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.
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 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 and Energy
Income Fund, L.P.
1.10 "Holder" means Energy Income Fund, L.P., a Delaware limited
partnership, and its successors or permitted assigns as holder of this Warrant.
1.11 "Loans" shall mean the loans made by Energy Income Fund, L.P. to
the Company pursuant to the terms of the Financing Agreement.
1.12 "Losses" has the meaning ascribed to that term in Section
8.5(a).
1.13 "1933 Act" means the Securities Act of 1933, as amended.
1.14 "Person" means any natural person, sole proprietorship, general
partnership, limited partnership, limited liability company, joint venture,
trust, unincorporated organization, association, corporation, institution,
private or governmental entity, or party.
1.15 "Publicly Traded" has the meaning ascribed to that term in
Section 1.8.
1.16 "Rights" has the meaning ascribed to that term in Section 4.4.
1.17 "Subscription Notice" means a written notice to the Company of
Holder's election to exercise its rights under the Warrant to purchase Common
Stock, in substantially the form appearing at the end of this Warrant.
1.18 "Warrant" means this Warrant and any warrants issued on or in
substitution for this Warrant including warrants issued in exchange for this
Warrant pursuant to Article 2 hereof.
1.19 "Warrant Stock" means the shares of Common Stock or other
securities acquired or to be acquired upon the exercise of the Warrant.
Article 2 Exercise of Warrant; Division of Warrant.
2.1 Exercise. This Warrant may be exercised in whole or in part.
In the event of a partial exercise, the Company shall execute and deliver to the
Holder (or to such other Person as shall be designated in the Subscription
Notice) a new Warrant covering the unexercised portion of the Warrant Stock. At
any time after the second anniversary of the date hereof, the Company may
require the Holder to exercise or surrender this Warrant within thirty (30) days
after receipt of a request for exercise from the Company, certifying that the
average trading price for shares of the Company's common stock during the
preceding three (3) month period, calculated based on the closing or last trade
price of each trading day, equals or exceeds two hundred percent (200%) of the
Exercise Price effective as of the date of such notice, and further certifying
that the average trading volume for such period has exceeded fifty thousand
(50,000) shares per day.
2.2 Procedure. To exercise this Warrant, the Holder shall deliver
to the Company at its principal office:
(a) a written notice, in substantially the form of the Subscription
Notice appearing at the end of this Warrant, of the Holder's election to
exercise this Warrant;
(b) a cashier's or certified check payable to the Company in the
amount of the Exercise Price; and
(c) this Warrant.
The Company shall as promptly as practicable, and in any event within
twenty (20) days after receipt of such items, execute and deliver or cause to be
executed and delivered one or more certificates representing the aggregate
number of shares of Warrant Stock to which the Holder is entitled and, if this
Warrant is exercised in part, a new Warrant as set forth in Section 2.1.
2.3 Name and Effective Date. The stock certificate(s) so
delivered shall be issued in the name of the Holder or such other name as shall
be designated in the notice specified in Section 2.2. Such certificate(s) shall
be deemed to have been issued and such Holder or any other Person so designated
to be named therein shall be deemed for all purposes to have become a holder of
record of such shares as of the date on which the Company has actually received
all of the items specified in Section 2.2.
2.4 Expenses. The Company shall pay all expenses, taxes, and
other charges payable in connection with the preparation, issue, and delivery of
such stock certificate(s), except that, in case such stock certificate(s) shall
be registered in a name or names other than the name of the Holder of this
Warrant, stock transfer taxes that are payable upon the issuance of such stock
certificate(s) shall be paid by the Holder hereof.
2.5 Legal Requirements. The Warrant Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid, and nonassessable.
2.6 No Fractional Shares. The Company shall not issue a stock
certificate representing any fraction of a share upon partial exercise by a
Holder of such 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:
(a) either a registration statement under the Securities Act of 1933
(the "1933 Act") is in effect covering the Warrant or the Warrant Stock, as the
case may be, or the Company has received an opinion from the Company's counsel
to the effect that such registration is not required, or the Holder has
furnished to the Company an opinion of Xxxxxx'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.
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 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.
On the expiration or termination of any of the Rights, the number of
shares of Common Stock then purchasable upon the exercise of each Warrant and
the exercise price then in effect shall be subject to readjustment and the
number of shares of Common Stock subject to the Warrants shall forthwith be
decreased and the exercise price under the Warrants shall forthwith be increased
to that which would have been in effect at the time of such expiration or
termination had such Rights, to the extent outstanding immediately prior to such
expiration or termination, never been issued.
