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EXHIBIT C
AMENDMENT TO
OPTION AND PURCHASE AGREEMENT
THIS AMENDMENT TO OPTION AND PURCHASE AGREEMENT (this "Amendment") is
entered into as of this 11th day of August, 1998, by and between Foreland
CORPORATION, a Nevada corporation ("Foreland") on the one hand, and PETRO
SOURCE CORPORATION, a Utah corporation ("Petro Source Corporation"), FORELAND
refining CORPORATION, a Texas corporation ("Foreland Refining"), and
PETROSOURCE TRANSPORTATION, a Utah corporation ("Petrosource Transportation"),
on the other (Petro Source Corporation, Foreland Refining, and Petrosource
Transportation are collectively referred to as "PSC"), based on the following:
PREMISES
A. Foreland, Petro Source Corporation, and Petrosource Transportation
are parties to that certain Option and Purchase Agreement dated December 31,
1997 (the "Option and Purchase Agreement"). Foreland Refining is a successor,
through merger, to Petro Source Refining Corporation, a Utah corporation
("Petro Source Refining"), which was also a party to the Option and Purchase
Agreement.
B. In May 1998, Foreland exercised its option to purchase the Business
and Business Assets as defined in the Option and Purchase Agreement, and the
parties are obligated to close that transaction.
C. The parties desire to amend the Option and Purchase Agreement in
order to modify certain provisions thereof to reflect changes and modifications
that have been agreed to since the execution of the Option and Purchase
Agreement, including the restructuring of the transaction as the acquisition of
certain assets of Foreland Refining, including the stock of Petrosource
Transportation, by a newly-formed, wholly-owned subsidiary of Foreland,
Foreland Asset Corporation ("Foreland Asset"), followed by the acquisition by
Foreland of Foreland Refining, rather than the sale of assets of Petro Source
Refining and Petrosource Transportation to Foreland as originally contemplated
by the Option and Purchase Agreement.
D. The parties desire to ratify and reaffirm all of the terms and
conditions of the Option and Purchase Agreement, except those provisions
specifically modified by the terms of this Amendment.
AGREEMENT
NOW, THEREFORE, based on the foregoing premises, and in consideration
of the mutual covenants and agreements hereinafter set forth and the mutual
benefit to the parties to be derived herefrom, it is hereby agreed as follows:
1. PSC Employees. The following provision will be added to the end of
Section 2.10 of the Option and Purchase Agreement:
(c) Foreland Refining or Petrosource Transportation will hire
the PSC employees contemplated by Section 2.10(b) as of August 15,
1998. Between the Closing Date and August
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14, 1998, such employees will remain in the employment of PSC and
shall be made available to Foreland Refining or Petrosource
Transportation pursuant to a Transition Services Agreement between the
parties.
2. The Purchase. Section 3.01 of the Option and Purchase Agreement is
amended to read in its entirety as follows:
Section 3.01 The Purchase. As a result of Foreland exercising
its Option as set forth in Article II of the Option and Purchase
Agreement, (i) Foreland Refining shall sell to Foreland Asset all of
the issued and outstanding stock of Petrosource Transportation and the
Business Assets set forth in subparagraphs (a), (b), (k), and (n)
below that are owned by it; and (ii) after completion of the sale of
assets contemplated by subparagraph (i) and the distribution of the
proceeds from such sale to Petro Source Corporation, Petro Source
Corporation shall sell, and Foreland shall purchase, all of the issued
and outstanding stock of Foreland Refining. References in this
Agreement to the acquisition of the Business and Business Assets shall
be read to mean the acquisition of the Business and Business Assets
through the purchase of the assets to be sold to Foreland Asset and
the subsequent purchase of the issued and outstanding stock of
Foreland Refining. The Business and Business Assets shall, subject to
the Excluded Assets identified in Section 3.02, consist of the
following:
(a) (i) all tangible personal property owned by PSC
and located at, or used in connection with, the operation of
the Eagle Springs Refinery, the Tonopah Refinery (excluding
the emulsifier and the two asphalt spreader trucks and
related equipment), (ii) the roofing asphalt equipment
located at the Fredonia Terminal (provided Foreland, at its
own expense, removes such equipment from PSC's property
within 24 months after the Closing Date, otherwise the
ownership of such equipment shall revert to Crown Asphalt
Distribution, L.L.C.), and (iii) the rights of PSC as lessee
of all tangible personal property leased, including the
equipment, tools, vehicles, furniture and fixtures, and
supplies described in Exhibit "A" (the "Tangible Personal
