As Filed: June 4, 1997 SEC File No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Registration Statement on Form S-2
Under the Securities Act of 1933
FORELAND CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Nevada 87-0422812
(State or other jurisdiction (I.R.S. Employer Identification No.)
of 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
- --------------------------- ---------- ----------------- -------------- ------------
<S> <C> <C> <C> <C>
Common Stock(2) 414,000 $ 12.00 $ 4,968,000 $ 1,505
N Warrants 414,000 -- -- --
Common Stock(2)(3) 1,500 $ 3.38 $ 5,063 $ 2
----------- ----------
Total $ 4,973,063 $ 1,507
</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 issued by the registrant on exercise of the N warrants is based on
the price at which the warrants may be exercised (rule 457(g). Pursuant
to Rule 457(g), no separate registration fee is required for the warrants.
The offering price for the common stock being offered by the Selling
Stockholders is based on the closing sales price, as quoted on the Nasdaq
SmallCapSM Market for the Registrant's Common Stock of $3.38 as of
June 2, 1997 (rule 457(c)).
(2) Consists of shares to be held following the exercise of common stock
purchase warrants. 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 warrants.
(3) Shares offered by Selling Stockholders.
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 June 4, 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
N Warrants and Common Stock
This Prospectus relates to the issuance by Foreland Corporation, a Nevada
corporation (the "Company") of (i) 414,000 common stock purchase warrants (the
"N Warrants"), representing the right to purchase one share of the Company's
common stock, par value $0.001 per share (the "Common Stock"), at $12.00 per
share through December 31, 1998, to those persons who held the Company's L
Warrants which expired on December 31, 1996, and (ii) 414,000 shares of Common
Stock on the exercise of a like number of N Warrants. (See "DESCRIPTION OF
SECURITIES").
This Prospectus also relates to the public offer and sale by certain
stockholders (the "Selling Stockholders") of 1,500 shares of Common Stock
issuable on exercise of a like number of common stock purchase warrants (the
"96-4 Warrants") now held by such Selling Stockholders.
The Company's Common Stock is included on the Nasdaq SmallCapSM Market
("Nasdaq") under the symbol "FORL." On June 2, 1997, the closing sales price
for the Company's Common Stock on Nasdaq was $3.38. The Company intends to
apply to list the N Warrants on Nasdaq. However, there can be no assurance that
such securities will be approved for listing or that a market therefor will
develop.
THE ACQUISITION AND OWNERSHIP OF THE SECURITIES OFFERED BY THIS PROSPECTUS
INVOLVE A HIGH DEGREE OF RISK. THE SECURITIES 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
Public Commissions Company(1)
-------- ----------- -----------
<S> <C> <C> <C>
By the Company:
N Warrants (2)
Per Warrant -- -- --
Total -- -- --
Common Stock
Per Share (3) $ 12.00 -- $ 12.00
Total $ 4,968,000 -- $ 4,968,000
By Selling Stockholders
Common Stock (4)
Per Share $ 3.38 -- $ 3.38
Total $ 5,063 -- $ 5,063
Total Offering $ 4,973,063 -- $ 4,973,063
</TABLE>
[FN]
(1) Does not reflect expenses of this offering payable by the Company estimated
at $20,000. (See "PLAN OF DISTRIBUTION" below.)
(2) The Company will receive no cash proceeds from the issuance of the N
Warrants to the holders of the expired L Warrants.
(3) The price per share for the shares of Common Stock issuable by the Company
on exercise of the N Warrants is the exercise price of the N Warrants.
(4) 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 $3.38 on June 2, 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 Stockholders 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.) 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.
The date of this Prospectus is , 1997.
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 will not receive any proceeds from the issuance of the N
Warrants to the holders of the expired L Warrants or on the sale of the Common
Stock by Selling Stockholders. However, the Company will receive proceeds upon
the issuance of the Common Stock on exercise of the N Warrants and 96-4
Warrants. (See "USE OF PROCEEDS.") In connection with this offering, the
Company estimates that it will incur costs of approximately $20,000 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 RECENT STOCK SPLIT
All share and per share data in this Prospectus have been adjusted to
reflect a 3-to-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, as amended on Form 10-K/A filed April 30, 1997, and May 7, 1997 ("1996
Form 10-K"), quarterly report on Form 10-Q for the quarter ended March 31, 1997
("1st Quarter 1997 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, and May
12, 1997, are incorporated herein by reference.
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-2 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.
This Prospectus contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of the Company or
management as well as assumptions made by and information currently available to
the Company or management. When used in this document, the words "anticipate,"
"believe," "estimate," "expect," and "intend" and similar expressions, as they
relate to the Company or its management, are intended to identify forward-
looking statements. Such statements reflect the current view of the Company
respecting future events and are subject to certain risks, uncertainties, and
assumptions, including the risks and uncertainties noted. 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. In each instance,
forward-looking information should be considered in light of the accompanying
meaningful cautionary statements 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
The Company is engaged in exploring for oil in the Great Basin and Range
geologic province in Nevada (the "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 since its organization in 1985, 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.
Business Plan
The Company has assembled a management and technical team of persons with
specialized technical training and experience concentrated on Nevada oil
exploration. In all, the Company's technical team has over 75 years of combined
Nevada oil exploration experience, much of it with major oil companies. The
Company believes that the working experience of its executives and employees in
Nevada is a significant factor in the Company's exploration progress to date and
in its ability to act as operator under exploration arrangements with other
exploration firms such as Enserch Exploration, Inc. ("Enserch"), Berry Petroleum
Company ("Berry"), Parker and Parsley Petroleum Company (successor-in-interest
to Santa Fe Energy Resources, Inc.) ("P&P"), and Barrett. This team employs the
following strategies in guiding the Company's Nevada exploration.
Science
The Company seeks to utilize the most advanced available scientific tools
and techniques to evaluate the risk and exploration potential of specific
prospects. The Company's oil exploration model for the Great Basin of Nevada
continually evolves from a large data base collected, originally by Gulf Oil
Corporation ("Gulf") and, since 1985, by the Company. As a result of the
Company's own work as well as information sharing arrangements with others, the
Company now has access to over 1,400 line miles of 2D seismic data, much of it
reprocessed with new analytical computer programs, newly acquired high
resolution 3D seismic surveys, and gravity data gathered by the Company as well
as by Exxon, P&P, Mobil, Chevron, Enserch, and Berry. Data from 3D seismic,
gravity, reprocessed seismic surveys, and previous drilling are integrated as a
guide to further exploration. The Company believes that it benefits from the
long-term involvement of the Company's personnel in Nevada oil exploration and
operations, which enhances the Company's ability to share data and expertise
with industry participants.
Prospect Generation and Leasing
The Company's leasing program is coordinated with prospect generation and
exploration results. As areas of interest are identified, the Company attempts
to acquire leases or other exploration rights on what preliminarily appears to
be the most promising prospect areas in order to establish a preemptive lease
position prior to generating a specific drilling prospect. As specific prospect
evaluation advances, the Company may seek leases on additional areas or
relinquish leases on areas that appear less promising, thereby reducing lease
holding costs. As a result, the Company has substantially increased the size of
its gross acreage while, in management's opinion, improving the exploration
potential of its leaseholdings.
Joint Exploration
The Company regularly seeks joint exploration arrangements with other oil
exploration firms active in Nevada to obtain access to additional scientific
data and technical expertise, particularly relatively expensive geophysical
data, including 3D seismic. Joint exploration arrangements are sought with
firms that have significant lease positions in the prospect area and that can
bear a portion of the costs of specified further exploration. The Company also
utilizes joint exploration arrangements to spread the risks of specific
exploration, attempting to retain a larger interest by bearing a greater
proportion of the related costs in those prospect areas in which management
believes that the risks and reserve potential warrant such action. In
situations in which management perceives a higher degree of risk or a smaller
potential for the prospect, it seeks to retain a smaller interest and bear a
smaller share of related costs. With the acquisition of Barrett's 40% interest
in the Eagle Springs field, the Company assumed the cost and associated risk of
100% of operations in the Eagle Springs field. Industry interest in oil
exploration in Nevada has fluctuated significantly in previous years, and there
can be no assurance that the Company can continue to identify oil exploration
firms to undertake joint exploration of Nevada prospects.
