FIRST AMENDMENT TO FINANCING AGREEMENT
First Amendment to Financing Agreement dated as of this 10th day of
August, 1998 (the "Amendment"), by and among Foreland Corporation, a Nevada
corporation ("Foreland"), Eagle Springs Production Limited-Liability Company, a
Nevada limited liability company ("Eagle Springs"), Foreland Refining
Corporation, a Texas corporation ("Foreland Refining"), Foreland Asphalt
Corporation, a Utah corporation ("Foreland Asphalt"), Foreland Asset
Corporation, a Nevada corporation ("Foreland Asset") and Petrosource
Transportation, a Utah corporation ("Transportation") (each a "Borrower" and
collectively referred to as "Borrowers"), and Energy Income Fund, L.P., a
Delaware limited partnership ("EIF"), to that certain Financing Agreement dated
as of January 6, 1998 (as amended, the "Agreement").
RECITALS
WHEREAS, pursuant to the Agreement, EIF agreed to make loans to
Foreland and Eagle Springs for the purposes and subject to the terms and
conditions set forth therein;
WHEREAS, Foreland and Eagle Springs have asked that EIF provide the
financing for the acquisition of (i) certain interests in the Ghost Ranch Field
from Plains Petroleum Operating Company, (ii) certain assets of Foreland
Refining, including all of the issued and outstanding stock of Transportation,
(iii) all of the issued and outstanding stock of Foreland Refining and (iv) a
one-third membership interest in Cowboy Asphalt Terminal, L.L.C. as more fully
described below;
WHEREAS, Foreland and Eagle Springs desire to add Foreland Refining,
Foreland Asphalt, Foreland Asset and Transportation as Borrowers under the
Financing Agreement and the Loans;
WHEREAS, Foreland wishes to issue a new series of convertible
preferred stock in order to raise capital;
WHEREAS, EIF wishes to subscribe for the entire issuance of that
certain preferred stock of Foreland in exchange for the consideration set forth
in that certain stock purchase agreement of even date herewith (the "Stock
Purchase Agreement") and in exchange for the consideration set forth herein;
WHEREAS, EIF and Foreland wish to revise the terms of Warrant No. 2 on
the terms described herein;
WHEREAS, Section 11.2(a) of the Agreement provides that the parties
thereto may amend or modify the Agreement by a written instrument duly executed
by the parties;
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. All capitalized terms used herein shall have the meanings
assigned to them in the Agreement unless expressly defined otherwise in this
Amendment.
2. Except as otherwise specifically provided herein, all terms and
conditions of the Agreement shall apply to the interpretation and enforcement of
this Amendment as if explicitly set forth herein.
3. The preamble to the Agreement is amended by adding "Foreland
Refining Corporation, a Texas corporation ("Foreland Refining"), Foreland
Asphalt, a Utah corporation ("Foreland Asphalt"), Foreland Asset Corporation, a
Nevada corporation ("Foreland Asset") and Petrosource Transportation, a Utah
corporation ("Transportation") as parties thereto and Borrowers thereunder. By
executing this Amendment, Foreland Refining, Foreland Asphalt, Foreland Asset
and Transportation agree to be bound by and expressly adopt, ratify, confirm and
restate all provisions under the Agreement as if they were original parties to
the Agreement, including but not limited to all representations and warranties,
each of which shall be deemed to have been made as of the date hereof. Prior to
the Funding of the Petro Source Acquisition Financing, Foreland, Eagle Springs,
Foreland Refining, Foreland Asphalt, Foreland Asset and Transportation shall
execute and deliver all certificates and opinions requested by EIF and its
counsel.
4. Section 1.1 of the Agreement is amended to include the following
definitions, inserted in the appropriate alphabetical order:
"Cave Valley Properties" shall mean those certain oil and gas
leasehold interests acquired by Foreland from Apollo Xxxxx
Exploration, a Colorado general partnership, pursuant to the Purchase
and Sale Agreement between Foreland and Apollo Xxxxx Exploration dated
June 26, 1998 and covering approximately 40,000 acres in Lincoln
County, Nevada.
"Cave Valley Prospect" shall mean that certain oil and gas
prospect operated by Xxxxxx X. Xxxxx Operating Company and comprised
of the Cave Valley Properties.
"Closing Financing" shall have the meaning set forth in Section
2.2(a)(vii) of this Agreement.
"Cowboy Asphalt Terminal, L.L.C." shall mean Cowboy Asphalt
Terminal, L.L.C., a Utah limited liability company.
