<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) JANUARY 21, 1999
PRIMA ENERGY CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 0-9408 84-1097578
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) file number) Identification No.)
1801 BROADWAY, SUITE 500, DENVER CO 80202
(Address of principal executive offices) (Zip Code)
(303) 297-2100
(Registrant's telephone number, including area code)
NO CHANGE
(Former name or former address, if changed from last report.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Prima Energy Corporation ("Prima") sold certain of its oil and gas
properties and related assets on January 21, 1999, for approximately $26,000,000
(subject to certain closing adjustments). The assets sold consisted of all of
the Company's interest in 16,253 gross acres and 134 producing wells and related
equipment in the Bonny Field in Yuma County, Colorado. Prima also sold its
15.5% interest in the Bonny Gathering Company joint venture, which owned the
pipeline, gathering, compression and dehydration facilities at the Bonny Field.
The assets were sold to WBI Production, Inc., a subsidiary of MDU Resources
(the "Purchaser"). The purchase price for the asset sale was determined by
arm's-length negotiation among the parties. There is no relationship between
the Purchaser and Prima or any of its affiliates, officers or directors or
any associates of any such officer or director.
The sales proceeds have been placed in a like-kind exchange escrow account
with Norwest Bank Colorado, National Association as escrow agent. The Company
intends to identify and close on certain qualifying properties pursuant to the
like-kind exchange provisions of Section 1031 of the Internal Revenue Code of
1986. Pursuant to these tax provisions, Prima must identify the qualifying
properties within 45 days and close within 180 days of the closing of the Bonny
Field transaction. There is no assurance that the Company will be able to
either identify and/or close on properties within these time limits. To the
extent the Company is unable to identify and close on qualifying properties, the
unexpended funds will be disbursed from the escrow account to Prima and will be
subject to federal and state income taxes.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
Unaudited Pro Forma Consolidated Balance Sheet at September 30, 1998 . . . . .4
Unaudited Pro Forma Consolidated Statement of Income
for the year ended December 31, 1997. . . . . . . . . . . . . . . . . . . .6
Unaudited Pro Forma Consolidated Statement of Income
for the nine months ended September 30, 1998. . . . . . . . . . . . . . . .7
Notes to Unaudited Pro Forma Consolidated Financial Information for
the year ended December 31, 1997 and the nine months ended
September 30, 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
</TABLE>
2
<PAGE>
(c) EXHIBITS
The following exhibits are filed herewith pursuant to the provisions of
Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit
Table No. Document Exhibit No.
--------- -------- -----------
<S> <C> <C>
2 Purchase and Sale Agreement 99-2.1 (1)
dated January 7, 1999
99 Prima Energy Corporation Press 99-99.1
Release dated January 22, 1999
</TABLE>
(1) Portions of this agreement have been omitted pursuant to a request by the
Registrant for confidential treatment pursuant to Rule 24b-2 promulgated
under the Securities Exchange Act of 1934.
3
<PAGE>
PRIMA ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
Pro
As Forma Pro
Reported Adjustments Forma
----------- ----------- ----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . $ 5,233,000 $0 $ 5,233,000
Restricted cash held in escrow. . . . . . . . . . 0 26,000,000 (1) 26,000,000
Available for sale securities, at market. . . . . 2,332,000 0 2,332,000
Receivables (net of allowance for doubtful
accounts of $48,000). . . . . . . . . . . . . . 3,852,000 0 3,852,000
Tubular goods inventory . . . . . . . . . . . . . 728,000 0 728,000
Other current assets. . . . . . . . . . . . . . . 335,000 0 335,000
---------- ---------- ----------
Total current assets . . . . . . . . . . . . 12,480,000 26,000,000 38,480,000
---------- ---------- ----------
OIL AND GAS PROPERTIES, at cost,
accounted for using the full cost method. . . . 79,544,000 0 79,544,000
Escrow for like-kind exchange . . . . . . . . . . 0 (25,704,000) (1) (25,704,000)
Less accumulated depreciation, depletion
and amortization. . . . . . . . . . . . . . . . (31,221,000) 0 (31,221,000)
---------- ---------- ----------
Oil and gas properties - net . . . . . . . . 48,323,000 (25,704,000) 22,619,000
---------- ---------- ----------
PROPERTY AND EQUIPMENT, at cost
Oilfield service equipment. . . . . . . . . . . . 4,055,000 0 4,055,000
Furniture and equipment . . . . . . . . . . . . . 792,000 0 792,000
Field office, shop and land . . . . . . . . . . . 433,000 0 433,000
---------- ---------- ----------
5,280,000 0 5,280,000
Less, accumulated depreciation. . . . . . . . . . (2,772,000) 0 (2,772,000)
---------- ---------- ----------
Property and equipment - net . . . . . . . . 2,508,000 0 2,508,000
---------- ---------- ----------
OTHER ASSETS. . . . . . . . . . . . . . . . . . . 553,000 (296,000) (1) 257,000
---------- ---------- ----------
$63,864,000 $ 0 $63,864,000
---------- ---------- ----------
---------- ---------- ----------
See accompanying notes to unaudited pro forma consolidated financial information.
</TABLE>
4
<PAGE>
PRIMA ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Pro
As Forma Pro
Reported Adjustments Forma
----------- ----------- ----------
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable. . . . . . . . . . . . . . . . . $ 690,000 $ 0 $ 690,000
Amounts payable to oil and gas property owners. . 1,403,000 0 1,403,000
Ad valorem and production taxes payable . . . . . 1,571,000 0 1,571,000
Accrued and other liabilities . . . . . . . . . . 345,000 0 345,000
Current portion of notes payable. . . . . . . . . 120,000 0 120,000
Deferred income taxes . . . . . . . . . . . . . . 14,000 0 14,000
---------- ---------- ----------
Total current liabilities. . . . . . . . . . 4,143,000 0 4,143,000
NOTES PAYABLE . . . . . . . . . . . . . . . . . . 120,000 0 120,000
AD VALOREM TAXES, non-current . . . . . . . . . . 717,000 0 717,000
DEFERRED INCOME TAXES . . . . . . . . . . . . . . 8,788,000 0 8,788,000
---------- ---------- ----------
Total liabilities. . . . . . . . . . . . . . 13,768,000 0 13,768,000
---------- ---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value,
2,000,000 shares authorized;
no shares issued or outstanding . . . . . . . . 0 0 0
Common stock, $.015 par value,
12,000,000 shares authorized;
5,835,556 shares issued . . . . . . . . . . . . 87,000 0 87,000
Additional paid-in capital. . . . . . . . . . . . 4,408,000 0 4,408,000
Retained earnings . . . . . . . . . . . . . . . . 46,343,000 0 46,343,000
Unrealized gain on available for sale securities. 45,000 0 45,000
Treasury stock, 63,000 shares at cost . . . . . . (787,000) 0 (787,000)
---------- ---------- ----------
Stockholders' equity - net . . . . . . . . . 50,096,000 0 50,096,000
---------- ---------- ----------
$63,864,000 0 $63,864,000
---------- ---------- ----------
---------- ---------- ----------
See accompanying notes to unaudited pro forma consolidated financial information.
</TABLE>
5
<PAGE>
PRIMA ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Pro
As Forma Pro
Reported Adjustments Forma
----------- ----------- ----------
<S> <C> <C> <C>
REVENUES
Oil and gas sales . . . . . . . . . . . . . . . . $17,840,000 $(1,624,000) (2) $16,216,000
Trading revenues. . . . . . . . . . . . . . . . . 15,999,000 0 15,999,000
Oilfield services . . . . . . . . . . . . . . . . 3,214,000 0 3,214,000
Management and operator fees. . . . . . . . . . . 1,035,000 (405,000) (5) 630,000
Interest and dividend income. . . . . . . . . . . 546,000 0 546,000
Other . . . . . . . . . . . . . . . . . . . . . . 216,000 (135,000) (4) 81,000
---------- ---------- ----------
38,850,000 (2,164,000) 36,686,000
---------- ---------- ----------
EXPENSES
Depreciation, depletion and amortization. . . . . 5,432,000 (2,094,000) (6) 3,338,000
Lease operating expense . . . . . . . . . . . . . 1,720,000 (143,000) (3) 1,577,000
Ad valorem and production taxes . . . . . . . . . 1,355,000 (42,000) (3) 1,313,000
Cost of trading . . . . . . . . . . . . . . . . . 15,323,000 0 15,323,000
Cost of oilfield services . . . . . . . . . . . . 2,368,000 0 2,368,000
General and administrative. . . . . . . . . . . . 1,915,000 (313,000) (5) 1,602,000
---------- ---------- ----------
28,113,000 (2,592,000) 25,521,000
---------- ---------- ----------
INCOME BEFORE INCOME TAXES. . . . . . . . . . . . 10,737,000 428,000 11,165,000
PROVISION FOR INCOME TAXES. . . . . . . . . . . . 2,635,000 105,000 (7) 2,740,000
---------- ---------- ----------
NET INCOME. . . . . . . . . . . . . . . . . . . . $ 8,102,000 $ 323,000 $ 8,425,000
---------- ---------- ----------
---------- ---------- ----------
BASIC NET INCOME PER SHARE$ . . . . . . . . . . . $ 1.40 $ 0.06 $ 1.46
---------- ---------- ----------
---------- ---------- ----------
DILUTED NET INCOME PER SHARE. . . . . . . . . . . $ 1.37 $ 0.05 $ 1.43
---------- ---------- ----------
---------- ---------- ----------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
BASIC. . . . . . . . . . . . . . . . . . . . . 5,771,089 5,771,089 5,771,089
---------- ---------- ----------
---------- ---------- ----------
DILUTED. . . . . . . . . . . . . . . . . . . . 5,910,451 5,910,451 5,910,451
---------- ---------- ----------
---------- ---------- ----------
See accompanying notes to unaudited pro forma consolidated financial information.
</TABLE>
6
<PAGE>
PRIMA ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Pro
As Forma Pro
Reported Adjustments Forma
----------- ----------- ----------
<S> <C> <C> <C>
REVENUES
Oil and gas sales . . . . . . . . . . . . . . . . $12,310,000 $(1,340,000) (2) $10,970,000
Trading revenues. . . . . . . . . . . . . . . . . 3,235,000 0 3,235,000
Oilfield services . . . . . . . . . . . . . . . . 3,027,000 0 3,027,000
Management and operator fees. . . . . . . . . . . 783,000 (304,000) (5) 479,000
Interest and dividend income. . . . . . . . . . . 375,000 0 375,000
Other . . . . . . . . . . . . . . . . . . . . . . 3,862,000 12,000 (4) 3,874,000
---------- ---------- ----------
23,592,000 (1,632,000) 21,960,000
---------- ---------- ----------
EXPENSES
Depreciation, depletion and amortization. . . . . 4,785,000 (1,840,000) (6) 2,945,000
Lease operating expense . . . . . . . . . . . . . 1,524,000 (169,000) (3) 1,355,000
Ad valorem and production taxes . . . . . . . . . 953,000 7,000(3) 960,000
Cost of trading . . . . . . . . . . . . . . . . . 3,177,000 0 3,177,000
Cost of oilfield services . . . . . . . . . . . . 2,089,000 0 2,089,000
General and administrative. . . . . . . . . . . . 1,548,000 (249,000) (5) 1,299,000
---------- ---------- ----------
14,076,000 (2,251,000) 11,825,000
---------- ---------- ----------
INCOME BEFORE INCOME TAXES. . . . . . . . . . . . 9,516,000 619,000 10,135,000
PROVISION FOR INCOME TAXES. . . . . . . . . . . . 2,658,000 172,000 (7) 2,830,000
---------- ---------- ----------
NET INCOME. . . . . . . . . . . . . . . . . . . . $ 6,858,000 $ 447,000 $ 7,305,000
---------- ---------- ----------
---------- ---------- ----------
BASIC NET INCOME PER SHARE. . . . . . . . . . . . $ 1.19 $ 0.08 $ 1.27
---------- ---------- ----------
---------- ---------- ----------
DILUTED NET INCOME PER SHARE. . . . . . . . . . . $ 1.16 $ 0.08 $ 1.23
---------- ---------- ----------
---------- ---------- ----------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
BASIC. . . . . . . . . . . . . . . . . . . . . 5,771,796 5,771,796 5,771,796
---------- ---------- ----------
---------- ---------- ----------
DILUTED. . . . . . . . . . . . . . . . . . . . 5,917,083 5,917,083 5,917,083
---------- ---------- ----------
---------- ---------- ----------
See accompanying notes to unaudited pro forma consolidated financial information.
