amended to
substitute April 15th for February 15th.
All other provisions of the letter of intent shall remain In
full force and effect.
<PAGE> 8
Please Indicate your acceptance hereof by executing a copy of
this letter in the space provided below for NEG's signature and
returning an executed copy to us.
Very truly yours,
ALEXANDER ENERGY CORPORATION
By: /s/ BOB G. ALEXANDER
------------------------
Bob G. Alexander, President
AGREED UPON THIS 20TH DAY OF
MARCH, 1996:
NATIONAL ENERGY GROUP, INC.
By: /s/ MILES D. BENDER
--------------------------
Miles D. Bender, President
<PAGE> 1
EXHIBIT 4(c)
WAIVER AND AMENDMENT TO NOTE AGREEMENT
This Waiver and Amendment to Note Agreement (this "Waiver and
Amendment") is entered into effective as of April 15, 1996 by and between
Alexander Energy Corporation, an Oklahoma corporation (the "Company"), John
Hancock Mutual Life Insurance Company, a Massachusetts corporation ("John
Hancock"), and Barnett & Co. John Hancock and Barnett & Co. are herein
collectively referred to as the "Noteholders".
RECITALS
1. The Company has requested a waiver of and an amendment to
certain provisions of that certain Note Agreement dated as of June 1, 1988
between the Company and John Hancock (the "Note Agreement"), pursuant to which
the Company issued those certain 10% Senior Notes payable to the order of John
Hancock (the "John Hancock Notes").
2. The Company, the various financial institutions as are or may
become parties thereto (the "Lenders"), and Canadian Imperial Bank of Commerce,
acting through its New York Agency as agent, and CIBC Inc., a Delaware
corporation ("CIBC"), are party to that certain Credit Agreement dated as of
November 14, 1994, as amended by that certain First Amendment to Credit
Agreement dated as of July 14, 1995, and as further amended by that certain
Second Amendment to Credit Agreement dated as of even date herewith (as so
amended, the "CIBC Credit Agreement"), pursuant to which the Company issued
certain promissory notes to the Lenders thereunder (the "CIBC Notes").
3. As partial consideration for the execution and delivery of
this Waiver and Amendment by the Noteholders, the Company is executing and
delivering to CIBC, in its capacity as collateral agent for the Noteholders and
the Lenders under the CIBC Credit Agreement, that certain Assignment, Security
Agreement and Financing Statement, that certain Mortgage, Deed of Trust,
Assignment, Security Agreement and Financing Statement (the "Security
Agreement"), and that certain letter agreement regarding hydrocarbons
(collectively, the "Security Documents").
AGREEMENT
NOW, THEREFORE, for and in consideration of the covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the parties hereto agree as follows:
1. Definitions. Except as otherwise defined in this Waiver and
Amendment, terms defined in the Note Agreement are used herein as defined
therein.
2. Waiver. Each of the Noteholders hereby waives, for the
specific dates and time periods described below, the following provisions of
the Note Agreement: (a) subject in all events to the application of Section
6.18(b) pursuant to and on the dates set forth in Section 3 of this Waiver and
Amendment, Section 6.18(b) with respect to its application on December 31, 1995
and through April 1, 1997 and with respect to its requirement that the Reserves
Value be determined as of March 31, 1996 for the Company's 1995 fiscal year and
as of December 31 of each prior calendar year that the Reserves Value was
determined as of December 31 of such year instead of March 31
<PAGE> 2
of the succeeding calendar year, (b) Section 7.1(b) and Section 7.1(c) with
respect to the requirement that the documents referred to in each such Section
be delivered within 120 days after December 31, 1995, (d) Section 7.1(g) with
respect to its application to Section 6.18(b) on December 31, 1995, and (c)
Section 7.1(h) with respect to all Indebtedness under that certain Credit
Agreement dated as of November 14, 1994 by and among the Company, Canadian
Imperial Bank of Canada and the Lenders named therein, as amended, for the time
period commencing on November 14, 1994 and ending on the date hereof.
3. Amendment. The Note Agreement is hereby amended as follows:
(a) Notwithstanding any provision set forth in Section 2
of this Waiver and Amendment to the contrary, Section 6.18(b) of the
Note Agreement shall be applied to the Company on and as of the
following dates in addition to the application of Section 6.18(b) of
the Note Agreement to the Company on December 31 of each year: (i)
June 15, 1996, unless prior to such date each of AEJH 1985 Limited
Partnership, a Delaware limited partnership, AEJH 1987 Limited
Partnership, a Delaware limited partnership, and AEJH 1989 Limited
Partnership, a Delaware limited partnership (collectively, the
"Partnerships"), has been dissolved and liquidated and all of the
assets of such Partnerships have been distributed to the partners of
such Partnerships in accordance with the terms of each agreement of
limited partnership governing such Partnership, except to the extent
otherwise provided in that certain Agreement Regarding Liquidation and
Winding Up of Certain Partnerships dated of even date herewith, and
all documents and instruments necessary to effectuate such liquidation
and distribution of the assets of each of the Partnerships have been
executed, delivered and recorded to the satisfaction of the
Noteholders; provided that such date may be extended to July 15, 1996
in order to accommodate the preparation of a final accounting with
respect thereto, and (ii) the date immediately preceding any merger or
consolidation of the Company, any Subsidiary, Partnership, or Joint
Venture (or all substantially all of such Person's assets) with or
into any other Person (regardless of who is the survivor thereof).
(b) Amendment. Exhibit G to the Note Agreement is hereby
amended by adding the following paragraph to the end of such Exhibit
G:
"H. Indebtedness outstanding from time to time under that
certain Credit Agreement dated as of November 14, 1994 between the
Company, Canadian Imperial Bank of Commerce, as Agent, and the Lenders
that are or may become parties thereto, as amended by that certain
First Amendment to Credit Agreement dated as of July 14, 1995, and
that certain Second Amendment to Credit Agreement dated as of April
15, 1996."
4. Representations and Warranties. The Company hereby represents
that:
(a) After giving effect to this Waiver and Amendment, no
Event of Default shall have occurred and be continuing on and as of
the date hereof;
-2-
<PAGE> 3
(b) The execution, delivery and performance of this
Waiver and Amendment and each of the Security Documents by the Company
are within the Company's corporate powers, have been duly authorized
by all necessary corporate action, have received all necessary
governmental approval (if any shall be required), and do not and will
not contravene or conflict with any contractual restriction (unless
the Company has received a binding waiver of such contractual
restrictions, a copy of which waiver must be sent to the Agent), law
or governmental regulation or court decree or order binding on the
Company or the organizational documents of the Company, or result in,
or require the creation or imposition of, any Lien on any of the
Company's properties, except for the Liens created pursuant to the
Security Documents;
(c) Each of this Waiver and Amendment, each of the
Security Documents and the Note Agreement as amended by this Waiver
and Amendment is the legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their
respective terms, subject in each case to the application of equitable
principles and subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar statutes, judicial
decisions or rules of law affecting creditors' rights generally; and
(d) All authorizations, approvals, and other actions
required by, notifications to and filings with, any governmental
authority or regulatory body or other Person required for the
Company's due execution, delivery or performance of this Waiver and
Amendment and each of the Security Documents have been obtained or
made, as applicable.
5. Conditions Precedent; Effectiveness. The effectiveness of
this Waiver and Amendment is conditioned upon receipt by the Noteholders on or
prior to May 13, 1996 of
(i) counterparts hereof duly executed and delivered by
the Company;
(ii) counterparts of the Security Documents evidencing a
first priority perfected Lien (subject to the Permitted Liens, as
defined in the Security Agreement) in favor of the Secured Parties on
substantially all the assets of the Company (provided that such Liens
may be pari passu with the Liens securing the CIBC Notes,) in each
case in form and substance satisfactory to the Noteholders in their
sole discretion, together with evidence of the completion (or
satisfactory arrangements for the completion) of all recordings and
filings of the Security Documents as may be necessary or, in the
reasonable opinion of the Noteholders, desirable effectively to create
a valid, perfected first priority Lien (subject to the Permitted
Liens, as defined in the Security Agreement) against the properties
purported to be covered thereby (provided that such Liens may be pari
passu with the Liens securing the CIBC Notes);
(iii) an opinion of McAfee & Taft as counsel to the Company
in form and substance satisfactory to the Noteholders;
(iv) an opinion from local counsel in each state where a
Security Document is to be filed, in form and substance satisfactory
to the Noteholders;
-3-
<PAGE> 4
(v) a duly executed intercreditor agreement in form and
substance satisfactory to the Noteholders, duly executed and delivered
by CIBC;
(vi) a waiver in form and substance satisfactory to the
Noteholders duly executed by CIBC of all defaults and events of
default under the CIBC Notes and the CIBC Note Agreement;
(vii) a certificate of a Secretary or Assistant Secretary
of the Company in form and substance satisfactory to the Agent (A) as
to the resolutions of its Board of Directors then in full force and
effect authorizing the execution, delivery and performance of this
Waiver and Amendment and the Security Documents, (B) as to its
Articles of Incorporation and By-laws, (C) as to the incumbency and
signatures of those of its officers authorized to act with respect to
this Waiver and Amendment and the Security Documents; and (D) that the
Security Documents describe all the assets of the Company other than
assets having a fair market value in the aggregate of all such assets
not in excess of $1,000,000;
(viii) payment of all costs and expenses of the Noteholders
incurred in connection with this Waiver and Amendment, including all
legal fees and expenses;
(ix) all consents and approvals required for the granting
of the Liens covered by the Security Documents and for the execution
and delivery of this Waiver and Amendment, if any; and
(x) such other documents and certificates, if any, as the
Noteholders shall reasonably require.
6. Limited Purpose. This Waiver and Amendment is given only for
the limited purposes and for the periods herein expressed and shall not effect
or constitute a waiver of any other term or condition of the Note Agreement or
any right or remedy with respect thereto.
7. Governing Law. The parties hereto specifically agree that
this Waiver and Amendment shall be governed by and construed in accordance with
the laws of the State of Oklahoma, excluding any conflict-of-law rule or law
that might refer same to the laws of another jurisdiction. The parties hereto
specifically and non-exclusively submit themselves to the personal jurisdiction
of the state and federal courts in the Commonwealth of Massachusetts, in
connection with all controversies and disputes arising out of or relating to
the effect, interpretation, performance, or breach of this Waiver and
Amendment, and, in that connection, the Company hereby appoints the Secretary
of State of the Commonwealth of Massachusetts as its agent for service of
process and any actions brought in the state or federal courts in the
Commonwealth of Massachusetts, arising out of or relating to the effect,
interpretation, performance, or breach of this Waiver and Amendment.
8. Counterparts. This Waiver and Amendment may be executed in
any number of counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this Waiver and Amendment
by signing such counterpart.
-4-
<PAGE> 5
9. Ratification. This Waiver and Amendment shall be deemed to be
an amendment to Note Agreement, and the Note Agreement, as amended hereby, is
hereby ratified, approved and confirmed in each and every respect. All
references to the Note Agreement in any other document, instrument, agreement
or writing shall hereafter be deemed to refer to the Note Agreement as amended
hereby.
10. Entire Agreement. This Waiver and Amendment, together with
the Note Agreement, constitutes the entire understanding among the parties
hereto with respect to the subject matter hereof and supersedes any prior
agreements, written or oral, with respect thereto.
THIS WAIVER AND AMENDMENT TOGETHER WITH THE NOTE AGREEMENT REPRESENTS
THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
Amendment to be duly executed as of the day and year first above written.
ALEXANDER ENERGY CORPORATION
By: /s/ David E. Grose
----------------------------------------
Name: David E. Grose
--------------------------------------
Title:Vice President and CFO
--------------------------------------
NOTEHOLDERS: JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Eugene X. Hodge, Jr.
----------------------------------------
Name: Eugene X. Hodge, Jr.
--------------------------------------
Title: Investment Officer
--------------------------------------
BARNETT & CO.
By: /s/ John Reilly
----------------------------------------
Name: John Reilly
--------------------------------------
Title:
--------------------------------------
-6-
<PAGE> 1
EXHIBIT 4(d)
AGREEMENT REGARDING LIQUIDATION
AND WINDING UP OF CERTAIN PARTNERSHIPS
This Agreement Regarding Liquidation and Winding up of Certain
Partnerships (this "Agreement") is entered into as of April 15, 1996, by and
among ALEXANDER ENERGY CORPORATION, an Oklahoma corporation (the "Company"),
and JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, a Massachusetts corporation
("John Hancock").
RECITALS
1. John Hancock is the only limited partner and the Company is the only
general partner of each of AEJH 1985 Limited Partnership, a Delaware
limited partnership, AEJH 1987 Limited Partnership, a Delaware limited
partnership (the "1987 Partnership"), and AEJH 1989 Limited
Partnership, a Delaware limited partnership (the "1989 Partnership")
(collectively, the "Partnerships").
2. John Hancock and the Company desire to liquidate and wind up each of
the Partnerships and in connection therewith cause each of the
Partnerships to distribute all of its respective assets to the
partners thereof pursuant to the terms of the relevant Agreement of
Limited Partnership for each such Partnership.
3. The parties have agreed to enter into this Agreement in order to set
forth certain agreements regarding the liquidation and winding up of
the Partnerships.
AGREEMENT
NOW, THEREFORE, for and in consideration of the covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the parties hereto agree as follows:
1. Liquidation and Winding Up. The parties agree to proceed
diligently with the dissolution, liquidation and winding up of
the Partnerships in accordance with the terms set forth
herein. Except as set forth below, the dissolution,
liquidation and winding up of each Partnership shall be done
in accordance with the terms and provisions of the applicable
Agreement of Limited Partnership, as amended, for such
Partnership.
2. Collateral Covered by Security Documents. The Company agrees
that, to the extent that any of that certain Assignment,
Security Agreement and Financing Statement, that certain
Mortgage, Deed of Trust, Assignment, Security Agreement and
Financing Statement, and that certain letter agreement
regarding hydrocarbons, all of which have been executed as of
even date herewith by the Company for the benefit of CIBC Inc.
in its capacity as collateral agent of even date hereof
(collectively, the "Security Documents") grants or purports to
grant a lien or security interest in or on any properties or
assets owned by any of the Partnerships, the Company shall, at
its sole
<PAGE> 2
cost and expense, execute and file all releases and other
documents as John Hancock may reasonably request insofar as
such may be necessary or desirable to release any lien or
security interest created or purported to be created by the
Security Documents in or on any asset or property of any of
the Partnerships.
3. Liquidator and Liquidating Trustee; Assignment by John
Hancock. The parties agree that, notwithstanding any
provision of any of the Agreements of Limited Partnership of
the Partnerships, as amended, (a) John Hancock, or such person
or entity as may be appointed by John Hancock, shall be the
liquidator or liquidating trustee, as applicable, in
connection with the liquidation and winding up of each of the
Partnerships, and (b) John Hancock may assign its rights to
receive its proportionate share of the assets of the
Partnerships in connection with the dissolution, liquidation
and winding up thereof to a third party. John Hancock hereby
appoints the Company as the initial liquidator or liquidating
trustee, as applicable, in connection with the liquidation and
winding up of the Partnerships, and the Company hereby accepts
such appointment; provided that it is acknowledged and agreed
that John Hancock shall have the right to remove the Company
as liquidator or liquidating trustee, as applicable, in
connection with the liquidation and winding up of the
Partnerships and appoint a new liquidator or liquidating
trustee, as applicable, for such liquidation and winding up of
the Partnerships if the Company files for bankruptcy, fails to
pay its debts as they become due, becomes insolvent, or if
John Hancock in good faith believes that the Company has not
discharged or is not discharging its duties and obligations as
the liquidator or liquidating trustee, as applicable, in a
proper or timely manner.
4. 1987 Partnership. The parties agree that the outstanding
principal, interest and other amounts currently owed to John
Hancock pursuant to loans from John Hancock to the 1987
Partnership (the "1987 Partnership Loans") currently exceed
the value of the net assets of the 1987 Partnership
(excluding, for purposes of such calculation, the 1987
Partnership Loans). Accordingly, the parties agree that all
assets of the 1987 Partnership shall be distributed to John
Hancock (or any assignee of John Hancock), in its capacity as
a creditor to the 1987 Partnership, in full satisfaction of
the 1987 Partnership Loans.
5. 1989 Partnership. The parties acknowledge that the assets of
the 1989 Partnership are burdened by and subject to the
provisions of that certain Note Agreement dated April 25, 1989
between the 1989 Partnership and John Hancock (the "1989
Partnership Note Agreement"). The 1989 Partnership Note
Agreement, the promissory note(s) issued thereunder and all
mortgages, deeds of trust, assignments, security agreements
and other documents executed in connection therewith are
herein referred to as the "1989 Partnership Loan Documents."
The parties agree, notwithstanding any provision of the
Agreement of Limited Partnership, as amended, of the 1989
Partnership, that, after paying all debts of the 1989
Partnership owed to third party creditors and all expenses
incurred in connection with the liquidation and winding up of
the 1989 Partnership, the remaining assets of the 1989
Partnership shall be distributed to the Partners thereof
subject to the debt outstanding, and all liens and security
interests existing, under the 1989 Partnership Loan Documents.
2
<PAGE> 3
The parties agree that the current amount of principal
outstanding under the 1989 Partnership Loan Documents is
$1,779,627.30 (such principal, together with all interest and
other charges outstanding under the 1989 Partnership Loan
Documents is herein referred to as the "1989 Partnership
Debt"). In connection with the liquidation and winding up of
the 1989 Partnership, the Company shall assume 50% of the 1989
Partnership Debt, and John Hancock shall assume 50% of the
1989 Partnership Debt. All 1989 Partnership Debt so assumed
by the Company and John Hancock shall be subject to, and shall
be repaid to John Hancock in accordance with, the terms and
provisions of the 1989 Partnership Loan Documents. Each of
the Company and John Hancock (in its capacity as a limited
partner in the 1989 Partnership), or such other assignee of
John Hancock to which John Hancock assigns its rights to
receive the properties and assets of the 1989 Partnership
attributable to John Hancock's interest therein, agrees to
execute and deliver to John Hancock, in its capacity as lender
to the 1989 Partnership, such note agreements, notes,
mortgages, deeds of trust, assignments, security agreements
and other loan documents, all in form substantially similar to
the 1989 Partnership Loan Documents, as John Hancock may
reasonably request insofar as such may be necessary or
desirable to continue to evidence the 1989 Partnership Debt
and the liens and security interests currently evidenced by
the 1989 Partnership Loan Documents.
6. Representation of the Company. The Company thereby represents
and warrants to John Hancock that (a) the Company has not
taken any action or omitted to take any action as general
partner of the Partnerships or otherwise in connection with
the Partnerships that could give rise to a claim in tort,
contract or otherwise by any other partner to any of the
Partnerships, and (b) the Partnerships have no indebtedness
other than (1) trade debt incurred in the ordinary course of
business of the Partnerships, and (2) indebtedness owing by
the 1987 Partnership and the 1989 Partnership to John Hancock
described in the most recent financial statements for each
such Partnership.
7. Governing Law. The parties hereto specifically agree that
this Agreement shall be governed by and construed in
accordance with the laws of the State of Oklahoma, excluding
any conflict-of-law rule or law that might refer same to the
laws of another jurisdiction.
8. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this
Agreement by signing such counterpart.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first set forth above.
ALEXANDER ENERGY CORPORATION
By: \s\ David E. Grose
------------------------------------
Name: David E. Grose
----------------------------------
Title: Vice President and CFO
---------------------------------
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By: \s\ Eugene X. Hodge, Jr.
------------------------------------
Name: Eugene X. Hodge, Jr.
----------------------------------
Title: Investment Officer
---------------------------------
4
<PAGE> 1
EXHIBIT 4(f)
CONSENT
John Hancock Mutual Life Insurance Company hereby ????? to the
dissolution, liquidation, winding up and distribution of the ????? of AEJH 1986
Limited Partnership, a Delaware limited partnership, AEJH 1987 Limited
Partnership, a Delaware limited partnership, and AEJH 1989 Limited Partnership,
a Delaware limited partnership (collectively, the "Partnership"), pursuant to
that certain agreement regarding Liquidation and Winding Up of Certain
Partnerships dated as of April 15, 1996 by and between John Hancock Mutual Life
Insurance and Alexander Energy Company and pursuant to Section 2 of that
certain Agreement and Consent dated as of April 15, 1996 by and among Canadian
Imperial Bank of Commerce, as Agent, CIBC Inc., as Collateral Agent and Lender,
and Alexander Energy Corporation.
EXECUTED effective as of April 15, 1996.
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Eugene T. Hodge Jr.
-------------------------------
Name: Eugene T. Hodge Jr.
-----------------------------
Title: Investment Officer
----------------------------
<PAGE> 1
EXHIBIT 10(d)
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of July 14, 1995
(herein called this "Amendment"), is entered into by and among Alexander Energy
Corporation, an Oklahoma corporation (herein called the "Borrower"),the various
financial institutions as are or may become parties hereto (herein collectively
called the "Lenders"), and Canadian Imperial Bank of Commerce, acting through
its New York Agency as agent (in such capacity, including its successors in
such capacity, the "Agent") for the Lenders. Terms defined in the Credit
Agreement (as hereinafter defined) are used herein with the same meanings as
given them therein, unless the context otherwise requires.
W I T N E S S E T H :
WHEREAS, the Borrower, the Lenders and the Agent have
heretofore entered into a certain Credit Agreement, dated as of November 14,
1994 (such agreement herein called the "Credit Agreement"); and
WHEREAS, the Borrower and the Lenders now desire to amend the Credit
Agreement in certain respects, as hereinafter provided;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Borrower, the Lenders and the Agent hereby
agree as follows:
SECTION 1. Amendment of Section 1.1. Section 1.1 of the Credit
Agreement is hereby amended as follows;
(a) The definition of "Capital Expenditures" is amended and
restated to read as follows:
"Capital Expenditures" means, for any period, the sum of
(a) the aggregate amount of all expenditures of the
Borrower and its Subsidiaries for fixed or capital assets made during
such period which, in accordance with GAAP, would be classified as
capital expenditures, but excluding any capitalized general and
administrative expenses and capitalized interest for such period; and
(b) the aggregate amount of all Capitalized Lease
Liabilities incurred during such period.
(b) The definition of "Interest Period" in Section 1.1 of the
Credit Agreement is hereby amended by deleting the date
1
<PAGE> 2
"March 1, 1995" from each of clauses (a) and (e) of such definition and
inserting in lieu thereof in each case the date "October 3, 1995."
SECTION 2. Amendment Of Section 2.7. Section 2.7 of the Credit
Agreement is hereby amended by adding the following paragraph thereto:
"The Borrower shall have the right to request a
redetermination of the Borrowing Base by the Agent and the
Required Lenders (or in the case of an increase in the
Borrowing Base, all the Lenders) as of any time designated by
the Borrower but no more than one time during the period from
the Effective Date to the Stated Maturity Date. Such request
for a redetermination of the Borrowing Base shall be made to
the Agent in writing and shall specify the date as of which
such redetermination is to be made (which date shall be no
more than 90 days before the delivery of such request) and
shall be accompanied by payment in full of the redetermination
fee as set forth in Section 3.3.3. Such redetermination shall
be based on the latest reports delivered pursuant to Section
2.6 and/or upon other information in form and substance
acceptable to the Lenders actually delivered to the Agent and
the Lenders prior to or concurrently with such request;
provided, however, that the Borrower shall also deliver to
the Agent and the Lenders, and the Agent and the Lenders
shall base their redetermination of the Borrowing Base on, any
updated engineering, production and operating data and other
information with respect to the Borrowing Base Properties as
any Lender or the Agent may reasonably request. Any
discretionary redetermination of the Borrowing Base pursuant
to this Section 2.7 shall be made by the Agent and the Lenders
within 30 days of receipt of such request and of any
information requested by the Agent and any Lender, in the same
manner and in accordance with the procedures and standards set
forth in Section 2.6."
SECTION 3. Addition to Section 3.3.3. Section 3.3 of the Credit
Agreement is hereby amended by adding thereto the following Section 3.3.3:
"SECTION 3.3.3. Redetermination Fee. As a condition
to the redetermination of the Borrowing Base requested by the
Borrower pursuant to the
2
<PAGE> 3
second paragraph of Section 2.7, the Borrower agrees to pay to
the Agent for its own account, the redetermination fee set
forth in the Fee Letter."
SECTION 4. Amendment of Section 7.2.4. Section 7.2.4 of the Credit
Agreement is hereby amended as follows:
(a) clause (b) of Section 7.2.4 of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:
"(b) Its Interest Expense Coverage Ratio for the last day of
the Fiscal Quarters shown below to be less than the ratio set forth
opposite such Fiscal Quarter below:
Fiscal Quarters Ending: Ratio
---------------------- -----
June 30, 1995 through
December 31, 1995 3.0 to 1.0
March 31, 1996 and June 30, 1996 3.5 to 1.0
September 30, 1996 and thereafter 4.0 to 1.0"
(b) Clause (c) of Section 7.2.4 of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:
"(c) Its Current Ratio for any Fiscal Quarter as of the last
day of such Fiscal Quarter to be less than the ratio set forth
opposite such Fiscal quarter below:
Fiscal Quarters Ending: Ratio
---------------------- -----
December 31, 1994 through
March 31, 1995 1.0 to 1.0
June 30, 1995 .85 to 1.0
September 30, 1995 and
thereafter 1.0 to 1.01"
SECTION 5. Waiver. Each of the Lenders hereby waives any Default or
Event of Default existing solely as a result of Borrower's failure to comply
with the provisions of Section 7.2.4 (b) with respect to the Interest Expense
Coverage Ratio during the Fiscal Quarter ending March 31, 1995; provided that,
nothing herein shall be construed to be a waiver of any Default or Event of
Default with respect to such provisions continuing after such date or any other
Default or Event of
3
<PAGE> 4
Default. Nothing herein shall be construed Lo waive any other provision of the
Credit Agreement or to require any similar or dissimilar waiver to be granted
hereafter.
SECTION 6. Representations and Warranties. To induce the Lenders and
the Agent to enter into this Amendment, the Borrower hereby reaffirms, as of
the date hereof, its representations and warranties contained in Article VI of
the Credit Agreement (except to the extent such representations and warranties
(i) relate solely to an earlier date, (ii) relate to properties and assets,
including Oil and Gas Properties, any Obligor has sold, transferred, abandoned,
released or otherwise disposed of after the Effective Date of the Credit
Agreement, with the Lenders' consent or in the ordinary course of such
Obligor's business or (iii) have been made inaccurate because of the merger of
any Obligor into the Borrower) and additionally represents and warrants as
follows:
(a) The execution, delivery and performance of this
Amendment by the Borrower are within the Borrower's corporate powers,
have been duly authorized by all necessary corporate action, have
received all necessary governmental approval (if any shall be
required), and do not and will not contravene or conflict with any
contractual restriction, law or governmental regulation or court
decree or order binding on the Borrower or the Organic Documents of
the Borrower, or result in, or require the creation or imposition of,
any Lien on any of the Borrower's properties;
(b) This Amendment is the legal, valid and binding
obligation of the Borrower enforceable against the Borrower in
accordance with its terms subject to the application of equitable
principles and subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar statutes, judicial
decisions or rules of law affecting creditors rights generally; and
(c) No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory
body or other Person is required for the due execution, delivery or
performance by the Borrower of this Amendment.
SECTION 7. Conditions Precedent; Effectiveness. The effectiveness of
this Amendment is conditioned upon receipt by the Agent of (i) counterparts
hereof executed by the Borrower and each of the Lenders, (ii) a letter
agreement amending the Fee Letter in form and substance satisfactory to the
Agent duly executed by the Borrower, (iii) a certificate of a Secretary or
Assistant Secretary
4
<PAGE> 5
of the Borrower in form and substance satisfactory to the Agent as to (A)
resolutions of its Board of Directors then in full force and effect authorizing
the execution, delivery and performance of this Amendment, (B) its Articles of
incorporation and By-laws and (C) the incumbency and signatures of those of its
officers authorized to act with respect to this Amendment; and (iv) such other
documents and certificates, if any, as the Agent shall reasonably require.
SECTION 8. Effect of Amendment. This Amendment shall be deemed to be
an amendment to the Credit Agreement, and the Credit Agreement, as amended
hereby, is hereby ratified, approved and confirmed in each and every respect.
All references to the Credit Agreement in any other document, instrument,
agreement or writing shall hereafter be deemed to refer to the Credit Agreement
as amended hereby.
SECTION 9. Choice of Law; Severability. THIS AMENDMENT SHALL BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
Whenever possible each provision of this Amendment shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Amendment shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Amendment.
SECTION 10. Counterpart Execution. This Amendment may be executed in
any number of counterparts, all of which taken together shall constitute one
and the same instrument, and any party hereto may execute this Amendment by
signing one or more counterparts.
SECTION 11. Binding Effect. This Amendment shall be binding upon the
Borrower, the Lenders and the Agent and their respective successors and
assigns, and shall inure to the benefit of the Borrower, the Lenders and the
Agent and the successors and assigns of the Lenders and the Agent.
SECTION 12. Entire Agreement. This Amendment, together with the
Credit Agreement and the other Loan Documents, constitutes the entire
understanding among the parties hereto with respect to the subject matter
hereof and supersedes any prior agreements, written or oral, with respect
thereto.
THIS WRITTEN AMENDMENT TOGETHER WITH THE CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
AGREEMENTS OF THE PARTIES.
THERE ARE NO WRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized as of the day and year first above written, to be effective
as of such date.