4.5 Anti-dilution Adjustment.
(a) Pursuant to Section 7.39 of the Financing Agreement, if during
the term of this Warrant and notwithstanding the prior repayment of Loans (as
such term is defined int he Financing Agreement), the Company issues additional
shares of Common Stock at a price of less than Six Dollars ($6) per share, the
Company shall deliver to Holder within five (5) days of such issuance an
additional warrant in the form of this Warrant for Common Stock equal to ten
percent (10%) of the shares so issued. Notwithstanding the prior repayment of
Loans, if the Company issues securities convertible or exercisable into Common
Stock at a conversion or exercise price of less than Six Dollars ($6) per share
and such securities are converted or exercised into Common Stock or repurchased
by the Company during the term of this Warrant, the Company shall deliver to
Holder within five (5) days of such conversion or exercise an additional warrant
in the form of this Warrant for Common Stock of the Company equal to ten percent
(10%) of the shares issued purusant to such conversion or exercise. The
foregoing shall not apply to securities issued pursuant to options, warrants,
calls, subscriptions, rights, agreements or commitments set forth on Schedule
5.23 of the Financing Agreement.
(b) The provisions of this Section 4.5(a) shall not apply in the
event the Company issues (i) shares of Common Stock at a price of Three Dollars
Seventy-Five Cents ($3.75) per share or less, or (ii) securities convertible or
exercisable into Common Stock at a conversion or exercise price of Three Dollars
Seventy-Five Cents ($3.75) per share or less and such securities are converted
or exercised into Common Stock or repurchased by the Company. In such instance,
the Company shall deliver to Holder within five (5) days of such issuance of
Common Stock or conversion or exercise of the convertible or exercisable
security, a warrant in the form of Warrant No. 1 and Warrant No. 2 for the
number of shares represented by Warrant No. 1 and Warrant No. 2 on such issuance
date at an exercise price equal to the sales, conversion or exercise price.
Upon issuance thereof, Holder will deliver warrant No. 1 and Warrant No. 2 to
the Company for cancellation. In addition, the foregoing provisions of this
Section shall not apply: (1) if the Company issues additional securities, the
proceeds of which are used to repay the Loans in full within thirty (30) days,
or (ii) if the Company issues equity securities in one offering with net
proceeds to the Company of Twenty Million Dollars ($20,000,000) or more.
4.6 Reorganization and Reclassification. In case of any capital
reorganization or any reclassification of the capital stock of the Company while
this Warrant remains outstanding, the Holder of this Warrant shall thereafter be
entitled to purchase pursuant to this Warrant (in lieu of the kind and number of
shares of Common Stock comprising Warrant Stock that such Holder would have been
entitled to purchase or acquire immediately before such reorganization or
reclassification) the kind and number of shares of stock of any class or classes
or other securities or property for or into which such shares of Common Stock
would have been exchanged, converted, or reclassified if the Warrant Stock had
been purchased immediately before such reorganization or reclassification. In
case of any such reorganization or reclassification, appropriate provision (as
determined by resolution of the Board of Directors of the Company) shall be made
with respect to the rights and interest thereafter of the Holder of this
Warrant, to the end that all the provisions of this Warrant (including
adjustment provisions) shall thereafter be applicable, as nearly as reasonably
practicable, in relation to such stock or other securities or property.
4.7 Statement of Adjustment of Warrant Stock. Whenever the number
or kind of shares comprising Warrant Stock or the Exercise Price is adjusted
pursuant to this Article 4, the Company shall promptly give notice to the Holder
of record of the outstanding Warrant, stating that such an adjustment has been
effected and setting forth the number and kind of shares purchasable and the
amount of the then-current Exercise Price, and stating in reasonable detail the
facts requiring such adjustment and the calculation of such adjustment.
4.8 No Other Adjustments. No adjustments in the number or kind or
price of shares constituting Warrant Stock shall be made except as provided in
this Article 4.
Article 5 Covenants of the Company.
The Company covenants and agrees that:
5.1 Reservation of Shares. At all times, the Company will reserve
and set apart and have, free from preemptive rights, a sufficient number of
shares of authorized but unissued Common Stock or other securities, if
applicable, to enable it at any time to fulfill all its obligations hereunder.
