UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
COMMISSION FILE NUMBER 0-8043
SOUTHERN MINERAL CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 36-2068676
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1201 LOUISIANA, SUITE 3350
HOUSTON, TEXAS 77002-5609
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 658-9444
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of each Class on which Registered
------------------- -------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01
6.875% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2007
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 15, 1999, 12,803,449 shares of Common Stock were outstanding and the
aggregate market value of these shares at such date (based upon the last
reported sales price in the Nasdaq National Market of $0.625 per share) held by
non-affiliates of the Registrant was approximately $8.0 million. Determination
of Common Stock ownership by affiliates was made solely for the purpose of
responding to this requirement and the Registrant is not bound by this
determination for any other purpose.
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In filing the Annual Report on Form 10-K of Southern Mineral
Corporation (the "Company" or the "Registrant"), the Company incorporated
certain information required by Part III by reference to the Company's Proxy
Statement for the 1999 Annual Meeting of Stockholders. The Company's Proxy
Statement for the 1999 Annual Meeting of Stockholders will not be filed within
the 120-day period following the end of the Company's fiscal year ended December
31, 1998. Accordingly, the Registrant hereby amends Part III of its Annual
Report on Form 10-K as set forth below to include such information:
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Company's directors and executive officers and their ages as of
April 30, 1999 are as follows:
<TABLE>
<CAPTION>
DIRECTOR SINCE AGE POSITION
<S> <C> <C>
Jeffrey W.C. Arsenych 1998 41 Director and Chief Executive Officer of Neutrino
B. Travis Basham 1995 60 Director
David W. Beckwermert 1998 41 Director and President of Neutrino
Michael R. Dawson N/A 45 Vice President-Finance and Chief Financial Officer
Thomas R. Fuller 1995 51 Director
Robert R. Hillery 1993 70 Director
E. Ralph Hines, Jr. 1985 70 Director
Howell H. Howard 1960 71 Chairman of the Board of Directors
Billy W. Lee N/A 53 Vice President-Engineering
Steven H. Mikel 1995 47 Director, President, Chief Executive Officer and Secretary
James E. Nielson 1993 68 Director
Jeffrey B. Robinson 1998 54 Director
John A. Walker N/A 49 Vice President-Exploration
Michael D. Watford 1998 45 Director
Timothy R. Weddle N/A 52 Vice President-Operations
Donald H. Wiese, Jr. 1995 57 Director
Spencer L. Youngblood 1995 53 Director
</TABLE>
JEFFREY W.C. ARSENYCH is the Chairman and Chief Executive Officer of
Neutrino Resources Inc., a Canadian subsidiary of the Company ("Neutrino"), and
has served as the Chief Executive Officer of Neutrino since its inception in
1993. From 1990 to 1993, Mr. Arsenych was Senior Coordinator of Business
Development with Saskatchewan Oil and Gas Corporation (now Wascana Energy,
Inc.). Prior to 1990, Mr. Arsenych was Manager of Exploration Ventures and
subsequently Manager of Corporate Development with Triton Canada Resources, Ltd.
(now Transwest Energy Ltd.). Mr. Arsenych is a founder of Neutrino. Mr. Arsenych
holds a B.A. from the University of Regina and an M.B.A. from the University of
Western Ontario.
B. TRAVIS BASHAM has served, since 1988, as a Manager of four Texas
general partnerships operating under the Diverse name and headquartered in San
Antonio, Texas, all of which are engaged in the oil and gas exploitation and
production business (collectively, the "Diverse Partnerships"). Mr. Basham also
has served as President of Venucot, Inc., an oil and gas production and
management company, since 1987. Mr. Basham is a certified public accountant with
prior administrative and financial positions with New London, Inc. (1985-1986),
Gulf Energy and Development Corp. (1976-1983), and Enserch (1959-1976). Mr.
Basham received a B.B.A. in accounting from Southern Methodist University.
DAVID W. BECKWERMERT is the President of Neutrino. Mr. Beckwermert has
over 15 years of entrepreneurial business experience in various businesses. In
1983, he joined a Canadian chartered bank's regional office in Saskatoon as a
management officer, later advancing to Program Review Analyst for the Treasury
Board Division of the Saskatchewan Department of Finance. Mr. Beckwermert
subsequently served as Manager-Capital Financing and Forecasting and as a
Director in the
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Technical Services Division of SPMC. In 1992 he became Director of Policy and
Legislation for the Saskatchewan Department of Environment and Resource
Management. Mr. Beckwermert is one of the founders of Neutrino where he has held
various management positions in the past five years. He graduated from Lakehead
University with degrees in Business Administration and Forestry.
MICHAEL R. DAWSON joined the Company in October 1998 and is Vice
President-Finance. Mr. Dawson has in excess of twenty years of experience in the
oil and gas finance industry, beginning his career at Shell Oil Company in
Houston, Texas and New Orleans, Louisiana. Mr. Dawson served most recently at
Union Texas Petroleum Holdings, Inc. of Houston, Texas as Director of
Acquisitions and Portfolio Management. Mr. Dawson received his B.B.A. from the
University of Iowa in 1975 and his CPA certification from the State of Texas.
THOMAS R. FULLER has been a Manager of the Diverse Partnerships since
1988. Since 1983, he has served as President of Wyogram Oil Company, which is
engaged in the oil and gas production business. In addition, he has served as
President of Michmatt, Inc. since 1992. He has also served as a vice president
of Hillin Oil Company (1980-1986) and First City National Bank (1974-1980), and
a drilling and reservoir engineer with Exxon Company, U.S.A. (1970-1974). He
holds a B.S. in petroleum engineering from the University of Wyoming, and
attended Louisiana State University's Graduate School of Banking.
ROBERT R. HILLERY has served as President and Chief Executive Officer
of The Links Group, Inc. ("LGI") since 1984. From 1984 until 1992, Mr. Hillery
was Director and President of Gulf Exploration Consultants, Inc. ("GEC"). Both
LGI and GEC are engaged in oil and gas exploration. He also has been a member of
the Board of Trustees of Phillips University since 1982. Mr. Hillery graduated
from Phillips University with a B.A. in geology, mathematics and physics.
E. RALPH HINES, JR. has been a partner of Moon & Hines Oil Exploration,
an oil and gas exploration partnership, since 1994. Since 1994, he also has been
Vice President of Moon-Hines-Tigrett Operating Co., Inc., an oil and gas
operating company.
HOWELL H. HOWARD has been Trustee of the Ehlco Liquidating Trust since
1986 and was Chairman of the Board of Edward Hines Lumber Company from 1981
until its liquidation in January 1989. Mr. Howard is a director of Harris Bank.
Mr. Howard has been Chairman of the Board of the Company since July 1981.
BILLY W. LEE has been Vice President-Engineering of the Company since
June 1997. He served as President of an independent oil and gas company from
1984 through June 1997. He earned a B.S. in petroleum engineering and an M.B.A.
from Texas A&M University. Mr. Lee has worked with Tenneco and BP Huddleston
Company in Houston.
STEVEN H. MIKEL has been the Company's President, Chief Executive
Officer and a director since January 1995. He has also been the Company's
Secretary since April 1999. From May 1993 to December 1994, he was an
independent consultant in the oil and gas industry, acting as a financial
advisor to small and medium-sized independent oil and gas companies in their
capital formation activities. Mr. Mikel was a co-founder and served as the
Managing Director of Resource Investors Management Company (RIMCO), an oil and
gas investment management company, from October 1985 to April 1993. He began his
career as a corporate finance attorney in Hartford, Connecticut, and then worked
in finance with Aetna Life and Casualty, where he specialized in natural
resource industries. Mr. Mikel received his B.A. and J.D. degrees from Syracuse
University and his M.B.A. from the University of Connecticut.
JAMES E. NIELSON has held the position of President and Chief Executive
Officer of Nielson & Associates, Inc. since 1992. From 1979 through 1992, he was
President and Chief Executive Officer of JN Oil and Gas Company, an oil and gas
exploration company. He has served as Director of the American Petroleum
Institute, Rocky Mountain Oil and Gas Association and Shoshone First Bank since
1974, 1989 and 1992, respectively. Mr. Nielson was President of Rocky Mountain
Oil and Gas Association from 1993 to 1995. Mr. Nielson received a B.S. in
business administration from the University of Wyoming.
JEFFREY B. ROBINSON has served as the President and Chief Executive
Officer of Fremont Exploration, Inc. since April 1999, an Oklahoma-based
international oil and gas company. He was the former President and Chief
Executive Officer of Centas Technical Services, L.L.C. from February 1998
through March 1999 and was President and Chief Executive Officer
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of Amerac Energy Corporation from July 1994 through January 1998. He was
previously with Amax Oil and Gas Inc. Mr. Robinson joined the Company's Board of
Directors in January of 1998 following the merger of Amerac with and into the
Company. Mr. Robinson received a B.S. in petroleum engineering from Marietta
College in Marietta, Ohio.
JOHN A. WALKER has been Vice President-Exploration of the Company since
May 1996. He has twenty-one years of petroleum exploration and production
experience with major and independent companies, most recently as Exploration
Manager of Stone & Webster Oil Company, Inc. from January 1994 to January 1996,
and as an independent geological/geophysical consultant from March 1987 to
December 1993. Mr. Walker received a B.S. in geology (1972) and an M.S. in
geology (1975) from Ohio University. Mr. Walker is an AAPG Certified Petroleum
Geologist, No. 4378.
MICHAEL D. WATFORD has served as Chairman and Chief Executive Officer
of Ultra Petroleum since January 1999. He was President, Chief Operating Officer
and Chief Executive Officer of Nuevo Energy Company from 1994 through September
1997. He was President of Torch Energy Marketing, Inc. from 1990 until 1993. Mr.
Watford began his career in 1975 with Shell Oil Company where he held various
positions in exploration and production, refining, chemicals, and mining. He
later held a number of positions of increasing responsibility at Superior Oil
Company and Meridian Oil, Inc. Mr. Watford has a B.S. in finance from the
University of Florida and an M.B.A. from the University of New Orleans.
TIMOTHY R. WEDDLE, Vice President-Operations of the Company since
January 1, 1998, has twenty-seven years of petroleum engineering and management
experience. Mr. Weddle joined the Company in 1998. Mr. Weddle held various
engineering and supervisory positions with Exxon Corporation domestically and
overseas, onshore and offshore. He managed the operations of a domestic
exploration company for fourteen years and was President and owner of Petroleum
Resource Management Co., an oil and gas operating company from 1993 through
1997. Mr. Weddle is a Registered Professional Engineer in Texas. He graduated
with honors from the University of Texas at Austin with a B.S. in chemical
engineering.
