EXHIBIT 1
EXCHANGE AND STOCK ISSUANCE AGREEMENT
by and among
INLAND RESOURCES INC.,
a Washington corporation
INLAND PRODUCTION COMPANY,
a Texas corporation
INLAND HOLDINGS, LLC,
a California limited liability company
and
SOLVation INC.,
a Delaware corporation
Dated as of January 30, 2003
TABLE OF CONTENTS
SECTION 1. DEFINITIONS.................................................................1
1.1 Definitions.................................................................1
1.2 Accounting Terms and Determinations.........................................8
1.3 Interpretation..............................................................9
SECTION 2. EXCHANGE OF SECURITIES......................................................9
2.1 Exchanges...................................................................9
2.2 The Closing................................................................10
2.3 Further Assurances.........................................................10
SECTION 3. REPRESENTATIONS and warranties OF THE COMPANIES............................10
3.1 Organization and Authorization of the Companies............................10
3.2 Capital Stock..............................................................11
3.3 Financial Information......................................................12
3.4 Independent Engineering Report.............................................12
3.5 Litigation.................................................................13
3.6 Absence of Undisclosed Liability...........................................13
3.7 Governmental Consents......................................................13
3.8 Compliance with Laws and Other Instruments of the Companies................13
3.9 No Affiliate Ownership.....................................................14
3.10 Compliance with Laws.......................................................14
3.11 Licenses and Permits.......................................................14
3.12 Taxes......................................................................14
3.13 ERISA Plans and Liabilities................................................14
3.14 Private Offering...........................................................15
3.15 Investment Company Act and Public Utility Holding Company Act..............15
3.16 Environmental Laws.........................................................15
3.17 Labor Relations............................................................16
3.18 No Broker's or Other Fees..................................................16
3.19 Material Agreements........................................................17
3.20 Title to Properties........................................................17
SECTION 4. REPRESENTATIONS and WARRANTIES of HOLDERS..................................17
4.1 Authority of Holder........................................................17
4.2 Acquisition for Holders' Account...........................................18
4.3 Investment Experience......................................................18
4.4 Securities Not Registered..................................................18
4.5 Accredited Investor........................................................18
4.6 Acknowledgement of Risk....................................................18
4.7 No Public Solicitation.....................................................18
SECTION 5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE HOLDERs.........................19
5.1 Representations and Warranties.............................................19
5.2 Performance................................................................19
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5.3 Officers' Certificates.....................................................19
5.4 Orders and Laws............................................................19
5.5 Regulatory Consents and Approvals..........................................19
5.6 Third Party Consents.......................................................20
5.7 Fairness Opinion...........................................................20
5.8 Resignation of Chairman of the Board and Director..........................20
5.9 Amendment to Senior Subordinated Note Purchase Agreement...................20
5.10 Amendment of the Option Agreement..........................................20
5.11 Amended Registration Rights Agreement......................................20
5.12 Development Agreement......................................................21
5.13 Termination of Shareholders Agreement......................................21
5.14 Transaction Documents......................................................21
5.15 Fees and Expenses..........................................................21
5.16 Simultaneous Exchange......................................................21
5.17 Opinions of Counsel to the Companies.......................................21
5.18 Filing and Dissemination of Information....................................21
5.19 Amendment to Employment Agreements.........................................21
5.20 Amendment of Articles of Incorporation.....................................21
5.21 Fourth Senior Bank Amendment...............................................21
SECTION 6. conditions PRECEDENT to obligations of inland..............................22
6.1 Representations and Warranties.............................................22
6.2 Performance................................................................22
6.3 Filing and Dissemination of Information....................................22
6.4 Fairness Opinion...........................................................22
6.5 Orders and Laws............................................................22
6.6 Simultaneous Exchange......................................................22
6.7 Amendment to Employment Agreements.........................................22
6.8 Transaction Documents......................................................23
SECTION 7. COVENANTS..................................................................23
7.1 Fulfillment of Conditions..................................................23
7.2 Board of Directors Representation..........................................23
7.3 Director Compensation......................................................23
SECTION 8. TRANSFERABILITY............................................................23
8.1 Restrictive Legend.........................................................23
8.2 Rule 144 and 144A..........................................................24
8.3 Transferability............................................................24
SECTION 9. INDEMNITY..................................................................24
SECTION 10. MISCELLANEOUS..............................................................25
10.1 Waivers and Amendments; Acknowledgment.....................................25
10.2 Survival of Agreements; Cumulative Nature..................................25
10.3 Notices....................................................................26
10.4 Governing Law; Submission to Process.......................................26
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10.5 Registration, Transfer, Exchange and Substitution of Stock.................26
10.6 Waiver of Jury Trial, Punitive Damages, Etc................................27
10.7 Exhibits and Disclosure Schedule; Additional Definitions...................28
10.8 Confidentiality of Holders.................................................28
10.9 Successors and Assigns.....................................................28
10.10 Counterparts...............................................................28
10.11 Severability...............................................................28
10.12 Expenses...................................................................29
10.13 Specific Performance.......................................................29
TABLE OF EXHIBITS AND SCHEDULES
Exhibit A Form of Officer's Certificate
Exhibit B Form of Secretary's Certificate
Exhibit C Form of Amendment to Senior Subordinated Note Purchase Agreement
Exhibit D Form of Amendment to Option Agreement
Exhibit E Form of Amended Registration Rights Agreement
Exhibit F Form of Development Agreement
Exhibit G Form of Termination Agreement
Exhibit H Form of Legal Opinion
Exhibit I-1 Form of ▇▇▇▇▇▇▇▇ Amendment to Employment Agreement
Exhibit I-2 Form of ▇▇▇▇▇▇▇▇▇▇ Amendment to Employment Agreement
Exhibit J Form of Amendment to Articles of Incorporation
Schedule 3.1 Subsidiaries
Schedule 3.2 Convertible Securities
Schedule 3.3 Financial Information
Schedule 3.5 Litigation
Schedule 3.6 Undisclosed Liabilities
Schedule 3.7 Consents/Approvals
Schedule 3.10 Compliance with Laws
Schedule 3.13 ERISA Plans
Schedule 3.16 Environmental
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EXCHANGE AND STOCK ISSUANCE AGREEMENT
This EXCHANGE AND STOCK ISSUANCE AGREEMENT (this "Agreement") is
dated as of January 30, 2003, by and among INLAND RESOURCES INC., a Washington
corporation ("Inland") and INLAND PRODUCTION COMPANY, a Texas corporation ("IPC"
together with Inland, the "Companies"), on the one hand, and INLAND HOLDINGS,
LLC, a California limited liability company ("TCW") and SOLVation Inc., a
Delaware corporation ("▇▇▇▇▇," together with TCW, the "Holders" and each, a
"Holder"), on the other hand.
WHEREAS, TCW is presently the holder of Inland's $98,968,964 in
aggregate original principal amount unsecured Subordinated Note No. R-001, due
September 30, 2009 (the "Exchanged Sub Note") issued pursuant to that certain
Exchange and Note Issuance Agreement dated as of August 2, 2001 among Inland,
IPC and TCW;
WHEREAS, ▇▇▇▇▇ is presently the holder of Inland's $5,000,000 in
aggregate original principal amount unsecured Junior Subordinated Note No.
R-3001, due March 31, 2010 (the "Exchanged Junior Note") issued pursuant to that
certain Junior Subordinated Note Purchase Agreement dated as of August 2, 2001
among Inland, IPC and ▇▇▇▇▇;
WHEREAS, TCW desires to exchange its entire interest in the
Exchanged Sub Note and accumulated interest thereon (together, the "Exchanged
Sub Debt") for (A) 911,588 shares of Series F Preferred Stock, plus 338 shares
per day for each day after November 30, 2002 to and including the Closing Date
and (B) 22,053,000 shares of Common Stock, subject to the terms and conditions
set forth herein;
WHEREAS, ▇▇▇▇▇ desires to exchange its entire interest in the
Exchanged Junior Note and accumulated interest thereon (together, the "Exchanged
Junior Debt") for 68,854, plus 27 shares per day for each day after November 30,
2002 to and including the Closing Date shares of Series F Preferred Stock,
subject to the terms and conditions set forth herein; and
WHEREAS, Inland desires to cancel the Exchanged Sub Debt and
Exchanged Junior Debt.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants, conditions and agreements contained
herein, and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally bound
by the terms hereof, agree as follows:
SECTION 1. DEFINITIONS.
1.1 Definitions. As used in this Agreement, each capitalized
term has the meaning ascribed to it in this Section 1.1.
"10-Q Filing Date" shall have the meaning set forth in Section
3.3.
"1935 Act" shall have the meaning set forth in Section 3.15.
"Affiliate" of a specified Person means:
(i) any other Person directly or indirectly owning, controlling or
holding with power to vote 50% or more of the outstanding voting
securities of the specified Person;
(ii) any other Person 50% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held
with power to vote by the specified Person;
(iii) any other Person directly or indirectly controlling, controlled
by or under common control with the specified Person; or
(iv) any officer, director, partner or sanguineous or affined kin of
the specified Person or of any other Person described in clause
(iii) above.
For the avoidance of doubt and without limiting the generality of the foregoing,
the following Persons shall be deemed to be Affiliates of ▇▇▇▇▇: (a) ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. Pasmas, ▇▇▇▇ ▇. ▇▇▇▇▇,
(b) any immediate family member of any Person falling within (a) above, (c) any
direct lineal descendant of any Person falling within (b) above, (d) any trust
established for the benefit of any Person falling within (a) to (c) above, (e)
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, and (f) any Person controlling, controlled by or under common
control with (a) to (e) above. For the further avoidance of doubt and without
limiting the generality of the foregoing, any partner, member, shareholder,
participant or beneficial interest owner of any TCW partner, member,
shareholder, participant or beneficial interest owner of any of the foregoing
shall be deemed to be an Affiliate of TCW.
"Agreement" has the meaning set forth in the preamble hereto.
"Amended Registration Rights Agreement" means that certain Second
Amended and Restated Registration Rights Agreement dated as of the Closing Date
by and among Inland, TCW, ▇▇▇▇▇ and Hampton.
"Amended Senior Bank Agreement" means the Third Amended and
Restated Credit Agreement dated as of November 30, 2001, by and between IPC,
Fortis Capital Corp., a Connecticut corporation, as agent, and various other
Lenders (as such term is defined therein), as amended from time to time.
"Amendment to Option Agreement" means that certain amendment to
the Option Agreement dated as of the Closing Date.
"Amendment to Senior Subordinated Note Purchase Agreement" means
that certain amendment to the Senior Subordinated Note Purchase Agreement dated
as of the Closing Date.
"Banks" means Fortis Capital Corp. and U.S. Bank National
Association.
"Board of Directors" means the board of directors of Inland or
IPC, as applicable.
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"Closing" has the meaning set forth in Section 2.2.
"Closing Date" shall mean the date on which the Closing occurs.
"Commission" has the meaning set forth in Section 3.3.
"Common Stock" means the common stock, $.001 par value per share,
of Inland.
"Companies" has the meaning set forth in the preamble.
"Disclosure Schedule" means the Disclosure Schedule attached
hereto.
"Debt" means, as to any Person, (i) all indebtedness of such
Person for borrowed money (whether by loan or the issuance and sale of debt
securities) or for the deferred purchase price of property or services (other
than current trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), (ii) any other indebtedness of
such Person which is evidenced by a note, bond, debenture or similar instrument,
(iii) all obligations of such Person which are required by GAAP to be classified
and accounted for as capital leases on the balance sheet of such Person, (iv)
all obligations of such Person in respect of letters of credit, acceptances or
similar instruments issued or created for the account of such Person, (v) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof
and (vi) the net liability under all hedging obligations of such Person.
"Development Agreement" means that certain agreement relating to
the pace of development of the Monument Butte Field dated as of the Closing Date
by and among the Companies and ▇▇▇▇▇ Energy Partnership.
"Environmental Laws" means any and all Laws relating to the
environment or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment including ambient air, surface water,
ground water, or land.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, together with all rules and regulations
promulgated with respect thereto.
"ERISA Affiliate" means each of the Companies and all members of
a controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control that, together with each of the Companies,
are treated as a single employer under Section 414 of the Internal Revenue Code
of 1986, as amended.
"ERISA Plan" means any pension benefit plan subject to Title IV
of ERISA.
"Evaluated Properties" has the meaning set forth in Section 3.4.
"Exchange Act" has the meaning set forth in Section 3.3.
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"Exchanged Junior Debt" has shall have the meaning set forth in
the recitals hereto.
"Exchanged Junior Note" has the meaning set forth in the recitals
hereto.
"Exchanged Sub Debt" has the meaning set forth in the recitals
hereto.
"Exchanged Sub Note" has the meaning set forth in the recitals
hereto.
"Financial Statements" has the meaning set forth in Section 3.3.
"Fiscal Year" means a twelve calendar month period ending on
December 31 of any year.
"Fourth Senior Bank Amendment" means the Fourth Amendment to the
Amended Senior Bank Agreement dated on or after the date hereof, by and between
IPC, Fortis Capital Corp., a Connecticut corporation, as agent, and various
other Lenders (as such term is defined therein).
"GAAP" means, with respect to Inland and any Related Person
domiciled in the United States, those generally accepted accounting principles
and practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor) in the United States on the
Closing Date.
"Governmental Person" means any national (Federal or foreign),
state or local government, any political subdivision or any governmental,
quasi-governmental, judicial, public or statutory instrumentality, authority,
agency, body or entity.
"Hampton" means Hampton Investments, LLC, a Delaware limited
liability company.
"Hazardous Materials" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Holders" and "Holder" shall have the meaning set forth in the
preamble.
"Indemnified Party" has the meaning set forth in Section 8.
"Independent Engineer" means ▇▇▇▇▇ ▇▇▇▇▇ Company Petroleum
Engineers or any other independent engineering consultant firm reasonably
acceptable to TCW.
"Independent Engineering Report" means each engineering report
prepared by an Independent Engineer, which shall be (i) effective as of January
1st of each year and (ii) prepared in accordance with the then existing
standards of the Society of Petroleum Engineers.
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"Initial Independent Engineering Report" means the engineering
report prepared by the Independent Engineer ▇▇▇▇▇ ▇▇▇▇▇ Company Petroleum
Engineers dated as of February 25, 2002.
"Inland" has the meaning set forth in the preamble.
"Investors' Agreement" means that certain Investors' Agreement
dated as of the date hereof by and among TCW, ▇▇▇▇▇, ▇▇▇▇▇▇▇ and Inland.
"IPC" has the meaning set forth in the preamble.
"Law" means any applicable statute, law, regulation, ordinance,
rule, treaty, judgment, order, decree, permit, concession, license or other
governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, province or
other political subdivision thereof.
"Liability" has the meaning set forth in Section 3.6.
"Lien" means, with respect to any property or assets, any right
or interest therein of a creditor to secure Debt owed to him or any other
arrangement with such creditor which provides for the payment of such Debt out
of such property or assets or which allows him to have such Debt satisfied out
of such property or assets prior to the general creditors of any owner thereof,
including any lien, mortgage, security interest, pledge, deposit, production
payment, rights of a vendor under any title retention or conditional sale
agreement or lease substantially equivalent thereto, tax lien, mechanic's or
materialman's lien, or any other charge or encumbrance for security purposes,
whether arising by law or agreement or otherwise, but excluding any right of
offset which arises without agreement in the ordinary course of business. "Lien"
also means any filed financing statement, any registration of a pledge (such as
with an issuer of unregistered securities), or any other arrangement or action
which would serve to perfect a Lien described in the preceding sentence,
regardless of whether such financing statement is filed, such registration is
made, or such arrangement or action is undertaken before or after such Lien
exists.
"Material Adverse Effect" means, as to any Person, a material
adverse effect on:
(i) the Property, business, operations, financial condition,
liabilities or capitalization of such Person taken as a whole;
or
(ii) the ability of such Person to timely perform its obligations
under any of the Transaction Documents to which it is a party;
or
(iii) the validity or enforceability of any of the Transaction
Documents; or
(iv) the rights, remedies, powers and privileges of such Person under
any of the Transaction Documents.
"New TCW Common Stock" shall have the meaning set forth in
Section 2.1(a).
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"Option Agreement" means that certain Option Agreement by and
between TCW and ▇▇▇▇▇ dated as of August 2, 2001, with respect to the ▇▇▇▇▇
Senior Subordinated Note.
"Order" means any order, writ, injunction, decree, judgment,
award, determination, direction or demand of any Governmental Person, court or
arbitrator with competent jurisdiction..
"Permitted Debt" means, without duplication: (i) liabilities for
taxes, assessments, governmental charges or levies, (ii) tax liabilities arising
as a result of the filing of the Companies' consolidated tax return; (iii) any
obligations or liabilities of the Companies under the Senior Bank Debt up to a
maximum principal amount of $90 million and the Transaction Documents, (iv)
commodity hedging obligations, (v) Debt incurred in connection with capital
leases of compressors, field, wellhead and other equipment or for the deferred
purchase price of such equipment in each case, incurred in the ordinary course
of business and in the aggregate not to exceed $1,000,000 outstanding at any
time, (vi) Debt in respect of performance bonds, appeal bonds and surety bonds
provided by the Companies in connection with operation or abandonment of the
Companies' Properties, (vii) Debt owed by either Company to the other Company,
(viii) other unsecured Debt of the Companies on a consolidated basis not to
exceed $1,000,000 outstanding at any time, (ix) indebtedness to Custom Energy
Construction Inc., in the aggregate amount and all accrued interest thereon not
to exceed $1.2 million, (x) the ▇▇▇▇▇ Senior Subordinated Note and all accrued
interest thereon and (xi) renewals of the foregoing.
