-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PXBxAJMsEqnPDbfg3uMXKgzR2alurMruskPSMqKyCAWvR+QY3cKCmsijfy8rG4f8 Dv7yzRhvhOjE3RY1wDHAyQ== 0000914233-99-000036.txt : 19990524 0000914233-99-000036.hdr.sgml : 19990524 ACCESSION NUMBER: 0000914233-99-000036 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORELAND CORP CENTRAL INDEX KEY: 0000773326 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 870422812 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-14096 FILM NUMBER: 99631767 BUSINESS ADDRESS: STREET 1: 143 UNION BOULEVARD STREET 2: SUITE 210 CITY: LAKEWOOD STATE: CO ZIP: 80228 BUSINESS PHONE: 3039883122 10-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A (AMENDMENT NO. 1) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMMISSION FILE NUMBER 0-14096 FORELAND CORPORATION ---------------------------------------------------- (Exact name of registrant as specified in its charter) NEVADA 87-0422812 ------------------------------ ------------------ (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 143 UNION BOULEVARD, SUITE 210 LAKEWOOD, COLORADO 80228-2019 -------------------------------------- ------------------ (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (303) 988-3122 Securities registered pursuant to section 12(b) of the Act: Title of each class Name of each exchange on which registered registered -------------------- ------------------------------ NONE NONE Securities registered pursuant to section 12(g) of the Act: COMMON STOCK, PAR VALUE $0.001 PREFERRED STOCK PURCHASE RIGHTS (Title of class) PART III. - ------------------------------------------------------------------------------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the name, age, term of directorship, and principal business experience of each director and executive officer of Foreland who has served in such position since Foreland's last fiscal year. DIRECTOR BUSINESS EXPERIENCE DURING PAST NAME AGE SINCE FIVE YEARS AND OTHER INFORMATION - ------------- ----- ------ ----------------------------------------------- Grant Steele* 74 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 Steele* 54 1985 Co-founder and president. Officer and director of Foreland since organization in 1985. Elected president in May 1996. Prior to joining Foreland in 1985, president of Magnum Resources, Inc., Ogden, Utah, a company engaged in mineral exploration in Nevada and Utah. Bruce C. Decker 47 1994 Officer and director of Foreland since 1994. Officer of the Krutex Energy Corporation from 1983 through acquisition by Foreland in 1989. Received bachelor's degree in finance and management from the University of Utah in 1973. Lee B. Van 59 1998 Has over thirty years of experience in the oil Ramshorst and gas industry. Has held various positions at Amoco Production Company, Texas Oil & Gas Corp., Inexco Oil Company, and Plains Petroleum. 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. - --------------- * Grant Steele is the uncle of N. Thomas Steele. During 1998, Robert Gershen served on the board of directors; effective April 28, 1999, Mr. Gershen resigned as a director. Grant Steele has given notice that he will resign as a director in June 1999 when his present employment term expires. SIGNIFICANT EMPLOYEES/CONSULTANTS Jerry Hansen. Mr. Hansen, who joined Foreland in 1986, is senior structural geologist for Foreland 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 Foreland 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 Foreland. David T. Greene. David T. Greene, who joined Foreland 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 Foreland's Eagle Springs Field drilling and development program and for overall Nevada exploitation. Mr. Greene is now a consultant to Foreland. Fred Merian. Mr. Merian, who joined Foreland in 1997, is Manager of Corporate Development for Foreland. 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 state of the U.S. Mr. Merian's technical knowledge coupled with finance and M&A experience has enhanced Foreland's corporate development opportunities. Mr. Merian graduated with a degree in Geological Engineering from the University of Missouri-Rolla in 1978. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Based solely upon a review of forms 3, 4, and 5, and amendments thereto, furnished to Foreland during or respecting its last fiscal year, no director, officer, beneficial owner of more than 10% of any class of equity securities of Foreland 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 Robert D. Gershen failed to timely file one report respecting the acquisition of warrants to purchase Common Stock by Energy Income Fund, L.P. ITEM 11. 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 Foreland and Bruce C. Decker, the only other executive officer who received total annual salary and bonuses in excess of $100,000 for all services rendered in all capacities to Foreland and its subsidiaries during the last fiscal year (the "Named Executive Officers").
