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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1 )
PRIMEENERGY CORPORATION
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(Name of Issuer)
COMMON STOCK, PAR VALUE $0.10
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(Title of Class of Securities)
74158E104
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(CUSIP Number)
E. Gaines Wehrle Copy to: Deborah A. Sink, Esquire
McJunkin Corporation Bowles Rice McDavid Graff & Love
P. O. Box 513 P. O. Box 1386
Charleston, WV 25322 Charleston, WV 25325-1386
(304) 348-1804 (304) 347-1100
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
May 31, 1996
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filling this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ].
Check the following box if a fee is being paid with the statement [ ]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Page 1 of 7 Pages
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CUSIP NO. 74158E104 Page 2 of 7 Pages
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| 1 | NAME OF REPORTING PERSON |
| | S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON |
| | MCJUNKIN CORPORATION |
| | 55-0229830 |
|---|--------------------------------------------------------------------------|
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP. (a) [ ] |
| | (b) [ ] |
| | |
| | |
|---|--------------------------------------------------------------------------|
| 3 | SEC USE ONLY |
| | |
| | |
| | |
|---|--------------------------------------------------------------------------|
| 4 | SOURCE OF FUNDS |
| | |
| | WC; BK; SEE ITEM 3 |
| | |
|---|--------------------------------------------------------------------------|
| | |
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT |
| | TO ITEMS 2(d) or 2(E) [ ] |
| | |
|---|--------------------------------------------------------------------------|
| | |
| | |
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION |
| | |
| | WEST VIRGINIA |
|------------------------------------------------------------------------------|
| NUMBER OF | 7 | SOLE VOTING POWER |
| SHARES | | 727,221 |
| |---|---------------------------------------------------|
| | | |
| BENEFICIALLY | 8 | SHARED VOTING POWER |
| OWNED | | -0- |
| |---|---------------------------------------------------|
| | | |
| BY EACH | 9 | SOLE DISPOSITIVE POWER |
| REPORTING PERSON | | 727,221 |
| | | |
| |---|---------------------------------------------------|
| | | |
| WITH |10 | SHARED DISPOSITIVE POWER |
| | | -0- |
| | | |
|------------------------------------------------------------------------------|
| | |
|11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
| | 727,221 |
|---|--------------------------------------------------------------------------|
| | |
|12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |
| | [ ] |
|---|--------------------------------------------------------------------------|
| | |
|13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
| | 15.1% |
| | |
|---|--------------------------------------------------------------------------|
| | |
|14 | TYPE OF REPORTING PERSON |
| | CO |
| | |
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SCHEDULE 13D
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Page 3 of 7 Pages
Item 1. Security and Issuer.
The class of equity securities to which this Statement relates is the
Common Stock, par value $0.10 per shares (the "Shares"), of Prime Energy
Corporation, formerly, K.R.M. Petroleum Corporation, a Delaware corporation
(the "Company"), whose principal executive offices are at One Landmark Square,
Stamford, CT 06901.
Item 2. Identity and Background.
(a)-(c); (f) McJunkin Corporation, a West Virginia corporation
("McJunkin"), is an industrial distributor of pipe, valves and fittings with
investments in oil and gas and real estate. McJunkin's principal executive
offices are located at 835 Hillcrest Road, Charleston, West Virginia 25311.
The name, business address, present principal occupation or employment
(including the name, principal business and address of any corporation or other
organization in which such employment is conducted) and citizenship of each
director and executive officer of McJunkin are set forth in Schedule A to this
statement and are incorporated herein by reference.
(d)-(e) During the last five years, neither McJunkin, nor to McJunkin's
best knowledge, any of the persons listed on Schedule A, has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
has been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which any such person was or is subject to
a judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The funds originally used to acquire the 1,127,221 Shares ($2,000,000
paid on September 10, 1984 and $4,000,000-$6,000,000 paid subsequently) were
obtained from McJunkin's lines of credit with banks. McJunkin utilized credit
available under lines of credit with the following banks: Morgan Guaranty Trust
Company, Chase Manhattan Bank, Pittsburgh National Bank, Charleston National
Bank, North Carolina National Bank, Canadian Imperial Bank of Commerce, Bank of
Dunbar and National Bank of Commerce. It was impossible to attribute the funds
borrowed
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Page 4 of 7 Pages
to purchase the Shares to any particular line of credit as McJunkin draws down
funds for general corporate purposes under several lines of credit each day.
