-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CBJ9xLY8vB3yXFJjzdMzEerXFSuNnsa+tqEJZF7HhTW9pWuQL7o30U8VRmDmCHNt Voc/r0v/qmoSOe9avTpe0g== 0000950134-96-002045.txt : 19960515 0000950134-96-002045.hdr.sgml : 19960515 ACCESSION NUMBER: 0000950134-96-002045 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALEXANDER ENERGY CORP CENTRAL INDEX KEY: 0000355143 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731088777 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11461 FILM NUMBER: 96563545 BUSINESS ADDRESS: STREET 1: 701 CEDAR LAKE BLVD CITY: OKLAHOMA CITY STATE: OK ZIP: 73114-7800 BUSINESS PHONE: 4054788686 MAIL ADDRESS: STREET 1: 701 CEDAR LAKE BLVD CITY: OKLAHOMA CITY STATE: OK ZIP: 73114 10-K 1 FORM 10-K FOR YEAR ENDED DECEMBER 31, 1995 1 =============================================================================== 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. =============================================================================== 2 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 i 3 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. 1 4 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 2 5 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. 3 6 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. 4 7 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. 5 8 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.
Name Age Position Since ------------------ --- ------------------------------------- ----- 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
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 6 9 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 10 PRIMARY OPERATING AREAS Proved reserves within the Company's primary operating areas are summarized as follows:
Natural Percent Number Natural Gas of of PDNP Oil Gas Equivalent Proved and PUD Field (Mbbl) (Mmcf) (Mmcfe) Reserves Locations - ------------------------ ------ ------ ---------- -------- --------- 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
(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 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 $350,000 (gross) to drill and complete and have approximately 2.0 Bcfe of ultimate recoverable reserves. OIL AND NATURAL GAS RESERVES The following table sets forth estimated proved reserves, the estimated future net revenues therefrom and the present value thereof as of December 31, 1995. The proved reserves are based upon the Estimate of Reserves and Future Revenue to the Alexander Interest in Certain Oil and Gas Properties as of December 31, 1995 of Netherland, Sewell & Associates, Inc. The calculations used in preparation of such report was prepared using standard geological and engineering methods generally accepted by the petroleum industry and in accordance with SEC guidelines (as described in the notes below). These correspond with the method used in presenting the supplemental information on oil and gas operations in the Notes to the Consolidated Financial Statements of the Company, except that income taxes otherwise attributable to such future net revenues have been disregarded in the presentation below. For supplemental disclosure of the estimated net quantities of oil and natural gas reserves, see Note 14 of Notes to Consolidated Financial Statements of the Company.
Natural Pretax Natural Gas Future Net Oil Gas Equivalent Revenue Present Value (MBbls) (Bcf) (Bcfe) (M$) (1) (M$) ------- ------- ---------- ---------- ------------- 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
- --------- (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 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.
Years ended December 31, ------------------------------------ 1993 1994 1995 ---------- ---------- ---------- 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
- --------- (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:
Year ended December 31, ----------------------------------------------------- 1993 1994 1995 --------------- ---------------- --------------- Gross Net Gross Net Gross Net ----- ------ ----- ------ ----- ----- 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
- --------- 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 13
Producing Wells Shut-In Wells ------------------------------------------- --------------------------------------------- Oil Gas Oil Gas ------------------- ---------------------- ---------------------- --------------------- State Gross Net Gross Net Gross Net Gross Net - ----- ----- ------------ ------------ -------- ----- --------------- ----------- -------- 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
Developed Acreage Undeveloped Acreage -------------------------- ---------------------------- State Gross Net Gross Net - ----- ------------ ------------ --------------- ----------- 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
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 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 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.
QUARTER ENDED HIGH LOW ------------- ------- ------ 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
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 16
Well - ---- Celsor 10-1 Celsor 10-2 0.03768520 0.02997890 0.02997890 Cimarron Clinton 31-13 0.24129407 0.19147800 Clouse 5-2
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.