5.2 Adjustment of Par Value. Before taking any action that would
cause an adjustment reducing the Exercise Price per share below the then par
value of the shares of Warrant Stock issuable upon exercise of the Warrant, the
Company will take any corporate action that may be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
such Warrant Stock at such adjusted price.
5.3 Notice of Significant Events. In case the Company proposes:
(a) to pay any dividend, payable in stock (of any class or classes)
or in convertible securities, upon its Common Stock or to make any distribution
(other than ordinary cash dividends) to the holders of its Common Stock; or
(b) to subdivide as a whole (by reclassification, by the issuance of
a stock dividend on Common Stock, or otherwise) the number of shares of Common
Stock then outstanding into a greater number of shares of Common Stock, with or
without par value; or
(c) to grant to the holders of its Common Stock generally any rights
or options; or
(d) to effect any capital reorganization or reclassification of
capital stock of the Company; or
(e) to consolidate with, or merge into, any other corporation or
business or transfer its property as an entirety or substantially as an
entirety; or
(f) to effect the liquidation, dissolution, or winding up of the
Company; or
(g) to make any other fundamental change in respect of which the
Holder of this Warrant would have been entitled to vote, pursuant to the
corporation law of Nevada, if this Warrant had been previously exercised;
then the Company shall cause notice of any such intended action to be given to
the Holder of record of this Warrant (i) not less than thirty (30) days before
the date on which the transfer books of the Company shall close or a record be
taken for such stock dividend, distribution, granting of rights or options, or
for determining rights to vote in respect of any fundamental change, including
any capital reorganization, reclassification, consolidation, merger, transfer,
liquidation, dissolution, winding up, or any other fundamental change, and (ii)
in the case of any such capital reorganization, reclassification, consolidation,
merger, transfer, liquidation, dissolution, winding up, or other fundamental
change not less than thirty (30) days before the same shall be effective.
5.4 Obligations of the Company after the Loans are Paid in Full.
After the Loans are paid in full pursuant to the terms of the Financing
Agreement, and until the exercise or expiration of the Warrants:
(a) At any time at which the Company's Common Stock is not
Publicly Traded, the Company will provide to the Holder: (1) annual and
quarterly financial statements of the Company, and (2) annual independent
reserve reports for all properties owned or leased by the Company. The annual
financial statements shall be audited by a firm of independent certified public
accountants.
(b) The Company shall not engage in any transaction with any
Affiliate of the Company or Associate of the Company or of such Affiliate (each
as defined below), except on terms no less favorable to the Company than are
obtainable in arms-length transactions with third parties. For purposes of this
Section 6.4, the terms "Affiliate" and "Associate"shall have the meanings set
forth in Rule 405, adopted under the Securities Act of 1933, as amended.
(c) The Company shall not make, directly or indirectly, any loan,
advance or extension of credit to, or any guarantee (by way of any commitment
to fund, or commitment to satisfy in any way, any debt, liability, or other
obligation or otherwise) for, any of its officers, directors, employees,
shareholders, partners, or Affiliates, or any Affiliate or Associate of such
person or entity, except on terms no less favorable to the Company than are
obtainable in arms-length transactions with third parties.
(d) The Company shall not pay any compensation to its officers or
directors in excess of reasonable, usual and customary compensation paid to
officers or directors in companies similar to the Company in the oil and gas
industry.
Article 6 Limitation of Right or Liability.
6.1 No provision of this Warrant shall be construed as conferring
upon the Holder hereof the right to vote or to consent or to receive dividends
or to receive notice as a stockholder in respect of meetings of stockholders for
the election of directors of the Company or any other matter whatsoever as a
stockholder of the Company. In the absence of affirmative 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.
8.1 Piggyback Registration Rights. If, at any time on or before the
expiration of this Warrant, the Company proposes to file a registration
statement for the public sale of any of its Common Stock or Common Stock
Equivalents under the 1933 Act (other than registration statements (i) provided
for in Section 8.2 hereof or (ii) pursuant to Form S-4 and Form S-8 of the
Securities Act of 1933) the Company shall, not later than thirty (30) days prior
to the initial filing of the registration statement, deliver notice of its
intent to file such registration statement to the Holder, setting forth the
minimum and maximum proposed offering price, commissions, and discounts in
connection with the offering, and other relevant information. Within twenty
(20) days after receipt of notice of the Company's intent to file a registration
statement, the Holder shall be entitled to request that the Warrant Stock be
included in such registration statement, and the Company will use its best
efforts to cause such Warrant Stock to be included in the offering covered by
such registration statement. In the event the Warrant Stock is included in the
registration statement, the Holder may transfer this Warrant to an underwriter
or broker for exercise by such underwriter or broker in connection with a
distribution of the Warrant Stock.
