<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14(a)-11(c) or
Section 240.14a-12
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
PRIMA ENERGY CORPORATION
(Name of Registrant as Specified in Its Charter)
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
(2) Aggregate number of securities to which transaction applies:
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined)
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
(4) Proposed maximum aggregate value of transaction:
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
(5) Total Fee Paid:
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by the Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
(2) Form, Schedule or Registration No.:
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
(3) Filing Party:
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
(4) Date Filed:
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
<PAGE>
PRIMA ENERGY CORPORATION
1801 BROADWAY, SUITE 500
DENVER, COLORADO 80202
(303) 297-2100
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 1998
Notice is hereby given that the Annual Meeting of Stockholders of Prima
Energy Corporation, a Delaware corporation, will be convened at 10:00 a.m.,
Mountain Daylight Time, on Wednesday, May 13, 1998, in the Hershner Room,
Norwest Bank Colorado, N.A., 1740 Broadway, Denver, Colorado, for the
following purposes:
1. To elect one director, as the Class I director, for the term expiring
in 2001 or until his successor shall be elected and qualified;
2. To ratify the selection of Deloitte & Touche LLP to serve as
independent auditors of Prima Energy Corporation, for fiscal 1998; and
3. To transact such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on April 6, 1998, are
entitled to notice of and to vote at the Meeting.
Stockholders are cordially invited to attend the meeting in person.
Whether or not you plan to attend the meeting in person, please indicate your
voting instructions on the enclosed proxy, date and sign it, and return it
promptly in the enclosed envelope. In the event you do attend the meeting in
person, you may withdraw your proxy and vote in person. Your vote is important.
BY ORDER OF THE BOARD OF DIRECTORS
SANDRA J. IRLANDO
Secretary
Denver, Colorado
April 17, 1998
<PAGE>
PROXY STATEMENT
PRIMA ENERGY CORPORATION
1801 BROADWAY, SUITE 500
DENVER, COLORADO 80202
(303) 297-2100
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 1998
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Prima Energy Corporation (hereinafter "the
Company" or "Prima"), Suite 500, 1801 Broadway, Denver, Colorado 80202, to be
used at the Annual Meeting of Stockholders (the "Meeting") to be held in the
Hershner Room, Norwest Bank Colorado, N.A., 1740 Broadway, Denver, Colorado, on
Wednesday, May 13, 1998, at 10:00 a.m., for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. This Proxy Statement and
the enclosed Proxy Card were sent to stockholders on or about April 17, 1998.
All expenses for soliciting Proxies, including clerical work, printing and
postage, will be paid by the Company. The Company will reimburse brokers and
other persons holding stock in their names, or in the name of nominees, for
their expenses in sending Proxy materials to principals and obtaining their
Proxies. In addition to solicitations by mail, officers, directors and
employees of the Company may solicit Proxies by telephone or by personal
interviews. Such persons will receive no additional compensation for such
services.
Shares represented by a properly executed Proxy will be voted at the
Meeting and, when instructions have been given by the stockholder, will be voted
in accordance with those instructions. If no instructions are given, the
stockholder's shares will be voted as recommended by the Board of Directors. A
Proxy may be revoked at any time by a stockholder before it is exercised by
giving written notice to the Secretary of the Company or by signing and
delivering a Proxy which is dated later, or if the stockholder attends the
Meeting in person, by either notice of revocation to the inspectors of election
at the Meeting or by voting at the Meeting.
QUORUM AND VOTING
Only stockholders of record at the close of business on April 6, 1998, will
be entitled to vote at the Meeting. On that date, there were issued and
outstanding 5,772,556 shares of the Company's $0.015 par value common stock
("Common Stock"), entitled to one vote per share. In the election of directors,
cumulative voting is not allowed. There are no outstanding shares of preferred
stock.
