<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
FORELAND CORPORATION
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(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE
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(Title of Class of Securities)
345458301
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(CUSIP Number)
Russell J. Bruemmer
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
(202) 663-6000
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
August 10, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g), check the
following box [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7 for other parties
to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following pages)
1
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SCHEDULE 13D
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CUSIP NO. 345458301
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Energy Income Fund, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
0
NUMBER OF --------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 1,833,333
OWNED BY
EACH --------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,833,333
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,833,333
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.7%
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14 TYPE OF REPORTING PERSON*
PN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
2
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SCHEDULE 13D
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CUSIP NO. 345458301
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
EIF General Partner, L.L.C.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
0
--------------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES 1,833,333
BENEFICIALLY
OWNED BY --------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON
WITH --------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,833,333
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,833,333
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.7%
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14 TYPE OF REPORTING PERSON*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
3
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SCHEDULE 13D
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CUSIP NO. 345458301
- ---------------------------
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Robert D. Gershen
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
0
NUMBER OF --------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 1,833,333
OWNED BY
EACH --------------------------------------------------------------
REPORTING 9 SOLE REPORTING DISPOSITIVE PERSON POWER
PERSON 0
WITH
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,833,333
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,833,333
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.7%
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TYPE OF REPORTING PERSON*
14 IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
4
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SCHEDULE 13D
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CUSIP NO. 345458301
- ---------------------------
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
George W. Siguler
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
0
--------------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF 1,833,333
SHARES
BENEFICIALLY --------------------------------------------------------------
OWNED BY 9 SOLE DISPOSITIVE POWER
EACH 0
REPORTING
PERSON --------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
1,833,333
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,833,333
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.7%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
5
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SCHEDULE 13D (CONTINUED)
This Amendment No. 1 to Schedule 13D is filed by and on behalf of
Energy Income Fund, L.P. ("EIF"), EIF General Partner, L.L.C. ("EIF General
Partner"), Robert D. Gershen ("Gershen") and George W. Siguler ("Siguler")
(collectively, the "Reporting Persons"). This Amendment No. 1 amends the initial
statement on Schedule 13D dated January 15, 1998 (the "Initial Statement").
Capitalized terms used herein but not defined herein shall have the meanings
ascribed to them in the Initial Statement.
Item 3 is hereby amended in its entirety to read as follows:
Item 3. Source and Amount of Funds or Other Consideration.
On January 6, 1998, EIF acquired warrants to purchase 1,000,000
shares of Common Stock of the Issuer as additional consideration in connection
with debt financing provided to the Issuer. On August 10, 1998, EIF amended one
of the warrants to allow for the purchase of an additional 500,000 shares of
Common Stock of the Issuer as consideration for certain amendments to the debt
financing provided to the Issuer. The exercise price of the warrants is $6.00
per share. On November 5, 1998, EIF acquired 2,000 shares of convertible
preferred stock of the Issuer for aggregate consideration of $2 million. The
source of funds for such debt financing and for the purchase price of the
convertible preferred stock was capital contributed by EIF's investors.
Item 4 is hereby amended in its entirety to read as follows:
Item 4. Purpose of Transaction.
The Reporting Persons are filing this Schedule 13D as the result of
(a) the acquisition by EIF of warrants to purchase 1,500,000 shares of Common
Stock of the Issuer pursuant to a loan agreement entered into on January 6,
1998, as amended on August 10, 1998 (the "1998 Loan Transaction") and (b) the
acquisition by EIF of 2,000 shares of convertible preferred stock on November
5, 1998 pursuant to a Stock Purchase Agreement entered into on August 10, 1998
(the "1998 Stock Purchase"). Pursuant to the 1998 Loan Transaction, a warrant
to purchase 750,000 shares of Common Stock at an exercise price of $6 per share
("Warrant No. 1") and a warrant to purchase 250,000 shares of Common Stock at
an exercise price of $10 per share ("Warrant No. 2") were acquired on January
6, 1998. On August 10, 1998, Warrant No. 2 was replaced with a warrant
exercisable into 750,000 shares of Common Stock at a reduced exercise price of
$6 per share ("New Warrant No. 2"). Warrant No. 1 and New Warrant No. 2
(collectively, the "Warrants") are exercisable until January 6, 2003. EIF has
acquired the equity securities described above solely for investment purposes.
As the result of the 1998 Loan Transaction and the 1998 Stock Purchase, EIF is
deemed to beneficially own 17.7% of the Common Stock of Issuer.
Pursuant to the terms of the 1998 Loan Transaction, Mr. Gershen was
appointed to the Board of Directors of Issuer, effective January 9, 1998. Mr.
Gershen is a Managing Director of EIF General Partner and is the president and
controlling shareholder of AEM and R. D. Gershen.
As described in Item 6 below, EIF has registration rights regarding
the shares of the Common Stock issuable pursuant to its Warrants and convertible
preferred stock. The Reporting Persons may sell some or all of the shares of
Common Stock issuable pursuant to the Warrants and the convertible preferred
stock in privately negotiated transactions, on the market or otherwise.
EIF and the Issuer are currently negotiating a restructuring of the
1998 Loan Transaction. The proposed restructuring may include, among other
things, the acquisition by EIF of 150,000 shares of Common Stock; the grant by
EIF to the Issuer of a right, expiring March 31, 1999, to reacquire all of the
Warrants and convertible preferred stock purchased by EIF as part of the 1998
Loan Transaction; an extension of the terms of the Warrants to December 31,
2003; and a reduction in the exercise price of the Warrants to $3.00 in the
event repayment of the financing extended to the Issuer by EIF under the 1998
Loan Transaction is delayed for a certain minimum period of time.
6
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SCHEDULE 13D (CONTINUED)
Sections (a), (b) and (c) of Item 5 are hereby amended in their entirety to read
as follows:
Item 5. Interest in Securities of the Issuer.
(a) EIF directly holds the Warrants for the right to acquire
1,500,000 shares of Common Stock and 2,000 shares of convertible preferred stock
convertible into 333,333 shares of Common Stock. Each of the Reporting Persons
is deemed to beneficially own an aggregate of 1,833,333 shares of Common Stock,
constituting 17.7% of the shares outstanding.
(b) The Reporting Persons share dispositive power over (i) the
Warrants for the purchase of 1,500,000 shares of Common Stock and (ii) the
convertible preferred stock convertible into 333,333 shares of Common Stock. If
and when the Warrants are exercised for Common Stock or the convertible
preferred stock is converted into Common Stock, the Reporting Persons will share
voting and dispositive power over the shares of Common Stock acquired upon such
exercise or conversion.
(c) There have been no transactions of shares of Common Stock
effected within the past 60 days by the Reporting Persons, Sigular Guff or R.D.
Gershen.
Item 6 is hereby amended to read in its entirety as follows:
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
In connection with the 1998 Stock Purchase, EIF and the Issuer have
entered into a registration rights agreement dated August 10, 1998. The
registration rights agreement provides that the Issuer shall file, not later
than two months after the date of the registration rights agreement, a
registration statement on Form S-3 (or other suitable form) as a shelf
registration statement under Rule 415 of the Securities Act of 1933 covering the
resale of the securities issuable or issued upon conversion of the convertible
preferred stock purchased by EIF pursuant to the 1998 Stock Purchase. If the
shelf registration statement is not declared effective within three months of
the date of the registration rights agreement, the Issuer is required to pay
certain penalties to EIF and EIF is entitled to demand and "piggy-back"
registration rights with respect to such shares. The registration rights
agreement also contains provisions relating to obligations of the Issuer,
registration expenses, indemnifications and certain other matters. The foregoing
description of the registration rights agreement is qualified in its entirety by
reference to such agreement, which is attached hereto as Exhibit B.
Under the provisions of the Warrants, EIF may exercise in whole or in
part the Warrants for, in the aggregate, 1,500,000 shares of Common Stock (the
"Warrant Stock"). As to Warrant Stock related to Warrant No. 1, EIF is entitled
to certain demand and "piggy back" registration rights. As to Warrant Stock
related to New Warrant No. 2, the Issuer has agreed to file, within two months
of written notice of any exercise of the Warrant, a registration statement on
Form S-3 (or other suitable form) as a shelf registration statement under Rule
415 of the Securities Act of 1933 covering the resale of all Warrant Stock. If
the registration statement is not declared effective within three months after
the notification of exercise, the Issuer is required to pay certain penalties to
EIF and EIF is entitled to certain demand and "piggy back" registration rights
with respect to such shares. The Warrants also contain provisions relating to
the procedures for exercising the Warrants, transfers of the Warrants and
Warrant Stock, adjustments to the exercise price of the Warrants,
indemnification and certain other matters. The foregoing description of the
Warrants is qualified in its entirety by reference to such Warrants, which are
attached hereto as Exhibits C and D.
Item 7 is hereby amended by adding thereto the following:
Item 7. Material to Be Filed as Exhibits
Exhibit B is the Registration Rights Agreement dated as of August 10,
1998 by and between Energy Income Fund, L.P. and Foreland Corporation.
7
<PAGE> 8
SCHEDULE 13D (CONTINUED)
Exhibit C is the Warrant issued by Foreland Corporation to Energy
Income Fund, L.P. dated January 6, 1998 exercisable for 750,000 shares of the
common stock of Foreland Corporation.
Exhibit D is the Warrant issued by Foreland Corporation to Energy
Income Fund, L.P. dated August 10, 1998 exercisable for 750,000 shares of common
stock of Foreland Corporation.
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
Dated: November 30, 1998
ENERGY INCOME FUND, L.P.
By: EIF General Partner, L.L.C.
By: /s/ ROBERT D. GERSHEN
----------------------
Robert D. Gershen
Managing Director
EIF GENERAL PARTNER, L.L.C.
By: /s/ ROBERT D. GERSHEN
----------------------
Robert D. Gershen
Managing Director
/s/ ROBERT D. GERSHEN
----------------------
Robert D. Gershen
/s/ GEORGE W. SIGULER
----------------------
George W. Siguler
8
<PAGE> 9
SCHEDULE 13D (CONTINUED)
EXHIBIT INDEX
-------------
Exhibit B Registration Rights Agreement dated as of August 10, 1998 by
and between Energy Income Fund, L.P. and Foreland Corporation
Exhibit C Warrant issued by Foreland Corporation to Energy Income Fund,
L.P. dated January 6, 1998 exercisable for 750,000 shares of
the common stock of Foreland Corporation
Exhibit D Warrant issued by Foreland Corporation to Energy Income Fund,
L.P. dated August 10, 1998 exercisable for 750,000 shares of
common stock of Foreland Corporation
9
<PAGE> 1
Exhibit B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") dated as of
August 10, 1998 is made by and between Energy Income Fund, L.P., a Delaware
limited partnership ("EIF") and Foreland Corporation, a Nevada corporation
("Foreland"). Terms used herein and not otherwise defined have the meanings
given them in that certain Stock Purchase Agreement, of even date herewith, by
and between EIF and Foreland ("Stock Purchase Agreement").
RECITALS
WHEREAS, Foreland and EIF have entered into the Stock Purchase
Agreement pursuant to which EIF is purchasing shares of Preferred Stock of
Foreland having an aggregate liquidation preference of Two Million Dollars
($2,000,000); and
WHEREAS, in connection with the purchase and sale of such
Preferred Stock, Foreland has agreed, on the terms and conditions set forth
herein, to register shares of Foreland owned by EIF as set forth below.
NOW THEREFORE, in consideration of the foregoing recitals and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. For purposes of the Shelf Registration under Section 2 hereof,
the term "Registrable Securities" means the shares of the Company's Common Stock
together with any capital stock issued in replacement of, in exchange for or
otherwise in respect of such Common Stock, issuable or issued upon conversion of
the Series 1998 Preferred Stock (the "Preferred Stock") issued to EIF except
that shares that have been resold in a public transaction shall not constitute
"Registrable Securities" for purposes of a Shelf Registration under Section 2
hereof. The number of "Registrable Securities then outstanding" shall be
determined by the number of shares of Registrable Securities at the time of such
determination.
For purposes of a Piggyback Registration under Section 3 hereof
or a Demand Registration under Section 4 hereof, "Registrable Securities" shall
have the meaning set forth above except that shares of Common Stock obtainable
on conversion of the Preferred Stock (in whole or in part) shall also not
constitute Registrable Securities for purposes of a Piggyback Registration under
Section 3 hereof or a Demand Registration under Section 4 hereof if those shares
of Common Stock may be resold in a public transaction without registration under
the 1933 Act, including without limitation pursuant to Rule 144 under the 1933
Act.
2. Shelf Registration. (a) At any time but no later in any event
than within 2 months of the date of this Agreement, Foreland shall file a
registration statement ("Registration Statement") on Form S-3 (or other suitable
form, at Foreland's discretion but subject to the
<PAGE> 2
reasonable approval of EIF), covering the resale of all shares of Registrable
Securities then outstanding including an indeterminate number of shares of
Common Stock as required to effect conversion of certain of the Registrable
Securities (the "Shelf Registration").
(b) The Registration Statement shall be prepared as a "shelf"
registration statement under Rule 415, and shall be maintained effective until
the distribution described in the Registration Statement is completed or until
all shares to be registered thereunder may be resold in a public transaction
without registration pursuant to Rule 144(k) of the 1933 Act. Foreland shall use
its best efforts to have the Registration Statement declared effective within
three (3) months of the date of this Agreement (the "Shelf Date").
(c) If the Registration Statement is not declared effective
by the Shelf Date, the Company must continue to use its best efforts to obtain a
declaration of effectiveness and shall pay EIF an amount equal to two percent
(2%) per month of the aggregate amount of Preferred Stock sold pursuant to the
Stock Purchase Agreement, compounded monthly and accruing daily, until the
Registration Statement or a registration statement filed pursuant to Section 3
or Section 4 is declared effective, payable in common stock, which common stock
shall also be deemed "Registrable Securities" for the purpose of this Agreement.