"Cowboy Improvement Financing" shall have the meaning set forth
in Section 2.3(a)(vii) of the Agreement.
"Cowboy Lease Purchase Financing" shall have the meaning set
forth in Section 2.3(a)(viii) of the Agreement.
"Eagle Springs #44-35 Well Financing" shall have the meaning set
forth in Section 2.2(a)(ii) of the Agreement.
"Eagle Springs #14-35 Well Financing" shall have the meaning set
forth in Section 2.2(a)(iii) of the Agreement.
"Eagle Springs #33-36 Well Financing" shall have the meaning set
forth in Section 2.2(a)(iv) of the Agreement.
"Eagle Springs Refinery" shall mean the refinery and related
facilities located in part in the E/2 SE/4 of Section 24, T, 9 N., R.
56E., M.D.M., County of Xxx, State of Nevada.
"EOR" shall have the meaning set forth in Section 2.2(a)(i) of
the Agreement.
"EOR Equipment Financing" shall have the meaning set forth in
Section 2.2(a)(x) of the Agreement.
"EOR Financing" shall have the meaning set forth in Section
2.2(a)(i) of the Agreement.
"EOR Operating Financing" shall have the meaning set forth in
Section 2.2(a)(viii) of the Agreement.
"EOR Workover Financing" shall have the meaning set forth in
Section 2.2(a)(ix) of the Agreement.
"Flat Top Federal #27-15 Well Financing" shall have the meaning
set forth in Section 2.2(a)(xvi) of the Agreement.
"Foreland Pledge and Security Agreements" shall mean,
collectively, the Pledge and Security Agreement, dated as of August
11, 1998, from Foreland to EIF, related to the stock of Foreland
Refining, the Pledge and Security Agreement, dated as of August 11,
1998, from Foreland to EIF, related to the stock of Foreland Asset,
the Pledge and Security Agreement, dated as of August 11, 1998, from
Foreland to EIF, related to the stock of Foreland Asphalt, and the
Pledge and Security Agreement, dated as of August 11, 1998, from
Foreland Refining to EIF related to the stock of Transportation.
"Foreland Refining" shall mean Foreland Refining Corporation, a
Texas corporation.
"Foreland Security Agreements" shall mean, collectively, the
Security Agreement dated as of August 11, 1998 from Foreland Asphalt
to EIF, the Security Agreement dated as of August 11, 1998 from
Foreland Asset to EIF, the Security Agreement dated as of August 11,
1998 from Foreland Refining to EIF and the Security Agreement dated as
of August 11, 1998 from Transportation to EIF.
"Ghost Ranch Acquisition Financing" shall have the meaning set
forth in Section 2.3(a)(ii) of this Agreement.
"Hay Ranch 3-D Financing" shall have the meaning set forth in
Section 2.2(a)(xvii) of the Agreement.
"Petro Source" shall mean Petro Source Refining Corporation, a
Utah corporation.
"Petro Source Acquisition" shall mean the acquisition by Foreland
of certain assets of Foreland Refining, including the Refineries and
all of the issued and outstanding stock of Transportation and all of
the issued and outstanding stock of Foreland Refining pursuant to that
certain Option and Purchase Agreement dated December 31, 1997, as
amended by the Amendment to Option and Purchase Agreement dated August
[ ], 1998, by and between Foreland and Petro Source Corporation,
Foreland Refining Corporation, as successor through merger to Petro
Source Refining Corporation, and Transportation.
"Petro Source Acquisition Financing" shall have the meaning set
forth in Section 2.3(a)(iii) of the Agreement.
"Petro Source Capital Improvement Financing" shall have the
meaning set forth in Section 2.3(a)(v) of the Agreement.
"Petro Source Inventory Financing" shall have the meaning set
forth in Section 2.3(a)(iv) of this Agreement.
"Petro Source Letter of Credit Financing" shall have the meaning
set forth in Section 2.3(a)(i) of the Agreement.
"Petro Source Working Capital Financing" shall have the meaning
set forth in Section 2.3(a)(vi) of the Agreement.
"Pine Creek Seismic Financing" shall have the meaning set forth
in Section 2.2(a)(vi) of the Agreement.
"Pine Creek Well Financing" shall have the meaning set forth in
Section 2.2(a)(xv) of the Agreement.
"Proposed Hydrocarbon Contracts" shall have the meaning set forth
in Section 7.7 of this Agreement.
