<PAGE> 1
As filed with the Securities and Exchange Commission on February 13, 1997.
Registration No. 333-19105
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
AMENDMENT NO. 2
TO
FORM S-3
---------------------------
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------
SOUTHERN MINERAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 36-2068676
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 DALLAS, SUITE 2800
HOUSTON, TEXAS 77002
(713) 658-9444
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
STEVEN H. MIKEL With copies to:
500 DALLAS, SUITE 2800 NORA J. DOBIN
HOUSTON, TEXAS 77002 PORTER & HEDGES, L.L.P.
(713) 658-9444 700 LOUISIANA, SUITE 3500
(Name, address, including zip code, and HOUSTON, TEXAS 77002-2764
telephone number, including area code, (713) 226-0600
of agent for service)
---------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
---------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION, DATED FEBRUARY 13, 1997
2,815,000 SHARES
SOUTHERN MINERAL CORPORATION
COMMON STOCK
---------------------------
The shares of common stock offered hereby are shares of common stock,
par value $.01 per share ("Common Stock"), of Southern Mineral Corporation, a
Nevada corporation (the "Company"), owned by certain stockholders of the
Company. See "Selling Stockholders" and "Description of Securities." The
Company will not receive any of the proceeds from the sale of the Common Stock
offered hereby.
The Company's Common Stock trades on the NASDAQ SmallCap Market under
the symbol "SMIN." On February 6, 1997, the reported closing sale price of the
Common Stock on the NASDAQ SmallCap Market was $7.50 per share.
The Common Stock may be offered and sold from time to time by Selling
Stockholders through brokers or to dealers or directly to one or more
purchasers in negotiated transactions, at market prices prevailing at the time
of sale or at prices related to such market prices. The Selling Stockholders
and brokers executing selling orders on behalf of the Selling Stockholders may
be deemed to be "underwriters" within the meaning of the Securities Act of
1933, as amended ("Securities Act"), in which event commissions received by
such brokers may be deemed to be underwriting commissions under the Securities
Act. Although each Selling Stockholder may sell all or a portion of the shares
of Common Stock offered hereby, no Selling Stockholder is required to make any
such sale. See "Plan of Distribution" for further information concerning the
plan of distribution of the Common Stock.
The expenses of this offering, estimated at $50,000, will be paid by the
Company.
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY SHOULD
CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER THE CAPTION "RISK FACTORS."
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY , 1997.
<PAGE> 3
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C., a Registration Statement on Form S-3 under
the Securities Act with respect to the Common Stock offered by this Prospectus.
Certain portions of the Registration Statement have not been included in this
Prospectus. For further information, reference is made to the Registration
Statement and the Exhibits thereto. The Company is subject to the information
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Commission. The Registration Statement (with exhibits),
as well as such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at its principal offices at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and its regional offices at Northwest Atrium Center,
500 Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the
Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission at
http://www.sec.gov.
The Company provides its security holders an annual report containing
audited financial statements for the fiscal year covered thereby. Such report
usually is provided within 120 days after the end of the Company's most recent
fiscal year.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's (i) annual report on Form 10-KSB, as amended by Form
10-KSB/A-1, for the fiscal year ended December 31, 1995, (ii) the Company's
quarterly report on Form 10-QSB for the fiscal quarter ended March 31, 1996,
(iii) the Company's quarterly report on Form 10-QSB for the fiscal quarter
ended June 30, 1996, (iv) the Company's quarterly report on Form 10-QSB, as
amended by Form 10-QSB/A-1, for the fiscal quarter ended September 30, 1996,
(v) the Company's current report on Form 8-K dated December 20, 1995, as
supplemented by Form 8-K/A dated December 20, 1995 and amended by Form 8-K/A-2
dated December 20, 1995, (vi) the Company's current report on Form 8-K dated May
17, 1996, (vii) the Company's current report on Form 8-K dated August 30, 1996,
as amended by Form 8-K/A-1 dated August 30, 1996, and (viii) the Company's
current report on Form 8-K dated December 23, 1996, as amended by Forms 8-K-1
and 8-K/A-2 dated December 23, 1996, are hereby incorporated herein by
reference.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the offering covered hereby shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in this Prospectus, in any
supplement to this Prospectus or in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference modifies or replaces such
statement. Any such statement shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the documents incorporated by reference in this
Prospectus, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the information that this
Prospectus incorporates. In addition, a copy of the Company's most recent
annual report on Form 10-K or Form 10-KSB, as the case may be, will be promptly
furnished, without charge, upon written or oral request. All such requests
should be directed to Southern Mineral Corporation, 500 Dallas, Suite 2800,
Houston, Texas 77002, Attention: Corporate Secretary, telephone number (713)
658-9444.
-2-
<PAGE> 4
THE COMPANY
Southern Mineral Corporation, a Nevada corporation (the "Company"), is
an independent oil and gas company engaged in the acquisition, exploitation,
exploration and operation of oil and gas properties, primarily along the Gulf
Coast, the Mid-continent and in Canada, with a primary focus on the Gulf Coast
Basin, both onshore and offshore. The Company's business strategy is to
increase reserves and shareholder value through a balanced program of
acquisitions, exploitation and controlled risk exploration. In addition to oil
and gas leasehold interests, the Company owns fee interests in the oil and gas
under some 665,148 gross surface acres (comprising some 346,760 net mineral
acres) in Mississippi, Texas and New Mexico. The Company has no current
development or other plans with respect to these fee interests other than
leasing them to third parties for exploration and development.
The Company's executive offices are located at 500 Dallas, Suite 2800,
Houston, Texas 77002, telephone number (713) 658-9444.
RISK FACTORS
Prospective purchasers should carefully consider the following factors.
HISTORICAL OPERATING LOSSES
The Company has incurred losses from operations (pre-tax) of $1,312,000,
$1,531,000, $881,000, $3,691,000 and $128,000 for each of its fiscal years
ended December 31, 1991, 1992, 1993, 1994 and 1995, respectively. Although
management expects the Company to be profitable in fiscal 1996, no assurance
can be made that the Company will operate profitably in the future. The
likelihood of the Company's future profitability must be considered in light of
the business and operating risks, expenses, difficulties, and delays frequently
encountered in connection with the oil and gas acquisition, exploration,
development and production business in which the Company is engaged.
REPLACEMENT OF RESERVES
The Company must continually acquire, explore for and develop new oil
and gas reserves to replace those being depleted by production. Without
successful reserve acquisitions or drilling operations, the Company's assets,
properties and revenues will continue to decline.