The accrual amount payable will be tolled for any periods occasioned by a delay
of a Registration Statement under Section 4 as a result of the choice of EIF to
have that Registration Statement underwritten.
(d) Foreland represents that it is presently eligible to
effect the registration contemplated hereby on Form S-3 and will use its best
efforts to continue to take such actions as are necessary to maintain such
eligibility.
3. Piggyback Registration Rights. If the Registration Statement
described in Section 2 above is not effective by the Shelf Date, and if, at any
time, Foreland proposes to file a registration statement for the public sale of
any shares of the Common Stock of Foreland, any capital stock issued in
replacement of, in exchange for or otherwise in respect of such Common Stock, or
any securities or other rights convertible into Common Stock, or entitled to
receive Common Stock, or any other equity security entitled to participate with
the Common Stock in the earnings or assets of Foreland under the Securities Act
of 1933, as amended (the "1933 Act") (other than a registration statement
provided for in Sections 2 or 4 hereof) Foreland shall, not later than thirty
(30) days prior to the initial filing of the registration statement, deliver
notice of its intent to file such registration statement to EIF, setting forth
the minimum and maximum proposed offering price, commissions, and discounts in
connection with the offering, and other relevant information. Within twenty (20)
days after receipt of notice of Foreland's intent to file a registration
statement, EIF shall be entitled to request that any Registrable Securities
owned by EIF or its assigns ("EIF Registrable Securities") be included in such
registration statement, and Foreland will use its best efforts to cause the EIF
Registrable Securities to be included in the offering covered by such
registration statement (a "Piggyback Registration").
4. Demand Registration Rights. (a) If the Registration Statement
described in Section 2 above is not effective by the Shelf Date, EIF shall be
entitled to request that any EIF Registrable Securities be registered under the
1933 Act if Foreland is already subject to, or
2
<PAGE> 3
becomes subject to, periodic reporting requirements under the regulations of the
United States Securities and Exchange Commission. As soon as practicable after
receipt by Foreland of a written request for registration, Foreland shall file,
and use its best efforts to cause to become effective, an appropriate
registration statement under the 1933 Act covering the EIF Registrable
Securities, provided that in the opinion of Foreland's counsel, no events
preclude such registration. EIF shall have the right to demand registration once
pursuant to this Section 4; provided, however, that the right shall not be
deemed exhausted unless the registration statement covering so much of the EIF
Registrable Securities as EIF and its assigns wish to sell pursuant to the
registration statement becomes effective.
(b) If EIF intends to distribute the Registrable Securities
covered by its request by means of an underwriting, EIF shall so advise Foreland
as a part of its request made pursuant to this Section 4. If a registration
requested pursuant to this Section 4 is to involve an underwritten public
offering in which the obligation of the underwriters is to take all of the
securities to be sold if any are to be taken, Foreland and other holders of
securities of Foreland may include securities in such registration only if the
managing underwriter of such public offering concludes that such inclusion will
not adversely affect the successful marketing or the price of the EIF
Registrable Securities to be included in such public offering. Such other
holders of securities (together with Foreland as provided in subsection 5f)
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by EIF and reasonably
acceptable to Foreland.
5. Filing Obligations of Foreland. In connection with any
registration of the EIF Registrable Securities effected under this Agreement,
Foreland shall:
(a) prepare and file the registration statement and such
amendments and supplements to the registration statement and the prospectus or
offering circular used in connection therewith as may be necessary to keep the
registration statement effective until the distribution described in the
registration statement is completed or until all shares to be registered
thereunder may be resold in a public transaction without registration pursuant
to Rule 144(k) of the 1933 Act and to comply with the provisions of the 1933 Act
and the rules and regulations thereunder with respect to the disposition of the
Registrable Securities covered by the registration statement for the period
required to effect the distribution thereof;
(b) furnish to EIF such number of copies of any prospectus or
offering circular, including a preliminary prospectus, and of a full
registration statement and exhibits in conformity with the requirements of the
1933 Act and rules and regulations thereunder, as EIF may reasonably request in
order to facilitate the disposition of such securities;
(c) use its best efforts to register or qualify such securities
covered by the registration statement, as the case may be, under the securities
or blue sky laws of such jurisdictions as EIF may reasonably request, and
accomplish any and all other acts and things which may be necessary or advisable
to permit sale in such jurisdictions of such Registrable Securities; provided,
however, that Foreland shall not be required to register as a dealer or to
3
<PAGE> 4
qualify as a foreign corporation in any such jurisdictions or to escrow any
shares of its capital stock;
(d) in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. EIF shall also
enter into and perform its obligations under such an agreement;
(e) notify EIF at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(f) furnish, at the request of EIF, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Agreement, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the outside
counsel of recognized standing (or reasonably acceptable to EIF) representing
Foreland for the purposes of such registration, in form and substance as is
customarily given to underwriters in such underwritten public offering,
addressed to the underwriters, if any, and to EIF and (ii) a letter dated such
date, from the independent certified public accountants of Foreland, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to EIF;
(g) as promptly as practicable after becoming aware of such
event, notify EIF of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the registration statement to correct such untrue statement or
omission, and deliver a number of copies of such supplement or amendment to EIF;
(h) provide EIF with written notice of the date that a
registration statement registering the resale of the Registrable Securities is
declared effective by the SEC, and the date or dates when the registration
statement is no longer effective;
(i) provide EIF and their representatives the opportunity to
conduct a reasonable due diligence inquiry of Foreland's pertinent financial and
other records and make available its officers, directors and employees for
questions regarding such information as it related to information contained in
the registration statement; and
4
<PAGE> 5
(j) provide EIF and its representatives the opportunity to
review the registration statement and all amendments thereto no later than three
(3) days prior to their filing with the SEC.
6. Expenses. All expenses incurred by Foreland in connection with
any registration of the Registrable Securities effected under Sections 2, 3 or 4
hereof, including, without limitation, all registration or filing fees, fees and
expenses of complying with state securities and blue sky laws, printing
expenses, fees and expenses of Foreland's counsel and accountants, and fees and
expenses of counsel for EIF, shall be paid by Foreland; provided, however, that
all underwriting discounts and selling commissions applicable to the EIF
Registrable Securities shall not be borne by Foreland but shall be borne by EIF.
7. Representations and Warranties of EIF. EIF hereby represents and
warrants to Foreland as follows: (a) EIF is duly organized, validly existing and
in good standing under the laws of Delaware; (b) EIF has the full power and
authority to enter into this Agreement; (c) the execution, delivery and
performance of this Agreement by EIF have been duly authorized by all necessary
corporate, governmental or other action; (d) this Agreement constitutes a legal,
valid and binding obligation of EIF, enforceable in accordance with its terms;
and (e) this Agreement does not violate or constitute a default under any of
EIF's organizational documents or under any indenture, mortgage, deed of trust
or other instrument, any contractual covenant or any restriction to which EIF is
a party or by which EIF or its assets are bound, nor does it violate any
provision of any law, rule, regulation, interpretation order, writ, judgment,
decree, determination, or award presently in effect having applicability to EIF.
8. Representations and Warranties of Foreland. Foreland hereby
represents and warrants to EIF as follows: (a) Foreland is duly organized,
validly existing and in good standing under the laws of Nevada; (b) Foreland has
the full power and authority to enter into this Agreement; (c) the execution,
delivery and performance of this Agreement by Foreland have been duly authorized
by all necessary corporate, governmental or other action; (d) this Agreement
constitutes a legal, valid and binding obligation of Foreland, enforceable in
accordance with its terms; (e) this Agreement does not violate or constitute a
default under any of Foreland's organizational documents or under any indenture,
mortgage, deed of trust or other instrument, any contractual covenant or any
restriction to which Foreland is a party or by which Foreland or its assets are
bound, nor does it violate any provision of any law, rule, regulation,
interpretation order, writ, judgment, decree, determination, or award presently
in effect having applicability to Foreland; and (f) there are no actions, suits,
or proceedings pending or, to the knowledge of Foreland, threatened against
Foreland or its affiliates in any court or by or before any governmental
department, agency, instrumentality, or any arbitrator, in which an adverse
decision could be reasonably expected to materially and adversely affect the
ability of Foreland or its affiliates to perform its obligations under this
Agreement.
9. Indemnification.
(a) By Foreland. In connection with the filing of any
registration statements and sales of the Registrable Securities thereunder,
Foreland shall indemnify and hold harmless EIF,
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<PAGE> 6
its officers and directors, any underwriter, and each other individual or
entity, if any, who controls ("Control Person") EIF or the underwriter within
the meaning of the 1933 Act, against Losses to which EIF, underwriter, or
Control Person may become subject under the 1933 Act or otherwise, insofar as
such Losses arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which the Registrable Securities were registered under the 1933 Act, any
preliminary prospectus, offering circular or final prospectus contained therein,
or any amendment or supplement thereto, or any report filed with the Securities
and Exchange Commission (the "Disclosure Documents"), or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse EIF, and any such underwriter, or Control Person
for any legal or any other expenses reasonably incurred in connection with
investigating or defending any such losses, excluding any amounts paid in
settlement of litigation, commenced or threatened, if such settlement is
effected without the prior written consent of Foreland; provided, however, that
Foreland shall not be liable in any such case to the extent that any such Losses
arise out of or are based upon any untrue statement, alleged untrue statement or
omission or alleged omission made in such Disclosure Document in reliance upon
and in conformity with information furnished to Foreland in writing by or on
behalf of EIF for use specifically in connection with the preparation of such
Disclosure Document.
(b) By EIF. In connection with the filing of any registration
statement and sales of the EIF Registrable Securities thereunder, EIF shall
indemnify Foreland, each of its directors, each of its officers who signed such
registration statement, and each other Control Person, against any Losses to
which Foreland, any of its directors, officers, or Control Persons may become
subject under the 1933 Act or otherwise, insofar as such Losses arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any of the Disclosure Documents or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse Foreland, and any of its directors, officers, or Control
Persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claims, excluding any amounts paid in
settlement of litigation, commenced or threatened, if such settlement is
effected without the prior written consent of EIF; provided, however, that such
indemnification or reimbursement shall be payable in any such case only to the
extent that such statement or alleged statement or omission or alleged omission
is made in reliance on information furnished to Foreland in writing by or on
behalf of EIF for use specifically in connection with the preparation of such
Disclosure Document.
10. Reports under Securities Exchange Act of 1934. With a view to
making available to EIF the benefits of Rule 144 promulgated under the 1933 Act
and any other rule or regulation of the SEC that may at any time permit EIF to
sell securities of Foreland to the public without registration, Foreland agrees
to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144;
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<PAGE> 7
(b) file with the SEC in a timely manner all reports and
other documents required of Foreland under the 1933 Act and the Securities
Exchange Act of 1934; and
(c) furnish to EIF, so long as EIF owns any Registrable
Securities, forthwith upon request (i) a written statement by Foreland, if true,
that it has complied with the reporting requirements of SEC Rule 144, the 1933
Act and the Securities Exchange Act of 1934, (ii) a copy of the most recent
annual or quarterly report of Foreland and such other reports and documents so
filed by Foreland, and (iii) such other information as may be reasonably
requested in availing EIF of any rule or regulation of the SEC which permits the
selling of any such securities without registration.
11. Notices. All notices and communications required or permitted
under this Agreement shall be in writing and any communication or delivery
hereunder shall be deemed to have been duly made when personally delivered to
the individual indicated below, or if sent by telecopier or mailed, when
received by the party charged with such notice and addressed as follows:
If to EIF:
Energy Income Fund, L.P.
136 Dwight Road
Longmeadow, MA 01106
Attn: Robert D. Gershen
Facsimile No.: (413) 567-7926
If to Foreland:
Foreland Corporation
Union Terrace Office Building
12596 West Bayaud, Suite 300
Lakewood, CO 80228-2019
Attn: N. Thomas Steele
Facsimile: (303) 988-3234
Copies of all notices (other than reports or other routine
communications), which shall not constitute notice, shall be delivered to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attn: Russell J. Bruemmer
Facsimile No.: (202) 663-6363
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Kruse, Landa & Maycock, L.L.C.
Eighth Floor, Bank One Tower
50 West Broadway (300 South)
Salt Lake City, UT 84101-2034
Attn: James R. Kruse
Facsimile No.: (801) 359-3954
Any party may, by written notice so delivered to the other
parties, change the address or individual to which delivery shall thereafter be
made.
12. Counterparts. This Agreement may be executed by EIF and Foreland
in any number of counterparts, no one of which need be executed by all parties
hereto, but all of which together shall constitute one and the same instrument.
13. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
15. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term of this Agreement, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never constituted a part of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement.
16. Entire Agreement. This Agreement and the Stock Purchase
Agreement constitute the entire understanding among the parties with respect to
the subject matter hereof, superseding all negotiations, prior discussions and
prior agreements and understandings relating to such subject matter.
17. Third Party Beneficiaries. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and, except as otherwise
prohibited, their respective heirs, devisees, executors, administrators,
successors and assigns; and except as provided in Section 9, nothing contained
in this Agreement, express or implied, is intended to confer upon any other
individual or entity any benefits, rights or remedies.
18. Amendments. Except for waivers specifically provided herein,
this Agreement may not be amended nor any rights hereunder waived except by an
instrument in writing signed by the party to be charged with such amendment or
waiver and delivered by such party to the party claiming the benefit of such
amendment or waiver.
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<PAGE> 9
19. Nonwaiver. No course of dealing or any delay or failure to
exercise any right, power or remedy hereunder on the part of EIF shall operate
as a waiver of or otherwise prejudice EIF's rights, powers or remedies.
20. Assignability. Foreland may not assign its obligations under
this Agreement without the written consent of EIF. The registration rights of
EIF under this Agreement may be assigned by EIF without the consent of Foreland.
21. Drafting. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement. The parties therefore
stipulate that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement to favor any party against the other.