"Permitted Lien" means (i) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a Liability that is not yet due or delinquent, (iii) any minor
imperfection of title or similar Lien which individually or in the aggregate
with other such Liens does not materially impair the value of the property
subject to such Lien or the use of such property in the conduct of the business
of Inland or any of its Subsidiaries, (iv) deposits or pledges (but not other
Liens) to secure the payment of worker's compensation, unemployment insurance or
other social security benefits or obligations, or public or statutory
obligations of a like general nature incurred in the ordinary course of
business, (v) Liens securing surety or appeal bonds, bid or performance bonds or
other obligations of a like general nature incurred in the ordinary course of
business, (vi) zoning restrictions, easements, licenses, or restrictions on the
use of real property which do not materially impair the use of such Property in
the operation of the business or the value of such Property, (vii) inchoate
liens arising under ERISA to secure current service pension liabilities as they
are incurred under the provisions of employee benefits plans from time to time
in effect; (viii) the rights of any lessors under any leases capitalized in
accordance with GAAP which constitute Permitted Debt, (ix) Liens arising by
operation of law in connection with judgments, if stayed, (x) Liens securing
obligations with respect to commodity hedging and (xi) Liens to secure Permitted
Debt obligations (other than Permitted Debt referred to in clauses (viii), (ix)
and (x) of the definition thereof) (including the Senior Bank Debt).
"Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof,
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unincorporated organization or joint venture, court or governmental unit or any
agency or subdivision thereof, or any other legally recognizable entity.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed.
"Register" has the meaning set forth in Section 10.5.
"Registration Rights Agreement" means that certain Amended and
Restated Registration Rights Agreement dated as of August 2, 2001 by and among
Inland, TCW and Hampton.
"Related Person" means any of the Companies or their respective
Subsidiaries, whether now existing or hereafter formed or acquired.
"Requisite Holders" means TCW and ▇▇▇▇▇, as long as such entities
each continue to hold Series F Preferred Stock.
"Reserves" means estimated volumes of crude oil, condensate,
natural gas, natural gas liquids, and associated substances anticipated to be
commercially recoverable from known accumulations from a given date forward,
under then existing economic conditions, by established operating practices, and
under current government regulations. Reserve estimates are based on
interpretation of geologic or engineering data available at the time of the
estimate. Reserves do not include volumes of crude oil, condensate, natural gas
(including storage gas), or natural gas liquids being held in inventory. If
required for financial reporting, reserve estimates or other purposes, Reserves
may be reduced for on-site processing losses and on-site fuel.
"Restricted Securities" has the meaning set forth under Rule 144
promulgated under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect at the time.
"Senior Bank Agreement" means that certain Third Amended and
Restated Credit Agreement dated as of November 30, 2001 by and among Inland,
IPC, Fortis Capital Corp. as agent and various other lenders referred to
therein, as amended, or any replacement credit or loan agreement approved by the
Requisite Holders with any Bank or Banks approved by Requisite Holders.
"Senior Bank Debt" means Debt under the Senior Bank Agreement.
"Series F Preferred Stock" means the Series F Preferred Stock,
$.001 par value per share, of Inland.
"Shareholders Agreement" means that certain Amended and Restated
Shareholders Agreement dated as of August 2, 2001 by and among TCW, Hampton and
Inland.
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"▇▇▇▇▇" has the meaning set forth in the preamble.
"▇▇▇▇▇ Exchange" has the meaning set forth in Section 2.1(b).
"▇▇▇▇▇ Exchange" has the meaning set forth in Section 2.1(b).
"▇▇▇▇▇ Senior Subordinated Note" has the meaning set forth in
Section 5.9.
"▇▇▇▇▇ Series F Preferred Stock" has the meaning set forth in
Section 2.1(b).
"Stock" means the TCW Series F Preferred Stock, the ▇▇▇▇▇ Series
F Preferred Stock and the New TCW Common Stock.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity has or might
have voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"TCW" has the meaning set forth in the preamble.
"TCW Exchange" has the meaning set forth in Section 2.1(a).
"TCW Series F Preferred Stock" has the meaning set forth in
Section 2.1(a).
"Termination Event" means (i) the occurrence with respect to any
ERISA Plan of (a) a reportable event described in Sections 4043(c)(5) or (6) of
ERISA or (b) any other reportable event described in Section 4043(c) of ERISA
other than a reportable event not subject to the provision for 30 day notice to
the Pension Benefit Guaranty Corporation pursuant to a waiver by the Pension
Benefit Guaranty Corporation under Section 4043(a) of ERISA, or (ii) the
withdrawal of any ERISA Affiliate from an ERISA Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or
(iii) the filing of a notice of intent to terminate any ERISA Plan or the
treatment of any ERISA Plan amendment as a termination under Section 4041 of
ERISA, or (iv) the institution of proceedings to terminate any ERISA Plan by the
Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (v) any
other event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
ERISA Plan.
"Transaction Documents" means this Agreement, the Investors'
Agreement, the Amended Registration Rights Agreement, the Amendment to Senior
Subordinated Note Purchase Agreement, the Amendment to Option Agreement, the
Development Agreement, the Fourth Senior Bank Amendment and any other agreement
entered into in connection with, as a condition of, or pursuant to this
Agreement, by and between Inland or any Subsidiary thereof, on the one hand, and
▇▇▇▇▇, ▇▇▇▇▇▇▇ or TCW, or any Affiliate of any of them, on the other hand.
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1.2 Accounting Terms and Determinations. Except as otherwise
expressly provided for in this Agreement, all accounting terms used in this
Agreement shall be interpreted, all determinations with respect to accounting
matters hereunder shall be made, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Holders
under this Agreement shall be prepared in accordance with GAAP, applied on a
basis consistent with those used in the preparation of the latest financial
statements furnished to the Holders under this Agreement. To enable the ready
and consistent determination of compliance with the covenants set forth herein,
Inland will not change the last day of its fiscal year from December 31 of each
year.
1.3 Interpretation. In this Agreement, unless otherwise
indicated, the singular includes the plural and conversely; words importing one
gender include the others; references to statutes or regulations are to be
construed as including all statutory or regulatory provisions consolidating,
amending or replacing the statute or regulation referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a tangible visible form; the word "or" shall not be exclusive (i.e.,
shall be deemed to include "and/or"); the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections), exhibits,
annexes or schedules (including the Disclosure Schedule) without reference to a
specific other document are to such parts of this Agreement; references to
agreements and other contractual instruments shall be deemed to include all
subsequent amendments, extensions and other modifications to such instruments
(without, however, limiting any prohibition on any such amendments, extensions
and other modifications by the terms of this Agreement); and references to
Persons include their respective permitted successors and assigns and, in the
case of Governmental Persons, Persons succeeding to their respective functions
and capacities.
SECTION ▇.▇▇▇▇▇▇▇▇ OF SECURITIES.
2.1 Exchanges.
(a) TCW Exchange. TCW agrees to exchange (the "TCW
Exchange") with Inland on the Closing Date, the Exchanged Sub Note and all of
TCW's right, title and interest in the Exchanged Sub Debt for (i) that number of
shares of Series F Preferred Stock equal to 911,588 plus 338 shares per day for
each day after November 30, 2002 to and including the Closing Date (the "TCW
Series F Preferred Stock") and (ii) 22,053,000 shares of Common Stock (the "New
TCW Common Stock"), subject to the terms and conditions set forth herein. Inland
agrees and TCW acknowledges that upon consummation of the TCW Exchange the
Exchanged Sub Note shall be cancelled. Inland agrees to issue and deliver to TCW
the New TCW Common Stock and the TCW Series F Preferred Stock in exchange for
the Exchanged Sub Debt in accordance with the foregoing.
(b) ▇▇▇▇▇ Exchange. ▇▇▇▇▇ agrees to exchange (the "▇▇▇▇▇
Exchange") with Inland on the Closing Date, the Exchanged Junior Note and all of
▇▇▇▇▇'▇ right, title and interest in the Exchanged Junior Debt for that number
of shares of Series F Preferred Stock equal to 68,854 plus 27 shares per day for
each day after November 30, 2002 until the Closing Date (the "▇▇▇▇▇ Series F
Preferred Stock"), subject to the terms and conditions set forth herein. Inland
agrees and ▇▇▇▇▇ acknowledges that upon consummation of the ▇▇▇▇▇ Exchange the
Exchanged
9
Junior Note shall be cancelled. Inland agrees to issue and deliver to ▇▇▇▇▇ the
▇▇▇▇▇ Series F Preferred Stock in exchange for the Exchanged Junior Debt in
accordance with the foregoing.
2.2 The Closing. The Closing will take place at the offices
of Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as the parties hereto
mutually agree, at 10:00 a.m. local time, on the Closing Date. At the closing of
the transactions described herein (the "Closing"): (i) TCW shall deliver to
Inland the Exchanged Sub Note; (ii) Inland shall accept the Exchanged Sub Note;
(iii) Inland shall deliver to TCW the stock certificates evidencing the New TCW
Common Stock and the TCW Series F Preferred Stock and cancel the Exchanged Sub
Note; (iv) ▇▇▇▇▇ shall deliver to Inland the Exchanged Junior Note; (v) Inland
shall accept the Exchanged Junior Note; and (vi) Inland shall deliver to ▇▇▇▇▇
the stock certificates evidencing the ▇▇▇▇▇ Series F Preferred Stock and cancel
the Exchanged Junior Note.
2.3 Further Assurances.
(a) At any time after the Closing, the Companies shall
execute and deliver to each of the Holders such other documents and instruments,
provide such materials and information and take such other actions as each of
the Holders may reasonably request more effectively to vest title to the TCW
Series F Preferred Stock, the New TCW Common Stock and the ▇▇▇▇▇ Series F
Preferred Stock, as the case may be, in the Holders.
(b) Following the Closing, the Companies will afford each of
the Holders, its counsel and its accountants, during normal business hours,
reasonable access to the books, records and other data relating to the business
or condition of Inland and the right to make copies and extracts therefrom.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES.
Each of the Companies hereby represents, warrants and covenants
to each of the Holders, as of the date hereof and as of the Closing Date, that
each of the representations and warranties set forth below is true and correct
in all material respects except as shall be set forth in the Disclosure
Schedule. 3.1 Organization and Authorization of the Companies.
(a) Each of the Companies and each of its Subsidiaries (i)
is a corporation duly organized or a limited liability company or other entity
duly formed, validly existing and in good standing under the laws of its
jurisdiction of incorporation or formation, (ii) has all requisite power and
authority to own or hold under lease the property it purports to own or hold
under lease and to transact the business in which it is presently engaged or
presently proposes to engage and (iii) is duly qualified as a foreign
corporation or other entity and is in good standing in each jurisdiction in
which the character of the properties owned or held under lease by it, or the
nature of the business transacted by it requires such qualification except where
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect on the Companies taken as a whole.
10
(b) Each of the Companies has all requisite power and
authority to execute and deliver this Agreement and any other documents or
agreements contemplated hereby and to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereunder and thereunder. Inland has all requisite power and
authority to issue the Stock. The execution and delivery of this Agreement and
the issuance of Stock, the performance of this Agreement, and the execution,
delivery and performance of any other documents or agreements to which any of
the Companies is a party contemplated hereby and thereby, and the consummation
of the transactions contemplated hereby and thereby, have been duly authorized
and approved by the Board of Directors of the respective Companies. Each of this
Agreement and any other document or agreement contemplated hereby to which any
of the Companies is a party has been (or on the Closing Date will have been)
duly authorized, executed and delivered by, and each is (or, when duly executed
and delivered on the Closing Date, will be) the valid and binding obligation of
each such Company, enforceable in accordance with its terms, except as may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other similar laws or by legal or equitable principles relating to or limiting
creditors' rights generally.
(c) Schedule 3.1 contains a true and correct list of all
Subsidiaries of Inland and any equity interests (whether stock, partnership
interests or limited liability company interests) held or owned thereby. Neither
Inland nor the Subsidiaries own, directly or indirectly, any capital stock,
joint venture or partnership interests in or other equity interest in any other
Person other than those Subsidiaries set forth on Schedule 3.1 hereto. Except as
set forth on Schedule 3.1, each of the Companies has good and valid title to all
the outstanding stock of each of its Subsidiaries, in each case, free and clear
of all liens and encumbrances.
3.2 Capital Stock.
(a) The total number of shares of capital stock which Inland
currently has authority to issue under its Articles of Incorporation is (i)
25,000,000 shares of Common Stock, of which 2,897,732 are issued and
outstanding, all of which outstanding shares are duly and validly issued and
fully paid and nonassessable, and (ii) 20,000,000 shares of Preferred Stock,
none of which are issued and outstanding.
(b) As of the date hereof and after giving effect to the
transactions contemplated by the Transaction Documents and except for the
Exchanged Sub Note, the Exchanged Junior Note and the Series F Preferred Stock
issuable hereunder, Inland does not, and as of the Closing Date, Inland will
not, have outstanding any capital stock or other securities convertible into or
exchangeable for any of its capital stock or any rights to subscribe for or to
purchase, or any options for the purchase of, or any agreements (contingent or
otherwise) providing for the issuance of, or any calls, commitments or claims of
any character relating to, any of its capital stock or any securities
convertible into or exchangeable for any of its capital stock, other than as set
forth on Schedule 3.2 (which schedule shall include the exercise price and
number of shares.
(c) As of the date hereof, except as provided in this
Agreement, Inland does not have any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of its capital stock or obligation
evidencing the right of the holder thereof to purchase any of its
11
capital stock. Other than the Amended Registration Rights Agreement, there is
not in effect on the date hereof any agreement by Inland (other than this
Agreement) or any of its Subsidiaries pursuant to which any holders of
securities of Inland or any of its Subsidiaries have a right to cause Inland to
register such securities under the Securities Act.
(d) As of the Closing and immediately thereafter, the
authorized capital stock of Inland will consist solely of (i) 25,000,000 shares
of Common Stock, of which 24,950,000 shares of will be issued and outstanding
and (ii) 20,000,000 shares of Preferred Stock, of which only the TCW Series F
Preferred Stock and ▇▇▇▇▇ Series F Preferred Stock will be issued and
outstanding. As of the Closing and immediately thereafter, all of the
outstanding shares of Inland's capital stock shall be duly authorized, validly
issued, fully paid and nonassessable.
3.3 Financial Information.
(a) The audited consolidated financial statements of Inland
and its Subsidiaries as filed with the Securities and Exchange Commission
("Commission") in accordance with the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), for fiscal years ended
December 31, 1999, 2000 and 2001 (and the unaudited interim periods reported
therein and through the date hereof) (collectively, the "Financial Statements")
fairly present in all material respects the financial position of Inland and its
Subsidiaries as of the respective dates of such balance sheets and the results
of operations of Inland and its Subsidiaries for the respective periods covered
by such statements of operations, stockholders' equity and cash flows, and have
been prepared in accordance with GAAP consistently applied throughout the
periods involved. There are no material liabilities, contingent or otherwise, of
Inland and its Subsidiaries as of the date hereof and as of the Closing Date
required to be reflected in a balance sheet prepared in accordance with GAAP
which are not reflected in such balance sheets.
(b) As of their respective dates, the Financial Statements
did not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Since the date of
Inland's most recent quarterly report on Form 10-Q (the "10-Q Filing Date"),
there has been no change in the business, properties, financial condition or
operations which has had a Material Adverse Effect on the Companies taken as a
whole.
3.4 Independent Engineering Report. The Companies have
delivered to TCW, in form satisfactory to TCW, results of the Initial
Independent Engineering Report on the fields and properties listed therein or
attached thereto (the "Evaluated Properties") in which the Companies will have
interests as of the Closing Date. The Initial Independent Engineering Report is
the latest engineering report available to the Companies relating to the
Evaluated Properties. To the knowledge of the Companies, the Companies have
provided no materially false or misleading information to and have not withheld
from the engineer preparing or who prepared the Initial Independent Engineering
Report any material information with respect to the preparation of the Initial
Independent Engineering Report. The Companies are not aware of any facts or
circumstances that should reasonably cause the Companies to conclude that (i)
any of the information that was supplied by the Companies to the Independent
Engineer in connection with
12
its preparation of the Initial Independent Engineering Report was not correct or
(ii) the Initial Independent Engineering Report was incorrect in any material
respect.
3.5 Litigation. Except as set forth in Schedule 3.5, (i)
there are no actions, suits, investigations or legal, equitable, arbitrative or
administrative proceedings pending or, to the knowledge of any officer of the
Companies, currently threatened against the Companies or the Subsidiaries before
any Governmental Person which could cause a Material Adverse Effect on the
Companies, either individually or in the aggregate; and (ii) there are no
outstanding judgments, injunctions, writs, rulings or Orders by any Governmental
Person against any of the Companies, their respective Subsidiaries or their
respective directors or officers which could have a Material Adverse Effect on
the Companies, either individually or in the aggregate.
3.6 Absence of Undisclosed Liability. None of the Companies
nor any of their respective Subsidiaries has any material direct or indirect
liability, indebtedness, obligation, expense, claim, deficiency, guarantee or
endorsement of or by any Person (other than endorsements of notes, bills and
checks presented to banks for collection deposit in the ordinary course of
business) of any type, whether accrued, absolute, contingent, matured, unmatured
or otherwise (a "Liability"), other than the Liabilities (i) that are reflected,
accrued or reserved for in the most recent quarterly balance sheet of Inland
filed pursuant to the Exchange Act with the Commission, or (ii) arising in the
ordinary course of the Companies' or their respective Subsidiaries' businesses
consistent with past practice which would not result in a Material Adverse
Effect on the Companies taken as a whole or (iii) that are disclosed in Schedule
3.6. Except as shown in the notes to Inland's most recent annual and quarterly
financial statements filed pursuant to the Exchange Act with the Commission or
disclosed on Schedule 3.6, none of the Companies nor any of their respective
Subsidiaries is subject to or restricted by any franchise, contract, deed,
charter restriction or other instrument or restriction which could reasonably be
expected to have a Material Adverse Effect on the Companies taken as a whole.