ACQUISITION RISKS
Until such time as an oil and gas exploration company acquires leases
covering its "prospects," its prospects are geological ideas rather than
recordable title interests in real property and are subject to prior lease in
whole or in part by others. Although the Company is actively engaged in
evaluating and negotiating reserve acquisition opportunities, there can be no
assurance that the Company will be successful in acquiring any additional
material property interests. The rate at which the Company is able to sustain
any future growth may be limited to the extent that it requires and is unable
to obtain suitable financing or timely expand its existing staff and operating
capabilities. The business of purchasing producing oil and gas properties is
an inherently speculative activity that involves a high degree of business and
financial risk. Property acquisition decisions generally are based on various
assumptions and subjective judgments that are speculative. If the Company
over-estimates the potential oil and gas reserves of a property to be acquired
or if subsequent operations on the property are unsuccessful, then acquisition
of the property could result in substantial losses to the Company.
UNCERTAINTY OF RESERVE ESTIMATES AND FUTURE NET CASH FLOWS
The Company's property acquisition activities are based in part on
available geological, geophysical, production and engineering data, the extent,
quality and reliability of which varies. Oil and gas reserve estimates and the
discounted present value estimates associated therewith are based on numerous
engineering, geological and operational assumptions that generally are derived
from limited data. Common assumptions include such matters as the areal extent
and average thickness of a particular reservoir, the average porosity and
permeability of the reservoir, the anticipated future production from existing
and future wells, future development and production costs, and the ultimate
hydrocarbon recovery percentage. In addition, estimates of reserve quantities
and future net cash flows and the present value thereof typically are based on
period-
-3-
<PAGE> 5
ended prices and costs which may be materially different than actual prices and
costs. As a result, oil and gas reserve estimates and the discounted net
present value estimates associated therewith frequently are revised in
subsequent periods to reflect actual prices and production data obtained after
the date of the original estimate. Actual oil and gas production may vary
considerably from anticipated results. If reserve estimates are inaccurate,
production rates may decline more rapidly than anticipated and future
production revenues may be less than anticipated. Moreover, significant
downward revision of reserve estimates may adversely affect the Company's
ability to borrow or have an adverse impact on other financing arrangements.
Further, if the estimates of quantities, prices and costs prove inaccurate, the
Company is unsuccessful in expanding its oil and gas reserve base, and/or
declines in oil and gas prices occur, then writedowns in the capitalized costs
associated with the Company's oil and gas assets may be required. Different
reserve engineers may make different estimates of reserve quantities and cash
flow from the same available data.
NEED FOR ADDITIONAL CAPITAL
The oil and gas industry is capital intensive. The Company's ability to
expand its reserve base is dependent upon the availability of internally
generated cash flow and financing alternatives. Such financing may consist of
bank or other commercial debt, forward sales of production, equity or debt
securities or any combination thereof. The Company currently has available to
borrow $14,100,000 of its $17,400,000 revolving line of credit with a
commercial bank. This credit facility is secured by substantially all of the
Company's oil and gas assets. In connection with the Company's payoff in
December 1996 of a term note to the bank with funds from this revolving
facility, the revolving line was increased to $18,000,000, with the borrowing
base commitment decreasing by $300,000 per month beginning January 1997, and
the Company's interest rate choice between floating prime and a LIBOR-based
rate changed by reducing the LIBOR rate option to LIBOR plus two and
one-quarter percent. There can be no assurance that the Company will be
successful in obtaining additional financing if and when required. Any
substantial alteration or increase in the Company's capitalization through the
issuance of debt or equity securities or otherwise may significantly increase
the leverage and decrease the financial flexibility of the Company. Due to
uncertainties respecting the availability of suitable properties, purchase
terms, and other matters associated with any purchase of such properties, the
Company is unable to estimate the amount of any financing that it may need to
acquire and develop additional properties. If the Company is unable to obtain
such financing if and when needed, it will be forced to curtail its
contemplated property acquisition and development activities, and to finance
its business activities with only such internally generated funds as may then
be available.
EXPLORATORY DRILLING ACTIVITIES
Exploratory drilling involves a high degree of financial and operating
risk, including the risk that no commercially productive natural gas and oil
reservoirs will be encountered. The cost of drilling, completing and operating
exploratory and development wells often is uncertain. Drilling operations may
be curtailed, delayed or canceled as a result of many factors, including
unexpected formations and drilling conditions, pressure or mechanical
irregularities in formations, equipment failures or accidents, as well as title
problems, weather conditions, compliance with governmental requirements,
shortages or delays in the delivery of equipment, and financial instability of
well operators, major working interest owners and well servicing companies.
The Company is dependent upon the operator of wells which are not operated by
the Company to properly conduct leasing, drilling and completion activities.
The operator's failure to properly perform could adversely affect the Company.
The Company's decision to participate in the drilling of exploratory wells and,
ultimately, the success of the Company's participation depends largely on the
results of seismic survey data and other geological and geophysical data. The
acquisition and interpretation of such data involves subjective professional
judgment. Therefore, reliance of such data and interpretations poses the risk
that a decision to participate in the drilling of a well may be founded on
incorrect data, erroneous interpretations of data, or both.
PRICE VOLATILITY
The revenues generated by the Company are highly dependent upon the
prices of oil and gas. Market conditions make it difficult to estimate future
prices of oil and natural gas. In the past, the Company's average annual sales
price for oil and natural gas has been erratic, and it is likely that oil and
gas prices will continue to fluctuate in the future. Various factors beyond
the Company's control affect prices of oil and natural gas, including worldwide
and domestic supplies of oil and natural gas, the ability of the members of the
Organization of Petroleum Exporting Countries (OPEC) to agree to and maintain
oil price and production controls, political instability or armed conflict in
oil-producing regions, the price of foreign
-4-
<PAGE> 6
imports, the level of consumer demand, the price and availability of
alternative fuels, the availability of pipeline capacity and changes in
existing federal regulation and price controls.
MARKETING RISKS
The availability of a ready market for the Company's oil and gas depends
on numerous factors beyond its control, including the demand for and supply of
oil and gas, the proximity of the Company's natural gas reserves to pipelines,
the capacity of such pipelines, fluctuations in production and seasonal demand,
the effects of inclement weather and governmental regulation. New gas wells
may be shut-in for lack of a market until a gas pipeline or gathering system
with available capacity is extended into the area. New oil wells may have
production curtailed until production facilities and delivery arrangements are
acquired or developed. The Company's business will always be subject to these
types of risks.
OPERATING HAZARDS AND UNINSURED RISKS
The Company's operations are subject to all of the risks incident to
exploration for and production of oil and gas, including blow-outs, cratering,
pollution and fires, each of which could result in damage to or destruction of
oil and gas wells or production facilities or damage to persons and property.