22. Interpretation. Unless the context of this Agreement otherwise
requires, (a) words of any gender include all genders; (b) words using the
singular or plural number also include the plural or singular number,
respectively; (c) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Agreement; (d) the term "Section" refers to
the specified Section of this Agreement and (e) the term "including" means
"including without limitation." Whenever this Agreement refers to a number of
days, such number shall refer to calendar days.
IN WITNESS WHEREOF, the parties hereto each has caused this
Agreement to be executed by its duly authorized officer all as of the day and
year first set forth above.
ENERGY INCOME FUND, L.P.
By: EIF General Partner, L.L.C.,
its General Partner
By: /s/ ROBERT D. GERSHEN
----------------------
Robert D. Gershen
A Managing Director
FORELAND CORPORATION
By: /s/ N. THOMAS STEELE
---------------------
N. Thomas Steele
President
9
<PAGE> 1
Exhibit C
Number of Shares: 750,000
FORELAND CORPORATION
COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES PURCHASABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT COVERING SUCH SECURITIES OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES (REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL), OR AN OPINION OF THE COMPANY'S COUNSEL, STATING THAT
SUCH SALE, TRANSFER, OR ASSIGNMENT IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
FOR VALUE RECEIVED, Energy Income Fund, L.P., a Delaware limited
partnership (the "Holder"), is entitled to purchase from Foreland Corporation, a
Nevada corporation (the "Company"), subject to the terms and conditions herein
set forth, at any time before 5:00 p.m. Longmeadow, Massachusetts time on
January 6, 2003, or the first business day thereafter if such day is not a
business day or such other date as may be established in accordance with the
terms of this Warrant (the "Expiration Date"), Seven Hundred Fifty Thousand
(750,000) of the shares of duly authorized, validly issued, fully paid and
nonassessable Common Stock of the Company, one-tenth of a cent ($.001) par value
(the "Warrant Stock"), subject to adjustment of the number or kind of shares
constituting Warrant Stock as hereinafter provided. The Holder is entitled to
purchase the Warrant Stock for Six Dollars ($6.00) per share, subject to
adjustment as hereinafter provided (the "Exercise Price"), and is entitled also
to exercise the other appurtenant rights, powers, and privileges hereinafter set
forth.
<PAGE> 2
Article 1 Definitions.
For all purposes of this Warrant, unless the context otherwise
requires, the following terms have the following meanings:
1.1 "Common Stock" means the Company's authorized common stock,
par value one-tenth of a cent ($.001) per share.
1.2 "Common Stock Equivalents" has the meaning ascribed to that
term in Section 4.5(a).
1.3 "Company" means Foreland Corporation, a corporation
organized and existing under the laws of the State of Nevada, and any successor
corporation.
1.4 "Disclosure Documents" has the meaning ascribed to that term
in Section 8.5(a).
1.5 "Exercise Price" means the exercise price for the Warrant
Stock established in accordance with Article 4.
1.6 "Existing Stock" shall have the meaning ascribed to that
term in Section 4.4 hereof.
1.7 "Expiration Date" means January 6, 2003, or the first
business day thereafter if such day is not a business day, or such other date as
may be established in accordance with the terms of this Warrant.
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<PAGE> 3
1.8 "Fair Market Value"
1.8.1 "Fair Market Value" in reference to the Common
Stock means, (i) in the event such stock is traded on a national securities
exchange or in the over the counter market as reported by the National
Association of Securities Dealers Automated Quotation System (stock being so
traded or reported being referred to herein as "Publicly Traded"), the average
closing price (or, if no sale takes place on any day, the average bid and ask
prices on such day) of such stock on the ten (10) trading days immediately
preceding the date as of which such value is to be determined, or (ii) in the
event the Common Stock is not so traded or reported, the Fair Market Value of
the Common Stock shall mean the total of: (x) the discounted present value of
the net revenues from the proved oil and gas properties, using a discount rate
of 15% and the risk adjustments to different categories of proved reserves as
follows: 100% of proved developed producing reserves; 70% of proved developed
non-producing reserves and proved behind pipe reserves; and 50% of proved
undeveloped reserves, and product price assumptions equal to the trailing twelve
(12) month weighted average wellhead price held flat for the life of the wells
as projected in the most recent Reserve Report; plus (y) the present value of
the assets of the Company other than reserves as determined by an independent
accountant, auditor or other third party mutually chosen by the Company and
Holder; minus (z) the liabilities of the Company. In the event the Common Stock
is not Publicly Traded, Fair Market Value in reference to a share of the Common
Stock shall mean the Fair Market Value of the Company allocable to the issued
Common Stock divided by the number of shares of Common Stock that would have
been outstanding had (i) this Warrant, (ii) all options to purchase Common
Stock, and (iii) all securities convertible into Common Stock at a price per
share no greater than Fair Market Value, been exercised or converted on the date
as of which value is to be determined (with appropriate adjustment by appraisal
to reflect the proceeds of the assumed exercise or conversion of outstanding
securities).
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<PAGE> 4
1.8.2 "Fair Market Value of This Warrant" means the Fair Market
Value of the Common Stock subject to this Warrant minus the Exercise Price of
this Warrant established in accordance with Article 4.
1.9 "Financing Agreement" shall mean that certain Financing
Agreement dated as of January 6, 1998, as amended from time to time, between
Foreland Corporation, Eagle Springs Production Limited-Liability Company and
Energy Income Fund, L.P.
1.10 "Holder" means Energy Income Fund, L.P., a Delaware limited
partnership, and its successors or permitted assigns as holder of this Warrant.
1.11 "Loans" shall mean the loans made by Energy Income Fund,
L.P. to the Company pursuant to the terms of the Financing Agreement.
1.12 "Losses" has the meaning ascribed to that term in
Section 8.5(a).
1.13 "1933 Act" means the Securities Act of 1933, as amended.
1.14 "Person" means any natural person, sole proprietorship,
general partnership, limited partnership, limited liability company, joint
venture, trust, unincorporated organization, association, corporation,
institution, private or governmental entity, or party.
1.15 "Publicly Traded" has the meaning ascribed to that term in
Section 1.8.
1.16 "Rights" has the meaning ascribed to that term in
Section 4.4.
1.17 "Subscription Notice" means a written notice to the
Company of Holder's election to exercise its rights under the Warrant to
purchase Common Stock, in substantially the form appearing at the end of this
Warrant.
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<PAGE> 5
1.18 "Warrant" means this Warrant and any warrants issued on or
in substitution for this Warrant including warrants issued in exchange for this
Warrant pursuant to Article 2 hereof.
1.19 "Warrant Stock" means the shares of Common Stock or other
securities acquired or to be acquired upon the exercise of the Warrant.
Article 2 Exercise of Warrant; Division of Warrant.
2.1 Exercise. This Warrant may be exercised in whole or in
part. In the event of a partial exercise, the Company shall execute and deliver
to the Holder (or to such other Person as shall be designated in the
Subscription Notice) a new Warrant covering the unexercised portion of the
Warrant Stock. At any time after the second anniversary of the date hereof, the
Company may require the Holder to exercise or surrender this Warrant within
thirty (30) days after receipt of a request for exercise from the Company,
certifying that the average trading price for shares of the Company's common
stock during the preceding three (3) month period, calculated based on the
closing or last trade price of each trading day, equals or exceeds two hundred
percent (200%) of the Exercise Price effective as of the date of such notice,
and further certifying that the average trading volume for such period has
exceeded fifty thousand (50,000) shares per day.
2.2 Procedure. To exercise this Warrant, the Holder shall
deliver to the Company at its principal office:
(a) a written notice, in substantially the form of the
Subscription Notice appearing at the end of this Warrant, of the Holder's
election to exercise this Warrant;
(b) a cashier's or certified check payable to the Company in the
amount of the Exercise Price; and
(c) this Warrant.
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<PAGE> 6
The Company shall as promptly as practicable, and in any event
within twenty (20) days after receipt of such items, execute and deliver or
cause to be executed and delivered one or more certificates representing the
aggregate number of shares of Warrant Stock to which the Holder is entitled and,
if this Warrant is exercised in part, a new Warrant as set forth in Section 2.1.
2.3 Name and Effective Date. The stock certificate(s) so
delivered shall be issued in the name of the Holder or such other name as shall
be designated in the notice specified in Section 2.2. Such certificate(s) shall
be deemed to have been issued and such Holder or any other Person so designated
to be named therein shall be deemed for all purposes to have become a holder of
record of such shares as of the date on which the Company has actually received
all of the items specified in Section 2.2.
2.4 Expenses. The Company shall pay all expenses, taxes, and
other charges payable in connection with the preparation, issue, and delivery
of such stock certificate(s), except that, in case such stock certificate(s)
shall be registered in a name or names other than the name of the Holder of
this Warrant, stock transfer taxes that are payable upon the issuance of such
stock certificate(s) shall be paid by the Holder hereof.
2.5 Legal Requirements. The Warrant Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid, and nonassessable.
2.6 No Fractional Shares. The Company shall not issue a stock
certificate representing any fraction of a share upon partial exercise by a
Holder of such Holder's rights hereunder.
2.7 Registration; Exchange of Warrant. The Company will keep
at its principal office a register in which the Company will provide for the
registration and transfer of this Warrant. The holder of this Warrant, or of any
warrant substituted therefor pursuant to the provisions of this Section 2.7,
may, at its option, in person or by duly authorized attorney,
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<PAGE> 7
surrender the same for exchange at such principal office of the Company and,
within a reasonable time thereafter and without expense (other than transfer
taxes, if any), receive in exchange therefor one or more duly executed warrants
each evidencing the right to receive one share of Common Stock of the Company or
such other whole number of shares as may be designated by the holder at the time
of surrender. The Company covenants and agrees to take and cause to be taken all
action necessary to effect such registrations, transfers and exchanges.
The Company and any agent of the Company may treat the person in
whose name a warrant is registered as the owner of the warrant for all purposes
hereunder and neither the Company or such agent shall be affected by notice to
the contrary.
2.8 Cashless Exercise. Notwithstanding Section 2.2 of this
Warrant or any other provision of this Warrant to the contrary, in addition to
the Holder's rights under this Warrant, the Holder may, upon full or partial
exercise of this Warrant, at its election, pay the aggregate Exercise Price
applicable to such exercise by delivering the Warrant to the Company and
receiving from the Company in return therefor the number of shares of Common
Stock having a Fair Market Value on the date of exercise equal to the "Fair
Market Value of This Warrant" as established by Section 1.8.2.
Article 3 Transfer.
3.1 Permitted Transfers. This Warrant shall be freely trans-
ferable, in whole or in part, subject to the limitations specified in Section
3.2 herein.
3.2 Securities Laws. Neither this Warrant nor the Warrant
Stock shall be transferable unless:
(a) either a registration statement under the Securities Act of
1933 (the "1933 Act") is in effect covering the Warrant or the Warrant Stock, as
the case may be, or the Company has received an opinion from the Company's
counsel to the effect that such registration is not required, or the Holder has
furnished to the Company an opinion of Holder's counsel, which
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<PAGE> 8
counsel shall be reasonably satisfactory to the Company, to the effect that such
registration is not required; and
(b) the proposed transfer complies with any applicable state
securities laws.
In the event Holder seeks an opinion from the Holder's counsel as to transfer
without registration, the Company shall provide such factual information to
Holder's counsel as Holder's counsel may reasonably request for the purpose of
rendering such opinion and such counsel may rely on the accuracy and
completeness of such information in rendering such opinion. Upon issuance at a
time when the Common Stock is not Publicly Traded, the Warrant Stock will bear a
legend describing the restrictions on transfer set forth in this Section 3.2.
3.3 Procedure. Subject to the limitations set forth in
Section 3.2, the Holder may transfer this Warrant on the books of the Company by
surrendering to the Company:
(a) this Warrant;
(b) a written assignment of this Warrant, in
substantially the form of the Assignment appearing at
the end of this Warrant, naming the assignee and duly
executed by the Holder; and
(c) funds sufficient to pay any stock transfer taxes
payable upon the making of such transfer.
The Company shall thereupon execute and deliver a new Warrant
in the name of the assignee specified in such instrument of assignment, and if
this Warrant is transferred in part, the Company shall also execute and deliver
in the name of the Holder a new Warrant covering the untransferred portion of
this Warrant. Upon issuance of the new Warrant or Warrants, the Warrant
surrendered for transfer shall be canceled by the Company.
3.4 Expenses. The Company shall pay all expenses, taxes
(other than transfer taxes), and other charges payable in connection with the
preparation, issue, and delivery of any new Warrant under this Article 3.
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Article 4 Exercise Price and Adjustments.
4.1 Initial Exercise Price. The initial Exercise Price for
the Warrant Stock shall be Six Dollars ($6.00) per share.
4.2 Stock Splits, Stock Dividends and Reverse Stock Splits.
If at any time the Company shall subdivide (by reclassification, by the issuance
of a Common Stock dividend on Common Stock, or otherwise) its outstanding shares
of Common Stock into a greater number, the number of shares of Common Stock that
may be purchased hereunder shall be increased proportionately and the Exercise
Price per share of Common Stock shall be decreased proportionately as of the
effective date of such action. The effective date of a stock dividend shall be
the date on which the dividend is declared. Issuance of a Common Stock dividend
shall be treated as a subdivision of the whole number of shares of Common Stock
outstanding immediately before the record date for such dividend into a number
of shares equal to such whole number of shares so outstanding plus the number of
shares issued as a stock dividend. If at any time the Company shall combine (by
reclassification or otherwise) its outstanding number of shares of Common Stock
into a lesser number, the number of shares of Common Stock that may be purchased
hereunder shall be reduced proportionately and the Exercise Price per share of
Common Stock shall be increased proportionately as of the effective date of such
action.
