SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to S240.14a-11(c) or S240.14a-12
FORELAND CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filling Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2), or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined).
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ]Fee paid previously by written preliminary materials.
[ ]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
FORELAND CORPORATION
12596 WEST BAYAUD, SUITE 300
LAKEWOOD, COLORADO 80228-2019
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 23, 1998
TO THE SHAREHOLDERS OF FORELAND CORPORATION:
The 1998 annual meeting of the shareholders (the "Annual Meeting") of
Foreland Corporation (the "Company") will be held at the Top of the Rockies, 555
17th Street Suite 3800, Denver, Colorado, on June 23, 1998. The Annual Meeting
will convene at 10:00 a.m., local time, to consider and take action on the
following proposals:
1. To elect five directors to serve until the expiration of their
respective terms and until respective successors are elected and
qualified;
2. To approve the grant of options to the executive officers and
directors of the Company;
3. To approve of the grant of options to recently appointed directors of
the Company; and
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment(s) thereof.
ONLY OWNERS OF RECORD OF THE 8,524,921 SHARES OF THE COMPANY'S COMMON
STOCK, EACH ENTITLED TO CAST ONE VOTE, AND THE 614,243 SHARES OF VOTING
PREFERRED STOCK, ENTITLED TO CAST AN AGGREGATE OF 204,748 VOTES, ISSUED AND
OUTSTANDING AS OF THE CLOSE OF BUSINESS ON MAY 1, 1998 (THE "RECORD DATE"), WILL
BE ENTITLED TO NOTICE OF AND TO VOTE AT THE ANNUAL MEETING.
HOLDERS OF AT LEAST ONE-THIRD OF THE VOTING SHARES OUTSTANDING ON THE
RECORD DATE MUST BE REPRESENTED AT THE MEETING TO CONSTITUTE A QUORUM FOR
CONDUCTING BUSINESS.
THE ATTENDANCE AT AND/OR VOTE OF EACH SHAREHOLDER AT THE ANNUAL MEETING IS
IMPORTANT, AND EACH SHAREHOLDER IS ENCOURAGED TO ATTEND. SHAREHOLDERS ARE
ENCOURAGED TO EXECUTE AND DELIVER A PROXY EVEN IF THEY PLAN TO ATTEND THE ANNUAL
MEETING.
FORELAND CORPORATION
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Don W. Treece, Secretary
Lakewood, Colorado
DATED: April 30, 1998
IMPORTANT
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE FILL IN,
SIGN, DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE SELF-ADDRESSED,
STAMPED ENVELOPE PROVIDED. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
SPECIAL REQUEST
IF YOUR SHARES ARE HELD IN THE NAME OF A BROKERAGE FIRM, NOMINEE, OR OTHER
INSTITUTION, ONLY IT CAN VOTE YOUR SHARES. PLEASE CONTACT PROMPTLY THE PERSON
RESPONSIBLE FOR YOUR ACCOUNT AND GIVE INSTRUCTIONS FOR YOUR SHARES TO BE VOTED.
<PAGE>
FORELAND CORPORATION
12596 WEST BAYAUD, SUITE 300
LAKEWOOD, COLORADO 80228-2019
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the management of Foreland Corporation (the "Company"), to
be voted at the annual meeting of shareholders to be held at the Top of the
Rockies, 555 17th Street Suite 3800, Denver, Colorado, on June 23, 1998, at
10:00 a.m., local time, or at any adjournment thereof (the "Annual Meeting").
The enclosed proxy, when properly executed and returned in a timely manner, will
be voted at the Annual Meeting in accordance with the directions set forth
thereon. If no instructions are indicated on the enclosed proxy, at the Annual
Meeting the proxy will be voted:
1. FOR the election of five directors to serve until the expiration of
their respective terms and until their respective successors are
elected and qualified;
2. FOR approval of the grant of options to executive officers and
directors of the Company;
3. FOR approval of the grant of options to recently appointed directors
of the Company; and
4. IN accordance with the best judgment of the persons acting under the
proxies on the transaction of such other business as may properly come
before the Annual Meeting or any adjournment(s) thereof.
The enclosed proxy, even though executed and returned to the Company, may
be revoked at any time before it is voted, either by giving a written notice,
mailed or delivered to the secretary of the Company, by submitting a new proxy
bearing a later date, or by voting in person at the Annual Meeting. If the
proxy is returned to the Company without specific direction, the proxy will be
voted in accordance with the board of directors' recommendations as set forth
above.
The entire expense of this proxy solicitation will be borne by the
Company. In addition to this solicitation, officers, directors, and regular
employees of the Company, who will receive no extra compensation for such
services, may solicit proxies by mail, by telephone, or in person. This
statement and form of proxy are being first mailed to shareholders on or about
May 26, 1998.