ALEXANDER ENERGY CORPORATION
By: /S/ DAVID E. GROSE
--------------------------------
Title: Vice President.
--------------------------
CANADIAN IMPERIAL BANK OF COMMERCE,
acting through its New York Agency,
as Agent
By: /s/ MARYBETH ROSS
--------------------------------
Title: AUTHORIZED SIGNATORY
--------------------------
LENDER
CIBC INC.
By: /s/ MARYBETH ROSS
--------------------------------
Title: AUTHORIZED SIGNATORY
--------------------------
6
<PAGE> 7
July 14, 1995
Canadian Imperial Bank of Commerce
acting through its New York Agency
425 Lexington Avenue
New York, New York 10017
Re: Fee Letter
Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of
November 14, 1994 by and among Alexander Energy Corporation (the "Borrower"),
certain financial institutions therein listed (together with their successors
and assigns, the "Lenders") and Canadian Imperial Bank of Commerce, acting
through its New York Agency, ("you") as Agent for the Lenders (in such capacity
together with its successors in such capacity, the "Agent"), as amended by that
certain First Amendment to Credit Agreement dated as of July 14, 1995 (such
agreement, as so amended and. as it may be further amended, supplemented,
restated or otherwise modified from time to time, the "Loan Agreement").
Reference is also made to that certain letter agreement dated November 14,
1994 (the "Existing Fee Letter") among the Agent, the Borrower, Bradmar
Petroleum Corporation ("Bradmar"), American Natural Energy Corporation
("ANEC"), and Edwards & Leach Oil Company ("Edwards & Leach"; Bradmar, ANEC and
Edwards & Leach each herein called an "Obligor" and collectively the
"Obligors"), The Borrower is the successor by merger of each of the Obligors
into Borrower pursuant to (i) an Agreement and Plan of Merger executed June
30, 1995, by the Borrower and each of the Obligors, (ii) a Certificate of
Ownership and Merger filed June 30, 1995, at the office of the Secretary of
State of Oklahoma, as respects each Obligor, and (iii) a Certificate of
Ownership and Merger filed on June 30, 1995, at the office of the Secretary of
State of Delaware, as respects Edwards & Leach. Unless otherwise defined
herein, capitalized terms used herein shall have the meaning set forth in the
Loan Agreement.
The Borrower hereby agrees that if the Borrower shall request a
redetermination of the Borrowing Base pursuant to the second paragraph of
Section 2.7 of the Loan Agreement, it shall pay to the Agent for its own
account, a non-refundable fee in the aggregate amount of Five Thousand United
States Dollars ($5,000) payable in immediately available funds without set-off
or counterclaim at the account designated by the Agent pursuant to Section 4.7
of the Loan Agreement as a condition precedent to such redetermination.
Such fee is in addition to and not in limitation or satisfaction of
any other fees payable under the Loan Agreement or the Existing Fee Letter,
including without limitation the fees described in Section 3.3.2 of the Loan
Agreement, the commitment fees payable under the Loan Agreement, customary fees
payable with respect to other agencies or financial services provided by the
Agent or any Lender to any of the undersigned (including but not limited to
fees for holding deposits, serving as collateral agent or servicing accounts),
or the reimbursement of
<PAGE> 8
Canadian Imperial Bank of Commerce
acting through its New York Agency
July 14, 1995
Page 2
other fees and expenses (including reasonable legal fees and expenses of the
Agent or any Lender) under the Loan Agreement or any other Loan Document.
This letter agreement supplemented and amends the Existing Fee Letter,
and the Existing Fee Letter, as supplemented and =ended hereby, is hereby
ratified, approved and confirmed in each and every respect. All references to
the Fee Letter in the Loan Agreement Including in Sections 3.3.2 and 3.3.3
thereof) or in any other document, instrument, agreement or writing shall
hereafter be deemed to refer to the Existing Fee Letter, as supplemented and
amended hereby.
This letter agreement may not be amended or any provision hereof
waived or modified except by an instrument in writing signed by the Borrower
and the Agent. This letter agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
Please indicate your agreement with the above provisions by singing below.
Very truly yours,
Borrower
ALEXANDER ENERGY CORPORATION
By: /s/ DAVID E. GROSE
-------------------------
Name: David E. Grose
-----------------------
Title: Vice President
----------------------
Agreed and Consented to By:
CANADIAN IMPERIAL BANK OF COMMERCE acting
through its New York Agency
By:
-------------------------
Name:
-----------------------
Title:
----------------------
<PAGE> 1
EXHIBIT 10(e)
November 20, 1995
Alexander Energy corporation
701 Cedar Lake Boulevard
Oklahoma City, OK 73114-7800
Attention: David E. Grose
Re: Credit Agreement among Alexander Energy Corporation, certain
commercial lending institutions (the "Lenders") and Canadian
imperial Bank of Commerce as the Agent for the Lenders, as
amended
Gentlemen:
Reference is hereby made to that certain credit Agreement among
Alexander Energy Corporation, certain commercial lending institutions (the
"Lenders") and Canadian Imperial Bank of Commerce as the Agent for the Lenders,
as amended by that certain First Amendment to Credit Agreement dated as of July
14, 1995 (as so amended, the "Credit Agreement"). Terms defined in the Credit
Agreement are used herein with the same meanings given them therein, unless
otherwise defined.
The Borrower has requested that the Lenders waive, and the Lenders
hereby waive with respect to those Borrowing Base Properties described in
Schedule I hereto only, the requirement pursuant to Section 7.2.11(d) of the
Credit Agreement (and any related Default or Event of Default) that prior to
any sale of Borrowing Base Properties the Borrower have obtained the written
consent of the Agent and the Required Lenders for such sale.
The Borrower also has requested that the Lenders waive, and the
Lenders hereby waive, the provisions of Section 7.2.4 (b) of the Credit
Agreement (and any related Default or Event of Default) to the extent the
Borrower did not maintain the Interest Expense Coverage Ratio of 4.0 to 1.0 for
the Fiscal Quarter ending September 30, 1995.
<PAGE> 2
Alexander Energy corporation
November 20, 1995
Page 2
Nothing herein shall be construed to waive any breach of any other
provision of the Credit Agreement or any breach of Section 7.2.11 of the Credit
Agreement other than as a result of the sale of the Borrowing Base Properties
set forth in Schedule I or any breach of Section 7.2.4(b) of the Credit
Agreement for any period other than the Fiscal Quarter ending September 30,
1995, or to require any similar or dissimilar waiver or approval to be granted
hereafter.
In consideration of the Lenders agreeing to the foregoing waivers, the
Borrower agrees that, effective immediately, the Maximum Commitment Amount and
the Commitments of the tenders will be permanently reduced by $1,500,000 and
the Borrower further agrees that it shall make two payments of the principal of
outstanding Loans in the amount of $500,000 each, together with accrued
interest thereon. The first such payment shall be made on the date hereof; the
second payment shall be made on or before December 27, 1995. In addition, each
of the Lenders hereby agrees that it shall not cause the Agent to communicate
to the Borrower any redetermination of, and the Borrower hereby waives the
requirement in Section 2.6 of the Credit Agreement that the Agent advise the
Borrower of, the Borrowing Base to be effective as of October 31, 1995 pursuant
to such Section 2.6, provided that the Agent shall notify the Borrower in
writing of the Borrowing Base on or about December 31, 1995 to be effective as
of December 31, 1995. The foregoing will not impair the Lender's rights to
determine the Borrowing Base pursuant to Section 2.7 as set forth in the Credit
Agreement upon (a) learning of any failure of the Borrower or any Obligor to
hold defensible title to any Borrowing Base Property, (b) the sale, lease,
transfer or other conveyance of any Borrowing Base Property pursuant to Section
7.2.11 of the Credit Agreement which is not set forth on Schedule I hereto or
(c) any change in energy prices which could reasonably be expected to have a
Material Adverse Effect with respect to the Borrower, at any time including on
or before December 31, 1995.
Please inform us immediately of any sales of Borrowing Base Properties
which have taken place and are not set forth on Schedule I hereto, and by your
signature below you represent and warrant that you have made no prior sales or
transfers of Oil and Gas Properties since the Effective Date except those
listed on Schedule I. In addition, please inform us of any further sales which
may be contemplated now or in the future which would require prior written
consent pursuant to Section 7.2.11(d) of the Credit Agreement.
<PAGE> 3
Alexander Energy corporation
November 20, 1995
Page 3
This letter agreement may be executed in several counterparts, each of
which shall constitute an original but all of which together shall comprise but
one and the same agreement.
This letter agreement shall be governed by the internal laws of the
State of New York. This letter agreement constitutes the entire understanding
of the parties hereto with respect to the subject matter hereof and supersedes
any prior agreements, written or oral, with respect thereto.
Please indicate your agreement with the foregoing by your signature
below, to be effective as of the date first written above.
Yours very truly,
CANADIAN IMPERIAL BANK OF
COMMERCE, individually and as
Agent
BY: /s/ MARYBETH ROSS
-----------------------------
AGREED:
ALEXANDER ENERGY CORPORATION
By: /s/ DAVID E. GROSE
-------------------------
<PAGE> 1
EXHIBIT 10(f)
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of April 15, 1996
(herein called this "Amendment"), is entered into by and among Alexander Energy
Corporation, an Oklahoma corporation (herein called the "Borrower"), the
various financial institutions as are or may become parties hereto
(collectively, the "Lenders"), and Canadian Imperial Bank of Commerce, acting
through its New York Agency as agent (together with its successors in such
capacity, the "Agent") for the Lenders. Terms defined in the Credit Agreement
(as hereinafter defined) are used herein with the same meanings as given them
therein, unless the context otherwise requires.
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders and the Agent have heretofore
entered into a certain Credit Agreement, dated as of November 14, 1994, which
was amended by that certain First Amendment to Credit Agreement dated as of
July 14, 1995 (such agreement, as so amended, herein called the "Credit
Agreement") and
WHEREAS, the Borrower and the Lenders now desire to further amend the
Credit Agreement in certain respects, as hereinafter provided;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Borrower, the Lenders and the Agent hereby
agree as follows:
SECTION 1. Amendment of Section 1.1. Section 1.1 of the Credit
Agreement is hereby amended as follows:
(a) The definition of the term "Applicable Margin" is hereby
amended in its entirety to read as follows:
"Applicable Margin" means with respect to any Revolving Loan
of any type on any day, the percentage set forth below opposite such
type of Revolving Loan applicable to such Revolving Loan, as set forth
below:
<TABLE>
<S> <C>
Base Rate Loan 1.0%
LIBOR Rate Loan 2.0%
</TABLE>
(b) The definition of the term "CD Rate Loan" is hereby deleted in
its entirety.
(c) The definition of the term "Current Ratio" is hereby
amended by deleting the period at the end of such definition and adding the
following language at the end thereof: "provided further that for purposes of
this calculation, the consolidated current
<PAGE> 2
liabilities of the Borrower shall exclude the current portion of all Loans."
(d) The definition of the term "Fixed Rate Loan" is hereby amended
in its entirety to read as follows:
"Fixed Rate Loan" means any LIBO Rate Loan.
(e) The definition of the term "Loan Document" is hereby amended
and restated in its entirety to read as follows:
"Loan Document" means this Agreement,, the Notes, the
Guaranties, the Security Agreement, each financing statement delivered
in conjunction with the Security Agreement, each Borrowing Request,
each Continuation/Conversion Notice, each Mortgage, each financing
statement delivered in conjunction with a Mortgage, each Hedging
Agreement entered into with a Lender or Affiliate of a Lender and each
other relevant agreement, document, certificate or instrument
delivered in connection with any of the aforementioned.
(f) The definition of the term "Loan" is hereby amended in its
entirety to read as follows:
"Loans" means any Revolving Loan or the Term Loan and
collectively any two or more of the foregoing.
(g) The definition of the term "Stated Maturity Date" is hereby
amended in its entirety to read as follows:
"Stated Maturity Date" means December 31, 2000.
(h) The definition of the term "Transition Date" is hereby amended
in its entirety to read as follows:
"Transition Date" means April 1, 1997.
(i) The definition of the term "type" is hereby amended in its
entirety to read as follows:
"type" means relative to any Revolving Loan, the portion
thereof, if any, being maintained as a Base Rate Loan or a LIBO Rate
Loan.
(j) The following definitions are hereby added to Section 1.1 of
the Credit Agreement inserted in appropriate alphabetical order:
"Arkansas Mortgage" means that certain Mortgage, Deed of
Trust, Assignment, Security Agreement and Financing Statement dated as
of April 15, 1996, executed by the Borrower and delivered to the
Collateral Agent, covering the interest described therein in Oil and
Gas
2
<PAGE> 3
Properties located in the State of Arkansas and the interests related
thereto, as the same may from time to time be amended, supplemented,
restated or otherwise modified.
"Asset" means as to any Person, all property of any kind,
name or nature, real or personal, tangible or intangible, legal or
equitable, whether now owned or hereafter acquired, including, without
limitation, money, stock, security, equity interest, partnership
interest, franchises, value as a going concern, causes of action,
undivided fractional ownership interests, and anything of any value
which can be made available for, or may be appropriated to the payment
of debts.
"Borrower's Excess Cash Flow from Operations" means with
respect to the Borrower and its Subsidiaries on a consolidated basis,
for any period for which a determination thereof is to be made, the
excess, if any, of
(x) the consolidated Borrower's Net Income
(Loss) of the Borrower for such period plus the sum of
estimated depreciation, depletion and amortization expense for
such period to the extent included in determining Borrower's
Net Income (Loss) plus deferred financing costs (other than
interest),
over
(y) the sum of capitalized general
administrative costs for such period, in each case to the
extent included in determining Borrower's Net Income (Loss),
plus scheduled principal payments made on all Indebtedness
during such period (other than payments made on the Loans and
on the John Hancock Notes), plus $700,000.
"Borrower's Net Income (Loss)" means with respect to the
Borrower and its Subsidiaries on a consolidated basis, for any period
for which a determination thereof is to be made, the excess if any of
(x) the Borrower's total consolidated revenues for such period, over
(y) the sum of depreciation, depletion and amortization expense for
such period, plus lease operating expense for such period, plus
general administrative expenses for such period, plus interest expense
for such period, plus production taxes for such period.
"Borrowing Base Deficiency Tranche" means Eleven Million
Dollars ($11,000,000).
3
<PAGE> 4
"Collateral Agents" means CIBC Inc. in its capacity as
Collateral Agent for the Secured Parties, together with its successors
and assigns in such capacity.
"Disposition" means a sale, transfer, lease, assignment,
contribution or any other disposition or transfer of an Asset,
including without limitation destruction of an Asset as a result of a
casualty and issuance of equity of any type including issuance of
common or preferred shares.
"EGOLF Sale" means the sale to the Egolfs of 228 oil and/or
gas wells more specifically described in Annex I hereto.
"Hedging Agreement" means (i) any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement
or similar agreement designed to protect the Borrower against
fluctuations in interest rates with respect to this Agreement and the
Notes and (ii) any commodity hedge, commodity swap, exchange,
forward, future, collar or cap agreements, fixed price agreements and
all other agreements or arrangements designed to protect the Borrower
against fluctuations in commodity prices.
"John Hancock Note Agreement" means that certain Note
Agreement dated as of June 1, 1988 between Borrower and John Hancock
Mutual Life Insurance Company, as from time to time amended,
supplemented, restated or otherwise modified.
"John Hancock Notes" means those certain 10% Senior Unsecured
Notes payable to the holder or holders thereof issued pursuant to the
John Hancock Note Agreement.
"Kansas Mortgage" means that certain Mortgage, Deed of Trust,
Assignment, Security Agreement and Financing Statement dated as of
April 15, 1996, executed by the Borrower and delivered to the
Collateral Agent, covering the interest described therein in oil and
Gas Properties located in the State of Kansas and the interests
related thereto, as the same may from time to time be amended,
supplemented, restated or otherwise modified.
"Mortgage" means each of the Kansas Mortgage, the Arkansas
Mortgage, the Texas Mortgage and the Oklahoma Mortgage, in each case
as amended, supplemented, restated or otherwise modified and in effect
from time to time, together with any other mortgage, deed of trust,
security agreement and financing statements, in form and substance
satisfactory to the Agent in its sole and absolute discretion, as the
Borrower or any other Obligor shall
4
<PAGE> 5
execute and deliver to the Collateral Agent in order to grant
additional collateral acceptable to the Agent for the payment of the
Loans and all other obligations of the obligors under the Loan
Documents.
"Mortgage Properties" means those properties and interests
subject to a Lien in favor of the Collateral Agent for the benefit of
the Secured Parties (as defined in the Mortgages) pursuant to any
Mortgage, including personal property as more specifically described in
the Mortgage, and any other properties or interests acceptable to the
Agent (and, if different from the Agent, the Collateral Agent) which
from time to time are subject to a valid perfected and first priority
Lien in favor of the Collateral Agent pursuant to any additional or
supplemental Mortgage.
"Oklahoma Mortgage" means that certain Mortgage, Deed of
Trust, Assignment, Security Agreement and Financing Statement dated as
of April 15, 1996, executed by the Borrower and delivered to the
Collateral Agent, covering the interest described therein in oil and
Gas Properties located in the State of Oklahoma and the interests
related thereto, as the same may from time to time be amended,
supplemented, restated or otherwise modified.
"Revolving Commitment" has the meaning set forth in Section
2.1.1(a).
"Revolving Loan" has the meaning set forth in Section 2.1.1(a).
"Second Amendment" means that certain Second Amendment to
Credit Agreement dated as of April 15, 1996.
"Second Amendment Closing Date" means the date occurring on or
prior to April 26, 1996, on which all conditions precedent to the
effectiveness of the Second Amendment have been satisfied.
"Secured Party" has the meaning set forth in the Mortgages.
"Security Agreement" means that certain Assignment, Security
Agreement dated April 15, 1996 between Borrower and CIBC Inc. as
Collateral Agent for the Secured Parties, as the same may be from time
to time amended, supplemented, restated, or otherwise modified.
"Swap Bank" has the meaning set forth in the Mortgages.
5
<PAGE> 6
"Term Commitment" has the meaning set forth in Section
2.1.1(b).
"Term Loan" has the meaning set forth in Section 2.1.1(b).
"Texas Mortgage" means that certain Mortgage, Deed of Trust,
Assignment, Security Agreement and Financing Statement dated as of
April 15, 1996, executed by the Borrower and delivered to the
Collateral Agent, covering the interest described therein in Oil and
Gas Properties located in the State of Texas and the interests related
thereto, as the same may from time to time be amended, supplemented,
restated or otherwise modified.
SECTION 2. Amendment to Sections 2.1.1 and 2.1.2. Sections 2.1.1 and
2.1.2 of the Credit Agreement are hereby amended in their entirety to read as
follows:
SECTION 2.1.1 Commitment of Each Lender.
(a) Revolving Loans. From time to time on any Business
Day occurring prior to the Commitment Termination Date, each Lender
will make revolving loans (relative to such Lender, and of any type,
its "Revolving Loans") to the Borrower equal to such Lender's
Percentage of the aggregate amount of the Borrowing requested by the
Borrower to be made on such day. The commitment of each Lender
described in this Section 2.1.1(a) is herein referred to as its
"Revolving Commitment". On the terms and subject to the conditions
hereof, the Borrower may from time to time borrow, prepay and reborrow
such Revolving Loans; provided, however that amounts paid pursuant to
payments required to be made as a result of the reductions to the
Maximum Commitment Amount required under Section 2.2.2 may not be
reborrowed.
(b) Term Loans. On the Second Amendment Closing Date,
each Lender will make one term loan (relative to such Lender, its
"Term Loan") to the Borrower equal to such Lender's Percentage of the
Borrowing Base Deficiency Tranche. The commitment of each Lender
described in this Section 2.1.1(b) is herein referred to as its "Term
Commitment." Amounts paid with respect to the Term Loan may not be
reborrowed. The proceeds of the Term Loan shall be used exclusively to
repay Loans outstanding under Section 2.1.1 of this Agreement
immediately prior to the effectiveness of the Second Amendment and
thus cure the Borrowing Base Deficiency then existing.
SECTION 2.1.2. Lenders Not Permitted or Required To Make
Loans. No Lender shall be permitted or required to
6
<PAGE> 7
make any Loan if, after giving effect thereto, the aggregate
outstanding principal amount
(a) of all Loans of all Lenders would exceed the
Commitment Amount, or
(b) of all Loans of such Lender would exceed such
Lender's Percentage of the Commitment Amount, or
(c) of all Revolving Loans of all Lenders would exceed
Thirty-Three Million Dollars, or
(d) of all Revolving Loans of such Lender would exceed
such Lender's Percentage of Thirty-Three Million Dollars, or
(e) of the Term Loan of all Lenders would exceed the
Borrowing Base Deficiency Tranche, or
(f) of the Term Loan of such Lender would exceed such
Lender's Percentage of the Borrowing Base Deficiency Tranche.
SECTION 3. Amendment to Section 2.3. Section 2.3 of the Credit
Agreement is hereby amended in its entirety to read as follows:
SECTION 2.3. Borrowing Procedure. By delivering a Borrowing
Request to the Agent on or before 10:00 a.m., New York, New York
time, on a Business Day, the Borrower may from time to time
irrevocably request, Loans (a) in the case of Revolving Loans
requested to be made as Base Rate Loans, on not less than one nor more
than five Business Days' notice and (b) in the case of Revolving Loans
requested to be made as Fixed Rate Loans, on not less than three nor
more than five Business Days' notice, that a Borrowing be made in a
minimum amount of $1,000,000 and an integral multiple of $100,000, or
in the unused amount of the Commitments. The Lenders shall make the
Term Loan as a Base Rate Loan on the Second Amendment Closing Date
upon receipt on or before 10:00 a.m., New York, New York time on such
date of a borrowing notice from the Borrower in form and substance
satisfactory to the Agent. On the terms and subject to the conditions
of this Agreement, each Borrowing shall be comprised of the type of
Loans, and shall be made on the Business Day, specified in such
Borrowing Request; provided that the Term Loan shall be made on a Base
Rate Loan on the Second Amendment Closing Date. On or before 11:00
a.m. (New York City, New York time) on such Business Day each Lender
shall deposit with the Agent same day funds in an amount equal to such
Lender's Percentage of the requested Borrowing (other than the
7
<PAGE> 8
Borrowing comprising the Term Loan). Such deposit will be made to an
account which the Agent shall specify from time to time by notice to
the Lenders. To the extent funds are received from the Lenders, the
Agent shall make such funds available to the Borrower by wire transfer
to the accounts the Borrower shall have specified in its Borrowing
Request. No Lender's obligation to make any Loan shall be affected by
any other Lender's failure to make any Loan.
SECTION 4. Amendment to Section 2.4. Section 2.4 of the Credit
Agreement is hereby amended by deleting the word "Loans" appearing in the
seventh, eighteenth and nineteenth lines hereof and substituting the words
"Revolving Loans" in each case in lieu thereof.
SECTION 5. Amendment to Section 2.9. Section 2.9 of the Credit
Agreement is hereby amended in its entirety to read as follows:
"SECTION 2.9 [INTENTIONALLY OMITTED.]"
SECTION 6. Amendment to Section 2.10. Section 2.10 of the Credit
Agreement is hereby amended in its entirety to read as follows:
SECTION 2.10 Notes. Each Lender's Revolving Loans under its
Commitment shall be evidenced by a Note in substantially the form of
Exhibit A hereto payable to the order of such Lender in a maximum
principal amount equal to such Lender's Percentage of the original
Maximum Commitment Amount. Each Lender's Term Loan under its Term Loan
Commitment shall be evidenced by a Note in substantially the form of
Annex II to the Second Amendment payable to the order of such Lender
in a maximum principal amount equal to such Lender's Percentage of the
Borrowing Base Deficiency Tranche. The Borrower hereby irrevocably
authorizes each Lender to make (or cause to be made) appropriate
notations on the grid attached to such Lender's Notes (or on any
continuation of such grid) or on such Lender's records, which
notations, if made, shall evidence, inter alia, the date of, the
outstanding principal of, and the interest rate and Interest Period
applicable to the Loans evidenced thereby. Such notations shall be
presumptive evidence of the accuracy of such matters; provided,
however, that the failure of any Lender to make any such notations
shall not limit or otherwise affect any Obligations of the Borrower or
any other Obligor.
SECTION 7. Amendment of Section 3.1. Section 3.1 of the Credit
Agreement is hereby amended by:
8
<PAGE> 9
(a) amending clause (c) of such Section 3.1 by deleting
the word "and" from the end of clause (c);
(b) amending clause (d) of such Section 3.1 by deleting
the period from the end of clause (d), replacing the period with a
semi-colon;
(c) adding the following new clauses (e) and (f) thereto
immediately following clause (d) thereof:
"(e) shall, in the case of the Borrowing Base
Deficiency Tranche,
(i) on or prior to April 30, 1996 make a
mandatory principal payment in the amount of
$750,000;
(ii) make a mandatory principal payment
in the amount of $350,000 on April 30, 1996, and make
eleven additional equal monthly mandatory principal
payments in the amount of $350,000 on the first
Business Day of each calendar month beginning May 1,
1996, each to be applied to reduce the outstanding
principal amount of the Term Loan;
(iii) on April 1, 1997 make a mandatory
principal payment in an amount equal to the then
outstanding amount of the Term Loan; and
(iv) on the thirtieth day of each
calendar month commencing with April 30, 1996 until
the Term Loan shall have been paid in full, make a
mandatory principal payment in an amount equal to
100% of the Borrower's Excess Cash Flow from
Operations; and
(f) shall concurrently with any Disposition or
any incurrence of Indebtedness from and after the date hereof
(other than Indebtedness described in clause (f) or clause (k)
of Section 7.2.2), make a mandatory principal payment equal to
100% of the proceeds from such Disposition or such
Indebtedness or such higher amount as the Required Lenders
shall require as a condition to a consent to any Disposition
or incurrence of Indebtedness, provided that the Lenders
9
<PAGE> 10
shall have no obligation to consent to any Disposition or
incurrence of Indebtedness which is not otherwise permitted by
the terms of this Agreement; and provided further that the
foregoing shall not authorize the Borrower or any Obligor to
make a Disposition or incur Indebtedness unless such
Disposition and Indebtedness are otherwise permitted to be
made pursuant to the terms of this Agreement.
SECTION 8. Amendment of Section 3.2.1. Section 3.2.1 of the
Credit Agreement is hereby amended by (i) deleting the period from the end of
clause (c) and replacing said period with a semi-colon and (ii) adding the
following proviso to Section 3.2.1 thereof after such semi-colon, as follows:
"provided that the Term Loan shall accrue interest at the following
rates per annum (i) for the period from and including the date the
Term Loan is made to and including October 15, 1996, at a per annum
rate equal to the sum of the Alternate Base Rate plus three percent
(3%); and (ii) for the period commencing on (but excluding) October
15, 1996 to and including April 1, 1997, at a rate per annum equal to
the sum of the Alternate Base Rate plus four percent (4%); provided
however, that any principal amount of the Term Loan and the Revolving
Loans which is due and payable and remains unpaid shall accrue
interest at the rate set forth in Section 3.2.2."
SECTION 9. Amendment to Section 3.2.2. Section 3.2.2 of the
Credit Agreement is hereby amended in its entirety to read as follows:
SECTION 3.2.2. Post-Maturity Rates. After the date any
principal amount of any Loan is due and payable and remains unpaid
(whether on account of a mandatory payment provision, on the Stated
Maturity Date, upon acceleration or otherwise), or after any other
monetary Obligation of the Borrower shall have become due and payable
and remains unpaid, the Borrower shall pay, but only to the extent
permitted by law, interest (after as well as before judgment) on such
amounts at a rate per annum equal to (i) in the case of the Term Loan
or any portion thereof, the Alternate Base Rate plus the margin then
applicable to the Term Loan as described in the proviso to Section
3.2.1 plus 2%, and (ii) in the case of any other Loan or Obligation,
the Alternate Base Rate plus the Applicable Margin for Base Rate Loans
plus an additional margin of 2%.
SECTION 10. Addition of Section 3.3.3. Section 3.3 of the Credit
Agreement is hereby amended by adding thereto the following Section 3.3.3:
10
<PAGE> 11
"SECTION 3.3.3. Second Amendment Fee. The Borrower further
agrees to pay to the Agent for the account of each Lender a fee in the
amount of one percent (1%) of the Borrowing Base Deficiency Tranche on
the Second Amendment Closing Date.
SECTION 11. Addition of Section 7.1.8, 7.1.9 and 7.1.10. The
following Sections 7.1.8, 7.1.9 and 7.1.10 are hereby added to Article VII of
the Credit Agreement immediately following Section 7.1.7:
SECTION 7.1.8. Additional Security Documents. Upon the
request of the Agent and upon granting of any Lien to secure the John
Hancock Notes, the Borrower shall deliver, and shall cause its
Subsidiaries to deliver, to the Collateral Agent Mortgages with
respect to Oil and Gas Properties of the Borrower or any of its
Subsidiaries specified by the Agent (or covered by the Lien granted to
secure the John Hancock Notes, as the case may be), together with such
other documents, agreements and instruments (including UCC-1 financing
statements) as the Agent (or, if different from the Agent, the
Collateral Agent) shall request and which may be necessary or
appropriate to place a first and prior Lien on such Oil and Gas
Properties in favor of the Collateral Agent for the benefit of the
Lenders and other Secured Parties and pari passu with liens granted to
secure the John Hancock Notes, and the Borrower shall deliver or cause
to be delivered such favorable opinions of counsel as the Agent or
Collateral Agent may request, in each case from counsel satisfactory
to the Agent and Co-Agent and in form and substance satisfactory to
the Agent (and, if different from the Agent, the Collateral Agent) in
its sole discretion.