Years ended December 31, -------------------------------------------- 1991 1992(1) 1993 1994(2) 1995 ------- ------- ------ ------- ------- (in thousands, except per share data) 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)
December 31, ------------------------------------------------ 1991 1992 1993 1994 1995 ------- ------- -------- ------- ------- (in thousands) 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
- --------- (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 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 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:
Years ended December 31, ----------------------------------------- 1993 1994 1995 --------- --------- --------- 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
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 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 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 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 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 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 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 26 ALEXANDER ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND 1995
ASSETS (Note 4) 1994 1995 ------------- ------------- 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 ============= =============
See accompanying notes. F-3 27 ALEXANDER ENERGY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, -------------------------------------------- 1993 1994 1995 ------------ ------------ ------------ 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) ============ ============ ============
See accompanying notes. F-4 28 ALEXANDER ENERGY CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
Preferred Common Paid-in Accumulated Treasury stock stock capital deficit stock Total ---------- -------- ------------ ------------ ------------ ------------ 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 ========== ======== ============ ============ ============ ============
See accompanying notes. F-5 29 ALEXANDER ENERGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED ON NEXT PAGE)
Years ended December 31, ------------------------------------------- 1993 1994 1995 ------------ ------------ ----------- 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)
F-6 30 ALEXANDER ENERGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years ended December 31, ------------------------------------------- 1993 1994 1995 ------------ ------------ ----------- 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 ============ ============ ===========
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 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 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 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.
Years ended December 31, ------------------------ 1993 1994 ------- -------- (in thousands, except per share data) 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)
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 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 35 ALEXANDER ENERGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. LONG-TERM DEBT Long-term debt consists of:
December 31, ------------------------- 1994 1995 ----------- ----------- 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 =========== ===========
- ------------- (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 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 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:
Years ended December 31, --------------------------------------- 1993 1994 1995 ----------- --------- ----------- 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) =========== ========= ===========
(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:
1994 1995 ------------ ------------ 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 ============ ============
(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 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 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 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:
Years ended December 31, --------------------------- 1993 1994 1995 ------- ------ ------ 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 ======= ====== ======
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.
Years ended December 31, ------------------------------- 1993 1994 1995 -------- -------- ------- 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 ======== ======== =======
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.
Years Ended December 31, ------------------------------ 1993 1994 1995 ------- -------- -------- 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 ======= ======== ========
F-17 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 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 43 ALEXANDER ENERGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COSTS INCURRED IN OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES:
Years ended December 31, -------------------------------------- 1993 1994 1995 ----------- ----------- ---------- 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 =========== =========== ==========
- --------- (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:
December 31, ---------------------------------------------- 1993 1994 1995 ------------ ------------- ------------- 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 ============ ============= =============
UNPROVED PROPERTIES NOT BEING AMORTIZED:
December 31, ---------------------------------------------- 1993 1994 1995 ------------ ------------- ------------- Property acquisition costs ........................ $ 533,673 $ 882,318 $ 624,953 Capitalized interest .............................. 81,334 109,334 109,804 ------------ ------------- ------------- $ 615,007 $ 991,652 $ 734,757 ============ ============= =============
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 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.
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 ---------- ---------- ---------- ------------ ------------ ------------ 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 ========== ========== ========== ============ ============ ============
(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 45 ALEXANDER ENERGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 --------- --------- --------- ---------- ---------- ---------- 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 ========= ========= ========= ========== ========== ==========
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):
Years ended December 31, ----------------------------------- 1993 1994 1995 --------- --------- --------- 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 ========= ========= =========
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 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):
Years ended December 31, -------------------------------- 1993 1994 1995 -------- -------- -------- 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 ======== ======== ========
(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 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 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 $100,000 during 1995, 1994 and 1993. SUMMARY COMPENSATION TABLE Long-Term Compensation Awards Annual Compensation (1) ------------------------------- ------------------------------------------------------ Restricted Other Annual Stock Fiscal Salary Bonus Compensation Award(s) Options Name and Principal Position Year ($)(2) ($)(3) ($) ($)(4) (#) - ------------------------------ ------ ------- -------- ------------ ----------- ---------- 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
- --------- (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 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 $500 for each meeting attended telephonically. Option Exercises and Year End Option Values. The following information is set forth with respect to each exercise of stock options during the year ended December 31, 1995 by each of the Company's named executive officers, and the year-end value of outstanding in-the-money options held by those executive officers. AGGREGATED OPTION EXERCISES FOR LAST FISCAL YEAR AND YEAR-END OPTION VALUES
VALUE OF NUMBER OF UNEXERCISED IN-THE- UNEXERCISED MONEY OPTIONS AT OPTIONS AT FISCAL FISCAL YEAR-END YEAR-END (#) ($) (1) SHARES ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/ NAME AND PRINCIPAL POSITION EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE - --------------------------- ------------ ------------ ----------------- ------------------- 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 / ---
- ------------ (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 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.
