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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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RULE 13e-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
SUMMIT PETROLEUM CORPORATION
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(Name of Issuer)
MRI ACQUISITION CORP.
MIDLAND RESOURCES, INC.
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(Name of Persons filing Statement)
COMMON STOCK, $.01 PAR VALUE
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(Title of Class of Securities)
866228 307
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(CUSIP Number of Class of Securities)
Deas H. Warley III, President
MRI Acquisition Corp.
16701 Greenspoint Park Drive, Suite 200
Houston, Texas 77060
713-873-4828
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of Person Filing Statement)
Copy:
Wayne M. Whitaker
Michener, Larimore, Swindle, Whitaker, Flowers, Reynolds, Sawyer & Chalk, L.L.P.
301 Commerce Street
3500 City Center Tower II
Fort Worth, Texas 76102
817-878-0530
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This statement is filed in connection with (check the appropriate box):
c.[X] A tender offer.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [ ]
Calculation of Filing Fee
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Transaction Valuation* Amount of filing fee
$1,890,129 $378
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*For the purpose of calculating the fee assumes the purchase of 2,700,184
shares of Common Stock of Summit Petroleum Corporation at $.70 per share.
Such number of shares includes all outstanding shares as of July 15, 1996,
and assumes the exercise of all stock options to purchase 300,000 shares of
Common Stock outstanding as of such date.
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: $378 Form or Registration No.: Schedule 14d-1
Filing Party: MRI Acquisition Corp. Date Filed: July 18, 1996
and Midland Resources
Inc.
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Exhibit Index on Page 7
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CROSS REFERENCE SHEET
Pursuant to Instruction F, answers to the items required by this Schedule 13e-3
are incorporated by reference from the Schedule 14D-1 filed by MRI Acquisition
Corp.("Purchaser") and Midland Resources, Inc. ("Parent") dated July 18, 1996.
Listed below is the item required by Schedule 13e-3 and the location in the
Schedule 14D-1 of the information required to be included in response to the
items of this statement.
Schedule 13E-3 Item Location of Response in Schedule 14D-1
Item 1. Issuer and Class of Security
Subject to the Transaction
(a) Item 1. Security and Subject Company
(b) Item 11. Material to be Filed as
Exhibits, Exhibit (a)(1) the "Offer to
Purchase"--Introduction and Paragraph 7.
(c), (d) Item 11. Material to be Filed as
Exhibits, Exhibit (a)(1) the "Offer to
Purchase"--Introduction and Paragraph 6.
(e) n/a
(f) Item 3. Past Contacts, Transactions or
Negotiations with the Subject Company
Item 2. Identity and Background Item 2. Identity and Background.
Item 3. Past Contracts, Transactions Item 3. Past Contracts, Transactions
or Negotiations or Negotiations with the Subject Company
Item 4. Terms of the Transaction
(a) Item 11. Material to be Filed as
Exhibits, Exhibit (a)(1) the "Offer to
Purchase"
(b) Item 11. Material to be Filed as
Exhibits, Exhibit (a)(1) the "Offer to
Purchase"-- Paragraph 10.
Item 5. Plans or Proposals of the Item 5. Purpose of the Tender Offer and
Issuer or Affiliate Plans or Proposals of the Bidder.
Item 6. Source and Amounts of Funds Item 4. Source and Amount of Funds or
or Other Consideration Other Consideration.
Item 7. Purpose(s), Alternatives, Item 5. Purpose of the Tender Offer and
Reasons and Effects Plans or Proposals of the Bidder.
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Item 8. Fairness of the Transaction None. Item 8 is answered herein.
Item 9. Reports, Opinions, Appraisals None. Item 9 is answered herein.
and Certain Negotiations
Item 10. Interest in Securities of the Item 6. Interest in Securities of the
Issuer Subject Company
Item 11. Contracts, Arrangements or Item 7. Contracts, Arrangement,
Understandings with Respect Understandings or Relationships
to the Issuer's Securities with Respect to the Subject Company's
Securities.