The present transaction involved the disposition of shares, hence there
is no need for a source of funding.
Item 4. Purpose of Transaction.
The original purpose of the purchase of 1,127,221 Shares by McJunkin on
September 10, 1984 was to acquire an equity position in the Company which could
have permitted McJunkin to control the Company. After the original purchase of
the Shares McJunkin was in a position to make a determination as to whether to
acquire all or a portion of the remaining equity interest in the Company.
McJunkin's determination to acquire all or a portion of the remaining equity
interest in the Company was to be based upon various factors including, but not
limited to, developments with respect to the business of the Company and with
respect to McJunkin's business, other business opportunities available to
McJunkin, general economic conditions and money and stock market conditions.
In addition, depending on market conditions and other factors, McJunkin
could have made additional acquisitions of Shares by means of transactions in
the over-the-counter market or in private transactions, if appropriate
opportunities to do so had become available.
Since the time of the original purchase in 1984, McJunkin has not
acquired additional Shares. The present transaction involves the disposition of
400,000 Shares.
McJunkin does not have any present plans or proposals which relate to or
would result in: (i) the acquisition by any person of additional securities of
the Company, or the disposition of securities of the Company; (ii) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries; (iii) a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries; (iv) any change in the present board of directors or management of
the Company, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board; (v) any material
change in the present capitalization or dividend policy of the Company; (vi) any
other material change in the Company's business or corporate structure; (vii)
changes in the Company's charter, by-laws, or other instruments corresponding
thereto or other actions which may impede the acquisition of control of the
Company by any person; (viii) causing a class of securities of the
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Page 5 of 7 Pages
Company to be delisted from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association; (ix) a class of equity securities of the
Company becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934; or (x) any action similar to
any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
(a) McJunkin presently owns 727,221 shares (15.1%) . McJunkin owned
1,127,221 Shares (49.99% of the Shares outstanding on September 10, 1984).
Michael Wehrle owns 18,000 Shares.
(b) Each of McJunkin Corporation and the individual named above has
the sole power to vote and dispose of the Shares owned by such person or entity.
(c) On May 31, 1996, McJunkin Corporation sold 400,000 Shares to
the Company. On September 10, 1984, McJunkin Corporation purchased 1,127,221
Shares from Callahan Mining Corporation, an Arizona corporation ("Callahan"),
for an aggregate purchase price of $8,000,000, subject to reduction to no less
than $6,000,000.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Other than Exhibit 2 hereto, there are no contracts, arrangements,
understandings or relationships among McJunkin and the persons named in Schedule
A hereto and any other person with respect to any securities of the Company.
Exhibit 2 consists of the Stock Purchase and Option Agreement, dated as of
October 7, 1987, between KRM Petroleum Corporation and The American Energy Group
which contains an agreement relating to representatives designated by McJunkin
Corporation to be nominated for as candidates for the Company's board of
directors. Pursuant to this agreement, 2,900,000 Shares were sold to The
American Energy Group and KRM Petroleum Corporation (now PrimeEnergy
Corporation) agreed to use its best efforts to cause two (2) persons designated
by McJunkin Corporation to be nominated and elected to its board of directors
for as long as McJunkin Corporation owns 10% or more of the Shares.
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Page 6 of 7 Pages
Item 7. Material to be Filed as Exhibits.
2. Stock Purchase and Option Agreement, dated as of October 7,
1987, between KRM Petroleum Corporation and The American Energy Group.
SIGNATURE TO AMENDMENT NO. 1 TO SCHEDULE 13D
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: June 10, 1996.