Drilling Near Existing Production
Further exploration drilling is required to delineate the extent of
productive horizons in individual fields and complete development where
warranted. In the Eagle Springs and Ghost Ranch fields, the Company's
geophysical and geological evaluation is ongoing to locate possible additional
drilling locations to develop the undeveloped reserves and to test the horizons
that are productive in the existing wells. In both fields, the Company has
surface facilities capable of handling additional production. The Company also
intends to continue to drill exploration wells in areas of existing production
in the Pine and Railroad Valleys to further evaluate reservoir extent and
characteristics, increase production, and obtain data that might benefit the
Company's overall exploration effort. The Company intends to pursue these
drilling objectives in Pine Valley as well as specific prospects in Railroad
Valley as involving somewhat lower risk than exploration testing in areas with
relatively less drilling history or other exploration success to date.
Long-Term Exploration
Management anticipates that it will take several years to explore fully
the target areas that may be identified by the Company in the Great Basin of
Nevada, as is the case in many frontier areas of exploration, and believes that
it is important to provide for an ongoing presence for the Company in Nevada
exploration. In such a long term exploration effort, the results of early
exploration serve as a guide for identifying new prospects so it is important,
in management's view, to continually identify new prospect concepts and areas
for possible future exploration while advancing existing prospects to the
drilling stage.
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 principal executive offices are located at 12596 West Bayaud,
Suite 300, Lakewood, Colorado 80228-2019 and its telephone number is (303) 988-
3122.
Capitalization
The following table shows the capitalization of the Company as of March 31,
1997, and as adjusted to give effect to the issuance of 34,123 shares of Common
Stock on conversion of outstanding shares of Preferred Stock, and the issuance
of 1,500 shares of Common Stock for services rendered to the Company:
<TABLE>
<CAPTION>
March 31, 1997
---------------------------
Historical As Adjusted
----------- -----------
<S> <C> <C>
Long term debt, net of current portion $ 916,931 $ 916,931
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 shares
issued and outstanding -- --
1996-4 Series Preferred Stock, 255 and 244 shares issued and
outstanding, respectively -- --
Common Stock, par value $0.001 per share, 50,000,000 shares
authorized, 7,283,927 and 7,319,550 shares outstanding
issued and outstanding, respectively 7,284 7,320
Additional paid in capital 32,650,301 32,767,766
Less note and stock subscriptions receivable (1,112,177) (1,112,177)
Accumulated deficit (22,875,459) (22,875,459)
------------ ------------
Total stockholders' equity 8,670,767 8,788,268
------------ ------------
Total capitalization $ 9,587,698 $ 9,705,199
============ ============
</TABLE>
<TABLE>
<CAPTION>
The Offering
<S> <C>
Securities offered by the Company
N Warrants...................................................... 414,000 warrants
Common Stock.................................................... 414,000 shares (1)
Securities offered by the Selling Stockholders...................... 1,500 shares (1)
Common Stock outstanding before the offering........................ 7,319,550 shares
Common Stock outstanding after the offering......................... 7,735,050 shares (1)
Common Stock reserved for issuance.................................. 2,566,721 shares (2)
Fully diluted Common Stock.......................................... 10,301,771 shares (2)
Nasdaq Symbols:
Common Stock...................................................... FORL
</TABLE>
[FN]
(1) The 414,000 shares of Common Stock offered by the Company are issuable on
exercise of the N Warrants, also offered by the Company pursuant to this
Prospectus. The 1,500 shares of Common Stock offered by the Selling
Stockholders are issuable on exercise of the 96-4 Warrants. The figures
in the table assume that all of the N Warrants and all of the 96-4 Warrants
are exercised to acquire shares of Common Stock. If all of the N Warrants
and 96-4 Warrants in this offering are exercised, the Company would receive
gross proceeds of $4,979,250.
(2) Consists of (i) up to 652,989 shares of Common Stock issuable on the
conversion of outstanding shares of Preferred Stock; (ii) up to 1,389,402
shares of Common Stock issuable on the exercise of outstanding options and
warrants at a weighted average exercise price of $5.95 per share; and (iii)
up to 524,330 shares of Common Stock issuable on the exercise of
outstanding options subject to vesting requirements at a weighted average
exercise price of $4.94 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 will receive no net proceeds from the issuance of the N
Warrants or from the sale by the Selling Stockholders of the Common Stock
issuable on exercise of the 96-4 Warrants. The N Warrants to be issued pursuant
to this Prospectus must be exercised to receive shares of Common Stock and the
96-4 Warrants held by Selling Stockholders must be exercised into shares of
Common Stock prior to the resale of the Common Stock offered by the Selling
Stockholders pursuant to this Prospectus. Proceeds received by the Company on
the exercise of warrants, aggregating $4,979,250 if all N Warrants and 96-4
Warrants are exercised, will be used by the Company to pay general and
administrative expenses, to the extent not funded from operating revenue, and
for additional drilling, geological and geophysical data gathering, or lease
acquisition. If all options and warrants held by persons other than those
receiving the N Warrants and the Selling Stockholders in this offering were
exercised to acquire 1,913,732 shares of Common Stock, the Company would receive
proceeds of $10,861,610. 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 incurred losses of $22,875,459 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 $216,694 for the
three months ended March 31, 1997. The Company anticipates continuing losses
through the remainder 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
OPERATIONS" in the Company's 1996 Form 10-K and see the Company's 1st Quarter
1997 10-Q.)
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 March 31, 1997, oil and gas
properties included approximately $420,000 related to a single well in progress.
Management expects that all information necessary to evaluate this property will
be available by the third quarter of 1997.
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 March 31, 1997, the Company also had a net investment of $616,300 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" and "ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA" in the Company's 1996 10-K.)
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 OPERATIONS" in the Company's 1996 Form 10-K
and see the Company's 1st Quarter 1997 10-Q.)
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, the nearest of which is 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 OPERATIONS--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 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 agreements with Crysen Refining, Inc., Salt
Lake City, Utah, to sell oil from its currently producing fields through August
1997 at minimum fixed prices, and with Petro Source Corporation, Salt Lake City,
Utah, to sell oil from a portion of the Ghost Ranch field through August 1997.
Notwithstanding these agreements, 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 957,670
shares of Common Stock with exercise prices ranging from $3.93 to $9.00 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
126,666 shares of Common Stock at prices ranging from $3.75 per share to $9.75
per share and warrants to purchase a total of 216,025 shares of Common Stock at
a weighted average exercise price of $10.78 per share, including warrants held
by Selling Stockholders to purchase 1,500 shares but excluding the N Warrants
offered hereby. 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, 7,319,550 shares of Common Stock were
issued and outstanding, and 2,980,721 additional shares were reserved for
issuance on the exercise or conversion of options, warrants (including the N
Warrants offered hereby), 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, 613,334 shares of 1995 Preferred Stock, 12.5 shares of
1996 Preferred Stock, and 244 shares of 1996-4 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,
the 1995 Preferred Stock has a liquidation preference of $1.50 per share, the
1996 Preferred Stock has a liquidation preference of $1,000 per share plus
accrued dividends, and the 1996-4 Preferred Stock has a liquidation preference
of $10,000 per share plus accrued dividends. On liquidation or termination of
the Company, an aggregate of $3,833,850 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, and the 1996 Preferred Stock and 1996-4 Preferred Stock
do not vote, except as otherwise required by the corporate statutes of Nevada.
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.)
No Shareholder Meetings or Reports
Since its formation, the Company has not held a meeting of its shareholders
for purposes of electing directors or for any other purpose and has not
distributed any annual report or financial information to its stockholders.