"Qualified Offering" means an offering of common stock of
Foreland in which the aggregate net proceeds to Foreland shall be at
least Four Million Dollars ($4,000,000).
"Refineries" shall mean the Eagle Springs Refinery and the
Tonopah Refinery and the real and personal properties related thereto.
"Registration Rights Agreement" shall mean that certain
registration rights agreement of even date herewith made between EIF
and Foreland and relating to shares of preferred stock of Foreland to
be purchased by EIF pursuant to the Stock Purchase Agreement.
"Sand Dune #2-21x Well Financing" shall have the meaning set
forth in Section 2.2(a)(xiii) of the Agreement.
"Sand Xxxx #00-00 Xxxx Xxxxxxxxx" shall have the meaning set
forth in Section 2.2(a)(xi) of the Agreement.
"Sand Xxxx #00-00 Xxxx Xxxxxxxxx" shall have the meaning set
forth in Section 2.2(a)(xii) of the Agreement.
"Sand Xxxx #00-00 Xxxx Xxxxxxxxx" shall have the meaning set
forth in Section 2.2(a)(v) of the Agreement.
"Sand Dune Section 1 Well Financing" shall have the meaning set
forth in Section 2.2(a)(xiv).
"Securities Laws" shall mean the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, and foreign
or state securities laws.
"Software and Transition Financing" shall have the meaning set
forth in Section 2.3(a)(ix) of the Agreement.
"Tonopah Refinery" shall mean the refinery and related facilities
located in part on 63 acres within or adjacent to the Tonopah Airport,
County of Xxx, State of Nevada.
"Transportation" shall mean Petrosource Transportation, a Utah
corporation.
5. Section 1.1 is further amended to delete the following
definitions, and to replace them in their entirety with the following
definitions, respectively:
"Borrower" shall mean any of Foreland, Eagle Springs, Foreland
Refining, Foreland Asphalt, Foreland Asset and Transportation.
"Borrowers" shall mean Foreland, Eagle Springs, Foreland
Refining, Foreland Asphalt, Foreland Asset and Transportation, jointly
and severally.
"Value," when used in reference to the Collateral that includes
reserves, shall mean the discounted present worth 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. When used in reference to other Collateral,
"Value" shall mean the value of such Collateral as determined by EIF
using a twenty percent (20%) discounted cash flow valuation
methodology. In cases where operational or cash flow history of
particular Collateral is deemed by EIF, in its sole discretion, to be
insufficient to be used as the basis for valuation, Value shall be the
acquisition cost of the Collateral at the most recent arms length
purchase and sale of those assets.
"Warrant No. 2" shall mean a Warrant issued by Foreland to EIF
for Seven Hundred Fifty Thousand (750,000) shares of common stock of
Foreland with an exercise price of Six Dollars ($6.00) per share.
6. Section 1.1 is further amended to delete the following
definitions:
Phase I Eagle Springs Air Injection Financing
Phase I Eagle Springs Drilling Financing
Phase I Closing Financing
Phase I of the Development Loan
Phase I Pine Creek Drilling Financing
Phase I Pine Creek Seismic Financing
Phase II of the Development Loan
Phase II Eagle Springs Air Injection Financing
Phase II Eagle Springs Drilling Financing
Phase II Pine Creek Additional Drilling Financing
Phase II Ghost Ranch Drilling Financing
Phase II Hay Ranch Seismic Financing
Phase III of the Development Loan
Phase III Hay Ranch Seismic Financing
Phase III Eagle Springs Drilling Financing
Phase III Hay Ranch Drilling Financing
Proposed Gas Contracts
7. The definition of "Hydrocarbons" in Section 1.1 of the Agreement
is amended by adding the phrase "or from refining operations" to the end of the
definition.
8. The definition of "Requirement of Law" in Section 1.1 of the
Agreement is amended by adding the phrase "or the Securities Laws" after the
phrase "under the Environmental Laws."
9. The definition of Security Instruments" in Section 1.1 of the
Agreement is amended by adding the phrase "pledge agreements," after the phrase
"security agreements."
10. Article II is amended by deleting Sections 2.1, 2.2 and 2.3 and
replacing them with the following:
"2.1 Refinancing Loan. Subject to the terms and conditions set forth
in this Agreement, EIF agrees to make a loan (the "Refinancing Loan") to
Borrowers of up to Six Hundred Seventy-Four Thousand Two Hundred Seventy-Nine
Dollars and Thirty-Four Cents ($674,279.34) to refinance the outstanding
principal and accrued interest due on the Bank Loans ("Bank Loans Financing").