McJUNKIN CORPORATION
By /s/ E. Gaines Wehrle
-----------------------------------
Its Senior Vice President
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Page 7 of 7 Pages
SCHEDULE A
Executive Officers Board of Directors
McJunkin Corporation McJunkin Corporation
835 Hillcrest Drive
Charleston, WV 25311
H. B. Wehrle, III H. B. Wehrle, Jr.
President and CEO Chairman of the Board-McJunkin
1622 Loudon Heights 1237 Upper Ridgeway Road
Charleston, WV 25314 Charleston, WV 25314
Michael H. Wehrle Martha G. Wehrle
Senior Vice President and CFO Member Board of Directors - McJunkin
334 South Pointe Drive 1440 Loudon Heights Road
Charleston, WV 25314 Charleston, WV 25314
Stephen D. Wehrle Frank E. Briber, Jr.
Senior Vice President Retired - Allis Chalmers
15 Grosscup Road Three Green Winged Teal Road
Charleston, WV 25314 Amelia Island, FL 32034
E. Gaines Wehrle G. S. Herscher
Senior Vice President Retired - McJunkin
1440 Loudon Heights Road 4516 Longboat Lane
Charleston, WV 25314 Fort Myers, FL 33919
H. B. Wehrle, Jr. George C. Kern, Jr.
Chairman of the Board Retired - Sullivan & Cromwell
1237 Upper Ridgeway Road 830 Park Avenue
Charleston, WV 25314 New York, NY 10021
Russell L. Isaacs
Wheat First Securities
1500 One Valley Square
Charleston, WV 25301
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INDEX TO EXHIBITS
No. Exhibit
(2) Stock Purchase and Option Agreement dated October 7, 1987,
between K.R.M. Petroleum Corporation and The American Energy
Group
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STOCK PURCHASE AND OPTION AGREEMENT
AGREEMENT, dated October 7, 1987, between K.R.M. Petroleum
Corporation, a Delaware corporation with its principal executive offices
located at 1900 Grant Street, Suite 300, Denver, Colorado 80203 (the "Seller"),
and The American Energy Group, a New York joint venture with its principal
executive offices located at 150 Grand Street, White Plains, New York 10601
(the "Buyer").
The parties hereto agree as follows:
1. Sale and Purchase of the Shares.
Simultaneously with the execution of this Agreement, and on
the terms and in reliance on the representations, warranties and covenants
hereinafter set forth, the Seller is selling to the Buyer, and Buyer is
purchasing from the Seller, 2,900,000 shares of Common Stock, par value $.10
per share, of the Seller (the "Shares") at a price of $0.70 per Share being an
aggregate purchase price of $2,030,000. Payment of the purchase price is being
made by wire transfer in Denver, Colorado, funds payable to the order of Seller
against delivery of one certificate registered in the name of the Buyer
representing the Shares.
2. Reevaluation to Adjust Shares.
If the average bid price for Seller's Common Stock during any
consecutive thirty (30) days preceding October 1, 1990, has been $3.00 or
greater, Buyer shall have the right to reevaluate the "1987 Assets"
(hereinafter defined) of Seller. If the average bid price for Seller's Common
stock during any consecutive thirty (30) days preceding October 1, 1990, has
not been $3.00 or greater, Seller shall have the right to reevaluate the 1987
Assets, in a like manner. Such right of Buyer or Seller
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to reevaluate must be exercised within seven (7) business days following
October 1, 1990.
This reevaluation will be made as follows:
For the purpose of this Agreement, the portion of the
aggregate purchase price for the Shares represented by
Seller's present oil and gas properties is $1,797,422, or an
aggregate of 2,567,746 shares of such Common Stock. Such
present oil and gas properties are referred to as the "1987
Assets".