Under Nevada law, the Company has been required since inception to have an
annual shareholders' meeting for the election of directors, but has not done so
because of the costs involved in the preparation and mailing of required proxy
materials and holding meetings. In any year in which the Company has not held
or does not hold a shareholders' meeting, a shareholder may force the Company to
call such a meeting. Shareholders of the Company would have the right to
nominate their own candidates for election as directors at such meeting in
addition to the nominees of the Company for election as directors. Other
business could also be acted on at such a meeting as the shareholders may
determine. As a result, it is possible that the current directors and
management could be replaced and Company policies changed. The Company has
agreed to hold an annual meeting of shareholders on or before June 30, 1997.
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.)
USE OF PROCEEDS
The Company will receive no net proceeds from the issuance by the Company
of the N Warrants or from the sale by the Selling Stockholders of the Common
Stock issuable on exercise of the 96-4 Warrants. The N Warrants to be issued
pursuant to this Prospectus must be exercised to receive shares of Common Stock
and the 96-4 Warrants held by Selling Stockholders must be exercised into shares
of Common Stock prior to the resale of the Common Stock offered by the Selling
Stockholders pursuant to this offering. Proceeds received by the Company on the
exercise of warrants, aggregating $4,979,250, if all N Warrants and 96-4
Warrants are exercised, will be used by the Company to pay general and
administrative expenses, to the extent not funded from operating revenue, and
for additional drilling, geological and geophysical data gathering, or lease
acquisition. If all options and warrants held by persons other than those
receiving N Warrants and the Selling Stockholders in this offering were
exercised to acquire an additional 1,913,732 shares of Common Stock, the Company
would receive proceeds of $10,861,610. 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, a copy of which
is attached to this prospectus.
DILUTION
Immediately prior to this offering, the Company had a pro forma net
tangible book value of $8,670,767, with 7,319,550 shares of Common Stock issued
and outstanding, or approximately $1.18 per share. The pro forma net tangible
book value per share decreases to $0.67 after deducting liquidation preferences
of an aggregate of $3,833,850 with respect to the shares of outstanding 1991,
1994, 1995, 1996, and 1996-4 Preferred Stock. The pro forma net tangible book
value is determined by adjusting the net tangible book value of the Company as
of December 31, 1996, to give pro forma effect to the subsequent issuance of
34,123 shares of Common Stock on conversion of outstanding shares of Preferred
Stock, and 1,500 shares of Common Stock for services rendered to the Company.
(See "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" in the Company's
1996 Form 10-K.)
Holders of N Warrants and 96-4 Warrants will suffer dilution in the
adjusted net tangible book value per share received on exercise below their
effective purchase price per share. Similarly, 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. Based on the Company's
net tangible book value immediately prior to this offering, after giving further
effect to the exercise of all N Warrants offered hereby and all 96-4 Warrants
owned by all Selling Stockholders to acquire the 415,500 shares of Common Stock
to be sold in this offering, the Company would have a net tangible book value of
$9,816,167, or approximately $1.27 per share, which represents a reduction of
$2.11 per share from the closing sales price of $3.38 for the Company's Common
Stock on Nasdaq on June 2, 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 96-4 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 96-4 Warrants
prior to their 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 96-4 Warrants held by such
Selling Stockholder prior to 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 Prior Shares Owned After
to the Offering(1) the Offering
---------------------- ------------------
Shares
Common 96-4 to be
Selling Stockholders Stock Warrants(2) Offered Number %
- -------------------- ------ ----------- ------- ------ -----
<S> <C> <C> <C> <C> <C>
Dwight B. Bronnum -- 750 750 -- --
Robert L. Hopkins -- 750 750 -- --
-- ----- ----- -- --
Total -- 1,500 1,500 -- --
== ===== ===== == ==
</TABLE>
[FN]
(1) Shares owned prior to the offering include all shares of Common Stock, if
any, 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 exercise of all 96-4 Warrants
by all Selling Stockholders.
(2) The 96-4 Warrants are a portion of like warrants issued to designees of the
placement agent in the offering in November 1996 of 1996-4 Preferred Stock,
which warrants entitle the holders thereof to purchase shares of Common
Stock at an exercise price of $7.50, subject to adjustment in certain
circumstances based on the market price of the Common Stock at each
anniversary date of the issuance of the 96-4 Warrants. Such 96-4
Warrants must be exercised to purchase shares of Common Stock before
the resale of the Common Stock offered by the Selling Stockholders
pursuant to this offering.
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
1996 Series 2,778 * $4.50 *
1996-4 Series 377,387 * $7.50 *
Warrants to purchase Common Stock 17,450 $4.50
29,353 $7.50
169,222 $12.00
Options to purchase Common Stock 10,000 $3.75
22,667 $3.93
422,000 $4.00
128,000 $4.50
150,000 $5.00
1,667 $5.63
216,667 $6.375
100,000 $6.90
6,666 $7.50
3,333 $7.88
20,000 $9.00
3,333 $9.75
</TABLE>
[FN]
*Based on the maximum conversion price of $4.50 per share for the 1996
Preferred Stock and $7.50 per share for the 1996-4 Preferred Stock. The
actual conversion prices may be less, depending on the market price of the
Common Stock at the time of conversion.
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, 613,334 shares designated as the 1995 Series Convertible
Preferred Stock, 12.5 shares designated as the 1996 Series 6% Convertible
Preferred Stock, and 244 shares designated as the 1996-4 Series 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
Preferred Stock is convertible, at the election of the holder, into the
Company's Common Stock at the rate of one share of 1996 Preferred Stock for the
number of shares of Common Stock determined by dividing $1,000 by 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 conversion. The 1996-4 Preferred Stock is
convertible, at the election of the holder, 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 is 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.
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, the 1995 Preferred Stock carries a liquidation
preference of $1.50 per share, the 1996 Preferred Stock carries a liquidation
preference of $1,000 per share plus accrued dividends, and the 1996-4 Preferred
Stock carries a liquidation preference of $10,000 per share plus accrued
dividends. 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. The 1996 Preferred Stock and 1996-4 Preferred Stock are not
entitled to vote except as required by the corporate laws of the state of Nevada
and on certain specific matters. Except for the 1996 Preferred Stock, 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 1996 Preferred Stock is entitled to a 6% dividend
payable in cash in the event the 1996 Preferred Stock is redeemed or in
additional shares of Common Stock upon the conversion of the 1996 Preferred
Stock. The 1996-4 Preferred Stock is entitled to an 8% accretion payable in
additional shares of Common Stock upon the conversion of the 1996-4 Preferred
Stock or in cash if the 1996-4 Preferred Stock is redeemed.
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, the 1995 Preferred Stock is redeemable at $3.00
per share at any time after December 31, 1995, and the 1996 Preferred Stock is
redeemable at $1,330 per share at any time after April 1, 1997. The 1996-4
Preferred Stock is redeemable at $13,000 per share at any time after November
20, 1997, through May 20, 1998, and at $12,500 thereafter. The 1996-4 Preferred
Stock will automatically convert into shares of Common Stock on November 20,
1998. In each case, the Preferred Stock can be converted prior to the
redemption date fixed in the notice.
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. The Company is offering pursuant to this Prospectus to the
record holders of the class L Warrants, which warrants expired pursuant to their
terms on December 31, 1996, N Warrants to purchase 414,000 shares of Common
Stock at $12.00 per share. The N Warrants will be 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 Investor Warrants. The Company will issue to each holder of 1996-4
Preferred Stock who converts his or her shares after November 20, 1997, an
Investor Warrant to purchase a number of shares of Common Stock, depending on
the dates on which such shares of 1996-4 Preferred Stock are converted. Each
share of 1996-4 Preferred Stock converted on November 20, 1996, will entitle the
holder thereof to receive an Investor Warrant to purchase 1,111 shares of Common
Stock at an exercise price of $9.00 per share. The number of shares and the
exercise price of the Investor Warrants issued thereafter shall be adjusted
ratably each day until November 20, 1998, when each share of 1996-4 Preferred
Stock converted on such date will entitle the holder thereof to receive an
Investor Warrant to purchase 1,333 shares of Common Stock at an exercise price
of $7.50 per share. This Prospectus relates to the resale of Common Stock
issuable on exercise of the Investor Warrants.
