SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Under to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported): November 16, 1999
Commission File Number: 0-14096
FORELAND CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Nevada 87-0422812
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12596 W. Bayaud Avenue
Suite 300, Lakewood, Colorado 80228
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
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(303) 988-3122
N/A
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(Former name, former address, and formal fiscal year, if changed since
last report)
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ITEM 5. OTHER EVENTS
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Foreland Corporation announced on November 16, 1999, that it had agreed
to surrender voluntarily the assets securing its principal indebtedness
with a current outstanding balance of approximately $13.5 million. The Foreland
assets to be conveyed consist of Foreland's Eagle Springs Field and other
producing properties, its refining and marketing operations, its transportation
company, a principal exploration prospect, and related database.
Foreland will cooperate in the foreclosure litigation to complete the
conveyances.
The surrender does not include the balance of Foreland's Nevada oil
exploration database that it has accumulated during the past approximately 15
years on other exploration prospects. In addition, Foreland has retained for
six months the right to participate at a 50% interest in drilling ventures on
the principal exploration prospect in agreed circumstances. Foreland will
immediately seek additional capital in order to satisfy obligations to other
creditors, meet ongoing general and administrative expenses, and continue its
Nevada exploration program on its retained prospects.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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(a) Financial statements of businesses acquired. None
(b) Pro forma financial information. None
(c) Exhibits. The following exhibit is included as part of this report:
SEC
Exhibit Reference
Number Number Title of Document Location
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Item 10. Material Contracts
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10.01 10 Voluntary Surrender Agreement dated November This Filing
15, 1999 by and between Foreland
Corporation, its subsidiaries, and Energy
Income Fund, L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: November 18, 1999
FORELAND CORPORATION
By /s/ Bruce C. Decker
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Bruce C. Decker, Vice-President
VOLUNTARY SURRENDER AGREEMENT
This Voluntary Surrender Agreement (this "Agreement") dated this 15th day
of November, 1999, by and between Foreland Corporation, a Nevada corporation
("Foreland"), Eagle Springs Production Limited Liability Company, a Nevada
limited liability company ("Eagle Springs"); Foreland Refining Corporation, a
Texas corporation ("Foreland Refining"); Foreland Asphalt Corporation, a Utah
corporation ("Foreland Asphalt"); Foreland Asset Corporation, a Nevada
corporation ("Foreland Asset"); and Foreland Transportation, Inc., a Utah
corporation ("Foreland Transportation") herein collectively referred to as
"Borrowers" and Energy Income Fund, L.P. ("EIF") referred to as "Lender."
RECITALS
WHEREAS, the Borrowers and Lender have entered into a Financing Agreement
dated as of January 6, 1998 as amended by that First Amendment to Financing
Agreement dated as of August 10, 1998, and that Second Amendment to Financing
Agreement dated as of February 4, 1999 (as amended the "Loan Documents").
WHEREAS, Lender and Borrowers are parties to the Loan Documents referenced
in the recital;
WHEREAS, Borrowers are in default of their obligations to Lender under the
Loan Documents and acknowledge that Lender is entitled to take remedial action
as a result of such default, including, among other things, accelerating the
loans and foreclosing on Borrower's collateral under the Loan Documents;
WHEREAS, Borrowers owe, as of October 19, 1999, Thirteen Million Four
Hundred Eighty-two Thousand Four Hundred Thirty-six and 73/100 Dollars
($13,482,436.73) pursuant to loans under the Loan Documents (estimated as of
October 15, 1999).
In consideration of the mutual covenants and agreements set forth herein,
the parties agree as follows:
1. Validity of Loan Documents. Borrowers acknowledge that the Loan
Documents are valid and binding obligations of Borrower and are enforceable
according to their terms. Borrowers acknowledge that they are in default under
the Loan Documents and that all of such indebtedness and other obligations
arising under the Loan Documents are secured by Lender's security interest and
liens in the collateral, which consists of substantially all of the personal
property and leasehold interest of all respective Borrowers ("the Collateral")
excluding generally:
(a) Borrowers oil and gas leasehold interests that are not included or
described in Lender's deeds of trust or other security instruments; and
(b) the office furniture and equipment in Foreland's Lakewood, Colorado
executive offices.