"2.2 Development Loan and Initial Funding.
" (a) Subject to the terms and conditions set forth in this
Agreement, EIF agrees to make a loan (the "Development Loan") to Borrowers in
the principal amount of up to Seven Million One Hundred Seventy-Five Thousand
Seven Hundred Twenty Dollars and Sixty-Six Cents ($7,175,720.66), for the
purposes set forth below.
" (i) up to Seven Hundred Eighty-Five Thousand Dollars
($785,000) to finance the implementation of the high pressure air
injection program also known as the enhanced oil recovery program (the
"EOR"), including the financing of compressors and buildings, in the
Eagle Springs Properties (the "EOR Financing");
"(ii) up to Eight Hundred Thirty Thousand Dollars
($830,000) to finance the drilling and completion of the Eagle Springs
#44-35 Well (the "Eagle Springs #44-35 Well Financing");
" (iii) up to Five Hundred Twenty-Five Thousand Dollars
($525,000) to finance the drilling and plugging of the Eagle Springs
#14-35 Well (the "Eagle Springs #14-35 Well Financing");
" (iv) up to Fourteen Thousand Dollars ($14,000) to finance
location costs associated with the Eagle Springs #33-36 Well (the
Xxxxx Xxxxxxx #00-00 Xxxx Xxxxxxxxx");
" (v) up to Nine Hundred Fifty Thousand Dollars ($950,000)
to finance the drilling and completion of the Sand Dune #88-35 Well
(the "Sand Xxxx #00-00 Xxxx Xxxxxxxxx");
" (vi) up to Three Hundred Twenty-Five Thousand Dollars
($325,000) to finance the three-dimensional seismic program on the
Pine Creek Properties (the "Pine Creek Seismic Financing");
"(vii) up to Three Hundred Thousand Dollars ($300,000) to
finance certain of EIF's costs related to the closing of the
Refinancing Loan and portions of the Development and Acquisition Loans
pursuant to Article X of this Agreement (the "Closing Financing");
" (viii) up to One Hundred Thousand Dollars ($100,000) to
finance certain operating costs associated with the EOR (the "EOR
Operating Financing");
" (ix) up to One Hundred Fifty Thousand Dollars ($150,000)
to finance certain EOR workovers (the "EOR Workover Financing");
" (x) up to Four Hundred Thousand Dollars ($400,000) to
finance certain equipment associated with the EOR (the "EOR Equipment
Financing");
" (xi) up to Six Hundred Thousand Dollars ($600,000) to
finance the deepening of the Sand Dune #58-35 Well (the "Sand Xxxx
#00-00 Xxxx Xxxxxxxxx");
" (xii) up to Nine Hundred Fifty Thousand Dollars
($950,000) to finance the drilling and completion of the Sand Dune
#68-35 Well (the "Sand Xxxx #00-00 Xxxx Xxxxxxxxx");
" (xiii) up to One Hundred Forty Thousand Dollars
($140,000) to finance the deepening of the Sand Dune #2-21x Well (the
"Sand Dune #2-21x Well Financing");
" (xiv) up to Three Hundred Ten Thousand Dollars ($310,000)
to finance the drilling of the Sand Dune Section 1 Well (the "Sand
Xxxx Xxxxxxx 0 Xxxx Xxxxxxxxx");
" (xv) up to Three Hundred Eight Thousand One Hundred
Fifty-Three Dollars and Ninety-Eight Cents ($308,153.98) to finance
the drilling and completion of one Pine Creek Well (the "Pine Creek
Well Financing");
" (xvi) up to Two Hundred Thirty-Eight Thousand Five
Hundred Sixty-Six Dollars and Sixty-Eight Cents ($238,566.68) to
finance the drilling and completion of the Flat Top Federal #27-15
Well and associated Cave Valley Prospect leasehold acquisition (the
"Flat Top Federal #27-15 Well Financing"); and
" (xvii) up to Two Hundred Fifty Thousand Dollars
($250,000) to finance preliminary survey and archeological work
associated with the Hay Ranch three-dimensional seismic program (the
"Hay Ranch 3-D Financing").
"The Development Loan shall consist of advances to be made by EIF to Borrowers
on or before December 31, 1998. Borrowers shall deliver an Advance Notice to
EIF with respect to each requested advance of the Development Loan. Each
Advance Notice shall specify the amount requested (subject to the limits set
forth in this Section), which amount shall be not less than Five Hundred
Thousand Dollars ($500,000) or such lesser amount as remains undisbursed under
the Development Loan. Subject to satisfaction of the conditions precedent
contained in this Agreement, each advance of the Development Loan shall be made
within thirty (30) days of EIF's receiving an Advance Notice from Borrowers.