4.3 Dividends Other than in Common Stock or Cash; Other
Distributions. If at any time while this Warrant is outstanding the Company
shall declare or make for the benefit of all holders of its Common Stock any
dividend or distribution upon its Common Stock other than ordinary cash
dividends, or distributions to which Section 4.2 or 4.4 apply (whether payable
in stock of any class or classes other than its Common Stock or payable in
evidences of indebtedness or assets or in rights, options, or warrants or
convertible or exchangeable securities), then in each such case the number of
shares of Common Stock that may be purchased hereunder shall be determined by
multiplying the number of shares of Common Stock theretofore comprising the
Warrant Stock by a fraction, the numerator of which shall be the Fair
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<PAGE> 10
Market Value per share of the Common Stock determined in accordance with Section
1.9 as of the record date for such dividend or distribution and the denominator
of which shall be the Fair Market Value per share, as so determined, less the
fair value as of such date, as reasonably determined by the Board of Directors
of the Company, of the portion of such dividend or distribution applicable to
one share of Common Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of distribution
retroactive to the record date for the determination of shareholders entitled to
receive the distribution. In the event the Company determines that the
adjustment provided for above is unduly difficult or expensive to effect because
of difficulties of valuation, the Company may, at its option and as an
alternative to the adjustment, distribute and place in escrow for the Holder
that portion of such dividend or distribution which the Holder would have
received had it exercised this Warrant before the declaration of the dividend or
the making of the distribution. Upon exercise of this Warrant, the Holder shall
receive its portion of the dividend, distribution, or rights.
4.4 Issuance on Common Stock of Options, Warrants or Rights.
If at any time while this Warrant is outstanding the Company shall grant to all
holders of its Common Stock any rights, options or warrants (referred to in this
Section 4.4 as "Rights") entitling them to purchase shares of Common Stock at a
price per share that is lower at the record date for such issuance than the Fair
Market Value of the Common Stock on such date determined in accordance with
Section 1.8, the number of Shares of Common Stock that may be purchased
hereunder shall be determined by multiplying the number of Shares of Common
Stock theretofore purchasable upon exercise of each Warrant by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding or
subject to issuance at prices at or below the Fair Market Value of the Common
Stock on such record date (the "Existing Stock") plus the number of shares
subject to issuance pursuant to the Rights and of which the denominator shall be
the number of shares of Existing Stock plus the number of shares which the
aggregate offering price of the total number of shares of Common Stock so
offered would purchase at the then current Fair Market Value per share of Common
Stock. Such adjustment shall be made whenever such rights, options or warrants
are issued and shall become effective retroactively immediately after the record
date for the determination of shareholders entitled to
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<PAGE> 11
receive such rights options or warrants. In the event the Company determines
that the adjustment provided for above in this Section is unduly difficult or
expensive to effect because of difficulties of valuation, the Company may, at
its option and as an alternative to the adjustment, grant and convey to the
Holder the Rights which the Holder would have received had it exercised this
Warrant before issuance of the Rights.
On the expiration or termination of any of the Rights, the
number of shares of Common Stock then purchasable upon the exercise of each
Warrant and the exercise price then in effect shall be subject to readjustment
and the number of shares of Common Stock subject to the Warrants shall forthwith
be decreased and the exercise price under the Warrants shall forthwith be
increased to that which would have been in effect at the time of such expiration
or termination had such Rights, to the extent outstanding immediately prior to
such expiration or termination, never been issued.
4.5 Anti-dilution Adjustment.
(a) Pursuant to Section 7.39 of the Financing Agreement, if
during the term of this Warrant and notwithstanding the prior repayment of Loans
(as such term is defined in the Financing Agreement), the Company issues
additional shares of Common Stock at a price of less than Six Dollars ($6) per
share, the Company shall deliver to Holder within five (5) days of such issuance
an additional warrant in the form of this Warrant for Common Stock equal to ten
percent (10%) of the shares so issued. Notwithstanding the prior repayment of
Loans, if the Company issues securities convertible or exercisable into Common
Stock at a conversion or exercise price of less than Six Dollars ($6) per share
and such securities are converted or exercised into Common Stock or repurchased
by the Company during the term of this Warrant, the Company shall deliver to
Holder within five (5) days of such conversion or exercise an additional warrant
in the form of this Warrant for Common Stock of the Company equal to ten percent
(10%) of the shares issued purusant to such conversion or exercise. The
foregoing shall not apply to securities issued pursuant to options, warrants,
calls, subscriptions, rights, agreements or commitments set forth on Schedule
5.23 of the Financing Agreement.
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<PAGE> 12
(b) The provisions of this Section 4.5(a) shall not apply in the
event the Company issues (i) shares of Common Stock at a price of Three Dollars
Seventy-Five Cents ($3.75) per share or less, or (ii) securities convertible or
exercisable into Common Stock at a conversion or exercise price of Three Dollars
Seventy-Five Cents ($3.75) per share or less and such securities are converted
or exercised into Common Stock or repurchased by the Company. In such instance,
the Company shall deliver to Holder within five (5) days of such issuance of
Common Stock or conversion or exercise of the convertible or exercisable
security, a warrant in the form of Warrant No. 1 and Warrant No. 2 for the
number of shares represented by Warrant No. 1 and Warrant No. 2 on such issuance
date at an exercise price equal to the sales, conversion or exercise price. Upon
issuance thereof, Holder will deliver warrant No. 1 and Warrant No. 2 to the
Company for cancellation. In addition, the foregoing provisions of this Section
shall not apply: (1) if the Company issues additional securities, the proceeds
of which are used to repay the Loans in full within thirty (30) days, or (ii) if
the Company issues equity securities in one offering with net proceeds to the
Company of Twenty Million Dollars ($20,000,000) or more.
4.6 Reorganization and Reclassification. In case of any
capital reorganization or any reclassification of the capital stock of the
Company while this Warrant remains outstanding, the Holder of this Warrant shall
thereafter be entitled to purchase pursuant to this Warrant (in lieu of the kind
and number of shares of Common Stock comprising Warrant Stock that such Holder
would have been entitled to purchase or acquire immediately before such
reorganization or reclassification) the kind and number of shares of stock of
any class or classes or other securities or property for or into which such
shares of Common Stock would have been exchanged, converted, or reclassified if
the Warrant Stock had been purchased immediately before such reorganization or
reclassification. In case of any such reorganization or reclassification,
appropriate provision (as determined by resolution of the Board of Directors of
the Company) shall be made with respect to the rights and interest thereafter of
the Holder of this Warrant, to the end that all the provisions of this Warrant
(including adjustment provisions) shall thereafter be applicable, as nearly as
reasonably practicable, in relation to such stock or other securities or
property.
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<PAGE> 13
4.7 Statement of Adjustment of Warrant Stock. Whenever the
number or kind of shares comprising Warrant Stock or the Exercise Price is
adjusted pursuant to this Article 4, the Company shall promptly give notice to
the Holder of record of the outstanding Warrant, stating that such an adjustment
has been effected and setting forth the number and kind of shares purchasable
and the amount of the then-current Exercise Price, and stating in reasonable
detail the facts requiring such adjustment and the calculation of such
adjustment.
4.8 No Other Adjustments. No adjustments in the number or
kind or price of shares constituting Warrant Stock shall be made except as
provided in this Article 4.
Article 5 Covenants of the Company.
The Company covenants and agrees that:
5.1 Reservation of Shares. At all times, the Company
will reserve and set apart and have, free from preemptive rights, a sufficient
number of shares of authorized but unissued Common Stock or other securities, if
applicable, to enable it at any time to fulfill all its obligations hereunder.
5.2 Adjustment of Par Value. Before taking any action
that would cause an adjustment reducing the Exercise Price per share below the
then par value of the shares of Warrant Stock issuable upon exercise of the
Warrant, the Company will take any corporate action that may be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable shares of such Warrant Stock at such adjusted price.
5.3 Notice of Significant Events. In case the Company
proposes:
(a) to pay any dividend, payable in stock (of any class or
classes) or in convertible securities, upon its Common Stock or to make any
distribution (other than ordinary cash dividends) to the holders of its Common
Stock; or
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<PAGE> 14
(b) to subdivide as a whole (by reclassification, by the
issuance of a stock dividend on Common Stock, or otherwise) the number of shares
of Common Stock then outstanding into a greater number of shares of Common
Stock, with or without par value; or
(c) to grant to the holders of its Common Stock generally any
rights or options; or
(d) to effect any capital reorganization or reclassification of
capital stock of the Company; or
(e) to consolidate with, or merge into, any other corporation or
business or transfer its property as an entirety or substantially as an
entirety; or
(f) to effect the liquidation, dissolution, or winding up of
the Company; or
(g) to make any other fundamental change in respect of which the
Holder of this Warrant would have been entitled to vote, pursuant to the
corporation law of Nevada, if this Warrant had been previously exercised;
then the Company shall cause notice of any such intended action to be given to
the Holder of record of this Warrant (i) not less than thirty (30) days before
the date on which the transfer books of the Company shall close or a record be
taken for such stock dividend, distribution, granting of rights or options, or
for determining rights to vote in respect of any fundamental change, including
any capital reorganization, reclassification, consolidation, merger, transfer,
liquidation, dissolution, winding up, or any other fundamental change, and (ii)
in the case of any such capital reorganization, reclassification, consolidation,
merger, transfer, liquidation, dissolution, winding up, or other fundamental
change not less than thirty (30) days before the same shall be effective.
5.4 Obligations of the Company after the Loans are Paid in
Full. After the Loans are paid in full pursuant to the terms of the Financing
Agreement, and until the exercise or expiration of the Warrants:
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<PAGE> 15
(a) At any time at which the Company's Common Stock is not
Publicly Traded, the Company will provide to the Holder: (1) annual and
quarterly financial statements of the Company, and (2) annual independent
reserve reports for all properties owned or leased by the Company. The annual
financial statements shall be audited by a firm of independent certified public
accountants.
(b) The Company shall not engage in any transaction with any
Affiliate of the Company or Associate of the Company or of such Affiliate (each
as defined below), except on terms no less favorable to the Company than are
obtainable in arms-length transactions with third parties. For purposes of this
Section 6.4, the terms "Affiliate" and "Associate" shall have the meanings set
forth in Rule 405, adopted under the Securities Act of 1933, as amended.
(c) The Company shall not make, directly or indirectly, any
loan, advance or extension of credit to, or any guarantee (by way of any
commitment to fund, or commitment to satisfy in any way, any debt, liability, or
other obligation or otherwise) for, any of its officers, directors, employees,
shareholders, partners, or Affiliates, or any Affiliate or Associate of such
person or entity, except on terms no less favorable to the Company than are
obtainable in arms-length transactions with third parties.
(d) The Company shall not pay any compensation to its
officers or directors in excess of reasonable, usual and customary compensation
paid to officers or directors in companies similar to the Company in the oil and
gas industry.
Article 6 Limitation of Right or Liability.
6.1 No provision of this Warrant shall be construed as
conferring upon the Holder hereof the right to vote or to consent or to receive
dividends or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matter
whatsoever as a stockholder of the Company. In the absence of affirmative
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<PAGE> 16
action by the Holder hereof to purchase shares of Common Stock, no provision
hereof shall give rise to any liability of such Holder for the purchase price or
as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
Article 7 Certain Mergers; Liquidation.
7.1 Continuation of Warrant. Except as provided in
Section 8.2, in the event that the Company proposes to consolidate with, or
merge into, any other corporation or business or to transfer its property as an
entirety or substantially as an entirety, or to effect the liquidation,
dissolution, or winding up of the Company, or to change the Common Stock in any
manner (other than to change its par value), then after the Company causes
notice of such proposed action to be given to the Holder of record as provided
in Section 6.3, the Holder shall be entitled, on or before the effective date of
such merger, consolidation, transfer, liquidation, dissolution, winding up, or
change, to require the Company of the successor or purchasing entity, as the
case may be, to (a) execute with the Holder an agreement providing that the
Holder shall have the right thereafter and throughout the then remaining term of
this Warrant, upon payment of the Exercise Price per Warrant Share in effect
immediately prior to such action to purchase with respect to each share of
Warrant Stock issuable upon exercise of this Warrant the kind and amount of
shares of stock and other securities, property (including cash) or any
combination thereof which the Holder would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale, conveyance, or
change had this Warrant been exercised with respect to such share of the Warrant
Stock immediately prior to such action and (b) make effective provision in its
Articles of Incorporation or otherwise, if necessary, in order to effect such
agreement. Such agreement shall provide for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Article 4 of this Warrant. The
provisions of this Section 8.1 shall similarly apply to successive
consolidations, mergers, sales, conveyances, or changes.
7.2 Exception. Section 8.1 shall not apply to a consolida-
tion or merger with a Person in which the Company is the surviving entity.
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<PAGE> 17
Article 8 Registration Rights.
8.1 Piggyback Registration Rights. If, at any time on or
before the expiration of this Warrant, the Company proposes to file a
registration statement for the public sale of any of its Common Stock or Common
Stock Equivalents under the 1933 Act (other than registration statements (i)
provided for in Section 8.2 hereof or (ii) pursuant to Form S-4 and Form S-8 of
the Securities Act of 1933) the Company shall, not later than thirty (30) days
prior to the initial filing of the registration statement, deliver notice of its
intent to file such registration statement to the Holder, setting forth the
minimum and maximum proposed offering price, commissions, and discounts in
connection with the offering, and other relevant information. Within twenty (20)
days after receipt of notice of the Company's intent to file a registration
statement, the Holder shall be entitled to request that the Warrant Stock be
included in such registration statement, and the Company will use its best
efforts to cause such Warrant Stock to be included in the offering covered by
such registration statement. In the event the Warrant Stock is included in the
registration statement, the Holder may transfer this Warrant to an underwriter
or broker for exercise by such underwriter or broker in connection with a
distribution of the Warrant Stock.
