<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEARS ENDED DECEMBER 1996, 1997 & 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
Commission file number: 0-8043
SOUTHERN MINERAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
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.)
1201 LOUISIANA, SUITE 3350 77002-5609
Houston, Texas (Zip Code)
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (713) 658-9444
================================================================================
<PAGE>
SOUTHERN MINERAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
INTRODUCTION
Southern Mineral Corporation, a Nevada corporation, with its subsidiaries,
established the Southern Mineral Corporation 1996 Employee Stock Purchase Plan
(the "Plan"). The Plan is intended to qualify as an "employee Stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986, as amended.
REQUIRED INFORMATION
Financial statements and exhibits
(a) Financial statements
These documents are listed in the Index to Financial Statements
(b) Exhibits:
Consent of Independent Auditors
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
Southern Mineral Corporation as Plan Administrator has duly caused this Annual
Report on Form 11-K for the period ended December 31 1996, 1997 and 1998 to be
signed on its behalf by the undersigned hereunto duly authorized.
SOUTHERN MINERAL CORPORATION
Employee Stock Purchase Plan
By /s/ MICHAEL E. LUTTRELL
---------------------------------------------
Date: July 8, 1999 Michael E. Luttrell
Vice President-Finance and Chief
Financial Officer
2
<PAGE>
SOUTHERN MINERAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Audited Financial Statements
Years ended December 31, 1996, 1997, 1998
CONTENTS
Independent Auditors' Report............................................... 4
Audited Financial Statements:
Statements of Net Assets Available for Benefits............................ 5
Statements of Changes in Net Assets Available for Benefits................. 5
Notes to Financial Statements.............................................. 6
3
<PAGE>
Independent Auditor's Report
The Board of Directors
Southern Mineral Corporation
Employee Stock Purchase Plan:
We have audited the accompanying statements of net assets available for benefits
of the Southern Mineral Corporation Employee Stock Purchase Plan (the Plan) as
of December 31, 1998, 1997 and 1996, and the related statements of changes in
net assets available for benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Plan as of December 31,
1998, 1997, and 1996, and the changes in net assets available for benefits for
the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that Southern
Mineral Corporation (the Company), the Plan's sponsor, will continue as a going
concern. As discussed in Note 3 to the Company's 1998 consolidated financial
statements on Form 10-K, the Company's substantial indebtedness, covenant
requirements and working capital deficit raise substantial doubt about its
ability to continue as a going concern. The Plan's financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
KPMG LLP
Houston, TX
July 6, 1999
4
<PAGE>
SOUTHERN MINERAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
As of December 31,
------------------------
1998 1997 1996
---- ---- ----
ASSETS
Due from Company $ 25,381 $ 985 $ -0-
-------- ------- -------
Net Assets $ 25,381 $ 985 $ -0-
======== ======= =======
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Additions to net assets attributed to:
Participant contributions $ 61,524 $38,169 $14,228
Deductions from net assets attributed to:
Stock purchases 12,218 25,772 13,548
Participant withdrawals 24,910 11,412 680
-------- ------- -------
Total deductions 37,128 37,184 14,228
-------- ------- -------
Net increase in net assets 24,396 985 -0-
Net assets:
Beginning of year 985 -0- -0-
-------- ------- -------
End of year $ 25,381 $ 985 $ -0-
======== ======= =======
See accompanying notes to financial statements.
5
<PAGE>
SOUTHERN MINERAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
1. PLAN DESCRIPTION
Southern Mineral Corporation (the "Company") established the Southern Mineral
Corporation 1996 Employee Stock Purchase Plan (the Plan) effective May 15, 1996.
The Plan provides a means by which eligible employees of the Company and its
controlled subsidiaries may purchase shares of the Company's authorized common
stock, par value $.01 per share, at a discount from the market price at times
specified by the Plan document.
The Plan is administered by the Compensation Committee of the Board of Directors
(the "Board") who have the authority to interpret and construe any provisions of
the Plan and adopt such rules and regulations for administering the plan as they
deem necessary.
All employees of the Company are eligible to participate in the plan except for
employees whose customary employment is less than 20 hours per week or for not
more than five months in any calendar year; provided, however no option shall be
granted to an employee if such employee, immediately after the option is
granted, owns stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of it parent or
subsidiary corporation. Under plan provisions, entry dates are limited to the
first day of January and July of each year and represent the first day of a
semi-annual period of participation on which each eligible employee is granted
an option to purchase stock.
Eligible employees may defer from 2% to 10% of eligible compensation through
payroll deductions, subject to a $25,000 limitation. These authorized payroll
deductions are recorded as an increase to the participant's account.
Participant contributions are deposited in the Company's corporate bank accounts
and may be used for general corporate purposes.
Except if the participant gives notice of withdrawal from the Plan, each
participant is automatically deemed to have exercised his or her option, as of
the last day of each semi-annual period of participation during which the
eligible employee is participating in the Plan. The number of shares of common
stock subject to each option shall be equal to the quotient of the total payroll
deductions made by the employee during the semi-annual period of participation
divided by the option price (defined below), excluding factional shares of
common stock. Upon exercise of the option, the Company will as soon as
practicable thereafter issue to the employee his or her shares of stock
purchased. Upon withdrawal of the option, the Company is required to promptly
refund to the withdrawing participant the balance in his or her account under
the Plan.
The per share exercise price of each option is an amount equal to the lesser of
the 85% of the fair market value of the Company's stock on the date of the grant
or the date of exercise of such option, whichever is less. Total shares
issuable under the plan are limited to 300,000.
