-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TKuQazNzjrhotOPITQFrtvcozB284hBtP3AAd6fbTuMZRfgV92aB6FYyTVKxPwk1 jZQDq1e9zgetjzOTcsJupQ== 0000914233-98-000102.txt : 19980902 0000914233-98-000102.hdr.sgml : 19980902 ACCESSION NUMBER: 0000914233-98-000102 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19980812 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980827 DATE AS OF CHANGE: 19980901 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORELAND CORP CENTRAL INDEX KEY: 0000773326 STANDARD INDUSTRIAL CLASSIFICATION: 1311 IRS NUMBER: 870422812 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-14096 FILM NUMBER: 98699499 BUSINESS ADDRESS: STREET 1: 12596 W BAYAUD AVE STE 300 STREET 2: UNION TERRACE OFFICE BLDG CITY: LAKEWOOD STATE: CO ZIP: 80228-2019 BUSINESS PHONE: 3039883122 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (date of earliest event reported): August 12, 1998 Commission File Number: 0-14096 FORELAND CORPORATION (Exact Name of Registrant as Specified in its Charter) NEVADA 87-0422812 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 12596 W. BAYAUD AVENUE SUITE 300, LAKEWOOD, COLORADO 80228 (Address of Principal Executive (Zip Code) Offices) Registrant's Telephone Number, including Area Code: (303) 988-3122 1 N/A (Former name, former address, and formal fiscal year, if changed since last report) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On August 12, 1998, Foreland Corporation (the "Company") completed the purchase from Petro Source Corporation, an independent crude oil processing, transportation, and trading firm based in Houston, Texas, of the Eagle Springs Nevada refinery, which manufactures asphalt and ancillary products from crude oil produced by the Company and other Nevada operators, a processing facility in Tonopah, Nevada, and trucks and related equipment used by Petrosource Transportation to gather crude oil and distribute products. In addition to the $520,000 payable in Common Stock to acquire the option, the Company paid $5,000,000 in cash and $2,676,322 in Common Stock and issued 100,000 additional shares of Common Stock. The Company intends to integrate the operation of the refinery and transportation assets with its oil production in Nevada to enable it to sell finished asphalt and other hydrocarbon products. The terms of the purchase were the result of arm's length negotiations. The purchase of the refinery and transportation assets and related operations was effective for accounting purposes as of June 1, 1998. The Eagle Springs atmospheric and vacuum distillation plant processes all of the crude oil currently produced in Nevada into asphalt, fuels, and solvents. The Tonopah specialty fractionation plant processes transmix and other feedstock into gasoline, diesel, and other specialty products. The refineries, with a combined rated capacity of approximately 12,000 barrels of feedstock per day, 2 sell their finished products in bulk sales to government, mining, and paving industry customers in five Western states and unfinished products to other West Coast and Rocky Mountain refiners. The transportation assets and operations acquired consist of approximately 24 truck tractors and 80 bulk crude oil gathering and finished goods delivery tank trailers with lease operators and related maintenance and operating facilities. A total of 60 employees previously engaged by Petro Source in refinery and transportation management and operations became employee of the Company following the transaction. The Petro Source option and purchase agreement was negotiated in December 1997 based on throughput of 1,300 barrels of crude oil per day. In anticipation of exercising its option and significantly improving operating results, the Company increased the refinery throughput by 1,000 barrels per day by adding production from its own wells and securing other Nevada production. The long- term success of these refineries will depend on the success of the Company and others in establishing additional oil production in Nevada. The Company will attempt to increase daily refinery throughput by development and exploration drilling, enhanced oil recovery projects, acquisitions, and refinery feedstock purchase contracts. At the current throughput of 2,300 barrels of oil per day, the Company's annualized gross revenues are expected to increase to $27 million. The Company expects that gross refinery margins, which have historically been $5.00 to $7.00 per barrel, will likely decline as throughput increases and a broader range and volume of lower margin products are sold. The purchase of the Nevada refineries will move Foreland toward fully integrated exploration, production, and finished good marketing. 3 The Company's long-term debt financing arrangement with Energy Income Fund was revised to draw $5,000,000 to fund the purchase of the Eagle Springs and Tonopah asphalt refinery and transportation company and to enable the Company to draw additional funds for refinery working capital and revised enhanced oil recovery, development, and other corporate expenditures. The Company also increased an outstanding warrant to purchase 250,000 shares at $10.00 per share to 750,000 shares and reduced the exercise price to $6.00 per share. In addition, the Company sold to Energy Income Fund for $2,000,000 a total of 2,000 shares of 1998 Series Preferred Stock convertible into an aggregate of 333,333 shares of Common Stock. As of the date of such revisions, the Common Stock traded at approximately $3.31 per share on the Nasdaq SmallCap Market. Robert Gershen, a manager of the general partner of Energy Income Fund, is a director of the Company; the disinterested members of the board of directors unanimously approved the terms of this transaction and believe them to be fair to the Company from a financial point of view. ITEM 5. OTHER EVENTS On August 21, 1998, the Company announced details of its Nevada exploration program for the balance of 1998. In addition to debt financing for the Petro Source refining and transportation operations purchase, related capital improvements, asphalt marketing, and Eagle Springs EOR, the $2 million preferred stock purchase by Energy Income Fund and anticipated cash flow from operations should permit Foreland Corporation to complete its aggressive 1998 exploration program in Pine and Huntington Valleys, Nevada. The program includes drilling four wells, two 3D defined prospects in the Pine Creek area, the Dixie Flat prospect and North Humboldt prospect. An additional 24 square miles of 3D seismic will be acquired during 1998 in the Hay Ranch area, located adjacent to the 17 square mile Pine Creek 3D survey. 4 Foreland Corporation also announced that the Ghost Ranch 58-35R will be plugged. The reentry and deepening of the Ghost Ranch 58-35R well was designed to test a structure about 1,600' west of the Sand Dune 88-35 discovery as the first offset well in the Sand Dune Field. Numerous oil and gas shows were encountered in a 1300' interval updip to the Sand Dune discovery well. Analysis of well logs through the zone indicates that reservoir quality was marginal. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS a)Financial statements required by this item will be filed by amendment as soon as practicable, but no later than 60 days after the filing of this report on Form 8-K. c) Exhibits The following exhibits are included as part of this report: SEC Exhibit Reference Number Number Title of Document Location Item 2 Plan of Acquisition, Reorganization, Arrangement, Liquidation, or Succession 2.01 2 Option and Purchase Agreement between Incorporated by Foreland Corporation, Petro Source Reference(1) Corporation, Petrosource Refining Corporation, and Petrosource Transportation dated December 31, 1997 2.02 2 Amendment to Option and Purchase This filing Agreement between Foreland Corporation, Petro Source Corporation, Foreland 5 SEC Exhibit Reference Number Number Title of Document Location Refining Corporation, and Petrosource Transportation dated August 11, 1998* Item 3 Instruments Defining the Rights of Security Holders 3.01 3 Designation of Rights, Privileges and This filing Preferences for 1998 Series Convertible Preferred Stock 3.02 3 Registration Rights Agreement between This filing Energy Income Fund, L.P., and Foreland Corporation, dated as of August 10, 1998 10.01 10 First Amendment to Financing Agreement This filing between Foreland Corporation, Eagle Springs Production Limited Liability Company, Foreland Refining Corporation, Foreland Asset Corporation, Petrosource Transportation, and Energy Income Fund, L.P., dated August 10, 1998* 10.02 10 Common Stock Purchase Warrant to purchase This filing 750,000 shares of common stock of Foreland Corporation at $6.00 per share 10.03 10 Stock Purchase Agreement dated August 10, This filing 1998, between Energy Income Fund, L.P., and Foreland Corporation 10.04 10 First Allonge to Acquisition Note in the This filing original principal amount of $2,327,000, dated as of August 10, 1998 10.05 10 First Allonge to Development Note in the This filing 6 SEC Exhibit Reference Number Number Title of Document Location original principal amount of $13,893,000, dated as of August 10, 1998 10.06 10 First Allonge to Refinancing Note in the This filing original principal amount of $680,000, dated as of August 10, 1998 10.07 10 Environmental Indemnity Agreement between This filing Petro Source Corporation, Petrosource Investments, Inc., Foreland Corporation, Foreland Refining Corporation, Foreland Asset Corporation, and Petrosource Transportation dated August 11, 1998 10.08 10 Second Amendment to Deed of Trust, This filing Security Agreement, Assignment of Production and Proceeds, Financing Statement and Fixture Filing dated as of August 11, 1998, by and among Foreland Corporation, Eagle Springs Production Limited Liability Company, First American Title Company of Nevada, and Energy Income Fund, L.P. * (1) Incorporated by reference from the Company's interim report on Form 8-K dated January 6, 1998. * Omitted schedules and similar attachments to this exhibit that are listed and briefly identified will be furnished supplementally to the Commission upon request. 7 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. Dated: August 27, 1998 FORELAND CORPORATION By /s/N. Thomas Steele, President 8 EX-2 2 AMENDMENT TO OPTION AND PURCHASE AGREEMENT THIS AMENDMENT TO OPTION AND PURCHASE AGREEMENT (this "Amendment") is entered into as of this 11 day of August, 1998, by and between FORELAND CORPORATION, a Nevada corporation ("Foreland") on the one hand, and PETRO SOURCE CORPORATION, a Utah corporation ("Petro Source Corporation"), FORELAND REFINING CORPORATION, a Texas corporation ("Foreland Refining"), and PETROSOURCE TRANSPORTATION, a Utah corporation ("Petrosource Transportation"), on the other (Petro Source Corporation, Foreland Refining, and Petrosource Transportation are collectively referred to as "PSC"), based on the following: PREMISES A. Foreland, Petro Source Corporation, and Petrosource Transportation are parties to that certain Option and Purchase Agreement dated December 31, 1997 (the "Option and Purchase Agreement"). Foreland Refining is a successor, through merger, to Petro Source Refining Corporation, a Utah corporation ("Petro Source Refining"), which was also a party to the Option and Purchase Agreement. B. In May 1998, Foreland exercised its option to purchase the Business and Business Assets as defined in the Option and Purchase Agreement, and the parties are obligated to close that transaction. C. The parties desire to amend the Option and Purchase Agreement in order to modify certain provisions thereof to reflect changes and modifications that have been agreed to since the execution of the Option and Purchase Agreement, including the restructuring of the transaction as the acquisition of certain assets of Foreland Refining, including the stock of Petrosource Transportation, by a newly-formed, wholly-owned subsidiary of Foreland, Foreland Asset Corporation ("Foreland Asset"), followed by the acquisition by Foreland of Foreland Refining, rather than the sale of assets of Petro Source Refining and Petrosource Transportation to Foreland as originally contemplated by the Option and Purchase Agreement. D. The parties desire to ratify and reaffirm all of the terms and conditions of the Option and Purchase Agreement, except those provisions specifically modified by the terms of this Amendment. AGREEMENT NOW, THEREFORE, based on the foregoing premises, and in consideration of the mutual covenants and agreements hereinafter set forth and the mutual benefit to the parties to be derived herefrom, it is hereby agreed as follows: 1. PSC Employees. The following provision will be added to the end of Section 2.10 of the Option and Purchase Agreement: (c) Foreland Refining or Petrosource Transportation will hire the PSC employees contemplated by Section 2.10(b) as of , 1998. Between the Closing Date and , 1998, such employees will remain in the employment of PSC and shall be made available to Foreland Refining or Petrosource Transportation pursuant to a Transition Services Agreement between the parties. 2. The Purchase. Section 3.01 of the Option and Purchase Agreement is amended to read in its entirety as follows: Section 3.01 The Purchase. As a result of Foreland exercising its Option as set forth in Article II of the Option and Purchase Agreement, (i) Foreland Refining shall sell to Foreland Asset all of the issued and outstanding stock of Petrosource Transportation and the Business Assets set forth in subparagraphs (a), (b), (k), and (n) below that are owned by it; and (ii) after completion of the sale of assets contemplated by subparagraph (i) and the distribution of the proceeds from such sale to Petro Source Corporation, Petro Source Corporation shall sell, and Foreland shall purchase, all of the issued and outstanding stock of Foreland Refining. References in this Agreement to the acquisition of the Business and Business Assets shall be read to mean the acquisition of the Business and Business Assets through the purchase of the assets to be sold to Foreland Asset and the subsequent purchase of the issued and outstanding stock of Foreland Refining. The Business and Business Assets shall, subject to the Excluded Assets identified in Section 3.02, consist of the following: (a) (i) all tangible personal property owned by PSC and located at, or used in connection with, the operation of the Eagle Springs Refinery, the Tonopah Refinery (excluding the emulsifier and the two asphalt spreader trucks and related equipment), (ii) the roofing asphalt equipment located at the Fredonia Terminal (provided Foreland, at its own expense, removes such equipment from PSC's property within 24 months after the Closing Date, otherwise the ownership of such equipment shall revert to Crown Asphalt Distribution, L.L.C.), and (iii) the rights of PSC as lessee of all tangible personal property leased, including the equipment, tools, vehicles, furniture and fixtures, and supplies described in Exhibit "A" (the "Tangible Personal Property"); (b) all of PSC's rights as lessee or holder of rights-of-way to the real property and all buildings and improvements thereon on which the Eagle Springs Refinery and the Tonopah Refinery are located, as more particularly described in Exhibit "B" (the "Real Property"); (c) all inventory of PSC existing as of the Effective Time which was purchased in furtherance of the Business, as described in Exhibit "C" (the "Inventory"); (d) all of the notes and trade and other accounts receivable associated with the Eagle Springs Refinery, the Tonopah Refinery, or Petrosource Transportation existing as of the Effective Time, as described in Exhibit "D" (the "Accounts Receivable"); (e) all cash, cash equivalents, and prepaid expenses held by Foreland Refining or Petrosource Transportation; (f) all of PSC's rights under (i) those crude oil and transmix purchase contracts and agreements described in Exhibit "E" which were entered into by PSC in the ordinary course of business and are executory, and (ii) all contracts and agreements intended to facilitate the sale of asphalt or other refinery products manufactured at the Eagle Springs or Tonopah refineries (together, the "Contract Rights"); (g) lists of current and past (within the preceding two years) customers and lists of prospective customers (i.e., persons with whom PSC has discussed potential sales and from whom PSC has received what PSC believes to be serious expressions of interest) of the Business compiled by PSC including, to the extent the same is in the possession of PSC, the name, address, contact person, and telephone number of each such customer or prospective customer (the "Customer Lists"), set forth on Exhibit "F"; (h) all lists of current and past (within the preceding two years) suppliers and all files, records, and data used in connection with the Business; (i) those prepaid expenses, fees, deposits, letters of credit, or bonds with respect to the Business or Business Assets, including those set forth on Exhibit "G," (the "Prepaid Expenses"); (j) to the extent they are assignable, all federal, state, or local licenses, permits, or approvals granted or used in connection with the operation of the Business or the Business Assets; (k) all of PSC's rights under warranties covering the Tangible Personal Property being transferred hereunder to the fullest extent permitted by such warranties; (l) all intellectual property of PSC necessary to the operation of the Business, including the proprietary scheduling software used in connection with Petrosource Transportation and the right to use any trade secrets, confidential or proprietary information, or general processes used by PSC in the conduct of the Business, together with the Melt PacTM License from Petro Source Asphalt Company dated as of May 31, 1998, all as described in Exhibit "H" (the "Intellectual Property"); (m) the current telephone number(s) used in connection with the Business at its locations in Eagle Springs and Tonopah, Nevada, and telephone and other directory listings used by PSC in the operation of the Business other than the Salt Lake City numbers; (n) to the extent permitted by the carrier without financial assurances or continued obligation by Petro Source Corporation, all contracts of insurance relating to the Business or Business Assets and all claims, casualties, or other occurrences prior to the Closing Date and prepaid premiums or deposits related thereto, which policies are specific to and separately maintained for the Business Assets, as described in Exhibit "I" (the "Insurance Policies"); (o) originals or copies of all accounting, operating, management, and other business records in documentary or electronic form relating to the Business or Business Assets (provided, however, PSC may maintain a record copy of any such items); (p) the rights of PSC under all confidentiality, non- competition, or similar agreements with present or former employees, consultants, and others associated with PSC insofar as related to the Business; (q) the goodwill of PSC associated with the Business, including the right to use the name "Petrosource Transportation" but excluding the use of the name "Petro Source Refining"; and (r) all other assets of PSC used to carry out the Business or part of the Business Assets not included in any specific provision of the foregoing subsections existing as of the Effective Time which are not excluded in section 3.02. 3. Excluded Assets. Section 3.02 is amended by adding a new subsection (h) to immediately follow subsection (g) thereof and to read as follows: (h) the accounts receivable of Foreland Refining that are not included in the amount set forth in paragraph (c) of the Closing Statement, which accounts receivable shall be, and are hereby, assigned to Petro Source Corporation. 4. Assumed Obligations. Section 3.03 is amended to read in its entirety as follows: Section 3.03 Obligations. On the Closing Date, Foreland Refining and/or Petrosource Transportation shall be obligated on or Foreland Asset shall and does hereby assume, as the case may be, the following obligations and liabilities with respect to the Business and Business Assets for all periods subsequent to the Effective Time, in accordance with their respective terms and subject to the respective conditions thereof, such obligations and liabilities to be held or assumed by the entity identified by the parties at the Closing: (a) all obligations of PSC under the leases or rights-of-way set forth on Exhibit K-1 relating to the Tangible Personal Property or the Real Property; (b) all current trade accounts payable and other current liabilities as of the Effective Time, that arose in the ordinary course of the Business, all to be set forth in Exhibit K-2 of the Closing Exhibits; (c) all liabilities and obligations of PSC to be paid or performed after the Effective Time under the contracts and other agreements set forth on Exhibit K-3 relating to the Business and Business Assets being conveyed hereunder; (d) all liabilities in respect of any taxes for the period beginning on the Effective Time; and any other accrued, but unpaid liabilities for taxes, as of the Effective Time and set forth in the Closing Schedule (real and personal property taxes shall be prorated between Foreland Refining and Petro Source Corporation as of the Effective Time); and (e) other obligations listed on Exhibit K-4. 5. Excluded Liabilities. Section 3.04 of the Option and Purchase Agreement is amended to read in its entirety as follows: Section 3.04. Excluded Liabilities. Unless the liability is reflected on the Closing Statement or Adjustment Statement (as those terms are defined in Section 3.05A), neither Foreland, Foreland Refining, Foreland Asset, nor Petrosource Transportation shall assume or be obligated to pay, perform, or otherwise discharge the following: (a) any liability or obligation of PSC direct or indirect, known or unknown, absolute or contingent not expressly assumed pursuant to section 3.03 or otherwise pursuant to this Agreement; (b) any liability arising out of the employer/employee relationship between PSC and its employees prior to the hiring of such employees by Foreland Refining or Petrosource Transportation, including liabilities for accrued bonuses, vacation, personal leave, or other amounts for the benefit of employees of the Business (the "Employee Benefits"); provided, however, Foreland Refining shall be responsible for payments to Petro Source Corporation required by the Transition Services Agreement; (c) taxes for any period prior to the Effective Time (real and personal property taxes shall be prorated between Foreland Refining and Petro Source Corporation as of the Effective Time); (d) the accounts payable listed on Schedule 3.04; and (e) any liability as to which Petro Source Corporation has indemnified Foreland, Foreland Refining, Petrosource Transportation, and/or Foreland Asset pursuant to the Environmental Indemnification Agreement. At the Closing, PSC shall deliver to Foreland, Foreland Asset, Foreland Refining, and Petrosource Transportation full and complete releases from any Excluded Liability for which they might be liable or to which the Business or Business Assets may be subject, including releases of all financing statements or other security documents, related to such Excluded Liability (the "Releases"). 6. Amount of Purchase Price. Section 3.05 of the Option and Purchase Agreement is amended to read in its entirety as follows: Section 3.05 Amount of Purchase Price. The consideration payable by Foreland for the purchase (the "Purchase Price") of the Business and Business Assets shall be five million dollars ($5,000,000)(the "Base Price"), plus: (a) the sum of the current assets (except to the extent set forth in Section 3.02), as of May 31, 1998, as determined in accordance with GAAP (except that finished goods inventory will be valued at market), held by Foreland Refining and/or Petrosource Transportation; (b) a negative amount equal to the sum of the current liabilities, as of May 31, 1998, as determined in accordance with GAAP, for which Foreland Refining, Foreland Asset, and/or Petrosource Transportation will continue to be liable subsequent to the Closing, excluding, however, the amount of $470,604 in intercorporate advances from Petro Source Corporation to Petrosource Transportation (which liability shall be paid prior to the Closing Date), and further excluding the current portion of long term liabilities or liabilities under operating leases that are not properly attributable to the period prior to the Effective Date in accordance with GAAP; (c) the sum of all capital contributions made by Petro Source Corporation to Foreland Refining and/or Petrosource Transportation since December 31, 1997 (other than the amount of $470,604 contributed to Petrosource Transportation by Petro Source Corporation prior to the Closing Date to enable Petrosource Transportation to repay the same amount in a current account payable owing to Petro Source Corporation); (d) a negative amount equal to all distributions, other than distributions of Excluded Assets or the cash proceeds of the sale by Foreland Refining of certain of its assets to Foreland Asset as contemplated by Section 3.01, made by Foreland Refining and/or Petrosource Transportation since May 31, 1998; (e) a positive amount equal to capital expenditures made by Foreland Refining's predecessor or Petrosource Transportation between December 31, 1997, and May 31, 1998, which added to the Business or Business Assets; (f) a negative amount equal to the net proceeds from the sale by Foreland Refining's predecessor or Petrosource Transportation between December 31, 1997, and May 31, 1998, of portions of the Business or Business Assets; (g) any unpaid portion of the Option Consideration; and (h) 100,000 shares of Foreland Stock (the "Original Shares"), the resale of which by PSC shall be covered by an effective Registration Statement in accordance with Article IX. 7. Closing Amounts and Payments. A new Section 3.05A shall be added to the Option and Purchase Agreement to read in its entirety as follows: Section 3.05A Estimated Purchase Price. The calculation of the Purchase Price as contemplated by Section 3.05 of the Agreement shall be based on an estimate and adjusted to actual results as follows: (a) Closing Statement. Petro Source Corporation has prepared and delivered to Foreland a statement (the "Closing Statement") setting forth estimates of the items specified in subsections 3.05(a) through (f) (the "Estimated Adjustments to Base Price"). The Closing Statement shall contain and shall have attached thereto such supporting documentation and other data as is reasonably necessary to provide a basis for the Estimated Adjustments to Base Price shown therein. The Estimated Adjustments to Base Price shall be based upon actual information available to Petro Source Corporation at the time of preparation of the Closing Statement and upon its good faith estimates and assumptions. Foreland and its representatives shall be provided access to all of PSC's books, records, computer runs and other documents containing information on which the Estimated Adjustments to Base Price are based for the purpose of conducting a review as Foreland may deem appropriate. (b) Closing Purchase Price. The Purchase Price to be used for the purposes of Closing (the "Closing Purchase Price") shall be the Base Price, the items described in subsections 3.05(g) and (h), and the Estimated Adjustments to Base Price computed as follows: (i) If the Estimated Adjustments to Base Price shown in the Closing Statement on the Closing Date is negative, then the Purchase Price shall be reduced by the amount of such Estimated Adjustments to Base Price, or (ii) If the Estimated Adjustments to Base Price shown in the Closing Statement is positive, then the Purchase Price shall be increased by the amount of such Estimated Adjustments to Base Price. (c) Non-Cash Portion of Closing Purchase Price. The Closing Purchase Price shall be paid in cash, except as follows: (i) The unpaid portion of the Option Consideration payable in accordance with subparagraph 3.05(g) shall be paid through Petro Source Corporation's continuing sale of Option Shares in accordance with the provisions of subparagraphs (d) through (f) of section 2.02, except that Petro Source Corporation shall not be limited as to the number of shares that can be sold at any time or during any period as provided in subparagraph (f) of such section, and any Option Shares or the proceeds therefrom in excess of the balance of the Option Consideration due shall be returned to Foreland. (ii) The 100,000 Original Shares of Foreland Stock identified in subparagraph 3.05(h), which shall be registered in the name of Petro Source Corporation and held and disposed of in accordance with the terms and conditions of subparagraph (e) of this section 3.05A.. (iii) The net amount of the Estimated Adjustments to Base Price shall be paid by the delivery by Foreland to Petro Source Corporation at the Closing of shares of Foreland Stock (the "Closing Shares"), which shall be registered in the name of Petro Source Corporation and held and disposed of in accordance with the terms and conditions of subparagraph (e) of this section 3.05A. (d) Payments and Deliveries. Prior to 11:00 a.m. Houston time on the Closing Date, Foreland shall (i) pay an amount equal to the Base Price for the account of Petro Source