The managing underwriter or underwriters in an underwritten
offering, or the holders of a majority in number of shares of Common Stock
requesting registration, may determine that the number of securities proposed to
be sold in the underwriting or offering exceeds the number that can be sold
without having a materially adverse effect on the price at which the securities
could be sold. If it or they make such a determination in good faith, then the
Company may reduce the number of shares of Common Stock to be included in the
registration to the highest number that the managing underwriter (or
underwriters) or a majority of the holders (as the case may be) determine will
not have a material adverse effect on the price of the shares to be sold. If the
number of shares of Common Stock to be sold in a registration are limited
pursuant to this paragraph, the Company will include in the registration:
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<PAGE> 18
(i) First, all shares the Company proposes to sell;
(ii) Second, all shares of Common Stock for which registration
was requested pursuant to rights to require the Company to register shares in
the absence of any other registration reduced, if necessary, to the maximum
number of shares consistent with the limitation required by this Section 8.1;
and ;
(iii) Third, shares of Common Stock for which registration was
requested pursuant to rights to require the Company to register shares
incidental to the registration of other shares reduced pro rata according to the
number of share for which registration was requested by each person so
requesting registration, or in such other proportions as such Persons may agree.
8.2 Demand Registration Rights. The Holder shall be entitled
to request that the Warrant Stock be registered under the 1933 Act. The Holder
shall obtain an underwriter and the Company shall, as soon as practicable after
receipt of a written request for registration, file, and use its best efforts to
cause to become effective, an appropriate registration statement under the 1933
Act covering the Warrant Stock, provided that in the opinion of the Company's
counsel, no events preclude such registration. The Company may postpone for a
reasonable period of time (not to exceed 90 days) the filing of any registration
statement otherwise required to be prepared and filed by it pursuant to this
Section if, at the time it receives a request for registration:
(1) the Company is conducting or about to conduct an
offering of its securities and the Company is advised
by its investment banker that such offering would be
affected adversely by the registration so demanded and
the Company shall have furnished to the Holder seeking
a demand registration a certificate signed by the
President of the Company to that effect;
(2) the Board of Directors of the Company shall determine
in good faith that such offering will interfere with a
pending or contemplated financing,
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<PAGE> 19
merger, sale of assets, recapitalization or other
similar corporate action of the Company and the Company
shall have furnished to the Holder seeking a demand
registration a certificate signed by the President of the
Company to that effect, accompanied by a certified copy
of the relevant board resolutions; or
(3) the Board of Directors of the Company shall determine
in good faith that the disclosures required in
connection with registration of the Warrant Stock might
adversely affect the business or prospects of the
Company and the Company shall have furnished to the
Holder seeking a demand registration a certificate
signed by the President of the Company to the effect,
accompanied by a certified copy of the relevant board
resolutions.
In the event that the Holder demands registration pursuant to
this Section 9.2 within the six months immediately prior to expiration of this
Warrant, and the Company, through no fault of the Holder, is unable to provide
such registration, the expiration date of this Warrant shall be extended until
the 30th day after a registration statement for the Warrant Stock is declared
effective.
The Holder's right to demand registration pursuant to this
Section 9.2 may be exercised only one time prior to expiration of the Warrant;
provided, however, that the right shall not be deemed exhausted unless the
registration statement covering so much of the Warrant Stock as Holder and its
assigns wish to sell pursuant to the registration statement becomes effective.
8.3 Filing Obligations of the Company. In connection with
any registration of the Warrant Stock effected under Sections 9.1 or 9.2, the
Company shall:
(a) prepare and file the registration statement and such
amendments and supplements to the registration statement and the prospectus or
offering circular used in
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<PAGE> 20
connection therewith as may be necessary to keep the registration statement
effective for a period of ninety (90) days and to comply with the provisions of
the 1933 Act and the rules and regulations thereunder with respect to the
disposition of the Warrant Stock covered by the registration statement for the
period required to effect the distribution thereof, but in no event shall the
Company be required to do so for a period of more than ninety (90) days
following the effective date of such registration statement;
(b) furnish to the Holder such number of copies of any
prospectus or offering circular, including a preliminary prospectus, and of a
full registration statement and exhibits in conformity with the requirements of
the 1933 Act and rules and regulations thereunder, as the Holder may reasonably
request in order to facilitate the disposition of such securities;
(c) use its best efforts to register or qualify the Warrant
Stock covered by the registration statement, as the case may be, under the
securities or blue sky laws of such jurisdictions as the Holder may reasonably
request, and accomplish any and all other acts and things which may be necessary
or advisable to permit sale in such jurisdictions of such Warrant Stock;
provided, however, that the Company shall not be required to register as a
dealer or to qualify as a foreign corporation in any such jurisdictions or to
escrow any shares of its capital stock.
8.4 Expenses. All expenses incurred by the Company in
connection with any registration of the Warrant Stock effected under Sections
9.1 or 9.2, including, without limitation, all registration or filing fees, fees
and expenses of complying with state securities and blue sky laws, printing
expenses, fees and expenses of the Company's counsel and accountants, and fees
and expenses of counsel for the Holder, shall be paid by the Company; provided,
however, that all underwriting discounts and selling commissions applicable to
the Warrant Stock shall not be borne by the Company but shall be borne by the
Holder.
8.5 Indemnification.
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<PAGE> 21
(a) By the Company. In connection with the filing of any
registration statements and sales of the Warrant Stock thereunder, the Company
shall indemnify and hold harmless the Holder of this Warrant, any underwriter,
and each other Person, if any, who controls the Holder or the underwriter within
the meaning of the 1933 Act, against losses, claims, damages or liabilities,
joint or several (or actions in respect thereto) ("Losses"), to which any such
Holder, underwriter, or controlling Person may become subject under the 1933 Act
or otherwise, insofar as such Losses arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which the Warrant Stock was registered under the
1933 Act, any preliminary prospectus, offering circular or final prospectus
contained therein, or any amendment or supplement thereto, or any report filed
with the Securities and Exchange Commission (the "Disclosure Documents"), or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse any such Holder,
underwriter, or controlling Person for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claims, excluding any amounts paid in settlement of litigation, commenced or
threatened, if such settlement is effected without the prior written consent of
the Company; provided, however, that the Company shall not be liable in any such
case to the extent that any such Losses arise out of or are based upon any
untrue statement, alleged untrue statement or omission or alleged omission made
in such Disclosure Document in reliance upon and in conformity with information
furnished to the Company in writing by or on behalf of the Holder of this
Warrant for use specifically in connection with the preparation of such
Disclosure Document.
(b) By the Holder. In connection with the filing of any
registration statement and sales of the Warrant Stock thereunder, the Holder
shall indemnify the Company, each of its directors, each of its officers who
signed such registration statement, and each other Person, if any, who controls
the Company within the meaning of the 1933 Act, against any Losses to which the
Company, any of its directors, officers, or controlling Persons may become
subject under the 1933 Act or otherwise, insofar as such Losses arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any of the Disclosure Documents or
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<PAGE> 22
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, and any of
its directors, officers, or controlling Persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claims, excluding any amounts paid in settlement of litigation, commenced
or threatened, if such settlement is effected without the prior written consent
of the Holder; provided, however, that such indemnification or reimbursement
shall be payable in any such case only to the extent that such statement or
alleged statement or omission or alleged omission is made in reliance on
information furnished to the Company in writing by or on behalf of the Holder
for use specifically in connection with the preparation of such Disclosure
Document.
8.6 Assignability. The piggyback and demand registration
rights of the Holder under Article 8 may be assigned by Holder, subject to the
transfer limitations set forth in Article 3 and assumption by the assignee of
the corresponding obligations hereunder.
Article 9 Miscellaneous.
9.1 Governing Law. The rights of the parties arising under
this Warrant shall be construed and enforced under the laws of the Commonwealth
of Massachusetts without giving effect to any choice of law or conflict of law
rules.
9.2 Notices. Any notice or other communication required or
permitted to be given or delivered pursuant to this Warrant shall be in writing
and shall be deemed effective as of the date of receipt if delivered personally
or by facsimile transmission (if receipt is confirmed by the facsimile operator
of the recipient), or delivered by overnight courier service or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address in the United
States of America for a party as shall be specified by like notice; provided
that notices of change of address shall be effective only upon receipt thereof):
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<PAGE> 23
(i) to the Holder as follows:
Energy Income Fund, L.P.
136 Dwight Road
Longmeadow, Massachusetts 01106
Attn: Robert D. Gershen
Facsimile No.: (413) 567-7926
with copies to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attn: Russell J. Bruemmer
Facsimile No.: (202) 663-6363
(ii) to the Company as follows:
Foreland Corporation
12596 West Bayaud Avenue
Suite 300
Lakewood, CO 80228-2019
Attn: N. Thomas Steele
Facsimile No.: (303) 988-3234
with copies to:
Kruse, Landa & Maycock, L.L.C.
8th Floor, Bank One Tower
50 West Broadway (300 South)
Salt Lake City, UT 84101-2034
Attn: James R. Kruse, Esq.
Facsimile No.: (801) 531-7091
9.3 Severability. If any provision of this Warrant shall be
held invalid, such invalidity shall not affect any other provision of this
Warrant that can be given effect without the invalid provision, and to this end,
the provisions hereof are separable.
9.4 Headings. The headings in this Warrant are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Warrant.
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<PAGE> 24
9.5 Amendment. This Warrant cannot be amended or modified
except by a written agreement executed by the Company and the Holder.
9.6 Assignment. This Warrant shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns except that no party may assign or
transfer its rights or obligations under this Warrant to the extent explicitly
prohibited herein.
9.7 Entire Agreement. This Warrant, together with its
attachments, contains the entire understanding among the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written, except as herein contained.
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<PAGE> 25
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed in its name by its President or a Vice President thereunto duly
authorized.
Dated: January 6, 1998
FORELAND CORPORATION
By /S/ N. THOMAS STEELE
-------------------------
N. Thomas Steele
President
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<PAGE> 26
SUBSCRIPTION NOTICE
The undersigned, the Holder of a Common Stock Purchase Warrant
issued by [name of issuer] pursuant to a Financing Agreement dated as of
[___________] between [name of issuer] and Energy Income Fund, L.P., hereby
elects to exercise purchase rights represented by such Warrant for, and to
purchase thereunder, ___________ shares of the Common Stock covered by such
Warrant and herewith makes payment in full therefor of _____________________and
requests that certificates for such shares (and any securities or the property
issuable upon such exercise) be issued in the name of and delivered to
____________________________________________________________, whose address is
________________________________________________________________________________
_______________________________________________________________________________.
If said number of shares of Common Stock is less than the number
of shares of Warrant Stock purchasable hereunder, the undersigned requests that
a new Warrant representing the balance of the Warrant Stock be registered in the
name of and issued and delivered to
__________________________________________________, whose address is
________________________________________________________________________________
_______________________________________________________________________________.
The undersigned hereby agrees to pay any transfer taxes on the
transfer of all or any portion of the Warrant or Warrant Stock requested herein.
The undersigned agrees that, in the absence of an effective
registration statement with respect to Common Stock issued upon this exercise,
the undersigned is acquiring such Common Stock for investment and not with a
view to distribution thereof and the certificate or certificates representing
such Common Stock may bear a legend substantially as follows: "The shares
represented by this certificate have not been registered under the Securities
Act of 1933, as amended, and may not be transferred except as provided in
Article 3 of the Common Stock Purchase Warrant issued by [name of issuer] on
[date], a copy of which is on file at the principal office of [name of issuer]."
----------------------------------
Signature guaranteed:
Dated:
-----------------
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<PAGE> 27
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto __[Name and Address]__ the rights represented by the foregoing
Common Stock Purchase Warrant issued by [name of issuer] on [date], and appoints
________________ its attorney to transfer said rights on the books of said corp-
oration, with full power of substitution in the premises.
-------------------------------
Signature guaranteed:
Dated:
------------------
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<PAGE> 1
Exhibit D
Number of Shares: 750,000
WARRANT NO. 2
FORELAND CORPORATION
COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES PURCHASABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT COVERING SUCH SECURITIES OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES (REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL), OR AN OPINION OF THE COMPANY'S COUNSEL, STATING THAT
SUCH SALE, TRANSFER, OR ASSIGNMENT IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
FOR VALUE RECEIVED, Energy Income Fund, L.P., a Delaware limited
partnership (the "Holder"), is entitled to purchase from Foreland Corporation, a
Nevada corporation (the "Company"), subject to the terms and conditions herein
set forth, at any time before 5:00 p.m. Longmeadow, Massachusetts time on
January 6, 2003, or the first business day thereafter if such day is not a
business day or such other date as may be established in accordance with the
terms of this Warrant (the "Expiration Date"), Seven Hundred Fifty Thousand
(750,000) of the shares of duly authorized, validly issued, fully paid and
nonassessable Common Stock of the Company, one-tenth of a cent ($.001) par value
(the "Warrant Stock"), subject to adjustment of the number or kind of shares
constituting Warrant Stock as hereinafter provided. The Holder is entitled to
purchase the Warrant Stock for Six Dollars ($6.00) per share, subject to
adjustment as hereinafter provided (the "Exercise Price"), and is entitled also
to exercise the other appurtenant rights, powers, and privileges hereinafter set
forth.
<PAGE> 2
Article 1 Definitions.
For all purposes of this Warrant, unless the context otherwise
requires, the following terms have the following meanings:
1.1 "Common Stock" means the Company's authorized common stock,
par value one-tenth of a cent ($.001) per share.
1.2 "Common Stock Equivalents" has the meaning ascribed to that
term in Section 4.5(a).
1.3 "Company" means Foreland Corporation, a corporation
organized and existing under the laws of the State of Nevada, and any successor
corporation.
1.4 "Disclosure Documents" has the meaning ascribed to that
term in Section 8.5(a).
1.5 "Exercise Price" means the exercise price for the Warrant
Stock established in accordance with Article 4.
1.6 "Existing Stock" shall have the meaning ascribed to that
term in Section 4.4 hereof.