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. This
Prospectus relates to the resale of Common Stock issuable on exercise of up to
1,500 of the Placement Agent Warrants. The resale of the shares of Common Stock
issuable on exercise of the remaining Placement Agent Warrants was previously
registered.
Options
The Company has issued and outstanding options to purchase up to 1,084,336
shares of Common Stock at a weighted average exercise price of $5.08 per share,
including options to purchase 957,667 shares of Common Stock at a weighted
average exercise price of $4.55 per share of Common Stock issued to executive
officers, directors and employees of the Company.
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 issuance by the Company of 414,000 N
Warrants to the persons who held the Company's L Warrants which expired on
December 31, 1996, and 414,000 shares of Common Stock issuable on exercise of
the N Warrants. This Prospectus also relates to the public offer and sale by
certain shareholders (the "Selling Stockholders") of up to 1,500 shares of
Common Stock of the Company issuable on exercise of the 96-4 Warrants at an
exercise price of $7.50 per share, subject to adjustment depending on the
trading price of the Common Stock at the anniversary dates of the issuance of
such Warrants. (See "SELLING STOCKHOLDERS" and "DESCRIPTION OF SECURITIES"
above.)
Exercise of Warrants
The N Warrants and 96-4 Warrants may be exercised, at the discretion of
the holder thereof, by the delivery to the Company at its principal executive
offices at Foreland Corporation, Union Terrace Office Bldg., 12596 West Bayaud,
Suite 300, Lakewood, Colorado 80228-2019, of the Warrant accompanied by an
election of exercise and payment of the purchase price for each share of Common
Stock purchased in accordance with the terms of such warrant. Payment on the
exercise of warrants must be made in the form of cash or check payable to the
order of the Company.
Determination of Exercise Prices
The exercise prices of the N Warrants and 96-4 Warrants were determined at
the time of the issuance by the board of directors, based on the historical and
future trading prices for the Common Stock in the over-the-counter market, the
possible results of exploration in the Company's properties, and the Company's
anticipated need for additional capital. The terms of the foregoing securities
were not determined through arm's length negotiations.
The exercise prices of the N Warrants and the 96-4 Warrants bear no
relationship to the assets, earnings, or book value of the Company or any other
recognized criteria of value.
Sale of Common Stock by Selling Stockholders
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
Stockholders 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 $20,000 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 N
Warrants and the Common Stock issuable on exercise of the N Warrants and 96-4
Warrants has 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 report 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> N WARRANTS
SUMMARY AND INTRODUCTION.........................3 SHARES OF COMMON STOCK
RISK FACTORS.....................................8
NO NET PROCEEDS.................................14
THE COMPANY.....................................14
DILUTION........................................15
SELLING STOCKHOLDERS............................15
DESCRIPTION OF SECURITIES.......................16
PLAN OF DISTRIBUTION............................20
LEGALITY OF SECURITIES..........................21
EXPERTS.........................................21
</TABLE>
No dealer, salesman, or other -----------------------
person has been authorized in PROSPECTUS
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. June _____, 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
with the distribution of the securities being registered:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee $ 1,507
Legal fees 12,000
State "blue sky" fees and expenses (including attorneys' fees) 1,000
Accounting fees and expenses 3,000
Printing expenses 1,000
Listing fees 1,493
--------
Total $ 20,000
========
</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>
Instruments Defining the Rights of Security Holders,
Including Indentures
Item 4.
4.01 4 Specimen Common Stock Certificate Incorporated by
Reference(1)
4.02 4 Designation of Rights, Privileges, and Preferences of 1991 Incorporated by
Series Preferred Stock Reference(1)
4.03 4 Designation of Rights, Privileges and Preferences of 1994 Incorporated by
Series Convertible Preferred Stock Reference(3)
4.04 4 Designation of Rights, Privileges and Preferences of 1995 Incorporated by
Series Convertible Preferred Stock Reference(7)
4.05 4 Designation of Rights, Privileges and Preferences of 1996 Incorporated by
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 Stock Incorporated by
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 offering Incorporated by
of 1996 Preferred Stock Reference(9)
4.13 4 Form of Warrant to placement agent and assigns relating to
offer of 1996-4 Series Preferred Stock, with related Incorporated1by
schedule
4.14 4 Form of First Amendment to the Designation of Rights, Incorporated by
Privileges, and Preferences of 1996-2 Series 6% Convertible Reference(13)
Preferred Stock
4.15 4 Warrant Agreement between the Company and Atlas Stock This Filing
Transfer Corporation relating to N Warrants
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 Warrants Reference(7)
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 Foreland Corporation and Petro Source Refining Reference(12)
Partners
10.27 10 Revolving Credit Agreement dated November 13, 1996, by and Incorporated by
among Foreland Corporation, Eagle Springs Production Limited Reference(13)
Liability Company, and Colorado National Bank
10.28 10 Promissory Note dated November 13, 1996 by Foreland
Corporation and Eagle Spring Production Limited Liability Incorporated1by
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.
** 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-2 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 30th day of May,
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 30th day of May, 1997.
/s/ N. Thomas Steele
- ---------------------------------------
N. Thomas Steele, Director and
President (Principal Executive Officer)
/s/ Dr. Grant Steele
- ---------------------------------------
Dr. Grant Steele, Director
/s/ Kenneth L. Ransom
- ---------------------------------------
Kenneth L. Ransom, Director and Vice-
President of Exploration
- ---------------------------------------
Bruce C. Decker, Director and Vice-
President of Operations (Principal
Financial and Accounting Officer)
II-16
Foreland Corporation
and
Atlas Stock Transfer Corporation
as Warrant Agent
Warrant Agreement
Dated as of January 1, 1997
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is entered into as of the 1st day
of January, 1997, by and between FORELAND CORPORATION, a Nevada corporation (the
"Company"), and ATLAS STOCK TRANSFER CORPORATION, a securities transfer agency
incorporated under the laws of the state of Utah, as warrant agent (the "Warrant
Agent").
Premises
A. The Company is conducting a public offering pursuant to a registration
statement on form S-2 (the "Registration Statement"), filed under the Securities
Act of 1933, as amended (the "Securities Act"), of various securities, including
up to 414,000 redeemable common stock purchase warrants (the "N Warrants"). The
N Warrants are offered hereby to those persons who are holders of record of the
Company's common stock purchase warrants that expired on December 31, 1996 (the
"L Warrants"), at the rate of one N Warrant for each three L Warrants held (to
give effect to a 3-to-1 reverse stock split of the Common Stock effective June
15, 1996). Each N Warrant entitles the holder to purchase one share of common
stock, par value $0.001 per share (the "Common Stock"), of the Company at any
time through December 31, 1998, at a purchase price of $12.00 per share. This
Agreement governs the N Warrants, including the issuance, exercise, and
redemption of such N Warrants, and the rights and obligations of the holders
thereof. The shares of Common Stock issuable on exercise of the N Warrants are
collectively referred to herein as the "Warrant Shares."
B. The Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to act in connection with the issuance,
division, transfer, exchange, and exercise of the N Warrants.
Agreement
In consideration of the foregoing and for the purpose of defining the terms
and provisions of the N Warrants and the respective rights and obligations
thereunder of the Company and the registered owners and the N Warrants (the
"Holders"), the Company and the Warrant Agent hereby agree as follows:
1. Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as agent for the Company in accordance with the instructions set
forth hereinafter in this Agreement, and the Warrant Agent hereby accepts such
appointment.
2. Transferability and Form of N Warrant.
2.1 Registration. The N Warrants shall be designated by class and
numbered and shall be registered in registers as they are issued. The
Company and the Warrant Agent shall be entitled to treat the Holder of any
N Warrant as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in such N
Warrant on the part of any other person, and shall not be liable for any
registration or transfer of N Warrants which are registered or to be
registered in the name of a fiduciary or the nominee of a fiduciary unless
made with the actual knowledge that a fiduciary or nominee is committing a
breach of trust in requesting such registration or transfer, or with
knowledge of such facts that the Warrant Agent participation therein
amounts to bad faith.