Item 12. Present Intention and None. Item 12 is answered herein.
Recommendation of Certain
Persons with Regard to the
Transaction
Item 13. Other Provisions of the None. Item 13 is answered herein.
Transaction.
Item 14. Financial Information None. Item 14 is answered herein.
Item 15. Persons and Assets Employed, None. Item 15 is answered herein
Retained or Utilized
Item 16. Additional Information None. Item 16 is answered herein
Item 17. Material to Be Filed as None. Item 17 is answered herein.
Exhibits
Item 8. Fairness of the Transaction.
(a) Both Purchaser and Parent reasonably believe that the Rule 13e
transaction is fair to unaffiliated security holders.
(b) Parent retained Southwest Merchant Group("SMG"), Dallas, Texas to
provide a fairness opinion regarding the price to offer the shareholders of
Summit Petroleum Corporation (the "Company"). SMG reached an opinion that $0.70
per share of the Company's common stock and for each share subject to a stock
option less the exercise price thereof was fair, from a financial point of view
to Parent. SMG considered the oil and gas reserves of the Company, the oil and
gas revenues of the Company, the revenues generated by oil and gas well
operations, the other assets and liabilities of the Company, the Company's net
operating loss for income tax benefits, and other oil and gas related industry
transactions. Current and historical market prices for the Company's securities
is not meaningful due to the lack of trading thereof. Consideration was given
to the in-depth knowledge Parent has of the Company due to the operational
control Parent has of the Company through a management contract and the
synergies that may be achieved by combining the two companies oil and gas
operations and properties. Further consideration was given to certain
intangible benefits Parent may realized by not being required to have to
disclose the affiliated party relationship that exists by virtue of the common
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shareholders, common members of the board of directors, common officers, certain
common oil and gas properties, and operational control through the management
agreement.
(c) The transaction has not been structured to require the approval of a
majority of unaffiliated Company security holders.
(d) The board of the Company has not retained an unaffiliated
representative to act solely on behalf of unaffiliated security holders for the
purposes of negotiating the terms of the 13e-3 transaction and/or preparing a
report concerning the fairness of such transaction. Parent did make available
the report prepared by SMG to the board of the Company.
(e) The Rule 13e-3 transaction was approved by the entire board of the
Company, one of which is the President. The Rule 13e-3 transaction was also
approved by the entire board of Parent, two of who are employees of Parent and
three of who (Messrs. Warley, Whitaker and Dillard) are also the directors of
the Company.
(f) The Company has not received any firm offers during the eighteen months
preceding the commencement of the tender offer by Purchaser regarding a merger
or consolidation, the sale or other transfer of all or any substantial part of
the assets of the Company, or securities of the Company which would enable the
holder thereof to exercise control of the Company.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a) Parent retained SMG to provide a fairness opinion regarding the price
to offer the shareholders of the Company. SMG reached an opinion that $0.70 per
share for the Company's common stock and for each share subject to a stock
option less the exercise price thereof was fair, from a financial point of view
to Parent.
(b) SMG is a small investment banking firm, whose principals have a
combined 40 years investment banking experience that included advising companies
on the value and fairness of transactions similar to the offer by Parent. Parent
chose SMG based upon their experience and willingness to provide the opinion in
a timely manner. SMG has an investment banking agreement entered into on June
3, 1996 with Parent relating to representing Parent in securing new financing
sources, as well as seeking potential acquisition targets. SMG will not receive
any finders or other fee in connection with the offer by Parent other than for
the rendering of it fairness opinion. SMG was requested to independently
determine a fair price to offer for the shares of the Company. Parent did not
place any limitations on SMG in making its determination.
(c) The report by SMG is available for inspection and copying at the
principal executive offices of Parent, 16701 Greenspoint Park Drive, Suite 200,
Houston, Texas 77060, during its regular business hours by any interested equity
security holder of the Company or his representative who has been so designated
in writing.
