<PAGE>
As filed with the Securities and Exchange Commission on September 16, 1998
SEC Registration No. 333-37797
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
AMENDMENT NO. (3)
TO
FORM S-3 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
EVERGREEN RESOURCES, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Colorado 84-0834147
------------------------------- ------------------------
(State of Other Jurisdiction (IRS Employer
of Incorporation) Identification Number)
1401 17th St., Suite 1200
Denver, Colorado 80202
(303) 298-8100
-------------------------------------------------------
(Address and Telephone Number of Registrant's Principal
Executive Offices and Principal Place of Business)
1401 17th St., Suite 1200
Denver, Colorado 80202
(303) 298-8100
--------------------------------------------------------------
(Name, Address and Telephone Number of Agent for Service)
Copies to:
John B. Wills, Esq. Kevin R. Collins
410 Seventeenth Street, Suite 1940 1401 17th St., Suite 1200
Denver, Colorado 80202 Denver, CO 80202
(303) 628-0747 (303) 298-8100 (tel) 303 298-7800 (fax)
------------------------------------------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
<TABLE>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Title of Each Amount Proposed Maximum Proposed Maximum Amount of
Class of Securities to be Offering Price Aggregate Offering Registration
to be Registered Registered(1) Price Per Share Price(2) Fee
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 200,000 $18.00 Per $3,600,000 $1,090.91(3)
$0.01 Stated Value Shares Share
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
(1) All securities subject to this Registration Statement are on behalf of
selling shareholders (see "Selling Shareholders").
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 by reference to the last sale reported on the NASDAQ
National Market System on October 10, 1997.
(3) Previously paid.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
PROSPECTUS
EVERGREEN RESOURCES, INC.
200,000 Shares Common Stock
($0.01 Stated Value)
All of the shares of Evergreen Resources, Inc. (the "Company" Common Stock
are being registered on behalf of security holders (the "Selling Shareholders"),
which are offering for sale 200,000 shares of the Company's Common Stock which
are presently outstanding or which underlie existing warrants. The Company will
receive up to $1,380,000 from the sale of such shares by the Selling
Shareholders upon exercise of the warrants (which have an exercise price of
$6.90). The Company will utilize proceeds for general working capital and for
capital expenditures associated with the development of the Company's natural
gas activities in the Raton Basin. The Selling Shareholders are not restricted
in the price or prices at which they may sell their shares and sales of such
shares may depress the market price of the Company's Common Stock. (See
"Selling Shareholders".)
This offering is not being underwritten. The shares will be offered and
sold by the Selling Shareholders from time to time at prices to be determined at
the time of such sales.
It is anticipated that sales of the 200,000 shares of Common Stock being
offered hereby when made, will be made through customary brokerage channels
either through broker-dealers acting as agents or brokers for the Selling
Shareholders, or through broker-dealers acting as principals who may then resell
the shares in the over-the-counter market or otherwise, or at private sales in
the over-the-counter market or otherwise, at negotiated prices related to
prevailing market prices at the time of the sales or by a combination of such
methods of offering. Thus, the period of distribution of such shares may occur
over an extended period of time. The Selling Shareholders will pay or assume
brokerage commissions or discounts incurred in the sale of their shares.
The Company is paying all of the expenses of registering the Common Stock
under the Securities Act of 1933, as amended, estimated to be $10,000 for
filing, printing, legal, accounting and miscellaneous expenses in connection
with the offering.
On September 10, 1998, the closing sale price of the Company's Common
Stock as reported on the NASDAQ National Market System was $17.25.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. (SEE "RISK FACTORS"
BEGINNING ON PAGE 5.)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is September ____, 1998.
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus in connection with the offer
contained in this Prospectus, and, if given or made, such other information or
representations must not be relied upon as having been authorized by the Company
or the Selling Stockholders. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create an implication that
there has been no change in the affairs of the Company since the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, Room 1024 and at the following
Regional Offices of the Commission: Everett McKinley Dirksen Building, 219 South
Dearborn Street, Chicago, Illinois 60604, Room 1204, and Jacob K. Javits
Building, 75 Park Place, 14th Floor, New York, New York 10007. Copies of such
material also can be obtained at prescribed rates by writing to the Commission,
Public Reference Section, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. The Commission also maintains a Web Site that contains reports,
proxy and information statements and other information regarding registrants,
including the Company, that file electronically with the Commission at
http:www.sec.gov. In addition, copies of such documents and other information
are provided to Nasdaq and can be inspected at the Nasdaq offices maintained at
the National Association of Securities Dealers, Inc., 1735 'K' Street,
Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, all of which were previously filed with the
Commission, are hereby incorporated by reference in this Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, as amended by Form 10-K/A for the fiscal year
ended December 31, 1997.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1998 and June 30, 1998.
3. The description of the Company's Common Stock that is contained in the
Company's Form 8-A filed with the Commission on or about December 21,
1981, including any amendment or report filed for the purpose of
updating such description.
4. The Company's Form 8-K dated June 8, 1998.
5. The Company's Form 8-K dated July 16, 1998, as amended by Form
8-K/A (filed on September 3, 1998).
All documents filed by the Company subsequent to the date of this
Prospectus pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act and
prior to the termination of the offering of the shares of Common Stock shall
be deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of those documents.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that such statement is modified or replaced by a statement contained
in this Prospectus or in any other subsequently filed document that also is or
is deemed to be incorporated by reference into this Prospectus. Any such
statement so modified or superseded shall not be deemed, except as so modified
or replaced, to constitute a part of this Prospectus. The Company undertakes to
provide without charge to each person to whom a copy of this Prospectus has been
delivered, upon the written or oral request of any such person, including any
beneficial owner, a copy of any or all of the documents referred to above that
have been or may be incorporated in this Prospectus by reference, other than
exhibits to such documents. Written or oral requests for such copies should be
directed to Evergreen Resources, Inc., 1401 17th St., Suite 1200, Denver,
Colorado 80202, (303)298-8100.
2
<PAGE>
TABLE OF CONTENTS
Page
----
Available Information.......................................... 2
Incorporation of Certain Documents by Reference................ 2
Prospectus Summary............................................. 4
Risk Factors................................................... 5
Recent Developments............................................ 11
Selling Shareholders........................................... 15
Plan of Distribution........................................... 15
Experts........................................................ 15
Legal Opinions................................................. 16
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information appearing elsewhere
in this Prospectus.
THE COMPANY
Evergreen Resources, Inc. ("Evergreen" or the "Company"), is a Colorado
corporation organized on January 14, 1981. Evergreen maintains its principal
executive offices at 1401 17th St., Suite 1200, Denver, Colorado 80202, and its
telephone number is (303) 298-8100.
Evergreen is an independent energy company engaged in the exploration,
development and acquisition of oil and gas properties. The Company's current
operations are principally focused on developing and expanding its coalbed
methane project located in the Raton Basin in southern Colorado. Evergreen also
holds exploration licenses onshore in the United Kingdom, a net 2% interest in a
group exploring offshore in the Falkland Islands, and an oil and gas license on
approximately 2.4 million acres in northern Chile.
Evergreen is one of the largest holders of oil and gas leases in the
Raton Basin with approximately 200,000 gross acres. In addition, the
Company's daily gas sales represent approximately 2/3 of the gas currently
sold from the Raton Basin. As of September 10, 1998, the Company had 140
producing gas wells on its Raton Basin. The Company has identified
approximately 560 drilling locations on its Raton Basin acreage, of which 150
are presently included in the Company's proved reserve base at December 31,
1997. These 150 proven locations comprise approximately 27% of the Company's
total acreage in the Raton Basin. Evergreen intends to spend approximately
$80 million over the next three years on the development of the Raton Basin,
including drilling approximately 210 wells and expanding and upgrading its
gathering and compression facilities. The Company will also be required to
spend approximately $4.4 million on its international projects over the next
three years. Any further development of its international projects will
require substantial additional capital. See "Risk Factors--Substantial
Capital Requirements."