DONALD H. WIESE, JR. has been, since 1986, a Manager of the Diverse
Partnerships, and since 1981, has been President of Heathery Resources, Inc., an
oil and gas consulting company. He has served as President of BHW Energy, Inc.
since 1994. He was retained by Primary Fuels, Inc. to establish and manage its
oil and gas acquisition program and was responsible for $240,000,000 in
producing property acquisitions from 1981 to 1987. Mr. Wiese was President of
Nord Petroleum Corporation from 1979 to 1981 and Vice-President of American
Express' international oil and gas project financing group from 1976 to 1979.
His technical training includes evaluation and appraisal experience as Vice
President of DeGolyer and MacNaughton (1973-1976), and oil and gas operations
with Texaco, Inc. (1965-1973). Mr. Wiese is a graduate of New Mexico State
University and a Registered Professional Engineer.
SPENCER L. YOUNGBLOOD has been an independent oil and gas investor and
President of Kona, Inc., an oil and gas production company, since 1990. From
1984 to 1990, he was Senior Vice President with Geodyne Resources, Inc., where
he directed more than $200,000,000 in acquisitions. Mr. Youngblood began his
career at Aminoil in 1975 and worked with Gulf Energy and Development Corp. from
1981 to 1984. He earned a B.S. in petroleum engineering from Louisiana State
University and an M.B.A. from Florida Technological University.
TERMS OF OFFICE
Each of the Company's directors will hold office until the Company's
Annual Meeting of Stockholders or until his successor is duly elected and
qualified. All executive officers of the Company serve at the discretion of the
Board of Directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, officers and persons holding more than ten percent of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission and any stock exchange or automated quotation system on
which the Common Stock may then be listed or quoted (i) initial reports of
ownership, (ii) reports of changes in ownership and (iii) annual reports of
ownership of Common Stock and other equity securities of the Company. Such
directors, officers and ten percent stockholders are also required to furnish
the Company with copies of all such filed reports.
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Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required during
1998, the Company believes that all of the Company's executive officers and
directors complied with Section 16(a) reporting requirements during 1998 except
as follows: each of Jeffrey W.C. Arsenych, David W. Beckwermert, Michael R.
Dawson, Billy W. Lee, John A. Walker and Timothy R. Weddle failed to file a Form
5 on a timely basis with respect to the repricing of options to purchase the
Company's Common Stock.
ITEM 11. EXECUTIVE COMPENSATION.
DIRECTOR COMPENSATION
The Company reimburses each director for his actual and necessary
expenses reasonably incurred in connection with attending meetings of the Board
of Directors and its committees. In April 1997, the Board of Directors adopted
the 1997 Non-Employee Director Compensation Plan ("1997 Plan") which is
effective through May 2002. Under the 1997 Plan, non-employee directors are
entitled to receive 1,000 shares of Common Stock for each Board of Directors
meeting attended, excluding telephonic meetings. No retainer or other
compensation for serving as a director of the Company was paid during 1998.
EXECUTIVE OFFICER COMPENSATION
The following table reflects all forms of compensation for Steven H.
Mikel, John A. Walker, Billy W. Lee, Timothy R. Weddle and James H. Price's
services to the Company during the applicable years ended December 31, 1998,
December 31, 1997 and December 31, 1996 by the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- -------------------------------------
AWARDS PAYOUTS
----------------------- ----------
SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) AWARDS ($) SARS (#) PAYOUTS ($) COMPENSATION ($)
- --------------------------- ---- ---------- --------- ---------------- ---------- ---------- ----------- ----------------
<S> <C> <C> <C>
Steven H. Mikel 1998 $175,000 -- -- -- -- -- $ 515(1)
President, Chief 1997 $150,000 $60,000 -- -- -- -- $ 5,265(1)(2)
Executive Officer 1996 $125,750 $50,000 -- -- 10,000 -- $ 5,265(1)(2)
and Secretary
John A. Walker 1998 $125,000 -- -- -- 120,000(3)(4) -- $ 477(5)
Vice President-Exploration 1997 $ 90,000 $24,000 -- -- -- -- $ 5,227(2)(5)
1996 $ 73,125 $20,000 -- -- -- -- $ 2,887(5)(6)
Billy W. Lee 1998 $125,000 -- -- -- 100,000(4)(7) -- $ 985(8)
Vice President-Engineering 1997 $ 45,243 $24,000 -- -- -- -- $ 187(9)
Timothy R. Weddle 1998 $110,000 -- -- -- 50,000(4)(10) -- --
Vice President-Operations
James H. Price(11) 1998 $ 78,750 -- -- -- -- -- $89,644(5)(12)
Vice President-Finance 1997 $ 90,000 $20,000 -- -- 70,000 -- $ 5,227(2)(5)
1996 $ 73,125 -- -- -- 50,000 -- $ 5,227(2)(5)
</TABLE>
- ------------------------
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(1) Includes $515 per year computed in accordance with Internal Revenue
Service guidelines for premiums paid on term life insurance exceeding
$50,000 in coverage. Substantially all employees of the Company are
covered by term life insurance policies.
(2) Includes $4,750 contributed by the Company to each officer's account in
the Company's Simplified Employee Pension Plan in which substantially all
of the Company's employees are eligible to participate.
(3) Comprised of an option originally granted on May 15, 1996 to purchase
50,000 shares, an option originally granted on March 4, 1997 to purchase
20,000 shares and an option originally granted on November 14, 1997 to
purchase 50,000 shares, with exercise prices ranging from $3.00 to $6.75
per share. All of such options were repriced to $1.00 per share by the
Compensation Committee effective December 21, 1998.
(4) See "Option/SAR Grants in Last Fiscal Year" table below.
(5) Includes $477 for each year computed in accordance with Internal Revenue
Service guidelines for premiums paid on term life insurance exceeding
$50,000 in coverages. Substantially all employees of the Company are
covered by term life income policies.
(6) Includes $2,410 contributed by the Company for Mr. Walker's account in the
Company's Simplified Employee Pension Plan in which substantially all of
the Company's employees are eligible to participate.
(7) Comprised of an option originally granted in July 1, 1997 to purchase
50,000 shares at $5.00 per share and an option originally granted on
November 14, 1997 to purchase 50,000 shares at $6.75 share. All of such
options were repriced to $1.00 per share by the Compensation Committee
effective December 21, 1998.
(8) Includes $985 for 1998 computed in accordance with Internal Revenue
Service guidelines for premiums paid on term life insurance exceeding
$50,000 in coverage.
(9) Includes $187 contributed by the Company for Mr. Lee's account in the
Company's Simplified Employee Pension Plan in which substantially all of
the Company's employees are eligible to participate.
(10) Comprised of an option originally granted on January 1, 1995 to purchase
50,000 shares at $5.50 per share. This option was repriced to $1.00 per
share by the Compensation Committee effective December 21, 1998.
(11) Mr. Price was no longer employed by the Company effective September 1998.
(12) Includes compensation of $89,167 pursuant to a Severance Agreement by and
between the Company and James H. Price as of September 30, 1998, $26,250
of which was paid in 1998 and $62,917 of which is to be paid in 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SECURITIES PERCENT OF TOTAL EXERCISE OR GRANT DATE
UNDERLYING OPTIONS/SARS OPTIONS/SARS GRANTED BASE PRICE EXPIRATION PRESENT
NAME(1) GRANTED (#)(2) TO EMPLOYEES IN 1998 ($/SHARE) DATE(3) VALUE ($)(4)
- ---------------------- ------------------------ ----------------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Billy W. Lee 50,000 4.3% $1.00 07/01/02 $5,648
50,000 4.3% $1.00 11/14/02 $5,545
John A. Walker 50,000 4.3% $1.00 05/15/01 $5,923
20,000 1.7% $1.00 03/04/02 $2,292
50,000 4.3% $1.00 11/14/02 $5,545
Timothy R. Weddle 50,000 4.3% $1.00(5) 01/01/03 $5,525
</TABLE>
- ------------------------
(1) Except for Mr. Weddle, neither Mr. Mikel nor any of the other named
executive officers was granted any options or SARs during 1998.
(2) The options become exercisable as to one-third of the shares after the
expiration of one year from the date of grant, as to two-thirds after the
expiration of two years and in full after the expiration of three years
from the date of grant. Options are granted for a term of five years,
subject to termination 90 days following termination of employment. Each
option vests in full upon death, disability, normal retirement or a change
of control of the Company.
(3) Reflects the original expiration date of the original grant of options
which was not affected by repricing of the options.
(4) The dollar amounts represent the value calculated using the Black-Scholes
option pricing model and using December 21, 1998, the date on which such
options were repriced, as the applicable grant date. The actual value, if
any, realized will depend on the excess of the stock price over the
exercise price at the date the option is exercised. The estimated values
under that model are based on assumptions that include (i) a stock price
volatility of 65.63%, (ii) a discount rate of 4.48% and (iii) a dividend
yield of 0%. The Company's use of the Black-Scholes model to indicate the
present value of each grant is not an endorsement of this valuation.
(5) Reflects the repricing of options by the Compensation Committee of the
Board of Directors effective December 21, 1998. The last sales price for
the Common Stock on December 21, 1998, as reported in the consolidated
reporting system for Nasdaq National Market issues, was $0.625.
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND OPTION/SAR VALUE AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
UNEXERCISED OPTIONS/SARS MONEY OPTIONS/SARS AT
SHARES AT DECEMBER 31, 1998 DECEMBER 31, 1998(1)
ACQUIRED VALUE -------------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Steven H. Mikel 0 $0 460,000 0 $0 $0
Billy W. Lee 0 $0 33,332 66,668 $0 $0
John A. Walker 0 $0 56,665 63,335 $0 $0
James H. Price 0 $0 27,446 667 $0 $0
Timothy R. Weddle 0 $0 -- 50,000 $0 $0
</TABLE>
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(1) Based upon the last sales price of $0.719 per share on December 31, 1998,
as reported in the consolidated reporting system for Nasdaq National
Market issues.
SIMPLIFIED EMPLOYEE PENSION PLAN
The Company terminated its 401(k) Retirement Plan in 1995, and adopted a
Simplified Employee Pension Plan ("SEP"). The SEP allows employees to defer part
of their salary. Employer contributions are optional, and the Company will
determine annually whether it will contribute and at what level. The maximum
amount that can be contributed annually per SEP plan participant, particularly
from a combination of salary deferrals plus Company optional contributions, is
$22,500. The Company's contributions amounted to $0, $33,784 and $22,554 in
1998, 1997 and 1996, respectively, and was 50% of the amount contributed by each
of the participants in the plan during 1997 and 1996.
