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Exhibit C
Number of Shares: 750,000
FORELAND CORPORATION
COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES PURCHASABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT COVERING SUCH SECURITIES OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES (REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL), OR AN OPINION OF THE COMPANY'S COUNSEL, STATING THAT
SUCH SALE, TRANSFER, OR ASSIGNMENT IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
FOR VALUE RECEIVED, Energy Income Fund, L.P., a Delaware limited
partnership (the "Holder"), is entitled to purchase from Foreland Corporation, a
Nevada corporation (the "Company"), subject to the terms and conditions herein
set forth, at any time before 5:00 p.m. Longmeadow, Massachusetts time on
January 6, 2003, or the first business day thereafter if such day is not a
business day or such other date as may be established in accordance with the
terms of this Warrant (the "Expiration Date"), Seven Hundred Fifty Thousand
(750,000) of the shares of duly authorized, validly issued, fully paid and
nonassessable Common Stock of the Company, one-tenth of a cent ($.001) par value
(the "Warrant Stock"), subject to adjustment of the number or kind of shares
constituting Warrant Stock as hereinafter provided. The Holder is entitled to
purchase the Warrant Stock for Six Dollars ($6.00) per share, subject to
adjustment as hereinafter provided (the "Exercise Price"), and is entitled also
to exercise the other appurtenant rights, powers, and privileges hereinafter set
forth.
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Article 1 Definitions.
For all purposes of this Warrant, unless the context otherwise
requires, the following terms have the following meanings:
1.1 "Common Stock" means the Company's authorized common stock,
par value one-tenth of a cent ($.001) per share.
1.2 "Common Stock Equivalents" has the meaning ascribed to that
term in Section 4.5(a).
1.3 "Company" means Foreland Corporation, a corporation
organized and existing under the laws of the State of Nevada, and any successor
corporation.
1.4 "Disclosure Documents" has the meaning ascribed to that term
in Section 8.5(a).
1.5 "Exercise Price" means the exercise price for the Warrant
Stock established in accordance with Article 4.
1.6 "Existing Stock" shall have the meaning ascribed to that
term in Section 4.4 hereof.
1.7 "Expiration Date" means January 6, 2003, or the first
business day thereafter if such day is not a business day, or such other date as
may be established in accordance with the terms of this Warrant.
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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 ▇▇▇▇▇
as projected in the most recent Reserve Report; plus (y) the present value of
the assets of the Company other than reserves as determined by an independent
accountant, auditor or other third party mutually chosen by the Company and
Holder; minus (z) the liabilities of the Company. In the event the Common Stock
is not Publicly Traded, Fair Market Value in reference to a share of the Common
Stock shall mean the Fair Market Value of the Company allocable to the issued
Common Stock divided by the number of shares of Common Stock that would have
been outstanding had (i) this Warrant, (ii) all options to purchase Common
Stock, and (iii) all securities convertible into Common Stock at a price per
share no greater than Fair Market Value, been exercised or converted on the date
as of which value is to be determined (with appropriate adjustment by appraisal
to reflect the proceeds of the assumed exercise or conversion of outstanding
securities).
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1.8.2 "Fair Market Value of This Warrant" means the Fair Market
Value of the Common Stock subject to this Warrant minus the Exercise Price of
this Warrant established in accordance with Article 4.
1.9 "Financing Agreement" shall mean that certain Financing
Agreement dated as of January 6, 1998, as amended from time to time, between
Foreland Corporation, Eagle Springs Production Limited-Liability Company and
Energy Income Fund, L.P.
1.10 "Holder" means Energy Income Fund, L.P., a Delaware limited
partnership, and its successors or permitted assigns as holder of this Warrant.
1.11 "Loans" shall mean the loans made by Energy Income Fund,
L.P. to the Company pursuant to the terms of the Financing Agreement.
1.12 "Losses" has the meaning ascribed to that term in
Section 8.5(a).
1.13 "1933 Act" means the Securities Act of 1933, as amended.
1.14 "Person" means any natural person, sole proprietorship,
general partnership, limited partnership, limited liability company, joint
venture, trust, unincorporated organization, association, corporation,
institution, private or governmental entity, or party.
1.15 "Publicly Traded" has the meaning ascribed to that term in
Section 1.8.
1.16 "Rights" has the meaning ascribed to that term in
Section 4.4.
1.17 "Subscription Notice" means a written notice to the
Company of Holder's election to exercise its rights under the Warrant to
purchase Common Stock, in substantially the form appearing at the end of this
Warrant.