1
<PAGE>
A majority of the outstanding Common Stock, present in person or by Proxy
and entitled to vote, will constitute a quorum for the transaction of business
at the Meeting. Under Delaware law and the Company's Certificate of
Incorporation, if a quorum is present at the Meeting, the nominee for election
as Class I director who receives the greatest number of votes cast at the
Meeting by the shares present in person or by Proxy and entitled to vote shall
be elected as the Class I director. The affirmative vote by the holders of a
majority of the shares of Common Stock present in person or by Proxy at the
Meeting and entitled to vote on the subject matter is required to ratify the
selection of Deloitte & Touche LLP as the Company's independent auditors for
fiscal 1998. In the election of the Class I director, any action other than a
vote for the nominee will have the practical effect of voting against the
nominee. Abstention from voting on Proposal 2 on the Proxy Card or on any other
matter presented at the Meeting will have the practical effect of voting against
any such matter since it is one less vote for approval, while broker nonvotes on
any such matter will not be considered "shares present" for voting purposes. At
the 1996 and 1997 Annual Meeting of Stockholders, approximately 90% and 83%
respectively of the then outstanding shares of the Company's Common Stock were
present in person or by Proxy.
BENEFICIAL OWNERSHIP OF PRIMA'S COMMON STOCK
The following table sets forth, as of March 13, 1998, the beneficial
ownership of Prima's Common Stock (i) by each person or group of persons known
by the Company to beneficially own more than 5% of the outstanding Common Stock,
(ii) the nominee as Class I director and each of the directors of Prima, (iii)
the executive officers named in the Summary Compensation Table set forth under
the caption "Executive Compensation" below, and (iv) the nominees and all
directors and executive officers as a group.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial Percent
of Beneficial Owner Ownership (1) (2) of Class
- ------------------- ----------------- --------
<S> <C> <C>
Richard H. Lewis................................ 874,244 (3) 14.79%
1801 Broadway, Suite 500
Denver, Colorado 80202
Robert E. Childress............................. 159,698 (4) 2.77
7505 Margarita Place
Colorado Springs, Colorado 80202
Douglas J. Guion................................ 97,397 1.69
1299 Gilpin Street, Unit 14E
Denver, Colorado 80218
John P. Lockridge............................... 323,655 (5) 5.61
1265 Lisbon Lane
Pebble Beach, California 93953
George L. Seward................................ 185,793 (6) 3.22
2710 County Rd. No. 39
Yuma, Colorado 80759
2
<PAGE>
John D. Longwell................................ 106,229 (7) 1.83
1801 Broadway, Suite 500
Denver, Colorado 80202
Robert G. James................................. 644,120 (8) 11.16
80 Ludlow Drive
Chappaqua, New York 10514
Employee Stock Ownership Trust.................. 288,068 (9) 4.99
with Robert E. Childress and
Sandra J. Irlando as Trustees
1801 Broadway, Suite 500
Denver, Colorado 80202
KPM Investment Management, Inc.................. 665,172 (10) 11.53
10250 Regency Circle
Omaha, Nebraska 68114
All directors and executive
officers as a group (10 persons)................ 1,909,875 (11) 31.66
</TABLE>
- ------------------
(1) Except as stated in the following notes, each person has sole voting and
investment powers associated with the shares stated as beneficially owned
by him.
(2) Beneficial ownership includes shares over which the indicated beneficial
owner exercises voting and/or investment power. Shares of Common Stock
subject to options currently exercisable or exercisable within 60 days are
deemed outstanding for computing the percentage ownership of the person
holding the options but not deemed outstanding for computing the percentage
ownership of any other person.
(3) Includes 141,000 shares purchasable under stock options granted pursuant to
the Prima Energy Corporation 1993 Stock Incentive Plan, 25,894 shares
allocated to Mr. Lewis' account in the ESOT as a participant in the ESOP
and 94,750 shares owned by the wife and children of Mr. Lewis. Mr. Lewis
disclaims beneficial interest of the shares owned by his wife and children.
(4) Includes 124 unallocated shares held by the ESOT as to which Mr. Childress
has shared voting and investment powers by virtue of being a Co-Trustee,
but does not include the remaining 288,068 shares held by the ESOT, as to
which he has no voting powers, but does have shared investment powers. See
Note (9) below.
(5) 130,500 shares are pledged on a bank loan.
(6) Includes 240 shares owned by the wife of Mr. Seward. Mr. Seward disclaims
beneficial ownership of these shares.
(7) Includes 37,000 shares purchasable under stock options granted pursuant to
the Prima Energy Corporation 1993 Stock Incentive Plan, 24,678 shares
allocated to Mr. Longwell's account in the
3
<PAGE>
ESOT as a participant in the ESOP and 4,996 shares owned by the children
of Mr. Longwell. Mr. Longwell disclaims beneficial interest of the
shares owned by his children.