The database of Borrowers as to the Collateral properties shall be transferred
to and owned by Lender. The database of Borrowers with respect to non-
Collateral properties shall remain the property of the Borrowers free and clear
of any claim by Lender. Borrower and Lender agree to provide and to make
available access to their respective databases during reasonable business hours
upon such terms and conditions as the Borrowers and Lender may agree.
2. Rights of Lender. Borrowers acknowledge that as a result of their
defaults under the Loan Documents, Lender is under no obligation under the Loan
Documents to make further advances to or for the benefit of Borrowers, and that
Lender has all the rights and remedies of secured parties under the Uniform
Commercial Code ("Code") and under the Loan Documents upon the occurrence of a
default.
3. Repossession of the Collateral. In order to assist Lender in its
efforts to maximize its recovery in this matter, which maximization is in the
direct interest of and benefit to the Borrowers, Borrowers acknowledge that
Lender hereby has the right, power and privilege to repossess the Collateral,
without the opportunity for any prior judicial or other type of hearing.
Borrowers hereby grant Lender peaceable possession of the Collateral and further
authorize and consent to Lender's entering upon the premises of Borrowers,
including without limitation, any warehouses, storage areas, vehicles or
offices, or other locations holding any Collateral at any time anywhere, whether
now or hereafter, (i) to repossess any of the Collateral and (ii) in the
Lender's discretion, to achieve and maintain exclusive possession and control of
and over any or all the Collateral owned or leased by any Borrower and (iii) to
prepare any of the Collateral for sale or disposition under the Code.
4. Waiver. The Borrowers each hereby renounce and waive any rights that
they may have under Article 9 of the Code or any jurisdiction in which any
collateral may now or hereafter be located or any of the rights under any other
applicable right. Without limiting the generality of the foregoing, Borrowers
each hereby renounce any right to receive notice of any disposition by Lender of
the Collateral pursuant to Section 9-504(3) of the Code, whether such
disposition is by public or private sale under the Code or otherwise. Borrowers
agree that such sales are commercially reasonable to sell the Collateral by
private or public sale and that Lender does not intend to take Collateral in
full satisfaction of its claim under Section 9-504 of the Code.
5. Application of Proceeds of Sale. Lender shall credit all sale
proceeds and other payments received in connection with any sale of the
Collateral to Borrower's indebtedness. Any proceeds received will be applied,
first to the interest due, then to the principal debt of the obligation, and
finally to the cost of collection, including attorney's fees.
6. Extension of Lender's Rights. Borrowers hereby agree that, except as
otherwise expressly set forth herein, Lender shall retain all of its rights and
remedies under the Loan Documents. The Borrowers acknowledge that as an
appropriate remedy, Lender may seek, and the Borrowers will consent to, the
appointment of a receiver in a pending civil action to be filed in the States of
Utah, Nevada and/or Colorado. Borrowers agree to cooperate with the Lender in
effectuating a conveyance and transfer of the Collateral by the respective
Borrowers in each respective state court action. Borrowers further agree to
forthwith fully cooperate with Lender in granting the Lender access to the books
and records of the Borrowers, including all executory contracts, supplier and
customer lists, and for the Lender to contact said executory contract holders,
suppliers, customers and interested parties in regard to assets secured by the
Lender in regard to each of the respective Borrowers' businesses.
7. Permitted Expenditures by Borrowers. Subject to the continuing
cooperation of Borrowers pending the conveyance and transfer of the Collateral
as contemplated hereby, Lender shall permit Borrowers to use cash proceeds
generated from its operation of the Collateral, which therefore constitutes part
of the Collateral, to be used by Borrowers for certain costs incurred by
Borrowers in discharging its obligations hereunder and in paying other costs as
agreed by Borrowers and Lender, all as set forth from time to time in budgets
for successive specified periods, initialed by the parties for identification.