Corporation by wire transfer of funds to Petro Source Corporation's designated bank account, and (ii) deliver to Petro Source Corporation one or more certificates for the Original Shares and the Closing Shares.. Petro Source Corporation shall deliver or cause to be delivered the Releases, as defined in Section 6.03A, together with all conveyances, instruments, and documents to be delivered by or on behalf of Petro Source Corporation at Closing. (e) Delivery and Sale of Original Shares and Closing Shares. The Original Shares and the Closing Shares shall be issued, held, and disposed of as follows: (i) At the earliest practicable date, but in any event by the earlier of the date that is (A) 10 days after the filing by Foreland of a report containing historical and pro forma combined financial information respecting the purchased Business and Business Assets pursuant to section 13 of the Securities Exchange Act of 1934, or (B) 75 days after the Closing Date, Foreland shall file, at its sole cost, a Registration Statement on such form as Foreland may select under the Securities Act covering the resale of the Closing Shares and the Original Shares, by and for the account of Petro Source Corporation, which shall be named as a selling shareholder in the Registration Statement, all as more particularly set forth in Article IX hereof. Foreland shall utilize its best efforts to obtain the effectiveness of the Registration Statement at the earliest practicable date and to maintain its effectiveness until June 30, 1999. In the event the registration of such shares does not become effective on or before the 50th day following the filing of the Registration Statement, Foreland shall pay Petro Source Corporation in cash an amount equal to 0.0333% of the Estimated Adjustments to Base Price for each day the effectiveness of the registration of such shares is delayed beyond such 50 day period. Such amounts shall be paid by Foreland to Petro Source Corporation every 30 days beginning with the 80th day following the filing of the Registration Statement. The amount described in the preceding sentence shall be paid in addition to the interest Petro Source Corporation is entitled to receive pursuant to the following paragraph. (ii) Petro Source Corporation may cause to be sold, at any time and from time-to-time and in accordance with the Registration Statement, that number of Closing Shares that yields proceeds, net of brokerage and other usual and customary transaction costs, the Estimated Adjustments to Base Price, plus simple interest on the unpaid balance from the Closing Date to the date such net proceeds from such sale are available to the account of Petro Source Corporation at the rate of 10% per annum (the "Realizable Amount"), provided, however, that Petro Source Corporation shall not sell or place an order to sell in the Nasdaq SmallCap Market that number of Closing Shares that would yield net proceeds of more than $400,000 in any consecutive 30 day period without Foreland's prior consent. There are no restrictions on the sale of the Original Shares of Foreland Stock delivered to Petro Source Corporation at Closing, other than in accordance with the Registration Statement. (iii) If the net proceeds from the sale of Closing Shares are less than the Realizable Amount, Petro Source Corporation may demand that Foreland pay such deficiency, in which case Foreland shall, within five days after such demand, at its option, either pay such amount in cash in immediately available funds or deliver to Petro Source Corporation such additional shares of Common Stock as Foreland estimates will yield net proceeds in the amount sufficient for Petro Source Corporation to realize in cash the Realizable Amount (the "Additional Shares"). Should the proceeds from the Additional Shares prove to be insufficient for Petro Source Corporation to realize in cash the Realizable Amount, Petro Source Corporation may demand that Foreland pay such deficiency, in which case Foreland shall, within five days after such demand, pay Petro Source Corporation such deficiency in cash. (iv) If any Closing Shares or Additional Shares remain unsold after the receipt by Petro Source Corporation of the Realizable Amount, such shares shall be returned to Foreland for cancellation. If Closing Shares or Additional Shares have been sold for net proceeds in excess of the Realizable Amount, such excess proceeds shall also be delivered to Foreland. Petro Source Corporation agrees to provide Foreland with access to the records concerning the sales of Closing Shares and Additional Shares in order to permit Foreland to verify the amount realized by Petro Source Corporation on such sales. 8. Post Closing Adjustment. A new Section 3.06A shall be added to the Option and Purchase Agreement to read in its entirety as follows: Section 3.06A Post Closing Adjustment. (a) Adjustment Statement. As soon as practicable but in any event not later than 60 days following the Closing Date (the "Post Closing Date") Petro Source Corporation shall deliver to Foreland a statement (the "Adjustment Statement") setting forth the actual amounts of the items specified in subsection 3.05(a) through (f) based on the best information available to Petro Source Corporation as of the Post Closing Date. The Adjustment Statement shall be in such detail and shall contain or have attached thereto such supporting documentation as Foreland shall reasonably request. Foreland and its representatives shall be provided access to all of Petro Source Corporation's books, records, computer runs, and other documents containing information on which the Adjustment Statement is based for the purpose of conducting an audit thereof or such other review as Foreland may deem appropriate. (b) Final Determination of Adjustments. The Adjustment Statement shall become final and binding on Petro Source Corporation and Foreland on the twentieth business day following the date the Adjustment Statement is received by Foreland, unless prior to such twentieth business day Foreland shall deliver to Petro Source Corporation notice of its disagreement with the contents of the Adjustment Statement, together with proposed changes thereto. If Foreland has delivered a notice of disagreement, then the Adjustment Statement will become final and binding upon written agreement between Foreland and Petro Source Corporation resolving all disagreements of Foreland. If the Adjustment Statement has not become final and binding by the thirtieth business day following its receipt by Foreland, then the Adjustment Statement shall be submitted to binding arbitration in accordance with the commercial rules of the American Arbitration Association, except that only one arbitrator shall be used. The fees and expenses of such arbitration shall be borne 50% by Petro Source Corporation and 50% by Foreland. The determination of the Adjustment Statement by such arbitration shall be final and binding upon Foreland and Petro Source Corporation. (c) Adjustment Payments. On the day the Adjustment Statement becomes final and binding, Foreland and Petro Source Corporation shall make the following payments: (i) If the mathematical sum of the actual amounts of the items specified in subsections 3.05(a) through (h) as shown in the final and binding Adjustment Statement, is less than the mathematical sum of the items to specified in subsections 3.05(a) through (h) in the Closing Statement, then Petro Source Corporation shall pay Foreland an amount equal to such deficiency. (ii) If the mathematical sum of the actual amounts of the items specified in subsections 3.05(a) through (h) as shown in the final and binding Adjustment Statement, exceeds the mathematical sum of the items to specified in subsections 3.05(a) through (h) in the Closing Statement, then Foreland shall pay Petro Source Corporation an amount equal to such excess. Any payments required by this Section 3.06A shall be by wire transfer to the account designated by the party to receive such payment. 9. Representations, Covenants, and Warranties of Petro Source Corporation. The lead-in paragraph to Article IV of the Option and Purchase Agreement is amended by substituting "Petro Source Corporation" for "PSC." 10. Organization. Section 4.01 of the Option and Purchase Agreement is amended to read in its entirety as follows: Section 4.01 Organization. Petro Source Corporation and Petrosource Transportation are each corporations duly organized, validly existing, and in good standing under the laws of the state of Utah. Foreland Refining Corporation is duly organized, validly existing, and in good standing under the laws of the state of Texas. Each of the corporations has the corporate power and are duly authorized, qualified, franchised, and licensed or shall have applied for licenses under all applicable laws, regulations, ordinances, and orders of public authorities to own all of their properties and assets and to carry on their business in all material respects as it is now being conducted. There is no jurisdiction in which any of such companies is not so qualified in which the character and location of the assets owned by it or the nature of the business transacted by it requires qualification, except where failure to do so would not have a material adverse effect on the business or properties of such company. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement in accordance with the terms hereof will not, violate any provision of such companies' articles of incorporation or bylaws. Each of such companies has taken all action required by law, its articles of incorporation, its bylaws, or otherwise to authorize the execution and delivery of this Agreement and the consummation of the transactions herein contemplated. 11. Capitalization. A new Section 4.01A shall be added to the Option and Purchase Agreement to read in its entirety as follows: Section 4.01A Capitalization. The authorized capital of Foreland Refining consists of 100,000 shares of common stock, par value $0.01, of which 1,000 shares are issued and outstanding. All such issued and outstanding shares are legally issued, fully paid, and nonassessable, and not issued in violation of the pre-emptive or other right of any person. No shares of the authorized capital of Foreland Refining are subject to any right held by any other person or entity to require the issuance of additional shares on the exercise or conversion of options, warrants, convertible debentures, or any other such rights. The authorized capital of Petrosource Transportation consists of 50,000 shares of common stock, with no par value, of which 1,000 shares are issued and outstanding. All such issued and outstanding shares are legally issued, fully paid, and nonassessable and are not issued in violation of the pre-emptive or other right of any person. Petrosource Transportation does not have any shares subject to issuance pursuant to the exercise or conversion of options, warrants, convertible debentures, or any other such rights held by any other person or entity. 12. Financial Statements. A new subparagraph 4.03(a2) is added to read as follows: (a2) Included in Schedule 4.03 to this Agreement is also the unaudited balance sheet of Petrosource Transportation as of March 31, 1998, and the related unaudited income statements for the three months ended March 31, 1998, and the years ended December 31, 1997, 1996, 1995, and 1994, which present fairly the results of operations and the financial position of Petrosource Transportation for the periods and as of the dates indicated in all respects which would be material to an entity consisting of Petrosource Transportation and Foreland Refining, except, however, with respect to matters that are customarily presented in footnotes to financial statements. All such financial statements have been prepared in accordance with GAAP consistently applied throughout the periods involved, except that such financial statements have not been audited by independent outside accountants and do not contain the footnote disclosures required by GAAP. 13. New Governmental Authorizations. A new Section 4.05A is added to the Option and Purchase Agreement to read in its entirety as follows: Section 4.05A New Governmental Authorizations. PSC has either transferred to Foreland Refining, or caused Foreland Refining to apply for and/or obtain, the licenses, franchises, permits, and other governmental authorizations that are legally required to enable it to conduct the Business in all material respects as it was conducted on the date of this Agreement. No governmental agency has declined to issue any such authorization or indicated that any such authorization may not be issued and Petro Source Corporation is not aware of any reason that Foreland Refining may not be able to obtain any such authorization. To the extent not obtained prior to Closing, Petro Source Corporation represents and warrants that Foreland Refining will, in the normal course of events, be able to obtain all of the required authorizations material to the operation of the Business. 14. Ownership of Stock. A new Section 4.21A is added to the Option and Purchase Agreement to read in its entirety as follows: Section 4.21A Ownership of Stock. Petro Source Corporation hereby represents and warrants as follows: Petro Source Corporation is the sole beneficial and record owner of all of the issued and outstanding equity ownership of Foreland Refining which consists of 1,000 shares of common stock, par value $0.01 per share (the "Foreland Refining Common Stock"). The Foreland Refining Common Stock is held solely by Petro Source Corporation, and, upon Closing, will be free and clear of any and all liens, encumbrances, or claims by any other person or entity. Foreland Refining is the sole record and beneficial owner of all of the equity interest in Petrosource Transportation, which consists of 1,000 shares of common stock, no par value (the "Petrosource Transportation Common Stock"). The Petrosource Transportation Common Stock is held solely by Foreland Refining and, upon Closing, will be free and clear of any and all liens, encumbrances, or claims by any other person or entity. 15. Certain Liabilities or Contingencies. New Sections 4.21B and 4.21C are hereby added to the Option and Purchase Agreement to read in its entirety as follows: Section 4.21B Undisclosed Liabilities or Contingencies. Petro Source Corporation represents and warrants that to Petro Source Corporation's Current Actual Knowledge, upon Closing, neither Foreland Refining nor Petrosource Transportation have, or are liable for, any liabilities or contingencies, whether known or unknown, other than the Assumed Obligations, and Petro Source Corporation will indemnify and hold Foreland Refining and Petrosource Transportation harmless from any such liabilities or contingencies if such are discovered in the future, whether or not known by Petro Source Corporation at the Closing Date. Section 4.21C Certain Environmental Matters. Notwithstanding anything to the contrary in the Option and Purchase Agreement and this Agreement and without respect to the disclosures set forth in Schedule 4.18 or elsewhere to the Option and Purchase Agreement, Petro Source Corporation shall indemnify Foreland, Foreland Refining Corporation, and Petrosource Transportation and hold them harmless from all environmental matters with respect to the Business or Business Assets prior to the Closing Date in accordance with the provisions of the Environmental Indemnity Agreement executed and delivered by the parties at Closing. 16. Releases. A new Section 6.03A is hereby added to the Option and Purchase Agreement to read in its entirety as follows: Section 6.03A. Releases. Petro Source Corporation shall have delivered the Releases required by Section 3.04 to Foreland, such Releases to be in form suitable for filing and, if appropriate, recordation with the appropriate governmental offices. 17. Closing Date Review and Deliveries. Section 6.06 of the Option and Purchase Agreement is hereby amended to read in its entirety as follows: Section 6.06 Closing Date Review and Deliveries. On and as of the Closing Date, PSC shall, together with one or more representatives of Foreland, undertake a Closing Date review of PSC's books, records, and physical inventory. Petro Source Corporation shall provide Foreland with a true, correct, and complete list and amount, as of the most recent practicable date of the following items and represents that there will be no material change in such items as of the Closing Date, except as may occur in the ordinary course of the Business: (a) the Inventory; (b) the Tangible Personal Property; (c) PSC's Accounts Receivable with respect to the Business and a list of all shipped but unbilled shipments as of the Closing Date, including an aging thereof; (d) PSC's trade accounts payable, accrued current liabilities, and the Assumed Obligations with respect to the Business; (e) all unfilled customer orders with respect to the Business; (f) all shipments made with respect to the Business during the period from the date of this Agreement to the Closing Date; (g) the Contract Rights; (h) the Customer Lists; (i) the Prepaid Expenses; and (j) the federal, state, or local licenses held or applied for by Foreland Refining or Petrosource Transportation, including a summary of the status of all pending applications. None of the above information shall, in Foreland's sole reasonable judgment, be different from the information supplied by PSC in the Exhibits and Schedules delivered to Foreland on or before January 15, 1998, to an extent that, when all such differences are taken as a whole, result in the value of the Business and Business Assets being materially less than the value of such Business and Business Assets on January 15, 1998. 18. Certain Other Matters. A new Section 6.09 is hereby added to the Option and Purchase Agreement to read in its entirety as follows: Section 6.09 Certain Other Matters. Foreland Refining and Petro Source Corporation have (i) entered into a transportation agreement for product shipped from Petro Source Corporation's Fredonia, Arizona facility, if Foreland Refining determines that it has equipment and personnel available; and (ii) executed and delivered the Environmental Indemnification Agreement. 19. Indemnification. Article X of the Option and Purchase Agreement is hereby amended by substituting "Petro Source Corporation" and "Petro Source Refining Corporation" for "PSC" in the case of each and every occurrence of "PSC" in Article X. Subsection 10.01(b) is further amended by adding the words "or its affiliates" immediately following the words "or obligation of the indemnifying party." 20. Tax Election. Foreland shall timely and effectively file an election pursuant to Internal Revenue Code Section 338(h)(10) to treat the transaction as an asset purchase for tax purposes, and Foreland and Petro Source Corporation shall record the transaction contemplated by this Agreement for tax purposes consistent with such election. The parties also agree to mutually cooperate in allocating the Purchase Price among the Business and Business Assets acquired by Foreland and to treat the transaction consistent with such allocation for tax purposes. 21. Ratification of Option and Purchase Agreement. Except as specifically provided by this Amendment, the parties hereby specifically ratify, confirm, and adopt and binding and enforceable, all of the terms and conditions of the Option and Purchase Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date first above written. FORELAND CORPORATION By /s/ N. Thomas Steele, President PETRO SOURCE CORPORATION By /s/ A. Howard McCollum, President FORELAND REFINING CORPORATION By /s/ N. Thomas Steele, President PETROSOURCE TRANSPORTATION By /s/ N. Thomas Steele, President EX-3 3 FORELAND CORPORATION DESIGNATION OF RIGHTS, PRIVILEGES, AND PREFERENCES OF 1998 SERIES CONVERTIBLE PREFERRED STOCK Pursuant to the provisions of Nevada Revised Statutes, Section 78.195, of the corporation laws of the State of Nevada, the undersigned corporation, Foreland Corporation (the "Corporation"), hereby adopts the following Designation of Rights, Privileges, and Preferences of 1998 Series Convertible Preferred Stock (the "Designation"): FIRST: The name of the Corporation is Foreland Corporation. SECOND: The following resolution establishing a series of preferred stock designated as the "1998 Series Convertible Preferred Stock" consisting of 2,000 shares, par value $0.001, was duly adopted by the board of directors of the Corporation on August , 1998, in accordance with the articles of incorporation of the Corporation and the corporation laws of the State of Nevada: RESOLVED, there is hereby created a series of preferred stock of the Corporation to be designated as the "1998 Series Convertible Preferred Stock" consisting of 2,000 shares, par value $0.001 (referred to herein as the "Preferred Stock"), with the following powers, preferences, rights, qualifications, limitations, and restrictions: 1. Dividends. 1.01 The Corporation shall pay dividends to the holders of the Preferred Stock at the times and in the amounts provided for in this Section 1. 1.02 The dividend rate for each share of the Preferred Stock shall be 12% per annum of the $1,000 price at which each share was originally issued by the Corporation, payable in cash quarterly when and as declared by the Board of Directors of the Corporation. Such dividends shall be cumulative from the date of initial issuance of such share of Preferred Stock and shall be payable to holders of record as their names then appear on the stock transfer books of the Corporation. Dividends payable for any partial dividend period shall be computed on the basis of the actual number of days elapsed over a 365 day year. The Preferred Stock shall be nonparticipating, and holders thereof shall not be entitled to receive any dividends thereon other than the dividends referred to in this Section 1. 1.03 No dividend or other distribution shall be declared or paid or set apart for payment on any stock ranking, as to dividends or upon liquidation, junior to the Preferred Stock, including, without limitation, the shares of the Corporation's common stock, par value $0.001 per share (the "Common Stock"), for any period unless the holders of the Preferred Stock shall have then been or contemporaneously are paid (or declared and a sum sufficient for the payment thereof set apart for such payment) all dividends for all dividend payment periods terminating on or prior to the date of payment of the distribution on such junior stock. No dividends shall be declared on any class or series of stock ranking on a parity with the Preferred Stock as to dividends in respect of any dividend period unless there shall otherwise be or have been declared on the Preferred Stock like dividends for all annual periods coinciding with or ending before such annual period, ratably in proportion to the respective annual dividend rates fixed therefor. If the Corporation is in default with respect to any dividends payable on, or any obligation to retire shares of, the Preferred Stock, the Corporation shall not declare or pay (or set apart a sum for such payment) any dividends or make any distribution in cash or other property on, or redeem, purchase, or otherwise acquire, any other class or series of stock ranking junior to the Preferred Stock either as to dividends or upon liquidation. 1.04 Any payment of dividends declared and due under this section 1 with respect to any shares of Preferred Stock shall be made by means of a check drawn on funds immediately available for the payment thereof to the order of the record holder of such share at the address for such record holder shown on the stock records maintained by or for the Corporation, which check shall be mailed by United States first class mail, postage prepaid. Any such payment shall be deemed to have been paid by the Corporation on the date that such payment is deposited in the United States mail as provided above; provided, that in the event the check by which any payment shall be made shall prove not to be immediately collectible on the date of payment, such payment shall not be deemed to have been made until cash in the amount of such payment shall actually be received by the person entitled to receive such payment. 1.05 Registration of transfer of any share of Preferred Stock on the stock records maintained by or for the Corporation to a person other than the transferor shall constitute a transfer of any right which the transferor may have had to receive any accrued but unpaid dividends as of the date of transfer, whether declared or undeclared, and the Corporation shall have no further obligation to the transferor with respect to such accrued and unpaid dividends. Any shares of Preferred Stock represented by a new certificate issued to a new or existing holder shall continue to accrue dividends as provided in this Section 1. 2. Liquidation. 2.01 In the event of any voluntary or involuntary liquidation (whether complete or partial), dissolution, or winding up of the Corporation, the holders of the Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders, whether from capital, surplus, or earnings, an amount per share in cash equal to $1,000 per share, plus all amounts to which the holders of the Preferred Stock are entitled for unpaid dividends in accordance with Section 1 above, whether or not previously declared, accrued thereon to the date of final distribution subject to the priority distribution required respecting any issued and outstanding shares of any series of preferred stock authorized prior to the date hereof. No distribution shall be made on any Common Stock or other subsequent series of preferred stock of the Corporation by reason of any voluntary or involuntary liquidation (whether complete or partial), dissolution, or winding up of the Corporation unless each holder of any Preferred Stock shall have received all amounts to which such holder shall be entitled under this subsection 2.01. 2.02 If on any liquidation (whether complete or partial), dissolution, or winding up of the Corporation, the assets of the Corporation available for distribution to holders of Preferred Stock and any other stock ranking as to any such distribution on a parity with the Preferred Stock shall be insufficient to pay the holders of outstanding Preferred Stock or such other stock the full amounts to which they otherwise would be entitled under subsection 2.01, the assets of the Corporation available for distribution to holders of Preferred Stock or such other stock shall be distributed to them pro rata on the basis of the full respective preferential amounts to which they are entitled. 3. Conversion. 3.01 Each share of Preferred Stock is convertible into shares of Common Stock at the times, in the manner, and subject to the conditions provided in this Section 3. 3.02 Each share of Preferred Stock may be converted at any time after the issuance thereof at the election of the holder on the presentation and surrender at the principal office of the Corporation, of the certificate representing the shares of Preferred Stock, duly endorsed, with written instructions specifying the number of shares of Preferred Stock to be converted and the name and address of the person to whom certificate(s) representing the Common Stock issuable on conversion are to be issued. Notwithstanding the foregoing, all of the shares of Preferred Stock shall be automatically converted without any further action by any person upon the completion by the Corporation of a public offering of Common Stock that results in at least $20 million in net proceeds to the Corporation. 3.03 Each share of Preferred Stock shall be convertible into Common Stock at the rate of 166.6665 shares of Common Stock for each share of Preferred Stock converted (the "Conversion Rate"). The date of conversion (the "Conversion Date") shall be the date of receipt by the Corporation of the stock certificate(s) representing the shares of Preferred Stock being converted with the conversion certificate thereon duly executed. The Corporation shall, within five business days after the Conversion Date, deliver or cause to be delivered by overnight courier a stock certificate representing the number of shares of Common Stock into which shares of Preferred Stock were converted in accordance herewith together with a certificate representing the remaining number of shares of Preferred Stock not being converted thereby, if any. The Conversion Rate shall be subject to adjustment pursuant to subsection 3.04. 