Only holders of the Company's 8,524,921 shares of common stock, par value
$0.001 (the "Common Stock"), and the 614,243 share of voting preferred stock,
consisting of 40,000 shares of 1991 Series Convertible Preferred Stock, 153,140
shares of 1994 Series Convertible Preferred Stock, and 421,103 shares of 1995
Series Preferred Stock, issued and outstanding as of the close of business on
May 1, 1998 (the "Record Date"), will be entitled to vote at the Annual Meeting.
The holders of the Common Stock, the 1991 Series Convertible Preferred Stock,
the 1994 Series Convertible Preferred Stock and the 1995 Series Preferred Stock
vote together as a single class (collectively referred to herein as "Shares").
Each share of Common Stock is entitled to one vote. Each series of voting
preferred stock is convertible into Common Stock at the rate of one share of
Common Stock for each three shares of preferred stock, for an aggregate of
204,748 shares of Common Stock issuable on conversion. Holders of voting
preferred stock are entitled to one vote for each share of Common Stock that
would be received on conversion. Holders of Shares having at least one-third of
the 8,729,669 votes entitled to be cast at the Annual Meeting and outstanding
on the Record Date must be represented either in person or by proxy at the
Annual Meeting to constitute a quorum for conducting business.
All properly executed and returned proxies, as well as Shares represented
in person at the meeting, will be counted for purposes of determining if a
quorum is present whether the proxies are instructed to abstain from voting or
consist of broker non-votes. Under Nevada corporate law and the Company's
articles of incorporation and bylaws, the election of directors requires a vote
by a plurality of the Shares present either in person or represented by proxy at
the Annual Meeting. All other matters except certain specified extraordinary
matters are considered approved by the shareholders if approved by at least a
majority of the Shares present at a meeting of the shareholders at which a
quorum is present. Therefore, abstentions and broker non-votes will have the
same legal effect as a vote against matters other than the election of
directors. Abstentions and broker non-votes will not be counted for the
election of directors.
Officers and directors holding an aggregate of 144,054 shares of Common
Stock, or approximately 1.7% of the issued and outstanding Shares entitled to
vote, have indicated their intent to vote in favor of all proposals.
- -------------------------------------------------------------------------------
1. ELECTION OF DIRECTORS
- -------------------------------------------------------------------------------
GENERAL
The Company's articles of incorporation provide that the board of
directors shall be elected at the annual meeting of the shareholders of the
Company. The board of directors has nominated Grant Steele, N. Thomas Steele,
Bruce C. Decker, Lee B. Van Ramshorst, and Robert D. Gershen for election as
directors. In connection with the appointment of Messrs. Van Ramshorst and
Gershen to the board of directors in early 1998, the directors adopted an
amendment to the bylaws of the Company to divide the board of directors into
three classes as nearly equal in size as possible. The term of office of each
director is three years and until such director's successor is elected and
qualified. In order to provide for three classes, the nominees, if elected,
will serve as directors for the following terms: Grant Steele and Lee B. Van
Ramshorst will serve until the 1999 annual meeting; Bruce C. Decker and Robert
D. Gershen will serve until the 2000 annual meeting; and N. Thomas Steele will
serve until the 2001 annual meeting.
It is intended that votes will be cast, pursuant to authority granted by
the enclosed proxy, for the election of the nominees named below as directors of
the Company, except as otherwise specified in the proxy. In the event that any
one or more of such nominees shall be unable to serve, votes will be cast,
pursuant to authority granted by the enclosed proxy, for such person or persons
as may be designated by the board of directors. Biographical information
follows for each person nominated. The officers of the Corporation are elected
at the annual meeting of the board of directors to hold office at the pleasure
of the board of directors. The information concerning the nominees and
directors and their security holdings has been furnished by them to the Company.
(See "Principal Shareholders" below.)
DIRECTORS
The following table sets forth the name, age, term of directorship, and
principal business experience of each director of the Company who has served in
such position since the Company's last fiscal year. Each such individual is a
nominee being considered for election at the Annual Meeting.
DIRECTOR BUSINESS EXPERIENCE DURING PAST
NAME AGE SINCE FIVE YEARS AND OTHER INFORMATION
Grant Steele* 73 1985 Co-founder and chairman. Executive officer
and chairman of the Company since
organization in 1985. Employed by Gulf Oil
Corporation from 1953 to 1983. From 1973 to
1980, Chief Geologist U.S. for Gulf Oil.
Graduated from the University of Utah, Salt
Lake City, Utah, in 1949 with bachelor of
science degree. Earned his doctorate in
geology from the University of Washington in
1959. Certified professional geologist and
an active member of the American Association
of Petroleum Geologists (awarded a
distinguished service award in 1984), the
Houston Geological Society, and the Society
of Economic Paleontologists and
Mineralogists.
N. Thomas 53 1985 Co-founder and president. Officer and
Steele* director of the Company since organization in
1985. Elected president in May 1996. Prior
to joining the Company in 1985, president of
Magnum Resources, Inc., Ogden, Utah, a
company engaged in mineral exploration in
Nevada and Utah.