2.2 Transfer. N Warrants shall be transferable only on the books of
the Company maintained at the principal office of the Warrant Agent in the
city of Salt Lake City, state of Utah, on delivery thereof duly endorsed by
the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment, or authority to
transfer. In all cases of transfer by an attorney, the original letter of
attorney, duly approved, or an official copy thereof, duly certified, shall
be deposited and remain with the Warrant Agent. In case of transfer by
executors, administrators, guardians, or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be
required to be deposited and remain with the Warrant Agent in its
discretion. On any registration of transfer, the Warrant Agent shall
countersign and deliver a new N Warrant or N Warrants to the person
entitled thereto.
2.3 Form of N Warrants. N Warrants, including the form of election to
purchase shares, shall be represented by certificates in substantially the
form set forth as Exhibit "A", which is attached hereto and incorporated
herein by reference. The price per Share and the number of Warrant Shares
issuable on exercise of N Warrants are subject to adjustment on the
occurrence of certain events, all as hereinafter provided. The N Warrants
shall be executed on behalf of the Company by the manual or facsimile
signature of the present or any future president or vice-president of the
Company, under its corporate seal, affixed or in facsimile, attested by the
manual or facsimile signature of the present or any future secretary or
assistant secretary of the Company. N Warrants shall be dated as of the
date of countersignature thereof by the Warrant Agent either on initial
issuance or on division, exchange, substitution, or transfer.
3. Countersignature of N Warrants. The N Warrants shall be countersigned
by the Warrant Agent (or any successor to the Warrant Agent then acting as
warrant agent under this Agreement) and shall not be valid for any purpose
unless so countersigned. N Warrants may be countersigned by the Warrant Agent
(or by its successor as warrant agent) and may be delivered by the Warrant
Agent, notwithstanding that the persons whose manual or facsimile signatures
appearing thereon as proper officers of the Company shall have ceased to be such
officers at the time of such countersignature, issuance, or delivery. The
Warrant Agent shall, on written instructions of the president or the secretary
of the Company, countersign, issue, and deliver N Warrants entitling the Holders
thereof to purchase not in excess of 414,000 Warrant Shares.
4. Exchange of N Warrants. The N Warrants may be exchanged for another N
Warrant or L Warrants of the same class entitling the Holder thereof to purchase
a like aggregate number of Warrant Shares as the N Warrant surrendered then
entitle the Holder to purchase. Any Holder of a Warrant desiring to exchange N
Warrants shall make such request in writing delivered to the Warrant Agent, and
shall surrender, properly endorsed, the N Warrants to be so exchanged.
Thereupon, the Warrant Agent shall countersign and deliver to the person
entitled thereto an N Warrant of the same class as so requested.
5. Term of N Warrants; Exercise of N Warrants. Each Holder of the N
Warrants shall have the right, which may be exercised for a period commencing on
the effective date of the Registration Statement, and ending at 11:59 p.m.
Mountain Time, on December 31, 1998, subject to earlier termination of called
for redemption as provided herein, to purchase from the Company one fully paid
and nonassessable Warrant Share for each N Warrant held at the warrant price as
set forth in sections 9 and 10 hereof (the "Warrant Price"), subject to the
conditions set forth in this Agreement. If the N Warrant is not exercised
during the exercise period set forth herein, it shall expire.
The Warrant Shares shall be issuable on exercise of the N Warrants on
surrender to the Company at the principal office of the Warrant Agent in Salt
Lake City, Utah, with the form of election to purchase on the reverse thereof
duly completed and signed, and on payment to the Warrant Agent for the account
of the Company of the Warrant Price for the number of Warrant Shares then
exercised. Payment of the Warrant Price shall be made in cash or by cashier's
check or by collection of checks or drafts. Subject to subsections 5.1 and 5.2
of this section, on such surrender of N Warrants and payment of the Warrant
Price as aforesaid, the Company shall issue and cause to be delivered with all
reasonable dispatch to or on the written order of the Holder and in such name or
names as the Holder may designate, a certificate or certificates for the number
of full Warrant Shares so purchased on the exercise of such N Warrants. No
fractional Warrant Shares shall be issuable on such surrender. Such certificate
or certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date of the surrender of such N Warrants and payment of
the Warrant Price, as aforesaid; provided, however, that if, at the date of
surrender of such N Warrants and payment of such Warrant Price, the transfer
books for the Warrant Shares on the exercise of such N Warrants shall be closed,
the certificates for the Warrant Shares in respect of which such N Warrants are
then exercised shall be issuable as of the date on which such books shall next
be opened (whether before of after expiration of the exercise period) and until
such date the Company shall be under no duty to deliver any certificate for such
Warrant Shares; provided further, however, that the transfer books of record,
unless otherwise required by law, shall not be closed at any one time for a
period longer than 60 days. The right of purchase represented by the N Warrants
shall be exercisable, at the election of the Holder thereof, either in full or
from time to time in part and, in the event that any N Warrant is exercised in
respect of less than all of the Warrant Shares specified therein at any time
prior to the date of expiration of the N Warrants, a new N Warrant or N Warrants
of the same class will be issued for the remaining number of Warrant Shares, and
the Warrant Agent is hereby irrevocably authorized to countersign and to deliver
the required new N Warrants pursuant to the provisions of this section and of
section 3 hereof. The Company, whenever required by the Warrant Agent, will
supply the Warrant Agent with N Warrants duly executed on behalf of the Company
for such purpose.
5.1 The N Warrants may not be exercised by the Holders in the absence
of a current registration statement under the Securities Act and
registration or qualification under applicable state securities laws
pertaining to the Warrant Shares. The Company shall use its best efforts
to maintain the effectiveness of its current registration statement filed
pursuant to the Securities Act to register the Warrant Shares issuable on
exercise of the N Warrants.
5.2 In connection with the Registration Statement under this section,
the Company covenants and agrees to take all necessary action which may be
required in qualifying or registering the Warrant Shares and N Warrants
included in a registration statement or post-effective amendment for the
offer and sale under the securities or blue sky laws of such state as
requested by the Holders; provided, that the Company shall not be obligated
to execute or file any general consent to service of process or to qualify
as a foreign corporation to do business under the laws of any such
jurisdiction. Holders who reside in any state where the Company cannon,
with the exercise of reasonable diligence and without consenting to general
service of process, obtain qualification for the exercise of the N Warrants
and the issuance of the Warrant Shares may not, as a result thereof, be
able to exercise their N Warrants, and the Company is under no obligation
to make such exercise possible in such circumstances. In the event that
the company determines to proceed with the qualification of the exercise of
the N Warrants and the issuance of the Warrant Shares under the securities
laws of a particular state, then the exercise of the N Warrants shall not
be effective and the Warrant Shares shall not be issued until such
qualification become effective. The costs of obtaining such state
qualification shall be borne by the Company.
5.3 The Company shall promptly notify the Warrant Agent of the date
on which the effectiveness of the Registrations Statement or the
qualification or registration of the Warrant Shares under the securities
laws of any state shall terminate. The Company shall not issue any Warrant
Shares with respect to any N Warrant surrendered for exercise unless such N
Warrants are surrendered and received by the Warrant Agent during a period
that a registration statement is effective. Furthermore, the Company shall
not issue any Warrant Shares on the exercise of any N Warrants received
from a Holder who is a resident of a state with respect to which the
Warrant Shares issuable on exercise of the N Warrants are not qualified or
registered.
6. Payment of Taxes. The Company will pay all documentary stamp taxes,
if any, attributable to the initial issuance of Warrant Shares issuable on the
exercise of the N Warrants; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect to the issuance
or delivery of any N Warrants or certificates for Warrant Shares involving a
transfer of record or beneficial ownership.
7. Mutilated or Missing N Warrants. In case any certificate representing
the N Warrants is mutilated, lost, stolen, or destroyed, the Company may at its
discretion issue and the Warrant Agent shall countersign and deliver in exchange
and substitution for and on cancellation of the mutilated N Warrant, or in lieu
of and substitution for the N Warrant lost, stolen, or destroyed, a new warrant
of like class and tenor and representing an equivalent right or interest, but
only on receipt of evidence satisfactory to the Company and the Warrant Agent of
such loss, theft, or destruction of such N Warrant and indemnity, if requested,
also satisfactory to them. Applicants for such substitute N Warrants shall also
comply with such other reasonable regulations and pay such other reasonable
charges as the Company or the Warrant Agent may prescribe.