The Company's insurance may not fully cover certain of these risks and the
occurrence of a significant event not fully insured against could have a
material adverse effect on the Company's financial position.
CANADIAN CURRENCY RISKS
Approximately 30% of the Company's revenues during the nine months ended
September 30, 1996 were derived from Canadian properties acquired in December
1995. The costs and revenues associated with the Company's Canadian operations
are denominated in Canadian dollars. The Company records its transactions and
prepares its financial statements in U.S. dollars. Fluctuations in the value
of the two currencies may cause currency translations losses for the Company or
reduced revenues and earnings, or both, with respect to its Canadian
operations. The Company cannot predict the effect of exchange rate
fluctuations upon future operating results.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL RISKS
Exploring for, producing and selling oil and gas are subject to a
variety of federal, state and local government regulations, including
regulations concerning the prevention of waste, the discharge of materials into
the environment, the conservation of natural gas and oil, pollution, permits
for drilling operations, drilling bonds, reports concerning operations, the
spacing of wells, the unitization and pooling of properties, the clean-up of
well sites, and various other matters, including taxes. Laws and regulations
protecting the environment are stringent and may in certain circumstances
impose strict liability, rendering a person liable for environmental damage
without regard to negligence or fault on the part of such person. Such laws
and regulations may expose the Company to liability for the conduct of
operations or conditions caused by others, or for acts of the Company which
were in compliance with all applicable laws at the time such acts were
performed. An increase in federal, state or local production or property
taxes, the modification of existing laws or regulations or the adoption of new
laws or regulations relating to environmental matters could have a material
adverse effect on the Company's operations.
The Oil Pollution Act ("OPA") currently requires persons responsible for
"offshore facilities" to establish $150,000,000 in financial responsibility to
cover environmental cleanup and restoration costs likely to be incurred in
connection with an oil spill in the waters of the United States. On September
30, 1996 Congress passed legislation that would lower the financial
responsibility requirement under OPA to $35,000,000, subject to increase to
$150,000,000 if a formal risk assessment indicates the increase is warranted.
The Company cannot predict whether the President will sign this legislation.
The impact of any legislation is not expected to be any more burdensome to the
Company than it will be to other similarly situated companies involved in oil
and gas exploration and production.
OPA imposes a variety of additional requirements on "responsible
parties" for vessels or oil and gas facilities related to the prevention of oil
spills and liability for damages resulting from such spills in waters of the
United States. The "responsible party" includes the owner or operator of an
onshore facility, pipeline, or vessel or the lessee or permittee of the area in
which an offshore facility is located. OPA assigns liability to each
responsible party for oil spill removal costs and
-5-
<PAGE> 7
a variety of public and private damages from oil spills. While liability
limits apply in some circumstances, a party cannot take advantage of liability
limits if the spill is caused by gross negligence or willful misconduct or
resulted from violation of a federal safety, construction or operating
regulation. If a party fails to report a spill or to cooperate fully in the
cleanup, liability limits likewise do not apply. OPA establishes a liability
limit for offshore facilities (including pipelines) of all removal costs plus
$75,000,000. Few defenses exist to the liability for oil spills imposed by
OPA. OPA also imposes other requirements on facility operators, such as the
preparation of an oil spill contingency plan. Failure to comply with ongoing
requirements or inadequate cooperation in a spill event may subject a
responsible party to civil or criminal enforcement actions.
The Federal Water Pollution Control Act ("FWPCA") imposes restrictions
and strict controls regarding the discharge of produced waters and other oil
and gas wastes into navigable waters. Permits must be obtained to discharge
pollutants to state and federal waters. The FWPCA and analogous state laws
provide for civil, criminal and administrative penalties for any unauthorized
discharges of oil and other hazardous substances in reportable quantities and,
along with the OPA, may impose substantial potential liability for the costs of
removal, remediation and damages. State water discharge regulations and the
federal (NPDES) permits prohibit or are expected to prohibit within the next
year the discharge of produced water and sand, and some other substances
related to the oil and gas industry, to coastal waters. Although the costs to
comply with zero discharge mandates under federal or state law may be
significant, the entire industry will experience similar costs and the Company
believes that these costs will not have a material adverse impact on the
Company's financial conditions and operations. Some oil and gas exploration
and production facilities are required to obtain permits for their storm water
discharges. Costs may be incurred in connection with treatment of wastewater
or developing storm water pollution prevention plans.
COMPETITION
The oil and gas industry is highly competitive in many respects,
including identification of attractive oil and gas properties for acquisition,
drilling and development, securing financing for such activities and obtaining
the necessary equipment and personnel to conduct such operations and
activities. In seeking suitable opportunities, the Company competes with a
number of other companies, including large oil and gas companies and other
independent operators with greater financial resources and, in some cases, with
more experience. Many other oil and gas companies in the industry have
financial resources, personnel and facilities substantially greater than those
of the Company and there can be no assurance that the Company can compete
effectively with these larger entities.
DEPENDENCE ON KEY PERSONNEL
The loss of the services of any of the Company's executive officers may
adversely affect the Company's business. The Company carries no key-man
insurance on any of its executive officers.
DIVIDENDS
The Company does not currently pay cash dividends on its Common Stock
and does not anticipate paying such dividends in the foreseeable future. The
Company's existing bank financing restricts, and its future financing
arrangements may restrict the payment of such dividends. See "Description of
Securities--Common Stock."
CONCENTRATION OF OWNERSHIP
The Company's directors and officers currently beneficially own
approximately 36% of the Company's outstanding Common Stock. Accordingly, if
these stockholders voted together, they could control or significantly
influence the election of the Company's directors and other matters requiring
action by its stockholders.
-6-
<PAGE> 8
SHARES ELIGIBLE FOR FUTURE SALE
The Common Stock presently owned by the Company's directors and officers
generally is currently freely tradeable, subject in certain instances to
Securities Act Rule 144 volume limitations. Upon initial effectiveness of this
registration statement, there are effective Securities Act shelf registrations
(exclusive of registrations on Form S-8) covering the resale by a relatively
small number of stockholders of up to approximately 60% of outstanding Common
Stock, assuming exercise of presently exercisable options and warrants
underlying Common Stock covered thereby. No prediction may be made as to the
effect, if any, that future sales of shares or the availability of shares for
sale will have on the market price for Common Stock prevailing from time to
time. Sales of substantial amounts of Common Stock in the public market, or
the perception of the availability of shares for sale, could adversely affect
the prevailing market price of the Common Stock and could impair the Company's
ability to raise capital through the sale of its equity securities.