Property");
(b) all of PSC's rights as lessee or holder of
rights-of-way to the real property and all buildings and
improvements thereon on which the Eagle Springs Refinery and
the Tonopah Refinery are located, as more particularly
described in Exhibit "B" (the "Real Property");
(c) all inventory of PSC existing as of the
Effective Time which was purchased in furtherance of the
Business, as described in Exhibit "C" (the "Inventory");
(d) all of the notes and trade and other accounts
receivable associated with the Eagle Springs Refinery, the
Tonopah Refinery, or Petrosource Transportation existing as
of the Effective Time, as described in Exhibit "D" (the
"Accounts Receivable");
(e) all cash, cash equivalents, and prepaid expenses
held by Foreland Refining or Petrosource Transportation;
(f) all of PSC's rights under (i) those crude oil
and transmix purchase contracts and agreements described in
Exhibit "E" which were entered into by PSC in the ordinary
course of business and are executory, and (ii) all contracts
and agreements
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intended to facilitate the sale of asphalt or other refinery
products manufactured at the Eagle Springs or Tonopah
refineries (together, the "Contract Rights");
(g) lists of current and past (within the preceding
two years) customers and lists of prospective customers
(i.e., persons with whom PSC has discussed potential sales
and from whom PSC has received what PSC believes to be
serious expressions of interest) of the Business compiled by
PSC including, to the extent the same is in the possession of
PSC, the name, address, contact person, and telephone number
of each such customer or prospective customer (the "Customer
Lists"), set forth on Exhibit "F";
(h) all lists of current and past (within the
preceding two years) suppliers and all files, records, and
data used in connection with the Business;
(i) those prepaid expenses, fees, deposits, letters
of credit, or bonds with respect to the Business or Business
Assets, including those set forth on Exhibit "G," (the
"Prepaid Expenses");
(j) to the extent they are assignable, all federal,
state, or local licenses, permits, or approvals granted or
used in connection with the operation of the Business or the
Business Assets;
(k) all of PSC's rights under warranties covering
the Tangible Personal Property being transferred hereunder to
the fullest extent permitted by such warranties;
(l) all intellectual property of PSC necessary to the
operation of the Business, including the proprietary
scheduling software used in connection with Petrosource
Transportation and the right to use any trade secrets,
confidential or proprietary information, or general processes
used by PSC in the conduct of the Business, together with the
Melt Pac(TM) License from Petro Source Asphalt Company dated
as of May 31, 1998, all as described in Exhibit "H" (the
"Intellectual Property");
(m) the current telephone number(s) used in
connection with the Business at its locations in Eagle
Springs and Tonopah, Nevada, and telephone and other
directory listings used by PSC in the operation of the
Business other than the Salt Lake City numbers;
(n) to the extent permitted by the carrier without
financial assurances or continued obligation by Petro Source
Corporation, all contracts of insurance relating to the
Business or Business Assets and all claims, casualties, or
other occurrences prior to the Closing Date and prepaid
premiums or deposits related thereto, which policies are
specific to and separately maintained for the Business
Assets, as described in Exhibit "I" (the "Insurance
Policies");
(o) originals or copies of all accounting,
operating, management, and other business records in
documentary or electronic form relating to the Business or
Business Assets (provided, however, PSC may maintain a record
copy of any such items);
(p) the rights of PSC under all confidentiality,
non-competition, or similar agreements with present or former
employees, consultants, and others associated with PSC
insofar as related to the Business;
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(q) the goodwill of PSC associated with the
Business, including the right to use the name "Petrosource
Transportation" but excluding the use of the name "Petro
Source Refining"; and
(r) all other assets of PSC used to carry out the
Business or part of the Business Assets not included in any
specific provision of the foregoing subsections existing as
of the Effective Time which are not excluded in section 3.02.
3. Excluded Assets. Section 3.02 is amended by adding a new subsection
(h) to immediately follow subsection (g) thereof and to read as follows:
(h) the accounts receivable of Foreland Refining
that are not included in the amount set forth in paragraph
(c) of the Closing Statement, which accounts receivable shall
be, and are hereby, assigned to Petro Source Corporation.