Evergreen Operating Corp., a wholly owned subsidiary, operates
approximately 300 oil and gas wells on behalf of the Company and, on a fee
basis, for others, coordinating drilling activities and arranging for the
production, gathering and sale of the gas and oil from the wells it operates.
THE OFFERING
Securities Offered by Selling Shareholders 200,000 Shares of Common Stock,
$0.01 stated value per share.
Offering Price All or part of the Shares offered
hereby may be sold from time to
time in amounts and on terms to be
determined by the Selling
Shareholders at the time of the
sale.
NASDAQ National Market Symbol EVER
4
<PAGE>
RISK FACTORS
This Prospectus, including the information incorporated by reference
herein, contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
including statements regarding, among other items, (i) the Company's growth
strategies, (ii) anticipated trends in the Company's business and its future
results of operations, (iii) market conditions in the oil and gas industry,
(iv) the ability of the Company to make and integrate acquisitions and (v)
the outcome of litigation and the impact of governmental regulation. These
forward-looking statements are based largely on the Company's expectations
and are subject to a number of risks and uncertainties, many of which are
beyond the Company's control, including those described below. Actual results
could differ materially from these forward-looking statements as a result of,
among other things, a decline in natural gas production, a decline in natural
gas prices, incorrect estimations of required capital expenditures, increases
in the cost of drilling, completion and gas gathering, an increase in the
cost of production and operations, an inability to meet growth projections,
and/or changes in general economic conditions. Actual results could
materially differ and could be adversely affected by the information set
forth below. In light of these risks and uncertainties, there can be no
assurance that actual results will be as projected in the forward-looking
statements.
CERTAIN RISKS
VOLATILITY OF OIL AND GAS PRICES. The Company's revenues, operating
results, profitability, future rate of growth and the carrying value of its oil
and gas properties are substantially dependent upon prevailing market prices for
oil and gas. Historically, the markets for oil and gas have been volatile and in
certain periods have been depressed by excess domestic and imported supplies.
Such volatility is expected to recur in the future. Various factors beyond the
control of the Company will affect prices of oil and gas, including worldwide
and domestic supplies of oil and gas, the ability of the members of the
Organization of Petroleum Exporting Countries to agree to and maintain oil price
and production controls, political instability or armed conflict in oil or gas
producing regions, the price and level of foreign imports, the level of consumer
demand, the price, availability and acceptance of alternative fuels, the
availability of pipeline capacity, and weather conditions. In addition to market
factors, actions of state and local agencies and the United States and foreign
governments affect oil and gas prices. These external factors and the volatile
nature of the energy markets make it difficult to estimate future prices of oil
and gas. Any substantial or extended decline in the price of oil or gas would
have a material adverse effect on the Company's financial condition and results
of operations. Such decline could reduce the Company's cash flow and borrowing
capacity and both the value and the amount of the Company's gas reserves.
In order to reduce its exposure to short-term fluctuations in the
price of natural gas, the Company enters into hedging arrangements from time
to time. The Company's hedging arrangements apply to only a portion of its
production and provide only partial price protection against declines in
natural gas prices. In addition, the Company's hedging arrangements limit the
benefit to the Company of increases in the price of natural gas. The Company
enters into contractual obligations that require future physical delivery to
attempt to manage price risk with regard to a portion of its natural gas
production. As of September 1, 1998, the Company had entered into contracts
to sell approximately 33.5 MMcf per day (approximately 90% of current
sales) through October 1998 at an average price of $1.93 per Mcf. The Company
enters into contractual obligations that require future physical delivery of
its natural gas production to attempt to manage price risk with regard to a
portion of its natural gas production. The Company identifies minimum internal
price targets and, assuming other market conditions are deemed favorable, the
Company will enter in hedging contracts to manage price risk. Typically, the
Company determines what percentage of its production it will hedge based on
how favorable a hedging price it can obtain. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Hedging
Transactions."
The Company periodically reviews the carrying value of its oil and gas
properties under the full cost accounting rules of the Securities and Exchange
Commission. Under these rules, capitalized costs of proved oil and gas
properties may not exceed the present value of estimated future net revenues
from proved reserves, discounted at 10%. Application of the ceiling test
generally requires pricing future revenue at the unescalated prices in effect as
of the end of each fiscal quarter and requires a write-down for accounting
purposes if the ceiling is exceeded, even if prices were depressed for only a
short period of time. The Company may be required to write down the carrying
value of its oil and gas properties when oil and gas prices are depressed or
unusually volatile. If a write-down is required, it would result in a charge to
earnings, but would not impact cash flow from operating activities. Once
incurred, a write-down of oil and gas properties is not reversible at a later
date.
SUBSTANTIAL CAPITAL REQUIREMENTS. The Company's current development
plans will require it to make substantial capital expenditures in connection
with the exploration and development of its natural gas properties. Also,
exploration and development of the Company's international projects is
dependent upon the Company securing the necessary capital. Historically, the
Company has funded its capital expenditures through a combination of funds
generated internally from sales of production or properties, equity
contributions, long-term debt financing and short-term financing
arrangements. The Company currently does not have any arrangements with
respect to, or sources of, additional financing other than the Company's
existing $50 million credit facility (the "Credit Facility") and equipment
leases. There can be no assurance that any additional financing will be
available to the Company on acceptable terms or at all. Future cash flows and
the availability of financing will be subject to a number of variables, such
as the level of production from existing wells, prices of oil and natural
gas, the Company's success in locating and producing new reserves and the
success of its coalbed methane project in the Raton Basin. To the extent that
future financing requirements are satisfied through the issuance of equity
securities, the Company's existing shareholders may experience dilution that
could be substantial. The incurrence of debt financing could result in a
substantial portion of the Company's operating cash flow being dedicated to
the payment of principal and interest on such indebtedness, could render the
Company more vulnerable to competitive pressures and economic downturns and
could impose restrictions on the Company's operations. If revenue were to
decrease as a result of lower oil and natural gas prices, decreased
production or otherwise, and the Company had no availability under the Credit
Facility or any other credit facility, the Company's ability to execute its
development plans, replace its reserves or maintain production levels could
be materially limited.
5
<PAGE>
UNCERTAINTY OF RESERVE INFORMATION AND FUTURE NET REVENUE ESTIMATES. There
are numerous uncertainties inherent in estimating quantities of proved oil and
natural gas reserves and their values, including many factors beyond the
Company's control. Estimates of proved undeveloped comprise a significant
portion of the Company's reserves, are by their nature uncertain. The reserve
information set forth in this Prospectus represents estimates only. Although the
Company believes such estimates to be reasonable, reserve estimates are
imprecise and may materially change as additional information becomes available.
Estimates of oil and natural gas reserves, by necessity, are projections
based on geologic and engineering data, and there are uncertainties inherent in
the interpretation of such data as well as the projection of future rates of
production and the timing of development expenditures. Reserve engineering is a
subjective process of estimating underground accumulations of oil and natural
gas that are difficult to measure. The accuracy of any reserve estimate is a
function of the quality of available data, engineering and geological
interpretation and judgment. Estimates of economically recoverable oil and
natural gas reserves and future net cash flows necessarily depend upon a number
of variable factors and assumptions, such as historical production from the area
compared with production from other producing areas, the assumed effects of
regulations by governmental agencies and assumptions governing future oil and
natural gas prices, future operating costs, severance and excise taxes,
development costs and workover and remedial costs, all of which may in fact vary
considerably from actual results. For these reasons, estimates of the
economically recoverable quantities of oil and natural gas attributable
to any particular group of properties, classifications of such reserves based on
risk of recovery, and estimates of the future net cash flows expected therefrom
may vary substantially. Any significant variance in the assumptions could
materially affect the estimated quantity and value of the reserves. Actual
production, revenues and expenditures with respect to the Company's reserves
will likely vary from estimates, and such variances may be material.