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1.18 "Warrant" means this Warrant and any warrants issued on or
in substitution for this Warrant including warrants issued in exchange for this
Warrant pursuant to Article 2 hereof.
1.19 "Warrant Stock" means the shares of Common Stock or other
securities acquired or to be acquired upon the exercise of the Warrant.
Article 2 Exercise of Warrant; Division of Warrant.
2.1 Exercise. This Warrant may be exercised in whole or in
part. In the event of a partial exercise, the Company shall execute and deliver
to the Holder (or to such other Person as shall be designated in the
Subscription Notice) a new Warrant covering the unexercised portion of the
Warrant Stock. At any time after the second anniversary of the date hereof, the
Company may require the Holder to exercise or surrender this Warrant within
thirty (30) days after receipt of a request for exercise from the Company,
certifying that the average trading price for shares of the Company's common
stock during the preceding three (3) month period, calculated based on the
closing or last trade price of each trading day, equals or exceeds two hundred
percent (200%) of the Exercise Price effective as of the date of such notice,
and further certifying that the average trading volume for such period has
exceeded fifty thousand (50,000) shares per day.
2.2 Procedure. To exercise this Warrant, the Holder shall
deliver to the Company at its principal office:
(a) a written notice, in substantially the form of the
Subscription Notice appearing at the end of this Warrant, of the Holder's
election to exercise this Warrant;
(b) a cashier's or certified check payable to the Company in the
amount of the Exercise Price; and
(c) this Warrant.
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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 ▇▇▇▇▇▇'s rights hereunder.
2.7 Registration; Exchange of Warrant. The Company will keep
at its principal office a register in which the Company will provide for the
registration and transfer of this Warrant. The holder of this Warrant, or of any
warrant substituted therefor pursuant to the provisions of this Section 2.7,
may, at its option, in person or by duly authorized attorney,
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surrender the same for exchange at such principal office of the Company and,
within a reasonable time thereafter and without expense (other than transfer
taxes, if any), receive in exchange therefor one or more duly executed warrants
each evidencing the right to receive one share of Common Stock of the Company or
such other whole number of shares as may be designated by the holder at the time
of surrender. The Company covenants and agrees to take and cause to be taken all
action necessary to effect such registrations, transfers and exchanges.
The Company and any agent of the Company may treat the person in
whose name a warrant is registered as the owner of the warrant for all purposes
hereunder and neither the Company or such agent shall be affected by notice to
the contrary.
2.8 Cashless Exercise. Notwithstanding Section 2.2 of this
Warrant or any other provision of this Warrant to the contrary, in addition to
the Holder's rights under this Warrant, the Holder may, upon full or partial
exercise of this Warrant, at its election, pay the aggregate Exercise Price
applicable to such exercise by delivering the Warrant to the Company and
receiving from the Company in return therefor the number of shares of Common
Stock having a Fair Market Value on the date of exercise equal to the "Fair
Market Value of This Warrant" as established by Section 1.8.2.
Article 3 Transfer.
3.1 Permitted Transfers. This Warrant shall be freely trans-
ferable, in whole or in part, subject to the limitations specified in Section
3.2 herein.
3.2 Securities Laws. Neither this Warrant nor the Warrant
Stock shall be transferable unless:
(a) either a registration statement under the Securities Act of
1933 (the "1933 Act") is in effect covering the Warrant or the Warrant Stock, as
the case may be, or the Company has received an opinion from the Company's
counsel to the effect that such registration is not required, or the Holder has
furnished to the Company an opinion of ▇▇▇▇▇▇'s counsel, which
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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 ▇▇▇▇▇▇ seeks an opinion from the Holder's counsel as to transfer
without registration, the Company shall provide such factual information to
▇▇▇▇▇▇'s counsel as ▇▇▇▇▇▇'s counsel may reasonably request for the purpose of
rendering such opinion and such counsel may rely on the accuracy and
completeness of such information in rendering such opinion. Upon issuance at a
time when the Common Stock is not Publicly Traded, the Warrant Stock will bear a
legend describing the restrictions on transfer set forth in this Section 3.2.
3.3 Procedure. Subject to the limitations set forth in
Section 3.2, the Holder may transfer this Warrant on the books of the Company by
surrendering to the Company:
(a) this Warrant;
(b) a written assignment of this Warrant, in
substantially the form of the Assignment appearing at
the end of this Warrant, naming the assignee and duly
executed by the Holder; and
(c) funds sufficient to pay any stock transfer taxes
payable upon the making of such transfer.