4. Assumed Obligations. Section 3.03 is amended to read in its
entirety as follows:
Section 3.03 Obligations. On the Closing Date, Foreland
Refining and/or Petrosource Transportation shall be obligated on or
Foreland Asset shall and does hereby assume, as the case may be, the
following obligations and liabilities with respect to the Business and
Business Assets for all periods subsequent to the Effective Time, in
accordance with their respective terms and subject to the respective
conditions thereof, such obligations and liabilities to be held or
assumed by the entity identified by the parties at the Closing:
(a) all obligations of PSC under the leases or
rights-of-way set forth on Exhibit K-1 relating to the
Tangible Personal Property or the Real Property;
(b) all current trade accounts payable and other
current liabilities as of the Effective Time, that arose in
the ordinary course of the Business, all to be set forth in
Exhibit K-2 of the Closing Exhibits;
(c) all liabilities and obligations of PSC to be
paid or performed after the Effective Time under the
contracts and other agreements set forth on Exhibit K-3
relating to the Business and Business Assets being conveyed
hereunder;
(d) all liabilities in respect of any taxes for the
period beginning on the Effective Time; and any other
accrued, but unpaid liabilities for taxes, as of the
Effective Time and set forth in the Closing Schedule (real
and personal property taxes shall be prorated between
Foreland Refining and Petro Source Corporation as of the
Effective Time); and
(e) other obligations listed on Exhibit K-4.
5. Excluded Liabilities. Section 3.04 of the Option and Purchase
Agreement is amended to read in its entirety as follows:
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Section 3.04. Excluded Liabilities. Unless the liability is
reflected on the Closing Statement or Adjustment Statement (as those
terms are defined in Section 3.05A), neither Foreland, Foreland
Refining, Foreland Asset, nor Petrosource Transportation shall assume
or be obligated to pay, perform, or otherwise discharge the following:
(a) any liability or obligation of PSC direct or
indirect, known or unknown, absolute or contingent not
expressly assumed pursuant to section 3.03 or otherwise
pursuant to this Agreement;
(b) any liability arising out of the
employer/employee relationship between PSC and its employees
prior to the hiring of such employees by Foreland Refining or
Petrosource Transportation, including liabilities for accrued
bonuses, vacation, personal leave, or other amounts for the
benefit of employees of the Business (the "Employee
Benefits"); provided, however, Foreland Refining shall be
responsible for payments to Petro Source Corporation required
by the Transition Services Agreement;
(c) taxes for any period prior to the Effective Time
(real and personal property taxes shall be prorated between
Foreland Refining and Petro Source Corporation as of the
Effective Time);
(d) the accounts payable listed on Schedule 3.04;
and
(e) any liability as to which Petro Source
Corporation has indemnified Foreland, Foreland Refining,
Petrosource Transportation, and/or Foreland Asset pursuant to
the Environmental Indemnification Agreement.
At the Closing, PSC shall deliver to Foreland, Foreland Asset,
Foreland Refining, and Petrosource Transportation full and complete releases
from any Excluded Liability for which they might be liable or to which the
Business or Business Assets may be subject, including releases of all financing
statements or other security documents, related to such Excluded Liability (the
"Releases").
6. Amount of Purchase Price. Section 3.05 of the Option and Purchase
Agreement is amended to read in its entirety as follows:
Section 3.05 Amount of Purchase Price. The consideration
payable by Foreland for the purchase (the "Purchase Price") of the
Business and Business Assets shall be five million dollars
($5,000,000)(the "Base Price"), plus:
(a) the sum of the current assets (except to the
extent set forth in Section 3.02), as of May 31, 1998, as
determined in accordance with GAAP (except that finished
goods inventory will be valued at market), held by Foreland
Refining and/or Petrosource Transportation;
(b) a negative amount equal to the sum of the
current liabilities, as of May 31, 1998, as determined in
accordance with GAAP, for which Foreland Refining, Foreland
Asset, and/or Petrosource Transportation will continue to be
liable subsequent to the Closing, excluding, however, the
amount of $470,604 in intercorporate advances from Petro
Source Corporation to Petrosource Transportation (which
liability shall be paid prior to the Closing Date), and
further excluding the current portion of long term
liabilities or liabilities under operating leases that are
not properly attributable to the period prior to the
Effective Date in accordance with GAAP;
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(c) the sum of all capital contributions made by
Petro Source Corporation to Foreland Refining and/or
Petrosource Transportation since December 31, 1997 (other
than the amount of $470,604 contributed to Petrosource
Transportation by Petro Source Corporation prior to the
Closing Date to enable Petrosource Transportation to repay
the same amount in a current account payable owing to Petro
Source Corporation);
(d) a negative amount equal to all distributions,
other than distributions of Excluded Assets or the cash
proceeds of the sale by Foreland Refining of certain of its
assets to Foreland Asset as contemplated by Section 3.01,
made by Foreland Refining and/or Petrosource Transportation
since May 31, 1998;
(e) a positive amount equal to capital expenditures
made by Foreland Refining's predecessor or Petrosource
Transportation between December 31, 1997, and May 31, 1998,
which added to the Business or Business Assets;
(f) a negative amount equal to the net proceeds from
the sale by Foreland Refining's predecessor or Petrosource
Transportation between December 31, 1997, and May 31, 1998,
of portions of the Business or Business Assets;
(g) any unpaid portion of the Option Consideration;
and
(h) 100,000 shares of Foreland Stock (the "Original
Shares"), the resale of which by PSC shall be covered by an
effective Registration Statement in accordance with Article
IX.