3.7 Governmental Consents. Other than filings required by
applicable state securities laws and any other consents or approvals listed in
Schedule 3.7, which shall be made or obtained prior to Closing by the Companies,
neither the nature of the Companies, their respective Subsidiaries, their
respective businesses or Properties, nor any relationship between either
Companies or any of its Subsidiaries and any other Person, nor (except as
expressly provided for in this Agreement) any circumstance in connection with
the offer, issue or sale of the Stock, is such as to require consent, approval
or authorization of, or filing, registration or qualification with, any
Governmental Person on the part of the Companies as a condition to the
execution, delivery and performance of the Transaction Documents.
3.8 Compliance with Laws and Other Instruments of the
Companies. Assuming consent from the Banks and those Persons listed on Schedule
3.7, the consummation of the transactions contemplated by this Agreement and the
execution, delivery and performance of the terms and provisions of the
Transaction Documents will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any Property of the Companies or their respective Subsidiaries under, any
corporate charter or bylaws, or material indenture, mortgage, deed of trust,
bank loan or credit agreement, or other material agreement or instrument to
which the Companies or the Subsidiaries are a party or by which the Companies or
their respective Subsidiaries or any of their Properties may be bound or
13
affected (taking into consideration the required consents set forth on Schedule
3.7), (ii) conflict with or result in a breach of any of the terms, conditions
or provisions of any Order applicable to the Companies, or (iii) violate any
provision of Law applicable to the Companies or their respective Subsidiaries,
(iv) require the consent of any other contracting party to any material
agreement to which the Companies or their respective Subsidiaries are a party,
or (v) give rise to any right of termination or cancellation of any material
agreement to which the Companies or their respective Subsidiaries are a party.
3.9 No Affiliate Ownership. Except as set forth in Inland's
most recent Annual Report on Form 10-K, as amended, its most recent proxy
statement, or its most recent Quarterly Reports filed on Form 10-Q after such
Annual Report on file with the Commission, no Person controlled by, controlling
or under common control with any of the Companies (other than any of their
respective wholly owned Subsidiaries) owns any interest in any of the Evaluated
Properties or any other material asset of the Companies or their respective
Subsidiaries.
3.10 Compliance with Laws. Except as set forth in Schedule
3.10, to the knowledge of the Companies, the Companies and their respective
Subsidiaries have complied with all Laws relating to the production of oil and
gas from their Properties, leases or assets and any of their assets, rights or
interests relating thereto, the conduct of drilling and production operations
with respect to their oil and gas Properties, leases, or assets and any of their
assets, rights or interests relating thereto and the regulation thereof, except
where the failure to comply could not reasonably be expected to have a Material
Adverse Effect on the Companies taken as a whole.
3.11 Licenses and Permits. The Companies and their respective
Subsidiaries have obtained and hold in full force and effect all licenses,
permits, franchises, certificates, authorizations, qualifications,
accreditations, easements, rights of way and other rights, patents, copyrights,
trademarks and trade names, or rights thereto, consents and approvals required
to conduct their business substantially as it is now conducted and as it is
currently proposed to be conducted, without known conflict with the rights of
others, except as has been disclosed in Inland's filings with the Commission or
except for such failures to obtain or hold or such conflicts as would not have a
Material Adverse Effect on the Companies taken as a whole.
3.12 Taxes. The Companies and their respective Subsidiaries
have (i) filed all tax returns with all appropriate Federal, state, local and
foreign taxing authorities that are required to have been filed by or with
respect to the Companies and their respective Subsidiaries as of the date of
this Agreement, and such tax returns are true, correct and complete in all
material respects; and (ii) paid all taxes shown to be due and payable on such
returns and all other taxes and assessments payable by the Companies and their
respective Subsidiaries to the extent the same have become due and payable and
before they have become delinquent, except for any taxes and assessments the
amount, applicability or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which the Companies have
set aside on their respective books reserves (segregated to the extent required
by GAAP) deemed by them to be adequate. The Companies know of no proposed
material tax assessment against the Companies or their respective Subsidiaries
and in the opinion of the Companies all tax liabilities are adequately provided
for on the books of the Companies.
14
3.13 ERISA Plans and Liabilities. All currently existing
ERISA Plans of the Companies are listed on Schedule 3.13. Except as disclosed in
Inland's most recent annual and quarterly financial statements filed under the
Exchange Act with the Commission or on Schedule 3.13, no Termination Event has
occurred with respect to any ERISA Plan and all ERISA Plans are in compliance
with ERISA in all material respects. No ERISA Affiliate is required to
contribute to, or has any other absolute or contingent liability in respect of,
any "multiemployer plan" as defined in Section 4001 of ERISA. Except as set
forth in Schedule 3.13, (i) no "accumulated funding deficiency" (as defined in
Section 412(a) of the Internal Revenue Code of 1986, as amended) exists with
respect to any ERISA Plan, whether or not waived by the Secretary of the
Treasury or his delegate, and (ii) the current value of each ERISA Plan's
benefit obligations does not exceed the current value of such ERISA Plan's
assets available for the payment of such benefits by more than $500,000.
3.14 Private Offering. During the six months prior to the
Closing Date, neither the Companies nor any other Person acting on behalf of the
Companies has offered any securities of the Companies (excluding options or
warrants to employees and shares issuable upon exercise or conversion of
securities outstanding prior to the date hereof) for sale to, or solicited
offers to buy any thereof from, or otherwise approached or negotiated with
respect thereto with, any Person other than prospective holders of such
securities who are "accredited investors", as defined in Rule 501 of Regulation
D promulgated under the Securities Act. The Companies agree that neither the
Companies nor anyone acting on their behalf has offered or will offer securities
for issue or sale to, or has solicited or will solicit any offer to acquire any
of the same from, anyone so as to bring the issuance and sale of the Stock under
Section 5 of the Securities Act. Based in part on the representations of TCW and
▇▇▇▇▇ set forth herein, the offer, sale and issuance of the Stock in conformity
with the terms of this Agreement are exempt from the registration requirements
of the Securities Act and any applicable state securities laws.
3.15 Investment Company Act and Public Utility Holding
Company Act. None of the Companies or any of their respective Subsidiaries is
considered an "investment company" or a Person directly or indirectly controlled
by or acting on behalf of an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. None of the Companies or any of
their respective Subsidiaries owns or operates any facility used for the
generation, transmission or distribution for sale of electrical energy or any
facility used for the retail distribution of natural or manufactured gas, each
within the meaning of the Public Utility Holding Company Act of 1935, as amended
(the "1935 Act"). None of the Companies or any of their respective Subsidiaries
is an "electrical utility company" within the meaning of the 1935 Act. None of
the Companies or any of their respective Subsidiaries is (i) a "holding
company," (ii) a "subsidiary company," an "affiliate" or "associate company" of
a "holding company" or (iii) an "affiliate" of a "subsidiary company" of a
"holding company," in each case within the meaning of the 1935 Act. None of the
Companies or any of their respective Subsidiaries is subject to regulation as a
public utility or public service company (or similar designation) by any
Governmental Person.
3.16 Environmental Laws. The sole representations of the
Companies with respect to environmental matters are set forth in this Section
3.16. To the extent representations in other sections of this Agreement also
could apply to environmental matters, including but not limited to Environmental
Laws, such representations shall be construed to exclude environmental
15
matters and to apply only to matters other than environmental matters. Except
(i) as to matters not within the Companies' knowledge, (ii) as could not
reasonably be expected to have a Material Adverse Effect on the Companies taken
as a whole, or (iii) as set forth on Schedule 3.16:
(a) The Companies and their respective Subsidiaries are
conducting their businesses in compliance in all material respects with all
applicable Environmental Laws, and have all permits, licenses and authorizations
required under Environmental Laws in connection with the conduct of their
businesses, and each of the Companies and its Subsidiaries is in compliance in
all material respects with the terms and conditions of all such permits,
licenses and authorizations, and with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in any applicable Environmental Law.
(b) No notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed, and no investigation or review is pending
or to the knowledge of any of the Companies threatened, by any Governmental
Person or any other Person with respect to (i) any actual or alleged treatment,
storage, transportation, disposal, or release of any Hazardous Materials, either
by any of the Companies or its Subsidiaries or on any property owned by any of
the Companies or its Subsidiaries, (ii) any material remedial action which might
be needed to respond to any such alleged treatment, storage, transportation,
disposal, or release, or (iii) any alleged failure by any of the Companies or
its Subsidiaries to have any permit, license or authorization required in
connection with the conduct of its business or with respect to any such
treatment, storage, transportation, disposal, or release.
(c) There are no Liens existing under or pursuant to any
Environmental Laws on any of the real Properties or other Properties owned or
leased by any of the Companies or its Subsidiaries, and to the knowledge of the
Companies no government actions have been taken or are in process which could
subject any of such Properties to such Liens.
3.17 Labor Relations. No material unfair labor practice
complaint or sex, age, race or other discrimination claim has been brought
during the one year prior to the Closing Date against the Companies or any of
their respective Subsidiaries before the National Labor Relations Board, the
Equal Employment Opportunity Commission or any other Governmental Person. During
that period, each of the Companies and its Subsidiaries has complied in all
material respects with all applicable Laws relating to the employment of labor,
including, without limitation, those relating to hiring, promotion, employment
and pay practices, terms and conditions of employment, federal and state wages
and hours laws, immigration, and collective bargaining. During the one year
prior to the Closing Date, no strike, slowdown, picketing or work stoppage by
any union or other group of employees against the Companies, any of their
respective Subsidiaries or any of their Properties wherever located, and no
secondary boycott with respect to their products, lockout by them of any of
their employees or any other labor trouble or other occurrence, event or
condition of a similar character, has occurred or, to the knowledge of any
officer of any of the Companies, been threatened which has had or could be
expected to have a Material Adverse Effect on the Companies taken as a whole.
16
3.18 No Broker's or Other Fees. Other than with respect to
the fairness opinion required pursuant to Section 5.7 hereof, no broker, finder
or investment banker is entitled to any fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
any of the Companies.
3.19 Material Agreements. There is no contract, agreement or
understanding required to be described in or filed as an exhibit to any form,
report or statement required to be filed by Inland with the Commission that is
not described in or filed as required by the Exchange Act or the rules and
regulations promulgated by the Commission thereunder (including without
limitation annual reports on Form 10-K, quarterly reports on Form 10-Q and other
reports on Form 8-K). Except as would not cause a Material Adverse Effect on the
Companies, either individually or in aggregate, all such contracts, agreements
and understandings are valid and binding and are in full force and effect and
enforceable in accordance with their respective terms other than contracts,
agreements or understandings which are by their terms no longer in force or
effect. Except to the extent any of the following would not cause a Material
Adverse Effect on the Companies, either individually or in aggregate, none of
the Companies is in violation or breach of or default under any such contract,
agreement or understanding, nor to the Companies' knowledge, is any other party
to any such contract, agreement or understanding.
3.20 Title to Properties. Each Company and each of its
Subsidiaries has good and marketable title to its Properties, free and clear of
all Liens other than Permitted Liens. Each Company and each of its Subsidiaries
is in possession of each parcel or real Property owned by it, together with all
buildings, structures, facilities, fixtures and other improvements thereon.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF HOLDERS.
Each of TCW and ▇▇▇▇▇ severally as to itself, and not jointly or
jointly and severally with any other Holders, hereby represents, warrants and
covenants to Inland as follows and IPC, as of the date hereof and as of the
Closing Date, that each of the representations and warranties set forth below is
true and correct in all material respects:
4.1 Authority of Holder
(a) Each Holder represents and warrants that it is a
corporation duly organized or a limited liability company duly formed, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or formation, as applicable.
(b) Each has all requisite power and authority to execute
and deliver this Agreement and any other documents or agreements contemplated
hereby and to which it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereunder and
thereunder. Each Holder represents and warrants that the execution and delivery
by it of this Agreement, and the performance of its obligations hereunder, has
been duly and validly authorized by the all necessary action of such Holder.
This Agreement has been duly and validly executed and delivered by such Holder
and constitutes the legal, valid and binding obligations of such Holder,
enforceable against such Holder, in accordance with its terms, except to the
extent such enforceability (i) may be limited by bankruptcy, insolvency,
17
reorganization, moratorium or other similar laws relating to creditors' rights
generally and (ii) is subject to general principles of equity.
4.2 Acquisition for Holders' Account. Each Holder represents
and warrants that it is acquiring and will acquire the TCW Series F Preferred
Stock and the New TCW Common Stock, or the ▇▇▇▇▇ Series F Preferred Stock, as
the case may be, and any Common Stock issued upon conversion of the Series F
Preferred Stock for its own account, with no present intention of distributing
or reselling such securities or any part thereof in violation of applicable
securities laws.
4.3 Investment Experience. Each Holder has such knowledge
and experience in financial and business matters, including investing in
securities of new and speculative companies, as to be able to evaluate the
merits and risks of an investment in the TCW Series F Preferred Stock and the
New TCW Common Stock, or the ▇▇▇▇▇ Series F Preferred Stock, as the case may be,
and any Common Stock issued upon conversion of the Series F Preferred Stock.
4.4 Securities Not Registered. Each Holder acknowledges that
the TCW Series F Preferred Stock and the New TCW Common Stock, or the ▇▇▇▇▇
Series F Preferred Stock, as the case may be, has not been registered under the
Securities Act or the securities laws of any state in the United States or any
other jurisdiction and may not be offered or sold by Holder unless subsequently
registered under the Securities Act (if applicable to the transaction) and any
other securities laws or unless exemptions from the registration or other
requirements thereof are available for the transaction.
4.5 Accredited Investor. Each Holder represents that it is
an "accredited investor" within the meaning of Rule 501 of Regulation D
promulgated under the Securities Act, as presently in effect.
4.6 Acknowledgement of Risk. Each Holder acknowledges that
an investment in the TCW Series F Preferred Stock and the New TCW Common Stock,
or the ▇▇▇▇▇ Series F Preferred Stock, as the case may be, and any Common Stock
issued upon conversion of the Series F Preferred Stock, involves a high degree
of risk and represents that it understands the economic risk of such investment.
Such Holder is prepared to bear the economic risk of retaining the TCW Series F
Preferred Stock and the New TCW Common Stock, or the ▇▇▇▇▇ Series F Preferred
Stock, as the case may be, and any Common Stock issued upon conversion of the
Series F Preferred Stock, for an indefinite period, all without prejudice,
however, to the rights of such Holder, in accordance with this Agreement,
lawfully to sell or otherwise dispose of all or any part of the TCW Series F
Preferred Stock and the New TCW Common Stock, or the ▇▇▇▇▇ Series F Preferred
Stock, as the case may be, held by it.
4.7 No Public Solicitation. To the best of each Holder's
knowledge, the issuing of the TCW Series F Preferred Stock and New TCW Common
Stock, or the ▇▇▇▇▇ Series F Preferred Stock, as the case may be, to such Holder
was made through direct, personal communication between such Holder and a
representative of Inland and not through public solicitation and advertising.
18
SECTION 5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE HOLDERS.
The obligations of each of the Holders hereunder are subject to
the fulfillment, at or before the Closing, of each of the following conditions
(all or any of which may be waived in whole or in part by such Holder in its
sole discretion):
5.1 Representations and Warranties. Each of the
representations and warranties made by the Companies and the other Holder in
this Agreement (other than those made as of a specified date earlier than the
Closing Date) shall be true and correct in all material respects on and as of
the Closing Date as though such representation or warranty was made on and as of
the Closing Date, and any representation or warranty made as of a specified date
earlier than the Closing Date shall have been true and correct in all material
respects on and as of such earlier date.
5.2 Performance. The Companies shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by the Companies
at or before the Closing.
5.3 Officers' Certificates. Each of the Companies shall have
delivered to each of the Holders (i) an officer's certificate, dated the Closing
Date and executed in the name and on behalf of Inland or IPC, as the case may
be, by the Chief Executive Officer and Chief Financial Officer of Inland or IPC,
as the case may be, substantially in the form of Exhibit A attached hereto and
(ii) a certificate, dated the Closing Date and executed by the Secretary or any
Assistant Secretary of Inland or IPC, as the case may be, substantially in the
form of Exhibit B attached hereto.
5.4 Orders and Laws. There shall not be in effect on the
Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or any of the other Transaction Documents or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the other Transaction
Documents to such Holder, and there shall not be pending or threatened on the
Closing Date any action, claim, lawsuit or proceeding in, before or by any
Governmental Person or regulatory authority seeking the imposition of monetary
damages, injunctive or other equitable relief against such Holder, which could
reasonably be expected to result in the issuance of any such Order or the
enactment, promulgation or deemed applicability of any such Law to the Holders,
any of the Companies, any Subsidiary thereof or the transactions contemplated by
this Agreement or any of the other Transaction Documents of any such Law. For
the avoidance of doubt, the "Merger" (as such term is defined in the Investors'
Agreement) is a transaction contemplated thereby.
5.5 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental Person or
regulatory authority necessary to permit the Holders and Inland to perform their
obligations under this Agreement and the other Transaction Documents and to
consummate the transactions contemplated hereby and thereby (i) shall have been
duly obtained, made or given, (ii) shall be in form and substance reasonably
19
satisfactory to the Holders, (iii) shall not be subject to the satisfaction of
any condition that has not been satisfied or waived and (iv) shall be in full
force and effect, and all terminations or expirations of waiting periods imposed
by any Governmental Person or regulatory authority necessary for the
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents, shall have occurred.