Bruce C. Decker 46 1994 Officer and director of the Company since
1994. Officer of the Krutex Energy
Corporation from 1983 through acquisition by
the Company in 1989. Received bachelor's
degree in finance and management from the
University of Utah in 1973.
Lee B. Van 58 1998 Has over thirty years of experience in the
Ramshorst oil and gas industry. Has held various
positions at Amoco Production Company, Texas
Oil & Gas Corp., Inexco Oil Company, and
Plains Petroleum Operating Company. Received
Engineering bachelor's degree from University
of Missouri-Rolla and master's in Management
Science from Texas Christian University.
During last ten years at Plains, held
positions from Vice President, Production and
Engineering to Senior Vice President,
Operations and Business Development.
Instrumental in structuring the joint venture
between Foreland and Plains in 1995.
Robert D. 44 1998 Founder and president of Associated Energy
Gershen Managers, Inc., an investment management
firm. Associated Energy Managers specializes
in opportunistic oil and gas investing
through financing the growth and development
of small independent energy companies.
* Grant Steele is the uncle of N. Thomas Steele.
SIGNIFICANT EMPLOYEES
Don W. Treece Secretary and controller of the Company. Mr. Treece is
responsible for the internal and external financial accounting and reporting
requirements of the Company and prepares and coordinates the review and filing
of the quarterly and year-end reports required by the Securities and Exchange
Commission. Additionally, he is reponsible for coordinating the Company's audit
with its auditors. Mr. Treece's previous experience includes public company
reporting, financial accounting, tax, and treasury functions. He has over 18
years of oil and gas accounting experience, and over 25 years of financial
accounting experience. Mr. Treece received B.B.A. in Accounting from Southwest
Texas State University
Jerry Hansen. Mr. Hansen, who joined the Company in 1986, is senior
structural geologist for the Company with primary responsibility for generating
and developing exploration proposals and drilling prospects. He has 13 years of
oil and gas experience focused on prospect generation and evaluation in the
Powder River Basin, Gulf Coast, and primarily, in Nevada. He graduated with
degrees in geology from the University of Colorado in 1973 and the University of
Arizona in 1982. As senior structural geologist, Mr. Hansen's primary
responsibility is in the generation and development of drillable prospects, from
inception to actual wellsite operations.
Carl Schaftenaar. Mr. Schaftenaar, who joined the Company in 1993, has
been a geophysicist and geologist in the oil industry for 13 years. He holds a
bachelor's degree in geology from Hope College, Holland, Michigan, and a master
of science degree in geophysics from Texas A&M University. Mr. Schaftenaar
worked for Chevron USA on exploration and development projects in Nevada and the
Rocky Mountain area from 1982 to 1992. As senior geophysicist, Mr. Schaftenaar
is responsible for the acquisition and analysis of proprietary two- and
three-dimension seismic programs for the Company.
David T. Greene. David T. Greene, who joined the Company in 1995, is a
petroleum engineer with 18 years oil and gas experience. He holds a bachelor's
degree in earth science from the University of California at Santa Cruz and a
masters degree in petroleum engineering from Stanford University. Mr. Greene has
worked at Amoco Production Co. as Staff Petroleum Engineer, for Pacific
Enterprises Oil Company. as Division Engineering Manager, and for Plains
Petroleum Operating Co. as Senior Exploitation Engineer. Mr. Greene has
experience in the Rocky Mountain, Mid-Continent, Gulf Coast, and Offshore Gulf
of Mexico areas, especially in evaluation, design, and implementation of
secondary and tertiary recovery projects, especially relating to heavy oil and
tight reservoirs. Mr. Greene is responsible for providing engineering and field
supervision support of the Company's Eagle Springs Field drilling and
development program and for overall Nevada exploitation.
Fred Merian. Mr. Merian, who joined the Company in 1997, is Manager of
Corporate Development for the Company. He has 19 years of oil and gas
experience and has held engineering, managerial and executive positions with
Amoco Production Company, Tenneco Oil Company, Union Pacific Resources
Corporation (Champlin) and recently as President-COO of Vessels Oil and Gas
Company. Mr. Merian has had direct finance and operational responsibilities for
integrated oil and gas project development in most western states of the United
States. Mr. Merian's technical knowledge coupled with finance and M&A
experience has enhanced the Company's corporate development opportunities. Mr.
Merian graduated with a degree in Geological Engineering from the University of
Missouri-Rolla in 1978.
BOARD MEETINGS AND COMMITTEES
The board of directors had four formal meetings during 1997. The directors
discussed the business and affairs of the Company informally on several
occasions throughout the year and took several actions through unanimous written
consents in lieu of meetings. The Company had no audit or compensation
committees during 1997.