" (b) The Initial Funding shall be for Five Million Four Hundred
Twenty-Five Thousand Two Hundred Seventy-Nine Dollars and Thirty-Four Cents
($5,425,279.34) and includes the proceeds for the Bank Loans Financing, the EOR
Financing, the Eagle Springs #44-35 Well Financing, the Xxxxx Xxxxxxx #00-00
Xxxx Xxxxxxxxx, the Xxxxx Xxxxxxx #00-00 Xxxx Xxxxxxxxx, the Sand Dune #88-35
Well Financing, the Pine Creek Seismic Financing, One Hundred Fifty Thousand
Dollars ($150,000) of the Closing Financing, the EOR Operating Financing, the
EOR Workover Financing, the EOR Equipment Financing, Two Hundred Seventy-Two
Thousand Dollars ($272,000) of the Sand Dune #58-35 Well Financing, the Cowboy
Lease Purchase Financing and the Petro Source Letter of Credit Financing. The
remaining One Hundred Fifty Thousand Dollars ($150,000) of the Closing Financing
shall be funded at such times and in such amounts as the parties mutually agree.
" (c) Three Hundred Thirty-Five Thousand Dollars ($335,000) of the
Eagle Springs #14-35 Well Financing, the Xxxxx Xxxxxxx #00-00 Financing
($14,000), the Pine Creek Seismic Financing ($325,000), the EOR Operating
Financing ($100,000), the EOR Workover Financing ($150,000), the EOR Equipment
Financing ($400,000), Two Hundred Seventy-Two Thousand Dollars ($272,000) of the
Sand Dune #58-35 Well Financing, the Petro Source Letter of Credit Financing and
the Cowboy Lease Purchase Financing and any future advances funded from the
Development and Acquisition Loans shall be subject to the limits set forth in
subsection (a) hereof and shall be deposited at the time of the related Funding
into an escrow account located at Peoples Bank, Holyoke, Massachusetts (the
"Escrow Account") pursuant to an escrow agreement (the "Escrow Agreement")
substantially in the form set forth in Exhibit D. Disbursements of the
Development Loan proceeds from the Escrow Account will be made to Borrowers in
connection with the development upon satisfaction of certain conditions set
forth in the Escrow Agreement, including without limitation execution of
releases and other documents requested by the Escrow Agent, all in form and
substance satisfactory to the Escrow Agent.
"2.3 Acquisition Loan.
" (a) Subject to the terms and conditions set forth in this
Agreement, EIF agrees to make a loan (the "Acquisition Loan") to Borrowers in
the principal amount of up to Nine Million Fifty Thousand Dollars ($9,050,000),
for the following purposes:
" (i) up to One Hundred Fifty Thousand Dollars ($150,000)
to finance a letter of credit in connection with the Petro Source
Acquisition (the "Petro Source Letter of Credit Financing");
"(ii) up to Five Hundred Thousand Dollars ($500,000) to
finance the acquisition of certain interests in the Ghost Ranch Field
from Plains Petroleum Operating Company (the "Ghost Ranch Acquisition
Financing");
"(iii) up to Five Million Dollars ($5,000,000) to finance
the acquisition by Foreland of certain assets of Foreland Refining,
including the Refineries, plus all of the common stock of
Transportation from Foreland Refining, pursuant to that certain Option
and Purchase Agreement dated December 31, 1997, as amended, by and
between Foreland and Petro Source Corporation, Petro Source Refining
Corporation and Petrosource Transportation (the "Petro Source
Acquisition Financing");
"(iv) up to One Million Three Hundred Thousand Dollars
($1,300,000) to finance the acquisition of inventory associated with
the Petro Source Acquisition (the "Petro Source Inventory Financing");
"(v) up to Five Hundred Thousand Dollars ($500,000) to
finance certain capital improvements on the Petro Source Refineries
(the "Petro Source Capital Improvement Financing");
"(vi) up to Six Hundred Thousand Dollars ($600,000) to
finance working capital associated with the Petro Source Refineries
(the "Petro Source Working Capital Financing");
"(vii) up to Seven Hundred Thousand Dollars ($700,000) to
finance certain improvements associated with the acquisition by
Foreland Asphalt of a one-third interest in Cowboy Asphalt Terminal,
L.L.C. pursuant to that certain Operating Agreement by and between
Foreland Asphalt and Crown Asphalt Products Company, including the
development by Foreland Asphalt of storage and marketing facilities at
the Cowboy Asphalt Terminal located in Xxxxx Cross, Utah (the "Cowboy
Improvement Financing");
"(viii) up to One Hundred Thousand Dollars ($100,000) to
finance certain lease purchase payments associated with the Cowboy
Acquisition (the "Cowboy Lease Purchase Funding"); and
"(ix) up to Two Hundred Thousand Dollars ($200,000) to
finance certain software and transition costs associated with the
Petro Source and Cowboy Acquisitions (the "Software and Transition
Financing").