5.6 Third Party Consents. The consents (or in lieu thereof
waivers) (i) listed in Section 6.7 of the Disclosure Schedule, (ii) of the Banks
and (iii) of all other relevant Persons (or in lieu thereof waivers) to the
performance by the Holders and Inland of their obligations under this Agreement
or to the consummation of the transactions contemplated hereby as are required
under any contract to which the Holders, Inland, the Companies or any of their
respective Subsidiaries is a party or by which any of their respective assets
and Properties are bound (a) shall have been obtained, (b) shall be in form and
substance reasonably satisfactory to the Holders, (c) shall not be subject to
the satisfaction of any condition that has not been satisfied or waived and (d)
shall be in full force and effect, except where the failure to obtain any such
consent (or in lieu thereof waiver) could not reasonably be expected,
individually or in the aggregate with other such failures, to materially
adversely affect the Holders or the business, prospects, Properties or condition
(financial or otherwise) of Inland or otherwise result in a material diminution
of the benefits of the transactions contemplated by this Agreement to the
Holders.
5.7 Fairness Opinion. Prior to the filing required under
Section 5.18 and Section 6.3, Inland shall have received from First Albany
Corporation a fairness opinion in form and substance acceptable to the Holders,
with respect to the fairness of the TCW Exchange and the ▇▇▇▇▇ Exchange to the
unaffiliated public shareholders of Inland from a financial point of view.
5.8 Resignation of Chairman of the Board and Director. ▇▇▇▇▇
shall have caused (i) Art Pasmas to have tendered, effective at the Closing, his
resignation as Chairman of the Board of Inland and (ii) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ to have
tendered, effective at Closing, his resignation as a director of Inland.
5.9 Amendment to Senior Subordinated Note Purchase
Agreement. The Senior Subordinated Note Purchase Agreement dated as of August 2,
2001 by and among Inland, IPC and ▇▇▇▇▇ with respect to the Senior Subordinated
Note No. R-1001, due July 1, 2007, in the principal amount of $5,000,000 (the
"▇▇▇▇▇ Senior Subordinated Note"), shall be shall be executed and delivered,
substantially in the form of Exhibit C attached hereto.
5.10 Amendment of the Option Agreement. An amendment to the
Option Agreement shall be shall be executed and delivered, substantially in the
form of Exhibit D attached hereto.
5.11 Amended Registration Rights Agreement. The Amended
Registration Rights Agreement, substantially in the form of Exhibit E attached
hereto, shall be executed and delivered.
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5.12 Development Agreement. The Development Agreement shall
be executed and delivered, substantially in the form of Exhibit F attached
hereto.
5.13 Termination of Shareholders Agreement. The Shareholders
Agreement shall have been terminated by executing and delivering a termination
agreement substantially in the form of Exhibit G attached hereto and TCW,
Hampton and ▇▇▇▇▇ shall have entered into the Investors' Agreement.
5.14 Transaction Documents. All Transaction Documents (other
than those in form attached hereto) shall be in form and substance reasonably
satisfactory to the Holders and their respective counsel.
5.15 Fees and Expenses. All reasonable fees and expenses of
the Holders and the Banks shall be paid by Inland.
5.16 Simultaneous Exchange. In the case of ▇▇▇▇▇, the TCW
Exchange shall occur and, in the case of TCW, the ▇▇▇▇▇ Exchange shall occur.
5.17 Opinions of Counsel to the Companies. Each Holder shall
have received acceptable opinions of regular outside and special Washington
counsel to the Companies dated as of the Closing Date, such opinions to be
substantially in the form attached as Exhibit H, with such additions and
qualifications as are acceptable to the Holders.
5.18 Filing and Dissemination of Information. Inland, Hampton
and the Holders shall have jointly (i) filed with the Commission a Schedule
13E-3 pursuant to Rule 13e-3 promulgated under the Exchange Act, and (ii)
disseminated to the holders of Common Stock the information statement required
under Rule 13e-3(e), all of which shall be in full compliance with the
requirements therefor established by the Commission. The expiration of any
waiting period imposed by the Commission necessary for the consummation of the
transactions contemplated by TCW Exchange and the ▇▇▇▇▇ Exchange shall have
occurred.
5.19 Amendment to Employment Agreements. The employment
agreements by and between Inland and ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ shall
have been amended, substantially in the forms of Exhibit I-1 and Exhibit I-2,
respectively, attached hereto.
5.20 Amendment of Articles of Incorporation. Prior to the
Closing Date, Inland shall have filed with the Secretary of State of Washington
the Articles of Amendment to the Articles of Incorporation of Inland,
substantially in the form of Exhibit J attached hereto.
5.21 Fourth Senior Bank Amendment. The Fourth Senior Bank
Amendment shall have been executed, delivered and shall be in full force and
effect (or shall be effective concurrently with the Closing) and the Amended
Senior Bank Agreement shall be in full force and effect.
21
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF INLAND.
The obligations of Inland hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by Inland in its sole
discretion):
6.1 Representations and Warranties. Each of the
representations and warranties made by the Holders in this Agreement shall be
true and correct in all material respects on and as of the Closing Date as
though such representation or warranty was made on and as of the Closing Date.
6.2 Performance. The Holders shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by the Holders at
or before the Closing.
6.3 Filing and Dissemination of Information. Inland, Hampton
and the Holders shall have jointly (i) filed with the Commission a Schedule
13E-3 pursuant to Rule 13e-3 promulgated under the Exchange Act, and (ii)
disseminated to the holders of Common Stock the information statement required
under Rule 13e-3(e), all of which shall be in full compliance with the
requirements therefor established by the Commission. The expiration of any
waiting period imposed by the Commission necessary for the consummation of the
transactions contemplated by the TCW Exchange and ▇▇▇▇▇ Exchange shall have
occurred.
6.4 Fairness Opinion. Prior to the filing required under
Section 5.18 and Section 6.3, Inland shall have received from First Albany
Corporation a fairness opinion in form and substance acceptable to the Holders,
with respect to the fairness of the TCW Exchange and the ▇▇▇▇▇ Exchange to the
unaffiliated public shareholders of Inland from a financial point of view.
6.5 Orders and Laws. There shall not be in effect on the
Closing Date any Order of Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or any of the other Transaction Documents or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the other Transaction
Documents to the Companies, and there shall not be pending or threatened on the
Closing Date any action, claim, lawsuit or proceeding in, before or by any
Governmental Person or regulatory authority which could reasonably be expected
to result in the issuance of any such Order or the enactment, promulgation or
deemed applicability to the Holders, Inland, any of Inland's Subsidiaries or the
transactions contemplated by this Agreement or any of the other Transaction
Documents of any such Law.
6.6 Simultaneous Exchange. The TCW Exchange and the ▇▇▇▇▇
Exchange shall occur.
6.7 Amendment to Employment Agreements. Each of the
employment agreements by and between Inland and ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ shall have been amended, substantially in the form of Exhibit F
attached hereto.
22
6.8 Transaction Documents. All Transaction Documents (other
than those in form attached hereto) shall be in form and substance reasonably
acceptable to Inland and its counsel.
SECTION 7. COVENANTS.
7.1 Fulfillment of Conditions. Each party hereto will
execute and deliver at the Closing each Transaction Document that it is required
hereby to execute and deliver as a condition to the Closing, will take all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each other condition to the obligations of the parties
hereto contained in this Agreement and will not, and will not permit any of its
Affiliates to, take or fail to take any action that could reasonably be expected
to result in the nonfulfillment of any such condition.
7.2 Board of Directors Representation. From and after the
Closing Date and as long as the ▇▇▇▇▇ Senior Subordinated Note is still
outstanding and held by ▇▇▇▇▇ or any Affiliate thereof or ▇▇▇▇▇ or any Affiliate
thereof continues to hold 50% of the voting capital stock it acquires in Inland
in the ▇▇▇▇▇ Exchange, then TCW and any of its Affiliates and successors who
hold Common Stock and/or Series F Preferred Stock or any other voting capital
stock of Inland shall in good faith take all necessary actions (including, where
necessary, calling a special meeting of the shareholders and voting their
respective shares of such stock including any shares of such stock hereafter
acquired, owned or controlled by TCW or any such Affiliate or successor), at any
regular or special meeting of shareholders of Inland called for the purpose of
filling positions on the Board or in any written consent executed in lieu of
such a meeting of shareholders, in such a manner that, and shall otherwise take
all actions in their capacities as shareholders necessary to, ensure that (i) if
the Board consists of between two and seven members, one member of the Board of
Inland is an individual designated by ▇▇▇▇▇ or (ii) if the Board consists of
between eight and eleven members, two members of the Board of Inland are
designated by ▇▇▇▇▇.
7.3 Director Compensation. Any member of the Board
designated by ▇▇▇▇▇ and elected to the Board pursuant to Section 7.2 above shall
be entitled to receive compensation equal to that paid by Inland to the
independent member(s) of the Board.
SECTION 8. TRANSFERABILITY.
8.1 Restrictive Legend. Each certificate evidencing the
Stock issued by Inland shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES EVIDENCED BY THIS STOCK CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
23
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION."
provided, that such restrictive legend shall not be required after the date on
which the securities evidenced by a certificate bearing such a restrictive
legend no longer constitute Restricted Securities, and upon the request of the
holder of such certificate, Inland, without expense to the Holder, shall issue a
new certificate not bearing the restrictive legend otherwise required to be
borne thereby.
8.2 Rule 144 and 144A. At any time when Inland is subject
neither to Section 13 nor Section 15(d) of the Exchange Act, Inland will, with
reasonable promptness upon the request of either Holder, in order to permit such
Holder to transfer if it so desires, pursuant to Rule 144 or 144A promulgated
under the Securities Act (or any successor to such rule), comply with all rules
and regulations of the Commission applicable in connection with use of Rule 144
and 144A (or any successor rules thereto), including the provision of
information concerning Inland to such Holder and the timely filing of all
reports with the Commission in order to enable such Holder, if it so elects, to
utilize Rule 144 or 144A, and Inland will cause any restrictive legends to be
removed and any transfer restrictions to be rescinded (to the extent Inland is
reasonably satisfied that such removal and rescission is in compliance with Law)
with respect to any sale of Stock which is exempt from registration under the
Securities Act pursuant to Rule 144 or 144A.
8.3 Transferability. Each Holder agrees not to make any
disposition of all or any portion of the Stock unless and until the transferee
has agreed in writing for the benefit of Inland to be bound by this Agreement
provided and to the extent it is then applicable, unless there is then in effect
a registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with such registration
statement, and if reasonably requested by Inland, such Holder shall have
furnished Inland with an opinion of counsel, reasonably satisfactory to Inland,
that such disposition will not require registration of such shares under the
Securities Act. It is agreed that Inland will not require opinions of counsel
for transactions made pursuant to Rule 144.
SECTION 9. INDEMNITY.
The Companies jointly and severally agree to indemnify each
Indemnified Party, upon demand, from and against any and all liabilities,
obligations, claims, losses, damages, penalties, fines, actions, judgments,
suits, settlements, costs, expenses or disbursements (including reasonable fees
of attorneys, accountants, experts and advisors) of any kind or nature
whatsoever (in this section collectively called "liabilities and costs") which
to any extent (in whole or in part) may be imposed on, incurred by, or asserted
against such Indemnified Party arising out of, resulting from or in any other
way associated with (i) the Transaction Documents or any transaction
contemplated thereby, (ii) any matter, event or occurrence with respect to the
Holders and their respective Affiliates as shareholders of Inland or (iii) this
Agreement, or any of the transactions and events (including the enforcement or
defense thereof) at any time associated herewith or contemplated herein
(including any violation or noncompliance with any Environmental Laws by any
Related Person or any liabilities or duties of any Related Person or
24
of any Indemnified Party with respect to Hazardous Materials found in or
released into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY OR ARE IN ANY EXTENT CAUSED, IN WHOLE OR IN PART,
BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY INDEMNIFIED PARTY,
provided only that no Indemnified Party shall be entitled under this section to
receive indemnification for that portion, if any, of any liabilities and costs
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment. As used in this section, the term
"Indemnified Party" refers to each of TCW Asset Management Company, a California
corporation, Trust Company of the West, a California trust company and the
Holders (and each of their respective Affiliates, excluding the Companies) and
each director, officer, agent, trustee, manager, member, partner, shareholder,
principal, attorney, employee, representative and Affiliate of any such Person
acting in such capacity.
SECTION 10. MISCELLANEOUS.
10.1 Waivers and Amendments; Acknowledgment. No failure or
delay (whether by course of conduct or otherwise) by the Holders in exercising
any right, power or remedy which either may have under any of the Transaction
Documents shall operate as a waiver thereof or of any other right, power or
remedy, nor shall any single or partial exercise by the Holders of any such
right, power or remedy preclude any other or further exercise thereof or of any
other right, power or remedy. No waiver of any provision of any Transaction
Document and no consent to any departure therefrom shall ever be effective
unless it is in writing and signed by the parties hereto, or, if so permitted to
be effective, by TCW, if any, and may be given or withheld in their or its sole
and absolute discretion and then such waiver or consent shall be effective only
in the specific instances and for the purposes for which given and to the extent
specified in such writing. This Agreement and the other Transaction Documents
set forth the entire understanding and agreement of the parties hereto and
thereto with respect to the transactions contemplated herein and therein and
supersede all prior discussions and understandings with respect to the subject
matter hereof and thereof, and no modification or amendment of or supplement to
this Agreement shall be valid or effective unless the same is in writing and
signed by the party against whom it is sought to be enforced. THIS WRITTEN
AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. This Agreement
may be amended, but only with the written consent of each of the parties hereto.
The remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Holders at Law or in equity or otherwise.
10.2 Survival of Agreements; Cumulative Nature. The various
representations and warranties in this Agreement shall not survive the Closing
or the purchase of the Stock and the delivery of the Stock and the other
Transaction Documents. All other covenants and
25
agreements in this Agreement shall survive the Closing or the purchase of the
Stock and the delivery of the Stock and the other Transaction Documents.
10.3 Notices. All notices, requests, consents, demands and
other communications required or permitted hereunder shall be in writing, unless
otherwise specifically provided, and shall be deemed sufficiently given or
furnished upon delivery, when delivered by personal delivery, by telecopy, by
delivery service with proof of delivery, or three days after being deposited in
the United States mail as registered or certified United States mail, postage
prepaid, to Inland, IPC or the Holders at the addresses set forth on the
signature pages hereto (unless changed by similar notice in writing given by the
particular Person whose address is to be changed).
10.4 Governing Law; Submission to Process. EXCEPT TO THE
EXTENT THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A
TRANSACTION DOCUMENT, THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. INLAND HEREBY
IRREVOCABLY SUBMITS ITSELF AND EACH OTHER RELATED PERSON TO THE NON-EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE STATE OF NEW YORK
AND THE COUNTY OF NEW YORK AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY
BE MADE UPON IT OR ANY OF ITS SUBSIDIARIES IN ANY LEGAL PROCEEDING RELATING TO
THE TRANSACTION DOCUMENTS BY ANY MEANS ALLOWED UNDER NEW YORK OR FEDERAL LAW.
INLAND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
10.5 Registration, Transfer, Exchange and Substitution of
Stock. Inland shall keep at its principal executive office a register for the
registration and registration of transfers of the Series F Preferred Stock (the
"Register"). The name and address of each holder of Series F Preferred Stock,
each transfer thereof and the name and address of each transferee shall be
registered in such Register. Prior to due presentment for registration of
transfer, the Person in whose name any shares of Series F Preferred Stock shall
be registered shall be deemed and treated as the owner and holder thereof for
all purposes hereof, and Inland shall not be affected by any notice or knowledge
to the contrary. Inland shall give to any holder of Series F Preferred Stock,
promptly upon request therefor, a complete and correct copy of the names and
addresses of all registered holders of the Series F Preferred Stock.
(a) Transfer and Exchange of Stock. Upon surrender of any
shares of Series F Preferred Stock at the principal executive office of Inland
for registration of transfer or exchange (and in the case of a surrender for
registration of transfer, duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered holder of such shares of Series F
Preferred Stock or its attorney duly authorized in writing and accompanied by
the address for notices of each transferee of such shares of Series F Preferred
Stock or part thereof), Inland shall
26
execute and deliver, at Inland's expense, one or more new stock certificates (as
requested by the holder thereof) of the same series in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered shares of Series F Preferred Stock; provided, however, that no
transfer of the Series F Preferred Stock may be made (i) to a transferee who is
not an institutional accredited investor (within the meaning of Rule 501(a)(1),
(2), (3) or (7) of Regulation D promulgated under the Securities Act) or a
qualified institutional buyer (as defined in Rule 144A promulgated under the
Securities Act) and (ii) unless such transfer is made pursuant to an exemption
from registration under the securities laws of the United States including
without limitation any resale of the Series F Preferred Stock under Rule 144A
promulgated under the Securities Act. Any purported transfer of the Series F
Preferred Stock or an interest therein which is prohibited hereby shall be null
and void ab initio and of no force or effect whatever.
(b) Replacement of Stock Certificates. Upon receipt by
Inland of evidence reasonably satisfactory to it of the ownership of and the
loss, theft, destruction or mutilation of any stock certificates evidencing the
Series F Preferred Stock, Inland shall execute and deliver, in lieu thereof, new
stock certificates.