</TABLE>
7
<PAGE>
PRIMA ENERGY CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION
YEAR ENDED DECEMBER 31, 1997 AND NINE MONTHS ENDED SEPTEMBER 30, 1998
This pro forma financial information has been prepared based upon
management's intention to identify and close on qualifying like-kind exchange
properties. There is no assurance the Company will be able to identify and
close on such qualifying properties within the time limitations placed by the
Internal Revenue Code of 1986. If the Company is unable to identify and close
on any qualifying properties, the Company estimates that its current income tax
liability would increase approximately $10,000,000, with a corresponding
reduction of its long-term deferred tax liability.
PRO FORMA ADJUSTMENTS TO CONSOLIDATED FINANCIAL INFORMATION
(1) To record proceeds from sale of properties, net of estimated closing costs.
For purposes of the pro forma financial information, the proceeds from the
sale were allocated between oil and gas properties and the Company's
investment in Bonny Gathering Company based upon estimated relative fair
values. The portion attributable to oil and gas properties was credited to
the full cost pool, with no gain recognized because the transaction
involved less than 25% of the Company's proved reserves.
(2) To eliminate oil and gas sales received or accrued on properties sold.
(3) To eliminate lease operating expenses and production taxes paid or accrued
on properties sold.
(4) To eliminate the Company's equity in the earnings of Bonny Gathering
Company.
(5) To eliminate management fees and direct costs associated with the Company's
position as managing joint venturer of Bonny Gathering Company.
(6) To adjust depletion expense for reduction in reserves attributable to
properties sold and related reduction in capitalized costs.
(7) To recognize tax effects of other pro forma adjustments based on the
Company's effective tax rate for the period presented.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIMA ENERGY CORPORATION
(Registrant)
Date February 5, 1999 By /s/ Richard H. Lewis
------------------ --------------------------------------
Richard H. Lewis,
President and
Principal Financial Officer
9
<PAGE>
EXHIBIT 99-2.1
PRIMA ENERGY CORPORATION
PURCHASE AND SALE AGREEMENT
DATED JANUARY 7, 1999
10
<PAGE>
PRIMA ENERGY CORPORATION
PURCHASE AND SALE AGREEMENT
DATED JANUARY 7, 1999
This exhibit has been filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment as promulgated by
Rule 24b-2 of the Securities Exchange Act of 1934. The information that has
been redacted in this agreement pursuant to Rule 24b-2 is denoted by an asterisk
placed in the text where such language has been removed.
PURCHASE AND SALE AGREEMENT
Purchase and Sale Agreement (hereinafter referred to as "AGREEMENT"), this 7th
day of January, 1999, by and among *, a * limited partnership and *, a *
corporation, (herein collectively referred to as "*"), whose addresses are *,
PRIMA OIL AND GAS COMPANY and BONNY AEI CORP., Colorado corporations, (herein
collectively referred to as "Prima"), whose addresses are 1801 Broadway, Suite
500, Denver, Colorado 80202, and *, a natural person, and *, a * corporation,
(herein collectively referred to as "*"), whose addresses are *, (each of whom,
*, Prima and *, is herein individually referred to as "SELLER" and is, unless
otherwise stated, included within the term "SELLER"), and WBI HOLDINGS, INC., a
Delaware corporation (herein referred to as "BUYER"), whose address is 200 North
Third Street, Suite 300, Bismarck, North Dakota 58501. (Seller and Buyer are
sometimes together referred to herein as "PARTIES").
W I T N E S S E T H:
WHEREAS, Seller owns certain oil and gas leasehold interests and related
assets more fully described on Exhibits A and B hereto; and
WHEREAS, Seller desires to sell and Buyer desires to purchase the said oil
and gas leasehold interests and related assets on the terms and conditions
hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, Seller and Buyer hereby agree as follows:
- ------------------------
* Such information has been redacted in this agreement pursuant to Rule 24b-2.
11
<PAGE>
ARTICLE 1.
DEFINITIONS
1.1 "ADVERSE CONTRACTUAL OBLIGATIONS" shall mean any contractual
obligation that a reasonable and prudent person engaged in the business of
development and operation of oil and gas properties with knowledge of all the
applicable facts and circumstances and appreciative of their legal significance
would determine to have a material adverse effect upon and would cause such
person to be unwilling to accept the Assets or portions thereof affected by such
obligation, discovered by a review of the documents described in SECTION 1.21(c)
or otherwise.
1.2 "AGREEMENT" shall mean this Purchase and Sale Agreement between
Seller and Buyer.
1.3 "ASSETS" shall mean the oil and gas leasehold interests and
related assets more fully described on Exhibits A and B hereto and includes the
Leases and the Personal Property and Incidental Rights.
1.4 "ASSUMED OBLIGATIONS" shall mean except as otherwise provided in
SECTION 16.1 obligations which would be obligations of Seller but for this
Agreement as follows:
(a) all Environmental Obligations or Liabilities that arise on or
after the Closing Date; and
(b) all liabilities, duties, and obligations that arise on or after
the Effective Date and Time from ownership and operation of the Assets, or
that arise on or after the Closing Date from ownership and/or operation of
the Assets, including, but not limited to: (i) all liabilities and
obligations of Seller from and after the Effective Date and Time until
Closing and of Buyer on or after Closing, with respect to compliance with
all applicable rules, regulations, statutes, permits or orders regardless
of when and by whom the original work (such as drilling and operation of
well and installation of production and plant facilities) was done,
including, but not limited to, plugging and abandoning any wells, the
restoration of any well sites, tank battery sites and gas plant sites, the
proper removal, disposal and abandonment of any wastes or fixtures, and the
proper capping and burying of all flow lines, gathering lines and pipe
lines which are included in the Assets; (ii) all duties, liabilities and
obligations arising on or after the Effective Date and Time under any
contract or agreement affecting the Assets and all obligations with respect
to gas production or sales; and (iii) all duties, liabilities and
obligations that arise under the Leases, assignments in the chain of title
of the Leases or burdens on production.
1.5 "BUYER'S CREDIT" shall be as defined in SECTION 3.3(b).
12
<PAGE>
1.6 "CASUALTY LOSS" shall be as defined in ARTICLE 14.
1.7 "CLAIMS" shall be as defined in SECTION 16.3(a).
1.8 "CLOSING" and "CLOSING DATE" shall be as defined in SECTION 12.1.
1.9 "CURE PERIOD" shall be as defined in SECTION 8.3.
1.10 "DEFENSIBLE TITLE," subject to and except for the Permitted
Encumbrances (as hereinafter defined), means that Sellers have such title that:
(a) entitles Sellers to receive the net revenue interest shown on EXHIBIT B in
the column captioned "Total Net Revenue Interest" and will entitle Buyer upon
consummation of this sale to receive the net revenue interest shown on EXHIBIT B
of all oil and gas produced, saved and marketed from or attributable to the well
or unit indicated; and (b) obligates Sellers to bear the costs and expenses
relating to the maintenance, development and operation of such well or unit in
an amount not greater than that set forth in EXHIBIT B in the column captioned
"Total Gross Working Interest," and will obligate Buyer upon consummation of
this sale to bear the costs and expenses relating to the maintenance,
development and operation of such well or unit in an amount corresponding to the
aforementioned "Total Gross Working Interest."
1.11 "EFFECTIVE DATE AND TIME" shall mean 7:00 a.m., local time, on
January 1, 1999.
1.12 "ENVIRONMENTAL OBLIGATIONS OR LIABILITIES" shall mean all
liabilities, obligations, expenses (including reasonable attorneys' fees),
fines, penalties, costs, claims, suits or damages (including natural resource
damages) of any nature, including personal injury, illness, disease, or wrongful
death, associated with the Assets and attributable to or resulting from:
(i) pollution or contamination of soil, groundwater or air, on the Assets; (ii)
underground injection activities and onsite waste disposal; (iii) clean-up
responses, remedial, control or compliance costs, including the required cleanup
or remediation of spills, pits, ponds, or lagoons, including any subsurface or
surface pollution caused by such spills, pits, ponds or lagoons; (iv)
noncompliance with applicable land use, permitting, surface disturbance,
licensing or notification requirements; and/or (v) violation of any federal,
state or local environmental or land use law.
1.13 "EXCLUDED ASSETS" shall mean the following:
(a) (i) all trade credits, accounts receivable, notes receivable
and other receivables attributable to the Assets with respect to any period
of time prior to the Effective Date and Time; (ii) all deposits, cash,
checks in process of collection, cash equivalents and funds attributable to
the Assets with respect to any period of time prior to the Effective Date
and Time; and (iii) all proceeds, benefits, income or revenues accruing
(and any security or other deposits made) with respect to the Assets prior
to the Effective Date and Time;
(b) all claims and causes of action of Seller arising from acts,
omissions or events or damage to or destruction of the Assets occurring
prior to the Effective Date and Time;
13
<PAGE>
(c) except as otherwise provided in ARTICLE 14, all rights,
titles, claims and interests of Seller attributable to any periods prior to
the Effective Date and Time: (i) under any policy or agreement of
insurance or indemnity; (ii) under any bond; or (iii) to any insurance or
condemnation process or awards;
(d) all Hydrocarbons produced and delivered or sold from or
attributable to the Assets with respect to all periods prior to the
Effective Date and Time, together with all proceeds from the sale of such
Hydrocarbons to the extent included within the Assets;
(e) all claims of Seller to refunds or loss carry forwards with
respect to production, windfall profit, severance, AD VALOREM, tribal,
income, franchise or any other taxes attributable to any period prior to
the Effective Date and Time;
(f) all amounts due or payable to Seller as adjustments or
refunds under any contracts or agreements (including take-or-pay contracts)
affecting the Assets respecting periods prior to the Effective Date and
Time;
(g) all amounts due or payable to Seller as adjustments to
insurance premiums related to the Assets with respect to any period prior
to the Effective Date and Time; and
(h) all proceeds, benefits, income or revenues accruing (and any
security or other deposits made) with respect to the Assets and all
accounts receivable attributable to the Assets prior to the Effective Date
and Time.
1.14 "FINAL SETTLEMENT" shall be as defined in SECTION 3.3.
1.15 "FINAL SETTLEMENT STATEMENT" shall be as defined in SECTION 3.3.
1.16 "HSR ACT" shall be as defined in SECTION 19.6.
1.17 "HYDROCARBONS" shall mean crude oil, natural gas, casinghead gas,
condensate, sulfur, natural gas liquids and other liquid or gaseous hydrocarbons
or gaseous liquids or gases (including CO2), and shall also refer to all other
minerals of every kind and character which may be covered by or included in the
Assets.
1.18 "LEASES" shall mean all right, title and interest of Seller in
and to the oil, gas and/or mineral interests, producing and non-producing alike,
including leases, leaseholds, permits, licensees, concessions, leasehold
estates, surface leases, surface estates, royalty interests, overriding royalty
interests, net revenue interests, executory interests, net profit interests,
production payments, working interests, reversionary interests, fee and term
mineral interests and/or any other interests in and to the oil, gas and mineral
estates or interests in Hydrocarbons which Seller is entitled to receive by
virtue of any participation, joint venture, farmin, farmout, joint operating
agreement or pooling
14
<PAGE>
or unitization agreement or other agreement, and any interest of Seller in any
pooled, unitized or communitized acreage described on EXHIBIT A.
1.19 "LIABILITIES" shall be as defined in SECTION 16.5.