In January 1998, the board appointed Messrs. G. Steele, Decker and Van
Ramshorst to the newly formed compensation committee. The compensation
committee is to consist of three directors as selected by the action of the
entire board of directors. The compensation committee has the responsibility of
reviewing and recommending compensation of executive officers and other
executive level personnel, counseling the chief executive officer respecting
compensation matters, supporting a suitable employment environment, and
developing and administering the Company's stock option and award plans for
executive officers and other employees.
In January 1998, the board also appointed Messrs. T. Steele, Van Ramshorst,
and Gershen to the newly formed audit committee. The audit committee is to
consist of three directors as selected by the action of the entire board of
directors. The audit committee recommends the selection of the Company's
independent auditors, reviews financial reports and audit results respecting
accounting practices and procedures, reviews procedures for preparation and
release of unaudited interim financial information, and reviews all related
party transactions and potential conflict of interest situations.
VOTE REQUIRED
Directors are elected by the affirmative vote of the holders of a plurality
of the Shares voted at the Annual Meeting. Abstentions and broker non-votes
will not be counted in the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES OF MANAGEMENT SET FORTH HEREIN AS DIRECTORS OF THE COMPANY, TO SERVE IN
SUCH CAPACITIES UNTIL THE EXPIRATION OF THEIR TERM AND UNTIL THEIR SUCCESSORS
ARE ELECTED AND QUALIFIED.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of forms 3, 4, and 5, and amendments thereto,
furnished to the Company during or respecting its last fiscal year, no director,
officer, beneficial owner of more than 10% of any class of equity securities of
the Company or any other person known to be subject to Section 16 of the
Exchange Act, failed to file on a timely basis reports required by Section 16(a)
of the Exchange Act for the last fiscal year, except that Grant Steele failed to
report two October transactions respecting the sale of an aggregate of 4,000
shares.
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth for each of the last three fiscal years the
annual and long term compensation earned by, awarded to, or paid to the chief
executive officer of the Company and Bruce C. Decker, the only other executive
officer who received total annual salary and bonuses in excess of $100,000 for
all services rendered in all capacities to the Company and its subsidiaries
during the last fiscal year (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- ----------------------- -----------------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING AWARD ALL OTHER
YEAR COMPEN- STOCK OPTIONS/ PLAN COMPEN-
NAME AND ENDED SALARY BONUS SATION AWARD(S) SARS PAYOUTS SATION
PRINCIPAL DEC. 31 ($) ($) ($) ($) (#) ($) ($)
POSITION
- --------------- ------- ------- ------- -------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
N. Thomas Steele 1997 129,800 23,884 24,000 -- 300,000/-- -- --
President (CEO) 1996 104,320 -- 10,000 -- 200,000/-- -- 37,500
1995 80,400 -- -- -- --/-- -- --
Bruce C. Decker 1997 119,000 10,836 24,000 -- 300,000/-- -- --
1996 88,958 -- 10,000 -- 200,000/-- -- --
1995 72,000 -- -- -- -- -- --
</TABLE>
Option/SAR Grants in Last Fiscal Year
The following table sets forth information respecting all individual grants
of options and stock appreciation rights ("SARs") made during the last completed
fiscal year to Named Executive Officers of the Company.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
STOCK APPRECIATION
FOR
OPTION TERM (1)
------------------------------------------------------------ --------------------
(A) (B) (C) (D) (E) (H)
% OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE
OPTIONS/SARS DURING PRICE EXPIRATION (G)
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ------------- ------------ ----------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
N. Thomas 200,000(1)/-- 20.4% $2.50 9/2/10 351,440 1,029,372
Steele,
President (CEO) 100,000(2)/-- 10.2% 4.00 9/2/07 (4,912) 259,070
Bruce C. Decker 200,000(1)/-- 20.4% 2.50 9/2/10 351,440 1,029,372
100,000(2)/-- 10.2% 4.00 9/2/07 (4,912) 259,070
</TABLE>
(1) Based on the closing sales price on Nasdaq for the Common Stock of $2.31 on
September 2, 1997, on the date of grant.
(2) Options were immediately exercisable to purchase 50,000 shares and vest to
purchase an additional 50,000 shares at the next three anniversaries of the
date of grant. The options expire in increments ten years from the date of
vesting. On a change in control of the Company, the optionee is entitled
to payment in an amount equal to the unexercised options times the fair
market value of the options.
(3) Options were immediately exercisable to purchase 25,000 shares and vest to
purchase an additional 25,000 shares at the next three anniversaries of the
date of grant. The options expire ten years from the date of grant. On a
change in control of the Company, the optionee is entitled to payment in an
amount equal to the unexercised options times the fair market value of the
options.
Aggregate Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
The following table sets forth information respecting the exercise of
options and SARs during the last completed fiscal year by the Named Executive
Officers of the Company and the fiscal year end values of unexercised options
and SARs.