10.6 Waiver of Jury Trial, Punitive Damages, Etc. EACH OF THE
COMPANIES AND THE HOLDERS HEREBY:
(a) KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY
WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR
INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THE
TRANSACTION DOCUMENTS OR THE PURCHASE AND SALE OF ANY STOCK CONTEMPLATED THEREBY
OR ASSOCIATED THEREWITH;
(b) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED
BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR
IN ADDITION TO, ACTUAL DAMAGES;
(c) CERTIFY THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR
AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVERS; AND
(d) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT, THE OTHER TRANSACTION DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
CONTAINED IN THIS SECTION.
27
10.7 Exhibits and Disclosure Schedule; Additional
Definitions. All Exhibits and the Disclosure Schedule to this Agreement are a
part hereof for all purposes.
10.8 Confidentiality of Holders.
(a) Notwithstanding the termination of this Agreement and
except as otherwise required by Law or provided herein or in the subsections
below, Inland shall maintain the confidentiality of the identities of the
Holders and any owner of a beneficial interest in the Stock (collectively,
"Confidential Information") and shall not, without the Requisite Holders' prior
written consent, disclose any such information to another Person or use such
information for purposes other than those contemplated herein.
(b) Inland may disclose Confidential Information to its
directors, officers, members, employees, and agents (including attorneys,
accountants, and consultants) to whom such disclosure is reasonably necessary
for the execution or effectuation hereof, provided Inland notifies all such
Persons that the Confidential Information disclosed to them is subject to this
section and requires them not to disclose or use such information in breach of
this Section. Inland may also disclose Confidential Information in filings with
the Commission to the extent required to be disclosed therein.
(c) If Inland is requested or required by legal process
(including law or regulation, oral questions, interrogatories, request for
information or documents, subpoena, and civil investigative demand) to disclose
any Confidential Information, Inland shall promptly notify the Holders of such
request prior to complying with such process so that the Holders may seek an
appropriate protective order or waive the respondent's compliance with this
Section. If, after such notice and after providing the Holders a reasonable
opportunity to obtain a protective order or to grant such waiver (so long as the
granting of such time does not put Inland in breach of its obligations to
disclose), Inland is nonetheless legally compelled to disclose such information,
Inland may do so without liability under this Section.
(d) Any Confidential Information which becomes publicly
available through no breach by Inland of its obligations hereunder or no breach
by a third party of a confidential obligation to the Holders shall no longer be
deemed to be Confidential Information.
10.9 Successors and Assigns. Except as otherwise expressly
provided herein, this Agreement shall inure to the benefit of and be binding
upon the successors and permitted assigns of each of the parties whether so
expressed or not.
10.10 Counterparts. Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument.
10.11 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
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10.12 Expenses. Whether or not the Closing occurs, the
Companies will pay all reasonable costs and expenses incurred by TCW, the Banks
and ▇▇▇▇▇ (i) relating to the negotiation, preparation, execution and delivery
of this Agreement and the other Transaction Documents and the issuance of the
Stock (including, without limitation, reasonable fees, office charges and
expenses of counsel to TCW, Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, and counsel to
▇▇▇▇▇, Akin Gump ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP), (ii) relating to printing the
instruments evidencing the Stock, (iii) relating to any amendments, waivers or
consents under this Agreement to the same extent as set forth in clause (i) and
(ii) above, (iv) incident to the enforcement by the Holders of, or the
protection or preservation of any right or remedy of the Holders under this
Agreement and the other Transaction Documents, or any other document or
agreement furnished pursuant hereto or thereto or in connection herewith or
therewith (including, without limitation, reasonable fees and expenses of
counsel) and (v) relating to any bankruptcy, insolvency or other similar action
or proceeding in any jurisdiction involving any of the Companies. The Companies
shall pay such costs and expenses, to the extent then payable, on the date of
issuance of the Stock or earlier termination of this Agreement (provided that if
a Holder's breach is the cause of such termination the Companies shall have no
obligation to pay any costs or expenses incurred by such Holder, notwithstanding
anything else herein to the contrary) or, with respect to those matters
described in clauses (ii) through (v) above, thereafter from time to time upon
demand by TCW or ▇▇▇▇▇, as the case may be, upon presentation, in each such
case, of a reasonably detailed statement thereof.
10.13 Specific Performance. The Companies recognize that money
damages may be inadequate to compensate the Holders for a breach by the
Companies of their obligations hereunder, and the Companies irrevocably agree
that the Holders shall be entitled to the remedy of specific performance or the
granting of such other equitable remedies as may be awarded by a court of
competent jurisdiction in order to afford the Holders the benefits of this
Agreement and that the Companies shall not object and hereby waive any right to
object to such remedy or such granting of other equitable remedies on the
grounds that money damages will be sufficient to compensate the Holders.
29
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
INLAND RESOURCES INC.,
a Washington corporation
By:
-------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
INLAND PRODUCTION COMPANY,
a Texas corporation
By:
-------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SOLVATION INC.,
a Delaware corporation
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President
Address for Notices:
SOLVation, Inc.
c/o Smith Management LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Akin Gump ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇ III
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
INLAND HOLDINGS, LLC,
a California limited liability company
By: TRUST COMPANY OF THE WEST, a
California trust company, as Sub-Custodian for
Mellon Bank for the benefit of Account No. CPFF
873-3032, Member
By:
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Managing Director
By:
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Managing Director
By: TCW PORTFOLIO NO. 1555 DR V SUB-
CUSTODY PARTNERSHIP, L.P.,
a California limited partnership, Member
By: TCW ROYALTY COMPANY, a California
corporation, Managing General Partner
By:
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President
Address for Notices:
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT A
Officer's Certificate
___________________, a __________ corporation (the "Company"),
pursuant to Section 5.3 of the Exchange And Stock Issuance Agreement dated as of
____________, 2003 (the "Exchange Agreement"; capitalized terms not defined
herein shall have the meanings ascribed to them in the Exchange Agreement),
HEREBY CERTIFIES that:
(1) Each of the representations and warranties made by the
Company in the Exchange Agreement (other than those made as of a specified date
earlier than the date hereof) is true and correct in all material respects on
and as of the date hereof as though made on and as of the date hereof, and each
of the representations and warranties made by the Company as of a specified date
earlier than the date hereof was true and correct in all material respects as of
such earlier date.
(2) Each of the agreements, covenants and obligations required by
the Exchange Agreement to be performed or complied with by the Company at or
before the Closing has been duly performed or complied with in all material
respects.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed on its behalf by the undersigned on and as of the ___ day of
____________, 2003.
[COMPANY]
By:
----------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
By:
----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Chief Financial Officer
EXHIBIT B
Secretary's Certificate
I, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Secretary of ______________, a __________
corporation (the "Company"), pursuant to Section 5.3 of the Exchange and Stock
Issuance Agreement dated as of ____________, 2003 (the "Exchange Agreement"), DO
HEREBY CERTIFY on behalf of the Company as follows:
(1) Attached hereto as Exhibit A is a true, complete and correct
copy of the Articles of Incorporation of the Company and all amendments thereto
(as so amended, the Articles of Incorporation"), and no amendment to the
Articles of Incorporation has been authorized or become effective since the date
of the last of such amendments, no amendment or other document relating to or
affecting the Articles of Incorporation has been filed in the office of the
Secretary of State of the State of [Washington/Texas] since such date and no
action has been taken by the Company, its shareholders, directors or officers in
contemplation of the filing of any such amendment or other document or in
contemplation of the liquidation or dissolution of the Company.
(2) Attached hereto as Exhibit B is a true, complete and correct
copy of the By-Laws of the Company as in full force and effect on the date
hereof and at all times since [date of last amendment].
(3) Attached hereto as Exhibit C is a true, complete and correct
copy of resolutions adopted by the Board of Directors of the Company with
respect to the Exchange Agreement and the transactions contemplated thereby,
which resolutions were duly and validly adopted at a meeting of the Board of
Directors of the Company on __________, 2003, at which a quorum was present and
acting throughout. All such resolutions are in full force and effect on the date
hereof in the form in which adopted and no other resolutions have been adopted
by the Board of Directors of the Company or any committee thereof relating to
the Exchange Agreement and the transactions contemplated thereby.
(4) Each of the following named individuals is a duly elected or
appointed, qualified and acting officer of the Company who holds, and at all
times since [date of execution of the Exchange Agreement] has held, the offices
set opposite such individual's name, and the signature written opposite the name
and title of such officer is such officer's genuine signature:
▇▇▇▇ ▇▇▇▇▇▇▇▇ Chief Executive Officer
and Chief Operating Officer
--------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ President, Chief Financial Officer
and Secretary
--------------------------
▇▇▇▇▇▇▇ ▇. War Vice President
--------------------------
IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed on its behalf by the undersigned on and as of the ____ day of
______________, 2003.
[COMPANY]
By:
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Secretary
I, ▇▇▇▇ ▇▇▇▇▇▇▇▇, Chief Executive Officer of the Company, DO
HEREBY CERTIFY on behalf of the Company that ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ is the duly
elected or appointed, qualified and acting Secretary of the Company, and the
signature set forth above is the genuine signature of such officer.
By:
------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
, 2003
---------------
2
EXHIBIT C
FORM OF
FIRST AMENDMENT TO SENIOR SUBORDINATED NOTE
PURCHASE AGREEMENT
This FIRST AMENDMENT TO SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
(this "Amendment") is dated as of ___________ __, 2003, by and among Inland
Resources Inc., a Washington corporation ("Inland"), Inland Production Company,
a Texas corporation ("IPC") and SOLVation Inc., a Delaware corporation
("▇▇▇▇▇").
RECITALS
A. The parties hereto entered into that certain Senior Subordinated Note
Purchase Agreement (the "Agreement") dated as of August 2, 2001, with respect to
the issuance by Inland of Senior Sub Notes (as defined in the Agreement) to
▇▇▇▇▇, which notes are unconditionally and irrevocably guaranteed by IPC. Unless
a particular word or phrase is otherwise defined or the context otherwise
requires, capitalized words and phrases used in this Amendment and defined in
the Agreement have the meanings set forth in the Agreement.
B. The parties hereto desire to amend the Agreement as provided
herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. AMENDMENTS.
1.1 Section 1.1 Amendments.
(a) The parties hereby amend Section 1.1 of the Agreement by
amending and restating in their entirety each of the following definitions to
read as follows:
"AGREEMENT" means the Senior Sub Note Purchase
Agreement.
"MATURITY DATE" means the first to occur of : (i) the
date that is six (6) months after the Senior Bank Debt Maturity
Date, (ii) the date at which the Senior Bank Debt is repaid in
full or otherwise no longer outstanding; provided, however, if
such date occurs prior to the otherwise applicable Revolving
Termination Date (as defined in the Senior Bank Agreement), the
Banks' commitments under the Senior Bank Agreement to make
Revolving Loans (as defined in the Senior Bank Agreement) shall
have been permanently reduced to zero at such date; and (iii)
July 1, 2009, or in each case the immediately succeeding
Business Day.
(b) The parties further amend Section 1.1 of the Agreement
by adding the following new definition in proper alphabetical order:
"SENIOR BANK DEBT MATURITY DATE" means the applicable
maturity date of the Term Loan (as defined in the Senior Bank
Agreement) set forth in Section 2.3 of the Senior Bank
Agreement.
1.2 Section 2.10(a) Amendment. The parties hereby amend Section
2.10(a) of the Agreement by changing the date "July 1, 2007" to "July 1, 2009"
in the first line thereof.
1.3 Section 2.12 Amendment. The parties hereby amend Section 2.12 of
the Agreement by deleting the phrase "are senior to the TCW Sub Notes and the
Junior Sub Notes pursuant to the TCW Subordination Agreement and the Junior Sub
[sic] Subordination Agreement, and" from the first sentence thereof.
1.4 Section 4.1 Amendment. The parties hereby amend Section 4.1 of
the Agreement by deleting "(i)" from the first paragraph thereof and placing a
period after the word "observed" in such paragraph, and deleting all of the text
that follows in Section 4.1 of the Agreement.
1.5 Section 4.2 Amendments.
(a) The parties hereby amend Section 4.2(a) by adding the
following proviso after "Maturity Date" in the last line thereof: "provided,
however, the Companies may not borrow any additional principal amounts under the
Senior Bank Agreement in excess of the aggregate principal balance of the Debt
outstanding thereunder (including in the calculation thereof the amount of any
outstanding reimbursement obligations to the Banks with respect to Letters of
Credit (as such term is defined in the Senior Bank Agreement) and the aggregate
amount of undrawn Letters of Credit) at the first to occur of (i) the Revolving
Termination Date (as defined in the Senior Bank Agreement) and (ii) December 31,
2004, and thereafter in excess of such principal balance as reduced from time to
time pursuant to Section 2.3 of the Senior Bank Agreement, by the repayment of
Letter of Credit reimbursement obligations or the expiration of Letters of
Credit or by other prepayments of such Debt unless the Senior Sub Notes shall
first or concurrently be paid in full".
(b) The parties hereby further amend Section 4.2 of the
Agreement by deleting in its entirety subsection (g) therefrom.
1.6 Annex A Amendments.
(a) The parties hereby amend Annex A to the Agreement by
deleting therefrom the definitions of "BOARD OF DIRECTORS", "JUNIOR SUB DEBT,"
"JUNIOR SUB NOTE PURCHASE Agreement," "JUNIOR SUB NOTE PURCHASE DOCUMENTS,"
"JUNIOR SUB NOTES," "PORTFOLIO", "SHAREHOLDERS AGREEMENT," "TCW SUB DEBT," "TCW
SUB NOTE ISSUANCE DOCUMENTS," "TCW SUB NOTES," and "TCW SUBORDINATION
AGREEMENT". The parties hereby amend the Agreement by deleting therefrom all
references to such definitions.
(b) The parties hereby further amend Annex A to the
Agreement by amending and restating in their entirety each of the following
definitions to read as follows:
"OPTION AGREEMENT" means that certain Option Agreement
by and between TCW and ▇▇▇▇▇ with respect to the Senior Sub
Notes, as amended by a
2
First Amendment to Option Agreement dated as of the Exchange
Closing Date by and between TCW and ▇▇▇▇▇.
"REGISTRATION RIGHTS AGREEMENT" means that certain
Second Amended and Restated Registration Rights Agreement dated
as of the Exchange Closing Date by and among Issuer, TCW and
▇▇▇▇▇.
"SENIOR BANK AGREEMENT" means that certain Third Amended
and Restated Credit Agreement dated as of November 30, 2001 by
and among Issuer, IPC, Fortis Capital Corp., as agent and
various other lenders referred to therein, as amended through
the Exchange Closing Date, or any replacement credit or loan
agreement approved by the Requisite Holders with any Bank or
Banks approved by the Requisite Holders.
"SENIOR BANK DEBT" means Debt under the Senior Bank
Agreement.
"SENIOR SUB NOTE PURCHASE AGREEMENT" means that certain
Senior Subordinated Note Purchase Agreement dated as of August
2, 2001 and entered into by and among the Companies and ▇▇▇▇▇,
as amended by a First Amendment to Senior Subordinated Note
Purchase Agreement dated as of the Exchange Closing Date entered
into among the Companies and ▇▇▇▇▇.
"SUBORDINATION AGREEMENTS" means the Bank Subordination
Agreement.
"SUB NOTES" means the Senior Sub Notes.
"TRANSACTION DOCUMENTS" means the Senior Sub Notes
Purchase Documents, the Exchange Agreement and the Transaction
Documents, as such term is defined in the Exchange Agreement,
and any other agreement entered into pursuant to the foregoing
by and between the Issuer or any Subsidiary thereof, on the one
hand, and ▇▇▇▇▇, on the other hand.
(c) The parties hereby further amend Annex A by adding a new
clause (viii) to the definition of "Permitted Debt" and renumbering existing
clauses (viii) and (ix) as clauses (ix) and (x), respectively, which new clause
(viii) shall read as follows: "(viii) unsecured Debt (A) the incurrence of which
is not prohibited under the Senior Bank Agreement, (B) that has a maturity date
no earlier than six months after the Maturity Date and requires no principal
amortization prior to such maturity date and (C) is subordinated and junior to
the Senior Sub Notes in right of payment and on other terms approved by the
Requisite Holders in their reasonable discretion".
(d) The parties hereby further amend Annex A by deleting all
of the text in the definition of "PERMITTED DISTRIBUTIONS" following the word
"Operator" in the twelfth line thereof.
(e) The parties hereby further amend Annex A by adding each
of the following new definitions in proper alphabetical order:
3
"EXCHANGE AGREEMENT" means the Exchange and Stock
Issuance Agreement dated as of ________, 2003 by and among the
Companies, TCW and ▇▇▇▇▇.
"EXCHANGE CLOSING DATE" means the closing Date, as such
term is defined in the Exchange Agreement.
"MERGER" means the "Merger," as such term is defined in
the Investors' Agreement referred to in the Exchange Agreement.
1.7 Annex C Amendments.
(a) The parties hereby amend Annex C to the Agreement by
amending and restating Section C-1.9 thereof to read as follows:
"Section C-1.9. Working Capital. Inland's consolidated
Working Capital Ratio will not be less than .9 to 1.0 for the
fiscal quarter ending March 31, 2003 and 1.0 to 1.0 for all
fiscal quarters thereafter. As used herein, "Working Capital
Ratio" means the ratio of Inland's consolidated current assets
to consolidated current liabilities, provided that for purposes
of determining the Working Capital Ratio: (a) consolidated
current assets and consolidated current liabilities will be
calculated without including any amounts resulting from the
application of FASB Statement 133, (b) consolidated current
liabilities will be calculated without including any amounts
relating to the Senior Sub Notes and any current amounts of the
Senior Bank Debt, (c) the unused portion of the commitment under
the Senior Bank Agreement shall be treated as a consolidated
current asset and (d) crude oil inventory (net to the Companies'
interest) will be included in consolidated current assets. Crude
oil inventory will be calculated by using the net well head oil
price per barrel at the end of each respective fiscal quarter
times the Companies' net crude oil barrels in inventory". [NOTE
- TO BE CONFORMED TO FINAL LANGUAGE OF THE ANALOGOUS PROVISION
IN THE FOURTH SENIOR BANK AMENDMENT (AS DEFINED IN THE EXCHANGE
AGREEMENT)].