Item 12. Present Intention and Recommendation of Certain Persons with Regard to
the Transaction.
(a) Those current members of the Company's board, and those employees and
officers of Parent who own shares of the Company's common stock have orally
indicated to the Parent that they will tender their Company shares pursuant to
the offer by Parent.
(b) Messrs. Warley and Whitaker, who are each directors of the Company and
own shares of the Company, voted to approve the Merger Agreement with Purchaser
and recommend the acceptance of the offer to the Company's shareholders. After
reviewing the report by SMG
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and discussing such report with the representative of SMG, reviewing the
financial records of the Company, participating in the board of directors
meeting of Parent in the capacity of a member of such board and discussing the
relative value of the proposed offer in light of the general knowledge of the
members of the Company's board with respect to transactions for oil and gas
properties and operations, Messrs. Warley and Whitaker as well as Mr. Dillard
voted to recommend the offer to the Company's security holders.
Item 13. Other Provisions of the Transaction.
(a) Appraisal rights under Colorado law are available to the Company's
shareholders who do not tender or vote to approve the merger. A description of
such rights is contained in Exhibit (e) to this Statement.
(b) No provision has been made by Parent in connection with the tender
offer to allow an unaffiliated security holder to obtain access to the corporate
files of the Company or Parent or to obtain counsel or appraisal services at the
expense of the Company or Parent.
Item 14. Financial Information.
(a) The Company's audited financial statements for fiscal 1994 and 1995
are incorporated by reference from the Company's Form 10-KSB for its years ended
July 31, 1994 and 1995. The Company's unaudited balance sheets and comparative
year-to-date income statements and statements of cash flows and related earnings
per share amounts contained in the Company's Form 10-QSB for the quarter ended
April 30, 1996 is incorporated herein by reference. The ratio of earnings to
fixed charges is not provided since the Company does not have an outstanding
issue of debt other than routine bank debt. Book value per share as of July 31,
1994, 1995 and April 30, 1996 is $0.228, $0.241, and $0.260, respectively.
Item 15. Persons and Assets Employed, Retained or Utilized.
(a) The Company's oil and gas assets will be pledged to secure Parents
current bank credit agreement in the normal course as any acquisition of oil and
gas properties.
(b) Parent has not specially employed anyone to solicit or recommend the
tender offer. Parent will utilize its current employees to respond to inquiries
from Company shareholders, brokers or other nominees as well as contact such
individuals or firms with respect to tendering Company shares.
Item 16. Additional Information.
None.
Item 17. Material to Be Filed as Exhibits.
(a) Loan Agreement between Parent and First Union National Bank of North
Carolina dated December 29, 1994 (Previously filed as the same exhibit number in
Parents Form 10-KSB dated December 31,1994 and incorporated herein by such
reference ).
(b) Report by Southwest Merchant Group, dated July 14, 1996.
(c) Plan and Agreement of Merger among the Company and Purchaser, dated
July 17, 1996.
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(d)(1) The Offer to Purchase
(d)(2) The Letter of Transmittal
(d)(3) Letter from The Company to Shareholders recommending acceptance
of Offer
(e) A statement describing the appraisal rights under Colorado Law
SIGNATURE
After due 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.
July 18, 1996
/s/Deas H. Warley III
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Deas H. Warley III, President
MRI Acquisition Corp.
Midland Resources, Inc.
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INDEX TO EXHIBITS
Exhibit Page No.
*(a) Loan Agreement between Parent and First Union National Bank
of North Carolina dated December 29, 1994 (Previously filed
as the same exhibit number in Parent's Form 10-KSB dated
December 31,1994 and incorporated herein by such reference ).
(b) Report by Southwest Merchant Group, dated July 14, 1996.