8. Reservation of Warrant Shares; Redemption of N Warrants.
8.1 Reservation of Warrant Shares. There have been reserved, and the
Company shall at all times keep reserved, out of the authorized and
unissued shares of Common Stock, a number of shares sufficient to provide
for the exercise of the rights of purchase represented by the outstanding N
Warrants, assuming exercise of all N Warrants. The transfer agent for the
Warrant Shares and every subsequent transfer agent for any Warrant Shares
issuable on the exercise of any of the rights of purchase aforesaid will be
irrevocably authorized and directed at all times to reserve such number of
authorized and unissued Warrant Shares as shall be requisite for such
purpose. The Company will keep a copy of this Agreement on file with the
transfer agent for the Warrant Shares and with every subsequent transfer
agent for any Warrant Shares of the Company's capital stock issuable on the
exercise of the rights of purchase represented by the N Warrants. The
Warrant Agent is hereby irrevocably authorized to requisition from time to
time from such transfer agent stock certificates required to honor
outstanding N Warrants on exercise thereof in accordance with the terms of
this Agreement. The Company will supply such transfer agent with duly
executed stock certificates for such purpose and will provide or otherwise
make available any cash which may be payable as provided in section 11
hereof. All N Warrants surrendered in the exercise of the rights thereby
evidenced shall be canceled by the Warrant Agent and shall thereafter be
delivered to the Company. Promptly after the date of expiration of the N
Warrants, the Warrant Agent shall certify to the Company the total
aggregate amount of N Warrants then outstanding, and thereafter no Warrant
Shares shall be subject to reservation in respect of such N Warrants.
8.2 Redemption of N Warrants by the Company. The N Warrants are
subject to redemption by the Company at a price of $0.10 per N Warrant on
30 days written notice to the Holders if the average closing bid price for
the Common Stock as reported on Nasdaq is at least equal to the Warrant
Price for 20 consecutive trading days ending within 10 days preceding the
date of the notice of redemption or, if not quoted on Nasdaq or listed on
an exchange, as reported on the Electronic Bulletin Board maintained by the
NASD or, if not on the Electronic Bulletin Board, any other reliable medium
of quotation. N Warrants may be exercised during the 30 day period after
such notice of redemption has been given but, if not exercised, shall
thereafter be redeemed. A registration statement and state qualifications
as required by subsections 5.1 through 5.3 must be effective prior to the
notice of redemption.
8.3 Redemption Procedure. Redemption of the N Warrants pursuant to
the provisions of subsection 8.2 shall be made in the following manner:
(a) The Company shall notify the Warrant Agent of its intention
to redeem the N Warrants at a price of $0.10 per N Warrant. On receipt
of such notice, the Warrant Agent shall promptly notify the Company of
the number of N Warrants outstanding as of the most recent practicable
date. Within five business days following the receipt of such
information from the Warrant Agent, the Company and the Warrant Agent
shall jointly establish a bank account at a bank acceptable to both
the Company and the Warrant Agent (the "Redemption Account") in which
the Company shall from time to time deposit the funds as may be
required during the redemption period to redeem the number of N
Warrants that have been tendered for redemption.
(b) The Company shall prepare a notice of redemption and cause
it to be delivered to the Holders in the manner provided in section 18
hereto.
(c) Such notice shall state that the N Warrants will be
automatically redeemed 30 days from the date of such notice unless
earlier exercised in accordance with their terms. Each Holder of the
N Warrants subject to redemption remaining unexercised after the
expiration of the 30 day period shall be required to tender the
redeemed N Warrants, duly endorsed, to the Warrant Agent in exchange
for payment of the redemption price. On such surrender of redeemed N
Warrants, a check drawn on the Redemption Account shall be issued and
delivered with all reasonable dispatch to, or on the written order of,
the Holder and in such name or names as the Holder may designate.
From and after the expiration of the 30 day period, the N Warrants
subject to redemption shall be of no further force and effect, and
shall represent only the interest of the Holder in the funds deposited
in the Redemption Account for redemption of such N Warrants.
(d) The Warrant Agent shall periodically, but not less
frequently than monthly, provide to the Company an accounting of the N
Warrants tendered for redemption and the funds disbursed from the
Redemption Account pursuant thereto. The Redemption Account shall be
closed 120 days following the expiration of the 30 day notice period
specified in paragraph (c) of this subsection 8.3, and all funds
remaining in said account will be returned to the Company, together
with a complete accounting of the N Warrants redeemed and a list of
all such N Warrants remaining unexercised and not returned to the
Company for redemption. Any N Warrants received by the Warrant Agent
subsequent to closing the Redemption Account will be promptly
delivered to the Company. The Company shall pay all costs associated
with establishing and maintaining the Redemption Account, including
the costs of issuing any checks.
8.4 Cancellation of N Warrants. In the event the Company shall
acquire N Warrants, the same shall thereupon be delivered to the Warrant
Agent and be canceled by it and retired. The Warrant Agent shall cancel
any N Warrant surrendered for exchange, substitution, transfer, or exercise
in whole or in part.
9. Warrant Price. The exercise price to acquire Warrant Shares issuable
on exercise of the N Warrants shall be $12.00 per share (the "Warrant Price").
The Warrant Price shall be subject to adjustment pursuant to section 10 hereof.
10. Adjustment of Warrant Price and Number of Warrant Shares.
10.1 Adjustments. The number of Warrant Shares issuable on the
exercise of each N Warrant and the Warrant Price shall be subject to
adjustment as follows:
(a) In case the Company shall (i) pay a dividend in Common Stock
or securities convertible into Common Stock or make a distribution in
Common Stock or securities convertible into Common Stock, (ii)
subdivide its outstanding Common Stock, (iii) combine its outstanding
Common Stock into a smaller number of shares, or (iv) issue by
reclassification of its Common Stock other securities of the Company,
the number of Warrant Shares issuable on exercise of each N Warrant
immediately prior thereto shall be adjusted so that the Holder of each
N Warrant shall be entitled to receive on exercise the kind and number
of Warrant Shares of the Company which he would have owned or have
been entitled to receive after the happening of any of the events
described above, had such N Warrant been exercised immediately prior
to the happening of such event or any record date with respect
thereto. Any adjustment made pursuant to this paragraph (a) shall
become effective immediately after the effective date of such event
retroactive to the record date for such event.
(b) No adjustment in the number of Warrant Shares issuable
hereunder shall be required unless such adjustment would require an
increase or decrease of at least 1% in the number of Warrant Shares
issuable on the exercise of each N Warrant; provided, however, that
any adjustments which by reason of this paragraph (b) are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment.
(c) Whenever the number of Warrant Shares issuable on the
exercise of each N Warrant is adjusted, as herein provided, the
Warrant Price payable on exercise of each N Warrant shall be adjusted
by multiplying such Warrant Price immediately prior to such adjustment
by a fraction, the numerator of which shall be the number of Warrant
Shares issuable on the exercise of each N Warrant immediately prior to
such adjustment and the denominator of which shall be the number of
Warrant Shares so issuable immediately thereafter.
(d) Whenever the number of Warrant Shares issuable on the
exercise of each N Warrant or the Warrant Price is adjusted, as herein
provided, the Company shall cause the Warrant Agent to promptly mail
by first class mail, postage prepaid, to each Holder of N Warrants
notice of such adjustment or adjustments and shall deliver to the
Warrant Agent a certificate of a firm of independent accountants
selected by the board of directors of the Company (which may be the
regular accountants employed by the Company) setting forth the number
of Warrant Shares issuable on the exercise of each N Warrant and the
Warrant Price after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such certificate, in
the absence of manifest error, shall be conclusive evidence of the
correctness of adjustment. The Warrant Agent shall be under no duty
or responsibility with respect to any such certificate, except to
exhibit the same, from time to time, to any Holder of N Warrants
desiring an inspection thereof during reasonable business hours. The
Warrant Agent shall not at any time be under any duty or
responsibility to any Holders of N Warrants to determine whether any
facts exist which may require any adjustment of the Warrant Prices or
the number of Warrant Shares issuable or other securities purchasable
or with respect to the nature or extent of any such adjustment when
made, or with respect to the method employed in making such
adjustment.