" (b) Certain Fundings of the Acquisition Loan are subject to the
limits set forth in subsection (a) hereof and may be deposited at the time of
the related Funding into the Escrow Account. Disbursements of the Acquisition
Loan proceeds from the Escrow Account will be made to Borrowers in connection
with the acquisitions upon satisfaction of certain conditions set forth in the
Escrow Agreement, including without limitation execution of releases and other
documents requested by the Escrow Agent, all in form and substance satisfactory
to the Escrow Agent. Any amounts under the Acquisition Loan which are not
funded by December 31, 1999 will be canceled effective December 31, 1999."
11. Article II is amended by adding the phrase "the Cave Valley
Properties" immediately after the phrase "the Hay Ranch Properties" in the first
sentence of Section 2.12(b).
12. Section 5.1 is amended by adding the phrase "or Texas" after the word
"Nevada" in the third line.
13. Article IV is amended by adding the following subsections to Section
4.1:
" (k) All of each Borrower's right, title and interest in the Refineries;
" (l) All of each Borrower's right, title and interest in the Inventory,
Equipment, Receivables, General Intangibles, Other Property and Proceeds of
Foreland Refining, Foreland Asphalt, Foreland Asset and Transportation, as those
terms are defined in the Foreland Security Agreements, as applicable;
" (m) All of each Borrower's right, title and interest in the one-third
membership interest in Cowboy Asphalt Terminal, L.L.C. purchased by Foreland
pursuant to that certain Operating Agreement by and between Foreland Asphalt and
Crown Asphalt Products Company;
" (n) All of each Borrower's right, title and interest in the issued and
outstanding stock of Foreland Refining, Foreland Asphalt, Foreland Asset and
Transportation, and all proceeds thereof, as described in the Foreland Pledge
and Security Agreements;
14. Article IV is amended by deleting the preamble to Section 4.2 and
replacing it in its entirety with the following:
"4.2 Assignment. Borrowers hereby absolutely and unconditionally TRANSFER,
ASSIGN, WARRANT and CONVEY to EIF, effective as of January 6, 1998 at 7:00 a.m.
local time, all of the interest of Borrowers in (i) all Hydrocarbons and all
other minerals which are thereafter produced, saved or sold from the Properties,
or allocated thereto pursuant to pooling or unitization of oil and gas leases or
otherwise, (ii) all Hydrocarbons or other products produced at the Refineries,
and (iii) all revenues and proceeds from the sale of (i) or (ii) (the "Proceeds
of Runs"), including all payments in lieu of production such as "take or pay"
payments or settlements, and all accounts, contract rights, and other general
intangibles under which such proceeds may arise and all revenues and proceeds
under agreements for refining, fractionating, manufacturing, processing and
transportation of Hydrocarbons and other products. Borrowers shall deliver to
EIF signed letters in lieu of transfer order executed in blank, substantially in
the form of Exhibit H. The following terms and conditions shall apply to the
Proceeds of Runs:
15. Article IV is amended by deleting Sections 4.3(f) and 4.3(g) and
replacing them in their entirety with the following:
" (f) any attempt to communicate in any manner with the purchasers of
production from the Collateral including without limitation the purchasers of
Hydrocarbons and other products and by-products of the Refineries and related
assets, or the purchasers of products under refining, fractionating, processing,
manufacturing, transporting or other contracts related to assets of the
Refineries after the delivery to such purchasers of a letter in the form of
Exhibit H in an attempt to hinder or interfere with the rights of EIF as stated
in Section 4.2 above and as restated in the Security Instruments; and
" (g) the return of, or reimbursement for, all monies received by
Borrowers from the purchasers of production for monies attributable to
production or from the purchasers of Hydrocarbons and other products and by-
products of the Refineries and related assets or under agreements for refining,
fractionating, manufacturing, processing or transportation of Hydrocarbons or
other products after receipt by any such purchaser of a letter in the form of
Exhibit H.