If a participant's employment is terminated for any reason other than death or
eligible retirement, his or her participation in the Plan terminates as of the
date of termination, entitling the participant solely to a refund of the balance
in his or her account under the Plan. If a participant retires after reaching
the age of 65, the participant`s may, by written notice to the Company within 90
days of the retirement date, either (i) exercise the participant's outstanding
options as of the retirement date (at an option price equal to 85% of the fair
market value per share of Common Stock as of the date of grant or the retirement
date, whichever is less), and receive a cash payment for any amount remaining in
his or her account after paying the applicable Option Price, or (ii) receive a
cash payment equal to the balance in his or her account under the Plan. Failure
to give timely notice to the Company is deemed an election to receive the cash
payment. If a participant's employment terminates due to death, the
participant's legal representative will have the same rights as those described
above relating to a participant's retirement upon reaching age 65, except the
date of death replaces the retirement date.
The Board in its discretion may terminate the Plan at any time with respect to
any shares for which options have not theretofore been granted. The Plan shall
terminate and no further options shall be granted at the earlier of (i) the
expiration of ten years from the date of its adoption by the Board, or (ii) the
point in time when no shares of Stock reserved for issuance pursuant to options
granted under the Plan are available.
6
<PAGE>
SOUTHERN MINERAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements Continued
Whenever any change is made in the Stock, by reason of a stock dividend or by
reason of subdivision, combinations, or reclassification of shares, appropriate
action will be taken by the Board to adjust accordingly the number of shares
subject to the Plan and the number and option price of shares subject to options
outstanding under the Plan.
If the Company shall not be the surviving corporation in any merger or
consolidation or if the Company is to be dissolved or liquidated, then, unless a
surviving corporation assumes or substitutes new options for all options then
outstanding, (i) the date of exercise for all options then outstanding shall be
accelerated to dates fixed by the Board prior to the effective date of such
merger or consolidation or such dissolution or liquidation, (ii) a participant
may either (x) withdraw from the Plan and receive a refund from the Company in
the amount of the balance in the participant's account under the Plan, (y)
exercise a portion of his or her outstanding options as of such exercise date to
purchase whole shares of Stock at the option price, to the extent of the balance
in the participant's account under the Plan or (z) exercise in full his or her
outstanding option as of such exercise date to purchase whole shares of stock,
at the option price, which exercise shall require such participant to make a
cash deposit as of the date of exercise in an amount sufficient to fully
exercise the option and pay the related option price.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PARTICIPANT CONTRIBUTIONS
Contributions are recorded when the Company makes payroll deductions from the
compensation of Plan participants.
STOCK PURCHASES
Stock purchases are recorded as of the last day of each semi-annual period of
participation after the price and number of shares purchased have been
determined for each participant.
PARTICIPANT WITHDRAWALS
Participant withdrawals and payments made to terminated participants are
recorded as of the date distributions are made.
3. STOCK PURCHASES
The following table summarizes the stock issued to plan participants during
1998, 1997 and 1996:
AVERAGE
PURCHASE TOTAL
SEMI-ANNUAL SHARES PRICE PURCHASE
PURCHASE DATE ISSUED PER SHARE PRICE
- ---------------- ------ --------- --------
December 31, 1996 5,313 $2.55 $13,548
June 30, 1997 1,581 4.25 6,719
December 31, 1997 4,716 4.04 19,053
June 30, 1998 3,913 2.92 11,426
December 31, 1998 1,298 .61 792
------ ----- -------
Total 16,821 $3.06 $51,538
====== ===== =======
7
<PAGE>
SOUTHERN MINERAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS CONTINUED
4. INCOME TAX STATUS
The Plan is an employee stock purchase plan as defined in section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"). So long as the Plan
meets the code requirements of an employee stock purchase plan, employees will
not recognize income when options are exercised, but will recognize such income
at the later disposition of the stock. The Plan is not required to and does not
maintain a determination letter from the Internal Revenue Service.
5. ADMINISTRATIVE EXPENSES
Officers or employees of the Company perform certain administrative functions.
No officers or employees receive compensation from the Plan. All expenses
associated with establishment, operation and administration of the Plan are
borne by the company.
6. YEAR 2000
Historically, most computer systems utilized software that recognized a calendar
year by its last two digits. Beginning in the year 2000, these systems will
require modification to distinguish twenty-first century dates from twentieth
century dates. The Plan relies on the Company's internal hardware and software
systems to provide all services. While the Company has begun its own
remediation efforts, there can be no guarantee that it's systems or other
companies' systems, on which the Company's systems rely, will be timely
converted, or a conversion that is incompatible with the Company's systems,
would not have a material adverse impact on the Plan.
8
<PAGE>
(B) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
23.1 Consent of KPMG LLP (filed herewith).
9
<PAGE>
Exhibit 23.1
Independent Auditors' Consent
The Board of Directors
Southern Mineral Corporation
Employee Stock Purchase Plan:
We consent to incorporation by reference in the registration statements on Form
S-8 of (No. 33-60571 and 333-12375) of Southern Mineral Corporation of our
report dated July 6, 1999, relating to the statements of net assets available
for benefits of the Southern Mineral Corporation Employee Stock Purchase Plan as
of December 31, 1998, 1997 and 1996, and the related statements of changes in
net assets available for benefits for the years then ended, which report appears
in the December 31, 1998, annual report on Form 11-K of the Southern Mineral
Corporation Employee Stock Purchase Plan. Our report dated July 6, 1999,
contains an explanatory paragraph that states that Southern Mineral
Corporation's (the Plan's sponsor) substantial indebtedness, covenant
requirements and working capital deficit raise substantial doubt about its
ability to continue as a going concern. The Southern Mineral Corporation
Employee Stock Purchase Plan financial statements do not include any adjustments
that might result from the outcome of that uncertainty.
KPMG LLP
Houston, Texas
July 8, 1999