7. Closing Amounts and Payments. A new Section 3.05A shall be added to
the Option and Purchase Agreement to read in its entirety as follows:
Section 3.05A Estimated Purchase Price. The calculation of
the Purchase Price as contemplated by Section 3.05 of the Agreement
shall be based on an estimate and adjusted to actual results as
follows:
(a) Closing Statement. Petro Source Corporation has
prepared and delivered to Foreland a statement (the "Closing
Statement") setting forth estimates of the items specified in
subsections 3.05(a) through (f) (the "Estimated Adjustments
to Base Price"). The Closing Statement shall contain and
shall have attached thereto such supporting documentation and
other data as is reasonably necessary to provide a basis for
the Estimated Adjustments to Base Price shown therein. The
Estimated Adjustments to Base Price shall be based upon
actual information available to Petro Source Corporation at
the time of preparation of the Closing Statement and upon its
good faith estimates and assumptions. Foreland and its
representatives shall be provided access to all of PSC's
books, records, computer runs and other documents containing
information on which the Estimated Adjustments to Base Price
are based for the purpose of conducting a review as Foreland
may deem appropriate.
(b) Closing Purchase Price. The Purchase Price to be
used for the purposes of Closing (the "Closing Purchase
Price") shall be the Base Price, the items described in
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subsections 3.05(g) and (h), and the Estimated Adjustments to
Base Price computed as follows:
(i) If the Estimated Adjustments to Base
Price shown in the Closing Statement on the Closing
Date is negative, then the Purchase Price shall be
reduced by the amount of such Estimated Adjustments
to Base Price, or
(ii) If the Estimated Adjustments to Base
Price shown in the Closing Statement is positive,
then the Purchase Price shall be increased by the
amount of such Estimated Adjustments to Base Price.
(c) Non-Cash Portion of Closing Purchase Price. The
Closing Purchase Price shall be paid in cash, except as
follows:
(i) The unpaid portion of the Option
Consideration payable in accordance with
subparagraph 3.05(g) shall be paid through Petro
Source Corporation's continuing sale of Option
Shares in accordance with the provisions of
subparagraphs (d) through (f) of section 2.02,
except that Petro Source Corporation shall not be
limited as to the number of shares that can be sold
at any time or during any period as provided in
subparagraph (f) of such section, and any Option
Shares or the proceeds therefrom in excess of the
balance of the Option Consideration due shall be
returned to Foreland.
(ii) The 100,000 Original Shares of
Foreland Stock identified in subparagraph 3.05(h),
which shall be registered in the name of Petro
Source Corporation and held and disposed of in
accordance with the terms and conditions of
subparagraph (e) of this section 3.05A..
(iii) The net amount of the Estimated
Adjustments to Base Price shall be paid by the
delivery by Foreland to Petro Source Corporation at
the Closing of 763,602 shares of Foreland Stock (the
"Closing Shares"), which shall be registered in the
name of Petro Source Corporation and held and
disposed of in accordance with the terms and
conditions of subparagraph (e) of this section
3.05A.
(d) Payments and Deliveries. Prior to 11:00 a.m.