16. Article V is amended by deleting the existing Schedule 5.11(a) and
replacing it with Schedule 5.11(a) attached hereto.
17. Section 5.20 is amended by adding the word", refining" after the word
"treating" in the second line of the provision and by adding the phrase",
including from the Refineries" after the word "Properties" in the fourth line of
the provision.
18. Section 5.23 is amended by adding the following text as four new
paragraphs at the end of the existing section:
" (a) The authorized capital of Foreland consists of (i) 50,000,000
shares of common stock, par value $0.001 per share (the "Shares"), of which
8,548,921 shares are issued and outstanding as of the date hereof, and (ii)
5,000,000 shares of preferred stock, par value $0.001 per share, of which
2,000,000 preferred shares are designated as 1991 Series Convertible Preferred
Stock with 40 of such preferred shares issued and outstanding as of the date
hereof (convertible into 13,333 shares of Common Stock); 1,650,000 preferred
shares are designated as 1994 Series Convertible Redeemable Preferred Stock with
165,140 of such preferred shares issued and outstanding as of the date hereof
(convertible into 55,047 shares of Common Stock); 1,000,000 preferred shares are
designated as 1995 Series Convertible Preferred Stock with 556,667 of such
preferred shares issued and outstanding as of the date hereof (convertible into
185,556 shares of Common Stock); 1,500 preferred shares are designated as 1996
Series 6% Convertible Preferred Stock with none of such preferred shares issued
and outstanding as of the date hereof; 10,000 preferred shares are designated as
1996-2 Series 6% Convertible Preferred Stock with none of such preferred shares
issued and outstanding as of the date hereof; 6,000 preferred shares are
designated as 1996-3 Series 8% Convertible Preferred Stock with none of such
preferred shares issued and outstanding as of the date hereof; 500 preferred
shares are designated as the 1996-4 Series Preferred Stock with none of such
preferred shares issued and outstanding as of the date hereof; 50,000 preferred
shares are designated as Series A Preferred Stock with none of such preferred
shares issued and outstanding as of the date hereof; 2,000 preferred shares are
designated as 1998 Series Convertible Preferred Stock with 2,000 of such
preferred shares issued and outstanding as of the date hereof (convertible into
333,333 shares of Common Stock); and 280,000 preferred shares are not designated
(together, the "Capital Stock"). Foreland has no other shares of Capital Stock
of any class or other equity securities authorized, issued, or outstanding.
Foreland has no other Shares or capital stock of any class or other equity
securities or equity equivalents authorized, issued or outstanding. Foreland
has reserved a sufficient number of authorized Shares for issuance pursuant to
the Warrants. Except as set forth in Schedule 5.23, there are no outstanding or
authorized options, warrants, calls, subscriptions, rights, agreements or
commitments of any character obligating Borrower to issue any Shares or
securities convertible into or exchangeable for or evidencing the right to
purchase or subscribe for any Capital of Borrower.
" (b) The authorized capital of Foreland Asset consists of 1,000 shares
of common stock, par value $0.001 per share, of which 1,000 shares are issued
and outstanding and held by Foreland as of the date hereof;
" (c) The authorized capital of Foreland Asphalt consists of 1,000
shares of common stock, par value $0.001 per share, of which 1,000 shares are
issued and outstanding and held by Foreland as of the date hereof;
" (d) The authorized capital of Foreland Refining consists of 100,000
shares of common stock, par value $0.01 per share, of which 1,000 shares are
issued and outstanding;
" (e) The authorized capital of Petrosource Transportation consists of
50,000 shares of common stock, no par value, of which 1,000 shares are issued
and outstanding; and
" (f) The authorized capital of Cowboy Asphalt Terminal, L.L.C.,
consists of 1,000 units of membership interests, of which Foreland holds 333
units.
19. Section 7.7 is amended by adding the phrase", refining, fractioning,
processing or manufacture" after the phrase "sale and/or transportation" in line
four of the provision and by adding the phrase", including the Refineries,"
after the phrase "from the Properties" in line four of the provision.
20. Article VII is amended by deleting Section 7.25 and replacing it with
the following:
"7.25 Inspection Report. Borrowers will comply with the
recommendations set out in that certain Inspection Report dated August 10, 1998,
prepared by WZI Inc. of Bakersfield, California, by December 31, 1998.