AMOUNT AND NATURE OF BENEFICIAL PERCENT NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS - ------------------------------------------------------- ------------- -------- 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%
- --------- * 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 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 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 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 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 55 INDEX TO EXHIBITS TO FORM 10-K
Exhibit No. - ------- 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.
2 56 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.
3 57 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
4 EX-2.(A) 2 LETTER OF INTENT TO MERGE 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] 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 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 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 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. 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 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. 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 EX-4.(C) 3 NOTE AGREEMENT 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 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- 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- 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- 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- 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- EX-4.(D) 4 AGREEMENT REGARDING LIQUIDATION 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 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 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 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 EX-4.(F) 5 CONSENT OF JOHN HANCOCK 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 ---------------------------- EX-10.(D) 6 1ST AMENDMENT TO CREDIT AGREEMENT 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 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 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 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 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 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 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 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: ---------------------- EX-10.(E) 7 LETTER AGREEMENT 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. 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. 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 ------------------------- EX-10.(F) 8 CREDIT AGREEMENT 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: Base Rate Loan 1.0% LIBOR Rate Loan 2.0%
(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 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 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 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 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 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 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 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 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 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 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 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, 12 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 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 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 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 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 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 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 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 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 22 SCHEDULE I Item 6.8 (Subsidiaries)
State of Incorporation Ownership Business Name or Organization % Description ---- --------------- --------- ----------- 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
23 EXHIBIT "A"
Well Location County State Operator ---- -------- ------ ----- -------- 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 Well GWI Oil WI NRI Gas WI NRI OK ORI NRI Gas ORI NRI Reversion ---- --- ---------- ---------- ---------- ----------- --------- 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
24
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
Well APO-NC Oil ORI APO-NC Gas ORI Remarks ---- -------------- -------------- ------------- 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
25
Well Location County State Operator ---- -------- ------ ----- -------- 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 Well GWI Oil WI NRI Gas WI NRI Oil ORI NRI Gas ORI NRI Reversion ---- --- ---------- ----------- ----------- ----------- --------- 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
26
Well APO GWI APO Oil NRI APO Gas NRI APO Oil ORI APO Gas ORI ---- --------- ------------- ------------- ------------- ------------- 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 Well APO-NC GWI APO-NC Oil NRI APO-NC Gas NRI APO-NC Oil ORI APO-NC Gas ORI Remarks ---- ---------- -------------- -------------- -------------- -------------- ------- 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
27
Well Location County State Operator GWI - --------------------------------------------------------------------------------------------------------------------------- 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
Well Oil WI NRI Gas WI NRI Oil ORI NRI Gas ORI NRI Reversion - ----------------------------------------------------------------------------------------------------------- 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
28
Well APO GWI APO Oil NRI APO Gas NRI APO Oil ORI APO Gas ORI ---- -------- ----------- ----------- ----------- ----------- 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
Well APO-NC GWI APO-NC Oil NRI APO-NC Gas NRI APO-NC Oil ORI APO-NC Gas ORI Remarks ---- ----------- -------------- -------------- -------------- -------------- ------- 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
29
Well Location County State Operator GWI Oil WI NRI ---- -------------------------- ----------- ----- --------------- ---------- ---------- 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 Well Gas WI NRI Oil ORI NRI Gas ORI NRI Reversion ---- ---------- ----------- ----------- --------- 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
30 [CAPTION] Well APO GWI APO Oil NRI Apo Gas NRI APO Oil ORI APO Gas ORI APO-NC GWI - ------------------------------------------------------------------------------------------------------------------- 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
[CAPTION] Well APO-NC Oil NRI APO-NC Gas NRI Apo-NC Oil ORI APO-NC Gas ORI Remarks - ------------------------------------------------------------------------------------------------------------------- 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
31
Well Location County State Operator GWI - --------------------------------------------------------------------------------------------------------------------------- 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
Well Oil WI NRI Gas WI NRI Oil ORI NRI Gas ORI NRI Reversion - ----------------------------------------------------------------------------------------------------------- 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