(8) The number of shares and nature of beneficial ownership is based on
information contained in Schedule 13D and Form 4 filed with the Securities
and Exchange Commission.
(9) Pursuant to the terms of the ESOT, the Trustees have investment powers
related to the Common Stock of Prima held by the ESOT.
(10) The number of shares and nature of beneficial ownership is based on
information contained in Schedule 13G filed with the Securities and
Exchange Commission as of December 31, 1997. KPM Investment Management,
Inc. reported sole voting power and sole dispositive power with respect to
all shares.
(11) Includes 262,000 shares purchasable under stock options granted pursuant to
the Prima Energy Corporation 1993 Stock Incentive Plan and 107,816 shares
allocated to the ESOT accounts of individuals who are directors or officers
of Prima.
ELECTION OF CLASS I DIRECTOR
(PROPOSAL 1 OF PROXY CARD)
The Company's Certificate of Incorporation and Bylaws provide that the
number of members of the Board of Directors shall be fixed by resolution of the
Board. The size of the Board is currently set at five. The Company's
Certificate of Incorporation also provides for the classification of the Board
of Directors into three classes, as nearly equal in number as possible; each of
which classes will serve for three years with one class being elected each year.
Currently the number of directors in each of the three classes is one in Class
I, two in Class II and two in Class III. The term of the Class I director
expires at the Meeting, the Class II directors at the 1999 Annual Meeting of
Stockholders and the Class III directors at the 2000 Annual Meeting of
Stockholders. The Board of Directors intends to submit one nominee (George L.
Seward) at the Meeting as the Class I director.
The Company has no nominating or similar committee of its Board of
Directors; therefore, it is the recommendation of the Board of Directors that
the Board for the coming year, and until their successors have been duly elected
and qualified, shall consist of a total of five (5) members. Unless authority
is withheld, it is intended that the shares represented by your Proxy will be
voted for the election of the nominee (George L. Seward) as the Class I
director. If this nominee is unable to serve for any reason, your Proxy will be
voted for such person as shall be designated by the Board of Directors to
replace such nominee. The Board of Directors has no reason to expect that the
nominee will be unable to serve.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE NOMINEE FOR CLASS I DIRECTOR, GEORGE L. SEWARD.
4
<PAGE>
Certain information concerning such nominee, as well as the other current
directors, is set forth below:
<TABLE>
<CAPTION>
Period of Service
Positions with as Director Class of
Name Age the Company or Officer Director
- ------------------------ ----- ------------------------ ------------------ --------
<S> <C> <C> <C> <C>
Richard H. Lewis........ 48 Chairman of the Board, Since April 1980 III (1)
Chief Executive Officer,
President, Treasurer
Robert E. Childress..... 50 Director Since October 1988 II (2)
Douglas J. Guion........ 49 Director Since October 1988 II (2)
John P. Lockridge....... 67 Director Since May 1980 III (1)
George L. Seward........ 47 Director Since April 1980 I (3)
</TABLE>
- --------------------------------
(1) Current term expires in 2000
(2) Current term expires in 1999
(3) Current term expires in 1998
The following includes additional information concerning the Class I
nominee for director and each of the director's business experience:
Mr. Lewis founded Prima in April 1980 and has served as its Chairman of the
Board, Chief Executive Officer and Chief Financial Officer since that time. Mr.
Lewis graduated from the University of Colorado in 1971 with a B.S. degree in
Finance and Accounting. Mr. Lewis was employed as a certified public accountant
with Arthur Andersen LLP, an international public accounting firm, from 1971
until 1980, serving as an audit manager since 1976. Mr. Lewis serves on the
Advisory Council to the School of Business at the University of Colorado and is
active in various civic and industry organizations. Mr. Lewis is the Chairman
of the Board of Entre Pure Industries, Inc., a privately held company involved
in the purified water and ice business.
Mr. Childress has been a Director of Prima since October 1988. He served
as Prima's Executive Vice President from October 1988 to April 1993, at which
time he resigned as Executive Vice President to devote more time to volunteer
activities. Mr. Childress holds a B.S. degree in Geophysical Engineering from
the Colorado School of Mines. He worked for Cities Service Oil Company from
1970 to 1981 in various positions, including Regional Geophysical Manager in
Houston and Manager of Planning for Worldwide Operations for the company's
Energy Resource Group in Tulsa. Mr. Childress joined Golden Buckeye Petroleum
Corporation ("GBPC") in 1981 and served as its President until that company
merged with Prima in October 1988.