*(c) Plan and Agreement of Merger among the Company and Purchaser,
dated July 17, 1996. (Filed as Exhibit (a)(3) to Schedule
14D-1 of MRI Acquisition Corp, and Midland Resources Inc.
dated July 18, 1996 and incorporated herein by reference)
*(d)(1)The Offer to Purchase (Filed as Exhibit (a)(1) to Schedule
14D-1 of MRI Acquisition Corp, and Midland Resources, Inc.
date July 18, 1996 and incorporated herein by reference)
*(d)(2)The Letter of Transmittal (Filed as Exhibit (a)(2) to Schedule
14D-1 of MRI Acquisition Corp, and Midland Resources, Inc.
date July 18, 1996 and incorporated herein by reference)
(d)(3) Letter from The Company to Shareholders dated July 18, 1996
recommending acceptance of Offer
(e) A statement describing the appraisal rights under Colorado Law
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* Incorporated herein by reference
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July 14, 1996
Board of Directors
Midland Resources, Inc.
16701 Greenspoint Park Drive, Suite 200
Houston, TX 77060
Gentlemen:
You have asked Southwest Merchant Group to express an opinion from a financial
point of view of the fairness of the price paid to purchase of all of the common
stock of Summit Petroleum, Inc. by Midland Resources, Inc.
Southwest Merchant Group is an investment banking and management consulting firm
located in Dallas, Texas. As an element of our business activities, we value
the shares and assets of both publicly held businesses for a number of
reasons, including mergers, acquisitions, public offerings, employee stock
ownership plans, valuation for estate tax purposes, etc. Information pertaining
to the experience of the principals of Southwest Merchant Group is attached.
In arriving at our opinion, we reviewed such documents (including various Summit
Petroleum, Inc. filings with the Securities and Exchange Commission), considered
such questions, and conducted such analysis as we deemed appropriate. Also, we
visited the common headquarters facilities of Summmit Petroleum, Inc. and
Midland Resources, Inc. and discussed the operations of the business, including
future prospects and potential problem areas with various management personnel.
In addition to reviewing documents and visiting the management offices, in
reaching our opinion we considered the nature and history of the business of
Summit Petroleum, Inc., the economic outlook for the economy in general, and for
the oil and gas exploration industry in particular. We also considered the
financial condition of Summit Petroleum, Inc., its oil and gas reserves, cash
flows derived from operation of wells, tax loss carryforward, as well as the
earnings and cash flow history and our estimate of the company's potential.
No limitations were placed on our investigation, and we were given full access
to all material requested on a timely basis. However, we have relied upon and
assumed the accuracy and completeness of the financial and other data provided
to us, particularly the audited and unaudited financial statements, and
estimates of oil and gas reserves of Summit Petroleum, Inc. prepared by the
company. We have not attempted independent verification of such data.
Based on our analysis of the factors deemed relevant, it is our opinion that the
proposed
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purchase of all of the common shares of a Summit Petroleum, Inc. by
Midland Resources, Inc., at a cash price of $0.70 per share, and the purchase of
option shares at a price of $0.70 per share, less the exercise price thereof, is
fair from a financial point of view to the shareholders of Midland Resources,
Inc.
Sincerely,
Southwest Merchant Group
5735 Pineland Drive, Suite 215
Dallas, Texas 75231
/s/Michael D. Riggs
Michael D. Riggs
Managing Director
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[LETTERHEAD]
July 18, 1996
Dear Fellow Shareholders:
Since assuming control of Summit in August 1989, returning value to the
Shareholders has certainly been a challenge. Recalling a statement I made in my
Letter to Shareholders in the 1994 Annual Report regarding the condition of
Summit in August 1989:
"... THE COMPANY WAS VIRTUALLY BANKRUPT. LONG TERM DEBT OBLIGATIONS AND
OVERHEAD EXCEEDED THE GROSS MONTHLY REVENUES BY ALMOST 200 PERCENT, TAXES
WERE DELINQUENT, ROYALTY PAYMENTS WERE DELINQUENT, WORKING INTEREST REVENUE
PAYMENTS WERE DELINQUENT, VENDOR ACCOUNTS WERE DELINQUENT, AND THE LIST
WENT ON. FUNDS WERE SIMPLY UNAVAILABLE TO MEET ORDINARY DAILY OPERATING
EXPENSES. SHAREHOLDER EQUITY HAD BEEN REDUCED TO A $173,000 DEFICIT AND
THE COMPANY HAD JUST FINISHED THE 1989 YEAR WITH A $413,000 LOSS."