COMPENSATION COMMITTEE
The following persons served on the compensation committee of the
Company's Board of Directors during the fiscal year ended December 31, 1998:
Howell H. Howard, E. Ralph Hines, Jr. and James E. Nielson.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
Effective July 1, 1998, the Company entered into an employment agreement
with each of Messrs. Arsenych and Beckwermert in connection with the Neutrino
acquisition. The agreement with Mr. Arsenych provides for a one-year initial
term of employment at Cdn.$170,000 per year, plus a grant of options to purchase
200,000 shares of the Company's Common Stock at a price of $3.75 per share
(which options were repriced to $1.00 per share effective December 21, 1998) and
a grant of certain additional shares of the Company's Common Stock to be held in
escrow pending completion of certain term of service requirements or a change of
control of the Company. The agreement with Mr. Beckwermert provides for a
one-year initial term of employment at Cdn.$160,000 per year, plus a grant of
options to purchase 200,000 shares of the Company's Common Stock at a price of
$3.75 per share (which options were repriced to $1.00 per share effective
December 21, 1998) and a grant of certain additional shares of the Company's
Common Stock to be held in escrow pending completion of certain term of service
requirements or a change of control of the Company. See "ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS." These agreements will terminate
effective June 30, 1999.
In addition, pursuant to a retention plan established by resolution of the
Board effective January 7, 1999, each officer is entitled to one year's salary,
payable in a lump sum, upon termination resulting from a change of control.
Pursuant to this retention plan, in the event of termination in connection with
a change of control, Messrs. Mikel, Lee, Walker and Weddle would be entitled to
receive payments of $175,000, $125,000, $125,000 and $110,000, respectively.
In September 1998, the Company entered into a severance agreement with
James H. Price, formerly Vice President-Finance of the Company. In connection
with the termination of his employment pursuant to such severance agreement, he
is entitled to salary continuation and benefits through June 30, 1999. The total
amount of such salary is $89,167, $26,250 of which was paid in 1998 and $62,917
of which is to be paid in 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of March 31, 1999, the number of shares
of the Company's Common Stock owned by each director and director nominee of the
Company, executive officer named in the Summary Compensation Table
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above, and all of the Company's directors and executive officers as a group.
Based on publicly-available filings with the Securities and Exchange Commission,
the Company knows of no person or entity, other than those listed below, who is
the holder of more than five percent of its voting securities. Unless otherwise
indicated, each holder has sole voting and investment power with respect to the
shares of Common Stock owned by such holder, and is a United States citizen,
except that Messrs. Arsenych and Beckwermert are Canadian citizens.
AMOUNT AND PERCENT
NATURE OF OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ------------------------------------------ -------------------- --------
Centennial Associates, L.P. and affiliates 762,009(1) 6.0%
900 Third Avenue
New York, NY 10022
Jeffrey W.C. Arsenych 163,758 1.3%
B. Travis Basham 522,807(2) 4.1%
David W. Beckwermert 94,192 *
Michael R. Dawson 10,000 *
Thomas R. Fuller 522,807(3) 4.1%
Robert R. Hillery 72,828(4) *
E. Ralph Hines, Jr 59,108(5) *
Howell H. Howard 570,417(6) 4.5%
Billy W. Lee 34,332(7) *
Steven H. Mikel 547,421(8) 4.3%
James E. Nielson 33,147(9) *
Jeffrey B. Robinson 86,497(10) *
John A. Walker 86,959(11) *
Michael D. Watford 4,000 *
Timothy R. Weddle 25,974(12) *
Donald H. Wiese, Jr 516,307(13) 4.0%
Spencer L. Youngblood 516,807(14) 4.0%
All Directors and Officers as a group (17 persons) 3,867,361 30.2%
- ------------------------
* Less than one percent of outstanding Common Stock.
(1) As reported in the Schedule 13G filed by Centennial Energy Partners, L.P.
("Centennial") on March 25, 1999, consists of 350,399 shares of Common
Stock, 373,479 shares of Common Stock, 38,131 shares of Common Stock,
723,878 shares of Common Stock, 762,009 shares of Common Stock, 762,009
shares of Common Stock owned by Centennial, Tercentennial Energy Partners,
L.P. ("Tercentennial"), Joseph H. Reich & Co., Inc. ("JHR & Co."),
Centennial Energy Partners, L.L.C. ("Energy"), Joseph H. Reich and Peter
K. Seldin, respectively. All of the foregoing parties share voting and
dispositive powers over such shares. JHR & Co. has the power to dispose of
the shares of Common Stock held by it in the Managed Account, which power
may be exercised by the employees of JHR & Co. who have investment
authority. Energy, the general partner of Centennial and Tercentennial,
has the power to dispose of and the power to vote the shares of Common
Stock beneficially owned by each of the foregoing. Joseph H. Reich, as the
Managing Member of Energy, has the power to vote and dispose of the Common
Stock beneficially held by Energy and as President of JHR & Co., has the
power to dispose of the shares of the Managed Account. Peter K. Seldin is
a non-managing member of Energy who has been delegated the authority to
vote and dispose of the shares of Energy and as Vice President of JHR &
Co. has the power to dispose of the shares of Common Stock held by it in
the Managed Account.
(2) Includes 376,985 shares held by Venucot, Inc., a corporation controlled by
Mr. Basham, and 7,924 and 69,576 shares issuable upon exercise of
presently exercisable options held by Mr. Basham and Venucot, Inc.,
respectively.
8
<PAGE>
(3) Includes 376,985 shares held by Michmatt, Inc., a corporation controlled
by Mr. Fuller, and 7,924 and 69,576 shares issuable upon exercise of
presently exercisable options held by Mr. Fuller and Michmatt, Inc.,
respectively.
(4) Includes 43,878 shares issuable upon exercise of a presently exercisable
option, and 6,054 shares issuable upon conversion of $50,000 of the
Company's 6.875% Convertible Subordinated Debentures ("Convertible
Debentures") at a conversion rate of 121.07 shares of Common Stock per
$1,000 of Convertible Debentures (the "Convertible Rate").
(5) Includes 41,750 shares owned by Mr. Hines' wife and 4,358 shares issuable
upon conversion of $36,000 of Convertible Debentures at the Conversion
Rate.
(6) Includes 363,633 shares held in trusts of which Mr. Howard or his wife
serves as a co-trustee and shares voting and dispositive power, and 26,488
shares owned directly by Mr. Howard's wife.
(7) Includes 33,332 shares issuable upon exercise of presently exercisable
options.
(8) Includes 460,000 shares issuable upon exercise of presently exercisable
options, and 2,421 shares issuable upon conversion of $20,000 of
Convertible Debentures at the Conversion Rate, which Convertible
Debentures are held in trusts of which Mr. Mikel is trustee and possesses
voting and dispositive power.
(9) Includes 4,000 shares held by Nielson & Associates, Inc., a corporation
controlled by Mr. Nielson, and 847 issuable upon conversion of $7,000 of
Convertible Debentures at the Conversion Rate.
(10) Includes 1,276 shares indirectly held by Mr. Robinson's children.
(11) Includes 79,999 shares issuable upon exercise of presently exercisable
options and 484 shares issuable upon conversion of $4,000 of Convertible
Debentures at the Conversion Rate.
(12) Includes 8,133 shares held by Petroleum Resource Management Company, a
company controlled by Mr. Weddle, and 16,666 shares issuable upon exercise
of presently exercisable options.
(13) Includes 369,485 shares held by DHW Energy, Inc., a corporation controlled
by Mr. Wiese, and 7,924 and 69,576 shares issuable upon exercise of
presently exercisable options held by Mr. Wiese and DHW Energy, Inc.,
respectively.
(14) Includes 376,985 shares held by Kona, Inc., a corporation controlled by
Mr. Youngblood, and 7,924 and 69,576 shares issuable upon exercise of
presently exercisable options held by Mr. Youngblood and Kona, Inc.,
respectively.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On January 1, 1998, the Company acquired certain U.S. onshore oil and gas
properties from Petroleum Resource Management Company in exchange for 8,333
shares of the Company's Common Stock. Petroleum Resource Management Company is
owned and controlled by Timothy R. Weddle. Concurrent with this transaction, Mr.
Weddle became an officer of Southern Mineral Corporation in the capacity of Vice
President-Operations.
In conjunction with the acquisition of Neutrino in July 1998, 324,430
shares of the Company's Common Stock were issued to key Neutrino management
personnel (including 144,407 shares to Mr. Arsenych and 86,333 shares to Mr.
Beckwermert) in consideration for retention and other obligations. The total
purchase price for the Neutrino shares was $57,198,000, including assumption of
debt and working capital deficit.
In September 1995, the Company entered into the Southern Links Group Joint
Venture ("Southern Links") to acquire, develop and market exploration prospects.
The Company's joint venture partner is LGI, a company that is controlled by
Robert Hillery, a director of the Company. The Company agreed to fund the third
party costs of Southern Links. Any proceeds from the sale of prospects or oil
and gas from such prospects is distributed 100% to the Company until it receives
an amount equal
9
<PAGE>
to the return of its invested capital, after which time all such proceeds and
property interests, if any, are to be distributed 75% to the Company and 25% to
LGI. In December 1998, the Company made the determination to discontinue further
evaluation of certain non-producing State of Texas offshore leases which were
held within the Southern Links Venture. Such leases were scheduled to expire in
January 1999 unless additional rental payments were made. Pursuant to the Joint
Venture agreement, the Company assigned six State of Texas leases to LGI for
nominal cash consideration and retention of an overriding royalty interest of 1%
of 8/8th in and to the leases.
In January 1998, the Company consummated the transactions contemplated by
an Amended and Restated Agreement and Plan of Merger ("Merger Agreement")
executed November 17, 1997 by and among Amerac Energy Corporation ("Amerac"),
SMC Acquisition Corp., a Delaware Corporation, and the Company. Pursuant to the
Merger Agreement, the Company acquired all of Amerac's outstanding capital stock
in consideration for issuing to Amerac's stockholders (including Mr. Robinson)
the right to receive 3,333,333 shares of the Company's Common Stock. Subsequent
to the acquisition, a number of non-strategic Amerac properties were sold and
the remainder became a part of the Company's U.S. oil and gas asset base.
Pursuant to the Merger Agreement, Mr. Robinson became a director of the Company.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A)(1) THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:
The following consolidated financial statements of the Company are
included in Part II, Item 8. of this report:
PAGE
Consolidated Statements of Income .............................. 27
Consolidated Balance Sheets .................................... 26
Consolidated Statements of Cash Flows .......................... 29
Consolidated Statements of Stockholders' Equity ................ 28
Notes to Consolidated Financial Statements ..................... 31
Report of independent accountants .............................. 25
(A)(2) EXHIBITS
(a) EXHIBIT
NUMBERS DESCRIPTION
2.1 Agreement by 779776 Alberta Ltd. to purchase all of the
outstanding Common Shares of Neutrino at a price of $1.80
(Canadian) per Common Share, dated May 29, 1998. (filed
with Form 8-K of Registrant dated July 2, 1998 (Commission
File No. 0-8043 and incorporated herein by reference).