1.20 "PERMITTED ENCUMBRANCES" shall mean:
(a) all tax liens and mechanic's and materialman's liens for
amounts not yet due and payable or those that are being contested in good
faith by Seller in the ordinary course of business;
(b) all liens or security interests created by law or reserved
with respect to the Assets for royalty, bonus, rental, other payment
obligations or created to secure compliance with the terms of the Leases;
(c) all valid, subsisting and applicable laws, rules and orders
of governmental authorities;
(d) to the extent any of the following do not materially
diminish the value of, or impair the conduct of operations on any of the
Assets and do not impair Seller's rights to receive the revenues
attributable thereto: (i) all easements, rights-of-ways, servitudes,
permits, surface leases and other rights in respect of surface operations,
pipelines, grazing, hunting, fishing, logging, canals, ditches, reservoirs
or the like; and (ii) all easements for streets, alleys, highways,
pipelines, telephone lines, power lines, railways and other similar
rights-of-ways, on, over or in respect of property owned or leased by
Seller or over which Seller owns rights of way, easements, permits or
licenses;
(e) all lessor's royalties, overriding royalties, net profit
interests, carried interest, production payments, reversionary interests
and other burdens on or deductions from the proceeds of production if the
net cumulative effect of such burdens or deductions will not reduce the net
revenue interest of Buyer after consummation of the sale contemplated by
this Agreement in any well or unit affected thereby to less than that
indicated in the applicable column in EXHIBIT B or impair the right of
Buyer to receive revenues attributable thereto;
(f) all existing production sales contracts, division orders,
contracts for purchase, exchange, refining, or processing of oil, gas and
other hydrocarbons including, but not limited to: (i) unitization and
pooling designations, declarations, orders and agreements; (ii) operating
agreements; (iii) agreements of development; (iv) area of mutual interest
agreements; (v) gas balancing or deferred production agreements; (vi)
processing agreements; (vii) plant agreements; (viii) pipeline, gathering
and transportation agreements; (ix) injection repressuring and recycling
agreements; (x) carbon dioxide purchase or sale agreements; (xi) salt water
or other disposal agreements; (xii) seismic or geophysical permits or
agreements; (xiii) and any and all other agreements which are ordinary and
customary in the oil, gas, sulfur and other
15
<PAGE>
mineral exploration, development or extraction business, or in the
business of processing of gas and gas condensate production for the
extraction of products therefrom;
(g) all defects, irregularities and encumbrances affecting the
Assets which are not such as to interfere with the operation or use of the
affected part of the Assets and which do not impair Buyer's rights to
receive the proceeds of production from the Assets and do not operate to
reduce the net revenue interest, nor increase the working interest (unless
Buyer's net revenue interest therein is proportionately increased), of
Buyer upon consummation of the sale contemplated by this Agreement as
reflected in the appropriate columns in EXHIBIT B hereto;
(h) all preferential rights to purchase and required third party
consents to assignments and similar agreements with respect to which
waivers or consents are obtained from the appropriate parties or the
appropriate time period for asserting such rights has expired without an
exercise of such rights prior to the Closing Date;
(i) all encumbrances or other matter (whether or not
constituting a Title Defect) waived in writing by Buyer; and
(j) all liens and encumbrances in favor of Seller's lenders
which shall be released at Closing.
1.21 "PERSONAL PROPERTY AND INCIDENTAL RIGHTS" shall mean all right,
title and interest of Seller in and to the following insofar as the same are
assignable and are attributable to, appurtenant to, incidental to or used for
the operation of the Leases:
(a) all easements, rights-of-way, permits, licenses, servitudes
or other interests;
(b) all wells, equipment and other personal property, inventory,
spare parts, tools, fixtures, pipelines, platforms, tank batteries,
appurtenances and improvements situated upon the Leases and/or used or held
for use in connection with the development or operation of the Leases or
the production, treatment, storage, compression, processing, gathering or
transportation of Hydrocarbons from or in the Leases;
(c) all contracts, agreements and title instruments to the
extent attributable to and affecting the Leases in existence at Closing
including all Hydrocarbon sales, purchase, gathering, transportation,
treating, marketing, exchange, processing and fractionating contracts and
joint operating agreements including, without limitation, all of Seller's
interests, rights, obligations and benefits under that certain undated
Amended and Restated Gas Purchase Contract by and between the following
Sellers: (* , Prima Oil and Gas Company and *) and
- ------------------------
* Such information has been redacted in this agreement pursuant to Rule 24b-2.
16
<PAGE>
William Natural Gas Company, the predecessor to Williams Gas Pipeline
Central, Inc., effective January 1, 1994, a true and correct copy of which
is attached hereto as EXHIBIT C hereof and which is, by this reference,
incorporated herein and made part hereof and under which Williams Gas
Pipeline Central , Inc., is performing under that certain Order of the
Federal District Court for the District of Colorado entered in Civil Action
No. 92 N 612, captioned PRIMA OIL AND GAS COMPANY, ET AL. V. WILLIAMS
NATURAL GAS COMPANY, dated April 29, 1994;
(d) original lease files, land files, well files, production
records, division order files, abstracts, title opinions and contract files
insofar as the same are related to the Assets; and
(e) all seismic data and interpretations thereof pertaining to
the Assets.
1.22 "PURCHASE PRICE" shall be as defined in SECTION 3.1.
1.23 "SELLER'S CREDIT" shall be as defined in SECTION 3.3 (a).
1.24 "TITLE DEFECT" shall mean any matter which will cause Buyer to
have less than Defensible Title to any of the Assets after the Closing.
1.25 "TITLE DEFECT PROPERTY" shall mean any Asset or portion thereof
burdened by a Title Defect or by an Adverse Contractual Obligation.
1.26 "TITLE DEFECT VALUE" shall have the meaning set forth in
SECTION 8.4.
ARTICLE 2.
AGREEMENT TO PURCHASE AND SELL
Subject to the terms and conditions of this Agreement, Seller agrees to
sell and convey the Assets to Buyer and Buyer agrees to purchase and pay for the
Assets, to assume the Assumed Obligations and to indemnify Seller as set forth
herein.
ARTICLE 3.
PURCHASE PRICE AND PAYMENT
3.1 PURCHASE PRICE. Subject to adjustment as set forth below, the
Purchase Price for the Assets shall be as follows:
17
<PAGE>
(a) The base Purchase Price shall be $*;
(b) The base Purchase Price shall be allocated to each of the
Sellers as follows:
(i) As to * (excluding *) : $*.
(ii) As to * : $*.
(iii) As to Prima: $ 26,825,000.
(iv) As to *: $*.
The base Purchase Price allocated to each Seller shall be adjusted upward
or downward as set forth in the Final Settlement Statement to be prepared by
Seller under SECTION 3.3 .
3.2 PRELIMINARY SETTLEMENT. Sellers shall jointly prepare and
deliver to Buyer, at least five (5) business days prior to Closing, Sellers'
estimate of the adjusted Purchase Price to be paid at Closing, together with a
preliminary statement setting forth Sellers' estimate of the amount of each
adjustment to the Purchase Price to be made pursuant to this ARTICLE 3. The
estimate shall be prepared on a form substantially similar to that attached as
EXHIBIT D. The Parties shall negotiate in good faith and shall attempt to agree
on such estimated adjustments prior to Closing. In the event any estimated
adjustment amounts are not agreed upon prior to Closing, the estimate of the
adjusted Purchase Price for purpose of Closing shall be calculated based on
Sellers' and Buyer's agreed upon estimated adjustments and Sellers' good faith
estimate of any disputed amounts.
3.3 FINAL SETTLEMENT/PURCHASE PRICE ADJUSTMENTS. Within 90 days
after Closing, Sellers shall jointly provide to Buyer, for Buyer's review, an
accounting (the "FINAL SETTLEMENT STATEMENT") of the actual amounts of each of
Sellers' and Buyer's Credits for the adjustment set out in this SECTION 3.3.
Buyer shall have the right for 60 days after receipt of the Final Settlement
Statement to audit and take exceptions to such adjustments. Any disagreements
shall be resolved on a best efforts basis by Sellers and Buyer within twenty
(20) days after Buyer presents its exceptions, if any, to Sellers. Those credits
agreed upon by Buyer and Sellers shall be netted and the final settlement shall
be paid as directed in writing by the receiving party on final adjustment by the
party owing it (the "FINAL SETTLEMENT") within 180 days after Closing.
- ------------------------
* Such information has been redacted in this agreement pursuant to Rule 24b-2.
18
<PAGE>
(a) The Purchase Price shall be adjusted upward by the following
("SELLER'S CREDITS"):
(i) all prepaid expenses attributable to the Assets
that are paid on behalf of Buyer prior to the Closing Date and
that are, in accordance with generally accepted accounting
principles, attributable to the period after the Effective Date
and Time including, without limitation, prepaid utility charges,
prepaid ad valorem, property, production, severance and similar
taxes (but not including income or franchise taxes) based upon or
measured by the ownership of the Assets or the production of
Hydrocarbons or the receipt of proceeds therefrom; and
(ii) an amount equal to the sum of any upward
adjustments provided elsewhere in this Agreement.
(b) The Purchase Price shall be adjusted downward by the
following ("BUYER'S CREDITS"):
(i) an amount equal to all revenues on a cash basis
received by Seller for Hydrocarbon production attributable to the
Assets sold by the Seller after the Effective Date and Time;
(ii) the amount of all unpaid AD VALOREM, property,
production, excise, severance and similar taxes and assessments (but
not including income or franchise taxes) based upon or measured by the
ownership of the Assets or production of Hydrocarbons or the receipt
of proceeds therefrom accruing to the Assets in accordance with
generally accepted accounting principles prior to the Effective Date
and Time, (it being agreed that any tax measured on the basis of
production, other than AD VALOREM taxes, shall be deemed to be a tax
for the period in which the production occurred, regardless of the
period for which the tax is assessed), which amount shall, to the
extent not actually assessed, be computed based upon such taxes and
assessments for the preceding calendar year, or, if such taxes or
assessments are assessed on other than a calendar year basis, for the
tax related year last ended (and such adjustment, as adjusted on the
Final Statement, shall be a final settlement of such taxes between
Seller and Buyer), it being agreed that any AD VALOREM taxes assessed
in the first quarter of 1999, payable in arrears for 1998, shall be
paid by Seller (and, if not paid by Seller, shall be the subject of a
downward price adjustment hereunder) and that any subsequently
assessed AD VALOREM taxes for taxable periods commencing on or after
the Effective Date shall be the responsibility of Buyer; and
(iii) an amount equal to the sum of any downward
adjustments provided elsewhere in this Agreement.
19
<PAGE>
3.4 RECIPROCITY. Buyer and Seller agree to remit to one another any
payments or invoices received by either that are properly the property or
obligation of the other by reason or arising from, or being attributable to, the
Assets prior to or after the Effective Date and Time as the case may be.
ARTICLE 4.
SELLER'S REPRESENTATIONS AND WARRANTIES
(a) * represents and warrants to Buyer as of the date hereof and
as of the Closing Date that:
(i) * is a * limited partnership, duly organized,
validly existing, in good standing under the laws
of said state and is duly qualified to carry on
its business in those states where it is required
to be qualified.
(ii) *, is a * corporation, duly organized, validly
existing, in good standing under the laws of said
state and is duly qualified to carry on its
business in the states where it is required to be
qualified.
(iii) * owns a *% joint venture interest in the Bonny
Gathering Company, a joint venture created
pursuant to that certain Joint Venture Agreement
dated March 9, 1982, by and between *, Prima, and
*.
(b) Prima represents and warrants to Buyer as of the date hereof
and as of the Closing Date that:
(i) Prima Oil and Gas Company and Bonny AEI Corp. are
Colorado corporations, duly organized, validly
existing, in good standing under the laws of the
state Colorado and are duly qualified to carry on
their businesses in those states where they are
required to be qualified.
(ii) Prima owns a 15.5% joint venture interest in the
Bonny Gathering Company, a joint venture created
pursuant to that certain Joint Venture Agreement
dated March 9, 1982, by and between *, Prima and
*.
- ------------------------
* Such information has been redacted in this agreement pursuant to Rule 24b-2.
20
<PAGE>
(c) * represents and warrants to Buyer as of the date hereof and
as of the Closing Date that:
(i) * is a natural person and under no legal or other
disability and that *, is a * corporation, duly
organized, validly existing, in good standing
under the laws of the state of * and is duly
qualified to carry on its business in those states
where it is required to be qualified.
(ii) * owns a *% joint venture interest in the Bonny
Gathering Company, a joint venture created
pursuant to that certain Joint Venture Agreement
dated March 9, 1982, by and between *, Prima and
*.
Seller represents and warrants to Buyer as of the date hereof and
as of the Closing Date that:
(i) Seller has or will have at Closing all requisite
power and authority to carry on its business as
presently conducted, to enter into this Agreement
and the other documents and agreements
contemplated hereby, and to perform its
obligations under this Agreement and the other
documents and agreements contemplated hereby. To
Seller's knowledge, the consummation of the
transactions contemplated by this Agreement will
not violate nor be in conflict with any provision
of its governing documents or any agreement or
instrument to which it is a party or by which it
is bound relating to (I) the preferential rights
to purchase all or any portion of the Assets; (II)
required consents to transfer and related
provisions; (III) maintenance of uniform interest
provisions; and (IV) any other third-party
approvals or consents contemplated herein or any
judgment, decree, order, statute, rule, or
regulation applicable to Seller.