Present value of future net revenues ('PV-10'), should not be
construed as the current market value of the estimated oil and natural gas
reserves attributable to the Company's properties. In accordance with
applicable regulations, the estimated discounted future net cash flows from
proved reserves are based on prices and costs as of the date of the estimate,
whereas actual future prices and costs may be materially higher or lower.
Actual future net cash flows also will be affected by factors such as the
amount and timing of actual production, supply and demand for natural gas,
curtailments or increases in consumption by natural gas purchasers and
changes in governmental regulations or taxation. The timing of actual future
net cash flows from proved reserves, and thus their actual present value,
will be affected by the timing of both the production and the incidence of
expenses in connection with development and production of oil and natural gas
properties. In addition, the 10% discount factor, which is required to be
used to calculate PV-10 for reporting purposes, is not necessarily the most
appropriate discount factor based on interest rates in effect from time to
time and risks associated with the Company or the oil and natural gas
industry in general.
SPECULATIVE NATURE OF OIL AND GAS EXPLORATION. The business of exploring
for and, to a lesser extent, of developing oil and gas properties is an
inherently speculative activity that involves a high degree of business and
financial risk. Property acquisition decisions generally are based on various
assumptions and subjective judgments that are speculative. Although available
geological and geophysical information can provide information with respect to
the potential of an oil or gas property, it is impossible to predict accurately
the ultimate production potential, if any, of a particular property or well.
Moreover, the successful completion of an oil or gas well does not ensure a
profit on the Company's investment therein. A variety of factors, both
geological and market-related, can cause a well to become uneconomic or
marginally economic.
OPERATING HAZARDS. The oil and natural gas business involves certain
operating hazards such as well blowouts, craterings, explosions, uncontrollable
flows of oil, natural gas or well fluids, fires, formations with abnormal
pressures, pipeline ruptures or spills, pollution, releases of toxic gas and
other environmental hazards and risks, any of which could result in substantial
losses to the Company. The availability of a ready market for the Company's
natural gas production also depends on the proximity of reserves to, and the
capacity of, natural gas gathering systems and pipelines. The Company delivers
natural gas through gas pipelines that it does not own. Federal and state
regulation of natural gas and oil production and transportation, tax and energy
policies, changes in supply and demand and general economic conditions all could
adversely affect the Company's ability to produce and market its oil and natural
gas. In addition, the Company may be liable for environmental damage caused by
previous owners of property purchased or leased by the Company. As a result,
substantial liabilities to third parties or governmental entities may be
incurred, the payment of which could reduce or eliminate the funds available for
exploration, development or acquisitions or result in losses to the Company. In
accordance with customary industry practices, the Company maintains insurance
against some, but not all, of such risks and losses. The Company carries
business interruption insurance in varying amounts based upon the estimated time
to cause the covered facilities to become operational. The Company may elect to
self-insure if management believes that the cost of insurance, although
available, is excessive relative to the risks
6
<PAGE>
presented. The occurrence of an event that is not covered, or not fully covered,
by insurance could have a material adverse effect on the Company's financial
condition and results of operations. In addition, pollution and environmental
risks generally are not fully insurable.
RISKS OF EXPLORATORY DRILLING. Exploratory drilling involves numerous
risks, including the risk that no commercially productive natural gas or oil
reservoirs will be encountered. The cost of drilling, completing and operating
wells is often uncertain, and drilling operations may be curtailed, delayed or
canceled as a result of a variety of factors, including unexpected drilling
conditions, pressure or irregularities in formations, equipment failures or
accidents, adverse weather conditions, compliance with governmental requirements
and shortages or delays in the availability of drilling rigs and the delivery of
equipment. The Company's future drilling activities may not be successful. There
can be no assurance that the Company's overall drilling success rate or its
drilling success rate for activity within a particular area will not decline.
Unsuccessful drilling activities could have a material adverse effect on the
Company's results of operations and financial condition. The Company may not
have any option or lease rights in potential drilling locations it identifies.
Although the Company has identified numerous potential drilling locations, there
can be no assurance that they will ever be drilled or that natural gas will be
produced from these or any other potential drilling locations.
DEPENDENCE UPON EXPANSION AND DEVELOPMENT OF THE RATON BASIN. The
Company's future success depends upon its ability to find, develop or acquire
additional oil and natural gas reserves in the Raton Basin that are
economically recoverable. All of the Company's proved reserves are in the
Raton Basin and due to development plans the Company's future growth is
highly dependent on increasing production and reserves in the Raton Basin.
The proved reserves of the Company will generally decline as reserves are
depleted, except to the extent that the Company conducts successful
exploration or development activities or acquires properties containing
proved reserves. At December 31, 1997, the Company had proved undeveloped
reserves of approximately 81 Bcfe, which constituted approximately 36% of the
Company's total proved reserves. The Company's current development plan
includes increasing its reserve base through continued drilling and
development of its existing properties in the Raton Basin. There can be no
assurance, however, that the Company's planned development projects in the
Raton Basin will result in significant additional reserves or that the
Company will have continuing success drilling productive wells at anticipated
finding and development costs.
WATER DISPOSAL. The Company believes that the water produced from the Raton
Basin coal seams will continue to be low in total dissolved solids, allowing the
Company, operating under permits issuable by the State of Colorado, to discharge
the water into well site pits and evaporation ponds. However, if non-potable
water is discovered, it may be necessary to install and operate evaporators or
to drill disposal wells to reinject the produced water back into the underground
rock formations adjacent to the coal seams or to lower sandstone horizons. In
the event the Company is unable to obtain permits from the State of Colorado in
the future, non-potable water is discovered or if applicable future laws or
regulations require water to be disposed of in an alternative manner, the costs
to dispose of produced water will increase, which increase could have a material
adverse effect on the Company's operations in this area.
PRIOR OPERATING LOSSES. The Company experienced losses in fiscal 1995 and
1996 and through December 31, 1997, had an accumulated deficit of $4,135,000.
The Company had net income of $675,000 for the nine month period ended December
31, 1996 and had net income of $5,064,000 for the year ended December 31, 1997.
Although the Company expects its results of operations to continue to improve as
additional Raton Basin wells are completed, there can be no assurance that this
will occur or that the Company will achieve, or be able to sustain, profitable
operations.
LIMITED PROTECTION FOR TECHNOLOGY; DEPENDENCE ON TECHNOLOGY OWNED BY
OTHERS. The Company employs operating practices that it believes to be of
significant value in developing coal bed methane resources. In most cases,
patent or other intellectual property protection is unavailable for such
technology. The Company's use of independent contractors in most aspects of its
drilling and completion operations makes the protection of such technology more
difficult. Moreover, the Company relies on certain technological know-how of the
independent contractors that it retains in connection with its oil and gas
operations. The Company has no long-term agreements with such contractors and
there is no assurance that the Company will continue to have access to such
know-how.
DEPENDENCE ON GATHERING AND TRANSPORTATION FACILITIES. Substantially all of
the Company's current production consists of natural gas. The marketability of
the Company's gas production depends in part upon the availability, proximity
and capacity of gas gathering systems, pipelines and processing facilities.
Federal and state regulation of gas and oil production and transportation,
general economic conditions, changes in supply and changes in demand all could
adversely affect the Company's ability to produce, gather and transport its
natural gas. If market factors were to change materially, the financial impact
on the Company could be substantial. The Company is a party to gas
transportation contracts that require the Company to transport minimum volumes.
If the Company ships smaller volumes, it may be liable for damages proportional
to the shortfall. The Company expects to meet its volume obligations with
respect to the Raton Basin transportation agreement. While the Company believes
that its production in the Raton Basin will be more than adequate to meet volume
requirements, unforeseen events, including production problems or substantial
decreases in the price for natural gas, could cause the Company to ship less
than the required volumes, resulting in losses on the transportation contracts.