Mr. Guion has been a Director of Prima since October 1988. In 1987, Mr.
Guion founded Colorado Energy Minerals, Inc., a privately held oil and gas
company owned by Mr. Guion and his family. He co-founded GBPC in 1980 and
served as its Chairman of the Board until the merger with Prima in 1988.
5
<PAGE>
Prior to 1980, Mr. Guion spent 10 years as a co-owner and manager for various
geological and geophysical consulting firms and in various other business
enterprises, including home building and real estate. Mr. Guion holds a B.S.
degree in Geophysical Engineering from the Colorado School of Mines. He is a
Registered Professional Engineer, Registered Geophysicist and Certified
Petroleum Geologist.
Mr. Lockridge has been a Director of Prima since May 1980. He has been
engaged in oil, gas and mineral exploration activities since graduation from the
Colorado School of Mines with a degree in Geological Engineering in 1952. From
1952 to 1968, Mr. Lockridge was employed by Mobil Oil Corporation in various
capacities of increasing responsibility, including Rocky Mountain Exploration
Manager. From 1968 to 1970, Mr. Lockridge was a Vice President for Koch
Exploration Company. Since 1970, Mr. Lockridge has been an independent operator
and is the Vice President of Mountain Petroleum Corporation, a privately held
oil and gas company. Mr. Lockridge has been involved in many professional
industry organizations, including past President of the Rocky Mountain
Association of Geologists and past Vice President of the American Association of
Petroleum Geologists. He is a recipient of several awards and is an Honorary
Member of both the RMAG and the AAPG.
Mr. Seward has been a Director of Prima since April 1980. He served as
Corporate Secretary from 1980 until 1988. He has been engaged in the farming
and ranching business since his graduation from Colorado State University with a
B.A. degree in 1972. Since 1975, Mr. Seward has owned and operated Seward Land
and Cattle Company, a privately held company, as its majority stockholder and
President.
OTHER EXECUTIVE OFFICERS
The following paragraphs set forth certain information concerning executive
officers who are not also directors of the Company:
John D. Longwell, age 43, has been Senior Vice President of Operations
since June 1993. He was Vice President of Operations from March 1990 to June
1993. Mr. Longwell served as Operations Manager for GBPC and subsequently for
Prima from 1984 to March 1990. Previously, Mr. Longwell worked in various
engineering capacities for Texaco, Superior Oil and Dome Petroleum. Mr.
Longwell has also served as President of Action Oilfield Services, Inc. (a
wholly owned subsidiary) since 1986. Mr. Longwell has been a Director of the
Colorado Oil and Gas Association since 1985, was Vice President for 1994 and
served as Association President for 1995. Mr. Longwell is a 22 year veteran in
the oil and gas industry and received a B.S. degree in Mechanical Engineering
from Syracuse University in 1976.
John H. Carpenter, age 42, has been Vice President of Marketing since April
1994. Mr. Carpenter has 17 years experience in the oil and gas industry,
primarily in the marketing, sales and trading of natural gas. Prior to joining
Prima, Mr. Carpenter was the Vice President of Barrett Fuels Corporation, a
natural gas trading subsidiary of Barrett Resources Corporation, for four years.
He also assisted in the initiation of natural gas trading activities for the
Public Service Company of Colorado in its wholly owned subsidiary, Fuel
Resources Development Co., where he worked for eight years and was its Manager
of Marketing. Mr. Carpenter is a former Director of the Rocky Mountain Natural
Gas Association and volunteer in the Mile High United Way Executive Loan
Program. He received a B.A. degree in Journalism and Master of Science in
Administration degree from the University of Denver.
Michael K. Decker, age 43, has been Vice President of Exploitation since
June 1993. Mr. Decker joined Prima in 1990 as Exploitation Manager, responsible
for geological engineering and reservoir engineering operations. Mr. Decker
spent the first eleven years of his career with Tenneco Oil Exploration
6
<PAGE>
and Production Company, working both onshore and offshore domestic
properties. Upon the sale of Tenneco, Mr. Decker joined Bonneville Fuels
Corporation and was responsible for evaluating acquisitions and prospects in
the United States and Canada. Mr. Decker is also an active member of the
Potential Gas Committee ("PGC"). He is currently the President of the
Committee and is on the PGC Board of Directors. Mr. Decker received a B.S.
degree in Geological Engineering from the Colorado School of Mines in 1977.
