As Filed: October 14, 1997 SEC File No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Registration Statement on Form S-3
Under the Securities Act of 1933
FORELAND CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Nevada 87-0422812
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12596 West Bayaud, Suite 300, Lakewood, Colorado 80228-2019 (303) 988-3122
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
N. Thomas Steele, 12596 West Bayaud, Suite 300, Lakewood, Colorado 80228-2019
(303) 988-3122
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
James R. Kruse
KRUSE, LANDA & MAYCOCK, L.L.C.
50 West Broadway, Eighth Floor
Salt Lake City, Utah 84101
Telephone: (801) 531-7090
Telecopy: (801) 359-3954
CompuServe E-Mail 72204,1417
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. /x/
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Amount Proposed Maxi- Proposed Maxi- Amount of
Title of Each Class of to be mum Offering mum Aggregate Registration
Securities Being Registered Registered Price Per Unit(1) Offering Price Fee (2)
- --------------------------- ---------- ----------------- -------------- ------------
<S> <C> <C> <C> <C>
Common Stock(3) 515,639 $3.8125 $1,965,874 $51
Total $1,965,874 $51
</TABLE>
[FN]
(1) Bona fide estimate of maximum offering price solely for the purpose of
calculating the registration fee. The offering price for the common stock
being sold by selling stockholders is based on the closing sales price, as
quoted on the Nasdaq SmallCapSM Market for the Registrant's Common Stock
of $3.8125 as of October 7,1997 (rule 457(c)).
(2) The Company has previously paid a registration fee of $706 relating to the
sale of 471,465 shares of common stock registered on registration statement
no. 333-19063. The fee set forth in the table is calculated on the
additional 44,174 shares not previously registered.
(3) Consists of shares held following the conversion of preferred stock of
the Registrant. Pursuant to rule 416, there are also being registered
such additional securities as may become issuable as a result of the
"antidilution" provisions of the preferred stock.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
section 8(a), may determine.
Subject to Completion -- Preliminary Prospectus Dated October 14, 1997.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation, or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
FORELAND CORPORATION
Common Stock
This Prospectus relates to the public offer and sale by certain
stockholders (the "Selling Stockholders") of an aggregate of up to 515,639
shares of common stock, par value $0.001 per share (the "Common Stock"), of
Foreland Corporation, a Nevada corporation (the "Company"). (See "SELLING
STOCKHOLDERS" and "DESCRIPTION OF SECURITIES").
The Selling Stockholders will offer their Common Stock through or to
securities brokers or dealers designated by them in the over-the-counter market
or in other transactions negotiated by the Selling Stockholders. Any such sale
of Common Stock by a Selling Stockholder must be accompanied by, or follow the
delivery of, a prospectus filed with a current registration statement relating
to the Common Stock being offered, unless a Selling Stockholder elects to rely
on Rule 144 or another exemption from the registration requirements in
connection with a particular transaction. The Selling Stockholders and any
broker, dealer, or agent that participates with the Selling Stockholders in the
sale of the Common Stock offered hereby may be deemed "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), and
any commissions or discounts received by them and any profit on the resale of
the Common Stock purchased by them may be deemed to be underwriting commissions
under the Securities Act. (See "SELLING STOCKHOLDERS" and "PLAN OF
DISTRIBUTION.")
The Company's Common Stock is included on the Nasdaq SmallCapSM Market
("Nasdaq") under the symbol "FORL." On October 7,1997, the closing sales price
for the Company's Common Stock on Nasdaq was $3.8125.
THE ACQUISITION AND OWNERSHIP OF THE COMMON STOCK INVOLVE A HIGH DEGREE
OF RISK. THE COMMON STOCK SHOULD BE PURCHASED ONLY BY INVESTORS
WHO ARE ABLE TO AFFORD THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT.
(See "RISK FACTORS" on page 8.)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE OR OTHER REGULATORY AUTHORITY, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE OR REGULATORY
AUTHORITY PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Offering Proceeds to Proceeds to
Public(1) Commissions(2) Selling Stockholders Company(3)
--------- -------------- -------------------- -----------
<S> <C> <C> <C> <C>
By Selling Stockholders
Per Share $ 3.8125 -- $ 3.8125 --
Total (4) $1,965,874 -- $1,965,874 --
</TABLE>
[FN]
(1) The price per share for the securities offered by the Selling Stockholders
is estimated at the closing sales price quoted by Nasdaq for the Common
Stock at $3.8125 on October 7,1997. The Common Stock may be offered at the
current market price, which may vary through the period during which the
securities may be offered, or at such other prices as may be negotiated by
the Selling Stockholder and the purchaser at the time of sale. (See
"ITEM 5: MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS" in the Company's 1996 Form 10-K.)
(2) The securities to be sold by Selling Stockholders may be sold by them
through or to securities brokers or dealers, which sales may involve the
payment of commissions by the Selling Stockholders. There is no agreement
between the Company and any broker or dealer respecting such sales.
(3) Does not reflect expenses of this offering payable by the Company estimated
at $12,000. (See "PLAN OF DISTRIBUTION" below.)
(4) The total figures reflect an aggregate of 515,639 shares of Common Stock
issued by the Company on conversion of 1996-4 Preferred Stock.
The date of this Prospectus is October -----, 1997.
The Company will not receive any proceeds from the sale of Common
Stock by the Selling Stockholders. (See "USE OF PROCEEDS.") In connection with
this offering, the Company estimates that it will incur costs of approximately
$12,000 for legal, accounting, printing, and other costs. Any separate costs of
the Selling Stockholders will be borne by them. Commissions or discounts paid
in connection with the sale of securities by the Selling Stockholders will be
determined by negotiations between them and the broker-dealer through or to
which the securities are to be sold and may vary depending on the broker-
dealers' commission or mark up schedule, the size of the transaction, and other
factors. (See "PLAN OF DISTRIBUTION" below.)
ADJUSTMENTS FOR STOCK SPLIT
All share and per share data in this Prospectus have been adjusted to
reflect a 3-for-1 reverse stock split of the Common Stock effective on June 15,
1996.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's annual report on Form 10-K for the year ended December 31,
1996 ("1996 Form 10-K"), quarterly reports on Form 10-Q for the quarters ended
March 31, 1997 ("March 1997 Form 10-Q"), and June 30, 1997 ("June 1997 Form
10-Q"), and current reports on Form 8-K dated January 13, 1997,
January 22, 1997, February 20, 1997, March 18, 1997, May 2, 1997,
May 12, 1997, and September 3, 1997, are incorporated herein by reference.
All documents subsequently filed by the Company pursuant to section 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934 prior to termination
of the offering shall be deemed to be incorporated by reference into this
Prospectus. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement.
The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the documents referred to above which have been or may be
incorporated by reference in this Prospectus, other than certain exhibits to
such documents. Requests for such copies should be directed to Shareholder
Relations, Foreland Corporation, Union Terrace Office Building, 12596 West
Bayaud, Suite 300, Lakewood, Colorado 80228-2019; telephone (303) 988-3122.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports and
other information with the Securities and Exchange Commission (the
"Commission"). The Company has filed with the Securities and Exchange
Commission a Registration Statement on Form S-3 under the Securities Act of
1933, as amended. For the purposes hereof, the term "Registration Statement"
means the original Registration Statement and any and all amendments thereto.
This prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, to which reference hereby is
made. Each statement made in this prospectus concerning a document filed as an
exhibit to the Registration Statement is qualified in its entirety by reference
to such exhibit for a complete statement of its provisions. Any interested
party may inspect the Registration Statement and its exhibits, as well as the
other reports and information filed by the Company, without charge, at the
public reference facilities of the Commission at its principal office at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at its regional offices at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, Suite 1300,
New York, New York 10048. Any interested party may obtain copies of all or any
portion of the Registration Statement and its exhibits we well as the other
reports and information filed by the Company at prescribed rates from the Public
Reference Section of the Commission at its principal office at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. In addition, the SEC
maintains an internet site that contains reports, proxy and information
statements and other information regarding the Company and other registrants
that file electronically with the SEC at http://www.sec.gov.
No person is authorized to give any information or make any representation
not contained in this Prospectus and, if given or made, such information or
representation should not be relied on as having been authorized.
SUMMARY AND INTRODUCTION
The following summary is qualified in its entirety by the more detailed
information, including the financial statements and notes thereto, appearing
elsewhere in this Prospectus or incorporated by reference herein.
Unless otherwise indicated, all information herein relating to oil and gas
reserves has been calculated in accordance with the rules and regulations of the
Securities and Exchange Commission (the "SEC").
Each prospective investor is urged to read this Prospectus in its entirety,
particularly the matters set forth under "RISK FACTORS."
The Company
Since its organization in June 1985, the Company has been engaged
principally in oil exploration in the Great Basin and Range of Nevada ("Great
Basin"), an area that management believes is one of the most promising
unexplored onshore domestic areas with potential for the discovery of major oil
reserves. In continuing to advance this exploration, the Company's strategy is
to generate exploration prospects with the most recent generally available
scientific techniques, expand and improve the Company's strategic land position,
and establish arrangements with other oil exploration firms active in Nevada to
obtain additional scientific data, leases, and funding.
Until 1994, the Company had only limited revenue, consisting of modest
amounts of interest income earned on net proceeds from the sale of securities
and revenue from producing properties. In order to supplement its own
exploration efforts, between 1993 and 1994, the Company acquired certain leases
and properties in Railroad Valley, Nevada, including the Eagle Springs field. In
the Eagle Springs field, the Company has reworked and returned to production
eleven acquired wells, drilled a new water injection well, drilled and placed
into production eight additional wells, replaced and improved surface equipment
to handle increased production and to lower long-term operating costs, and
undertook a 3D seismic evaluation program. Much of this development work was
conducted under an agreement with Plains Petroleum Operating Company, which was
acquired in August 1995 by Barrett Resources Corporation (together, "Barrett"),
resulting in Barrett acquiring a 40% interest in the Eagle Springs field. In
November 1996, the Company acquired Barrett's interest in the Eagle Springs
field, effective August 1, 1996. The Company plans to continue additional
drilling in the Eagle Springs field to place into production undeveloped
reserves and to drill at additional locations to test horizons that are
productive in existing wells.
During 1996, the Company continued with exploration drilling on two
prospects, including a test that discovered the Ghost Ranch field on a different
geologic structure approximately one-half mile south of the Eagle Springs field
in a different formation. The first Ghost Ranch discovery well reached total
depth in late July 1996 and resulted in significant production and increases in
the Company's oil reserves. The Company plugged a second Ghost Ranch well in
November 1996, after determining it was not economic to produce. The Company
completed a third Ghost Ranch well for production in February 1997, which is now
producing at levels comparable to the discovery well, and completed a fourth
well in May 1997 that the Company is continuing to work to increase oil
production. The Company has a 60% working interest in the Ghost Ranch field and
is the operator. Barrett continues to hold the remaining 40% working interest
pursuant to the agreement discussed above. Of the other wells drilled during
1996, one well in Toano Draw is still being tested and one well in Pine Valley
was plugged and abandoned.
During most of the first half of 1996, the Company's exploration and
development activities were significantly restricted due to shortages of working
capital and cash. Following the receipt of net proceeds from the sale of
securities during the second quarter of 1996, the Company was financially able
to resume its exploration and development program.
The Company continues to increase and improve its geological and
geophysical expertise respecting the Great Basin of Nevada through its own
efforts and by obtaining data from third parties as part of joint exploration,
property acquisition, or data sharing arrangements and from drilling and other
field work in which the Company participates. In addition, all information is
continually reanalyzed as additional drilling data is gathered and as new
computer modeling and other analytical tools become available to the industry.
This has enabled the Company to increase substantially its understanding of the
geology, location, potential, and other characteristics of exploration prospects
in Nevada. To date, the Company has funded its exploration program principally
from the sale of its equity securities. The Company also benefits from capital
provided by oil industry participants for drilling and other exploration of
certain oil prospects through joint arrangements typical in the oil industry.
In November 1996 the Company established a bank credit facility to provide debt
financing.
During recent years, the Company has focused its activities on drilling in
the Eagle Springs to exploit proved undeveloped reserved and to evaluate at new
locations horizons that are productive in existing wells and to drill in
additional exploratory prospects in the Pine, Railroad, and Huntington Valleys
and Toano Draw of Nevada. In 1996, the Company's exploration effort led to the
discovery of the Ghost Ranch field, which it is now developing. Through 1997,
the Company will continue its exploration and development activities in such
areas. In addition, the Company will continue its acquisition of 3D seismic
data and reanalysis of existing 2D seismic data. The Company will also continue
its evaluation of data to identify additional exploration targets, expand its
lease holdings where warranted, and seek additional exploration arrangements
with other industry participants.
The Company's management and technical team consists of individuals with a
broad mix of formal education and over 70 years of combined Nevada exploration
experience, including positions with major oil companies such as Gulf, Amoco,
and Chevron, all Nevada oil exploration pioneers. (See "ITEM 10. DIRECTORS AND
EXECUTIVE OFFICERS OF REGISTRANT" in the Company's 1995 Form 10-K.)
The Company's principal executive offices are located at 12596 West Bayaud,
Suite 300, Lakewood, Colorado 80228-2019 and its telephone number is (303) 988-
3122.
1996-4 Preferred Stock
The Company issued 255 shares of 1996-4 Preferred Stock in an offering
completed in November 1996 for which the Company received net proceeds of
approximately $2,310,000. The 1996-4 Preferred Stock became convertible 15% on
March 20, 1997, and 15% each month thereafter. Prior to September 20, 1997, no
more than 20% of the aggregate number of shares could be converted during any 30
day period. Pursuant to the terms of the 1996-4 Preferred Stock, each share of
1996-4 Preferred Stock was convertible into a number of shares of Common Stock,
plus an accretion at 8% per annum, based on the market price of the Common Stock
at the time of conversion. As of the date of this prospectus, all of the 1996-4
Preferred Stock has been converted into an aggregate of 1,172,972 shares of
Common Stock.
On January 30, 1997, a registration statement filed with the Securities and
Exchange Commission became effective, which registration statement registered,
among other things, the resale of up to 788,799 shares of Common Stock issuable
by the Company on the conversion of the 1996-4 Preferred Stock and up to 283,333
shares of Common Stock on exercise of investor warrants issuable to the holders
of the 1996-4 Preferred Stock under certain circumstances. Because none of the
holders of the 1996-4 Preferred Stock held their preferred shares for the
requisite period of time, no investor warrants have been or will be issued to
the holders of the 1996-4 Preferred Stock by the Company.
The number of shares of common stock issued by the Company upon the
conversion of the 1996-4 Preferred Stock exceeds the number of shares of common
stock registered for resale under the prior registration statement. This
prospectus relates to the resale of the shares of Common Stock issued by the
Company on the conversion of the 1996-4 Preferred Stock in excess of the shares
covered by the prior registration statement.
(See "DESCRIPTION OF SECURITIES" below.)