Houston time on the Closing Date, Foreland shall (i) pay an
amount equal to the Base Price for the account of Petro
Source Corporation by wire transfer of funds to Petro Source
Corporation's designated bank account, and (ii) deliver to
Petro Source Corporation one or more certificates for the
Original Shares and the Closing Shares. Petro Source
Corporation shall deliver or cause to be delivered the
Releases, as defined in Section 6.03A, together with all
conveyances, instruments, and documents to be delivered by or
on behalf of Petro Source Corporation at Closing.
(e) Delivery and Sale of Original Shares and Closing
Shares. The Original Shares and the Closing Shares shall be
issued, held, and disposed of as follows:
(i) At the earliest practicable date, but
in any event by the earlier of the date that is (A)
10 days after the filing by Foreland of a report
containing
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historical and pro forma combined financial
information respecting the purchased Business and
Business Assets pursuant to section 13 of the
Securities Exchange Act of 1934, or (B) 75 days
after the Closing Date, Foreland shall file, at its
sole cost, a Registration Statement on such form as
Foreland may select under the Securities Act
covering the resale of the Closing Shares and the
Original Shares, by and for the account of Petro
Source Corporation, which shall be named as a
selling shareholder in the Registration Statement,
all as more particularly set forth in Article IX
hereof. Foreland shall utilize its best efforts to
obtain the effectiveness of the Registration
Statement at the earliest practicable date and to
maintain its effectiveness until June 30, 1999. In
the event that all of the Closing Shares are not
sold by Petro Source Corporation under the
Registration Statement on or before December 31,
1998, Foreland shall pay interest to Petro Source
Corporation in cash equal to 5.0% per annum
multiplied by the difference between (i) the
Estimated Adjustments to Base Price less (ii) the
net proceeds realized by Petro Source Corporation
from the sale of such Closing Shares. Such amounts
shall be paid by Foreland to Petro Source
Corporation on the last day of each month beginning
with the last day of January 1999. The amount
described in the preceding sentence shall be paid in
addition to the interest Petro Source Corporation is
entitled to receive pursuant to the following
paragraph.
(ii) Petro Source Corporation may cause to
be sold, at any time and from time-to-time and in
accordance with the Registration Statement, that
number of Closing Shares that yields proceeds, net
of brokerage and other usual and customary
transaction costs, the Estimated Adjustments to Base
Price, plus simple interest on the unpaid balance
from the Closing Date to the date such net proceeds
from such sale are available to the account of Petro
Source Corporation at the rate of 10% per annum (the
"Realizable Amount"), provided, however, that Petro
Source Corporation shall not sell or place an order
to sell in the Nasdaq SmallCap Market that number of
Closing Shares that would yield net proceeds of more
than $400,000 in any consecutive 30 day period
without Foreland's prior consent. There are no
restrictions on the sale of the Original Shares of
Foreland Stock delivered to Petro Source Corporation
at Closing, other than in accordance with the
Registration Statement.
(iii) If the net proceeds from the sale of
Closing Shares are less than the Realizable Amount,
Petro Source Corporation may demand that Foreland
pay such deficiency, in which case Foreland shall,
within five days after such demand, at its option,
either pay such amount in cash in immediately
available funds or deliver to Petro Source
Corporation such additional shares of Common Stock
as Foreland estimates will yield net proceeds in the
amount sufficient for Petro Source Corporation to
realize in cash the Realizable Amount (the
"Additional Shares"). Should the proceeds from the
Additional Shares prove to be insufficient for Petro
Source Corporation to realize in cash the Realizable
Amount, Petro Source Corporation may demand that
Foreland pay such deficiency, in which case Foreland
shall, within five days after such demand, pay Petro
Source Corporation such deficiency in cash.
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(iv) If any Closing Shares or Additional
Shares remain unsold after the receipt by Petro
Source Corporation of the Realizable Amount, such
shares shall be returned to Foreland for
cancellation. If Closing Shares or Additional Shares
have been sold for net proceeds in excess of the
Realizable Amount, such excess proceeds shall also
be delivered to Foreland. Petro Source Corporation
agrees to provide Foreland with access to the
records concerning the sales of Closing Shares and
Additional Shares in order to permit Foreland to
verify the amount realized by Petro Source
Corporation on such sales.
8. Post Closing Adjustment. A new Section 3.06A shall be added to
the Option and Purchase Agreement to read in its entirety as follows:
Section 3.06A Post Closing Adjustment.