32
Well APO GWI APO Oil NRI APO Gas NRI APO Oil ORI APO Gas ORI ---- -------- ----------- ----------- ----------- ----------- 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 Well APO-NC GWI APO-NC Oil NRI APO-NC Gas NRI APO-NC Oil ORI APO-NC Gas ORI Remarks ---- ----------- -------------- -------------- -------------- -------------- ------- 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
33
WELL LOCATION COUNTY STATE OPERATOR ---- -------- ----------- ------ ----------- 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
WELL GWI Oil WI NRI Gas WI NRI Oil ORI NRI Gas ORI NRI Reversion ---- ----- ---------- ---------- ----------- ----------- --------- 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
34
Well APO GWI APO Oil NRI APO Gas NRI APO Oil ORI APO Gas ORI ---- -------- ----------- ----------- ----------- ----------- 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
Well APO-NC GWI APO-NC Oil NRI APO-NC Gas NRI APO-NC Oil ORI APO-NC Gas ORI Remarks ---- ----------- -------------- -------------- -------------- -------------- ------- 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
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. 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 37 TERM LOAN AND PRINCIPAL PAYMENTS - -------------------------------------------------------------------------------
Amount of Unpaid Amount of Principal Principal Loan Made Repaid Balance --------------- ------------------------------- Base Base Base Notation Date Rate Rate Rate Total Made By - ---------- ---- ---- ---------------
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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- 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- 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- 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: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- -5- 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: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- -6- 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: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NEIGHBORING PROPERTIES/FACILITIES Describe the Past and Present Uses of neighboring properties/facilities including any operations or services they perform: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- -7- 45 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- I certify that the foregoing information is true and correct to the best of my knowledge and belief. Date: ------------------------------------------ ------------------------------- Name: -------------------------- Title: ------------------------- -8- EX-10.(G) 9 SECURED TERM NOTE 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. 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 EX-10.(H) 10 LETTER AGREEMENT 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; 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. 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 --------------------------------- EX-10.(I) 11 INTERCREDITOR AGREEMENT 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 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- 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- 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- 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- 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- 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. -7- 8 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 -8- 9 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 -9- 10 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 -10- 11 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 -11- 12 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, -12- 13 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 -13- 14 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 -14- 15 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 -15- 16 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 -16- 17 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- 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- 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- 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 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. 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 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 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 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: ( ) ---------------------------- 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 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: __________________________ EX-10.(J) 12 AGREEMENT AND CONSENT 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. 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 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 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 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 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 EX-10.(BB) 13 LETTER BY AND AMONG CIBC 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 ----------------------------- 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 ---------------------- EX-10.(CC) 14 LETTER REFERENCING THE CREDIT AGREEMENT 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 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 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 ----------------------- 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 ---------------------------- EX-10.(DD) 15 LETTER REFERENCING THAT CERTAIN CREDIT AGREEMENT 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 EX-11 16 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 PAGE 1 OF 2 ALEXANDER ENERGY CORPORATION COMPUTATION OF EARNINGS (LOSS) PER SHARE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
For the Three Months Ended For the Twelve -------------------------------------------------------- Months Ended March 31, June 30, September 30, December 31, December 31, ----------- ----------- ------------ ------------ -------------- 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) =========== =========== =========== ============ ===========
2 PAGE 2 OF 2 ALEXANDER ENERGY CORPORATION COMPUTATION OF EARNINGS (LOSS) PER SHARE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
For the Three Months Ended For the Twelve -------------------------------------------------------- Months Ended March 31, June 30, September 30, December 31, December 31, ----------- ----------- ------------ ------------ -------------- 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 =========== =========== =========== ============ ===========
EX-21 17 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 Subsidiaries of the Registrant 1) Boomer Marketing Corporation, an Oklahoma corporation EX-23.(A) 18 CONSENT OF ERNST & YOUNG LLP 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 EX-23.(B) 19 CONSENT OF COOPERS & LYBRAND 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 EX-27 20 FINANCIAL DATA SCHEDULE
5 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. YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1,451,983 0 4,192,891 0 370,057 6,172,963 134,018,893 49,863,075 91,866,698 12,667,989 44,350,985 373,548 0 0 30,254,894 91,866,698 16,599,191 19,611,728 6,107,489 25,814,655 0 0 3,960,743 (6,202,927) (1,744,000) (4,458,927) 0 0 0 (4,458,927) (.36) (.36)
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