The managing underwriter or underwriters in an underwritten offering,
or the holders of a majority in number of shares of Common Stock requesting
registration, may determine that the number of securities proposed to be sold in
the underwriting or offering exceeds the number that can be sold without having
a materially adverse effect on the price at which the securities could be sold.
If it or they make such a determination in good faith, then the Company may
reduce the number of shares of Common Stock to be included in the registration
to the highest number that the managing underwriter (or underwriters) or a
majority of the holders (as the case may be) determine will not have a material
adverse effect on the price of the shares to be sold. If the number of shares
of Common Stock to be sold in a registration are limited pursuant to this
paragraph, the Company will include in the registration:
(i) First, all shares the Company proposes to sell;
(ii) Second, all shares of Common Stock for which registration was
requested pursuant to rights to require the Company to register shares in the
absence of any other registration reduced, if necessary, to the maximum number
of shares consistent with the limitation required by this Section 8.1; and ;
(iii) Third, shares of Common Stock for which registration was
requested pursuant to rights to require the Company to register shares
incidental to the registration of other shares reduced pro rata according to the
number of share for which registration was requested by each person so
requesting registration, or in such other proportions as such Persons may agree.
8.2 Demand Registration Rights. The Holder shall be entitled to
request that the Warrant Stock be registered under the 1933 Act. The Holder
shall obtain an underwriter and the Company shall, as soon as practicable after
receipt of a written request for registration, file, and use its best efforts to
cause to become effective, an appropriate registration statement under the 1933
Act covering the Warrant Stock, provided that in the opinion of the Company's
counsel, no events preclude such registration. The Company may postpone for a
reasonable period of time (not to exceed 90 days) the filing of any registration
statement otherwise required to be prepared and filed by it pursuant to this
Section if, at the time it receives a request for registration:
(1) the Company is conducting or about to conduct an offering of its
securities and the Company is advised by its investment banker
that such offering would be affected adversely by the
registration so demanded and the Company shall have furnished to
the Holder seeking a demand registration a certificate signed by
the President of the Company to that effect;
(2) the Board of Directors of the Company shall determine in good
faith that such offering will interfere with a pending or
contemplated financing, merger, sale of assets, recapitalization
or other similar corporate action of the Company and the Company
shall have furnished to the Holder seeking a demand registration
a certificate signed by the President of the Company to that
effect, accompanied by a certified copy of the relevant board
resolutions; or
(3) the Board of Directors of the Company shall determine in good
faith that the disclosures required in connection with
registration of the Warrant Stock might adversely affect the
business or prospects of the Company and the Company shall have
furnished to the Holder seeking a demand registration a
certificate signed by the President of the Company to the effect,
accompanied by a certified copy of the relevant board
resolutions.
In the event that the Holder demands registration pursuant to this
Section 9.2 within the six months immediately prior to expiration of this
Warrant, and the Company, through no fault of the Holder, is unable to provide
such registration, the expiration date of this Warrant shall be extended until
the 30th day after a registration statement for the Warrant Stock is declared
effective.
The Holder's right to demand registration pursuant to this Section 9.2
may be exercised only one time prior to expiration of the Warrant; provided,
however, that the right shall not be deemed exhausted unless the registration
statement covering so much of the Warrant Stock as Holder and its assigns wish
to sell pursuant to the registration statement becomes effective.
8.3 Filing Obligations of the Company. In connection with any
registration of the Warrant Stock effected under Sections 9.1 or 9.2, the
Company shall:
(a) prepare and file the registration statement and such amendments
and supplements to the registration statement and the prospectus or offering
circular used in connection therewith as may be necessary to keep the
registration statement effective for a period of ninety (90) days and to comply
with the provisions of the 1933 Act and the rules and regulations thereunder
with respect to the disposition of the Warrant Stock covered by the registration
statement for the period required to effect the distribution thereof, but in no
event shall the Company be required to do so for a period of more than ninety
(90) days following the effective date of such registration statement;
(b) furnish to the Holder such number of copies of any prospectus or
offering circular, including a preliminary prospectus, and of a full
registration statement and exhibits in conformity with the requirements of the
1933 Act and rules and regulations thereunder, as the Holder may reasonably
request in order to facilitate the disposition of such securities;
(c) use its best efforts to register or qualify the Warrant Stock
covered by the registration statement, as the case may be, under the securities
or blue sky laws of such jurisdictions as the Holder may reasonably request, and
accomplish any and all other acts and things which may be necessary or advisable
to permit sale in such jurisdictions of such Warrant Stock; provided, however,
that the Company shall not be required to register as a dealer or to qualify as
a foreign corporation in any such jurisdictions or to escrow any shares of its
capital stock.