Sandra J. Irlando, age 46, has been Vice President of Accounting since June
1993 and Corporate Secretary since June 1994. Ms. Irlando has been Controller
of Prima since 1988. She joined GBPC in 1985 as Tax Manager and became its
Controller in 1987. Prior to joining GBPC, Ms. Irlando worked as a certified
public accountant for nine years. She received a B.S.B.A. degree in Accounting
from the University of Denver in 1975.
G. Walter Lunsford, age 46, has been Vice President of Land since June
1993. He served as Secretary from October 1988 to June 1994 and was Land
Manager of Prima from October 1988 to June 1993. He served as Secretary and
Land Manager for GBPC from 1982 until the merger with Prima in 1988. Mr.
Lunsford received a B.S. degree from Indiana University and is a Registered
Professional Landman and member of the American Association of Professional
Landmen.
No family relationship exists between the nominee for Class I director or
any of the directors and executive officers of the Company with the exception of
Mr. Lunsford, who is the brother-in-law of Mr. Guion. In addition, neither the
nominee for Class I director nor any of the directors is a director of any
company with a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934 or subject to the requirements of Section 15(d)
of that Act.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held 7 meetings during the year ended December 31,
1997. Each director attended at least 75 percent of the aggregate of the total
number of meetings of the Board of Directors and the meetings of the Committees
described below of which each respective director is a member.
The audit committee of the Board of Directors consists of Messrs. Lockridge
and Seward. Its functions include recommending to the Board of Directors the
independent auditors to be employed, discussing the scope of the independent
auditors' examinations, reviewing the financial statements and independent
auditors' report, soliciting recommendations from the independent auditors
regarding internal controls and other matters, establishing guidelines for the
Board of Directors review of related party transactions for potential conflicts
of interest, making recommendations to the Board of Directors and other related
tasks as requested by the Board of Directors. During the year ended December
31, 1997, the committee met formally one time.
The compensation committee of the Board of Directors consists of Messrs.
Childress, Guion, Lockridge and Seward. The committee has the authority to
establish policies concerning compensation and employee benefits for all
employees of the Company. The committee reviews and makes recommendations
concerning the Company's compensation policies and the implementation of those
policies and determines compensation and benefits for certain executive
officers. During the year ended December 31, 1997, the committee met formally
two times.
At present, the Company has no nominating, executive or similar committees.
7
<PAGE>
DIRECTOR COMPENSATION
During 1997, no director of Prima was compensated for any services provided
as a director under any standard arrangement or otherwise. Effective May 1998,
non-employee directors will be paid a $10,000 annual retainer, payable
quarterly, and $1,000 per meeting attended.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid or accrued during each of the Company's last three fiscal years, to its
Chief Executive Officer and Senior Vice President of Operations, the only two
executive officers whose salary and bonus exceeded $100,000 for the last fiscal
year for services in their capacity as such.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation All Other
Name and ------------------- ------------ Compensation
Principal Position Year Salary Bonus Options (#) (1)
- ------------------------------ -------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Richard H. Lewis.............. 12/31/97 $210,000 $100,000 none $7,500
Chief Executive 12/31/96 188,754 100,000 none 7,500
Officer, President, 12/31/95 178,754 50,000 75,000 7,500
and Treasurer
John D. Longwell............. 12/31/97 $103,330 $ 12,500 none $6,327
Senior Vice President 12/31/96 96,932 25,000 none 5,200
of Operations 12/31/95 92,467 7,500 15,000 5,318
</TABLE>
(1) Amounts consist of allocations during each of the years under Prima's
Employee Stock Ownership Plan ("Plan"). The Plan is qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended, and is for
the benefit of all eligible employees of the Company. Allocations to
participants are made annually as of the last day of the Plan year,
September 30, and are allocated among the participants in proportion to
their compensation for the Plan year. Contributions to the Plan are
payable at a minimum rate of 5% of eligible salaries (consisting of salary,
bonus, and, in the case of certain non-officer employees, overtime).