Capitalization
The following table shows the capitalization of the Company as of June 30,
1997, and as adjusted to give effect to the issuance of 963,758 shares of Common
Stock on conversion of outstanding shares of Preferred Stock:
<TABLE>
<CAPTION>
June 30, 1997
---------------------------
Historical As Adjusted
----------- -----------
<S> <C> <C>
Long term debt, net of current portion $ 765,575 $ 765,575
----------- -----------
Stockholders' Equity
Preferred Stock, par value $0.001 per share, 5,000,000 shares authorized
1991 Convertible Preferred Stock, 40,000 shares issued and
outstanding 40 40
1994 Convertible Redeemable Preferred Stock, 165,140 shares
issued and outstanding 165 165
1995 Convertible Redeemable Preferred Stock, 613,334 shares
issued and outstanding 613 613
1996 Series 6% Convertible Preferred Stock, 12.5 and 0 shares
issued and outstanding, respectively -- --
1996-4 Series Preferred Stock, 198 and 0 shares issued and
outstanding, respectively -- --
Common Stock, par value $0.001 per share, 50,000,000 shares
authorized, 7,506,310 and 8,470,068 shares issued and outstanding,
respectively 7,506 8,470
Additional paid in capital 32,723,443 32,722,479
Less note and stock subscriptions receivable (1,133,214) (1,133,214)
Accumulated deficit (23,214,317) (23,214,317)
----------- -----------
Total stockholders' equity 8,384,236 8,384,236
----------- -----------
Total capitalization $ 9,149,811 $ 9,149,811
=========== ===========
</TABLE>
The Offering
<TABLE>
<CAPTION>
<S> <C>
Securities offered by Selling Stockholders.......................... 515,639 shares of Common Stock(1)
Common Stock outstanding before the offering........................ 8,470,068 shares
Common Stock outstanding after the offering......................... 8,470,068 shares(1)
Common Stock reserved for issuance.................................. 2,500,182 shares(2)
Fully diluted Common Stock.......................................... 10,970,250 shares(2)
Nasdaq Symbols:
Common Stock...................................................... FORL
</TABLE>
[FN]
(1) All of the 515,639 shares of Common Stock offered hereby by Selling
Stockholders were issued on conversion of the 1996-4 Preferred Stock.
(2) Consists of (i) up to 272,824 shares of Common Stock issuable on the
conversion of outstanding shares of Preferred Stock; (ii) up to 1,887,358
shares of Common Stock issuable on the exercise of outstanding options and
warrants at a weighted average exercise price of $7.25 per share; and
(iii) up to 340,000 shares of Common Stock issuable on the exercise of
outstanding options subject to vesting requirements at a weighted average
exercise price of $4.88 per share. (See "ITEM 11. EXECUTIVE
COMPENSATION," "ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT," and "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS," in the Company's 1996 Form 10-K, and "DESCRIPTION OF
SECURITIES--Preferred Stock, Warrants, and Options Outstanding" below.)
The board of directors has authority to authorize the offer and sale of
additional securities without the vote of or notice to existing shareholders,
and it is likely that additional securities will be issued to provide future
financing. The issuance of additional securities could dilute the percentage
interest and per share book value of existing shareholders, including persons
purchasing securities in this offering. (See "DESCRIPTION OF SECURITIES" below)
Use of Proceeds
The Company has not received and will not receive any net proceeds from the
conversion of the 1996-4 Preferred Stock or from the sale by the Selling
Stockholders of the Common Stock issued on such conversion. If all options and
warrants held by persons other than the Selling Stockholders were exercised to
acquire 2,227,358 shares of Common Stock, the Company would receive proceeds of
$15,338,037. There can be no assurance that any of the outstanding options or
warrants will be exercised to provide any proceeds therefrom to the Company.
Risk Factors
Offerees should not purchase these securities without carefully reading and
considering the risks involved and unless they are willing and able to accept
the complete loss of their investment. The securities offered hereby are
speculative and involve an unusually high degree of risk. (See "RISK FACTORS"
below.)
No Dividends
The Company has not paid dividends. The Company seeks growth and expansion
of its business through the reinvestment of profits, if any, and does not
anticipate that it will pay dividends in the foreseeable future. In addition,
the Company's credit agreement with a commercial bank contains, among other
provisions, a negative covenant that prohibits the Company from paying
dividends.
RISK FACTORS
The purchase of the Common Stock involves certain risks. Prospective
purchasers should consider, in addition to the negative implications of the
other information and financial data set forth herein or incorporated herein by
reference, the following risk factors before making an investment in the Common
Stock.
This document and all Company disclosures, including periodic reports filed
with the Commission, contain certain forward-looking statements and information
relating to the Company that are based on the beliefs of Company management as
well as assumptions made by and information currently available to Company
management. When used herein and in other Company disclosures, the words
"anticipate," "believe," "estimate," "expect," "intend," and similar
expressions, as they relate to the Company or Company management, are intended
to identify forward-looking statements. Such statements reflect the current
views of the Company with respect to future events and are subject to certain
risks, uncertainties and assumptions, including the risk factors described
below. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated,
expected, or intended. The Company does not intend to update these forward-
looking statements.
Risks Related to the Business of the Company
Concentration of Risks Resulting From Barrett Acquisition
Prior to the acquisition of the 40% interest in the Eagle Springs field
from Barrett in November 1996, the Company diversified the economic risks
associated with drilling and the other activities in the Eagle Springs field
because, as a 40% working interest owner, Barrett was responsible for 40% of all
costs. As a result of the acquisition by the Company of Barrett's interest, the
Company assumed the cost and associated risk of 100% of operations in the Eagle
Springs field.
Company's Ability to Continue as a Going Concern/Shortages of Working
Capital and Continuing Losses
The Company has an accumulated deficit of $23,214,317 since its inception
in 1985 and expects that its accumulated deficit will increase. During 1995 the
Company experienced a net loss of $2,275,565. These losses continued, with a
loss of $3,385,287 for the year ended December 31, 1996, and a loss of $528,689
for the first six months of 1997. The Company anticipates continuing losses
through the balance of 1997. Based on current production and oil prices,
management believes that its production revenue is now sufficient to meet its
fixed and recurring operating costs. The Company will also incur substantial
additional exploration costs, depending on the level of its drilling activity,
which may vary dramatically from quarter to quarter. The Company's independent
auditor's report on the financial statements for the year ended December 31,
1996, as for preceding fiscal years, contains an explanatory paragraph as to the
Company's ability to continue as a going concern. (See "ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA" and "ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION" in the Company's 1996
Form 10-K and March and June 1997 Form 10-Qs.)
Additional Possible Expenses Related to Capitalized Costs
The Company includes in oil and gas properties on its balance sheets costs
of wells in progress, which are capitalized until a decision is made to plug and
abandon or, if the well is still being evaluated, until one year after reaching
total depth, at which time such costs are charged to expense, even though the
well may subsequently be placed into production. At June 30, 1997, oil and gas
properties included approximately $420,000 related to a single well in progress.
The Company is continuing to evaluate this property. If the evaluation of this
property does not establish reserves by year end, the costs associated with such
well will be charged to expense.
The Company evaluates its proved oil and gas properties for impairment
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. When such an assessment is required, the Company compares
the net carrying value on a lease-by-lease basis to the related estimates of
undiscounted future net cash flows for each property. If the net carrying value
exceeds the estimated net cash flows, then impairment expense is recognized to
reduce the carrying value to the estimated fair value. Estimates of future cash
flows for specific properties are based upon reserve engineering evaluations
which are impacted by a number of factors, including historical oil production
levels, adjacent drilling results, lease operating costs, and historical and
projected prices for oil, which have typically been volatile.
At June 30, 1997, the Company also had a net investment of $651,400 in
undeveloped oil and gas leases for which no proved reserves have been
established. For these properties, it will be necessary to drill exploratory
wells to determine if sufficient economic oil and gas reserves exist.
Management periodically assesses these properties for impairment by considering
a number of factors, including unsuccessful drilling activity by the Company or
others in the vicinity of the lease, management's plans to pay delay rentals or
to drill a well prior to the expiration of the primary lease term, opportunities
to obtain and/or evaluate seismic data related to the lease, and management's
expectations about oil and gas prices, production costs and development costs.
Adverse information related to any of the above matters could have a
material adverse impact on the Company's future results of operations.
Dependence on Joint Exploration Arrangements with Industry Participants
The Company has entered into a number of joint exploration agreements with
industry participants to obtain leases, scientific data, and funds for drilling
and other exploration. These agreements typically set forth obligations that
the Company must perform timely in order to earn specified property interests,
permit funding participants to terminate their participation at specified points
during the exploration program, and condition continuation of joint efforts on
obtaining satisfactory results. If such a participant elects not to continue
with respect to any well, the Company would be required to fund all of the costs
of such well, in which case it would be dependent on proceeds from the sale of
securities and production revenue, which would delay or limit planned drilling.
Limited Production Revenue
The Company has only recently established revenue from oil production from
its Eagle Springs, Nevada, property acquired during 1993, and its Ghost Ranch
field. Based on current production and oil prices, management believes that its
production revenue is now sufficient to meet its current fixed and recurring
operating costs as well as a portion of the Company's costs of exploration.
There can be no assurance, however, that ongoing oil production in commercial
quantities will continue, that oil prices will not decrease dramatically, or
that oil reserves will be proved as a result of the Company's exploration
efforts. (See "ITEM 1. BUSINESS" in the Company's 1996 Form 10-K.)
Limited Commercial Drilling Success to Date
Despite the expertise of management, the significant amount of data that
the Company has collected with respect to Nevada, and the expenditure of several
million dollars in property acquisition, data collection, and exploration since
1985, the Company has established only limited reserves and developed limited
ongoing production as a result of its drilling program. The Ghost Ranch
discovery well, which was placed into production recently, is the first
exploration test by the Company that has resulted in significant ongoing
production. The oil production from the Eagle Springs field was acquired by the
Company in 1993 and, except for the increased production resulting from certain
reworking of existing wells and the development wells drilled by the Company,
did not result from the Company's exploration or drilling activities. Although
the Company began to receive oil production revenue from the Eagle Springs field
in early 1994 and from the Ghost Ranch well in mid-1996, the Company's success
will continue to depend on the results of drilling, evaluation, and testing of
its various prospects. (See "ITEM 1. BUSINESS" in the Company's 1996 Form 10-K
and "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" in the Company's 1996
Form 10-K and March and June 1997 Form 10-Qs.)
Need for Additional Funds
The nature, extent, and cost of exploring prospects in the Great Basin
province over several years cannot be predicted, but the total cost could amount
to tens of millions of dollars. Because of the size of the total exploration
possibilities and the Company's limited resources, it is likely that the
interest of the Company's shareholders in the Company and the interest of the
Company in its drilling prospects will continue to be diluted substantially as
the Company continues to obtain funding through the sale of additional
securities or through sharing arrangements with industry participants. There
can be no assurance that exploration funds will be available to the Company when
required or, if available, that such funds can be obtained on terms acceptable
or favorable to the Company. (See "ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA" and "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION" in the Company's 1996 Form 10-K
and March and June 1997 Form 10-Qs.)
Concentration of Activities in Frontier Area
Management of the Company has focused its efforts on acquiring lease
positions, developing data, and exploring and drilling in the Great Basin area
of Nevada, a largely unproved and unexplored geological province. While the
Company holds exploration rights to a significant number of acres, its holdings
are insignificant when compared to the size of the potential geological area.
Other than in the Eagle Springs field and Ghost Ranch field, no significant
ongoing commercial production of oil has been established on the Company's
properties. In addition, the areas targeted by the Company, other than the
Eagle Springs field and Ghost Ranch field, have geological, geophysical,
drilling, completion, and production problems which to date have prevented the
Company and others with larger exploration budgets from developing or
establishing significant production or reserves. There is no assurance that
these problems can be overcome or that the Company's drilling program will be
commercially successful. (See "ITEM 1. BUSINESS" in the Company's 1996 Form
10-K.)
Dependence on Key Employees
The business of the Company is dependent on its management and technical
team and their substantial Nevada exploration experience, the loss of any one of
whom could adversely affect the Company's proposed activities. The Company does
not have and does not intend to acquire key man life insurance on any of its
executives. (See "ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT" in
the Company's 1996 Form 10-K.)
Speculative Nature of Oil and Gas Industry
Exploration for oil is a highly speculative business. There is no way to
know in advance of drilling and testing whether any prospect will yield oil in
sufficient quantities to be economically feasible. The completion of a well for
production or the initiation of production in paying quantities does not
necessarily mean that the well will be economic because it may not produce
sufficient revenues to recover related costs and generate a financial return to
the Company.
High Operating Costs
The costs of exploring, drilling, producing, and transporting are higher in
the geological province targeted by management than they would be in a more
fully developed oil producing area. Access roads to drilling targets over
relatively long distances frequently have to be completed, drilling equipment
and services typically must be brought in from considerable distances, and there
is no collection pipeline so that any oil that is produced must be trucked to a
refinery. Most of the Company's oil is transported to a refinery in Salt Lake
City, Utah, a distance of several hundred miles. (See "ITEM 1. BUSINESS--Oil
Properties" in the Company's 1996 Form 10-K.)
Uncertainty of Reserve Estimates and Future Net Revenues
There are numerous uncertainties inherent in estimating quantities of
proved oil reserves. The estimates in the 1996 Form 10-K which are incorporated
into this Prospectus are based on various assumptions relating to rates of
future production, timing and amount of development expenditures, oil prices and
the results of planned development work. Actual future production rates and
volumes, revenues, taxes, operating expenses, development expenditures and
quantities of recoverable oil reserves may vary substantially from those assumed
in the estimates. Any significant change in these assumptions, including
changes that result from variances between projected and actual results, could
materially and adversely affect future reserve estimates. In addition, such
reserves may be subject to downward or upward revision based upon production
history, results of future development, prevailing oil prices and other factors.
(See "ITEM 2. PROPERTIES" and "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION--Liquidity and Capital Resources"
in the 1996 Form 10-K.)
Dependence on Oil Prices
The Company's oil exploration and production activities are dependent on
the prevailing price for oil, which is beyond the Company's control or
influence, and there is no assurance that the Company's wells can be produced at
levels in excess of related production costs. Oil prices have increased
materially during 1996, but there can be no assurance that such prices will
continue. Oil and gas prices have been and are likely to continue to be
volatile and subject to wide fluctuations in response to any of the following
factors: relatively minor changes in the supply of and demand for oil and gas;
market uncertainty; political conditions in international oil producing regions;
the extent of domestic production and importation of oil; the level of consumer
demand; weather conditions; the competitive position of oil or gas as a source
of energy as compared with coal, nuclear energy, hydroelectric power, and other
energy sources; the refining capacity of prospective oil purchasers; the effect
of federal and state regulation on the production, transportation and sale of
oil; and other factors, all of which are beyond the control or influence of the
Company. In an effort to limit the adverse effects of extreme declines in oil
prices, the Company has entered into an agreement with Crysen Refining, Inc.,
Salt Lake City, Utah, to sell oil from its currently producing fields (other
than a portion of the Ghost Ranch field) through August 1997 at minimum fixed
prices. Notwithstanding this agreement, adverse changes in the market or
regulatory environment would likely have an adverse effect on the Company's
ability to obtain funding from lending institutions, industry participants, the
sale of additional securities, and other sources. (See "ITEM 1. BUSINESS--Oil
Properties" in the Company's 1996 Form 10-K.)
Operating Risks and Uninsured Hazards
Oil drilling involves hazards such as fire, explosion, pipe failure, cave
in, collapse, encountering unusual or unexpected formations, pressures, and
other conditions, environmental damage, personal injury, and other occurrences
that could result in the Company incurring substantial losses and liabilities to
third parties. As is customary in exploration arrangements with other energy
companies under which specified drilling is to be conducted, the operator is
required to purchase and pay for insurance against risks customarily insured
against in the oil and gas industry by others conducting similar activities.
(See "ITEM 1. BUSINESS--Operational Hazards and Insurance" in the Company's
1996 Form 10-K.) Nevertheless, the Company may not be insured against all
losses or liabilities that may arise from all hazards because such insurance is
unavailable at economic rates, because the operator has not fulfilled its
obligation to purchase such insurance, or because of other factors. Any
uninsured loss could have a material adverse effect on the Company.
Risks of Adverse Weather
The Company's activities are subject to periodic interruptions due to
weather conditions, which may be quite severe at various times of the year.
Periods of heavy precipitation make travel to exploration or drilling locations
difficult and/or impossible, while extremely cold temperatures limit or
interrupt drilling, pumping, and/or production activities or increase operating
costs.
Intense Competition in Oil and Gas Industry
The acquisition and exploration of oil and gas prospects are highly
competitive. Many of the Company's current and potential competitors engaged in
oil exploration in the Great Basin of Nevada have greater financial resources,
broader exploration programs, and a greater number of managerial and technical
personnel. Because the Company's resources will be limited even on successful
completion of this offering, there can be no assurance that it will be able to
compete effectively in the exploration for oil in Nevada. (See "ITEM 1.