All "net cash flows" during the three year period
ending September 30, 1990, from the 1987 Assets will be
discounted, at 20% per annum, back to October 1, 1987. To that
amount will be added the present value of the "estimated
future net cash flow" from the 1987 Assets as of September 30,
1990, discounted back to October 1, 1987 at 20%. Present value
shall be determined by a nationally recognized petroleum
engineering consulting firm in the manner shown by Annex A
hereto. For the purpose of this reevaluation, and to compute
"net cash flows" and "estimated future net cash flow", the
price of oil will be increased, from an initial price of
$19.50 at October 1, 1987, 5% per year for the first 5 years
and 3% per year thereafter. The price of natural gas will be
increased, from an initial price of $1.74 at October 1, 1987,
5% per year for the first 5 years then increased 3% per year
thereafter. The result of such reevaluation is hereinafter
referred to as the "1990 Assets". If either Buyer or Seller
shall have elected to reevaluate the 1987 Assets as above
provided, and if either of Buyer or Seller shall then elect to
adjust Shares, such
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adjustments shall be made as follows:
If one-half the 1990 Assets is less than one-half of
the 1987 Assets, Buyer will be issued additional shares of
Common Stock (the "Reevaluation Shares") in an amount equal to
such difference divided by $.70, in order to bring the average
cost per share down to reflect the redetermined asset value
per share; provided, however, the average price per share
shall not be less than $.57.
If one-half of the 1990 Assets is greater than
one-half of the 1987 Assets, Buyer will surrender back to
Seller as treasury shares such number of shares of Common
Stock in an amount equal to such difference divided by $.70,
in order to bring the average acquisition cost per share up to
this value; provided, however, that the average price per
share shall not exceed $.83 per share.
The Reevaluation Shares and such shares to be
surrendered as treasury shares shall be adjusted for stock
splits, dividends, recapitalization or similar matters.
3. Representations and Warranties of the Seller.
Seller represents and warrants to Buyer as follows:
3.1. Organization, Good Standing, Power, Etc. The Seller (a) is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware; (b) is qualified or authorized to do business as
a foreign corporation and is in good standing in all jurisdictions in which
such qualification is required; and (c) has all requisite corporate power and
authority, licenses, permits and franchises to (i) own or lease and operate its
properties and carry on its business as presently being
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conducted; (ii) execute, deliver and perform this Agreement; (iii) issue the
Shares and the Reevaluation Shares; and (iv) consummate the transactions
contemplated hereby.
3.2. Certificate of Incorporation and By-laws. The Seller has
heretofore furnished the Buyer with a complete and correct copy of (a) the
Seller's Certificate of Incorporation, as amended to date, and (b) the Seller's
By-laws, as amended to date. The Seller's Certificate of Incorporation and
By-laws are in full force and effect, and the Seller is not in violation of any
of the provisions thereof.
3.3. Capitalization.
3.3.1. The capitalization of Seller consists of (a)
15,000,000 shares of Common Stock, par value $0.10 per share (the "Common
Stock"), of which, on the date hereof, 2,817,746 shares are issued and
outstanding and 200,882 shares are held in the treasury of the Seller, (b)
10,000,000 shares of Preferred Stock, par value $0.10 per share, none of which
have been issued; and (c) 6,000,000 shares of Class B Stock, par value $0.10
per share, none of which have been issued. All of such issued and outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and non-assessable with no personal liability attaching to the
ownership thereof.
3.3.2. The Shares have been duly authorized and validly
issued and are fully paid and non-assessable with no personal liability
attaching to the ownership thereof. The Reevaluation Shares have been duly
authorized and validly reserved for issuance upon determination of the
Reevaluation, and will be, when issued upon such exercise, duly authorized and
validly issued, fully paid and non-assessable with no personal liability
attaching to the ownership thereof.
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3.4. Agreements Relating to Capital Stock. Insofar as known to the
Seller, there are no agreements or understandings among Seller's stockholders
with respect to the voting of shares of Seller's Common Stock on any matter.
Seller is not a party to any agreement which imposes any obligation on the
Seller, or creates any rights in any person, with respect to shares of the
capital stock or any other security of the Seller, except as referred to in
Section 3.5.
3.5. Options, Warrants, Rights, etc. Seller does not have
outstanding any option, warrant, or other right to purchase or convert any
obligation into, any shares of its Common Stock, or any other of its
securities, nor has Seller agreed to issue or sell any shares of its Common
Stock, except upon exercise of options granted pursuant to the Seller's 1983
qualified stock option plan to purchase an aggregate of 35,000 shares of
Seller's Common Stock.
3.6. Subsidiaries. Seller does not have any subsidiaries and does
not own a controlling interest in any capital stock of any corporation.