(ii) This Agreement, and all documents and instruments
required hereunder to be executed and delivered
by Seller at Closing, constitute legal, valid and
binding obligations of Seller in accordance with
their respective terms, subject to applicable
bankruptcy and other similar laws of general
application with respect to creditors.
- ------------------------
* Such information has been redacted in this agreement pursuant to Rule 24b-2.
21
<PAGE>
(iii) There are no bankruptcy, reorganization or
receivership proceedings pending, being
contemplated by or, to the actual knowledge of
Seller, threatened against Seller.
(iv) The execution, delivery and performance of this
Agreement and the transaction contemplated
hereunder have been duly and validly authorized by
all requisite authorizing action, corporate,
partnership or otherwise, on the part of Seller
(v) Seller has not incurred any obligation or
liability, contingent or otherwise, for broker's
or finder's fees payable by Buyer in connection
with this Agreement and the transaction provided
herein.
(vi) Except as may be required by laws relating to
assignments of federal, state or Indian leases (if
any are applicable), to Seller's knowledge no
consent, approval, authorization, designation,
declaration or filing with any governmental
authority is required on the part of Seller in
connection with the execution, delivery or
performance of this Agreement.
(vii) To Seller's knowledge, all royalties currently
owed or due from or on account of the Leases have
been paid.
(viii) There are no judicial or administrative actions or
proceedings pending or, to Seller's knowledge,
threatened that challenge the validity of this
Agreement or seek to restrain or prevent any
action taken or to be taken by Seller in
connection with this Agreement. Except as
disclosed on EXHIBIT E: (I) there is no litigation
or proceeding pending or, to Seller's knowledge,
threatened, or any order, injunction or decree
outstanding against or relating to the Assets;
and (II) (a) Seller is not in violation of any
applicable law, regulation, ordinance or any other
applicable requirements of any governmental body
or court, which violation could have material
adverse effect upon the Assets or the continued
operation thereof, and (b) no notice has been
received by Seller alleging such violation.
(ix) Except as disclosed on EXHIBIT E, Seller has not
given nor been given notice of any default under,
or action to alter, terminate, rescind or procure
a judicial reformation of any material provision
of any contract, agreement or Lease or contract or
agreement covering or relating to the Assets.
Except as disclosed on EXHIBIT E, to the knowledge
of Seller there are no material gas imbalances as
between
22
<PAGE>
Seller and any third party with respect to
operations relating to the Assets. Except as
disclosed on EXHIBIT E, with respect to marketing
arrangements relating to the Assets, to the
knowledge of Seller, Seller has not received any
advance, take-or-pay or other similar payments
under any contract that entitle the purchaser to
make-up or otherwise receive deliveries of
Hydrocarbons at any time after the Effective Date
and Time without paying at such time the full
contract proceeds thereof. Except as disclosed on
EXHIBIT E, all ad valorem, property, production,
severance, windfall profits and similar taxes and
assessments based on or measured by the ownership
of the Assets or the production of Hydrocarbons or
the receipt of proceeds therefrom that have become
due and payable with respect to the Assets have
been paid timely, except such taxes as are being
contested in good faith.
(x) Except as disclosed on EXHIBIT E, the Assets to be
conveyed to Buyer hereunder will be free of any
and all liens and encumbrances including tax liens
(other than for current taxes not yet due and
payable).
(xi) To Seller's knowledge, there are no material
Environmental Obligations or Liabilities.
(xii) To Seller's knowledge, all pipelines and plant
facilities included in the Assets are being
operated in material compliance with all
applicable laws, codes, rules and regulations.
(xiii) Seller has filed all tax reports, returns,
information returns and other documents
(collectively "Tax Returns") required to be filed
on or prior to the date hereof in respect of all
relevant taxes pertaining to the property (other
than tax returns based on the net income of
Seller, including interest and penalties).
(xiv) All consents which are necessary have been
obtained and all conditions have been met and
there is no impediment to the transfer of all the
Sellers' respective interests in the Bonny
Gathering Company joint venture as part and parcel
of the transaction hereunder.
23
<PAGE>
ARTICLE 5.
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller as of the date hereof and as of the
Closing Date that:
(a) Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is duly qualified to carry
on its business in those states where it is required to do so. As of the
Closing Date, Buyer will be qualified to carry on business in those states in
which any material portion of the Assets is located.
(b) Buyer has or will have at Closing all requisite power and authority to
carry on its business as presently conducted, to enter into this Agreement and
the other documents and agreements contemplated hereby and to perform its
obligations under this Agreement and the other documents and agreements
contemplated hereby. The consummation of the transactions contemplated by this
Agreement will not violate or be in conflict with any provision of Buyer's
articles of incorporation, by-laws or governing documents or any material
agreement or instrument to which it is a party or by which it is bound, or any
judgment, decree, order, statute, rule or regulation applicable to Buyer.
(c) This Agreement, and all documents and instruments required hereunder
to be executed and delivered by Buyer at Closing, constitute legal, valid and
binding obligations of Buyer in accordance with their respective terms, subject
to applicable bankruptcy and other similar laws of general application with
respect to creditors.
(d) There are no bankruptcy, reorganization or receivership proceedings
pending, being contemplated by or, to the actual knowledge of Buyer, threatened
against Buyer.
(e) Buyer has not incurred any obligation or liability, contingent or
otherwise, for broker's or finder's fees payable by Seller in connection with
this Agreement and the transaction provided herein.
(f) Buyer is an experienced and knowledgeable investor and operator in the
oil and gas business. Prior to entering into this Agreement, Buyer was advised
by and has relied solely on its own expertise and legal, tax, reservoir
engineering and other professional counsel concerning this Agreement, the Assets
and the value thereof.
(g) Buyer has arranged to comply with all contracts, laws, ordinances,
rules and regulations applicable to the Assets.
(h) The execution, delivery and performance of this Agreement and the
transaction contemplated hereunder have been duly and validly authorized by all
requisite authorizing action, corporate, partnership or otherwise, on the part
of Buyer.
24
<PAGE>
ARTICLE 6.
ACCESS TO INFORMATION
6.1 INSPECTION. Subject to any necessary third-party operator
approval, Seller shall permit Buyer and its representatives at reasonable times
and at their sole risk, cost and expense, to conduct reasonable inspections of
the Assets and of all equipment, inventory, gas or hydrocarbon extraction plants
and other personal property and to conduct environmental inspections, audits and
tests and other surveys and tests which, in Buyer's discretion, Buyer deems
necessary for evaluation of the Assets; provided, however, Buyer shall repair
any damage to the Assets resulting from such inspections and Buyer does hereby
indemnify and hold Seller harmless from and against any and all losses, costs,
damages, obligations, claims, liabilities, expenses or causes of action arising
from Buyer's inspection and observation of the Assets. Seller may require that
Buyer be accompanied by a representative of Seller during any inspection.
6.2 TITLE FILES AND ENVIRONMENTAL FILES. Promptly after the
execution of this Agreement and until the Closing Date:
(a) Seller shall permit Buyer and its representatives at
reasonable times during normal business hours to examine in Seller's
offices at their actual location all abstracts of title, title opinions,
title files, ownership maps, lease files, assignments, division orders,
payout statements and agreements pertaining to the Assets as requested by
Buyer insofar as the same may now be in existence and in the possession of
Seller. No warranty of any kind is made by Seller as to the information so
supplied and Buyer agrees that any conclusions drawn therefrom are the
result of its own independent review and judgment.
(b) Except as may be prohibited by any existing agreements with
third parties, Seller shall permit Buyer and its representatives at
reasonable times during normal business hours to examine in Seller's
offices at their actual location all environmental audits, surveys, reports
and results of environmental testing pertaining to the Assets which are now
in existence and in the possession or control of Seller.
6.3 OTHER FILES. Promptly after the execution of this Agreement and
until the Closing Date, Seller shall permit Buyer and its representatives at
reasonable times during normal business hours to examine in Seller's offices at
their actual location all production, well, regulatory, engineering, geological,
geophysical and geochemical information and other information, files, books,
records and data (including economic evaluations and reserve reports) pertaining
to the Assets as requested by Buyer insofar as the same may now be in existence
and in the possession of Seller. No warranty of any kind is made by Seller as to
the information so supplied and Buyer agrees that any conclusions drawn
therefrom are the results of its own independent review and judgment.
6.4 NON-DISCLOSURE. Seller agrees that it will not discuss or
disclose the terms or substance of this Agreement or those of any transaction
referred to herein or contemplated hereby with or to any third parties except as
authorized by this Agreement and will maintain all such
25
<PAGE>
information as confidential and propriety and will exercise its best efforts to
maintain the confidentiality of such information except as required by
applicable law, rule regulation or court order. Seller will keep, save and hold
Buyer harmless from any and all damages, claims and liabilities of whatsoever
nature including, without limitation, reasonable attorneys' fees, arising from
or relating to Seller's unauthorized disclosure of any such information.
Nothing in this Section shall prevent Seller from disclosing the terms and
substance of this Agreement to the extent necessary for Seller to enforce its
rights under this Agreement.
6.5 NO WARRANTY OR REPRESENTATION ON SELLER'S INFORMATION. SELLER
MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE
ACCURACY, COMPLETENESS OR MATERIALITY OF THE INFORMATION, RECORDS, AND DATA NOW,
HERETOFORE OR HEREAFTER MADE AVAILABLE TO BUYER IN CONNECTION WITH THE ASSETS OR
THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY DESCRIPTION OF THE ASSETS,
QUALITY OR QUANTITY OF HYDROCARBON RESERVES, IF ANY, PRODUCTION RATES,
RECOMPLETION OPPORTUNITIES, DECLINE RATES, GAS BALANCING INFORMATION, ALLOWABLES
OR OTHER REGULATORY MATTERS, POTENTIAL FOR PRODUCTION OF HYDROCARBONS FROM THE
ASSETS, OR ANY OTHER MATTERS CONTAINED IN OR OMITTED FROM ANY OTHER MATERIAL
FURNISHED TO BUYER BY SELLER. ANY AND ALL SUCH DATA, INFORMATION AND MATERIAL
FURNISHED BY SELLER IS PROVIDED AS A CONVENIENCE ONLY AND ANY RELIANCE ON OR USE
OF THE SAME IS AT BUYER'S SOLE RISK. NEITHER ANYTHING CONTAINED HEREIN OR ANY OF
BUYER'S INSPECTION OR EXAMINATION OR ANY INFORMATION RECORDS OR DATA MADE
AVAILABLE TO BUYER SHALL LIMIT ANY WARRANTY OR REPRESENTATION MADE BY SELLER IN
ARTICLE 4 HEREOF.
ARTICLE 7.
ENVIRONMENTAL MATTERS, ADJUSTMENTS AND TERMINATION
7.1 BUYER'S INVESTIGATION OF CONDITIONS OF ASSETS. Upon execution of
and pursuant to the terms of this Agreement, Buyer shall have the right, at
reasonable times during normal business hours, to conduct its investigation into
the physical and environmental condition of the Assets. If, in the course of
conducting such investigation, Buyer discovers Environmental Obligations or
Liabilities which affect the Assets, Buyer may, no later than 5:00 p.m. Central
time eight (8) days prior to the Closing Date, notify Seller in writing
specifying such defects, the Assets affected thereby and Buyer's good faith
estimate of the net reduction in value of the Assets affected by such defects
based upon the expected costs of remediation.
7.2 WAIVER OF DEFECTS. If Buyer fails to notify Seller prior to 5:00
p.m. Central Time eight (8) days prior to the Closing Date of any such defects,
all defects will be deemed waived, Seller shall be released from any liability
therefor, the Parties shall proceed with Closing and Buyer shall assume the
risks, liability and obligations associated with the Assets except as warranted
by Seller
26
<PAGE>
in ARTICLE 4 hereof.