8.4 Expenses. All expenses incurred by the Company in connection
with any registration of the Warrant Stock effected under Sections 9.1 or 9.2,
including, without limitation, all registration or filing fees, fees and
expenses of complying with state securities and blue sky laws, printing
expenses, fees and expenses of the Company's counsel and accountants, and fees
and expenses of counsel for the Holder, shall be paid by the Company; provided,
however, that all underwriting discounts and selling commissions applicable to
the Warrant Stock shall not be borne by the Company but shall be borne by the
Holder.
8.5 Indemnification.
(a) By the Company. In connection with the filing of any
registration statements and sales of the Warrant Stock thereunder, the Company
shall indemnify and hold harmless the Holder of this Warrant, any underwriter,
and each other Person, if any, who controls the Holder or the underwriter within
the meaning of the 1933 Act, against losses, claims, damages or liabilities,
joint or several (or actions in respect thereto) ("Losses"), to which any such
Holder, underwriter, or controlling Person may become subject under the 1933 Act
or otherwise, insofar as such Losses arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which the Warrant Stock was registered under the
1933 Act, any preliminary prospectus, offering circular or final prospectus
contained therein, or any amendment or supplement thereto, or any report filed
with the Securities and Exchange Commission (the "Disclosure Documents"), or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse any such Holder,
underwriter, or controlling Person for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claims, excluding any amounts paid in settlement of litigation, commenced or
threatened, if such settlement is effected without the prior written consent of
the Company; provided, however, that the Company shall not be liable in any such
case to the extent that any such Losses arise out of or are based upon any
untrue statement, alleged untrue statement or omission or alleged omission made
in such Disclosure Document in reliance upon and in conformity with information
furnished to the Company in writing by or on behalf of the Holder of this
Warrant for use specifically in connection with the preparation of such
Disclosure Document.
(b) By the Holder. In connection with the filing of any registration
statement and sales of the Warrant Stock thereunder, the Holder shall indemnify
the Company, each of its directors, each of its officers who signed such
registration statement, and each other Person, if any, who controls the Company
within the meaning of the 1933 Act, against any Losses to which the Company, any
of its directors, officers, or controlling Persons may become subject under the
1933 Act or otherwise, insofar as such Losses arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any of the Disclosure Documents or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company, and any of its directors, officers, or controlling
Persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claims, excluding any amounts paid in
settlement of litigation, commenced or threatened, if such settlement is
effected without the prior written consent of the Holder; provided, however,
that such indemnification or reimbursement shall be payable in any such case
only to the extent that such statement or alleged statement or omission or
alleged omission is made in reliance on information furnished to the Company in
writing by or on behalf of the Holder for use specifically in connection with
the preparation of such Disclosure Document.
8.6 Assignability. The piggyback and demand registration rights of
the Holder under Article 8 may be assigned by Xxxxxx, subject to the transfer
limitations set forth in Article 3 and assumption by the assignee of the
corresponding obligations hereunder.
Article 9 Miscellaneous.
9.1 Governing Law. The rights of the parties arising under this
Warrant shall be construed and enforced under the laws of the Commonwealth of
Massachusetts without giving effect to any choice of law or conflict of law
rules.
9.2 Notices. Any notice or other communication required or permitted
to be given or delivered pursuant to this Warrant shall be in writing and shall
be deemed effective as of the date of receipt if delivered personally or by
facsimile transmission (if receipt is confirmed by the facsimile operator of the
recipient), or delivered by overnight courier service or mailed by registered or
certified mail (return receipt requested), postage prepaid, to the parties at
the following addresses (or at such other address in the United States of
America for a party as shall be specified by like notice; provided that notices
of change of address shall be effective only upon receipt thereof):
(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, Esq.
Facsimile No.: (000) 000-0000
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: January 6, 1998
FORELAND CORPORATION
By /s/ X. Xxxxxx Xxxxxx
X. Xxxxxx Xxxxxx
President
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:
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:
