<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 23, 1996
---------------------------
SOUTHERN MINERAL CORPORATION
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(Exact name of registrant as specified in its charter)
Nevada
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(State or other jurisdiction of incorporation)
0-8043 36-2068676
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(Commission File Number) (IRS Employer Identification No.)
500 Dallas, Suite 2800, Houston, Texas 77002-4708
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 658-9444
---------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS
On December 23, 1996, Southern Mineral Corporation, a Nevada
corporation (the "Company"), consummated a sale of 2,500,000 shares of its
common stock, par value $.01 per share ("Common Stock"), at a price of $4.50
per share or an aggregate $11,250,000. The sale was made in a private
placement to institutional and accredited investors for which Morgan Keegan &
Company, Inc. ("MKC") was the placement agent. Net proceeds to the Company
were $10,687,500 after payment to the placement agent of a 5% fee of $562,500.
The Company used the net proceeds to repay outstanding bank debt, and will use
the existing credit facility to fund approximately $6,000,000 of planned
exploration and development activities, pay approximately $100,000 in
third-party offering expenses, and for working capital and general corporate
purposes. As part of MKC's compensation for acting as placement agent, the
Company issued to MKC a warrant exercisable for 120,000 shares of Common Stock
at $4.50 per share until December 23, 2001, subject to certain anti-dilution
adjustments. The Company has agreed to file a shelf registration statement to
cover the resale of the shares of Common Stock sold in the private placement
and underlying MKC's warrant. The Company has agreed to indemnify the selling
stockholders including MKC, and also to indemnify MKC in its capacity as
placement agent, against certain liabilities, including liabilities under the
federal securities laws, and to contribute to payments that they may be
required to make in respect thereof.
This summary is qualified by reference to the placement agent
agreement between the Company and MKC, Stock Purchase Agreement between the
Company and the purchasers in the offering, and the Warrant issued to MKC,
copies of which are filed herewith as exhibits.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
Inapplicable.
(b) Pro Forma Financial Information.
Inapplicable.
(c) Exhibits.
2.1 Agreement between Southern Mineral Corporation and
Morgan Keegan & Company, Inc., dated November 4, 1996
and executed November 6, 1996 (filed herewith).
2.2 Form of Stock Purchase Agreement, dated December 23,
1996, entered into by Southern Mineral Corporation
and the Purchasers identified therein (filed
herewith).
2.3 Form of Warrant, dated December 23, 1996, issued by
Southern Mineral Corporation to Morgan Keegan &
Company, Inc. for up to 120,000 shares of Common
Stock (filed herewith).
99 Press Release of Southern Mineral Corporation dated
December 23, 1996 concerning private placement of
Common Stock on same date (filed herewith).
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<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
December 30, 1996 SOUTHERN MINERAL CORPORATION
By: /s/ James H. Price
----------------------------------
James H. Price,
Vice President--Finance
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<PAGE> 4
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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<S> <C>
2.1 Agreement between Southern Mineral Corporation and Morgan
Keegan & Company, Inc., dated November 4, 1996 and
executed November 6, 1996 (filed herewith).
2.2 Form of Stock Purchase Agreement, dated December 23,
1996, entered into by Southern Mineral Corporation and
the Purchasers identified therein (filed herewith).
2.3 Form of Warrant, dated December 23, 1996, issued by
Southern Mineral Corporation to Morgan Keegan & Company,
Inc. for up to 120,000 shares of Common Stock (filed
herewith).
99 Press Release of Southern Mineral Corporation dated
December 23, 1996 concerning private placement of Common
Stock on same date (filed herewith).
</TABLE>
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<PAGE> 1
EXHIBIT 2.1
[LETTERHEAD OF MORGAN KEEGAN]
November 4, 1996
Mr. Steven H. Mikel
President and CEO
Southern Mineral Corporation
500 Dallas, Suite 2800
Houston, TX 77002
Dear Mr. Mikel:
This letter outlines our understanding of the terms upon which Morgan Keegan &
Company, Inc. ("Morgan Keegan") is being engaged by Southern Mineral
Corporation (the "Company") to provide investment banking advice and services
and to serve as the exclusive private placement agent in connection with a
potential private equity placement. The private equity placement may be
referred to herein as the "Offering."
Based on our discussions, we have agreed as follows:
1. Subject to Morgan Keegan's satisfactory completion of its due
diligence investigations and the approval of Morgan Keegan's Corporate
Commitment Committee, Morgan Keegan is being engaged as your sole and exclusive
financial advisor to analyze the Company and its prospects with a view to
assisting the Company in developing a plan to carry out its Offering. In
particular, together with the Company's legal counsel, accountants and tax
advisors, Morgan Keegan will assist you in structuring, planning and
negotiating the financial aspects of the Offering.
2. In connection with the Offering, the Company, with Morgan Keegan's
assistance, will prepare a Confidential Offering Memorandum (the "Memorandum")
which will contain (a) a description of the Company and its business, assets,
prospects and management; (b) the terms and conditions of the Offering; and (c)
audited financial statements. The Company represents that the Memorandum will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
<PAGE> 2
Southern Mineral Corporation
November 4, 1996
Page 2
3. In connection with the Offering, Morgan Keegan agrees to use its best
efforts to complete the private placement of equity securities contemplated
herein. The terms of the Offering shall be subject to the mutual agreement of
the Company and each investor in the Offering. It is anticipated that the
security offered will be common stock as described on the attached Term Sheet.
Morgan Keegan will contact potential investors, assist in the negotiation and
the structuring of the investment in the Company, and provide related services
that may facilitate the successful completion of the Offering. Morgan Keegan
will sell the securities only to accredited investors as defined in Rule 501 of
the Securities Act of 1933, as amended (the "Act"), and otherwise conduct all
sales and solicitation efforts in a manner consistent with your intent that the
Offering be an exempt transaction pursuant to Regulation D and Section 4(2) of
the Act. The Company shall have the right to reject any subscription in its
reasonable discretion.
4. The Offering will be sold pursuant to a purchase agreement which shall
(a) contain customary representations, warranties and covenants on behalf of
the Company, (b) provide for the delivery by the Company's counsel of customary
opinions, and (c) contain such other terms and conditions as shall be agreed to
by the Company and the investors.
In order to coordinate our efforts during the term of our engagement hereunder,
the Company will not initiate any discussions relating to the sale of the
securities without first notifying Morgan Keegan. In the event that the
Company, its directors, management or controlling shareholders receive any
inquiry or are otherwise aware of the interest of any third party concerning
the sale of securities during the term of the engagement, they will promptly
inform Morgan Keegan of the prospective purchaser and its interest. Morgan
Keegan agrees to keep the Company informed on a timely basis of the status of
negotiations with prospective purchasers.
Morgan Keegan shall promptly notify the Company of the states in which it
intends to market the Offering. You shall advise Morgan Keegan of those states
in which the securities have been qualified or exempted under the appropriate
securities laws. The Company and Morgan Keegan agree not to solicit any
offerees or to take any action which might jeopardize the availability of the
exemption under the Act or in any state.
5. In consideration of our services as your financial advisor and
placement agent as set forth above, the Company agrees to pay to Morgan Keegan
a contingent placement fee (the "Contingent Placement Fee") to be paid to
Morgan Keegan in the form of cash and warrants upon the closing of the offering
as follows:
<PAGE> 3
Southern Mineral Corporation
November 4, 1996
Page 3
(a) A Cash Fee of five percent (5%) of the gross proceeds raised
on behalf of the Company;
(b) Additionally, the Company shall issue to Morgan Keegan 100,000
warrants to purchase, at an exercise price equal to the greater of (i)
the per share price for this offering, or (ii) $4.50 per share. The
warrants shall have a five year term. Morgan Keegan shall have the
same rights as the purchaser of the shares in the Offering.
Payment of the Contingent Placement Fee shall be conditioned on the closing of
the Offering. If more than one closing is required to complete the Offering,
only that portion of the Contingent Placement Fee applicable to each closing
shall be payable at such closing.
The Company shall reimburse the investors for the reasonable fees of one legal
counsel for all of the investors. In addition, whether or not the Offering is
completed, the Company agrees to reimburse Morgan Keegan monthly for its
reasonable out-of-pocket expenses including fees and expenses of counsel
incurred in connection with the performance of Morgan Keegan's duties
hereunder.
6. The Company represents and warrants that no person or organization
other than Morgan Keegan is, as a result of any action by the Company, entitled
to compensation for services as a finder, broker, placement agent or investment
banker in connection with the transaction(s) contemplated hereby.
7. In consideration of our services as the Company's financial advisor
under this letter agreement, the Company agrees to indemnify and hold harmless
Morgan Keegan and each of its directors, officers, agents, employees and
controlling persons (within the meaning of the Securities Act of 1933, as
amended) to the extent and as provided in Addendum A attached hereto and
incorporated herein by reference. The provisions of this Section 7 and
Addendum A incorporated herein by reference shall survive the termination of
Morgan Keegan's engagement under this letter agreement and shall be binding
upon any successors or assigns of the Company.
8. In the event of consummation of any transaction, Morgan Keegan shall
have the right to disclose its participation in such transaction, including,
without limitation, the placement of "tombstone" advertisements in financial
and other newspapers and journals.
9. The initial term of this engagement shall be six (6) months and it
shall automatically renew on a month-to- month basis until terminated in
writing by either party. However,
<PAGE> 4
Southern Mineral Corporation
November 4, 1996
Page 4
upon completion of the Offering, or upon mutual written consent of both
parties, the engagement shall terminate immediately. In any such event the
Company shall be responsible for the reimbursement of expenses as set forth in
Paragraph 5 above, incurred by Morgan Keegan through the date of termination.
Morgan Keegan shall be entitled to its fee as provided herein after such period
should an investment in the Company be consummated within six (6) months from
the date of termination by any investor with whom the Company or Morgan Keegan
has had contact during the term of this engagement. Morgan Keegan shall notify
the Company of any such investor by written instrument within 30 days of a
termination of this letter Agreement.
10. For a period of two years from closing of the Offering, the Company
shall provide Morgan Keegan in a timely manner, with all written information
and financial reports provided to the investors in this Offering.
If the foregoing terms and conditions accurately reflect our agreement, please
sign in the appropriate space below and return to me a fully-executed original
copy for our files.
We are pleased to be working with Southern Mineral Corporation on this offering
and look forward to a successful outcome.
Sincerely,
MORGAN KEEGAN & COMPANY, INC.
By: /s/ Richard J. Hunter
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Title: Vice President
----------------------------------------
Accepted and agreed as of the 6th day of November, 1996.
SOUTHERN MINERAL CORPORATION
By: /s/ Steven H. Mikel
-------------------------------------------
Steven H. Mikel
Title: President and Chief Executive Officer
----------------------------------------
Date: November 6, 1996
-----------------------------------------
<PAGE> 5
ADDENDUM A
In connection with our engagement described in the foregoing letter dated
November 4, 1996 (the "Letter") to which this Addendum A is attached, the
Company (as defined in the Letter) agrees to indemnify and hold harmless Morgan
Keegan & Company, Inc. ("Morgan Keegan") and each of its directors, officers,
agents, employees, and controlling persons (within the meaning of the
Securities Act of 1933, as amended) against any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) related to or
arising out of the engagement of Morgan Keegan by the Company, and will
reimburse Morgan Keegan and each other person indemnified hereunder (each, an
"Indemnified Party") for all legal and other expenses in connection with
investigating or defending any such loss or threatened litigation in which an
Indemnified Party is a party; provided however, the Company will not be liable
in any such case for losses, claims, damages, liabilities or expenses that a
court of competent jurisdiction shall have found in a final judgment to have
arisen primarily from the gross negligence or willful misconduct of Morgan
Keegan or the party claiming a right to indemnification and any such party
receiving advances shall immediately remit such payment to the Company. In
case any proceeding shall be instituted involving any Indemnified Party, such
person shall promptly notify the Company and the Company, upon the request of
the Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and any others the Company
may designate in such proceeding and shall pay the fees and expenses of such
counsel related to such proceeding. In any such proceeding, any Indemnified
Party shall have the right to retain its own counsel at its own expense, except
that the Company shall pay as incurred the fees and expenses of counsel
retained by the Indemnified Party in the event that (i) the Company and the
Indemnified Party shall have mutually agreed to the retention of such counsel,
or (ii) the named parties or the parties in interest to any such proceeding
(including any impleaded parties) include both the Company and the Indemnified
Party and representation of both parties by the same counsel would be
inappropriate, in the reasonable opinion of counsel to the Company and counsel
to the Indemnified Party, due to actual or potential differing interests
between them provided, however, that in connection with any one action or
proceeding, the Company shall not be responsible for the fees and expenses of
more than one separate law firm for all indemnified parties.