1.7 "Expiration Date" means January 6, 2003, or the first
business day thereafter if such day is not a business day, or such other date as
may be established in accordance with the terms of this Warrant.
1.8 "Fair Market Value"
1.8.1 "Fair Market Value" in reference to the Common
Stock means,
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<PAGE> 3
(i) in the event such stock is traded on a national securities exchange or in
the over the counter market as reported by the National Association of
Securities Dealers Automated Quotation System (stock being so traded or reported
being referred to herein as "Publicly Traded"), the average closing price (or,
if no sale takes place on any day, the average bid and ask prices on such day)
of such stock on the ten (10) trading days immediately preceding the date as of
which such value is to be determined, or (ii) in the event the Common Stock is
not so traded or reported, the Fair Market Value of the Common Stock shall mean
the total of: (x) the discounted present value of the net revenues from the
proved oil and gas properties, using a discount rate of 15% and the risk
adjustments to different categories of proved reserves as follows: 100% of
proved developed producing reserves; 70% of proved developed non-producing
reserves and proved behind pipe reserves; and 50% of proved undeveloped
reserves, and product price assumptions equal to the trailing twelve (12) month
weighted average wellhead price held flat for the life of the wells as projected
in the most recent Reserve Report; plus (y) the present value of the assets of
the Company other than reserves as determined by an independent accountant,
auditor or other third party mutually chosen by the Company and Holder; minus
(z) the liabilities of the Company. In the event the Common Stock is not
Publicly Traded, Fair Market Value in reference to a share of the Common Stock
shall mean the Fair Market Value of the Company allocable to the issued Common
Stock divided by the number of shares of Common Stock that would have been
outstanding had (i) this Warrant, (ii) all options to purchase Common Stock, and
(iii) all securities convertible into Common Stock at a price per share no
greater than Fair Market Value, been exercised or converted on the date as of
which value is to be determined (with appropriate adjustment by appraisal to
reflect the proceeds of the assumed exercise or conversion of outstanding
securities).
1.8.2 "Fair Market Value of This Warrant" means the Fair Market
Value of the Common Stock subject to this Warrant minus the Exercise Price of
this Warrant established in accordance with Article 4.
1.9 "Financing Agreement" shall mean that certain Financing
Agreement dated as of January 6, 1998, as amended from time to time, between
Foreland Corporation, Eagle Springs
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Production Limited-Liability Company, Foreland Refining Corporation, Foreland
Asphalt Corporation, Foreland Asset Corporation, Petrosource Transportation and
Energy Income Fund, L.P.
1.10 "Holder" means Energy Income Fund, L.P., a Delaware limited
partnership, and its successors or permitted assigns as holder of this Warrant.
1.11 "Loans" shall mean the loans made by Energy Income Fund,
L.P. to the Company pursuant to the terms of the Financing Agreement.
1.12 "Losses" has the meaning ascribed to that term in
Section 8.5(a).
1.13 "1933 Act" means the Securities Act of 1933, as amended.
1.14 "Person" means any natural person, sole proprietorship,
general partnership, limited partnership, limited liability company, joint
venture, trust, unincorporated organization, association, corporation,
institution, private or governmental entity, or party.
1.15 "Publicly Traded" has the meaning ascribed to that term in
Section 1.8.
1.16 "Rights" has the meaning ascribed to that term in
Section 4.4.
1.17 "Subscription Notice" means a written notice to the
Company of Holder's election to exercise its rights under the Warrant to
purchase Common Stock, in substantially the form appearing at the end of this
Warrant.
1.18 "Warrant" means this Warrant and any warrants issued on or
in substitution for this Warrant including warrants issued in exchange for this
Warrant pursuant to Article 2 hereof.
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1.19 "Warrant No. 1 means the warrant issued by Foreland to EIF
for Seven Hundred Fifty Thousand (750,000) shares of Common Stock with an
exercise price of Six Dollars ($6) per share.
1.20 "Warrant Stock" means the shares of Common Stock or other
securities acquired or to be acquired upon the exercise of the Warrant.
Article 2 Exercise of Warrant; Division of Warrant.
2.1 Exercise. This Warrant may be exercised in whole or
in part. In the event of a partial exercise, the Company shall execute and
deliver to the Holder (or to such other Person as shall be designated in the
Subscription Notice) a new Warrant covering the unexercised portion of the
Warrant Stock. At any time after the second anniversary of the date hereof, the
Company may require the Holder to exercise or surrender this Warrant within
thirty (30) days after receipt of a request for exercise from the Company,
certifying that the average trading price for shares of the Company's common
stock during the preceding three (3) month period, calculated based on the
closing or last trade price of each trading day, equals or exceeds two hundred
percent (200%) of the Exercise Price effective as of the date of such notice,
and further certifying that the average trading volume for such period has
exceeded fifty thousand (50,000) shares per day.
2.2 Procedure. To exercise this Warrant, the Holder shall
deliver to the Company at its principal office:
(a) a written notice, in substantially the form of the
Subscription Notice appearing at the end of this Warrant, of the Holder's
election to exercise this Warrant;
(b) a cashier's or certified check payable to the Company in the
amount of the Exercise Price; and
(c) this Warrant.
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The Company shall as promptly as practicable, and in any event
within twenty (20) days after receipt of such items, execute and deliver or
cause to be executed and delivered one or more certificates representing the
aggregate number of shares of Warrant Stock to which the Holder is entitled and,
if this Warrant is exercised in part, a new Warrant as set forth in Section 2.1.
2.3 Name and Effective Date. The stock certificate(s) so
delivered shall be issued in the name of the Holder or such other name as shall
be designated in the notice specified in Section 2.2. Such certificate(s) shall
be deemed to have been issued and such Holder or any other Person so designated
to be named therein shall be deemed for all purposes to have become a holder of
record of such shares as of the date on which the Company has actually received
all of the items specified in Section 2.2.
2.4 Expenses. The Company shall pay all expenses, taxes, and
other charges payable in connection with the preparation, issue, and delivery of
such stock certificate(s), except that, in case such stock certificate(s) shall
be registered in a name or names other than the name of the Holder of this
Warrant, stock transfer taxes that are payable upon the issuance of such stock
certificate(s) shall be paid by the Holder hereof.
2.5 Legal Requirements. The Warrant Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid, and nonassessable.
2.6 No Fractional Shares. The Company shall not issue a
stock certificate representing any fraction of a share upon partial exercise by
a Holder of such Holder's rights hereunder.
2.7 Registration; Exchange of Warrant. The Company will keep
at its principal office a register in which the Company will provide for the
registration and transfer of this Warrant. The holder of this Warrant, or of
any warrant substituted therefor pursuant to the
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provisions of this Section 2.7, may, at its option, in person or by duly
authorized attorney, surrender the same for exchange at such principal office of
the Company and, within a reasonable time thereafter and without expense (other
than transfer taxes, if any), receive in exchange therefor one or more duly
executed warrants each evidencing the right to receive one share of Common Stock
of the Company or such other whole number of shares as may be designated by the
holder at the time of surrender. The Company covenants and agrees to take and
cause to be taken all action necessary to effect such registrations, transfers
and exchanges.
The Company and any agent of the Company may treat the person in
whose name a warrant is registered as the owner of the warrant for all purposes
hereunder and neither the Company or such agent shall be affected by notice to
the contrary.
2.8 Cashless Exercise. Notwithstanding Section 2.2 of this
Warrant or any other provision of this Warrant to the contrary, in addition to
the Holder's rights under this Warrant, the Holder may, upon full or partial
exercise of this Warrant, at its election, pay the aggregate Exercise Price
applicable to such exercise by delivering the Warrant to the Company and
receiving from the Company in return therefor the number of shares of Common
Stock having a Fair Market Value on the date of exercise equal to the "Fair
Market Value of This Warrant" as established by Section 1.8.2.
Article 3 Transfer.
3.1 Permitted Transfers. This Warrant shall be freely
transferable, in whole or in part, subject to the limitations specified in
Section 3.2 herein.
3.2 Securities Laws. Neither this Warrant nor the Warrant
Stock shall be transferable unless:
(a) either a registration statement under the 1933 Act is in
effect covering the Warrant or the Warrant Stock, as the case may be, or the
Company has received an opinion from
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<PAGE> 8
the Company's counsel to the effect that such registration is not required, or
the Holder has furnished to the Company an opinion of Holder's counsel, which
counsel shall be reasonably satisfactory to the Company, to the effect that such
registration is not required; and
(b) the proposed transfer complies with any applicable state
securities laws.
In the event Holder seeks an opinion from the Holder's counsel as to transfer
without registration, the Company shall provide such factual information to
Holder's counsel as Holder's counsel may reasonably request for the purpose of
rendering such opinion and such counsel may rely on the accuracy and
completeness of such information in rendering such opinion. Upon issuance at a
time when the Common Stock is not Publicly Traded, the Warrant Stock will bear a
legend describing the restrictions on transfer set forth in this Section 3.2.
3.3 Procedure. Subject to the limitations set forth in
Section 3.2, the Holder may transfer this Warrant on the books of the Company
by surrendering to the Company:
(a) this Warrant;
(b) a written assignment of this Warrant, in
substantially the form of the Assignment appearing at
the end of this Warrant, naming the assignee and duly
executed by the Holder; and
(c) funds sufficient to pay any stock transfer taxes
payable upon the making of such transfer.
The Company shall thereupon execute and deliver a new Warrant in
the name of the assignee specified in such instrument of assignment, and if this
Warrant is transferred in part, the Company shall also execute and deliver in
the name of the Holder a new Warrant covering the untransferred portion of this
Warrant. Upon issuance of the new Warrant or Warrants, the Warrant surrendered
for transfer shall be canceled by the Company.
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<PAGE> 9
3.4 Expenses. The Company shall pay all expenses, taxes
(other than transfer taxes), and other charges payable in connection with the
preparation, issue, and delivery of any new Warrant under this Article 3.
Article 4 Exercise Price and Adjustments.
4.1 Initial Exercise Price. The initial Exercise Price
for the Warrant Stock shall be Six Dollars ($6.00) per share.
4.2 Stock Splits, Stock Dividends and Reverse Stock Splits.
If at any time the Company shall subdivide (by reclassification, by the issuance
of a Common Stock dividend on Common Stock, or otherwise) its outstanding shares
of Common Stock into a greater number, the number of shares of Common Stock that
may be purchased hereunder shall be increased proportionately and the Exercise
Price per share of Common Stock shall be decreased proportionately as of the
effective date of such action. The effective date of a stock dividend shall be
the date on which the dividend is declared. Issuance of a Common Stock dividend
shall be treated as a subdivision of the whole number of shares of Common Stock
outstanding immediately before the record date for such dividend into a number
of shares equal to such whole number of shares so outstanding plus the number of
shares issued as a stock dividend. If at any time the Company shall combine (by
reclassification or otherwise) its outstanding number of shares of Common Stock
into a lesser number, the number of shares of Common Stock that may be purchased
hereunder shall be reduced proportionately and the Exercise Price per share of
Common Stock shall be increased proportionately as of the effective date of such
action.
4.3 Dividends Other than in Common Stock or Cash; Other
Distributions. If at any time while this Warrant is outstanding the Company
shall declare or make for the benefit of all holders of its Common Stock any
dividend or distribution upon its Common Stock other than ordinary cash
dividends, or distributions to which Section 4.2 or 4.4 apply (whether payable
in stock of any class or classes other than its Common Stock or payable in
evidences of
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<PAGE> 10
indebtedness or assets or in rights, options, or warrants or convertible or
exchangeable securities), then in each such case the number of shares of Common
Stock that may be purchased hereunder shall be determined by multiplying the
number of shares of Common Stock theretofore comprising the Warrant Stock by a
fraction, the numerator of which shall be the Fair Market Value per share of the
Common Stock determined in accordance with Section 1.9 as of the record date for
such dividend or distribution and the denominator of which shall be the Fair
Market Value per share, as so determined, less the fair value as of such date,
as reasonably determined by the Board of Directors of the Company, of the
portion of such dividend or distribution applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made, and
shall become effective on the date of distribution retroactive to the record
date for the determination of shareholders entitled to receive the distribution.
In the event the Company determines that the adjustment provided for above is
unduly difficult or expensive to effect because of difficulties of valuation,
the Company may, at its option and as an alternative to the adjustment,
distribute and place in escrow for the Holder that portion of such dividend or
distribution which the Holder would have received had it exercised this Warrant
before the declaration of the dividend or the making of the distribution. Upon
exercise of this Warrant, the Holder shall receive its portion of the dividend,
distribution, or rights.
4.4 Issuance on Common Stock of Options, Warrants or Rights.
If at any time while this Warrant is outstanding the Company shall grant to all
holders of its Common Stock any rights, options or warrants (referred to in this
Section 4.4 as "Rights") entitling them to purchase shares of Common Stock at a
price per share that is lower at the record date for such issuance than the Fair
Market Value of the Common Stock on such date determined in accordance with
Section 1.8, the number of Shares of Common Stock that may be purchased
hereunder shall be determined by multiplying the number of Shares of Common
Stock theretofore purchasable upon exercise of each Warrant by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding or
subject to issuance at prices at or below the Fair Market Value of the Common
Stock on such record date (the "Existing Stock") plus the number of shares
subject to issuance pursuant to the Rights and of which the denominator shall be
the number of shares of Existing Stock plus the number of shares which the
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<PAGE> 11
aggregate offering price of the total number of shares of Common Stock so
offered would purchase at the then current Fair Market Value per share of Common
Stock. Such adjustment shall be made whenever such rights, options or warrants
are issued and shall become effective retroactively immediately after the record
date for the determination of shareholders entitled to receive such rights
options or warrants. In the event the Company determines that the adjustment
provided for above in this Section is unduly difficult or expensive to effect
because of difficulties of valuation, the Company may, at its option and as an
alternative to the adjustment, grant and convey to the Holder the Rights which
the Holder would have received had it exercised this Warrant before issuance of
the Rights.