SECTION 7.1.9. Report of Borrower's Cash Flow from
Operations. On or before the thirtieth day of each calendar month
commencing on April 30, 1996, the Borrower shall deliver to the Agent
a report in form and substance satisfactory to the Agent setting forth
calculation of the Borrower's Excess Cash Flow from Operations for the
immediately preceding calendar month, certified by the highest
financial officer of the Borrower as being true, complete and correct
to the best of his knowledge after due inquiry as of such day.
SECTION 7.1.10. Environmental Questionnaires. On or before
August 15, 1996, the Borrower shall execute and deliver to the Agent
duly executed environmental questionnaires in substantially the form
of Annex III.
SECTION 12. Amendment of Section 7.2.2. Section 7.2.2 of the
Credit Agreement is hereby amended by deleting clause (b)
11
<PAGE> 12
thereof and renumbering all subsequent clauses. Section 7.2.2 of the Credit
Agreement is further amended by deleting the words "or (k) " appearing in the
proviso and placing the word "or" immediately before the reference to clause
(j) in such proviso.
SECTION 13. Amendment of Section 7.2.4. Section 7.2.4 of the
Credit Agreement is hereby amended as follows:
(i) clause (b) of Section 7.2.4 is hereby amended and
restated in its entirety to read as follows:
"(b) Its Interest Expense Coverage Ratio for each of the
Fiscal Quarters ending during the period commencing on January
1, 1996 through and including March 31, 1997 to be less than
2.65 to 1 as of the last day of such Fiscal Quarter; and, its
Interest Expense Coverage Ratio for any Fiscal Quarter ending
thereafter to be less than 3.50 to 1.0 as of the last day of
such Fiscal Quarter"; and
(ii) clause (c) of Section 7.2.4 is hereby amended and
restated in its entirety to read as follows:
"(c) Its Current Ratio for each of the Fiscal Quarters
occurring during the period commencing on January 1, 1996 and
ending on March 31, 1997 to be less than.50 to 1.0 as of the
last day of such Fiscal Quarter; and its Current Ratio for any
Fiscal Quarter ending thereafter to be less than 1.0 to 1.0 as
of the last day of such Fiscal Quarter."
SECTION 14. Amendment of Section 7.2.5. Section 7.2.5 of the
Credit Agreement is hereby amended as set forth below:
(a) The word "and" is deleted from the final line of
clause (g) thereof;
(b) The period ending clause (h) thereof is replaced by a
semicolon and the word "and," and
(c) A new clause (i) is added thereto to read in its
entirety as follows:
"(i) with respect to any Oil and Gas Properties
and related assets acquired by the Borrower or any of its
Subsidiaries pursuant to an Investment permitted above, at the
request of the Agent the Borrower or such Subsidiary of the
Borrower shall deliver to the Collateral Agent a duly executed
Mortgage, in form and substance satisfactory to the Agent and
the Collateral Agent,
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<PAGE> 13
creating a Lien on all or part of the Oil and Gas Properties
so acquired in favor of the Collateral Agent for the benefit
of the Lenders and other Secured Parties, together with such
opinions, agreements, certificates and other documents
(including duly executed financing statements), as the Agent
or Collateral Agent may request."
SECTION 15. Amendment of Section 7.2.1. Section 7.2.7 of the
Credit Agreement is hereby amended by adding the following proviso at the end
of the first sentence thereof immediately prior to the final period:
; provided further however that the Borrower will not, and will not
permit any of its Subsidiaries to, make any Capital Expenditures other
than completion expenditures not to exceed $175,000 for the Gray 2-11
well operated by Louis Dreyfus Natural Gas Corporation and other than
for development, including without limitation, development drilling,
reworkings, plugging back, redrilling or similar development
operations only on (i) proved producing properties existing as of
April 15, 1996 or (ii) on proved undeveloped properties.
SECTION 16. Amendment of Section 7.2.11. Clauses (c) and (d) of
Section 7.2.11 of the Credit Agreement are hereby amended in their entirety to
read as follows:
"(c) Subject to the proviso of the immediately following
clause (d) hereof, the net book value of such assets, together with
the net book value of all other assets sold, transferred, leased,
contributed or conveyed otherwise than in the ordinary course of
business by the Borrower or any of its Subsidiaries pursuant to this
clause, does not exceed $2,000,000 in the aggregate since the
Effective Date and such assets do not constitute Borrowing Base
Properties or Mortgaged Properties and no Default exists immediately
before or after giving effect to such sale or other disposition and as
of the date of such sale or other disposition, no excess of the
principal of Loans outstanding over the Commitment Amount exists or
would result therefrom; or
(d) such sale, transfer, lease, contribution or
conveyance is approved in writing by the Agent and the Required
Lenders prior to the date thereof, provided, that, the Required
Lenders and the Agent have the right to redetermine the Borrowing Base
in accordance with their customary practices upon the sale, transfer,
lease, contribution or conveyance of any Borrowing Base Property
pursuant to Section 2.7 and, if applicable, prior to or concurrently
with such sale, transfer, lease, contribution or conveyance the
Borrower shall have made
13
<PAGE> 14
a payment in an amount equal to the higher of (x) the excess of the
principal amount of Loans then outstanding over the Borrowing Base as
in effect immediately following any redetermination thereof on account
of such sale, transfer, lease, contribution or conveyance and (y) the
gross proceeds of such Sale net of all reasonable and customary
transaction costs."
SECTION 17. Amendment of Section 7.2.12. Section 7.2.12 of the
Credit Agreement is hereby amended by (a) inserting immediately after the words
"Subordinated Debt" in the fifth line thereof the phrase "or the John Hancock
Notes (including the John Hancock Note Agreement)" and (b) adding the following
proviso to the end of such Section 7.2.12: "provided, however, that the
Borrower may consent to the waivers of certain provisions of the John Hancock
Note Agreement as described in Section 26 of the Second Amendment."
SECTION 18. Amendment of Section 7.2.14. Section 7.2.14 of the
Credit Agreement is hereby amended by adding the following sentence as the last
sentence of such Section 7.2.14: "Notwithstanding the foregoing, none of the
John Hancock Agreement, the John Hancock Notes, or any other document
evidencing Indebtedness of a type permitted pursuant to clause (c) of Section
7.2.2 shall prohibit the creation of Liens on any property of the Borrower or
its Subsidiaries in favor of the Collateral Agent for the benefit of the
Lenders and other Secured Parties to secure the obligations of the Borrower or
any other Obligor, unless such prohibition concerns the Borrower's creation of
Liens in favor of the Collateral Agent which are not on at least a pari passu
basis with any Liens on such property in favor of John Hancock as security for
the John Hancock Notes and the John Hancock Note Agreement."
SECTION 19. Amendment of Section 8.1.5. Section 8.1.5 of the
Credit Agreement is hereby amended by (a) changing the final period thereof to
a comma and (b) adding the following after the final word and immediately after
such comma: "or any event of default (as defined in the John Hancock Note
Agreement) shall occur or any event of default (as defined in each John Hancock
Note) shall occur or any event or condition shall exist which, with the passage
of time or the giving of notice, or both, shall be sufficient to permit the
holder of any John Hancock Note or any trustee or agent for such holder or
holders to cause such Indebtedness to become due and payable prior to its
expressed maturity."
SECTION 20. Addition of Section 9.8. Article IX of the Credit
Agreement is hereby amended by adding thereto the following Section 9.8:
SECTION 9.8 Collateral Agent. The provisions of Article
IX and of Sections 10.3 and 10.4 shall also apply to the Collateral
Agent with respect to all matters,
14
<PAGE> 15
actions and inactions pursuant to the Mortgages and relating to the
Mortgaged Property. Each reference to the Agent in Article IX and in
Sections 10.3 and 10.4 shall be deemed to include a reference to the
Collateral Agent in its capacity as such and each reference to "CIBC"
in Section 9.5 shall be deemed to include CIBC Inc. Each Lender
hereby agrees that it shall cause each of its Affiliates which becomes
a Swap Bank pursuant to any Hedging Agreement secured by the Mortgage
to execute such agreements and documents as the Agent or Collateral
Agent may reasonably request to evidence such Affiliate's agreement to
the provisions of this Article IX and the Mortgages.
SECTION 21. Amendment of Section 10.l(d). Clause (d) of Section
10.1 of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:
(d) affect adversely the interests, rights or obligations
of the Agent qua Agent or the Collateral Agent qua Collateral Agent
shall be made without the consent of the Agent or Collateral Agent,
as the case may be.
SECTION 22. Amendment of Section 10.3. Section 10.3 of the Credit
Agreement is hereby amended by (a) deleting the final word "and" of clause (a)
thereof; (b) deleting the final period of clause (b) thereof and replacing such
period with a comma followed by the word "and"; and (c) adding the following
clause (c) thereto: "(c) the filing, recording, refiling or rerecording of any
Mortgage and/or any Uniform Commercial Code financing statements relating
thereto and all amendments, supplements and modifications to any thereof and
any and all other documents or instruments of further assurance required to be
filed or recorded or refiled or rerecorded by the terms hereof or of any
Mortgage or of the Security Agreement."
SECTION 23. Amendment of Disclosure Schedule. The Disclosure
Schedule attached to the Credit Agreement is hereby amended by deleting
therefrom Item 6.8 ("Existing Subsidiaries") and inserting in lieu thereof Item
6.8 as attached hereto.
SECTION 24. Other Additional Amendments. CD Rate Loans shall no
longer be available under the Credit Agreement, accordingly all references and
provisions relating to CD Rate Loans contained in the Credit Agreement shall
have no force and effect and shall not apply with respect to any period
commencing after the date hereof insofar as those provisions relate to CD Rate
Loans.
SECTION 25. Representations and Warranties. To induce the
Lenders, the Collateral Agent and the Agent to enter into this Amendment, the
Borrower hereby reaffirms, as of the date hereof, its representations and
warranties contained in Article VI of the
15
<PAGE> 16
Credit Agreement (except to the extent such representations and warranties (i)
relate solely to an earlier date, (ii) relate to properties and assets,
including Oil and Gas Properties, any Obligor has sold, transferred, abandoned,
released or otherwise disposed of from and after the Effective Date with the
Lenders' consent or in the ordinary course of such Obligor's business or (iii)
have been made inaccurate because of the merger of any Obligor into the
Borrower) and additionally represents and warrants as follows:
(a) The execution, delivery and performance of this
Amendment, the Term Notes, each of the Subject Mortgages (as
hereinafter defined), the Security Agreement and the Financing
Statements (as hereinafter defined) by the Borrower are within the
Borrower's corporate powers, have been duly authorized by all
necessary corporate action, have received all necessary governmental
approval (if any shall be required), and do not and will not
contravene or conflict with any contractual restriction (unless the
Borrower has not received a binding waiver of such contractual
restrictions, a copy of which waiver must be sent to the Agent), law
or governmental regulation or court decree or order binding on the
Borrower or the Organic Documents of the Borrower, or result in, or
require the creation or imposition of, any Lien on any of the
Borrower's properties, except for the Liens created pursuant to the
Subject Mortgages, the Security Agreement and Financing Statements;
(b) This Amendment, the Term Notes, the Security
Agreement, each of the Subject Mortgages, the Financing Statements and
the Credit Agreement as amended by the Amendment are the legal, valid
and binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms, subject in each
case to the application of equitable principles and subject to the
effect of bankruptcy, insolvency, reorganization, moratorium or other
similar statutes, judicial decisions or rules of law affecting
creditors' rights generally; and
(c) All authorizations, approvals, and other actions
required by, notifications to and filings with, any governmental
authority or regulatory body or other Person required for the
Borrower's due execution, delivery or performance of this Agreement,
the Notes, any of the Subject Mortgages, the Security Agreement or the
Financing Statements have been obtained or made, as applicable.
SECTION 26. Limited Waiver of Certain Defaults. Lenders hereby
waive (i) the Event of Default that occurred under Section 8.1.5 of the Credit
Agreement as a result of Borrower's
16
<PAGE> 17
default under Section 9.1(c) of the John Hancock Note Agreement by Borrower's
exceeding its debt coverage under section 6.18, 7.1(g) and 7.1(h) of the John
Hancock Note Agreement for the period ending April 1, 1997, (ii) the Event of
Default resulting from the Eleven Million Dollars Borrowing Base Deficiency
existing as of May 1, 1996, but only insofar as such deficiency on such date is
concerned, (iii) the Event of Default resulting from noncompliance with clauses
(b) and (c) of Section 7.2.4 for the period ending on December 31, 1995, (iv)
the Event of Default under Section 7.1.7 of the Credit Agreement resulting from
Borrower's failure to deliver an environmental audit by March 1, 1995
(provided, however, Borrower shall execute and deliver to the Agent a duly
executed environmental questionnaire in substantially the form of Annex III on
or before August 15, 1996), and (v) the Event of Default resulting from
Borrower's failure to deliver an annual audit report for Fiscal Year 1995 and
Borrower's failure to deliver the compliance certificate described in Section
7.1.1(b) of the Credit Agreement with respect to Fiscal Year 1995, in each case
within the time frames therein specified; provided, however, that the Lenders
hereby waive (a) such noncompliance with Section 7.1.1(b) until the earlier of
two (2) days after filing such annual report and such compliance certificate
with the Securities and Exchange Commission or May 2, 1996 and (b) such
noncompliance with Section 7.1.7 of the Credit Agreement until August 15, 1996.
The foregoing notwithstanding, however, failure to deliver such annual audit
report and such compliance certificate within two (2) days of filing the same
with the Securities and Exchange Commission, but in no event later than May 2,
1996, and/or failure to deliver to the Agent a duly executed environmental
questionnaire as described above on or before August 15, 1996 shall constitute
an Event of Default under the Credit Agreement, as amended by the Second
Amendment. Except as noted in the immediately preceding sentence of this
Section 26, nothing contained in this Amendment shall be deemed to be a waiver
or abandonment of any rights or remedies available to the Lenders or the Agent
under the Credit Agreement, applicable law or otherwise nor a waiver of any
Default or Event of Default known or unknown, which may be currently existing
or which may occur in the future. The Agent and Lenders specifically reserve
all their rights and remedies including, without limitation, the right to
declare all Loans and other Obligations immediately due and payable with
respect to any Events of Default which have not been specifically waived
herein.
SECTION 27. Conditions Precedent; Effectiveness. The
effectiveness of this Amendment is conditioned upon receipt by the Agent on or
prior to April 30, 1996 of
(i) counterparts hereof duly executed and delivered by
the Borrower and each of the Lenders;
(ii) the Term Notes for the account of Lenders duly
executed and delivered by the Borrower;
17
<PAGE> 18
(iii) counterparts of a Mortgage, Deed of Trust,
Assignment, Security Agreement and Financing Statement in form and
substance satisfactory to the Agent creating a Lien upon all Oil and
Gas Properties of the Borrower in each of Kansas, Texas, Oklahoma and
Arkansas (herein sometimes called the "Subject Mortgages") and of the
Security Agreement, each in form and substance satisfactory to the
Agent and each duly executed by the Borrower, together with duly
executed UCC-1 financing statements (the "Financing Statements")
evidencing Liens on substantially all personal property of the
Borrower and any other collateral documents required or desirable to
create a first priority perfected Lien (subject to the Permitted
Liens, as defined in the Security Agreement) in favor of the Secured
Parties on substantially all the Assets of the Borrower (provided that
such Liens may be pari passu with the liens securing the John Hancock
Notes,) in each case in form and substance satisfactory to the Agent
in its sole discretion, together with evidence of the completion (or
satisfactory arrangements for the completion) of all recordings and
filings of the Mortgages, the Security Agreement and the Financing
Statements as may be necessary or, in the reasonable opinion of the
Agent and Collateral Agent, desirable effectively to create a valid,
perfected first priority Lien (subject to the Permitted Liens, as
defined in the Security Agreement) against the properties purported to
be covered thereby (provided that such Liens may be pari passu with
the liens securing the John Hancock Notes); provided further that it
is understood that the property and Assets covered by the Liens in
this clause (iii) have a fair market value in the aggregate of such
property and Assets not in excess of $1,000,000;
(iv) an opinion of McAfee & Taft as counsel to the
Borrower in form and substance satisfactory to the Agent;
(v) an opinion from local counsel in each state where a
Subject Mortgage or the Security Agreement is to be filed, in form and
substance satisfactory to the Agent;
(vi) a duly executed consent of John Hancock Mutual Life
Insurance Company in form and substance satisfactory to the Agent to
the Liens on the real and personal property of the Borrower and its
Subsidiaries described in the Mortgages, the Security Agreement and
the Financing Statements in favor of the Collateral Agent for the
benefit of the Secured Parties and to all future such Liens as may be
required pursuant to the terms of the Credit Agreement as amended
hereby, and to all other transactions set forth herein, together with
copies of all Liens granted to secure the John Hancock Notes which
18
<PAGE> 19
Liens shall be in form and substance satisfactory to the Agent, and an
intercreditor agreement in form and substance satisfactory to the
Agent duly executed and delivered by the owner and holder of the John
Hancock Notes;
(vii) a waiver in form and substance satisfactory to the
Agent duly executed by John Hancock Life Insurance Company of all
defaults and events of default under the John Hancock Notes or the
John Hancock Note Agreement;
(viii) a certificate of a Secretary or Assistant Secretary
of the Borrower in form and substance satisfactory to the Agent (A) as
to the resolutions of its Board of Directors then in full force and
effect authorizing the execution, delivery and performance of this
Amendment and the Subject Mortgages (B) as to its Articles of
Incorporation and By-laws, (C) as to the incumbency and signatures of
those of its officers authorized to act with respect to this Amendment
and the Subject Mortgages; and (D) that the Subject Mortgages, the
Security Agreement and the Financing Statements describe all the
Assets of the Borrower other than Assets having a fair market value in
the aggregate of all such Assets not in excess of $1,000,000;
(ix) payment of the fee described in Section 10 of the
Second Amendment and of all reimbursable costs and expenses of the
Lenders and the Agents including legal fees and charges billed prior
to April 30, 1996;
(x) all consents and approvals required for the granting
of the Liens covered by the Loan Documents and to the execution and
delivery of the Second Amendment, if any;
(xi) such other documents and certificates, if any, as the
Agent shall reasonably require; and
(xii) all conditions to a Borrowing shall have been
satisfied as of the date of the effectiveness of this Amendment.
SECTION 28. Effect of Amendment. This Amendment shall be deemed
to be an amendment to the Credit Agreement, and the Credit Agreement, as
amended hereby, is hereby ratified, approved and confirmed in each and every
respect. All references to the Credit Agreement in any other document,
instrument, agreement or writing shall hereafter be deemed to refer to the
Credit Agreement as amended hereby.
SECTION 29. Choice of Law; Severability. THIS AMENDMENT SHALL BE
A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
19
<PAGE> 20
THE STATE OF NEW YORK. Whenever possible each provision of this Amendment shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Amendment shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Amendment.
SECTION 30. Counterpart Execution. This Amendment may be executed
in any number of counterparts, all of which taken together shall constitute one
and the same instrument, and any party hereto may execute this Amendment by
signing one or more counterparts.
SECTION 31 Binding Effect. This Amendment shall be binding upon
the Borrower, the Lenders, the Collateral Agent and the Agent and their
respective successors and assigns, and shall inure to the benefit of the
Borrower, the Lenders and the Agent and the successors and assigns of the
Lenders and the Agent.
SECTION 32. Entire Agreement. This Amendment, together with the
Credit Agreement and the other Loan Documents, constitutes the entire
understanding among the parties hereto with respect to the subject matter
hereof and supersedes any prior agreements, written or oral, with respect
thereto.
THIS WRITTEN AMENDMENT TOGETHER WITH THE CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
20
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written, to be effective as of such date.
ALEXANDER ENERGY CORPORATION
By: /s/ DAVID E. GROSE
-----------------------------
David E. Grose
Title: Chief Financial Officer
and Vice President
CANADIAN IMPERIAL BANK OF COMMERCE,
acting through its New York Agency,
as Agent
By: /s/ MARYBETH ROSS
-------------------------------
Title: AUTHORIZED SIGNATURE
LENDER:
CIBC INC.
By: /s/ MARYBETH ROSS
-------------------------------
Title: AUTHORIZED SIGNATURE
COLLATERAL AGENT:
CIBC INC., as Collateral Agent
By: /s/ MARYBETH ROSS
-------------------------------
Title: AUTHORIZED SIGNATURE
Schedule I - Existing Subsidiaries
Annex I - EGOLF Sale Property Description
Annex II - Form of Term Note
Annex III - Environmental Questionnaire
21
<PAGE> 22
SCHEDULE I
Item 6.8 (Subsidiaries)
<TABLE>
<CAPTION>
State of
Incorporation Ownership Business
Name or Organization % Description
---- --------------- --------- -----------
<S> <C> <C> <C>
Corporations
------------
1. Boomer Marketing Organization Oklahoma 100 marketing of oil and
gas production
Partnerships
------------
1. AEJH 1985 Limited Partnership Delaware Borrower is the oil and gas exploration
General Partner and development
2. AEJH 1987 Limited Partnership Delaware Borrower is the oil and gas exploration
General Partner and development
4. AEJH 1989 Limited Partnership Delaware Borrower is the oil and gas exploration
General Partner and development
</TABLE>
<PAGE> 23
EXHIBIT "A"
<TABLE>
<CAPTION>
Well Location County State Operator
---- -------- ------ ----- --------
<S> <C> <C> <C> <C>
Abel 29-1 13N-5W:W/2 SW 29 Canadian OK AEC
Abel 29-2 13N-5W:E/2 SW 29 Canadian OK AEC
Allison 35-1 12N-20W: 35 Custer OK Apache
Allman 10-1 20N-15W: 10 Major OK Comanche
Ann 1-8 17N-7W: 6 Kingfisher OK Simcoe
Annis 19-1 12N-8W: 19 Canadian OK Milmac
Ashley 24-1 9N-2E: W/2 SW 24 Pottawatomie OK Leigh
Barbara 1 17N-7W:6 Kingfisher OK Simcoe
Barham 1-32 11N-21W: 32 Beckham OK AEC
Barr 35-2 18N-7W: 35 Kingfisher OK Simcoe
Baustert 31-1 14N-7W: SW 31 Canadian OK AEC
Bill 24-1 12N-19W: 24 Custer OK Anson
Binger Unit, East 10N-10W:19-21,28-30,33,34,10N-11W:24-25 Caddo OK Phillips Petr
Blodgett 28-2 5S-2W: SE 28 Carter OK Proven Reserves Mgmt
Boeckman 34-1 17N-7W: SW 34 Kingfisher OK AEC
Boeckman, Emil 17N-7W: S/2 SW 22 Kingfisher OK AEC
Boelte 2-1 12N-6W: SE SW2 Canadian OK AEC
Bollinger 1-16 11N-8W: 16 Canadian OK Mack Energy
Bollinger 31-1 11N-7W: E/2 31 Canadian OK Kerr-McGee
Bollman 30-1 15N-7W: SW 30 Kingfisher OK Ramco
Bomhoff 20-1 12N-7W: 20 Canadian OK Kerr McGee
Bomhoff 20-2 12N-7W: 20 Canadian OK Santa Fe
Bomhoff 20-3 12N-7W: 20 Canadian OK Santa Fe
Bomhoff 20-4 12N-7W: 20 Canadian OK AEC
Borden 33-1 18N-16W: 33 Dewey OK Cimarron
Bradshaw 33-1 16S-13W: N/2 33 Barton KS Nuss Oil
Bradshaw 33-2 16S-13W: N/2 33 Barton KS Tomlinson, S
Breath 13-1 1S-3W: NW SW 13 Carter OK AEC
Brindley 20-1 11N-5W: W/2 SW 20 Canadian OK AEC
Brindley 29-1 11N-5W: N/2 NW 29 Canadian OK AEC
Briscoe 1-29 13N-10W: 29 Canadian OK An-Son
Brooks 7-1 28N-22W: S/2 7 Harper OK Elder/Vaughn
Bules, Marvin 36-1 26N-6W: S/2 NE/4 36 Grant OK Golf, DC
Burmeier 22-1 12N-7W: 22 Canadian OK Kerr McGee
Burmeier 22-2 12N-7W: 22 Canadian OK Santa Fe
Carr 13-1 1S-3W: NE SW 13 Carter OK Dreyfus
Cary 10-2 11N-5W: NE SE 10 Canadian OK AEC
Cary 3-1 11N-5W: N/2 SE 3 Canadian OK AEC
Cary 3-2 11N-5W: N/2 SW 3 Canadian OK AEC
Cary 3-6 11N-5W: S/2 SE 3 Canadian OK AEC
Case 12-1 21N-15W: W/2 NW & NE NW 12 Major OK Clifton
Cashion B 11-1 12N-3W: SW 11 Oklahoma OK PetroCorp
Catron 13-1 15N-6W: S/2 NW 13 Kingfisher OK AEC
<CAPTION>
Well GWI Oil WI NRI Gas WI NRI OK ORI NRI Gas ORI NRI Reversion
---- --- ---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Abel 29-1 0.81050000 0.58853593 0.58853593 0.02635310 0.02635310 No
Abel 29-2 0.58182530 0.44369550 0.44369550 0.00438980 0.00438980 No
Allison 35-1 0.00292772 0.00232180 0.00232180 No
Allman 10-1 0.03008000 0.02256000 0.02258000 No
Ann 1-8 0.24375000 0.19500000 0.19500000 No
Annis 19-1 0.02955564 0.02283230 0.02283230 No
Ashley 24-1 0.05200000 0.03937500 0.03937500 No
Barbara 1 0.11250000 0.09000000 0.09000000 Yes
Barham 1-32 0.21741381 0.16115968 0.16115966 Yes
Barr 35-2 0.26500000 0.21200000 0.21200000 No
Baustert 31-1 0.78387980 0.50757100 0.50757100 0.02000000 0.02000000 Yes
Bill 24-1 0.05000000 0.03912500 0.03912500 No
Binger Unit, East 0.00079050 0.00058522 0.00057199 No
Blodgett 28-2 0.00509018 0.00409305 0.00409305 No
Boeckman 34-1 0.38145730 0.32185540 0.32185565 No
Boeckman, Emil 1.00000000 0.87500000 0.87500000 No
Boelte 2-1 0.93555558 0.80084550 0.80084550 No
Bollinger 1-16 0.15929472 0.13900020 0.13900020 No
Bollinger 31-1 0.03135500 0.02400599 0.02400599 No
Bollman 30-1 0.09329800 0.08163600 0.08163600 No
Bomhoff 20-1 0.19432495 0.15190081 0.15190081 No
Bomhoff 20-2 0.14307496 0.11407920 0.11407920 0.00001810 0.00001810 No
Bomhoff 20-3 0.13145025 0.10554900 0.10554900 No
Bomhoff 20-4 0.70685523 0.54872650 0.54872650 No
Borden 33-1 0.02471400 0.01853500 0.01853500 0.00146480 0.00146480 No
Bradshaw 33-1 0.00022310 0.00022310 No
Bradshaw 33-2 0.00356891 0.00312280 0.00312280 No
Breath 13-1 0.78354140 0.61546700 0.61546700 No
Brindley 20-1 0.73133330 0.51544885 0.51544885 0.04400130 0.04400130 No
Brindley 29-1 0.76062500 0.52875000 0.52875000 0.04436290 0.04436290 No
Briscoe 1-29 0.23131660 0.18515030 0.18515030 Yes
Brooks 7-1 0.09356800 0.08187200 0.08187200 No
Bules, Marvin 36-1 0.10000000 0.07967700 No
Burmeier 22-1 0.06260000 0.05078120 0.05078120 No
Burmeier 22-2 0.01562500 0.01562500 Yes
Carr 13-1 0.48091706 0.37993860 0.37993860 No
Cary 10-2 0.23500000 0.19093745 0.19093745 No
Cary 3-1 0.40062500 0.30098070 0.30098070 0.02249140 0.02249140 No
Cary 3-2 0.27000000 0.20550000 0.20250000 No
Cary 3-6 0.48750000 0.36562500 0.36562500 0.00230000 0.00230000 No
Case 12-1 0.03125000 0.02583500 0.02563500 No
Cashion B 11-1 0.00624862 0.00506463 0.00506463 Yes
Catron 13-1 0.91500000 0.70755353 0.70755343 0.00008298 0.00008298 No
</TABLE>
<PAGE> 24
<TABLE>
<Caption
Well APO GWI APO Oil NRI APO Gas NRI APO Oil ORI APO Gas ORI APO-NC GWI APO-NC Oil NRI APO-NC Gas NRI
- ---- ---------- ----------- ----------- ----------- ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Abel 29-1
Abel 29-2
Allison 35-1
Allman 10-1
Ann 1-8
Annis 19-1
Ashley 24-1
Barbara 1
Barham 1-32 0.10824500 0.08265372 0.08265372 0.14869570 0.11030822 0.11030822
Barr 35-2
Baustert 31-1 0.48992488 0.38431195 0.38431195 0.01250001 0.01250001
Bill 24-1
Binger Unit, East
Blodgett 28-2
Boeckman 34-1
Boeckman, Emil
Boelte 2-1
Bollinger 1-16
Bollinger 31-1
Bollman 30-1
Bomhoff 20-1
Bomhoff 20-2
Bomhoff 20-3
Bomhoff 20-4
Borden 33-1
Bradshaw 33-1
Bradshaw 33-2
Breath 13-1
Brindley 20-1
Brindley 29-1
Briscoe 1-29 0.23131660 0.18515030 0.18515030 0.18750000 0.15000000 0.15000000
Brooks 7-1
Bules, Marvin 36-1
Burmeier 22-1
Burmeier 22-2 0.06260000 0.05070000 0.05070000 0.03125000 0.03125000
Carr 13-1
Cary 10-2
Cary 3-1
Cary 3-2
Cary 3-6
Case 12-1
Cashion B 11-1 0.00624862 0.00506463 0.00506463 0.00587730 0.00477535 0.00477535
Catron 13-1
</TABLE>
<TABLE>
<CAPTION>
Well APO-NC Oil ORI APO-NC Gas ORI Remarks
---- -------------- -------------- -------------
<S> <C> <C> <C>
Abel 29-1
Abel 29-2
Allison 35-1
Allman 10-1
Ann 1-8
Annis 19-1
Ashley 24-1
Barbara 1
Barham 1-32
Barr 35-2
Baustert 31-1
Bill 24-1
Binger Unit, East
Blodgett 28-2
Boeckman 34-1
Boeckman, Emil
Boelte 2-1
Bollinger 1-16
Bollinger 31-1
Bollman 30-1
Bomhoff 20-1
Bomhoff 20-2
Bomhoff 20-3
Bomhoff 20-4
Borden 33-1
Bradshaw 33-1
Bradshaw 33-2
Breath 13-1
Brindley 20-1
Brindley 29-1
Briscoe 1-29
Brooks 7-1
Bules, Marvin 36-1
Burmeier 22-1
Burmeier 22-2
Carr 13-1
Cary 10-2
Cary 3-1
Cary 3-2
Cary 3-6
Case 12-1
Cashion B 11-1
Catron 13-1
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
Well Location County State Operator
---- -------- ------ ----- --------
<S> <C> <C> <C> <C>
Celsor 10-1 8N-20W:10 Washita OK Samson Res
Celsor 10-2 8N-20W:10 Washita OK Samson Res
Cimarron 17N-6W:23 Kingfisher OK Simcoe
Clinton 31-13 12N-16W:31 Custer OK SMR Prop.