The Company shall not be liable for any settlement of any proceeding effected
without its written consent, which shall not be unreasonably withheld or
delayed, but if settled with such consent or if there be a final judgment for
the plaintiff, the Company agrees to indemnify the Indemnified Party to the
extent set forth in this Addendum A. In addition, the Company will not,
without the prior written consent of Morgan Keegan, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be sought
<PAGE> 6
hereunder (whether or not Morgan Keegan or any Indemnified Party is an actual
or potential party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of Morgan
Keegan and each other Indemnified Party hereunder from all liability arising
out of such claim, action, suit or proceeding.
In the event a claim for indemnification under this Addendum A is determined to
be unenforceable by a final judgment of a court of competent jurisdiction, then
the Company shall contribute to the aggregate losses, claims, damages or
liabilities to which Morgan Keegan or its officers, directors, agents,
employees or controlling persons may be subject in such amount as is
appropriate to reflect the relative benefits received by each of the Company
and the party seeking contribution on the one hand, and the relative faults of
the Company and the party seeking contribution on the other, as well as any
other relevant equitable considerations.
This indemnification shall apply to the original engagement as set forth in the
Letter and any modification of the original engagement and the indemnification
provided herein shall survive termination of such engagement and shall be
binding upon any successors or assigns of the Company.
Acknowledged and Agreed:
SOUTHERN MINERAL CORPORATION
By: /s/ Steven H. Mikel
-------------------------------------------
Steven H. Mikel
Title: President and Chief Executive Officer
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Date: November 6, 1996
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<PAGE> 7
TERM SHEET
REGISTRATION RIGHTS OFFERING
<TABLE>
<S> <C>
ISSUER: Southern Mineral Corporation
SECURITIES OFFERED: 2,000,000 shares of common stock.
REGISTRATION: Following the closing of the transaction, the Company will be obligated to: (i) file a
shelf registration statement as soon as practicable but in any event not later than 5
days after the closing; (ii) use its best efforts to have such registration statement
declared effective as soon as practicable but in any event no later than 50 days after
closing; and (iii) use its best efforts to maintain such registration statement for a
continuous period of three years.
PLACEMENT AGENT: Morgan Keegan
PLACEMENT AGENT FEE: A 5% cash fee plus 100,000 warrants at an exercise price per share equal to the
greater of (i) the per share price of this offering, or (ii) $4.50 per share.
EXPENSES: The Company shall reimburse the investors for the reasonable cost of one legal counsel
for all of the investors. In addition, whether or not the Offering is completed, the
Company agrees to reimburse Morgan Keegan for its reasonable out-of-pocket expenses.
</TABLE>
<PAGE> 1
EXHIBIT 2.2
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Common Stock Purchase Agreement
by and among
SOUTHERN MINERAL CORPORATION
(the "Company")
and
The Purchasers Listed on Schedule 1
("Purchasers")
December 23, 1996
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I. AUTHORIZATION AND SALE OF COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Sale of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. CLOSING DATE; DELIVERY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.2 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3.1. Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3.2. Representations, Warranties and Covenants of the Purchasers . . . . . . . . . . . . . . . . . 7
ARTICLE IV. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.1 Closing Conditions of each Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.2 Conditions to Closing of Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.3 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.4 Registration Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.5 Indemnification and Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V. RESTRICTIONS ON TRANSFERABILITY OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.1 Restrictions on Transferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.2 Instruction Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.3 Transfer of Shares After Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.4 Purchaser Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VI. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.1 Waivers and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.2 Broker's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.4 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.7 Notices, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.8 Severability of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.11 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 6.12 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 6.13 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 6.14 Effectiveness of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 3
SOUTHERN MINERAL CORPORATION
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (the "Agreement") is made as of
December 23, 1996, by and among Southern Mineral Corporation, a Nevada
corporation (the "Company") with its principal office at 500 Dallas, Suite
2800, Houston, Texas 77002, and the persons listed on the Schedule of
Purchasers attached hereto as Schedule I (the "Purchasers").
ARTICLE I. AUTHORIZATION AND SALE OF COMMON STOCK
SECTION 1.1 AUTHORIZATION. The Company has authorized the
issuance and sale pursuant to this Agreement of 2,500,000 shares of its common
stock, par value $0.01 per share (the "Common Stock"). The Common Stock shall
have the rights as set forth in the Company's Amended and Restated Articles of
Incorporation, as amended.
SECTION 1.2 SALE OF COMMON STOCK. Subject to the terms and
conditions of this Agreement, the Company agrees to issue and sell to each
Purchaser and each Purchaser severally agrees to purchase from the Company, at
the Closing, the number of Shares of Common Stock ("Shares") set forth opposite
each Purchaser's name on Schedule I for $4.50 per Share.
ARTICLE II. CLOSING DATE; DELIVERY
SECTION 2.1 CLOSING DATE. The closing of the purchase and sale of
the Shares hereunder (the "Closing") shall be held at the offices of Porter &
Hedges, L.L.P., Houston, Texas, at 10:00 a.m. Houston Time, on December 23,
1996, or at such other time and place upon which the Company and the Purchasers
purchasing the majority of the Shares shall agree. The date of the Closing is
hereinafter referred to as the "Closing Date."
SECTION 2.2 DELIVERY. At the Closing, the Company will deliver to
each Purchaser a certificate or certificates, registered in the Purchaser's
name as shown on Schedule B-1, representing the number of shares of Common
Stock to be purchased by the Purchaser. Such delivery shall be against payment
of the purchase price therefor by wire transfer to the Company's bank account
in the amount set forth on Schedule I.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to the Purchasers as of the Closing Date as
follows:
(a) ORGANIZATION AND GOOD STANDING. The Company is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. The Company has full
corporate power and
<PAGE> 4
authority to own, use and lease its properties and to conduct its
business as such properties are owned, used or leased and as such
business is currently conducted. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction in which it owns or leases property or where the conduct
of its business would require such qualification, except where the
failure to be so qualified would not have a material adverse effect on
the condition, financial or otherwise, or on the earnings, business
affairs or business prospects of the Company and its Significant
Subsidiaries (as hereinafter defined) taken as a whole ("Material
Adverse Effect").
(b) CORPORATE POWER AND AUTHORITY; AUTHORIZATION. The
Company has full corporate power and authority to enter into this
Agreement and to perform its obligations hereunder, including the
issuance and sale of the Shares to the Purchasers. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized and approved
by the Board of Directors of Company, and no other corporate proceeding
on the part of the Company is necessary to authorize and approve this
Agreement and the transactions contemplated hereby. This Agreement has
been duly executed and delivered by, and constitutes a valid and
binding obligation of, the Company, enforceable against the Company in
accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally or by the principles
governing the availability of equitable remedies, and except that the
enforceability of indemnification provisions for the violation of
securities laws may be limited by public policy).
(c) CAPITAL STOCK. The authorized capital stock of the
Company consists of 20,000,000 shares of Common Stock, of which
6,588,519 shares are issued and outstanding as of November 29, 1996.
All of the outstanding shares of Common Stock are validly issued, fully
paid and nonassessable. There are not any outstanding agreements,
warrants, options, calls, preemptive or other rights, or other
commitments of any nature relating to any of the authorized but
unissued shares of capital stock or other shares held in the treasury
of the Company, other than as described in the SEC Documents (as
hereinafter defined) and the Memorandum (as hereinafter defined).
(d) ISSUANCE AND DELIVERY OF THE SHARES. The Shares, when
issued in compliance with the provisions of this Agreement, will be
validly issued, fully paid and nonassessable and will conform to the
description of the Common Stock set forth in the Memorandum. The
issuance and delivery of the Shares is not subject to preemptive or any
other similar rights of the stockholders of the Company or any liens or
encumbrances.
(e) SIGNIFICANT SUBSIDIARIES. Each Significant Subsidiary
of the Company, as defined in the rules and regulations of the
Securities and Exchange Commission ("SEC"), is listed in the SEC
Documents. Each such Significant Subsidiary has been legally
incorporated, duly organized and is validly existing as a corporation
in good standing under the laws of the jurisdiction of its
incorporation, and has full corporate power and authority to conduct
its business as now being conducted. Each Significant Subsidiary is
duly qualified and in good
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<PAGE> 5
standing under the laws of any jurisdiction in which such Subsidiary
does business or is otherwise required to be so qualified, except where
the failure to be so qualified would not have a Material Adverse
Effect. All of the outstanding shares of capital stock of each such
Significant Subsidiary have been duly authorized and validly issued,
and are fully paid and non-assessable, and, except as otherwise
disclosed in the SEC Documents, are owned directly or indirectly by the
Company, free and clear of any of the following (collectively
"Claims"): security interests, liens, pledges, interests arising in
connection with community property laws or other laws relating to the
rights of spouses, claims, charges, escrows, encumbrances, options,
rights of first refusal, mortgages, indentures, security agreements or
other agreements, arrangements, contracts, commitments, understandings,
obligations, whether or not relating in any way to credit or the
borrowing of money, voting agreements or proxies. There are not any
outstanding agreements, warrants, options, calls, preemptive or other
similar rights, or other commitments of any nature relating to any of
the authorized but unissued shares of capital stock or other shares
held in the treasury of any Significant Subsidiary, except as disclosed
in the SEC Documents.
(f) NO CONFLICTS. The execution, delivery and performance
by the Company of this Agreement and the consummation of the
transactions contemplated hereby will not violate any provision of law
or conflict with, or result in any breach of, or constitute a default
under, or result in the creation of a Claim on any of the properties or
assets of the Company pursuant to any corporate charter, bylaw or
regulation or any agreement, instrument, judgment or decree to which
the Company or any Significant Subsidiary is a party or by which the
Company or any Significant Subsidiary or their respective properties is
or may be bound or affected, or eliminate or impair any intangible
right, concession (including any tax concession), license or privilege
allowed to or enjoyed by the Company or any Significant Subsidiary. No
unobtained approval, authorization, consent, order or other action of,
or filing with, any person, firm or corporation, or any court,
administrative agency (including the National Association of Securities
Dealers, Inc.) or other governmental authority, domestic or foreign, is
required in connection with the execution and delivery by the Company
of this Agreement or the consummation by the Company of the
transactions contemplated hereby, including the issuance of the Shares
to the Purchasers except for post-Closing filings required to perfect
exemptions under federal and state securities laws.
(g) PRIVATE PLACEMENT OFFERING MEMORANDUM; SEC DOCUMENTS;
FINANCIAL STATEMENT. Each complete or partial statement, report, or
proxy statement included as an Attachment to the Company's Confidential
Private Placement Memorandum dated December [], 1996 (the "Memorandum")
is a true and complete copy of or excerpt from such document as filed
by the Company with the SEC. The Company has filed in a timely manner
all documents that the Company was required to file with the SEC under
Sections 13, 14(a) and 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), during the 24 months preceding the date
of this Agreement (the "SEC Documents"). As of their respective filing
dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act or the Securities Act of 1933, as
amended (the "Securities Act"), as applicable. Neither the Memorandum
nor any of the SEC Documents as of their respective dates contained any
untrue
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<PAGE> 6
statement of material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the
SEC Documents (the "Financial Statements") comply as to form in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto. The
Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied and fairly present
the consolidated financial position of the Company and any subsidiaries
at the dates thereof and the consolidated results of their operations
and consolidated cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal, recurring adjustments that are
not in the aggregate material).