REGULATION. The oil and gas industry is extensively regulated by federal,
state and local authorities. Legislation and regulations affecting the industry
are under constant review for amendment or expansion, raising the possibility of
changes that may affect, among other things, the pricing or marketing of oil and
gas production. Substantial penalties may be assessed for noncompliance with
various applicable statutes and regulations, and the overall regulatory burden
on the industry increases its cost of doing business and, in turn, decreases its
profitability. State and local authorities regulate various aspects of oil and
gas drilling and production activities, including the drilling of wells (through
permit and bonding requirements), the spacing of wells, the unitization or
pooling of oil and gas properties, environmental matters, safety standards, the
sharing of markets, production limitations, plugging and abandonment, and
restoration.
RISKS OF INTERNATIONAL OPERATIONS. Evergreen holds exploration licenses
onshore in the United Kingdom and in northern Chile, and an interest in a
consortium exploring offshore in the Falkland Islands. International operations
are subject to political, economic and other uncertainties, including, among
others, risk of war, revolution, border disputes, expropriation, re-negotiation
or modification of existing contracts, import, export and transportation
regulations and tariffs, taxation policies, including royalty and tax increases
and retroactive tax claims, exchange controls, limits on allowable levels of
production, currency fluctuations, labor disputes and other uncertainties
arising out of foreign government sovereignty over the Company's international
operations.
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS. The Company's operations are
subject to complex and constantly changing environmental laws and regulations
adopted by federal, state and local governmental authorities. The implementation
of new, or the modification of existing, laws or regulations could have a
material adverse effect on the Company. The discharge of oil, natural gas or
other pollutants into the air, soil or water may give rise to significant
liabilities on the part of the Company to the government and third parties and
may require the Company to incur substantial costs of remediation. No assurance
can be given that existing environmental laws or regulations, as currently
interpreted or reinterpreted in the future, or future laws or regulations will
not materially adversely affect the Company's results of operations and
financial condition or that material indemnity claims will not arise against the
Company with respect to properties acquired by or from the Company.
COMPETITION. Major oil companies, independent producers, institutional and
individual investors are actively seeking to acquire oil and gas properties
throughout the world, as well as the equipment, labor, and materials required to
operate such properties. Many of the Company's competitors have financial and
technological resources vastly exceeding those available to the Company. Many
oil and gas properties are sold in a competitive bidding process in which the
Company, if it is making an independent bid, may lack technological information
or expertise available to other bidders. There is no assurance that the Company
will be successful in acquiring and developing profitable properties in the face
of such competition.
DEPENDANCE ON KEY PERSONNEL. The Company's success has been and will
continue to be highly dependent on the continued services of its executive
officers, and a limited number of other senior management and technical
personnel. Loss of the services of one or more of these individuals could have a
material adverse effect on the Company's operations. The Company maintains "key
man" insurance on the lives of Mark S. Sexton and Dennis R. Carlton in the
amount of $1,000,000 each. The Company does not have employment agreements with
any of its executive officers.
RISKS OF HEDGING TRANSACTIONS. In order to manage its exposure to price
risks in the marketing of its oil and natural gas, the Company may enter into
oil and natural gas price hedging arrangements with respect to a portion of its
expected production. These arrangements may include futures contracts on the New
York Mercantile Exchange, fixed price delivery contracts and financial collars
and swaps. While intended to reduce the effects of the volatility of the price
of oil and natural gas, such transactions may limit potential gains by the
Company if oil and natural gas prices were to rise substantially over the price
established by the hedge. In addition, such transactions may expose the Company
to the risk of financial loss in certain circumstances, including instances in
which (i) production is less than expected, (ii) the counterparties to the
Company's future contracts fail to perform the contract, or (iii) a sudden,
unexpected event materially impacts oil or natural gas prices.
NO DIVIDENDS. The Company has never declared or paid any cash dividends to
the holders of Common Stock and has no present intention to pay cash dividends
to such holders in the foreseeable future.
CERTAIN ANTI-TAKEOVER MATTERS. The Company's Articles of Incorporation and
Bylaws contain provisions that may have the effect of delaying, deferring or
preventing a change in control of the Company. These provisions, among other
things, provide for noncumulative voting in the election of the Board of
Directors and impose certain procedural requirements on shareholders of the
Company who wish to make nominations for the election of directors or propose
other actions at shareholders' meetings. In addition, the Company's Articles of
Incorporation authorize the Board to issue up to 25,000,000 shares of preferred
stock without shareholder approval and to set the rights, preferences and other
designations, including voting rights, of those shares as the Board of Directors
may determine. These provisions, alone or in combination with each other and
with the Rights Plan described below, may discourage transactions involving
actual or potential changes of control of the Company, including transactions
that otherwise could involve payment of a premium over prevailing market prices
to holders of Common Stock.
On July 7, 1997 the Board of Directors adopted a Shareholder Rights
Agreement ("Rights Plan"), pursuant to which uncertificated stock purchase
rights were distributed to its common shareholders at a rate of one Right for
each share of Common Stock held of record as of July 22, 1997. The Rights Plan
is designed to enhance the Board's ability to prevent an acquirer from depriving
shareholders of the long-term value of their investment and to protect
shareholders against attempts to acquire the Company by means of unfair or
abusive takeover tactics. However, the existence of the Rights Plan may impede a
takeover of the Company not supported by the Board of Directors, including
7
<PAGE>
a takeover which may be desired by a majority of the Company's shareholders
or involving a premium over the prevailing stock price.
SOUTHERN UTE INDIAN TRIBE V. AMOCO PRODUCTION COMPANY LITIGATION. The
Company extracts coalbed methane from properties for which it owns or leases
oil and gas rights. On July 20, 1998 in SOUTHERN UTE INDIAN TRIBE V. AMOCO
PRODUCTION COMPANY ("SOUTHERN UTE V. AMOCO") an en banc panel of the Court of
Appeals for the Tenth Circuit upheld a previous circuit court ruling that
coalbed methane rights derive from coal rights rather than oil and gas rights
under the Coal Lands Acts of 1909 and 1910 (the "Coal Lands Acts"). Under
the Coal Lands Acts, the federal government granted title to certain lands to
private land holders but reserved coal rights for the federal government. The
rights transferred to private parties included oil and gas rights. Federal
coal rights were in some cases later transferred to third parties such as the
Southern Ute Indian Tribe. Under a 1981 opinion of the Solicitor for the
Department of the Interior, coalbed methane was excluded from the definition
of coal under the Coal Lands Acts and included under the definition of gas
encompassed by oil and gas rights. The Tenth Circuit has now held that
coalbed methane rights are actually part of the coal rights reserved for the
federal government under the Coal Lands Acts.
The Company has drilled or acquired 163 coalbed methane gas wells in
Las Animas County, 66 of which were drilled on 40 acre drill sites where the
(federal) Bureau of Land Management ("BLM") holds coal rights. The Company
either owns or leases the oil and gas rights to these lands. Although no
adverse claims concerning ownership of coalbed methane on the Company's lands
have been asserted, if the holding in SOUTHERN UTE V. AMOCO stands, the BLM
may claim to hold the coalbed methane rights to these lands rather than the
Company. Thus, the Company may have to negotiate to purchase or lease rights
to the coalbed methane from the BLM at some cost to the Company. The
additional cost of purchasing or leasing such rights could have a material
adverse impact on the Company's financial condition and results of operations.
The Company is unable to determine at this time what the effect of the
SOUTHERN UTE V. AMOCO holding on the Company might be. The Company is not a
party to SOUTHERN UTE V. AMOCO, nor are any of the Company's lands subject to
that litigation. Any holding in SOUTHERN UTE V. AMOCO will not automatically
change property rights to the Company's lands, and additional litigation may
be required as as a result of circumstances which may be unique to the
Company's lands as compared to the lands at issue in SOUTHERN UTE V. AMOCO.