3.7. Authorization of Agreement. This Agreement has been duly and
validly authorized, executed and delivered by the Seller and constitutes the
valid and binding obligation of the Seller, enforceable against Seller in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, moratorium or other similar laws presently and
hereafter in effect affecting the enforcement of creditors' rights generally.
3.8. Government and Other Consents. No consent, authorization or
approval of, or exemption by, any governmental or public body or authority is
required in connection with the execution, delivery and performance by the
Seller of this Agreement or any of the instruments or agreements herein
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referred to, or the taking of any action herein contemplated.
3.9. Financial Statements. Seller has delivered to Buyer copies of
Seller's Annual Report, Form 10-K, as filed with the Securities and Exchange
Commission which contains the audited Balance Sheets of Seller as of December
31, 1986, and December 31, 1985, and the related Statements of Operations,
Stockholders' Equity and Changes in Financial Position for the fiscal years
ended on such dates, and Seller's Quarterly Report, Form 10-Q for the six
months ended June 30, 1987, which contains the unaudited Balance Sheet of
Seller as of June 30, 1987, and related Statements of Operations and Changes in
Financial Position for the six months then ended. The foregoing financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with that of prior years or periods,
are correct and complete and fairly present the financial position and results
of operations of Seller as of said dates and for the periods indicated. Since
June 30, 1987, there has not been any material adverse change in the business,
assets or condition, financial or otherwise, of the Seller, the Seller has not
incurred any obligation or liability (fixed or contingent) except trade or
business obligations incurred in the ordinary course of business, none of which
are materially adverse and the Seller has not declared or paid any dividend or
made any payment or distribution to its stockholders or purchased or redeemed
any shares of its Common Stock. Seller has informed Buyer that effective July
1, 1987, Seller sold substantially all of its producing oil and gas properties
in the State of Kansas, together with its reversionary interest in certain of
Seller's oil and gas properties in the Coochie Field, Concordia Parish,
Louisiana, for an aggregate consideration of $600,000. Of such cash
consideration, $535,000 was applied to a reduction of Seller's
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bank debt and $65,000 was applied to working capital.
3.10. Title to Property. The Seller has good and marketable title to
all of its assets and properties, whether real or personal, tangible or
intangible, subject to no liens, mortgages, security interests, encumbrances or
charges other than (i) minor imperfections or exceptions of or to title, none
of which will materially interfere with the realization by the Company of the
practical benefits of ownership or use of such assets and properties and (ii)
liens and security interests securing the Seller's debt to United Bank of
Denver, National Association, which debt, as of the date hereof, has an
outstanding principal balance of $1,975,000.
3.11. Property and Inventories. The oil and gas properties of the
Seller consist of the oil and gas properties described on a schedule heretofore
delivered by Seller to Buyer and initialled by each party for identification.
3.12. Taxes. All federal, state, local and other governmental (both
domestic and foreign) tax returns, including, but not limited to, withholding,
excise, unemployment, franchise, use, Social Security and property tax
renditions, required to be filed by, or with respect to, the Seller have been
timely and correctly filed, and all taxes, other assessments and levies shown
thereon which are due and payable have been paid; except that Seller has not
filed its 1986 Federal income tax return and an extension of time to file such
return was made to September 15, 1987. No further extension has been filed. In
addition, Seller has not filed its 1986 income tax returns (i) in the States of
Colorado, Louisiana, Nebraska and Utah and extensions have been filed in
respect of such returns to October 15, 1987; (ii) in the States of Kansas,
Mississippi, New Mexico, North Dakota and Oklahoma, for which extensions were
filed to September 15,
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<PAGE> 8
1987, based upon the 1986 Federal income tax return. Further, Seller has not
filed the 1986 Federal income tax return and the 1986 income tax returns for
the States of Colorado, Montana, Michigan, Utah and North Dakota on behalf of
DECA Energy Corp. All taxes and other assessments and levies which either the
Seller is required by law to withhold or to collect have been duly withheld or
collected and have been paid over to the proper governmental authorities or are
held by the Seller for such payment, and all such withholdings and collections
and all other payments due in connection therewith are duly reflected on the
books of the Seller.