(h) NO MATERIAL CHANGE. Except as otherwise disclosed
herein, since September 30, 1996, there have not been:
(1) Any changes in the financial condition or
results of operations of the Company and the Significant
Subsidiaries from that reflected in the Financial Statements
except changes in the ordinary course of business which have
not been, either individually or in the aggregate, materially
adverse;
(2) Any material increase in indebtedness for
borrowed money, current liabilities or total liabilities
(whether absolute, accrued, contingent or otherwise) incurred
by the Company or any Significant Subsidiary, except for
liabilities, commitments and obligations incurred in the
ordinary course of business;
(3) Any sale, assignment, transfer or other
disposition of any material tangible or intangible asset of
the Company or any Significant Subsidiary, except in the
ordinary course of business;
(4) Any extraordinary transaction by the Company
or any Significant Subsidiary; and
(5) Any execution or authorization of a material
agreement that the Company would be required to file with the
SEC.
(i) LITIGATION. There are no actions, suits, proceedings
or investigations pending or, to the best of the Company's knowledge,
threatened against the Company or any Significant Subsidiary or any of
their respective properties before or by any court or arbitrator or any
governmental body, agency or official in which there is a reasonable
likelihood (in the judgment of the Company) of an adverse decision that
(a) could have a Material Adverse Effect or (b) could impair the
ability of the Company to perform in any material respect its
obligations under this Agreement.
(j) COMPLIANCE. The Company, the Significant Subsidiaries
and their use and occupancy of their assets and properties wherever
located, are in compliance in all material respects with all, and not
in violation of any, and the
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<PAGE> 7
Company has not received any claim or notice that it is not in material
compliance with, or that it is in violation of any, applicable federal,
state, local or other governmental laws or ordinances, or any order,
rule or regulation of any federal, state or local or other governmental
agency or body, to which the Company, the Significant Subsidiaries or
their respective businesses, operations, agents, employees, assets or
properties are subject (including, without limitation, all
recordkeeping and reporting requirements thereof); nor has the Company
or any Significant Subsidiary failed to obtain or to adhere to the
requirements of any government license, permit or authorization
reasonably necessary to the ownership of its assets and properties or
the conduct of its business, which noncompliance, violation or failure
to obtain or adhere would have a Material Adverse Effect.
(k) INDEPENDENT ACCOUNTANTS. Grant Thornton LLP, who have
certified certain financial statements of the Company included in the
SEC Documents, are independent public accountants as required by the
Securities Act and the rules and regulations of the SEC thereunder.
(l) RESERVE INFORMATION. The information supplied by the
Company to the independent petroleum engineering consultants for the
Company for purposes of preparing the reserve reports and estimates of
such consultants included in the Memorandum and the SEC Documents,
including, without limitation, production, costs of operation and
development, current prices for production, agreements relating to
current and future operations and sales of production, was true and
correct in all material respects on the date supplied and was prepared
in accordance with customary industry practices; Netherland, Sewell &
Associates, Inc. and McDaniel & Associates Consultants Ltd., who
prepared estimates of the amount and value of proved reserves of the
Company as set forth in certain of the SEC Documents, are independent
with respect to the Company. Information with respect to the estimated
quantities of the Company's proved reserves and the present value of
such reserves included in the SEC Documents were prepared in accordance
with the rules and guidelines set forth in the rules and regulations of
the SEC.
(m) INVESTMENT COMPANY; PUBLIC UTILITY HOLDING COMPANY.
The Company is not an "investment company" as defined in the Investment
Company Act of 1940, as amended, and the rules and regulations
promulgated thereunder, and the Company is not a "holding company" or
and "affiliate" of a holding company or public utility as defined in
the Public Utility Holding Company Act of 1940, as amended, and the
rules and regulations promulgated thereunder.
(n) OIL AND GAS PROPERTIES. The Company and its
Significant Subsidiaries have defensible title to their producing oil
and gas properties and gas gathering properties free and clear of all
liens, encumbrances and defects, except (1) those described in the
Memorandum and SEC Documents, (2) liens securing taxes and other
governmental charges, or claims of materialmen, mechanics and similar
persons, not yet due and payable, (3) liens and encumbrances under
operating agreements, unitization and pooling agreements, and gas sales
contracts, securing payment of amounts not yet due and payable and of a
scope and nature customary in the oil and gas business and (4) liens,
encumbrances and
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<PAGE> 8
defects that do not in the aggregate materially and adversely affect
the value of such oil and properties or gas gathering properties or
materially and adversely affect the use made or proposed to be made of
such properties by the Company and its Significant Subsidiaries; except
as described in the Memorandum and the SEC Documents, the oil, gas and
mineral leases, options to lease, concessions or other property
interests held by the Company and its Significant Subsidiaries reflect
in all material respects the right of the Company and its Significant
Subsidiaries to explore for or receive production from the undeveloped
properties described in the SEC Documents, and the care taken by the
Company and its Significant Subsidiaries with respect to acquiring or
otherwise procuring such leases, options to lease, drilling concessions
and other property interests was generally consistent with standard
industry practices for acquiring or procuring leases and interests
therein to explore such for hydrocarbons.
(o) PAYMENTS. All royalties, rentals, deposits and other
amounts required to be paid under the producing oil and gas leases of
the Company and its Significant Subsidiaries have been properly and
timely paid, and no proceeds from the sale or production attributable
to the producing oil and gas leases of the Company and its Significant
Subsidiaries are currently being held in suspense by any purchaser
thereof, and there are no claims under take-or-pay contracts pursuant
to which natural gas purchasers have any make-up rights affecting the
interest of the Company and its Significant Subsidiaries in its oil and
gas properties which, in any such case, would have a Material Adverse
Effect.
(p) BALANCING. The aggregate undiscounted net monetary
liability, after giving effect to oil and gas due from co-owners, of
the Company and its Significant Subsidiaries for oil or gas taken or
received under any operating or gas balancing and storage agreement
relating to its oil and gas properties that permits any person to
receive any portion of the interest of the Company or any of its
Significant Subsidiaries in oil or gas or to receive cash or other
payments to balance any disproportionate allocation of oil or gas could
not, singularly or in the aggregate, have a Material Adverse Effect.
(q) ENVIRONMENTAL LAWS. The Company and its Significant
Subsidiaries (A) are in compliance with any and all applicable federal,
state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic
substances or waste, pollutants or contaminants ("Environmental Laws"),
(B) have received all permits, licenses or other approvals required of
it under applicable Environmental Laws to conduct their respective
businesses and (C) are in compliance with all terms and conditions of
any such permit, license or approval, except for such noncompliance
with Environmental Laws, failure to receive required permits, licenses
or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals that would not, singularly or in
the aggregate, have a Material Adverse Effect. There has been no
storage, disposal, generation, transportation, handling or treatment of
hazardous substances or solid wastes by the Company or any of its
Significant Subsidiaries (or to the knowledge of the Company and the
Significant Subsidiaries, any of their respective predecessors in
interest) at, upon or from any of the property now or previously owned
or leased by the Company or any Significant Subsidiary in violation of
any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit or which would require remedial action by the Company
or any Significant Subsidiary under any applicable law, ordinance,
rule,
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<PAGE> 9
regulation, order, judgment, decree or permit, except for any violation
or remedial action which would not result in, or which would not be
reasonably likely to result in, singularly or in the aggregate with all
such violations and remedial actions, a Material Adverse Effect; there
has been no spill, discharge, leak, emission, injection, escape,
dumping or release of any kind onto such property or into the
environment surrounding such property of any solid wastes or hazardous
substances due to or caused by a knowing act or omission by the Company
or a Significant Subsidiary, except for any such spill, discharge,
leak, emission, injection, escape, dumping or release which would not
result in or would not be reasonably likely to result in, singularly or
in the aggregate with all such spills, discharges, leaks, emissions,
injections, escape, dumping or releases, a Material Adverse Effect: and
the terms "hazardous substances" and "solid wastes" shall have the
meanings specified in any applicable local, state and federal laws or
regulations with respect to environmental protection.
(r) REGISTRATION RIGHTS. Except for the registration
rights granted in connection with (i) this Agreement and (ii) described
in the Memorandum or SEC Documents, the Company has not agreed to
register the sale of any of its securities under the Securities Act.
SECTION 3.2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PURCHASERS. Each Purchaser hereby severally represents and warrants to the
Company, effective as of the Closing Date, as follows:
(a) AUTHORIZATION. Purchaser represents and warrants to
the Company that: (i) Purchaser has all requisite legal and corporate
or other power and capacity and has taken all requisite corporate or
other action to execute and deliver this Agreement, to purchase the
Shares to be purchased by it and to carry out and perform all of its
obligations under this Agreement; and (ii) this Agreement constitutes
the legal, valid and binding obligation of the Purchaser, enforceable
in accordance with its terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, or similar laws relating to or
affecting the enforcement of creditors' rights generally and (b) as
limited by equitable principles generally.
(b) INVESTMENT EXPERIENCE. Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Purchaser
is aware of the Company's business affairs and financial condition and
has had access to and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
Shares. Purchaser has such business and financial experience as is
required to give it the capacity to protect its own interests in
connection with the purchase of the Shares.
(c) INVESTMENT INTENT. Purchaser has not been formed for
the purpose of acquiring the Shares. Purchaser is purchasing the
Shares for its own account as principal, for investment purposes only,
and not with a present view to, or for, resale, distribution or
fractionalization thereof, in whole or in part, within the meaning of
the Securities Act. Purchaser understands that its acquisition of the
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<PAGE> 10
Shares has not been registered under the Securities Act or registered
or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other
things, the bona fide nature of Purchaser's investment intent as
expressed herein. Purchaser has completed or caused to be completed and
delivered to the Company, the Purchaser Questionnaire attached hereto
as Exhibit B-2 for use in preparation of the Registration Statement (as
hereinafter defined). Purchaser has, in connection with its decision to
purchase the number of Shares set forth in Schedule I hereto, relied
solely upon the Memorandum and the documents attached thereto and the
representations and warranties of the Company contained herein.
Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Shares
except in compliance with the Securities Act, applicable state
securities laws, and the rules and regulations promulgated thereunder.
The information provided by Purchaser in the Schedules and Exhibits
hereto is true, complete and correct in all material respects.
(d) REGISTRATION OR EXEMPTION REQUIREMENTS. Purchaser
further acknowledges and understands that the Shares may not be resold
or otherwise transferred except in a transaction registered under the
Securities Act or unless an exemption from such registration is
available. Purchaser understands that the certificate(s) evidencing the
Shares will be imprinted with a legend that prohibits the transfer of
the Shares unless (i) they are registered or such registration is not
required, and (ii) if the transfer is pursuant to an exemption from
registration other than Rule 144 under the Securities Act and, if the
Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Company is obtained to the effect that the
transaction is so exempt.
(e) RESTRICTION ON SHORT SALES. Purchaser represents and
warrants to and covenants with the Company that Purchaser has not
engaged and will not engage in any short sales of the Company's Common
Stock prior to the effectiveness of the Registration Statement, except
to the extent that any such short sale is fully covered by shares of
Common Stock of the Company other than the Shares.
(f) NO LEGAL, TAX OR INVESTMENT ADVICE. Purchaser
understands that nothing in the Memorandum, this Agreement or any other
materials presented to Purchaser in connection with the purchase and
sale of the Shares constitutes legal, tax or investment advice.
Purchaser has consulted such legal, tax and investment advisors as it,
in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Shares.
ARTICLE IV. CONDITIONS TO CLOSING
SECTION 4.1 CLOSING CONDITIONS OF EACH PURCHASER. Each Purchaser's
obligation to purchase the Shares at the Closing is, at the option of such
Purchaser, subject to the fulfillment or waiver as of the Closing Date of the
following condition:
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<PAGE> 11
(a) REPRESENTATIONS AND WARRANTIES TRUE. If the date of
this Agreement is different than the Closing Date, the Company shall
have furnished to the Purchasers and Morgan Keegan & Company, Inc.
certificates of officers of the Company as to the accuracy of the
representations and warranties of the Company as of the Closing Date,
compliance with all agreements and conditions under this Agreement and
as to such other matters as the Purchasers and Morgan Keegan & Company,
Inc. may reasonably request.