(e) For the purpose of this subsection 10.1, the term "Common
Stock" shall mean (i) the class of stock designated as the common
stock of the Company at the date of this Agreement, or (ii) any other
class of stock resulting from successive changes or reclassifications
of such shares consisting solely of changes in par value, or from par
value to no par value, or from no par value to par value. In the
event that at any time, as a result of an adjustment made pursuant to
paragraph (a) above, the Holders of N Warrants shall become entitled
to purchase any securities of the Company other than Warrant Shares,
thereafter the number of such other securities so purchasable on
exercise of each N Warrant and the Warrant Price of such securities
shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in paragraphs (a) through (d),
inclusive, above, and the provisions of section 5 and subsections 10.2
through 10.5, inclusive, with respect to the Warrant Shares shall
apply on like terms to any such other securities.
10.2 No Adjustments for Dividends. Except as in subsection 10.1, no
adjustment in respect of any dividends shall be made during the term of the
N Warrants or on the exercise of N Warrants
10.3 No Adjustment in Certain Cases. No adjustments shall be made:
(a) In connection with the issuance of any Warrant Shares on the
exercise of the N Warrants;
(b) In connection with the issuance or conversion of shares of
preferred stock of the Company (except for a dividend or distribution
by the Company with respect to Common Stock of preferred stock
convertible into Common Stock).
(c) In connection with the issuance of additional Warrant Shares
or other securities on account of the anti-dilution provisions
contained in or relating to the N Warrants:
(d) In connection with the purchase or other acquisition by the
Company of any shares of Common Stock, preferred stock, evidences of
its indebtedness or assets, or rights, options, warrants, or
convertible securities containing the right to subscribe for or
purchase Common Stock; or
(e) In connection with the sale or exchange by the Company of
any shares of Common Stock, preferred stock, evidences of its
indebtedness or assets; or rights, options, warrants, or convertible
securities containing the right to subscribe for or purchase Common
Stock.
10.4 Preservation of Purchase Rights on Reclassification, Consolidation,
Etc. In case of any consolidation of the Company with or merger of the Company
into another corporation or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, the Company or such successor or purchasing corporation, as the case
may be, shall execute with the Warrant Agent an agreement that each Holder of an
N Warrant shall have the right thereafter on payment of the Warrant Price in
effect immediately prior to such action to purchase on exercise of each N
Warrant the kind and amount of Warrant Shares and other securities and property
which he would have owned or have been entitled to receive after the happening
of such consolidation, merger, sale, or conveyance had such N Warrant been
exercised immediately prior to such action. The Company shall mail by first
class mail, postage prepaid, to the Holder of each N Warrant notice of the
execution of any such agreement. Such agreement shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this section 10. The provisions of this subsection 10.4 shall
similarly apply to successive consolidations, mergers, sales, or conveyances.
The Warrant Agent shall be under no duty or responsibility to determine the
correctness of any provisions contained in any such agreement relating either to
the kind or amount of Warrant Shares of stock or other securities or property
receivable on exercise of N Warrants or with respect to the method employed and
provided therein for any adjustments.
10.5 Statement on N Warrants. Irrespective of any adjustments in the
Warrant Price or the number or kind of Warrant Shares purchasable on the
exercise of the N Warrants, N Warrants theretofore or hereafter issued may
continue to express the same price and number and kind of Warrant Shares as are
stated in the N Warrants initially issuable pursuant to this Agreement.
11. Fractional Interests. The Company shall not be required to issue
fractional Warrant Shares on the exercise of N Warrants. If more than one N
Warrant shall be presented for exercise in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable on the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares represented by the N Warrants so presented. If any fraction of a
share would, except for the provisions of this section 11, be issuable on the
exercise of any N Warrant (or specified portion thereof), the Company shall pay
an amount in cash equal to the current value of such fraction computed on the
basis of (i) the highest closing bid price of the Common Stock, as reported by
Nasdaq on the last business day prior to the date of exercise, (ii) the last
reported sale price of the Common Stock on the national stock exchange on which
the Common Stock is listed on the last business day prior to the date of
exercise on which such a sale shall have been effected, if the Common Stock is
listed on such an exchange, or (iii) if not quoted on Nasdaq or listed on an
exchange, as reported on the Electronic Bulletin Board maintained by the NASD
or, if not on the Electronic Bulletin Board, any other reliable medium of
quotation.
12. No Right as Shareholders; Notices to N Warrant Holders. Nothing
contained in this Agreement or in the N Warrants shall be construed as
conferring on the Holders or their transferees the right to vote or to receive
dividends or to consent to or to receive notice as shareholders in respect of
the meeting of shareholders for the election of directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company.
13. Disposition of Proceeds on Exercise of N Warrants; Inspection of
Warrant Agreement. The Warrant Agent shall account promptly to the Company with
respect to N Warrants exercised and concurrently pay to the Company all moneys
received by the Warrant Agent for the purchase of the Company's Warrant Shares
through the exercise of such N Warrants. The Warrant Agent shall keep copies of
this Agreement and any notices given or received hereunder available for
inspection by Holders of N Warrants during normal business hours at its
principal office in the city of Salt Lake City, state of Utah. The Company
shall supply the Warrant Agent from time to time with such numbers of copies of
this Agreement as the Warrant Agent may request.
14. Merger or Consolidation or Change of Name of Warrant Agent. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided, that such
corporation would be eligible for appointment as a successor Warrant Agent under
the provisions of section 16 hereof. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, any of the
N Warrants shall have been countersigned but not delivered, any such successor
to the Warrant Agent may adopt the countersignature of the original Warrant
Agent and deliver such N Warrants so countersigned, and in case at that time any
of the N Warrants shall not have been countersigned, any successor to the
Warrant Agent may countersign such N Warrants either in the name of the
predecessor Warrant Agent or in the name of the successor Warrant Agent, and in
all such cases, the N Warrant shall have the full force provided in the N
Warrants and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and at
such time any of the N Warrants shall have been countersigned but not delivered,
the Warrant Agent may adopt the countersignature under its prior name and
deliver N Warrants so countersigned, and in case at that time any of the N
Warrants shall not have been countersigned, the Warrant Agent may countersign
such N Warrants either in its prior name or in its changed name, and in all such
cases such N Warrants shall have the full force provided in the N Warrants and
in this Agreement.
15. Concerning the Warrant Agent. The Warrant Agent undertakes the duties
and obligations imposed by this Agreement on the following terms and conditions,
by all of which the Company and the Holders of N Warrants, by their acceptance
thereof shall be bound:
15.1 The statements contained herein and in the N Warrants shall be
taken as statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken by it. The Warrant Agent
assumes no responsibility with respect to the distribution of the N
Warrants except as herein otherwise provided.
15.2 The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or
in the N Warrants to be complied with by the Company.
15.3 The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys, agents or employees, and the Warrant Agent
shall not be answerable or accountable for any act of any such attorneys,
agents, or employees or for any loss to the Company resulting from such
act, except for the negligence or bad faith of such attorneys, agents, or
employees; provided, reasonable care shall have been exercised in the
selection and continued employment thereof.
15.4 The Warrant Agent may consult at any time with legal counsel
satisfactory to it (who may be counsel for the Company), and the Warrant
Agent shall incur no liability or responsibility to the Company or to any
Holder of any Warrant in respect of any action taken, suffered, or omitted
by it hereunder in good faith and in accordance with the opinion or the
advice of such counsel.
15.5 Whenever in the performance of its duties under this Agreement
the Warrant Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering
any action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the president or a vice-
president or the treasurer or the secretary of the Company and delivered to
the Warrant Agent, and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance on such certificate.