Development of coalbed methane on Company lands has progressed with the full
knowledge (and approval) of the BLM. Much of the Company's lands lie within
federal units created for the development of coalbed methane on lands covered
by the Coal Lands Acts. These federal units were subject to and received the
approval of the BLM for coalbed methane development.
The Company believes that Amoco will appeal the SOUTHERN UTE V. AMOCO
ruling to the U.S. Supreme Court. If Amoco is ultimately successful, coalbed
methane rights will again be considered part of oil and gas rights and not
coal rights to land covered by the Coal Lands Acts, and the Company will not
have to negotiate to purchase or lease coalbed methane rights from the BLM.
There can be no assurance that Amoco would be successful in obtaining
CERTIORARI from the U.S. Supreme Court, or if the U.S. Supreme Court grants
CERTIORARI, whether Amoco would prevail. The Company does not intend to
change its drilling plans in response to the SOUTHERN UTE V. AMOCO holding.
YEAR 2000
The Company has conducted a review of its computer systems to identify
the systems that could be affected by the Year 2000 issue. The "Year 2000"
problem is the result of computer programs being written using two digits
rather than four to define the applicable year. Any of the Company's programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a major system failure
or miscalculations.
The Company believes that the Year 2000 problem will not pose material
operational problems for the Company and that it is adequately prepared for
the Year 2000. The Company's computer software provider has assured the
Company that all of the Company's material software is Year 2000 compliant
(i.e. will function properly in the year 2000 and beyond). The Company's
software provider provides written assurance that its products are Year 2000
compliant on its web site. To the Company's knowledge after investigation no
"imbedded technology" (such as microchips in an electronic control system) of
the Company poses a material Year 2000 problem.
Because the Company believes that it has no material internal Year 2000
problems, the Company has not and does not expect to expend a significant
amount of funds to address Year 2000 issues. It is Company policy to
continue to review its suppliers' Year 2000 compliance and require assurance
of Year 2000 compliance from new suppliers; however, such monitoring does not
involve a significant cost to the Company.
In addition to the foregoing, the Company has contacted its major
vendors and received either oral or written assurances from its major vendors
or viewed assurances contained on vendors' web sites that they have no
material Year 2000 problems. The Company believes that its vendors are
largely fungible; therefore, in the event a vendor's representations
regarding its Year 2000 compliance were untrue for any reason, the Company
believes that it could find adequate Year 2000 compliant vendors as
substitutes.
The Company is materially dependant on the Colorado Interstate Gas
Company ("CIG") for the delivery of the Company's gas. CIG has provided the
Company with oral assurances that a CIG internal task force has examined
CIG's Year 2000 compliance and that CIG has no material Year 2000 problem.
The Company expects to receive written assurance to this effect from CIG.
In the event that one or more of the Company's vendors or CIG were to
have a material Year 2000 problem, the Company believes that the foreseeable
consequence would be a temporary delay in revenue collection caused by an
interruption in computerized billing (and not an interruption in the actual
flow of the Company's coalbed methane) which would not have a substantial
long-term impact on the Company's ability to conduct operations.
8
<PAGE>
RECENT DEVELOPMENTS
RATON BASIN
On July 2, 1998, Evergreen completed the acquisition, effective July 1,
1998, of approximately 100% of the working interest in 27,590 acres in Amoco
Production Company's ("Amoco") Cottontail Pass Federal Unit, together with 28
existing well bores, current production of 3.7 million cubic feet ("MMcf") per
day and related gathering facilities. Evergreen estimates that 40 billion
cubic feet ("Bcf") will be added to the 225 Bcf of proved reserves the Company
reported at December 31, 1997. The Company estimates that there are
approximately 100 additional drilling locations in the unit.
The Cottontail Pass Unit is situated between Evergreen's Spanish peaks
and Sangre de Cristo Federal Units.
The acquisition of the Cottontail Pass Federal Unit from Amoco resolves
the preferential rights litigation between Evergreen and Amoco.
The purchase price was approximately $13,100,000 cash, funded by the
Company's line of credit with Hibernia National Bank as administrative agent.
Also on July 2, 1998, Evergreen formed a joint venture with Infinity,
Inc. to develop the 17,000 acre Lorencito Property in the Raton Basin with
Infinity's gas exploration company (CIS Oil and Gas). Evergreen will
initially have a 35% working interest in the properties which are located
just south of properties currently being developed by Evergreen. The Company
estimates that it will drill approximately 15 wells on the Lorencito property
over the next eighteen months.
On August 7, 1998, Evergreen formed a second joint venture with
Infinity to develop the 24,000 acre Long Canyon property. Evergreen will
initially have a 25% working interest in the properties.
Primero Gas Marketing Company will purchase Long Canyon and Lorencito
Property gas at the wellhead and will be responsible for all costs to
construct, own, and operate all gathering, dehydration, and compression
facilities.
FISCAL YEAR
Effective with the period ended December 31, 1996, the Company elected to
begin utilizing a December 31 fiscal year end. Therefore, the period ended
December 31, 1996 represents a nine-month short period as compared to the twelve
month fiscal years ended March 31, 1996, 1995, and 1994.
RESULTS OF OPERATIONS
The Company reported net income of $2,731,900 or $0.26 per common
share (basic) for the six months ended June 30, 1998, compared to net income
of $1,660,200 or $0.18 per common share (basic) for the same period in 1997. The
increase in net income during the six months ended June 30, 1998 as compared
to the prior year is attributable to higher Raton Basin production volumes
and improved natural gas prices.
The financial information with respect to the three months ended March
31, 1998 and 1997 is unaudited. In the opinion of management, such
information contains all adjustments, consisting only of normal recurring
accruals necessary for a fair presentation of the results for such period.
The results of operations for interim periods are not necessarily indicative
of the results of operations for the full fiscal year.
CHILE
On March 18, 1997 the Government of Chile awarded an oil and gas
exploration contract to Evergreen on two 5,000 square kilometer (1.2 million
acre) blocks in Northern Chile.
Evergreen has 75% working interest in the blocks and will serve as
Operator. Empresa Nacional del Petroleo (ENAP), the State-owned energy company,
holds the remaining 25% working interest. The Chilean government will initially
receive a 10% royalty on production up to 10,000 barrels per day.
Evergreen and ENAP will share the following work commitments
proportionately for the periods of time, stated as Exploration Periods for
each block as set forth in the table below:
<TABLE>
<CAPTION>
Period Term Work Commitment
------ ---- ---------------
<C> <C> <S>
1 1 Year Geologic mapping, aeromagnetic and gravity surveys
(completed)
2 2 Years 200 km seismic (committed)
3 2 Years 1 exploratory well
4-9 1 year each 1 exploratory well
</TABLE>
Under the exploration contract, Evergreen and ENAP will share
proportionately the work commitments for the project. Evergreen's estimated
financial commitment for years one through three is approximately $1.8 million.
The Company expects to fulfill its commitment through cash flow from operations
and available borrowings under its $50 million credit facility.
RATON BASIN
Since December 1991, Evergreen has acquired oil and gas leases covering
over 200,000 gross acres in the Raton Basin, Las Animas County in Southeastern
Colorado. This acreage position will support over 500 wells on 160 acre
spacing. Independent engineering estimates indicate that the wells have average
proved reserves of 1.8 Bcf of gas per well.
9
<PAGE>
Two exploratory wells have been drilled in the Northern portion of the
Spanish Peaks Unit, and two exploratory wells have been drilled in the central
portion of the Sangre de Cristo Unit. The exploratory wells will test
production levels, provide additional geologic control, and also will fulfill
Unit obligations.
Gas sales began in January 1995 and production has improved as new wells
have been drilled to a present level of approximately 37 million cubic feet
(MMcf) per day gross. Evergreen's net sales are approximately 32 MMcf per day
at present.