(b) DELIVERY OF CERTIFICATES. The Company shall have made
the delivery of certificates as required by Article I.
(c) LEGAL OPINION. Each Purchaser shall receive a legal
opinion of Porter & Hedges, L.L.P. in substantially the form of Exhibit
E.
Notwithstanding anything herein to the contrary, the obligation of each
Purchaser to close the transactions contemplated hereby expressly is not
subject to the condition that each or any other Purchaser close the
transactions contemplated hereby.
SECTION 4.2 CONDITIONS TO CLOSING OF COMPANY. The Company's
obligation to sell and issue the Shares at the Closing is, at the option of the
Company, subject to the fulfillment or waiver of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties made by the Purchasers in Section 3.2 hereof shall be
true and correct in all material respects on the Closing Date.
(b) COVENANTS. All covenants, agreements and conditions
contained in this Agreement to be performed by each of the Purchasers
on or prior to the Closing Date shall have been performed or complied
with by each of such Purchasers in all material respects.
SECTION 4.3 FINANCIAL INFORMATION. The Company hereby covenants
and agrees to mail notice of filing of the following reports to each Purchaser
until such Purchaser transfers, assigns or sells all of the Shares purchased by
such Purchaser pursuant to this Agreement:
(a) Within one hundred twenty (120) days after the end of
each fiscal year, a copy of its Annual Report on Form 10-K.
(b) Within sixty (60) days after the end of the first,
second and third quarterly accounting periods of each fiscal year of
the Company, a copy of its Quarterly Report on Form 10-Q.
(c) Within ten (10) days after the Company files any
Current Report on Form 8-K with the SEC, such Current Report on Form
8-K.
SECTION 4.4 REGISTRATION REQUIREMENTS.
(a) No later than five business days after the Closing
Date, the Company shall prepare and file a registration statement with
the SEC under the
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<PAGE> 12
Securities Act to register the resale of the Shares by the Purchasers
(the "Registration Statement").
(b) The Company shall pay all Registration Expenses (as
defined below) in connection with any registration, qualification or
compliance hereunder, and each Purchaser shall pay all Selling Expenses
(as defined below) relating to the Shares resold by such Purchaser.
"Registration Expenses" shall mean all expenses, except for Selling
Expenses, incurred by the Company in complying with the registration
provisions herein described, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses and the expense of any special audits incident to or
required by any such registration. "Selling Expenses" shall mean all
selling commissions, underwriting fees and stock transfer taxes
applicable to the Shares and all fees and disbursements of counsel for
any Purchaser.
(c) In the case of the registration effected by the
Company pursuant to these registration provisions, the Company will use
its best efforts to: (i) keep such registration effective until the
earlier of (A) the third anniversary date of the Closing Date, (B) such
date as all of the Shares have been resold pursuant to the Registration
Statement, or (C) such time as all of the Shares held by the Purchasers
can be sold within a given three-month period without compliance with
the registration requirements of the Securities Act pursuant to Rule
144; (ii) prepare and file with the SEC such amendments and supplements
to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by the Registration Statement; (iii) furnish such
number of prospectuses and other documents incident thereto, including
any amendment of or supplement to the prospectus, as a Purchaser from
time to time may reasonably request; (iv) cause all Shares registered
as described herein to be listed on each securities exchange and quoted
on each quotation service on which similar securities issued by the
Company are then listed or quoted; (v) provide a transfer agent and
registrar for all Shares registered pursuant to the Registration
Statement and a CUSIP number for all such Shares; (vi) otherwise use
its best efforts to comply with all applicable rules and regulations of
the SEC; and (vii) file the documents and pay any fees required of the
Company in (A) all jurisdictions in which any of the Shares are
originally sold and (B) all other states specified in writing by a
Purchaser, provided as to clause (B), however, that the Company shall
not be required to qualify to do business or consent to service of
process in any state in which it is not now so qualified or has not so
consented.
(d) With a view to making available to the Purchasers and
Permitted Assignees the benefits of Rule 144 promulgated under the
Securities Act ("Rule 144") and any other rule or regulation of the SEC
that may at any time permit a Purchaser to sell Shares to the public
without registration or pursuant to a registration on Form S-3, the
Company covenants and agrees to: (i) make and keep public information
available, as those terms are understood and defined in Rule 144, until
the earlier of (A) the third anniversary of the date hereof or (B) such
date as all of the Shares shall have been resold; (ii) file with the
SEC in a timely manner all reports and other documents required of the
Company under the
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<PAGE> 13
Securities Act and Exchange Act; and (iii) furnish to any Purchaser
upon request, as long as the Purchaser owns any Shares, (A) a written
statement by the Company that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, (B) a copy of
the most recent annual or quarterly report of the Company, and (C) such
other information as may be reasonably requested in order to avail any
Purchaser of any rule or regulation of the SEC that permits the sale of
any such Shares without registration or pursuant to such Form S-3.
(e) In the event that a Purchaser disposes of Shares
pursuant to an exemption from the registration provisions of the
Securities Act, the Purchaser shall have the right to assign its rights
and delegate its obligations under Sections 4.4 and 4.5 in respect of
the Shares so transferred to the person acquiring such Shares who shall
be deemed a Purchaser as provided in Sections 4.4 and 4.5. As a
condition to the assignment of such rights and obligations, the Company
and such assignee shall execute a written acknowledgment of such
assignment and assumption and the assignee shall provide the Company
such information about itself as the Company shall reasonably request
for purposes of complying with Sections 4.4 and 4.5.
SECTION 4.5 INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Purchaser (for purposes of this Section 4.5(a), including its officers,
directors, agents and employees, each person who controls such holder,
within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, and the officers, directors, agents or employees of
such controlling person) from and against any losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) to which
such Purchaser may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of, or are based
upon, any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (including any
post-effective amendment thereto), on the effective date thereof, or
arise out of, or are based upon, any omission or alleged omission of a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or arise out of any failure by the
Company to fulfill any undertaking included in the Registration
Statement, and the Company will, as incurred, reimburse such Purchaser
for any legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim;
provided, however, that the Company shall not be liable in any such
case to the extent that such loss, claim, damage or liability arises
out of, or is based upon (i) an untrue statement or omission, or
alleged untrue statement or omission in such Registration Statement in
reliance upon and in conformity with written information furnished to
the Company by or on behalf of such Purchaser specifically for use in
preparation of the Registration Statement including, without
limitation, statements made by Purchaser in this Agreement or documents
delivered pursuant hereto, (ii) breach or inaccuracy of such
Purchaser's representations and warranties in this Agreement or
documents delivered pursuant hereto, or the failure of such Purchaser
to comply with the covenants and agreements contained in this Agreement
or documents delivered
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<PAGE> 14
pursuant hereto, or (iii) any untrue statement or omission, or alleged
untrue statement or omission in any Prospectus that is corrected in any
subsequent Prospectus that was delivered to the Purchaser prior to the
pertinent sale or sales by the Purchaser. If requested, the Company
shall also indemnify the underwriters, selling brokers, dealer managers
and similar securities industry professionals participating in the
distribution covered by the Registration Statement, their officers,
directors, agents and employees and each person who controls such
person (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act) pursuant to customary indemnification
and contribution provisions, to the same extent as provided above.
(b) Each Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company and its officers, directors,
agents and employees and each person who controls such persons (within
the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act) from and against any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) to which the
Company and such other persons may become subject (under the Securities
Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon (i) an untrue statement or omission, or alleged
untrue statement or omission made in such Registration Statement in
reliance upon and in conformity with written information furnished to
the Company by or on behalf of such Purchaser specifically for use in
preparation of the Registration Statement including, without
limitation, statements made by such Purchaser in this Agreement and
documents delivered pursuant hereto, provided, however, that no
Purchaser shall be liable in any such case for any untrue statement or
omission, or alleged untrue statement or omission in any Prospectus
which has been corrected, in writing, by such Purchaser and delivered
to the Company before the sale from which such loss occurred, (ii)
breach or inaccuracy of such Purchaser's representations and warranties
in this Agreement or documents delivered pursuant hereto, or the
failure of such Purchaser to comply with the covenants and agreements
contained in this Agreement, or (iii) any untrue statement or omission,
or alleged untrue statement or omission in any Prospectus that is
corrected in any subsequent Prospectus that was delivered to the
Purchaser prior to the pertinent sale or sales by the Purchaser, and
each Purchaser, severally and not jointly, will, as incurred, reimburse
the Company for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that the indemnity agreement
contained in this subsection (b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if
such settlement is effected without the consent of such Purchaser
(which consent shall not be unreasonably withheld). Notwithstanding the
provisions of this subsection (b), no Purchaser shall be liable for any
amount in excess of the amount by which the net amount received by the
Purchaser from the sale of the Shares to which such loss relates
exceeds the amount of any damages which such Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
(c) Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of which
indemnity is to be sought against an indemnifying person pursuant to
this Section 4.5, such indemnified
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<PAGE> 15
person shall notify the indemnifying person in writing of such claim or
of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified
thereof, the indemnifying person shall be entitled to participate
therein, and, to the extent that it shall wish, to assume the defense
thereof, with counsel reasonably satisfactory to the indemnified
person. After notice from the indemnifying person to such indemnified
person of the indemnifying person's election to assume the defense
thereof, the indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof; provided,
however, that if there exists or may exist a conflict of interest that
would make it inappropriate in the reasonable judgment of counsel to
the indemnified person for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or
associate thereof, the indemnified person shall be entitled to retain
its own counsel at the expense of such indemnifying person.
(d) If the indemnification provided for in this Section
4.5 is unavailable to or insufficient to hold harmless an indemnified
party under subsection (a) or (b) above in respect of any losses,
claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as
result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and the Purchasers on the
other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or a Purchaser on
the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Company and the Purchasers agree that it would not be
just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Purchasers were treated
as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to
above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, or
liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding
the provisions of this subsection (d), no Purchaser shall be required
to contribute any amount in excess of the amount by which the net
amount received by the Purchaser from the sale of the Shares to which
such loss relates exceeds the amount of any damages which such
Purchaser has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Purchasers' obligations in this subsection (d) to
-13-
<PAGE> 16
contribute are several in proportion to their respective sales of
Shares to which such loss relates and not joint.
(e) The obligations of the Company and the Purchasers
under this Section 4.5 shall be in addition to any liability which the
Company and the respective Purchasers may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls the Company or any Purchaser within the meaning of the
Exchange Act or the Securities Act.
ARTICLE V. RESTRICTIONS ON TRANSFERABILITY OF SHARES
SECTION 5.1 RESTRICTIONS ON TRANSFERABILITY. The Shares shall not
be transferred in the absence of a registration under the Securities Act or an
exemption therefrom or in the absence of compliance with any term of this
Agreement. The Company shall be entitled to give stop transfer instructions to
its transfer agent with respect to the Shares in order to enforce the foregoing
restrictions.
SECTION 5.2 INSTRUCTION SHEET. Each certificate representing the
Shares shall bear the legend set forth on the Instruction Sheet attached hereto
as Exhibit C (in addition to any legends required under applicable securities
laws).
SECTION 5.3 TRANSFER OF SHARES AFTER REGISTRATION. Each Purchaser
hereby covenants with the Company not to make any sale of the Shares except
either (i) in accordance with the Registration Statement, in which case
Purchaser covenants to comply with the requirement of delivering a current
prospectus, or (ii) in accordance with Rule 144, in which case Purchaser
covenants to comply with Rule 144. Purchaser further acknowledges and agrees
that such Shares are not transferable on the books of the Company unless the
certificate submitted to the Company's transfer agent evidencing such Shares
are accompanied by a separate certificate executed by an officer of, or other
person duly authorized by, the Purchaser in the form attached hereto as Exhibit
D.
SECTION 5.4 PURCHASER INFORMATION. Each Purchaser covenants that
it will promptly notify the Company of any changes in the information set forth
in the Registration Statement regarding such Purchaser or such Purchaser's
"Plan of Distribution."