Clouse 5-2 12N-7W:5 Canadian OK AEC
Clouse 5-3 12N-7W:5 Canadian OK AEC
Coop 32-A 25N-21W:32 Harper OK Samson Res
Cooper 32-A 25N-21W:32 Harper OK Ricks Explo
Cude 28-1 5S-2W:NW 28 Carter OK Dreyfus,L
Daniel 23-1 7S-5E:23 Marshall OK Marshall Oil Corp.
Deathridge 16-1 13N-7W:16 Canadian OK Mack Energy
Deathridge 16-2 aka 16-1 13N-7W:16 Canadian OK Mack Energy
Dona 1 18N-7W:35 Kingfisher OK Simcoe
Dow 24-1 20N-15W:E/2 SE 24 Major OK AEC
Drake 4-1 18N-20W:4 Dewey OK Warren Corp
Dudley 27-1 5S-2W:SE 27 Carter OK Dreyfus,L
Dugger 18-1 13N-20W:18 Custer OK Anadarko
Dunn 11-1 6N-7W:11 Grady OK Kaiser-Francis Oil C
Elmenhorst 33-1 12N-7W:33 Canadian OK AEC
Elmenhorst 34-1 12N-8W:34 Canadian OK Kerr-McGee
England 22-1 13N-8W:22 Canadian OK SMR
Erwin 2-1 7N-8W:2 Grady OK Kaiser-Francis Oil C
Essary 13-1 12N-7W:13 Canadian OK AEC
Evans 18-1 12N-6W:18 Canadian OK AEC
Evans 18-2 12N-6W:18 Canadian OK AEC
Forman 20-1 11N-5W:E/2 SW 20 Canadian OK AEC
Franklin 13-1 1S-3W:SE SW 13 Carter OK AEC
Gamble 1-3 11N-6W:NW 3 Canadian OK AEC
Gore 10-1 16N-18W:10 Dewey OK Gore, Gail B.
Groenwald 18-1 18N-8W:W/2 NW 18 Kingfisher OK AEC
Hall 29-3 21N-10W:29 Major OK Champlin
Harris 19-1 1S-5W:W/2 SW 19 Stephens OK AEC
Harris 30-2 1S-5W:W/2 NW 30 Stephens OK AEC
Hayter 31-1 10N-8W:31 Grady OK Apache
Hendricks 20-1 11N-6W:20 Canadian OK Universal
Hinton 28-2 12N-6W:28 Canadian OK AEC
Hinton 28-3 12N-6W:28 Canadian OK Crabtree, J
Hixon A1 19N-21W:30 Ellis OK OXY USA
Hobbs, Rodney Unit 17N-7W:N/2 SW 22 Kingfisher OK AEC
Hoisington 30-1 21N-9W:E/2 SW 30 Major OK AEC
Holder 14-4 18N-16W: E/2 NE 14 Dewey OK AEC
Horne 9-1 12N-6W:9 Canadian OK Continental
Hostutler 35-1 18N-14W:S/2 NE 35 Dewey OK Universal
<CAPTION>
Well GWI Oil WI NRI Gas WI NRI Oil ORI NRI Gas ORI NRI Reversion
---- --- ---------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Celsor 10-1 0.02499140 0.01988388 0.01988388 No
Celsor 10-2 0.03792670 0.03008540 0.03008540 Yes
Cimarron 0.20000000 0.16000000 0.16000000 No
Clinton 31-13 0.24698789 0.19525184 0.19525184 Yes
Clouse 5-2 0.94109170 0.72698041 0.72701771 0.00027420 0.00027420 No
Clouse 5-3 0.94109160 0.74084151 0.74084151 0.00027420 0.00027420 No
Coop 32-A 0.00939385 0.00939385 No
Cooper 32-A 0.00058470 0.00058470 No
Cude 28-1 0.00352290 0.00275414 0.00275414 No
Daniel 23-1 0.08854200 0.07747390 0.07747390 No
Deathridge 16-1 0.00280710 0.00245620 0.00245620 No
Deathridge 16-2 aka 16-1 0.00280710 0.00245620 0.00245620 No
Dona 1 0.01000000 0.00800000 0.00800000 No
Dow 24-1 0.64833000 0.49574750 0.49574750 0.07595320 0.07595320 No
Drake 4-1 0.02481860 0.02065296 0.01958960 No
Dudley 27-1 0.01839838 0.01496780 0.01496780 No
Dugger 18-1 0.01552900 0.01149150 Yes
Dunn 11-1 No
Elmenhorst 33-1 0.64307752 0.48857270 0.48857270 Yes
Elmenhorst 34-1 0.01234620 0.00949640 0.00949640 No
England 22-1 0.00002360 0.00002360 No
Erwin 2-1 No
Essary 13-1 0.68461466 0.54288106 0.54288106 Yes
Evans 18-1 0.48365509 0.36265269 0.36265269 Yes
Evans 18-2 0.29655157 0.22235930 0.22235930 Yes
Forman 20-1 0.80209710 0.56143190 0.56143190 0.02784790 0.02784790 No
Franklin 13-1 0.36143536 0.28233900 0.28233900 Yes
Gamble 1-3 0.56790741 0.42593055 0.42593060 0.06250000 0.06250000 Yes
Gore 10-1 0.00141386 0.00105690 0.00105690 No
Groenwald 18-1 0.38291665 0.30750495 0.30750495 0.00087785 0.00087785 No
Hall 29-3 0.02625000 0.02201980 0.02201980 No
Harris 19-1 0.14830920 0.11586660 0.11586660 No
Harris 30-2 0.05909431 0.04616742 0.04616742 No
Hayter 31-1 0.01190200 0.01041400 0.01041400 No
Hendricks 20-1 0.10575000 0.08142760 0.08142760 No
Hinton 28-2 0.91884177 0.70469926 0.70469926 0.00011854 0.00011854 Yes
Hinton 28-3 0.44361329 0.38803950 0.38803950 No
Hixon A1 0.00068500 0.00059900 0.00059900 No
Hobbs, Rodney Unit 1.00000000 0.85937500 No
Hoisington 30-1 0.48972715 0.37873460 0.37873460 0.00586500 0.00586500 No
Holder 14-4 0.39580000 0.29680000 0.29680000 Yes
Horne 9-1 0.12183800 0.10661000 0.10661000 No
Hostutler 35-1 0.02272780 0.01818230 0.01818230 No
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
Well APO GWI APO Oil NRI APO Gas NRI APO Oil ORI APO Gas ORI
---- --------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Celsor 10-1
Celsor 10-2 0.03768520 0.02997890 0.02997890
Cimarron
Clinton 31-13 0.24129407 0.19147800 0.19147800
Clouse 5-2
Clouse 5-3
Coop 32-A
Cooper 32-A
Cude 28-1
Daniel 23-1
Deathridge 16-1
Deathridge 16-2 aka 16-1
Dona 1
Dow 24-1
Drake 4-1
Dudley 27-1
Dugger 18-1 0.00772940 0.00586130
Dunn 11-1
Elmenhorst 33-1 0.60623773 0.47549421 0.47549421
Elmenhorst 34-1
England 22-1
Erwin 2-1
Essary 13-1
Evans 18-1
Evans 18-2 0.22241368 0.19626625 0.19626625
Forman 20-1
Franklin 13-1 0.36143536 0.28233900 0.28233900
Gamble 1-3 0.67593056 0.54919357 0.54919357
Gore 10-1
Groenwald 18-1
Hall 29-3
Harris 19-1
Harris 30-2
Hayter 31-1
Hendricks 20-1
Hinton 28-2 0.72115382 0.63056628 0.63056628 0.00011854 0.00011854
Hinton 28-3
Hixon A1
Hobbs. Rodney Unit
Hoisington 30-1
Holder 14-4 0.34632500 0.26542350 0.26542350
Home 9-1
Hostutler 35-1
<CAPTION>
Well APO-NC GWI APO-NC Oil NRI APO-NC Gas NRI APO-NC Oil ORI APO-NC Gas ORI Remarks
---- ---------- -------------- -------------- -------------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
Celsor 10-1
Celsor 10-2 0.03470160 0.02760920 0.02760920
Cimarron
Clinton 31-13 0.24063354 0.19094133 0.19094133
Clouse 5-2
Clouse 5-3
Coop 32-A
Cooper 32-A
Cude 28-1
Daniel 23-1
Deathridge 16-1
Deathridge 16-2 aka 16-1
Dona 1
Dow 24-1
Drake 4-1
Dudley 27-1
Dugger 18-1 0.01164670 0.00861860
Dunn 11-1
Elmenhorst 33-1
Elmenhorst 34-1
England 22-1
Erwin 2-1
Essary 13-1
Evans 18-1
Evans 18-2
Forman 20-1
Franklin 13-1 0.31678496 0.24746213 0.24746213
Gamble 1-3
Gore 10-1
Groenwald 18-1
Hall 29-3
Harris 19-1
Harris 30-2
Hayter 31-1
Hendricks 20-1
Hinton 28-2 0.45280893 0.39595272 0.39595272 0.00011854 0.00011854
Hinton 28-3
Hixon A1
Hobbs. Rodney Unit
Hoisington 30-1
Holder 14-4
Home 9-1
Hostutler 35-1
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
Well Location County State Operator GWI
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
House 20-1 11N-10W:20 Canadian OK Vintage 0.00328211
Howerton 32-1 20N-12W:32 Major/Blaine OK AEC 0.91062500
Hrdy 23-1 13N-7W:23 Canadian OK Mack 0.00108000
Hunt 13-1 13N-7W:NW 13 Canadian OK Mack
Hunt 32-2 13N-7W:32 Canadian OK AEC 0.88170310
Hurst 28-1 12N-6W:28 Canadian OK Crabtree, J 0.43798830
Hurst 28-2 12N-6W:28 Canadian OK Crabtree, J 0.53017579
I.R.C. 14-1 21N-15W:NW 14 Major OK Courtney, W 0.50000000
Inselman A-1 16N-23W:3 Ellis OK Kaiser-Francis 0.10613600
Jacobs 18-1 14N-6W:SW 18 Canadian OK AEC 0.89893958
Janet 25-1 17N-6W:25 Kingfisher OK Simcoe 0.11000000
Jarvis 10-1 10N-23W:10 Beckham OK Samson 0.01025400
Jean Marie 1 18N-7W:35 Kingfisher OK Simcoe 0.26500000
Jennings 4-1 8N-10W:4 Caddo OK Hall 0.00249960
Jensen 28-1 12N-7W:28 Canadian OK AEC 0.73117504
Jensen 28-2 12N-7W:28 Canadian OK AEC 0.45116293
Jensen 28-4 12N-7W:28 Canadian OK AEC 0.35440978
Jones, Fred 35-1 12N-5W:S/2 SE 35 Canadian OK AEC 0.37875000
Juanita 1 18N-7W:18 Kingfisher OK Simcoe 0.05000000
Keith 34-1 5S-2W:W/2 NE 34 Carter OK Dreyfus, Louis 0.03133334
Kenny 4A 15N-20W:15 Custer OK Sonat
Kent-5-4 11N-22W:5 Beckham OK Meridian Res. 0.00513300
Kilhoffer 21-1 10N-20W:21, E/2 20, SE 17, S/2 16 Washita OK Meridian
Kincaid 22-1 15N-17W:22 Custer OK Ward 0.00102728
Kitty 1-14 17N-6W:14 Kingfisher OK Simcoe 0.03125000
Kortemeir 9-1 12N-6W:9 Canadian OK Continential 0.12183770
Kouba 24-1 12N-6W:E/2 SE 24 Canadian OK AEC 0.59237500
Kouba 24-2 12N-6W:W/2 SE 24 Canadian OK AEC 0.56612500
Kruger, N.J. 15-2 13N-6W:15 Canadian OK Dreyfus, L 0.02693719
Kunneman 30-1 14N-7W:NE 30 Canadian OK Summit 0.05060470
LaBahn 13-1 12N-7W:13 Canadian OK OTC 0.30599220
Lanman 12-1 13N-8W:12 Canadian OK AEC 0.64285341
Lanman 12-2 13N-8W:12 Canadian OK Santa Fe Min
Lanman 12-3 13N-8W:12 Canadian OK AEC 0.79574240
Lanman 12-4 13N-8W:12 Canadian OK Santa Fe M
Laub 21-1 13N-8W:21 Canadian OK Unit
Lawler 1 16N-8W:8 Kingfisher OK Simcoe 0.06250000
Lester 29-1 8N-5W:29 Grady OK Apache 0.01817700
Letha 4-3 18N-3W:SW NW 4 Logan OK AEC 0.93750000
Leuszler 32-1 13N-5W:E/2 NW 32 Canadian OK AEC 0.53550000
Levan Estate 31-1 12N-8W:31 Canadian OK AEC 1.00000000
Linda 19-1 20N-1W:NW 19 Noble OK Leigh 0.05950000
Lisa 17N-7W:5 Kingfisher OK Simcoe 0.13125000
</TABLE>
<TABLE>
<CAPTION>
Well Oil WI NRI Gas WI NRI Oil ORI NRI Gas ORI NRI Reversion
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
House 20-1 0.00246159 0.00246159 No
Howerton 32-1 0.74156270 0.74156270 0.02675840 0.02675840 No
Hrdy 23-1 0.00094502 0.00094502 No
Hunt 13-1 0.00005070 0.00010140 No
Hunt 32-2 0.67537310 0.67537310 0.00018800 0.00018800 No
Hurst 28-1 0.38311770 0.38311770 No
Hurst 28-2 0.41142090 0.41142090 No
I.R.C. 14-1 0.03812500 0.03812500 No
Inselman A-1 0.08286900 0.09288900 No
Jacobs 18-1 0.69665439 0.69665439 Yes
Janet 25-1 0.08800000 0.08800000 No
Jarvis 10-1 0.00738300 0.00738300 No
Jean Marie 1 0.21200000 0.21200000 No
Jennings 4-1 0.00194201 0.00194201 No
Jensen 28-1 0.58920010 0.58920010 Yes
Jensen 28-2 0.33769460 0.33769460 0.03785400 0.03785400 Yes
Jensen 28-4 0.26247971 0.29247971 0.03785400 0.03785400 Yes
Jones, Fred 35-1 0.29542500 0.29542500 No
Juanita 1 0.03750000 0.03750000 No
Keith 34-1 0.02406300 0.02406300 No
Kenny 4A Yes
Kent-5-4 0.00449200 0.00449200 No
Kilhoffer 21-1 Yes
Kincaid 22-1 0.00079354 0.00079354 No
Kitty 1-14 0.02343750 0.02343750 No
Kortemeir 9-1 0.10661000 0.10661000 No
Kouba 24-1 0.48130369 0.48130369 No
Kouba 24-2 0.45997850 0.45997650 No
Kruger, N.J. 15-2 0.02154975 0.02154975 No
Kunneman 30-1 0.03795350 0.03795350 Yes
LaBahn 13-1 0.22949415 0.22949415 Yes
Lanman 12-1 0.50903709 0.50903709 0.00026040 0.00026040 No
Lanman 12-2 0.00026041 0.00026041 No
Lanman 12-3 0.62016539 0.62016539 0.00026041 0.00026041 No
Lanman 12-4 0.00026040 0.00026040 No
Laub 21-1 0.00012920 0.00012920 No
Lawler 1 0.04687500 0.04687500 No
Lester 29-1 0.01476900 0.01476900 No
Letha 4-3 0.76699220 0.76699220 0.05687500 0.05687500 No
Leuszler 32-1 0.41875480 0.41875480 No
Levan Estate 31-1 0.78130479 0.78130479 No
Linda 19-1 0.04760000 0.04760000 No
Lisa 0.10368750 0.10368750 No
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
Well APO GWI APO Oil NRI APO Gas NRI APO Oil ORI APO Gas ORI
---- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
House 20-1
Howerton 32-1
Hrdy 23-1
Hunt 13-1
Hunt 32-2
Hurst 28-1
Hurst 28-2
I.R.C. 14-1
Inselman A-1
Jacobs 18-1 0.89893958 0.69665439 0.69665439
Janet 25-1
Jarvis 10-1
Jean Marie 1
Jennings 4-1
Jensen 28-1 0.73117504 0.58920010 0.58920010
Jensen 28-2 0.50426321 0.40915872 0.40915872
Jensen 28-4 0.42859507 0.34751189 0.34751189
Jones, Fred 35-1
Juanita 1
Keith 34-1
Kenny 4A 0.01562500 0.01263100 0.01263100
Keni 5-4
Kilhoffer 21-1
Kincaid 22-1
Kitty 1-14
Kortemeir 9-1
Kouba 24-1
Kouba 24-2
Kruger, N.J. 15-2
Kunneman 30-1 0.03162790 0.02767444
LaBahn 13-1 0.22949414 0.19428248 0.19428248
Lanman 12-1
Lanman 12-2
Lanman 12-3
Lanman 12-4
Laub 21-1
Lawler 1
Lester 29-1
Letha 4-3
Leuszler 32-1
Levan Estate 31-1
Linda 19-1
Lisa
</TABLE>
<TABLE>
<CAPTION>
Well APO-NC GWI APO-NC Oil NRI APO-NC Gas NRI APO-NC Oil ORI APO-NC Gas ORI Remarks
---- ----------- -------------- -------------- -------------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
House 20-1
Howerton 32-1
Hrdy 23-1
Hunt 13-1
Hunt 32-2
Hurst 28-1
Hurst 28-2
I.R.C. 14-1
Inselman A-1
Jacobs 18-1 0.88191518 0.68347428 0.68347428
Janet 25-1
Jarvis 10-1
Jean Marie 1
Jennings 4-1
Jensen 28-1 0.61405760 0.49233370 0.49233370
Jensen 28-2 0.49722437 0.40347673 0.40347673
Jensen 28-4
Jones, Fred 35-1
Juanita 1
Keith 34-1
Kenny 4A
Keni 5-4
Kilhoffer 21-1 0.00445630 0.00385470 0.00385470
Kincaid 22-1
Kitty 1-14
Kortemeir 9-1
Kouba 24-1
Kouba 24-2
Kruger, N.J. 15-2
Kunneman 30-1
LaBahn 13-1
Lanman 12-1
Lanman 12-2
Lanman 12-3
Lanman 12-4
Laub 21-1
Lawler 1
Lester 29-1
Letha 4-3
Leuszler 32-1
Levan Estate 31-1
Linda 19-1
Lisa
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
Well Location County State Operator GWI Oil WI NRI
---- -------------------------- ----------- ----- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Loosen 1-14 12N-8W: 14 Canadian OK United 0.00701103 0.00525800
Lowery 35-1 17N-7W: W/2 SW 35 Kingfisher OK NBI 0.18750000 0.15893600
Ludwig 20-1 14N-7W: SW 20 Canadian OK AEC 0.41618639 0.35306458
Ludwig 28-2 14N-7W: SE 28 Canadian OK AEC 0.64700000 0.47251650
Maggard 23-1 9N-11W: 23 Caddo OK Walsh, FH Jr. 0.00226082 0.00169526
Majer 9-1 12N-5W:9 Canadian OK Singer, C 0.50000000 0.43750000
Manning 29-1 12N-6W: 29 Canadian OK AEC 0.91785297 0.69688638
Marshall 9-1 8N-6W: 9 Grady OK Payne, W.C. 0.12500000 0.10420410
Mary 6-1 7N-9W: 6 Caddo OK Apache 0.00234710 0.00176450
Matti, F.32-2 16N-8W: W/2 SE 32 Kingfisher OK United 0.02958535 0.02426923
Mattie 6-1 15N-8W: E/2 NW 6 Kingfisher OK AEC 0.98251370 0.80596850
Max A 14-1 17N-8W: 14 Kingfisher OK Cummings 0.24000000 0.19200000
Mayes 17N-7W: 22 Kingfisher OK Simcoe 0.47000000 0.35250000
McAlister, Sena 23-1 10N-19W: 23 Washita OK EP Operating 0.01144578 0.00923380
Merrick 10-1 12N-22W: 10 Roger Mills OK Nadel & Gussman 0.02005334
Meyer 28-1 14N-7W: NW 28 Canadian OK AEC 0.62900000 0.45175000
Meyers 35-1 12N-8W: 35 Canadian OK Bogo Energy 0.37500000 0.28987794
Miller 9-1 13N-8W: 9 Canadian OK SMR 0.18386540 0.13789900
Mitchell 29-1 12N-5W: W/2 SE 29 Canadian OK Ramsey 0.41982680 0.32104690
Monson 35-2 5S-2W: E/2 SW 35 Carter OK Dreyfus, Louis 0.03970560 0.02983261
Monson 35-3 5S-2W: W/2 NE 35 Carter OK Dreyfus, Louis 0.01402205 0.01079040
Montgomery 14-1 12N-6W: W/2 NW 14 Canadian OK PNG 0.24233300 0.19689600
MPI 35-1 12N-5W: N/2 SE 35 Canadian OK AEC 0.91189700 0.69658730
Munkres 18-1 21N-9W: E/2 NW 18 Major OK Continental 0.43045000 0.34833350
Myers 22-1 15N-17W: 22 Custer OK Tepee Petro 0.05309144 0.04101317
Nicek 13-1 12N-7W: 13 Canadian OK AEC 0.76932268 0.61166880
Novotny 15-1 8N-8W: 15 Grady OK Kaiser-Francis 0.03125001 0.02563499
Oxley 11-1 22N-12W: 11 Major OK Dreyfus, Louis
Pazourek 29-1 13N-5W: W/2 SE 29 Canadian OK AEC 0.42000000 0.29717260
Pendley 1-4 3N-7W: 4 Grady OK Anson 0.00105580 0.00084460
Perigo 18N-8W: 13 Kingfisher OK Simcoe 0.08125000 0.06093750
Petree 8-1 11N-5W: N/2 NE 8 Canadian OK AEC 0.45281530 0.34058030
Pettigrew "B" 10-1 11N-7W: 10 Canadian OK Bogo 0.01691791 0.01268843
Piatt 15-1 14N-6W: N/2 NE 15 Canadian OK AEC 0.94531250 0.68957020
Pospisil 29-1 12N-6W: 29 Canadian OK AEC 0.85582199 0.68483527
Ratzlaff 34-1 20N-13W: 34 Major OK AEC 0.58808200 0.43807390
Reding 20-1 13N-8W: 20 Canadian OK AEC 0.44786228 0.33934970
Riedel 2 13S-19W: E/2 NW & N/2 NE 31 Ellis KS Tomlinson, S 0.00535340 0.00468420
Riekenberg-McKay 20-1 11N-10W: 20 Canadian OK Andrmn/Smith 0.00315790 0.00276311
Riekenberg-McKay 20-2 11N-10W: 20 Canadian OK Andrmn/Smith
Rouse, W.T. 1 10N-19W: 23 Washita OK EP 0.00408980 0.00315423
Royce, Ralph 17-1 13N-8W: N/2 SW 17 Canadian OK Marathon 0.22321950 0.18834142
<CAPTION>
Well Gas WI NRI Oil ORI NRI Gas ORI NRI Reversion
---- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Loosen 1-14 0.00525800 0.00195312 0.00195312 No
Lowery 35-1 0.15893600 No
Ludwig 20-1 0.35306458 0.01923660 0.01923660 No
Ludwig 28-2 0.47251850 0.01992250 0.01992250 Yes
Maggard 23-1 0.00169526 No
Majer 9-1 0.43750000 No
Manning 29-1 0.69688638 Yes
Marshall 9-1 0.10420410 No
Mary 6-1 0.00176450 Yes
Matti, F.32-2 0.02426923 No
Mattie 6-1 0.80596850 No
Max A 14-1 0.19200000 No
Mayes 0.35250000 No
McAlister, Sena 23-1 0.00923380 Yes
Merrick 10-1 0.01483950 No
Meyer 28-1 0.45175000 0.02000000 0.02000000 Yes
Meyers 35-1 0.28987794 No
Miller 9-1 0.13789900 Yes
Mitchell 29-1 0.32104690 No
Monson 35-2 0.02983261 No
Monson 35-3 0.01079040 No
MOntgomery 14-1 0.19689600 No
MPI 35-1 0.69658730 0.00479510 0.00479510 No
Munkres 18-1 0.34833350 No
Myers 22-1 0.04101317 No
Nicek 13-1 0.61166880 Yes
Novotny 15-1 0.02563499 No
Oxley 11-1 Yes
Pazourek 29-1 0.29717260 0.00572790 0.00572790 No
Pendley 1-4 0.00084460 Yes
Perigo 0.06093750 No
Petree 8-1 0.34058030 0.01938560 0.01938560 No
Pettigrew "B" 10-1 0.01268843 0.01562500 0.01562500 Yes
Piatt 15-1 0.68957010 No
Pospisil 29-1 0.68483527 Yes
Ratzlaff 34-1 0.43807390 0.05340620 0.05340620 No
Reding 20-1 0.33934970 No
Riedel 2 0.00468420 No
Riekenberg-McKay 20-1 0.00276311 No
Riekenberg-McKay 20-2 Yes
Rouse, W.T. 1 0.00315423 No
Royce, Ralph 17-1 0.18834142 No
</TABLE>
<PAGE> 30
[CAPTION]
<TABLE>
Well APO GWI APO Oil NRI Apo Gas NRI APO Oil ORI APO Gas ORI APO-NC GWI
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loosen 1-14
Lowery 35-1
Ludwig 20-1
Ludwig 28-2 0.48587700 0.31846649 0.31846649 0.01992250 0.01992250
Maggard 23-1
Maier 9-1
Manning 29-1 0.77288307 0.64299141 0.64299141 0.77865973
Marshall 9-1
Mary 6-1 0.00214973 0.00161230 0.00161230
Matti, F.32-2
Mattie 6-1
Max A 14-1
Mayes
McAlister, Sena 23-1 0.01144578 0.00923380 0.00923380 0.00575270
Merrick 10-1
Meyer 28-1 0.47175000 0.40334624 0.40334624 0.02000000 0.02000000
Meyers 35-1
Miller 9-1 0.13788190 0.11349750 0.11349750
Mitchell 29-1
Monson 35-2
Monson 35-3
Montgomery 14-1
MPI 35-1
Munkres 18-1
Myers 22-1
Nicek 13-1 0.76932268 0.61166880 0.61166880 0.69816398
Novotny 15-1
Oxley 11-1 0.06439400 0.05634500 0.05634500
Pazourek 29-1
Pendley 1-4 0.00105580 0.00084460 0.00084460 0.01469750
Perigo
Petree 8-1
Pettigrew "B" 10-1 0.07518843 0.06109060 0.06109060
Piatt 15-1
Pospisil 29-1 0.72780397 0.63682815 0.63682815
Ratziaff 34-1
Reding 20-1
Riedel 2
Riekenberg-McKay 20-1
Riekenberg-McKay 20-2 0.00199876
Rouse, W.T. 1
Royce, Ralph 17-1
</TABLE>
[CAPTION]
<TABLE>
Well APO-NC Oil NRI APO-NC Gas NRI Apo-NC Oil ORI APO-NC Gas ORI Remarks
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loosen 1-14
Lowery 35-1
Ludwig 20-1
Ludwig 28-2
Maggard 23-1
Maier 9-1
Manning 29-1 0.64804606 0.64804606
Marshall 9-1
Mary 6-1
Matti, F.32-2
Mattie 6-1
Max A 14-1
Mayes
McAlister, Sena 23-1 0.00443677 0.00443677
Merrick 10-1
Meyer 28-1
Meyers 35-1
Miller 9-1
Mitchell 29-1
Monson 35-2
Monson 35-3
Montgomery 14-1
MPI 35-1
Munkres 18-1
Myers 22-1
Nicek 13-1 0.55388384 0.55388384
Novotny 15-1
Oxley 11-1
Pazourek 29-1
Pendley 1-4 0.01175799 0.01175799
Perigo
Petree 8-1
Pettigrew "B" 10-1
Piatt 15-1
Pospisil 29-1
Ratziaff 34-1
Reding 20-1
Riedel 2
Riekenberg-McKay 20-1
Riekenberg-McKay 20-2 0.00174891 0.00174891
Rouse, W.T. 1
Royce, Ralph 17-1
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
Well Location County State Operator GWI
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rubes 28-4 12N-6W:28 Canadian OK AEC 0.44361630
Schein 2-9 & 3-9 12N-5W:W/2 NE 9 Canadian OK Singer, C 0.50000000
Schein 9-1 12N-5W:NW 9 Canadian OK Singer, C 0.50000000
Schellstede 14-2 13N-6W:W/2 SE 14 Canadian OK AEC 0.79166000
Schimmels 13-1 13N-8W:13 Canadian OK Laguna
Schimmels A 17N-8W:14 Kingfisher OK Cummings 0.24000000
Schlect C 24-1 12N-8W:24 Canadian OK Lu-Ray 0.00986178
Schulte A 15-2 13N-6W:SW 15 Canadian OK AEC 1.00000000
Scott 23-2 14N-7W:NE 23 Canadian OK AEC 0.77120500
Shaller Trust 7-1 14N-24W:7 Roger Mills OK Samson Res 0.00285730
Shannon 2 18N-7W:W/2 NE 35 Kingfisher OK AEC 0.98437500
Shook-Boyd 12N-6W:14 Canadian OK PNG 0.16075000
Siegfried 20-1 11N-7W:20 Canadian OK Bristol 0.01795810
Siegrist 9-2 13N-7W:9 Canadian OK Bristol 0.00616909
Sican 20-1 5S-2W:NE 20 Carter OK Dreyfus, Louis 0.01275250
Smith, C.C. 32-1 25N-21W:32 Harper OK BRG 0.01298790
Smith, L S. 8-1 16N-22W:E/2 SW 9 Roger Mills OK AEC 0.84875000
Spear 8-1 13N-8W:8 Canadian OK Samedan 0.17555060
Stafford 13-1 12N-7W:13 Canadian OK AEC 0.95572415
State 2-36 13N-17W:36 Custer OK Kaiser-Francis
State 29-1 14N-5E:29 Lincoln OK AEC 0.40841000
State 36-1 11N-4W:NW 36 Oklahoma OK Marathon 0.50098238
Steifferman 20-1 14N-7W:SE 20 Canadian OK Summit 0.01139063
Sweet 21-1 10N-24W:21 Beckham OK Samson 0.00904872
Tech 8-1 14N-9W:6 Canadian OK AEC 0.69666280
Thumond, Jimmie 1-1 22N-24W:1 Ellis OK PNG Operating Compa 0.00360639
TLS 1 18N-7W:32 Kingfisher OK Simcoe 0.03485130
Turnbill 36-1 8N-10W:36 Caddo OK Ricks Explo 0.00314200
Van Buskirk 2-1 13N-8W:2 Canadian OK Laguna 0.00834138
Varner 1-13 1S-3W:13 Carter OK AEC 0.48846750
Varner 13-2 1S-3W: NW NW 13 Carter OK AEC 0.80386360
Vasicek 29-1 12N-6W:29 Canadian OK AEC 0.84325000
Vasicek 36-1 12N-7W:36 Canadian OK Chaco 0.01346860
Vasicek C 1-28 12N-6W:28 Canadian OK Parker&Parsley 0.32861330
Verden, NE Unit 8N-8W:15 Grady OK Oryx Energy 0.00057039
Vincent 17N-7W:11 Kingfisher OK Simcoe 0.05000000
Vogt 29-A 15N-8W:29 Kingfisher OK Vista 0.00634425
Von Tungeln 1-20 12N-8W:20 Canadian OK Continental 0.24270376
Ward 10-1 20N-15W:10 Major OK Dreyfus, Louis
Weber, Melvin 7-1 12N-5W:E/2 SW 7 Canadian OK Prime 0.16670000
Wendt 18N-6W:S/2 SW 24 Kingfisher OK AEC 1.00000000
Westfahl 34-1 20N-13W:34 Major OK AEC 0.84534000
</TABLE>
<TABLE>
<CAPTION>
Well Oil WI NRI Gas WI NRI Oil ORI NRI Gas ORI NRI Reversion
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rubes 28-4 0.38803937 0.38803937 No
Schein 2-9 & 3-9 0.43750000 0.43750000 No
Schein 9-1 0.43750000 0.43750000 No
Schellstede 14-2 0.66889916 0.66889916 0.03455640 0.03455640 No
Schimmels 13-1 0.00052084 0.00052084 No
Schimmels A 0.19200000 0.19200000 No
Schlect C 24-1 0.00739630 0.00739630 0.00781250 0.00781250 Yes
Schulte A 15-2 0.76616538 0.76616536 Yes
Scott 23-2 0.57840363 0.57840363 No
Shaller Trust 7-1 0.00229960 0.00229960 No
Shannon 2 0.79980470 0.79980470 No
Shook-Boyd 0.13069400 0.13069400 No
Siegfried 20-1 0.01374920 0.01374920 No
Siegrist 9-2 0.00462654 0.00456265 Yes
Sican 20-1 0.01039891 0.01039891 No
Smith, C.C. 32-1 0.01136440 0.01136440 No
Smith, L S. 8-1 0.69941690 0.69941690 0.00783450 0.01019150 No
Spear 8-1 0.13762958 0.13752228 0.00010740 No
Stafford 13-1 0.71204030 0.71204030 Yes
State 2-36 0.00020620 0.00020620 Yes
State 29-1 0.33183287 0.33183287 No
State 36-1 0.39079910 0.39079910 Yes
Steifferman 20-1 0.00831517 0.00831517 0.00045562 0.00045562 No
Sweet 21-1 0.00832250 0.00832250 No
Tech 8-1 0.54074850 0.54074850 No
Thumond, Jimmie 1-1 0.00272980 0.00272980 No
TLS 1 0.02613830 0.02613830 No
Turnbill 36-1 0.00237500 0.00237500 No
Van Buskirk 2-1 0.00625601 0.00625601 No
Varner 1-13 0.37948300 0.37948300 No
Varner 13-2 0.59943290 0.59943290 No
Vasicek 29-1 0.67540620 0.67540620 Yes
Vasicek 36-1 0.01178502 0.01178502 No
Vasicek C 1-28 0.28741440 0.28741440 No
Verden, NE Unit 0.00042779 0.00042779 No
Vincent 0.04000000 0.04000000 No
Vogt 29-A 0.00469471 0.00469471 No
Von Tungeln 1-20 0.18202778 0.18202778 Yes
Ward 10-1 0.00164499 0.00164499 No
Weber, Melvin 7-1 0.14583300 0.14583300 No
Wendt 0.82098680 0.82098680 No
Westfahl 34-1 0.64118510 0.64118510 0.06303120 0.06303120 No
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
Well APO GWI APO Oil NRI APO Gas NRI APO Oil ORI APO Gas ORI
---- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Rubes 28-4
Schein 2-9 & 3-9
Schein 9-1
Schellstede 14-2
Schimmels 13-1
Schimmels A
Schlect C 24-1 0.04111170 0.03278730 0.03278730
Schulte A 15-2 0.98784720 0.75705080 0.75705080
Scott 23-2
Shaller Trust 7-1
Shannon 2
Shook-Boyd
Siegfried 20-1