10
<PAGE>
EXHIBIT
NUMBERS DESCRIPTION
------- -----------
2.2 Agreement and Plan of Merger, dated as of November 17,
1997, by and among the Company, AEC Acquisition Corp. and
Amerac (filed with original Form 8-K of Registrant dated
November 17, 1997 (Commission File No. 0-8043) and
incorporated herein by reference)).
3.1 Restated Articles of Incorporation of the Company (filed
as Exhibit 3.1 to the Company's Form 8-K dated January 28,
1998 (Commission File No. 0-8043) and incorporated herein
by reference).
3.2 Amended and Restated Bylaws of the Company, as amended
(incorporated herein by reference to Exhibit (a)(3)(b) of
Item 14, Part IV of the Company's Annual Report on Form
10-K filed for the year ended December 31, 1989
(Commission File No. 0-8043)).
4.1 Indenture pursuant to which the Company's 6.875%
Convertible Subordinated Debentures due 2007 are issued
(incorporated by reference to Form S-2 Registration
333-35843 dated September 17, 1997).
*10.1 Stock Option Agreement made as of December 31, 1994
between Southern Mineral Corporation and Steven H. Mikel
(incorporated by reference to Exhibit (h) to the Company's
annual report on Form 10-K for year ended December 31,
1994 1989 (Commission File No. 0-8043)).
*10.2 Southern Mineral Corporation 1995 Non-Employee Director
Compensation Plan (incorporated by reference to Exhibit
(k) to the Company's annual report on Form 10-K dated
December 31, 1994 (Commission File No. 0-8043)).
10.3 Credit Agreement, dated December 20, 1995, between
Southern Mineral Corporation, SMC Production Co., San
Salvador Development Company, Inc., Venture Resources,
Inc., Venture Pipeline Company, VenGas Pipeline Company,
Spruce Hills Production Company, Inc., and Compass
Bank-Houston for Reducing Revolver Line of Credit of up to
$25,000,000 (incorporated by reference to Exhibit 10.1
to Form 8-K of Registrant dated December 20, 1995
(Commission File No. 0-8043)).
10.4 Promissory Note, dated December 20, 1995, in the original
principal amount of $25,000,000 made by Southern Mineral
Corporation, SMC Production Co., San Salvador Development
Company, Inc., Venture Resources, Inc., Venture Pipeline
Company, VenGas Pipeline Company, Spruce Hills Production
Company, Inc. in favor of Compass Bank-Houston
(incorporated by reference to Exhibit 10.2 to Form 8-K of
Registrant dated December 20, 1995 (Commission File No.
0-8043)).
10.5 Credit Agreement, dated December 20, 1995, between
Southern Mineral Corporation, SMC Production Co., San
Salvador Development Company, Inc., Venture Resources,
Inc., Venture Pipeline Company, VenGas Pipeline Company,
Spruce Hills Production Company, Inc. and Compass
Bank-Houston for Term Loan of $3,500,000 (incorporated by
reference to Exhibit 10.3 to Form 8-K of Registrant dated
December 20, 1995 (Commission File No. 0-8043)).
10.6 Promissory Note, dated December 20, 1995, in the original
principal amount of $3,500,000 made by Southern Mineral
Corporation, SMC Production Co., San Salvador Development
Company, Inc., Venture Resources, Inc., Venture Pipeline
Company, VenGas Pipeline Company, Spruce Hills Production
Company, Inc. in favor of Compass Bank-Houston
(incorporated by reference to Exhibit 10.4 to Form 8-K of
Registrant dated December 20, 1995 (Commission File No.
0-8043)).
11
<PAGE>
EXHIBIT
NUMBERS DESCRIPTION
------- -----------
*10.7 1996 Stock Option Plan (incorporated by reference to
Exhibit 10.10 to Form 10-KSB dated December 31, 1995
(Commission File No. 0-8043)).
*10.8 1996 Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.11 to Form 10-KSB dated December
31, 1995 (Commission File No. 0-8043)).
10.9 Joint Venture Agreement, dated October 1, 1995, between
Southern Mineral Corporation and The Links Group, Inc.
(incorporated by reference to Exhibit 10.12 to Form 10-KSB
dated December 31, 1995 (Commission File No. 0-8043)).
*10.10 Option Agreement, dated January 5, 1996, between Southern
Mineral Corporation and Diasu Oil & Gas Company, Inc.
covering the exploration joint venture (incorporated by
reference to Exhibit 10.13 to Form 10-KSB dated December
31, 1995 (Commission File No. 0-8043)).
*10.11 Stock Option Agreement dated April 6, 1995, between
Southern Mineral Corporation and Robert R. Hillery
(incorporated by reference to Exhibit 10.14 to Form 10-KSB
dated December 31, 1995 (Commission File No. 0-8043)).
10.12 Subscription Agreement and Assumption of Obligations,
dated January 5, 1995, between Southern Mineral
Corporation and Gary L. Chitty, and Thomas J. McMinn
(incorporated by reference to Exhibit 10.15 to Form
10-KSB/A-1 dated December 31, 1995 (Commission File No.
0-8043)).
10.13 Amendment to Credit Agreement between Southern Mineral
Corporation et al and Compass Bank-Houston dated August
30, 1996 (incorporated by reference to Exhibit 10.1 to
Form 8-K of the Company dated August 30, 1996 (Commission
File No. 0-8043)).
10.14 Second Amendment to Credit Agreements between the Company
and Compass Bank dated December 17, 1996 (incorporated by
reference to Exhibit 10.14 to Form 10-KSB dated December
31, 1996 (Commission File No. 0-8043)).
10.15 Third Amendment to Credit Agreement between the Company
and Compass Bank, dated June 10, 1997 (incorporated by
reference to Exhibit 10.15 to Form S-2 (Commission File
No. 333-35843)).
10.16 Fourth Amendment to Credit Agreement between the Company
and Compass Bank, dated June 30, 1997 (incorporated by
reference to Exhibit 10.1 to Form 10-QSB for the quarterly
period ended June 30, 1997 (Commission File No. 0-8043)).
*10.17 Incentive Stock Option Agreement between the Company and
M. M. Jenson, Dated August 26, 1997 (incorporated by
reference to Exhibit 10.17 to Form S-2 (Commission File
No. 333-35843)).
10.18 Fifth Amendment to Credit Agreement between the Company
and Compass Bank, dated December 31, 1997 (incorporated by
reference to Exhibit 10.1 to Form 8-K dated January 28,
1998 (Commission File No. 0-8043)).
12
<PAGE>
EXHIBIT
NUMBERS DESCRIPTION
------- -----------
10.19 Sixth Amendment to Credit Agreement between the Company
and Compass Bank, dated January 28, 1998 (incorporated by
reference to Exhibit 10.2 to Form 8-K dated January 28,
1998 (Commission File No. 0-8043 )).
10.20 Letter Agreement between the Company and Amerac, dated
November 17, 1997 (incorporated by reference to Exhibit
10.18 to Form S-4 (Commission File No. 333-42045)).
10.21 Letter Agreement between the Company and Amerac, dated
November 21, 1997 (incorporated by reference to Exhibit
10.19 to Form S-4 (Commission File No. 333-42045)).
10.22 Amended and Restated Credit Agreement between the Company,
Compass Bank-Houston and First Union National Bank dated
June 19, 1998 (incorporated by reference to Exhibit 10.1
to Form 10-QSB for the quarterly period ended June 30,
1998 (Commission File No. 0-8043)).
10.23 Letter Amendment dated November 4, 1998, to the Amended
and Restated Credit Agreement between the Company, Compass
Bank-Houston and First Union National Bank dated June 19,
1998 (incorporated by reference to Exhibit 10.1 to the
Company's Form 10-QSB for the quarterly period ended
September 30, 1998).
*10.24 1997 Stock Option Plan (incorporated by reference to Form
S-8, filed April 28, 1998, Registration No. 333-51237
(Commission File No. 333-420450)).
10.25 Neutrino Resources Inc. Credit Facility Agreement with
National Bank of Canada as amended February 26, 1999
(incorporated by reference to Exhibit 10.25 to Form 10-K
dated December 31, 1998 (Commission File No. 0-8043).
*10.26 Neutrino Resources Inc. Employee Stock Savings Plan
effective July 8, 1998 (incorporated by reference to
Exhibit 10.26 to Form 10-K dated December 31, 1998
(Commission File No. 0-8043).
10.27 Second Amendment to Amended and Restated Credit Agreement
between the Company, Compass Bank-Houston and First Union
National Bank dated March 29, 1999 (incorporated by
reference to Exhibit 10.27 to Form 10-K dated December
31, 1998 (Commission File No. 0-8043).
*10.28 Amendment to Incentive Stock Option Agreement of the
Company (incorporated by reference to Exhibit 10.28 to
Form 10-K dated December 31, 1998 (Commission File No.
0-8043).
*10.29 Board Resolution of the Company establishing a Retention
Plan in the event of a change of control of the Company
dated January 7, 1999 (incorporated by reference to
Exhibit 10.29 to Form 10-K dated December 31, 1998
(Commission File No. 0-8043).
*10.30 Employment Agreement between Jeffrey W. C. Arsenych and
Neutrino Resources, Inc. dated as of July 1, 1998 (filed
herewith).
*10.31 Employment Agreement between David W. Beckwermert and
Neutrino Resources, Inc. dated as of July 1, 1998 (filed
herewith).
21.1 Subsidiaries of the Company (incorporated by reference to
Exhibit 21.1 to Form 10-K dated December 31, 1998
(Commission File No. 0-8043).
23.1 Consent of KPMG LLP (incorporated by reference to Exhibit
23.1 to Form 10-K dated December 31, 1998 (Commission
File No. 0-8043).
23.2 Consent of Netherland, Sewell & Associates, Inc.
(incorporated by reference to Exhibit 23.2 to Form 10-K
dated December 31, 1998 (Commission File No. 0-8043).
23.3 Consent of McDaniel & Associates Consultants, Ltd.
(incorporated by reference to Exhibit 23.3 to Form 10-K
dated December 31, 1998 (Commission File No. 0-8043).
23.4 Consent of Ryder Scott Company (incorporated by reference
to Exhibit 23.4 to Form 10-K dated December 31, 1998
(Commission File No. 0-8043).
23.5 Consent of Chapman Petroleum Engineering, Ltd.
(incorporated by reference to Exhibit 23.5 to Form 10-K
dated December 31, 1998 (Commission File No. 0-8043).
23.6 Consent of Gilbert Laustsen Jung Associates Ltd.
(incorporated by reference to Exhibit 23.6 to Form 10-K
dated December 31, 1998 (Commission File No. 0-8043).