ARTICLE VI. MISCELLANEOUS
SECTION 6.1 WAIVERS AND AMENDMENTS. With the exception of Section
4.5 hereof, the terms of this Agreement may be waived or amended with the
written consent of the Company and each Purchaser. With respect to Section 4.5
hereof, with the written consent of the Company and the record holders of more
than fifty percent (50%) of the Shares then outstanding and held by Purchasers,
the terms of the Agreement may be waived or amended and any such amendment or
waiver shall be binding upon the Company and all holders of Shares.
SECTION 6.2 BROKER'S FEE. Each Purchaser acknowledges that the
Company has agreed to pay a fee to Morgan Keegan & Company, Inc. in respect of
the sale of the Shares to the Purchaser. Each of the parties hereto hereby
represents that, on the basis of
-14-
<PAGE> 17
any actions and oral or written agreements by it, there are no other brokers or
finders entitled to compensation in connection with the sale of the Shares to
the Purchasers.
SECTION 6.3 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
WITHOUT ANY REGARD TO CONFLICTS OF LAWS PRINCIPLES.
SECTION 6.4 SURVIVAL. The representations, warranties, covenants
and agreements made in this Agreement shall survive any investigation made by
the Company or the Purchasers and the Closing.
SECTION 6.5 SUCCESSORS AND ASSIGNS. The provisions hereof shall
inure to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties to this Agreement. Notwithstanding
the foregoing, except as provided in Section 4.4(f), no Purchaser shall assign
this Agreement or assign any of such Purchaser's rights or delegate any of such
Purchaser's duties under this Agreement without the prior written consent of
the Company.
SECTION 6.6 ENTIRE AGREEMENT. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subjects thereof.
SECTION 6.7 NOTICES, ETC.. All notices and other communications
required or permitted under this Agreement shall be effective upon receipt and
shall be in writing and may be delivered in person, by telecopy, overnight
delivery service or registered or certified United States mail, addressed to
the Company or the Purchasers, as the case may be, at their respective
addresses set forth at the beginning of this Agreement or on Schedule I, or at
such other address as the Company or the Purchasers shall have furnished to the
other party in writing. All notices and other communications shall be effective
upon the earlier of actual receipt thereof by the person to whom notice is
directed or (i) in the case of notices and communications sent by personal
delivery or telecopy, one business day after such notice or communication
arrives at the applicable address or was successfully sent to the applicable
telecopy number, (ii) in the case of notices and communications sent by
overnight delivery service, at noon (local time) on the second business day
following the day such notice or communication was sent, and (iii) in the case
of notices and communications sent by United States mail, seven days after such
notice or communication shall have been deposited in the United States mail.
SECTION 6.8 SEVERABILITY OF THIS AGREEMENT. If any provision of
this Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 6.9 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
SECTION 6.10 FURTHER ASSURANCES. Each party to this Agreement shall
do and perform or cause to be done and performed all such further acts and
things and shall execute and deliver all such other agreements, certificates,
instruments and documents as
-15-
<PAGE> 18
the other party hereto may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
SECTION 6.11 TERMINATION. In the event that the Closing Date shall
not have occurred on or before 90 days from the date hereof, this Agreement
shall terminate at the close of business on such date.
SECTION 6.12 EXPENSES. The Company and each such Purchaser shall
bear its own expenses incurred on its behalf with respect to this Agreement and
the transactions contemplated hereby, including fees of legal counsel except
that the Company shall pay the reasonable fees and expenses of Butler & Binion,
L.L.P. as legal counsel for the Purchasers.
SECTION 6.13 CURRENCY. All references to "dollars" or "$" in this
Agreement shall be deemed to refer to United States dollars.
SECTION 6.14 EFFECTIVENESS OF AGREEMENT. The Company's agreement to
sell the Shares to the Purchasers pursuant to the terms of this Agreement will
only be effective upon acceptance of this Agreement by the Company as evidenced
by the Company's execution of this Agreement.
-16-
<PAGE> 19
IN WITNESS WHEREOF, the Company and Purchaser have executed this
Purchase Agreement as of the date first above written.
"COMPANY"
SOUTHERN MINERAL CORPORATION,
a Nevada corporation
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
"PURCHASER"
-------------------------------------------
(Name of Purchaser)
-------------------------------------------
(Authorized signature for Purchaser)
-------------------------------------------
(Name of person signing on behalf of
Purchaser, printed)
-------------------------------------------
(Title of person on behalf of Purchaser)
The number of Shares Subscribed is set
forth on Schedule I
-17-
<PAGE> 20
Schedule I
LIST OF PURCHASERS
<TABLE>
<CAPTION>
Number of Shares Purchase Price Total Purchase
Name and Address of Purchaser Purchased Per Share Price
----------------------------- ------------------ ------------------- -----------------
<S> <C> <C> <C>
Trinity Capital 125,000 $4.50 $562,500
1620 Independent Square
Jacksonville, Florida 32002
Blue Ridge Capital 250,000 $4.50 $1,125,000
630 Fifth Avenue, #3225
New York, New York 10111
Cannell Capital 100,000 $4.50 $450,000
750 Battery Street, #1620
San Francisco, California 94111
Walden/Ashfield 50,000 $4.50 $225,000
750 Battery Street, #700
San Francisco, California 94111
Warburg Pincus Counsellors 235,500 $4.50 $1,059,750
466 Lexington Avenue, 10th Floor
New York, New York 10017
Schaenen Fox Capital 55,500 $4.50 $249,750
200 Park Avenue, #3900
New York, New York 10166
Strong Quest Limited Partnership 2,500 $4.50 $11,250
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
Strong Special Investment Limited 28,000 $4.50 $126,000
Partnership
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
Harbour Investments Ltd. 124,500 $4.50 $560,250
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
Kirr Marbach 100,000 $4.50 $450,000
621 Washington Street
Columbus, Indiana 47202
Northriver 50,000 $4.50 $225,000
One State Street Plaza, 23rd Floor
New York, New York 10004
WAFRA 100,000 $4.50 $450,000
9 West 57th Street, 38th Floor
New York, New York 10019
</TABLE>
-18-
<PAGE> 21
<TABLE>
<CAPTION>
Number of Shares Purchase Price Total Purchase
Name and Address of Purchaser Purchased Per Share Price
----------------------------- ------------------ ------------------- -----------------
<S> <C> <C> <C>
Fred Cox, Jr. 50,000 $4.50 $225,000
Box 237
Big Arm, Montana 59910-0237
Financial Institutions Retirement 50,000 $4.50 $225,000
Fund
5 Corporate Park Drive, 2nd Floor
White Plains, New York 10604
Carillon Advisors, Inc. 350,000 $4.50 $1,575,000
1876 Waycross Road
Cincinnati, Ohio 45240
Centennial 444,000 $4.50 $1,998,000
900 3rd Avenue, #1801
New York, New York 10022
Kennedy Capital Management 185,000 $4.50 $832,500
10829 Olive Road, 1st Floor
St. Louis, Missouri 63141-7739
Harris Bank Winnetka 50,000 $4.50 $225,000
F/B/O Howell Howard
520 Green Bay Road
Winnetka, Illinois 60093
Putnam Capital Appreciation Fund 100,000 $4.50 $450,000
One Post Office Square
Boston, Massachusetts 02109
Graham Smith 25,000 $4.50 $112,500
396 Waverly Rd.
Proctor, Arkansas 72376
EnCap Investments LC 25,000 $4.50 $112,500
1100 Louisiana, Suite 3150
Houston, Texas 77002
</TABLE>
-19-
<PAGE> 22
Exhibit A
INSTRUCTION SHEET FOR PURCHASER
(TO BE READ IN CONJUNCTION WITH THE ENTIRE COMMON STOCK PURCHASE AGREEMENT)
A. Complete the following items in the Common Stock Purchase
Agreement:
1. SIGNATURE PAGE: Provide the information regarding the
Purchaser requested on the signature page. The Agreement must be
executed by an individual authorized to bind the Purchaser.
2. EXHIBIT B-1: Stock Certificate Questionnaire:
Provide the information requested by the Stock Certificate
Questionnaire;
3. EXHIBIT B-2: Registration Statement Questionnaire:
Provide the information requested by the Registration Statement
Questionnaire.
4. EXHIBIT B-3: Purchaser Certificate: Provide the
information requested by the Certificate for the Purchasers or the
Certificate for Corporate, Partnership, Trust, Foundation and Joint
Purchasers, as applicable.
5. Return the signed Purchase Agreement including the
properly completed Exhibits to:
MORGAN KEEGAN & COMPANY, INC.
PLACEMENT AGENT
FIFTY FRONT STREET
20TH FLOOR
MEMPHIS, TENNESSEE 38103
ATTN: MS. PAM ALLEN
FAX: (901) 579-4355
B. Instructions regarding the transfer of funds for the purchase
of Shares will be telecopied to the Purchaser by the Placement Agent at a later
date.
C. Upon the resale of the Shares by the Purchaser after the
Registration Statement covering the Shares is effective, as described in the
Purchase Agreement, the Purchaser:
(1) must deliver a current prospectus, and annual and
quarterly reports of the Company to the buyer (prospectuses, and annual
and quarterly reports may be obtained from the Company at the
Purchaser's request); and
(2) must send a letter in the form of Exhibit D to the
Company so that the Shares may be properly transferred.
-20-
<PAGE> 23
Exhibit B-1
SOUTHERN MINERAL CORPORATION
STOCK CERTIFICATE QUESTIONNAIRE
Please provide us with the following information:
1. The exact name that the Shares are to be registered in (this
is the name that will appear on the stock certificate(s)). You may use a
nominee name if appropriate:
___________________________________
2. The relationship between the Purchaser of the Shares and the
Registered Holder listed in response to item 1 above:
___________________________________
3. The mailing address of the Registered Holder listed in
response to item 1 above:
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
4. The Tax Identification Number of the Registered Holder listed
in response to item 1 above:
____________________________________
-21-
<PAGE> 24
Exhibit B-2
SOUTHERN MINERAL CORPORATION
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement,
please provide us with the following information regarding the Purchaser.
1. Please state your organization's name exactly as it should
appear in the Registration Statement:
_____________________________
2. Have you or your organization had any position, office or
other material relationship within the past three years with the Company or its
affiliates other than as disclosed in the Prospectus included in the
Registration Statement?
____ Yes ____ No
If yes, please indicate the nature of any such relationships below:
___________________________________
___________________________________
___________________________________
__________________________________
__________________________________
-22-
<PAGE> 25
Exhibit B-3
SOUTHERN MINERAL CORPORATION
CERTIFICATE FOR INDIVIDUAL PURCHASERS
If the investor is an individual Purchaser (or married couple) the
Purchaser must complete, date and sign this Certificate.
CERTIFICATE:
I certify that the representations and responses below are true and
accurate:
In order for the Company to offer and sell the Shares in
conformance with state and federal securities laws, the following
information must be obtained regarding your investor status. Please
initial each category applicable to you as an investor in the Company.
___ (1) A natural person whose net worth, either
individually or jointly with such person's spouse exceeds
$1,000,000;
___ (2) A natural person who had an income in excess
of $200,000, or joint income with that person's spouse in
excess of $300,000, in 1993, 1994 and 1995, and reasonably
expects to have individual income reaching the same level in
1996;
___ (3) An executive officer or director of the
Company.
_________________________________
(Name of Purchaser)
_________________________________
(Signature)
_________________________________
(Signature)
_________________________________
(Date)
-23-
<PAGE> 26
Exhibit B-3
SOUTHERN MINERAL CORPORATION
CERTIFICATE FOR CORPORATE, PARTNERSHIP, TRUST, FOUNDATION AND JOINT PURCHASERS
If the investor is a corporation, partnership, trust, pension plan,
foundation, joint purchaser (other than a married couple) or other entity, an
authorized officer, partner, or trustee must complete, date and sign this
Certificate.
CERTIFICATE
The undersigned certifies that the representations and responses below
are true and accurate:
(a) The investor has been duly formed and is validly
existing and has full power and authority to invest in the Company. The
person signing on behalf of the undersigned has the authority to
execute and deliver the Common Stock Purchase Agreement on behalf of
the Purchaser and to take other actions with respect thereto.