The Company shall thereupon execute and deliver a new Warrant
in the name of the assignee specified in such instrument of assignment, and if
this Warrant is transferred in part, the Company shall also execute and deliver
in the name of the Holder a new Warrant covering the untransferred portion of
this Warrant. Upon issuance of the new Warrant or Warrants, the Warrant
surrendered for transfer shall be canceled by the Company.
3.4 Expenses. The Company shall pay all expenses, taxes
(other than transfer taxes), and other charges payable in connection with the
preparation, issue, and delivery of any new Warrant under this Article 3.
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Article 4 Exercise Price and Adjustments.
4.1 Initial Exercise Price. The initial Exercise Price for
the Warrant Stock shall be Six Dollars ($6.00) per share.
4.2 Stock Splits, Stock Dividends and Reverse Stock Splits.
If at any time the Company shall subdivide (by reclassification, by the issuance
of a Common Stock dividend on Common Stock, or otherwise) its outstanding shares
of Common Stock into a greater number, the number of shares of Common Stock that
may be purchased hereunder shall be increased proportionately and the Exercise
Price per share of Common Stock shall be decreased proportionately as of the
effective date of such action. The effective date of a stock dividend shall be
the date on which the dividend is declared. Issuance of a Common Stock dividend
shall be treated as a subdivision of the whole number of shares of Common Stock
outstanding immediately before the record date for such dividend into a number
of shares equal to such whole number of shares so outstanding plus the number of
shares issued as a stock dividend. If at any time the Company shall combine (by
reclassification or otherwise) its outstanding number of shares of Common Stock
into a lesser number, the number of shares of Common Stock that may be purchased
hereunder shall be reduced proportionately and the Exercise Price per share of
Common Stock shall be increased proportionately as of the effective date of such
action.
4.3 Dividends Other than in Common Stock or Cash; Other
Distributions. If at any time while this Warrant is outstanding the Company
shall declare or make for the benefit of all holders of its Common Stock any
dividend or distribution upon its Common Stock other than ordinary cash
dividends, or distributions to which Section 4.2 or 4.4 apply (whether payable
in stock of any class or classes other than its Common Stock or payable in
evidences of indebtedness or assets or in rights, options, or warrants or
convertible or exchangeable securities), then in each such case the number of
shares of Common Stock that may be purchased hereunder shall be determined by
multiplying the number of shares of Common Stock theretofore comprising the
Warrant Stock by a fraction, the numerator of which shall be the Fair
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Market Value per share of the Common Stock determined in accordance with Section
1.9 as of the record date for such dividend or distribution and the denominator
of which shall be the Fair Market Value per share, as so determined, less the
fair value as of such date, as reasonably determined by the Board of Directors
of the Company, of the portion of such dividend or distribution applicable to
one share of Common Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of distribution
retroactive to the record date for the determination of shareholders entitled to
receive the distribution. In the event the Company determines that the
adjustment provided for above is unduly difficult or expensive to effect because
of difficulties of valuation, the Company may, at its option and as an
alternative to the adjustment, distribute and place in escrow for the Holder
that portion of such dividend or distribution which the Holder would have
received had it exercised this Warrant before the declaration of the dividend or
the making of the distribution. Upon exercise of this Warrant, the Holder shall
receive its portion of the dividend, distribution, or rights.
4.4 Issuance on Common Stock of Options, Warrants or Rights.
If at any time while this Warrant is outstanding the Company shall grant to all
holders of its Common Stock any rights, options or warrants (referred to in this
Section 4.4 as "Rights") entitling them to purchase shares of Common Stock at a
price per share that is lower at the record date for such issuance than the Fair
Market Value of the Common Stock on such date determined in accordance with
Section 1.8, the number of Shares of Common Stock that may be purchased
hereunder shall be determined by multiplying the number of Shares of Common
Stock theretofore purchasable upon exercise of each Warrant by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding or
subject to issuance at prices at or below the Fair Market Value of the Common
Stock on such record date (the "Existing Stock") plus the number of shares
subject to issuance pursuant to the Rights and of which the denominator shall be
the number of shares of Existing Stock plus the number of shares which the
aggregate offering price of the total number of shares of Common Stock so
offered would purchase at the then current Fair Market Value per share of Common
Stock. Such adjustment shall be made whenever such rights, options or warrants
are issued and shall become effective retroactively immediately after the record
date for the determination of shareholders entitled to
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receive such rights options or warrants. In the event the Company determines
that the adjustment provided for above in this Section is unduly difficult or
expensive to effect because of difficulties of valuation, the Company may, at
its option and as an alternative to the adjustment, grant and convey to the
Holder the Rights which the Holder would have received had it exercised this
Warrant before issuance of the Rights.