(a) Adjustment Statement. As soon as practicable but in any
event not later than 60 days following the Closing Date (the "Post
Closing Date") Petro Source Corporation shall deliver to Foreland a
statement (the "Adjustment Statement") setting forth the actual
amounts of the items specified in subsection 3.05(a) through (f) based
on the best information available to Petro Source Corporation as of
the Post Closing Date. The Adjustment Statement shall be in such
detail and shall contain or have attached thereto such supporting
documentation as Foreland shall reasonably request. Foreland and its
representatives shall be provided access to all of Petro Source
Corporation's books, records, computer runs, and other documents
containing information on which the Adjustment Statement is based for
the purpose of conducting an audit thereof or such other review as
Foreland may deem appropriate.
(b) Final Determination of Adjustments. The Adjustment
Statement shall become final and binding on Petro Source Corporation
and Foreland on the twentieth business day following the date the
Adjustment Statement is received by Foreland, unless prior to such
twentieth business day Foreland shall deliver to Petro Source
Corporation notice of its disagreement with the contents of the
Adjustment Statement, together with proposed changes thereto. If
Foreland has delivered a notice of disagreement, then the Adjustment
Statement will become final and binding upon written agreement between
Foreland and Petro Source Corporation resolving all disagreements of
Foreland. If the Adjustment Statement has not become final and binding
by the thirtieth business day following its receipt by Foreland, then
the Adjustment Statement shall be submitted to binding arbitration in
accordance with the commercial rules of the American Arbitration
Association, except that only one arbitrator shall be used. The fees
and expenses of such arbitration shall be borne 50% by Petro Source
Corporation and 50% by Foreland. The determination of the Adjustment
Statement by such arbitration shall be final and binding upon Foreland
and Petro Source Corporation.
(c) Adjustment Payments. On the day the Adjustment Statement
becomes final and binding, Foreland and Petro Source Corporation shall
make the following payments:
(i) If the mathematical sum of the actual amounts of
the items specified in subsections 3.05(a) through (h) as
shown in the final and binding Adjustment Statement, is less
than the mathematical sum of the items to specified in
subsections 3.05(a) through (h) in the Closing Statement,
then Petro Source Corporation shall pay Foreland an amount
equal to such deficiency.
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(ii) If the mathematical sum of the actual amounts
of the items specified in subsections 3.05(a) through (h) as
shown in the final and binding Adjustment Statement, exceeds
the mathematical sum of the items to specified in subsections
3.05(a) through (h) in the Closing Statement, then Foreland
shall pay Petro Source Corporation an amount equal to such
excess.
Any payments required by this Section 3.06A shall be by wire transfer
to the account designated by the party to receive such payment.
9. Representations, Covenants, and Warranties of Petro Source
Corporation. The lead-in paragraph to Article IV of the Option and Purchase
Agreement is amended by substituting "Petro Source Corporation" for "PSC."
10. Organization. Section 4.01 of the Option and Purchase Agreement is
amended to read in its entirety as follows:
Section 4.01 Organization. Petro Source Corporation and
Petrosource Transportation are each corporations duly organized,
validly existing, and in good standing under the laws of the state of
Utah. Foreland Refining Corporation is duly organized, validly
existing, and in good standing under the laws of the state of Texas.
Each of the corporations has the corporate power and are duly
authorized, qualified, franchised, and licensed or shall have applied
for licenses under all applicable laws, regulations, ordinances, and
orders of public authorities to own all of their properties and assets
and to carry on their business in all material respects as it is now
being conducted. There is no jurisdiction in which any of such
companies is not so qualified in which the character and location of
the assets owned by it or the nature of the business transacted by it
requires qualification, except where failure to do so would not have a
material adverse effect on the business or properties of such company.
The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement in
accordance with the terms hereof will not, violate any provision of
such companies' articles of incorporation or bylaws. Each of such
companies has taken all action required by law, its articles of
incorporation, its bylaws, or otherwise to authorize the execution and
delivery of this Agreement and the consummation of the transactions
herein contemplated.