The Company enters into hedging contracts that require future physical
delivery to attempt to manage price risk with regard to a portion of its
natural gas production. As of September 1, 1998, the Company had entered
into contracts to sell approximately 33.5 MMcf per day (90% of its current
sales) at $1.93 per Mcf for the period through October 1998. The Company
identifies minimum internal price targets and assuming other market
conditions are deemed favorable, the Company will enter into hedging
contracts to manage price risk.
Colorado Interstate Gas Company ("CIG") completed a new 115-mile, 16 inch
pipeline from Trinidad to Campo, Colorado. Capacity of this new pipeline will
initially be approximately 100 million cubic feet per day.
Evergreen has entered into a long-term firm transportation agreement with
CIG to transport its natural gas on the Campo lateral.
UNITED KINGDOM
Under a new onshore Licensing regime implemented by the UK Department of
Trade and Industry (DTI), Evergreen has converted its existing onshore
Exploration Licenses to new onshore Licenses, called Petroleum Exploration and
Development Licenses. These new Licenses will provide up to a 30 year term with
optional periodic relinquishment of portions of the licenses, subject to future
development plans. There are no royalties or burdens encumbering the Licenses.
Work commitments on the Licenses have been fulfilled through 1997 as a result of
Evergreen's prior UK activity.
The DTI has approved the Company's request to relinquish 259,461 presently
licensed acres, which were not considered highly prospective for coalbed methane
(CBM) development. The Company retains 371,018 acres, which were high-graded
for CBM and conventional hydrocarbon potential. Evergreen expects that it will
be required to spend $1.2 million over the next three years to maintain these
licenses. Work commitments for acreage retained will include remote sensing
studies, additional seismic studies and the drilling of three wells, one per
year beginning in 1999.
Evergreen is continuing to hold discussions with various funding sources,
including potential industry partners, for the purpose of resuming evaluation
and development of the Licenses.
FALKLAND ISLANDS
Evergreen has a net 2% working interest in a consortium which has recently been
awarded an exploration license for Tranche A in the First Offshore Falkland
Islands Licensing Round. Amerada Hess (Falklands Islands) Limited is Operator
of the consortium, which includes Fina Exploration Atlantic BV, Murphy South
Atlantic Oil Company, Teikoku Oil Co. Ltd., and Argos Evergreen Limited.
10
<PAGE>
Argos Evergreen Limited, a 5% working interest holder in the consortium, is a
joint venture company formed in the Falkland Islands and owned 60% by Argos
Resources Limited and 40% by Evergreen Resources (UK) Limited, the UK subsidiary
of Evergreen Resources Inc.
Argos Resources Limited is a subsidiary of Argos Limited, a Falkland Islands
company which owns and operates a fleet of deep sea fishing vessels in the
Falkland Islands area.
The license covers 626 square miles and lies approximately 150 miles to the
north of the islands in water depths ranging up to 1,575 feet. This area
incorporates part of a major unexplored sedimentary basin which has not yet been
tested by drilling. It therefore represents a rare opportunity to be involved
during the early phase of exploration in an unexplored basin. The Company
expects to spend approximately $1.4 million on this project over the next three
years.
The first well in the Falklands was spudded on April 27, 1998. The well did
not show hydrocarbons in commercial quantities and will be plugged and
abandoned.
SHAREHOLDER RIGHTS PLAN
On July 7, 1997 the Board of Directors adopted a Shareholder Rights Plan
("Rights Plan"), pursuant to which stock purchase rights will be distributed as
a dividend to its common stockholders at a rate of one Right for each share of
common stock held of record as of July 22, 1997.
The Rights Plan is designed to enhance the Board's ability to prevent an
acquiror from depriving stockholders of the long-term value of their investment
and to protect shareholders against attempts to acquire the Company by means of
unfair or abusive takeover tactics that have been prevalent in many unsolicited
takeover attempts.
This action is not taken in response to any pending or threatened takeover
effort to acquire the Company.
Under the Rights Plan, the rights will become exercisable only if a person
or a group (except for existing 20% shareholders) acquires or commences a tender
offer for 20% or more of the Company's common stock. Until they become
exercisable, the Rights attach to and trade with the Company's common stock.
The Rights will expire July 22, 2007. The Rights may be redeemed by the
continuing members of the Board at $.001 per Right prior to the day after a
person or group has accumulated 20% or more of the Company's common stock.
In the event that a person or group acquires 20% of the Company's common
stock, the rights would then be modified to represent the right to receive for
the exercise price, Company common stock having a value worth twice the exercise
price.
In the event that the Company is involved in a merger or other business
combination at any time after a person or group has acquired 20% or more of the
Company's common stock, the Rights will be modified so as to entitle a holder to
buy a number of shares of common stock of the acquiring entity having a market
value of twice the exercise price of each Right.
All Rights held or acquired by a person or group holding 20% or more of the
Company's shares are void. The Rights are not triggered by continued stock
ownership of the Company's existing 20% shareholders, unless these Shareholders
increase their holdings in the Company above 30%.
11
<PAGE>
AMOCO LITIGATION
On July 1, 1998, the Company entered into an agreement with Amoco to
acquire all of its oil and gas interests in the Raton Basin. This agreement
resolved all current preferential rights litigation between Evergreen and
Amoco. See "Recent Developments -- Raton Basin.
CONVERSION OF PREFERRED STOCK
Effective November 1, 1997, all outstanding shares of the Company's 8%
Convertible Preferred Stock were converted into 905,660 shares of Common Stock.
12
<PAGE>
SELLING SHAREHOLDERS
All of the securities offered hereby are to be offered for the account of
the security holders set forth below ("Selling Shareholders").
Shares Registered
Pursuant To
Name This Offering (1)
---- -----------------
Paulson Investment Co., Inc. 151,375
Chester L.F. Paulson 15,750
M. Lorraine Maxwell 7,875
Robert O. McDonald 8,155
Robert G. Rader 5,081
Gregory M. Jones 1,967
John E. Adams 1,000
Norman Frager 2,155
Robert M. Jones 1,363
Edward F. Marburger 1,363
E. Robin Landry 1,189
T. Ray Phillips III 967
Donald A. Pape 967
Ernest McCollum 793
-------
TOTAL 200,000
- --------------
(1) Shares of restricted common stock underlying warrants issued by
the Company to Underwriters as compensation.
PLAN OF DISTRIBUTION
The Selling Shareholders are not restricted as to the prices at which they
may sell their shares and sales of such shares at less than the market price may
depress the market price of the Company's Common Stock. Further, the Selling
Shareholders are not restricted as to the number of shares which may be sold at
any one time, and it is possible that a significant number of shares could be
sold at the same time which may also have a depressive effect on the market
price of the Company's Common Stock. However, it is anticipated that the sale
of the Common Stock being offered hereby will be made through customary
brokerage channels either through broker-dealers acting as agents or brokers for
the seller, or through broker-dealers acting as principals, who may then resell
the shares in the over-the-counter market, or a private sale in the over-the-
counter market or otherwise, at negotiated prices related to prevailing market
prices and customary brokerage commissions at the time of the sales, or by a
combination of such methods. Thus, the period for sale of such shares by the
Selling Shareholders may occur over an extended period of time.
There are no contractual arrangements between or among any of the Selling
Shareholders and the Company with regard to the sale of the shares and no
professional underwriter in its capacity as such will be acting for the Selling
Shareholders.
13
<PAGE>
EXPERTS
The financial statements are incorporated by reference in this Prospectus
have been audited by BDO Seidman, LLP, independent certified public
accountants, to the extent and for the periods set forth in their report
incorporated herein by reference, and are incorporated herein in reliance
upon such report given upon the authority of said firm as experts in auditing
and accounting.
LEGAL OPINIONS
The legality of the Shares offered hereby has been passed upon for the Company
by John B. Wills, Attorney At Law.