On the expiration or termination of any of the Rights, the
number of shares of Common Stock then purchasable upon the exercise of each
Warrant and the exercise price then in effect shall be subject to readjustment
and the number of shares of Common Stock subject to the Warrants shall forthwith
be decreased and the exercise price under the Warrants shall forthwith be
increased to that which would have been in effect at the time of such expiration
or termination had such Rights, to the extent outstanding immediately prior to
such expiration or termination, never been issued.
4.5 Anti-dilution Adjustment.
(a) Pursuant to Section 7.39 of the Financing Agreement, if
during the term of this Warrant and notwithstanding the prior repayment of Loans
(as such term is defined in the Financing Agreement), the Company issues
additional shares of Common Stock at a price of less than Six Dollars ($6) per
share, the Company shall deliver to Holder within five (5) days of such issuance
an additional warrant in the form of this Warrant for Common Stock equal to ten
percent (10%) of the shares so issued. Notwithstanding the prior repayment of
Loans, if the Company issues securities convertible or exercisable into Common
Stock at a conversion or exercise price of less than Six Dollars ($6) per share
and such securities are converted or exercised into Common Stock or repurchased
by the Company during the term of this Warrant, the Company shall deliver to
Holder within five (5) days of such conversion or exercise an additional warrant
in the form of this Warrant for Common Stock of the Company equal to ten percent
(10%) of the shares issued purusant to such conversion or exercise. The
foregoing shall not apply to securities issued pursuant to options, warrants,
calls, subscriptions, rights, agreements or commitments set forth on Schedule
5.23 of the Financing Agreement.
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(b) The provisions of this Section 4.5(a) shall not apply in the
event the Company issues (i) shares of Common Stock at a price of Three Dollars
Seventy-Five Cents ($3.75) per share or less, or (ii) securities convertible or
exercisable into Common Stock at a conversion or exercise price of Three Dollars
Seventy-Five Cents ($3.75) per share or less and such securities are converted
or exercised into Common Stock or repurchased by the Company. In such instance,
the Company shall deliver to Holder within five (5) days of such issuance of
Common Stock or conversion or exercise of the convertible or exercisable
security, a warrant in the form of Warrant No. 1 and Warrant No. 2 for the
number of shares represented by Warrant No. 1 and Warrant No. 2 on such issuance
date at an exercise price equal to the sales, conversion or exercise price. Upon
issuance thereof, Holder will deliver warrant No. 1 and Warrant No. 2 to the
Company for cancellation. In addition, the foregoing provisions of this Section
shall not apply: (1) if the Company issues additional securities, the proceeds
of which are used to repay the Loans in full within thirty (30) days, or (ii) if
the Company issues equity securities in one offering with net proceeds to the
Company of Twenty Million Dollars ($20,000,000) or more.
4.6 Reorganization and Reclassification. In case of any
capital reorganization or any reclassification of the capital stock of the
Company while this Warrant remains outstanding, the Holder of this Warrant shall
thereafter be entitled to purchase pursuant to this Warrant (in lieu of the kind
and number of shares of Common Stock comprising Warrant Stock that such Holder
would have been entitled to purchase or acquire immediately before such
reorganization or reclassification) the kind and number of shares of stock of
any class or classes or other securities or property for or into which such
shares of Common Stock would have been exchanged, converted, or reclassified if
the Warrant Stock had been purchased immediately before such reorganization or
reclassification. In case of any such reorganization or reclassification,
appropriate provision (as determined by resolution of the Board of Directors of
the Company) shall be made with respect to the rights and interest thereafter of
the Holder of this Warrant, to the end that all the provisions of this Warrant
(including adjustment provisions) shall thereafter be applicable, as nearly as
reasonably practicable, in relation to such stock or other securities or
property.
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4.7 Statement of Adjustment of Warrant Stock. Whenever the
number or kind of shares comprising Warrant Stock or the Exercise Price is
adjusted pursuant to this Article 4, the Company shall promptly give notice to
the Holder of record of the outstanding Warrant, stating that such an adjustment
has been effected and setting forth the number and kind of shares purchasable
and the amount of the then-current Exercise Price, and stating in reasonable
detail the facts requiring such adjustment and the calculation of such
adjustment.
4.8 No Other Adjustments. No adjustments in the number or
kind or price of shares constituting Warrant Stock shall be made except as
provided in this Article 4.