11. Capitalization. A new Section 4.01A shall be added to the Option
and Purchase Agreement to read in its entirety as follows:
Section 4.01A Capitalization. The authorized capital of
Foreland Refining consists of 100,000 shares of common stock, par
value $0.01, of which 1,000 shares are issued and outstanding. All
such issued and outstanding shares are legally issued, fully paid, and
nonassessable, and not issued in violation of the pre-emptive or other
right of any person. No shares of the authorized capital of Foreland
Refining are subject to any right held by any other person or entity
to require the issuance of additional shares on the exercise or
conversion of options, warrants, convertible debentures, or any other
such rights. The authorized capital of Petrosource Transportation
consists of 50,000 shares of common stock, with no par value, of which
1,000 shares are issued and outstanding. All such issued and
outstanding shares are legally issued, fully paid, and nonassessable
and are not issued in violation of the pre-emptive or other right of
any person. Petrosource Transportation does not have any shares
subject to issuance pursuant to the exercise or conversion of options,
warrants, convertible debentures, or any other such rights held by any
other person or entity.
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12. Financial Statements. A new subparagraph 4.03(a2) is added to read
as follows:
(a2) Included in Schedule 4.03 to this Agreement is also the
unaudited balance sheet of Petrosource Transportation as of March 31,
1998, and the related unaudited income statements for the three months
ended March 31, 1998, and the years ended December 31, 1997, 1996,
1995, and 1994, which present fairly the results of operations and the
financial position of Petrosource Transportation for the periods and
as of the dates indicated in all respects which would be material to
an entity consisting of Petrosource Transportation and Foreland
Refining, except, however, with respect to matters that are
customarily presented in footnotes to financial statements. All such
financial statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved, except that such
financial statements have not been audited by independent outside
accountants and do not contain the footnote disclosures required by
GAAP.
13. New Governmental Authorizations. A new Section 4.05A is added to
the Option and Purchase Agreement to read in its entirety as follows:
Section 4.05A New Governmental Authorizations. PSC has either
transferred to Foreland Refining, or caused Foreland Refining to apply
for and/or obtain, the licenses, franchises, permits, and other
governmental authorizations that are legally required to enable it to
conduct the Business in all material respects as it was conducted on
the date of this Agreement. No governmental agency has declined to
issue any such authorization or indicated that any such authorization
may not be issued and Petro Source Corporation is not aware of any
reason that Foreland Refining may not be able to obtain any such
authorization. To the extent not obtained prior to Closing, Petro
Source Corporation represents and warrants that Foreland Refining
will, in the normal course of events, be able to obtain all of the
required authorizations material to the operation of the Business.
14. Ownership of Stock. A new Section 4.21A is added to the Option and
Purchase Agreement to read in its entirety as follows:
Section 4.21A Ownership of Stock. Petro Source Corporation
hereby represents and warrants as follows: Petro Source Corporation is
the sole beneficial and record owner of all of the issued and
outstanding equity ownership of Foreland Refining which consists of
1,000 shares of common stock, par value $0.01 per share (the "Foreland
Refining Common Stock"). The Foreland Refining Common Stock is held
solely by Petro Source Corporation, and, upon Closing, will be free
and clear of any and all liens, encumbrances, or claims by any other
person or entity. Foreland Refining is the sole record and beneficial
owner of all of the equity interest in Petrosource Transportation,
which consists of 1,000 shares of common stock, no par value (the
"Petrosource Transportation Common Stock"). The Petrosource
Transportation Common Stock is held solely by Foreland Refining and,
upon Closing, will be free and clear of any and all liens,
encumbrances, or claims by any other person or entity.
15. Certain Liabilities or Contingencies. New Sections 4.21B and 4.21C
are hereby added to the Option and Purchase Agreement to read in its entirety
as follows:
Section 4.21B Undisclosed Liabilities or Contingencies. Petro
Source Corporation represents and warrants that to Petro Source
Corporation's Current Actual Knowledge, upon Closing, neither Foreland
Refining nor Petrosource Transportation have, or are liable for, any
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liabilities or contingencies, whether known or unknown, other than the
Assumed Obligations, and Petro Source Corporation will indemnify and
hold Foreland Refining and Petrosource Transportation harmless from
any such liabilities or contingencies if such are discovered in the
future, whether or not known by Petro Source Corporation at the
Closing Date.
Section 4.21C Certain Environmental Matters. Notwithstanding
anything to the contrary in the Option and Purchase Agreement and this
Agreement and without respect to the disclosures set forth in Schedule
4.18 or elsewhere to the Option and Purchase Agreement, Petro Source
Corporation shall indemnify Foreland, Foreland Refining Corporation,
and Petrosource Transportation and hold them harmless from all
environmental matters with respect to the Business or Business Assets
prior to the Closing Date in accordance with the provisions of the
Environmental Indemnity Agreement executed and delivered by the
parties at Closing.