(A) (B) (C) (D) (E)
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED ON FY END (#) FY END ($)
EXERCISE VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE(1) UNEXERCISABLE(2)
- ------------ --------- ------------- --------------- ----------------
N. Thomas -- -- 249,000/225,500 $78,447/$231,975
Steele,
President (CEO)
Bruce C. Decker -- -- 175,000/225,000 77,325/231,975
(1) For a complete description of the terms of options held by the Name
Executive Officers, see "Principal Shareholders" below.
(2) Based on the closing sales price on Nasdaq for the Common Stock of $4.031
on December 31, 1997.
EMPLOYMENT AGREEMENTS
Effective September 2, 1997, the Company entered into new executive
employment agreements with its executive officers in order to provide a
prospective lender assurances that key management personnel would have a strong
incentive to remain in their positions during the term of the loan. Under the
agreements, Grant Steele, N. Thomas Steele, and Bruce C. Decker will be
compensated at annual salaries of $72,000, $125,000, and $119,000, respectively,
with increases to be determined by the board of directors, provided that on each
anniversary the amount is increased by the percentage increase, if any, in the
Consumer Price Index of all Urban Consumers for the year end preceding such
anniversary date. The agreement with Grant Steele provides that $54,000 of his
annual salary shall be accrued and paid only toward the exercise of stock
options held by him. The agreements for N. Thomas Steele and Bruce C. Decker
provide for a $48,000 increase in each such executive officer's annual salary at
such time as the Company achieves sustained net oil production of at least 1,000
barrels per day for any calendar month. Each such employment agreement is for a
36-month term and is automatically renewed each month for a new 36-month term.
The employment agreements contain covenants not to compete for two years after
termination of employment, restrictions on the disclosure of confidential
information, provisions for reimbursement of expenses and payment of major
medical insurance coverage, and an agreement of the Company to register
securities of the Company held by such persons at the request of the employees.
These agreements provide for the grant to each executive of ten-year
options to purchase 200,000 shares of Common Stock (50,000 shares in the case of
Grant Steele) at a price of $2.50 per share and options to purchase 100,000
shares at an exercise price of $4.00 per share. All of such options were
immediately vested to purchase 25% of the covered shares and vest in equal
increments on the next three successive anniversary dates. In the event of
termination of employment resulting from a change in control not approved by the
board of directors, each executive will receive payment, in cash or Common
Stock, at the executive's option, in an amount equal to the executive's base
salary for the remaining term of his respective employment agreement plus any
incentive compensation previously earned. In addition, all options held by the
executive shall immediately become vested and exercisable and the executive
shall receive payment equal to the fair market value of the options granted
under the employment agreement times the number of unexercised options in
consideration of the cancellation of such options.
DIRECTORS' COMPENSATION
The board has approved the payment of $2,000 per month to each of the
Company's directors who are also employees of the Company. In connection with
the appointment of two new directors in January 1998, the board of directors has
also adopted a stock option plan to compensate those directors who are not
employees. Under this plan, Messrs. Van Ramshorst and Gershen have each been
granted options to purchase an aggregate of 45,000 shares of Common Stock at an
exercise price of $5.00 per share. Such options were vested to purchase 5,000
shares on appointment and vest to purchase an additional 10,000 shares if the
individual is elected to serve as a director at the Annual Meeting. Thereafter,
each director's options will vest to purchase an additional 10,000 shares at the
next three anniversaries of election at the Annual Meeting, provided that such
individual is continuing to serve as a director. In connection with the
requirements of Nasdaq, these options are being submitted to the shareholders
for their approval, as discussed below under "3. APPROVAL OF DIRECTOR OPTIONS."
LIMITATION OF LIABILITY AND INDEMNIFICATION
The articles of incorporation of the Company limit or eliminate the
personal liability of directors for damages for breaches of their fiduciary
duty, unless the director has engaged in intentional misconduct, fraud, or a
knowing violation of law, or paid a dividend in violation of the Nevada Revised
Statutes.
The Company's articles of incorporation and bylaws further provide for the
indemnification of officers and directors for certain civil liabilities,
including liabilities arising under the Securities Act, unless such person is
adjudged in any action, suit, or proceeding to be liable for his own negligence
or misconduct in the performance of his duty. 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.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of May 1, 1998, the outstanding Common
Stock of the Company owned of record or beneficially by each person who owned of
record, or was known by the Company to own beneficially, more than 5% of the
Company's shares of Common Stock issued and outstanding, and the name and share
holdings of each director and all of the executive officers and directors as a
group:
PERCENTAGE
NATURE OF NUMBER OF COMMON OF
NAME OF BENEFICIAL OWNER OWNERSHIP SHARES OWNED(1) OWNERSHIP(2)
- --------------------------- -------------- ----------------- ------------
DIRECTORS AND PRINCIPAL
SHAREHOLDERS
Grant Steele Common Stock 78,832(3) 0.9%
Options 183,333(4)(8) 3.2
---------
Total 262,165 4.1
N. Thomas Steele Common Stock 50,888(8) 0.6%
Options 474,000(5)(8) 5.3
---------
Total 524,888 5.8
Bruce C. Decker Common Stock 13,334 0.2%
Options 400,000(6)(8) 4.6
---------
Total 413,334 4.8
Lee B. Van Ramshorst Common Stock 1,000 0.0%
Options 0(8) 0.0
---------
Total 1,000 0.0
Robert D. Gershen Common Stock 0 0.0%
Warrants 1,000,000(7) 10.5
Options 0(8)
---------
Total 1,000,000 10.5
ALL EXECUTIVE OFFICERS AND
DIRECTORS AS A
GROUP (6 PERSONS) Common Stock 144,721 1.7%
Options 1,064,999 11.1
Warrants 1,000,000 10.5
---------
Total 2,209,720 20.9
=========
(1) Except as otherwise noted, shares are owned beneficially and of record, and
such record shareholder has sole voting, investment, and dispositive power.