15.6 The Company agrees to pay the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the
execution of its duties under the terms of this Agreement, to reimburse the
Warrant Agent for all expenses, taxes and governmental charges, and other
charges of any kind and nature incurred by the Warrant Agent in the
execution of its duties under the terms of this Agreement, and to indemnify
the Warrant Agent and save it harmless against any and all liabilities,
including judgments, costs and counsel fees, for anything done or omitted
by the Warrant Agent in the execution of its duties under the terms of this
Agreement, except as a result of the Warrant Agent's negligence or bad
faith.
15.7 The Warrant Agent shall be under no obligation to institute any
action, suit, or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more Holders of N Warrants
shall furnish the Warrant Agent with reasonable security and indemnity for
any costs and expenses which may be incurred, but this provision shall not
affect the power of the Warrant Agent to take such action as the Warrant
Agent may consider proper, whether with or without any such security or
indemnity. All rights of action under this Agreement or under any of the N
Warrants may be enforced by the Warrant Agent without the possession of any
of the N Warrants or the production thereof at any trial or other
proceeding relative thereto, and any such action, suit, or proceeding
instituted by the Warrant Agent shall be brought in its name as Warrant
Agent, and any recovery of judgment shall be for the ratable benefit of the
Holders of the N Warrants, as their respective rights or interests may
appear.
15.8 The Warrant Agent and any stockholder, director, officer, or
employee of the Warrant Agent may buy, sell, or deal in any of the N
Warrants or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend money to or otherwise act as fully and freely as
though it were not Warrant Agent under this Agreement. Nothing herein
shall preclude the Warrant Agent from acting in any other capacity for the
Company or for any other legal entity.
15.9 The Warrant Agent shall act hereunder solely as agent, and its
duties shall be determined solely by the provisions hereof. The Warrant
Agent shall not be liable for anything which it may do or refrain from
doing in connection with this Agreement, except for its own negligence or
bad faith.
15.10 The Warrant Agent will not incur any liability or
responsibility to the Company or to any Holder of any N Warrant for any
action taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, document, or instrument reasonably believed by
it to be genuine and to have been signed, sent, or presented by the proper
party or parties.
15.11 The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Warrant Agent) or in respect
of the validity or execution of any N Warrant (except its countersignature
thereof), nor shall the Warrant Agent by any act hereunder be deemed to
make any representation or warranty as to the authorization or reservation
of any Warrant Shares (or other stock) to be issued pursuant to this
Agreement or any N Warrant or as to whether any Warrant Shares (or other
stock) will when issued be validly issued, fully paid, and nonassessable or
as to the Warrant Price, or the number or kind or amount of Warrant Shares
or other securities or other property issuable on exercise of any N
Warrant.
15.12 The Warrant Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from the chairman of the board or the president or a vice-president or the
secretary or the treasurer of the Company, and to apply to such officers
for advice or instructions in connection with its duties, and shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer.
16. Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving to the Company 30
days' notice in writing. The Warrant Agent may be removed by like notice to the
Warrant Agent from the Company. If the Warrant Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by the Holder of an N Warrant (who shall with
such notice submit his N Warrant for inspection by the Company), then the Holder
of any N Warrant may apply to any court of competent jurisdiction for the
appointment of a successor to the Warrant Agent. Any successor warrant agent,
whether appointed by the Company or such a court, shall be a bank, trust
company, or securities transfer agency, in good standing, incorporated under the
laws of the states of Delaware, Nevada, or Utah, or of the United States of
America. After appointment the successor warrant agent shall be vested with the
same powers, rights, duties, and responsibilities as if it had been originally
named as Warrant Agent without further act or deed; but the former Warrant Agent
shall deliver and transfer to the successor warrant agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act, or deed necessary for the purpose. Failure to file any notice
provided for in this section 16, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor warrant agent, as the case may be. In
the event of such resignation or removal, the successor warrant agent shall
mail, first class, to each Holder, written notice of such removal or resignation
and the name and address of such successor warrant agent.
17. Identity of Transfer Agent. Forthwith on the appointment of any
subsequent Transfer Agent for the Company's Warrant Shares, or any other shares
of the Company's capital stock issuable on the exercise of the rights of
purchase represented by the N Warrants, the Company will file with the Warrant
Agent a statement setting forth the name and address of such Transfer Agent.
18. Notices. Any notice pursuant to this Agreement by the Company or by
the Holder of any N Warrant to the Warrant Agent, or by the Warrant Agent or by
the Holder of any N Warrant to the Company, shall be in writing and shall be
deemed to have been duly given if delivered or mailed certified mail, return
receipt requested (a) if to the Company, to Foreland Corporation, Union Terrace
Office Bldg., 12596 West Bayaud, Suite 300, Lakewood, Colorado 80226-2016, and
(b) if to the Warrant Agent, to Atlas Stock Transfer Corporation, 5899 South
State Street, Salt Lake City, Utah 84107. Each party hereto may from time to
time change the address to which notices to it are to be delivered or mailed
hereunder by notice in writing to the other party.
Any notice mailed pursuant to this Agreement by the Company or the Warrant
Agent to the Holders of N Warrants shall be in writing and shall be deemed to
have been duly given if mailed, postage prepaid, to such Holders at their
respective addresses as reflected on the books of the Warrant Agent.
19. Supplements and Amendments. The Company and the Warrant Agent may
from time to time supplement or amend this Agreement, without the approval of
any Holders of N Warrants, in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein or to make any other provisions in regard to
matters or questions arising hereunder which the Company and the Warrant Agent
may deem necessary or desirable and which shall not be inconsistent with the
provision of the N Warrants and which shall not adversely affect the interests
of the Holders of the N Warrants. In this regard, but not by way of limitation,
establishing an earlier date of exercise without a change in the expiration date
of the N Warrants set forth in section 5 or extending the period for exercise
without a change in the date on which the N Warrants are first exercisable set
forth in section 5 shall not be deemed to adversely affect the interests of the
Holders. As such, the board of directors of the Company and the Warrant Agent
may at their discretion extend the exercise periods for the N Warrants.
20. Successors. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
21. Merger or Consolidation of the Company. The Company will not merge or
consolidate with or into any other corporation unless the corporation resulting
from such merger or consolidation (if not the Company) shall expressly assume,
by supplemental agreement satisfactory in form to the Warrant Agent and executed
and delivered to the Warrant Agent, the due and punctual performance and
observance of each and every covenant and condition of this Agreement to be
performed and observed by the Company.
22. Applicable Law. This Agreement and each Warrant issued hereunder
shall be deemed to be a contract made under the laws of the state of Nevada and
for all purposes shall be construed in accordance with the laws of said state.
23. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrant Agent, and the Holders of the N Warrants any legal or equitable right,
remedy, or claim under this Agreement, but this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent, and the Holders of the
N Warrants.
24. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
25. Captions. The captions of the sections and subsections of this
Agreement have been inserted for convenience only and shall have no substantive
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the date first above written.
FORELAND CORPORATION
By: /s/ N. Thomas Steele
N. Thomas Steele, President
ATLAS STOCK TRANSFER CORPORATION, as
Warrant Agent
By: /s/ David Sorensen
David Sorensen, President
- 29 -
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
June 3, 1997
Board of Directors
Foreland Corporation
12596 West Bayaud, Suite 300
Lakewood, Colorado 80228-2019
Re: Foreland Corporation
Registration Statement on Form S-2
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-2 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. Warrant Agreement dated as of January 1, 1997 (the
"Warrant Agreement"), relating to common stock purchase
warrants designated as the N Warrants (herein so called);
4. The Registration Statement; and
5. 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 issued upon exercise of the N Warrants will be, when issued in
accordance with the terms set forth in the Warrant Agreement, and the Common
Stock to be sold by selling stockholders 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.
KL&M/RCT:pjc
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the registration statement of
Foreland Corporation on Form S-2 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 years in the three-year 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
May 22, 1997
MALKEWICZ HUENI ASSOCIATES, INC.
May 15, 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-2.
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