3.04 In order to prevent dilution of the rights granted hereunder, the Conversion Rate shall be subject to adjustment from time to time in accordance with this subsection 3.04. (a) In the event the Corporation shall declare a stock dividend or make any other distribution on any capital stock of the Corporation payable in Common Stock, options to purchase Common Stock, or securities convertible into Common Stock or the Corporation shall at any time subdivide (other than by means of a dividend payable in Common Stock) its outstanding shares of Common Stock into a greater number of shares or combine such outstanding stock into a smaller number of shares, then in each such event, the Conversion Rate in effect immediately prior to such combination shall be adjusted so that the holders of the Preferred Stock shall be entitled to receive the kind and number of shares of Common Stock or other securities of the Corporation which they would have owned or had been entitled to receive after the happening of any of the events described above, had such shares of Preferred Stock been converted immediately prior to the happening of such event or any record date with respect thereto; an adjustment made pursuant to this paragraph (a) shall become effective immediately after the effective date of such event retroactive to the record date for such event. (b) If any capital reorganization or reclassification of the capital stock of the Corporation, consolidation or merger of the Corporation with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger, or sale, lawful adequate provisions shall be made whereby the holders of the Preferred Stock shall thereafter have the right to acquire and receive on conversion of the Preferred Stock such shares of stock, securities, or assets as would have been issuable or payable (as part of the reorganization, reclassification, consolidation, merger, or sale) with respect to or in exchange for such number of outstanding shares of Common Stock as would have been received on conversion of the Preferred Stock immediately before such reorganization, reclassification, consolidation, merger, or sale. In any such case, appropriate provision shall be made with respect to the rights and interests of the holders of the Preferred Stock to the end that the provisions hereof (including without limitations provisions for adjustments of the Conversion Rate and for the number of shares issuable on conversion of the Preferred Stock) shall thereafter be applicable in relation to any shares of stock, securities, or assets thereafter deliverable on the conversion of the Preferred Stock. In the event of a merger or consolidation of the Corporation with or into another corporation or the sale of all or substantially all of its assets as a result of which a number of shares of Common Stock of the surviving or purchasing corporation greater or lesser than the number of shares of Common Stock outstanding immediately prior to such merger, consolidation, or purchase are issuable to holders of Common Stock, then the Conversion Rate in effect immediately prior to such merger, consolidation, or purchase shall be adjusted in the same manner as though there was a subdivision or combination of the outstanding shares of Common Stock. The Corporation will not effect any such consolidation, merger, or sale unless prior to the consummation thereof the successor corporation resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written instrument mailed or delivered to the holders of the Preferred Stock at the last address of each such holder appearing on the books of the Corporation, the obligation to deliver to each such holder such shares of stock, securities, or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire on conversion of Preferred Stock. (c) No adjustment shall be made in the Conversion Rate of the number of shares of Common Stock issuable on conversion of Preferred Stock solely as a result of: (i) The offer and sale of any shares of Preferred Stock; (ii) The issuance of any Common Stock, securities, or assets on conversion or redemption of shares of Preferred Stock; (iii) The issuance of any shares of Common Stock, securities, or assets on account of the antidilution provisions set forth in this subsection 3.04, other than as heretofore provided in this subsection 3.04; (iv) The purchase or other acquisition by the Corporation of any capital stock, evidence of its indebtedness, or other securities of the Corporation; or (v) The sale or exchange by the Corporation for cash or other property of any Common Stock, evidence of its indebtedness, or other securities of the Corporation, including securities containing the right to subscribe for or purchase Common Stock or preferred stock of the Corporation. 3.05 The Corporation covenants and agrees that: (a) The shares of Common Stock, securities, or assets issuable on any conversion of any shares of Preferred Stock shall have been deemed to have been issued to the person on the Conversion Date, and on the Conversion Date such person shall be deemed for all purposes to have become the record holder of such Common Stock, securities, or assets. (b) All shares of Common Stock or other securities which may be issued on any conversion of the Preferred Stock will, on issuance, be fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issue thereof. Without limiting the generality of the foregoing, the Corporation will from time to time take all such action as may be requisite to assure that the par value of the unissued Common Stock or other securities acquirable on any conversion of the Preferred Stock is at all times sufficient to render the Common Stock issued upon conversion as fully paid and non-assessable. (c) The issuance of certificates for Common Stock or other securities on conversion of the Preferred Stock shall be made without charge to the registered holder thereof for any issuance tax in respect thereof or other costs incurred by the Corporation in connection with the conversion of the Preferred Stock and the related issuance of Common Stock or other securities. (d) The number of shares of Common Stock issuable upon conversion of the Preferred Stock hereunder shall at all times and under all circumstances be fully and validly reserved from the Corporation's authorized and unissued shares of Common Stock for issuance therefor. 4. Voting Rights. The Preferred Stock shall be voted with the Common Stock as a single class and shall not be entitled to vote as a separate class, except to the extent that the consent of the holders of the Preferred Stock, voting as a class, is specifically required by the provisions of the corporation laws of the State of Nevada, as now existing or as hereafter amended. Notwithstanding the foregoing, the holders of the Preferred Stock shall vote as a separate class on any resolution proposed for adoption by the stockholders of the Corporation which seeks to (i) authorize, create or issue, or increase the authorized or issued amount, of any class or series of stock ranking senior to the Preferred Stock with respect to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up of the Corporation or which may be convertible into any class of shares ranking senior to the Preferred Stock as regards to participation in dividends or the distribution of assets on dissolution, liquidation or winding up; or (ii) amend, alter or repeal the provisions of the Corporation's articles of incorporation or this Designation, so as to adversely affect any right, preference, privilege or voting power of the Preferred Stock or the holders thereof. In addition, without the approval of holders of at least a majority of the issued and outstanding shares of Preferred Stock, the Corporation shall not become subject to any restriction on the Preferred Stock other than restrictions arising under the general corporation laws of the State of Nevada or existing under the articles of incorporation of the Corporation as in effect on June , 1998. Each holder of Preferred Stock shall be entitled to such number of votes in respect of each share of such stock held by him or her that would be appurtenant to the Common Stock issuable upon conversion in respect of such stock. 5. Additional Provisions 5.01 No change in the provisions of the Preferred Stock set forth in this Designation affecting any interests of the holders of any shares of Preferred Stock shall be binding or effective unless such change shall have been approved or consented to by the holders of a majority of the Preferred Stock in the manner provided in the corporation laws of the State of Nevada, as the same may be amended from time to time. 5.02 A share of Preferred Stock shall be transferable only on the books of the Corporation maintained at its principal office, on delivery thereof duly endorsed by the holder or by his duly authorized attorney or representative or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, the original letter of attorney, duly approved, or an official copy thereof, duly certified, shall be deposited and remain with the Corporation. In case of transfer by executors, administrators, guardians, or other legal representatives, duly authenticated evidence of their authority shall be produced and may be required to be deposited and remain with the Corporation in its discretion. On any registration or transfer, the Corporation shall deliver a new certificate representing the share of Preferred Stock so transferred to the person entitled thereto. 5.03 The Corporation shall not be required to issue any fractional shares of Common Stock on the conversion of any share of Preferred Stock. If any fraction of a share of Common Stock would, except for the provisions of this subsection 5.03, be issuable on the conversion of any share of Preferred Stock, the Corporation shall round the number of shares to the nearest whole number of shares. 5.04 Any notice required or permitted to be given to the holders of the Preferred Stock under this Designation shall be deemed to have been duly given if mailed by first class mail, postage prepared to such holders at their respective addresses appearing on the stock records maintained by or for the Corporation and shall be deemed to have been given as of the date deposited in the United States mail. IN WITNESS WHEREOF, the foregoing Designation of Rights, Privileges, and Preferences of 1998 Series Convertible Preferred Stock of the Corporation has been executed this day of August, 1998. ATTEST: FORELAND CORPORATION By/s/ Donald Treece, Secretary By /s/ N. Thomas Steele, President STATE OF COLORADO ) :ss COUNTY OF JEFFERSON ) On August 11, 1998, before me, the undersigned, a notary public in and for the above county and state, personally appeared N. Thomas Steele and Donald Treece, who being by me duly sworn, did state, each for themselves, that he, N. Thomas Steele, is the president, and that he, Donald Treece, is the secretary, of Foreland Corporation, a Nevada corporation, and that the foregoing Designation of Rights, Privileges, and Preferences of 1998 Series Convertible Preferred Stock of Foreland Corporation was signed on behalf of such corporation by authority of a resolution of its board of directors, and that the statements contained therein are true. WITNESS MY HAND AND OFFICIAL SEAL. /s/ Notary Public EX-3 4 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") dated as of August 10, 1998 is made by and between Energy Income Fund, L.P., a Delaware limited partnership ("EIF") and Foreland Corporation, a Nevada corporation ("Foreland"). Terms used herein and not otherwise defined have the meanings given them in that certain Stock Purchase Agreement, of even date herewith, by and between EIF and Foreland ("Stock Purchase Agreement"). RECITALS WHEREAS, Foreland and EIF have entered into the Stock Purchase Agreement pursuant to which EIF is purchasing shares of Preferred Stock of Foreland having an aggregate liquidation preference of Two Million Dollars ($2,000,000); and WHEREAS, in connection with the purchase and sale of such Preferred Stock, Foreland has agreed, on the terms and conditions set forth herein, to register shares of Foreland owned by EIF as set forth below. NOW THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. For purposes of the Shelf Registration under Section 2 hereof, the term "Registrable Securities" means the shares of the Company's Common Stock together with any capital stock issued in replacement of, in exchange for or otherwise in respect of such Common Stock, issuable or issued upon conversion of the Series 1998 Preferred Stock (the "Preferred Stock") issued to EIF except that shares that have been resold in a public transaction shall not constitute "Registrable Securities" for purposes of a Shelf Registration under Section 2 hereof. The number of "Registrable Securities then outstanding" shall be determined by the number of shares of Registrable Securities at the time of such determination. For purposes of a Piggyback Registration under Section 3 hereof or a Demand Registration under Section 4 hereof, "Registrable Securities" shall have the meaning set forth above except that shares of Common Stock obtainable on conversion of the Preferred Stock (in whole or in part) shall also not constitute Registrable Securities for purposes of a Piggyback Registration under Section 3 hereof or a Demand Registration under Section 4 hereof if those shares of Common Stock may be resold in a public transaction without registration under the 1933 Act, including without limitation pursuant to Rule 144 under the 1933 Act. 2. Shelf Registration. (a) At any time but no later in any event than within 2 months of the date of this Agreement, Foreland shall file a registration statement ("Registration Statement") on Form S-3 (or other suitable form, at Foreland's discretion but subject to the reasonable approval of EIF), covering the resale of all shares of Registrable Securities then outstanding including an indeterminate number of shares of Common Stock as required to effect conversion of certain of the Registrable Securities (the "Shelf Registration"). (b) The Registration Statement shall be prepared as a "shelf" registration statement under Rule 415, and shall be maintained effective until the distribution described in the Registration Statement is completed or until all shares to be registered thereunder may be resold in a public transaction without registration pursuant to Rule 144(k) of the 1933 Act. Foreland shall use its best efforts to have the Registration Statement declared effective within three (3) months of the date of this Agreement (the "Shelf Date"). (c) If the Registration Statement is not declared effective by the Shelf Date, the Company must continue to use its best efforts to obtain a declaration of effectiveness and shall pay EIF an amount equal to two percent (2%) per month of the aggregate amount of Preferred Stock sold pursuant to the Stock Purchase Agreement, compounded monthly and accruing daily, until the Registration Statement or a registration statement filed pursuant to Section 3 or Section 4 is declared effective, payable in common stock, which common stock shall also be deemed "Registrable Securities" for the purpose of this Agreement. The accrual amount payable will be tolled for any periods occasioned by a delay of a Registration Statement under Section 4 as a result of the choice of EIF to have that Registration Statement underwritten. (d) Foreland represents that it is presently eligible to effect the registration contemplated hereby on Form S-3 and will use its best efforts to continue to take such actions as are necessary to maintain such eligibility. 3. Piggyback Registration Rights. If the Registration Statement described in Section 2 above is not effective by the Shelf Date, and if, at any time, Foreland proposes to file a registration statement for the public sale of any shares of the Common Stock of Foreland, any capital stock issued in replacement of, in exchange for or otherwise in respect of such Common Stock, or any securities or other rights convertible into Common Stock, or entitled to receive Common Stock, or any other equity security entitled to participate with the Common Stock in the earnings or assets of Foreland under the Securities Act of 1933, as amended (the "1933 Act") (other than a registration statement provided for in Sections 2 or 4 hereof) Foreland 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 EIF, 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 Foreland's intent to file a registration statement, EIF shall be entitled to request that any Registrable Securities owned by EIF or its assigns ("EIF Registrable Securities") be included in such registration statement, and Foreland will use its best efforts to cause the EIF Registrable Securities to be included in the offering covered by such registration statement (a "Piggyback Registration"). 4. Demand Registration Rights. (a) If the Registration Statement described in Section 2 above is not effective by the Shelf Date, EIF shall be entitled to request that any EIF Registrable Securities be registered under the 1933 Act if Foreland is already subject to, or becomes subject to, periodic reporting requirements under the regulations of the United States Securities and Exchange Commission. As soon as practicable after receipt by Foreland of a written request for registration, Foreland shall file, and use its best efforts to cause to become effective, an appropriate registration statement under the 1933 Act covering the EIF Registrable Securities, provided that in the opinion of Foreland's counsel, no events preclude such registration. EIF shall have the right to demand registration once pursuant to this Section 4; provided, however, that the right shall not be deemed exhausted unless the registration statement covering so much of the EIF Registrable Securities as EIF and its assigns wish to sell pursuant to the registration statement becomes effective. (b) If EIF intends to distribute the Registrable Securities covered by its request by means of an underwriting, EIF shall so advise Foreland as a part of its request made pursuant to this Section 4. If a registration requested pursuant to this Section 4 is to involve an underwritten public offering in which the obligation of the underwriters is to take all of the securities to be sold if any are to be taken, Foreland and other holders of securities of Foreland may include securities in such registration only if the managing underwriter of such public offering concludes that such inclusion will not adversely affect the successful marketing or the price of the EIF Registrable Securities to be included in such public offering. Such other holders of securities (together with Foreland as provided in subsection 5f) shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by EIF and reasonably acceptable to Foreland. 5. Filing Obligations of Foreland. In connection with any registration o the EIF Registrable Securities effected under this Agreement, Foreland 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 until the distribution described in the registration statement is completed or until all shares to be registered thereunder may be resold in a public transaction without registration pursuant to Rule 144(k) of the 1933 Act and to comply with the provisions of the 1933 Act and the rules and regulations thereunder with respect to the disposition of the Registrable Securities covered by the registration statement for the period required to effect the distribution thereof; (b) furnish to EIF 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 EIF may reasonably request in order to facilitate the disposition of such securities; (c) use its best efforts to register or qualify such securities covered by the registration statement, as the case may be, under the securities or blue sky laws of such jurisdictions as EIF 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 Registrable Securities; provided, however, that Foreland shall not be required to register as a dealer or to qualify as a foreign corporation in any such jurisdictions or to escrow any shares of its capital stock; (d) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. EIF shall also enter into and perform its obligations under such an agreement; (e) notify EIF at any time when a prospectus relating thereto is required to be delivered under the 1933 Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (f) furnish, at the request of EIF, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Agreement, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the outside counsel of recognized standing (or reasonably acceptable to EIF) representing Foreland for the purposes of such registration, in form and substance as is customarily given to underwriters in such underwritten public offering, addressed to the underwriters, if any, and to EIF and (ii) a letter dated such date, from the independent certified public accountants of Foreland, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to EIF; (g) as promptly as practicable after becoming aware of such event, notify EIF of the happening of any event of which the Company has knowledge, as a result of which the prospectus included in the registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and use its best efforts promptly to prepare a supplement or amendment to the registration statement to correct such untrue statement or omission, and deliver a number of copies of such supplement or amendment to EIF; (h) provide EIF with written notice of the date that a registration statement registering the resale of the Registrable Securities is declared effective by the SEC, and the date or dates when the registration statement is no longer effective; (i) provide EIF and their representatives the opportunity to conduct a reasonable due diligence inquiry of Foreland's pertinent financial and other records and make available its officers, directors and employees for questions regarding such information as it related to information contained in the registration statement; and (j) provide EIF and its representatives the opportunity to review the registration statement and all amendments thereto no later than three (3) days prior to their filing with the SEC. 6. Expenses. All expenses incurred by Foreland in connection with any registration of the Registrable Securities effected under Sections 2, 3 or 4 hereof, 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 Foreland's counsel and accountants, and fees and expenses of counsel for EIF, shall be paid by Foreland; provided, however, that all underwriting discounts and selling commissions applicable to the EIF Registrable Securities shall not be borne by Foreland but shall be borne by EIF. 7. Representations and Warranties of EIF. EIF hereby represents and warrants to Foreland as follows: (a) EIF is duly organized, validly existing and in good standing under the laws of Delaware; (b) EIF has the full power and authority to enter into this Agreement; (c) the execution, delivery and performance of this Agreement by EIF have been duly authorized by all necessary corporate, governmental or other action; (d) this Agreement constitutes a legal, valid and binding obligation of EIF, enforceable in accordance with its terms; and (e) this Agreement does not violate or constitute a default under any of EIF's organizational documents or under any indenture, mortgage, deed of trust or other instrument, any contractual covenant or any restriction to which EIF is a party or by which EIF or its assets are bound, nor does it violate any provision of any law, rule, regulation, interpretation order, writ, judgment, decree, determination, or award presently in effect having applicability to EIF. 8. Representations and Warranties of Foreland. Foreland hereby represents and warrants to EIF as follows: (a) Foreland is duly organized, validly existing and in good standing under the laws of Nevada; (b) Foreland has the full power and authority to enter into this Agreement; (c) the execution, delivery and performance of this Agreement by Foreland have been duly authorized by all necessary corporate, governmental or other action; (d) this Agreement constitutes a legal, valid and binding obligation of Foreland, enforceable in accordance with its terms; (e) this Agreement does not violate or constitute a default under any of Foreland's organizational documents or under any indenture, mortgage, deed of trust or other instrument, any contractual covenant or any restriction to which Foreland is a party or by which Foreland or its assets are bound, nor does it violate any provision of any law, rule, regulation, interpretation order, writ, judgment, decree, determination, or award presently in effect having applicability to Foreland; and (f) there are no actions, suits, or proceedings pending or, to the knowledge of Foreland, threatened against Foreland or its affiliates in any court or by or before any governmental department, agency, instrumentality, or any arbitrator, in which an adverse decision could be reasonably expected to materially and adversely affect the ability of Foreland or its affiliates to perform its obligations under this Agreement. 9. Indemnification. (a) By Foreland. In connection with the filing of any registration statements and sales of the Registrable Securities thereunder, Foreland shall indemnify and hold harmless EIF, its officers and directors, any underwriter, and each other individual or entity, if any, who controls ("Control Person") EIF or the underwriter within the meaning of the 1933 Act, against Losses to which EIF, underwriter, or Control 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 Registrable Securities were 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 EIF, and any such underwriter, or Control Person for any legal or any other expenses reasonably incurred in connection with investigating or defending any such losses, excluding any amounts paid in settlement of litigation, commenced or threatened, if such settlement is effected without the prior written consent of Foreland; provided, however, that Foreland 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 Foreland in writing by or on behalf of EIF for use specifically in connection with the preparation of such Disclosure Document. (b) By EIF. In connection with the filing of any registration statement and sales of the EIF Registrable Securities thereunder, EIF shall indemnify Foreland, each of its directors, each of its officers who signed such registration statement, and each other Control Person, against any Losses to which Foreland, any of its directors, officers, or Control 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 Foreland, and any of its directors, officers, or Control 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 EIF; 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 Foreland in writing by or on behalf of EIF for use specifically in connection with the preparation of such Disclosure Document. 10. Reports under Securities Exchange Act of 1934. With a view to making available to EIF the benefits of Rule 144 promulgated under the 1933 Act and any other rule or regulation of the SEC that may at any time permit EIF to sell securities of Foreland to the public without registration, Foreland agrees to: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144; (b) file with the SEC in a timely manner all reports and other documents required of Foreland under the 1933 Act and the Securities Exchange Act of 1934; and (c) furnish to EIF, so long as EIF owns any Registrable Securities, forthwith upon request (i) a written statement by Foreland, if true, that it has complied with the reporting requirements of SEC Rule 144, the 1933 Act and the Securities Exchange Act of 1934, (ii) a copy of the most recent annual or quarterly report of Foreland and such other reports and documents so filed by Foreland, and (iii) such other information as may be reasonably requested in availing EIF of any rule or regulation of the SEC which permits the selling of any such securities without registration. 11. Notices. All notices and communications required or permitted under this Agreement shall be in writing and any communication or delivery hereunder shall be deemed to have been duly made when personally delivered to the individual indicated below, or if sent by telecopier or mailed, when received by the party charged with such notice and addressed as follows: If to EIF: Energy Income Fund, L.P. 136 Dwight Road Longmeadow, MA 01106 Attn: Robert D. Gershen Facsimile No.: (413) 567-7926 If to Foreland: Foreland Corporation Union Terrace Office Building 12596 West Bayaud, Suite 300 Lakewood, CO 80228-2019 Attn: N. Thomas Steele Facsimile: (303) 988-3234 Copies of all notices (other than reports or other routine communications), which shall not constitute notice, shall be delivered to: Wilmer, Cutler & Pickering 2445 M Street, N.W. Washington, D.C. 20037 Attn: Russell J. Bruemmer Facsimile No.: (202) 663-6363 - and - Kruse, Landa & Maycock, L.L.C. Eighth Floor, Bank One Tower 50 West Broadway (300 South) Salt Lake City, UT 84101-2034 Attn: James R. Kruse Facsimile No.: (801) 359-3954 Any party may, by written notice so delivered to the other parties, change the address or individual to which delivery shall thereafter be made. 12. Counterparts. This Agreement may be executed by EIF and Foreland in any number of counterparts, no one of which need be executed by all parties hereto, but all of which together shall constitute one and the same instrument. 13. Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. 15. Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never constituted a part of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. 16. Entire Agreement. This Agreement and the Stock Purchase Agreement constitute the entire understanding among the parties with respect to the subject matter hereof, superseding all negotiations, prior discussions and prior agreements and understandings relating to such subject matter. 17. Third Party Beneficiaries. This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and, except as otherwise prohibited, their respective heirs, devisees, executors, administrators, successors and assigns; and except as provided in Section 9, nothing contained in this Agreement, express or implied, is intended to confer upon any other individual or entity any benefits, rights or remedies. 