Article 5 Covenants of the Company.
The Company covenants and agrees that:
5.1 Reservation of Shares. At all times, the Company
will reserve and set apart and have, free from preemptive rights, a sufficient
number of shares of authorized but unissued Common Stock or other securities, if
applicable, to enable it at any time to fulfill all its obligations hereunder.
5.2 Adjustment of Par Value. Before taking any action
that would cause an adjustment reducing the Exercise Price per share below the
then par value of the shares of Warrant Stock issuable upon exercise of the
Warrant, the Company will take any corporate action that may be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable shares of such Warrant Stock at such adjusted price.
5.3 Notice of Significant Events. In case the Company
proposes:
(a) to pay any dividend, payable in stock (of any class or
classes) or in convertible securities, upon its Common Stock or to make any
distribution (other than ordinary cash dividends) to the holders of its Common
Stock; or
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(b) to subdivide as a whole (by reclassification, by the
issuance of a stock dividend on Common Stock, or otherwise) the number of shares
of Common Stock then outstanding into a greater number of shares of Common
Stock, with or without par value; or
(c) to grant to the holders of its Common Stock generally any
rights or options; or
(d) to effect any capital reorganization or reclassification of
capital stock of the Company; or
(e) to consolidate with, or merge into, any other corporation or
business or transfer its property as an entirety or substantially as an
entirety; or
(f) to effect the liquidation, dissolution, or winding up of
the Company; or
(g) to make any other fundamental change in respect of which the
Holder of this Warrant would have been entitled to vote, pursuant to the
corporation law of Nevada, if this Warrant had been previously exercised;
then the Company shall cause notice of any such intended action to be given to
the Holder of record of this Warrant (i) not less than thirty (30) days before
the date on which the transfer books of the Company shall close or a record be
taken for such stock dividend, distribution, granting of rights or options, or
for determining rights to vote in respect of any fundamental change, including
any capital reorganization, reclassification, consolidation, merger, transfer,
liquidation, dissolution, winding up, or any other fundamental change, and (ii)
in the case of any such capital reorganization, reclassification, consolidation,
merger, transfer, liquidation, dissolution, winding up, or other fundamental
change not less than thirty (30) days before the same shall be effective.
5.4 Obligations of the Company after the Loans are Paid in
Full. After the Loans are paid in full pursuant to the terms of the Financing
Agreement, and until the exercise or expiration of the Warrants:
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(a) At any time at which the Company's Common Stock is not
Publicly Traded, the Company will provide to the Holder: (1) annual and
quarterly financial statements of the Company, and (2) annual independent
reserve reports for all properties owned or leased by the Company. The annual
financial statements shall be audited by a firm of independent certified public
accountants.
(b) The Company shall not engage in any transaction with any
Affiliate of the Company or Associate of the Company or of such Affiliate (each
as defined below), except on terms no less favorable to the Company than are
obtainable in arms-length transactions with third parties. For purposes of this
Section 6.4, the terms "Affiliate" and "Associate" shall have the meanings set
forth in Rule 405, adopted under the Securities Act of 1933, as amended.
(c) The Company shall not make, directly or indirectly, any
loan, advance or extension of credit to, or any guarantee (by way of any
commitment to fund, or commitment to satisfy in any way, any debt, liability, or
other obligation or otherwise) for, any of its officers, directors, employees,
shareholders, partners, or Affiliates, or any Affiliate or Associate of such
person or entity, except on terms no less favorable to the Company than are
obtainable in arms-length transactions with third parties.
(d) The Company shall not pay any compensation to its
officers or directors in excess of reasonable, usual and customary compensation
paid to officers or directors in companies similar to the Company in the oil and
gas industry.
Article 6 Limitation of Right or Liability.
6.1 No provision of this Warrant shall be construed as
conferring upon the Holder hereof the right to vote or to consent or to receive
dividends or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matter
whatsoever as a stockholder of the Company. In the absence of affirmative
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action by the Holder hereof to purchase shares of Common Stock, no provision
hereof shall give rise to any liability of such Holder for the purchase price or
as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
Article 7 Certain Mergers; Liquidation.