Contemporaneously with the execution hereof, Lender and Borrowers have agreed to
an initial budget for the period, in the amounts and for the items set forth
therein. The failure of Borrowers to fully and completely cooperate with Lender
in effectuating a conveyance and transfer of assets previously pledged to Lender
by Borrower through appropriate state court foreclosure proceedings will
terminate the ability of Borrowers to use any funds as set forth in the budget
attached hereto as Exhibit "A."
8. Satisfaction of Obligation to Lender. Upon effectuating the
conveyance and transfer of the Collateral by the respective Borrowers in each
respective state court proceeding and obtaining a final order in each respective
state, the obligations, liabilities and duties of Borrowers under the Loan
Agreement shall be satisfied in full. Borrowers shall have no further
obligations thereunder in favor of Lender unless there has been an involuntary
bankruptcy filed, a voluntary bankruptcy filed or any action filed to set aside
the state court proceedings. Lender affirmatively states, and has taken the
position previously, that the obligation of the Borrowers is a recourse
obligation. Lender further sets forth that the additional assets held by
Borrowers are as a result of the utilization of proceeds from Lender and that
Lender claims an interest in the additional assets acquired by Borrowers from
Lender's proceeds. Lender agrees not to pursue any such causes of action or
indebtedness provided that no involuntary bankruptcy, voluntary bankruptcy or
any state court action to set aside the determination as to the rights and
priorities of the Lender have been filed. To the extent an involuntary
bankruptcy is filed, a voluntary bankruptcy or any action in state court in the
applicable state court proceeds to attempt to set aside the indebtedness or
determination as to perfection of Collateral pledged by Borrowers in favor of
Lender, then Lender may proceed to seek a judgment against Borrowers for
imposition of a lien against other assets of the Borrowers.
9. Release of Claims and Waiver by Borrowers to Lender. Each Borrower,
for itself and its present and former officers, shareholders, directors,
managers, members, employees, agents, attorneys, heirs, administrators, personal
representatives, successors and assigns, hereby release, remise, acquit, and
forever discharge Lender, together with all of its future, present, and former
employees, agents, representatives, consultants, attorneys, fiduciaries,
servants, officers, directors, managers, partners, predecessors, successors and
assigns, subsidiary corporations and companies, parent corporations and
companies, and all related corporate and company divisions (of the respective
other parties), from any and all actions and causes of action, judgments,
execution, suits, debts, claims, demands, liabilities, obligations, damages, and
expenses of any and every character, known or unknown, direct and/or indirect,
at law or in equity, or whatsoever kind of nature, whether heretofore or
hereafter arising, for or because of any matter or things done, omitted or
suffered to be done by any of the other parties prior to and including the date
of execution hereof, and in any way directly or indirectly arising out of or in
any way connected to this Agreement and the Loan Documents. Borrowers
acknowledge that the agreements in this paragraph are intended to be in full
satisfaction of any and all related injuries or damages arising in connection
with this matter. Borrowers represent and warrant that they have not purported
to transfer, assign or otherwise convey to any other person any right, title or
interest in any of the claims released under the terms of this Agreement, are
the sole owners of all such claims, have full authority to release such claims
and to agree to all matters set forth in this Agreement and that the foregoing
constitutes a full and complete release of Lender. This Release shall not be
effective to the extent the Borrowers or any of them individually or in concert
have converted or diverted assets previously pledged by the Borrowers to the
Lender and any release agreement herein shall not be effective to prohibit the
Lender from proceeding to recover said converted or transferred assets and to
bring affirmative actions against any and all parties necessary for any damages
or expenses incurred therein including reasonable attorney fees. To the extent
an involuntary bankruptcy, a voluntary bankruptcy or an action to set aside
state court proceedings has been filed, then to the extent the relief provide
herein has been set aside, then this Release shall be of no further force or
effect.