7.3 REMEDIATION AND ELECTION TO TERMINATE. Upon notification of
defects pursuant to SECTION 7.1, Seller must, if the Buyer's good faith estimate
of the reduction in the value of the Assets is greater than $10,000, remediate
the same or the Purchase Price shall be reduced by the amount of the Buyer's
good faith estimate of the reduction in value of the Assets. Within 90 days
after closing, Seller shall commence reasonable efforts to remediate or cause
the operator of the Assets to remediate any such defects which a reasonably
prudent operator would remediate. Costs of such remediation shall be born
exclusively by Seller. Upon remediation, Buyer shall pay to Seller the amount
by which the Purchase Price was reduced by reason of such defect. If Buyer's
good faith estimate of the net reduction in value of the Assets affected by such
defects based upon the expected costs of remediation exceeds $100,000, Seller
shall have the right to terminate this Agreement in lieu of remediation by
notifying Buyer in writing.
ARTICLE 8.
ADVERSE CONTRACTUAL OBLIGATIONS
TITLE DEFECTS, TERMINATION AND ADJUSTMENTS
8.1 NOTICE OF TITLE DEFECTS AND ADVERSE CONTRACTUAL OBLIGATIONS.
Prior to 5:00 p.m. Central Time eight (8) days prior to the Closing Date, Buyer
may provide Seller written notice of any Title Defect and/or Adverse Contractual
Obligation along with a description of those matters which, in Buyer's
reasonable opinion, constitute Title Defects or Adverse Contractual Obligations,
and setting forth in detail Buyer's calculation of the Title Defect Value for
each Title Defect or Adverse Contractual Obligation. Seller may elect, at its
sole cost and expense, but without obligation, to cure all or any portion of
such Title Defects or Adverse Contractual Obligations prior to the Closing Date.
Buyer's failure to deliver to Seller such notice by 5:00 p.m. Central Time eight
(8) days prior to the Closing Date, shall be deemed a waiver by Buyer of all
Title Defects and Adverse Contractual Obligations not covered by a proper
written notice from Buyer received by Seller prior to such deadline.
8.2 OPTION TO TERMINATE. If the aggregate of the Title Defect Values
attributable to all Title Defect Properties identified pursuant to SECTION 8.1
shall exceed $100,000 and Seller fails or refuses to cure pursuant to SECTION
8.3, Buyer may, at its sole option, terminate this Agreement without any further
obligation by giving written notice of termination to Seller.
8.3 TITLE DEFECT ADJUSTMENT. During the time between Seller's receipt
of any notices of Title Defects or Adverse Contractual Obligations and the
Closing ("CURE PERIOD"), Seller shall have the opportunity to cure any Title
Defect or Adverse Contractual Obligation. If Seller fails or refuses to cure
any Title Defect or Adverse Contractual Obligation prior to the expiration of
the Cure Period, subject to Buyer's right to terminate this Agreement in
accordance with SECTION 8.2, at Closing, Buyer shall elect to either: (i) accept
the affected Title Defect Property and waive all of the Title Defects and/or
Adverse Contractual Obligations applicable thereto (which Title Defects and
Adverse
27
<PAGE>
Contractual Obligations shall be deemed Permitted Encumbrances); or (ii) based
on the mutual assessment of the Parties in accordance with SECTION 8.4, have the
Asset to which the title defect pertains deleted from the sale contemplated by
this Agreement and become Excluded Assets and to have the base Purchase Price
reduced by the value of such Assets and accept all other Assets and waive all
Title Defects and Adverse Contractual Obligations affecting such other Assets.
8.4 TITLE DEFECT VALUES FOR DEVELOPED PRODUCING PROPERTIES. In
determining the value of a Title Defect and/or Adverse Contractual Obligation
(the "TITLE DEFECT VALUE"), it is the intent of the Parties to include, to the
extent possible, only that portion of the lands, leases and wells, whether an
undivided interest, separate interest or otherwise, materially and adversely
affected by the defect. The Title Defect Value shall be determined by agreement
of the parties in good faith taking into account all relevant factors,
including, but not limited to, the following:
(a) the Value of the Assets affected thereby;
(b) the potential or actual reduction in the indicated net
revenue interest of the Title Defect Property, or the amount by which the
cost sharing percentage for such property is greater than the indicated
working interest;
(c) the productive or prospective status of the Title Defect
Property (i.e., proved, developed, producing, etc.) and the present value
of the income expected to be produced therefrom;
(d) if the Title Defect represents only a possibility of title
failure, the probability that such failure will occur and whether the
revenue stream from the Title Defect Property has been and is likely to be
adversely affected in the future;
(e) the legal effect of the Title Defect or Adverse Contractual
Obligation;
(f) if the Title Defect or Adverse Contractual Obligation is a
lien or encumbrance on the leases, lands or wells, the cost of removing
such lien or encumbrance; and
(g) the present value of the anticipated adverse economic effect
of any Title Defect or Adverse Contractual Obligation.
8.5 WARRANTY. EXCEPT AS STATED IN ARTICLE 4, SELLER SHALL CONVEY THE
ASSETS TO BUYER SUBJECT TO ALL ROYALTIES, OVERRIDING ROYALTIES, BURDENS AND
ENCUMBRANCES, AND WITHOUT ANY WARRANTY OF TITLE, EXPRESS OR IMPLIED EXCEPT BY,
THROUGH AND UNDER SELLER BUT NOT OTHERWISE, AS PROVIDED IN THE FORM OF
ASSIGNMENT, BILL OF SALE AND CONVEYANCE ATTACHED AS EXHIBIT F HERETO.
IMBALANCES WITH RESPECT TO OIL OR NATURAL GAS ARE GOVERNED BY ARTICLE 17 HEREOF.
THE PARTIES AGREE THAT THE EXISTENCE OF ANY SUCH IMBALANCES SHALL NOT BE DEEMED
28
<PAGE>
A TITLE DEFECT.
ARTICLE 9.
PREFERENTIAL PURCHASE RIGHTS AND CONSENTS
9.1 ACTIONS AND CONSENTS.
(a) Seller and Buyer agree that each shall use reasonable
efforts to take or cause to be taken all such action as may be necessary to
consummate and make effective the transaction provided in this Agreement
and to assure that such party will not be under any material corporate,
legal, or contractual restriction that could prohibit or delay the timely
consummation of such transaction.
(b) Certain preferential purchase rights or rights of approval
or consent may exist with respect to the Assets. Seller shall use its best
efforts to notify all holders of preferential rights, rights of consent to
the assignment and rights of approval to the assignment of the Assets, of
Seller's intention to sell the applicable Assets to Buyer and of the terms
and conditions of this Agreement of which the holders of such rights are
entitled to be advised. Seller shall promptly notify Buyer if any
preferential rights are exercised, any consents or approvals denied or if
the requisite period has elapsed without said rights having been exercised
or consents or approvals having been received. If prior to Closing, any
such preferential rights are timely and properly exercised, or if Seller is
unable to obtain a necessary consent or approval prior to Closing, the
interest or part thereof so affected shall be eliminated from the Assets
and the Purchase Price reduced by the value thereof. If any additional
third party preferential purchase rights are discovered after Closing, or
if a third party preferential rights holder alleges improper notice, then
Buyer agrees to cooperate with Seller in giving effect to any such third
party preferential purchase rights. In the event any such valid third
party preferential purchase rights are validly exercised after Closing,
Seller shall promptly return to Buyer that portion of the Purchase Price
relating to the Assets on which such rights are exercised and lost by Buyer
to such third party. Nothing in this subsection shall apply to consents or
approvals of assignment by governmental entities where such approvals are
customarily obtained after Closing.
ARTICLE 10.
COVENANTS OF SELLER
10.1 COVENANTS OF SELLER PENDING CLOSING.
(a) From and after the date of execution of this Agreement and
until the Closing, and subject to SECTION 10.2 and the constraints of
applicable operating agreements and other agreements pertinent thereto,
Seller shall operate, manage and administer the Assets in a
29
<PAGE>
good and workmanlike manner consistent with its past practices and shall
carry on its business with respect to the Assets in substantially the same
manner as before execution of this Agreement. Seller shall use reasonable
efforts to preserve in full force and effect all oil and gas leases,
operating agreements, easements, rights-of-way, permits, licenses and
agreements which relate to the Assets and shall perform all obligations of
Seller in or under all such agreements relating to the Assets. Seller
shall, except for emergency action taken in the face of serious risk to
life, property or the environment or expenditures incurred or committed
prior to the execution of this Agreement, submit to Buyer for prior written
approval all requests for operating or capital expenditures and all
proposed contracts and agreements which involve individual commitments
attributable to the Assets of more than Fifty Thousand Dollars ($50,000).
On any matter requiring Buyer's approval under this SECTION 10.1(a), Buyer
shall respond within five (5) business days to Seller's request for
approval and failure of Buyer to respond to Seller's request for approval
within such time shall release Seller from the obligation to obtain Buyer's
approval before proceeding on such matter; PROVIDED, however, if a rig is
on location, Buyer's response shall be required within the time required
under any applicable agreement, but in any case not less than 24 hours
after notice from Seller to Buyer.
(b) Seller shall promptly notify Buyer of any suit, lessor
demand action, or other proceeding before any court, arbitrator, or
governmental agency and any cause of action which relates to the Assets or
which might result in impairment or loss of Seller's interest in any
portion of the Assets or which might hinder or impede the operation of the
Assets.
10.2 LIMITATIONS ON SELLER'S COVENANTS PENDING CLOSING. To the extent
Seller is not the operator of any of the Assets, the obligations of Seller in
SECTION 10.1 concerning operations or activities which normally or pursuant to
existing contracts are carried out or performed by the operator, shall be
construed to require only that Seller use reasonable efforts to cause the
operator of such Assets to take such actions or render such performance within
the constraints of the applicable operating agreements and other applicable
agreements.
ARTICLE 11.
CLOSING CONDITIONS
11.1 SELLER'S CLOSING CONDITIONS. The obligations of Seller under
this Agreement are subject, at the option of Seller, to the satisfaction of
Seller in its sole discretion at or prior to the Closing, of the following
conditions:
(a) all representations and warranties of Buyer contained in
this Agreement shall be true in all material respects at and as of the
Closing as if such representations and warranties were made at and as of
the Closing and Buyer shall have performed and satisfied all agreements
required by this Agreement to be performed and satisfied by Buyer at or
prior to the Closing;
30
<PAGE>
(b) the execution, delivery and performance of this Agreement
and the transactions contemplated hereby have been duly and validly
authorized by all necessary action, corporate, partnership or otherwise, on
the part of Buyer;
(c) except for those consents of approvals customarily obtained
after Closing, all necessary consents to the filings with any state or
federal governmental authority or agency relating to the consummation of
the transactions contemplated by this Agreement shall have been obtained,
accomplished or waived; and
(d) as of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by Seller) shall be pending or
threatened before any court or governmental agency seeking to restrain
Seller or prohibit the Closing or seeking damages against Seller as a
result of the consummation of this Agreement.
11.2 BUYER'S CLOSING CONDITIONS. The obligations of Buyer under this
Agreement are subject, at the option of Buyer, to the satisfaction of Buyer in
its sole discretion at or prior to the Closing, of the following conditions:
(a) all representations and warranties of Seller contained in
this Agreement shall be true in all material respects at and as of the
Closing as if such representations and warranties were made at and as of
the Closing and Seller shall have performed and satisfied all agreements
required by this Agreement to be performed and satisfied by Seller at or
prior to the Closing including the Covenants contained in Article 10
hereof;
(b) the execution, delivery and performance of this Agreement
and the transactions contemplated hereby have been duly and validly
authorized by all necessary action, corporate, partnership or otherwise, on
the part of Seller;
(c) except for those consents and approvals customarily obtained
after Closing, all necessary consents of and filings with any state or
federal governmental authority or agency relating to the consummation of
the transactions contemplated by this Agreement shall have been obtained,
accomplished or waived and the Parties shall be in full compliance with all
applicable laws and regulations pertaining to this transaction and all
necessary approvals shall have been obtained;
(d) as of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by Buyer) shall be pending or
threatened before any court or governmental agency seeking to restrain
Buyer or prohibit the Closing or seeking damages against Buyer as a result
of the consummation of this Agreement;
(e) all existing mortgages, deeds of trust and security
interests held by Seller's lenders to the extent they burden the Assets
shall be released as of Closing;
31
<PAGE>
(f) no material Environmental Obligations or Liabilities or
Title Defects or Adverse Contractual Obligations with respect to the Assets
have arisen between the date of notification by Buyer under SECTIONS 7.2
AND 8.1 and Closing;
(g) no event shall have occurred between the date for
notification by Buyer under SECTIONS 7.2 AND 8.1 and the Closing which has
caused a material change in the Net Revenue Interests shown on EXHIBIT B;
(h) all policies of insurance in existence as of the date
hereof, shall have remained in full force and effect as of and through the
Closing Date; and
(i) other than as to matters covered in ARTICLES 7 AND 8 hereof,
Buyer shall have determined, in its sole discretion, that the results of
its due diligence review are satisfactory.