3.13. Books and Records. The books and records of the Seller
accurately and fairly reflect the transactions relating to, and dispositions
of, the assets of the Seller as set forth therein. All books and minutes of the
Company are in existence, are in the possession of the Seller at the principal
office of the Seller and will be maintained at such location on the Closing
Date.
3.14. Litigation and Claims. There is no litigation or, to the
knowledge of Seller, any claim pending or threatened involving or affecting the
Seller. To the knowledge of Seller, there is no threatened or pending
investigation, including written inquiries, citations or complaints by any
federal, state or local government or governmental department, commission,
board, bureau, agency or administration against or affecting the Company.
3.15. Contracts and Commitments. Schedule A describes all material
contracts, commitments, leases, licenses, judgments, decrees, joint venture
agreements or other arrangements to which the Seller is a party. To the best
knowledge of Seller, Seller has not materially breached any provision of, nor
is Seller in material default in any respect under the terms of, any contract,
commitment, agreement, lease or license the effect of which would
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<PAGE> 9
have a material adverse impact on the business or financial condition of the
Seller; and the contracts, commitments, agreements, leases and licenses are
valid and enforceable in accordance with their terms and construed by the
Seller.
3.16. Insurance. Seller has in force policies of insurance of the
type and amounts customarily carried by companies engaged in a business similar
to that of the Seller. All of such insurance or the equivalent will be
continued in full force and effect through the closing. No policies of
insurance presently in force shall be cancelled or change in any respect prior
to closing, except with the prior written consent of Buyer.
3.17. Officers and Directors. Schedule B contains a complete and
correct list of the officers and directors of the Seller. Simultaneously with
the execution and delivery of this Agreement, Messrs. James F. Gilbert, Walter
C. Emery, Robert A. Kadane and Robert L. Koch have resigned as Directors of
the Company and Messrs. Oliver J. Sterling, III and Charles E. Drimal, Jr. have
been elected as Directors of the Company.
4. Representation of Buyer and Legend.
The Buyer represents that it is acquiring the Shares and the
Reevaluation Shares for its own account and not with a view to the distribution
thereof within the meaning of the Securities Act of 1933. Each certificate for
Shares or Reevaluation Shares shall be stamped or otherwise imprinted with an
appropriate restrictive legend.
5. Opinion of Counsel for the Seller.
Simultaneously with the execution of this Agreement, Buyer is
receiving from James F. Gilbert, Esq., counsel for the Seller, a favorable
opinion, dated the date hereof, to the effect that: (a) Seller is a
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<PAGE> 10
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, has all requisite power to carry on its business
as now being conducted and to execute, deliver and perform this Agreement; (b)
Seller is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of the business conducted by
it or the property owned, operated or leased by it makes such qualification
necessary; (c) this Agreement has been duly authorized by all necessary
corporate action on the part of the Seller, has been duly executed and
delivered by Seller and constitutes the legal, valid and binding obligation of
Seller in accordance with its terms; (d) the Shares have been duly authorized
and are validly issued, fully paid and non-assessable with no personal liability
attaching to the ownership thereof; (e) the Reevaluation Shares have been duly
authorized and validly reserved for issuance upon reevaluation of the 1987
Assets, and will be, if and when issued upon such reevaluation, duly
authorized and validly issued, fully paid and non-assessable with no personal
liability attaching to the ownership thereof; (f) no authorization, approval,
consent or order of any court or tribunal or any Federal, state or governmental
body and no consent, approval or authorization of any person (including the
stockholders of the Seller) is required in connection with the execution,
delivery and performance by Seller of this Agreement, the issuance, sale and
delivery of the Shares and the Reevaluation Shares, and the consummation of the
transactions contemplated hereby; (g) neither the execution, delivery or
performance by Seller of this Agreement, nor compliance by Seller with the
terms and provisions hereof, will conflict with, or result in breach of the
terms, conditions or provisions of, or will constitute a default under, the
Certificate of Incorporation or By-laws of Seller or any agreement or
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<PAGE> 11
instrument known to such counsel to which Seller is a party or by which Seller
or any of its properties or assets is bound; (h) there are no actions, suits or
proceedings pending or, to the knowledge of such counsel, threatened against
the Seller before any court or administrative agency, which, if adversely
decided, will result in any material adverse change in the business or
financial condition of the Seller or which questions the validity of this
Agreement or the Shares or the Reevaluation Shares issuable hereunder; (i) the
issuance, sale and delivery of the Shares and Reevaluation Shares under the
circumstances contemplated by this Agreement constitute exempted transactions
under the Securities Act of 1933; and (j) as to such other matters incident to
the transactions contemplated hereby as Buyer may reasonably request.