NEVADA TAKEOVER STATUTE
Provisions of Nevada law requiring disinterested director or stockholder
approval of certain business combinations between the Company and holders of
10% or more of its voting securities could have the effect of delaying,
deferring, or preventing a change in control of the Company, and make more
difficult a merger, tender offer or proxy contest involving the Company. See
"Description of Securities--Certain Provisions of Charter Documents and Nevada
Law."
LIMITATION OF MANAGEMENT LIABILITY
As permitted by Nevada law, the Company's Amended and Restated Articles
of Incorporation allow the Company and its stockholders only equitable remedies
for most breaches of fiduciary duty by its directors and officers. Elimination
of monetary damages as a remedy may discourage litigation against the Company's
directors and officers for such breaches. In addition, equitable remedies may
be ineffective in situations where the only remedy is to enjoin an act or
omission which already has occurred, possibly leaving the Company and its
stockholders with no effective remedy against the subject directors or
officers. See "Description of Securities--Certain Provisions of Charter
Documents and Nevada Law."
SELLING STOCKHOLDERS
The following table sets forth certain information concerning the
Selling Stockholders:
<TABLE>
<CAPTION>
SHARES SHARES TO SHARES TO PERCENT OF
NAME AND ADDRESS OWNED BE SOLD BE OWNED CLASS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
125,000 None 0
Trinity Capital of Jacksonville, Inc.(2) . . . . . . . . . . . 125,000(1)(2)
1620 Independent Square
Jacksonville, FL 32202
Blue Ridge Limited Partnership(3) . . . . . . . . . . . . . . . 250,000 250,000(1) None 0
c/o Blue Ridge Capital
630 Fifth Avenue, #3225
New York, NY 10111
Microcap Partners Limited Partnership(4) . . . . . . . . . . . 60,000 60,000(1) None 0
Tonga Partners L.P.(4). . . . . . . . . . . . . . . . . . . . . 40,000 40,000(1) None 0
c/o Cannell Capital Management
750 Battery Street, #1620
San Francisco, CA 94111
Walden Management Corporation Pension Trust
FBO George Sarlo . . . . . . . . . . . . . . . . . . . . . . . 50,000 50,000(1) None 0
George Sarlo, Trustee
750 Battery Street, #700
San Francisco, CA 94111
</TABLE>
-7-
<PAGE> 9
<TABLE>
<CAPTION>
SHARES SHARES TO SHARES TO PERCENT OF
NAME AND ADDRESS OWNED BE SOLD BE OWNED CLASS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Warburg, Pincus Counsellors, Inc.(5) . . . . . . . . . . . . . 235,500(5) 235,500(1)(5) None 0
466 Lexington Avenue, 10th Floor
New York, NY 10017
Emanon Partners, L.P.(6) . . . . . . . . . . . . . . . . . . . 52,700 52,700(1) None 0
Abraxas Partners, Ltd.(6) . . . . . . . . . . . . . . . . . . . 2,800 2,800(1) None 0
c/o Schaenen Fox Capital Management, LLC
200 Park Avenue, #3900
New York, NY 10166
Strong Quest Limited Partnership(7) . . . . . . . . . . . . . . 2,500 2,500(1) None 0
Strong Special Investment Limited Partnership(7) . . . . . . . 28,000 28,000(1) None 0
100 Heritage Reserve
Menomonee Falls, WI 53051
Harbour Investments Ltd.(8) . . . . . . . . . . . . . . . . . . 124,500 124,500(1) None 0
Hemisphere House
9 Church Street
Hamilton, HM 11 Bermuda
621 Partners, L.P.(9) . . . . . . . . . . . . . . . . . . . . . 100,000 100,000(1) None 0
c/o Kirr, Marbach & Company, LLC
621 Washington Street
Columbus, IN 47202
North River Trading Company, LLC(10) . . . . . . . . . . . . . 50,000 50,000(1) None 0
c/o Northriver
One State Street Plaza, 23rd Floor
New York, NY 10004
StarVest Growth Fund Ltd.(11) . . . . . . . . . . . . . . . . . 100,000 100,000(1) None 0
c/o Wafra Investment Advisory Group, Inc.
9 West 57th Street, 38th Floor
New York, NY 10019
Cox Living Trust, Dated 5/26/88 . . . . . . . . . . . . . . . . 50,000 50,000(1) None 0
Fred B. Cox, Trustee
1205 Labella Lane
Box 237
Big Arm, MT 59910-0237
Financial Institutions Retirement Fund(12) . . . . . . . . . 50,000 50,000(1) None 0
108 Corporate Park Drive
White Plains, NY 10604
Carillon Equity Portfolio of Carillon Fund, Inc.(13) . . . . . 350,000 350,000(1) None 0
c/o Carillon Advisers, Inc.
1876 Waycross Road
Cincinnati, OH 45240
Centennial Energy Partners, L.P.(14) . . . . . . . . . . . . . 296,000 296,000(1) None 0
Tercentennial Energy Partners, L.P.(14) . . . . . . . . . . . . 148,000 148,000(1) None 0
c/o Centennial
900 Third Avenue, #1801
New York, NY 10022
</TABLE>
-8-
<PAGE> 10
<TABLE>
<CAPTION>
SHARES SHARES TO SHARES TO PERCENT OF
NAME AND ADDRESS OWNED BE SOLD BE OWNED CLASS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ELL & CO f/b/o AT&T Investment Management Corp.(15) . . . . . . 185,000 185,000(1) None 0
c/o Kennedy Capital Management, Inc.
10829 Olive Road, First Floor
St. Louis, MO 63141-7739
Harris Bank Winnetka, Co-Trustee(16) . . . . . . . . . . . . . 558,917(16)(17) 50,000(1)(16) 508,917(17) 5.6%
520 Green Bay Road
Winnetka, IL 60093
Putnam Capital Appreciation Fund(18) . . . . . . . . . . . . . 100,000 100,000(1) None 0
One Post Office Square
Boston, MA 02109
Graham R. Smith . . . . . . . . . . . . . . . . . . . . . . . . 25,000 25,000(1) None 0
396 Waverly Road
Proctor, AR 72376
EnCap Investments L.C.(19) . . . . . . . . . . . . . . . . . . 45,000(20) 45,000(20) None 0
1100 Louisiana, #3150
Houston, TX 77002
Morgan Keegan & Company, Inc.(21) . . . . . . . . . . . . . . . 120,000(1)(22) 120,000(1)(22) None 0
Fifty Front Street
Memphis, TN 38103
Gary L. Chitty . . . . . . . . . . . . . . . . . . . . . . . . 389,500(23) 87,500(24) 302,000(23) 3.2%
4422 FM 1960 West, Suite 400
Houston, TX 77068
Thomas J. McMinn . . . . . . . . . . . . . . . . . . . . . . . 389,500(25) 87,500(24) 302,000(25) 3.2%
4422 FM 1960 West, Suite 400
Houston, TX 77068
</TABLE>
- ------------------------------------
(1) These shares were acquired on December 23, 1996 in a private placement
by the Company of 2,500,000 shares of Common Stock at a price of $4.50
per share or an aggregate $11,250,000 (the "Private Placement"). 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. 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 agreed to file this registration statement to
cover the resale of the shares of Common Stock sold in the private
placement and underlying MKC's warrant. In connection therewith, 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.