ARTICLE 12.
CLOSING
12.1 CLOSING. The closing of this transaction (the "CLOSING") shall
be held at the offices of McGloin, Davenport, Severson & Snow, P.C., 1600 Stout,
Suite 1600, Denver, Colorado, at 10:00 a.m. on January 21, 1999; or at such
other date or place as the Parties may agree in writing (herein called "CLOSING
DATE"). Time is of the essence and the Closing Date shall not be extended
unless by written agreement of the Parties. On or before three (3) business
days prior to Closing, Buyer and Seller shall use their best efforts to provide
each other copies of all closing documents.
12.2 SELLER'S CLOSING OBLIGATIONS. At Closing, Seller shall deliver
to Buyer the following:
(a) the Assignment and Conveyance substantially in the form
attached hereto as EXHIBIT F;
(b) a non-foreign certificate executed by Seller in the form
attached as EXHIBIT G;
(c) originals of all third-party waivers, consents, approvals,
permits and actions obtained and all files pertaining thereto; and
(d) releases of existing mortgages, deeds of trust and security
interests held by Seller's lenders to the extent they burden the Assets.
32
<PAGE>
12.3 BUYER'S CLOSING OBLIGATIONS. At least three (3) days prior to
the Closing, each Seller shall deliver wire transfer instructions to Buyer
which shall materially conform to wire transfer instructions commonly given in
this type of transaction. At or before Closing, Buyer shall deliver to each
Seller each Seller's share of the Purchase Price as provided herein by wire
transfer in immediately available funds. At Closing and at the request of
Seller, Buyer shall execute instructions to Evergreen Operating Company
("Evergreen"), operator of the Assets, to pay to Seller the production revenues,
if any, which Evergreen holds in suspense, in its accounts or in separate
accounts, and which are derived from production prior to the Effective Date and
attributed to the interests of Seller, to the extent that such funds are not
necessary to discharge the obligations of Seller under this Agreement or are not
necessary to discharge the obligation of Seller under SECTION 3.3(b)(2) hereof.
12.4 JOINT CLOSING OBLIGATIONS. Both Parties at Closing shall execute
a Settlement Statement evidencing the amount actually wire transferred and all
adjustments to the Purchase Price taken into account at Closing. All events of
Closing shall each be deemed to have occurred simultaneously with the other,
regardless of when actually occurring, and each shall be a condition precedent
to the other.
ARTICLE 13.
LIMITATIONS ON WARRANTIES AND REMEDIES
THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN THIS
AGREEMENT ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND
WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO THE QUALITY, QUANTITY OR VOLUME OF
THE RESERVES, IF ANY, OF OIL, GAS OR OTHER HYDROCARBONS IN OR UNDER THE LEASES
OR THE ENVIRONMENTAL CONDITION OF THE ASSETS. THE ITEMS OF PERSONAL PROPERTY,
EQUIPMENT, IMPROVEMENTS, FIXTURES AND APPURTENANCES CONVEYED AS PART OF THE
ASSETS ARE SOLD HEREUNDER "AS IS, WHERE IS AND WITH ALL FAULTS" AND NO IMPLIED
WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, INCLUDING ANY WARRANTY
OF QUALITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONDITION ARE
GIVEN BY OR ON BEHALF OF SELLER. IT IS UNDERSTOOD AND AGREED THAT PRIOR TO
CLOSING BUYER SHALL HAVE INSPECTED THE ASSETS FOR ALL PURPOSES AND HAS SATISFIED
ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE AND
SUBSURFACE, AND THAT BUYER ACCEPTS THE SAME IN ITS "AS IS, WHERE IS AND WITH ALL
FAULTS" CONDITION. THE WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT ARE
EXCLUSIVE AND IN LIEU OF ALL OTHER IMPLIED WARRANTIES AND BUYER HEREBY WAIVES
ALL IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS
33
<PAGE>
FOR A PARTICULAR PURPOSE OR CONDITION OR CONFORMITY TO SAMPLES.
ARTICLE 14.
CASUALTY LOSS AND CONDEMNATION
If, prior to the Closing, all or any portion of the Assets are destroyed by
fire or other casualty or if any portion of the Assets shall be taken by
condemnation or under the right of eminent domain (all of which are herein
called "CASUALTY LOSS" and limited to property damage or taking only), Buyer and
Seller must agree prior to Closing either: (i) to delete that portion of the
Assets which is subject to the Casualty Loss from the Assets, and reduce the
Purchase Price by the value thereof; or (ii) for Buyer to proceed with the
purchase of such Assets, notwithstanding any such Casualty Loss (without
reduction of the Purchase Price) in which case Seller shall pay to Buyer, at the
Closing, all sums paid to Seller by third parties by reason of the Casualty Loss
and shall assign, transfer and set over unto Buyer all of the right, title and
interest of Seller in and to any claims, causes of action, unpaid proceeds or
other payments from third parties arising out of such Casualty Loss; provided,
however, if the value of that portion of the Assets affected by the Casualty
Loss, exceeds $500,000, Buyer and Seller shall each have the right to terminate
this Agreement and, upon written notification one to the other, the transaction
shall not close and thereafter neither Buyer nor Seller shall have any liability
or further obligations to the other hereunder.
ARTICLE 15.
DEFAULT AND REMEDIES
15.1 SELLER'S REMEDIES. Upon failure of Buyer to comply herewith by
the Closing Date, as it may be extended in accordance herewith, for a reason
other than failure of a condition to Buyer's performance, Seller, at its sole
option, may: (i) enforce this Agreement by specific performance; or (ii) may
terminate this Agreement, as Seller's sole and exclusive remedies, all other
remedies (except as expressly retained in SECTION 15.3) being expressly waived
by Seller.
15.2 BUYER'S REMEDIES. Upon failure of Seller to comply herewith by
the Closing Date, as it may be extended in accordance herewith, for a reason
other than failure of a condition to Seller's performance, Buyer, at its sole
option, may: (i) enforce specific performance; or (ii) terminate this Agreement,
as Buyer's sole and exclusive remedies, all other remedies (except as expressly
retained in SECTION 15.3) being expressly waived by Buyer.
34
<PAGE>
15.3 OTHER REMEDIES. Notwithstanding the foregoing, termination of
this Agreement shall not prejudice or impair Buyer's rights or remedies under
SECTION 6.4 and such other portions of this Agreement as are necessary to the
enforcement and construction of SECTION 6.4. The prevailing party in any legal
proceeding brought under or to enforce this Agreement shall be additionally
entitled to recover court costs and reasonable attorneys' fees from the
non-prevailing party.
15.4 EFFECT OF TERMINATION. In the event of termination of this
Agreement under this ARTICLE 15, the transaction shall not close and neither
Buyer nor Seller shall have any further obligations, remedies, liabilities,
rights or duties to the other hereunder, except as expressly provided herein.
ARTICLE 16.
ASSUMPTION AND INDEMNITY
16.1 ASSUMED OBLIGATIONS; PRE-CLOSING LIABILITIES. Buyer shall assume
all risk and loss with respect to any change in the condition of the Assets from
the Effective Date and Time until Closing for production of Hydrocarbons through
normal depletion (including the watering-out or sand infiltration of any well
but not including production under the terms and conditions of that certain
Amended and Restated Gas Purchase Contract, a true and correct copy of which is
attached hereto as EXHIBIT "C") and the depreciation of personal property
through ordinary wear and tear but only to the extent any such changes in the
condition of the Assets do not decrease the value of the Assets by more than
$100,000 in which case Buyer shall have the right to cancel this Agreement
before Closing. Upon and after Closing, Buyer shall own the Assets, together
with all the rights, duties, obligations, and liabilities, including the Assumed
Obligations and Buyer's indemnity obligations hereunder. Buyer agrees to assume
and pay, perform, fulfill and discharge all Assumed Obligations. To the extent
not included in the Assumed Obligations, or those matters for which Seller is
indemnified, Seller agrees to pay, perform, fulfill and discharge all costs,
expenses and liabilities incurred by Seller with respect to the ownership or
operation of the Assets prior to the Effective Date and Time and accruing prior
to Closing.
35
<PAGE>
16.2 PLUGGING, ABANDONMENT, REMOVAL, DISPOSAL, AND RESTORATION. Upon
Closing, Buyer shall assume all of Seller's plugging, abandonment, removal,
disposal and restoration obligations associated with the Assets, including, but
not limited to: (i) all necessary and proper plugging, abandonment, removal and
disposal of the wells, structures and equipment located on or comprising a part
of the Assets; (ii) the necessary and proper capping and burying all associated
flow lines; (iii) the proper abandonment and restoration of all oil and gas
leasehold, fee and other property comprising a part of the Assets, both surface
and subsurface, as any be required by applicable laws, regulations, or contract;
and (iv) any necessary disposal of naturally occurring radioactive material
(NORM). Buyer shall be responsible for the plugging and abandonment of any
wells drilled and the removal of any structures placed on the Assets subsequent
to Closing. All plugging, abandonment, removal, disposal and restoration
operations shall be in compliance with applicable laws and regulations and shall
be performed in a good and workmanlike manner.
16.3 BUYER'S INDEMNITY.
EXCEPT TO THE EXTENT CAUSED IN WHOLE OR IN PART BY (AND
INCLUDING) ANY SOLE OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY OF SELLER
AND TO THE EXTENT THEY ARISE OR ARE ASSERTED AFTER THE EFFECTIVE DATE AND
TIME HEREOF, BUYER AGREES TO INDEMNIFY, DEFEND AND HOLD SELLER HARMLESS
FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, LOSSES, DAMAGES, PUNITIVE
DAMAGES, COSTS, EXPENSES, CAUSES OF ACTION OR JUDGMENTS OF ANY KIND OR
CHARACTER ("CLAIMS") WITH RESPECT TO:
(i) THE ASSUMED OBLIGATIONS OR THE CONDITION OF THE
ASSETS;
(ii) BUYER'S ACTS OR OMISSIONS; AND
(iii) THE OWNERSHIP AND OPERATION OF THE ASSETS BY
BUYER,
INCLUDING, WITHOUT LIMITATION, ANY INTEREST, PENALTY, REASONABLE ATTORNEY'S
FEES AND OTHER COSTS AND EXPENSES INCURRED IN CONNECTION THEREWITH OR IN
THE DEFENSE THEREOF.
(b) EXCEPT TO THE EXTENT CAUSED IN WHOLE OR IN PART BY (AND
INCLUDING) ANY SOLE OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY OF SELLER,
BUYER AGREES TO INDEMNIFY, DEFEND AND HOLD SELLER HARMLESS FROM AND AGAINST
ANY AND ALL CLAIMS FOR PERSONAL INJURY, ILLNESS, DISEASE AND WRONGFUL DEATH
WHICH
36
<PAGE>
ARISE OR ARE ASSERTED AFTER THE EFFECTIVE DATE AND TIME WHICH ARE
ATTRIBUTABLE TO THE OWNERSHIP AND OPERATION OF THE ASSETS BY BUYER, OR THAT
ARISE ON OR AFTER THE CLOSING DATE FROM OWNERSHIP AND/OR OPERATION OF THE
ASSETS, INCLUDING, WITHOUT LIMITATION, ANY INTEREST, PENALTY, REASONABLE
ATTORNEYS' FEES AND OTHER COSTS AND EXPENSES INCURRED IN CONNECTION
THEREWITH OR IN THE DEFENSE THEREOF.