6. Board of Directors of Seller.
So long as McJunkin Corporation shall be the holder of ten
percent (10%) or more of Seller's Common Stock and at the request of McJunkin
Corporation, Buyer will use its best efforts to cause two persons designated by
McJunkin Corporation to be nominated and elected to, and remain on, the Board
of Directors of Seller.
7. General and Administrative Costs.
For a period of one year from and after the date of this
Agreement, Buyer will not permit or cause the general and administrative costs
of Seller to exceed an average of $15,000 per month. Thereafter and until
October 1, 1990, Buyer will not permit or cause the general and administrative
costs of Seller to exceed an average of $15,000 per month without the unanimous
approval of the Board of Directors of Seller. General and administrative costs
shall include all items of overhead not
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specifically allocated to individual oil and gas properties, but will not
include (i) the amortization of pre-paid items or the payment of capitalized
lease obligations (ii) the payment for goods and services rendered or received
prior to the date of closing; (iii) costs associated with the preparation and
filing of Seller's and Deca Energy Corp's tax returns for periods prior to
September 30, 1987, and (iv) all costs and expenses incurred in connection with
the consummation of the transactions contemplated by this Agreement, including
consulting fees, transition costs and the relocation of Seller's office to
White Plains, New York. Fees in connection with the annual audit of Seller for
1987 and the independent engineering review of Seller's oil and gas properties
for 1987 will be prorated to September 30, 1987.
8. Purchase of Kabrana Royalties.
Simultaneously with the execution of this Agreement, and on
the terms and in reliance on the representations, and warranties herein set
forth, the Seller is purchasing from Sterling Drilling and Production Company,
Inc., as agent for Buyer and Sterling Drilling and Production Company, Inc. as
agent for Buyer is selling to the Seller an undivided one-third (1/3) of the
interest acquired by Buyer in those certain oil and gas properties and
interests therein known as the "Kabrana Royalties" located in Archer, Young and
Jack Counties, Texas. The purchase price to be paid by Seller to Buyer is
$950,000, adjusted for net production from June 30, 1987, and to bear interest
at the rate of 12% per annum from August 18, 1987, on such adjusted purchase
price, payable by certified or bank check payable to the Buyer. Such oil and
gas properties and interests are more particularly described in the form of
assignments attached hereto as Annex B. Such assignments shall be with special
warranty of title, conveying good and
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marketable title, free and clear of all liens and encumbrances.
9. Option to Purchase Shares of Sterling Drilling and Production Co.,
Inc.
By their execution hereof, each of Messr. Oliver J. Sterling,
III and Charles E. Drimal, Jr. as principals of Buyer and as additional
consideration to Seller to enter into this Agreement, do hereby grant to Seller
the following option to purchase shares of the voting equity securities of
Sterling Drilling and Production Co., Inc.:
If prior to October 1, 1990, the average bid and asked price
of Seller's Common Stock as quoted on the over-the-counter market for any
preceding consecutive thirty (30) day period shall not be $2.25 or greater,
then Seller shall have the option to purchase for an aggregate consideration of
$1.00, an aggregate of 10% of all voting equity securities of Sterling Drilling
and Production Co., Inc. or any successor, held of record or beneficially by
Messrs. Oliver J. Sterling, III and Charles E. Drimal, Jr. which number of
shares shall not be less than 6% of Al outstanding voting equity securities of
Sterling Drilling and Production Co., Inc.