18. Amendments. Except for waivers specifically provided herein, this Agreement may not be amended nor any rights hereunder waived except by an instrument in writing signed by the party to be charged with such amendment or waiver and delivered by such party to the party claiming the benefit of such amendment or waiver. 19. Nonwaiver. No course of dealing or any delay or failure to exercise any right, power or remedy hereunder on the part of EIF shall operate as a waiver of or otherwise prejudice EIF's rights, powers or remedies. 20. Assignability. Foreland may not assign its obligations under this Agreement without the written consent of EIF. The registration rights of EIF under this Agreement may be assigned by EIF without the consent of Foreland. 21. Drafting. Each party acknowledges that its legal counsel participated in the preparation of this Agreement. The parties therefore stipulate that the rule of construction that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement to favor any party against the other. 22. Interpretation. Unless the context of this Agreement otherwise requires, (a) words of any gender include all genders; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms "hereof," "herein," "hereby" and derivative or similar words refer to this entire Agreement; (d) the term "Section" refers to the specified Section of this Agreement and (e) the term "including" means "including without limitation." Whenever this Agreement refers to a number of days, such number shall refer to calendar days. IN WITNESS WHEREOF, the parties hereto each has caused this Agreement to be executed by its duly authorized officer all as of the day and year first set forth above. ENERGY INCOME FUND, L.P. By: EIF General Partner, L.L.C., its General Partner By/s/ Robert D. Gershen A Managing Director FORELAND CORPORATION By: /s/ N. Thomas Steele President EX-10 5 FIRST AMENDMENT TO FINANCING AGREEMENT First Amendment to Financing Agreement dated as of this 10th day of August, 1998 (the "Amendment"), by and among Foreland Corporation, a Nevada corporation ("Foreland"), Eagle Springs Production Limited-Liability Company, a Nevada limited liability company ("Eagle Springs"), Foreland Refining Corporation, a Texas corporation ("Foreland Refining"), Foreland Asphalt Corporation, a Utah corporation ("Foreland Asphalt"), Foreland Asset Corporation, a Nevada corporation ("Foreland Asset") and Petrosource Transportation, a Utah corporation ("Transportation") (each a "Borrower" and collectively referred to as "Borrowers"), and Energy Income Fund, L.P., a Delaware limited partnership ("EIF"), to that certain Financing Agreement dated as of January 6, 1998 (as amended, the "Agreement"). RECITALS WHEREAS, pursuant to the Agreement, EIF agreed to make loans to Foreland and Eagle Springs for the purposes and subject to the terms and conditions set forth therein; WHEREAS, Foreland and Eagle Springs have asked that EIF provide the financing for the acquisition of (i) certain interests in the Ghost Ranch Field from Plains Petroleum Operating Company, (ii) certain assets of Foreland Refining, including all of the issued and outstanding stock of Transportation, (iii) all of the issued and outstanding stock of Foreland Refining and (iv) a one-third membership interest in Cowboy Asphalt Terminal, L.L.C. as more fully described below; WHEREAS, Foreland and Eagle Springs desire to add Foreland Refining, Foreland Asphalt, Foreland Asset and Transportation as Borrowers under the Financing Agreement and the Loans; WHEREAS, Foreland wishes to issue a new series of convertible preferred stock in order to raise capital; WHEREAS, EIF wishes to subscribe for the entire issuance of that certain preferred stock of Foreland in exchange for the consideration set forth in that certain stock purchase agreement of even date herewith (the "Stock Purchase Agreement") and in exchange for the consideration set forth herein; WHEREAS, EIF and Foreland wish to revise the terms of Warrant No. 2 on the terms described herein; WHEREAS, Section 11.2(a) of the Agreement provides that the parties thereto may amend or modify the Agreement by a written instrument duly executed by the parties; NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. All capitalized terms used herein shall have the meanings assigned to them in the Agreement unless expressly defined otherwise in this Amendment. 2. Except as otherwise specifically provided herein, all terms and conditions of the Agreement shall apply to the interpretation and enforcement of this Amendment as if explicitly set forth herein. 3. The preamble to the Agreement is amended by adding "Foreland Refining Corporation, a Texas corporation ("Foreland Refining"), Foreland Asphalt, a Utah corporation ("Foreland Asphalt"), Foreland Asset Corporation, a Nevada corporation ("Foreland Asset") and Petrosource Transportation, a Utah corporation ("Transportation") as parties thereto and Borrowers thereunder. By executing this Amendment, Foreland Refining, Foreland Asphalt, Foreland Asset and Transportation agree to be bound by and expressly adopt, ratify, confirm and restate all provisions under the Agreement as if they were original parties to the Agreement, including but not limited to all representations and warranties, each of which shall be deemed to have been made as of the date hereof. Prior to the Funding of the Petro Source Acquisition Financing, Foreland, Eagle Springs, Foreland Refining, Foreland Asphalt, Foreland Asset and Transportation shall execute and deliver all certificates and opinions requested by EIF and its counsel. 4. Section 1.1 of the Agreement is amended to include the following definitions, inserted in the appropriate alphabetical order: "Cave Valley Properties" shall mean those certain oil and gas leasehold interests acquired by Foreland from Apollo Smith Exploration, a Colorado general partnership, pursuant to the Purchase and Sale Agreement between Foreland and Apollo Smith Exploration dated June 26, 1998 and covering approximately 40,000 acres in Lincoln County, Nevada. "Cave Valley Prospect" shall mean that certain oil and gas prospect operated by Conley P. Smith Operating Company and comprised of the Cave Valley Properties. "Closing Financing" shall have the meaning set forth in Section 2.2(a)(vii) of this Agreement. "Cowboy Asphalt Terminal, L.L.C." shall mean Cowboy Asphalt Terminal, L.L.C., a Utah limited liability company. "Cowboy Improvement Financing" shall have the meaning set forth in Section 2.3(a)(vii) of the Agreement. "Cowboy Lease Purchase Financing" shall have the meaning set forth in Section 2.3(a)(viii) of the Agreement. "Eagle Springs #44-35 Well Financing" shall have the meaning set forth in Section 2.2(a)(ii) of the Agreement. "Eagle Springs #14-35 Well Financing" shall have the meaning set forth in Section 2.2(a)(iii) of the Agreement. "Eagle Springs #33-36 Well Financing" shall have the meaning set forth in Section 2.2(a)(iv) of the Agreement. "Eagle Springs Refinery" shall mean the refinery and related facilities located in part in the E/2 SE/4 of Section 24, T, 9 N., R. 56E., M.D.M., County of Nye, State of Nevada. "EOR" shall have the meaning set forth in Section 2.2(a)(i) of the Agreement. "EOR Equipment Financing" shall have the meaning set forth in Section 2.2(a)(x) of the Agreement. "EOR Financing" shall have the meaning set forth in Section 2.2(a)(i) of the Agreement. "EOR Operating Financing" shall have the meaning set forth in Section 2.2(a)(viii) of the Agreement. "EOR Workover Financing" shall have the meaning set forth in Section 2.2(a)(ix) of the Agreement. "Flat Top Federal #27-15 Well Financing" shall have the meaning set forth in Section 2.2(a)(xvi) of the Agreement. "Foreland Pledge and Security Agreements" shall mean, collectively, the Pledge and Security Agreement, dated as of August 11, 1998, from Foreland to EIF, related to the stock of Foreland Refining, the Pledge and Security Agreement, dated as of August 11, 1998, from Foreland to EIF, related to the stock of Foreland Asset, the Pledge and Security Agreement, dated as of August 11, 1998, from Foreland to EIF, related to the stock of Foreland Asphalt, and the Pledge and Security Agreement, dated as of August 11, 1998, from Foreland Refining to EIF related to the stock of Transportation. "Foreland Refining" shall mean Foreland Refining Corporation, a Texas corporation. "Foreland Security Agreements" shall mean, collectively, the Security Agreement dated as of August 11, 1998 from Foreland Asphalt to EIF, the Security Agreement dated as of August 11, 1998 from Foreland Asset to EIF, the Security Agreement dated as of August 11, 1998 from Foreland Refining to EIF and the Security Agreement dated as of August 11, 1998 from Transportation to EIF. "Ghost Ranch Acquisition Financing" shall have the meaning set forth in Section 2.3(a)(ii) of this Agreement. "Hay Ranch 3-D Financing" shall have the meaning set forth in Section 2.2(a)(xvii) of the Agreement. "Petro Source" shall mean Petro Source Refining Corporation, a Utah corporation. "Petro Source Acquisition" shall mean the acquisition by Foreland of certain assets of Foreland Refining, including the Refineries and all of the issued and outstanding stock of Transportation and all of the issued and outstanding stock of Foreland Refining pursuant to that certain Option and Purchase Agreement dated December 31, 1997, as amended by the Amendment to Option and Purchase Agreement dated August [ ], 1998, by and between Foreland and Petro Source Corporation, Foreland Refining Corporation, as successor through merger to Petro Source Refining Corporation, and Transportation. "Petro Source Acquisition Financing" shall have the meaning set forth in Section 2.3(a)(iii) of the Agreement. "Petro Source Capital Improvement Financing" shall have the meaning set forth in Section 2.3(a)(v) of the Agreement. "Petro Source Inventory Financing" shall have the meaning set forth in Section 2.3(a)(iv) of this Agreement. "Petro Source Letter of Credit Financing" shall have the meaning set forth in Section 2.3(a)(i) of the Agreement. "Petro Source Working Capital Financing" shall have the meaning set forth in Section 2.3(a)(vi) of the Agreement. "Pine Creek Seismic Financing" shall have the meaning set forth in Section 2.2(a)(vi) of the Agreement. "Pine Creek Well Financing" shall have the meaning set forth in Section 2.2(a)(xv) of the Agreement. "Proposed Hydrocarbon Contracts" shall have the meaning set forth in Section 7.7 of this Agreement. "Qualified Offering" means an offering of common stock of Foreland in which the aggregate net proceeds to Foreland shall be at least Four Million Dollars ($4,000,000). "Refineries" shall mean the Eagle Springs Refinery and the Tonopah Refinery and the real and personal properties related thereto. "Registration Rights Agreement" shall mean that certain registration rights agreement of even date herewith made between EIF and Foreland and relating to shares of preferred stock of Foreland to be purchased by EIF pursuant to the Stock Purchase Agreement. "Sand Dune #2-21x Well Financing" shall have the meaning set forth in Section 2.2(a)(xiii) of the Agreement. "Sand Dune #58-35 Well Financing" shall have the meaning set forth in Section 2.2(a)(xi) of the Agreement. "Sand Dune #68-35 Well Financing" shall have the meaning set forth in Section 2.2(a)(xii) of the Agreement. "Sand Dune #88-35 Well Financing" shall have the meaning set forth in Section 2.2(a)(v) of the Agreement. "Sand Dune Section 1 Well Financing" shall have the meaning set forth in Section 2.2(a)(xiv). "Securities Laws" shall mean the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and foreign or state securities laws. "Software and Transition Financing" shall have the meaning set forth in Section 2.3(a)(ix) of the Agreement. "Tonopah Refinery" shall mean the refinery and related facilities located in part on 63 acres within or adjacent to the Tonopah Airport, County of Nye, State of Nevada. "Transportation" shall mean Petrosource Transportation, a Utah corporation. 5. Section 1.1 is further amended to delete the following definitions, and to replace them in their entirety with the following definitions, respectively: "Borrower" shall mean any of Foreland, Eagle Springs, Foreland Refining, Foreland Asphalt, Foreland Asset and Transportation. "Borrowers" shall mean Foreland, Eagle Springs, Foreland Refining, Foreland Asphalt, Foreland Asset and Transportation, jointly and severally. "Value," when used in reference to the Collateral that includes reserves, shall mean the discounted present worth of the net revenues from the proved oil and gas properties (using a discount rate of 15% and the risk adjustments to different categories of proved reserves as follows: 100% of proved developed producing reserves; 70% of proved developed non-producing reserves and proved behind pipe reserves; and 50% of proved undeveloped reserves) and product price assumptions equal to the trailing twelve (12) month weighted average wellhead price held flat for the life of the wells as projected in the most recent Reserve Report. When used in reference to other Collateral, "Value" shall mean the value of such Collateral as determined by EIF using a twenty percent (20%) discounted cash flow valuation methodology. In cases where operational or cash flow history of particular Collateral is deemed by EIF, in its sole discretion, to be insufficient to be used as the basis for valuation, Value shall be the acquisition cost of the Collateral at the most recent arms length purchase and sale of those assets. "Warrant No. 2" shall mean a Warrant issued by Foreland to EIF for Seven Hundred Fifty Thousand (750,000) shares of common stock of Foreland with an exercise price of Six Dollars ($6.00) per share. 6. Section 1.1 is further amended to delete the following definitions: Phase I Eagle Springs Air Injection Financing Phase I Eagle Springs Drilling Financing Phase I Closing Financing Phase I of the Development Loan Phase I Pine Creek Drilling Financing Phase I Pine Creek Seismic Financing Phase II of the Development Loan Phase II Eagle Springs Air Injection Financing Phase II Eagle Springs Drilling Financing Phase II Pine Creek Additional Drilling Financing Phase II Ghost Ranch Drilling Financing Phase II Hay Ranch Seismic Financing Phase III of the Development Loan Phase III Hay Ranch Seismic Financing Phase III Eagle Springs Drilling Financing Phase III Hay Ranch Drilling Financing Proposed Gas Contracts 7. The definition of "Hydrocarbons" in Section 1.1 of the Agreement is amended by adding the phrase "or from refining operations" to the end of the definition. 8. The definition of "Requirement of Law" in Section 1.1 of the Agreement is amended by adding the phrase "or the Securities Laws" after the phrase "under the Environmental Laws." 9. The definition of Security Instruments" in Section 1.1 of the Agreement is amended by adding the phrase "pledge agreements," after the phrase "security agreements." 10. Article II is amended by deleting Sections 2.1, 2.2 and 2.3 and replacing them with the following: "2.1 Refinancing Loan. Subject to the terms and conditions set forth in this Agreement, EIF agrees to make a loan (the "Refinancing Loan") to Borrowers of up to Six Hundred Seventy-Four Thousand Two Hundred Seventy-Nine Dollars and Thirty-Four Cents ($674,279.34) to refinance the outstanding principal and accrued interest due on the Bank Loans ("Bank Loans Financing"). "2.2 Development Loan and Initial Funding. " (a) Subject to the terms and conditions set forth in this Agreement, EIF agrees to make a loan (the "Development Loan") to Borrowers in the principal amount of up to Seven Million One Hundred Seventy-Five Thousand Seven Hundred Twenty Dollars and Sixty-Six Cents ($7,175,720.66), for the purposes set forth below. " (i) up to Seven Hundred Eighty-Five Thousand Dollars ($785,000) to finance the implementation of the high pressure air injection program also known as the enhanced oil recovery program (the "EOR"), including the financing of compressors and buildings, in the Eagle Springs Properties (the "EOR Financing"); "(ii) up to Eight Hundred Thirty Thousand Dollars ($830,000) to finance the drilling and completion of the Eagle Springs #44-35 Well (the "Eagle Springs #44-35 Well Financing"); " (iii) up to Five Hundred Twenty-Five Thousand Dollars ($525,000) to finance the drilling and plugging of the Eagle Springs #14-35 Well (the "Eagle Springs #14-35 Well Financing"); " (iv) up to Fourteen Thousand Dollars ($14,000) to finance location costs associated with the Eagle Springs #33-36 Well (the Eagle Springs #33-36 Well Financing"); " (v) up to Nine Hundred Fifty Thousand Dollars ($950,000) to finance the drilling and completion of the Sand Dune #88-35 Well (the "Sand Dune #88-35 Well Financing"); " (vi) up to Three Hundred Twenty-Five Thousand Dollars ($325,000) to finance the three-dimensional seismic program on the Pine Creek Properties (the "Pine Creek Seismic Financing"); "(vii) up to Three Hundred Thousand Dollars ($300,000) to finance certain of EIF's costs related to the closing of the Refinancing Loan and portions of the Development and Acquisition Loans pursuant to Article X of this Agreement (the "Closing Financing"); " (viii) up to One Hundred Thousand Dollars ($100,000) to finance certain operating costs associated with the EOR (the "EOR Operating Financing"); " (ix) up to One Hundred Fifty Thousand Dollars ($150,000) to finance certain EOR workovers (the "EOR Workover Financing"); " (x) up to Four Hundred Thousand Dollars ($400,000) to finance certain equipment associated with the EOR (the "EOR Equipment Financing"); " (xi) up to Six Hundred Thousand Dollars ($600,000) to finance the deepening of the Sand Dune #58-35 Well (the "Sand Dune #58-35 Well Financing"); " (xii) up to Nine Hundred Fifty Thousand Dollars ($950,000) to finance the drilling and completion of the Sand Dune #68-35 Well (the "Sand Dune #68-35 Well Financing"); " (xiii) up to One Hundred Forty Thousand Dollars ($140,000) to finance the deepening of the Sand Dune #2-21x Well (the "Sand Dune #2-21x Well Financing"); " (xiv) up to Three Hundred Ten Thousand Dollars ($310,000) to finance the drilling of the Sand Dune Section 1 Well (the "Sand Dune Section 1 Well Financing"); " (xv) up to Three Hundred Eight Thousand One Hundred Fifty-Three Dollars and Ninety-Eight Cents ($308,153.98) to finance the drilling and completion of one Pine Creek Well (the "Pine Creek Well Financing"); " (xvi) up to Two Hundred Thirty-Eight Thousand Five Hundred Sixty-Six Dollars and Sixty-Eight Cents ($238,566.68) to finance the drilling and completion of the Flat Top Federal #27-15 Well and associated Cave Valley Prospect leasehold acquisition (the "Flat Top Federal #27-15 Well Financing"); and " (xvii) up to Two Hundred Fifty Thousand Dollars ($250,000) to finance preliminary survey and archeological work associated with the Hay Ranch three-dimensional seismic program (the "Hay Ranch 3-D Financing"). "The Development Loan shall consist of advances to be made by EIF to Borrowers on or before December 31, 1998. Borrowers shall deliver an Advance Notice to EIF with respect to each requested advance of the Development Loan. Each Advance Notice shall specify the amount requested (subject to the limits set forth in this Section), which amount shall be not less than Five Hundred Thousand Dollars ($500,000) or such lesser amount as remains undisbursed under the Development Loan. Subject to satisfaction of the conditions precedent contained in this Agreement, each advance of the Development Loan shall be made within thirty (30) days of EIF's receiving an Advance Notice from Borrowers. " (b) The Initial Funding shall be for Five Million Four Hundred Twenty-Five Thousand Two Hundred Seventy-Nine Dollars and Thirty-Four Cents ($5,425,279.34) and includes the proceeds for the Bank Loans Financing, the EOR Financing, the Eagle Springs #44-35 Well Financing, the Eagle Springs #14-35 Well Financing, the Eagle Springs #33-36 Well Financing, the Sand Dune #88-35 Well Financing, the Pine Creek Seismic Financing, One Hundred Fifty Thousand Dollars ($150,000) of the Closing Financing, the EOR Operating Financing, the EOR Workover Financing, the EOR Equipment Financing, Two Hundred Seventy-Two Thousand Dollars ($272,000) of the Sand Dune #58-35 Well Financing, the Cowboy Lease Purchase Financing and the Petro Source Letter of Credit Financing. The remaining One Hundred Fifty Thousand Dollars ($150,000) of the Closing Financing shall be funded at such times and in such amounts as the parties mutually agree. " (c) Three Hundred Thirty-Five Thousand Dollars ($335,000) of the Eagle Springs #14-35 Well Financing, the Eagle Springs #33-36 Financing ($14,000), the Pine Creek Seismic Financing ($325,000), the EOR Operating Financing ($100,000), the EOR Workover Financing ($150,000), the EOR Equipment Financing ($400,000), Two Hundred Seventy-Two Thousand Dollars ($272,000) of the Sand Dune #58-35 Well Financing, the Petro Source Letter of Credit Financing and the Cowboy Lease Purchase Financing and any future advances funded from the Development and Acquisition Loans shall be subject to the limits set forth in subsection (a) hereof and shall be deposited at the time of the related Funding into an escrow account located at Peoples Bank, Holyoke, Massachusetts (the "Escrow Account") pursuant to an escrow agreement (the "Escrow Agreement") substantially in the form set forth in Exhibit D. Disbursements of the Development Loan proceeds from the Escrow Account will be made to Borrowers in connection with the development upon satisfaction of certain conditions set forth in the Escrow Agreement, including without limitation execution of releases and other documents requested by the Escrow Agent, all in form and substance satisfactory to the Escrow Agent. "2.3 Acquisition Loan. " (a) Subject to the terms and conditions set forth in this Agreement, EIF agrees to make a loan (the "Acquisition Loan") to Borrowers in the principal amount of up to Nine Million Fifty Thousand Dollars ($9,050,000), for the following purposes: " (i) up to One Hundred Fifty Thousand Dollars ($150,000) to finance a letter of credit in connection with the Petro Source Acquisition (the "Petro Source Letter of Credit Financing"); "(ii) up to Five Hundred Thousand Dollars ($500,000) to finance the acquisition of certain interests in the Ghost Ranch Field from Plains Petroleum Operating Company (the "Ghost Ranch Acquisition Financing"); "(iii) up to Five Million Dollars ($5,000,000) to finance the acquisition by Foreland of certain assets of Foreland Refining, including the Refineries, plus all of the common stock of Transportation from Foreland Refining, pursuant to that certain Option and Purchase Agreement dated December 31, 1997, as amended, by and between Foreland and Petro Source Corporation, Petro Source Refining Corporation and Petrosource Transportation (the "Petro Source Acquisition Financing"); "(iv) up to One Million Three Hundred Thousand Dollars ($1,300,000) to finance the acquisition of inventory associated with the Petro Source Acquisition (the "Petro Source Inventory Financing"); "(v) up to Five Hundred Thousand Dollars ($500,000) to finance certain capital improvements on the Petro Source Refineries (the "Petro Source Capital Improvement Financing"); "(vi) up to Six Hundred Thousand Dollars ($600,000) to finance working capital associated with the Petro Source Refineries (the "Petro Source Working Capital Financing"); "(vii) up to Seven Hundred Thousand Dollars ($700,000) to finance certain improvements associated with the acquisition by Foreland Asphalt of a one-third interest in Cowboy Asphalt Terminal, L.L.C. pursuant to that certain Operating Agreement by and between Foreland Asphalt and Crown Asphalt Products Company, including the development by Foreland Asphalt of storage and marketing facilities at the Cowboy Asphalt Terminal located in Woods Cross, Utah (the "Cowboy Improvement Financing"); "(viii) up to One Hundred Thousand Dollars ($100,000) to finance certain lease purchase payments associated with the Cowboy Acquisition (the "Cowboy Lease Purchase Funding"); and "(ix) up to Two Hundred Thousand Dollars ($200,000) to finance certain software and transition costs associated with the Petro Source and Cowboy Acquisitions (the "Software and Transition Financing"). " (b) Certain Fundings of the Acquisition Loan are subject to the limits set forth in subsection (a) hereof and may be deposited at the time of the related Funding into the Escrow Account. Disbursements of the Acquisition Loan proceeds from the Escrow Account will be made to Borrowers in connection with the acquisitions upon satisfaction of certain conditions set forth in the Escrow Agreement, including without limitation execution of releases and other documents requested by the Escrow Agent, all in form and substance satisfactory to the Escrow Agent. Any amounts under the Acquisition Loan which are not funded by December 31, 1999 will be canceled effective December 31, 1999." 11. Article II is amended by adding the phrase "the Cave Valley Properties" immediately after the phrase "the Hay Ranch Properties" in the first sentence of Section 2.12(b). 12. Section 5.1 is amended by adding the phrase "or Texas" after the word "Nevada" in the third line. 13. Article IV is amended by adding the following subsections to Section 4.1: " (k) All of each Borrower's right, title and interest in the Refineries; " (l) All of each Borrower's right, title and interest in the Inventory, Equipment, Receivables, General Intangibles, Other Property and Proceeds of Foreland Refining, Foreland Asphalt, Foreland Asset and Transportation, as those terms are defined in the Foreland Security Agreements, as applicable; " (m) All of each Borrower's right, title and interest in the one-third membership interest in Cowboy Asphalt Terminal, L.L.C. purchased by Foreland pursuant to that certain Operating Agreement by and between Foreland Asphalt and Crown Asphalt Products Company; " (n) All of each Borrower's right, title and interest in the issued and outstanding stock of Foreland Refining, Foreland Asphalt, Foreland Asset and Transportation, and all proceeds thereof, as described in the Foreland Pledge and Security Agreements; 14. Article IV is amended by deleting the preamble to Section 4.2 and replacing it in its entirety with the following: "4.2 Assignment. Borrowers hereby absolutely and unconditionally TRANSFER, ASSIGN, WARRANT and CONVEY to EIF, effective as of January 6, 1998 at 7:00 a.m. local time, all of the interest of Borrowers in (i) all Hydrocarbons and all other minerals which are thereafter produced, saved or sold from the Properties, or allocated thereto pursuant to pooling or unitization of oil and gas leases or otherwise, (ii) all Hydrocarbons or other products produced at the Refineries, and (iii) all revenues and proceeds from the sale of (i) or (ii) (the "Proceeds of Runs"), including all payments in lieu of production such as "take or pay" payments or settlements, and all accounts, contract rights, and other general intangibles under which such proceeds may arise and all revenues and proceeds under agreements for refining, fractionating, manufacturing, processing and transportation of Hydrocarbons and other products. Borrowers shall deliver to EIF signed letters in lieu of transfer order executed in blank, substantially in the form of Exhibit H. The following terms and conditions shall apply to the Proceeds of Runs: 15. Article IV is amended by deleting Sections 4.3(f) and 4.3(g) and replacing them in their entirety with the following: " (f) any attempt to communicate in any manner with the purchasers of production from the Collateral including without limitation the purchasers of Hydrocarbons and other products and by-products of the Refineries and related assets, or the purchasers of products under refining, fractionating, processing, manufacturing, transporting or other contracts related to assets of the Refineries after the delivery to such purchasers of a letter in the form of Exhibit H in an attempt to hinder or interfere with the rights of EIF as stated in Section 4.2 above and as restated in the Security Instruments; and " (g) the return of, or reimbursement for, all monies received by Borrowers from the purchasers of production for monies attributable to production or from the purchasers of Hydrocarbons and other products and by- products of the Refineries and related assets or under agreements for refining, fractionating, manufacturing, processing or transportation of Hydrocarbons or other products after receipt by any such purchaser of a letter in the form of Exhibit H. 16. Article V is amended by deleting the existing Schedule 5.11(a) and replacing it with Schedule 5.11(a) attached hereto. 17. Section 5.20 is amended by adding the word", refining" after the word "treating" in the second line of the provision and by adding the phrase", including from the Refineries" after the word "Properties" in the fourth line of the provision. 