LONG TERM COMPENSATION ----------------------------- ANNUAL COMPENSATION AWARDS PAYOUTS --------------------- -------------------- ------- (A) (B) (C) (D) (E) (F) (G) (H) (I) OTHER SECURITIES ANNUAL RESTRICTED UNDERLYING AWARD ALL OTHER NAME AND YEAR COMPEN- STOCK OPTIONS/ PLAN COMPEN- PRINCIPAL ENDED SALARY BONUS SATION AWARD(S) SARS PAYOUTS SATION POSITION DEC. 31 ($) ($) ($) ($) (#) ($) ($) - --------------- ------- ------ ------ --------- ------- ---------- ------- -------- N. Thomas Steele 1998 129,800 -- 24,000 -- --/-- -- -- President (CEO) 1997 129,800 23,884 24,000 -- 300,000/-- -- -- 1996 104,320 -- 10,000 -- 200,000/-- -- 37,500 Bruce C. Decker 1998 119,000 -- 24,000 -- --/-- -- -- 1997 119,000 10,836 24,000 -- 300,000/-- -- -- 1996 88,958 -- 10,000 -- 200,000/-- -- --
OPTION/SAR GRANTS IN LAST FISCAL YEAR There were no grants of options or stock appreciation rights during the last completed fiscal year to any Named Executive Officer of Foreland. AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES The following table sets forth information respecting the exercise of options and SARs during the last completed fiscal year by the Named Executive Officers of Foreland and the fiscal year end values of unexercised options and SARs. (A) (B) (C) (D) (E) NUMBER OF VALUE OF SECURITIES UNEXERCISED UNDERLYING IN-THE-MONEY SHARES UNEXERCISED OPTIONS/SARS ACQUIRED OPTIONS/SARS AT AT FY END ($) ON VALUE FY END (#) EXERCISABLE/ EXERCISE REALIZED EXERCISABLE/ UNEXERCISABLE NAME (#) ($) UNEXERCISABLE(1) (2) - ---------------- -------- -------- ---------------- ------------- N. Thomas Steele, -- -- 324,000/150,000 --/-- President (CEO) Bruce C. Decker -- -- 250,000/150,000 --/-- - ----------------- (1) For a complete description of the terms of options held by the Named Executive Officers, see "Principal Shareholders" below. (2) Based on the closing sales price on Nasdaq for the Common Stock of $1.125 on December 31, 1998. EMPLOYMENT AGREEMENTS Effective September 2, 1997, Foreland 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, during 1998, N. Thomas Steele, and Bruce C. Decker received base salaries of $125,000, and $119,000, respectively. The agreements provide for a $48,000 increase in each such executive officer's annual salary at such time as Foreland achieves sustained net oil production of at least 1,000 barrels per day for any calendar month. Each 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 Foreland to register securities of Foreland held by such persons at the request of the employees. In connection with the agreements, N. Thomas Steele and Bruce C. Decker received ten-year options to purchase 200,000 shares of Common Stock at a price of $2.50 per share. Additionally, each executive received ten-year options to purchase 100,000 shares of Common Stock at an exercise price of $5.00 per share. Such options are now 50% vested and vest in equal increments on the next two 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 previously approved the payment of $2,000 per month to each of Foreland's directors who are also employees of Foreland. This payment was waived subsequent to December 31, 1998. Foreland has a stock option plan to compensate those directors who are not employees. Under this plan, Lee B. Van Ramshorst and Robert D. Gershen were each granted options to purchase an aggregate of 45,000 shares of Common Stock at an exercise price of $5.00 per share. Such options are presently vested to purchase 15,000 each. Mr. Van Ramshorst's options will vest to purchase an additional 10,000 shares at the next three anniversaries of election; provided that he continues to serve as a director. Mr. Gershen resigned from the board of directors in April 1999. LIMITATION OF LIABILITY AND INDEMNIFICATION The articles of incorporation of Foreland 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. Foreland'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. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of the date hereof, the outstanding Common Stock of Foreland owned of record or beneficially by each person who owned of record, or was known by Foreland to own beneficially, more than 5% of Foreland'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: NUMBER OF COMMON PERCENTAGE NATURE OF SHARES OF NAME OF BENEFICIAL OWNER OWNERSHIP OWNED(1) OWNERSHIP(2) - --------------------------- --------- --------- ------------ DIRECTORS AND PRINCIPAL STOCKHOLDERS Grant Steele Common Stock 78,832 0.8% Options 183,333(3) 1.9 --------- Total 262,165 2.7 N. Thomas Steele Common Stock 50,888 0.5 Options 474,000(4) 4.7 --------- Total 524,888 5.2 Bruce C. Decker Common Stock 13,334 0.1 Options 400,000(5) 3.9 --------- Total 413,334 4.1 Lee B. Van Ramshorst Common Stock 1,000 -- Options 0 -- --------- Total 1,000 -- Energy Income Fund, LP Common Stock 250,000 2.6 Warrants 1,500,000(5) 13.4 Preferred Stock 333,333(5) 3.3 --------- Total 2,083,333 18.1 Petro Source Corporation Common Stock 863,602 8.9 ALL EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP (FOUR PERSONS) Common Stock 144,054 1.5 Options 1,057,333 9.8 Warrants -- -- --------- Total 1,201,387 11.2% ========= - ------------------- (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 Foreland. (2) Calculations of total percentages of share ownership 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) 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. (4) 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. (5) 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. (6) Consists of warrants to purchase 1,500,000 shares at $6.00 per share through January 6, 2003, and 2,000 shares of 1998 Series Preferred Stock convertible into an aggregate of 333,333 shares of Common Stock. ITEM 13. 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 Foreland owed $348,691 in salaries and interest to two current officers and directors and a former officer and director at December 31, 1998. Foreland also had outstanding loans from a current officer and director and two former officers and directors in the amount of $316,279 as of such date. Energy Income Fund Financing In December 1997, Foreland entered into a financing arrangement with Energy Income Fund, L.P. ("EIF"), that was amended in August 1998 and February 1999. Amounts due under the financing arrangement are collateralized by substantially all of the property and equipment of Foreland, and Foreland is required to maintain certain financial ratios and comply with other terms and conditions while any balance of indebtedness remains outstanding. In connection with the EIF financing, Foreland granted EIF warrants to purchase an aggregate of 1,500,000 shares of common stock at $6.00 per share, issued 250,000 shares of common stock to EIF, and sold to EIF for $2,000,000 in cash 2,000 shares of 1998 Series Preferred Stock, convertible into an aggregate of 333,333 shares of common stock. Foreland also agreed to transfer to EIF a 3% overriding royalty interest in the Company's proved oil and gas properties and a 1% overriding royalty interest in certain unproved properties. As of the date hereof, Foreland has borrowed approximately $12.6 million pursuant to the financing arrangement. Foreland is currently in default on the loan. Management continue to negotiate a payment plan with EIF and is hopeful that EIF will continue to make concessions to prevent acceleration of the entire principal balance. As a condition to establishing the financing, Foreland agreed to permit EIF to appoint one member to serve on its board of directors. On January 9, 1998, Robert D. Gershen was appointed a director and resigned on April 28, 1999. Petro Source Acquisition On December 31, 1997, Foreland obtained an option to purchase certain oil refining and transportation assets and operations from Petro Source. Foreland paid $520,000 for the option by issuing 130,000 shares of common stock. Foreland subsequently exercised the option and, on August 12, 1998, completed the purchase of the refining and transportation assets by paying $5,000,000 in cash (utilizing funds from the EIF loan), with the remaining $2,676,322 non-cash portion of the purchase price paid by the issuance of 763,602 shares of common stock, subject to adjustment in the number of shares and potential issuances of additional shares if the resale of such shares by Petro Source yields net proceeds less than $2,676,332 plus interest at 10% per annum. In addition, Foreland issued 100,000 shares of common stock to Petro Source at the closing of the purchase. SIGNATURES Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FORELAND CORPORATION Dated: May 20, 1999 By /s/ N. Thomas Steele, President -----END PRIVACY-ENHANCED MESSAGE-----