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering, all of which are to be born by the
Registrant, are as follows:
SEC Filing Fee $ 1,090.91
Printing Expenses 500.00*
Accounting Fees and Expenses 1,000.00*
Legal Fees and Expenses 6,000.00*
Miscellaneous 1,409.09*
----------
Total $10,000.00*
----------
----------
- -----------------
*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only charter provision, bylaw, contract, arrangement or statute under
which any Director or Officer of the Registrant is insured or indemnified in any
manner against any liability which he may incur in his capacity as such, is as
follows:
(a) Section 7-109-102, 103, 104, 105, 106, 107, 108, 109 and 110 of
the Colorado Business Corporation Act provides that each corporation shall
have the following powers:
"7-109-102. Authority to Indemnify directors
(1) Except as provided in subsection (4) of this section, a
corporation may indemnify a person made a party to a
proceeding because the person is or was a director against
liability incurred in the proceeding if:
(a) The person conducted himself or herself in good faith;
and
(b) The person reasonably believed:
(I) In the case of conduct in an official capacity
with the corporation, that his or her conduct was
in the corporation's best interests; and
(II) In all other cases, that his or her conduct was at
least not opposed to the corporation's best
interests; and
(c) In the case of any criminal proceeding, the person had
no reasonable cause to believe his or her conduct was
unlawful.
(2) A director's conduct with respect to an employee benefit
plan for a purpose the director reasonably believed to be in
the interests of the participants in or beneficiaries of the
plan is conduct that satisfies the requirement of
subparagraph (II) of paragraph (b) of subsection (1) of this
section. A director's conduct with respect to an employee
benefit plan for a purpose that the director did not
reasonably believe to be in the interests of the
participants in or beneficiaries of the plan shall be deemed
not to satisfy the requirements of paragraph (a) of
subsection (1) of this section.
(3) The termination of a proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or
its equivalent is not, of itself, determinative that the
director did not meet the standard of conduct described in
this section.
<PAGE>
(4) A corporation may not indemnify a director under this
section:
(a) In connection with a proceeding by or in the right of
the corporation in which the director was adjudged
liable to the corporation; or
(b) In connection with any other proceeding charging that
the director derived an improper personal benefit,
whether or not involving action in an official
capacity, in which proceeding the director was adjudged
liable on the basis that he or she derived an improper
personal benefit.
(5) Indemnification permitted under this section in connection
with a proceeding by or in the right of the corporation is
limited to reasonable expenses incurred in connection with
the proceeding.
"7-109-103. Mandatory indemnification of directors
Unless limited by its articles of incorporation, a
corporation shall indemnify a person who was wholly successful,
on the merits or otherwise, in the defense of any proceeding to
which the person was a party because the person is or was a
director, against reasonable expenses incurred by him or her in
connection with the proceeding.
"7-109-104. Advance of expenses to directors
(1) A corporation may pay for or reimburse the reasonable
expenses incurred by a director who is a party to a
proceeding in advance of final disposition of the
proceeding if:
(a) The director furnishes to the corporation a written
affirmation of the director's good faith belief that
he or she has met the standard of conduct described in
section 7-109-102;
(b) The director furnishes to the corporation a written
undertaking, executed personally or on the director's
behalf, to repay the advance if it is ultimately
determined that he or she did not meet the standard of
conduct; and
(c) A determination is made that the facts then known to
those making the determination would not preclude
indemnification under this article.
(2) The undertaking required by paragraph (b) of subsection (1)
of this section shall be an unlimited general obligation of
the director but need not be secured and may be accepted
without reference to financial ability to make repayment.
(3) Determinations and authorizations of payments under this
section shall be made in the manner specified in section
7-109-106.
"7-109-105. Court-ordered indemnification of directors
(1) Unless otherwise provided in the articles of incorporation,
a director who is or was a party to a proceeding may apply
for indemnification to the court conducting the proceeding
or to another court of competent jurisdiction. On receipt
of an application, the court, after giving any notice the
court considers necessary, may order indemnification in the
following manner:
(a) If it determines that the director is entitled to
mandatory indemnification under section 7-109-103, the
court shall order indemnification, in which case the
court shall also order the corporation to pay the
director's reasonable expenses incurred to obtain
court-ordered indemnification.
(b) If it determines that the director is fairly and
reasonably entitled to indemnification in view of all
the relevant circumstances, whether or not the director
met the standard of conduct set forth in section
7-109-102(1) or was adjudged liable in the
circumstances described in section 7-109-102(4), the
court may order such indemnification as the court deems
proper; except that the indemnification with respect to
any proceeding in which liability shall have been
adjudged in the circumstances described in section
7-109-102(4) is limited to reasonable expenses incurred
in connection with the proceeding and reasonable
expenses incurred to obtain court-ordered
indemnification.
<PAGE>
"7-109-106. Determination and authorization of indemnification of
directors
(1) A corporation may not indemnify a director under section
7-109-102 unless authorized in the specific case after a
determination has been made that indemnification of the
director is permissible in the circumstances because the
director has met the standard of conduct set forth in
section 7-109-102. A corporation shall not advance expenses
to a director under section 7-109-104 unless authorized in
the specific case after the written affirmation and
undertaking required by section 7-109-104(1)(a) and (1)(b)
are received and the determination required by section
7-109-104(1)(c) has been made.
(2) The determinations required by subsection (1) of this
section shall be made:
(a) By the board of directors by a majority vote of those
present at a meeting at which a quorum is present, and
only those directors not parties to the proceeding
shall be counted in satisfying the quorum; or
(b) If a quorum cannot be obtained, by a majority vote of a
committee of the board of directors designated by the
board of directors, which committee shall consist of
two or more directors not parties to the proceeding;
except that directors who are parties to the proceeding
may participate in the designation of directors for the
committee.
(3) If a quorum cannot be obtained as contemplated in paragraph
(a) of subsection (2) of this section, and a committee
cannot be established under paragraph (b) of subsection (2)
of this section, or, even if a quorum is obtained or a
committee is designated, if a majority of the directors
constituting such quorum or such committee so directs, the
determination required to be made by subsection (1) of this
section shall be made:
(a) By independent legal counsel selected by a vote of the
board of directors or the committee in the manner
specified in paragraph (a) or (b) of subsection (2) of
this section or, if a quorum of the full board cannot
be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote
of the full board of directors; or
(b) By the shareholders.
(4) Authorization of indemnification and advance of expenses
shall be made in the same manner as the determination that
indemnification or advance of expenses is permissible;
except that, if the determination that indemnification or
advance of expenses is permissible is made by independent
legal counsel, authorization of indemnification and advance
of expenses shall be made by the body that selected such
counsel.
"7-109-107. Indemnification of officers, employees, fiduciaries, and
agents
(1) Unless otherwise provided in the articles of incorporation:
(a) An officer is entitled to mandatory indemnification
under section 7-109-103, and is entitled to apply for
court-ordered indemnification under section 7-109-105,
in each case to the same extent as a director;
(b) A corporation may indemnify and advance expenses to an
officer, employee, fiduciary, or agent of the
corporation to the same extent as to a director; and
(c) A corporation may also indemnify and advance expenses
to an officer, employee, fiduciary, or agent who is not
a director to a greater extent, if not inconsistent
with public policy, and if provided for by its bylaws,
general or specific action of its board of directors or
shareholders, or contract.