10. Release of Claims and Waiver by Lender. Lender, for itself and its
present and former officers, shareholders, directors, managers, members,
employees, agents, attorneys, heirs, administrators, personal representatives,
successors and assigns, hereby releases, remises, acquits, and forever
discharges Borrowers, together with all of Borrowers' respective future,
present, and former employees, agents, representatives, consultants, attorneys,
fiduciaries, servants, officers, directors, managers, partners, predecessors,
successors and assigns, subsidiary corporations and companies, parent
corporations and companies, and all related corporate and company divisions (of
the respective other parties), from any and all actions and cause of action,
judgments, executions, suits, debts, claims, demands, liabilities, obligations,
damages, and expenses of any and every character, known or unknown, direct
and/or indirect, at law or in equity, or whatsoever kind of nature, whether
heretofore or hereafter arising, for or because of any matter or things done,
omitted or suffered to be done by any of the other parties prior to and
including the date of execution hereof, and in any way directly or indirectly
arising out of or in any way connected to this Agreement and the Loan Documents,
save and except, only after a final order of foreclosure in the appropriate
state court proceeding has been effectuated as to the conveyance and transfer of
the collateral by the respective Borrowers to the Lender in each respective
state court action as provided above, the covenants and obligations of Lender
under the Loan Documents and this Agreement. Lender acknowledge that the
agreements in this paragraph are intended to be in full satisfaction of any and
all related injuries or damages arising in connection with this matter. Lender
represents and warrants that it has not purported to transfer, assign or
otherwise convey any right, title or interest in any of the claims released
under the terms of this Agreement, is the sole owners of all such claims, has
full authority to release such claims and to agree to all matters set forth in
this Agreement and that the foregoing constitutes a full and complete release of
Borrowers. The limitations as set forth in paragraphs 7, 8 and 9 are
incorporated herein by reference and limit the scope and extent of the relief
provided herein.
11. Merger; Entire Agreement. The Loan Documents and this Agreement,
together with the documents to be delivered in connection with the transactions
contemplated hereby, represent the entire agreement between the parties. Any
and all other negotiations, courses of dealing, communications, understandings,
agreements, representations, or warranties, written or oral, specifically
including that certain document entitled "Memorandum of Agreement, Foreland
Recapitilization Plan" dated October 1, 1999, shall be of no force or effect.
No amendment or modification hereof shall be effective until and unless the same
shall have been set forth in writing and signed by the parties hereto.
12. Hay Ranch. Until May 1, 2000, Lender or its successor will offer to
Foreland the right to participate for up to 50% of Lender's working interest (a)
on the same terms as agreed by any third-party, which terms are acceptable to
Lender, in any exploration program involving the Hay Ranch, Nevada, prospect, as
set forth on Exhibit "B" attached hereto, (b) in any Foreland proposal that is
acceptable to Lender or its successor, or (c) if Lender or its successor drills
without any third party participation then on terms that are negotiated between
Foreland and Lender or its successor. In order to exercise such right, Foreland
shall, in each instance, notify Lender or its successor in writing within ten
days after receiving the offer(s) to participate and shall meet the
authorization for expenditures cash call and other provisions on the same terms
as accepted by the third-party participant(s) or as agreed to by Lender or its
successor.
In witness whereof, the parties have executed this Voluntary Surrender
Agreement as of the date and year first above written.
"BORROWERS"
Foreland Corporation
By /s/ N. Thomas Steele
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N. Thomas Steele, President
Eagle Springs Production Limited Liability
Company
By /s/ Bruce C. Decker
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Bruce C. Decker, Manager
Foreland Refining Corporation
By /s/ Bruce C. Decker
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Bruce C. Decker, President
Foreland Asphalt Corporation
By Bruce C. Decker
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Bruce C. Decker, President
Foreland Asset Corporation
By /s/ Bruce C. Decker
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Bruce C. Decker, President
Foreland Transportation
By /s/ Bruce C. Decker
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Bruce C. Decker, President
"LENDER"
Energy Income Fund, L.P.
By /s/ Steven P. McDonald
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Steven P. McDonald
Vice-President