(b) The parties hereby amend Section C-2.1 of Annex C to the
Agreement by amending and restating Section C-2.1 to read as follows:
"Section 2.1. Limitation on Sales of Property. Without
the express written consent of the Requisite Holders, Inland
will not sell, transfer, lease, exchange, discount, assign,
abandon, surrender, alienate or dispose of any material
Property, or any material interest therein, that reduces the
Asset Coverage Ratio below 150%, except (a) equipment which is
worthless or obsolete or which is replaced by equipment of equal
suitability and value; (b) personal property inventory
(including oil and gas sold as produced and seismic data) which
is sold in the ordinary course of business; (c) specific
Properties not subject to the Mortgages (as defined in the
Senior Bank Agreement) (or specific portions thereof), provided
the same are abandoned and not otherwise disposed of and further
provided that no well situated on the property to be abandoned,
or located
4
on any unit containing all or any part thereof, is capable (or
is subject to being made capable through commercially feasible
operations) of producing oil, gas or other hydrocarbons or
minerals in paying quantities (with such determination of paying
quantities being made taking into account the prudent operation
of any unit in which such property is located); (d) farmouts on
terms and conditions consistent with general industry standards;
and (e) sales, transfers, leases, exchanges, discounts,
assignments, abandonments, surrenders, alienations or
dispositions permitted by the Agent (as defined in the Senior
Bank Agreement) and/or otherwise under the Senior Bank Agreement
or the Loan Documents (as defined in the Senior Bank Agreement).
Neither Inland nor any of Inland's Subsidiaries will sell,
transfer or otherwise dispose of capital stock of any of
Inland's Subsidiaries except that any Subsidiary of Inland may
sell or issue its own capital stock to the extent not otherwise
prohibited hereunder."
(c) The parties hereby amend Section C-2.2 of Annex C to the
Agreement by deleting the heading and all of the existing text thereof and
replacing the same with "Intentionally Omitted".
2. APPROVALS.
2.1 Approval of the Exchange Transactions. For all purposes of the
Agreement, as amended hereby, including specifically but without limitation
Section 4.2(d) thereof, ▇▇▇▇▇, as Holder of all of the issued and outstanding
Senior Sub Notes, hereby approves the execution and delivery by the Companies of
the Exchange Agreement; the performance by the Companies of their obligations
thereunder; and the consummation of the transactions contemplated thereby.
2.2 Approval of the Merger. For all purposes of the Agreement, as
amended hereby, including specifically but without limitation Section 4.2(c)
thereof, ▇▇▇▇▇, as Holder of all of the issued and outstanding Senior Sub Notes,
hereby approves the Merger.
3. MISCELLANEOUS.
3.1 Replacement Note(s). In furtherance of this Amendment and the
transactions contemplated hereby, Inland will deliver to ▇▇▇▇▇ its replacement
senior subordinated note(s) in the form of Exhibit A hereto in the aggregate
principal amount of $5,000,000, in denominations of at least $500,000, each
dated the Exchange Closing Date and registered in the name of ▇▇▇▇▇ (or in the
name of a nominee of ▇▇▇▇▇ as designated in writing by ▇▇▇▇▇), against delivery
by ▇▇▇▇▇ to Inland on the Exchange Closing Date of the Senior Sub Notes
currently issued and outstanding, marked "Renewed and Extended". Such
replacement note(s) shall, upon acceptance by ▇▇▇▇▇, constitute replacements and
substitutions for the Senior Sub Notes and all references in the Agreement, as
amended by this Amendment, to the "Senior Sub Notes" and the "Sub Notes" shall,
from and after the date hereof, be deemed to refer to such replacement note(s),
the same as if such replacement note(s) were the Senior Sub Notes defined,
described and referred to in the Agreement.
3.2 Ratification of Agreement. The parties hereby ratify and confirm
the Agreement heretofore executed and delivered and it shall remain in full
force and effect as amended hereby.
5
3.3 IPC Guaranty. The guaranty by IPC of the Obligations set forth
in Section 5 of the Agreement is hereby amended to reflect that the Agreement
has been amended and modified by this Amendment and that as so amended and
modified, the Agreement and the guaranty of IPC set forth in such Section 5 are
hereby ratified, confirmed and adopted by IPC, as Guarantor; and to induce ▇▇▇▇▇
to execute this Amendment, effective as of the date hereof, IPC hereby
unconditionally and irrevocably guarantees to ▇▇▇▇▇ and each future Holder of
the Senior Sub Notes at any time outstanding (i) the prompt and indefeasible
payment in full in dollars when due (whether its stated maturity by
acceleration, by prepayment or otherwise) of the Obligations and (ii) the prompt
performance and observance by Inland of all covenants, agreements and conditions
on its part to be performed and observed under the Agreement, as amended by this
Amendment, in each case strictly in accordance with the terms thereof, all in
accordance with the terms of such Section 5 as if such payments and Obligations
were originally described therein and guaranteed thereunder as the "Guaranteed
Obligations".
3.4 No Default. Inland represents and warrants that as of the
Closing (as defined in the Exchange Agreement) no Default has occurred and is
continuing at the date hereof.
3.5 Counterparts. This Amendment may be executed in as many
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
[SIGNATURE PAGES FOLLOW]
6
This Amendment is executed as of the date above written.
INLAND RESOURCES INC.
By:
------------------------------------
Name:
-----------------------------
Title:
-----------------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
INLAND PRODUCTION COMPANY
By:
------------------------------------
Name:
-----------------------------
Title:
-----------------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
SOLVATION INC.
By:
------------------------------------
Name:
-----------------------------
Title:
-----------------------------
Address for Notices:
c/o Smith Management LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT D
FIRST AMENDMENT TO OPTION AGREEMENT
This FIRST AMENDMENT TO OPTION AGREEMENT (this "Amendment") is dated as
of ___________ __, 2003, by and between Inland Holdings, LLC, a California
limited liability company ("TCW") and SOLVation Inc., a Delaware corporation
("▇▇▇▇▇").
RECITALS
A. The parties hereto entered into that certain Option Agreement (the
"Agreement") dated as of August 2, 2001, with respect to an exclusive option to
purchase all, but not less than all, of the Senior Sub Notes (as defined in the
Agreement). Unless a particular word or phrase is otherwise defined or the
context otherwise requires, capitalized words and phrases used in this Amendment
and defined in the Agreement have the meanings set forth in the Agreement.
B. The parties hereto desire to amend the Agreement as provided
herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. AMENDMENT TO SECTIONS 1.2 AND 1.3 OF THE AGREEMENT.
1.1 Section 1.2 Amendment. The parties hereby amend Section 1.2 of
the Agreement to delete the phrase "when TCW shall hold any TCW Sub Notes (as
defined in the Senior Subordinated Note Purchase Agreement)" from the end of the
first sentence thereof.
1.2 Section 1.3 Amendment. The parties hereby amend Section 1.3 of
the Agreement to delete the phrase "in connection with the transfer to such
Affiliate of TCW Sub Notes then outstanding representing 50% or more of the
outstanding principal balance thereof" from the end of the first sentence
thereof and replacing it with "in connection with the transfer to such Affiliate
of beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended) of shares of voting stock of Inland representing more than 50% of the
total number of shares of such stock then owned by TCW".
2. MISCELLANEOUS.
2.1 Ratification of Agreement. The parties hereby ratify and confirm
the Agreement heretofore executed and delivered and it shall remain in full
force and effect as amended hereby.
2.2 Counterparts. This Amendment may be executed in as many
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
[SIGNATURES PAGES FOLLOW]
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This Amendment is executed as of the date above written.
INLAND HOLDINGS LLC, a California limited
liability company
By: TRUST COMPANY OF THE WEST, a California
trust company, as Sub-Custodian for Mellon Bank for the
benefit of Account No. CPFF 873-3032, Member
By:
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Managing Director
By:
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Managing Director
By: TCW PORTFOLIO NO. 1555 DR V SUB-CUSTODY
PARTNERSHIP, L.P., a California limited partnership,
Member
By: TCW ROYALTY COMPANY, a California
corporation, Managing General Partner
By:
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President
Address for Notices:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a Copy To:
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SOLVation INC., a Delaware Corporation
By:
-----------------------------------
Name:
Title:
Address for Notices:
SOLVation, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Akin Gump ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇ III
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT E
SECOND AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
DATED AS OF ________________, 2003
BY AND AMONG
INLAND RESOURCES INC.,
INLAND HOLDINGS, LLC,
SOLVation INC.,
AND
HAMPTON INVESTMENTS LLC
TABLE OF CONTENTS
Page
Section 1. Definitions...............................................1
Section 2. Piggyback Registration....................................2
Section 3. Registration Procedures...................................3
Section 4. Registration Expenses.....................................7
Section 5. Preemptive Rights.........................................7
Section 6. Indemnification; Contribution.............................8
Section 7. Rule 144.................................................11
Section 8. Remedies.................................................11
Section 9. Binding Effect; Transferees; Termination.................11
Section 10. Amendments and Waivers...................................12
Section 11. Notices..................................................12
Section 12. Entire Agreement.........................................12
Section 13. Counterparts.............................................12
Section 14. Headings.................................................12
Section 15. Governing Law............................................13
Section 16. Severability.............................................13
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SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Second Amended and Restated Registration Rights Agreement
(this "Agreement") is made and entered into as of the __ day of __________,
2003, by and among Inland Resources Inc., a Washington corporation
("Inland-Washington"), Inland Holdings, LLC, a California limited liability
company ("TCW"), SOLVation Inc., a Delaware corporation ("SOLVation"), and
Hampton Investments LLC, a Delaware limited liability company ("Hampton", and,
together with SOLVation, "▇▇▇▇▇").
RECITALS
WHEREAS, Inland-Washington, Holdings, TCW Portfolio No. 1555 DRV
Sub-Custody Partnership, L.P., a California limited partnership, Joint Energy
Development Investments II Limited Partnership, a Delaware limited partnership,
Pengo Securities Corporation, ▇▇▇▇▇ Energy Partnership, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
entered into that certain Registration Rights Agreement dated September 21, 1999
(the "Original Agreement");
WHEREAS Inland-Washington, TCW and Hampton entered into that
certain Amended and Restated Registration Rights Agreement dated August 2, 2001
(the "First Amended and Restated Agreement");
WHEREAS, TCW and SOLVation, simultaneously herewith, will acquire
shares of the Series F Preferred Stock pursuant to that certain Exchange and
Stock Issuance Agreement dated as of even date herewith among Inland-Washington,
Inland Production Company, TCW and SOLVation Inc.(the "Exchange Agreement"); and
WHEREAS, it is a condition of the Exchange Agreement that the
parties hereto amend and restate the First Amended and Restated Agreement.
The parties hereby agree that the First Amended and Restated
Agreement is amended and restated in its entirety as follows and is fully
superseded by this Agreement:
Section 1. Definitions.
As used in this Agreement, the following terms have the meanings
indicated below:
"Commission" means the Securities and Exchange Commission or any
similar agency having jurisdiction to enforce the Securities Act.
"Common Stock" means the common stock, par value $.001 per share,
of the Company.
"Company" means Inland-Washington, prior to the merger of
Inland-Washington with and into Inland-Delaware, and, after such merger, the
term "Company" means Inland-Delaware.
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Inland-Delaware" means Inland Resources Inc., a Delaware
corporation.
"Merger" means the merger of Inland-Washington with and into
Inland-Delaware.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental or political subdivision, agency or
instrumentality thereof or other entity or organization of any kind.
"Piggyback Registration" has the meaning ascribed to such term in
Section 2.
"Register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of
effectiveness of such registration statement.
"Registrable Stock" means, collectively, (a) the shares of Common
Stock held by TCW before, as of, and after the date hereof, (b) the shares of
Common Stock held by ▇▇▇▇▇ before, as of, and after the date hereof, (c) any
shares of Common Stock or other securities issued with respect to the Common
Stock described in clauses (a) and (b) of this definition whether by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation, share exchange, reorganization or
otherwise held by TCW or ▇▇▇▇▇, and (d) any shares of Series F Preferred Stock
held by TCW and ▇▇▇▇▇; provided, however, such securities shall cease to be
Registrable Stock when (i) a registration statement with respect to the
disposition of such securities shall have become effective under the Securities
Act and such securities shall have been disposed of in accordance with the plan
of distribution set forth in such registration statement, (ii) such securities
shall have been sold pursuant to Rule 144 (or any successor provision) under the
Securities Act, (iii) such securities shall have ceased to be outstanding or
(iv) all of such securities held by a Person may be sold pursuant to Rule 144
(or a successor provision) under the Securities Act without being restricted by
the volume limitations or method of sale restrictions thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Series F Preferred Stock" means the Series F Preferred Stock,
par value $.001 per share, of Inland-Washington.
Section 2. Piggyback Registration.
(a) If the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders) any of its
capital stock or other securities under the Securities Act (other than pursuant
to a registration statement on Forms S-4 or S-8 (or successor forms) or in
connection with an exchange offer), then, subject to the following sentences of
this Section 2(a), the Company shall, in each case, give written notice of such
proposed filing to the holders of Registrable Stock (which notice shall
indicate, to the extent then known, the proposed managing underwriter or
underwriters, if such offering is to be underwritten, and such other terms of
the proposed offering that the Company reasonably believes to be material to the
holders of
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Registrable Stock) and shall include in such registration statement all or a
portion of the Registrable Stock, of the same class as the stock being offered
by the Company and/or selling shareholders, as applicable, owned by such holders
which such holders shall request to be so included by written notice given by
such holders to the Company within 10 business days after such holders' receipt
of such notice from the Company (a "Piggyback Registration"). The Company shall
use its best efforts to effect the registration of all Registrable Stock
requested to be so registered in such offering on the same terms and conditions
as any securities of the Company and/or the selling shareholders, as applicable,
of the same class included therein. If the managing underwriter or underwriters
of an underwritten offering, if any, advise the holders of Registrable Stock in
writing that in its or their reasonable opinion or, in the case of a Piggyback
Registration not being underwritten, the Company shall reasonably determine (and
notify the holders of Registrable Stock of such determination), after
consultation with an investment banker of nationally recognized standing, that
the number of shares or securities proposed to be sold in such registration will
adversely affect the success of such offering, the Company will include in such
registration the number of securities, if any, which, in the opinion of such
underwriter or underwriters, or the Company, and/or the selling shareholders, as
applicable, as the case may be, can be sold as follows: (i) first, the shares
the Company and/or the selling shareholders, as applicable, proposed to sell,
(ii) second, the Registrable Stock and other shares of stock requested to be
included in such registration by the holders thereof entitled to participate in
such registration under any registration rights agreement in effect on the date
hereof and (iii) third, any Common Stock requested to be included in such
registration by the holders thereof entitled to participate in such registration
under a registration rights agreement effective after the date hereof.
Notwithstanding the above, if the managing underwriter or underwriters of an
underwritten offering, if any, advise the Company that it or they intend to
sell, as an over-allotment option, a number of shares or securities in excess of
the number of shares of stock requested to be sold by the parties pursuant to
this Section 2(a) (the "Excess Stock"), the Excess Stock to be sold shall be
sold by the holders of the Registrable Stock and shall be allocated among them
pro rata based upon the number of shares of Registrable Stock that each such
holder holds in excess of the stock requested to be sold pursuant to this
Section 2(a).
(b) The holders of Registrable Stock shall be parties to the
underwriting agreement between the Company, the selling shareholders (if
applicable) and such underwriters. The representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of the holders of
Registrable Stock to be distributed by such underwriters, and the conditions
precedent to the obligations of such holders of Registrable Stock under such
underwriting agreement shall be reasonably satisfactory to such holders. Such
holders shall not be required to make any representations or warranties to the
Company or its underwriters other than representations or warranties regarding
such holders' interest in the shares to be distributed and such holders'
intended method of distribution. The Company shall have the right to discontinue
any Piggyback Registration under this Section 2 at any time prior to the
effective date of such registration if the registration of the securities giving
rise to such Piggyback Registration under this Section 2 is discontinued by the
Company.
(c) Section 2(a) hereof shall not be applicable if the
Company proposes to file a registration statement and the Company has gone
private since the date hereof and such proposed registration statement is the
first registered primary offering of the Company's securities to the general
public since that time.
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Section 3. Registration Procedures.