18. Section 5.23 is amended by adding the following text as four new paragraphs at the end of the existing section: " (a) The authorized capital of Foreland consists of (i) 50,000,000 shares of common stock, par value $0.001 per share (the "Shares"), of which 8,548,921 shares are issued and outstanding as of the date hereof, and (ii) 5,000,000 shares of preferred stock, par value $0.001 per share, of which 2,000,000 preferred shares are designated as 1991 Series Convertible Preferred Stock with 40 of such preferred shares issued and outstanding as of the date hereof (convertible into 13,333 shares of Common Stock); 1,650,000 preferred shares are designated as 1994 Series Convertible Redeemable Preferred Stock with 165,140 of such preferred shares issued and outstanding as of the date hereof (convertible into 55,047 shares of Common Stock); 1,000,000 preferred shares are designated as 1995 Series Convertible Preferred Stock with 556,667 of such preferred shares issued and outstanding as of the date hereof (convertible into 185,556 shares of Common Stock); 1,500 preferred shares are designated as 1996 Series 6% Convertible Preferred Stock with none of such preferred shares issued and outstanding as of the date hereof; 10,000 preferred shares are designated as 1996-2 Series 6% Convertible Preferred Stock with none of such preferred shares issued and outstanding as of the date hereof; 6,000 preferred shares are designated as 1996-3 Series 8% Convertible Preferred Stock with none of such preferred shares issued and outstanding as of the date hereof; 500 preferred shares are designated as the 1996-4 Series Preferred Stock with none of such preferred shares issued and outstanding as of the date hereof; 50,000 preferred shares are designated as Series A Preferred Stock with none of such preferred shares issued and outstanding as of the date hereof; 2,000 preferred shares are designated as 1998 Series Convertible Preferred Stock with 2,000 of such preferred shares issued and outstanding as of the date hereof (convertible into 333,333 shares of Common Stock); and 280,000 preferred shares are not designated (together, the "Capital Stock"). Foreland has no other shares of Capital Stock of any class or other equity securities authorized, issued, or outstanding. Foreland has no other Shares or capital stock of any class or other equity securities or equity equivalents authorized, issued or outstanding. Foreland has reserved a sufficient number of authorized Shares for issuance pursuant to the Warrants. Except as set forth in Schedule 5.23, there are no outstanding or authorized options, warrants, calls, subscriptions, rights, agreements or commitments of any character obligating Borrower to issue any Shares or securities convertible into or exchangeable for or evidencing the right to purchase or subscribe for any Capital of Borrower. " (b) The authorized capital of Foreland Asset consists of 1,000 shares of common stock, par value $0.001 per share, of which 1,000 shares are issued and outstanding and held by Foreland as of the date hereof; " (c) The authorized capital of Foreland Asphalt consists of 1,000 shares of common stock, par value $0.001 per share, of which 1,000 shares are issued and outstanding and held by Foreland as of the date hereof; " (d) The authorized capital of Foreland Refining consists of 100,000 shares of common stock, par value $0.01 per share, of which 1,000 shares are issued and outstanding; " (e) The authorized capital of Petrosource Transportation consists of 50,000 shares of common stock, no par value, of which 1,000 shares are issued and outstanding; and " (f) The authorized capital of Cowboy Asphalt Terminal, L.L.C., consists of 1,000 units of membership interests, of which Foreland holds 333 units. 19. Section 7.7 is amended by adding the phrase", refining, fractioning, processing or manufacture" after the phrase "sale and/or transportation" in line four of the provision and by adding the phrase", including the Refineries," after the phrase "from the Properties" in line four of the provision. 20. Article VII is amended by deleting Section 7.25 and replacing it with the following: "7.25 Inspection Report. Borrowers will comply with the recommendations set out in that certain Inspection Report dated August 10, 1998, prepared by WZI Inc. of Bakersfield, California, by December 31, 1998. 21. Section 7.31 is amended by adding the phrase "and the Refineries" at the end of the sentence. 22. Article VII is amended by deleting Section 7.39 and replacing it with the following: "7.39 Warrants. "a. Public Offering for Eagle Springs. If equity securities in Eagle Springs, or any successor thereto, are registered pursuant to the Securities Act of 1933 and/or pursuant to section 12 of the Securities Exchange Act of 1934 (the "Exchange Act") (a "Public Company"), Borrowers shall, if EIF so elects, cause such Public Company to issue warrants to EIF within thirty (30) days of such election with substantially similar terms and conditions as Warrant No. 1 and Warrant No. 2 (the "Eagle Springs Warrants") and upon issuance of the Eagle Springs Warrants, EIF will deliver Warrant No. 1 and Warrant No. 2 to Foreland for cancellation. "b. Issuance of Shares by Foreland below $6.00. If, during the term of either Warrant No. 1 or Warrant No. 2 or both, Foreland issues additional shares of common stock at a price of less than Six Dollars ($6) or issues securities convertible or exercisable into common stock of Foreland at a conversion or exercise price of less than Six Dollars ($6) and such securities are converted or exercised into common stock or repurchased by Foreland, the following calculation shall be made and additional warrants shall be delivered by Foreland to EIF in the number and manner described below. "Effective December 31, 1998, EIF and Foreland shall jointly calculate, at six month intervals, the number of shares issued as described in the above paragraph. In making this determination, EIF and Foreland shall not consider shares issued pursuant to stock options of directors and officers of Foreland outstanding as of the date hereof as set forth on Schedule 5.23 to this Agreement. Within 10 days of receipt of a written request from EIF for delivery of additional warrants based on this calculation, Foreland shall deliver to EIF additional warrants for the number of shares of common stock of Foreland equal to 15% of the shares issued as described in the above paragraph during such six month interval. Such warrants shall be in the form of Warrant No. 2 with an exercise price of Six Dollars ($6) per share. "The foregoing provisions of this Section 7.39 shall not apply to (i) each issuance of additional securities, if any, the proceeds of which are used to repay the Loan in full within thirty (30) days (ii) each issuance of equity securities, if any, that is pursuant to an offering with net proceeds to Foreland of Twenty Milllion Dollars ($20,000,000) or more or (iii) the issuance of securities pursuant to the Stock Purchase Agreement. The occurrence of any issuance described in (i), (ii) or (iii) above shall not in any way limit the subsequent application of any other provision of this Section. "c. Qualified Offering. If Foreland has not received, and delivered to EIF, a commitment for a Qualified Offering by November 9, 1998, Foreland shall deliver to EIF a warrant in the form of Warrant No. 2 with an exercise price of Five Dollars ($5) per share. If Foreland has not received the net proceeds of a Qualified Offering by February 10, 1999, Foreland shall deliver to EIF a warrant in the form of Warrant No. 2 with an exercise price of Four Dollars ($4) per share. The warrant issued shall be for the number of shares equal to: (i) the shares represented by Warrant No. 1; (ii) the shares represented by Warrant No. 2 and (iii) the total number of shares represented by all warrants issued pursuant to Section 7.39(b) of this Agreement. Upon issuance of the warrants pursuant to this paragraph, EIF will deliver the then existing Warrant No. 1 and Warrant No. 2 and any warrants issued pursuant to Sections 7.39(b) of this Agreement to Foreland for cancellation. 23 Article VII is further amended by adding the following: "7.40 Qualified Offering. Foreland shall have received the net proceeds of a Qualified Offering no later than March 11, 1999." 24 Article VII is further amended by adding the following: "7.41 Repayment of the Petro Source Inventory Financing. Borrowers shall repay the Petro Source Inventory Financing withing ninety (90) days after the Funding of the Petro Source Inventory Financing. 25 Foreland shall have executed and delivered to EIF, concurrent with the signing hereof, a Warrant substantially in the form of Exhibit M hereto. 26 Foreland shall have executed and delivered to EIF, concurrent with the signing hereof, allonges to the Refinancing Note, the Development Note and the Acquisition Note, substantially in the form of Exhibit N hereto. 27 Foreland shall have executed and delivered to EIF, concurrent with the signing hereof, the Registration Rights Agreement and the Stock Purchase Agreement. 28 Wherever the term "Borrowers" includes Foreland, Eagle Springs, and Foreland Refining, the remaining language in such section of the Financing Agreement shall be interpreted to apply to each of Foreland, Eagle Springs and Foreland Refining, as the context requires. Each place where the phrases "either Borrower" or "either Borrower's" appears in the Financing Agreement shall be revised to substitute the phrase "any Borrower" or "any Borrower's", respectively. 29 THIS AMENDMENT IS TO BE CONSTRUED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. 30 Except as expressly amended hereby, the Agreement remains in full force and effect. Any references to the Agreement in the Loan Documents shall refer to the Agreement as amended hereby. 31 This Amendment shall be of no force and effect until receipt and execution of this Amendment by EIF in its offices in Longmeadow, Massachusetts. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. FORELAND CORPORATION By: /s/ N. Thomas Steele President EAGLE SPRINGS PRODUCTION LIMITED-LIABILITY COMPANY By: /s/ N. Thomas Steele Manager FORELAND REFINING CORPORATION By: /s/ N. Thomas Steele President FORELAND ASPHALT CORPORATION By: /s/ N. Thomas Steele President FORELAND ASSET CORPORATION By: /s/ N. Thomas Steele President ENERGY INCOME FUND, L.P. By: EIF General Partner, L.L.C., its General Partner By:/s/ Robert D. Gershen A Managing Director EX-10 6 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 - WCP8: 41772-5 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 wells as projected in the most recent Reserve Report; plus (y) the present value of the assets of the Company other than reserves as - 2 - WCP8: 41772-5 determined by an independent accountant, auditor or other third party mutually chosen by the Company and Holder; minus (z) the liabilities of the Company. In the event the Common Stock is not Publicly Traded, Fair Market Value in reference to a share of the Common Stock shall mean the Fair Market Value of the Company allocable to the issued Common Stock divided by the number of shares of Common Stock that would have been outstanding had (i) this Warrant, (ii) all options to purchase Common Stock, and (iii) all securities convertible into Common Stock at a price per share no greater than Fair Market Value, been exercised or converted on the date as of which value is to be determined (with appropriate adjustment by appraisal to reflect the proceeds of the assumed exercise or conversion of outstanding securities). 1.8.2 ``Fair Market Value of This Warrant'' means the Fair Market Value of the Common Stock subject to this Warrant minus the Exercise Price of this Warrant established in accordance with Article 4. 1.9 ``Financing Agreement'' shall mean that certain Financing Agreement dated as of January 6, 1998, as amended from time to time, between Foreland Corporation, Eagle Springs Production Limited-Liability Company, Foreland Refining Corporation, Foreland Asphalt Corporation, Foreland Asset Corporation, Petrosource Transportation and Energy Income Fund, L.P. 1.10 ``Holder'' means Energy Income Fund, L.P., a Delaware limited partnership, and its successors or permitted assigns as holder of this Warrant. 1.11 ``Loans'' shall mean the loans made by Energy Income Fund, L.P. to the Company pursuant to the terms of the Financing Agreement. 1.12 ``Losses'' has the meaning ascribed to that term in Section 8.5(a). 1.13 ``1933 Act'' means the Securities Act of 1933, as amended. 1.14 ``Person'' means any natural person, sole proprietorship, general partnership, limited partnership, limited liability company, joint venture, trust, - 3 - WCP8: 41772-5 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 No. 1 means the warrant issued by Foreland to EIF for Seven Hundred Fifty Thousand (750,000) shares of Common Stock with an exercise price of Six Dollars ($6) per share. 1.20 ``Warrant Stock'' means the shares of Common Stock or other securities acquired or to be acquired upon the exercise of the Warrant. Article 2 Exercise of Warrant; Division of Warrant. 2.1 Exercise. This Warrant may be exercised in whole or in part. In the event of a partial exercise, the Company shall execute and deliver to the Holder (or to such other Person as shall be designated in the Subscription Notice) a new Warrant covering the unexercised portion of the Warrant Stock. At any time after the second anniversary of the date hereof, the Company may require the Holder to exercise or surrender this Warrant within thirty (30) days after receipt of a request for exercise from the Company, certifying that the average trading price for shares of the Company's common stock during the preceding three (3) month period, calculated based on the closing or last trade price of each trading day, equals or exceeds two hundred percent (200%) of the Exercise Price effective as of the date of such notice, and further certifying that the average trading volume for - 4 - WCP8: 41772-5 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 - 5 - WCP8: 41772-5 upon partial exercise by a Holder of such Holder'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: - 6 - WCP8: 41772-5 (a) either a registration statement under the 1933 Act is in effect covering the Warrant or the Warrant Stock, as the case may be, or the Company has received an opinion from the Company's counsel to the effect that such registration is not required, or the Holder has furnished to the Company an opinion of Holder's counsel, which counsel shall be reasonably satisfactory to the Company, to the effect that such registration is not required; and (b) the proposed transfer complies with any applicable state securities laws. In the event Holder seeks an opinion from the Holder's counsel as to transfer without registration, the Company shall provide such factual information to Holder's counsel as Holder'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. - 7 - WCP8: 41772-5 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 - 8 - WCP8: 41772-5 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. - 9 - WCP8: 41772-5 On the expiration or termination of any of the Rights, the number of shares of Common Stock then purchasable upon the exercise of each Warrant and the exercise price then in effect shall be subject to readjustment and the number of shares of Common Stock subject to the Warrants shall forthwith be decreased and the exercise price under the Warrants shall forthwith be increased to that which would have been in effect at the time of such expiration or termination had such Rights, to the extent outstanding immediately prior to such expiration or termination, never been issued. 4.5 Anti-dilution Adjustment. Pursuant to Section 7.39 of the Financing Agreement, if, during the term of this Warrant or Warrant No. 1, or both, Foreland issues additional shares of common stock at a price of less than Six Dollars ($6) or issues securities convertible or exercisable into common stock of Foreland at a conversion or exercise price of less than Six Dollars ($6) and such securities are converted or exercised into common stock or repurchased by Foreland, the following calculation shall be made and additional warrants shall be delivered by Foreland to EIF in the number and manner described below. Effective December 31, 1998, EIF and Foreland shall jointly calculate, at six month intervals, the number of shares issued as described in the above paragraph. In making this determination, EIF and Foreland shall not consider shares issued pursuant to stock options of directors and officers of Foreland outstanding as of the date hereof as set forth on Schedule 5.23 to this Agreement. Within 10 days of receipt of a written request from EIF for delivery of additional warrants based on this calculation, Foreland shall deliver to EIF additional warrants for the number of shares of common stock of Foreland equal to 15% of the shares issued as described in the above paragraph during such six month interval. Such warrants shall be in the form of Warrant No. 2 with an exercise price of Six Dollars ($6) per share. The foregoing provisions of this Section shall not apply to (i) each issuance of additional securities, if any, the proceeds of which are used to repay the Loan in full within thirty (30) days (ii) each issuance of equity securities, if any, that is pursuant to an offering with net proceeds to Foreland of Twenty Milllion Dollars ($20,000,000) or more or (iii) the issuance of securities pursuant to the Stock Purchase Agreement. The occurrence of any issuance described in (i), (ii) or (iii) above shall not in any way limit the subsequent application of any other provision of this Section. - 10 - WCP8: 41772-5 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. - 11 - WCP8: 41772-5 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, - 12 - WCP8: 41772-5 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 - 13 - WCP8: 41772-5 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. - 14 - WCP8: 41772-5 8.1 For purposes of the Shelf Registration under Section 8.2 hereof, the term "Warrant Stock" means the Warrant Stock together with any capital stock issued in replacement of, in exchange for or otherwise in respect of such Warrant Stock. The number of shares of "Warrant Stock then outstanding" shall be determined by the number of shares of Warrant Stock which have been issued or are issuable upon exercise of the Warrant at the time of such determination other than shares of Warrant Stock that have been resold in a public transaction. For purposes of a Piggyback Registration under Section 8.3 hereof or a Demand Registration under Section 8.4 hereof, "Warrant Stock" shall have the meaning set forth above except that the following shall not constitute "Warrant Stock" for such purposes: (i) Warrant Stock that may be resold in a public transaction without registration under the 1933 Act, including without limitation pursuant to Rule 144 under the 1933 Act; and (ii) Warrant Stock that has been resold in a public transaction. 8.2 Shelf Registration. (a) At any time but no later in any event than within two (2) months of written notice by the Holder of any exercise of the Warrant, as required by Section 2.2 of the Warrant, the Company shall file a registration statement ("Registration Statement") on Form S- 3 (or other suitable form, at the Company's discretion but subject to the reasonable approval of the Holder), covering the resale of all shares of Warrant Stock then outstanding including an indeterminate number of shares of Common Stock as required to effect exercise of the Warrant (the "Shelf Registration"). (b) The Registration Statement shall be prepared as a "shelf" registration statement under Rule 415, and shall be maintained effective until the distribution described in the Registration Statement is completed or until all shares to be distributed thereunder may be resold in a public transaction pursuant to Rule 144(k) of the 1933 Act. The Company shall use its best efforts to have the Registration Statement declared effective within three (3) months after notification by the Holder of any exercise of the Warrant, as described in Section 8.2(a) above (the "Shelf Date"). (c) If the Registration Statement is not declared effective by the Shelf Date, the Company must continue to use its best efforts to obtain a declaration of effectiveness and shall pay the Holder an amount equal to two percent (2%) per month of the aggregate amount of the - 15 - WCP8: 41772-5 Warrant, compounded monthly and accruing daily, until the Registration Statement or a registration statement filed pursuant to Section 8.3 or Section 8.4 is declared effective, payable in Common Stock, which Common Stock shall also be deemed "Warrant Stock" for the purpose of this Agreement. The accrual amount payable will be tolled for any periods occasioned by a delay of a registration statement under Section 8.4 as a result of the choice of the Holder to have that registration statement underwritten. (d) The Company represents that it is presently eligible to effect the registration contemplated hereby on Form S-3 and will use its best efforts to continue to take such actions as necessary to maintain such eligibility. 8.3 Piggyback Registration Rights. If the registration statement described in Section 8.2 above is not effective by the Shelf Date, and if, at any time on or before the expiration of this Warrant, the Company proposes to file a registration statement for the public sale of any of its Common Stock or Common Stock Equivalents under the 1933 Act (other than registration statements (i) provided for in Section 8.4 hereof or (ii) pursuant to Form S-4 and Form S-8 of the Securities Act of 1933) the Company shall, not later than thirty (30) days prior to the initial filing of the registration statement, deliver notice of its intent to file such registration statement to the Holder, setting forth the minimum and maximum proposed offering price, commissions, and discounts in connection with the offering, and other relevant information. Within twenty (20) days after receipt of notice of the Company's intent to file a registration statement, the Holder shall be entitled to request that some or all of the Warrant Stock be included in such registration statement, and the Company will use its best efforts to cause such Warrant Stock to be included in the offering covered by such registration statement. In the event the Warrant Stock is included in the registration statement (a "Piggyback Registration"), the Holder may transfer this Warrant to an underwriter or broker for exercise by such underwriter or broker in connection with a distribution of the Warrant Stock. The managing underwriter or underwriters in an underwritten offering, or the holders of a majority in number of shares of Warrant Stock requesting registration, may determine that the number of securities proposed to be sold in the underwriting or offering exceeds the number that can be sold without having a materially adverse effect on the price at which the securities could be sold. If it or they make such a determination in good faith, then the Company may reduce the number of shares of Common Stock to be included in the registration to the highest number that the managing underwriter (or underwriters) or a majority of - 16 - WCP8: 41772-5 the holders (as the case may be) determine will not have a material adverse effect on the price of the shares to be sold. If the number of shares of Common Stock to be sold in a registration are limited pursuant to this paragraph, the Company will include in the registration: (i) First, all shares the Company proposes to sell; (ii) Second, all shares of Common Stock for which registration was requested pursuant to rights to require the Company to register shares in the absence of any other registration reduced, if necessary, to the maximum number of shares consistent with the limitation required by this Section 8.3; and (iii) Third, shares of Common Stock for which registration was requested pursuant to rights to require the Company to register shares incidental to the registration of other shares reduced pro rata according to the number of shares for which registration was requested by each Person so requesting registration, or in such other proportions as such Persons may agree. 8.4 Demand Registration Rights. If the Registration Statement described in Section 8.2 above is not effective by the Shelf Date, the Holder shall be entitled to request that the Warrant Stock be registered under the 1933 Act. The Company shall, as soon as practicable after receipt of a written request for registration, file, and use its best efforts to cause to become effective, an appropriate registration statement under the 1933 Act covering the Warrant Stock, provided that in the opinion of the Company's counsel, no events preclude such registration. The Company may postpone for a reasonable period of time (not to exceed 90 days) the filing of any registration statement otherwise required to be prepared and filed by it pursuant to this Section if, at the time it receives a request for registration: (1) the Company is conducting or about to conduct an offering of its securities and the Company is advised by its investment banker that such offering would be affected adversely by the registration so demanded and the Company shall have furnished to the Holder seeking a demand registration a certificate signed by the President of the Company to that effect; (2) the Board of Directors of the Company shall determine in good faith that such offering will interfere with a pending or contemplated financing, merger, sale of assets, recapitalization or other similar corporate action of the Company and the Company shall have furnished to the - 17 - WCP8: 41772-5 Holder seeking a demand registration a certificate signed by the President of the Company to that effect, accompanied by a certified copy of the relevant board resolutions; or (3) the Board of Directors of the Company shall determine in good faith that the disclosures required in connection with registration of the Warrant Stock might adversely affect the business or prospects of the Company and the Company shall have furnished to the Holder seeking a demand registration a certificate signed by the President of the Company to the effect, accompanied by a certified copy of the relevant board resolutions. If the Holder intends to distribute the Warrant Stock covered by its request by means of an underwriting, the Holder shall so advise the Company as a part of its request made pursuant to this Section. If a registration requested pursuant to the Section is to involve an underwritten public offering in which the obligation of the underwriters is to take all of the securities to be sold if any are to be taken, the Company and other holders of securities of the Company may include securities in such registration only if the managing underwriter of such public offering concludes that such inclusion will not adversely affect the successful marketing or the price of the Warrant Stock to be included in such public offering. Such other holders of securities (together with the Company as provided in subsection 8.5(d)) shall enter in to an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Holder and reasonably acceptable to the Company. In the event that the Holder demands registration pursuant to this Section 8.4 within the six months immediately prior to expiration of this Warrant, and the Company, through no fault of the Holder, is unable to provide such registration, the expiration date of this Warrant shall be extended until the 30th day after a registration statement for the Warrant Stock is declared effective. The Holder's right to demand registration pursuant to this Section 8.4 may be exercised only one time prior to expiration of the Warrant; provided, however, that the right shall not be deemed exhausted unless the registration statement covering so much of the Warrant Stock as Holder and its assigns wish to sell pursuant to the registration statement becomes effective. 