16.4 SELLER'S INDEMNITY.
SELLER AGREES TO INDEMNIFY, DEFEND AND HOLD BUYER HARMLESS FROM
AND AGAINST ANY AND ALL CLAIMS (OTHER THAN ASSUMED OBLIGATIONS OR AS
PROVIDED IN SECTION 16.5) INCURRED AS A RESULT OF OR ARISING FROM:
(i) FAILURE OF SELLER TO ASSUME AND TIMELY DISCHARGE
ALL OF ITS DUTIES AND OBLIGATIONS HEREUNDER WHICH
ARISE FROM PRODUCTION BEFORE THE EFFECTIVE DATE
AND TIME INCLUDING IMPROPER PAYMENT OF ROYALTIES
OR OTHER REVENUES OR TAX (SUBJECT TO SECTION
3.3(b)(2)) TO ANY PERSON, ENTITY OR GOVERNMENTAL
UNIT;
(ii) PERSONAL INJURY, ILLNESS, DISEASE AND/OR WRONGFUL
DEATH WHICH ARISE OR ARE ASSERTED PRIOR TO THE
EFFECTIVE DATE AND TIME OR ARE ASSERTED AFTER THE
EFFECTIVE DATE TO THE EXTENT THEY ARE ATTRIBUTABLE
TO THE OWNERSHIP AND OPERATION OF THE ASSETS BY
SELLER PRIOR TO THE EFFECTIVE DATE AND TIME; AND
(iii) CLAIMS WHICH MAY BE INSTITUTED BY SELLER'S
SECURITYHOLDERS, CREDITORS OR EMPLOYEES ARISING
OUT OF OR RELATED TO THE TRANSACTIONS PROVIDED FOR
HEREIN,
INCLUDING, WITHOUT LIMITATION, ANY INTEREST, PENALTY, REASONABLE ATTORNEYS'
FEES AND OTHER COSTS AND EXPENSES IN CONNECTION THEREWITH OR IN THE DEFENSE
THEREOF.
(b) SELLER FURTHER AGREES TO INDEMNIFY, DEFEND AND HOLD BUYER
HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS TO THE EXTENT RESULTING FROM
LITIGATION OR PROCEEDINGS IDENTIFIED IN
37
<PAGE>
EXHIBIT E HERETO.
(c) SELLER FURTHER AGREES TO INDEMNIFY, DEFEND AND HOLD BUYER
HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES OR LIABILITIES,
INCLUDING ATTORNEYS' FEES, ARISING FROM OR RELATED TO THE INSUFFICIENCY OF
ANY WARRANTY OR REPRESENTATION CONTAINED IN ARTICLE 4 (a)(iii), 4(b)(ii) OR
4(c)(ii) HEREOF RESPECTIVELY.
16.5 LIABILITIES. SELLER SHALL BE RESPONSIBLE FOR ANY AND ALL
LIABILITIES, CLAIMS, CAUSES OF ACTION, TAXES, (SUBJECT TO SECTION 3.3(b)(2),
INCLUDING AD VALOREM, SEVERANCE, CONSERVATION OR OTHER TAXES MEASURED BY
PRODUCTION) DAMAGES AND PUNITIVE DAMAGES (COLLECTIVELY "LIABILITIES") ARISING
OUT OF THE ACCOUNTING OR PAYMENT TO ROYALTY OWNERS AND/OR WORKING INTEREST
OWNERS IN THE LEASES AND/OR TO GOVERNMENTAL UNITS INSOFAR AS SUCH LIABILITIES
RELATE TO OR ARISE OUT OF ACTIONS OF SELLER OR EVENTS PRIOR TO THE EFFECTIVE
DATE AND TIME; AND SELLER SHALL DEFEND, INDEMNIFY AND HOLD BUYER HARMLESS FROM
AND AGAINST ALL SUCH CLAIMS. BUYER SHALL BE RESPONSIBLE FOR ALL LIABILITIES
ARISING OUT OF THE ACCOUNTING OR PAYMENT TO ROYALTY OWNERS AND/OR WORKING
INTEREST OWNERS IN THE LEASES OR TO GOVERNMENTAL UNITS INSOFAR AS SUCH
LIABILITIES RELATE TO ACTIONS OF BUYER, PRODUCTION OR EVENTS FROM AND AFTER THE
EFFECTIVE DATE AND TIME (INCLUDING BY REASON OF THIS AGREEMENT OR ANY
TERMINATION OR MODIFICATION OF THAT CERTAIN AMENDED AND RESTATED GAS PURCHASE
CONTRACT ATTACHED HERETO AS EXHIBIT C) AND BUYER SHALL DEFEND, INDEMNIFY AND
HOLD SELLER HARMLESS FROM AND AGAINST ALL SUCH LIABILITIES.
16.6 BROKER OR FINDER'S FEE. Each party hereby agrees to indemnify
and hold the other harmless from and against any claim for a brokerage or
finder's fee or commission in connection with this Agreement or the transactions
contemplated by this Agreement to the extent such claim arises from or is
attributable to the actions of such indemnifying party, including, without
limitation, any and all losses, damages, punitive damages, attorneys' fees,
costs and expenses of any kind or character arising out of or incurred in
connection with any such claim or defending against the same.
16.7 NORM. BUYER ACKNOWLEDGES THAT IT HAS BEEN INFORMED THAT OIL AND
GAS PRODUCING FORMATIONS CAN CONTAIN NATURALLY OCCURRING RADIOACTIVE MATERIAL
(NORM). SOME OR ALL OF THE EQUIPMENT, MATERIAL, APPURTENANCES, IMPROVEMENTS AND
FIXTURES SUBJECT TO THIS AGREEMENT MAY HAVE LEVELS OF NORM ABOVE BACKGROUND
LEVELS. A HEALTH HAZARD MAY EXIST IN CONNECTION WITH THIS EQUIPMENT.
THEREFORE, BUYER MAY NEED TO FOLLOW SAFETY PROCEDURES WHEN HANDLING THIS
EQUIPMENT. BUYER AGREES TO
38
<PAGE>
INDEMNIFY, DEFEND AND HOLD SELLER HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS
WITH RESPECT TO ALL LIABILITIES AND OBLIGATIONS OR ALLEGED OR THREATENED
LIABILITIES AND OBLIGATIONS, INCLUDING CLAIMS FOR PERSONAL INJURY, ILLNESS,
DISEASE, WRONGFUL DEATH, DAMAGE TO PROPERTY, ENVIRONMENTAL POLLUTION OR
CONTAMINATION, CLEANUP EXPENSES AND LIABILITY BASED ON STRICT LIABILITY OR
CONDITION OF ASSETS, ATTRIBUTABLE TO OR ARISING OUT OF THE EXISTENCE OF NORM ON
THE EQUIPMENT, MATERIAL, APPURTENANCES, IMPROVEMENTS AND FIXTURES SUBJECT TO
THIS AGREEMENT, INCLUDING, WITHOUT LIMITATIONS ANY INTEREST, PENALTY, REASONABLE
ATTORNEYS' FEES AND OTHER COSTS AND EXPENSES INCURRED IN CONNECTION THEREWITH OR
THE DEFENSE THEREOF, EXCEPT TO THE EXTENT CAUSED BY (AND INCLUDING) ANY SOLE OR
CONCURRENT NEGLIGENCE OR STRICT LIABILITY OF SELLER. THE INDEMNITY PROVIDED FOR
IN THIS SECTION 16.7 SHALL NOT BE INTERPRETED TO COVER OR APPLY TO CLAIMS FOR
PERSONAL INJURY, ILLNESS, DISEASE OR WRONGFUL DEATH WHICH ARISE OR ARE ASSERTED
PRIOR TO THE EFFECTIVE DATE AND TIME OR ARE ASSERTED AFTER THE EFFECTIVE DATE
AND TIME AND ARE ATTRIBUTABLE TO THE OWNERSHIP AND OPERATION OF THE ASSETS BY
SELLER PRIOR TO THE EFFECTIVE DATE AND TIME.
16.8 MISCELLANEOUS. There shall be no upward or downward adjustment
to the Purchase Price as a result of any matter for which Buyer or Seller is
indemnified under this Agreement. With respect to any claim for which an
indemnifying party may be required to provide partial or full indemnity, or for
which a party may be obligated to defend in warranty, such indemnifying party
shall have the right, but not the obligation, to participate in the defense of
any such claim. Reasonable attorneys' fees, court costs, interest, penalties
and other expenses incurred in connection with the defense of such claims shall
be included in Seller's and Buyer's indemnities herein.
ARTICLE 17.
GAS IMBALANCES
Seller represents that, except as shown on EXHIBIT H, Seller is not
obligated by virtue of:
(i) any prepayment arrangement;
(ii) any "take-or-pay" or similar provision;
(iii) any production payment;
(iv) any "gas balancing" agreement; or
(v) any other arrangement
39
<PAGE>
to deliver hydrocarbons produced from the Assets at some future time without
then or thereafter receiving full payment therefor. If, prior to Closing, such
a payment obligation is disclosed or discovered, Seller and Buyer shall meet and
in good faith negotiate an appropriate purchase price adjustment. From and
after the Effective Date and Time Buyer agrees to assume any liability and
obligation for gas production imbalances (whether over or under) attributable to
the Assets as of the Effective Date. In assuming this liability at Closing,
Buyer shall not be obligated to make any additional payment over the Purchase
Price to Seller and Seller shall not be obligated to refund any of said price to
reimburse Buyer for any over-balances existing at the time of sale. Buyer and
Seller agree that the economic effect of the imbalance set forth in EXHIBIT H
are included in the Purchase Price set forth in SECTION 3.1.
ARTICLE 18.
BULK SALES COMPLIANCE
18.1 BULK SALES LAWS.
Each of the parties waives compliance with the provisions of any
applicable bulk sales, fraudulent conveyance or other law for the
protection of creditors and Seller agrees to indemnify and hold Buyer
harmless from and reimburse Buyer for any loss, cost, expense, liability or
damage which Buyer may suffer or incur by virtue of the noncompliance by
Seller with such applicable laws except that Seller shall not indemnify
Buyer with respect to any losses or liabilities arising from or incurred in
connection with any Assumed Liabilities and Buyer hereby agrees to
indemnify and hold Seller harmless with respect to any losses or
liabilities arising from or incurred in connection with the Assumed
Liabilities.
Seller shall give all required notices of the transfer of the
Assets to all applicable taxing authorities. If all appropriate tax
clearance certificates are not available with respect to Taxes for which
the Seller is liable hereunder the Closing shall not be delayed and the
Seller shall retain any liability for such taxes.
ARTICLE 19.
MISCELLANEOUS
19.1 PUBLIC ANNOUNCEMENTS.
(a) The parties hereto agree that prior to Closing and prior to
making any public announcement or statement with respect to the transaction
contemplated by this Agreement, the party desiring to make such public
announcement or statement shall consult with the other party hereto and
agree upon the text of a joint public announcement or statement to be made
by both of such parties or obtain written approval from the other party
hereto of the
40
<PAGE>
text of a public announcement or statement to be made solely by Seller or
Buyer, as the case may be. Such agreement or approval shall not be
unreasonably withheld by either party.
(b) Nothing contained in this section or in SECTION 6.4 shall be
construed to require either party to obtain approval of the other party to
disclose information with respect to the transactions contemplated by this
Agreement to any local, state or federal governmental authority or agency
to the extent required by applicable law or by any applicable rules,
regulations or orders of any governmental authority or agency having
jurisdiction or necessary to comply with disclosure requirements of the New
York Stock Exchange, or other recognized exchange, and applicable
securities laws.
19.2 LETTER IN LIEU OF TRANSFER ORDER, FILING AND RECORDING OF
ASSIGNMENTS, ETC. At Closing, Seller shall deliver Letter in Lieu or Transfer
Order to Buyer. Buyer shall promptly file and record assignments and other
documents related to the sale of the Assets to Buyer contemplated in this
Agreement.
19.3 FURTHER ASSURANCES AND RECORDS. After the Closing each of the
parties will execute, acknowledge and deliver to the other such further
instruments and take such other action as may be reasonably requested in order
to more effectively assure to said party all of the respective properties,
rights, titles, interests, estates and privileges intended to be assigned,
delivered, transferred or inuring to the benefit of such party in consummation
of the transactions contemplated hereby, including, but not limited to, the
execution, acknowledgement and delivery of an instrument correcting any error in
the description or any Assets contained in Exhibit A and/or B.
19.4 NOTICES. Except as otherwise expressly provided herein, all
communications required or permitted under this Agreement shall be in writing,
including by facsimile transmission, and any communication or delivery hereunder
shall be deemed to have been duly given and received when actually delivered to
the address of the parties to be notified as set forth below and addressed as
follows:
If to Seller, as follows:
*
*
*
*
*
Attention: *
Phone: *
Fax: *
- ------------------------
* Such information has been redacted in this agreement pursuant to Rule 24b-2.