7.1 Continuation of Warrant. Except as provided in
Section 8.2, in the event that the Company proposes to consolidate with, or
merge into, any other corporation or business or to transfer its property as an
entirety or substantially as an entirety, or to effect the liquidation,
dissolution, or winding up of the Company, or to change the Common Stock in any
manner (other than to change its par value), then after the Company causes
notice of such proposed action to be given to the Holder of record as provided
in Section 6.3, the Holder shall be entitled, on or before the effective date of
such merger, consolidation, transfer, liquidation, dissolution, winding up, or
change, to require the Company of the successor or purchasing entity, as the
case may be, to (a) execute with the Holder an agreement providing that the
Holder shall have the right thereafter and throughout the then remaining term of
this Warrant, upon payment of the Exercise Price per Warrant Share in effect
immediately prior to such action to purchase with respect to each share of
Warrant Stock issuable upon exercise of this Warrant the kind and amount of
shares of stock and other securities, property (including cash) or any
combination thereof which the Holder would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale, conveyance, or
change had this Warrant been exercised with respect to such share of the Warrant
Stock immediately prior to such action and (b) make effective provision in its
Articles of Incorporation or otherwise, if necessary, in order to effect such
agreement. Such agreement shall provide for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Article 4 of this Warrant. The
provisions of this Section 8.1 shall similarly apply to successive
consolidations, mergers, sales, conveyances, or changes.
7.2 Exception. Section 8.1 shall not apply to a consolida-
tion or merger with a Person in which the Company is the surviving entity.
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Article 8 Registration Rights.
8.1 Piggyback Registration Rights. If, at any time on or
before the expiration of this Warrant, the Company proposes to file a
registration statement for the public sale of any of its Common Stock or Common
Stock Equivalents under the 1933 Act (other than registration statements (i)
provided for in Section 8.2 hereof or (ii) pursuant to Form S-4 and Form S-8 of
the Securities Act of 1933) the Company shall, not later than thirty (30) days
prior to the initial filing of the registration statement, deliver notice of its
intent to file such registration statement to the Holder, setting forth the
minimum and maximum proposed offering price, commissions, and discounts in
connection with the offering, and other relevant information. Within twenty (20)
days after receipt of notice of the Company's intent to file a registration
statement, the Holder shall be entitled to request that the Warrant Stock be
included in such registration statement, and the Company will use its best
efforts to cause such Warrant Stock to be included in the offering covered by
such registration statement. In the event the Warrant Stock is included in the
registration statement, the Holder may transfer this Warrant to an underwriter
or broker for exercise by such underwriter or broker in connection with a
distribution of the Warrant Stock.
The managing underwriter or underwriters in an underwritten
offering, or the holders of a majority in number of shares of Common Stock
requesting registration, may determine that the number of securities proposed to
be sold in the underwriting or offering exceeds the number that can be sold
without having a materially adverse effect on the price at which the securities
could be sold. If it or they make such a determination in good faith, then the
Company may reduce the number of shares of Common Stock to be included in the
registration to the highest number that the managing underwriter (or
underwriters) or a majority of the holders (as the case may be) determine will
not have a material adverse effect on the price of the shares to be sold. If the
number of shares of Common Stock to be sold in a registration are limited
pursuant to this paragraph, the Company will include in the registration:
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(i) First, all shares the Company proposes to sell;
(ii) Second, all shares of Common Stock for which registration
was requested pursuant to rights to require the Company to register shares in
the absence of any other registration reduced, if necessary, to the maximum
number of shares consistent with the limitation required by this Section 8.1;
and ;
(iii) Third, shares of Common Stock for which registration was
requested pursuant to rights to require the Company to register shares
incidental to the registration of other shares reduced pro rata according to the
number of share for which registration was requested by each person so
requesting registration, or in such other proportions as such Persons may agree.
8.2 Demand Registration Rights. The Holder shall be entitled
to request that the Warrant Stock be registered under the 1933 Act. The Holder
shall obtain an underwriter and the Company shall, as soon as practicable after
receipt of a written request for registration, file, and use its best efforts to
cause to become effective, an appropriate registration statement under the 1933
Act covering the Warrant Stock, provided that in the opinion of the Company's
counsel, no events preclude such registration. The Company may postpone for a
reasonable period of time (not to exceed 90 days) the filing of any registration
statement otherwise required to be prepared and filed by it pursuant to this
Section if, at the time it receives a request for registration:
(1) the Company is conducting or about to conduct an
offering of its securities and the Company is advised
by its investment banker that such offering would be
affected adversely by the registration so demanded and
the Company shall have furnished to the Holder seeking
a demand registration a certificate signed by the
President of the Company to that effect;
(2) the Board of Directors of the Company shall determine
in good faith that such offering will interfere with a
pending or contemplated financing,
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19
merger, sale of assets, recapitalization or other
similar corporate action of the Company and the Company
shall have furnished to the Holder seeking a demand
registration a certificate signed by the President of the
Company to that effect, accompanied by a certified copy
of the relevant board resolutions; or
(3) the Board of Directors of the Company shall determine
in good faith that the disclosures required in
connection with registration of the Warrant Stock might
adversely affect the business or prospects of the
Company and the Company shall have furnished to the
Holder seeking a demand registration a certificate
signed by the President of the Company to the effect,
accompanied by a certified copy of the relevant board
resolutions.