(a) Certain Company Obligations. Whenever Registrable Stock
is to be registered pursuant to Sections 2 of this Agreement,
the Company will use its best efforts to effect the registration
of such Registrable Stock in accordance with the intended method
of disposition thereof as quickly as practicable, and in
connection with any such request and with the Piggyback
Registration, the Company will as expeditiously as possible:
(i) prepare and file with the Commission a
registration statement which includes the Registrable Stock
requested to be included and use its best efforts to cause such
registration statement to become effective; provided that before
filing a registration statement or prospectus or any amendments
or supplements thereto, the Company will furnish to the holders
of the Registrable Stock covered by such registration statement
and the underwriters, if any, draft copies of all such documents
proposed to be filed at least five (5) business days prior
thereto (or, in the case of any amendments to documents that
have previously been filed with the Commission, such shorter
period of time if the Company reasonably believes it is
necessary in order to effect the registration on a timely basis
so long as such period is not less than 24 hours), which
documents will be subject to the reasonable review of such
holders and underwriters, and provided further that if such
registration statement refers to any holder of Registrable Stock
by name or otherwise as the holder of any securities of the
Company, then such holder shall have the right to require (A)
the insertion therein of language, in form and substance
satisfactory to such holder, to the effect that the holding by
such holder and the Company of such securities does not
necessarily make such holder a "controlling person" of the
Company within the meaning of the Securities Act and is not to
be construed as a recommendation by such holder of the
investment quality of the Company's securities covered thereby
and that such holding does not imply that such holder will
assist in meeting any future financial requirements of the
Company, or (B) in the event that such reference to such holder
by name or otherwise is not required by the Securities Act or
any rules and regulations promulgated thereunder, the deletion
of the reference to such holder;
(ii) prepare and file as soon as reasonably
practicable with the Commission such amendments and
post-effective amendments to the registration statement as may
be necessary to keep the registration statement effective for 90
days (or such shorter period which will terminate when all
Registrable Stock covered by such registration statement has
been sold or withdrawn); cause the prospectus to be supplemented
by any required prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 under the Securities Act; and
comply with the provisions of the Securities Act applicable to
it with respect to the disposition of all securities covered by
such registration statement during the applicable period in
accordance with the intended methods of disposition by the
holders thereof set forth in such registration statement or
supplement to the prospectus;
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(iii) furnish to any holder of Registrable Stock
included in such registration statement and to the managing
underwriter or underwriters, if any, without charge, at least
one signed copy of the registration statement and any
post-effective amendment thereto, upon request, and such number
of conformed copies thereof and such number of copies of the
prospectus (including each preliminary prospectus) and any
amendments or supplements thereto, and any documents
incorporated by reference therein, as such holder or underwriter
may reasonably request in order to facilitate the disposition of
the Registrable Stock being sold by such holder;
(iv) notify in writing each holder of Registrable
Stock included in such registration statement, at any time when
a prospectus relating thereto is required to be delivered under
the Securities Act, when the Company becomes aware of the
happening of any event as a result of which the prospectus
included in such registration statement (as then in effect)
contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein
(in the case of the prospectus or any preliminary prospectus, in
light of the circumstances under which they were made) not
misleading and, as promptly as practicable thereafter, prepare
and file with the Commission and furnish a supplement or
amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Stock, such prospectus will
not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading;
(v) use reasonable diligence to cause all
Registrable Stock included in such registration statement to be
listed, by the date of the first sale of Registrable Stock
pursuant to such registration statement, on each securities
exchange on which the Common Stock of the Company is then listed
or proposed to be listed, if any, and use reasonable diligence
to cause all Registrable Stock included in such Registration
Statement to be quoted on The Nasdaq Stock Market (or other
national or small-cap market), if the Common Stock of the
Company is then quoted thereon;
(vi) make generally available to its security holders
an earnings statement satisfying the provisions of Section 11(a)
of the Securities Act as soon as practicable, which earnings
statement shall cover the requisite 12-month period, which
requirements will be deemed to be satisfied if the Company
timely files complete and accurate information on Forms 10-Q,
10-K and 8-K under the Exchange Act and otherwise complies with
Rule 158 under the Securities Act as soon as feasible;
(vii) if requested by the managing underwriter or
underwriters or any holder of Registrable Stock covered by the
registration statement, promptly incorporate in a prospectus
supplement or post-effective amendment such information as the
managing underwriter or underwriters or such holder reasonably
requests to be included therein, including, without limitation,
with respect to the Registrable Stock being sold by such holder
to such underwriter or underwriters, the
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purchase price being paid therefor by such underwriter or
underwriters and with respect to any other terms of the
underwritten offering of the Registrable Stock to be sold in
such offering, and promptly make all required filings of such
prospectus supplement or post-effective amendment;
(viii) on or prior to the date on which the
registration statement is declared effective, use reasonable
diligence to register or qualify, and cooperate with the holders
of Registrable Stock included in such registration statement,
the underwriter or underwriters, if any, and their counsel, in
connection with the registration or qualification of the
Registrable Stock covered by the registration statement for
offer and sale under the securities or blue sky laws of each
state and other jurisdiction of the United States as any such
holder or underwriter reasonably requests in writing, and use
reasonable diligence to keep each such registration or
qualification effective, including through new filings, or
amendments or renewals, during the period such registration
statement is required to be kept effective and to do any and all
other acts or things necessary or advisable to enable the
disposition in all such jurisdictions of the Registrable Stock
covered by the applicable registration statement; provided that
the Company will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified
or to take any action which would subject it to general service
of process in any such jurisdiction where it is not then so
subject;
(ix) cooperate with the holders of Registrable Stock
covered by the registration statement and the managing
underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any
restrictive legends) representing securities to be sold under
the registration statement, and enable such securities to be in
such denominations and registered in such names as the managing
underwriter or underwriters, if any, or such holders may
request;
(x) enter into such customary agreements (including
an underwriting agreement in customary form) and take all such
other actions as the holders of the Registrable Stock being sold
or the underwriters retained by holders participating in an
underwritten public offering, if any, reasonably request in
order to expedite or facilitate the disposition of such
Registrable Stock;
(xi) make available for inspection by the holders, by
any underwriter participating in any disposition to be effected
pursuant to such registration statement and by any attorney,
accountant or other agent retained by the holders or any such
underwriter, all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and
cause all of the Company's officers, directors and employees to
supply all information, reasonably requested by the holders or
any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement. In that connection,
the Company may require the holders, such underwriter and such
other persons to conduct their investigation in a manner which
does not disrupt the operations of the Company and to execute
such
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confidentiality agreements as the Company may reasonably
determine to be advisable;
(xii) notify each holder of Registrable Stock of any
stop order issued or threatened by the Commission in connection
with any registration statement covering Registrable Stock and
take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered; and
(xiii) if such sale is pursuant to an underwritten
offering, obtain "cold comfort" letters dated the effective date
of the registration statement and the date of the closing under
the underwriting agreement from the Company's independent public
accountants in customary form and covering such matters of the
type customarily covered by "cold comfort" letters as the
counsel of the holders of Registrable Stock may reasonably
request or the managing underwriter reasonably requests.
(b) Certain Obligations of Holders of Registrable Stock.
Each holder of Registrable Stock shall provide the Company in writing such
information as the Company reasonably requests in order to effectuate the
registration and disposition of such holder's Registrable Stock pursuant to this
Agreement and such holder shall execute all consents, powers of attorney,
registration statements and other documents reasonably required to be signed by
such holder in order to effectuate the registration or disposition of
Registrable Stock by such holder.
Section 4. Registration Expenses. The Company shall pay all
expenses incident to the Company's performance of or compliance with its
obligations hereunder, including, without limitation, all registration, filing
and National Association of Securities Dealers, Inc. fees, all fees and expenses
of complying with securities or blue sky laws, all word processing, duplicating
and printing expenses, messenger and delivery expenses, and the reasonable fees
and disbursements of the Company's independent public accountants, the Company's
counsel and reasonable fees and expenses of one law firm acting as counsel to
the holders requesting registration of all or a portion of their Registrable
Stock. Holders of Registrable Stock requesting registration will be responsible
for any other expenses incurred by them, including for their own accountants and
representatives, as well as any underwriting discounts and commissions on the
sale of the Registrable Stock.
Section 5. Preemptive Rights.
(a) The Company hereby grants (i) prior to the Merger, to
each holder of Series F Preferred Stock of Inland-Washington and (ii) after the
Merger, to TCW, SOLVation and ▇▇▇▇▇, each as a holder of the Common Stock of
Inland-Delaware, the right to purchase up to its respective pro rata share of
New Securities (as defined in this Section 5) which the Company may, from time
to time, propose to sell and issue. Each holder of Series F Preferred Stock's or
Common Stock's pro rata share, for purposes of this right, is the ratio of the
number of shares of Common Stock (on a fully diluted basis and assuming full
conversion of the Series F Preferred Stock) owned by such holder immediately
prior to the issuance of the New Securities, to the total number of shares of
Common Stock (on a fully diluted basis and assuming full conversion of the
Series F Preferred Stock) held by all holders immediately prior to the issuance
of the New Securities. This right shall be subject to the following provisions:
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(b) "New Securities" shall mean any capital stock of the
Company whether now authorized or not, and rights, options or warrants to
purchase such capital stock, and securities of any type whatsoever that are, or
may become, convertible into capital stock; provided that the term "New
Securities" does not include (i) securities issued in connection with a merger,
acquisition, reorganization or other similar transaction undertaken by the
Company; (ii) any borrowings, direct or indirect, from financial institutions or
other persons by the Company, whether or not presently authorized, including any
type of loan or payment evidenced by any type of debt instrument, even if such
borrowings have equity features including warrants, options or other rights to
purchase capital stock and are not convertible into capital stock of the
Company; (iii) securities issued to employees, consultants, officers or
directors of the Company and pursuant to any stock option, stock purchase bonus
plan, warrant, agreement or arrangement approved by the Company's Board of
Directors; (iv) securities issued in connection with obtaining lease financing,
whether issued to a lessor, guarantor or other person and such issuance is
undertaken for purposes primarily other than equity financing; (v) securities
issued in connection with any stock split, stock dividend or recapitalization of
the Company; and (vi) any right, option or warrant to acquire any security
convertible into the securities excluded from the definition of New Securities
pursuant to subsections (i) through (v) above.
(c) In the event the Company proposes to undertake an
issuance of New Securities, it shall give TCW and SOLVation (and their
respective Affiliate transferees of which the Company has received notice of the
name and address of such transferee) written notice of its intention, describing
the type of New Securities, their price and the general terms upon which the
Company proposes to issue same. TCW or SOLVation (or their respective
Affiliates) shall have ten (10) business days after any such notice is received
to agree to purchase up to their pro rata share of such New Securities for the
price and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
(d) In the event TCW or SOLVation (or their respective
Affiliates) fail to exercise fully the right within said ten (10) business day
period, the Company shall have one hundred and twenty (120) days thereafter to
sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within ninety (90) days from the
date of said agreement) to sell the New Securities respecting TCW's or
SOLVation's (or their respective Affiliate's) preemptive right option set forth
in this Section 5, at a price and upon terms no more favorable to the purchasers
thereof than specified in the Company's notice to TCW and SOLVation pursuant to
Section 5(c). In the event the Company has not sold the New Securities within
such one hundred and twenty (120) day period or entered into an agreement in
accordance with the foregoing to sell the New Securities within ninety (90) days
from the date of said agreement, the Company shall not thereafter issue or sell
any New Securities, without first again offering such securities to TCW and
SOLVation (and their respective Affiliates) in the manner provided above.
(e) The preemptive rights under this Section 5 shall not be
assignable by either TCW, Hampton or SOLVation other than to a respective
Affiliate thereof which also acquires Series F Preferred Stock or Common Stock
therefrom. Section 5 hereof shall not be applicable to any holder of Series F
Preferred Stock of Inland-Washington or Common Stock of Inland-Delaware if such
holder holds less than 4% of the Company on a fully diluted basis.
8
Section 6. Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless each holder of Registrable Stock, its officers,
directors, partners and members (and officers and directors of such partners and
members) and each person who controls such holder (within the meaning of the
Securities Act) against all losses, claims, damages or liabilities arising out
of or based upon any untrue or alleged untrue statement of material fact
contained in any registration statement registering the disposition of
Registrable Stock, any amendment or supplement thereto, any prospectus or
preliminary prospectus or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same arise out of or are based
upon information furnished in writing to the Company by such indemnified person
expressly for use therein and will reimburse, as incurred, such holder, officer,
director, partner, member or controlling person for any reasonable legal or
other expenses incurred by such holder, officer, director, partner, member or
controlling person in connection with investigating, defending or appearing as a
third party witness in connection with any such loss, claim, damage, or
liability. In connection with an underwritten offering, the Company will
indemnify, and reimburse for expenses, the underwriters thereof, their officers
and directors and each person who controls such underwriters (within the meaning
of the Securities Act) to the same extent as provided above with respect to
holders of Registrable Stock.
(b) Indemnification by Holders of Registrable Stock. In
connection with any registration statement in which a holder of Registrable
Stock is participating, such holder will furnish to the Company in writing such
information with respect to the name and address of such holder and the amount
of Registrable Stock held by such holder, the language, if any, contemplated
under Section 3(a)(i)(A) hereof, and such other information as the Company shall
reasonably request, for use in connection with any such registration statement
or prospectus and agrees to indemnify the Company, its directors and officers,
any underwriter (within the meaning of the Securities Act) for the Company or
other persons selling securities pursuant to such registration statement, and
each person who controls the Company, against any losses, claims, damages,
liabilities and expenses resulting from any untrue statement of a material fact
or any omission of a material fact required to be stated in the registration
statement or prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, that such untrue statement or omission is contained in any
information with respect to such holder so furnished in writing by such holder
expressly for inclusion in any prospectus or registration statement. In no event
shall the liability of any selling holder of Registrable Stock hereunder be
greater in amount than the dollar amount of the net proceeds received by such
holder upon the sale of the Registrable Stock giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any person
entitled to indemnification hereunder agrees to give prompt written notice to
the indemnifying party after the receipt by such person of any written notice of
the commencement of any action, suit, proceeding or investigation or threat
thereof made in writing as to which such person will claim indemnification or
contribution pursuant to this Agreement and, unless in the reasonable judgment
of such indemnified party a conflict of interest may exist between such
indemnified party and the indemnifying party with respect to such claim, permit
the indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to such indemnified party. The failure to notify
9
the indemnifying party promptly of such commencement or threat shall not relieve
the indemnifying party of its obligation to indemnify the indemnified party,
except to the extent that the indemnifying party is actually prejudiced by such
failure. Whether or not such defense is assumed by the indemnifying party, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation. If the indemnifying party is
not entitled to, or elects not to, assume the defense of a claim, it will not be
obligated to pay the fees and expenses of more than one counsel for the
indemnified party or parties with respect to such claim, unless in the
reasonable judgment of any indemnified party an actual conflict of interest
exists between such indemnified party and any other of such indemnified parties
with respect to such claim, in which event the indemnified party shall be
obligated to pay the fees and expenses of such additional counsel or counsels.
(d) Contribution. If the indemnification provided
for in this Section 5 from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then the indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact, has been made by, or
related to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 6(b), any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6(d), no underwriter shall be
required to contribute any amount in excess of the amount by which the
underwriting discount applicable to the Registrable Stock purchased by it and
distributed to the public exceeds the amount of any damages which such
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no selling holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Stock of such selling holder was offered to
the public exceeds the amount of any damages which such selling holder has
otherwise been required to pay by reason of such untrue statement or omission.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
10
The obligations of the Company pursuant to this Section 6 shall
be further subject to such additional express agreements of the Company as may
be required to facilitate an underwritten offering, provided that no such
agreement shall in any way limit the rights of the holders of Registrable Stock
under this Agreement, or create additional obligations of such holders not set
forth herein, except as otherwise expressly agreed in writing by any such
holders. The obligations of the Company pursuant to this Section 6 shall be in
addition to any liability or obligation the Company may have at common law or
otherwise.
Section 7. Rule 144. The Company covenants that for so long as
any holder owns any Registrable Stock and the Company is a public reporting
company, that it will file, in a timely manner, the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder, and it will take such further
action as any holder of Registrable Stock may reasonably request, all to the
extent required from time to time to enable such holder to sell Registrable
Stock without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable Stock,
the Company will deliver to such holder a written statement as to whether it has
complied with such requirements.
Section 8. Remedies. Each holder of Registrable Stock in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate. If any
party hereto fails to perform any of its obligations under this Agreement, then
the defaulting party shall pay any and all costs and expenses incurred by the
other party on account of such default, including, without limitation, court
costs and reasonable attorneys' fees and disbursements. Any such attorneys' fees
and other expenses incurred by either party in enforcing a judgment in its favor
under this Agreement shall be recoverable separately from and in addition to any
other amount included in such judgment, and such attorneys' fees obligation is
intended to be severable from the other provisions of this Agreement and to
survive and not be merged into any such judgment.
Section 9. Binding Effect; Transferees; Termination. Except to
the extent otherwise provided herein, the provisions of this Agreement shall be
binding upon and accrue to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and permitted assigns. If
the separate corporate existence of the Company shall cease, its successor
corporation shall be subject to all the rights and obligations of this
Agreement. A transferee of Registrable Stock, which acquires such securities
from a holder of Registrable Stock in a transfer, whether in a public
distribution or otherwise, which results in such transferred securities not
being Registrable Stock in the hands of such transferee, shall not be a holder
of Registrable Stock hereunder and shall not have any rights or obligations
hereunder as a result of such transfer of Registrable Stock. Except as provided
in the preceding sentence, a transferee of a holder of Registrable Stock,
whether becoming such by sale, transfer, assignment, operation of law or
otherwise, shall be deemed to be a holder of Registrable Stock hereunder and
such transferee shall be entitled to the rights, and subject to the obligations,
of such a holder hereunder; provided, (i)
11
notice of such transfer (containing the name and address of the transferee) is
given to the Company and (ii) such transferee agrees to be bound by the terms of
this Agreement as a holder of Registrable Stock. This Agreement shall terminate
as to any Person at such time as such Person no longer holds shares of
Registrable Stock.