21. Section 7.31 is amended by adding the phrase "and the Refineries" at
the end of the sentence.
22. Article VII is amended by deleting Section 7.39 and replacing it with
the following:
"7.39 Warrants.
"a. Public Offering for Eagle Springs. If equity securities in Eagle
Springs, or any successor thereto, are registered pursuant to the Securities Act
of 1933 and/or pursuant to section 12 of the Securities Exchange Act of 1934
(the "Exchange Act") (a "Public Company"), Borrowers shall, if EIF so elects,
cause such Public Company to issue warrants to EIF within thirty (30) days of
such election with substantially similar terms and conditions as Warrant No. 1
and Warrant No. 2 (the "Eagle Springs Warrants") and upon issuance of the Eagle
Springs Warrants, EIF will deliver Warrant No. 1 and Warrant No. 2 to Foreland
for cancellation.
"b. Issuance of Shares by Foreland below $6.00. If, during the term of
either Warrant No. 1 or Warrant No. 2 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 7.39 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.
"c. Qualified Offering. If Foreland has not received, and delivered to
EIF, a commitment for a Qualified Offering by November 9, 1998, Foreland shall
deliver to EIF a warrant in the form of Warrant No. 2 with an exercise price of
Five Dollars ($5) per share. If Foreland has not received the net proceeds of a
Qualified Offering by February 10, 1999, Foreland shall deliver to EIF a warrant
in the form of Warrant No. 2 with an exercise price of Four Dollars ($4) per
share. The warrant issued shall be for the number of shares equal to: (i) the
shares represented by Warrant No. 1; (ii) the shares represented by Warrant No.
2 and (iii) the total number of shares represented by all warrants issued
pursuant to Section 7.39(b) of this Agreement. Upon issuance of the warrants
pursuant to this paragraph, EIF will deliver the then existing Warrant No. 1 and
Warrant No. 2 and any warrants issued pursuant to Sections 7.39(b) of this
Agreement to Foreland for cancellation.
23 Article VII is further amended by adding the following:
"7.40 Qualified Offering. Foreland shall have received the net
proceeds of a Qualified Offering no later than March 11, 1999."
24 Article VII is further amended by adding the following:
"7.41 Repayment of the Petro Source Inventory Financing. Borrowers
shall repay the Petro Source Inventory Financing withing ninety (90) days after
the Funding of the Petro Source Inventory Financing.
25 Foreland shall have executed and delivered to EIF, concurrent with the
signing hereof, a Warrant substantially in the form of Exhibit M hereto.
26 Foreland shall have executed and delivered to EIF, concurrent with the
signing hereof, allonges to the Refinancing Note, the Development Note and the
Acquisition Note, substantially in the form of Exhibit N hereto.
27 Foreland shall have executed and delivered to EIF, concurrent with the
signing hereof, the Registration Rights Agreement and the Stock Purchase
Agreement.
28 Wherever the term "Borrowers" includes Foreland, Eagle Springs, and
Foreland Refining, the remaining language in such section of the Financing
Agreement shall be interpreted to apply to each of Foreland, Eagle Springs and
Foreland Refining, as the context requires. Each place where the phrases
"either Borrower" or "either Borrower's" appears in the Financing Agreement
shall be revised to substitute the phrase "any Borrower" or "any Borrower's",
respectively.
29 THIS AMENDMENT IS TO BE CONSTRUED UNDER THE LAWS OF THE COMMONWEALTH
OF MASSACHUSETTS.
30 Except as expressly amended hereby, the Agreement remains in full
force and effect. Any references to the Agreement in the Loan Documents shall
refer to the Agreement as amended hereby.
31 This Amendment shall be of no force and effect until receipt and
execution of this Amendment by EIF in its offices in Longmeadow, Massachusetts.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
FORELAND CORPORATION
By: /s/ N. Xxxxxx Xxxxxx
President
EAGLE SPRINGS PRODUCTION LIMITED-LIABILITY COMPANY
By: /s/ N. Xxxxxx Xxxxxx
Manager
FORELAND REFINING CORPORATION
By: /s/ N. Xxxxxx Xxxxxx
President
FORELAND ASPHALT CORPORATION
By: /s/ N. Xxxxxx Xxxxxx
President
FORELAND ASSET CORPORATION
By: /s/ N. Xxxxxx Xxxxxx
President
ENERGY INCOME FUND, L.P.
By: EIF General Partner, L.L.C.,
its General Partner
By:/s/ Xxxxxx X. Xxxxxxx
A Managing Director