8.5 Filing Obligations of the Company. In connection with any registration of the Warrant Stock, the Company shall: - 18 - WCP8: 41772-5 (a) prepare and file the registration statement and such amendments and supplements to the registration statement and the prospectus or offering circular used in connection therewith as may be necessary to keep the registration statement effective until the Holders of the Warrant Stock covered by such registration statement have completed the distribution described in the registration statement or until all shares to be distributed thereunder may be resold in a public transaction pursuant to Rule 144(k) of the 1933 Act and to comply with the provisions of the 1933 Act and the rules and regulations thereunder with respect to the disposition of the Warrant Stock covered by the registration statement for the period required to effect the distribution thereof; (b) furnish to the Holder such number of copies of any prospectus or offering circular, including a preliminary prospectus, and of a full registration statement and exhibits in conformity with the requirements of the 1933 Act and rules and regulations thereunder, as the Holder may reasonably request in order to facilitate the disposition of Warrant Stock owned by such Holder; (c) use its best efforts to register or qualify the Warrant Stock covered by the registration statement, as the case may be, under the securities or blue sky laws of such jurisdictions as the Holder may reasonably request, and accomplish any and all other acts and things which may be necessary or advisable to permit sale in such jurisdictions of such Warrant Stock; provided, however, that the Company shall not be required to register as a dealer or to qualify as a foreign corporation in any such jurisdictions or to escrow any shares of its capital stock; (d) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. The Holder shall also enter into and perform its obligations under such an agreement; (e) furnish, at the request of the Holder, on the date that such Warrant Stock is delivered to the underwriters for sale in connection with a registration pursuant to this Agreement, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the outside counsel of recognized standing (or reasonably acceptable to the Holder) representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in such underwritten public offering, addressed to the underwriters, if any, and to the Holder and (ii) a letter dated such date, from the independent - 19 - WCP8: 41772-5 certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holder; (f) as promptly as practicable after becoming aware of such event, notify the Holder of the happening of any event of which the Company has knowledge, as a result of which the prospectus included in the registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and use its best efforts promptly to prepare a supplement or amendment to the registration statement to correct such untrue statement or omission, and deliver a number of copies of such supplement or amendment to the Holder; (g) provide the Holder with written notice of the date that a registration statement registering the resale of the Warrant Stock is declared effective by the SEC, and the date or dates when the registration statement is no longer effective; (h) provide the Holder and their representatives the opportunity to conduct a reasonable due diligence inquiry of the Company's pertinent financial and other records and make available its officers, directors and employees for questions regarding such information as it related to information contained in the registration statement; and (i) provide the Holder and its representatives the opportunity to review the registration statement and all amendments thereto no later than three (3) days prior to their filing with the SEC. 8.6 Expenses. All expenses incurred by the Company in connection with any registration of the Warrant Stock effected under Sections 8.2, 8.3 or 8.4, including, without limitation, all registration or filing fees, fees and expenses of complying with state securities and blue sky laws, printing expenses, fees and expenses of the Company's counsel and accountants, and fees and expenses of counsel for the Holder, shall be paid by the Company; provided, however, that all underwriting discounts and selling commissions applicable to the Warrant Stock shall not be borne by the Company but shall be borne by the Holder. - 20 - WCP8: 41772-5 8.7 Indemnification. (a) By the Company. In connection with the filing of any registration statements and sales of the Warrant Stock thereunder, the Company shall indemnify and hold harmless the Holder of this Warrant, its directors and officers, any underwriter, and each other Person, if any, who controls the Holder or the underwriter within the meaning of the 1933 Act, against losses, claims, damages or liabilities, joint or several (or actions in respect thereto) (``Losses''), to which any such Holder, underwriter, or controlling Person may become subject under the 1933 Act or otherwise, insofar as such Losses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which the Warrant Stock was registered under the 1933 Act, any preliminary prospectus, offering circular or final prospectus contained therein, or any amendment or supplement thereto, or any report filed with the Securities and Exchange Commission (the ``Disclosure Documents''), or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse any such Holder, underwriter, or controlling Person for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claims, excluding any amounts paid in settlement of litigation, commenced or threatened, if such settlement is effected without the prior written consent of the Company; provided, however, that the Company shall not be liable in any such case to the extent that any such Losses arise out of or are based upon any untrue statement, alleged untrue statement or omission or alleged omission made in such Disclosure Document in reliance upon and in conformity with information furnished to the Company in writing by or on behalf of the Holder of this Warrant for use specifically in connection with the preparation of such Disclosure Document. (b) By the Holder. In connection with the filing of any registration statement and sales of the Warrant Stock thereunder, the Holder shall indemnify the Company, each of its directors, each of its officers who signed such registration statement, and each other Person, if any, who controls the Company within the meaning of the 1933 Act, against any Losses to which the Company, any of its directors, officers, or controlling Persons may become subject under the 1933 Act or otherwise, insofar as such Losses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any of the Disclosure Documents or arise out of or are - 21 - WCP8: 41772-5 based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, and any of its directors, officers, or controlling Persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claims, excluding any amounts paid in settlement of litigation, commenced or threatened, if such settlement is effected without the prior written consent of the Holder; provided, however, that such indemnification or reimbursement shall be payable in any such case only to the extent that such statement or alleged statement or omission or alleged omission is made in reliance on information furnished to the Company in writing by or on behalf of the Holder for use specifically in connection with the preparation of such Disclosure Document. 8.8 Reports under Securities Exchange Act of 1934 (the "1934 Act"). With a view to making available to the Holder the benefits of Rule 144 promulgated under the 1933 Act and any other rule or regulation of the SEC that may at any time permit the Holder to sell securities of the Company to the public without registration, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144; (b) file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act; and (c) furnish to the Holder, so long as the Holder owns any Warrant Stock, forthwith upon request (i) a written statement by the Company, if true, that it has complied with the reporting requirements of SEC Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing the Company of any rule or regulation of the SEC which permits the selling of any such securities without registration. 8.9 Assignability. The piggyback and demand registration rights of the Holder under Article 8 may be assigned by Holder, subject to the transfer limitations set forth in Article 3 and assumption by the assignee of the corresponding obligations hereunder. Article 9 Miscellaneous. - 22 - WCP8: 41772-5 9.1 Governing Law. The rights of the parties arising under this Warrant shall be construed and enforced under the laws of the Commonwealth of Massachusetts without giving effect to any choice of law or conflict of law rules. 9.2 Notices. Any notice or other communication required or permitted to be given or delivered pursuant to this Warrant shall be in writing and shall be deemed effective as of the date of receipt if delivered personally or by facsimile transmission (if receipt is confirmed by the facsimile operator of the recipient), or delivered by overnight courier service or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address in the United States of America for a party as shall be specified by like notice; provided that notices of change of address shall be effective only upon receipt thereof): (i) to the Holder as follows: Energy Income Fund, L.P. 136 Dwight Road Longmeadow, Massachusetts 01106 Attn: Robert D. Gershen Facsimile No.: (413) 567-7926 with copies to: Wilmer, Cutler & Pickering 2445 M Street, N.W. Washington, D.C. 20037 Attn: Russell J. Bruemmer Facsimile No.: (202) 663-6363 (ii) to the Company as follows: Foreland Corporation 12596 West Bayaud Avenue Suite 300 Lakewood, CO 80228-2019 Attn: N. Thomas Steele Facsimile No.: (303) 988-3234 with copies to: Kruse, Landa & Maycock, L.L.C. 8th Floor, Bank One Tower 50 West Broadway (300 South) Salt Lake City, UT 84101-2034 Attn: James R. Kruse Facsimile No.: (801) 531-7091 - 23 - WCP8: 41772-5 9.3 Severability. If any provision of this Warrant shall be held invalid, such invalidity shall not affect any other provision of this Warrant that can be given effect without the invalid provision, and to this end, the provisions hereof are separable. 9.4 Headings. The headings in this Warrant are for reference purposes only and shall not affect in any way the meaning or interpretation of this Warrant. 9.5 Amendment. This Warrant cannot be amended or modified except by a written agreement executed by the Company and the Holder. 9.6 Assignment. This Warrant shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns except that no party may assign or transfer its rights or obligations under this Warrant to the extent explicitly prohibited herein. 9.7 Entire Agreement. This Warrant, together with its attachments, contains the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its name by its President or a Vice President thereunto duly authorized. Dated: August 10, 1998 FORELAND CORPORATION By N. Thomas Steele President - 24 - WCP8: 41772-5 SUBSCRIPTION NOTICE The undersigned, the Holder of a Common Stock Purchase Warrant issued by [name of issuer] pursuant to a Financing Agreement dated as of [ ] between [name of issuer] and Energy Income Fund, L.P., hereby elects to exercise purchase rights represented by such Warrant for, and to purchase thereunder, shares of the Common Stock covered by such Warrant and herewith makes payment in full therefor of and requests that certificates for such shares (and any securities or the property issuable upon such exercise) be issued in the name of and delivered to , whose address is . If said number of shares of Common Stock is less than the number of shares of Warrant Stock purchasable hereunder, the undersigned requests that a new Warrant representing the balance of the Warrant Stock be registered in the name of and issued and delivered to , whose address is . The undersigned hereby agrees to pay any transfer taxes on the transfer of all or any portion of the Warrant or Warrant Stock requested herein. The undersigned agrees that, in the absence of an effective registration statement with respect to Common Stock issued upon this exercise, the undersigned is acquiring such Common Stock for investment and not with a view to distribution thereof and the certificate or certificates representing such Common Stock may bear a legend substantially as follows: `The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be transferred except as provided in Article 3 of the Common Stock Purchase Warrant issued by [name of issuer] on [date], a copy of which is on file at the principal office of [name of issuer].' Signature guaranteed: Dated: - 25 - 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: - 26 - EX-10 7 STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (this "Agreement") dated as of August 10, 1998, is made between Energy Income Fund, L.P., a Delaware limited partnership ("EIF") and Foreland Corporation, a Nevada Corporation ("Foreland"). RECITALS WHEREAS, EIF wishes to subscribe for certain convertible preferred stock of Foreland in exchange for Two Million Dollars ($2,000,000) and Foreland is willing to issue and sell to EIF such preferred stock on the terms described herein; NOW THEREFORE, in consideration of the premises, and other good and valuable consideration the adequacy of which is expressly acknowledged, the parties hereby agree as follows: ARTICLE I DEFINITIONS I.1 Defined Terms. The following terms shall have the meanings set forth herein: "Affiliate", anAffiliate, anAffiliate, anAffiliate, an{tc \l 2 "Affiliate, an"} "affiliate of", or a Person "affiliated" with, a specified Person, is a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. "Business Day" shall mean any day other than a (i) Saturday, (ii) Sunday, or (iii) any day on which commercial banking institutions in New York, New York are authorized or obligated to close, provided that if four (4) consecutive days are not Business Days, the next day shall be deemed a Business Day whether or not banks located in New York are authorized or obligated to close. "Closing Date" shall mean the date when Closing actually occurs. "Common Stock" shall mean the common stock, par value $.001 per share, of Foreland. "Eagle Springs" shall mean Eagle Springs Production Limited-Liability Company, a Nevada limited liability company. "Financing Agreement" shall mean that certain Financing Agreement dated January 6, 1998 by and between EIF, Foreland, Eagle Springs, Foreland Refining, Foreland Asphalt, Foreland Asset and Transportation as amended from time to time. "Foreland Asphalt" shall mean Foreland Asphalt Corporation, a Utah corporation. "Foreland Asset" shall mean Foreland Asset Corporation, a Nevada corporation. "Foreland Refining" shall mean Foreland Refining Corporation, a Texas corporation. "Lien" shall mean any mortgage, security interest, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge, preference, priority or other security agreement, option, warrant, attachment, right of first refusal, preemptive, conversion, put, call or other claim or right, restriction on transfer (other than restrictions imposed by federal and state securities laws), or preferential arrangement of any kind or nature whatsoever (including any restriction on the transfer of any assets, any conditional sale or other title retention agreement, any financing lease involving substantially the same economic effect as any of the foregoing and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction). "Loan Documents" shall have the meaning given to it in the Financing Agreement. "Losses" shall mean losses, damages, claims, demands, suits, costs, expenses, liabilities and sanctions of every kind and character, including without limitation reasonable attorneys' fees, court costs and costs of investigation. "Person" shall mean any natural person, sole proprietorship, corporation, general partnership, limited partnership, limited liability company, union, association, court, agency, agreement, tribunal, instrumentality, commission, arbitrator, board, bureau, or other entity or authority. "Properties" shall mean those certain oil and gas properties pledged by Foreland, Eagle Springs, Foreland Refining, Foreland Asphalt, Foreland Asset and Transportation to EIF pursuant the Financing Agreement and the Loan Documents. "Qualified Offering" means an offering of the Common Stock in which the aggregate net proceeds to Foreland shall be at least Four Million Dollars ($4,000,000). "Registration Rights Agreement" shall mean that certain Registration Rights Agreement, of even date herewith, by and between EIF and Foreland. "Shareholder" shall mean any holder of Shares. "Shares" shall mean any and all issued and outstanding shares of capital stock of Foreland, including, without limitation, the Common Stock and the Preferred Stock. "Transportation" shall mean Petrosource Transportation, a Utah Corporation. In addition, the following terms are defined elsewhere in the Agreement: "Closing" Section 2.1 "Effective Time" Section 2.3 "EIF" Introductory paragraph "Final Payment Date" Section 3.1(b) "Indemnified Party" Section 6.3 "Indemnifying Party" Section 6.3 "Indemnity Obligation" Section 6.3 "Liability" Section 4.1(h) "Preferred Stock" Section 2.1 "Purchase Price" Section 2.2 I.2 Accounting Terms. Accounting terms used herein and not otherwise defined herein shall be construed in accordance with generally accepted accounting definitions and principles consistently applied. I.3 Singular and Plural. Words used herein in the singular, where the context so permits, shall be deemed to include the plural and vice versa. The definitions of words in the singular herein shall apply to such words when used in the plural where the context so permits and vice versa. ARTICLE II PURCHASE AND SALE II.1 Description of the Preferred Stock. The preferred stock shall consist of 2,000 shares of convertible preferred stock of Foreland, bearing the rights and characteristics set forth in Annex A hereto (the "Preferred Stock"), representing one hundred percent (100%) of the total issued and outstanding Preferred Stock of Foreland on a fully diluted basis. II.2 Subscription and Sale. Pursuant to the terms and subject to the conditions hereof, on the Closing Date, but effective as of the Effective Time, Foreland shall offer for subscription and issue to EIF the Preferred Stock for the Purchase Price (defined below) and EIF shall subscribe and pay for such Preferred Stock in accordance with Section 2.4. II.3 Effective Time. The subscription of the Preferred Stock shall be effective as of August [ ], 1998, at 7 a.m. EST(the "Effective Time"); provided however, that this Agreement shall be of no force and effect until receipt by EIF and execution of this Agreement by EIF in Massachusetts. II.4 Purchase Price. The Purchase Price for the Preferred Stock shall be Two Million Dollars ($2,000,000). II.5 Payment of Purchase Price. The amount set forth in Section 2.4 shall be paid by EIF by wire transfer or other delivery of immediately available funds at the Closing to the credit of such account as Foreland shall designate. ARTICLE III THE CLOSING III.1 Date of Closing. Subject to the conditions stated in this Agreement, the consummation of the transactions contemplated hereby (the "Closing") shall be held on or before August 11, 1998, or such other date as is mutually satisfactory to the parties hereto. III.2 Place of Closing. The Closing shall be held at such place as the parties hereto may agree in writing. III.3 Conditions to Foreland's Closing. The obligations of Foreland hereunder are subject to the following conditions, each of which must be satisfied or waived by Foreland prior to Closing: (a) Delivery of Purchase Price. At the Closing, Foreland shall have received the Purchase Price as set forth in Article II. (b) Other Deliveries. EIF shall have delivered such documents, certificates and/or instructions as may be reasonably necessary or advisable to carry out EIF's obligations under, and to fulfill the purpose of, this Agreement. (c) Representations and Warranties True. Foreland shall be satisfied that all representations and warranties of EIF contained in this Agreement are true in all material respects at and as of the Closing as if such representations and warranties were made at and as of the Closing, and that EIF shall have performed and satisfied all material agreements in all material respects as required by this Agreement to be performed and satisfied by EIF at or prior to the Closing. III.4 Conditions to EIF's Closing. The obligations of EIF hereunder are subject to the following conditions, each of which must be satisfied or waived by EIF prior to closing: (a) Resolutions. Prior to or at Closing, EIF shall have received resolutions of the Board of Directors and/or Shareholders of Foreland, as required by law and Foreland's By-laws, authorizing and approving the transactions contemplated by this Agreement, certified by the respective Secretary or Assistant Secretary of Foreland, together with certified copies of Foreland's Articles of Incorporation and By-laws and a good- standing certificate with respect to Foreland from the State of Nevada. (b) Stock Certificates. At the closing, Foreland shall deliver to EIF a certificate representing the Preferred Stock, with all necessary transfer taxes paid or other revenue stamps affixed thereto. (c) Opinion of Counsel. Prior to or at Closing, EIF shall have received an opinion of Kruse, Landa & Maycock, L.L.C. in form and substance reasonably acceptable to EIF. (d) Registration Rights Agreement. Prior to or at Closing, Foreland shall deliver the Registration Rights Agreement to EIF, executed by Foreland. (e) Other Deliveries. Foreland shall have delivered such additional instruments, as may be reasonably necessary or advisable to carry out EIF's obligations under, and to fulfill the purpose of, this Agreement and any other document, certificate or other instructions delivered pursuant hereto. (f) Representations and Warranties True. EIF shall be satisfied that all representations and warranties of Foreland contained in this Agreement shall be true in all material respects as at and as of the Closing as if such representations and warranties were made at and as of the Closing, and that Foreland have performed and satisfied all material agreements in all material respects as required by this Agreement to be performed and satisfied by Foreland at or prior to the Closing. ARTICLE IV REPRESENTATIONS AND WARRANTIES IV.1 Representations and Warranties of Foreland. Foreland represents and warrants as of the date hereof and as of the Closing Date as follows: (a) Organization. Foreland is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and is duly qualified to carry on its business as now being conducted. (b) Capital Stock. On the date hereof, the authorized capital of Foreland consists of (i) 50,000,000 shares of Common Stock, par value $0.001 per share, of which 8,548,921 shares are issued and outstanding as of the date hereof, and (ii) 5,000,000 shares of preferred stock, par value $0.001 per share, of which: (A) 2,000,000 preferred shares are designated as 1991 Series Convertible Preferred Stock with 40 of such preferred shares issued and outstanding (convertible into 13,333 shares of Common Stock); (B) 1,650,000 preferred shares are designated as 1994 Series Convertible Redeemable Preferred Stock with 153,140 of such preferred shares issued and outstanding (convertible into 51,047 shares of Common Stock); (C) 1,000,000 preferred shares are designated as 1995 Series Convertible Preferred Stock with 361,103 of such preferred shares issued and outstanding (convertible into 120,368 shares of Common Stock); (D) 50,000 preferred shares are designated as Series A Preferred Stock with none of such preferred shares issued and outstanding; (E) 2,000 preferred shares are designated as 1998 Series Convertible Preferred Stock with all of such preferred shares to be issued and outstanding in connection with the transactions contemplated by this Agreement; and (F) 298,000 preferred shares are not designated. Foreland has no other Shares or capital stock of any class or other equity securities or equity equivalents authorized, issued or outstanding. Foreland has reserved a sufficient number of authorized shares of Common Stock for issuance pursuant to the Warrants and for conversion of the Preferred Stock. Except as set forth in Schedule 4.1, there are no outstanding or authorized options, warrants, calls, subscriptions, rights, agreements or commitments of any character obligating Foreland to issue any Shares or securities convertible into or exchangeable for or evidencing the right to purchase or subscribe for any capital stock of Foreland. All issued and outstanding shares of the capital stock of Foreland (i) are, or shall be upon the Closing, duly authorized, validly issued, fully-paid and nonassessable, (ii) are, shall be and have been free of any preemptive rights, (iii) were not, and shall not be, issued in violation of the terms of any contract, agreement, lease, plan, instrument or other document binding on Foreland, and (iv) were and shall be issued in compliance with all applicable charter documents of Foreland and all applicable federal and state securities or "blue sky" laws and regulations. (c) Transfer of the Preferred Stock. Upon the consummation of the transactions contemplated hereby, EIF will acquire title to the Preferred Stock, free and clear of any and all Liens. The Preferred Stock has been, or will be prior to the Closing, duly authorized and, when issued and delivered to EIF as provided in this Agreement, will be validly issued, fully paid, and nonassessable, and the issuance of such shares will not be subject to any agreement or restriction of any kind and will not violate or contravene the terms of any contract, agreement, note, bond, mortgage, indenture, deed or trust, license, franchise, permit, lease, plan, instrument, or other document binding on Foreland. (d) No Conflict. Foreland has all requisite power and authority to carry on its business as presently conducted, to enter into this Agreement and to perform its obligations hereunder. The consummation of the transactions contemplated by this Agreement will not violate, or be in conflict with, any material provision of the certificate of incorporation of Foreland or any material provision of any agreement or instrument to which Foreland is a party or by which it is bound (except for any provision in any agreement relating to required consents to transfer) noncompliance with which would have a materially adverse effect upon EIF, upon EIF's ownership of the Preferred Stock after the Closing Date or upon any of the transactions contemplated by this Agreement or, to the knowledge of Foreland, any judgment, decree, order, statute, rule or regulation applicable to Foreland (subject to required approvals of Federal, state or other governmental agencies). (e) Authorization. The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all requisite action on the part of Foreland. (f) Enforceability. This Agreement has been duly executed and delivered on behalf of Foreland. This Agreement constitutes legal, valid and binding obligations of Foreland enforceable in accordance with their respective terms. (g) Proceedings. There are no actions, suits, proceedings or governmental investigations or inquiries pending, or, to the knowledge of Foreland, threatened against Foreland or any of its Affiliates, or their respective properties, assets, operations or businesses, which would, singly or in the aggregate, have a material adverse effect on the business of Foreland. (h) Financial Statements. The financial statements of Foreland dated as of March 31, 1998 and identified on Schedule 4.1(i) hereto, (i) fairly present the assets, liabilities, and financial condition of Foreland as of the dates thereof and the results of operations of Foreland for the respective periods ended on such dates, (ii) have been prepared from the books and records of Foreland in accordance with generally accepted accounting principles consistently applied, and (iii) include all adjustments that are necessary for a fair presentation of the information shown and do not contain any items of a special or nonrecurring nature that are not identified as such. Foreland has no direct or indirect liability, indebtedness, obligation, expense, claim, deficiency, guaranty, or endorsement of or by any Person (other than endorsements of notes, bills, and checks presented to banks for collection or deposit in the ordinary course of business) of any type, whether accrued, absolute, contingent, matured, unmatured, or otherwise ("Liability") other than Liabilities that are reflected, accrued or reserved for in the Financial Statements or arise in the ordinary course of Foreland's business consistent with past practice. The Financial Statements do not contain as of the date hereof any misstatement of material fact and does not fail to state any facts necessary (in lights of the circumstances in which they were made) to make the statements therein not misleading. Since the date of such Financial Statements, there has been no material adverse change in the assets, business, financial condition or prospects of Foreland. (i) Compliance with Law. Foreland is not in violation of any order, injunction, judgment, ruling, law, or regulation of any court or governmental authority applicable to the property or business of Foreland, which violation or violations in the aggregate would have a material adverse effect on Foreland. The licenses, permits and other governmental authorizations held by Foreland are valid and sufficient for the conduct of Foreland's businesses as currently conducted, except where the failure to hold such licenses, permits, and other governmental authorizations would not have a material adverse effect. (j) Fees. Foreland has not incurred any liability, contingent or otherwise, for brokers' or finders' fees relating to the transactions contemplated by this Agreement for which EIF or Foreland shall have any responsibility whatsoever. IV.2 Representations and Warranties of EIF. EIF represents and warrants to Foreland as of the date hereof and as of the Closing Date as follows: (a) Organization. EIF is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to carry on its business as currently conducted. (b) No Conflict. EIF has all requisite power and authority to carry on its business as presently conducted, to enter into this Agreement, to purchase the Preferred Stock on the terms described in this Agreement and to perform its other obligations under this Agreement. The consummation of the transactions contemplated by this Agreement will not violate, or be in conflict with, any material provision of the limited partnership or partnership agreement of EIF or any agreement or instrument to which EIF is a party or by which it is bound, noncompliance with which would have a materially adverse effect upon Foreland or upon EIF's acquisition or ownership of the Preferred Stock or upon any of the transactions