The address of all such persons for purposes of this table is deemed to be
the address of the Company.
(2) Calculations of total percentages of shares outstanding for each individual
assumes the exercise of all options held by that individual to which the
percentage relates, including options subject to vesting provisions.
Percentages calculated for totals of all executive officers and directors
as a group assume the exercise of all options held by the indicated group.
(3) Includes 33,333 shares held in trust, over which Dr. Steele exercises sole
investment, voting, and dispositive power.
(4) Consists of options to acquire 33,333 shares of Common Stock at an exercise
price of $4.50 per share at any time prior to December 31, 2002, options
vesting incrementally to acquire an aggregate of 50,000 shares at $2.50 per
share expiring incrementally through September 2, 2010, and options vesting
incrementally to acquire an aggregate of 100,000 shares at $4.00 per share
expiring September 2, 2007. The options to acquire 33,333 shares at $4.50
per share 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.
(5) Consists of options to acquire 38,889 shares of Common Stock at an exercise
price of $4.50 per share at any time prior to December 31, 2002, options to
acquire 11,111 shares at an exercise price of $3.93 per share at any time
prior to December 31, 2002, options to acquire 24,000 shares at $4.50 per
share at any time prior to May 19, 2003, options to acquire an aggregate of
100,000 shares at an exercise price of $5.00 per share expiring
incrementally through September 1, 2006, options vesting incrementally to
acquire an aggregate of 200,000 shares at $2.50 per share expiring
incrementally through September 2, 2010, and options vesting incrementally
to acquire an aggregate of 100,000 shares at $4.00 per share expiring
September 2, 2007. The options to acquire 38,889 shares at $4.50 per share
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.
(6) Consists of options to acquire an aggregate of 100,000 shares at $5.00 per
share expiring incrementally through September 1, 2006, options vesting
incrementally to acquire an aggregate of 200,000 shares at $2.50 per share
expiring incrementally through September 2, 2010, and options vesting to
acquire an aggregate of 100,000 shares at $4.00 per share expiring
September 2, 2007.
(7) Consists of warrants to purchase 750,000 shares at $6.00 per share and
250,000 shares at $10.00 per share through January 6, 2003. These warrants
are held by Energy Income Fund, L.P. Mr. Gershen is the managing director
of EIF General Partner, L.L.C., its general partner.
(8) Does not include options to purchase 100,000 shares of Common Stock at an
exercise price of $4.00 per share at any time through July 18, 2001,
granted to each of Grant Steele, N. Thomas Steele, and Bruce C. Decker
or options to purchase 45,000 shares of Common Stock at an exercise price
of $5.00 per share granted to each of Lee B. Van Ramshorst and Robert D.
Gershen. All of such options are subject to stockholder approval, as
discussed below under "2. APPROVAL OF EXECUTIVE OPTIONS" and
"3. APPROVAL OF DIRECTOR OPTIONS."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Unless otherwise indicated, the terms of the following transactions between
related parties were not determined as a result of arm's length negotiations.
Salary Deferrals and Waivers; Officer and Director Notes Payable
The Company owed $333,866 in salaries and interest to two current officers
and directors and a former officer and director at December 31, 1997. The
Company also had outstanding loans from a current officer and director and two
former officers and directors in the amount of $311,758 as of such date.
The September 1997 principal and interest installment due on officer and
director notes delivered in September 1994 as payment for option exercises was
extended 90 days, due to issues raised by potential third party sources of
financing respecting the lack of management's adequate equity stake in the
Company. Subsequent to September 30, 1997, each of N. Thomas Steele and Kenneth
Ransom satisfied their obligation to pay $238,900, and Grant Steele satisfied
his obligation to pay $213,600, in principal and accrued interest on such notes
by the delivery of 41,692 shares of Common Stock at a value of $4.75 per share,
the approximate market price of such Common Stock on the date of delivery, and
canceling options to purchase 66,667 shares at $6.375. Similarly, Bruce C.