(2) Includes 100,000 shares held by Trinity Fund, Ltd. and 25,000 shares
held by Spirit Fund, Ltd. The general partners of both Trinity Fund,
Ltd. and Spirit Fund, Ltd. are Trinity Capital of Jacksonville, Inc.
("TCJ") and Thad L. McNulty. Mr. McNulty is the sole director,
president, and sole shareholder of TCJ.
(3) The general partner of Blue Ridge Limited Partnership is JAG Holdings,
L.L.C which is controlled by John Griffin.
-9-
<PAGE> 11
(4) The sole general partner of Microcap Partners Limited Partnership is MCP
Capital Management, L.L.C. whose manager is Jeremy Crigler. J. Carlo
Cannell d/b/a Cannell Capital Management is an investment advisor to
Microcap Partners Limited Partnership and the sole general partner of
Tonga Partners, L.P.
(5) Includes 176,625 shares held by Warburg, Pincus Trust-Small Company
Growth Portfolio and 58,875 shares held by Warburg, Pincus Institutional
Fund, Inc.-Small Company Growth Portfolio. Stephen J. Lurito is Managing
Director of both Portfolios.
(6) The general partner of Emanon Partners, L.P. is Naima Associates, LLC
whose sole principals are Michael Schaenen and Christopher S. Fox.
Abraxas Partners, Ltd. is an international business company domiciled in
the Bahamas and administered in Ireland. Abraxas' investment manager is
Schaenen Fox Capital Management, LLC whose sole principals are Messrs.
Schaenen and Fox.
(7) The general partner of each of Strong Quest Limited Partnership and
Strong Special Investment Limited Partnership is Strong Capital
Management, Inc. which is controlled by Richard S. Strong.
(8) Harbour Investments Ltd. is a mutual fund company and wholly-owned
subsidiary of Harbour Holdings, Ltd., both of which are incorporated in
Bermuda. These entities are controlled by directors (and alternates)
Bradley C. Tank, Christopher Wetherhill (Joseph Kelly), Richard S.L.
Pearman (Anthony D. Whaley), Nicolas G. Trollope (Anthony D. Whaley),
and officers Christopher Wetherhill, President and Treasurer; Joseph
Kelly, Vice President; and T. W. Tucker Hall, Secretary.
(9) The general partner of 621 Partners, L.P. is Kirr, Marbach & Company,
LLC whose members are David M. Kirr, Gregg T. Summerville, Mark D.
Foster and Mickey Kim.
(10) The principals of North River Trading Company, LLC are Philip Gottlieb,
Arielle Wolfson, Aaron Wolfson, Abraham Wolfson and Steve Schlam, its
manager.
(11) StarVest Growth Fund Ltd. is controlled by Bader Al-Humaidhi, Chairman
and Director; Yacoub Al-Muzaini, Deputy Chairman and Director; Mohamad
W. Khouja, President; Anthony G. Barbuto, Vice President and Treasurer;
Judith Collis, Director; David T. Smith, Director; and Margaret M.
Moran, Secretary.
(12) Financial Institutions Retirement Fund is a pension trust under Section
413(c) of the Internal Revenue Code of 1986, as amended, and its trustee
is Bank of New York.
(13) The directors of Carillon Fund, Inc. are George M. Callard, M.D., George
L. Clucas, Theodore H. Emmerich, James M. Ewell, Richard H. Finan, Jean
Patrice, John H. Jacobs, Charles W. McMahon, and Harry Rossi, and its
executive officers are George L. Clucas, President and Chief Executive
Officer; Stephen R. Hatcher, Senior Vice President; John F. Labmeier,
Vice President and Secretary; Thomas G. Knipper, Controller; Joseph A.
Tucker, Treasurer; and John M. Lucas, Assistant Secretary.
(14) The general partners of Centennial Energy Partners, L.P. and
Tercentennial Energy Partners, L.P. are Joseph H. Reich, Peter K.
Seldin, G. Bryan Dutt and Tracy S. Nagler.
(15) Kennedy Capital Management, Inc. ("KCM") is Investment Manager for the
AT&T Investment Management Corp. account. KCM's management is Gerald T.
Kennedy, director, Chairman of the Board and President; Patricia A. Row,
director, Vice President and Portfolio Manager; Richard E. Anderson,
director, Executive Vice President and Chief Operating Officer; Charles
A. Dill, director; and A. Nicholas Filippello, director.
(16) Includes (i) 17,500 shares held by Loretta H. Howard T/U/W FBO Howell H.
Howard, (ii) 17,500 shares held by Loretta H. Howard 1947 Trust FBO
Howell H. Howard, (iii) 2,500 shares held by Loretta H. Howard 1947
Trust FBO Howell H. Howard Accumulation Fund, and (iv) 12,500 shares
held by Mary Foss Trust FBO Mary Foss Howard. Harris Bank Winnetka is
co-trustee of all four of these trusts, Howell H. Howard is co-trustee
of the first three trusts and his spouse is co-trustee of the fourth
trust. Co-trustees share voting and dispositive power over shares held
in trust.
-10-
<PAGE> 12
Mr. Howard has been a director of the Company since 1960 and has served
as Chairman of the Board of the Company since July 1981.
(17) Includes 170,796 shares held by Howell H. Howard, 324,133 shares held in
trusts of which Mr. Howard is a co- trustee and shares voting and
dispositive power, and 13,988 shares owned by Mr. Howard's wife.
(18) Putnam Capital Appreciation Fund is a business trust and a registered
investment company. Its manager is Putnam Investment Management, Inc.,
a registered investment adviser.
(19) The members of Encap Investments, L.C. are Eugene C. Fiedorek, David B.
Miller, Gary R. Petersen, D. Martin Phillips and Robert L. Zorich.
(20) Includes 25,000 shares purchased in the Private Placement and 20,000
shares issued under a November 5, 1996 agreement between EnCap and the
Company as a retainer for EnCap's efforts to target acquisition
candidates for the Company. If and when the consideration paid by the
Company for such acquisitions exceeds $5,000,000, the Company agreed to
issue EnCap warrants exercisable for three years for 80,000 shares of
Common Stock at an exercise price equal to the Common Stock's market
price at the time the $5,000,000 threshold is exceeded.