"7-109-108. Insurance
A corporation may purchase and maintain insurance on behalf of a
person who is or was a director, officer, employee, fiduciary, or
agent of the corporation, or who, while a director, officer,
employee, fiduciary, or agent of the corporation, is or was
serving at the request of the corporation as a director, officer,
partner, trustee, employee, fiduciary, or agent of another
domestic or foreign corporation or other person or of an employee
benefit plan, against liability asserted against or
<PAGE>
incurred by the person in that capacity or arising from his or
her status as a director, officer, employee, fiduciary, or
agent, whether or not the corporation would have power to
indemnify the person against the same liability under section
7-109-102, 7-109-103, or 7-109-107. Any such insurance may be
procured from any insurance company designated by the board of
directors, whether such insurance company is formed under the
laws of this state or any other jurisdiction of the United
States or elsewhere, including any insurance company in which
the corporation has an equity or any other interest through
stock ownership or otherwise.
"7-109-109. Limitation of indemnification of directors
(1) A provision treating a corporation's indemnification of, or
advance of expenses to, directors that is contained in
its articles of incorporation or bylaws, in a resolution
of its shareholders or board of directors, or in a
contract, except an insurance policy, or otherwise, is
valid only to the extent the provision is not
inconsistent with sections 7-109-101 to 7-109-108. If
the articles of incorporation limit indemnification or
advance of expenses, indemnification and advance of
expenses are valid only to the extent not inconsistent
with the articles of incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's
power to pay or reimburse expenses incurred by a director
in connection with an appearance as a witness in a
proceeding at a time when he or she has not been made a
named defendant or respondent in the proceeding.
"7-109-110. Notice to shareholders of indemnification of director
If a corporation indemnifies or advances expenses to a director
under this article in connection with a proceeding by or in the
right of the corporation, the corporation shall give written
notice of the indemnification or advance to the shareholders
with or before the notice of the next shareholders' meeting.
If the next shareholder action is taken without a meeting at
the instigation of the board of directors, such notice shall
be given to the shareholders at or before the time the first
shareholders signs a writing consenting to such action.
(b) Articles VII and XIII of Registrant's Articles of Incorporation
provide as follows:
ARTICLE VII
INDEMNIFICATION OF DIRECTORS AND OTHERS
1. The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the right
of the corporation), by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines, and amounts
paid in settlement actually and reasonably incurred by him in connection
with such action, suit, or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the corporation and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduce was unlawful. The
termination of any action, suit, or proceeding by judgment, order,
settlement, or conviction or upon a plea of NOLO CONTENDERE or its
equivalent shall not of itself create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in the
best interests of the corporation and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was
unlawful.
2. The corporation shall indemnify any person who was or is a party
or is threatened to be
<PAGE>
made a party to any threatened, pending, or completed action or suit by
or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee, or
agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation; but no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of his duty
to the corporation unless and only to the extent that the court in which
such action or suit was brought determines upon application that,
despite the adjudication of liability, but in view of all circumstances
of the case, such person is fairly and reasonably entitled to
indemnification for such expenses which such court deems proper.
3. To the extent that a director, officer, employee, or agent of the
corporation has been successful on the merits or otherwise in defense of
any action, suit, or proceeding referred to in this article or in defense
of any claim, issue, or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
4. Any indemnification under paragraph 1 or 2 of this article
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in said
paragraphs 1 or 2 of this article. Such determination shall be made by the
board of directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or, if such a
quorum is not obtainable or even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
by the shareholders.
5. Expenses (including attorneys' fees) incurred in defending a
civil or criminal action, suit, or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit, or
proceeding as authorized in paragraph 4 of this article upon receipt of an
undertaking by or on behalf of the director, officer, employee, or agent to
repay such amount unless it shall ultimately as authorized in this article.
6. The indemnification provided by this article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under the Articles of Incorporation, any bylaw, agreement, vote of
shareholders or disinterested directors, or otherwise, and any procedure
provided for by any of the foregoing, both as to action in his official
capacity and as to action in another capacity while holding such office,
and shall continue as to a person who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of heirs, executors, and
administrators of such a person.
7. The corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee, or agent of the
corporation or who is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise against any liability asserted
against him and incurred by him in any such capacity or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provision of this article.
8. A unanimous vote of each class of shares entitled to vote shall
be required to amend this article.
<PAGE>
ARTICLE XI
LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS
TO CORPORATIONS AND SHAREHOLDERS
No director shall be personally liable to the Corporation or to its
shareholders for monetary damages for breach of fiduciary duty as a
director occurring on or after the date on which this Article XI
becomes effective; provided, however, that this Article XI shall not
eliminate or limit the liability of a director to the Corporation or to its
shareholders for monetary damages for any breach of the director's duty
of loyalty to the corporation or to its shareholders, acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, acts specified in Section 7-108-403 of the Colorado
Revised Statutes (or any successor provision thereof), or any
transaction from which the director or indirectly derived an improper
personal benefit.
No director or officer shall be personally liable for any injury to
person or property arising out of a tort committed by an employee of the
Corporation unless such director or officer was personally involved in
the situation giving rise to the litigation or unless such director or
officer committed a criminal offense in connection with such situation.
The protection afforded in this Section 11.2 shall not restrict other
common-law protections and rights that a director or officer may have.
This Section 11.2 shall not restrict the Corporation's right to
eliminate or limit tha personal liability of a director to the
Corporation or to its shareholders for monetary damages for breach of
fiduciary duty as a director as provided in Section 11.1.
ITEM 16. EXHIBITS.
The following Exhibits are filed as part of this Registration
Statement pursuant to Item 601 of Regulation S-K:
Exhibit No. Title
----------- -----
3.1 Articles of Incorporation: Incorporated by reference to Exhibit
3.1 of the Company's Registration Statement on Form S-1,
Commission File No. 33-273035.
3.2 Amendment to Articles of Incorporation: Incorporated by
reference to Exhibit I to the Company's Current Report on
Form 8-K dated December 9, 1994.
3.3 Amendment to Articles of Incorporation: Incorporated by
reference to Exhibit 3.1 to the Company's Current Report on
Form 8-K dated June 1, 1998.
3.4 Bylaws: Incorporated by reference to Exhibit 3.2 to the
Company's Current Report on Form 8-K dated June 1, 1998.
4.1 See Exhibits 3.1 through 3.4.
4.2 Shareholders' Rights Agreement: Incorporated by reference to
Exhibit 2 of the Company's Current Report on Form 8-K dated
July 7, 1997.
* 5 Opinion of John B. Wills, Attorney at Law, regarding the legality
of the securities being registered dated October 10, 1997.
* 24.1 Consent of John B. Wills, Attorney at Law, dated October 10,
1997.
24.2 Consent of BDO Seidman, LLP
-----------------------------
* Previously filed
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant of Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Amendment
No. 3 to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Denver, State of
Colorado on September 14, 1998.
EVERGREEN RESOURCES, INC.
Date: September 14, 1998 By: /s/ Mark S. Sexton
--------------------------------------
Mark S. Sexton, President and
Chief Executive Officer
Date: September 14, 1998 By: /s/ Kevin R. Collins
--------------------------------------
Kevin R. Collins, Vice President,
Treasurer and Chief Financial Officer,
Principal Accounting Officer
SIGNATURES
Date: September 14, 1998 By: /s/ Alain Blanchard
--------------------------------------
Alain Blanchard, Director
Date: September 14, 1998 By: /s/ Dennis R. Carlton
--------------------------------------
Dennis R. Carlton, Director
Date: September 14, 1998 By: /s/ Larry D. Estridge
--------------------------------------
Larry D. Estridge, Director
Date: September 14, 1998 By: /s/ John J. Ryan III
--------------------------------------
John J. Ryan III, Director
Date: September 14, 1998 By: /s/ Mark S. Sexton
--------------------------------------
Mark S. Sexton, Director
Date: September 14, 1998 By: /s/ Scott D. Sheffield
--------------------------------------
Scott D. Sheffield, Director
<PAGE>
EXHIBIT 24.2
CONSENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Evergreen Resources, Inc.
Denver, Colorado
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated
February 10, 1998 relating to the consolidated financial statements of
Evergreen Resources, Inc. and subsidiaries appearing in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Denver, Colorado
September 10, 1998