Decker satisfied an obligation for $43,600 in principal and interest due on a
note for the purchase of stock on the exercise of options by delivering 5,158
shares of Common Stock and options to purchase 8,333 shares at $6.375. In
connection with these transactions, the Company agreed to pay an aggregate of
$67,400 to fund the related tax obligation from the foregoing.
During 1997, the Company extended for five years the expiration date of
options with a current expiration date of December 1997 or May 1998 as follows:
N. Thomas Steele, options to purchase 62,889 shares at $4.50 and 11,111 shares
at $3.93; and Grant Steele, options to purchase 33,333 shares at $4.50.
Effective October 23, 1997, Kenneth L. Ransom assumed the position of
senior geological advisor through December 31, 1998, at an annual salary of
$90,000 and resigned as an officer and director.
- --------------------------------------------------------------------------------
2. APPROVAL OF EXECUTIVE OPTIONS
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As discussed above, the board of directors believes that it is important
that the Company continue its policy of providing that employees have the
opportunity to acquire an equity interest in the Company in order that they may
benefit from their effort on behalf of the Company. At present, the executive
officers and directors of the Company hold only 144,054 shares of Common Stock,
or 1.7% of the outstanding Common Stock.
In July 1996, in recognition of the completion of certain funding, the
Company granted to each of Grant Steele, N. Thomas Steele, Kenneth L. Ransom,
and Bruce C. Decker five-year options to purchase 100,000 shares of Common Stock
("Executive Options"), subject to approval by the Company's shareholders. The
options are exercisable at an exercise price of $4.00 per share, the approximate
market price of the Common Stock on the date of grant, by delivering cash, a
promissory note, or shares of Common Stock already owned. These options provide
that, in the event of termination of employment resulting from a change in
control not approved by the board of directors, each executive will receive
payment equal to the fair market value of the options times the number of
unexercised options in consideration of the cancellation of such options. None
of such options has been exercised. The options were submitted for approval at
the 1997 annual meeting, but did not receive the requisite votes. These options
are being submitted for consideration at the Annual Meeting.
FEDERAL TAX CONSEQUENCES
The options are nonqualified. The optionees will not realize income at the
time of the grant. Upon exercise of the option, the excess of the fair market
value of the Common Stock on the date of exercise over the exercise price of
$4.00 will be taxable to the optionee as ordinary income. The tax basis to the
optionee for the stock acquired will be the exercise price plus the amount
recognized as income. The Company will be entitled to a deduction equal to the
amount of the ordinary income realized by the optionee in the taxable year which
includes the end of the optionee's taxable year in which he realizes the
ordinary income. When shares acquired pursuant to the exercise of the option
are disposed of, the holder will realize additional capital gain or loss equal
to the difference between the sales proceeds and his or her tax basis in the
shares.
If an optionee exercises such option by payment of the exercise price in
whole or in part with previously owned shares, the optionee will not realize
income with respect to the number of shares received on exercise which equals
the number of shares delivered by the optionee. The optionee's basis for the
delivered shares will carry over to the option shares received. With regard to
the number of nonqualified option shares received which exceeds the number of
shares delivered, the optionee will realize ordinary income at the time of
exercise; the optionee's tax basis in these additional option shares will equal
the amount of ordinary income realized plus the amount of any cash paid.
VOTE REQUIRED
Approval of the Executive Options requires the approval of a majority of
the Shares present, in person or represented by proxy, and entitled to vote at
the Annual Meeting. Abstentions and broker non-votes will have the same legal
effect as a vote against the approval of the Executive Options.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
EXECUTIVE OPTIONS. IT IS INTENDED THAT, IN THE ABSENCE OF CONTRARY
SPECIFICATIONS, VOTES WILL BE CAST PURSUANT TO THE ENCLOSED PROXIES FOR THE
APPROVAL OF THE EXECUTIVE OPTIONS.
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3. APPROVAL OF DIRECTOR OPTIONS
- -------------------------------------------------------------------------------
As discussed above, the board of directors, on appointing Messrs. Van
Ramshorst and Gershen to serve as directors, adopted a stock option plan to
compensate those directors who are not employees. Under this plan, Messrs. Van
Ramshorst and Gershen have each been granted options (the "Director Options") to
purchase an aggregate of 45,000 shares of Common Stock at an exercise price of
$5.00 per share. Such options were immediately vested to purchase 5,000 shares
on appointment and vest to purchase an additional 10,000 shares if the
individual is elected to serve as a director at the Annual Meeting. Thereafter,
each such director's options will vest to purchase an additional 10,000 shares
at the next three anniversaries of election at the Annual Meeting, provided that
such individual is continuing to serve as a director. The Director Options are
nonqualified and have the same income tax implications as the Director Options
discussed above. In connection with the requirements of Nasdaq, the Director
Options are being submitted to their shareholders for their approval.