On the expiration or termination of any of the Rights, the
number of shares of Common Stock then purchasable upon the exercise of each
Warrant and the exercise price then in effect shall be subject to readjustment
and the number of shares of Common Stock subject to the Warrants shall forthwith
be decreased and the exercise price under the Warrants shall forthwith be
increased to that which would have been in effect at the time of such expiration
or termination had such Rights, to the extent outstanding immediately prior to
such expiration or termination, never been issued.
4.5 Anti-dilution Adjustment.
Pursuant to Section 7.39 of the Financing Agreement, if, during
the term of this Warrant or Warrant No. 1, or both, Foreland issues additional
shares of common stock at a price of less than Six Dollars ($6) or issues
securities convertible or exercisable into common stock of Foreland at a
conversion or exercise price of less than Six Dollars ($6) and such securities
are converted or exercised into common stock or repurchased by Foreland, the
following calculation shall be made and additional warrants shall be delivered
by Foreland to EIF in the number and manner described below.
Effective December 31, 1998, EIF and Foreland shall jointly
calculate, at six month intervals, the number of shares issued as described in
the above paragraph. In making this
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<PAGE> 12
determination, EIF and Foreland shall not consider shares issued pursuant to
stock options of directors and officers of Foreland outstanding as of the date
hereof as set forth on Schedule 5.23 to this Agreement. Within 10 days of
receipt of a written request from EIF for delivery of additional warrants based
on this calculation, Foreland shall deliver to EIF additional warrants for the
number of shares of common stock of Foreland equal to 15% of the shares issued
as described in the above paragraph during such six month interval. Such
warrants shall be in the form of Warrant No. 2 with an exercise price of Six
Dollars ($6) per share.
The foregoing provisions of this Section shall not apply to (i)
each issuance of additional securities, if any, the proceeds of which are used
to repay the Loan in full within thirty (30) days (ii) each issuance of equity
securities, if any, that is pursuant to an offering with net proceeds to
Foreland of Twenty Milllion Dollars ($20,000,000) or more or (iii) the issuance
of securities pursuant to the Stock Purchase Agreement. The occurrence of any
issuance described in (i), (ii) or (iii) above shall not in any way limit the
subsequent application of any other provision of this Section.
4.6 Reorganization and Reclassification. In case of any
capital reorganization or any reclassification of the capital stock of the
Company while this Warrant remains outstanding, the Holder of this Warrant shall
thereafter be entitled to purchase pursuant to this Warrant (in lieu of the kind
and number of shares of Common Stock comprising Warrant Stock that such Holder
would have been entitled to purchase or acquire immediately before such
reorganization or reclassification) the kind and number of shares of stock of
any class or classes or other securities or property for or into which such
shares of Common Stock would have been exchanged, converted, or reclassified if
the Warrant Stock had been purchased immediately before such reorganization or
reclassification. In case of any such reorganization or reclassification,
appropriate provision (as determined by resolution of the Board of Directors of
the Company) shall be made with respect to the rights and interest thereafter of
the Holder of this Warrant, to the end that all the provisions of this Warrant
(including adjustment provisions) shall thereafter be applicable, as nearly as
reasonably practicable, in relation to such stock or other securities or
property.
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<PAGE> 13
4.7 Statement of Adjustment of Warrant Stock. Whenever the
number or kind of shares comprising Warrant Stock or the Exercise Price is
adjusted pursuant to this Article 4, the Company shall promptly give notice to
the Holder of record of the outstanding Warrant, stating that such an adjustment
has been effected and setting forth the number and kind of shares purchasable
and the amount of the then-current Exercise Price, and stating in reasonable
detail the facts requiring such adjustment and the calculation of such
adjustment.
4.8 No Other Adjustments. No adjustments in the number
or kind or price of shares constituting Warrant Stock shall be made except as
provided in this Article 4.
Article 5 Covenants of the Company.
The Company covenants and agrees that:
5.1 Reservation of Shares. At all times, the Company will
reserve and set apart and have, free from preemptive rights, a sufficient number
of shares of authorized but unissued Common Stock or other securities, if
applicable, to enable it at any time to fulfill all its obligations hereunder.
5.2 Adjustment of Par Value. Before taking any action that
would cause an adjustment reducing the Exercise Price per share below the then
par value of the shares of Warrant Stock issuable upon exercise of the Warrant,
the Company will take any corporate action that may be necessary in order that
the Company may validly and legally issue fully paid and nonassessable shares of
such Warrant Stock at such adjusted price.
5.3 Notice of Significant Events. In case the Company
proposes:
(a) to pay any dividend, payable in stock (of any class or
classes) or in convertible securities, upon its Common Stock or to make any
distribution (other than ordinary cash dividends) to the holders of its Common
Stock; or
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<PAGE> 14
(b) to subdivide as a whole (by reclassification, by the
issuance of a stock dividend on Common Stock, or otherwise) the number of shares
of Common Stock then outstanding into a greater number of shares of Common
Stock, with or without par value; or
(c) to grant to the holders of its Common Stock generally any
rights or options;
or
(d) to effect any capital reorganization or reclassification of
capital stock of the Company; or
(e) to consolidate with, or merge into, any other corporation or
business or transfer its property as an entirety or substantially as an
entirety; or
(f) to effect the liquidation, dissolution, or winding up of
the Company; or
(g) to make any other fundamental change in respect of which the
Holder of this Warrant would have been entitled to vote, pursuant to the
corporation law of Nevada, if this Warrant had been previously exercised;
then the Company shall cause notice of any such intended action to be given to
the Holder of record of this Warrant (i) not less than thirty (30) days before
the date on which the transfer books of the Company shall close or a record be
taken for such stock dividend, distribution, granting of rights or options, or
for determining rights to vote in respect of any fundamental change, including
any capital reorganization, reclassification, consolidation, merger, transfer,
liquidation, dissolution, winding up, or any other fundamental change, and (ii)
in the case of any such capital reorganization, reclassification, consolidation,
merger, transfer, liquidation, dissolution, winding up, or other fundamental
change not less than thirty (30) days before the same shall be effective.
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5.4 Obligations of the Company after the Loans are Paid in
Full. After the Loans are paid in full pursuant to the terms of the Financing
Agreement, and until the exercise or expiration of the Warrants:
(a) At any time at which the Company's Common Stock is not
Publicly Traded, the Company will provide to the Holder: (1) annual and
quarterly financial statements of the Company, and (2) annual independent
reserve reports for all properties owned or leased by the Company. The annual
financial statements shall be audited by a firm of independent certified public
accountants.
(b) The Company shall not engage in any transaction with any
Affiliate of the Company or Associate of the Company or of such Affiliate (each
as defined below), except on terms no less favorable to the Company than are
obtainable in arms-length transactions with third parties. For purposes of this
Section 6.4, the terms "Affiliate" and "Associate"shall have the meanings set
forth in Rule 405, adopted under the Securities Act of 1933, as amended.
(c) The Company shall not make, directly or indirectly, any
loan, advance or extension of credit to, or any guarantee (by way of any
commitment to fund, or commitment to satisfy in any way, any debt, liability, or
other obligation or otherwise) for, any of its officers, directors, employees,
shareholders, partners, or Affiliates, or any Affiliate or Associate of such
person or entity, except on terms no less favorable to the Company than are
obtainable in arms-length transactions with third parties..
(d) The Company shall not pay any compensation to its
officers or directors in excess of reasonable, usual and customary compensation
paid to officers or directors in companies similar to the Company in the oil and
gas industry.
Article 6 Limitation of Right or Liability.
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<PAGE> 16
6.1 No provision of this Warrant shall be construed as
conferring upon the Holder hereof the right to vote or to consent or to receive
dividends or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matter
whatsoever as a stockholder of the Company. In the absence of affirmative action
by the Holder hereof to purchase shares of Common Stock, no provision hereof
shall give rise to any liability of such Holder for the purchase price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
Article 7 Certain Mergers; Liquidation.
7.1 Continuation of Warrant. Except as provided in
Section 8.2, in the event that the Company proposes to consolidate with, or
merge into, any other corporation or business or to transfer its property as an
entirety or substantially as an entirety, or to effect the liquidation,
dissolution, or winding up of the Company, or to change the Common Stock in any
manner (other than to change its par value), then after the Company causes
notice of such proposed action to be given to the Holder of record as provided
in Section 6.3, the Holder shall be entitled, on or before the effective date of
such merger, consolidation, transfer, liquidation, dissolution, winding up, or
change, to require the Company of the successor or purchasing entity, as the
case may be, to (a) execute with the Holder an agreement providing that the
Holder shall have the right thereafter and throughout the then remaining term of
this Warrant, upon payment of the Exercise Price per Warrant Share in effect
immediately prior to such action to purchase with respect to each share of
Warrant Stock issuable upon exercise of this Warrant the kind and amount of
shares of stock and other securities, property (including cash) or any
combination thereof which the Holder would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale, conveyance, or
change had this Warrant been exercised with respect to such share of the Warrant
Stock immediately prior to such action and (b) make effective provision in its
Articles of Incorporation or otherwise, if necessary, in order to effect such
agreement. Such agreement shall provide for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Article 4 of this Warrant. The
provisions of this
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Section 8.1 shall similarly apply to successive consolidations, mergers, sales,
conveyances, or changes.
7.2 Exception. Section 8.1 shall not apply to a consolida-
tion or merger with a Person in which the Company is the surviving entity.
Article 8 Registration Rights.
8.1 For purposes of the Shelf Registration under Section 8.2
hereof, the term "Warrant Stock" means the Warrant Stock together with any
capital stock issued in replacement of, in exchange for or otherwise in respect
of such Warrant Stock. The number of shares of "Warrant Stock then outstanding"
shall be determined by the number of shares of Warrant Stock which have been
issued or are issuable upon exercise of the Warrant at the time of such
determination other than shares of Warrant Stock that have been resold in a
public transaction.
For purposes of a Piggyback Registration under
Section 8.3 hereof or a Demand Registration under Section 8.4 hereof, "Warrant
Stock" shall have the meaning set forth above except that the following shall
not constitute "Warrant Stock" for such purposes:
(i) Warrant Stock that may be resold in a public
transaction without registration under the 1933
Act, including without limitation pursuant to Rule
144 under the 1933 Act; and
(ii) Warrant Stock that has been resold in a public
transaction.
8.2 Shelf Registration. (a) At any time but no later in any
event than within two (2) months of written notice by the Holder of any exercise
of the Warrant, as required by Section 2.2 of the Warrant, the Company shall
file a registration statement ("Registration Statement") on Form S-3 (or other
suitable form, at the Company's discretion but subject to the reasonable
approval of the Holder), covering the resale of all shares of Warrant Stock then
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outstanding including an indeterminate number of shares of Common Stock as
required to effect exercise of the Warrant (the "Shelf Registration").
(b) The Registration Statement shall be prepared as a "shelf"
registration statement under Rule 415, and shall be maintained effective until
the distribution described in the Registration Statement is completed or until
all shares to be distributed thereunder may be resold in a public transaction
pursuant to Rule 144(k) of the 1933 Act. The Company shall use its best efforts
to have the Registration Statement declared effective within three (3) months
after notification by the Holder of any exercise of the Warrant, as described in
Section 8.2(a) above (the "Shelf Date").
(c) If the Registration Statement is not declared
effective by the Shelf Date, the Company must continue to use its best efforts
to obtain a declaration of effectiveness and shall pay the Holder an amount
equal to two percent (2%) per month of the aggregate amount of the Warrant,
compounded monthly and accruing daily, until the Registration Statement or a
registration statement filed pursuant to Section 8.3 or Section 8.4 is declared
effective, payable in Common Stock, which Common Stock shall also be deemed
"Warrant Stock" for the purpose of this Agreement. The accrual amount payable
will be tolled for any periods occasioned by a delay of a registration statement
under Section 8.4 as a result of the choice of the Holder to have that
registration statement underwritten.
(d) The Company represents that it is presently eligible
to effect the registration contemplated hereby on Form S-3 and will use its best
efforts to continue to take such actions as necessary to maintain such
eligibility.
8.3 Piggyback Registration Rights. If the registration
statement described in Section 8.2 above is not effective by the Shelf Date, and
if, at any time on or before the expiration of this Warrant, the Company
proposes to file a registration statement for the public sale of any of its
Common Stock or Common Stock Equivalents under the 1933 Act (other than
registration statements (i) provided for in Section 8.4 hereof or (ii) pursuant
to Form S-4 and
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Form S-8 of the Securities Act of 1933) the Company shall, not later than thirty
(30) days prior to the initial filing of the registration statement, deliver
notice of its intent to file such registration statement to the Holder, setting
forth the minimum and maximum proposed offering price, commissions, and
discounts in connection with the offering, and other relevant information.
Within twenty (20) days after receipt of notice of the Company's intent to file
a registration statement, the Holder shall be entitled to request that some or
all of the Warrant Stock be included in such registration statement, and the
Company will use its best efforts to cause such Warrant Stock to be included in
the offering covered by such registration statement. In the event the Warrant
Stock is included in the registration statement (a "Piggyback Registration"),
the Holder may transfer this Warrant to an underwriter or broker for exercise by
such underwriter or broker in connection with a distribution of the Warrant
Stock.