Through the Plan year ended September 30, 1993, the Plan provided for
contributions to be made quarterly and to be used to purchase Prima Common
Stock on the open market. Effective October 1, 1993, the Plan was amended
to allow fully vested employees the option to direct the Plan Trustees to
diversify a portion of their Plan investments by selling a limited percent
of Prima Common Stock each year and investing the proceeds in various
investment options. Plan participants become fully vested in the Plan
after six years of service to the Company. Mr. Lewis and Mr. Longwell are
fully vested in the Plan.
8
<PAGE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth information concerning each exercise of
stock options during the year ended December 31, 1997 by the Company's Chief
Executive Officer and Senior Vice President of Operations and the fiscal
year-end value of unexercised options held by each of them.
AGGREGATED OPTION/SAR EXERCISES
FOR YEAR ENDED DECEMBER 31, 1997
AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-The-Money Options at
Shares Value Options at Year End(#)(1) Year -End ($)(2)
Acquired on Realized ------------------------- -------------------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard H. Lewis... 0 0 126,000 69,000 $1,295,970 $678,555
John D. Longwell... 10,000 $119,200 34,000 16,000 $ 425,805 $158,910
</TABLE>
(1) The total number of unexercised options held as of December 31, 1997,
separated between those options that were exercisable and those options
that were not exercisable.
(2) For all unexercised options held as of December 31, 1997, the aggregate
dollar value of the excess of the market value of the stock underlying the
options over the exercise price of those options. On December 31, 1997,
the closing sale price of the Common Stock was $19.375 per share. The
exercise price is $8.83 per share for 120,000 shares, of which 96,000 were
exercisable and $9.92 for 75,000 shares, of which 30,000 were exercisable,
for Mr. Lewis. For Mr. Longwell, the exercise price is $8.83 per share for
35,000 shares, of which 28,000 were exercisable and $9.92 for 15,000
shares, of which 6,000 were exercisable. The values are shown separately
for those options which are exercisable, and those options that were not
yet exercisable.
9
<PAGE>
PERFORMANCE GRAPH
The following graph shows the changes over the past five year period in the
value of $100 invested in: (1) Prima Energy Corporation Common Stock; (2) the
NASDAQ Market Index; and (3) a peer group consisting of all the crude petroleum
and natural gas companies with stock trading on the NASDAQ Market within SIC
code 1311, consisting of 186 companies. The year end values of each investment
are based on share price appreciation and assume that $100 was invested December
31, 1992 and that all dividends are reinvested. Calculations exclude trading
commissions and taxes. The comparison in the graph is required by the SEC and,
therefore, is not intended to forecast or be indicative of possible future
performance of the Company's Common Stock.
[GRAPH]
<TABLE>
<CAPTION>
As of December 31,
----------------------------------------------------------------
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Prima Energy Corporation.... $100.00 $142.50 $115.00 $132.50 $228.49 $294.98
Peer Group Index............ 100.00 119.15 124.87 137.33 182.60 185.09
NASDAQ Market Index......... 100.00 119.95 125.94 163.35 202.99 248.30
</TABLE>
10
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Childress, Guion, Lockridge and Seward served as members of the
Compensation Committee during calendar 1997. None of the committee members were
officers or employees of the Company during 1997. Messrs. Childress, Guion and
Seward were officers of the Company at various times prior to 1997. Mr. Guion
is the brother-in-law of Mr. Lunsford, Vice President of Land for the Company.
During 1997, Mr. Lockridge participated in oil and gas properties in which the
Company had an interest. See "Transactions With Management and Others" below.
COMPENSATION COMMITTEE REPORT
Under rules established by the Securities and Exchange Commission, the
Company is required to provide certain information regarding the compensation of
its Chief Executive Officer and other executive officers whose salary and bonus
exceed $100,000 per year. Disclosure requirements include a report explaining
the rationale and considerations that lead to fundamental executive compensation
decisions. The following report has been prepared to fulfill this requirement.
The Compensation Committee ("Committee") of the Board of Directors sets and
administers the policies that govern the annual compensation and long-term
compensation of executive officers of the Company. The Committee consists of
Messrs. Childress, Guion, Lockridge and Seward, none of whom is an employee of
the Company. The Committee makes all decisions concerning compensation of
executive officers who receive salary and bonus in excess of $100,000 annually,
determine the total amount of bonuses to be paid annually and grant all awards
of stock options under the Company's Stock Incentive Plan. The Committee's
policy is to offer executive officers competitive compensation packages that
will permit the Company to attract and retain highly qualified individuals and
to motivate and reward such individuals on the basis of the Company's
performance.