16. Releases. A new Section 6.03A is hereby added to the Option and
Purchase Agreement to read in its entirety as follows:
Section 6.03A. Releases. Petro Source Corporation shall have
delivered the Releases required by Section 3.04 to Foreland, such
Releases to be in form suitable for filing and, if appropriate,
recordation with the appropriate governmental offices.
17. Closing Date Review and Deliveries. Section 6.06 of the Option and
Purchase Agreement is hereby amended to read in its entirety as follows:
Section 6.06 Closing Date Review and Deliveries. On and as of
the Closing Date, PSC shall, together with one or more representatives
of Foreland, undertake a Closing Date review of PSC's books, records,
and physical inventory. Petro Source Corporation shall provide
Foreland with a true, correct, and complete list and amount, as of the
most recent practicable date of the following items and represents
that there will be no material change in such items as of the Closing
Date, except as may occur in the ordinary course of the Business:
(a) the Inventory;
(b) the Tangible Personal Property;
(c) PSC's Accounts Receivable with respect to the
Business and a list of all shipped but unbilled shipments as
of the Closing Date, including an aging thereof;
(d) PSC's trade accounts payable, accrued current
liabilities, and the Assumed Obligations with respect to the
Business;
(e) all unfilled customer orders with respect to the
Business;
(f) all shipments made with respect to the Business
during the period from the date of this Agreement to the
Closing Date;
(g) the Contract Rights;
(h) the Customer Lists;
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(i) the Prepaid Expenses; and
(j) the federal, state, or local licenses held or
applied for by Foreland Refining or Petrosource
Transportation, including a summary of the status of all
pending applications.
None of the above information shall, in Foreland's sole reasonable
judgment, be different from the information supplied by PSC in the
Exhibits and Schedules delivered to Foreland on or before January 15,
1998, to an extent that, when all such differences are taken as a
whole, result in the value of the Business and Business Assets being
materially less than the value of such Business and Business Assets on
January 15, 1998.
18. Certain Other Matters. A new Section 6.09 is hereby added to the
Option and Purchase Agreement to read in its entirety as follows:
Section 6.09 Certain Other Matters. Foreland Refining and
Petro Source Corporation have (i) entered into a transportation
agreement for product shipped from Petro Source Corporation's
Fredonia, Arizona facility, if Foreland Refining determines that it
has equipment and personnel available; and (ii) executed and delivered
the Environmental Indemnification Agreement.
19. Indemnification. Article X of the Option and Purchase Agreement is
hereby amended by substituting "Petro Source Corporation" and "Petro Source
Refining Corporation" for "PSC" in the case of each and every occurrence of
"PSC" in Article X. Subsection 10.01(b) is further amended by adding the words
"or its affiliates" immediately following the words "or obligation of the
indemnifying party."
20. Tax Election. Foreland shall timely and effectively file an
election pursuant to Internal Revenue Code Section 338(h)(10) to treat the
transaction as an asset purchase for tax purposes, and Foreland and Petro Source
Corporation shall record the transaction contemplated by this Agreement for tax
purposes consistent with such election. The parties also agree to mutually
cooperate in allocating the Purchase Price among the Business and Business
Assets acquired by Foreland and to treat the transaction consistent with such
allocation for tax purposes.
21. Payment of Cost of Survey. On or before ten days following the
Closing, Foreland shall reimburse Petro Source Corporation for the cost incurred
by Petro Source Corporation in obtaining a survey of the properties pursuant to
the Option and purchase Agreement.
22. Ratification of Option and Purchase Agreement. Except as
specifically provided by this Amendment, the parties hereby specifically ratify,
confirm, and adopt and binding and enforceable, all of the terms and conditions
of the Option and Purchase Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first above written.
FORELAND CORPORATION
By /s/ N. Xxxxxx Xxxxxx, President
PETRO SOURCE CORPORATION
By /s/ A. Xxxxxx XxXxxxxx, President
FORELAND REFINING CORPORATION
By /s/ A Xxxxxx XxXxxxxx, President
PETROSOURCE TRANSPORTATION
By /s/ A. Xxxxxx XxXxxxxx, President
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