41
<PAGE>
Prima Oil and Gas Company and
Bonny AEI Corp.
1801 Broadway, Suite 500
Denver, Colorado 80202
Attention: Richard H. Lewis
Phone: (303) 297-2100
Fax: (303) 297-7708
* and
*
*
*
Phone: *
Fax: *
If to Buyer:
WBI Holdings, Inc.
200 North Third Street, Suite 300
Bismarck, North Dakota 58501
Attention: John K. Castleberry
Phone: (701) 221-1201
Fax: (701) 221-1297
Any party may, by written notice so delivered to the other, change the
address to which delivery shall thereafter be made.
19.5 INCIDENTAL EXPENSES. Buyer shall bear and pay all filing,
recording or registration fees for any assignment or conveyance delivered
hereunder. Each party shall bear its own respective expenses incurred in
connection with the negotiation and Closing of this transaction, including the
Party's own consultants' fees, attorneys' fees, accountants' fees and other
similar costs and expenses.
19.6 ANTITRUST LAWS. If the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR ACT") is applicable to this transaction, then each party
shall have the responsibility for filing with the Federal Trade Commission and
the Department of Justice their respective notifications and reports and any
supplemental information which may be reasonably requested in connection with
the HSR Act, which reports and notifications and supplemental information will
comply in all material respects with the requirements of the HSR Act.
- ------------------------
* Such information has been redacted in this agreement pursuant to Rule 24b-2.
42
<PAGE>
19.7 WAIVER. Any of the terms, provisions, covenants,
representations, warranties or conditions hereof may be waived only by a written
instrument executed by the party waiving compliance. Except as otherwise
expressly provided in this Agreement, the failure of any party at any time or
times to require performance of any provision hereof shall in no manner affect
such party's right to enforce the same. No waiver by any party of any
condition, or of the breach of any term, provision, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach or a waiver of any other
condition or of the breach of any other term, provision, covenant,
representation or warranty.
19.8 BINDING EFFECT; ASSIGNMENT. All the terms, provisions,
covenants, obligations, indemnities, representations, warranties and conditions
of this Agreement shall be binding on and enforceable by the Parties hereto and
their respective successors and assigns. The rights of each party under this
Agreement are personal to that party and, except for assignment or transfer by
Buyer to any of its subsidiaries or affiliates, may not be assigned or
transferred to any other party, firm, corporation or other entity, without the
prior, express and written consent of the other party, and such consent may be
withheld for any reason, including convenience. Except for assignment or
transfer by Buyer to any of its subsidiaries or affiliates, any attempt to
assign this Agreement over the objection or without the express written consent
of the other party shall be absolutely void. Seller may condition its consent to
assign this Agreement on Buyer providing Seller with an appropriate guarantee of
its assignee's performance. The provisions of this Section are subject to the
provisions of Section 19.12.
19.9 TAXES.
(a) Except as expressly provided with respect to AD VALOREM taxes in
SECTION 3.3(b)(2), Seller shall be responsible for and shall pay all taxes
attributable to or arising from the ownership or operation of the assets
prior to the Effective Date and Time. Buyer shall be responsible for and
shall pay all taxes attributable to or arising from the ownership or
operation of the Assets after the Effective Date and Time. Any party which
pays such taxes for the other party shall be entitled to prompt
reimbursement upon evidence of such payment. Each party shall be
responsible for its own federal income taxes, if any, as may result from
this transaction.
(b) If this transaction is determined to result in state sales or
transfer taxes, Seller shall be solely responsible for any and all such
taxes due with respect to the Assets acquired by Buyer or by virtue of this
transaction or any other actions contemplated by this Agreement. If Buyer
is assessed such taxes, Buyer shall promptly inform Seller and Seller shall
promptly remit same to the taxing authority or to Buyer if Buyer has paid
the same.
19.10 CONFIDENTIALITY OF AGREEMENT. This Agreement and the terms and
provisions hereof, including the Purchase Price, shall be maintained
confidential by Buyer and Seller until Closing; provided, however, that this
Agreement and the terms and provisions thereof may be disclosed to
43
<PAGE>
Seller's and Buyer's lenders, if any, and their consultants, who shall be
required to keep such information confidential.
19.11 AUDITS. It is expressly understood and agreed that Seller
retains its right to receive its proportionate share of the proceeds from any
audits relating to activities prior to the Effective Date and Time.
19.12 LIKE-KIND EXCHANGES. Each party consents to the other party's
assignment of its rights and obligations under this Agreement to a Qualified
Intermediary (as that term is defined in Section 1.1031(k)-1(g)(4)(iii) of the
Treasury Regulations) in connection with effectuation of a like-kind exchange.
However, Seller and Buyer acknowledge and agree that any assignment of this
Agreement to a Qualified Intermediary does not release either party from any of
their respective liabilities and obligations to each other under this Agreement.
19.13 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS OTHERWISE APPLICABLE TO SUCH DETERMINATIONS.
19.14 ENTIRE AGREEMENT. Except as provided herein, this Agreement and
the documents simultaneously executed herewith or at the Closing embody the
entire agreement between the Parties and replace and supersede all prior
agreements, arrangements and understandings related to the subject matter
hereof, whether written or oral. Except as provided herein, no other agreement,
statement or promise made by any party, or to any employee, officer or agent of
any party, which is not contained in this Agreement shall be binding or valid.
This Agreement may be supplemented, altered, amended, modified or revoked by
writing only, signed by the Parties hereto. The headings herein are for
convenience only and shall have no significance in the interpretation hereof.
The Parties stipulate and agree that this Agreement shall be deemed and
considered for all purposes as prepared through the joint efforts of the Parties
and shall not be construed against one party or the other as a result of the
preparation, submittal or other event of negotiation, drafting or execution
thereof.
19.15 EXHIBITS. All Exhibits attached to this Agreement, and the terms
of those Exhibits which are referred to in this Agreement are made a part hereof
and incorporated herein by reference.
19.16 SURVIVAL. All of the representations, warranties, indemnities,
covenants and agreements of or by the parties hereto shall survive Closing and
the execution and delivery of the Assignment and Conveyance.
19.17 THIRD-PARTY BENEFICIARIES. It is expressly agreed that there
are no intended third-party beneficiaries of this Agreement and that no person
other than the Parties, and their successors and assigns, may enforce any of the
provisions hereof.
44
<PAGE>
19.18 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each and every counterpart shall be deemed for all purposes
one (1) Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
SELLER:
*
By: *
--------------------------------
By:
--------------------------------
*, President
*
By: *
--------------------------------
*, President
PRIMA OIL AND GAS COMPANY
By:
--------------------------------
Richard H. Lewis, President
BONNY AEI CORP.
By:
--------------------------------
Richard H. Lewis, President
- ------------------------
* Such information has been redacted in this agreement pursuant to Rule 24b-2.
45
<PAGE>
*
By:
--------------------------------
*, President
*
By:
--------------------------------
*, President
BUYER:
WBI HOLDINGS, INC.
By:
--------------------------------
John K. Castleberry, President
and CEO
- ------------------------
* Such information has been redacted in this agreement pursuant to Rule 24b-2.
46
<PAGE>
LIST OF EXHIBITS TO
PURCHASE AND SALE AGREEMENT
DATED JANUARY 7, 1999
Exhibit Reference Description
A ASSETS Consisting of a single page labeled as
"Exhibit A," and Exhibits A-1, A-2, and A-3
B WELL LIST
C AMENDED AND RESTATED CONTRACT
D PRELIMINARY SETTLEMENT STATEMENT
E JUDICIAL OR ADMINISTRATIVE PROCEEDINGS ARTICLE
4(D)(VIII)
NOTICE OF CONTRACT DEFAULTS ARTICLE 4(D)(IX)
GAS IMBALANCES ARTICLE 4(D)(IX)
TAKE-OR-PAY PAYMENTS SUBJECT TO MAKE-UP ARTICLE
4(D)(IX)
UNPAID PRODUCTION-RELATED TAXES ARTICLE 4(D)(IX)
ENCUMBRANCES ARTICLE 4(D)(X)
F ASSIGNMENT, BILL OF SALE AND CONVEYANCE
G NON-FOREIGN AFFIDAVITS
H PRODUCTION IMBALANCES
The registrant hereby agrees to furnish supplementally a copy of any omitted
exhibits to the Purchase and Sale Agreement dated January 7, 1999 to the
Commission upon request.
47
<PAGE>
EXHIBIT 99-99.1
PRIMA ENERGY CORPORATION
PRESS RELEASE DATED JANUARY 22, 1999
48
<PAGE>
January 22, 1999
Denver, Colorado
FOR IMMEDIATE RELEASE
PRIMA ENERGY CORPORATION REPORTS SALE OF OIL AND GAS PROPERTIES
AND RELATED ASSETS
Prima Energy Corporation ("Prima"), a Denver based independent oil and gas
company, today announced it had closed on the sale of certain of its oil and gas
properties and related assets for $26 million. Prima sold all of its interest
in 16,253 gross acres and 134 producing wells and related equipment in the Bonny
Field located in Yuma County, Colorado. Prima also sold its 15.5% interest in
the Bonny Gathering Company joint venture, which owned the pipeline, gathering,
compression and dehydration facilities in the Bonny Field. Prima served as its
managing venturer and operator.
During mid 1998, Prima and its partners successfully completed a significant
renovation of the Bonny Gathering facilities. This renovation was undertaken to
increase deliverability, reduce line pressure and facilitate future field
development. During 1998, Prima and its partners drilled 21 new wells in the
Bonny Field with 19 completed as producers and two abandoned as dry holes. The
natural gas production from the Bonny Field is sold pursuant to a gas contract
that provides for a $5.90 per MMBtu price. The reserves attributable to the
Bonny Field represented approximately 12% of the Company's discounted cash flow
from proved reserves at December 31, 1997, the latest published reserves. Prima
reported the production from the Bonny Field wells represented approximately 11%
of Prima's oil and gas production revenue and 12% of net oil & gas revenue after
operating expenses for the nine months ended September 30, 1998.
The sales proceeds of $26 million, after paying off the Bonny Gathering Company
loan and certain closing adjustments, have been placed in a like-kind exchange
escrow account with Norwest Bank Colorado, N.A. as escrow agent. The Company
intends to identify and close on certain qualifying properties pursuant to the
like-kind exchange provisions of Section 1031 of the Internal Revenue Code.
Pursuant to these tax provisions, Prima must identify the qualifying properties
within 45 days and close within 180 days of the closing of the Bonny Field
transaction.
(over)
49
<PAGE>
There is no assurance that the Company will be able to either identify and/or
close on properties within these time limits. To the extent the Company is
unable to identify and close on qualifying properties, the unexpended funds will
be disbursed from the escrow account to Prima.
Richard H. Lewis, President of Prima stated, "We believe now is an opportune
time to monetize the value of our Bonny Field assets. We intend to redeploy the
capital from this transaction into selective opportunities that may be available
due to a distressed industry environment resulting from historically low oil and
gas prices. The funds available from this transaction and Prima's debt-free
status provide us with the potential opportunity to acquire significant
qualifying properties in a tax-free exchange."
THIS PRESS RELEASE MAY CONTAIN PROJECTIONS OR FORWARD-LOOKING STATEMENTS AND IS
MADE PURSUANT TO THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. ANY SUCH STATEMENTS OR PROJECTIONS REFLECT THE
COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE.
NO ASSURANCES CAN BE GIVEN, HOWEVER, THAT THESE EVENTS WILL OCCUR OR THAT SUCH
PROJECTIONS WILL BE ACHIEVED AND ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE PROJECTED. PRIMA DOES NOT UNDERTAKE TO UPDATE, REVISE OR CORRECT ANY OF
THE FORWARD-LOOKING INFORMATION. A DISCUSSION OF IMPORTANT FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED IS INCLUDED IN
THE COMPANY'S PERIODIC REPORTS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.
NASDAQ Symbol: PENG
Contacts: Richard H. Lewis, President
Michael J. McGuire, Executive Vice President, Exploration
Michael R. Kennedy, Executive Vice President, Corporate
Development
Sandra J. Irlando, Vice President, Accounting
Telephone Number: (303) 297-2100
50