Siegrist 9-2 0.00427496 0.00374060 0.00374060
Sloan 20-1
Smith, C.C. 32-1
Smith, L.S. 9-1
Spear 8-1
Stafford 13-1
State 2-36 0.00285433 0.00202788 0.00202788
State 29-1
State 36-1 0.50098238 0.39079810 0.39079910
Steifferman 20-1
Sweet 21-1
Tech 6-1
Thurmond, Jimmie 1-1
TLS 1
Turnbill 36-1
Van Buskirk 2-1
Varner 1-13
Varner 13-2
Vasicek 29-1 0.71837500 0.62857790 0.62857790
Vasicek 36-1
Vasicek C 1-28
Verden, NE Unit
Vincent
Vogt 29-A
Von Tungein 1-20 0.18202780 0.14789760 0.14789760
Ward 10-1
Weber, Melvin 7-1
Wendt
Westfahl 34-1
<CAPTION>
Well APO-NC GWI APO-NC Oil NRI APO-NC Gas NRI APO-NC Oil ORI APO-NC Gas ORI Remarks
---- ----------- -------------- -------------- -------------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
Rubes 28-4
Schein 2-9 & 3-9
Schein 9-1
Schellstede 14-2
Schimmels 13-1
Schimmels A
Schlect C 24-1
Schulte A 15-2 0.91493060 0.69324880 0.69324880
Scott 23-2
Shaller Trust 7-1
Shannon 2
Shook-Boyd
Siegfried 20-1
Siegrist 9-2 0.00569994 0.00427500 0.00427500
Sloan 20-1
Smith, C.C. 32-1
Smith, L.S. 9-1
Spear 8-1
Stafford 13-1
State 2-36
State 29-1
State 36-1 0.48630830 0.37992850 0.37992850
Steifferman 20-1
Sweet 21-1
Tech 6-1
Thurmond, Jimmie 1-1
TLS 1
Turnbill 36-1
Van Buskirk 2-1
Varner 1-13
Varner 13-2
Vasicek 29-1
Vasicek 36-1
Vasicek C 1-28
Verden, NE Unit
Vincent
Vogt 29-A
Von Tungein 1-20
Ward 10-1
Weber, Melvin 7-1
Wendt
Westfahl 34-1
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
WELL LOCATION COUNTY STATE OPERATOR
---- -------- ----------- ------ -----------
<S> <C> <C> <C> <C>
Wheatland East Unit 11N-4W:32 Oklahoma/Cleveland OK Marathon
White, Irene 18-1 12N-6W:18 Canadian OK AEC
Wiedrick 27N-25W:25 Harper OK PG&E
Wieman 29-1 14N-7W:NE 29 Canadian OK AEC
Wier 8-1 12N-8W:8 Canadian OK Golden
Wilkerson 11-1 11N-7W:11 Canadian OK AEC
Wittkopp 10-2 11N-5W:E/2 NE 10 Canadian OK AEC
Wolf 29-1 13N-9W:29 Canadian OK Bristol Res
Yeck 29-1 12N-6W:29 Canadian OK AEC
Zaloudik 1-1 12N-6W:N/2 1 Canadian OK AEC
Zaloudik 2-1 12N-6W:N/2 1 Canadian OK AEC
Zaloudik 3-1 12N-6W:N/2 1 Canadian OK AEC
Zaloudik 4-1 12N-6W:N/2 1 Canadian OK AEC
Zum Mallen 23-1 14N-7W:SW 23 Canadian OK Milmac
</TABLE>
<TABLE>
<CAPTION>
WELL GWI Oil WI NRI Gas WI NRI Oil ORI NRI Gas ORI NRI Reversion
---- ----- ---------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Wheatland East Unit 0.01062749 0.00798024 0.00798024 Yes
White, Irene 18-1 0.29655157 0.22235933 0.22235933 No
Wiedrick 0.00781250 0.00683590 0.00683590 No
Wieman 29-1 0.66090737 0.48246236 0.48246230 0.01923660 0.01999998 Yes
Wier 8-1 0.01423257 0.01156389 0.01156389 No
Wilkerson 11-1 0.82875000 0.64158200 0.64158200 Yes
Wittkopp 10-2 0.71499930 0.53781250 0.53781250 0.03544270 0.03544270 No
Wolf 29-1 0.00104163 0.00104163
Yeck 29-1 0.85714000 0.68847507 0.68847507 No
Zaloudik 1-1 0.93555558 0.80084550 0.80084550 Yes
Zaloudik 2-1 0.93555558 0.80084550 0.80084550 No
Zaloudik 3-1 0.93555558 0.80084550 0.80084550 No
Zaloudik 4-1 0.49146836 0.40591008 0.40591008 No
Zum Mallen 23-1 0.01518140 0.01168970 0.01168970 0.00030360 0.00030360 No
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
Well APO GWI APO Oil NRI APO Gas NRI APO Oil ORI APO Gas ORI
---- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Wheatland East Unit 0.01138686 0.00854630 0.00854630
White, Irene 18-1
Wiedrick 25-2
Wieman 29-1 0.66090737 0.48246236 0.48246230 0.01923660 0.01999998
Wier 8-1
Wilkerson 11-1 0.62875000 0.49158200 0.49158200
Wittkopp 10-2
Wolf 29-1
Yeck 29-1 0.85714000 0.68847507 0.68847507
Zaloudik 1-1
Zaloudik 2-1
Zaloudik 3-1
Zaloudik 4-1
Zum Mallen 23-1
</TABLE>
<TABLE>
<CAPTION>
Well APO-NC GWI APO-NC Oil NRI APO-NC Gas NRI APO-NC Oil ORI APO-NC Gas ORI Remarks
---- ----------- -------------- -------------- -------------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
Wheatland East Unit
White, Irene 18-1
Wiedrick 25-2
Wieman 29-1 0.55991518 0.40873802 0.40873802 0.01923660 0.01999998
Wier 8-1
Wilkerson 11-1
Wittkopp 10-2
Wolf 29-1
Yeck 29-1 0.56610940 0.44997400 0.44997400
Zaloudik 1-1
Zaloudik 2-1
Zaloudik 3-1
Zaloudik 4-1
Zum Mallen 23-1
</TABLE>
<PAGE> 35
ANNEX II
FORM OF TERM NOTE
SECURED TERM NOTE
$______________ April 15, 1996
FOR VALUE RECEIVED, the undersigned, ALEXANDER ENERGY CORPORATION, an
Oklahoma corporation (the "Borrower"), promises to pay to the order of
___________________ (the "Lender"), the principal sum of ______________________
DOLLARS ($_______________) payable in principal installments on the dates and
in the amounts as set forth in the Credit Agreement, dated as of November 14,
1994 (together with all amendments and other modifications, if any, from time
to time thereafter made thereto, the "Credit Agreement"), among the Borrower,
CANADIAN IMPERIAL BANK OF COMMERCE, New York Agency, as Agent, and the various
financial institutions (including the Lender) as are, or may from time to time
become, parties thereto.
The Borrower also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement provided
that such rates shall not exceed the Highest Lawful Rate.
Payments of both principal and interest are to be made in lawful money of
the United States of America in same day or immediately available funds to the
account designated by the Agent pursuant to the Credit Agreement.
This Secured Term Note is a Term Note referred to in, and evidences
Indebtedness incurred under, the Credit Agreement, to which reference is made
for a description of the security for this Note and for a statement of the terms
and conditions on which the Borrower is permitted and required to make
prepayments and repayments of principal of the Indebtedness evidenced by this
Note and on which such Indebtedness may be declared to be immediately due and
payable. Unless otherwise defined, terms used herein have the meanings provided
in the Credit Agreement.
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.
<PAGE> 36
THIS SECURED TERM NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
ALEXANDER ENERGY CORPORATION
By:___________________________
Name:_________________________
Title:________________________
2
<PAGE> 37
TERM LOAN AND PRINCIPAL PAYMENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Principal Principal
Loan Made Repaid Balance
--------------- -------------------------------
Base Base Base Notation
Date Rate Rate Rate Total Made By
- ---------- ---- ---- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 38
ANNEX III
FORM OF ENVIRONMENTAL QUESTIONNAIRE
OIL & GAS PROPERTY/FACILITY
This questionnaire is to be completed by the Borrower and submitted as
part of the closing documents prepared in connection with the funding of the
loan:
Name of Borrower:
---------------------------------------------------------
Name of person completing
this questionnaire:
-----------------------------------------------------
PROPERTY/FACILITY IDENTIFICATION
Property/Facility Name (use well name and API number if
appropriate):
-------------------------------------------------------------------
Location:
-----------------------------------------------------------------------
Current Operator:
---------------------------------------------------------------
Address:
------------------------------------------------------------------------
Contact: Telephone: ( )
-------------------------------------- ---- -------------
Land Owner:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Contact: Telephone: ( )
-------------------------------------- ---- -------------
[Attach Additional Pages if Necessary]
PROPERTY/FACILITY DESCRIPTION
Describe any Geological Features of the property/facility which may give rise
to special environmental concerns, including the presence of hydrogen sulfide
or other hazardous substances found to occur naturally or otherwise in or
produced with oil and natural gas, the proximity of the property/facility to
aquifers, wetlands, wildlife refuges or habitats for endangered species:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 39
Describe the Present Uses of the property/facility including all current
operations and services performed on-site:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Describe the Past Uses of the property/facility including all operations and
services which were previously performed on-site:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STORAGE PRACTICES
Describe the type, quantity, age, capacity, contents, and location of all past
and present Above Ground Storage Vessels including but not limited to
containers (pails, drums, portable tanks) and active or inactive stationary
tanks and pipelines (including underground pipelines), surface impoundments,
lagoons, pits and chemical/waste piles; and indicate which, if any,
governmental authorities have been notified of such above ground storage
vessels:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Describe the type, quantity, age, capacity, contents, and location of all past
and present Below Ground Storage Vessels including but not limited to active or
inactive underground tanks
-2-
<PAGE> 40
and pipelines; and indicate which, if any, governmental authorities have been
notified of such below ground storage vessels:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Describe any spill, leak or emission Contingency Measures which are in effect
such as tank overfill alarms, corrosion protection systems, bermed storage
areas (i.e., secondary containment), monitoring wells, spill cleanup materials,
emission detection or venting equipment; and describe any emergency response
plans including employee training which have been implemented:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DISPOSAL PRACTICES
Describe all On-Site Treatment and Disposal Practices, past and present,
including but not limited to land application, landfills, injection wells,
ocean disposal, septic tanks, dumpsters, drums, severs, incinerators, or any
discharges or emissions whatsoever onto or into soil, onto or into
surface/groundwater, or into the atmosphere; and indicate which, if any,
governmental authorities have been notified of such treatment and disposal
practices:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-3-
<PAGE> 41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Describe all Off-Site Treatment and Disposal Practices, past and present, and
specify the names and addresses of all transporters and treatment/storage/
disposal facilities (including tires, batteries, spent parts, washer fluids,
solvents and used oil), to which such materials have been transported, vacuum
companies, trash haulers; and indicate which, if any, governmental authorities
have been notified of such treatment and disposal practices:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HAZARDOUS MATERIALS
Describe the type, quantity, and location of any known or suspected Asbestos
Containing Building Materials (or other asbestos products used on-site)
including but not limited to pipe/duct insulation, roofing material, cap sheet,
concrete, ceiling/wall coverings, floor tiles, and transite piping; and
indicate which, if any, governmental authorities have been notified of such
asbestos:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-4-
<PAGE> 42
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Describe the type, quantity, and location of any and all electrical
transformers and capacitors (including florescent ballasts); and indicate
whether they are known to contain Polychlorinated Biphenyls ("PCBs") (and, if
so, please provide a copy of the laboratory report and indicate whether an
inspection/management plan has been developed and is in operation); and which,
if any, governmental authorities have been notified of such PCB:
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Describe any and all Chemicals including raw materials, products, byproducts,
or waste (including detergents, acids, cleaning fluids, solvents and used oil)
not previously described that have been or are presently generated,
manufactured, treated, stored, handled, or disposed at the property/facility;
and indicate which, if any, governmental authorities have been notified of
their use:
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<PAGE> 43
ENVIRONMENTAL REGULATORY AFFAIRS
List all federal, state, and local Environmental Permits related to the
property/facility which have been issued, which are pending, or which have been
denied; and include the permit number, the name of the regulatory agency, the
date of approval or denial, the date of expiration or reason for denial, and
provide your EPA twelve digit Identification Number if one has been issued:
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Describe any previous Environmental Assessments including but not limited to
surveys, investigations, audits, or impact statements which have been
performed for the property/facility and attach copies of the instructions for
preparation of the report, all drafts and the final copy of the report to this
questionnaire:
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Describe any Federal, State, or Local Laws, statutes, rules, or other
regulations relating to the protection of the environment with which you have
not in the past or cannot at present comply:
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<PAGE> 44
Identify all Environmental Violations including but not limited to
administrative orders, temporary or permanent injunctions, civil penalties, or
criminal actions concerning the environment issued at any time against the
property/facility, its owners, its operators, or its managers; and for each
action provide the date, the agency or regulatory body involved, the type of
action, a description of the violation, and how the violation was resolved:
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Describe any known or suspected Spills or Discharges of hazardous materials or
hazardous wastes onto or into soil, onto or into surface/groundwater, or into
the atmosphere which have occurred in the past or are presently occurring at
the property/facility:
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NEIGHBORING PROPERTIES/FACILITIES
Describe the Past and Present Uses of neighboring properties/facilities
including any operations or services they perform:
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<PAGE> 45
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Describe any Storage, Treatment, or Disposal Practices, past or present, by
neighboring properties/facilities which may have caused any contamination of
Borrower's property/facility:
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Describe any known or suspected Spills, Emissions or Discharges of hazardous
materials or hazardous wastes onto or into soil, onto or into
surface/groundwater, or into the atmosphere which have occurred in the past or
are presently occurring at neighboring properties/facilities which may have
caused any contamination of Borrower's property/facility:
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I certify that the foregoing information is true and correct to the best of my
knowledge and belief.
Date:
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Name:
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Title:
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-8-
<PAGE> 1
EXHIBIT 10(g)
SECURED TERM NOTE
$11,000,000 April 15, 1996
FOR VALUE RECEIVED, the undersigned, ALEXANDER ENERGY CORPORATION, an
Oklahoma corporation (the "Borrower"), promises to pay to the order of CANADIAN
IMPERIAL BANK OF COMMERCE (the "Lender"), the principal sum of ELEVEN MILLION
DOLLARS ($11,000,000) payable in principal installments on the dates and in the
amounts as set forth in the Credit Agreement, dated as of November 14, 1994
(together with all amendments and other modifications, if any, from time to
time thereafter made thereto, the "Credit Agreement"), among the Borrower,
CANADIAN IMPERIAL BANK OF COMMERCE, New York Agency, as Agent, and the various
financial institutions (including the Lender) as are, or may from time to time
become, parties thereto.
The Borrower also promises to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement provided
that such rates shall not exceed the Highest Lawful Rate.
Payments of both principal and interest are to be made in lawful money
of the United States of America in same day or immediately available funds to
the account designated by the Agent pursuant to the Credit Agreement.
This Secured Term Note is a Term Note referred to in, and evidences
Indebtedness incurred under, the Credit Agreement, to which reference is made
for a description of the security for this Note and for a statement of the
terms and conditions on which the Borrower is permitted and required to make
prepayments and repayments of principal of the Indebtedness evidenced by this
Note and on which such Indebtedness may be declared to be immediately due and
payable. Unless otherwise defined, terms used herein have the meanings
provided in the Credit Agreement.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of
dishonor.
<PAGE> 2
THIS SECURED TERM NOTE SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
ALEXANDER ENERGY CORPORATION
By: /s/ DAVID E. GROSE
-----------------------------
Name: David E. Grose
Title: Chief Financial Officer
and Vice President
2
<PAGE> 1
EXHIBIT 10(h)
April 29, 1996
Alexander Energy Corporation
701 Cedar Lake Boulevard
Oklahoma City, Oklahoma 73114
Re: Disposition of Hydrocarbons Assigned by Means of certain
Mortgages, Deeds of Trust, Assignments, Security Agreements
and Financing Statements
Gentlemen:
We refer to:
(i) Credit Agreement dated as of November 14, 1994 among Alexander
Energy Corporation (herein called the "Borrower"), various
financial institutions which are or may hereafter be parties
thereto (the "Lenders"), and Canadian Imperial Bank of
Commerce, New York Agency as agent (the "Agent") for the
Lenders as amended by a First Amendment to Credit Agreement
dated as of July 14, 1995 and a Second Amendment to Credit
Agreement dated as of April 15, 1996 (as so amended, herein
called the "Credit Agreement");
(ii) Note Agreement dated as of June 1, 1988, by and between the
Borrower and John Hancock Mutual Life Insurance Company, a
Massachusetts corporation (as amended, supplemented, restated,
replaced or otherwise modified and in effect from time to
time, the "John Hancock Note Agreement");
(iii) A Note of the Borrower dated November 14, 1994 (herein called
the "Note") payable to the order of CIBC Inc. as Lender in the
principal amount of $52,000,000;
(iv) Notes of the Borrower dated June 1, 1988 (herein called the
"John Hancock Notes") issued pursuant to the John Hancock Note
Agreement in the aggregate original principal amount of
$5,000,000;
<PAGE> 2
Alexander Energy Corporation
April 29, 1996
Page 2
(v) Mortgage, Deed of Trust, Assignment, Security Agreement and
Financing Statement [Texas] dated as of April 26, 1996 (the
"Texas Mortgage") from the Borrower to CIBC Inc. as collateral
agent (the "Collateral Agent") for the Secured Parties, as
defined therein, and the Trustees for the Collateral Agent;
(vi) Mortgage, Deed of Trust, Assignment, Security Agreement and
Financing Statement [Oklahoma] dated as of April 26, 1996
(the "Oklahoma Mortgage ") from the Borrower to the Collateral
Agent and the Trustees for the Collateral Agent; and
(vii) Mortgage, Deed of Trust, Assignment, Security Agreement and
Financing Statement [Arkansas] dated as of April 26, 1996 (the
"Arkansas Mortgage") from the Borrower to the Collateral Agent
and the Trustees for the Collateral Agent.
The Texas Mortgage, Oklahoma Mortgage and Arkansas Mortgage are
hereinafter collectively referred to as the "Mortgage."
Pursuant to Article III of the Mortgage, the Borrower has assigned to
the Collateral Agent all Hydrocarbons (as defined in the Mortgage) which are
produced from and would accrue to the Mortgaged Property (as defined in the
Mortgage) commencing on April 26, 1996, together with all proceeds therefrom.
This letter is to inform you that, until the Collateral Agent shall at
any time by written notice direct otherwise, the Borrower may continue to
receive, retain and use all Hydrocarbons and proceeds therefrom. Upon the
giving of any such notice (which notice may be given by the Collateral Agent at
any time in the exercise of its sole discretion, after the occurrence and
during the continuance of any Default or Event of Default pursuant to the
Credit Agreement, any default or Event of Default pursuant to the John Hancock
Note Agreement or any default or event of default pursuant to a Mortgage), you
agree that you will no longer collect, receive, retain or use any such
Hydrocarbons or proceeds therefrom, and any such items which are received by
you shall not be commingled with any other of your own funds or property and
shall be held by you in express trust for the Collateral Agent, until delivered
to the Collateral Agent, and you agree to promptly deliver any and all such
items to the Collateral Agent.
<PAGE> 3
Alexander Energy Corporation
April 29, 196
Page 3
Nothing herein contained shall be deemed to prejudice the exercise by
the Collateral Agent or any other Secured Party of any or all of its rights and
remedies under the Credit Agreement, the John Hancock Note Agreement, the Note,
the John Hancock Notes, the Mortgage, or any other instrument obtained or to be
obtained in connection with any of the foregoing, including, without
limitation, any and all acceptances thereof.
Sincerely,
CIBC INC., as Collateral Agent
By: /s/ ILLEGIBLE
-----------------------------------
Name:
---------------------------------
Title: AUTHORIZED SIGNATORY
---------------------------------
AGREED TO AND ACCEPTED:
ALEXANDER ENERGY CORPORATION
By: /s/ DAVID E. GROSE
-----------------------------------
Name: David E. Grose
---------------------------------
Title: Chief Financial Officer
and Vice President
---------------------------------
<PAGE> 1
EXHIBIT 10(i)
INTERCREDITOR AGREEMENT
THIS CREDITOR AGREEMENT, dated as of April 15, 1996 (herein called
this "Agreement"), is entered into by and among Canadian Imperial Bank of
Commerce, acting through its New York Agency, as agent (in such capacity
together with its successors in such capacity the "Agent") for certain
financial institutions as are or may become parties to the Credit Agreement
hereinafter referenced (the "Lenders"), John Hancock Life Insurance Company, a
Massachusetts corporation (together with its successors and assigns "John
Hancock"), Barnett & Co., Canadian Imperial Bank of Commerce, as administrative
agent for itself and the Secured Persons hereinafter referenced (in such
capacity together with its successors in such capacity the "Administrative
Agent") and CIBC Inc., a Delaware corporation, as collateral agent for itself
and the Secured Persons (in such capacity together with its successors in such
capacity the "Collateral Agent"). John Hancock and Barnett & Co. are
collectively referred to herein as the "Noteholders".
WITNESSETH:
WHEREAS, Alexander Energy Corporation, an Oklahoma corporation (herein
called the "Company"), the Lenders and the Agent have entered into a Credit
Agreement, dated as of November 14, 1994, as amended by that certain First
Amendment to Credit Agreement dated as of July 14, 1995, and as further amended
by that Second Amendment to Credit Agreement dated as of April 15, 1996
(herein, as so amended and as hereinafter further amended, supplemented,
restated, replaced or otherwise modified and in effect from time to time, the
"Credit Agreement"), pursuant to which, among other things, the Lenders have
made and agreed to make certain loans to the Company;
WHEREAS, the Company and CIBC have entered into or may, from time to
time, enter into interest rate or commodity swap agreements with respect to
various obligations of the Company (herein, as hereafter executed and amended,
supplemented, restated, replaced or otherwise modified and in effect from time
to time, collectively called the "Swap Agreements");
WHEREAS, the Company issued to John Hancock those certain 10% Senior
Unsecured Notes ("John Hancock Notes") pursuant to a Note Agreement dated as of
June 1, 1988, by and between the Company and John Hancock (herein, as amended,
supplemented, restated, replaced or otherwise modified and in effect from time
to time, the "John Hancock Note Agreement");
WHEREAS, in connection with a Borrowing Base Deficiency (as defined in
the Credit Agreement) and various defaults under the Credit Agreement the
Company has agreed to grant to the Collateral Agent for the benefit of the
Lenders, the Collateral Agent and the Agent, a lien on all of the Assets (as
defined in the Credit Agreement) and property of the Company and in connection
with various defaults under the John Hancock Note Agreement the Company has
agreed to grant to the Collateral Agent for the benefit of the Noteholders as
security for the Company's obligations under the John Hancock Note Agreement a
lien on those same assets and property, which liens are to be pari passu;
WHEREAS, the Lenders, the Agent, the Collateral Agent, the
Administrative Agent, the Noteholders have agreed to enter into this Agreement
so as to evidence the agreement
<PAGE> 2
among themselves with respect to the Collateral and with respect to certain
payments that may be received by the Agent, the Collateral Agent, the
Noteholders and/or the Lenders;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. Uniform Definitions. Each of the terms defined in each
Credit Facility and not otherwise defined in this Agreement is used herein with
the meaning therein specified.
SECTION 1.02. Additional Definitions. The terms defined in the
preamble and prefatory clauses shall have the meanings specified therein and
the following terms, as used herein, shall have the following meanings:
"Acceleration" shall mean the earlier of (i) the acceleration of the
maturity of any amount outstanding under a Credit Facility and (ii) the
occurrence of a Bankruptcy Event.
"Affected Secured Person" shall have the meaning set forth in Section
2.04.
"Assignee" shall mean any assignee, participant or other transferee of
any portion of the right, title or interest of any Secured Person under any
Credit Facility, except for any such transferee that becomes a Secured Person
for purposes hereof in accordance with Section 6.02.
"Bankruptcy Event" shall mean an event specified in Sections 9.1(f),
9.1(g) and 9.1(h) of the John Hancock Note Agreement with respect to the
Company or Section 8.1.9 of the Credit Agreement with respect to the Company.
"Business Day" shall mean any day, except a Saturday, Sunday or other
day on which commercial banks in Boston, Massachusetts, or the City of New York
are authorized or required by law to close.
"Calculation Date" shall mean the earlier of:
(a) if a Notice of Default is given by a Secured Person
pursuant to Section 3.01(c) (or was required by that Section to be given) and
Acceleration occurs within 90 days thereafter for any reason without such
Default having been cured, the date that such Notice of Default was given or
required to be given under such Section;
(b) if a Notice of Event of Default is given by a Secured
Person pursuant to Section 3.01(d) (or was required by that Section to be
given) and Acceleration occurs within 90 days thereafter for any reason without
such Event of Default having been cured, the date that such Notice of Event of
Default was given or required to be given under such Section; and
(c) the date on which Acceleration occurs.
-2-
<PAGE> 3
"Collateral" shall mean any and all property, security or other
interest, tangible or intangible, securing the obligations of the Company under
any or all of the Credit Facilities.
"Credit Facilities" shall mean the Credit Agreement and any notes
issued pursuant thereto, the John Hancock Note Agreement, the John Hancock
Notes, any Swap Agreement and any other evidences of indebtedness issued
pursuant to any of the foregoing, and "Credit Facility" means any of the
foregoing.
"Default" means any Event of Default under either Credit Facility or
any condition, occurrence or event which, after notice or lapse of time or
both, would constitute an Event of Default under either Credit Facility.
"Financial Obligations" shall mean, with respect to any Secured
Person, the aggregate amount payable (whether or not then due) to such Secured
Person under the Credit Facilities, in respect of principal, premium (if any),
interest (determined in accordance with the applicable provisions of the Credit
Facilities), fees plus all expenses owing under the Credit Facilities.
"Financing Documents" shall mean the Credit Facilities and the
Security Documents.
"Indebtedness" shall mean, with respect to a Calculation Date, the
aggregate outstanding principal amount of the indebtedness of the Company under
the Credit Agreement, the Notes issued under the Credit Agreement, the John
Hancock Note Agreement and the John Hancock Notes.
"Mortgage" shall mean any mortgage, pledge, assignment, security
agreement or financing statement or other lien or encumbrance of any type
granted by the Company, from time to time, pursuant to the Credit Facilities.
"Non-Reallocable Payment" shall mean, (i) with respect to any Credit
Facility, any scheduled payments received at any time from the Company prior to
Acceleration including without limitation payments made on account of
Borrower's Excess Cash Flow and (ii) with respect to the Credit Agreement,
non-scheduled repayment of advances made on a revolving basis which are
received prior to, on or after a Calculation Date and prior to the time the
Agent has actual knowledge of an Acceleration; provided that if the aggregate
repayments described in the preceding clause (ii) received during the period
from the Calculation Date to Acceleration are in excess of the aggregate
advances made during such period, such excess shall constitute a Reallocable
Payment; and provided further that any advances made by a Lender after the date
such Lender gives, or was required to give, a Notice of Default or a Notice of
Event of Default cannot be used to offset payments received during such period.
"Notice of Default" shall have the meaning specified in Section
3.01(d) of this Agreement.
"Proportionate Share" shall mean as of any date, a fraction (a) the
numerator of which is the sum of the Indebtedness owing to such Secured Person
plus any Swap Amount owing to such Secured Person as of the Calculation Date
and (b) the denominator of which is the sum of the Indebtedness owing to all
Secured Persons plus the Swap Amount owing to all Secured
-3-
<PAGE> 4
Persons as of the Calculation Date; provided, however, that following a
recalculation pursuant to Section 2.04, "Proportionate Share" shall mean such
fraction as so recalculated.
"Reallocable Payment" shall mean any amount received by a Secured
Person or an Assignee in respect of any Credit Facility by virtue of any
payment or prepayment (other than a Non-Reallocable Payment) made by or for the
account of the Company, or by virtue of an exercise of any right of set-off,
combination, zero-balancing, or similar mechanisms, or from any sums disbursed
pursuant to any judgment on or settlement of any claim arising from or relating
to any Credit Facility or any recovery made with respect to the Collateral or
any Credit Facility at any time after the Calculation Date.
"Required Secured Persons" shall mean the Secured Persons holding at
least 75% of the Total Indebtedness outstanding from time to time; provided,
however, that with respect to any matter at any time when an Event of Default
shall not have occurred and be continuing under the Credit Agreement, the
unused portion of the Maximum Commitment Amount of the Lenders shall be
included as Indebtedness of such Lenders for purposes of this definition.
"Secured Persons" shall mean the Noteholders, the Agent, the
Administrative Agent, the Collateral Agent, each Lender and each financial
institution that becomes a "Secured Person" for purposes hereof in accordance
with Article VI, and "Secured Person" means any one of them.
"Security Documents" shall mean the Mortgages, that certain
Assignment, Security Agreement and Financing Statement of even date herewith
executed by the Company in favor of the Collateral Agent for the benefit of the
Secured Persons, and any other agreement encumbering the Collateral.
"Sharing Notice" shall mean a notice given by the Administrative Agent
pursuant to Section 2.01.
"Swap Amount" shall mean with respect to each Lender (a "Swap Lender")
on a Calculation Date, the aggregate amount of all breakage, unwinding and all
related costs under all Swap Agreements which would be due and owing thereunder
to such Lender on such Calculation Date if any such Swap Agreement was
terminated on such date whether or not such Swap Amount is actually due and
owing on such date.
"Total Indebtedness" shall mean, at any time, the aggregate principal
amounts then outstanding under the Credit Facilities including, without
limitation, all contingent obligations thereunder.
-4-
<PAGE> 5
ARTICLE III.
PAYMENTS
SECTION 2.01. Payments Prior to Calculation Date: Sharing Notice. So
long as no Calculation Date has occurred, (a) the Lenders may accept and apply
payments (including regularly scheduled payments and prepayments) to any of the
Notes issued pursuant to the Credit Agreement from any source at any time, and
(b) John Hancock may accept and apply payments (including regularly scheduled
payments and prepayments) to any of the John Hancock Notes from any source at
any time. Upon Acceleration the accelerating Secured Person, if any, shall
promptly notify each of the Collateral Agent and the Administrative Agent of
such Acceleration, and the Administrative Agent shall promptly thereafter give
notice (a "Sharing Notice") to each of the Secured Persons informing them that
the provisions of this Article II are to be implemented. Each Secured Person
shall provide the Administrative Agent within five days following the receipt
of the Sharing Notice of such Secured Person's Indebtedness and Financial
Obligation as of the Calculation Date specifying the nature and amount of such
Secured Party's Indebtedness and Financial Obligations in such detail as the
Administrative Agent shall request. Any Sharing Notice shall be effective as of
the date it is sent by the Administrative Agent and shall remain effective
until all the Secured Persons agree that such Sharing Notice is no longer in
effect. The Administrative Agent shall calculate the Proportionate Share of
each Secured Person as of the Calculation Date based on information received
from each Secured Person and shall promptly following receipt of the
information requested from each Secured Person pursuant to this Section 2.01
notify each Secured Person of the Indebtedness, Financial Obligation and the
Proportionate Share of each Secured Person.
SECTION 2.02. Reallocable Payments. If any Secured Person (or any
Assignee of any Secured Person) (the "Purchasing Secured Person") obtains or
obtained any Reallocable Payment (whether by way of voluntary or involuntary
payment, by virtue of an exercise of any right of set-off or offset, by virtue
of the application of any provision of any of the Financing Documents or in any
other manner except pursuant to this Agreement), such Purchasing Secured Person
shall, promptly after receiving the Sharing Notice, notify each of the
Collateral Agent and the Administrative Agent of its (or such Assignee's)
obtaining the same and shall purchase from the other Secured Persons (the
"Selling Secured Persons") such participation(s) in the Indebtedness held by
such other Selling Secured Persons as shall be necessary to cause such
Purchasing Secured Person to share such payment or other recovery ratably with
such Selling Secured Persons. Such purchase shall be made by payment to the
Administrative Agent for the account of the Selling Secured Persons (pro rata
in accordance with their respective Proportionate Shares) an amount equal to
the Reallocable Payment, net of any out-of-pocket costs and expenses paid by
such Secured Person (or such Assignee) in so obtaining the same, less such
Secured Person's Proportionate Share of such net amount. Upon receipt of any
such payment the Administrative Agent shall distribute the same to the Selling
Secured Persons (pro rata in accordance with their respective Proportionate
Shares) as in effect on such date; provided, however that (subject to Section
2.03) any such payment received by the Administrative Agent on account of a
contingent obligation shall be distributed by the Administrative Agent to the
Collateral Agent to be held by the Collateral Agent (or at the Collateral
Agent's request by the Administrative Agent or a commercial bank acceptable to
the Administrative Agent having a combined capital and surplus of at least
$250,000,000 as its bailee) in an interest bearing account in trust for the
account of the Selling Secured Persons until the Purchasing Secured Person
notifies the Collateral Agent and the Administrative Agent (a) that such
contingent obligation has
-5-
<PAGE> 6
become an actual obligation whereupon such payment plus any accrued interest
will, if then held by the Collateral Agent, be delivered by the Collateral
Agent to the Administrative Agent and will be distributed by the Administrative
Agent to the Selling Secured Persons (pro rata in accordance with their
respective Proportionate Shares) or (b) that such obligation no longer exists,
whereupon such payment plus any accrued interest will, if then held by the
Collateral Agent, be delivered by the Collateral Agent to the Administrative
Agent and will be distributed by the Administrative Agent to the Purchasing
Secured Person and the Proportionate Shares of all Secured Persons shall be
recalculated taking into account such distribution. Amounts received hereunder
for the benefit or account of a Secured Person shall not be deemed received on
account of a contingent obligation unless and until there are no other
principal obligations then owing to such Purchasing Secured Person.
SECTION 2.03. Preferences. If all or any portion of a Reallocable
Payment shared by a Purchasing Secured Person pursuant to Section 2.02 is
thereafter recovered from such Purchasing Secured Person, the purchase shall be
rescinded, and upon receipt of notice of such event from the Purchasing Secured
Person each Selling Secured Person shall repay to the Purchasing Secured Person
the purchase price, to the ratable extent of such recovery, together with an
amount equal to such Selling Secured Person's ratable share (according to the
proportion of (x) the amount of such Selling Secured Person's required
repayment to the Purchasing Secured Person to (y) the total amount so recovered
from the purchasing Secured Person) of any interest or other amount paid or
payable by the Purchasing Secured Person in respect of the total amount so
recovered; provided that to the extent any of the relevant amounts deemed
received by a Selling Secured Person pursuant to Section 2.02 are then held in
trust, such Selling Secured Person shall not to such extent be obligated to
make a payment to or for the account of such Purchasing Secured Person (but
shall repay, to the extent not covered by accrued interest on the Reallocable
Payment held in trust, any such interest or other amounts) but the Collateral
Agent shall, upon receipt of notice of such required repurchase from the
Purchasing Secured Person, distribute such amount so held in trust plus any
accrued interest to the Administrative Agent for payment to such Purchasing
Secured Person on behalf of such Selling Secured Person.
SECTION 2.04. Adjustments to Proportionate Shares. (a) if, at any time
after the receipt of a Sharing Notice, a Secured Person or its Assignee is
required to repay to the Company or any other Person all or any portion of an
amount received on or prior to the date of such Sharing Notice, then the
repaying Secured Person's Indebtedness be increased by the amount such Secured
Person is required to repay; or
(b) if, at any time after the receipt of a Sharing
Notice, a Swap Amount of a Secured Person is not due and owing on a Calculation
Date and does not actually become due and owing upon any an Acceleration, then
such Secured Person's Indebtedness will be decreased by such Swap Amount (each
Secured Person described in any of the foregoing clauses being herein called an
"Affected Secured Person").
Upon the occurrence of any event described in the immediately
preceding sentence of this Section 2.04, the Affected Secured Person shall
promptly notify the Administrative Agent and the Collateral Agent of such event
and of the relevant amount by which such Secured Person's Indebtedness is so
increased or decreased and promptly following receipt of such notice, the
Administrative Agent shall recalculate and adjust (and shall promptly notify
each Secured Person
-6-
<PAGE> 7
and the Collateral Agent of) the Proportionate Shares of the Secured Persons
following such increase or decrease, as the case may be, which adjustment shall
become effective upon the giving of notice thereof by the Administrative Agent
to the Secured Persons and the Collateral Agent. Each Secured Person other than
the Affected Secured Person, or the Affected Secured Person, as the case may be,
shall promptly (and in any event within five Business Days after its receipt of
notification from the Administrative Agent of such adjustment to the
Proportionate Shares, which notification the Administrative Agent shall dispatch
promptly upon its determining the adjusted Proportionate Shares and the amount
of the repayment required from each such other Secured Person or from the
Affected Secured Person, as the case may be, as required above) repay to the
Agent for the account of the relevant Affected Secured Person or the other
Secured Persons, as the case may be, the portion of any payments previously
received by it under Section 2.02 in excess of its Proportionate Share as so
redetermined, together with such amount (if any) as is equal to the appropriate
portion of any interest (in respect of the period during which such other
Secured Person held such amount) the Affected Secured Person or its Assignee
shall have been obligated to pay when repaying such amount described in clause
(a) above, or in the case of reduction of the Affected Secured Person's
Proportionate Share pursuant to clause (b) the payment made by the Affected
Secured Person shall include such other Secured Person's Proportionate Share of
any interest earned by the Affected Secured Person on such Swap Amount. Anything
herein contained to the contrary notwithstanding, if a Secured Person is
required to make a payment hereunder on account of amounts then held in trust
for. such Secured Person, such Secured Person shall not be required to make such
payment but rather the Administrative Agent shall pay (or if such funds are then
held by the Collateral Agent, the Collateral Agent shall make such funds
available to the Administrative Agent, and the Administrative Agent shall pay)
the amounts so held in trust on behalf of such Secured Person to the other
relevant Secured Person.
SECTION 2.05. (a) Pro Rata Treatment. Except as otherwise provided in
this Agreement, the Secured Persons hereby agree that they will receive and
give pro rata treatment in connection with all payments, distributions,
collections or recoveries received in respect of the Collateral and all other
matters relating to the Collateral hereunder and as to all Reallocable
Payments and under each of the Security Documents and that all liens securing
the Credit Facilities shall be pari passu notwithstanding the time of such
liens in accordance with this Agreement. Each payment or distribution by or
from or received in connection with the exercise of remedies after a Default or
an Event of Default in respect of the Collateral shall be shared and applied
ratably in accordance with each Secured Person's Proportionate Share.
(b) This Agreement Controlling. The provisions contained
herein concerning Reallocable Payments, Non-Reallocable Payments, and all
payments, distributions, collections or recoveries in respect of the Collateral
and proceeds thereof and payment thereon after a Default or Event of Default
shall be controlling, notwithstanding the terms of any agreement between any
Secured Person, the Collateral Agent, the Administrative Agent or the Company
under any other document or instrument between such parties, whether or not
bankruptcy, receivership or insolvency proceedings shall at any time have been
commenced. Except with respect solely to the priority of any Liens on any
Assets of the AEJH 1989 Limited Partnership (a Delaware limited partnership)
granted under any mortgages, deeds of trust, assignment, and other documents
executed pursuant to that certain Note Agreement dated April 25, 1989, between
the AEJH 1989 Limited Partnership and John Hancock, each Secured Person agrees
that it will not challenge the validity, enforceability, perfection or priority
of any Lien created by any Loan Document.
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SECTION 2.06. Application of Proceeds. The net proceeds of any sale,
enforcement or other disposition of any of the Collateral or other distribution
in respect of the Collateral, following an Acceleration, and the net proceeds
of any distributions received by the Secured Persons, the Administrative Agent
or the Collateral Agent following any marshalling of the assets of the Company
(whether in bankruptcy, reorganization, winding-up proceedings or similar
proceedings, or otherwise) or following confirmation of a plan of arrangement
or plan or reorganization of the Company shall be applied by the Secured Persons
and the Administrative Agent in the following order (and if received by the
Collateral Agent shall be distributed by the Collateral Agent to the
Administrative Agent for application as follows):
first, to the pro rata payment of all costs, fees, and
expenses incurred by the Collateral Agent and the Administrative
Agent, in connection with the collection or enforcement of the
Financial Obligations of the Secured Persons;
second, to the payment of the Financial Obligations of the
Secured Persons which payment shall be shared by the Secured Persons
according to their respective Proportionate Shares; and
third to the payment to the Company, its successor or assigns,
or as a court of competent jurisdiction may direct, or otherwise as
required by law, if any surplus is then remaining from such proceeds.
ARTICLE M.
COOPERATION AMONG LENDERS
SECTION 3.01. Cooperation. Each Secured Person agrees with each of the
other Secured Persons, the Administrative Agent and the Collateral Agent that:
(a) it will, and will cause each of its Assignees to,
from time to time provide such information to each of the Collateral Agent and
the Administrative Agent as may be necessary to enable the Administrative Agent
to make any calculation as referred to in Article II of this Agreement or
otherwise required for any other purpose hereof or for any purpose of any
Security Document and to notify each of the Collateral Agent and the
Administrative Agent of any Acceleration of which it has knowledge;
(b) it will, and will cause each of its Assignees to,
from time to time consult with the Collateral Agent and the Administrative
Agent and the other Secured Persons in good faith regarding the enforcement of
its and each of its Assignee's rights with a view to recovering amounts due
under the credit Facilities;
(c) it will, and will cause each of its Assignees to,
upon becoming aware of the occurrence of any Default as defined in the Credit
Facility to which such Secured Person is a party or in which it participates,
give each other Secured Person and each of the Administrative Agent and the
Collateral Agent prompt notice, and if such notice is oral, confirmed in
writing, of such Default (a "Notice of Default");
(d) it will, and will cause each of its Assignees to,
upon becoming aware of the occurrence of any Event of Default as defined in the
Credit Facility to which such Secured
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Person is a party or in which it participates, give each other Secured Person,
the Administrative Agent and the Collateral Agent prompt notice, and if such
notice is oral, confirmed in writing, of such Event of Default (a "Notice of
Event of Default"); and
(e) it will, and will cause each of its Assignees to,
give the Collateral Agent, the Administrative Agent and each other Secured
Person prompt written notice of any acceleration of any of such Secured
Person's or Assignee's Financial Obligations, the termination or unwinding of
any Swap Agreement, the termination or expiration of any contingent liability
following a Sharing Notice, and the suspension of all or any portion of any
Secured Person's commitment to advance the Company funds pursuant to a Credit
Facility.
ARTICLE IV.
COLLATERAL AGENT AND ADMINISTRATIVE AGENT
SECTION 4.01. Appointment and Authority of Agents. In order to
expedite the enforcement of the rights and remedies set forth in the Security
Documents, and the sharing of the payments and Collateral as set forth herein,
the Secured Persons hereby appoint CIBC Inc. to act as their Collateral Agent
under the Security Documents and this Agreement and appoint Canadian Imperial
Bank of Commerce to act as their Administrative Agent under this Agreement and
each of CIBC Inc. and Canadian Imperial Bank of Commerce hereby accepts its
respective appointment subject to the terms and conditions of this Agreement.
The Secured Persons hereby authorize and direct the Collateral Agent and the
Administrative Agent to take such action on their behalf under the terms and
provisions of the Security Documents and this Agreement and to exercise such
rights and remedies thereunder as are specifically delegated to or required of
the Collateral Agent and the Administrative Agent, respectively, under the
terms and provisions hereof and thereof. Each of the Collateral Agent and the
Administrative Agent is hereby expressly authorized as agent on behalf of
Secured Persons, without hereby limiting the foregoing, and subject to, and in
accordance with, the terms and conditions of this Agreement and the Security
Documents:
(a) to receive on behalf of each of the Secured Persons
any payment of monies paid to the Collateral Agent in accordance with the
Security Documents or paid to the Administrative Agent pursuant to this
Agreement, and to distribute to each Secured Person its respective
Proportionate Share of all payments so received in accordance with the terms of
this Agreement;
(b) to receive all documents and items to be furnished
under the Security Documents;
(c) to maintain physical possession of any of the
Collateral as contemplated in any of the Security Documents and this Agreement;
(d) to act on behalf of the Secured Persons in and under
the Security Documents;
(e) to execute and deliver to the Company and others
requests, demands, notices, approvals, consents and other communications
received from the Secured Persons in
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connection with the Security Documents and this Agreement subject to the terms
and conditions set forth herein;
(f) to the extent permitted by this Agreement and the
Security Documents, to exercise on behalf of each Secured Person all remedies
of the Secured Persons upon the occurrence of any Default or Event of Default
under any of the Security Documents, the Credit Agreement, or the John Hancock
Note Agreement; and
(g) to take such other actions, other than as specified
in Section 4.02 hereof, as may be requested by the Required Secured Persons as
are incident to any powers granted to the Collateral Agent or the
Administrative Agent, as applicable, hereunder and, subject to Section 4.06,
not in conflict with applicable law or regulation or any Security Document;
provided, however, that anything herein contained to the contrary
notwithstanding the Administrative Agent shall have no duties or obligations
under the Security Documents.
SECTION 4.02. Certain Actions Requiring Consent of Secured Persons.
Neither the Collateral Agent nor the Administrative Agent shall, without the
prior written consent of all Secured Persons execute or consent to, a release
of any Collateral except as required by the Security Documents. Neither the
Collateral Agent nor the Administrative Agent shall alter the amount of Total
Indebtedness required to take any action pursuant to Section 4.01(g) hereof.
The Collateral Agent shall not enter into any amendment, modification or
supplement of any of the Security Documents which could reasonably be expected
to adversely affect the interest of any Secured Person without the prior
written consent of all Secured Persons.
SECTION 4.03. Non-Reliance on Collateral Agent, Administrative Agent
and Other Secured Persons. Each Secured Person agrees that it has,
independently and without reliance on the Collateral Agent, the Administrative
Agent or any other Secured Person, and based upon such documents and
information as it has deemed appropriate, made its own credit analysis of the
Company and the Collateral, and its independent decision to enter into the
Credit Facilities, this Agreement and the Security Documents, and that it will,
independently and without reliance upon the Collateral Agent, the
Administrative Agent or any other Secured Person, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under any Credit
Facility, this Agreement and the Security Documents. Neither the Collateral
Agent nor the Administrative Agent shall be required to keep informed as to the
performance or observance by the Company of any Credit Facility, this
Agreement, any Security Document or any other document, instrument or
agreement, referred to or provided for therein or to inspect the properties or
books of the Company. Neither the Collateral Agent nor the Administrative Agent
shall have any duty, responsibility or liability to provide any Secured Person
with any credit or other information concerning the affairs, financial
condition or business of the Company which may come into the possession of the
Collateral Agent or the Administrative Agent; provided, however, that the
Collateral Agent and the Administrative Agent shall send to the Secured Persons
(i) written notice of any Default or Event of Default or Acceleration of which
the Collateral Agent or the Administrative Agent, respectively, has actual
knowledge or of which it has been given notice, and (ii) notice of receipt by
it of, and shall remit to the relevant Secured Persons (or in the case of the
Collateral Agent to the Administrative Agent) all payments and repayments of
amounts
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required hereunder to be paid to the Secured Persons received by it or under or
in connection with the Security Documents or this Agreement; and each of the
Collateral Agent and the Administrative Agent shall provide each Secured Person
with a schedule of all costs and expenses which it has paid or proposes to pay
from the proceeds of such payments or repayments pursuant to the provisions of
this Agreement.
SECTION 4.04. Agents and Affiliates. Each of CIBC Inc. and Canadian
Imperial Bank of Commerce shall have the same rights and powers under the
Financing Documents and may exercise or refrain from exercising the same as
though it were not the Collateral Agent or the Administrative Agent hereunder
or under any of the Security Documents, and each of CIBC Inc. and Canadian
Imperial Bank of Commerce and their respective affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust, hedging
or other business with or for any Secured Person or the Company, or affiliate
of any Secured Person or the Company, as if it were not acting as the
Collateral Agent or the Administrative Agent hereunder or under any of the
Security Documents or as the Agent under any Credit Facility and the term
"Secured Person" or "Secured Persons" shall, unless otherwise expressly
indicated, include CIBC Inc. and Canadian Imperial Bank of Commerce in their
respective individual capacities. Each of CIBC Inc. and Canadian Imperial Bank
of Commerce and each other Person who becomes the Collateral. Agent or the
Administrative Agent, and their respective affiliates may be engaged in, or may
hereafter engage in, one or more loans, letters of credit, leasing or other
financing activities not the subject of this Agreement (collectively, the
"Other Financings") with the Company or any of its respective Affiliates, or
may act as trustee on behalf of, or depositary for, or otherwise engage in
other business transactions with the Company or any of its Affiliates (all
Other Financings and other such business transactions being collectively, the
"Other Activities") with no responsibility to account therefor to the Secured
Persons other than as provided in Section 5.03. Without limiting the rights and
remedies of the Secured Persons specifically set forth herein and except as
otherwise provided in Section 5.03, no other Secured Person by virtue of being
a Secured Person hereunder shall have any interest in (a) any Other Activities,
(b) any present or future guaranty by or for the account of the Company not
contemplated or included herein, (c) any present or future offset exercised by
the Collateral Agent in respect of any such Other Activities, or (d) any
present or future property taken as security for any such Other Activities;
provided, however, that if any payment in respect of such guaranties or such
property or the proceeds thereof shall be applied to reduction of the Financial
Obligations, then each Secured Person shall be entitled to share in such
application according to its pro rata portion of such obligations.
SECTION 4.05. Action by Collateral Agent and Administrative Agent. The
obligations of the Collateral Agent and the Administrative Agent, respectively,
hereunder and under the Financing Documents are only those expressly set forth
herein and therein with respect to such Person. Without limiting the generality
of the foregoing, neither the Collateral Agent nor the Administrative Agent
shall be required to take any action with respect to any Default or Event of
Default, except as expressly provided in Section 4.07.
SECTION 4.06. Consultation with Experts. Each of the Collateral Agent
and the Administrative Agent may consult with legal counsel including counsel
for any Secured Person or the Company, independent public accountants and any
other experts selected by it and shall
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not be liable for any action taken or omitted to be taken by it in good faith
in accordance with the advice of such counsel, accountants or experts.
SECTION 4.07. LIABILITY OF AGENTS. NEITHER THE COLLATERAL AGENT, THE
ADMINISTRATIVE AGENT NOR THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR
EMPLOYEES SHALL BE LIABLE FOR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY ANY OF
THEM UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY OF THE OTHER FINANCING
DOCUMENTS (A) IN THE ABSENCE OF SUCH PERSON'S OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OR (B) WITH THE CONSENT OR AT THE REQUEST OF THE REQUIRED SECURED
PERSONS (IT BEING THE EXPRESS INTENTION OF THE PARTIES HERETO THAT THE
COLLATERAL AGENT, THE ADMINISTRATIVE AGENT, AND THEIR RESPECTIVE DIRECTORS,
OFFICERS, AGENTS AND EMPLOYEES SHALL HAVE NO LIABILITY FOR ACTIONS AND
OMISSIONS RESULTING FROM THEIR SOLE ORDINARY OR CONTRIBUTORY NEGLIGENCE).