(21) Morgan Keegan & Company, Inc. is a wholly-owned subsidiary of Morgan
Keegan, Inc., a publicly-held corporation whose directors and officers
are Allen B. Morgan, Jr., Chairman, John W. Stokes, Jr., Vice-Chairman,
G. Douglas Edwards, C. David Ramsey, Joseph C. Weller, Terry C. Graves
and James H. Ganier.
(22) Issuable upon exercise of a presently exercisable warrant. See note (1)
above.
(23) Includes 300,000 shares issuable upon exercise of presently exercisable
warrants, and 2,000 shares owned by G & T Interests, Inc., a corporation
50% of the voting securities of which are beneficially owned by Mr.
Chitty and of which he is a director and President. The warrants may be
exercised until January 5, 2001 at $2.00 per share. See note (24)
below.
(24) These shares were acquired on January 5, 1996 pursuant to a Subscription
Agreement and Assumption of Obligations between the Company and Messrs.
Chitty and McMinn ("Subscription Agreement"). Each of Messrs. Chitty
and McMinn is a director, executive officer and beneficial owner of 50%
of the outstanding equity securities of Diasu Oil & Gas Co., Inc., a
Texas corporation ("Diasu") principally engaged in the exploration and
production of oil and gas. On January 5, 1996, Diasu and the Company
entered into an Option Agreement granting the Company an option to
participate as an investor in any oil and gas exploration and
development projects proposed by Diasu or its affiliates during
following the 24-month period (the "Option Agreement"). Pursuant to the
Subscription Agreement, each of Messrs. Chitty and McMinn agreed to
cause Diasu to honor its obligations under the Option Agreement and to
make the Option Agreement applicable to any oil and gas prospects that
either of Messrs. Chitty or McMinn and certain of their affiliates might
pursue. In consideration for the Company's rights under the
Subscription Agreement, the Company issued each of Messrs. Chitty and
McMinn 87,500 shares of Common Stock and a presently exercisable warrant
for 200,000 shares of Common Stock (collectively, the "First Warrants").
Pursuant to the Option Agreement, the Company issued Diasu warrants
exercisable for 200,000 shares of Common Stock (the "Second Warrants").
Diasu subsequently transferred a Second Warrant exercisable for 100,000
shares to each of Messrs. Chitty and McMinn. Each of the First Warrants
and Second Warrants may be exercised until January 5, 2001 at $2.00 per
share and are subject to certain anti-dilution adjustments. The Company
negotiated the $2.00 per share exercise price of these warrants to be at
a premium of the average last sale price for the Common Stock on the
NASDAQ SmallCap Market on January 2, 3 and 4, 1996 of $1.5625 per share.
The Company agreed to register the resale of shares of Common Stock
actually issued to Messrs. Chitty and McMinn under the Subscription
Agreement and upon exercise of the First Warrants and Second Warrants,
and in connection therewith, the Company agreed to indemnify them
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. Also on January 5, 1996, Diasu sold for
$1,200,000 cash certain oil and gas properties to a limited partnership
co-managed by the Company and Diasu whose sole limited partner was Torch
Energy Finance Fund Limited Partnership I, whose general partner was
Torch Energy Finance Company (collectively, "Torch"). On August 30,
1996, the Company purchased from Torch 100% of the limited partnership
interest in the limited partnership for $3,000,000 cash, the limited
partnership was dissolved and its oil and gas properties distributed to
the
-11-
<PAGE> 13
Company and Diasu as follows: the Company and Diasu acquired an
undivided 93% and 7% interest in the properties, respectively, except
that the Company's interest in certain of the properties will decrease
to 81.5% after the Company has recovered its costs of acquiring Torch's
limited partnership interest.
(25) Includes 300,000 shares issuable upon exercise of presently exercisable
warrants, and 2,000 shares owned by G & T Interests, Inc., a corporation
50% of the voting securities of which are beneficially owned by Mr.
McMinn and of which he is a director and Vice President. The warrants
may be exercised until January 5, 2001 at $2.00 per share. See note
(24) above.
PLAN OF DISTRIBUTION
All or part of the Common Stock offered hereby may be sold by the
Selling Stockholders from time to time on the NASDAQ SmallCap Market or
otherwise at prices current at the time of sale or at prices related to such
market prices, either directly or through brokers or to dealers, to the extent
that such prices are obtainable and satisfactory to the Selling Stockholders.
It is anticipated that any commissions with respect to such sales will not
exceed regular brokerage commissions. The Selling Stockholders, and brokers
executing selling orders on behalf of the Selling Stockholders and dealers to
whom the Selling Stockholders may sell, may be deemed "underwriters" within the
meaning of the Securities Act. Any profit represented by the excess of the
selling price over the cost of the shares sold in the case of dealers, or any
commission received in the case of brokers, may be deemed to be underwriting
discounts or commissions under the Securities Act.
The Selling Stockholders may sell all or part of the Common Stock
offered hereby pursuant to Rule 144 under the Securities Act.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company's authorized capital stock consists of 20,000,000 shares of
common stock, par value $.01 per share, of which as of January 31, 1997,
9,093,832 shares were issued and outstanding and 2,075,565 shares were reserved
for issuance upon exercise of outstanding options and warrants and for issuance
under the Company's various stock option and compensation plans. Outstanding
shares of Common Stock are, and shares of Common Stock offered hereby when
issued and paid for will be, fully paid and nonassessable.
Holders of Common Stock are entitled to receive dividends, if, as and
when declared by the board of directors out of funds legally available
therefor, and are entitled on liquidation to share ratably in all assets of the
Company remaining after the payment of liabilities. Since 1994, the Company
has reinvested any earnings in its business and, accordingly, has not paid any
dividends on its Common Stock. Although the Company intends to continue to
invest any future earnings in its business, it may determine to pay cash
dividends in the future. The Company's ability to declare and pay any such
dividends would depend upon, among other things, the earnings and financial
condition of the Company, and restrictive provisions of any financing
arrangements to which the Company may be subject from time to time. The
Company's current bank financing restricts payment of dividends.
Each share of Common Stock has one vote on all matters presented to the
stockholders. A majority of issued and outstanding shares of Common Stock
entitled to vote and represented at a stockholders meeting in person or by
proxy constitutes a quorum for the transaction of business. The affirmative
vote of a majority of shares present and entitled to vote at a meeting at which
a quorum is present generally will constitute stockholder action. Certain
fundamental corporate changes such as amending the articles of incorporation, a
merger or a disposition of all of the Company's assets, require the approval of
a majority of outstanding shares entitled to vote thereon. Directors are
elected by a plurality of votes cast by stockholders entitled to vote therefor.