13
<PAGE>
27.1 Financial Data Schedule (incorporated by reference to
Exhibit 27.1 to Form 10-K dated December 31, 1998
(Commission File No. 0-8043).
* Management Contracts, Plans or Arrangements to Item 601
(b)(10)(iii)(A) of Regulation S-K.
(a) Reports on Form 8-K
Form 8-K/A filed September 11, 1998, reporting the acquisition of
Neutrino Resources, Inc. financial statements and exhibits and filed
as an exhibit to the Form 8-K filed on July 17, 1998.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Amendment to be signed on
its behalf by the undersigned, hereunto duly authorized.
SOUTHERN MINERAL CORPORATION
Date: April 30, 1999 BY: STEVEN H. MIKEL
Steven H. Mikel
President, Chief Executive
Officer and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
/S/ JEFFREY W. C. ARSENYCH Director, Chairman and April 30, 1999
Jeffrey W. C. Arsenych Chief Executive Officer
Neutrino Resources Inc.
_______________________ Director April 30, 1999
B. Travis Basham
/S/ DAVID W. BECKWERMERT Director, President and Chief April 30, 1999
David W. Beckwermert Operating Officer-Neutrino
Resources Inc.
/S/ MICHAEL R. DAWSON Vice President-Finance and April 30, 1999
Michael R. Dawson Chief Financial Officer
/S/ THOMAS R. FULLER Director April 30, 1999
Thomas R. Fuller
______________________ Director April 30, 1999
Robert R. Hillery
/S/ E. RALPH HINES, JR. Director April 30, 1999
E. Ralph Hines, Jr.
/S/ HOWELL H. HOWARD Director and Chairman April 30, 1999
Howell H. Howard of the Board of Directors
15
<PAGE>
_______________________ Treasurer April 30, 1999
M. M. Jenson (principal accounting officer)
/S/ STEVEN H. MIKEL Director, President, April 30, 1999
Steven H. Mikel Chief Executive Officer and
Secretary
/S/ JAMES E. NIELSON Director April 30, 1999
James E. Nielson
/S/ JEFFREY B. ROBINSON Director April 30, 1999
Jeffrey B. Robinson
/S/ MICHAEL D. WATFORD Director April 30, 1999
Michael D. Watford
_____________________ Director April 30, 1999
Donald H. Wiese, Jr.
______________________ Director April 30, 1999
Spencer L. Youngblood
16
EMPLOYMENT AGREEMENT
BETWEEN
JEFFREY W.C. ARSENYCH
AND
NEUTRINO RESOURCES INC.
MADE AS OF
JULY 1, 1998
<PAGE>
i
TABLE OF CONTENTS
ARTICLE 1
EMPLOYMENT.......................................................1
1.1 Employment.................................................1
1.2 Term of Employment.........................................2
1.3 Place of Employment........................................2
ARTICLE 2
REMUNERATION.....................................................2
2.1 Salary.....................................................2
2.2 Benefits...................................................2
2.3 Vacation...................................................2
2.4 Expenses...................................................2
2.5 Stock Option Grant.........................................3
ARTICLE 3
EMPLOYEE BENEFIT PLAN............................................3
3.1 Contribution...............................................3
3.2 Custodian..................................................3
3.3 Entitlement................................................3
3.4 Termination................................................3
3.5 Change of Control..........................................4
ARTICLE 4
EMPLOYEE'S COVENANTS.............................................4
4.1 Service....................................................4
4.2 Duties and Responsibilities................................4
4.3 Rules and Regulations......................................4
4.4 Non-Disclosure.............................................4
4.5 Inventions and Patents.....................................4
ARTICLE 5
TERMINATION OF EMPLOYMENT........................................5
5.1 Termination by Employer for Cause..........................5
5.2 Termination by Employee on Notice..........................5
5.3 Termination by Employer on Notice..........................5
5.4 Fair and Reasonable........................................5
5.5 Return of Property.........................................5
5.6 Non-Solicitation of Employees..............................6
5.7 Provisions Which Operate Following Termination.............6
5.8 Definition in "Change in Control"..........................6
ARTICLE 6
RENEWAL OF AGREEMENT.............................................7
6.1 Automatic Renewal..........................................7
6.2 Non-Renewal................................................7
ARTICLE 7
GENERAL..........................................................7
7.1 Sections and Headings......................................7
7.2 Number.....................................................7
7.3 Schedules..................................................7
7.4 Benefit of Agreement.......................................7
<PAGE>
ii
7.5 Entire Agreement...........................................8
7.6 Amendments and Waivers.....................................8
7.7 Severability...............................................8
7.8 Notices....................................................8
7.9 Governing Law..............................................9
7.10 Attornment.................................................9
7.11 Copy of Agreement..........................................9
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of July 1, 1998
BETWEEN:
JEFFREY W.C. ARSENYCH, of the City of Calgary in the
Province of Alberta (hereinafter referred to as the "Employee"),
OF THE FIRST PART
- and -
NEUTRINO RESOURCES INC., a corporation incorporated under
the laws of Alberta (hereinafter referred to as the "Employer"),
OF THE SECOND PART
WHEREAS the Employee has held the position of President & Chief
Executive Officer with the Employer under the terms of a prior employment
agreement with the Employee made as of December 1, 1997 (the "Prior Agreement");
AND WHEREAS the Employer has been subject to a Change of Control, as
defined in the Prior Agreement, as a result of a successful offer for the
Employer's shares by Southern Mineral Corporation ("SMC"), or a wholly-owned
subsidiary of SMC;
AND WHEREAS the said Change of Control has triggered certain rights
and obligations for the Employer and the Employee, if the Employee elects to
terminate his employment under the Prior Agreement;
AND WHEREAS the Employer and the Employee wish to continue to the
employment relationship on the terms and conditions set out in this agreement
(the "Agreement").
NOW THEREFORE in consideration of the covenants and agreements
herein contained, the parties agree as follows:
ARTICLE 1
EMPLOYMENT
1.1 EMPLOYMENT
The Employee agrees to continue employment with the Employer and the
Employee specifically waives any rights that have accrued or may accrue to the
Employee under the Prior Agreement, and subject to the terms and conditions
herein contained, the Employee shall be employed by the Employer as Chairman and
Chief Executive Officer, reporting to the Board of
<PAGE>
2
Directors, and shall perform such duties and exercise such powers related
thereto as may from time to time be assigned to him by the Employer. The
Employee shall sit as a member of the Board of Directors of the Employer, and of
SMC, until the next Annual General Meeting of each respective organization.
1.2 TERM OF EMPLOYMENT
The employment of the Employee hereunder shall commence on July 1,
1998 and shall be for a period of 1 year to terminate on June 30, 1999, subject
to any renewal of this Agreement pursuant to Section 6.1 and subject to earlier
termination of this Agreement pursuant to Article 5.
1.3 PLACE OF EMPLOYMENT
The Employee shall perform his work and services for the Employer or
for such other person as may be authorized by the Employer from time to time in
Calgary, Alberta and the Employee shall reside within a reasonable daily
commuting distance of such place of employment provided that the Employee shall
also perform his work and services in such other places within Canada as the
Employer may require from time to time.
ARTICLE 2
REMUNERATION
2.1 SALARY
The Employer shall pay the Employee during the term of this
Agreement a gross annual salary of $170,000.00 (Cdn.) payable monthly in arrears
(the "Base Salary"). Such Base Salary shall be reviewed by the parties prior to
any renewal of this Agreement and any changes in such Base Salary shall be as
agreed upon in writing between the parties.
2.2 BENEFITS
The Employee will be entitled to participate in all of the
Employer's insurance and perquisite plans generally available to its employees
from time to time in accordance with the terms thereof. The Employee will also
be entitled to participate in the Employee Benefit Plan described in Article 3
hereof.
2.3 VACATION
During the term of this Agreement the Employee shall be entitled to
four weeks vacation per annum. Such vacation shall be taken at a time or times
acceptable to the Employer having regard to its operations.
2.4 EXPENSES
The Employee shall be reimbursed for all authorized travelling and
other out-of-pocket expenses actually and properly incurred by him in connection
with his duties hereunder. For all such expenses the Employee shall furnish to
the Employer statements and vouchers as and when required by the Employer.
<PAGE>
3
2.5 STOCK OPTION GRANT
The Employee shall be entitled to a grant, on or shortly following
the signing of this Agreement, to 200,000 options to purchase common shares in
the capital stock of Southern Mineral Corporation (the "Options") at a strike
price of $3.75 (U.S.) per Option, which Options shall be awarded for a five-year
term, from the date of the grant, vesting as to one-third (1/3) of the grant on
the first anniversary date of this Agreement, and as to a further one-third
(1/3) on each of the next two subsequent anniversary dates, and which Options
shall be subject to the terms and conditions of the applicable SMC Stock Option
Agreement.
Notwithstanding the vesting provisions provided herein, in the event
of a change of control as defined in Section 5.8 hereof, all options granted
under this Section 2.5 shall immediately vest, to the extent that they have not
earlier vested, as of the effective date of the change of control.
ARTICLE 3
EMPLOYEE BENEFIT PLAN
3.1 CONTRIBUTION
The Employer agrees to contribute on or before July 10, 1998,
144,406 common shares of SMC to a custodian for the benefit of the Employee, in
an arrangement intended to be an Employee Benefit Plan within the meaning of
Section 248 of the INCOME TAX ACT (Canada).
3.2 CUSTODIAN
The parties hereto agree that the law firm of Burnet, Duckworth &
Palmer, or such mutually-acceptable party, shall act as custodian of the shares
of SMC that have been contributed and transferred pursuant to Section 3.1
subject to the terms of a satisfactory Escrow Agreement.
3.3 ENTITLEMENT
The Employee shall be entitled to receive from the custodian, as a
bonus for entering into this Agreement and rendering services to the Employer in
accordance with this Agreement, the shares so contributed as follows:
a. If the Employee is employed by the Employer in accordance with the terms
of this Agreement throughout the period commencing July 1, 1998, and
ending June 30, 1999, 50% of the shares of SMC contributed by the Employer
to the custodian hereunder, which shall be delivered on July 2, 1999; and
b. If the Employee continues to be employed by the Employer in accordance
with the terms of this agreement throughout the period commencing July
1,1999, and ending June 30, 2000, the remaining shares of SMC contributed
by the Employer to the custodian hereunder which shall be delivered on
July 2, 2000.
<PAGE>
4
3.4 TERMINATION
In the event the Employee terminates his employment with the
Employer or in the event the Employee is terminated for cause, the Employee's
right to receive shares from the Employee Benefit Plan described in this Article
3 shall not terminate, but the employee shall not receive delivery of the SMC
shares contributed by the Employer to the custodian, to the extent they may not
have been delivered as of the Termination date, until July 2, 2000.