Each of the Collateral Agent and the Administrative Agent shall be
entitled to rely on any communication or document believed by it to be genuine
and correct and to have been communicated or signed by the person by whom it
purports to be communicated or signed and shall not be liable to any Secured
Person for any of the consequence of such reliance. Neither the Collateral
Agent nor the Administrative Agent nor any of their respective directors,
officers, employees or agents shall be liable for any action taken or not taken
by it, him or them under, or in connection with, any of the Financing Documents
or this Agreement in the absence of its or their gross negligence or willful
misconduct. Nothing in this Agreement or any other Financing Document,
expressed or implied, is intended to, or shall be so construed as to, impose
upon the Collateral Agent or the Administrative Agent any obligations in
respect of this Agreement or any other Financing Document except as expressly
set forth herein or therein. Neither the Collateral Agent nor the
Administrative Agent shall be required to exercise any discretion or take any
action as to any matters not expressly provided for by this Agreement, or any
of the other Financing Documents to which it is a party (including enforcement
or collection of) the Financial Obligations. As to any matters not expressly
provided for herein or in the Financing Documents, the Collateral Agent and the
Administrative Agent, respectively, shall act or refrain from acting (and shall
be fully protected in so acting or refraining from acting) in accordance with
written instructions from the Required Secured Persons and such instructions
shall be binding upon all Secured Persons and all holders of Financial
Obligations; provided, however, that the Collateral Agent shall not be
obligated to follow any such written directions or otherwise take or refrain
from taking any action to the extent that it shall determine that such
directions are in conflict with any provision of any applicable law or
regulation or any Financing Document or this Agreement or would expose the
Collateral Agent or the Administrative Agent to personal liability. Neither the
Collateral Agent nor the Administrative Agent nor any director, officer,
employee or agent of the Collateral Agent or of the Administrative Agent shall
be responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with any of the
Financing Documents or of this Agreement or any payment thereunder or
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Company or any Secured Person under any of the Financing
Documents or of this Agreement; (iii) the validity,
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effectiveness or genuineness of any of the Financing Documents or of this
Agreement or any other instrument or writing furnished in connection therewith
or herewith; or (iv) the existence, genuineness or value of any of the
Collateral or the validity, effectiveness, perfection, priority or
enforceability of the security interests in or liens on any of the Collateral.
SECTION 4.08. Indemnification of Agents. (a) Each Secured Person
hereby agrees to indemnify each of the Administrative Agent, the Collateral
Agent and each of their respective, directors, officers, affiliates,
representatives and agents (as used in this Section 4.08 "Indemnified Agent"
shall mean all of the foregoing) against all damages, costs, liabilities,
expenses and losses (to the extent not paid by the Company and not arising out
of or as a result of gross negligence or willful misconduct on the part of the
relevant Indemnified Agent), including attorneys' fees, resulting from any
action taken or to be taken by it as Collateral Agent or Administrative Agent
on behalf of the Secured Persons within the scope of its authority as provided
in this Agreement or any of the Security Documents, to the extent of such
Secured Person's pro rata share (according to such Secured Person's
Proportionate Share) of any such damage, cost, liability, expense and loss.
(b) Each of the Collateral Agent and the Administrative
Agent shall notify each Secured Person as promptly as is reasonably practicable
upon becoming aware of the written assertion of, or the commencement of, any
claim, suit, action or proceeding filed against the Collateral Agent or the
Administrative Agent, as applicable, arising out of, or in connection with, the
acceptance or administration of the duties imposed upon the Collateral Agent or
the Administrative Agent, as the case may be, hereunder or under any of the
Security Documents or any action or omission taken or made within the scope of
the rights or powers conferred upon the Collateral Agent or the Administrative
Agent, as the case may be, hereunder or under the Security Documents promptly
after the Collateral Agent or the Administrative Agent, as applicable, shall
have received the written assertion or have been served with the summons or
other first legal process giving information as to the nature and basis of the
lawsuit, but the failure to so notify the Secured Persons shall not release the
Secured Persons from any liability which they might otherwise have on account
of this Agreement, except to the extent that the Secured Persons are prejudiced
and damaged by the Collateral Agent's or the Administrative Agent's, as
applicable, failure to so notify. Each Secured Person shall be entitled to
participate in and assume, at its own expense, the defense of any such claim,
suit, action or proceeding, and such defense shall be conducted by counsel
chosen by such Secured Person and reasonably satisfactory to the Collateral
Agent, or the Administrative Agent, as applicable; provided, however, that (i)
if any Secured Person has not assumed the defense of such claim, suit, action
or proceeding, (ii) if the attorneys handling the defense are not reasonably
satisfactory to the Collateral Agent or the Administrative Agent, as
applicable, or (iii) if the defendants in any such action include both the
Collateral Agent or the Administrative Agent, as applicable, and one or more of
the Secured Persons and the Collateral Agent or the Administrative Agent, as
applicable, shall have been advised by its counsel that there may be legal
defenses available to it that are different from or additional to those
available to the Secured Persons, which in the reasonable opinion of such
counsel are sufficient to make it undesirable for the same counsel to represent
both the Secured Persons and the Collateral Agent or the Administrative Agent,
as applicable, the Collateral Agent or the Administrative Agent, as applicable,
shall have the right to employ its own counsel in all such instances described
in (i), (ii) or (iii) above, and all
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reasonable fees of such counsel shall be borne by the Secured Persons in
accordance with their respective Proportionate Shares; provided, further that
no Secured Person shall interfere with any defense or action properly being
conducted or pursued by the Collateral Agent or the Administrative Agent and
that if more than one Secured Person wishes to assume the defense such Secured
Persons agree to consult and cooperate with each other regarding such defense.
Except as described above, upon any Secured Person's assumption of the defense
of the claim, suit, action or proceeding, the Secured Persons shall have no
liability for additional fees (including attorneys' fees), costs or expenses
incurred by the Collateral Agent or the Admistrative Agent, as applicable, in
such instances. The Collateral Agent and the Administrative Agent are always
entitled to defend themselves at their own expense, respectively. Neither the
Secured Persons nor the Collateral Agent nor the Administrative Agent shall be
bound by any settlement entered into by the other parties without such party's
consent.
(c) Neither the Collateral Agent nor the Administrative
Agent shall be required to take any action hereunder or to prosecute or defend
any suit in respect of this Agreement, or any other Financing Document unless
indemnified to its satisfaction by the Secured Persons against damages, costs,
liabilities, expenses and losses. If any indemnity furnished to the Collateral
Agent or the Administrative Agent shall become impaired, or in such Collateral
Agent's or Administrative Agent's opinion is not adequate or sufficient, the
Collateral Agent and Administrative Agent, as the case may be, may call for
additional indemnity and cease to do the acts indemnified against until such
additional indemnity is given.
(d) The provisions of this Section 4.08 shall survive the
termination of this Agreement, the payment of the Financial Obligations and/or
the assignment thereof.
SECTION 4.09. Resignation or Removal of Agents. Subject to the
appointment and acceptance of a successor agent as provided below, each of the
Collateral Agent and the Administrative Agent may resign at any time by giving
notice thereof to each Secured Person. Upon any such resignation, a successor
agent may be appointed by unanimous consent of the Secured Persons. If no
successor agent shall have been appointed by the Secured Persons and shall have
accepted such appointment within 30 days after the retiring Collateral Agent's
or Administrative Agent's, as the case may be, giving of notice of resignation,
then the retiring Collateral Agent or the retiring Administrative Agent, as
applicable, may, on behalf of the Secured Persons, appoint a successor agent
which shall be a commercial bank organized under the laws of the United States
of America or any state thereof (except in the case of the Collateral Agent,
including any federal or state branch or agency of a foreign bank) and having a
combined capital and surplus of at least $250,000,000 and which shall be
qualified to perform its duties hereunder and under the Security Documents.
If the Collateral Agent or Administrative Agent, as the case may be,
shall fail or refuse to perform or commence performing any act set forth in
written instructions delivered pursuant to, and in accordance with the terms
and conditions of, this Agreement (other than where such nonperformance is
beyond the control of the Collateral Agent or the Administrative Agent, as the
case may be, or where such performance would entail a violation of applicable
law or conflict with the provisions of any Financing Document or subject the
Collateral Agent or the Administrative Agent to personal liability), and such
failure continues for a period of 15
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consecutive days from the date of receipt of said written instructions, the
Collateral Agent or Administrative Agent, as the case may be, (subject to the
appointment and acceptance of a successor agent as provided below) may be
removed by the Secured Person(s) directing the action which the Collateral
Agent or Administrative Agent, as the case may be, failed or refused to take.
Such Secured Person(s) shall also have the right to appoint a successor
Collateral Agent, or Administrative Agent, as the case may be, with the consent
of the other Secured Persons, and if no successor Collateral Agent or
Administrative Agent, as the case may be, shall have been so appointed and
shall have accepted such appointment within five Business Days after removal,
then the Secured Person(s) which directed the action which the Collateral
Agent, or Administrative Agent, as the case may be, failed or refused to take
may, on behalf of Secured Persons, appoint a successor Collateral Agent, or
Administrative Agent, as the case may be, which shall be a commercial bank
organized under the laws of the United States of America or any state thereof
(except in the case of the Collateral Agent including any federal or state
branch or agency of any foreign bank) and having a combined capital and surplus
of at least $250,000,000 and which shall be qualified to perform its duties
hereunder and under the Security Documents; provided that the Required Secured
Persons may at any time thereafter with or without cause remove such Collateral
Agent or Administrative Agent, as the case may be, by giving 5 days notice of
such removal and subject to the appointment of a successor Collateral Agent or
Administrative Agent, as the case may be, by the Required Secured Persons and
acceptance of such appointed such successor Collateral Agent or Administrative
Agent, as applicable.
Upon the acceptance of any appointment as Collateral Agent or
Administrative Agent, as the case may be, hereunder by a successor agent, such
successor agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Collateral Agent, or
Administrative Agent, as the case may be, and the retiring Collateral Agent, or
the retiring Administrative Agent, as applicable, shall be discharged from its
duties and obligations hereunder, except to the extent provided above for acts
or omissions prior to the resignation or termination. After any retiring
Collateral Agent or retiring Administrative Agent's resignation or removal
hereunder as Collateral Agent, or Administrative Agent, as the case may be, (i)
Article IV shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Collateral Agent, or
Administrative Agent, as the case may be, (ii) any Collateral held in
possession of the retiring Collateral Agent or the retiring Administrative
Agent, as the case may be, shall be delivered to the successor Collateral
Agent, or the successor Administrative Agent, as the case may be, and (iii) the
retiring Collateral Agent or the retiring Administrative Agent, as the case may
be, shall assign all of its rights, if any, as secured party, mortgagee,
assignee, deed of trust beneficiary, bailee or other similar position with
respect to all of the Collateral to the extent such rights arise in its favor
in its capacity as Collateral Agent or Administrative Agent, as applicable, to
the successor agent for the pro rata benefit of the Secured Persons.
SECTION 4.10. Appointment of Co-Agents. At any time or times, in order
to comply with any legal requirement in any jurisdiction, each of the
Collateral Agent and the Administrative Agent may appoint another bank or trust
company or one or more other persons, either to act as co-agent or co-agents,
jointly with the Collateral Agent and the Administrative Agent, or to act as
separate agent or agents on behalf of the Secured Persons with such power
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and authority as may be necessary for the effective operation of the provisions
hereof and may be specified in the instrument of appointment (which may, in the
discretion of the Collateral Agent or the Administrative Agent, as applicable,
include provisions for the protection of such co-agent or separate agent
similar to the provisions of this Article IV). Each of the Collateral Agent
and the Administrative Agent may perform any of its respective duties hereunder
by or through its agents and employees.
SECTION 4.11. Expenses. Each of the Collateral Agent and the
Administrative Agent hereby agrees to serve hereunder for such compensation to
be paid by the Company, as the Company and the Collateral Agent and the
Administrative Agent, respectively shall have agreed. Any successor agent
appointed pursuant to Section 4.09 shall be compensated on a scheduled basis
which shall be approved by the Required Secured Persons. The Secured Persons
agree that all out of pocket expenses incurred by the Collateral Agent and the
Administrative Agent or such successor agent, on behalf of the Secured Persons
incident to the exercise or enforcement of any terms or provisions of this
Agreement or any of the Security Documents shall be indebtedness to the
Collateral Agent and the Administrative Agent or such successor agent, secured
by the Collateral. Upon the request of the Collateral Agent or the
Administrative Agent or such successor agent, however, the Secured Persons will
reimburse the Collateral Agent, the Administrative Agent, and such successor
agent, as applicable, to the extent not paid by the Company, for such out of
pocket expenses in accordance with each Secured Person's Proportionate Share.
SECTION 4.12. Withholding Taxes. Each Secured Person severally
represents and agrees, in each case for itself only, with the Collateral Agent
and the Administrative Agent that under applicable law and treaties no taxes
will be required to be withheld by the Collateral Agent, the Administrative
Agent, the Agent, or the Company with respect to any payments to be made to
such Secured Person hereunder in respect of any Financial Obligation and each
Secured Person that is organized under the laws of a jurisdiction outside the
United States agrees to furnish the Collateral Agent and the Administrative
Agent in respect of any Financial Obligation in a timely fashion either Form
4224 or Form 1001 of the Internal Revenue Service or such other documentation
as may from time to time be required (wherein such Secured Person claims
entitlement to the benefits of a tax treaty that provides for a zero rate of
withholding), or comparable statements in accordance with applicable United
States laws and regulations, and amendments and renewals thereof, duly executed
and completed by such Secured Person (and each such Secured Person agrees to
comply from time to time with all applicable United States laws and regulations
with regard to such withholding tax exemption). Notwithstanding the foregoing,
if either of the Collateral Agent or the Administrative Agent, in its capacity
as a United States withholding tax agent, is required by law to and does pay
any United States withholding tax on behalf of a Secured Person such Secured
Person hereby agrees to indemnify and hold harmless each of the Collateral
Agent and the Administrative Agent, respectively, from any such withholding tax
and from any penalties or interest paid by such Collateral Agent or
Administrative Agent in connection therewith, together with any other related
damages, losses, claims, liabilities, costs and expenses (including, without
limitation, reasonable fees of counsel, reasonable out-of-pocket expenses and
reasonable expenses of investigation). Secured Persons who are not subject to
the statutory United States withholding tax on payments made by the Collateral
Agent or the Administrative Agent under this Agreement shall file with the
Collateral
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Agent and the Administrative Agent all IRS forms deemed by the Collateral Agent
and the Administrative Agent to be necessary or convenient in order for it not
to be required to withhold any tax on payments to such Secured Person or in
order for it to withhold at a reduced rate of tax. Failure by a Secured Person
to supply the necessary IRS forms to the Collateral Agent or the Administrative
Agent regarding an exemption from or a reduction of withholding tax entitles
such Collateral Agent and such Administrative Agent, respectively (in its
capacity as a withholding tax agent) to withhold tax on payments made under
this Agreement pursuant to its obligations under the Internal Revenue Code of
1986, as amended, and the regulations thereunder.
ARTICLE V.
ENFORCEMENT OF REMEDIES
SECTION 5.01. Waivers of Rights. Except as otherwise expressly set
forth herein, so long as the Total Indebtedness remain unpaid, the Secured
Persons hereby agree that (i) they will notify the Administrative Agent of the
occurrence of any Default under their Credit Facilities, and of the intention
to exercise any rights or remedies under the Security Documents and (ii) any
proceeds from the exercise of any right under any of the Security Documents and
any Collateral shall be shared pursuant to the provisions of Article III. The
Secured Persons hereby further waive any and all rights each may individually
(i.e., other than through the Collateral Agent) now or hereafter have to
exercise any right or remedy pursuant to the Security Documents, or under
provisions of the laws of any jurisdiction or otherwise dispose of or retain
any of the Collateral. The Lenders hereby agree not to take any action
whatsoever to enforce any term or provision of the Security Documents or to
enforce any right with respect to the Collateral in conflict with this
Agreement or the terms and provisions of the Security Documents.
SECTION 5.02. Permitted Action by the Secured Persons. Any Secured
Person may, without instruction from the Collateral Agent or the Administrative
Agent (but in no event shall be required to) take action permitted by
applicable law or in accordance with the terms of the Security Documents to
preserve their rights and liens in any item of Collateral securing the payment
and performance of the Financial Obligations, including but not limited to
curing any default or alleged default under any contract entered into by the
Company, paying any tax, fee or expense on behalf of the Company, exercising
any offset or recoupment rights and paying insurance premiums on behalf of the
Company so long as such action shall not impair the rights of the Collateral
Agent, the Administrative Agent or of any other Secured Person.
SECTION 5.03. Payments under Other Agreements. Any payments made by
the Company after an Event of Default to any Secured Person pursuant to any
loans or other extensions of credit not made under any of the Credit Facilities
shall be deemed by the Secured Person receiving such payments to be payments
under its respective Credit Facility and shall be applied by such Secured
Person to its Financial Obligations, unless such payments shall be accompanied
by clear instructions from the Company or any such other party that such
payments be applied to such other loan or extension of credit, until all of the
Financial Obligations of the Secured Persons shall be satisfied in full, and
any payments received by such Secured Person from the Company or any such other
party in contravention of the immediately preceding clause shall be deemed to
be payments received by such Secured Person under Section 2.02 and shall
-17-
<PAGE> 18
be distributed to each of the Secured Persons, pro rata, according to their
respective Proportionate Shares and any lien granted by the Company or any such
other party to such Secured Person to secure such loans or other extensions of
credit shall be deemed Collateral and shall secure the Financial Obligations of
all Secured Persons until such Financial Obligations are satisfied in full.
ARTICLE VI.
SUCCESSORS AND ASSIGNS
SECTION 6.01. Assignees. No provision of this Agreement shall restrict
in any manner the assignment, participation or other transfer by any Secured
Person of all or any part of its right, title or interest under any Credit
Facility; provided that, unless any transferee that is not already a Secured
Person becomes a Secured Person for purposes hereof in accordance with Section
7.02, the transferor Secured Person shall remain responsible for performance of
this Agreement with respect to the interest transferred, all as more fully set
forth herein, and until the Collateral Agent and the Administrative Agent shall
have received a duly executed Supplement to Intercreditor Agreement in
substantially the form of Exhibit A hereto from a Purchaser or any other
Person, each of the Collateral Agent and the Administrative Agent shall deal
solely and directly with the Secured Persons who have executed this Agreement
or a Supplement, respectively, in connection with such Purchaser's, or other
Person's rights and obligations hereunder and under the Financing Documents.
SECTION 6.02. Additional Secured Persons. In connection with an
assignment of all, or of a proportionate part of all, of its right, title and
interest under any Credit Facility to any bank, insurance company or other
financial institution (the "Purchaser"), together with, in the case of any
Purchaser under the Credit Agreement, the assumption by the Purchaser of the
obligations of such Credit Agreement Secured Person thereunder to the extent of
the interest assigned, all in accordance with the applicable provisions of the
relevant Credit Facility, such Purchaser shall become a Secured Person
hereunder only upon (i) the written agreement of such transferor Secured Person
and such Purchaser and (ii) the receipt by each of the Collateral Agent and the
Administrative Agent of a Supplement to Intercreditor Agreement substantially
in the form of Exhibit A hereto executed by such Purchaser.
ARTICLE VII.
MISCELLANEOUS
SECTION 7.01. No Partnership or Joint Venture. Nothing contained in
this Agreement, and no action taken by the Administrative Agent, the Collateral
Agent or the Secured Persons (or any of them) pursuant hereto, is intended to
constitute or shall be deemed to constitute the Secured Persons a partnership,
association, joint venture or other entity.
SECTION 7.02. Notices. All notices and other communications provided
to any Secured Person (whether in its capacity as Secured Person,
Administrative Agent or Collateral Agent, as applicable) under this Agreement
shall be in writing or by facsimile and addressed, delivered or transmitted to
such Secured Person at its address or facsimile number set forth below its
signature hereto or at such other address or facsimile number as may be
designated by such
-18-
<PAGE> 19
Secured Person in a notice to the other Secured Persons. Any notice, if mailed
and properly addressed with postage prepaid or if properly addressed and sent
by pre-paid courier service, shall be deemed given when received; any notice,
if transmitted by facsimile, shall be deemed given when transmitted if actually
received, and the burden of proving receipt shall be on the transmitting
Secured Person.
SECTION 7.03. Amendments and Waivers. Any provision of this Agreement
may be amended or waived if, and only if, such amendment or waiver is in
writing and signed by each of the Secured Persons (and, if the rights or duties
of the Administrative Agent or the Collateral Agent are affected thereby, by the
Administrative Agent or the Collateral Agent, respectively).
SECTION 7.04. Payments. All payments hereunder shall be made in the
same manner and means of payment as received. All payments to the Collateral
Agent or the Administrative Agent shall be made to it at such office or account
as it may specify for the purpose by notice to the Secured Persons. All
payments to any Secured Person shall be made to it, to the extent practicable,
in accordance with the provisions of the relevant Credit Facility.
SECTION 7.05. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, and
all of which taken together shall constitute a single agreement, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when the Administrative Agent shall have
received counterparts hereof executed by each of the parties listed on the
signature pages hereof.
SECTION 7.06. Benefits. This Agreement shall be binding upon, and
inure to the benefit of and be enforceable by, the Secured Persons and each of
their respective successors, transferees and assigns. Without limiting the
generality of the foregoing sentence, any Secured Person may assign or
otherwise transfer (in whole or in part) to any other Person the obligations of
the Company to such Secured Person (with respect to the Lenders, subject to the
provisions of the Credit Agreement or the Notes, as the case may be, and, with
respect to John Hancock, subject to the provisions of the John Hancock Note
Agreement or the John Hancock Notes, as the case may be), and such other Person
shall thereupon become vested with all rights and benefits, and become subject
to all the obligations, in respect thereof granted to or imposed upon such
Secured Person under this Agreement, subject, however, to any contrary
provisions on such assignment or transfer (with respect to the Lenders, subject
to the provisions of the Credit Agreement or the Notes, as case may be, and,
with respect to John Hancock, subject to the provisions of the John Hancock
Note Agreement or the John Hancock Notes, as the case may be).
SECTION 7.07. Agreement of Company and Guarantor. The Company, by
signing a copy of this Agreement, agrees that each Secured Person so purchasing
a participation from another Secured Person pursuant to Article II hereof may,
to the fullest extent permitted by law, exercise all its rights of payment
(including rights of set-off) with respect to such participation as fully as if
such Secured Person were the direct creditor of the Company in the amount of
such participation.
-19-
<PAGE> 20
SECTION 7.08. Secured Claims. If under any applicable bankruptcy,
insolvency or other similar law, any Secured Person receives a secured claim in
lieu of a set-off to which Section 7.07 hereof applies, such Secured Person
shall exercise its rights in respect of such secured claim in a manner
consistent with the rights of the other Secured Persons in accordance with
Article II hereof
SECTION 7.09. Term. This Agreement shall in all respects be a
continuing, absolute, unconditional and irrevocable agreement, and shall
remain in full force and effect until all obligations of the Company to the
Secured Persons under this Agreement, the Credit Agreement, the John Hancock
Note Agreement, the John Hancock Notes, and any Swap Agreement shall have been
satisfied in full and all obligations of all Secured Persons to the other
Secured Persons hereunder shall have been satisfied in full. Each Secured
Person agrees that this Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment (in whole or in
part) of any of the obligations of the Company is rescinded or must otherwise
be restored by any Secured Person, upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, as though such payment had not been
made.
SECTION 7.10. Representation of Lenders and Agent. In order to induce
the Noteholders to enter into this Agreement, each of the Lenders and the Agent
represent and warrant to the Noteholders (i) that it has full corporate power,
and has taken all action necessary, to execute and deliver this Agreement and
to fulfill its respective obligations hereunder, (ii) that no governmental or
other authorizations are required in connection herewith, (iii) that this
Agreement constitutes its legal, valid and binding obligation, enforceable in
accordance with its terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium, regulatory and similar laws of general application
and by general principles of equity, (iv) that CIBC Inc. is the only current
Lender under the Credit Agreement, (v) that it has given the Administrative
Agent a true, correct and complete copies of all its Financing Documents, and
(vi) that none of CIBC Inc. nor Canadian Imperial Bank of Commerce is an
"insider" of the Company as such term is defined in the Bankruptcy Code.
SECTION 7.11. Representations of the Noteholders. In order to induce
the Agent and the Lenders to enter into this Agreement, each of John Hancock
and Barnett & Co. represents and warrants to the Lenders and the Agent (i) that
it has full corporate power, and has taken all action necessary, to execute and
deliver this Agreement and to fulfill its obligations hereunder, (ii) that no
governmental or other authorizations are required in connection herewith, (iii)
that this Agreement constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium, regulatory and similar laws of general
application and by general principles of equity, (iv) that John Hancock is the
current beneficial owner and that Barnett & Co. is the registered holder of the
John Hancock Notes for the benefit of John Hancock, (v) that it has given to
the Agent and the Administrative Agent a true, correct and complete copy of its
Financing Documents, and (vi) that no Noteholder is an "insider" of the Company
as such term is defined in the Code. Barnett & Co., as holder of the John
Hancock Notes, hereby acknowledges and agrees that it is bound by all of the
terms and provisions of this Agreement as they relate to the Secured Parties
and John Hancock.
SECTION 7.12. No Defense. None of the provisions of this Agreement
shall inure to the benefit of the Company or any other person other than the
Secured Persons; consequently, the Company and any and all other persons shall
not be entitled to rely upon, or to raise as a
<PAGE> 21
defense, in any manner whatsoever, the provisions of this Agreement or the
failure of any Secured Person to comply with such provisions.
SECTION 7.13. No Waiver. No failure or delay on the part of any
Secured Person in exercising any power or right under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power or right preclude any other or further exercise thereof or the
exercise of any other power or right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 7.14. Severance. Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
SECTION 7.15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THIS
AGREEMENT CONSTITUTES THE ENTIRE UNDERSTANDING BETWEEN THE PARTIES WITH RESPECT
TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ANY PRIOR AGREEMENTS, WRITTEN OR
ORAL, WITH RESPECT THERETO.
SECTION 7.16. WAIVER OF JURY TRIAL. EACH SECURED PERSON HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY SECURED
PERSON IN CONNECTION HEREWITH. EACH SECURED PERSON ACKNOWLEDGES AND AGREES
THAT IT HAS FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE OTHER SECURED PERSONS ENTERING INTO
THIS AGREEMENT.
SECTION 7.17. Entire Agreement. This Agreement supersedes any
conflicting provisions in any other agreements or instruments to which the
Secured Persons, the Administrative Agent or the Collateral Agent are parties
with respect to the rights, duties and obligations of the Secured Persons, the
Administrative Agent and the Collateral Agent to each other.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written by their duly authorized
officers.
<PAGE> 22
CANADIAN IMPERIAL BANK OF COMMERCE, as
Agent and as Administrative Agent
By: /s/ MARYBETH ROSS
---------------------------------
Name: Marybeth Ross
Title: Authorized Signatory
Address: 425 Lexington Avenue
New York, New York 10017
Attention: Marybeth Ross
with a copy to:
Address: 909 Fannin, Suite 1200
Houston, Texas 77010
Attention: John Grandstaff
Facsimile: (713) 650-3727
(713) 658-9922
Telephone: (713) 655-5252
<PAGE> 23
CIBC INC., as Collateral Agent and as Lender
By: /s/ MARYBETH ROSS
---------------------------------
Name: Marybeth Ross
--------------------------------
Title: Authorized Signatory
--------------------------------
Address: 425 Lexington Avenue
New York, New York 10017
Attention: Marybeth Ross
with a copy to:
Address: 909 Fannin, Suite 1200
Houston, Texas 77010
Attention: John Grandstaff
Facsimile: (713) 650-3727
(713) 658-9922
Telephone: (713) 655-5252
<PAGE> 24
BARNETT & CO.
By: /s/ JOHN REILLY
-----------------------------------
Name: John Reilly
---------------------------------
Title: Operation Specialist
---------------------------------
Address: Barnett & Co.
c/o Banners Trust Co.
PO Box 998
Bowling Green Station
New York, NY 10274
Attention: Private Placement Unit
Facsimile: (615) 835-2493
Telephone: (615) 835-3523
<PAGE> 25
Noteholders:
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By: /s/ EUGENE X. HODGE, JR.
-----------------------------------
Name: Eugene X. Hodge, Jr.
---------------------------------
Title: Investment Officer
---------------------------------
Address: Bond & Corporate Finance
Department T-57
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: R. A. Walker
Facsimile: ( )
----------------------------
Telephone: ( )
----------------------------
<PAGE> 26
ACKNOWLEDGMENT
The Company hereby acknowledges that it has received a copy of the
foregoing Intercreditor Agreement and that it will not act in contravention
thereof. The Company hereby further agrees that it has no rights under the
terms of said Intercreditor Agreement and that it is not a third party
beneficiary thereof.
ALEXANDER ENERGY CORPORATION
By: /s/ DAVID E GROSE
-----------------------------------
Name: David E. Grose
Title: Chief Financial Officer
and Vice President
<PAGE> 27
EXHIBIT A
SUPPLEMENT TO INTERCREDITOR AGREEMENT
[Date]
Re: Intercreditor Agreement dated as of April 15, 1996 by and
among CIBC Inc. as Lender and Collateral Agent for the Secured
Persons, Canadian Imperial Bank of Commerce acting through its
New York Agency as Agent for the Lenders and as Administrative
Agent for the Secured Persons, John Hancock Mutual Life
Insurance Company and Barnett & Co., and CIBC Inc. (the
"Intercreditor Agreement"). Capitalized terms used herein and
not otherwise defined herein shall have the meaning provided
in the Intercreditor Agreement.