(b) Indicate the form of entity of the undersigned:
___ Limited Partnership
___ General Partnership
___ Corporation
___ Revocable Trust (identify each grantor and
indicate under what circumstances the trust is revocable by
the grantor:
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
(Continue on a separate piece of paper, if necessary.)
___ Other Type of Trust (indicate type of trust
and, and, for trusts other than pension trusts, name the
grantors and beneficiaries:
_______________________________________________________
_______________________________________________________
_______________________________________________________
(Continue on a separate piece of paper, if necessary.)
-24-
<PAGE> 27
___ Other form of organization (indicate form of
organization (_______________________).
(c) Indicate the approximate date the undersigned entity was
formed:
__________________________.
(d) In order for the Company to offer and sell the Shares in
conformance with state and federal securities laws, the following information
must be obtained regarding your investor status. Please initial each category
applicable to you as an investor in the Company.
___ 1. A bank as defined in Section 3(a)(2) of the
Securities Act, or any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities Act
whether acting in its individual or fiduciary capacity;
___ 2. A broker or dealer registered pursuant to Section
15 of the Securities Exchange Act of 1934;
___ 3. An insurance company as defined in Section 2(13) of
the Securities Act;
___ 4. An investment company registered under the
Investment Company Act of 1940 or a business development company as
defined in Section 2(a)(48) of that Act;
___ 5. A Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958;
___ 6. A plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees, if such
plan has total assets in excess of $5,000,000;
___ 7. An employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, if the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of
such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons
that are accredited investors;
___ 8. A private business development company as defined
in Section 202(a)(22) of the Investment Advisers Act of 1940;
___ 9. An organization described in Section 501(c)(3) of
the Internal Revenue Code, a corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific purpose of
acquiring the Shares, with total assets in excess of $5,000,000;
-25-
<PAGE> 28
___ 10. A trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the
Shares, whose purchase is directed by a sophisticated person who has
such knowledge and experience in financial and business matters that
such person is capable of evaluating the merits and risks of investing
in the Company;
___ 11. An entity in which all of the equity owners
qualify under any of the above subparagraphs. If the undersigned
belongs to this investor category only, list the equity owners of the
undersigned, and the investor category which each such equity owner
satisfies:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
(Continue on a separate piece of paper, if necessary.)
Dated: December __, 1996
____________________________________________
(Name of investor)
____________________________________________
(Signature and title of authorized officer,
partner or trustee)
-26-
<PAGE> 29
Exhibit C
SOUTHERN MINERAL CORPORATION
IMPORTANT - DO NOT REMOVE THIS INSTRUCTION SHEET FROM THE ATTACHED SHARE
CERTIFICATE UNLESS AND UNTIL THE SHARES ARE SOLD AS FOLLOWS:
(1) THE SHARES ARE RESOLD PURSUANT TO THE REGISTRATION STATEMENT
ON FORM S-3 (NO. 333- ), AND, IN CONNECTION WITH SUCH RESALE, THE HOLDER
HAS DELIVERED TO THE PURCHASER OF THE SHARES A CURRENT PROSPECTUS AND HAS
PROVIDED TO THE COMPANY A PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE; OR
(2) THE SHARES ARE RESOLD IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, PROVIDED
THAT, PRIOR TO SUCH RESALE, THE HOLDER HAS NOTIFIED THE COMPANY OF SUCH
DISPOSITION AND PROVIDED THE COMPANY WITH WRITTEN ASSURANCES, IN FORM AND
SUBSTANCE SATISFACTORY TO THE COMPANY OF COMPLIANCE WITH THE REQUIREMENTS OF
SUCH EXEMPTION.
DO NOT REMOVE THIS INSTRUCTION SHEET FROM THE ATTACHED SHARE
CERTIFICATE EXCEPT IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH ABOVE.
-27-
<PAGE> 30
Exhibit D
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
To : [Name and Address of Transfer Agent]
Attention:
The undersigned, the Purchaser or an officer of, or other person duly
authorized by the Purchaser, hereby certifies that
________________________________________________________________________ [fill
in name of Purchaser] was the Purchaser of the shares evidenced by the attached
certificate, and as such, proposes to transfer such shares on or about
______________ [date] either (i) in accordance with the registration statement,
file number ________ in which case the Purchaser certifies that the requirement
of delivering a current prospectus has been complied with or will be complied
with in connection with such sale, or (ii) in accordance with Rule 144 under
the Securities Act of 1933 ("Rule 144"), in which case the Purchaser certifies
that it has complied with or will comply with the requirements of Rule 144.
Print or type:
Name of Purchaser: __________________________________________________
Name of Individual representing Purchaser (if an
Institution):_________________________________________________________
Title of Individual representing Purchaser (if an
Institution):_________________________________________________________
Signature by:
_________________________________________________
(Purchaser or Individual representing Purchaser)
-28-
<PAGE> 1
EXHIBIT 2.3
================================================================================
WARRANT
Southern Mineral Corporation
a Nevada Corporation
(the "Company")
To Purchase up to 120,000
Shares of the Company's common stock
issued to
Morgan Keegan & Company, Inc.
("Warrantholder")
December 23, 1996
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. EXERCISE OF WARRANT . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Manner of Exercise. . . . . . . . . . . . . . . . . . . 1
Section 1.2. When Exercise Effective. . . . . . . . . . . . . . . . 1
Section 1.3. Delivery of Stock Certificates, etc. . . . . . . . . . 2
(a) Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Partial Exercise . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE . . . . . . . . 2
Section 2.1. General; Warrant Price. . . . . . . . . . . . . . . . . 2
Section 2.2. Issuance of Additional Shares of Common Stock. . . . . 2
Section 2.3. Extraordinary Dividends and Distributions. . . . . . . 3
Section 2.4. Treatment of Options and Convertible Securities. . . . 3
Section 2.5. Treatment of Stock Dividends, Stock Splits, etc. . . . 4
Section 2.6. Computation of Consideration. . . . . . . . . . . . . . 5
(a) Shares Actually Issued . . . . . . . . . . . . . . . . . . . . . 5
(b) Shares Deemed Issued . . . . . . . . . . . . . . . . . . . . . . 5
(c) Stock Dividends, Etc. . . . . . . . . . . . . . . . . . . . . . 5
(d) Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.7. Adjustments for Combinations, etc. . . . . . . . . . . 6
Section 2.8. Dilution in Case of Other Securities. . . . . . . . . . 6
ARTICLE III. CONSOLIDATION, MERGER, ETC. . . . . . . . . . . . . . . . . . . 7
Section 3.1. Consolidation, Merger, Sale of Assets,
Reorganization, etc. . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.2. Assumption of Obligations. . . . . . . . . . . . . . . 7
ARTICLE IV. OTHER PROVISIONS CONCERNING DILUTION . . . . . . . . . . . . . . 7
Section 4.1. No Dilution or Impairment. . . . . . . . . . . . . . . 7
Section 4.2. Registration of Common Stock. . . . . . . . . . . . . . 8
Section 4.3. Availability of Information. . . . . . . . . . . . . . 8
Section 4.4. Reservation of Stock, etc. . . . . . . . . . . . . . . 8
ARTICLE V. RESTRICTIONS ON TRANSFER . . . . . . . . . . . . . . . . . . . . 8
Section 5.1. Restrictive Legends. . . . . . . . . . . . . . . . . . 9
Section 5.2. Notice of Proposed Transfer; Opinions of Counsel. . . . 9
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 5.3. Termination of Restrictions. . . . . . . . . . . . . . 9
ARTICLE VI. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS . . . . . . . . 10
Section 6.1. Ownership of Warrants. . . . . . . . . . . . . . . . . 10
Section 6.2. Office, Transfer and Exchange of Warrants. . . . . . . 10
(a) Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) New Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6.3. Replacement of Warrants. . . . . . . . . . . . . . . . 10
ARTICLE VII. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.1. Remedies. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.2. No Rights or Liabilities as Stockholder. . . . . . . . 13
Section 8.3. Notices. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.4. Registration Rights . . . . . . . . . . . . . . . . . . 13
Section 8.5. Miscellaneous. . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
ii
<PAGE> 4
SOUTHERN MINERAL CORPORATION
Warrant
No. W-1 December 23, 1996
Southern Mineral Corporation, a Nevada corporation (the "Company"),
for value received, hereby certifies that Morgan Keegan & Company, Inc., or
registered assigns, is entitled to purchase from the Company up to 120,000 duly
authorized, validly issued, fully paid and non-assessable shares of its common
stock, $0.01 par value (the "Common Stock") at any time or from time to time
prior to 5:00 p.m., Houston, Texas time, on the Expiration Date, all subject to
terms, conditions and adjustments set forth in this Warrant.
This Warrant (the "Warrant") (such term to include any warrants issued
in substitution therefor) evidences rights to purchase an aggregate of up to
120,000 shares of Common Stock subject to adjustment as provided herein.
Certain capitalized terms used in this Warrant are defined in Article VII;
unless otherwise specified, references to an "Exhibit" mean one of the exhibits
attached to this Warrant, references to an "Article" mean one of the articles
in this Warrant and references to a "Section" mean one of the sections of this
Warrant.
ARTICLE I. EXERCISE OF WARRANT
SECTION 1.1. MANNER OF EXERCISE. This Warrant may be exercised by
the holder hereof, in whole or in part, during normal business hours on any
Business Day, by surrender of this Warrant to the Company at its office
maintained pursuant to subsection (a) of Section 6.2, accompanied by a
subscription in substantially the form attached to this Warrant (or a
reasonable facsimile thereof) duly executed by such holder and accompanied by
payment, in cash or by certified or official bank check payable to the order of
the Company in the amount obtained by multiplying (a) the number of shares of
Common Stock (without giving effect to any adjustment thereof) designated in
such subscription by (b) the Initial Price, and such holder shall thereupon be
entitled to receive the number of duly authorized, validly issued, fully paid
and non-assessable shares of Common Stock (or Other Securities) determined as
provided in Articles II through IV.
SECTION 1.2. WHEN EXERCISE EFFECTIVE. Each exercise of this
Warrant shall be deemed to have been effected immediately prior to the close of
business on the Business Day on which this Warrant shall have been surrendered
to the Company as provided in Section 1.1, and at such time the Person or
Persons in whose name or names any
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certificate or certificates for shares of Common Stock (or Other Securities)
shall be issuable upon such exercise as provided in Section 1.3 shall be deemed
to have become the holder or holders of record thereof.
SECTION 1.3. DELIVERY OF STOCK CERTIFICATES, ETC. As soon as
practicable after each exercise of this Warrant, in whole or in part, and in
any event within five Business Days thereafter, the Company, at its expense
(including the payment by it of any applicable issue taxes), will cause to be
issued in the name of and delivered to the holder hereof, subject to Article V,
as such holder (upon payment by such holder of any applicable transfer taxes)
may direct, the following:
(A) CERTIFICATES. A certificate or certificates for the
number of duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock (or Other Securities) to which
such holder shall be entitled upon such exercise plus, in lieu of any
fractional share to which such holder would otherwise be entitled,
cash in an amount equal to the same fraction of the Market Price per
share on the Business Day next preceding the date of such exercise.
(B) PARTIAL EXERCISE.. In case such exercise is in part
only, a new Warrant or Warrants of like tenor dated the date hereof,
calling in the aggregate on the face or faces thereof for the number
of shares of Common Stock equal (without giving effect to any
adjustment thereof) to the number of such shares called for on the
face of this Warrant minus the number of such shares designated by the
holder upon such exercise as provided in Section 1.1.
ARTICLE II. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE
SECTION 2.1. GENERAL; WARRANT PRICE. The number of shares of
Common Stock which the holder of this Warrant shall be entitled to receive upon
each exercise hereof shall be determined by multiplying the number of shares of
Common Stock which would be issuable upon such exercise, as designated by the
holder hereof pursuant to Section 1.1, by a fraction (the "Dilution Factor")
(a) the numerator of which is the Initial Price and (b) the denominator of
which is the Warrant Price in effect at the effective time of such exercise (as
provided in Section 1.2). The "Warrant Price" shall initially be the Initial
Price, shall be adjusted and readjusted from time to time as provided in this
Article II and, as so adjusted or readjusted, shall remain in effect until a
further adjustment or readjustment thereof is required by this Article II.