Since the Common Stock does not have cumulative voting rights, holders of more
than 50% of the shares present and entitled to vote for directors at a meeting
at which a quorum is present may, if they choose to do so, elect all of the
directors and, in that event, the holders of the remaining shares will not be
able to elect any directors.
-12-
<PAGE> 14
Under Nevada law, since the Company's articles of incorporation do not
deny preemptive rights, holders of Common Stock have preemptive rights to
acquire unissued shares, treasury shares or securities convertible into such
shares EXCEPT with respect to (i) shares issued to directors, officers or
employees pursuant to approval by the affirmative vote of the holders of a
majority of the shares entitled to vote or when authorized by a plan approved
by such a vote of shareholders, (ii) shares sold for a consideration other than
cash, (iii) shares issued at the same time that the shareholder who claims a
preemptive right acquired his shares, (iv) shares issued as part of the same
offering in which the shareholder who claims a preemptive right acquired his
shares, (v) shares (or shares into which convertible securities may be
converted) which upon issuance are registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), or (vi) shares of
any class that is preferred or limited as to dividends or assets or to any
obligations, unless convertible into Common Stock or carrying a right to
subscribe to or acquire Common Stock. To the extent any preemptive right
exists, it only is an opportunity to acquire shares or other securities upon
such terms as the board of directors fixes for the purpose of providing a fair
and reasonable opportunity for the exercise of such right. The Common Stock is
registered under Section 12 of the Exchange Act and holders thereof will have
no preemptive rights in respect of Common Stock issuances for so long as the
Common Stock remains so registered.
American Stock Transfer & Trust Company, New York, New York, is the
transfer agent and registrar for the Common Stock.
CERTAIN PROVISIONS OF CHARTER DOCUMENTS AND NEVADA LAW
Liability Limitation. As permitted by Section 78.037 of the General
Corporation Law of Nevada (the "NGCL"), the Company's Amended and Restated
Articles of Incorporation eliminate the liability of its directors and officers
to the Company and its stockholders for damages for breach of fiduciary duty,
except for acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, or for the payment of distributions in violation of
the NGCL. To the extent that this provision limits the remedies of the Company
and its stockholders to equitable remedies, it might reduce the likelihood of
derivative litigation and discourage the Company's management or stockholders
from initiating litigation against its directors or officers for breach of
their fiduciary duties. Additionally, equitable remedies may not be effective
in many situations. If a stockholder's only remedy is to enjoin the completion
of an act, such remedy would be ineffective if the stockholder does not become
aware of a transaction or event until after it has been completed. In such a
situation, it is possible that the Company and its stockholders would have no
effective remedy against directors or officers.
Indemnification. The Company's Bylaws make mandatory the
indemnification permitted by the NGCL and the Company's Amended and Restated
Articles of Incorporation. Accordingly, the Company generally must indemnify
its directors, officers, employees and agents against liabilities and expenses
to which they may become subject or which they may incur as a result of being
or having been a director, officer, employee or agent of the Company. Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
Nevada Takeover Statute. The Company is subject to provisions of the
NGCL which generally restrict business combinations between the Company and
those of its stockholders who beneficially own 10% or more of the voting power
of its outstanding voting shares. The effect of these provisions is to permit
friendly, negotiated transactions which are approved in advance by the Board of
Directors while restricting a hostile acquiror's flexibility in acquiring the
Company. The following discussion of these provisions is qualified in its
entirety by reference to Nevada Revised Statutes 78.411 through 78.444
(collectively, the "Takeover Statute"). References to Sections are to sections
of the Takeover Statute.
Combinations covered by the Takeover Statute are identified in Section
78.416 and generally include transactions involving the Company's assets or
securities. Section 78.438, subject to certain exceptions, prohibits the
Company from engaging in any combination with any interested stockholder for
three years after the interested stockholder's date of acquiring shares unless
the combination or the purchase of shares made by the interested stockholder on
such stockholder's date of acquiring shares is approved by the Board of
Directors before that date.
-13-
<PAGE> 15
Further, Section 78.439 prohibits any combination with an interested
stockholder following the expiration of three years after his date of acquiring
shares unless the combination complies with the Company's articles of
incorporation and either (i) the combination or the purchase of shares by the
interested stockholder is approved by the Board of Directors before the
stockholder's date of acquiring shares, or (ii) the combination is approved by
the affirmative vote of the holders of stock representing a majority of the
outstanding voting power not beneficially owned by the interested stockholder
at a meeting called for that purpose no earlier than three years after the
interested stockholder's date of acquiring shares, or (iii) the aggregate value
of consideration to be received by the holders of the Common Stock and by the
holders of any other class or series of shares satisfies certain standards
specified in the Takeover Statute, the consideration to be received by the
stockholders is distributed promptly and is in cash or the same form as the
interested stockholder used to acquire the largest number of shares previously
acquired by such stockholder, and except as specified in the statute, the
interested stockholder has not become the beneficial owner of any additional
voting shares of the Company after the date of acquiring shares and before the
date of consummation of the combination.
"Interested stockholder" is defined under Section 78.423 as any person
(other than the Company or any of its subsidiaries) who beneficially owns,
directly or indirectly, 10% or more of the voting power of the Company's
outstanding voting shares, or any affiliate or associate of the Company who, at
any time within three years immediately before the date in question, was the
beneficial owner of 10% or more of the voting power of the Company's then
outstanding shares.
COUNSEL
The validity of the Common Stock offered hereby has been passed upon for
the Company by Porter & Hedges, L.L.P., Houston, Texas.
-14-
<PAGE> 16
================================================================================
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS; ANY INFORMATION OR REPRESENTATION NOT
CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY STATE
WHERE SUCH OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
PAGE
<S> <C>
Available Information . . . . . . . . . . . . . 2
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . 3
Selling Stockholders . . . . . . . . . . . . . 7
Plan of Distribution . . . . . . . . . . . . . 12
Description of Securities . . . . . . . . . . . 12
Counsel . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
------------------------
2,815,000 SHARES
SOUTHERN MINERAL
CORPORATION
COMMON STOCK
---------------------
P R O S P E C T U S
---------------------
FEBRUARY , 1997
<PAGE> 17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee . . . . . . . . . . $ 5,119
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 15,000
Blue Sky and Related Expenses . . . . . . . . . . . . . . . . . . . . . 3,000
Printing Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,881
-------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50,000(1)
=======
</TABLE>
- -------------------
(1) To be borne 100% by the Registrant.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Ninth of Registrant's Amended and Restated Articles of
Incorporation permits, and Article VII of Registrant's Bylaws contains
indemnification provisions which make mandatory the indemnification permitted
by Section 78.751 of the General Corporation Law of Nevada ("NGCL").