3.5 CHANGE OF CONTROL
In the event that SMC undergoes a change of control as defined in
Section 5.8 hereof, the Employee shall be entitled to the immediate receipt from
the custodian of all shares of SMC held by the custodian on his behalf.
ARTICLE 4
EMPLOYEE'S COVENANTS
4.1 SERVICE
Except as set forth in Schedule "A" hereto and as may otherwise may
be agreed to by the Employer, the Employee shall devote the whole of his time,
attention and ability to the business of the Employer or to the business of any
other person as authorized by the employer and shall well and faithfully serve
the Employer and shall use his best efforts to promote the interests of the
Employer.
4.2 DUTIES AND RESPONSIBILITIES
The Employee shall duly and diligently perform all the duties
assigned to him while in the employ of the Employer, and shall truly and
faithfully account for and deliver to the Employer all money, securities and
things of value belonging to the Employer which the Employee may from time to
time receive for, from or on account of the Employer.
4.3 RULES AND REGULATIONS
The Employee shall be bound by and shall faithfully observe and
abide by all the rules and regulations of the Employer from time to time in
force which are brought to his notice or of which he should reasonably be aware.
4.4 NON-DISCLOSURE
The Employee shall not (either during the continuance of the
employment or at any time thereafter) disclose any information relating to the
private or confidential affairs of the Employer or relating to any secrets of
the Employer to any person other than for the Employer s purposes and, without
limiting the generality of the foregoing, the Employee shall not (either during
the continuance of the employment or one year thereafter) disclose to any person
other than for the Employer's purposes and shall not (either during the
continuance of the employment or one year thereafter) use for his own purposes
or for any purposes other than those of the Employer any such information or
secrets he may acquire in relation to the business of oil and gas exploration
and production.
<PAGE>
5
4.5 INVENTIONS AND PATENTS
In the event the Employee contributes to any patentable invention
arising out of or in the course of his employment hereunder, any such patentable
invention shall be the exclusive property of the Employer and the Employer shall
have the exclusive right to file patent applications in the name of the Employer
in connection therewith and the Employee shall co-operate with the Employer and
provide all necessary assistance in the filing and prosecution of such patent
applications.
ARTICLE 5
TERMINATION OF EMPLOYMENT
5.1 TERMINATION BY EMPLOYER FOR CAUSE
The Employer may terminate this Agreement at any time for cause
without payment of any compensation either by way of anticipated earnings or
damages of any kind.
5.2 TERMINATION BY EMPLOYEE ON NOTICE
The Employee may terminate this Agreement upon the giving of 30 days
written notice to the Employer without payment by the Employer of any
compensation either by way of anticipated earnings or damages of any kind.
5.3 TERMINATION BY EMPLOYER ON NOTICE
The Employer may terminate this Agreement by non-renewal as set out
in Article 6.2 or upon the giving of sixty (60) days written notice to the
Employee. Upon such termination or non-renewal of this Agreement by the
Employer:
a. Employer shall pay to the Employee the greater of: (i) the Employee's Base
Salary for the sixty (60) day notice period; and (ii) the amount of
remaining Base Salary not yet paid but which would have been paid to the
end of the then current term of this Agreement;
b. notwithstanding Article 3 hereof, the Employee shall continue to be
eligible for receipt of SMC shares, under the Employment Benefit Plan
described in Article 3 hereof, subject to the following:
i. should the termination or non-renewal occur during the first year
following the Effective Date of this Agreement, all of the shares
contributed thereunder shall be delivered to the Employee on the
first anniversary date of this Agreement; or
ii. should the termination or non-renewal occur on or following the
first anniversary date of this Agreement, all of the shares
contributed thereunder shall be immediately delivered to the
Employee;
c. all other benefits of employment shall cease at the earlier of the
effective date of written notice, non-renewal or the date that the
Employee is last actively at work, and the Employer retains the right, at
its sole discretion, to waive the requirement to have the Employee
<PAGE>
6
attend at work or perform any further duties for the Employer for the
remaining period of the written notice or the term of this Agreement, as
the case may be.
5.4 FAIR AND REASONABLE
The parties confirm that the notice, pay in lieu of notice and
settlement provisions contained in this Article are fair and reasonable and the
parties agree that upon any termination of this Agreement by the Employer in
compliance with Sections 5.1 or 5.3 or upon any termination of this Agreement by
the Employee, the Employee shall have no action, cause of action, claim or
demand against the Employer or any other person as a consequence of such
termination.
5.5 RETURN OF PROPERTY
Upon any termination of this Agreement the Employee shall at once
deliver or cause to be delivered to the Employer all books, documents, effects,
moneys securities or other property belonging to the Employer or for which the
Employer is liable to others, which are in the possession, charge, control or
custody of the Employee.
5.6 NON-SOLICITATION OF EMPLOYEES
The Employee acknowledges and agrees that, as a senior executive of
the Employer, the Employee has fiduciary obligations to the Employer which
include the protection of the Employer's best interests both during and after
the term of employment and this Agreement. Without limiting the generality of
this duty, the Employee specifically agrees to refrain during the term of this
Agreement or the term of any employment with the Employer, and in the event of
termination of employment or this Agreement for any reason for period of one (1)
year thereafter, from:
a. hiring or contracting (directly or indirectly), or
b. inducing or attempting to influence the termination of any employee,
contractor or consultant of the Employer (or its subsidiaries and/or other
affiliated entities and/or its parent organization).
5.7 PROVISIONS WHICH OPERATE FOLLOWING TERMINATION
Notwithstanding any termination of this Agreement for any reason
whatsoever and with or without cause, the provisions of Sections 4.4, 4.5, 5.4
and 5.6 of this Agreement and any other provisions of this Agreement necessary
to give efficacy thereto shall continue in full force and effect following such
termination.
5.8 DEFINITION IN "CHANGE IN CONTROL"
For purposes of this Agreement the expression "change in control" of
SMC shall mean the events specified in subparagraphs (a) and (b) shall have
occurred and the change in control will be deemed to take effect on the later of
the two events:
<PAGE>
7
a. the direct or indirect acquisition by any person or group of associated
persons acting in concert, of any aggregate of more than 40% of the
outstanding voting shares including securities which on conversion to
voting shares would be more than 40% of the outstanding voting shares; and
b. within a 12 month period following the event described in sub-paragraph
(a) any single change or series of changes in the composition of the Board
of Directors of SMC resulting in a majority of the directors of SMC as of
the date four months prior to the change in control under sub-paragraph
(a) of this paragraph, ceasing to constitute a majority of the directors
of SMC.
ARTICLE 6
RENEWAL OF AGREEMENT
6.1 AUTOMATIC RENEWAL
This Agreement shall continue for successive periods of one year's
duration on the same terms and conditions of employment or on such terms and
conditions of employment as are agreed upon in writing between the parties
unless the Employer has given at least 60 days written notice to the Employee
that this Agreement is to terminate at the end of the initial period of one year
or at the end of any successive period of one year.
6.2 NON-RENEWAL
In the event that the Employer gives written notice that this
Agreement is to terminate at the end of the initial period of one year or any
successive period of one year as set forth in Section 6.1 hereof, this Agreement
shall expire and the employment hereunder shall terminate at the end of the
initial period of one year or that successive period of one year for which it
was last renewed pursuant to Section 6.1 hereof, as the case may be, and the
Employee shall be entitled to those amounts payable to the Employee as if he
were terminated by the Employer pursuant to Section 5.3 hereof.
ARTICLE 7
GENERAL
7.1 SECTIONS AND HEADINGS
The division of this Agreement into Articles and Sections and the
insertion of headings are for the convenience of reference only and shall not
affect the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof , "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement or instrument supplemental or ancillary hereto. Unless
something in the subject matter or context is inconsistent therewith, references
herein to Articles and Sections are to Articles and Sections of this Agreement.
7.2 NUMBER
In this Agreement words importing the singular number only shall
include the plural and VICE VERSA and words importing the masculine gender shall
include the feminine and neuter
<PAGE>
8
genders and VICE VERSA and words importing persons shall include individuals,
partnerships, associations, trusts, unincorporated organizations and
corporations and VICE VERSA.
7.3 SCHEDULES
The following Schedule is annexed hereto and incorporated by
reference and deemed to be part hereof:
Schedule A - Outside Interests
7.4 BENEFIT OF AGREEMENT
This Agreement shall enure to the benefit of and be binding upon the
heirs, executors, administrators and legal personal representatives of the
Employee and the successors and permitted assigns of the Employer respectively.
7.5 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and cancels and supersedes any prior
understandings and agreements between the parties hereto with respect thereto
and in particular, this Agreement cancels and supersedes the Prior Agreement.
There are no representations, warranties, forms, conditions, undertakings or
collateral agreements, express, implied or statutory between the parties other
than as expressly set forth in this Agreement.
7.6 AMENDMENTS AND WAIVERS
No amendment to this Agreement shall be valid or binding unless set
forth in writing and duly executed by both of the parties hereto. No waiver of
any breach of any provision of this Agreement shall be effective or binding
unless made in writing and signed by the party purporting to give the same and,
unless otherwise provided in the written waiver, shall be limited to the
specific breach waived.
7.7 SEVERABILITY
If any provision of this Agreement is determined to be invalid or
unenforceable in whole or in part, such invalidity or unenforceability shall
attach only to such provision or part thereof and the remaining part of such
provision and all other provisions hereof shall continue in full force and
effect.
7.8 NOTICES
Any demand, notice or other communication (hereinafter in this
Section 7.8 referred to as a "Communication") to be given in connection with
this Agreement shall be given in writing and may be given by personal delivery
or by registered mail addressed to the recipient as follows:
<PAGE>
9
To the Employee:
Jeffrey W.C. Arsenych
1805, 1200 - 6th Street S.E.
Calgary, Alberta
T2R 1H3
To the Employer:
Neutrino Resources Inc.
c/o Southern Mineral Corporation
1201 Louisiana Street, Suite 3350
Houston, Texas 77002-5609
U.S.A.
Attention: Steve Mikel
or such other address or individual as may be designated by notice by either
party to the other. Any Communication given by personal delivery shall be
conclusively deemed to have been given on the day of actual delivery thereof
and, if made or given by registered mail, on the 3rd day, other than a Saturday,
Sunday or statutory holiday in Alberta, following the deposit thereof in the
mail. If the party giving any communication knows or ought reasonably to know of
any difficulties with the postal system which might affect the delivery of mail,
any such Communication shall not be mailed but shall be given by personal
delivery.
7.9 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Alberta and the laws of Canada applicable therein.
