AMENDMENT TO
OPTION AND PURCHASE AGREEMENT
THIS AMENDMENT TO OPTION AND PURCHASE AGREEMENT (this "Amendment") is
entered into as of this 11th day of August, 1998, by and between FORELAND
CORPORATION, a Nevada corporation ("Foreland") on the one hand, and PETRO SOURCE
CORPORATION, a Utah corporation ("Petro Source Corporation"), FORELAND REFINING
CORPORATION, a Texas corporation ("Foreland Refining"), and PETROSOURCE
TRANSPORTATION, a Utah corporation ("Petrosource Transportation"), on the other
(Petro Source Corporation, Foreland Refining, and Petrosource Transportation are
collectively referred to as "PSC"), based on the following:
PREMISES
A. Foreland, Petro Source Corporation, and Petrosource Transportation are
parties to that certain Option and Purchase Agreement dated December 31, 1997
(the "Option and Purchase Agreement"). Foreland Refining is a successor,
through merger, to Petro Source Refining Corporation, a Utah corporation ("Petro
Source Refining"), which was also a party to the Option and Purchase Agreement.
B. In May 1998, Foreland exercised its option to purchase the Business
and Business Assets as defined in the Option and Purchase Agreement, and the
parties are obligated to close that transaction.
C. The parties desire to amend the Option and Purchase Agreement in order
to modify certain provisions thereof to reflect changes and modifications that
have been agreed to since the execution of the Option and Purchase Agreement,
including the restructuring of the transaction as the acquisition of certain
assets of Foreland Refining, including the stock of Petrosource Transportation,
by a newly-formed, wholly-owned subsidiary of Foreland, Foreland Asset
Corporation ("Foreland Asset"), followed by the acquisition by Foreland of
Foreland Refining, rather than the sale of assets of Petro Source Refining and
Petrosource Transportation to Foreland as originally contemplated by the Option
and Purchase Agreement.
D. The parties desire to ratify and reaffirm all of the terms and
conditions of the Option and Purchase Agreement, except those provisions
specifically modified by the terms of this Amendment.
AGREEMENT
NOW, THEREFORE, based on the foregoing premises, and in consideration of
the mutual covenants and agreements hereinafter set forth and the mutual benefit
to the parties to be derived herefrom, it is hereby agreed as follows:
1. PSC Employees. The following provision will be added to the end of
Section 2.10 of the Option and Purchase Agreement:
(c) Foreland Refining or Petrosource Transportation will hire the PSC
employees contemplated by Section 2.10(b) as of August 15, 1998. Between
the Closing Date and August 14, 1998, such employees will remain in the
employment of PSC and shall be made available to Foreland Refining or
Petrosource Transportation pursuant to a Transition Services Agreement
between the parties.
2. The Purchase. Section 3.01 of the Option and Purchase Agreement is
amended to read in its entirety as follows:
Section 3.01 The Purchase. As a result of Foreland exercising its
Option as set forth in Article II of the Option and Purchase Agreement, (i)
Foreland Refining shall sell to Foreland Asset all of the issued and
outstanding stock of Petrosource Transportation and the Business Assets set
forth in subparagraphs (a), (b), (k), and (n) below that are owned by it;
and (ii) after completion of the sale of assets contemplated by
subparagraph (i) and the distribution of the proceeds from such sale to
Petro Source Corporation, Petro Source Corporation shall sell, and Foreland
shall purchase, all of the issued and outstanding stock of Foreland
Refining. References in this Agreement to the acquisition of the Business
and Business Assets shall be read to mean the acquisition of the Business
and Business Assets through the purchase of the assets to be sold to
Foreland Asset and the subsequent purchase of the issued and outstanding
stock of Foreland Refining. The Business and Business Assets shall,
subject to the Excluded Assets identified in Section 3.02, consist of the
following:
(a) (i) all tangible personal property owned by PSC and located
at, or used in connection with, the operation of the Eagle Springs
Refinery, the Tonopah Refinery (excluding the emulsifier and the two
asphalt spreader trucks and related equipment), (ii) the roofing
asphalt equipment located at the Fredonia Terminal (provided Foreland,
at its own expense, removes such equipment from PSC's property within
24 months after the Closing Date, otherwise the ownership of such
equipment shall revert to Crown Asphalt Distribution, L.L.C.), and
(iii) the rights of PSC as lessee of all tangible personal property
leased, including the equipment, tools, vehicles, furniture and
fixtures, and supplies described in Exhibit "A" (the "Tangible
Personal Property");
(b) all of PSC's rights as lessee or holder of rights-of-way to
the real property and all buildings and improvements thereon on which
the Eagle Springs Refinery and the Tonopah Refinery are located, as
more particularly described in Exhibit "B" (the "Real Property");
(c) all inventory of PSC existing as of the Effective Time which
was purchased in furtherance of the Business, as described in Exhibit
"C" (the "Inventory");
(d) all of the notes and trade and other accounts receivable
associated with the Eagle Springs Refinery, the Tonopah Refinery, or
Petrosource Transportation existing as of the Effective Time, as
described in Exhibit "D" (the "Accounts Receivable");
(e) all cash, cash equivalents, and prepaid expenses held by
Foreland Refining or Petrosource Transportation;
(f) all of PSC's rights under (i) those crude oil and transmix
purchase contracts and agreements described in Exhibit "E" which were
entered into by PSC in the ordinary course of business and are
executory, and (ii) all contracts and agreements 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 763,602 shares of Foreland
Stock (the "Closing Shares"), which shall be registered in the
name of Petro Source Corporation and held and disposed of in
accordance with the terms and conditions of subparagraph (e) of
this section 3.05A.