If the average bid and asked price of Seller's Common Stock
during any preceding consecutive thirty (30) day period prior to October 1,
1990, is greater than $2.25, then such option shall terminate. Such option
shall be exercisable at any time during the 30 day period following October 1,
1990, upon written notice to Messrs. Sterling and Drimal. At any time following
exercise of such option by Seller, Messrs. Sterling and Drimal may repurchase
such securities of Sterling Drilling & Production Co., Inc. for any aggregate
cash consideration of $225,000.
10. Finder's Fees.
Seller (a) represents and warrants to Buyer that it has not
taken
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and will not take any action which would cause Buyer to have any obligation or
liability to any person for broker's or finder's fees in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, and (b) agrees to indemnify Buyer against any
loss, liability, cost or expense arising out of the breach or inaccuracy of the
foregoing representation and warranty.
Buyer (a) represents and warrants to Seller that it has not
taken and will not take any action which would cause Seller to have any
obligation or liability to any person for broker's or finder's fees in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, and (b) agrees to
indemnify Seller against any loss, liability, cost or expense arising out of
the breach or inaccuracy of the foregoing representation and warranty.
11. Survival of Representations, Warranties and Agreements.
None of the representations, warranties and agreements
contained herein or made in writing by Seller in connection herewith shall
survive the closing and the issuance and delivery of the Shares regardless of
any investigation made by or on behalf of Buyer.
12. Expenses.
Whether or not the transactions hereby contemplated are
consummated, each of the parties hereto shall pay the fees and expenses of
their respective counsel, accountants and other experts, and all other expenses
arising in connection%with the preparation of this Agreement and the
consummation of the transactions contemplated hereby and no party shall have
any liability to any other party for such expenses.
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13. Other Interests.
Seller recognizes their Buyer and Sterling Drilling and
Production Company, Inc. are each engaged in the oil and gas business for their
account and for the account of third parties, including their principals and
affiliates.
14. Successors and Assigns.
All representations, warranties, covenants and agreements in
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, representatives, successors and
assigns whether so expressed or not.
15. Governing Law.
This Agreement is to be governed by and interpreted under the
laws of the State of New York, without giving effect to the principles of
conflicts of laws thereof.
16. Notices.
All notices, requests, Consents and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally or sent by certified mail, return receipt requested, with
postage prepaid as follows:
16.1. If to the Seller, addressed to:
K.R.M. Petroleum Corporation
1900 Grant Street, Suite 300
Denver, Colorado 80203
16.2. If to Buyer, addressed to:
The American Energy Group
150 Grand Street
White Plains, New York 10601
Attention: Charles E. Drimal, Jr.
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16.3. If to Messrs. Sterling and Drimal, addressed to:
Sterling Drilling and Production Co., Inc.
150 Grand Street
White Plains, New York 10601
17. Entire Agreement.
This Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreements, understandings and
arrangements, oral or written, between the parties hereto with respect to the
subject matter hereof.
18. Amendments and Waivers.
This Agreement may not be modified or amended except by an
instrument or instruments in writing signed by the party against whom
enforcement of any such modification or amendment is sought. Any party hereto
may, by an instrument in writing, waive compliance by the other party with any
term or provision of this Agreement on the part of such other party hereto to
be performed or complied with. The waiver by any party hereto of a breach of
any term or provision of this Agreement shall not be construed as a waiver of
any subsequent breach.
19. Separability.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
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<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed in their respective names by one of their officers or
representatives thereunto duly authorized as of the date first above written.
K.R.M. PETROLEUM CORPORATION
By: /s/ J. HOWELL KELLY
-----------------------------------
J. Howell Kelly
President
THE AMERICAN ENERGY GROUP
By: STERLING DRILLING AND PRODUCTION
CO., INC., MANAGING VENTURER
By: /s/ CHARLES E. DRIMAL, JR.
-----------------------------------
/s/ OLIVER J. STERLING, III
--------------------------------------
Oliver J. Sterling, III
/s/ CHARLES E. DRIMAL, JR.
--------------------------------------
Charles E. Drimal, Jr.
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<PAGE> 18
Schedule A, Schedule B, Annex A
and Annex B to Stock Purchase and Option Agreement
are omitted as not applicable
