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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.
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[NATIONAL ENERGY GROUP, INC. LETTERHEAD]
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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
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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.
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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
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Bob G. Alexander,
President and Chief Executive Officer
MDB/gmb
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[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.
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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
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Miles D. Bender, President
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[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.
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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
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Bob G. Alexander, President
AGREED UPON THIS 20TH DAY OF
MARCH, 1996:
NATIONAL ENERGY GROUP, INC.
By: /s/ MILES D. BENDER
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Miles D. Bender, President