Accordingly, Registrant generally must indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director, officer,
employee or agent of Registrant or is or was serving at the request of
Registrant as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding. However, with respect to an action or suit brought to obtain a
judgment in Registrant's favor, whether by Registrant itself or derivatively by
a stockholder, (i) such indemnification is limited to expenses, including
amounts paid in settlement and attorneys' fees actually and reasonably incurred
by him in connection with the defense or settlement of the action or suit, and
(ii) indemnification may not be made for any claim, issue or matter as to which
such a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to Registrant or for amounts
paid in settlement to Registrant, unless and only to the extent that the court
in which the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
In all cases, the person seeking indemnification must have acted in good
faith and in a manner he reasonably believed to be in, or not opposed to,
Registrant's best interests. In the case of criminal actions or proceedings,
the person must also have had no reasonable cause to believe his conduct was
unlawful. The determination as to whether a person seeking indemnification has
met the required standard of conduct must be made by Registrant's stockholders,
by a majority vote of a quorum of its disinterested directors, or by
independent legal counsel in a written opinion if such a quorum does not exist
or if the disinterested directors so direct.
To the extent that a director, officer, employee or agent of Registrant
has been successful on the merits or otherwise in defending any action, suit or
proceeding for which indemnification is permissible under the NGCL, or in
defending any claim, issue or matter therein, Registrant must, under both the
NGCL and its Bylaws, indemnify him against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense. As
permitted by the NGCL, Registrant's Bylaws require it to advance expenses which
its officers and directors incur in defending any civil or criminal action,
suit or proceeding upon receipt of an undertaking by him or on his behalf to
repay such amounts if it is ultimately determined by a court of competent
jurisdiction that he is not entitled to be indemnified by Registrant.
The NGCL and Registrant's Bylaws provide that the indemnification and
advancement of expenses authorized therein are not exclusive. Accordingly,
Registrant could provide for other indemnification of its directors and
officers acting in either or both of their official capacities or other
capacities while holding office. However, excepting advancement of
II-1
<PAGE> 18
expenses and court-ordered indemnification explicitly provided for by the NGCL,
the NGCL and Registrant's Bylaws prohibit Registrant from indemnifying any
director or officer if a final adjudication establishes that his acts or
omissions involved intentional misconduct, fraud or a knowing violation of the
law and was material to the cause of action.
Consistent with Section 78.752 of the NGCL, Registrant's Bylaws empower
it to procure and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of Registrant, or at Registrant's request,
of another entity, against any liability asserted against him and incurred by
him in such capacity, or arising out of his status as such, regardless of
whether Registrant could indemnify him against such liability. Registrant has
purchased insurance on behalf of its directors and officers against certain
liabilities that may be asserted against, or incurred by, such persons in their
capacities as directors or officers of the Registrant, or that may arise out of
their status as directors or officers of the Registrant, including liabilities
under federal and state securities laws.
As permitted by Section 78.037 of the NGCL, Registrant's Amended and
Restated Articles of Incorporation eliminate the liability of its directors and
officers to Registrant and its stockholders for damages for breach of fiduciary
duty, except for acts or omissions which involve intentional misconduct, fraud
or a knowing violation of law, or for the payment of distributions in violation
of Section 78.300 of the NGCL. To the extent that this provision limits the
remedies of Registrant and its stockholders to equitable remedies, it might
reduce the likelihood of derivative litigation and discourage Registrant's
management or stockholders from initiating litigation against its directors or
officers for breach of their fiduciary duties. Additionally, equitable
remedies may not be effective in many situations. If a stockholder's only
remedy is to enjoin the completion of an action, such remedy would be
ineffective if the stockholder does not become aware of a transaction or event
until after it has been completed. In such a situation, it is possible that
Registrant and its stockholders would have no effective remedy against
directors or officers.
Registrant has purchased insurance on behalf of its directors and
officers against certain liabilities that may be asserted against, or incurred
by, such persons in their capacities as directors or officers of the
Registrant, or that may arise out of their status as directors or officers of
the Registrant, including liabilities under the federal and state securities
laws.
The above discussion of the NGCL and Registrant's Amended and Restated
Articles of Incorporation and Bylaws is not intended to be exhaustive and is
qualified in its entirety by the NGCL and such Articles and Bylaws.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
5 Opinion of Porter & Hedges, L.L.P. with respect to legality of securities.
23.1 Consent of Porter & Hedges, L.L.P. (included in Exhibit 5).
23.2 Consent of Grant Thornton LLP.
23.3 Consent of Netherland, Sewell & Associates, Inc.
23.4 Consent of McDaniel & Associates Consultants Ltd.
24 Powers of Attorney (included on signature page).
</TABLE>
II-2
<PAGE> 19
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement
to:
(i) Include any prospectus required by section 10(a)(3)
of the Securities Act of 1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change
in the information in the registration statement; and
(iii) Include any additional or changed material
information on the plan of distribution;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant under the
Exchange Act.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post- effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
its Registration Statement No. 333-19105 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 13th day of February 1997.
SOUTHERN MINERAL CORPORATION
By: /s/ Steven H. Mikel
-------------------------------------------
Steven H. Mikel,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
as of the 13th day of February 1997.
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE TITLE
/s/ Steven H. Mikel* Director, and
- ----------------------------- President and Chief Executive Officer
Steven H. Mikel
/s/ James H. Price Vice President -- Finance and Treasurer
- ----------------------------- (principal financial and accounting officer)
James H. Price
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
/s/ B. Travis Basham* Director
- -----------------------------------------
B. Travis Basham
/s/ Thomas R. Fuller* Director
- -----------------------------------------
Thomas R. Fuller
/s/ Robert R. Hillery* Director
- -----------------------------------------
Robert R. Hillery
/s/ E. Ralph Hines, Jr.* Director
- -----------------------------------------
E. Ralph Hines, Jr.
/s/ Howell H. Howard* Director and Chairman of the Board
- -----------------------------------------
Howell H. Howard
/s/ James E. Nielson* Director
- -----------------------------------------
James E. Nielson
/s/ Donald H. Wiese, Jr.* Director
- -----------------------------------------
Donald H. Wiese, Jr.
/s/ Spencer L. Youngblood* Director
- -----------------------------------------
Spencer L. Youngblood
*By: /s/ Steven H. Mikel
-------------------------------------
Steven H. Mikel,
Individually and as Attorney-in-Fact
</TABLE>
II-5