At present, the executive compensation package consists of base salary,
cash bonus awards and long-term incentive opportunities in the form of stock
options and an employee stock ownership plan. Executive salaries are reviewed
by the Committee on an annual basis and are set for individual executive
officers based on subjective evaluations of each individual's performance, the
Company's performance and a comparison to salary ranges for executives of other
companies in the oil and gas industry with characteristics similar to those of
the Company. This allows the Committee to set salaries in a manner that is both
competitive and reasonable within the Company's industry.
Cash bonuses may be awarded on an annual basis for exceptional effort and
performance. The use of a specific formula to evaluate management performance
is not employed because it is difficult to define an appropriate formula and it
restricts the flexibility of the Committee. The Committee considers the
achievements of the Company, specifically including earnings for the year,
return on stockholders' equity and growth in proved oil and natural gas
reserves, in determining appropriate levels for bonus awards. Following a
review of the Company's performance after the close of the 1997 fiscal year, in
April 1998 the Committee determined that cash bonuses should be awarded, set a
total dollar limit for the bonus pool and awarded cash bonuses to the Company's
Chief Executive Officer and Senior Vice President of Operations, based upon
contribution to the Company's performance during the year.
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Incentive stock options may be granted to key employees, including
executive officers of the Company. Such stock based awards continue to be an
important element of the executive compensation package because they aid in the
objective of aligning the key employees' interests with those of the
stockholders by giving key employees a direct stake in the performance of the
Company. Decisions concerning the granting of stock options are made on the
same basis as decisions concerning base salary and cash bonus awards as
discussed above. No options were granted in 1997.
The compensation of the Chief Executive Officer is largely dependent upon
the overall performance of the Company as well as a comparison to compensation
being paid by other comparable peer companies to their chief executive officers.
For the year ended December 31, 1997, the base salary of the Chief Executive
Officer of the Company, Richard H. Lewis, increased approximately 11.3 percent
to $210,000 from $188,754. A cash bonus award for 1997 of $100,000 was paid in
April 1998.
Compensation Committee of the Board of Directors:
Robert E. Childress
Douglas J. Guion
John P. Lockridge
George L. Seward
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company is a 6% limited partner in a real estate limited partnership
which owns 22 acres of undeveloped land in Phoenix, Arizona. The land was
acquired in 1987 and is held by the partnership for investment and capital
appreciation. The Company has invested $256,668 in the partnership from
inception. No funds have been invested since 1991. One of the general partners
of the partnership is a company controlled by the brother of the Company's
president. The Company participated on the same basis as the other limited
partners. This transaction was approved by the disinterested members of the
Board of Directors.
Certain of the Company's directors and executive officers have
participated, either individually or through entities which they control, in oil
and gas prospects or properties in which the Company has an interest. These
participations, which have been on a working interest basis, have been in
prospects or properties originated or acquired by the Company. In some cases,
the interests sold to affiliated and non-affiliated participants were sold on a
promoted basis requiring these participants to pay a portion of the Company's
costs. Each of the participations by directors and executive officers is
believed to have been on terms no less favorable to the Company than it could
have obtained from non-affiliated participants. Such participations create
interests that may conflict with those of the Company. It is expected that
joint participations with the Company will occur from time to time in the
future. All participations by the officers and directors have and will continue
to be approved by the disinterested members of the Board of Directors and are
subject to standard industry operating agreements.
At any point in time, there are receivables and payables with officers and
directors that arise in the ordinary course of business. Prima, as operator,
commenced drilling a well in December 1997 in which Mr. Lockridge, a director of
Prima, is a 61% working interest owner. The estimated costs to drill and
complete the well are $1,686,800, or $1,026,000 net to Mr. Lockridge. As of the
end of February 1998, the most recent billing period, Mr. Lockridge owed Prima
$299,433 for his proportionate share of costs billed through that date, net of
prepayments made of $389,311. There were no significant amounts due to or from
any other officers or directors in 1997.
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SECTION 16 REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC and the National Association of
Securities Dealers, Inc. Officers, directors, and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) filings.
Based solely on its review of copies of such forms received by the Company
or written representations that no Form 5's were required for those persons, the
Company believes that, during the year ended December 31, 1997, its officers,
directors, and greater than 10% beneficial owners complied with all applicable
filing requirements except as noted below.