7.10 ATTORNMENT
For the purpose of all legal proceedings this Agreement shall be
deemed to have been performed in the Province of Alberta and the courts of the
Province of Alberta shall have jurisdiction to entertain any action arising
under this Agreement. The Employer and the Employee each hereby attorns to the
jurisdiction of the courts of the Province of Alberta provided that nothing
herein contained shall prevent the Employer from proceeding at its election
against the Employee in the courts of any other province or country.
<PAGE>
10
7.11 COPY OF AGREEMENT
The Employee hereby acknowledges receipt of a copy of this
Agreement duly signed by the Employer.
IN WITNESS WHEREOF the parties have executed this Agreement.
SIGNED, SEALED AND DELIVERED in )
the presence of: )
)
)
/s/ ILLEGIBLE )
Witness ) /s/ JEFFREY W.C. ARSENYCH
NEUTRINO RESOURCES INC.
Per: /s/ STEVEN H. MIKEL
Per:
<PAGE>
SCHEDULE "A"
OUTSIDE INTERESTS
Sessional instructor at the University of Calgary.
Occasional oil and gas seminar instructor.
Director of Kattner/FVB District Energy Inc., a company which provided
consulting services in district heating, cooling and cogeneration.
Director of VENOIL 2020, S.A. (a company 19.9% owned by Neutrino Resources
Inc.,), a company established in conjunction with certain Venezuelan
parties to pursue oil and gas exploitation projects in Venezuela.
Director and Secretary-Treasurer of Yamal Canada Energy Corporation (potentially
50% owned by Jeff Arsenych), a company being established in conjunction
with Valens Developments Ltd. (a company controlled by Messrs. Ron and
Brent Bullen) to pursue opportunities in the Russian Federation.
<PAGE>
EMPLOYMENT AGREEMENT
BETWEEN
DAVID W. BECKWERMERT
AND
NEUTRINO RESOURCES INC.
MADE AS OF
JULY 1, 1998
<PAGE>
i
TABLE OF CONTENTS
ARTICLE 1
EMPLOYMENT.......................................................1
1.1 Employment.................................................1
1.2 Term of Employment.........................................2
1.3 Place of Employment........................................2
ARTICLE 2
REMUNERATION.....................................................2
2.1 Salary.....................................................2
2.2 Benefits...................................................2
2.3 Vacation...................................................2
2.4 Expenses...................................................2
2.5 Stock Option Grant.........................................3
ARTICLE 3
EMPLOYEE BENEFIT PLAN............................................3
3.1 Contribution...............................................3
3.2 Custodian..................................................3
3.3 Entitlement................................................3
3.4 Termination................................................3
3.5 Change of Control..........................................4
ARTICLE 4
EMPLOYEE'S COVENANTS.............................................4
4.1 Service....................................................4
4.2 Duties and Responsibilities................................4
4.3 Rules and Regulations......................................4
4.4 Non-Disclosure.............................................4
4.5 Inventions and Patents.....................................4
ARTICLE 5
TERMINATION OF EMPLOYMENT........................................5
5.1 Termination by Employer for Cause..........................5
5.2 Termination by Employee on Notice..........................5
5.3 Termination by Employer on Notice..........................5
5.4 Fair and Reasonable........................................5
5.5 Return of Property.........................................5
5.6 Non-Solicitation of Employees..............................6
5.7 Provisions Which Operate Following Termination.............6
5.8 Definition in "Change in Control"..........................6
ARTICLE 6
RENEWAL OF AGREEMENT.............................................7
6.1 Automatic Renewal..........................................7
6.2 Non-Renewal................................................7
ARTICLE 7
GENERAL..........................................................7
7.1 Sections and Headings......................................7
7.2 Number.....................................................7
7.3 Schedules..................................................7
7.4 Benefit of Agreement.......................................7
<PAGE>
ii
7.5 Entire Agreement...........................................8
7.6 Amendments and Waivers.....................................8
7.7 Severability...............................................8
7.8 Notices....................................................8
7.9 Governing Law..............................................9
7.10 Attornment.................................................9
7.11 Copy of Agreement..........................................9
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of July 1, 1998
BETWEEN:
DAVID W. BECKWERMERT, of the City of Calgary in the
Province of Alberta (hereinafter referred to as the "Employee"),
OF THE FIRST PART
- and -
NEUTRINO RESOURCES INC., a corporation incorporated under
the laws of Alberta (hereinafter referred to as the "Employer"),
OF THE SECOND PART
WHEREAS the Employee has held the position of Executive Vice
President with the Employer under the terms of a prior employment agreement with
the Employee made as of December 1, 1997 (the "Prior Agreement");
AND WHEREAS the Employer has been subject to a Change of Control, as
defined in the Prior Agreement, as a result of a successful offer for the
Employer's shares by Southern Mineral Corporation ("SMC"), or a wholly-owned
subsidiary of SMC;
AND WHEREAS the said Change of Control has triggered certain rights
and obligations for the Employer and the Employee, if the Employee elects to
terminate his employment under the Prior Agreement;
AND WHEREAS the Employer and the Employee wish to continue to the
employment relationship on the terms and conditions set out in this agreement
(the "Agreement").
NOW THEREFORE in consideration of the covenants and agreements
herein contained, the parties agree as follows:
ARTICLE 1
EMPLOYMENT
1.1 EMPLOYMENT
The Employee agrees to continue employment with the Employer and the
Employee specifically waives any rights that have accrued or may accrue to the
Employee under the Prior Agreement, and subject to the terms and conditions
herein contained, the Employee shall be employed by the Employer as President
and Chief Operating Officer, reporting to the Board of
<PAGE>
2
Directors, and shall perform such duties and exercise such powers related
thereto as may from time to time be assigned to him by the Employer. The
Employee shall sit as a member of the Board of Directors of the Employer, and of
SMC, until the next Annual General Meeting of each respective organization.
1.2 TERM OF EMPLOYMENT
The employment of the Employee hereunder shall commence on July 1,
1998 and shall be for a period of 1 year to terminate on June 30, 1999, subject
to any renewal of this Agreement pursuant to Section 6.1 and subject to earlier
termination of this Agreement pursuant to Article 5.
1.3 PLACE OF EMPLOYMENT
The Employee shall perform his work and services for the Employer or
for such other person as may be authorized by the Employer from time to time in
Calgary, Alberta and the Employee shall reside within a reasonable daily
commuting distance of such place of employment provided that the Employee shall
also perform his work and services in such other places within Canada as the
Employer may require from time to time.
ARTICLE 2
REMUNERATION
2.1 SALARY
The Employer shall pay the Employee during the term of this
Agreement a gross annual salary of $160,000.00 (Cdn.) payable monthly in arrears
(the "Base Salary"). Such Base Salary shall be reviewed by the parties prior to
any renewal of this Agreement and any changes in such Base Salary shall be as
agreed upon in writing between the parties.
2.2 BENEFITS
The Employee will be entitled to participate in all of the
Employer's insurance and perquisite plans generally available to its employees
from time to time in accordance with the terms thereof. The Employee will also
be entitled to participate in the Employee Benefit Plan described in Article 3
hereof.
2.3 VACATION
During the term of this Agreement the Employee shall be entitled to
four weeks vacation per annum. Such vacation shall be taken at a time or times
acceptable to the Employer having regard to its operations.
2.4 EXPENSES
The Employee shall be reimbursed for all authorized travelling and
other out-of-pocket expenses actually and properly incurred by him in connection
with his duties hereunder. For all such expenses the Employee shall furnish to
the Employer statements and vouchers as and when required by the Employer.
<PAGE>
3
2.5 STOCK OPTION GRANT
The Employee shall be entitled to a grant, on or shortly following
the signing of this Agreement, to 200,000 options to purchase common shares in
the capital stock of Southern Mineral Corporation (the "Options") at a strike
price of $3.75 (U.S.) per Option, which Options shall be awarded for a five-year
term, from the date of the grant, vesting as to one-third (1/3) of the grant on
the first anniversary date of this Agreement, and as to a further one-third
(1/3) on each of the next two subsequent anniversary dates, and which Options
shall be subject to the terms and conditions of the applicable SMC Stock Option
Agreement.
Notwithstanding the vesting provisions provided herein, in the event
of a change of control as defined in Section 5.8 hereof, all options granted
under this Section 2.5 shall immediately vest, to the extent that they have not
earlier vested, as of the effective date of the change of control.
ARTICLE 3
EMPLOYEE BENEFIT PLAN
3.1 CONTRIBUTION
The Employer agrees to contribute on or before July 10, 1998, 86,333
common shares of SMC to a custodian for the benefit of the Employee, in an
arrangement intended to be an Employee Benefit Plan within the meaning of
Section 248 of the INCOME TAX ACT (Canada).
3.2 CUSTODIAN
The parties hereto agree that the law firm of Burnet, Duckworth &
Palmer, or such other mutually-acceptable party, shall act as custodian of the
shares of SMC that have been contributed and transferred pursuant to Section 3.1
subject to the terms of a satisfactory Escrow Agreement.
3.3 ENTITLEMENT
The Employee shall be entitled to receive from the custodian, as a
bonus for entering into this Agreement and rendering services to the Employer in
accordance with this Agreement, the shares so contributed as follows:
a. If the Employee is employed by the Employer in accordance with the terms
of this Agreement throughout the period commencing July 1, 1998, and
ending June 30, 1999, 50% of the shares of SMC contributed by the Employer
to the custodian hereunder, which shall be delivered on July 2, 1999; and
b. If the Employee continues to be employed by the Employer in accordance
with the terms of this agreement throughout the period commencing July 1,
1999, and ending June 30, 2000, the remaining shares of SMC contributed by
the Employer to the custodian hereunder which shall be delivered on July
2, 2000.
<PAGE>
4
3.4 TERMINATION
In the event the Employee terminates his employment with the
Employer or in the event the Employee is terminated for cause, the Employee's
right to receive shares from the Employee Benefit Plan described in this Article
3 shall not terminate, but the employee shall not receive delivery of the SMC
shares contributed by the Employer to the custodian, to the extent they may not
have been delivered as of the Termination date, until July 2, 2000.
3.5 CHANGE OF CONTROL
In the event that SMC undergoes a change of control as defined in
Section 5.8 hereof, the Employee shall be entitled to the immediate receipt from
the custodian of all shares of SMC held by the custodian on his behalf.
ARTICLE 4
EMPLOYEE'S COVENANTS
4.1 SERVICE
Except as set forth in Schedule "A" hereto and as may otherwise may
be agreed to by the Employer, the Employee shall devote the whole of his time,
attention and ability to the business of the Employer or to the business of any
other person as authorized by the employer and shall well and faithfully serve
the Employer and shall use his best efforts to promote the interests of the
Employer.