contemplated by this Agreement, or, to the knowledge of EIF, any judgment, decree, order, statute, rule or regulation applicable to EIF (subject to required approvals of Federal, state or other governmental agencies). (c) Accredited Investor. EIF is an Accredited Investor as defined by Regulation D of the Securities Act of 1933, as amended. (d) Authorization. The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all requisite action on the part of EIF. (e) Enforceability. This Agreement has been duly executed and delivered on behalf of EIF. This Agreement constitutes legal, valid and binding obligations of EIF, enforceable in accordance with their respective terms. (f) Investment Intent. EIF acknowledges that the Preferred Stock has not been registered under the Securities Act of 1933, as amended, or applicable state securities laws and that the certificates representing such shares will bear a legend to such effect. EIF is acquiring the Preferred Stock hereunder for investment purposes only and not with a view to, or for resale in connection with, the distribution thereof and with no intention of distributing or selling any thereof except in compliance with federal or state securities laws, and will make no sale or other transfer of the Preferred Stock except in compliance with federal or state securities laws. (g) Fees. EIF has incurred no liability, contingent or otherwise, for brokers' or finders' fees relating to the transactions contemplated by this Agreement for which Foreland shall have any responsibility whatsoever. ARTICLE V OBLIGATIONS AFTER CLOSING V.1 Use of Proceeds. The Purchase Price shall be used for general corporate purposes as approved by the Board of Foreland. V.2 Transfer Taxes. Foreland shall pay all transfer, documentary, sales, use, registration, excise or similar taxes in connection with the transactions contemplated by this Agreement. V.3 Financial Information. Foreland shall prepare financial statements in accordance with generally accepted accounting principles consistently applied as of each March 31, June 30, September 30, and December 31 for the periods then ended. Quarterly statements shall contain consolidated financial statements including a balance sheet, statement of income, and statements of the source and application of cash flow for the period then ended. Annual statements prepared as of each December 31 and for the year period then ended shall be audited and accompanied by an opinion from an independent certified public accountant. Copies of the financial statements required by this subsection shall be furnished to EIF within 45 days after the end of each fiscal period except for the annual statements, copies of which shall be furnished within 90 days after the end of the fiscal period to which they relate. (a) Foreland shall, within five days after the same are sent, furnish to EIF all financial documents and reports sent or furnished to any of its lenders, or to any other security holders or creditors of Foreland, and to any state or federal governmental authority. (b) EIF acknowledges that, while the Financing Agreement is in place, delivery of such financial information as is required pursuant to the Financing Agreement will satisfy Foreland's obligation under this Section 5.3. V.4 Registration. In addition to any and all rights set forth in this Agreement, EIF shall have registration rights as set forth in the Registration Rights Agreement. V.5 Preemptive RightsV.5 Preemptive RightsV.5 Preemptive Rights. EIF shall cause Foreland not toissue any Shares, or enter into any agreement in respect of such issuance unless (a) the issuance has been approved as contemplated by the Articles of Incorporation and Bylaws of Foreland and this Agreement and (b) such issuance offers to EIF the right to participate proportionately, according to EIF's pro rata share, in such proposed issuance. Foreland shall provide prompt written notice of any such proposed issuance to EIF and EIF may elect to exercise the rights granted pursuant to the preceding sentence by providing written notice to Foreland within thirty (30) days after delivery to EIF of such written notice of the proposed issuance. If EIF elects to exercise its rights pursuant to this Section 5.5, EIF shall have the right, at its option, to receive its proportion of the new issuance in the form of additional shares of any class of stock of Foreland that EIF possesses or any other Shares as are being issued at such time. If EIF fails to deliver in writing an election to so exercise such rights to Foreland within the thirty (30)-day notice period, such failure shall be deemed to be a rejection of the right of EIF to participate in the subscription and purchase of the Shares to be issued. Notwithstanding anything to the contrary in this section, EIF shall not have any rights under this Section 5.5 to subscribe to shares issued (i) pursuant to options for capital stock of Foreland existing as of the Closing Date, (ii) in connection with the Qualified Offering, (iii) in connection with a registration of any Shares in accordance with the Registration Rights Agreement, or (iv) pursuant to transactions falling within Rule 145(a) of the 1933 Act; provided that, as to (iv), such transactions are fair value transactions conducted at arms' length. V.6 Future Financings. EIF may, in its discretion, elect to finance acquisitions by Foreland of properties subject to EIF's normal terms and conditions. V.7 Further Assurances. After Closing, Foreland and EIF shall each execute, acknowledge and deliver or cause to be executed, acknowledged and delivered such instruments and take such other action as may be necessary or advisable to assure to the other the rights, titles, interests, estates, and privileges intended to be assigned, delivered, or reserved to such party and to consummate the transactions and to carry out their obligations under this Agreement and under any document, certificate, or other instrument delivered pursuant hereto. ARTICLE VI INDEMNIFICATION VI.1 Indemnification by EIF. From and after the Closing Date, EIF shall defend, indemnify and save and hold harmless Foreland, its directors, officers, employees and agents against all Losses arising out of or resulting from any breach of any representation, warranty, covenant or agreement of EIF under this Agreement (including the Schedules and the Exhibits hereto or thereto). VI.2 Indemnification by Foreland. From and after the Closing Date, Foreland shall defend, indemnify and save and hold harmless EIF, its directors, officers, employees and agents against all Losses (a) arising out of or resulting from any breach of any representation, warranty, covenant or agreement of Foreland under this Agreement (including the Schedules and the Exhibits hereto or thereto); (b) that relate to claims or other demands by third parties with respect to any violation by Foreland of any federal or state securities laws in connection with the transactions contemplated by this Agreement; or (c) in connection with the operating of the Properties from the Closing Date. VI.3 Procedures. The parties hereto agree promptly to notify the other party of the making of any demand, the assertion of any claim, or the commencement of any suit, action or proceeding by any third party for which indemnity may be sought under this Agreement (an "Indemnity Obligation") prior to expending or committing to expend funds for which indemnity may be sought. The party from whom indemnification is sought (the "Indemnifying Party") shall have the right, but not the obligation, to assume the defense or settlement of any Indemnity Obligation of which the party seeking indemnification (the "Indemnified Party") gives notice; provided, however, that if the Indemnifying Party does not elect to assume such defense or settlement, the Indemnified Party shall have the right, but not the obligation, to assume such defense or settlement but shall not thereby waive any right to indemnity therefor by the Indemnifying Party pursuant to this Agreement, and the Indemnifying Party shall at all times have the right, at its option and expense, to participate fully therein. Each party shall have reasonable access to the books, records and personnel in the possession or control of the other party which are pertinent to the defense or settlement of any Indemnity Obligation. The parties shall cooperate in the defense or settlement of any Indemnity Obligation, but the party electing to assume such defense or settlement shall have full authority to determine all action to be taken with respect thereto and the terms of the settlement; provided, however, that without the consent of the Indemnified Party, no settlement shall be entered into that does not include as an unconditional term thereof the giving by the Person asserting such claims of an unconditional release of the Indemnified Party from all personal liability with respect to such claim. The Indemnified Party may join the Indemnifying Party in any suit, action or proceeding to which any such right of indemnity created by this Agreement would or might apply, for the purpose of enforcing any such right. ARTICLE VII MISCELLANEOUS VII.1 Survival. The representations, warranties, covenants, agreements and indemnities set forth in this Agreement shall survive the Closing; provided, however, that any claim or demand for breach of a representation or warranty under Sections 6.1 or 6.2(a) and any claim or demand under Section 6.2 must be asserted in writing on or before the one (1) year anniversary date of the Closing Date, after which date such indemnities shall expire except to the extent this Agreement expressly provides that any such provision shall survive for a longer period. If the Closing occurs, all conditions of Closing shall be deemed to have been satisfied or waived, and, after the Closing, neither party shall have any liability whatsoever to the other arising out of, resulting from or attributable to any such conditions of Closing, regardless of whether such conditions of Closing were, in fact, satisfied or waived. VII.2 Exhibit and Schedules. The Exhibit and Schedules referred to in this Agreement are hereby incorporated in this Agreement by reference and constitute a part of this Agreement. Each party to this Agreement and its counsel has received a copy of the Exhibits and Schedules prior to and as of the execution of this Agreement. VII.3 Expenses. Foreland shall be responsible for payment of all expenses, including legal fees, incurred by Foreland and EIF to negotiate, document, and close the transactions contemplated hereby. VII.4 Notices. All notices and communications required or permitted under this Agreement shall be in writing and any communication or delivery hereunder shall be deemed to have been duly made when personally delivered to the individual indicated below, or if sent by telecopier or mailed, when received by the party charged with such notice and addressed as follows: If to EIF: Energy Income Fund, L.P. 136 Dwight Road Longmeadow, MA 01106 Attn: Robert D. Gershen Facsimile No.: (413) 567-7926 If to Foreland: Foreland Corporation 12596 West Bayaud Avenue Suite 300 Lakewood, CO 80228-2019 Attn: N. Thomas Steele Facsimile No.: (303) 988-3234 Copies of all notices (other than reports or other routine communications), which shall not constitute notice hereunder, shall be delivered to: Wilmer, Cutler & Pickering 2445 M Street, N.W. Washington, D.C. 20037 Attn: Russell J. Bruemmer Facsimile No.: (202) 663-6363 - and - Kruse, Landa & Maycock, L.L.C. Eighth Floor, Bank One Tower 50 West Broadway (300 South) Salt Lake City, UT 84101-2034 Attn: James R. Kruse, Esq. Facsimile No.: (801) 359-3954 Any party may, by written notice so delivered to the other parties, change the address or individual to which delivery shall thereafter be made. VII.5 Amendments. Except for waivers specifically provided herein, this Agreement may not be amended nor any rights hereunder waived except by an instrument in writing signed by the party to be charged with such amendment or waiver and delivered by such party to the party claiming the benefit of such amendment or waiver. VII.6 Limitation of Remedies. In no event shall either party to this Agreement be entitled to recover special or consequential damages from the other party as a result of a breach of this Agreement by such other party, including, without limitation, special damages in the nature of lost or future profits. VII.7 Counterparts. This Agreement may be executed by EIF and Foreland in any number of counterparts, no one of which need be executed by all parties hereto, but all of which together shall constitute one and the same instrument. VII.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. VII.9 Entire Agreement. This Agreement (including the Exhibits and Schedules hereto and all other agreements executed in connection herewith) constitutes the entire understanding among the parties with respect to the subject matter hereof, superseding all negotiations, prior discussions and prior agreements and understandings relating to such subject matter. VII.10 Parties in Interest. This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and, except as otherwise prohibited, their respective heirs, devisees, executors, administrators, successors and assigns; and except as provided in this Article VII, which is also intended to benefit and be enforceable by the Indemnified Parties, nothing contained in this Agreement, express or implied, is intended to confer upon any other Person any benefits, rights or remedies. VII.11 Nonwaiver. No course of dealing or any delay or failure to exercise any right, power or remedy hereunder on the part of EIF shall operate as a waiver of or otherwise prejudice EIF's rights, powers or remedies. VII.12 Drafting. Each Party acknowledges that its legal counsel participated in the preparation of this Agreement. The Parties therefore stipulate that the rule of construction that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement to favor any Party against the other. IN WITNESS WHEREOF, the parties hereto each has caused this Agreement to be executed by its duly authorized officer all as of the day and year first set forth above. ENERGY INCOME FUND, L.P. By: EIF General Partner, L.L.C., its General Partner By: Robert D. Gershen A Managing Director FORELAND CORPORATION By: N. Thomas Steele President SCHEDULE 4.1 The following schedule sets forth the number of shares of common stock issuable pursuant to outstanding options, warrants, calls, subscriptions, rights, agreements or commitments of any character obligating Foreland to issue any Shares or securities convertible into or exchangeable for or evidencing the right to purchase or subscribe for any Capital Stock of Foreland: Shares Reason for Potential Issuable Issuance Preferred Stock 1991 Series 13,333 1994 Series 51,047 1995 Series 120,368 Options 1,755,000 Warrants 1,630,025 Warrants to Purchase 90,541 Preferred Stock TOTAL ISSUABLE 3,660,314 The foregoing schedule does not include the 1998 Series Convertible Preferred Stock being sold pursuant to the Stock Purchase Agreement, warrants to purchase 500,000 shares of common stock to be granted to Energy Income Fund, L.P., pursuant to that certain First Amendment to Financing Agreement or shares issuable to Petro Source Corporation pursuant to that certain Amendment to Option and Purchase Agreement. The schedule also does not include shares that may be issuable pursuant to applicable anti-dilution provisions respecting the foregoing. EX-10 8 FIRST ALLONGE TO ACQUISITION NOTE THIS FIRST ALLONGE TO THE ACQUISITION NOTE (the "First Allonge"), dated as of August 10, 1998, is to become affixed to, modify and become a part of that certain promissory note (the "Acquisition Note") in the original principal sum of Two Million Three Hundred Twenty-Seven Thousand Dollars ($2,327,000), dated as of January 6, 1998, made originally by FORELAND CORPORATION, a corporation organized and existing under the laws of the State of Nevada, and EAGLE SPRINGS PRODUCTION LIMITED-LIABILITY COMPANY, a limited liability company organized under the laws of the State of Nevada (collectively, the "Borrowers"), and payable to the order of ENERGY INCOME FUND, L.P., a Delaware limited partnership ("Lender"). Lender and Borrowers have agreed that the Acquisition Note should be amended and modified as follows: 1. The first full paragraph of the Acquisition Note is amended by adding "Foreland Refining Corporation, a corporation organized and existing under the laws of the State of Texas, Foreland Asphalt Corporation, a corporation organized and existing under the laws of the State of Utah, Foreland Asset Corporation, a corporation organized and existing under the laws of the State of Nevada and Petrosource Transportation, a corporation organized and existing under the laws of the State of Utah" as Borrowers. By executing this First Allonge, Foreland Refining Corporation ("Foreland Refining"), Foreland Asphalt Corporation ("Foreland Asphalt"), Foreland Asset Corporation ("Foreland Asset") and Petrosource Transportation ("Transportation") agree to be bound by and expressly adopt, ratify, confirm and restate all provisions under the Acquisition Note as if they were original parties to the Acquisition Note, including but not limited to all representations and warranties, each of which shall be deemed to have been made as of the date hereof by Foreland Refining, Foreland Asphalt, Foreland Asset and Transportation. 2.The first full paragraph of the Acquisition Note is further amended by inserting the phrase ", as amended" immediately prior to the parenthetical "(the "Financing Agreement")" in the first sentence of the paragraph. 3.The first full paragraph of the Acquisition Note is further amended by deleting the principal sum of the Acquisition Note and replacing it with "Nine Million Fifty Thousand Dollars ($9,050,000)." 4.The last two full paragraphs of the Acquisition Note are amended by deleting them and replacing with the following: The obligations and liabilities of Borrowers under this Note and the Loan Documents are joint and several and Lender may enforce its rights under this Note and the Loan Documents, in its sole discretion, against any or all Borrowers. Notwithstanding anything to the contrary contained in this Note, the Financing Agreement or any other Loan Document, no Borrower shall have any personal liability for payment of principal and interest on this Note, and Lender shall look solely to the Collateral for the payment of such principal and interest and shall not seek a deficiency or other personal judgment against any Borrower in the event that any sale of the Collateral shall be insufficient to satisfy this Note. Nothing herein contained shall, however, impair any right, remedy or security of Lender with respect to the Collateral under this Note, nor limit any Borrower's obligations to perform any of Borrowers' other obligations under the Loan Documents, including without limitation Borrowers' obligation to pay damages as set forth in Section 4.3 and to indemnify Lender as set forth in Article 9 of the Financing Agreement. 5.This First Allonge shall effect the amendments and modifications to the Acquisition Note described in paragraphs 1-4 above. 6.All terms and conditions of the Acquisition Note shall, except as herein modified, remain in full force and effect and all rights, duties, obligations and responsibilities of Borrowers and Lender shall be governed and determined by the Acquisition Note as the same has been modified by this First Allonge. 7.Wherever the term "Borrowers" includes Foreland, Eagle Springs, Foreland Refining, Foreland Asphalt, Foreland Asset or Transportation, the remaining language in such paragraph shall be interpreted to apply to each of Foreland, Eagle Springs, Foreland Refining, Foreland Asphalt, Foreland Asset or Transportation, as the context requires. 8.THIS FIRST ALLONGE IS TO BE CONSTRUED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. 9.This First Allonge shall be of no force and effect until receipt and execution of it by Lender at its offices in Longmeadow, Massachusetts. IN WITNESS WHEREOF, each of the undersigned has executed and delivered this First Allonge to Acquisition Note as of the date first written above. FORELAND CORPORATION By: /s/ N. Thomas Steele President EAGLE SPRINGS PRODUCTION LIMITED-LIABILITY COMPANY By: /s/ N. Thomas Steele Manager FORELAND REFINING CORPORATION By: /s/ N. Thomas Steele President FORELAND ASPHALT CORPORATION By: /s/ N. Thomas Steele President FORELAND ASSET CORPORATION By: /s/ N. Thomas Steele President PETROSOURCE TRANSPORTATION By: /s/ N. Thomas Steele President CONSENTED AND AGREED TO: ENERGY INCOME FUND, L.P. By: EIF General Partner, L.L.C., its General Partner By: /s/ Steven P. McDonald Vice President EX-10 9 FIRST ALLONGE TO DEVELOPMENT NOTE THIS FIRST ALLONGE TO THE DEVELOPMENT NOTE (the "First Allonge"), dated as of August 10, 1998, is to become affixed to, modify and become a part of that certain promissory note (the "Development Note") in the original principal sum of Thirteen Million Eight Hundred Ninety-Three Thousand Dollars ($13,893,000), dated as of January 6, 1998, made originally by FORELAND CORPORATION, a corporation organized and existing under the laws of the State of Nevada, and EAGLE SPRINGS PRODUCTION LIMITED-LIABILITY COMPANY, a limited liability company organized under the laws of the State of Nevada (collectively, the "Borrowers"), and payable to the order of ENERGY INCOME FUND, L.P., a Delaware limited partnership ("Lender"). Lender and Borrowers have agreed that the Development Note should be amended and modified as follows: 1. The first full paragraph of the Development Note is amended by adding "Foreland Refining Corporation, a corporation organized and existing under the laws of the State of Texas, Foreland Asphalt Corporation, a corporation organized and existing under the laws of the State of Utah, Foreland Asset Corporation, a corporation organized and existing under the laws of the State of Nevada and Petrosource Transportation, a corporation organized and existing under the laws of the State of Utah" as Borrowers. By executing this First Allonge, Foreland Refining Corporation ("Foreland Refining"), Foreland Asphalt Corporation ("Foreland Asphalt"), Foreland Asset Corporation ("Foreland Asset") and Petrosource Transportation ("Transportation") agree to be bound by and expressly adopt, ratify, confirm and restate all provisions under the Development Note as if they were original parties to the Development Note, including but not limited to all representations and warranties, each of which shall be deemed to have been made as of the date hereof by Foreland Refining, Foreland Asphalt, Foreland Asset and Transportation. 2.The first full paragraph of the Development Note is further amended by inserting the phrase ", as amended" immediately prior to the parenthetical "(the "Financing Agreement")" in the first sentence of the paragraph. 3.The first full paragraph of the Development Note is further amended by deleting the principal sum of the Development Note and replacing it with "Seven Million One Hundred Seventy-Five Thousand Seven Hundred Twenty Dollars and Sixty-Six Cents ($7,175,720.66)." 4.The last two full paragraphs of the Development Note are amended by deleting them and replacing with the following: The obligations and liabilities of Borrowers under this Note and the Loan Documents are joint and several and Lender may enforce its rights under this Note and the Loan Documents, in its sole discretion, against any or all Borrowers. Notwithstanding anything to the contrary contained in this Note, the Financing Agreement or any other Loan Document, no Borrower shall have any personal liability for payment of principal and interest on this Note, and Lender shall look solely to the Collateral for the payment of such principal and interest and shall not seek a deficiency or other personal judgment against any Borrower in the event that any sale of the Collateral shall be insufficient to satisfy this Note. Nothing herein contained shall, however, impair any right, remedy or security of Lender with respect to the Collateral under this Note, nor limit any Borrower's obligations to perform any of Borrowers' other obligations under the Loan Documents, including without limitation Borrowers' obligation to pay damages as set forth in Section 4.3 and to indemnify Lender as set forth in Article 9 of the Financing Agreement. 5.This First Allonge shall effect the amendments and modifications to the Development Note described in paragraphs 1-4 above. 6.All terms and conditions of the Development Note shall, except as herein modified, remain in full force and effect and all rights, duties, obligations and responsibilities of Borrowers and Lender shall be governed and determined by the Development Note as the same has been modified by this First Allonge. 7.Wherever the term "Borrowers" includes Foreland, Eagle Springs, Foreland Refining, Foreland Asphalt, Foreland Asset or Transportation, the remaining language in such paragraph shall be interpreted to apply to each of Foreland, Eagle Springs, Foreland Refining, Foreland Asphalt, Foreland Asset or Transportation, as the context requires. 8.THIS FIRST ALLONGE IS TO BE CONSTRUED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. 9.This First Allonge shall be of no force and effect until receipt and execution of it by Lender at its offices in Longmeadow, Massachusetts. IN WITNESS WHEREOF, each of the undersigned has executed and delivered this First Allonge to Development Note as of the date first written above. FORELAND CORPORATION By: /s/ N. Thomas Steele President EAGLE SPRINGS PRODUCTION LIMITED-LIABILITY COMPANY By: /s/ N. Thomas Steele Manager FORELAND REFINING CORPORATION By: /s/ N. Thomas Steele President FORELAND ASPHALT CORPORATION By: /s/ N. Thomas Steele President FORELAND ASSET CORPORATION By: /s/ N. Thomas Steele President PETROSOURCE TRANSPORTATION By: /s/ N. Thomas Steele President CONSENTED AND AGREED TO: ENERGY INCOME FUND, L.P. By: EIF General Partner, L.L.C., its General Partner By: /s/ Steven P. McDonald Vice President EX-10 10 FIRST ALLONGE TO REFINANCING NOTE THIS FIRST ALLONGE TO THE REFINANCING NOTE (the "First Allonge"), dated as of August 10, 1998, is to become affixed to, modify and become a part of that certain promissory note (the "Refinancing Note") in the original principal sum of Six Hundred Eighty Thousand Dollars ($680,000), dated as of January 6, 1998, made originally by FORELAND CORPORATION, a corporation organized and existing under the laws of the State of Nevada, and EAGLE SPRINGS PRODUCTION LIMITED-LIABILITY COMPANY, a limited liability company organized under the laws of the State of Nevada (collectively, the "Borrowers"), and payable to the order of ENERGY INCOME FUND, L.P., a Delaware limited partnership ("Lender"). Lender and Borrowers have agreed that the Refinancing Note should be amended and modified as follows: 1. The first full paragraph of the Refinancing Note is amended by adding "Foreland Refining Corporation, a corporation organized and existing under the laws of the State of Texas, Foreland Asphalt Corporation, a corporation organized and existing under the laws of the State of Utah, Foreland Asset Corporation, a corporation organized and existing under the laws of the State of Nevada and Petrosource Transportation, a corporation organized and existing under the laws of the State of Utah" as Borrowers. By executing this First Allonge, Foreland Refining Corporation ("Foreland Refining"), Foreland Asphalt Corporation ("Foreland Asphalt"), Foreland Asset Corporation ("Foreland Asset") and Petrosource Transportation ("Transportation") agree to be bound by and expressly adopt, ratify, confirm and restate all provisions under the Refinancing Note as if they were original parties to the Refinancing Note, including but not limited to all representations and warranties, each of which shall be deemed to have been made as of the date hereof by Foreland Refining, Foreland Asphalt, Foreland Asset and Transportation. 2.The first full paragraph of the Refinancing Note is further amended by inserting the phrase ", as amended" immediately prior to the parenthetical "(the "Financing Agreement")" in the first sentence of the paragraph. 3.The first full paragraph of the Refinancing Note is further amended by deleting the principal sum of the Refinancing Note and replacing it with "Six Hundred Seventy-Four Thousand Two Hundred Seventy-Nine Dollars and Thirty-Four Cents ($674,279.34)." 4.The last two full paragraphs of the Refinancing Note are amended by deleting them and replacing with the following: The obligations and liabilities of Borrowers under this Note and the Loan Documents are joint and several and Lender may enforce its rights under this Note and the Loan Documents, in its sole discretion, against any or all Borrowers. Notwithstanding anything to the contrary contained in this Note, the Financing Agreement or any other Loan Document, no Borrower shall have any personal liability for payment of principal and interest on this Note, and Lender shall look solely to the Collateral for the payment of such principal and interest and shall not seek a deficiency or other personal judgment against any Borrower in the event that any sale of the Collateral shall be insufficient to satisfy this Note. Nothing herein contained shall, however, impair any right, remedy or security of Lender with respect to the Collateral under this Note, nor limit any Borrower's obligations to perform any of Borrowers' other obligations under the Loan Documents, including without limitation Borrowers' obligation to pay damages as set forth in Section 4.3 and to indemnify Lender as set forth in Article 9 of the Financing Agreement. 