Mr. Lockridge, a director of Prima, failed to timely file Form 5 for 1996
reporting the gifting of 6,000 shares, Form 4 for June 1997 reporting the sale
of 6,440 shares and Form 5 for 1997 reporting the gifting of 10,000 shares of
Prima stock. The forms were due February 15, 1997, July 10, 1997 and February
15, 1998, respectively, and were all filed April 10, 1998. Mr. Longwell, an
officer of Prima, failed to timely file one Form 4 reporting the receipt of
10,000 shares of common stock upon the exercise of stock options. The Form 4
was due December 10, 1997 and was filed January 12, 1998. Mr. James, an owner
of more than 10% of the outstanding stock of Prima, failed to timely file three
Form 4's during 1997 reporting purchases of Prima common stock. Total shares of
5,600 were purchased. The Forms were all filed within 60 days of their
respective due dates.
PROPOSAL TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS AUDITORS
(PROPOSAL 2 ON PROXY CARD)
The independent certified public accounting firm of Deloitte & Touche LLP
has been engaged by the Company to audit the accounts and financial statements
of the Company annually for the periods from its inception, April 11, 1980
through December 31, 1997.
Although ratification by stockholders of the appointment of Deloitte &
Touche LLP is not required by Delaware corporate law or the Company's
Certificate of Incorporation or Bylaws, management feels a decision of this
nature should be made with the consideration of the Company's stockholders. If
stockholder approval is not received, management will reconsider the
appointment.
It is expected that a representative of Deloitte & Touche LLP will be
present at the Meeting and will be given the opportunity to make a statement if
he so desires. It is also expected that the representative will be available to
respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF
THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
THE YEAR ENDING DECEMBER 31, 1998.
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OTHER BUSINESS
The Board of Directors of the Company is not aware of any other matters
that are to be presented at the Meeting, and it has not been advised that any
other person will present any other matters for consideration at the Meeting.
Nevertheless, if other matters should properly come before the Meeting, the
stockholders present, or the person, if any, authorized by a valid Proxy to vote
on their behalf, shall vote on such matters in accordance with their judgment.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR
ANNUAL MEETING SCHEDULED TO BE HELD IN MAY, 1999
Any proposal by a stockholder to be presented at the Company's Annual
Meeting of Stockholders scheduled to be held in May 1999, must be received at
the offices of the Company, Suite 500, 1801 Broadway, Denver, Colorado 80202,
no later than December 10, 1998 in order to be considered for inclusion in the
Company's Proxy Statement and form of Proxy for that meeting.
ANNUAL REPORTS AND CONSOLIDATED FINANCIAL STATEMENTS
You are referred to the Company's annual report, including consolidated
financial statements, for the year ended December 31, 1997, enclosed herein for
your information. The annual report is not incorporated in this Proxy Statement
and is not to be considered part of the soliciting material.
BY ORDER OF THE BOARD OF DIRECTORS
SANDRA J. IRLANDO
Secretary
Denver, Colorado
April 17, 1998
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PROXY
Prima Energy Corporation
1801 Broadway, Suite 500
Denver, Colorado 80202
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard H. Lewis, Sandra J. Irlando and G.
Walter Lunsford as Proxies, or any one of them, each with the power to
appoint his or her substitute, and hereby authorizes them to represent and to
vote, as directed below, all the shares of common stock of Prima Energy
Corporation held of record by the undersigned on April 6, 1998, at the Annual
Meeting of Stockholders to be held on May 13, 1998, or any adjournment
thereof, hereby ratifying and confirming all that said Proxies may do or
cause to be done by virtue thereof.
1. ELECTION OF CLASS I DIRECTOR:
/ / FOR George L. Seward, / / WITHHOLD AUTHORITY to vote for
nominee as Class I Director George L. Seward, nominee as
Class I Director.
2. PROPOSAL TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT
AUDITORS OF PRIMA ENERGY CORPORATION FOR FISCAL 1998.
/ / FOR / / AGAINST / / ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE NOMINEE SET FORTH IN PROPOSAL 1 AND FOR PROPOSAL 2.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When
signing as attorney, as executor,
administrator, trustee, or guardian,
please give full title as such.
If a corporation, please sign in
full corporate name by President
or other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
DATED 1998
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PLEASE MARK, SIGN, DATE AND RETURN Signature
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
- ---------------------------------- ----------------------------------------
Signature, if held jointly