SECTION 2.2. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In
case the Company at any time or from time to time after the date hereof shall
issue or sell Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to section 2.4 or 2.5) without
consideration or for a
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consideration per share less than the Current Market Price, then, and in each
such case, such Warrant Price shall be reduced, concurrently with such issue or
sale, to the price calculated by multiplying the Warrant Price then in
existence by a fraction, the numerator of which shall be (i) the number of
shares of Common Stock outstanding immediately prior to such issue or sale plus
(ii) the number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of such Additional Shares of
Common Stock so issued or sold would purchase at the Current Market Price, and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such issue or sale, provided that, for the
purposes of this Section 2.2, (i) immediately after any Additional Shares of
Common Stock are deemed to have been issued pursuant to Section 2.4 or 2.5,
such Additional Shares of Common Stock shall be deemed to be outstanding, and
(ii) treasury shares shall not be deemed to be outstanding. Notwithstanding
the foregoing, no adjustment to the Warrant Price shall be made in connection
with the sale of Common Stock in an underwritten public offering or in a
private placement in which the purchase price for the Common Stock issued is in
excess of 70% of the Current Market Price.
SECTION 2.3. EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. Without
the prior written consent of the holder of this Warrant, the Company shall not
make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or Other Securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock, other than (a) a dividend
payable in Additional Shares of Common Stock or (b) a dividend payable in cash
or other property and declared out of the earned surplus of the Company as at
the date thereof as increased by any credits (other than credits resulting from
a revaluation of property) and decreased by any debits made thereto.
SECTION 2.4. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES.
(a) In case the Company at any time or from time to time after the
date hereof shall issue, sell, grant or assume, or shall fix a record date for
the determination of holders of any class of securities entitled to receive,
any Options or Convertible Securities, then, and in each such case, the maximum
number of Additional Shares of Common Stock (as set forth in the instrument
relating thereto, without regard to any provisions contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed to be
the number of Additional Shares of Common Stock issued as of the time of such
issue, sale, grant or assumption or, in case such a record date shall have been
fixed, as of the close of business on such record date (or, if the Common Stock
trades on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading); provided that such Additional Shares of Common Stock
shall not be deemed to have been issued unless the consideration per share
(determined pursuant to Section 2.6) of such shares would be less than the
Current Market Value in effect on the date of and
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immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), as the case may be; and provided, further, that in any such case in
which Additional Shares of Common Stock are deemed to be issued no further
adjustment of the Warrant Price shall be made upon the subsequent issue or sale
of Convertible Securities or Additional Shares of Common Stock upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(b) Upon the expiration (or purchase by the Company and
cancellation or retirement) of any such Options which shall not have been
exercised or the expiration of any rights of conversion or exchange under any
such Convertible Securities which (or purchase by the Company and cancellation
or retirement of any such Convertible Securities the rights of conversion or
exchange under which) shall not have been exercised, the Warrant Price computed
upon the original issue, sale, grant or assumption thereof (or upon the
occurrence of the record date, or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or
Convertible Securities, the only Additional Shares of Common
Stock issued or sold were the Additional Shares of Common
Stock, if any, actually issued or sold upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the
consideration actually received by the Company for the issue,
sale, grant or assumption of all such Options, whether or not
exercised, plus the consideration actually received by the
Company upon such exercise, or for the issue or sale of all
such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually
received by the Company upon such conversion or exchange, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually
issued or sold upon the exercise of such Options were issued
at the time of the issue, sale, grant or assumption of such
Options, and consideration received by the Company for the
Additional Shares of Common Stock deemed to have then been
issued was the consideration actually received by the Company
for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed to
have been received by the Company (pursuant to Section 2.6)
upon the issue or sale of such Convertible Securities with
respect to which such Options were actually exercised.
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SECTION 2.5. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In
case the Company at any time or from time to time after the date hereof shall
declare or pay any dividend on the Common Stock payable in Common Stock, or
shall effect a subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in Common Stock), then, and in each such case,
Additional Shares of Common Stock shall be deemed to have been issued (a) in
the case of any such dividend, immediately after the close of business on the
record date for the determination of holders of any class of securities
entitled to receive such dividend, or (b) in the case of any such subdivision,
at the close of business on the day immediately prior to the day upon which
such corporate action becomes effective.
SECTION 2.6. COMPUTATION OF CONSIDERATION. For the purpose of
Article II, the following shall be used to determine the consideration received
or deemed received by the Company:
(A) SHARES ACTUALLY ISSUED. The consideration for the
issue or sale of any Additional Shares of Common Stock shall,
irrespective of the accounting treatment of such consideration,
(i) insofar as it consists of cash, be computed
at the net amount of cash received by the Company, without
deducting any expenses paid or incurred by the Company or any
commissions or compensations paid or concessions or discounts
allowed to underwriters, dealers or others performing similar
services in connection with such issue or sale,
(ii) insofar as it consists of property (including
securities) other than cash, be computed at the fair value
thereof at the time of such issue or sale, as determined in
good faith by the Board of Directors of the Company, and
(iii) in case Additional Shares of Common Stock are
issued or sold together with other stock or securities or
other assets of the Company for a consideration which covers
both, be the portion of such consideration so received,
computed as provided in clauses (i) and (ii) above, applicable
to such Additional Shares of Common Stock, all as determined
in good faith by the Board of Directors of the Company.
(B) SHARES DEEMED ISSUED. Additional Shares of Common
Stock deemed to have been issued pursuant to Section 2.4, relating to
Options and Convertible Securities, shall be deemed to have been
issued for a consideration per share determined by dividing,
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(i) the value of the total amount, if any,
received and receivable by the Company as consideration for
the issue, sale, grant or assumption of the Options or
Convertible Securities in question, plus the value of the
minimum aggregate amount of additional consideration (as set
forth in the instruments relating thereto, without regard to
any provision contained therein for a subsequent adjustment of
such consideration to protect against dilution) payable to the
Company upon the exercise in full of such Options or the
conversion or exchange of such Convertible Securities or, in
the case of Options for Convertible Securities, the exercise
of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities, in each case
computing such consideration as provided in the foregoing
subdivision (a),
by
(ii) the maximum number of Additional Shares of
Common Stock (as set forth in the instruments relating
thereto, without regard to any provision contained therein for
a subsequent adjustment of such number to protect against
dilution) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(C) STOCK DIVIDENDS, ETC.. Additional Shares of Common
Stock issued or deemed to have been issued pursuant to Section 2.5,
relating to stock dividends, stock splits, etc., shall be deemed to
have been issued for no consideration.
(D) SERVICES. Additional Shares of Common Stock issued
or sold or deemed issued or sold in exchange for services or the
promise of future services shall be deemed to have been issued for
such consideration as is determined by the Board of Directors in good
faith.
SECTION 2.7. ADJUSTMENTS FOR COMBINATIONS, ETC. In case the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Warrant Price in effect immediately prior to such combination or
consolidation shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
SECTION 2.8. DILUTION IN CASE OF OTHER SECURITIES. In case any
Other Securities shall be issued or sold or shall become subject to issue or
sale upon the conversion or exchange of any stock (or Other Securities) of the
Company (or any issuer of Other Securities or any other Person referred to in
Article III) or to subscription, purchase or other acquisition pursuant to any
Options issued or granted by the Company (or any such other issuer or Person)
for a consideration such as to dilute, on a basis consistent with the standards
established in the other provisions of this Article II, the purchase rights
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granted by this Warrant, then, and in each such case, the computations,
adjustments and readjustments provided for in this Article III with respect to
the Warrant Price shall be made as nearly as possible in the manner so provided
and applied to determine the amount of Other Securities from time to time
receivable upon the exercise of the Warrants, so as to protect the holders of
the Warrants against the effect of such dilution.
ARTICLE III. CONSOLIDATION, MERGER, ETC.
SECTION 3.1. CONSOLIDATION, MERGER, SALE OF ASSETS,
REORGANIZATION, ETC. From and after the date hereof, the Company shall not (a)
consolidate with or merge into any other Person if the Company is not the
continuing or surviving corporation of such consolidation or merger, or (b)
permit any other Person to consolidate with or merge into the Company even
though the Company shall be the continuing or surviving Person if, in
connection with such consolidation or merger, the Common Stock or Other
Securities shall be changed into or exchanged for stock or other securities of
any other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or (d)
effect a capital reorganization or reclassification of the Common Stock or
Other Securities (other than a capital reorganization or reclassification
resulting in the issue of Additional Shares of Common Stock for which
adjustment in the Warrant Price is provided in Section 2.2 or 2.3) unless the
Company provides the holder of this Warrant written notice of the proposed
transaction 10 days prior to any record date for notice to stockholders
entitled to vote on such transaction or, if no such vote is taken, 20 days
prior to the effective date or closing of the transaction.
SECTION 3.2. ASSUMPTION OF OBLIGATIONS. Notwithstanding anything
contained in this Warrant to the contrary, the Company will not effect any of
the transactions described in clauses (a) through (d) of Section 3.1 unless,
prior to the consummation thereof, each Person (other than the Company) which
may be required to deliver any stock, securities, cash or property upon the
exercise of this Warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the holder of this Warrant, (a)
the obligations of the Company under this Warrant (and if the Company shall
survive the consummation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing obligations
of the Company under this Warrant) and (b) the obligation to deliver to such
holder such shares of stock, securities, cash or property as, in accordance
with the foregoing provisions of this Article III, such holder may be entitled
to receive.
ARTICLE IV. OTHER PROVISIONS CONCERNING DILUTION
SECTION 4.1. NO DILUTION OR IMPAIRMENT. The Company will not, by
amendment of its certificate of incorporation or through any consolidation,
merger, reorganization,
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transfer of assets, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant
against dilution or other impairment. Without limiting the generality of the
foregoing, the Company (a) will not permit the par value of any shares of stock
receivable upon the exercise of this Warrant to exceed the amount payable
therefor upon such exercise, (b) will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock on the exercise of the Warrant
from time to time outstanding, and (c) will not take any action which results
in any adjustment of the Warrant Price if the total number of shares of Common
Stock (or Other Securities) issuable after the action upon the exercise of the
Warrant would exceed the total number of shares of Common Stock (or Other
Securities) then authorized by the Company's certificate of incorporation and
available for the purpose of issuance upon such exercise.
SECTION 4.2. REGISTRATION OF COMMON STOCK. If any shares of
Common Stock required to be reserved for purposes of exercise of this Warrant
require registration with or approval of any governmental authority under any
federal or state law (other than the Securities Act) before such shares may be
issued upon exercise because no exemption from such registration is available,
the Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered or approved, as the case may
be. At any such time as Common Stock is listed on any national securities
exchange, the Company will, at its expense, list the shares of Common Stock
issuable upon exercise of the Warrant and maintain the listing of such shares
after their issuance; and the Company will also list on such national
securities exchange, will register under the Exchange Act and will maintain
such listing of, any Other Securities that at any time are issuable upon
exercise of the Warrants, if and at the time that any securities of the same
class shall be listed on such national securities exchange by the Company.
SECTION 4.3. AVAILABILITY OF INFORMATION. The Company will
cooperate with each holder of any Warrant, in supplying such information as may
be reasonably requested by such holder to complete and file any information
reporting forms presently or hereafter required by the Commission to report
such holders beneficial ownership of Common Stock or Other Securities or as a
condition to the availability of an exemption from the provisions of the
Securities Act for the sale of any Restricted Securities.
SECTION 4.4. RESERVATION OF STOCK, ETC. The Company will at all
times reserve and keep available, solely for issuance and delivery upon
exercise of the Warrants, the number of shares of Common Stock (or Other
Securities) from time to time issuable upon exercise of the Warrant. All
shares of Common Stock (or Other Securities) issuable upon exercise of the
Warrant shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and non-assessable with
no liability on the part of the holders thereof.