In the event that the Holder demands registration pursuant to
this Section 9.2 within the six months immediately prior to expiration of this
Warrant, and the Company, through no fault of the Holder, is unable to provide
such registration, the expiration date of this Warrant shall be extended until
the 30th day after a registration statement for the Warrant Stock is declared
effective.
The Holder's right to demand registration pursuant to this
Section 9.2 may be exercised only one time prior to expiration of the Warrant;
provided, however, that the right shall not be deemed exhausted unless the
registration statement covering so much of the Warrant Stock as Holder and its
assigns wish to sell pursuant to the registration statement becomes effective.
8.3 Filing Obligations of the Company. In connection with
any registration of the Warrant Stock effected under Sections 9.1 or 9.2, the
Company shall:
(a) prepare and file the registration statement and such
amendments and supplements to the registration statement and the prospectus or
offering circular used in
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20
connection therewith as may be necessary to keep the registration statement
effective for a period of ninety (90) days and to comply with the provisions of
the 1933 Act and the rules and regulations thereunder with respect to the
disposition of the Warrant Stock covered by the registration statement for the
period required to effect the distribution thereof, but in no event shall the
Company be required to do so for a period of more than ninety (90) days
following the effective date of such registration statement;
(b) furnish to the Holder such number of copies of any
prospectus or offering circular, including a preliminary prospectus, and of a
full registration statement and exhibits in conformity with the requirements of
the 1933 Act and rules and regulations thereunder, as the Holder may reasonably
request in order to facilitate the disposition of such securities;
(c) use its best efforts to register or qualify the Warrant
Stock covered by the registration statement, as the case may be, under the
securities or blue sky laws of such jurisdictions as the Holder may reasonably
request, and accomplish any and all other acts and things which may be necessary
or advisable to permit sale in such jurisdictions of such Warrant Stock;
provided, however, that the Company shall not be required to register as a
dealer or to qualify as a foreign corporation in any such jurisdictions or to
escrow any shares of its capital stock.
8.4 Expenses. All expenses incurred by the Company in
connection with any registration of the Warrant Stock effected under Sections
9.1 or 9.2, including, without limitation, all registration or filing fees, fees
and expenses of complying with state securities and blue sky laws, printing
expenses, fees and expenses of the Company's counsel and accountants, and fees
and expenses of counsel for the Holder, shall be paid by the Company; provided,
however, that all underwriting discounts and selling commissions applicable to
the Warrant Stock shall not be borne by the Company but shall be borne by the
Holder.
8.5 Indemnification.
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(a) By the Company. In connection with the filing of any
registration statements and sales of the Warrant Stock thereunder, the Company
shall indemnify and hold harmless the Holder of this Warrant, any underwriter,
and each other Person, if any, who controls the Holder or the underwriter within
the meaning of the 1933 Act, against losses, claims, damages or liabilities,
joint or several (or actions in respect thereto) ("Losses"), to which any such
Holder, underwriter, or controlling Person may become subject under the 1933 Act
or otherwise, insofar as such Losses arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which the Warrant Stock was registered under the
1933 Act, any preliminary prospectus, offering circular or final prospectus
contained therein, or any amendment or supplement thereto, or any report filed
with the Securities and Exchange Commission (the "Disclosure Documents"), or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse any such Holder,
underwriter, or controlling Person for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claims, excluding any amounts paid in settlement of litigation, commenced or
threatened, if such settlement is effected without the prior written consent of
the Company; provided, however, that the Company shall not be liable in any such
case to the extent that any such Losses arise out of or are based upon any
untrue statement, alleged untrue statement or omission or alleged omission made
in such Disclosure Document in reliance upon and in conformity with information
furnished to the Company in writing by or on behalf of the Holder of this
Warrant for use specifically in connection with the preparation of such
Disclosure Document.