BUSINESS--Competition and Markets" in the Company's 1996 Form 10-K.)
Environmental and Other Governmental Regulation
Oil and gas exploration and production are subject to comprehensive
federal, state, and local laws and regulations controlling the exploration for
and production and sale of oil and gas and the possible effects of such
activities on the environment. To date, the Company has not been required to
expend significant resources in order to satisfy applicable environmental laws
and regulations respecting its own activities. Although management believes
that the Company has substantially completed certain remediation work that it
agreed to undertake in connection with the acquisition of the Eagle Springs
field, there can be no assurance that additional work may not be required. In
addition, present, as well as future, legislation and regulations could cause
additional expenditures, restrictions, and delays in the Company's business, the
extent of which cannot be predicted and which may require the Company to limit
substantially, delay or cease operations in some circumstances or subject the
Company to various governmental controls. From time to time, regulatory
agencies have proposed or imposed price controls and limitations on production
by restricting the rate of flow of oil and gas wells below actual production
capacity in order to conserve supplies of oil and gas. Because federal energy
and taxation policies are subject to constant revisions, no prediction can be
made as to the ultimate effect of such governmental policies and controls on the
Company. (See "ITEM 1. BUSINESS--Government Regulation" in the Company's 1996
Form 10-K.)
General Risks Relating to Offering
Volatility of Common Stock
The market price for the Common Stock has been volatile in the past and
could fluctuate significantly in response to the results of specific exploration
drilling tests, variations in quarterly operating results, and changes in
recommendations by securities analysts. Further, the trading volume of the
Common Stock is relatively small, and the market for the Common Stock may not be
able to efficiently accommodate significant trades on any given day.
Consequently, sizable sales or purchases of the Common Stock have in the past,
and may in the future, cause volatility in the market price of the Common Stock
to a greater extent than in other more actively traded securities. Until more
trading volume develops, larger transactions may not be able to be closed at the
then current market price for the Common Stock. In addition, the securities
markets regularly experience significant price and volume fluctuations that are
often unrelated or disproportionate to the results of operations of particular
companies. These broad fluctuations may adversely affect the market price of
the Common Stock. See "ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS" in the Company's 1996 Form 10-K.
Substantial Warrants and Options Outstanding
The Company has issued to employees, officers, directors, and others
providing services to the Company vested options to purchase up to 1,147,333
shares of Common Stock with exercise prices ranging from $3.93 to $9.75 per
share. Options to purchase a total of 94,000 shares contain a provision that,
on exercise, the holder is granted a new option covering the number of shares
for which the prior option was exercised, with the exercise price of the new
option fixed at the then fair market value of the Common Stock. In addition,
the Company has outstanding options held by unrelated third parties to purchase
110,000 shares of Common Stock at prices ranging from $3.75 per share to $6.90
per share and warrants to purchase a total of 630,025 shares of Common Stock at
a weighted average exercise price of $11.58 per share. The existence of such
options and warrants may prove to be a hindrance to future financing by the
Company, and the exercise of options and warrants may further dilute the
interests of the stockholders. The possible future sale of Common Stock
issuable on the exercise of such options and warrants could adversely affect the
prevailing market price of the Company's Common Stock. Further, the holders of
options and warrants may exercise them at a time when the Company would
otherwise be able to obtain additional equity capital on terms more favorable to
the Company. (See "DESCRIPTION OF SECURITIES--Preferred Stock, Warrants, and
Options Outstanding" below and "ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT" in the Company's 1996 Form 10-K.)
Issuance of Additional Common Stock
The Company has authorized 5,000,000 shares of Preferred Stock, par value
$0.001 per share, and 50,000,000 shares of Common Stock, par value $0.001 per
share. As of the date of this Prospectus, 8,470,068 shares of Common Stock were
issued and outstanding, and 2,250,723 additional shares were reserved for
issuance on the exercise or conversion of options, warrants, and shares of
Preferred Stock issued and outstanding or issuable on exercise of placement
agent warrants. The Company's board of directors also has authority, without
action or vote of the shareholders, to issue all or part of the authorized but
unissued shares. Any such issuance will dilute the percentage ownership of
shareholders and may further dilute the book value of the Company's Common
Stock.
Preferential Rights of Preferred Stock Outstanding
The Company has 40,000 shares of 1991 Preferred Stock, 165,140 shares of
1994 Preferred Stock, and 613,334 shares of 1995 Preferred Stock issued and
outstanding. The 1991 Preferred Stock has a liquidation preference of $1.25 per
share, the 1994 Preferred Stock has a liquidation preference of $2.00 per share,
and the 1995 Preferred Stock has a liquidation preference of $1.50 per share.
On liquidation or termination of the Company, an aggregate of $1,300,281 in
assets would be distributed to the holders of the currently issued and
outstanding Preferred Stock, after payment of all of the Company's obligations,
prior to any distribution to the holders of Common Stock. The 1991, 1994 and
1995 Preferred Stock vote as a single class with the Common Stock. If the
Company seeks to amend its certificate of incorporation to change the provisions
relating to the Preferred Stock or to approve a merger containing provisions
that would require a class vote if they were contained in an amendment to the
certificate of incorporation, the approval of each class of Preferred Stock
affected thereby, voting as a separate class, will be required. Consequently,
the holders of a relatively minor number of shares of Preferred Stock may be
able to block such proposals, even in circumstances where they would be in the
best interests of the holders of Common Stock. (See "DESCRIPTION OF SECURITIES-
- -Preferred Stock, Warrants, and Options Outstanding" below.)
Determination of Purchase and Exercise Price
The conversion ratio of the outstanding Preferred Stock and the exercise
prices of the outstanding options and warrants were determined by the Company,
taking into account the history of, and recent prices for, the Common Stock as
quoted on Nasdaq at the time the Preferred Stock, options, and warrants were
issued, the business history and prospects of the Company, the number of
securities to be offered, and the general condition of the securities market,
all as assessed by the Company's management. Such prices bear no relationship
to the assets, earnings, or net tangible book value of the Company or any other
traditional criteria of value. (See "PLAN OF DISTRIBUTION" and "DESCRIPTION OF
SECURITIES" below.)
Substantial and Immediate Dilution
Persons purchasing the Common Stock will suffer a substantial and immediate
dilution to the net tangible book value below the purchase price of such Common
Stock. (See "DILUTION" below.)
No Dividends
The Company has not paid dividends in the past and does not plan to pay
dividends in the foreseeable future, even if it were profitable. Earnings, if
any, are expected to be used to advance the Company's exploration activities and
for general corporate purposes, rather than to make distributions to
shareholders. In addition, the Company's credit agreement with a commercial bank
contains, among other provisions, a negative covenant that prohibits the Company
from paying dividends.
Registration Rights of Existing Shareholders
The Company has previously granted to existing shareholders and holders of
options and warrants, including officers and directors, registration rights that
require the Company to include securities in future registration statements
filed by the Company, subject to the approval of the managing underwriter in
such future offerings and, in some cases, to file registration statements with
respect to the resale, exercise, or conversion of the securities held by the
holders of such registration rights, all at the expense of the Company. The
Company has obtained the effectiveness of a registration statement respecting
all of its registration obligations, subject to the requirement for updating
through supplements or post-effective amendments. (See "DESCRIPTION OF
SECURITIES--Registration Rights" below.)
NO NET PROCEEDS
The Company has not received and will not receive any net proceeds from the
conversion of the Preferred Stock or from the sale by the Selling Stockholders
of the Common Stock issued on such conversion or exercise. If all options and
warrants held by persons other than the Selling Stockholders were exercised to
acquire an additional 2,227,358 shares of Common Stock, the Company would
receive proceeds of $15,338,037. There can be no assurance that any of the
outstanding options or warrants will be exercised to provide any proceeds
therefrom to the Company.
THE COMPANY
For information regarding the Company, reference is made to the Company's
annual report on Form 10-K for the year ended December 31, 1996, the Company's
quarterly report on Form 10-Q for the quarters ended March 31, 1997, and June
30, 1997, and all documents subsequently filed by the Company pursuant to
section 13(a), 13(c), 14, or 15(d) of the Exchange Act.
DILUTION
Immediately prior to this offering, the Company had a pro forma net
tangible book value of $8,384,236, with 8,470,068 shares of Common Stock issued
and outstanding, or approximately $0.99 per share. The pro forma net tangible
book value per share decreases to $0.84 after deducting liquidation preferences
of an aggregate of $1,300,281 with respect to the shares of outstanding 1991,
1994, and 1995 Preferred Stock. The pro forma net tangible book value is
determined by adjusting the net tangible book value of the Company as of June
30, 1997, to give pro forma effect to the subsequent issuance of 963,758 shares
of Common Stock on conversion of outstanding shares of Preferred Stock. (See
"ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" in the Company's 1996
Form 10-K and March and June 1997, Form 10-Qs.)
Purchasers of shares of Common Stock from Selling Stockholders will likely
suffer substantial and immediate dilution in the adjusted net tangible book
value per share of the Common Stock they purchase below the purchase price for
such shares. Similarly, holders of Preferred Stock will suffer dilution in the
adjusted net tangible book value per share received on conversion or exercise
below their effective purchase price per share. Based on the Company's net
tangible book value immediately prior to this offering, which gives effect to
the conversion of all outstanding shares of Company Preferred Stock to acquire
the 100,840 shares of Common Stock to be sold in this offering, the Company
would have a net tangible book value of $7,083,955, or approximately $0.84 per
share, which represents a reduction of $2.97 per share from the closing sales
price of $3.8125 for the Company's Common Stock on Nasdaq on October 7,1997.
SELLING STOCKHOLDERS
The following table provides certain information, as of the date of this
Prospectus, respecting the Selling Stockholders, the shares of Common Stock held
by them, to be sold, and to be held following the offering, assuming the sale by
such Selling Stockholders of all shares of Common Stock offered.
The Selling Stockholders named below confirmed at the time they acquired
the Preferred Stock and the Warrants that such securities were acquired for
investment purposes only and without a view toward their resale and acknowledged
the existence of restrictions on resale applicable to such securities. Such
Selling Stockholders can sell such securities only in limited circumstances.
The Company is not aware of any intention by any Selling Stockholder to sell
such Preferred Stock or Warrants prior to their conversion or exercise. This
offering relates only to the sale of shares of Common Stock held or to be held
by the Selling Stockholders named in the following table. If a Selling
Stockholder sells the Preferred Stock or Warrants held by such Selling
Stockholder prior to converting or exercising such securities into shares of
Common Stock, such shares of Common Stock will not be registered and may not be
resold pursuant to this offering.
<TABLE>
<CAPTION>
Securities Owned Shares Owned
Prior to the Offering After Offering
--------------------- ----------------
1996-4
Common Preferred Shares to
Selling Stockholders Stock Stock(2) Be Offered Number %
- ----------------------------- ------- --------- ---------- ------ ---
<S> <C> <C> <C> <C> <C>
Banque Edouard Constant 64,606 -- 64,606 -- --
Global Bermuda, L.P. 137,832 -- 137,832 -- --
Lakeshore International, Ltd. 86,487 -- 86,487 -- --
Legong Investments, N.V. 86,637 -- 86,637 -- --
The Matthew Fund, N.V. 83,124 -- 83,124 -- --
Otato Limited Partnership 56,953 -- 56,953 -- --
Total 515,639 -- 515,639 -- --
======= == ======= == ==
</TABLE>
[FN]
(1) Shares owned prior to the offering include all shares of Common Stock and
underlying securities convertible or exercisable into shares of Common
Stock owned by or issuable to the Selling Stockholder. Shares owned
after the offering assume the sale of all shares of Common Stock offered
pursuant to this offering. Percentage figures respecting the securities
owned after the offering give effect to the conversion of all shares of
Preferred Stock by all Selling Stockholders.
(2) The 1996-4 Preferred Stock became convertible 15% on March 20, 1997, and
15% each month thereafter; until September 20, 1997, no more than 20% of
the aggregate number of shares could be converted during any 30 day
period. All of the 1996-4 Preferred Stock has been converted into an
aggregate of 1,172,972 shares of Common Stock. Each share of 1996-4
Preferred Stock was convertible into the number of shares of Common
Stock, plus an accretion at 8% per annum, based on the market price
of the Common Stock at the time of conversion. (See "DESCRIPTION OF
SECURITIES" below.)
DESCRIPTION OF SECURITIES
The Company is authorized to issue 5,000,000 shares of preferred stock, par
value $0.001 per share, and 50,000,000 shares of Common Stock, par value $0.001
per share.
Common Stock
The holders of the Company's Common Stock are entitled to one vote per
share on each matter submitted to vote at any meeting of shareholders. Shares
of Common Stock do not carry cumulative voting rights, and therefore, a majority
of the shares of outstanding Common Stock is able to elect the entire board of
directors, and if they do so, minority shareholders would not be able to elect
any persons to the board of directors. The Company's bylaws provide that one-
third of the issued and outstanding shares of the Company shall constitute a
quorum for shareholders' meetings, except with respect to certain matters for
which a greater percentage quorum is required.
Shareholders of the Company have no preemptive right to acquire additional
shares of Common Stock or other securities. The Common Stock is not subject to
redemption and carries no subscription or conversion rights. In the event of
liquidation of the Company, the shares of Common Stock are entitled to share
equally in corporate assets after satisfaction of all liabilities. The shares
of Common Stock, when issued, are fully paid and nonassessable.
Holders of Common Stock are entitled to receive such dividends as the board
of directors may from time to time declare out of funds legally available for
the payment of dividends. The Company seeks growth and expansion of its
business through the reinvestment of profits, if any, and does not anticipate
that it will pay dividends in the foreseeable future.
The board of directors has the authority to issue the authorized but
unissued shares without action by the shareholders. The issuance of such shares
would reduce the percentage ownership held by persons purchasing stock in this
offering and may dilute the book value of the then existing shareholders.
Preferred Stock, Warrants and Options Outstanding
As of the date of this Prospectus, the Company had the following Preferred
Stock, options, and warrants outstanding as discussed in detail below.
<TABLE>
<CAPTION>
Number of Shares of Price Per Share of
Common Stock or Common Stock or
Common Stock Common Stock
Description Equivalent Equivalent
- ------------------------------------ ------------------- ------------------
<S> <C> <C>
Preferred Stock
1991 Series 13,334 $3.75
1994 Series 55,047 $6.00
1995 Series 204,443 $4.50
Warrants to purchase Common Stock 17,450 $4.50
29,353 $7.50
583,222 $12.00
Options to purchase Common Stock(1) 10,000 $3.75
22,667 $3.93
440,000 $4.00
128,000 $4.50
300,000 $5.00
1,667 $5.63
216,667 $6.375
100,000 $6.90
6,666 $7.50
28,333 $9.00
3,333 $9.75
</TABLE>
[FN]
(1) Does not include options subject to vesting requirements to purchase up
to 340,000 shares of Common Stock at a weighted average exercise price
of $4.88 per share.
Preferred Stock
The Company has 40,000 shares designated as 1991 Series Convertible
Preferred Stock, 165,140 shares designated as 1994 Series Convertible Redeemable
Preferred Stock, and 613,334 shares designated as the 1995 Series Convertible
Preferred Stock issued and outstanding as of the date of this Prospectus. The
Company has no current plans to issue any additional Preferred Stock, except
70,000 shares of 1993 Preferred Stock to be issued on the exercise of the
outstanding 1993 Placement Agent Warrants and 131,622 shares of 1994 Preferred
Stock to be issued on the exercise of the outstanding 1994 Placement Agent
Warrants. The Company's articles of incorporation provide that the board of
directors of the Company has authority, without action by the shareholders, to
issue the authorized but unissued Preferred Stock in one or more series, and to
determine the voting rights, preferences as to dividends and liquidation,
conversion rights, and other rights of such series.
The 1991, 1994 and 1995 Preferred Stock is convertible, at the election of
the holder, into the Company's Common Stock at the rate of one share of Common
Stock for each three shares of Preferred Stock, after giving effect to the 3-
for-1 reverse stock split of the Common Stock. The 1993 Preferred Stock issuable
on the exercise of the 1993 Placement Agent Warrants is convertible, at the
election of the holder, into the Company's Common Stock at the rate of two
shares of Common Stock for each three shares of Preferred Stock.
The 1996-4 Preferred Stock was convertible into the Company's Common Stock
at the rate of one share of 1996-4 Preferred Stock for the number of shares of
Common Stock determined by dividing $10,000, plus an accretion at 8% per annum,
by the lesser of $7.50 or a percentage of the average closing bid price of the
Common Stock as reported on Nasdaq for the five days preceding the date of
conversion. Such percentage was 90% of the 1996-4 Preferred Stock if converted
after March 20, 1997, and before May 20, 1997, 85% if after May 20, 1997, and
before November 20, 1997, and 82.5% if after November 20, 1997. All of the 1996-
4 Preferred Stock has been converted into an aggregate of 1,172,972 shares of
Common Stock.
The 1991 Preferred Stock carries a preference of $1.25 per share on
dissolution and liquidation of the Company, the 1994 Preferred Stock carries a
preference of $2.00 per share, and the 1995 Preferred Stock carries a
liquidation preference of $1.50 per share. The 1991, 1994, and 1995 Preferred
Stock votes as a single class with the Common Stock except as otherwise provided
by the corporate laws of the state of Nevada. Shares of 1991, 1994 and 1995
Preferred Stock are entitled to one vote per share. None of the issued and
outstanding Preferred Stock is entitled to preferential dividends, but
participates with the Common Stock in the unlikely event that a dividend is
declared.
The 1991 Preferred Stock is redeemable at $1.25 per share at any time after
December 31, 1995, the 1994 Preferred Stock is redeemable at $4.00 per share at
any time after March 31, 1996, and the 1995 Preferred Stock is redeemable at
$3.00 per share at any time after December 31, 1995. In each case, the
Preferred Stock can be converted prior to the redemption date fixed in the
notice.
This Prospectus relates to the resale of Common Stock issued on conversion
of 1996-4 Preferred Stock in excess of the shares registered in a prior
registration.
Warrants
The Company has issued and outstanding the following warrants to purchase
Common Stock and has reserved an equivalent number of shares of Common Stock for
issuance on exercise of such warrants. Each of the warrants described below is
governed by a warrant agreement between the Company and the warrant agent. The
following summary is subject to the detailed provisions of the warrant agreement
governing such warrants.
Holders of warrants are deemed to be shareholders of the Company only to
the extent of the shares of Common Stock held by them. Holders of warrants, as
such, are not entitled to vote with respect to matters submitted to the
shareholders of the Company, are not entitled to participate in dividends, if
any, and do not have ownership rights on termination or liquidation of the
Company.
$4.50 Warrants. The Company has issued and outstanding warrants to
purchase 8,333 shares of Common Stock at an exercise price of $4.50 per share
which expire in June 2000.
N Warrants. Effective January 1, 1997, the Company issued to the record
holders of the class L Warrants, which warrants expired pursuant to their terms
on December 31, 1996, warrants to purchase 414,000 shares of Common Stock at
$12.00 per share. The N Warrants are exercisable through December 31, 1998. The
N Warrants are subject to redemption by the Company at a redemption price of
$0.10 per Warrant if the average closing price of the Common Stock is at least
$12.00 per share for 20 consecutive trading days preceding the date of notice of
redemption, subject to certain other conditions. Such Warrants may be exercised
during the period after notice of redemption has been given and prior to the
redemption date.
M Warrants. The Company has issued and outstanding 507,666 M Warrants.
Giving effect to the reverse stock split, the M Warrants entitle the holder to
purchase one share of Common Stock for each three M Warrants held at $12.00 at
any time through December 1, 1998. The M Warrants are subject to redemption by
the Company at a redemption price of $0.10 per Warrant if the average closing
price of the Common Stock is at least $12.00 per share for 20 consecutive
trading days preceding the date of notice of redemption, subject to certain
other conditions. Such Warrants may be exercised during the period after notice
of redemption has been given and prior to the redemption date.
1996 Placement Agent Warrants. The placement agent in the offering in
which the 1996 Preferred Stock was sold has warrants to acquire 9,117 shares of
Common Stock at a price equal to the lesser of $4.50 or 75% of the closing bid
price of the Common Stock as reported on Nasdaq on the day preceding the date of
exercise. The placement agent's warrants are exercisable before March 25, 2001.
1996-4 Placement Agent Warrants. The designees of the placement agent in
the 1996-4 Preferred Stock offering have warrants to purchase an aggregate of
29,353 shares of Common Stock at an exercise price equal to the lesser of $7.50
or 125% of the average closing price of the Common Stock as reported on Nasdaq
for the five days preceding each anniversary of the issuance of such warrants.
Such warrants are exercisable at any time prior to November 8, 2001.
Options
The Company has issued and outstanding options to purchase up to 1,257,333
shares of Common Stock at a weighted average exercise price of $5.07 per share,
including options to purchase 1,147,333 shares of Common Stock at a weighted
average exercise price of $4.93 per share of Common Stock issued to executive
officers, directors and employees of the Company. In addition, the Company has
issued to employees of the Company options to purchase up to 340,000 shares of
Common Stock that at a weighted average exercise price of $4.88 per share that
are subject to vesting requirements.
General
Each of the foregoing warrants and options contain provisions that protect
the holders thereof against dilution by adjustment in the number of shares of
Common Stock purchasable on exercise of the warrants and options in certain
events such as stock splits or stock dividends. In the event the number of
warrant or option shares purchasable is increased, through the operation of the
anti-dilution provisions, the exercise price will be reduced proportionately.
Conversely, if the number of warrant or option shares purchasable is decreased,
the exercise price will be increased proportionately.
Registrar and Transfer Agent
The registrar and transfer agent of the Company's securities is Atlas Stock
Transfer Corporation, 5899 South State Street, Salt Lake City, Utah 84107,
telephone (801) 266-7151.
PLAN OF DISTRIBUTION
General
This Prospectus relates to the public offer and sale by certain
shareholders (the "Selling Stockholders") of an aggregate of up to 515,639
shares of Common Stock of the Company issued on conversion of shares of 1996-4
Preferred Stock. (See "SELLING STOCKHOLDERS" and "DESCRIPTION OF SECURITIES"
above.)
Sale of Common Stock
The Common Stock to be sold by the Selling Stockholders may be sold by them
from time to time directly to purchasers. Alternatively, the Selling
Stockholders may, from time to time, offer the Common Stock for sale in the
over-the-counter market through or to securities brokers or dealers that may
receive compensation in the form of discounts, concessions, or commissions from
the Selling Stockholders and/or the purchasers of Common Stock for whom they may
act as agent. Any such sale of Common Stock by Selling Stockholders must be
accompanied by, or follow the delivery of, a prospectus filed with a current
registration statement relating to the Common Stock being offered, unless a
Selling Stockholder elects to rely on Rule 144 or another exemption from the
registration requirements in connection with a particular transaction. The
Selling Stockholders, and any dealers or brokers that participate in the
distribution of the Common Stock, may be deemed to be "underwriters" as that
term is defined in the Securities Act, and any profit on the sale of Common
Stock by them and any discounts, commissions, or concessions received by any
such dealers or brokers may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Common Stock may be sold by the Selling Stockholders from time to time
in one or more transactions at a fixed offering price, which may be changed, or
at prices that may vary through the period during which the securities may be
offered, or at such other prices as may be negotiated by the Selling Stockholder
and the purchaser at the time of sale. The Company does not intend to enter into
any arrangement with any securities dealer concerning solicitation of offers to
purchase the Common Stock.
The Company estimates that it will incur costs of approximately $10,000 in
connection with this offering for legal, accounting, printing, and other costs.
Any separate costs of the Selling Stockholders will be borne by them.
Commissions or discounts paid in connection with the sale of securities by the
Selling Stockholders will be determined by negotiations between them and the
broker-dealer through or to which the securities are to be sold and may vary
depending on the broker-dealers' commission or mark up schedule, the size of the
transaction, and other factors.
LEGALITY OF SECURITIES
The validity under the Nevada Revised Statutes of the issuance of the
Common Stock have been passed on for the Company by Kruse, Landa & Maycock,
L.L.C.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, have been audited by Hein + Associates LLP, certified public
accountants, as stated in their report, which is incorporated herein by
reference, and has been so incorporated in reliance upon such report given on
the authority of that firm as experts in accounting and auditing.
The year end independent reserve dated December 31, 1996, incorporated by
reference into this Prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, has been prepared by the firm of
Malkewicz Hueni Associates, Inc., Golden, Colorado, as stated in its report,
which is incorporated by reference and has been so incorporated by reference in
reliance and upon such report given on the authority of that firm as experts in
mining engineering.
TABLE OF CONTENTS FORELAND CORPORATION
<TABLE>
<CAPTION>
Section Page
<S> <C>
SUMMARY AND INTRODUCTION.........................3 SHARES OF COMMON STOCK
RISK FACTORS.....................................7
NO NET PROCEEDS.................................13
THE COMPANY.....................................13
DILUTION........................................13
SELLING STOCKHOLDERS............................14
DESCRIPTION OF SECURITIES.......................15
PLAN OF DISTRIBUTION............................18
LEGALITY OF SECURITIES..........................18
EXPERTS.........................................18
</TABLE>
No dealer, salesman, or other PROSPECTUS
person has been authorized in
connection with this offering to give
any information or to make any
representation other than as
contained in this Prospectus and, if
made, such information or
representation must not be relied on
as having been authorized by the
Company. This Prospectus does not
constitute an offer to sell or the
solicitation of an offer to buy any
securities covered by this Prospectus
in any state or other jurisdiction to
any person to whom it is unlawful to
make such offer or solicitation in
such state or jurisdiction. October -----, 1997
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses in connection with the
distribution of the securities being registered:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee $ 133
Legal fees 6,000
State "blue sky" fees and expenses (including attorneys' fees) 1,000
Accounting fees and expenses 3,000
Printing expenses 500
Listing fees 1,367
--------
Total $ 12,000
========
</TABLE>
All expenses, except the SEC fees, are estimates.
The Selling Shareholder will not bear any portion of the foregoing
expenses, but will pay fees in connection with the sale of the Common Stock
offered hereby in those transactions completed to or through securities broker
and/or dealers in the form of markups, markdowns, or commissions.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.037 and 78.751 of the Nevada Revised Statutes and "ARTICLE VII.
INDEMNIFICATION OF DIRECTORS AND OFFICERS" of the Registrant's articles of
incorporation provide for indemnification of the Registrant's directors and
officers in a variety of circumstances, which may include liabilities under the
Securities Act of 1933, as amended.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons pursuant to the
foregoing provisions, the Registrant has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is contrary to
public policy as expressed in the Securities Act and, therefore, is
unenforceable. (See "ITEM 17. UNDERTAKINGS.")
ITEM 16. EXHIBITS
Copies of the following documents are included as exhibits to this
Registration Statement, pursuant to item 601 of regulation S-K.
Exhibits
<TABLE>
<CAPTION>
SEC
Exhibit Reference
No. No. Title of Document Location
- ------- --------- ------------------------------------------------------ ----------------
<S> <C> <C> <C>
Item 3. Articles of Incorporation and Bylaws
3.01 3 Articles of Restatement of the Articles of This Filing
Incorporation
3.02 3 Revised Bylaws This Filing
Item 4. Instruments Defining the Rights of Security Holders,
Including Indentures
4.01 4 Specimen Common Stock Certificate Incorporated by
Reference(1)
4.02 4 Designation of Rights, Privileges, and Preferences of Incorporated by
1991 Series Preferred Stock Reference(1)
4.03 4 Designation of Rights, Privileges and Preferences of Incorporated by
1994 Series Convertible Preferred Stock Reference(3)
4.04 4 Designation of Rights, Privileges and Preferences of Incorporated by
1995 Series Convertible Preferred Stock Reference(7)
4.05 4 Designation of Rights, Privileges and Preferences of Incorporated by
1996 Series 6% Convertible Preferred Stock Reference(8)
4.06 4 Designation of Rights, Privileges and Preferences of Incorporated by
1996-2 Series 6% Convertible Preferred Stock Reference(9)
4.07 4 Designation of Rights, Privileges and Preferences of Incorporated by
1996-3 Series 8% Convertible Preferred Stock Reference(9)
4.08 4 Certificate of Designation of 1996-4 Series Preferred Incorporated by
Stock Reference(10)
4.09 4 Form of Underwriter's Warrant to Purchase Units Incorporated by
Reference(5)
4.10 4 Form of Warrant Agreement between the Company and Incorporated by
Atlas Stock Transfer Corporation relating to M Warrants Reference(7)
4.11 4 Form of Warrants to Kevin L. Spencer and Jay W. Enyart Incorporated by
Reference(9)
4.12 4 Warrant to First Geneva Holdings, Inc., relating to Incorporated by
offering of 1996 Preferred Stock Reference(9)
4.13 4 Form of Warrant to placement agent and assigns relating Incorporated by
to offer of 1996-4 Series Preferred Stock, with related Reference(10)
schedule
4.14 4 Form of First Amendment to the Designation of Rights, Incorporated by
Privileges, and Preferences of 1996-2 Series 6% Reference(13)
Convertible Preferred Stock
4.15 4 Form of Warrant Agreement between the Company and Incorporated by
Atlas Stock Transfer Corporation relating to N Warrants Reference(14)
Item 5. Opinion re Legality
5.01 5 Opinion and Consent of Kruse, Landa & Maycock, L.L.C. This Filing
Item 10. Material Contracts
10.01 10 Option Agreement between N. Thomas Steele and Incorporated by
Foreland Corporation, dated June 24, 1985** Reference(6)
10.02 10 Option Agreement between Kenneth L. Ransom and Incorporated by
Foreland Corporation, dated June 24, 1985** Reference(6)
10.03 10 Option Agreement between Grant Steele and Foreland Incorporated by
Corporation, dated June 24, 1985** Reference(6)
10.04 10 Form of Options to directors dated April 30, 1991 with Incorporated by
respect to options previously granted 1986** Reference(1)
10.05 10 Form of Stock Appreciation Rights Agreement between Incorporated by
the Company and officers, with related schedule** Reference(4)
10.06 10 Form of Nonqualified Stock Option between the Company Incorporated by
and unrelated third parties, with related schedule Reference(4)
10.07 10 Crude Oil Purchase Agreement between the Company Incorporated by
and Crysen Refining, Inc., dated September 1, 1993 (Nye Reference(3)
County, Nevada)
10.08 10 Crude Oil Purchase Agreement between the Company Incorporated by
and Crysen Refining, Inc., dated September 1, 1993 Reference(3)
(Eureka County, Nevada)
10.09 10 Lease Agreement dated June 7, 1993, by and between Incorporated by
Ulster Joint Venture and the Company regarding Union Reference(3)
Terrace Office, as amended
10.10 10 Agreement dated August 9, 1994, between Plains Incorporated by
Petroleum Operating Company and the Company Reference(3)
10.11 10 Form of Promissory Notes relating to certain options Incorporated by
exercised by officers, with related schedule Reference(5)
10.12 10 Form of Option granted pursuant to reload provisions of Incorporated by
previously granted options with related schedule Reference(5)
10.13 10 Letter dated January 25, 1995 from Plains Petroleum Incorporated by
Operating Company regarding Plains' election under the Reference(7)
Agreement dated August 9, 1994.
10.14 10 Form of Letter Agreement dated March 8, 1995 between Incorporated by
the Company and Parsley & Parsley Development, L.P. Reference(7)
regarding Exploration Agreement.
10.15 10 Form of Letter Agreement dated March 24, 1995 between Incorporated by
the Company and Mobil Exploration & Producing U.S., Reference(7)
Inc., regarding the Rustler Prospect Farmout Agreement
10.16 10 Form of Registration Agreement relating to Units Incorporated by
consisting of 1995 Series Preferred Stock and M Reference(7)
Warrants
10.17 10 Crysen Refining, Inc., document respecting extension of Incorporated by
Crude Oil Purchase Agreement Reference(7)
10.18 10 Form of Registration Agreement relating to 1996 Series Incorporated by
Convertible Preferred Stock Reference(9)
10.19 10 Amendment and Replacement of Acreage Exchange Incorporated by
and Seismic Agreement dated September 1, 1995 Reference(9)
between Foreland Corporation, Hugoton
Energy Corporation and Maxwell Petroleum, Inc.
10.20 10 Form of Revised Executive Employment Agreement Incorporated by
between the Company and executive officers, with Reference(10)
related schedule**
10.21 10 Form of Nonqualified Stock Options granted to executive Incorporated by
officers dated July 18, 1996, with related schedule** Reference(10)
10.22 10 Form of Nonqualified Stock Options granted to executive Incorporated by
officers in connection with employment agreements, with Reference(10)
related schedule**
10.23 10 Form of Nonqualified Stock Options granted to Incorporated by
employees in connection with employment agreements, Reference(10)
with related schedule
10.24 10 Form of Registration Rights Agreement relating to offer Incorporated by
of 1996-4 Series Preferred Stock, with related schedule Reference(10)
10.25 10 Purchase and Sale Agreement dated November 14, 1996, Incorporated by
between Plains Petroleum Operating Company and Reference(11)
Eagle Springs Production Limited Liability Company,
respecting the purchase of Plains' interest in the
Eagle Springs Field, with related Assignment, Conveyance,
and Bill of Sale
10.26 10 Purchase Contract Confirmation dated September 1, 1996, Incorporated by
between the Company and Petro Source Refining Partners Reference(12)
10.27 10 Revolving Credit Agreement dated November 13, 1996, Incorporated by
by and among the Company, Eagle Springs Production Reference(13)
Limited Liability Company, and Colorado National Bank
10.28 10 Promissory Note dated November 13, 1996, by the Incorporated by
Company and Eagle Springs Production Limited Liability Reference(13)
Company
Item 23. Consents of Experts and Counsel
23.01 23 Consent of Kruse, Landa & Maycock, L.L.C., counsel to See Item 5
Registrant
23.02 23 Consent of Hein + Associates LLP, certified public This Filing
accountants
23.03 23 Consent of Malkewicz Hueni Associates, Inc. This Filing
Item 24. Power of Attorney
24.01 24 Power of Attorney See Signature
Page
</TABLE>
[FN]
(1) Incorporated by reference from the Company's registration statement on form
S-2, SEC file number 33-42828.
(2) Incorporated by reference from the Company's registration statement on form
S-1, SEC file number 33-19014.
(3) Incorporated by reference from the Company's registration statement on form
S-1, SEC file number 33-81538.
(4) Incorporated by reference from the Company's registration statement on form
S-2, SEC file number 33-64756.
(5) Incorporated by reference from the Company's registration statement on form
S-2, , SEC file number 33-86076.
(6) Incorporated by reference from the Company's annual report on form 10-K for
the fiscal year ended December 31, 1985.
(7) Incorporated by reference from the Company's annual report on form 10-K for
the fiscal year ended December 31, 1994.
(8) Incorporated by reference from the Company's annual report on form 10-K for
the fiscal year ended December 31, 1995.
(9) Incorporated by reference from the Company's registration statement on form
S-3, SEC file number 333-3779.
(10) Incorporated by reference from the Company's quarterly report on form 10-Q
for the period ending September 30, 1996.
(11) Incorporated by reference from the Company's interim report on form 8-K
dated November 15, 1996.
(12) Incorporated by reference from the Company's registration statement on
form S-3, SEC file number 333-19063.
(13) Incorporated by reference from the Company's annual report on form 10-K
for the fiscal year ended December 31, 1996.
(14) Incorporated by reference from the Company's registration statement on
form S-2, SEC file number 333-28471.
** Identifies each management contract or compensatory plan or arrangement
required to be filed as an exhibit.
ITEM 17. UNDERTAKINGS
Rule 415 Offerings: Post-Effective Amendments. [Regulation S-K, Item 512(a)]
The undersigned Registrant will:
(1) File, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change
to such information in the Registration Statement.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new Registration Statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
Filings Incorporating Subsequent Exchange Act Documents by Reference [Regulation
S-K, Item 512(b)]
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Incorporated Annual and Quarterly Reports [Regulation S-K, Item 512(e)]
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of rule 14a-3 or rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
article 3 of regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Indemnification. [Regulation S-K, Item 512(h)]
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer, or controlling person of the small business issuer
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the small business issuer will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Lakewood, state of Colorado, on the 10th day of
October, 1997.
FORELAND CORPORATION
(Registrant)
By /s/ N. Thomas Steele
N. Thomas Steele, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints N. Thomas Steele and Bruce C. Decker, and each of
them, with power of substitution, as his attorney-in-fact for him, in all
capacities, to sign any amendments to this Registration Statement and to file
the same with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact or his substitutes may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities
indicated and on the 10th day of October, 1997.
/s/ N. Thomas Steele
N. Thomas Steele, Director and
President (Principal Executive Officer)
/s/ Grant Steele
Dr. Grant Steele, Director
/s/ Kenneth L. Ransom
Kenneth L. Ransom, Director and Vice-
President of Exploration
/s/ Bruce C. Decker
Bruce C. Decker, Director and Vice-
President of Operations (Principal
Financial and Accounting Officer)
ARTICLES OF RESTATEMENT
OF THE
ARTICLES OF INCORPORATION
OF
FORELAND CORPORATION
The undersigned, pursuant to the Nevada Revised Statutes, hereby adopt the
following restated articles of incorporation of Foreland Corporation (referred
to herein as the "Corporation"), which articles of incorporation were originally
filed with the state of Nevada on June 12, 1985.
1. The name of the Corporation is: Foreland Corporation
2. The text of the restated articles of incorporation is as follows:
ARTICLE I
NAME
The name of the Corporation shall be:
Foreland Corporation
ARTICLE II
PURPOSE
The Corporation is organized to engage in any lawful act or activity for
which a corporation may be organized under the Nevada Revised Statutes.
ARTICLE III
CAPITAL STOCK
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 55,000,000 shares, consisting of 5,000,000
shares of preferred stock, par value $0.001 per share (hereinafter the
"Preferred Stock"), and 50,000,000 shares of common stock, par value $0.001 per
share (hereinafter the "Common Stock"). The Common Stock shall be non-
assessable and shall not have cumulative voting rights.
(a) Preferred Stock. Shares of Preferred Stock may be issued from
time to time in one or more series as may from time to time be determined
by the Board of Directors. Each series shall be distinctly designated.
All shares of any one series of the Preferred Stock shall be alike in every
particular, except that there may be different dates from which dividends
thereon, if any, shall be cumulative, if made cumulative. The powers,
preferences and relative, participating, optional and other rights of each
such series, and the qualifications, limitations or restrictions thereof,
if any, may differ from those of any and all other series at any time
outstanding. Except as hereinafter provided, the Board of Directors of
this corporation is hereby expressly granted authority to fix, by
resolution or resolutions adopted prior to the issuance of any shares of
each particular series of Preferred Stock, the designation, powers,
preferences and relative, participating, optional and other rights, and the
qualifications, limitations and restrictions thereof, if any, of such
series, including but without limiting the generality of the foregoing, the
following:
(i) the distinctive designation of, and the number of shares of
Preferred Stock which shall constitute the series, which number may be
increased (except as otherwise fixed by the Board of Directors) or
decreased (but not below the number of shares thereof then
outstanding) from time to time by action of the Board of Directors;
(ii) the rate and times at which, and the terms and conditions
upon which, dividends, if any, on shares of the series shall be paid,
the extent of preferences or relations, if any, of such dividends to
the dividends payable on any other class or classes of stock of this
corporation, or on any series of Preferred Stock or of any other class
or classes of stock of this corporation, and whether such dividends
shall be cumulative or non-cumulative;
(iii) the right, if any, of the holders of shares of the series
to convert the same into, or exchange the same for, shares of any
other class or classes of stock of this corporation, or of any series
of Preferred Stock or of any other class or classes of stock of this
corporation, and the terms and conditions of such conversion or
exchange;
(iv) whether shares of the series shall be subject to
redemption, and the redemption price or prices including, without
limitation, a redemption price or prices payable in shares of the
Common Stock and the time or times at which, and the terms and
conditions upon which, shares of the series may be redeemed;
(v) the rights, if any, of the holders of shares of the series
upon voluntary or involuntary liquidation, merger, consolidation,
distribution or sale of assets, dissolution or winding-up of this
corporation;
(vi) the terms of the sinking fund or redemption or purchase
account, if any, to be provided for shares of the series; and
(vii) the voting powers, if any, of the holders of shares of
the series which may, without limiting the generality of the
foregoing, include the right to more or less than one vote per share
of any or all matters voted upon by the shareholders and the right to
vote, as a series by itself or together with other series of Preferred
Stock as a class, upon such matters, under such circumstances and upon
such conditions as the Board of Directors may fix, including, without
limitation, the right, voting as a series by itself or together with
other series of Preferred Stock or together with all series of
Preferred Stock as a class, to elect one or more directors of this
corporation in the event there shall have been a default in the
payment of dividends on any one or more series of Preferred Stock or
under such other circumstances and upon such condition as the Board
may determine.
(b) Common Stock.
(i) After the requirements with respect to preferential dividends on
Preferred Stock (fixed in accordance with the provisions of subparagraph
(a)(ii) of this Article, if any, shall have been met and after this
corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts as sinking funds or redemption or purchase accounts
(fixed in accordance with the provisions of subparagraph (a)(ii) of this
Article) and subject further to any other conditions which may be fixed in
accordance with the provisions of paragraph (a) of this Article, then, but
not otherwise, the holders of Common Stock shall be entitled to receive
such dividends, if any, as may be declared from time to time by the board
of directors;
(ii) after distribution in full of the preferential amount (fixed in
accordance with the provisions of paragraph (a) of this Article), if any,
to be distributed to the holders of Preferred Stock in the event of
voluntary or involuntary liquidation, distribution or sale of assets,
dissolution or winding-up of the corporation, the holders of the Common
Stock shall be entitled to receive all the remaining assets of this
Corporation, tangible and intangible, of whatever kind available for
distribution to stockholders, ratably in proportion to the number of shares
of the Common Stock held by each, and
(iii) no holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have any
pre-emptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation or any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the board of directors to such persons, firms, corporation or
association, whether such holders or others, and upon such terms as may be
deemed advisable by the board of directors in the exercise of its sole
discretion.
ARTICLE IV
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation shall indemnify any and all persons who may serve or who
have served at any time as directors or officers or who at the request of the
Board of Director of the Corporation, may serve or any time have served as
directors or officers of another corporation in which the Corporation at such
time owned or may own shares of stock or of which it was or may be a creditor,
and their respective heirs, administrators, successors and assigns, against any
and all expenses, including amounts paid upon judgments, counsel fees and
amounts paid in settlement (before or after suit is commenced), actually and
necessarily by such persons in connection with the defense or settlement of any
claim, action, suit or proceeding in which they, or any of them, are made
parties, or a party, or which may be asserted against them or any of them, by
reason of being or having been directors or officers of the Corporation, or of
such other corporation, except in relation to matters as to which any such
director or officer of the Corporation, or of such other corporation or former
director or officer or person shall be adjudged in any action, suit or
proceeding to be liable for his own negligence or misconduct in the performance
of his duty. Such indemnification shall be in addition to any other rights to
which those indemnified may be entitled under any law, by law, agreement, vote
of shareholder or otherwise.
ARTICLE V
OFFICERS' AND DIRECTORS' CONTRACTS
No contract or other transaction between this Corporation and any other
firm or corporation shall be affected by the fact that a director or officer of
this Corporation has an interest in, or is a director or officer of this
Corporation or any other corporation. Any officer or director, individually or
with others, may be a party to, or may have an interest in, any transaction of
this Corporation or any transaction in which this Corporation is a party or has
an interest. Each person who is now or may become an officer or director of
this Corporation is hereby relieved from liability that he might otherwise
obtain in the event such officer or director contracts with this Corporation for
the benefit of himself or any firm or other corporation in which he may have an
interest, provided such officer or director acts in good faith.
ARTICLE VI
ADOPTION AND AMENDMENT OF BYLAWS
The initial bylaws of the Corporation shall be adopted by its board of
directors. The power to alter or amend or repeal the bylaws or adopt new bylaws
shall be vested in the board of directors, but the holders of common stock of
the Corporation may also alter, amend, or repeal the bylaws or adopt new bylaws.
The bylaws may contain any provisions for the regulation and management of the
affairs of the Corporation not inconsistent with law or these articles of
incorporation.
ARTICLE VII
REGISTERED OFFICE AND AGENT
The address of the Corporation's registered office and the name of the
registered agent at the address in the state of Nevada is:
The Corporation Trust Company of Nevada
One East First Street
Reno, Nevada 89501
Either the registered office or the registered agent may be changed in the
manner provided for by law.
ARTICLE VIII
DIRECTORS
The Corporation shall not have fewer directors than the number of
shareholders who own an equity interest in the Corporation. At such time as the
Corporation has three (3) or more shareholders, it shall not have less than
three (3) nor more than nine (9) directors. The permissible number of directors
may be increased or decreased from time to time by the board of directors in
accordance with Section78.330 of the Nevada Revised Statutes or any amendment or
successor statute.
The name and address of each person who currently serves as a director of
the Corporation, to each serve until the expiration of his or her respective
term and until his or her successor is elected and shall qualify, is as follows:
Name Address
N. Thomas Steele 12596 West Bayaud, Suite 300
Lakewood, Colorado 80228-2019
Grant Steele 12596 West Bayaud, Suite 300
Lakewood, Colorado 80228-2019
Kenneth L. Ransom 12596 West Bayaud, Suite 300
Lakewood, Colorado 80228-2019
Bruce C. Decker 2561 South 1560 West, Suite 200
Woods Cross, Utah 84087
ARTICLE IX
REMOVAL OF DIRECTORS
Subject to the rights of the holders of any Preferred Stock then
outstanding, the stockholders may remove one or more directors at a meeting of
stockholders called expressly for the purpose of removing directors, as stated
in the notice of meeting, with or without cause, on the affirmative vote of two-
thirds of the Common Stock or other securities of the Corporation entitled to
vote generally for the election of directors. In the event that cumulative
voting for directors is permitted pursuant to these articles of incorporation,
then no director may be removed except upon the vote of stockholders owning
sufficient shares to have prevented such director's election to office in the
first instance.
ARTICLE X
LIMITATION ON LIABILITY
OF DIRECTORS AND OFFICERS
To the fullest extent permitted by the Nevada Revised Statutes or any
other applicable law as now in effect or as it may hereafter be amended, a
director or officer of the Corporation shall have no personal liability to the
Corporation or its stockholders for damages for breach of fiduciary duty as a
director or officer, except for damages resulting from (a) acts or omissions
which involve intentional misconduct, fraud, or a knowing violation of law, or
(b) the payment of dividends in violation of the provisions of section 78.300 of
the Nevada Revised Statutes, as it may be amended from time to time, or any
successor statute thereto.
3. The foregoing Restated Articles of Incorporation contain amendments to the
Articles of Incorporation that were adopted by the shareholders of the
Corporation on August 12, 1997, pursuant to section 78.380 et.seq. of the Nevada
Revised Statutes. The Corporation has two classes of shares issued and
outstanding, that being Common Stock and Preferred Stock. The Common Stock and
the Preferred Stock vote together as a single class. On June 4, 1997, the
Corporation had 7,358,139 shares of issued and outstanding Common Stock, each
share entitled to cast one vote, and 818,470 shares of voting Preferred Stock,
entitled to cast an aggregate of 272,824 votes of which the shareholders voted
in favor of adoption of the following provisions as set forth below:
(a) Make general modernizing changes to delete those provisions in the
articles that are no longer required or permitted under applicable
law, to identify the current directors, and to adopt Article IX, which
parallels current Nevada corporation law; and
For 5,005,119 Against 461,167
(b) Eliminate the personal liability of directors in certain
circumstances
For 4,933,016 Against 540,297
By executing these Restated Articles of Incorporation the president and the
secretary do hereby certify that on August 12, 1997 the foregoing amendments
were authorized and approved pursuant to section 78.390 of the Nevada Revised
Statutes. The undersigned affirms and acknowledges, under penalties of perjury,
that the foregoing instrument is my act and deed and that the facts stated
herein are true.
DATED this day of September, 1997.
FORELAND CORPORATION
By: /s/ N. Thomas Steele By: /s/ Kenneth L. Ransom
N. Thomas Steele, President Kenneth L. Ransom, Secretary
STATE OF COLORADO )
:ss
COUNTY OF JEFFERSON )
On this day of September 1997, personally appeared before me, the
undersigned, a notary public, N. Thomas Steele and Kenneth L. Ransom, who being
first duly sworn, declared they are the president and secretary, respectively,
of Foreland Corporation, acknowledged that they signed the forgoing Restated
Articles of Incorporation, and verified that the statements contained therein
are true.
IN WITNESS WHEREOF I have hereunto set my hand and official seal.
/s/ Notary Public
Notary Public
BYLAWS
OF
FORELAND CORPORATION
A NEVADA CORPORATION
TABLE OF CONTENTS
PAGE
ARTICLE I OFFICES 1
Section1.01 Principal Office 1
Section1.02 Locations of Offices 1
ARTICLE II STOCKHOLDERS 1
Section2.01 Annual Meeting 1
Section2.02 Special Meetings 1
Section2.03 Place of Meetings 1
Section2.04 Notice of Meetings 1
Section2.05 Waiver of Notice 1
Section2.06 Fixing Record Date 1
Section2.07 Voting Lists 2
Section2.08 Quorum 2
Section2.09 Vote Required 2
Section2.10 Voting of Stock 2
Section2.11 Proxies 2
Section2.12 Nomination of Directors 3
Section2.13 Inspectors of Election 3
Section2.14 Election of Directors 4
Section2.15 Business at Annual Meeting 4
Section2.16 Business at Special Meeting 4
Section2.17 Written Consent to Action by Stockholders 4
Section2.18 Procedure for Meetings 4
ARTICLE III DIRECTORS 5
Section3.01 General Powers 5
Section3.02 Number, Term, and Qualifications 5
Section3.03 Vacancies and Newly Created Directorships 5
Section3.04 Regular Meetings 5
Section3.05 Special Meetings 5
Section3.06 Meetings by Telephone Conference Call 5
Section3.07 Notice 5
Section3.08 Quorum 6
Section3.09 Manner of Acting 6
Section3.10 Compensation 6
Section3.11 Presumption of Assent 6
Section3.12 Resignations 6
Section3.13 Written Consent to Action by Directors 6
Section3.14 Removal 6
ARTICLE IV OFFICERS 6
Section4.01 Number 6
Section4.02 Election, Term of Office, and Qualifications 7
Section4.03 Subordinate Officers, Etc. 7
Section4.04 Resignations 7
Section4.05 Removal 7
Section4.06 Vacancies and Newly Created Offices 7
Section4.07 The Chairman of the Board 7
Section4.08 The President 7
Section4.09 The Vice-Presidents 8
Section4.10 The Secretary 8
Section4.11 The Treasurer 9
Section4.12 Salaries 9
Section4.13 Surety Bonds 9
ARTICLE V EXECUTION OF INSTRUMENTS, BORROWING OF
MONEY, AND DEPOSIT OF CORPORATE FUNDS 9
Section5.01 Execution of Instruments 9
Section5.02 Loans 10
Section5.03 Deposits 10
Section5.04 Checks, Drafts, Etc. 10
Section5.05 Bonds and Debentures 10
Section5.06 Sale, Transfer, Etc. of Securities 10
Section5.07 Proxies 10
ARTICLE VI CAPITAL STOCK 10
Section6.01 Stock Certificates 10
Section6.02 Transfer of Stock 11
Section6.03 Regulations 11
Section6.04 Maintenance of Stock Ledger at Principal Place
of Business 11
Section6.05 Transfer Agents and Registrars 11
Section6.06 Closing of Transfer Books and Fixing of
Record Date 11
Section6.07 Lost or Destroyed Certificates 12
ARTICLE VII EXECUTIVE COMMITTEE AND OTHER COMMITTEES 12
Section7.01 Executive Committee 12
Section7.02 Other Committees 12
Section7.03 Proceedings 12
Section7.04 Quorum and Manner of Acting 13
Section7.05 Resignations 13
Section7.06 Removal 13
Section7.07 Vacancies 13
Section7.08 Compensation 13
ARTICLE VIII INSURANCE AND OFFICER AND DIRECTOR CONTRACTS 13
Section8.01 Indemnification: Third Party Actions 13
Section8.02 Indemnification: Corporate Actions 14
Section8.03 Determination 14
Section8.04 Advances 14
Section8.05 Scope of Indemnification 14
Section8.06 Insurance 15
Section8.07 Officer and Director Contracts 15
ARTICLE IX FISCAL YEAR 15
ARTICLE X DIVIDENDS 15
ARTICLE XI AMENDMENTS 15
CERTIFICATE OF SECRETARY 16
BYLAWS
OF
FORELAND CORPORATION
ARTICLE I
OFFICES
Section 1.01 Principal Office. The principal office shall be in the city
of Reno, Washoe County, Nevada.
Section 1.02 Locations of Offices. The corporation may also have offices
at such other places both within and without the state of Nevada as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
STOCKHOLDERS
Section 2.01 Annual Meeting. The annual meeting of the stockholders
shall be held within 180 days after the end of the corporation's fiscal year at
such time as is designated by the board of directors and as is provided for in
the notice of the meeting. If the election of directors shall not be held on
the day designated herein for the annual meeting of the stockholders or at any
adjournment thereof, the board of directors shall cause the election to be held
at a special meeting of the stockholders as soon thereafter as may be
convenient.
Section 2.02 Special Meetings. Special meetings of the stockholders may
be called at any time in the manner provided in the articles of incorporation.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been stated in the notice of such special meeting.
Section 2.03 Place of Meetings. The board of directors may designate any
place, either within or without the state of incorporation, as the place of
meeting for any annual meeting or for any special meeting called by the board of
directors. A waiver of notice signed by all stockholders entitled to vote at a
meeting may designate any place, either within or without the state of
incorporation, as the place for the holding of such meeting. If no designation
is made, the place of meeting shall be at the principal office of the
corporation.
Section 2.04 Notice of Meetings. The secretary or assistant secretary,
if any, shall cause notice of the time, place, and purpose or purposes of all
meetings of the stockholders (whether annual or special), to be mailed at
least 10 but not more than 60 days prior to the meeting, to each stockholder of
record entitled to vote.
Section 2.05 Waiver of Notice. Any stockholder may waive notice of any
meeting of stockholders (however called or noticed, whether or not called or
noticed, and whether before, during, or after the meeting) by signing a written
waiver of notice or a consent to the holding of such meeting or an approval of
the minutes thereof. Attendance at a meeting, in person or by proxy, shall
constitute waiver of all defects of notice regardless of whether a waiver,
consent, or approval is signed or any objections are made, unless attendance is
solely for the purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. All such waivers, consents, or approvals shall be made a part of the
minutes of the meeting.
Section 2.06 Fixing Record Date. For the purpose of determining
(i) stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in writing
without a meeting; (ii) stockholders entitled to receive payment of any dividend
or other distribution or allotment of any rights or entitled to exercise any
rights in respect to any change, conversion, or exchange of stock; or
(iii) stockholders of the corporation for any other lawful purpose, the board of
directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than 60 days
and, in case of a meeting of stockholders, not less than 10 days prior to the
date on which the particular action requiring such determination of stockholders
is to be taken. If no record date is fixed for the determination of
stockholders entitled to notice of or to vote at a meeting, the day preceding
the date on which notice of the meeting is mailed shall be the record date. For
any other purpose, the record date shall be the close of business on the date on
which the resolution of the board of directors pertaining thereto is adopted.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment thereof. Failure to comply with this section shall not
affect the validity of any action taken at a meeting of stockholders.
Section 2.07 Voting Lists. The officers of the corporation shall cause
to be prepared from the stock ledger at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the principal
executive office of the corporation. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present. The original stock ledger shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by this section, or the books of the corporation, or
to vote in person or by proxy at any meeting of stockholders.
Section 2.08 Quorum. Stock representing a majority of the voting power
of all outstanding stock of the corporation entitled to vote, present in person
or represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as otherwise provided by
statute or by the articles of incorporation. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such reconvened meeting at which a quorum is present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than 30 days or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
Section 2.09 Vote Required. When a quorum is present at any meeting, the
vote of the holders of stock having a majority of the voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one on which by express provision of the
statutes of the state of Nevada or of the articles of incorporation a different
vote is required, in which case such express provision shall govern and control
the decision of such question.
Section 2.10 Voting of Stock. Unless otherwise provided in the articles
of incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, subject to the modification of
such voting rights of any class or classes of the corporation's capital stock by
the articles of incorporation.
Section 2.11 Proxies. At each meeting of the stockholders, each
stockholder entitled to vote shall be entitled to vote in person or by proxy;
provided, however, that the right to vote by proxy shall exist only in case the
instrument authorizing such proxy to act shall have been executed in writing by
the registered holder or holders of such stock, as the case may be, as shown on
the stock ledger of the corporation or by his attorney thereunto duly authorized
in writing. Such instrument authorizing a proxy to act shall be delivered at
the beginning of such meeting to the secretary of the corporation or to such
other officer or person who may, in the absence of the secretary, be acting as
secretary of the meeting. In the event that any such instrument shall designate
two or more persons to act as proxy, a majority of such persons present at the
meeting, or if only one be present, that one shall (unless the instrument shall
otherwise provide) have all of the powers conferred by the instrument on all
persons so designated. Persons holding stock in a fiduciary capacity shall be
entitled to vote the stock so held, and the persons whose shares are pledged
shall be entitled to vote, unless the transfer by the pledgor in the books and
records of the corporation shall have expressly empowered the pledgee to vote
thereon, in which case the pledgee, or his proxy, may represent such stock and
vote thereon. No proxy shall be voted or acted on after six months from its
date, unless the proxy is coupled with an interest, or unless the proxy provides
for a longer period not to exceed seven years.
Section 2.12 Nomination of Directors. Only persons who are nominated in
accordance with the procedures set forth in this section shall be eligible for
election as directors. Nominations of persons for election to the board of
directors of the corporation may be made at a meeting of stockholders at which
directors are to be elected only (a) by or at the direction of the board of
directors or (b) by any stockholder of the corporation entitled to vote for the
election of directors at a meeting who complies with the notice procedures set
forth in this section. Such nominations, other than those made by or at the
direction of the board of directors, shall be made by timely notice in writing
to the secretary of the corporation. To be timely, a stockholder's notice must
be delivered or mailed to and received at the principal executive offices of the
corporation not less than 30 days prior to the date of the meeting; provided, in
the event that less than 40 days' notice of the date of the meeting is given or
made to stockholders, to be timely, a stockholder's notice must be so received
not later than the close of business on the 10th day following the day on which
such notice of the date of the meeting was mailed. Such stockholder's notice
shall set forth (a) as to each person whom such stockholder proposes to nominate
for election or reelection as a director, all information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to regulation 14A
under the Securities Exchange Act of 1934, as amended (including each such
person's written consent to serve as a director if elected); and (b) as to the
stockholder giving the notice (i) the name and address of such stockholder as it
appears on the corporation's books, and (ii) the class and number of shares of
the corporation's capital stock that are beneficially owned by such stockholder.
At the request of the board of directors, any person nominated by the board of
directors for election as a director shall furnish to the secretary of the
corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in accordance with
the provisions of this section. The officer of the corporation or other person
presiding at the meeting shall, if the facts so warrant, determine and declare
to the meeting that a nomination was not made in accordance with such
provisions, and if such officer should so determine, such officer shall so
declare to the meeting, and the defective nomination shall be disregarded.
Section 2.13 Inspectors of Election. There shall be appointed at least
one inspector of the vote for each stockholders' meeting. Such inspector(s)
shall first take and subscribe an oath or affirmation faithfully to execute the
duties of inspector at such meeting with strict impartiality and according to
the best of their ability. Unless appointed in advance of any such meeting by
the board of directors, such inspector(s) shall be appointed for the meeting by
the presiding officer. No director or candidate for the office of director
shall be appointed as such inspector. Such inspector(s) shall be responsible
for tallying and certifying each vote required to be tallied and certified by
them as provided in the resolution of the board of directors appointing them or
in their appointment by the person presiding at such meeting, as the case may
be.
Section 2.14 Election of Directors. At all meetings of the stockholders
at which directors are to be elected, except as otherwise set forth in any
preferred stock designation (as defined in the articles of incorporation) with
respect to the right of the holders of any class or series of preferred stock to
elect additional directors under specified circumstances, directors shall be
elected by a plurality of the votes cast at the meeting. The election need not
be by ballot unless any stockholder so demands before the voting begins. Except
as otherwise provided by law, the articles of incorporation, any preferred stock
designation, or these bylaws, all matters other than the election of directors
submitted to the stockholders at any meeting shall be decided by a majority of
the votes cast with respect thereto.
Section 2.15 Business at Annual Meeting. At any annual meeting of the
stockholders, only such business shall be conducted as shall have been brought
before the meeting (a) by or at the direction of the board of directors or
(b) by any stockholder of the corporation who is entitled to vote with respect
thereto and who complies with the notice procedures set forth in this section.
For business to be properly brought before an annual meeting by a stockholder,
the stockholder must have given timely notice thereof in writing to the
secretary of the corporation. To be timely, a stockholder's notice shall be
delivered or mailed to and received at the principal executive offices of the
corporation not less than 30 days prior to the date of the annual meeting;
provided, in the event that less than 40 days' notice of the date of the meeting
is given or made to stockholders, to be timely, a stockholder's notice shall be
so received not later than the close of business on the 10th day following the
day on which such notice of the date of the annual meeting was mailed. A
stockholder's notice to the secretary shall set forth as to each matter such
stockholder proposes to bring before the annual meeting (a) a brief description
of the matter desired to be brought before the annual meeting and the reasons
for presenting such matter at the annual meeting, (b) the name and address, as
they appear on the corporation's books, of the stockholder proposing such
matter, (c) the class and number of shares of the corporation's capital stock
that are beneficially owned by such stockholder, and (d) any material interest
of such stockholder in such matter. Notwithstanding anything in these bylaws to
the contrary, no matter shall be brought before or conducted at an annual
meeting except in accordance with the provisions of this section. The officer
of the corporation or other person presiding at the annual meeting shall, if the
facts so warrant, determine and declare to the meeting that a matter was not
properly brought before the meeting in accordance with such provisions, and such
matter shall not be presented or voted on by the stockholders.
Section 2.16 Business at Special Meeting. At any special meeting of the
stockholders, only such business shall be conducted as shall have been stated in
the notice of such special meeting.
Section 2.17 Written Consent to Action by Stockholders. Unless otherwise
provided in the articles of incorporation, any action required to be taken at
any annual or special meeting of stockholders of the corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice, and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
Section 2.18 Procedure for Meetings. Meeting of the stockholders shall
be conducted pursuant to such reasonable rules of conduct and protocol as the
board of directors or the officer of the Corporation or other person presiding
at the meeting may prescribe or, if no such rules are prescribed, in accordance
with the most recent published edition of Robert's Rules of Order.
ARTICLE III
DIRECTORS
Section 3.01 General Powers. The business of the corporation shall be
managed under the direction of its board of directors, which may exercise all
such powers of the corporation and do all such lawful acts and things as are not
by statute or by the articles of incorporation or by these bylaws directed or
required to be exercised or done by the stockholders.
Section 3.02 Number, Term, and Qualifications. The number of directors
which shall constitute the board, subject to the limitations set forth in the
articles of incorporation, shall be determined by resolution of a majority of
the total number of directors if there were no vacancies (the "Whole Board") or,
if there are fewer directors than a majority of the Whole Board, by the
unanimous consent of the remaining directors or by the stockholders at the
annual meeting of the stockholders or a special meeting called for such purpose,
except as provided in section 3.03 of this article, which such resolution shall
be incorporated by this reference into and shall be a part of these bylaws.
Each director elected shall hold office until his successor is elected and
qualified. Directors need not be residents of the state of incorporation or
stockholders of the corporation.
Section 3.03 Vacancies and Newly Created Directorships. Vacancies and
newly created directorships resulting from any increase in the authorized number
of directors may be filled by a majority of the directors then in office, though
less than a quorum of the Whole Board, or by a sole remaining director, and the
directors so chosen shall hold office until the next annual election and until
their successors are duly elected and qualified. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute.
Section 3.04 Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than this bylaw immediately
following and at the same place as the annual meeting of stockholders. The
board of directors may provide by resolution the time and place, either within
or without the state of incorporation, for the holding of additional regular
meetings without other notice than such resolution.
Section 3.05 Special Meetings. Special meetings of the board of
directors may be called by or at the request of the chairman of the board,
president, or any two directors or, in the absence or disability of the
president, by any vice-president. The person or persons authorized to call
special meetings of the board of directors may fix any place, either within or
without the state of incorporation, as the place for holding any special meeting
of the board of directors called by them.
Section 3.06 Meetings by Telephone Conference Call. Members of the board
of directors may participate in a meeting of the board of directors or a
committee of the board of directors by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
Section 3.07 Notice. Notice of any special meeting can be given at least
72 hours prior thereto by written notice delivered personally or sent by
facsimile transmission confirmed by registered mail or certified mail, postage
prepaid, or by overnight courier to each director. Any such notice shall be
deemed to have been given as of the date so personally delivered or sent by
facsimile transmission or as of the day following dispatch by overnight courier.
Each director shall register his or her address and telephone number(s) with the
secretary for purpose of receiving notices. Any director may waive notice of
any meeting. Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting solely for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. An entry of the service of notice
given in the manner and at the time provided for in this section may be made in
the minutes of the proceedings of the board of directors, and such entry, if
read and approved at a subsequent meeting of the board of directors, shall be
conclusive on the issue of notice.
Section 3.08 Quorum. A majority of the Whole Board shall constitute a
quorum for the transaction of business at any meeting of the board of directors,
provided, that the directors present at a meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
directors if any action taken is approved by a majority of the required quorum
for such meeting. If less than a majority is present at a meeting, a majority
of the directors present may adjourn the meeting from time to time without
further notice.
Section 3.09 Manner of Acting. The act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, and individual directors shall have no power as such.
Section 3.10 Compensation. By resolution of the board of directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the board of directors and may be paid a fixed sum for attendance at each
meeting of the board of directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 3.11 Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting, unless he shall file
his written dissent to such action with the person acting as the secretary of
the meeting before the adjournment thereof, or unless he shall forward such
dissent by registered or certified mail to the secretary of the corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
Section 3.12 Resignations. A director may resign at any time by
delivering a written resignation to either the president, a vice president, the
secretary, or assistant secretary, if any. The resignation shall become
effective on giving of such notice, unless such notice specifies a later time
for the effectiveness of such resignation.
Section 3.13 Written Consent to Action by Directors. Any action required
to be taken at a meeting of the directors of the corporation or any other action
which may be taken at a meeting of the directors or of a committee, may be taken
without a meeting, if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors, or all of the members of the committee,
as the case may be. Such consent shall have the same legal effect as a
unanimous vote of all the directors or members of the committee.
Section 3.14 Removal. Subject to any limitations set forth in the
articles of incorporation or the corporate statutes of the state of Nevada, at a
meeting expressly called for that purpose, one or more directors may be removed
by a vote of a majority of the shares of outstanding stock of the corporation
entitled to vote at an election of directors.
ARTICLE IV
OFFICERS
Section 4.01 Number. The officers of the corporation shall be a
president, a secretary, a treasurer, and such other officers as may be
appointed by the board of directors. The board of directors may elect, but
shall not be required to elect, a chairman of the board and one or more
vice-presidents, and the board of directors may appoint a general manager.
Section 4.02 Election, Term of Office, and Qualifications. The officers
shall be chosen by the board of directors annually at its annual meeting. In
the event of failure to choose officers at an annual meeting of the board of
directors, officers may be chosen at any regular or special meeting of the board
of directors. Each such officer (whether chosen at an annual meeting of the
board of directors) shall hold his office until the next ensuing annual meeting
of the board of directors and until his successor shall have been chosen and
qualified, or until his death or until his resignation or removal in the manner
provided in these bylaws. Any one person may hold any two or more of such
offices, except that the president shall not also be the secretary. No person
holding two or more offices shall execute any instrument in the capacity of more
than one office. The chairman of the board, if any, shall be and remain
director of the corporation during the term of his office. No other officer
need be a director.
Section 4.03 Subordinate Officers, Etc. The board of directors from
time to time may appoint such other officers or agents as it may deem advisable,
each of whom shall have such title, hold office for such period, have such
authority, and perform such duties as the board of directors from time to tim
may determine. The board of directors from time to time may delegate to any
officer or agent the power to appoint any such subordinate officer or agents
and to prescribe their respective titles, terms of office, authorities, and
duties. Subordinate officers need not be stockholders or directors.
Section 4.04 Resignations. Any officer may resign at any time by
delivering a written resignation to the board of directors, the president,
or the secretary. Unless otherwise specified therein, such resignation shall
take effect on delivery.
Section 4.05 Removal. Any officer may be removed from office at any
special meeting of the board of directors called for that purpose or at a
regular meeting, by the vote of a majority of the directors, with or without
cause. Any officer or agent appointed in accordance with the provisions of
section 4.03 hereof may also be removed, either with or without cause, by any
officer on whom such power of removal shall have been conferred by the board
of directors.
Section 4.06 Vacancies and Newly Created Offices. If any vacancy shall
occur in any office by reason of death, resignation, removal, disqualification,
or any other cause or if a new office shall be created, then such vacancies or
newly created offices may be filled by the board of directors at any regular or
special meeting.
Section 4.07 The Chairman of the Board. The chairman of the board, if
there be such an officer, shall have the following powers and duties:
(a) To preside at all stockholders' meetings;
(b) To preside at all meetings of the board of directors; and
(c) To be a member of the executive committee, if any.
Section 4.08 The President. The president shall have the following
powers and duties:
(a) To be the chief executive officer of the corporation and, subject
to the direction of the board of directors, to have general charge of the
business, affairs, and property of the corporation and general supervision
over its officers, employees, and agents;
(b) If no chairman of the board has been chosen or if such officer is
absent or disabled, to preside at meetings of the stockholders and board of
directors;
(c) To be a member of the executive committee, if any;
(d) To be empowered to sign certificates representing stock of the
corporation, the issuance of which shall have been authorized by the board
of directors; and
(e) To have all power and perform all duties normally incident to the
office of a president of a corporation and shall exercise such other powers
and perform such other duties as from time to time may be assigned to him
by the board of directors.
Section 4.09 The Vice-Presidents. The board of directors may, from time
to time, designate and elect one or more vice-presidents, one of whom may be
designated to serve as executive vice-president. Each vice-president shall have
such powers and perform such duties as from time to time may be assigned to him
by the board of directors or the president. At the request or in the absence or
disability of the president, the executive vice-president or, in the absence or
disability of the executive vice-president, the vice-president designated by the
board of directors or (in the absence of such designation by the board of
directors) by the president, as senior vice-president, may perform all the
duties of the president, and when so acting, shall have all the powers of, and
be subject to all the restrictions on, the president.
Section 4.10 The Secretary. The secretary shall have the following
powers and duties:
(a) To keep or cause to be kept a record of all of the proceedings of
the meetings of the stockholders and of the board of directors in books
provided for that purpose;
(b) To cause all notices to be duly given in accordance with the
provisions of these bylaws and as required by statute;
(c) To be the custodian of the records and of the seal of the
corporation, and to cause such seal (or a facsimile thereof) to be affixed
to all certificates representing stock of the corporation prior to the
issuance thereof and to all instruments, the execution of which on behalf
of the corporation under its seal shall have been duly authorized in
accordance with these bylaws, and when so affixed, to attest the same;
(d) To see that the books, reports, statements, certificates, and other
documents and records required by statute are properly kept and filed;
(e) To have charge of the stock ledger and books of the corporation and
cause such books to be kept in such manner as to show at any time the
amount of the stock of the corporation of each class issued and
outstanding, the manner in which and the time when such stock was paid for,
the names alphabetically arranged and the addresses of the holders of
record thereof, the amount of stock held by each holder and time when each
became such holder of record; and he shall exhibit at all reasonable times
to any director, on application, the original or duplicate stock ledger.
He shall cause the stock ledger referred to in section 6.04 hereof to be
kept and exhibited at the principal office of the corporation, or at such
other place as the board of directors shall determine, in the manner and
for the purpose provided in such section;
(f) To be empowered to sign certificates representing stock of the
corporation, the issuance of which shall have been authorized by the board
of directors; and
(g) To perform in general all duties incident to the office of
secretary and such other duties as are given to him by these bylaws or as
from time to time may be assigned to him by the board of directors or the
president.
Section 4.11 The Treasurer. The treasurer shall have the following
powers and duties:
(a) To have charge and supervision over and be responsible for the
monies, securities, receipts, and disbursements of the corporation;
(b) To cause the monies and other valuable effects of the corporation
to be deposited in the name and to the credit of the corporation in such
banks or trust companies or with such banks or other depositories as shall
be selected in accordance with section 5.03 hereof;
(c) To cause the monies of the corporation to be disbursed by checks or
drafts (signed as provided in section 5.04 hereof) drawn on the authorized
depositories of the corporation, and to cause to be taken and preserved
property vouchers for all monies disbursed;
(d) To render to the board of directors or the president, whenever
requested, a statement of the financial condition of the corporation and of
all of his transactions as treasurer, and render a full financial report at
the annual meeting of the stockholders, if called on to do so;
(e) To cause to be kept correct books of account of all the business
and transactions of the corporation and exhibit such books to any directors
on request during business hours;
(f) To be empowered from time to time to require from all officers or
agents of the corporation reports or statements giving such information as
he may desire with respect to any and all financial transactions of the
corporation;
(g) To perform in general all duties incident to the office of
treasurer and such other duties as are given to him by these bylaws or as
from time to time may be assigned to him by the board of directors or the
president; and
(h) To, in the absence of the designation to the contrary by the board
of directors, act as the chief financial officer and/or principal
accounting officer of the corporation.
Section 4.12 Salaries. The salaries or other compensation of the
officers of the corporation shall be fixed from time to time by the board of
directors, except that the board of directors may delegate to any person or
group of persons the power to fix the salaries or other compensation of any
subordinate officers or agents appointed in accordance with the provisions of
section 4.03 hereof. No officer shall be prevented from receiving any such
salary or compensation by reason of the fact that he is also a director of the
corporation.
Section 4.13 Surety Bonds. In case the board of directors shall so
require, any officer or agent of the corporation shall execute to the
corporation a bond in such sums and with such surety or sureties as the board
of directors may direct, conditioned on the faithful performance of his duties
to the corporation, including responsibility for negligence and for the proper
accounting of all property, monies, or securities of the corporation which may
come into his hands.
ARTICLE V
EXECUTION OF INSTRUMENTS, BORROWING OF MONEY,
AND DEPOSIT OF CORPORATE FUNDS
Section 5.01 Execution of Instruments. Subject to any limitation
contained in the articles of incorporation or these bylaws, the president or any
vice-president may, in the name and on behalf of the corporation, execute and
deliver any contract or other instrument authorized in writing by the board of
directors. The board of directors may, subject to any limitation contained in
the articles of incorporation or in these bylaws, authorize in writing any
officer or agent to execute and deliver any contract or other instrument in the
name and on behalf of the corporation; any such authorization may be general or
confined to specific instances.
Section 5.02 Loans. No loan or advance shall be contracted on behalf of
the corporation, no negotiable paper or other evidence of its obligation under
any loan or advance shall be issued in its name, and no property of the
corporation shall be mortgaged, pledged, hypothecated, transferred, or conveyed
as security for the payment of any loan, advance, indebtedness, or liability of
the corporation, unless and except as authorized by the board of directors. Any
such authorization may be general or confined to specific instances.
Section 5.03 Deposits. All monies of the corporation not otherwise
employed shall be deposited from time to time to its credit in such banks or
trust companies or with such bankers or other depositories as the board of
directors may select or as from time to time may be selected by any officer or
agent authorized to do so by the board of directors.
Section 5.04 Checks, Drafts, Etc. All notes, drafts, acceptances,
checks, endorsements, and, subject to the provisions of these bylaws, evidences
of indebtedness of the corporation shall be signed by such officer or officers
or such agent or agents of the corporation and in such manner as the board of
directors from time to time may determine. Endorsements for deposit to the
credit of the corporation in any of its duly authorized depositories shall be in
such manner as the board of directors from time to time may determine.
Section 5.05 Bonds and Debentures. Every bond or debenture issued by the
corporation shall be evidenced by an appropriate instrument which shall be
signed by the president or a vice president and by the secretary and sealed with
the seal of the corporation. The seal may be a facsimile, engraved or printed.
Where such bond or debenture is authenticated with the manual signature of an
authorized officer of the corporation, or other trustee designated by an
indenture of trust or other agreement under which such security is issued, the
signature of any of the corporation's officers named thereon may be a facsimile.
In case any officer who signed or whose facsimile signature has been used on any
such bond or debenture shall cease to be an officer of the corporation for any
reason before the same has been delivered by the corporation, such bond or
debenture may nevertheless be adopted by the corporation and issued and
delivered as through the person who signed it or whose facsimile signature has
been used thereon had not ceased to be such officer.
Section 5.06 Sale, Transfer, Etc. of Securities. Sales, transfers,
endorsements, and assignments of stocks, bonds, and other securities owned by or
standing in the name of the corporation and the execution and delivery on behalf
of the corporation of any and all instruments in writing incident to any such
sale, transfer, endorsement, or assignment shall be effected by the president or
by any vice-president and the secretary or assistant secretary, or by any
officer or agent thereunto authorized by the board of directors.
Section 5.07 Proxies. Proxies to vote with respect to stock of other
corporations owned by or standing in the name of the corporation shall be
executed and delivered on behalf of the corporation by the president or any
vice-president and the secretary or assistant secretary of the corporation or by
any officer or agent thereunder authorized by the board of directors.
ARTICLE VI
CAPITAL STOCK
Section 6.01 Stock Certificates. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by the president or
any vice-president and the secretary or assistant secretary, and sealed with the
seal (which may be a facsimile, engraved or printed) of the corporation,
certifying the number and kind, class, or series of stock owned by him in the
corporation; provided, however, that where such a certificate is countersigned
by (a) a transfer agent or an assistant transfer agent, or (b) registered by a
registrar, the signature of any such president, vice-president, secretary, or
assistant secretary may be a facsimile. In case any officer who shall have
signed or whose facsimile signature or signatures shall have been used on any
such certificate shall cease to be such officer of the corporation, for any
reason, before the delivery of such certificate by the corporation, such
certificate may nevertheless be adopted by the corporation and be issued and
delivered as though the person who signed it or whose facsimile signature or
signatures shall have been used thereon has not ceased to be such officer.
Certificates representing stock of the corporation shall be in such form as
provided by the statutes of the state of incorporation. There shall be entered
on the stock books of the corporation at the time of issuance of each share, the
number of the certificate issued, the name and address of the person owning the
stock represented thereby, the number and kind, class, or series of such stock,
and the date of issuance thereof. Every certificate exchanged or returned to
the corporation shall be marked "canceled" with the date of cancellation.
Section 6.02 Transfer of Stock. Transfers of stock of the corporation
shall be made on the books of the corporation on authorization of the holder of
record thereof or by his attorney thereunto duly authorized by a power of
attorney duly executed in writing and filed with the secretary of the
corporation or its transfer agent, and on surrender of the certificate or
certificates, properly endorsed or accompanied by proper instruments of
transfer, representing such stock. Except as provided by law, the corporation
and its transfer agents and registrars, if any, shall be entitled to treat the
holder of record of any stock as the absolute owner thereof for all purposes,
and accordingly shall not be bound to recognize any legal, equitable, or other
claim to or interest in such stock on the part of any other person whether or
not it or they shall have express or other notice thereof.
Section 6.03 Regulations. Subject to the provisions of the articles of
incorporation, the board of directors may make such rules and regulations as
they may deem expedient concerning the issuance, transfer, redemption, and
registration of certificates for stock of the corporation.
Section 6.04 Maintenance of Stock Ledger at Principal Place of Business.
A stock ledger (or ledgers where more than one kind, class, or series of stock
is outstanding) shall be kept at the principal place of business of the
corporation, or at such other place as the board of directors shall determine,
containing the names alphabetically arranged of the stockholders of the
corporation, their addresses, their interest, the amount paid on their shares,
and all transfers thereof and the number and class of stock held by each. Such
stock ledgers shall at all reasonable hours be subject to inspection by persons
entitled by law to inspect the same.
Section 6.05 Transfer Agents and Registrars. The board of directors may
appoint one or more transfer agents and one or more registrars with respect to
the certificates representing stock of the corporation and may require all such
certificates to bear the signature of either or both. The board of directors
may from time to time define the respective duties of such transfer agents and
registrars. No certificate for stock shall be valid until countersigned by a
transfer agent, if at the date appearing thereon the corporation had a transfer
agent for such stock, and until registered by a registrar, if at such date the
corporation had a registrar for such stock.
Section 6.06 Closing of Transfer Books and Fixing of Record Date.
(a) The board of directors shall have power to close the stock ledgers
of the corporation for a period of not to exceed 60 days preceding the date
of any meeting of stockholders, the date for payment of any dividend, the
date for the allotment of rights, the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection
with obtaining the consent of stockholders for any purpose.
(b) In lieu of closing the stock ledgers as aforesaid, the board of
directors may fix in advance a date, not less than 10 days and not
exceeding 60 days preceding the date of any meeting of stockholders, the
date for the payment of any dividend, the date for the allotment of rights,
the date when any change or conversion or exchange of capital stock shall
go into effect, or the date for obtaining the consent of the stockholders
for any purpose, as a record date for the determination of the stockholders
entitled to a notice of, and to vote at, any such meeting and any
adjournment thereof, entitled to receive payment of any such dividend, to
any such allotment of rights, to exercise the rights in respect of any such
change, conversion or exchange of capital stock, or to give such consent.
(c) If the stock ledgers shall be closed or a record date set for the
purpose of determining stockholders entitled to notice of, or to vote at, a
meeting of stockholders, such books shall be closed for or such record date
shall be set as of a date at least 10 days immediately preceding such
meeting.
Section 6.07 Lost or Destroyed Certificates. The corporation may issue a
new certificate for stock of the corporation in place of any certificate
theretofore issued by it, alleged to have been lost or destroyed, and the board
of directors may, in its discretion, require the owner of the lost or destroyed
certificate or his legal representatives to give the corporation a bond in such
form and amount as the board of directors may direct and with such surety or
sureties as may be satisfactory to the board, and to indemnify the corporation
and its transfer agents and registrars, if any, against any claims that may be
made against it or any such transfer agent or registrar on account of the
issuance of the new certificate. A new certificate may be issued without
requiring any bond when, in the judgment of the board of directors, it is proper
to do so.
ARTICLE VII
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 7.01 Executive Committee. The board of directors, by resolution
adopted by a majority of the Whole Board, may appoint from its membership an
executive committee of not less than three members (whose members shall include
the chairman of the board, if any, and the president, one of whom shall act as
chairman of the executive committee, as the board may designate). The board of
directors shall have the power at any time to dissolve the executive committee,
to change the membership thereof, and to fill vacancies thereon. When the board
of directors is not in session, the executive committee shall have and may
exercise all of the powers delegated to it by the board of directors, except the
following powers: to fill vacancies in the board of directors; to appoint,
change membership of, or fill vacancies in any other committee appointed by the
board of directors; to declare dividends or other distributions to stockholders;
to adopt, amend, or repeal the articles of incorporation or these bylaws; to
approve any action that also requires stockholder approval; to amend or repeal
any resolution of the board of directors which by its express terms is not so
amendable or repealable; to fix the compensation of directors for serving on the
board of directors or on any committee; to adopt an agreement of merger or
consolidation; to recommend to the stockholders the sale, lease, or exchange of
all or substantially all of the corporation's property and assets; to recommend
to the stockholders a dissolution of the corporation or a revocation of a
dissolution; to recommend to stockholders an amendment of bylaws; or to
authorize the issuance of stock (provided that the executive committee, if so
directed by the board of directors, may determine the number of shares of stock
to be issued to individuals and the amount of consideration for which such
shares shall be issued not in excess of the number of shares authorized to be
issued by the board of directors).
Section 7.02 Other Committees. The board of directors, by resolution
adopted by a majority of the Whole Board, may appoint such other committees as
it may, from time to time, deem proper and may determine the number of members,
frequency of meetings, and duties thereof.
Section 7.03 Proceedings. The executive committee and such other
committees as may be designated hereunder by the board of directors may fix
their own presiding and recording officer or officers and may meet at such place
or places, at such time or times, and on such notice (or without notice) as it
shall determine from time to time. Each committee may make rules for the
conduct of its business as it shall from time to time deem necessary. It will
keep a record of its proceedings and shall report such proceedings to the board
of directors at the meeting of the board of directors next following.
Section 7.04 Quorum and Manner of Acting. At all meetings of the
executive committee and of such other committees as may be designated hereunder
by the board of directors, the presence of members constituting a majority of
the total membership of the committee shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the act of a majority
of the members present at any meeting at which a quorum is present shall be the
act of such committee. The members of the executive committee and of such other
committees as may be designated hereunder by the board of directors shall act
only as a committee, and the individual members thereof shall have no powers as
such.
Section 7.05 Resignations. Any member of the executive committee and of
such other committees as may be designated hereunder by the board of directors
may resign at any time by delivering a written resignation to either the board
of directors, the president, the secretary, or assistant secretary, or to the
presiding officer of the committee of which he is a member, if any shall have
been appointed and shall be in office. Unless otherwise specified therein, such
resignation shall take effect on delivery.
Section 7.06 Removal. The board of directors may, by resolutions adopted
by a majority of the Whole Board, at any time remove any member of the executive
committee or of any other committee designated by it hereunder either for or
without cause.
Section 7.07 Vacancies. If any vacancy shall occur in the executive
committee or of any other committee designated by the board of directors
hereunder, by reason of disqualification, death, resignation, removal, or
otherwise, the remaining members shall, until the filling of such vacancy,
constitute the then total authorized membership of the committee and continue to
act, unless such committee is left with only one member as a result thereof.
Such vacancy may be filled at any meeting of the Whole Board or, if the
authority to do so is delegated to the board of directors by the Whole Board, by
action taken by a majority of the quorum of the board of directors.
Section 7.08 Compensation. The Whole Board may allow a fixed sum and
expenses of attendance to any member of the executive committee or of any other
committee designated by it hereunder who is not an active salaried employee of
the corporation for attendance at each meeting of the said committee.
ARTICLE VIII
INSURANCE AND OFFICER AND DIRECTOR CONTRACTS
Section 8.01 Indemnification: Third-Party Actions. The corporation
shall indemnify any officer or director who was or is a party or is threatened
to be made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the corporation), by reason of the fact
that he is or was a director or officer of the corporation (and, in the
discretion of the board of directors, may so indemnify a person by reason of the
fact that he is or was an employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise), against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in connection
with any such action, suit, or proceeding, if he acted in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, or, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
Section 8.02 Indemnification: Corporate Actions. The corporation shall
indemnify any director or officer who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer of the corporation (and, in the
discretion of the board of directors, may so indemnify a person by reason of the
fact that he is or was an employee or agent of the corporation or is or was
serving as an employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise), against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the corporation, except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which such action
or suit was brought or other court of competent jurisdiction shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
Section 8.03 Determination. To the extent that a director, officer,
employee, or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred to in
sections 8.01 and 8.02 hereof, or in defense of any claim, issue, or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith. Any other
indemnification under sections 8.01 or 8.02 hereof, unless ordered by a court,
shall be made by the corporation only in a specific case in which a
determination is made that indemnification of the director, officer, employee,
or agent is proper in the circumstances because he has met the applicable
standard or conduct set forth in sections 8.01 or 8.02 hereof. Such
determination shall be made either (i) by the board of directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit, or proceeding, (ii) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the stockholders by a majority vote of
a quorum of stockholders at any meeting duly called for such purpose.
Section 8.04 Advances. Expenses incurred by an officer or director in
defending a civil or criminal action, suit, or proceeding shall be paid by the
corporation in advance of the final disposition of such action, suit, or
proceeding on receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized by this section.
Such expenses incurred by other employees and agents may be so paid on such
terms and conditions, if any, as the board of directors deems appropriate.
Section 8.05 Scope of Indemnification. The indemnification and
advancement of expenses provided by, or granted pursuant to, sections 8.01,
8.02, and 8.04:
(a) Shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled, under
any bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office; and
(b) Shall, unless otherwise provided when authorized or ratified,
continue as to a person who ceases to be a director, officer, employee,
or agent of the corporation and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
Section 8.06 Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against any such liability.
Section 8.07 Officer and Director Contracts. No contract or other
transaction between the corporation and one or more of its directors or officers
or between the corporation and any corporation, partnership, association, or
other organization in which one or more of the corporation's directors or
officers are directors, officers, or have a financial interest, is either void
or voidable solely on the basis of such relationship or solely because any such
director or officer is present at or participates in the meeting of the board of
directors or a committee thereof which authorizes the contract or transaction or
solely because the vote or votes of each director or officer are counted for
such purpose, if:
(a) The material facts of the relationship or interest are disclosed
or known to the board of directors or committee and the board or committee
in good faith authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors even though the
disinterested directors be less than a quorum;
(b) The material facts of the relationship or interest is disclosed
or known to the stockholders and they approve or ratify the contract or
transaction in good faith by a majority vote of the shares voted at a
meeting of stockholders called for such purpose or written consent of
stockholders holding a majority of the shares entitled to vote (the votes
of the common or interested directors or officers shall be counted in any
such vote of stockholders); or
(c) The contract or transaction is fair as to the corporation at
the time it is authorized, approved, or ratified by the board of
directors, a committee thereof, or the stockholders.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
Whole Board.
ARTICLE X
DIVIDENDS
The board of directors may from time to time declare, and the corporation
may pay, dividends on its outstanding stock in the manner and on the terms and
conditions provided by the articles of incorporation and bylaws.
ARTICLE XI
AMENDMENTS
All bylaws of the corporation, whether adopted by the board of directors or
the stockholders, shall be subject to amendment, alteration, or repeal, and new
bylaws may be made, except that:
(a) No bylaw adopted or amended by the stockholders shall be altered
or repealed by the board of directors;
(b) No bylaw shall be adopted by the board of directors which shall
require more than the stock representing a majority of the voting power for
a quorum at a meeting of stockholders or more than a majority of the votes
cast to constitute action by the stockholders, except where higher
percentages are required by law;
(c) If any bylaw regulating an impending election of directors is
adopted or amended or repealed by the board of directors, there shall be
set forth in the notice of the next meeting of the stockholders for the
election of directors, the bylaws so adopted or amended or repealed,
together with a concise statement of the changes made; and
(d) No amendment, alteration, or repeal of this article XI shall be
made except by the stockholders.
CERTIFICATE OF SECRETARY
The undersigned does hereby certify that such is the secretary of Foreland
Corporation, a corporation duly organized and existing under and by virtue of
the laws of the state of Nevada; that the above and foregoing bylaws of said
corporation were duly and regularly adopted as such by the board of directors of
said corporation by unanimous consent dated , 1997 and that the above
and foregoing bylaws are now in full force and effect and supersede and replace
any prior bylaws of the corporation.
DATED this day of , 1997.
/s/ Kenneth L. Ransom
Kenneth L. Ransom, Secretary
KRUSE, LANDA & MAYCOCK, L.L.C.
EIGHTH FLOOR, BANK ONE TOWER
50 WEST BROADWAY (300 SOUTH)
SALT LAKE CITY, UTAH 84101-2034
TELEPHONE: (801) 531-7090
ATTORNEYS AT LAW TELECOPY: (801) 531-7091
(801) 359-3954
October 10, 1997
Board of Directors
Foreland Corporation
12596 West Bayaud, Suite 300
Lakewood, Colorado 80228-2019
Re: Foreland Corporation
Registration Statement on Form S-3
Gentlemen:
We have been engaged by Foreland Corporation (the "Company") to render our
opinion respecting the legality of certain securities to be offered and sold
pursuant to the registration statement on form S-3 being filed by the Company
with the Securities and Exchange Commission (the "Registration Statement").
Capitalized terms used but not defined herein have the same meanings as set
forth in the Registration Statement.
In connection with this engagement, we have examined the following:
1. Articles of incorporation of the Company;
2. Bylaws of the Company;
3. The Registration Statement; and
4. Unanimous consents of the Company's board of directors.
We have examined such other corporate records and documents and have made
such other examination as we deemed relevant.
Based upon the above examination, we are of the opinion that the Common
Stock to be sold pursuant to the Registration Statement will be, when sold in
accordance with the terms set forth in the Registration Statement, legally
issued, fully paid, and nonassessable under the Nevada Revised Statutes, as
amended.
This firm consents to being named in the Prospectus included in the
Registration Statement as having rendered the foregoing opinion and as having
represented the Company in connection with the Registration Statement.
Sincerely yours,
/s/ Kruse, Landa & Maycock, L.L.C.
KRUSE, LANDA & MAYCOCK, L.L.C.
HEIN + ASSOCIATES LLP
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS WITH
OFFICES IN DENVER, HOUSTON, DALLAS AND LOS ANGELES
717 SEVENTEENTH STREET, SUITE 1600
DENVER, CO 80202-3330
PHONE: (303) 298-9600
FAX: (303) 298-8118
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the registration statement of
Foreland Corporation on Form S-3 of our report dated March 14, 1997, on our
audits of the consolidated financial statements of Foreland Corporation, as of
December 31, 1995 and 1996, and for each of the three years in the period ended
December 31, 1996, which report is included in the Company's Annual Report on
Form 10-K.
/s/ Hein + Associates LLP
HEIN + ASSOCIATES LLP
Denver, Colorado
October 8, 1997
MALKEWICZ HUENI
ASSOCIATES
October 8, 1997
Kruse Landa & Maycock, L.L.C.
Eighth Floor, Bank One Tower
50 West Broadway (300 South)
Salt Lake City, Utah 84101-2034
To Whom It May Concern:
We consent to the use of our report respecting Foreland Corporation's (the
"Company"), properties and the discussion of such report as contained in the
Company's annual report on Form 10-K for the year ended December 31, 1996, and
to the incorporation by reference of such report as it is referred to in the
Company's annual report to the Registration Statement on Form S-3.
Sincerely,
Malkewicz Hueni Associates, Inc.
/s/ Gregory B. Hueni
Gregory B. Hueni
Vice-President
14142 Denver West Parkway, Suite 190
Golden, Colorado 80401 U.S.A.
(303) 277-0270
Fax: (303) 277-0267
