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 ($6.00) per share, subject
to adjustment as hereinafter provided (the ``Exercise
Price''), and is entitled also to exercise the other
appurtenant rights, powers, and privileges hereinafter set
forth.
Article 1 Definitions.
For all purposes of this Warrant, unless the context
otherwise requires, the following terms have the following
meanings:
1.1 ``Common Stock'' means the Company's authorized
common stock, par value one-tenth of a cent ($.001) per
share.
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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, (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 xxxxx as projected in
the most recent Reserve Report; plus (y) the present value
of the assets of the Company other than reserves as
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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 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,
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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 Xxxxxx'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.
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
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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.
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
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upon partial exercise by a Holder of such Xxxxxx'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, 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:
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(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
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 Xxxxxx seeks an opinion from the Holder's
counsel as to transfer without registration, the Company
shall provide such factual information to Xxxxxx's counsel
as Xxxxxx'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 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
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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 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.
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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 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.
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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.
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.
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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
(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,
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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:
(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
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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 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
consolidation or merger with a Person in which the Company
is the surviving entity.
Article 8 Registration Rights.
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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 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
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WCP8: 41772-5
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
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
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WCP8: 41772-5
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
(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 the Company and the Company shall have furnished to the
- 17 -
WCP8: 41772-5
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.
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.
8.5 Filing Obligations of the Company. In connection
with any registration of the Warrant Stock, the Company
shall:
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WCP8: 41772-5
(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
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
- 19 -
WCP8: 41772-5
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 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.
- 20 -
WCP8: 41772-5
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 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
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WCP8: 41772-5
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.
8.8 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 Xxxxxx, subject to the transfer limitations set
forth in Article 3 and assumption by the assignee of the
corresponding obligations hereunder.
Article 9 Miscellaneous.
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WCP8: 41772-5
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):
(i) to the Holder as follows:
Energy Income Fund, L.P.
000 Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxxxx
00000
Attn: Xxxxxx X. Xxxxxxx
Xxxxxxxxx No.: (000) 000-0000
with copies to:
Xxxxxx, Xxxxxx & Xxxxxxxxx
0000 X Xxxxxx, X.X.
Washington, D.C. 20037
Attn: Xxxxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
(ii) to the Company as follows:
Foreland Corporation
00000 Xxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000-2019
Attn: X. Xxxxxx Xxxxxx
Facsimile No.: (000) 000-0000
with copies to:
Xxxxx, Xxxxx & Xxxxxxx, L.L.C.
8th Floor, Bank One Tower
00 Xxxx Xxxxxxxx (000 Xxxxx)
Xxxx Xxxx Xxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
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WCP8: 41772-5
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.
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
X. Xxxxxx Xxxxxx
President
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WCP8: 41772-5
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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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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