We have come a long way since then and I am pleased to report to you that we now
have the opportunity to "cash-in" on the effort.
On July 3, 1996, the Board of Directors voted unanimously to recommend to all
shareholders of Summit Petroleum Corporation that they accept the offer by
Midland Resources, Inc. (through a subsidiary corporation, MRI Acquisition Corp)
to purchase all the outstanding stock of Summit at a purchase price of $0.70 per
share.
I certainly enjoyed the challenge of rebuilding the Company and the support I
have received from the shareholders.
Sincerely,
/s/ Deas H. Warley
Deas H. "Gene" Warley
President
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DESCRIPTION OF COLORADO DISSENTERS' RIGHTS
Under the Colorado Business Corporation Act ("CBCA"), a shareholder is entitled
to dissent and obtain payment of the fair value of his or her shares in the
event of consummation of a plan of merger of the corporation. A dissenting
shareholder is entitled to "fair value" for his shares, but is not entitled to
also challenge the corporate action creating the fair value entitlement unless
the action is unlawful or fraudulent with respect to such shareholder or the
corporation. CBCA Section 7-113-102. "Fair value" is defined as "the value of
the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporation action except to the extent that exclusion
would be inequitable." CBCA Section 7113-101.
The Company must include in the notice of shareholder meeting a notice of
shareholders' rights to dissent from the corporate action. Upon receipt of
required notice of dissenters' rights in connection with the proposed merger, a
shareholder who wishes to assert dissenters' rights must deliver to the
corporation, before any vote is taken, written notice of the shareholder's
intention to demand payment for his or her shares if the proposed merger is
effectuated, and such shareholder must not vote his shares in favor of the
proposed merger or execute any writing consenting to the proposed merger. CBCA
Sections 7-113-201 and 7-113-202. If the proposed merger is authorized, the
corporation, must within 10 days after the effective date of the corporate
action, give a written dissenters' notice to all shareholders who are entitled
to demand payment for their shares. CBCA Section 7-113-203. A shareholder who
is given a dissenters' notice and who wishes to assert dissenters' rights must,
in accordance with the terms of and within the times stated in the dissenters'
notice, deliver to the corporation before the vote is taken a statutory payment
demand in writing, and tender the share certificates. Except as otherwise
provided by the CBCA, the demand for payment and deposit of certificates is
irrevocable. A shareholder who does not timely demand payment and deposit his
or her share certificates is not entitled to payment for shares pursuant to
dissenters' rights. CBCA Section 7-113-204.
Within 30 days from receipt of the corporation's offer of fair value, a
dissenting shareholder may give written notice to the corporation of the
dissenter's estimate of the fair value of his shares and the amount of interest
due and may demand payment of such estimate, less certain payments as provided
by the CBCA, or reject the corporation's offer and demand payment of fair value
and interest if the dissenter believes the amount offered by the corporation is
less than the fair value of the shares or if the corporation fails to make
payment of the offered value within 60 days from receipt of payment demand.
CBCA Section 7-113-209. In some cases, the fair value of the dissenter's shares
may be determined by a court of competent jurisdiction, and costs of court may
be assessed against the dissenters if the court find they have acted
arbitrarily, vexatiously, or not in good faith in their payment demand. CBCA
Section 7-113-301.