4.2 DUTIES AND RESPONSIBILITIES
The Employee shall duly and diligently perform all the duties
assigned to him while in the employ of the Employer, and shall truly and
faithfully account for and deliver to the Employer all money, securities and
things of value belonging to the Employer which the Employee may from time to
time receive for, from or on account of the Employer.
4.3 RULES AND REGULATIONS
The Employee shall be bound by and shall faithfully observe and
abide by all the rules and regulations of the Employer from time to time in
force which are brought to his notice or of which he should reasonably be aware.
4.4 NON-DISCLOSURE
The Employee shall not (either during the continuance of the
employment or at any time thereafter) disclose any information relating to the
private or confidential affairs of the Employer or relating to any secrets of
the Employer to any person other than for the Employer s purposes and, without
limiting the generality of the foregoing, the Employee shall not (either during
the continuance of the employment or one year thereafter) disclose to any person
other than for the Employer's purposes and shall not (either during the
continuance of the employment or one year thereafter) use for his own purposes
or for any purposes other than those of the Employer any such information or
secrets he may acquire in relation to the business of oil and gas exploration
and production.
<PAGE>
5
4.5 INVENTIONS AND PATENTS
In the event the Employee contributes to any patentable invention
arising out of or in the course of his employment hereunder, any such patentable
invention shall be the exclusive property of the Employer and the Employer shall
have the exclusive right to file patent applications in the name of the Employer
in connection therewith and the Employee shall co-operate with the Employer and
provide all necessary assistance in the filing and prosecution of such patent
applications.
ARTICLE 5
TERMINATION OF EMPLOYMENT
5.1 TERMINATION BY EMPLOYER FOR CAUSE
The Employer may terminate this Agreement at any time for cause
without payment of any compensation either by way of anticipated earnings or
damages of any kind.
5.2 TERMINATION BY EMPLOYEE ON NOTICE
The Employee may terminate this Agreement upon the giving of 30 days
written notice to the Employer without payment by the Employer of any
compensation either by way of anticipated earnings or damages of any kind.
5.3 TERMINATION BY EMPLOYER ON NOTICE
The Employer may terminate this Agreement by non-renewal as set out
in Article 6.2 or upon the giving of sixty (60) days written notice to the
Employee. Upon such termination or non-renewal of this Agreement by the
Employer:
a. Employer shall pay to the Employee the greater of: (i) the Employee's Base
Salary for the sixty (60) day notice period; and (ii) the amount of
remaining Base Salary not yet paid but which would have been paid to the
end of the then current term of this
Agreement;
b. notwithstanding Article 3 hereof, the Employee shall continue to be
eligible for receipt of SMC shares, under the Employment Benefit Plan
described in Article 3 hereof, subject to the following:
i. should the termination or non-renewal occur during the first year
following the Effective Date of this Agreement, all of the shares
contributed thereunder shall be delivered to the Employee on the
first anniversary date of this Agreement; or
ii. should the termination or non-renewal occur on or following the
first anniversary date of this Agreement, all of the shares
contributed thereunder shall be immediately delivered to the
Employee;
c. all other benefits of employment shall cease at the earlier of the
effective date of written notice, non-renewal or the date that the
Employee is last actively at work, and the Employer retains the right, at
its sole discretion, to waive the requirement to have the Employee
<PAGE>
6
attend at work or perform any further duties for the Employer for the
remaining period of the written notice or the term of this Agreement, as
the case may be.
5.4 FAIR AND REASONABLE
The parties confirm that the notice, pay in lieu of notice and
settlement provisions contained in this Article are fair and reasonable and the
parties agree that upon any termination of this Agreement by the Employer in
compliance with Sections 5.1 or 5.3 or upon any termination of this Agreement by
the Employee, the Employee shall have no action, cause of action, claim or
demand against the Employer or any other person as a consequence of such
termination.
5.5 RETURN OF PROPERTY
Upon any termination of this Agreement the Employee shall at once
deliver or cause to be delivered to the Employer all books, documents, effects,
moneys securities or other property belonging to the Employer or for which the
Employer is liable to others, which are in the possession, charge, control or
custody of the Employee.
5.6 NON-SOLICITATION OF EMPLOYEES
The Employee acknowledges and agrees that, as a senior executive of
the Employer, the Employee has fiduciary obligations to the Employer which
include the protection of the Employer's best interests both during and after
the term of employment and this Agreement. Without limiting the generality of
this duty, the Employee specifically agrees to refrain during the term of this
Agreement or the term of any employment with the Employer, and in the event of
termination of employment or this Agreement for any reason for period of one (1)
year thereafter, from:
a. hiring or contracting (directly or indirectly), or
b. inducing or attempting to influence the termination of any employee,
contractor or consultant of the Employer (or its subsidiaries and/or other
affiliated entities and/or its parent organization).
5.7 PROVISIONS WHICH OPERATE FOLLOWING TERMINATION
Notwithstanding any termination of this Agreement for any reason
whatsoever and with or without cause, the provisions of Sections 4.4, 4.5, 5.4
and 5.6 of this Agreement and any other provisions of this Agreement necessary
to give efficacy thereto shall continue in full force and effect following such
termination.
5.8 DEFINITION IN "CHANGE IN CONTROL"
For purposes of this Agreement the expression "change in control" of
SMC shall mean the events specified in subparagraphs (a) and (b) shall have
occurred and the change in control will be deemed to take effect on the later of
the two events:
<PAGE>
7
a. the direct or indirect acquisition by any person or group of associated
persons acting in concert, of any aggregate of more than 40% of the
outstanding voting shares including securities which on conversion to
voting shares would be more than 40% of the outstanding voting shares; and
b. within a 12 month period following the event described in sub-paragraph
(a) any single change or series of changes in the composition of the Board
of Directors of SMC resulting in a majority of the directors of SMC as of
the date four months prior to the change in control under sub-paragraph
(a) of this paragraph, ceasing to constitute a majority of the directors
of SMC.
ARTICLE 6
RENEWAL OF AGREEMENT
6.1 AUTOMATIC RENEWAL
This Agreement shall continue for successive periods of one year's
duration on the same terms and conditions of employment or on such terms and
conditions of employment as are agreed upon in writing between the parties
unless the Employer has given at least 60 days written notice to the Employee
that this Agreement is to terminate at the end of the initial period of one year
or at the end of any successive period of one year.
6.2 NON-RENEWAL
In the event that the Employer gives written notice that this
Agreement is to terminate at the end of the initial period of one year or any
successive period of one year as set forth in Section 6.1 hereof, this Agreement
shall expire and the employment hereunder shall terminate at the end of the
initial period of one year or that successive period of one year for which it
was last renewed pursuant to Section 6.1 hereof, as the case may be, and the
Employee shall be entitled to those amounts payable to the Employee as if he
were terminated by the Employer pursuant to Section 5.3 hereof.
ARTICLE 7
GENERAL
7.1 SECTIONS AND HEADINGS
The division of this Agreement into Articles and Sections and the
insertion of headings are for the convenience of reference only and shall not
affect the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof , "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement or instrument supplemental or ancillary hereto. Unless
something in the subject matter or context is inconsistent therewith, references
herein to Articles and Sections are to Articles and Sections of this Agreement.
7.2 NUMBER
In this Agreement words importing the singular number only shall
include the plural and VICE VERSA and words importing the masculine gender shall
include the feminine and neuter
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8
genders and VICE VERSA and words importing persons shall include individuals,
partnerships, associations, trusts, unincorporated organizations and
corporations and VICE VERSA.
7.3 SCHEDULES
The following Schedule is annexed hereto and incorporated by
reference and deemed to be part hereof:
Schedule A - Outside Interests
7.4 BENEFIT OF AGREEMENT
This Agreement shall enure to the benefit of and be binding upon the
heirs, executors, administrators and legal personal representatives of the
Employee and the successors and permitted assigns of the Employer respectively.
7.5 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and cancels and supersedes any prior
understandings and agreements between the parties hereto with respect thereto
and in particular, this Agreement cancels and supersedes the Prior Agreement.
There are no representations, warranties, forms, conditions, undertakings or
collateral agreements, express, implied or statutory between the parties other
than as expressly set forth in this Agreement.
7.6 AMENDMENTS AND WAIVERS
No amendment to this Agreement shall be valid or binding unless set
forth in writing and duly executed by both of the parties hereto. No waiver of
any breach of any provision of this Agreement shall be effective or binding
unless made in writing and signed by the party purporting to give the same and,
unless otherwise provided in the written waiver, shall be limited to the
specific breach waived.
7.7 SEVERABILITY
If any provision of this Agreement is determined to be invalid or
unenforceable in whole or in part, such invalidity or unenforceability shall
attach only to such provision or part thereof and the remaining part of such
provision and all other provisions hereof shall continue in full force and
effect.
7.8 NOTICES
Any demand, notice or other communication (hereinafter in this
Section 7.8 referred to as a "Communication") to be given in connection with
this Agreement shall be given in writing and may be given by personal delivery
or by registered mail addressed to the
recipient as follows:
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9
To the Employee:
David W. Beckwermert
96 Sunmount Road S.E.
Calgary, Alberta
T2X 2M6
To the Employer:
Neutrino Resources Inc.
c/o Southern Mineral Corporation
1201 Louisiana Street, Suite 3350
Houston, Texas 77002-5609
U.S.A.
Attention: Steve Mikel
or such other address or individual as may be designated by notice by either
party to the other. Any Communication given by personal delivery shall be
conclusively deemed to have been given on the day of actual delivery thereof
and, if made or given by registered mail, on the 3rd day, other than a Saturday,
Sunday or statutory holiday in Alberta, following the deposit thereof in the
mail. If the party giving any communication knows or ought reasonably to know of
any difficulties with the postal system which might affect the delivery of mail,
any such Communication shall not be mailed but shall be given by personal
delivery.
7.9 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Alberta and the laws of Canada applicable therein.
7.10 ATTORNMENT
For the purpose of all legal proceedings this Agreement shall be
deemed to have been performed in the Province of Alberta and the courts of the
Province of Alberta shall have jurisdiction to entertain any action arising
under this Agreement. The Employer and the Employee each hereby attorns to the
jurisdiction of the courts of the Province of Alberta provided that nothing
herein contained shall prevent the Employer from proceeding at its election
against the Employee in the courts of any other province or country.
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10
7.11 COPY OF AGREEMENT
The Employee hereby acknowledges receipt of a copy of this
Agreement duly signed by the Employer.
IN WITNESS WHEREOF the parties have executed this Agreement.
SIGNED, SEALED AND DELIVERED in )
the presence of: )
)
)
/s/ ILLEGIBLE )
Witness ) /s/ DAVID W. BECKWERMERT
NEUTRINO RESOURCES INC.
Per: /s/ STEVEN H. MIKEL
Per:
F:\053593\0001\RBS\DAVID\DAVID.AG4\