(d) Payments and Deliveries. Prior to 11:00 a.m. Houston time on
the Closing Date, Foreland shall (i) pay an amount equal to the Base
Price for the account of Petro Source Corporation by wire transfer of
funds to Petro Source Corporation's designated bank account, and (ii)
deliver to Petro Source Corporation one or more certificates for the
Original Shares and the Closing Shares.. Petro Source Corporation
shall deliver or cause to be delivered the Releases, as defined in
Section 6.03A, together with all conveyances, instruments, and
documents to be delivered by or on behalf of Petro Source Corporation
at Closing.
(e) Delivery and Sale of Original Shares and Closing Shares.
The Original Shares and the Closing Shares shall be issued, held, and
disposed of as follows:
(i) At the earliest practicable date, but in any event by
the earlier of the date that is (A) 10 days after the filing by
Foreland of a report containing historical and pro forma combined
financial information respecting the purchased Business and
Business Assets pursuant to section 13 of the Securities Exchange
Act of 1934, or (B) 75 days after the Closing Date, Foreland
shall file, at its sole cost, a Registration Statement on such
form as Foreland may select under the Securities Act covering the
resale of the Closing Shares and the Original Shares, by and for
the account of Petro Source Corporation, which shall be named as
a selling shareholder in the Registration Statement, all as more
particularly set forth in Article IX hereof. Foreland shall
utilize its best efforts to obtain the effectiveness of the
Registration Statement at the earliest practicable date and to
maintain its effectiveness until June 30, 1999. In the event
that all of the Closing Shares are not sold by Petro Source
Corporation under the Registration Statement on or before
December 31, 1998, Foreland shall pay interest to Petro Source
Corporation in cash equal to 5.0% per annum multiplied by the
difference between (i) the Estimated Adjustments to Base Price
less (ii) the net proceeds realized by Petro Source Corporation
from the sale of such Closing Shares. Such amounts shall be paid
by Foreland to Petro Source Corporation on the last day of each
month beginning with the last day of January 1999. The amount
described in the preceding sentence shall be paid in addition to
the interest Petro Source Corporation is entitled to receive
pursuant to the following paragraph.
(ii) Petro Source Corporation may cause to be sold, at any
time and from time-to-time and in accordance with the
Registration Statement, that number of Closing Shares that yields
proceeds, net of brokerage and other usual and customary
transaction costs, the Estimated Adjustments to Base Price, plus
simple interest on the unpaid balance from the Closing Date to
the date such net proceeds from such sale are available to the
account of Petro Source Corporation at the rate of 10% per annum
(the "Realizable Amount"), provided, however, that Petro Source
Corporation shall not sell or place an order to sell in the
Nasdaq SmallCap Market that number of Closing Shares that would
yield net proceeds of more than $400,000 in any consecutive 30
day period without Foreland's prior consent. There are no
restrictions on the sale of the Original Shares of Foreland Stock
delivered to Petro Source Corporation at Closing, other than in
accordance with the Registration Statement.
(iii) If the net proceeds from the sale of Closing
Shares are less than the Realizable Amount, Petro Source
Corporation may demand that Foreland pay such deficiency, in
which case Foreland shall, within five days after such demand, at
its option, either pay such amount in cash in immediately
available funds or deliver to Petro Source Corporation such
additional shares of Common Stock as Foreland estimates will
yield net proceeds in the amount sufficient for Petro Source
Corporation to realize in cash the Realizable Amount (the
"Additional Shares"). Should the proceeds from the Additional
Shares prove to be insufficient for Petro Source Corporation to
realize in cash the Realizable Amount, Petro Source Corporation
may demand that Foreland pay such deficiency, in which case
Foreland shall, within five days after such demand, pay Petro
Source Corporation such deficiency in cash.
(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. Payment of Cost of Survey. On or before ten days following the
Closing, Foreland shall reimburse Petro Source Corporation for the cost incurred
by Petro Source Corporation in obtaining a survey of the properties pursuant to
the Option and purchase Agreement.
22. Ratification of Option and Purchase Agreement. Except as specifically
provided by this Amendment, the parties hereby specifically ratify, confirm, and
adopt and binding and enforceable, all of the terms and conditions of the Option
and Purchase Agreement.
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/ A. Howard McCollum, President
PETROSOURCE TRANSPORTATION
By /s/ A. Howard McCollum, President