Ladies and Gentlemen:
We acknowledge that we have received a copy of the Intercreditor
Agreement and we refer to Section 6.02 thereof.
Upon your receipt of this Supplement, we (a) shall have all the rights
and benefits of a "Secured Person" under the Intercreditor Agreement as if we
were an original signatory thereto, and (b) agree to be bound by the terms and
conditions set forth in the Intercreditor Agreement and to be obligated
thereunder as if we were an original signatory thereto.
[We hereby advise you that we have succeeded to the interest of [Name
of Institution] under the Credit Agreement and have assumed the obligations of
such Institution thereunder.)
(We hereby advise you that we have succeeded to the interest of [John
Hancock] [Barnett & Co.] under the John Hancock Note Agreement and the John
Hancock Notes and have assumed the obligations of [John Hancock] [Barnett & Co.]
[thereunder.]
We hereby advise you of the following administrative details:
Facsimile:
Telephone:
Address:
Attn:
IN WITNESS WHEREOF, the undersigned has caused this supplement to be
duly executed by its proper officers thereunto duly authorized.
[NEW SECURED PERSON]
By: _____________________________
Name: ___________________________
Title: __________________________
<PAGE> 1
EXHIBIT 10(j)
AGREEMENT AND CONSENT
This Agreement and Consent (this "Agreement") is entered into as of
April 15, 1996, by and among Alexander Energy Corporation, an Oklahoma
corporation (herein called the "Borrower"), the Lenders (as defined below), the
Agent (as defined below), and CIBC Inc., as collateral agent under certain of
the Loan documents (the "Collateral Agent"). Reference is hereby made to that
certain Credit Agreement, dated as of November 14, 1994, entered into by and
among the Borrower, the various financial institutions as are or may become
parties hereto (collectively, the "Lenders"), and Canadian Imperial Bank of
Commerce, acting through its New York Agency as agent (together with its
successors in such capacity, the "Agent") for the Lenders, which was amended
by that certain First Amendment to Credit Agreement dated as of July 14, 1995
and by that certain Second Amendment to Credit Agreement dated as of April 15,
1996 (such Credit Agreement as so amended and as hereinafter from time to time
further amended, supplemented, restated or otherwise modified herein called the
"Credit Agreement"). Unless otherwise stated herein, capitalized terms used
herein shall have the same meaning as in the Credit Agreement, unless the
context otherwise requires.
RECITALS
1. The Borrower has represented to the Agent and the Lenders that
it is the general partner of each of the following partnerships (herein
collectively the "Partnerships") and has the following interests therein:
AEJH 1985 Limited
Partnership (the "1985 Partnership") General Partner
AEJH 1987 Limited
Partnership (the "1987 Partnership") General Partner
AEJH 1989 Limited
Partnership (the "1989 Partnership") General Partner
2. The Credit Agreement and the Loan Documents contain certain
limitations and restrictions regarding the Borrower's interest in each of the
Partnerships and on the Indebtedness and Liens of such Partnerships and require
the maintenance of the existence of such Partnerships.
3. The Borrower has asked the Agent and the Lenders to consent to
the winding up of the business of the Partnerships, the dissolutions of the
Partnerships and the distributions of the Assets thereof to their respective
partners in accordance with the terms of the relevant partnership agreement.
<PAGE> 2
AGREEMENTS AND CONSENTS
For valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties hereto, the parties hereto agree as follows:
1. The Agent, the Lenders and the Collateral Agent hereby agree
and consent to the following matters, subject to the qualifications set forth
below and on the basis of the representations and warranties contained in this
Agreement and in the other Loan Documents:
a. The winding up of the business of the 1985
Partnership, the dissolution of the 1985 Partnership, the liquidation
of the 1985 Partnership and the distribution of the Assets thereof in
kind to the partners of the 1985 Partnership, provided that:
i. such winding up, dissolution, liquidation and
distribution shall be accomplished in accordance with
applicable law and the relevant partnership agreement, all
Indebtedness (including, without limitation, all trade debt)
of the 1985 Partnership (including Indebtedness owed to John
Hancock in its capacity as a creditor to the 1985 Partnership)
shall be paid in full in cash or otherwise fully discharged in
writing prior to the distribution of any Assets to the
partners, and the Borrower shall not assume or incur any
Indebtedness as a result of such winding up, dissolution,
liquidation or distribution; provided that the Borrower shall
obtain the Lenders' prior consent to any sale of Oil and Gas
Properties owned by the Partnership or any payment in kind;
ii. following such winding up, dissolution,
liquidation and distribution, the Borrower shall have received
Oil and Gas Properties representing the Borrower's percentage
partnership interests in such Partnership shown in the
engineering report prepared by Netherland, Sewell &
Associates, Inc. dated as of December 31, 1995, after the
payment of the above-referenced Indebtedness, free and clear
of all Liens and Indebtedness.
b. The winding up of the business of the 1987 Partnership, the
dissolution of the 1987 Partnership, the liquidation of the 1987
Partnership and the distribution of the Assets thereof in kind to the
partners of the 1987 Partnership to the extent such Assets are not
required to repay the Indebtedness of the 1987 Partnership (including
Indebtedness owed to John Hancock in its capacity as a
2
<PAGE> 3
creditor to the 1987 Partnership), it being understood that the
Borrower may not receive any distribution of Assets from the 1987
Partnership as a result of such repayment, provided that such winding
up, dissolution, liquidation and distribution shall be accomplished in
accordance with applicable law, the relevant partnership agreement,
and all Indebtedness of the 1987 Partnership shall be paid in full in
cash or otherwise fully discharged in writing prior to the
distribution of any Assets to the partners; and provided that the
Borrower shall obtain the Lenders' prior consent to any sale of Oil
and Gas Properties owned by the Partnership or any payment in kind.
C. The winding up of the business of the 1989 Partnership, the
dissolution of the 1989 Partnership, the liquidation of the 1989
Partnership and the distribution of the Assets thereof in kind to the
partners of the 1989 Partnership, provided that such winding up,
dissolution, liquidation and distribution shall be accomplished in
accordance with applicable law and the relevant partnership agreement
and all Indebtedness (including, without limitation, trade debt) of the
1989 Partnership shall be paid in full in cash or otherwise fully
discharged in writing prior to the distribution of any assets to the
partners, provided that following such winding up, dissolution,
liquidation and distribution, the Borrower shall have received Oil and
Gas Properties representing the Borrower's percentage partnership
interests in such Partnership shown in the engineering report prepared
by Netherland, Sewell & Associates, Inc. dated as of December 31,
1995, after the payment of the above-referenced Indebtedness, free and
clear of all Liens and Indebtedness other than Liens securing
non-recourse Indebtedness not exceeding as to its principal amount the
lesser of $890,000 and 50% of the unpaid 1989 Partnership's
Indebtedness immediately prior to the distribution of Assets to the
Partners (the "Existing Liens") and other than such hereinabove
described Indebtedness, it being understood that such Indebtedness
shall be recourse only to the Oil and Gas Properties of the 1989
Partnership which are so distributed in kind to the Borrower as a
result of the dissolution of the 1989 Partnership; and provided
further that the Secured Parties shall have a second Lien on such Oil
and Gas Properties; it being understood that the Borrower shall
receive such properties subject to existing liens securing 50% of the
above described non-recourse Indebtedness which may include
Indebtedness owing to John Hancock; and provided that the Borrower
shall obtain the Lenders' prior consent to any sale of Oil and Gas
Properties owned by the Partnership or any payment in kind.
3
<PAGE> 4
d. Each of the foregoing consents is hereby further
conditioned on the following:
i. It is understood and agreed that the Secured
Parties have and shall continue to have a Lien in and to any
and all distributions, dividends and proceeds resulting from
the Borrower's rights, interests and titles in and to the
Partnerships including any Oil and Gas Properties distributed
to the Borrower as a result of any dissolution or liquidation
of any of the Partnerships subject only to Permitted Liens and
the Liens specifically described in clause (c) above, and the
Borrower hereby agrees that it will, at its own expense,
promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary
or desirable, or that the Agent, the Secured Parties or the
Collateral Agent may request, in order to perfect and protect
the assignment and security interest granted or purported to
be granted under the Security Agreement or the Lien
hereinabove described or to enable the Agent, the Secured
Parties or the Collateral Agent to exercise and enforce their
respective rights and remedies hereunder or under any Loan
Documents with respect to any Collateral and in order to cause
all such Liens to be first priority Liens in favor of the
Secured Parties except that the Liens on the oil and Gas
Properties received by the Borrower from the dissolution of
the 1989 Partnership may be junior to the Existing Liens
thereon;
ii. As a condition precedent to the effectiveness
of this Agreement, the Borrower shall have received the
consent of John Hancock Mutual Life Insurance Company and
Barnett & Co. (collectively, "John Hancock") as Secured
Parties under the Security Agreement to the foregoing
agreements;
iii. The Borrower hereby represents and warrants
that (a) the terms to which the Lenders, the Agent and the
Collateral Agent are consenting hereby do not permit the other
partners of the Partnerships nor the creditors thereof to
receive payments which they were not otherwise entitled to
receive, (b) it has not taken any action or omitted to take
any action as general partner of the Partnerships or otherwise
in connection with the Partnerships which could give rise to a
claim in tort, contract or otherwise by any other partner to
any of the Partnerships, and (c) the Partnerships have no
Indebtedness other than, (1) trade debt incurred in the
ordinary course of business, and (2) the Indebtedness owing by
the 1987 Partnership and the 1989 Partnership to
4
<PAGE> 5
John Hancock described in the most recent financial statements
for each such Partnership; and
iv. Nothing herein contained shall preclude the
Lenders from effectuating Borrowing Base redeterminations and
requiring payments of any Borrowing Base Deficiency pursuant
to the terms of the Credit Agreement.
2. Each of the Agent, the Collateral Agent and the Lenders agrees
that the dissolution, liquidation, and winding up of the business of the
Partnerships in accordance with the terms set forth herein shall not constitute
a Default or Event of Default under the Credit Agreement or any other Loan
Document. Further, each of the Agent, the Collateral Agent and the Lenders
agrees that, upon the dissolution, liquidation and winding up of the business
of the Partnerships in accordance with the terms set forth herein, (a) the
Borrower shall no longer be obligated to maintain the agreements of limited
partnership relating to each Partnership in full force and effect pursuant to
Section 4.1.1 of the Security Agreement; and (b) Section 4.1.6 of the Security
Agreement shall cease to be applicable to the Partnerships. Except as
specifically provided above, nothing herein contained shall be construed to
waive any breach of or Default or Event of Default under the Credit Agreement
or any other Loan Document or to waive any other provision of the Credit
Agreement or any other Loan Document or to require any similar or dissimilar
waiver, approval or extension to be granted hereafter, or to amend or modify
the Credit Agreement or any other Loan Document except as specifically set
forth herein. The Credit Agreement and the other Loan Documents as amended
hereby are hereby reaffirmed and ratified in all respects. It is understood and
agreed that the partners to each of the Partnerships can determine who will act
as a liquidator for each of the Partnerships.
3. This letter agreement may be executed in several counterparts,
each of which shall constitute an original but all of which together shall
comprise but one and the same agreement.
4. This letter agreement shall be governed by the internal laws
of the State of New York. This letter agreement together with the Credit
Agreement constitutes the entire understanding of the parties hereto with
respect to the subject matter hereof and supersedes any prior agreements,
written or oral, with respect thereto.
5. This Agreement shall be of no force or effect unless the Agent
shall have received a counterpart hereof duly executed by the Borrower prior to
May 15, 1996.
6. Each of the Borrower, the Lenders, the Agent, and the
Collateral Agent acknowledges and agrees that John Hancock (and its successors
and assigns) shall be entitled to rely upon the waivers
5
<PAGE> 6
and consents set forth in Sections 1 and 2 of this Agreement; provided that
neither John Hancock nor its successors or assigns shall be third party
beneficiaries to any representation or warranty herein contained.
Dated as of April 15, 1996.
AGENT:
CANADIAN IMPERIAL BANK OF COMMERCE,
acting through its New York Agency,
as Agent
By: /s/ MARYBETH ROSS
-----------------------------------
Name: Marybeth Ross
Title: Authorized Signatory
COLLATERAL AGENT AND LENDER:
CIBC INC., as Collateral Agent
and Lender
By: /s/ MARYBETH ROSS
-----------------------------------
Name: Marybeth Ross
Title: Authorized Signatory
BORROWER:
ALEXANDER ENERGY CORPORATION
By: /s/ DAVID E. GROSE
-----------------------------------
Name: David E. Grose
Title: Chief Financial Officer/
Vice President
<PAGE> 1
EXHIBIT 10(bb)
May 8, 1996
Alexander Energy Corporation
701 Cedar Lake Boulevard
Oklahoma City, Oklahoma 73114
Gentlemen:
Reference is hereby made to that certain Agreement and Consent dated April
15, 1996 ("Consent") by and among Canadian Imperial Bank of Commerce, as Agent,
CIBC Inc., as Lender and as Collateral Agent, and Alexander Energy Corporation.
Unless otherwise indicated, capitalized terms used herein shall have the same
meaning as in the Consent.
Anything in the Consent to the contrary notwithstanding, the undersigned
hereby agree, consent and acknowledge to the distribution in kind of assets from
the 1987 Partnership in connection with the dissolution and winding up of such
Partnership, and the payment in full of all the Indebtedness of the 1987
Partnership.
With respect to the consent from John Hancock required pursuant to Section
1d.ii. of the Consent, it is understood and agreed that a consent by John
Hancock to the consent to dissolution, liquidation and winding up of the
Partnerships, the distribution of assets and the payment of the Indebtedness of
the Partnerships as well as to the terms and provisions of section 2 to the
Agreement is all that is required thereunder, it being understood that such
consent shall stipulate that each of the Agent, the Collateral Agent and the
Lenders shall be entitled to rely on such consent.
This letter together with the Consent constitutes the entire understanding
of the parties hereto with respect to the subject matter hereof and supersedes
any prior agreements, written or oral, with respect thereto. This letter may
be executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument, and any party hereto may execute this
letter by signing one or more counterparts.
CANADIAN IMPERIAL BANK OF COMMERCE,
acting through its New York Agency,
as Agent
By: MARYBETH ROSS
-------------------------------
Title: Authorized Signatory
-----------------------------
<PAGE> 2
Alexander Energy Corporation
May 8, 1996
Page 2
CIBC INC., as Collateral Agent and
Lender
By: MARYBETH ROSS
----------------------------------------
Title: Authorized Signatory
-------------------------------------
AGREED AND CONSENTED TO:
ALEXANDER ENERGY CORPORATION
By: /s/ DAVID E. GROSE
-------------------------
Title: CFO/Vice President
----------------------
<PAGE> 1
EXHIBIT 10(cc)
May 7, 1996
David E. Grose
Chief Financial Officer
Alexander Energy Corporation
701 Cedar Lake Boulevard
Oklahoma City, Oklahoma 7314-7800
Dear Dave:
Reference is made to that certain Credit Agreement dated as of November
14, 1994 between and among Alexander Energy Corporation (sometimes herein
referred to herein as "you" and sometimes as the "Borrower"), various financial
institutions as are or may become parties thereto (the "Lenders") and Canadian
Imperial Bank of Commerce, acting through its New York Agency as agent
(together with its successors in such capacity, the "Agent") for the Lenders,
as amended by the First Amendment to Credit Agreement dated as of July 14,
1995, as amended by that certain Second Amendment to the Credit Agreement (the
"Second Amendment") dated as of April 15, 1996 (such credit agreement, as so
amended and as the same may from time to time be further amended, supplemented,
restated or otherwise modified, the "Credit Agreement"). Unless other
specified, terms defined in the Credit Agreement are used herein as therein
defined except as the context may otherwise require.
As a condition precedent to the effectiveness of the Second Amendment, the
Agent has required delivery of clean searches of the UCC records of each of
the jurisdictions where the Mortgage and Security Agreement are to be filed
(the "Searches") showing no prior liens (other than Permitted Liens) on the
Mortgage Properties and the Collateral (as defined in the Mortgage and Security
Agreement, respectively, and used herein with the same meaning). You have
requested that we waive as a condition precedent to the effectiveness of the
Second Amendment actual receipt of the results of such Searches.
By its signature below and in reliance on the agreements set forth in the
immediately following paragraph, the Agent, the Lenders and the Collateral
Agent agree to waive and hereby waive receipt of the results of the Searches as
a condition precedent to the effectiveness of the Second Amendment, provided,
however, that
<PAGE> 2
Mr. David Grose
Alexander Energy Corporation
May 7, 1996
Page 2
the Borrower, the Agent, the Collateral Agent and the Lenders hereby agree that
the Borrower shall obtain all necessary releases from any outstanding Liens
(except Permitted Liens) and shall file such releases (or make arrangements
satisfactory to the Agent and the Secured Parties for the filing of such
releases) and take all other action necessary, or in the opinion of the Agent or
the Secured Parties desirable, to effectively create a valid, perfected first
priority lien (subject to the Permitted Liens) against the Assets purported to
be covered thereby; provided further that the existence of any Liens (other than
the Permitted Liens) on any of the Mortgaged Properties or the Collateral shall
constitute an Event of Default under the terms and provisions of the Credit
Agreement, the Mortgage and the Security Agreement.
In consideration of such limited waiver, by your signature below, you
hereby represent and warrant to the Agent, the Collateral Agent and the Lenders
(i) that you have granted no Liens on the Mortgaged Properties or the
Collateral except pursuant to the Mortgages and Security Agreement, and (ii)
that you have not received notice of any Liens which have not been released or
which have not terminated or expired having been filed against you, the
Mortgaged Properties or the Collateral.
It is further agreed and understood that (i) the deadline for satisfying
the conditions precedent set forth in the Second Amendment is hereby extended
to May 10, 1996, (ii) the deadline for delivering the annual audit for Fiscal
Year 1995 and the compliance certificate described in Section 7.1.1(b) of the
Credit Agreement with respect to Fiscal Year 1995 as required pursuant to
Section 26 of the Second Amendment is hereby extended from May 2, 1996 to May
15, 1996, and (iii) the filing of the Kansas Mortgage is not a condition
precedent to the effectiveness of the Second Amendment, provided, however, that
the Agent, the Collateral Agent or any other Secured Party may, or may request
the Borrower to, take all action necessary or, in the reasonable opinion of the
Agent, Collateral Agent or Secured Party, as the case may be, desirable to file
and record the Kansas Mortgage so as to create a valid, perfected first
priority lien in the Assets purported to be covered thereby. The Borrower
hereby agrees to take all such action at its own cost promptly upon the Agent's
or the Collateral Agent's request.
Nothing herein shall be construed to waive any breach of or Default under
the Credit Agreement or to waive, modify or limit any
<PAGE> 3
Mr. David Grose
Alexander Energy Corporation
May 7, 1996
Page 3
other provision (including, without limitation, any representation or warranty)
of the Credit Agreement or any other Loan Document or to require any similar or
dissimilar waiver, approval or extension to be granted hereafter, or to amend
or modify the Credit Agreement or any other Loan Document except those
provisions of the Credit Agreement as specifically set forth herein. The Credit
Agreement as amended hereby is hereby reaffirmed and ratified in all respects.
This letter agreement may be executed in several counterparts, each of
which shall constitute an original but all of which together shall comprise but
one and the same agreement.
This letter agreement shall be governed by the internal laws of the State
of New York. This letter agreement together with the Credit Agreement
constitutes the entire understanding of the parties hereto with respect to the
subject matter hereof and supersedes any prior agreements, written or oral,
with respect thereto.
Please indicate your agreement with the foregoing by your signature below.
This agreement shall be of no force or effect unless the Agent shall have
received a counterpart hereof duly executed by the Borrower prior to or on May
8, 1996.
CANADIAN IMPERIAL BANK OF
COMMERCE, as Agent
By: /s/ MARY BETH RON
--------------------------
Title: AUTHORIZED SIGNATURE
-----------------------
LENDER:
CIEC INC.
By: /s/ MARY BETH RON
--------------------------
Title: AUTHORIZED SIGNATURE
-----------------------
<PAGE> 4
Mr. David Gross
Alexander Energy Corporation
May 7, 1996
Page 4
COLLATERAL AGENT:
CIBC INC., as Collateral Agent
By: /s/ MARYBETH ROSS
--------------------------------
Title: AUTHORIZED SIGNATORY
-----------------------------
AGREED AND CONSENTED TO:
ALEXANDER ENERGY CORPORATION
By: /s/ DAVID E. GROSS
-------------------------------
Title: CFO/Vice President
----------------------------
<PAGE> 1
EXHIBIT 10(dd)
[CIBC WOOD GUNDY LETTERHEAD]
May 10, 1996
David E. Gross
Chief Financial Officer
Alexander Energy Corporation
701 Cedar Lake Boulevard
Oklahoma City, Oklahoma 73114-7800
Re: Credit Agreement among Alexander Energy Corporation, certain commercial
lending institutions (the Lenders) and Canadian Imperial Bank of Commerce,
as the Agent for the Lenders, dated as of November 14, 1994, as amended.
Dear Dave:
Please accept this letter as confirmation that the April 30, 1996 dates
contained in Section 7(e) of the Second Amendment to Credit Agreement will be
changed to reflect today's date of May 10, 1996. With respect to the Excess
Cash Flow payment, the starting date for the calculation of that payment will
remain as it is; however, no payments would be due under this provision prior
to May 10, 1996.
Our understanding is that you will be making the following payments today
subject to obtaining final signatures from John Hancock; (1) $750,000 payment
pursuant to 7(e)(1), (2) $700,000 under (e)(ii) representing the April 1
payment of $350,000 and the May 1 payment of $350,000 and (3) $110,000
representing the amendment fee in Section 10.
We will make the above changes to the Second Amendment this afternoon and will
fax the same to you for your records.
Sincerely,
/s/ BRIAN R. SWINFORD
Brian R. Swinford
Director, Global Energy
<PAGE> 1
EXHIBIT 11
PAGE 1 OF 2
ALEXANDER ENERGY CORPORATION
COMPUTATION OF EARNINGS (LOSS) PER SHARE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
For the Three Months Ended For the Twelve
-------------------------------------------------------- Months Ended
March 31, June 30, September 30, December 31, December 31,
----------- ----------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
1995:
Weighted average common and
common equivalent shares:
Common stock outstanding from
beginning of period . . . . . 12,271,563 12,273,993 12,279,756 12,451,605
Common stock issued . . . . . . . 1,053 3,217 97,881 ---
----------- ----------- ----------- ------------
12,272,616 12,277,210 12,377,637 12,451,605
=========== =========== =========== ============
Weighted average shares (sum of quarters above divided by four) . . . . . . . . . . . . . . . 12,344,767
============
Net loss applicable to common
stock . . . . . . . . . . . . . . $ (441,302) $ (212,507) $ (656,213) $ (3,148,905) $(4,458,927)
=========== =========== =========== ============ ===========
Net loss per common share . . . . . $ (.04) $ (.02) $ (.05) $ (.25) $ (.36)
=========== =========== =========== ============ ===========
1994:
Weighted average common and
common equivalent shares:
Common stock outstanding from
beginning of period . . . . . 11,715,504 11,715,504 11,715,504 12,161,476
Common stock issued . . . . . . . --- --- 355,715 37,916
Common stock equivalents . . . . 516,483 454,584 --- ---
----------- ----------- ----------- ------------
12,231,987 12,170,088 12,071,219 12,199,392
=========== =========== =========== ============
Weighted average shares (sum of quarters above divided by four) . . . . . . . . . . . . . . . 12,168,172
===========
Net income (loss) applicable to
common stock:
Income (loss) before extraordinary
item . . . . . . . . . . . . . $ 945,560 $ 490,440 $(1,945,558) $ (1,784,664) $(2,294,222)
Gain on extraordinary item . . . --- --- --- 1,051,760 1,051,760
----------- ----------- ----------- ------------ -----------
Net income (loss) applicable to
common stock . . . . . . . . . $ 945,560 $ 490,440 $(1,945,558) $ (732,904) $(1,242,462)
=========== =========== =========== ============ ===========
Income (loss) per common and
common equivalent share:
Income (loss) before gain on
extraordinary item . . . . . . $ .08 $ .04 $ (.16) $ (.15) $ (.19)
Gain on extraordinary item . . . --- --- --- .09 .09
----------- ----------- ----------- ------------ -----------
Net income (loss) per common
share . . . . . . . . . . . . . $ .08 $ .04 $ (.16) $ (.06) $ (.10)
=========== =========== =========== ============ ===========
</TABLE>
<PAGE> 2
PAGE 2 OF 2
ALEXANDER ENERGY CORPORATION
COMPUTATION OF EARNINGS (LOSS) PER SHARE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
For the Three Months Ended For the Twelve
-------------------------------------------------------- Months Ended
March 31, June 30, September 30, December 31, December 31,
----------- ----------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
1993:
Weighted average common and
common equivalent shares:
Common stock outstanding from
beginning of period . . . . . 6,329,028 9,357,908 9,551,341 11,336,674
Common stock issued . . . . . . . 937,810 137,052 490,921 4,678
Common stock equivalents . . . . --- 738,393 854,822 855,579
----------- ----------- ----------- ------------
7,266,838 10,233,353 10,897,084 12,196,931
=========== =========== =========== ============
Weighted average shares (sum of quarters above divided by four) . . . . . . . . . . . . . . . 10,148,552
===========
Net income (loss) applicable to
common stock:
Income (loss) before loss on
extraordinary item and cumulative
effect of accounting change . $ (514,245) $ 1,690,613 $ 859,501 $ 538,719 $ 2,574,588
Dividend on preferred stock, if not
converted . . . . . . . . . . . (19,273) (9,000) (8,384) --- (36,657)
----------- ----------- ----------- ------------ -----------
Income (loss) before loss on extraordinary
item and cumulative effective of accounting
change . . . . . . . . . . . . (533,518) 1,681,613 851,117 538,719 2,537,931
Loss on extraordinary item . . . --- (510,000) --- --- (510,000)
Cumulative effect of acocunting
change . . . . . . . . . . . . 425,000 --- --- --- 425,000
----------- ----------- ----------- ------------ -----------
Net income (loss) applicable to
common stock . . . . . . . . . $ (108,518) $ 1,171,613 $ 851,117 $ 538,719 $ 2,452,931
=========== =========== =========== ============ ===========
Income (loss) per common and common
equivalent shares:
Income (loss) before cumulative
effect of accounting change and
extraordinary item . . . . . . $ (.07) $ .16 $ .08 $ .04 $ .25
Loss on extraordinary item . . . --- (.05) --- --- (.05)
Cumulative effect of accounting
change . . . . . . . . . . . . .06 --- --- --- .04
----------- ---------- ----------- ----------- ----------
Net income (loss) per common
share . . . . . . . . . . . . . $ (.01) $ .11 $ .08 $ .04 $ .24
=========== =========== =========== ============ ===========
</TABLE>
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Registrant
1) Boomer Marketing Corporation, an Oklahoma corporation
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
pertaining to the Alexander Energy Corporation Post-Merger Stock Option Plan
and 1993 Restricted Stock Award Plan (Form S-8 No. 33-59489), 1993 Stock Option
Plan (Form S-8 No. 33-63978) and the 1986 Incentive Stock Option Plan (Form S-8
No. 33-20425) of our report dated March 30, 1996, except Notes 4 and 13 for
which the date is May 10, 1996, with respect to the consolidated financial
statements of Alexander Energy Corporation included in the Annual Report (Form
10-K) for the year ended December 31, 1995.
ERNST & YOUNG LLP
Oklahoma City, Oklahoma
May 10, 1996
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
pertaining to the Alexander Energy Corporation Post-Merger Stock Option Plan,
1993 Restricted Stock Award Plan (Form S-8 No. 33-59489), the 1993 Stock Option
Plan (Form S-8 No. 33-63978) and the 1986 Incentive Stock Option Plan (Form S-8
No. 33-20425) of our report dated February 22, 1994, on our audit of the
consolidated financial statements of American Natural Energy Corporation and
Subsidiaries for the year ended December 31, 1993, which report is included in
the Annual Report on Form 10-K, of Alexander Energy Corporation, for the year
ended December 31, 1995.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
May 9, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10K DEC. 31, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,451,983
<SECURITIES> 0
<RECEIVABLES> 4,192,891
<ALLOWANCES> 0
<INVENTORY> 370,057
<CURRENT-ASSETS> 6,172,963
<PP&E> 134,018,893
<DEPRECIATION> 49,863,075
<TOTAL-ASSETS> 91,866,698
<CURRENT-LIABILITIES> 12,667,989
<BONDS> 44,350,985
<COMMON> 373,548
0
0
<OTHER-SE> 30,254,894
<TOTAL-LIABILITY-AND-EQUITY> 91,866,698
<SALES> 16,599,191
<TOTAL-REVENUES> 19,611,728
<CGS> 6,107,489
<TOTAL-COSTS> 25,814,655
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,960,743
<INCOME-PRETAX> (6,202,927)
<INCOME-TAX> (1,744,000)
<INCOME-CONTINUING> (4,458,927)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,458,927)
<EPS-PRIMARY> (.36)
<EPS-DILUTED> (.36)
</TABLE>