5.This First Allonge shall effect the amendments and modifications to the Refinancing Note described in paragraphs 1-4 above. 6.All terms and conditions of the Refinancing Note shall, except as herein modified, remain in full force and effect and all rights, duties, obligations and responsibilities of Borrowers and Lender shall be governed and determined by the Refinancing Note as the same has been modified by this First Allonge. 7.Wherever the term "Borrowers" includes Foreland, Eagle Springs, Foreland Refining, Foreland Asphalt, Foreland Asset or Transportation, the remaining language in such paragraph shall be interpreted to apply to each of Foreland, Eagle Springs, Foreland Refining, Foreland Asphalt, Foreland Asset or Transportation, as the context requires. 8.THIS FIRST ALLONGE IS TO BE CONSTRUED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. 9.This First Allonge shall be of no force and effect until receipt and execution of it by Lender at its offices in Longmeadow, Massachusetts. IN WITNESS WHEREOF, each of the undersigned has executed and delivered this First Allonge to Refinancing Note as of the date first written above. FORELAND CORPORATION By: /s/ N. Thomas Steele President EAGLE SPRINGS PRODUCTION LIMITED-LIABILITY COMPANY By: /s/ N. Thomas Steele Manager FORELAND REFINING CORPORATION By: /s/ N. Thomas Steele President FORELAND ASPHALT CORPORATION By: /s/ N. Thomas Steele President FORELAND ASSET CORPORATION By: /s/ N. Thomas Steele President PETROSOURCE TRANSPORTATION By: /s/ N. Thomas Steele President CONSENTED AND AGREED TO: ENERGY INCOME FUND, L.P. By: EIF General Partner, L.L.C., its General Partner By: /s/ Steven P. McDonald Vice President EX-10 11 ENVIRONMENTAL INDEMNITY AGREEMENT This Environmental Indemnity Agreement (this "Agreement"), dated as of August 11, 1998, is among PETRO SOURCE CORPORATION, a Utah corporation ("Petro Source Corp."), and Petro Source Investments, Inc., a Delaware corporation ("Petro Source Parent") (Petro Source Corp. and Petro Source Parent shall be referred to collectively as the "Petro Source Group"), and FORELAND CORPORATION, a Nevada corporation ("Foreland Corp."), FORELAND REFINING CORPORATION, a Texas corporation ("Foreland Refining"), FORELAND Asset Corporation, a Nevada corporation ("Foreland Asset"), and PETROSOURCE TRANSPORTATION, a Utah corporation ("Transportation") (Foreland Corp., Foreland Refining, Foreland Asset and Transportation shall be referred to collectively as, the "Foreland Group"). RECITALS A. By Option and Purchase Agreement, dated effective as of December 31, 1997, among Foreland Corp., Petro Source Corp., Petro Source Refining Corporation ("Petro Source Refining"), and Transportation, as amended by Amendment to Option and Purchase Agreement, dated as of , 1998, by and between Foreland Corp., Foreland Refining (as successor in interest to Petro Source Refining), Petro Source Corp. and Transportation (as amended, the Purchase Agreement"), Foreland Corp. agreed to acquire, directly or indirectly, certain properties, interests and rights generally described as: (i) all of the issued and outstanding stock of Transportation, which owns various rolling stock and other properties, (ii) the properties owned by Foreland Refining, including, without limitation, two refineries known as the Tonopah Refinery and the Eagle Springs Refinery and related properties, and (iii) all of the issued and outstanding stock of Foreland Refining, all as more particularly described in the Purchase Agreement. Such properties, including, without limitation, the Tonopah Refinery and the Eagle Springs Refinery and related properties, and the properties owned by Transportation shall be referred to collectively as the "Acquired Properties." All other properties at any time owned by any member of the Petro Source Group, Petro Source Refining, Foreland Refining, Transportation or any predecessor in interest to the Acquired Properties shall be referred to collectively as the "Other Properties." The Acquired Properties and the Other Properties shall be referred to collectively as the "Properties." B. Petro Source Corp. is the wholly owned subsidiary of Petro Source Parent. C. It is a condition precedent to Foreland Corp. proceeding with the closing of the transactions provided for by the Purchase Agreement, that the Petro Source Group execute and agree as provided herein. AGREEMENT In consideration of Foreland Corp. proceeding with the closing under the Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Petro Source Group and the Foreland Group agree as follows: 1. Definitions. As used herein, the following items shall have the following meanings: Hazardous Materials. The term "Hazardous Materials" shall mean (i) any oil, flammable substances, explosives, radioactive materials, hazardous wastes or substances, toxic wastes, wastes or substances or any other materials or pollutants which (A) pose a hazard to the Properties or to persons on or about the Properties, or (B) cause the Properties to be in violation of any federal, state, tribal or local laws, rules, ordinances, regulations, orders or policies relating to the environment, health and safety, or to industrial hygiene or the environmental conditions on, under or about the Premises, including, without limitation, soil and groundwater conditions; (ii) asbestos in any form which is or could become friable, urea formaldehyde foam insulation, transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty (50) parts per million; and (iii) any chemical, material or substance defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," or "toxic substances" or words of similar import under any applicable local, state or federal laws or the regulations adopted or publications promulgated pursuant thereto. Hazardous Materials Claims. The term "Hazardous Materials Claims" shall mean any and all enforcement, clean-up, removal, remedial or other governmental or regulatory actions or orders threatened, instituted or completed pursuant to any Hazardous Materials Laws, together with any and all claims made or threatened by any third party against the Foreland Group or the Properties relating to damage, contribution, cost recovery compensation, loss or injury resulting, from any Hazardous Materials. Hazardous Materials Laws. The term "Hazardous Materials Laws" shall mean any federal, state, tribal or local laws, rules, ordinances, regulations, orders or policies relating to the environment, health and safety, any Hazardous Materials (including, without limitation, the use, handling, transportation, production, disposal, discharge, storage, clean-up or remedy of contamination thereof) or to industrial hygiene or the environmental conditions in, on, under, about or otherwise relating to the Properties, including, without limitation, soil, groundwater and indoor and ambient air conditions. 2. Indemnity. The Petro Source Group shall protect, indemnify, defend and hold harmless each of the Foreland Group and its lenders and its and their directors, officers, members, employees, agents and shareholders from and against any and all actual or potential claims, liabilities, damages, losses, fines, penalties, judgments, awards, costs and expenses (including without limitation, attorneys' fees and costs and expenses of investigation) (collectively, the "Claims and Expenses") which are reasonably incurred and arise out of or relate in any way to any use, handling, production, transportation, disposal, transportation or storage of any Hazardous Materials in, on, under or through or migrating into, on, from or through the Acquired Properties on or prior to the date the closing occurs under the Purchase Agreement (the "Closing Date") and the Other Properties on, prior to or after the Closing Date, including, without limitation: (i) all foreseeable and all unforeseeable damages (specifically including, but not limited to, consequential damages) directly or indirectly arising out of (A) the use, generation, storage, discharge or disposal of Hazardous Materials by any person or entity, or (B) any residual contamination affecting any natural resource or the environment; and (ii) the reasonably incurred costs of any required or necessary repair, cleanup, or detoxification of the Properties and the preparation of any closure or other required plans; provided, however, that the Petro Source Group agrees that in the event any Hazardous Material is caused to be removed from the Properties by any member of the Petro Source Group, the Foreland Group or any other person, the number assigned by the Environmental Protection Agency or any other agency to such Hazardous Material shall, to the extent such matter is within the Petro Source Group's control, be solely in the name of a member of Petro Source Group and the Petro Source Group understands and agrees that its liability to the aforementioned indemnified parties shall arise from the earlier to occur of (a) discovery of any Hazardous Materials in, on, under or about the Properties, or (b) the institution of any Hazardous Material Claim, and not upon the realization of loss or damage; and the Petro Source Group agrees to pay to the Foreland Group from time to time, immediately upon request, an amount equal to such Claims or Expenses, as reasonably determined by the Foreland Group. 3. Survivability. The obligation of the Petro Source Group shall survive any transfer of title to the Properties by the Foreland Group through a foreclosure, deed in lieu of foreclosure or otherwise as part of a remedy exercised by an entity providing the Foreland Group with financing, but not otherwise, and shall inure to the benefit of any transferee of the Acquired Properties as well as the Foreland Group after any such transfer. Such obligation shall not be affected by any investigation by or on behalf of or by any information which the Foreland Group may have obtained with respect to the matters indemnified against by the Petro Source Group hereunder; provided that the Foreland Group, upon written request from the Petro Source Group, will provide the Petro Source Group with copies of any such written materials or information. The Petro Source Group hereby waives the right to assert any statute of limitations as a defense to the obligations under this Agreement to the fullest extent permitted by applicable law. The obligations of the Petro Source Group under this Agreement shall be joint and severable. 4. Severability. Wherever possible, each provision of this Agreement shall be interpreted in such a manner as to be valid and enforceable to the fullest extent permitted by applicable law. If any provision of this Agreement, or the application of any such provision to any person or circumstance, shall, to any extent, be held to be invalid, illegal or unenforceable under applicable law, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is invalid, illegal or unenforceable, shall not be affected thereby. 5. Governing Law. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Nevada. 6. Section Titles. The section titles contained in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning or interpretation of any provision of this Agreement. 7. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument. 8. Amendments and Waivers. No provision of this Agreement may be amended or terminated except by an instrument in writing setting forth the terms of such amendment or termination and signed by the party against whom enforcement is sought. No waiver of any provision of this Agreement nor consent to any departure by either party therefrom shall in any event be effective unless the same shall be in writing and signed by the other party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on either party shall in any case entitle it to any other or further notice or demand in similar or other circumstances. No failure on the part of either party to exercise and no delay in exercising any right or remedy hereunder, at law or in equity, shall operate as a waiver thereof; nor shall either party be estopped to exercise any such right or remedy at any future time because of any such failure to delay; nor shall any single or partial exercise of any such right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. 9. Attorneys' Fees. In the event of any litigation between the parties hereto to enforce any of the provisions of this Agreement or any right of either party hereto, the unsuccessful party to such litigation hereby agrees to pay any and all costs and expenses (including, without limitation, reasonable attorneys' fees) incurred by the successful party in enforcing any rights or remedies under this Agreement. 10. Notice. Any notice, demand, request, consent, approval, or communication that any party desires, or is required, to give to any other party or any other personal shall be in writing and either served personally or sent by prepaid, first-class mail to the other party at the following address: To Petro Source Group: Petro Source Corporation 9801 Westheimer, Suite 900 Houston, Texas 77042 Attention: A. Howard McCallum, President With copies to: Petro Source Corporation 9801 Westheimer, Suite 900 Houston, Texas 77042 Attention: Harvey H. Cody III, General Counsel To Foreland Group: Foreland Corporation 12596 West Bayaud, Suite 300 Lakewood, Colorado 80226 Attention: N. Thomas Steele, President With copies to: James R. Kruse, Esq. Kruse, Landa & Maycock, L.L.C. Eighth Floor, Bank One Tower 50 West Broadway (300 South) Salt Lake City, Utah 84101 Any party may change its address by so notifying the other party of the change of address. 11. Successors. This Agreement shall be binding on, and inure to the benefit of, the parties hereto and, to the extent specified in Section 3 hereof, their respective successors and assigns, including, without limitation, the successors to the Foreland Group. 12. Construction. Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular and the singular the plural. The word "or" is not exclusive. The words "hereof," "herein," "hereunder" and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. In the event of a conflict between the Purchase Agreement and this Agreement, this Agreement shall control. The parties hereto have executed and delivered this Agreement as of the date first written above. PETROSOURCE GROUP: Petro Source Corporation, a Utah corporation By /s/ Howard McCollum President Petro Source Investments, Inc., a Delaware corporation By /s/ Howard McCollum President FORELAND GROUP: Foreland Corporation, a Nevada corporation By /s/ N. Thomas Steele President Foreland Refining Corporation, a Texas corporation By /s/ N. Thomas Steele President Foreland Asset Corporation, a Nevada corporation By /s/ N. Thomas Steele President Petrosource Transportation, a Utah corporation By /s/ N. Thomas Steele President EX-10 12 WHEN RECORDED AND/OR FILED RETURN TO: Peter O. Hansen, Esq. Holme Roberts & Owen LLP 1700 Lincoln, Suite 4100 Denver, Colorado 80203 SECOND AMENDMENT TO DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF PRODUCTION AND PROCEEDS, FINANCING STATEMENT, AND FIXTURE FILING This Second Amendment to Deed of Trust, Security Agreement, Assignment of Production and Proceeds, Financing Statement and Fixture Filing (this "Second Amendment to Deed of Trust"), dated as of August 11, 1998, is among FORELAND CORPORATION, a Nevada corporation, EAGLE SPRINGS PRODUCTION LIMITED-LIABILITY COMPANY (also known as Eagle Springs Production Limited Liability Company), a Nevada limited liability company (collectively, "Debtors"), both with an address of 12596 West Bayaud, Suite 300, Lakewood, Colorado 80228, and ENERGY INCOME FUND, L.P., a Delaware limited partnership ("Secured Party"), with an address of 136 Dwight Road, Longmeadow, Massachusetts 01106. RECITALS A. By Deed of Trust, Security Agreement, Assignment of Production and Proceeds, Financing Statement and Fixture Filing, dated as of January 6, 1998 (the "Original Deed of Trust"), Debtors granted to Secured Party and to First American Title Company of Nevada, a Nevada corporation, as Trustee for the benefit of Secured Party, liens on and security interests in certain property, interests and rights as more specifically described therein. B. The Original Deed of Trust was recorded in the real property records of Elko, Eureka and Nye Counties, Nevada as follows: County Date Recording Data Elko 2/6/98 Book 1031 -- Page 458 No. 422281 Eureka 1/13/98 Book 317 -- Page 157 No. 169580 Nye 1/16/98 No. 435893 C. By First Amendment to Deed of Trust, Security Agreement, Assignment of Production and Proceeds, Financing Statement, and Fixture Filing, dated as of February 2, 1998, (the "First Amendment to Deed of Trust"), Debtors and Secured party amended the Original Deed of Trust to confirm that additional interests acquired by Debtors in a portion of oil and gas properties subject to the Original Deed of Trust and located in Nye County, Nevada were subject to the Original Deed of Trust. The Original Deed of Trust as amended by the First Amendment shall be referred to as the "Deed of Trust." Capitalized terms used herein without definition shall have the meaning ascribed thereto in the Deed of Trust. D. The First Amendment to Deed of Trust was recorded in the real property records of Nye County, Nevada as follows: County Date Recording Data Nye 2/11/98 No. 437922 The First Amendment to Deed of Trust was recorded only in Nye County, Nevada, because it affected real property located only in Nye County, Nevada. E. Secured Party is the owner of the indebtedness evidenced and created by the Notes, and Debtors are the legal owners of the Collateral, and all of the Collateral remains subject to the terms of the Deed of Trust. F. The Debtors, Foreland Refining Corporation, a Texas corporation ("Foreland Refining"), Foreland Asset Corporation, a Nevada corporation ("Foreland Asset"), Foreland Asphalt Corporation, a Utah corporation ("Foreland Asphalt"), and Petrosource Transportation, a Utah corporation ("Transportation") and Secured Party have amended the Loan Agreement by Amendment to Financing Agreement, dated as of August 10, 1998, in part to add Foreland Refining, Foreland Asset, Foreland Asphalt and Transportation as borrowers thereunder, and have amended the Notes by Allonges thereto which added Foreland Refining, Foreland Asset, Foreland Asphalt and Transportation as makers and obligors thereunder. G. This Second Amendment to Deed of Trust is executed to amend the Deed of Trust as provided herein. AMENDMENT In consideration of the mutual promises contained herein, the benefits to be derived by each party hereunder and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Amendment to Definition of Obligations. The definition of "Obligations" contained in the Deed of Trust is hereby amended such that Section 1.1 of the Deed of Trust shall read in its entirety as follows: Section 1.1 Obligations Secured. This Instrument is executed, acknowledged and delivered by Debtors to secure and enforce the following indebtedness, liabilities and obligations (the "Obligations"): A. Notes. All indebtedness (including principal, interest, fees and penalties), liabilities and obligations under or pursuant to the following described notes, and any renewals, extensions or restatements thereof, modifications, changes, amendments or supplements thereto and substitutions therefor (collectively, the "Notes"): 1. Refinancing Note, dated as of January 6, 1998, in the maximum principal amount of $680,000 made by Debtors and payable to the order of Secured Party on or before January 1, 2002, together with interest until maturity or default at the rate of 12% per annum (the "Standard Interest Rate"), and after maturity or default at the rate of 15% per annum (the "Default Rate"), as amended and supplemented by First Allonge to Refinancing Note, dated as of August 10, 1998, and executed by Debtors, Foreland Refining Corporation, a Texas corporation ("Foreland Refining"), Foreland Asset Corporation, a Nevada corporation ("Foreland Asset"), Foreland Asphalt Corporation, a Utah corporation ("Foreland Asphalt") and Petrosource Transportation, a Utah corporation ("Transportation") (collectively, the "Foreland Group"), which added Foreland Refining, Foreland Asset, Foreland Asphalt and Transportation as makers and obligors and decreased the principal amount to $674,279.34; 2. Acquisition Note, dated as of January 6, 1998, in the maximum principal amount of $2,327,000 made by Debtors and payable to the order of Secured Party on or before January 1, 2002, together with interest until maturity at the Standard Interest Rate, and after maturity or default at the Default Rate, as amended and supplemented by First Allonge to Acquisition Note, dated as of August 10, 1998, and executed by the Foreland Group, which added Foreland Refining, Foreland Asset, Foreland Asphalt and Transportation as makers and obligors and increased the principal amount to $9,050,000.00; and 3. Development Note, dated as of January 6, 1998, in the maximum principal amount of $13,893,000 made by Debtors and payable to the order of Secured Party on or before January 1, 2002, together with interest until maturity or default at the Standard Interest Rate, and after maturity or default at the Default Rate, as amended and supplemented by First Allonge to Development Note, dated as of August 10, 1998 and executed by the Foreland Group, which added Foreland Refining, Foreland Asset, Foreland Asphalt and Transportation as makers and obligors and decreased the principal amount to $7,175,720.66; B. Loan Agreement. All indebtedness, liabilities and obligations of whatever kind or character, now existing or hereafter created or arising under or pursuant to that certain Financing Agreement (the "Loan Agreement"), dated as of January 6, 1998, among Debtors and Secured Party, as amended by First Amendment to Financing Agreement, dated as of August 10, 1998, among the Foreland Group and Secured Party, as amended and as may be amended from time to time; C. This Instrument. All indebtedness, liabilities and obligations of Debtors to Secured Party of whatever kind or character, now existing or hereafter created or arising under or pursuant to this Instrument, including, without limitation, those arising under or pursuant to the representations, warranties, covenants and indemnities contained herein and any and all amounts advanced to protect the liens and security interests herein granted and all reasonable attorneys fees, court costs, and expenses of whatever kind or character now existing or hereafter created or arising, incident thereto or to the collection of the indebtedness, liabilities and obligations hereby secured and enforcement of the liens and security interests herein granted and created; D. Other Obligations. All other indebtedness, liabilities and obligations of Debtors and the other members of the Foreland Group to Secured Party of whatever kind or character now existing or hereafter created or arising, whether fixed, absolute or contingent, direct or indirect, primary or secondary, joint, several or joint and several, due or to become due, and however evidenced whether by note, open account, overdraft, endorsement, surety agreement, guarantee or otherwise, it being contemplated that Debtors and the other members of the Foreland Group may hereafter become indebted to Secured Party in such further sum or sums; and E. Renewals, Extensions and Amendments. All indebtedness, liabilities and obligations of whatever kind or character, now existing or hereafter created or arising under or pursuant to all renewals, extensions and restatements of, modifications, changes, amendments and supplements to and substitutions for, all or any part of the foregoing. 2. Incorporation and References. This Second Amendment to Deed of Trust shall be considered as an amendment and supplement to the Deed of Trust. References in the Deed of Trust to "this Instrument" shall be deemed to be references to the Deed of Trust as amended by this Second Amendment to Deed of Trust. When used in this Second Amendment to Deed of Trust or in the Deed of Trust, each reference to a term defined in the Deed of Trust which is amended by this Second Amendment to Deed of Trust, shall be deemed to be the term as amended by this Second Amendment to Deed of Trust, including without limitation, references to the "Obligations" shall be deemed to be references to the "Obligations" as such definition is amended herein, references to the "Notes" shall be deemed to be references to the "Notes" as such definition is amended herein and references to the "Loan Agreement" shall be references to the "Loan Agreement" as such definition is amended herein. 3. Confirmation. Debtors hereby adopt, ratify, approve and confirm in every respect the Deed of Trust as amended by this Second Amendment to Deed of Trust, and hereby specifically reaffirm their obligations under the warranties, representations, covenants, agreements and indemnities and other provisions contained in the Deed of Trust as amended by this Second Amendment to Deed of Trust. To the extent necessary to confirm such amendments, Debtors hereby: A. Real Property. Grant, bargain, sell, assign, transfer and convey to Trustee, with POWER OF SALE, for the benefit of Secured Party, that part of the Collateral that is real property (including any fixtures that are real property under applicable state law), subject to the assignment of severed and extracted Hydrocarbons and the proceeds thereof made under C below; TO HAVE AND TO HOLD all of the Collateral that is real property (including any fixtures that are real property under applicable state law), together with all of the rights, privileges, benefits, hereditaments and appurtenances in any way belonging, incidental or pertaining thereto, to Trustee and its successors and assigns, forever, IN TRUST, NEVERTHELESS, for the security and benefit of Secured Party and its successors and assigns, subject to all of the terms, conditions, covenants, agreements and trusts set forth in the Deed of Trust as Amended by this Second Amendment to Deed of Trust; B. Personal Property. Grant to Secured Party a security interest in that part of the Collateral that is personal property (including any fixtures that are personal property under applicable state law); and C. Assignment of Production. Absolutely assign, grant and transfer to Secured Party all of the severed and extracted Hydrocarbons produced from or allocated or attributed to any of the Collateral or any other interest of Debtors (whether now owned or hereafter acquired by operation of law or otherwise) in, to and under or that covers, affects or otherwise relates to the Land or to any of the estates, property rights or other interests described or referred to above or herein, together with all of the proceeds, rents, income, issues and profits thereof and therefrom and payments in lieu thereof. 4. Miscellaneous. This Second Amendment to Deed of Trust shall bind Debtors and inure to the benefit of Secured Party and their respective successors and assignees. Except as specifically provided for in this Second Amendment to Deed of Trust (a) the Deed of Trust and the liens and security interests created thereby shall remain in full force and effect, (b) this Second Amendment to Deed of Trust does not modify or affect the terms, conditions or provisions of the Deed of Trust, and (c) nothing contained in this Second Amendment to Deed of Trust shall be deemed to be, or construed as, a waiver of any such terms, conditions or provisions, or as a waiver of any other term, condition or provision. Executed as of the date first set forth above. DEBTORS: FORELAND CORPORATION, a Nevada corporation By: /s/ N. Thomas Steele, President Tax I.D. No. 87-0422812 EAGLE SPRINGS PRODUCTION LIMITED-LIABILITY COMPANY (also known as Eagle Springs Production Limited Liability Company), a Nevada limited liability company By: /s/ N. Thomas Steele, Manager Tax I.D. No. 87-0522668 SECURED PARTY: ENERGY INCOME FUND, L.P., a Delaware limited partnership By: EIF GENERAL PARTNER, L.L.C., a Delaware limited liability company, its General Partner By /s/ Steven P. McDonald, Vice President Tax I.D. No. 04-3309082 ACKNOWLEDGMENT CERTIFICATES STATE OF COLORADO ) ) ss. COUNTY OF DENVER ) This instrument was acknowledged before me on August , 1998, by N. THOMAS STEELE, Manager of EAGLE SPRINGS PRODUCTION LIMITED-LIABILITY COMPANY (also known as Eagle Springs Production Limited Liability Company), a Nevada limited liability company. /s/ Notary Public My commission expires: (NOTARIAL SEAL) STATE OF COLORADO ) ) ss. COUNTY OF DENVER ) This instrument was acknowledged before me on August , 1998, by N. THOMAS STEELE, as President of FORELAND CORPORATION, a Nevada corporation. /s/ Notary Public My commission expires: (NOTARIAL SEAL) STATE OF COLORADO ) ) ss. COUNTY OF DENVER ) This instrument was acknowledged before me on August , 1998, by STEVEN P. McDONALD, Vice President of EIF GENERAL PARTNER, L.L.C., a Delaware limited liability company, the General Partner of ENERGY INCOME FUND, L.P., a Delaware limited partnership. /s/ Notary Public My commission expires: (NOTARIAL SEAL) -----END PRIVACY-ENHANCED MESSAGE-----