The managing underwriter or underwriters in an underwritten
offering, or the holders of a majority in number of shares of Warrant Stock
requesting registration, may determine that the number of securities proposed to
be sold in the underwriting or offering exceeds the number that can be sold
without having a materially adverse effect on the price at which the securities
could be sold. If it or they make such a determination in good faith, then the
Company may reduce the number of shares of Common Stock to be included in the
registration to the highest number that the managing underwriter (or
underwriters) or a majority of the holders (as the case may be) determine will
not have a material adverse effect on the price of the shares to be sold. If the
number of shares of Common Stock to be sold in a registration are limited
pursuant to this paragraph, the Company will include in the registration:
(i) First, all shares the Company proposes to sell;
(ii) Second, all shares of Common Stock for which
registration was requested pursuant to rights to require the Company to register
shares in the absence of any other registration reduced, if necessary, to the
maximum number of shares consistent with the limitation required by this Section
8.3; and
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(iii) Third, shares of Common Stock for which registration was
requested pursuant to rights to require the Company to register shares
incidental to the registration of other shares reduced pro rata according to the
number of shares for which registration was requested by each Person so
requesting registration, or in such other proportions as such Persons may agree.
8.4 Demand Registration Rights. If the Registration
Statement described in Section 8.2 above is not effective by the Shelf Date,
the Holder shall be entitled to request that the Warrant Stock be registered
under the 1933 Act. The Company shall, as soon as practicable after receipt of
a written request for registration, file, and use its best efforts to cause to
become effective, an appropriate registration statement under the 1933 Act
covering the Warrant Stock, provided that in the opinion of the Company's
counsel, no events preclude such registration. The Company may postpone for a
reasonable period of time (not to exceed 90 days) the filing of any
registration statement otherwise required to be prepared and filed by it
pursuant to this Section if, at the time it receives a request for
registration:
(1) the Company is conducting or about to conduct an offering
of its securities and the Company is advised by its
investment banker that such offering would be affected
adversely by the registration so demanded and the Company
shall have furnished to the Holder seeking a demand
registration a certificate signed by the President of the
Company to that effect;
(2) the Board of Directors of the Company shall determine in
good faith that such offering will interfere with a
pending or contemplated financing, merger, sale of
assets, recapitalization or other similar corporate
action of he Company and the Company shall have furnished
to the Holder seeking a demand registration a certificate
signed by the President of the Company to that effect,
accompanied by a certified copy of the relevant board
resolutions; or
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<PAGE> 21
(3) the Board of Directors of the Company shall determine in
good faith that the disclosures required in connection
with registration of the Warrant Stock might adversely
affect the business or prospects of the Company and the
Company shall have furnished to the Holder seeking a
demand registration a certificate signed by the President
of the Company to the effect, accompanied by a certified
copy of the relevant board resolutions.
If the Holder intends to distribute the Warrant Stock covered by
its request by means of an underwriting, the Holder shall so advise the Company
as a part of its request made pursuant to this Section. If a registration
requested pursuant to the Section is to involve an underwritten public offering
in which the obligation of the underwriters is to take all of the securities to
be sold if any are to be taken, the Company and other holders of securities of
the Company may include securities in such registration only if the managing
underwriter of such public offering concludes that such inclusion will not
adversely affect the successful marketing or the price of the Warrant Stock to
be included in such public offering. Such other holders of securities (together
with the Company as provided in subsection 8.5(d)) shall enter in to an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Holder and reasonably acceptable to the
Company.
In the event that the Holder demands registration pursuant to
this Section 8.4 within the six months immediately prior to expiration of this
Warrant, and the Company, through no fault of the Holder, is unable to provide
such registration, the expiration date of this Warrant shall be extended until
the 30th day after a registration statement for the Warrant Stock is declared
effective.
The Holder's right to demand registration pursuant to this
Section 8.4 may be exercised only one time prior to expiration of the Warrant;
provided, however, that the right shall not be deemed exhausted unless the
registration statement covering so much of the Warrant Stock as Holder and its
assigns wish to sell pursuant to the registration statement becomes effective.
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<PAGE> 22
8.5 Filing Obligations of the Company. In connection with any
registration of the Warrant Stock, the Company shall:
(a) prepare and file the registration statement and such
amendments and supplements to the registration statement and the prospectus or
offering circular used in connection therewith as may be necessary to keep the
registration statement effective until the Holders of the Warrant Stock covered
by such registration statement have completed the distribution described in the
registration statement or until all shares to be distributed thereunder may be
resold in a public transaction pursuant to Rule 144(k) of the 1933 Act and to
comply with the provisions of the 1933 Act and the rules and regulations
thereunder with respect to the disposition of the Warrant Stock covered by the
registration statement for the period required to effect the distribution
thereof;
(b) furnish to the Holder such number of copies of any
prospectus or offering circular, including a preliminary prospectus, and of a
full registration statement and exhibits in conformity with the requirements of
the 1933 Act and rules and regulations thereunder, as the Holder may reasonably
request in order to facilitate the disposition of Warrant Stock owned by such
Holder;
(c) use its best efforts to register or qualify the Warrant
Stock covered by the registration statement, as the case may be, under the
securities or blue sky laws of such jurisdictions as the Holder may reasonably
request, and accomplish any and all other acts and things which may be necessary
or advisable to permit sale in such jurisdictions of such Warrant Stock;
provided, however, that the Company shall not be required to register as a
dealer or to qualify as a foreign corporation in any such jurisdictions or to
escrow any shares of its capital stock;
(d) in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing
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<PAGE> 23
underwriter of such offering. The Holder shall also enter into and perform its
obligations under such an agreement;
(e) furnish, at the request of the Holder, on the date that such
Warrant Stock is delivered to the underwriters for sale in connection with a
registration pursuant to this Agreement, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the outside
counsel of recognized standing (or reasonably acceptable to the Holder)
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in such underwritten public
offering, addressed to the underwriters, if any, and to the Holder and (ii) a
letter dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holder;
(f) as promptly as practicable after becoming aware of such
event, notify the Holder of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the registration statement to correct such untrue statement or
omission, and deliver a number of copies of such supplement or amendment to the
Holder;
(g) provide the Holder with written notice of the date that a
registration statement registering the resale of the Warrant Stock is declared
effective by the SEC, and the date or dates when the registration statement is
no longer effective;
(h) provide the Holder and their representatives the opportunity
to conduct a reasonable due diligence inquiry of the Company's pertinent
financial and other records and
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<PAGE> 24
make available its officers, directors and employees for questions regarding
such information as it related to information contained in the registration
statement; and
(i) provide the Holder and its representatives the opportunity
to review the registration statement and all amendments thereto no later than
three (3) days prior to their filing with the SEC.
8.6 Expenses. All expenses incurred by the Company in
connection with any registration of the Warrant Stock effected under Sections
8.2, 8.3 or 8.4, including, without limitation, all registration or filing fees,
fees and expenses of complying with state securities and blue sky laws, printing
expenses, fees and expenses of the Company's counsel and accountants, and fees
and expenses of counsel for the Holder, shall be paid by the Company; provided,
however, that all underwriting discounts and selling commissions applicable to
the Warrant Stock shall not be borne by the Company but shall be borne by the
Holder.
8.7 Indemnification.
(a) By the Company. In connection with the filing of any
registration statements and sales of the Warrant Stock thereunder, the Company
shall indemnify and hold harmless the Holder of this Warrant, its directors and
officers, any underwriter, and each other Person, if any, who controls the
Holder or the underwriter within the meaning of the 1933 Act, against losses,
claims, damages or liabilities, joint or several (or actions in respect thereto)
("Losses"), to which any such Holder, underwriter, or controlling Person may
become subject under the 1933 Act or otherwise, insofar as such Losses arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which the Warrant
Stock was registered under the 1933 Act, any preliminary prospectus, offering
circular or final prospectus contained therein, or any amendment or supplement
thereto, or any report filed with the Securities and Exchange Commission (the
"Disclosure Documents"), or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
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<PAGE> 25
any such Holder, underwriter, or controlling Person for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claims, excluding any amounts paid in settlement of litigation, commenced
or threatened, if such settlement is effected without the prior written consent
of the Company; provided, however, that the Company shall not be liable in any
such case to the extent that any such Losses arise out of or are based upon any
untrue statement, alleged untrue statement or omission or alleged omission made
in such Disclosure Document in reliance upon and in conformity with information
furnished to the Company in writing by or on behalf of the Holder of this
Warrant for use specifically in connection with the preparation of such
Disclosure Document.
(b) By the Holder. In connection with the filing of any
registration statement and sales of the Warrant Stock thereunder, the Holder
shall indemnify the Company, each of its directors, each of its officers who
signed such registration statement, and each other Person, if any, who controls
the Company within the meaning of the 1933 Act, against any Losses to which the
Company, any of its directors, officers, or controlling Persons may become
subject under the 1933 Act or otherwise, insofar as such Losses arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any of the Disclosure Documents or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company, and any of its directors, officers, or
controlling Persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claims, excluding any
amounts paid in settlement of litigation, commenced or threatened, if such
settlement is effected without the prior written consent of the Holder;
provided, however, that such indemnification or reimbursement shall be payable
in any such case only to the extent that such statement or alleged statement or
omission or alleged omission is made in reliance on information furnished to the
Company in writing by or on behalf of the Holder for use specifically in
connection with the preparation of such Disclosure Document.
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<PAGE> 26
8.8 Reports under Securities Exchange Act of 1934 (the "1934
Act"). With a view to making available to the Holder the benefits of Rule 144
promulgated under the 1933 Act and any other rule or regulation of the SEC that
may at any time permit the Holder to sell securities of the Company to the
public without registration, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and the 1934 Act;
and
(c) furnish to the Holder, so long as the Holder owns any
Warrant Stock, forthwith upon request (i) a written statement by the Company, if
true, that it has complied with the reporting requirements of SEC Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing the Company of any rule or regulation of the SEC which permits the
selling of any such securities without registration.
8.9 Assignability. The piggyback and demand registration rights
of the Holder under Article 8 may be assigned by Holder, subject to the transfer
limitations set forth in Article 3 and assumption by the assignee of the
corresponding obligations hereunder.
Article 9 Miscellaneous.
9.1 Governing Law. The rights of the parties arising under this
Warrant shall be construed and enforced under the laws of the Commonwealth of
Massachusetts without giving effect to any choice of law or conflict of law
rules.
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<PAGE> 27
9.2 Notices. Any notice or other communication required or
permitted to be given or delivered pursuant to this Warrant shall be in writing
and shall be deemed effective as of the date of receipt if delivered personally
or by facsimile transmission (if receipt is confirmed by the facsimile operator
of the recipient), or delivered by overnight courier service or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address in the United
States of America for a party as shall be specified by like notice; provided
that notices of change of address shall be effective only upon receipt thereof):
(i) to the Holder as follows:
Energy Income Fund, L.P.
136 Dwight Road
Longmeadow, Massachusetts 01106
Attn: Robert D. Gershen
Facsimile No.: (413) 567-7926
with copies to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attn: Russell J. Bruemmer
Facsimile No.: (202) 663-6363
(ii) to the Company as follows:
Foreland Corporation
12596 West Bayaud Avenue
Suite 300
Lakewood, CO 80228-2019
Attn: N. Thomas Steele
Facsimile No.: (303) 988-3234
with copies to:
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<PAGE> 28
Kruse, Landa & Maycock, L.L.C.
8th Floor, Bank One Tower
50 West Broadway (300 South)
Salt Lake City, UT 84101-2034
Attn: James R. Kruse
Facsimile No.: (801) 531-7091
9.3 Severability. If any provision of this Warrant shall be held
invalid, such invalidity shall not affect any other provision of this Warrant
that can be given effect without the invalid provision, and to this end, the
provisions hereof are separable.
9.4 Headings. The headings in this Warrant are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Warrant.
9.5 Amendment. This Warrant cannot be amended or modified except
by a written agreement executed by the Company and the Holder.
9.6 Assignment. This Warrant shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns except that no party may assign or
transfer its rights or obligations under this Warrant to the extent explicitly
prohibited herein.
9.7 Entire Agreement. This Warrant, together with its
attachments, contains the entire understanding among the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written, except as herein contained.
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<PAGE> 29
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed in its name by its President or a Vice President thereunto duly
authorized.
Dated: August 10, 1998
FORELAND CORPORATION
By /S/ N. THOMAS STEELE
----------------------------------
N. Thomas Steele
President
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<PAGE> 30
SUBSCRIPTION NOTICE
The undersigned, the Holder of a Common Stock Purchase Warrant
issued by [name of issuer] pursuant to a Financing Agreement dated as of
[___________] between [name of issuer] and Energy Income Fund, L.P., hereby
elects to exercise purchase rights represented by such Warrant for, and to
purchase thereunder ___________, shares of the Common Stock covered by such
Warrant and herewith makes payment in full therefor of _____________________and
requests that certificates for such shares (and any securities or the property
issuable upon such exercise) be issued in the name of and delivered to
____________________________________________________________, whose address is
________________________________________________________________________________
_______________________________________________________________________________.
If said number of shares of Common Stock is less than the number
of shares of Warrant Stock purchasable hereunder, the undersigned requests that
a new Warrant representing the balance of the Warrant Stock be registered in the
name of and issued and delivered to
__________________________________________________, whose address is
________________________________________________________________________________
_______________________________________________________________________________.
The undersigned hereby agrees to pay any transfer taxes on the
transfer of all or any portion of the Warrant or Warrant Stock requested herein.
The undersigned agrees that, in the absence of an effective
registration statement with respect to Common Stock issued upon this exercise,
the undersigned is acquiring such Common Stock for investment and not with a
view to distribution thereof and the certificate or certificates representing
such Common Stock may bear a legend substantially as follows: "The shares
represented by this certificate have not been registered under the Securities
Act of 1933, as amended, and may not be transferred except as provided in
Article 3 of the Common Stock Purchase Warrant issued by [name of issuer] on
[date], a copy of which is on file at the principal office of [name of issuer]."
----------------------------------
Signature guaranteed:
Dated:
-----------------
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<PAGE> 31
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto __[Name and Address]___ the rights represented by the foregoing
Common Stock Purchase Warrant issued by [name of issuer] on [date], and appoints
________________ its attorney to transfer said rights on the books of said
corporation, with full power of substitution in the premises.
-----------------------------
Signature guaranteed:
Dated:
----------------
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