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ARTICLE V. RESTRICTIONS ON TRANSFER
SECTION 5.1. RESTRICTIVE LEGENDS. Except as otherwise permitted
by this Article V, each Warrant (including each Warrant issued upon the
transfer of any Warrant) shall be stamped or otherwise imprinted with a legend
in substantially the following form:
"This Warrant and any shares acquired upon the exercise of
this Warrant have not been registered under the Securities Act of
1933, as amended, and may not be transferred, sold or otherwise
disposed of in the absence of such registration or an exemption
therefrom under such Act. This Warrant and such Shares may be
transferred only in compliance with the conditions specified in this
Warrant."
Except as otherwise permitted by this Article V, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and may not be transferred
in the absence of such registration or an exemption therefrom under
such Act."
SECTION 5.2. NOTICE OF PROPOSED TRANSFER; OPINIONS OF COUNSEL.
Prior to any transfer of any Restricted Securities which transfer is not
registered under an effective registration statement under the Securities Act,
the holder thereof will give written notice to the Company of such holder's
intention to effect such transfer and to comply in all other respects with this
Section 5.2. Each such notice (a) shall describe the manner and circumstances
of the proposed transfer and (b) if requested by the Company, shall include an
opinion of legal counsel addressed to the Company, in form and substance
reasonably satisfactory to the Company, to the effect that such transfer does
not violate the Securities Act of 1933 and applicable state securities laws.
SECTION 5.3. TERMINATION OF RESTRICTIONS. The restrictions
imposed by this Article V upon the transferability of Restricted Securities
shall cease and terminate as to any particular Restricted Securities when such
securities shall have been sold pursuant to an effective registration statement
under the Securities Act or otherwise become freely transferable under
applicable federal and state securities laws by the holder thereof. Whenever
such restrictions shall cease and terminate as to any Restricted Securities,
the holder thereof shall be entitled to receive from the Company, without
expense (other than applicable transfer taxes, if any), new certificates
representing the securities not bearing the applicable legends required by
Section 5.1.
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ARTICLE VI. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS
SECTION 6.1. OWNERSHIP OF WARRANTS. The Company may treat the
person in whose name any Warrant is registered on the register kept at the
office of the Company maintained pursuant to subdivision (a) of Section 6.2 as
the owner and holder thereof for all purposes, notwithstanding any notice to
the contrary, except that, if and when any Warrant is properly assigned in
blank, the Company may (but shall not be obligated to) treat the bearer thereof
as the owner of such Warrant for all purposes, notwithstanding any notice to
the contrary. Subject to Article V, a Warrant, if properly assigned, may be
exercised by a new holder without a new Warrant first having been issued.
SECTION 6.2. OFFICE, TRANSFER AND EXCHANGE OF WARRANTS.
(A) OFFICE. The Company will maintain an office in where
notices, presentations and demands in respect of this Warrant may be
made upon it. Such office currently is at 500 Dallas, Suite 2800,
Houston, Texas 77002 until such time as the Company shall notify each
holder of the Warrant of any change of location of such office.
(B) NEW WARRANT. Upon the surrender of any Warrant,
properly endorsed, for registration of transfer or for exchange at the
office of the Company maintained pursuant to subdivision (a) of this
Section 6.2, the Company at its expense will (subject to compliance
with Article V, if applicable) execute and deliver to or upon the
order of the holder thereof a new Warrant or Warrants of like tenor,
in the name of such holder or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, calling in the
aggregate on the face or faces thereof for the number of shares of
Common Stock called for on the face or faces of the Warrant or
Warrants so surrendered.
SECTION 6.3. REPLACEMENT OF WARRANTS. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction of any Warrant held by a Person other than Purchaser or any
institutional investor, upon delivery of indemnity reasonably satisfactory to
the Company in form and amount or, in the case of any such mutilation, upon
surrender of such Warrant for cancellation at the office of the Company
maintained pursuant to subdivision (a) of Section 6.2, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
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ARTICLE VII. DEFINITIONS
As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:
Additional Shares of Common Stock: All shares (including treasury
shares) of Common Stock issued or sold (or pursuant to Section 2.4 or 2.5,
deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than
(a) shares issued upon the exercise of the Warrant or
pursuant to Options issued in exchange for services rendered to the
Company or any subsidiary;
(b) such additional number of shares as may become
issuable upon the exercise of any of the securities referred to in the
foregoing clause (a) by reason of adjustments required pursuant to
anti-dilution provisions applicable to such securities as in effect on
the date hereof, but only if and to the extent that such adjustments
are required as the result of the original issuance of the Warrants.
Business Day: Any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in the States of Texas or New York are
authorized by law to be closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
Commission: The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such
term to include (i) any stock into which such Common Stock shall have been
changed or any stock resulting from any reclassification of such Common Stock
or (ii) all other stock of any class or classes (however designated) of the
Company the holders of which have the right, without limitation as to amount,
either to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference.
Company: As defined in the introduction to this Warrant, such term to
include any corporation which shall succeed to or assume the obligations of the
Company hereunder in compliance with Article III.
Convertible Securities: Any evidences of indebtedness, shares of
stock (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
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Current Market Price: On any date specified herein, the average daily
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that
if no Common Stock is then listed or admitted to trading on any national
securities exchange or quoted in the over-the-counter market, the Current
Market Price shall be the Market Price on such date; provided, however, that if
Common Stock is sold pursuant to a firm commitment public offering, the Current
Market Price for purposes of Section 2.2 shall be deemed to be the proceeds per
share to the Company from such offering.
Dilution Factor: As defined in Section 2.1.
Exchange Act: The Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time.
Expiration Date: December 23, 2001.
Initial Price: $4.50 per share.
Market Price: On any date specified herein, the amount per share of
the Common Stock, equal to (a) the last sale price of such Common Stock,
regular way, on such date or, if no such sale takes place on such date, the
average of the closing bid and asked prices thereof on such date, in each case
as officially reported on the principal national securities exchange on which
such Common Stock is then listed or admitted to trading, or (b) if such Common
Stock is not then listed or admitted to trading on any national securities
exchange but is designated as a national market system security by the NASD,
the last trading price of the Common Stock on such date, or (c) if there shall
have been no trading on such date or if the Common Stock is not so designated,
the average of the closing bid and asked prices of the Common Stock on such
date as shown by the NASD automated quotation system, or (d) if such Common
Stock is not then listed or admitted to trading on any national exchange or
quoted in the over-the-counter market, the fair market value of the Common
Stock as determined by the Company's Board of Directors in good faith.
NASD: The National Association of Securities Dealers, Inc.
Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which
the holder of the Warrant at any time shall be entitled to receive, or shall
have received upon the exercise of the Warrant, in lieu of or in addition to
Common Stock, or which at any time shall be
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issuable or shall have been issued in exchange for or in replacement of Common
Stock or Other Securities pursuant to Article III or otherwise.
Person: Any corporation, limited liability company, association,
partnership, joint venture, trust, estate, organization, business, individual,
government or political subdivision thereof or governmental agency.
Purchase Agreement: The Purchase Agreement, dated December 23, 1996,
among the Company. and certain purchasers of Common Stock named therein.
Restricted Securities: All of the following: (a) any Warrants
bearing the applicable legend or legends referred to in Section 5.1, (b) any
shares of Common Stock (or Other Securities) which have been issued upon the
exercise of Warrants and which are evidenced by a certificate or certificates
bearing the applicable legend or legends referred to in such section and (c)
unless the context otherwise requires, any shares of Common Stock (or Other
Securities) which are at the time issuable upon the exercise of Warrants and
which, when so issued, will be evidenced by a certificate or certificates
bearing the applicable legend or legends referred to in such section.
Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Warrant Price: As defined in Section 2.1 of this Warrant.
ARTICLE VIII. MISCELLANEOUS
SECTION 8.1. REMEDIES. The Company stipulates that the remedies
at law of the holder of this Warrant in the event of any default or threatened
default by the Company in the performance of or compliance with any of the
terms of this Warrant are not and will not be adequate and that, to the fullest
extent permitted by law, such terms may be specifically enforced by a decree
for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
SECTION 8.2. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. The holder
of this Warrant and all subsequent holders thereof hereby agree that no
provision of this Warrant shall be construed as conferring upon the holder
hereof any rights as a stockholder of the Company or as imposing any obligation
on such holder to purchase any securities or as imposing any liabilities on
such holder as a stockholder of the Company, whether such obligation or
liabilities are asserted by the Company or by creditors of the Company.
SECTION 8.3. NOTICES. All notices and other communications under
this Warrant shall be in writing and shall be mailed by registered or certified
mail, return receipt
13
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requested, addressed (a) if to any holder of any Warrant, to the registered
address of such holder as set forth in the register kept at the principal
office of the Company, or (b) if the Company, to the attention of its President
at its office maintained pursuant to subdivision (a) of Section 6.2, provided
that the exercise of any Warrant shall be effective in the manner provided in
Article I.
SECTION 8.4. REGISTRATION RIGHTS. The shares of Common Stock
issuable upon exercise of this Warrant shall be entitled to the registration
rights provided in the Purchase Agreement.
SECTION 8.5. MISCELLANEOUS.
(a) This Warrant may be amended, waived, discharged or terminated
and the Company may take any action herein required to be performed by it, only
if the Company shall have obtained the written consent to such amendment,
action or omission to act, of the holder or holders of Warrants entitling such
holders to purchase 51% or more by number of shares of the total number of
shares of Common Stock issuable under all Warrants at the time outstanding.
(b) THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
(c) The section headings in this Warrant are for purposes of
convenience only and shall not constitute a part hereof.
(d) This Agreement shall be binding upon and inure to the Benefit
of and be enforceable by the parties hereto and their respective successors and
assigns, subject to compliance with applicable federal and state securities
laws.
SOUTHERN MINERAL CORPORATION
By:
---------------------------------
14
<PAGE> 18
FORM OF SUBSCRIPTION
To ___________________________:
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases _________* shares of
Common Stock of Southern Mineral Corporation, and herewith makes payment of
$___________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to _____________________, whose address is
_______________________________________.
Dated: (Signature must conform in all respects
--------------------- to name of holder as specified on the
face or Warrant)
------------------------------------------
(Street Address)
------------------------------------------
(City) (State) (Zip Code)
- ---------------------------
*Insert the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any adjustment
for Additional Shares of Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of this Warrant,
may be delivered upon exercise. In the case of a partial exercise, a new
Warrant or Warrants will be issued and delivered, representing the unexercised
portion of the Warrant, to the holder surrendering the Warrant.
15
<PAGE> 19
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto _________________ the right
represented by such Warrant to purchase shares of Common Stock of Southern
Mineral Corporation to which such Warrant relates, and appoints ______________
his Attorney in fact to make such transfer on the books of maintained for such
purpose, with full power of substitution in the premises.
Dated: (Signature must conform in all respects
--------------------------- to name of holder as specified on the
face or Warrant)
------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- --------------------------
16
<PAGE> 1
EXHIBIT 99
CONTACT:
James H Price
Vice President-Finance
(713) 658-9444
December 23, 1996
SOUTHERN MINERAL REPORTS PRIVATE PLACEMENT OF COMMON STOCK
HOUSTON-- Southern Mineral Corporation (NASDAQ:SMIN) today announced
the private placement of 2,500,000 shares of the Company's common stock at
$4.50 per share to institutional investors. Immediately following closing, the
Company will register the shares in a shelf registration to be filed with the
Securities and Exchange Commission. Proceeds from the offering of
approximately $10,600,000, after related expenses, will reduce bank debt, fund
the cost of future exploration and development projects and provide additional
working capital for general corporate purposes. Morgan Keegan & Company, Inc.
acted as placement agent for the Company in the issuance of the shares.
"This placement is a major step for Southern Mineral Corporation,"
stated Steven H. Mikel, President. "We are positioning the Company to begin
1997 on strong financial footing to pursue acquisitions as well as exploration
and development. This is another step in our plan to create market awareness
of the Company, and we are pleased to have added over a dozen new institutional
shareholders to our existing shareholder base."
Southern Mineral Corporation is an oil and gas acquisition,
exploration and production company that owns interests in oil and gas
properties located along the Gulf Coast, the Mid-continent and in Canada. The
Company is listed on the NASDAQ SmallCap Market under the symbol SMIN.