VOTE REQUIRED
Approval of the Director Options requires the approval of a majority of the
Shares present, in person or represented by proxy, and entitled to vote at the
Annual Meeting. Abstentions and broker non-votes will have the same legal
effect as a vote against the approval of the Executive Options.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
DIRECTOR OPTIONS. IT IS INTENDED THAT, IN THE ABSENCE OF CONTRARY
SPECIFICATIONS, VOTES WILL BE CAST PURSUANT TO THE ENCLOSED PROXIES FOR THE
APPROVAL OF THE DIRECTOR OPTIONS.
INDEPENDENT PUBLIC ACCOUNTANTS
The selection of the Company's auditors will not be submitted to the
shareholders for their approval in the absence of a requirement to do so. It is
anticipated that representatives of Hein + Associates LLP will be present at the
Annual Meeting and will be provided the opportunity to make a statement, if they
desire to do so, and be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
No proposals have been submitted by shareholders of the Company for
consideration at the Annual Meeting. It is anticipated that the next annual
meeting of shareholders will be held during June 1999. Shareholders may present
proposals for inclusion in the proxy statement to be mailed in connection with
the 1999 annual meeting of shareholders of the Company, provided such proposals
are received by the Company no later than February 1, 1999, and are otherwise in
compliance with applicable laws and regulations and the governing provisions of
the articles of incorporation and bylaws of the Company.
OTHER MATTERS
Management does not know of any business other than that referred to in the
Notice which may be considered at the Annual Meeting. If any other matters
should properly come before the Annual Meeting, it is the intention of the
persons named in the accompanying form of proxy to vote the proxies held by them
in accordance with their best judgment.
In order to assure the presence of the necessary quorum and to vote on the
matters to come before the Annual Meeting, please indicate your choices on the
enclosed proxy and date, sign, and return it promptly in the envelope provided.
The signing of a proxy by no means prevents your attending the meeting.
By Order of the board of directors
FORELAND CORPORATION
/s/ Don W. Treece, Secretary
Lakewood, Colorado
April 30, 1998
<PAGE>
PROXY
FORELAND CORPORATION
ANNUAL MEETING OF THE SHAREHOLDERS OF (THIS PROXY IS SOLICITED ON BEHALF
FORELAND CORPORATION ON JUNE 23, 1998 OF THE BOARD OF DIRECTORS)
The undersigned hereby appoints N. Thomas Steele and Bruce C. Decker, and
each of them, proxies, with full power of substitution, to vote the voting
shares of FORELAND CORPORATION (the "Company"), which the undersigned is
entitled to vote at the Annual Meeting of shareholders of the Company ("Annual
Meeting") to be held at the Top of the Rockies, 555 17th Street Suite 3800,
Denver, Colorado, on June 23, 1998, at 10:00 a.m., local time, or any
adjournment(s) thereof, such proxies being directed to vote as specified below.
IF NO INSTRUCTIONS ARE SPECIFIED, SUCH PROXY WILL BE VOTED "FOR" EACH PROPOSAL.
To vote in accordance with the Board of Directors' recommendations, sign
below. The "FOR" boxes may, but need not, be checked. To vote against any of
the recommendations, check the appropriate box(es) marked "AGAINST" below. To
withhold authority for the proxies to vote for any of the recommendations, check
the appropriate box(es) marked "WITHHOLD AUTHORITY" below.
The Board of Directors recommends votes "FOR" the following proposals,
each of which has been proposed by the Board of Directors:
1. To elect each of the following nominees to serve as a director for a
term expiring at the Annual Meeting of the shareholders for the year
indicated next to the nominee's name and, in each case, until a
successor is elected and qualified. To withhold your vote for any
individual nominee, strike a line through such nominee's name.
GRANT STEELE (1999) LEE B. VAN RAMSHORST (1999)
BRUCE C. DECKER (2000) ROBERT D. GERSHEN (2000)
N. THOMAS STEELE (2001)
2. To approve the grant of options to executive officers and directors of
the Company.
FOR o AGAINST o WITHHOLD AUTHORITY o
3. To approve the grant of options to recently appointed directors of
the Company.
FOR o AGAINST o WITHHOLD AUTHORITY o
4. To transact such other business as may properly come before the
Annual Meeting.
FOR o AGAINST o WITHHOLD AUTHORITY o
PLEASE PRINT YOUR NAME AND SIGN EXACTLY AS YOUR NAME APPEARS IN THE RECORDS OF
THE COMPANY. WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. IF YOUR
SHARES ARE HELD AT A BROKERAGE HOUSE, PLEASE INDICATE IN THE SPACE PROVIDED THE
NAME OF THE BROKERAGE HOUSE AND THE NUMBER OF SHARES HELD.
Dated: Number of Shares Held of Record
Signature Signature (if held jointly)
PLEASE MARK, SIGN, DATE, AND ATLAS STOCK TRANSFER CORPORATION
RETURN PROMPTLY, USING THE 5899 SOUTH STATE STREET
ENCLOSED ENVELOPE, TO: MURRAY, UTAH 84107