(b) By the Holder. In connection with the filing of any
registration statement and sales of the Warrant Stock thereunder, the Holder
shall indemnify the Company, each of its directors, each of its officers who
signed such registration statement, and each other Person, if any, who controls
the Company within the meaning of the 1933 Act, against any Losses to which the
Company, any of its directors, officers, or controlling Persons may become
subject under the 1933 Act or otherwise, insofar as such Losses arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any of the Disclosure Documents or
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22
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, and any of
its directors, officers, or controlling Persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claims, excluding any amounts paid in settlement of litigation, commenced
or threatened, if such settlement is effected without the prior written consent
of the Holder; provided, however, that such indemnification or reimbursement
shall be payable in any such case only to the extent that such statement or
alleged statement or omission or alleged omission is made in reliance on
information furnished to the Company in writing by or on behalf of the Holder
for use specifically in connection with the preparation of such Disclosure
Document.
8.6 Assignability. The piggyback and demand registration
rights of the Holder under Article 8 may be assigned by ▇▇▇▇▇▇, subject to the
transfer limitations set forth in Article 3 and assumption by the assignee of
the corresponding obligations hereunder.
Article 9 Miscellaneous.
9.1 Governing Law. The rights of the parties arising under
this Warrant shall be construed and enforced under the laws of the Commonwealth
of Massachusetts without giving effect to any choice of law or conflict of law
rules.
9.2 Notices. Any notice or other communication required or
permitted to be given or delivered pursuant to this Warrant shall be in writing
and shall be deemed effective as of the date of receipt if delivered personally
or by facsimile transmission (if receipt is confirmed by the facsimile operator
of the recipient), or delivered by overnight courier service or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address in the United
States of America for a party as shall be specified by like notice; provided
that notices of change of address shall be effective only upon receipt thereof):
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(i) to the Holder as follows:
Energy Income Fund, L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
Washington, D.C. 20037
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) to the Company as follows:
Foreland Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-2019
Attn: ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.C.
8th Floor, Bank One Tower
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ (▇▇▇ ▇▇▇▇▇)
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
9.3 Severability. If any provision of this Warrant shall be
held invalid, such invalidity shall not affect any other provision of this
Warrant that can be given effect without the invalid provision, and to this end,
the provisions hereof are separable.
9.4 Headings. The headings in this Warrant are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Warrant.
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9.5 Amendment. This Warrant cannot be amended or modified
except by a written agreement executed by the Company and the Holder.
9.6 Assignment. This Warrant shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns except that no party may assign or
transfer its rights or obligations under this Warrant to the extent explicitly
prohibited herein.
9.7 Entire Agreement. This Warrant, together with its
attachments, contains the entire understanding among the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written, except as herein contained.
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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/ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------
▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
President
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SUBSCRIPTION NOTICE
The undersigned, the Holder of a Common Stock Purchase Warrant
issued by [name of issuer] pursuant to a Financing Agreement dated as of
[___________] between [name of issuer] and Energy Income Fund, L.P., hereby
elects to exercise purchase rights represented by such Warrant for, and to
purchase thereunder, ___________ shares of the Common Stock covered by such
Warrant and herewith makes payment in full therefor of _____________________and
requests that certificates for such shares (and any securities or the property
issuable upon such exercise) be issued in the name of and delivered to
____________________________________________________________, whose address is
________________________________________________________________________________
_______________________________________________________________________________.
If said number of shares of Common Stock is less than the number
of shares of Warrant Stock purchasable hereunder, the undersigned requests that
a new Warrant representing the balance of the Warrant Stock be registered in the
name of and issued and delivered to
__________________________________________________, whose address is
________________________________________________________________________________
_______________________________________________________________________________.
The undersigned hereby agrees to pay any transfer taxes on the
transfer of all or any portion of the Warrant or Warrant Stock requested herein.
The undersigned agrees that, in the absence of an effective
registration statement with respect to Common Stock issued upon this exercise,
the undersigned is acquiring such Common Stock for investment and not with a
view to distribution thereof and the certificate or certificates representing
such Common Stock may bear a legend substantially as follows: "The shares
represented by this certificate have not been registered under the Securities
Act of 1933, as amended, and may not be transferred except as provided in
Article 3 of the Common Stock Purchase Warrant issued by [name of issuer] on
[date], a copy of which is on file at the principal office of [name of issuer]."
----------------------------------
Signature guaranteed:
Dated:
-----------------
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto __[Name and Address]__ the rights represented by the foregoing
Common Stock Purchase Warrant issued by [name of issuer] on [date], and appoints
________________ its attorney to transfer said rights on the books of said corp-
oration, with full power of substitution in the premises.
-------------------------------
Signature guaranteed:
Dated:
------------------
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