Section 10. Amendments and Waivers. This Agreement may be
amended, but only with the written consent of each party being adversely
affected by such amendment; provided that the cutback provisions of Section 2
may be amended only with the consent of both (i) the holders of a majority of
the Registrable Stock then held by TCW and its affiliates, and (ii) the holders
of a majority of the Registrable Stock then held by ▇▇▇▇▇ and its affiliates. No
failure or delay (whether by course of conduct or otherwise) by the parties
hereto in exercising any right, power or remedy which they may have under this
Agreement shall operate as a waiver thereof or of any other right, power or
remedy, nor shall any single or partial exercise by the parties hereto of any
such right, power or remedy preclude any other or further exercise thereof or of
any other right, power or remedy. No waiver or amendment of any provision of
this Agreement and no consent to any departure therefrom shall ever be effective
unless it is in writing and signed by each party being adversely affected by
such waiver or consent; provided that the cutback provisions of Section 2 may be
waived with the consent of both (i) the holders of a majority of the Registrable
Stock then held by TCW and its affiliates, and (ii) the holders of a majority of
the Registrable Stock then held by ▇▇▇▇▇ and its affiliates, and then such
waiver or consent shall be effective only in the specific instances and for the
purposes for which given and to the extent specified in such writing. The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the parties at law or in equity or otherwise.
Section 11. Notices. All notices, requests, consents, demands
and other communications required or permitted under this Agreement shall be in
writing and shall be deemed sufficiently given or furnished upon delivery, when
delivered by personal delivery, by telecopy, by delivery service with proof of
delivery, or three days after being deposited in the U.S. mail as registered or
certified United States mail, postage prepaid, if to a holder of Registrable
Stock at the most current address given by such holder to the Company and, if to
the Company, at:
Inland Resources Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 12. Entire Agreement. This Agreement constitutes the
entire understanding between the parties with respect to the subject matter
hereof, superseding all prior negotiations, preliminary agreements,
correspondence or understandings, written or oral between the parties with
respect to the subject matter hereof. Except as expressly provided herein, there
are no representations or warranties of any party hereto.
Section 13. Counterparts. Two or more duplicate originals of
this Agreement may be signed by the parties, each of which shall be an original
but all of which together shall constitute one and the same instrument.
12
Section 14. Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
Section 15. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the internal laws of the State of New York
without reference to the conflicts of the law provisions thereof.
Section 16. Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
[REMAINDER OF PAGE LEFT BLANK]
13
IN WITNESS WHEREOF, the parties have executed this Second Amended
and Restated Registration Rights Agreement as of the date first written above.
INLAND RESOURCES INC.,
a Washington corporation
By:
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
INLAND HOLDINGS, LLC, a California limited
liability company,
By: TRUST COMPANY OF THE WEST, a
California trust company, as Sub-Custodian for
Mellon Bank for the benefit of Account No.
CPFF 873-3032, Member
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Managing Director
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Managing Director
By: PORTFOLIO NO. 1555 DR V SUB-CUSTODY
PARTNERSHIP, L.P., a California limited
partnership, Member
By: TCW ROYALTY COMPANY, a California
corporation, Managing General Partner
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President
HAMPTON INVESTMENTS LLC,
a Delaware limited liability company
By:
---------------------------------------
Name:
------------------------------------
Title:
------------------------------------
SOLVATION INC.,
a Delaware corporation
By:
---------------------------------------
Name:
------------------------------------
Title:
------------------------------------
EXHIBIT F
FORM OF
DEVELOPMENT AGREEMENT
MONUMENT BUTTE FIELD
DUCHESNE AND UINTAH COUNTIES, UTAH
This DEVELOPMENT AGREEMENT (this "Agreement") is made and entered into
as of _____________, 2003 by and among Inland Resources Inc., a Washington
corporation ("Inland"), Inland Production Company, a Texas corporation ("IPC";
together with Inland, the "Companies") and ▇▇▇▇▇ Energy Partnership, assignee of
▇▇▇▇▇ Management LLC ("▇▇▇▇▇").
WITNESSETH
WHEREAS, the Companies, Inland Holdings, LLC and SOLVation Inc. (an
affiliate of ▇▇▇▇▇) ("SOLVation") are parties to an Exchange and Stock Issuance
Agreement dated as of January 30, 2003 (the "Exchange Agreement");
WHEREAS, ▇▇▇▇▇ owns working or unit interests in various oil and gas
leases and/or units (the "▇▇▇▇▇ Interests") covering lands generally within or
about the Monument Butte Field, located in Duchesne and Uintah Counties, Utah
(the "Field") in which IPC also owns working or unit interests (the "Joint
Interests") and which are subject to various unit or joint operating agreements
naming IPC as Operator or Unit Operator (the "Operating Agreements"); and
WHEREAS, under the Exchange Agreement, it is a condition precedent to
the obligations of SOLVation to effect the ▇▇▇▇▇ Exchange (as defined in the
Exchange Agreement) that the Companies and ▇▇▇▇▇ execute and deliver this
Agreement;
NOW, THEREFORE, to induce SOLVation to consummate the ▇▇▇▇▇ Exchange,
and for the other valuable consideration (the receipt and adequacy of which is
hereby acknowledged), and in further consideration of the mutual promises,
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound to the terms hereof, agree as
follows:
SECTION 1. PACE OF DEVELOPMENT.
1.1 The Companies will cause the Joint Interests to be developed at
a pace such that the aggregate amount payable by ▇▇▇▇▇ each calendar year under
the Operating Agreements as its share of all amounts expended in the development
of the Joint Interests and properly classifiable as "capital expenditures" under
U.S. generally accepted accounting principles attributable to the ▇▇▇▇▇
Interests (such aggregate amount payable in any calendar year period is referred
to as "▇▇▇▇▇ Annual Capex" and in any calendar month period is referred to as
"▇▇▇▇▇ Monthly Capex") would not reasonably be expected to exceed ▇▇▇▇▇ Annual
NOCF otherwise payable to ▇▇▇▇▇ in such calendar year. For purposes of clarity,
▇▇▇▇▇ Annual Capex and ▇▇▇▇▇ Monthly Capex shall not include expenses incurred
in normal operations, reworking or repair of the Joint Interests. For purposes
of this Agreement, "▇▇▇▇▇ Annual NOCF" means for any calendar year, and "▇▇▇▇▇
Monthly NOCF" means for any month, the difference between (i) aggregate cash
revenues paid or payable to ▇▇▇▇▇ attributable to the ▇▇▇▇▇ Interests' share of
production minus (ii) amounts properly billed to ▇▇▇▇▇ under the Operating
Agreements for lease operating expenses (including production taxes)
attributable to the ▇▇▇▇▇ Interests.
1.2 If for any reason, notwithstanding Section 1.1 above, in any
month ▇▇▇▇▇ Monthly Capex shall exceed ▇▇▇▇▇ Available Monthly NOCF, the excess
shall be deemed to be a trade payable from ▇▇▇▇▇ to the Companies on an
interest-free basis (in each case, a "▇▇▇▇▇ Trade Payable"). For purposes of
this Agreement, "▇▇▇▇▇ Available Monthly NOCF" means, for any month (i) ▇▇▇▇▇
Monthly NOCF minus (ii) the sum of (A) ▇▇▇▇▇ Monthly Capex for such month and
(B) the amount of previous ▇▇▇▇▇ Trade Payables recouped from ▇▇▇▇▇ Monthly NOCF
that month pursuant to Section 1.3.
1.3 ▇▇▇▇▇ authorizes the Companies to deduct capital expenditures
and expenses attributable to the ▇▇▇▇▇ Interests from revenues attributable to
the ▇▇▇▇▇ Interests unless and until ▇▇▇▇▇ revokes such authorization, upon
which revocation ▇▇▇▇▇ shall promptly pay the same when and as due under the
Operating Agreements. ▇▇▇▇▇ further authorizes the Companies to deduct amounts
otherwise payable to ▇▇▇▇▇ as ▇▇▇▇▇ Monthly NOCF to effect the recoupment of any
outstanding ▇▇▇▇▇ Trade Payables as contemplated by Section 1.2 above (i.e.,
provided that the amount of ▇▇▇▇▇ Available Monthly NOCF shall not be less than
zero) until all amounts of any outstanding ▇▇▇▇▇ Trade Payables theretofore
credited have been recouped. The Companies will provide to ▇▇▇▇▇ a monthly
statement reflecting for each month (i) ▇▇▇▇▇ Monthly NOCF for such month, (ii)
▇▇▇▇▇ Monthly Capex for such month, (iii) any ▇▇▇▇▇ Trade Payable deemed made
for such month pursuant to Section 1.2, (iv) any recoupment of any outstanding
▇▇▇▇▇ Trade Payables effected by the Companies in such month permitted by
Section 1.3, (v) the total balance of any unrecouped or outstanding ▇▇▇▇▇ Trade
Payables deemed made pursuant to Section 1.2 and (vi) a calculation of ▇▇▇▇▇
Available NOCF for such month.
1.4 ▇▇▇▇▇ agrees that so long as the pace of development of the
Joint Interests is not in violation of Section 1.1 above, ▇▇▇▇▇ will approve all
AFE's proposed by the Companies with respect to the Joint Interests.
1.5 The parties hereto expressly agree that notwithstanding any
other provisions hereof which may be interpreted otherwise, nothing in this
Agreement shall obligate any party hereto take any action or fail to take any
action which would constitute a breach of, or result in a termination of, any
Operating Agreement or any other contract, agreement or lease which constitutes
or is binding upon the Joint Interests.
SECTION 2. MISCELLANEOUS.
2.1 Attorney's Fees and Expenses. If any party hereto fails to
perform any of its obligations under this Agreement, then the defaulting party
shall pay any and all costs and expenses incurred by the other party on account
of such default, including, without limitation, court costs and reasonable
attorneys' fees and disbursements. Any such attorneys' fees and other expenses
incurred by either party in enforcing a judgment in its favor under this
Agreement shall be recoverable separately from and in addition to any other
amount included in such judgment, and such attorneys' fees obligation is
intended to be severable from the other provisions of this Agreement and to
survive and not be merged into any such judgment.
2
2.2 Successors and Assigns. Except as otherwise expressly provided
herein, this Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of the parties hereto. The Companies shall not
sell or otherwise transfer any interest or any Joint Interest unless the
transferee expressly and in writing for the benefit of ▇▇▇▇▇ agrees to be bound
hereby. ▇▇▇▇▇ may not assign its rights hereunder to the purchaser or transferee
of the ▇▇▇▇▇ Interests other than an affiliate of ▇▇▇▇▇ who acquires all of the
▇▇▇▇▇ Interests and which agrees expressly and in writing to be bound hereby.
2.3 Amendment and Waiver, etc. This Agreement may be amended, but
only with the written consent of each of the parties hereto. No failure or delay
(whether by course of conduct or otherwise) by the parties hereto in exercising
any right, power or remedy which they may have under this Agreement shall
operate as a waiver thereof or of any such right, power or remedy, nor shall any
single or partial exercise by the parties hereto of any such right, power or
remedy preclude any other or further exercise thereof or of any other right,
power or remedy. No waiver of any provision of this Agreement and no consent to
any departure therefrom shall ever be effective unless it is in writing and
signed by each party being adversely affected by such waiver or consent, and
then such waiver or consent shall be effective only in the specific instances
and for the purposes for which given and to the extent specified in such
writing. The remedies provided for herein are cumulative and are not exclusive
of any remedies that may be available to the parties at law or in equity or
otherwise.
2.4 Counterparts. Two or more duplicate originals of this Agreement
may be signed by the parties, each of which shall be an original but all of
which together shall constitute one and the same instrument.
2.5 Term. This Agreement shall terminate as follows with respect to
any Joint Interest upon the first to occur of: (i) termination of the Operating
Agreement covering such interest; (ii) the sale or transfer by each of the
Companies and ▇▇▇▇▇ to a third party not affiliated with either the Companies or
▇▇▇▇▇ of all of their respective interests therein in a single transaction or
series of related transactions; or (iii) December 31, 2007.
2.6 Notices. All notices, requests, consents, demand and other
communications required or permitted under this Agreement shall be in writing an
shall be deemed sufficiently given or furnished when delivered by personal
delivery, by telecopy, by delivery service with proof of delivery, or three (3)
days after being deposited in the U.S. mail as registered or certified United
States mail, postage prepaid, at the addresses set forth on the signature pages
hereto (unless changed by similar notice in writing given by the particular
person whose address is to be changed).
2.7 Original Agreement; Entire Agreement. This Agreement constitutes
the entire understanding between the parties with respect to the subject matter
hereof, superseding all prior negotiations, preliminary agreements,
correspondence or understandings, written or oral between the parties with
respect to the subject matter hereof. Except as expressly provided herein, there
are no representations or warranties of any party hereto.
3
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
INLAND RESOURCES INC.,
a Washington corporation
By:
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
INLAND PRODUCTION COMPANY,
a Texas corporation
By:
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇)▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ENERGY PARTNERSHIP,
a New York partnership
By: SOLVation Inc., a Delaware corporation, a General
Partner
By:
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President
Address for Notices:
▇▇▇▇▇ Energy Partnership
c/o Smith Management LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT G
TERMINATION AGREEMENT
This TERMINATION AGREEMENT (this "Agreement") is dated as of
_________ __, 2003 (but is effective as of the Effective Time, as defined in
Section 8 hereof) by and among Inland Resources Inc., a Washington corporation
("Inland"), Inland Holdings, LLC, a California limited liability company ("TCW")
and Hampton Investments LLC, a Delaware limited liability company ("▇▇▇▇▇").
WHEREAS, Inland, TCW and ▇▇▇▇▇ are parties to that certain
Amended and Restated Shareholders Agreement, dated as of August 2, 2001 (the
"Shareholders Agreement");
WHEREAS, Inland, Inland Production Company, TCW and SOLVation
Inc. hereto are entering into that certain Exchange and Stock Issuance Agreement
(the "Exchange Agreement") dated as of _________ __, 2003; and
WHEREAS, it is a condition to the obligations of each of TCW and
SOLVation Inc. (an affiliate of ▇▇▇▇▇) under the Exchange Agreement that each of
Inland, TCW and ▇▇▇▇▇ executes this Agreement to terminate the Shareholders
Agreement, including any documentation related thereto.
NOW, THEREFORE, in consideration of certain of their respective
obligations under the Exchange Agreement, Inland, TCW and ▇▇▇▇▇ hereby agree
that:
Section 1. TERMINATION. Inland, TCW and ▇▇▇▇▇ hereby terminate
the Shareholders Agreement, and none of Inland, TCW or ▇▇▇▇▇ shall have any
further rights or obligations to any other party with respect to the
Shareholders Agreement. The Shareholders Agreement shall be null and void as of
the Effective Time.
Section 2. REPRESENTATIONS. Each of Inland, TCW and ▇▇▇▇▇
represents and warrants that (a) it has all authority, consents and approvals
necessary to enter into this Agreement and to perform fully its obligations
hereunder and (b) this Agreement has been duly executed and delivered by it and
constitutes a legal, valid and binding obligation of it, enforceable against it
in accordance with its terms.
Section 3. FURTHER ASSURANCES. Each of Inland, TCW and ▇▇▇▇▇
shall perform such acts and duly authorize, execute, acknowledge, deliver, file
and record such additional releases, agreements, documents, instruments and
certificates as may be reasonably necessary or appropriate to carry out the
purposes of this Agreement.
Section 4. SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, this Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties hereto whether so
expressed or not.
Section 5. COUNTERPARTS. Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument.
Section 6. SEVERABILITY. In the event that any one or more of
the provisions, or portion thereof, contained herein, or the application thereof
in any circumstances, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision, or portion thereof, in every
other respect and of the remaining provisions contained herein shall not be
affected or impaired thereby.
Section 7. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of Washington.
Section 8. SIMULTANEOUS EFFECTIVENESS. For purposes of this
Agreement, the "Effective Time" is the time of the Closing, as defined in the
Exchange Agreement.
Section 9. DEFINITIONS. Capitalized terms not otherwise defined
herein have the respective meanings set forth in the Exchange Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
2
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
INLAND RESOURCES INC.,
a Washington corporation
By:
----------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
INLAND HOLDINGS LLC, a California limited
liability company
By: TRUST COMPANY OF THE WEST, a California
trust company, as Sub-Custodian for Mellon Bank
for the benefit of Account No. CPFF 873-3032,
Member
By:
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Managing Director
By:
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Managing Director
By: TCW HOLDINGS NO. 1555 DR V SUB-CUSTODY
PARTNERSHIP, L.P., a California limited
partnership, Member
By: TCW ROYALTY COMPANY, a California
corporation, Managing General Partner
By:
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President
Address for Notices:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
HAMPTON INVESTMENTS, LLC,
a Delaware limited liability company
By:
----------------------------------
Name:
Title:
Address for Notices:
Hampton Investments LLC
c/o Smith Management LLC
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Akin Gump ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇ III
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT H
[Form of Opinion of Counsel to Inland]
1. Inland is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Washington and has full
corporate power and authority to conduct its business as and to the extent now
conducted. IPC is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Texas and has full corporate power and
authority to conduct its business as and to the extent now conducted.
2. The authorized capital stock of Inland consists of _____________
shares of Common Stock and ___________ shares of Preferred Stock, ______________
of which are issued and outstanding. The Stock (as defined in the Exchange
Agreement) is duly authorized, validly issued, outstanding, fully paid and
nonassessable. The authorized capital stock of IPC consists of _____________
shares of Common Stock, of which ________________ are outstanding, and owned of
record by Inland. IPC is duly qualified, licensed or admitted to do business and
is in good standing in Utah.
3. Each of the Exchange Agreement and the Transaction Documents to
which the Companies are party has been duly and validly executed and delivered
by each of Inland and IPC, as the case may be, and constitutes legal, valid and
binding obligations of the Companies, enforceable against the Companies in
accordance with their terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors generally.
4. The execution, delivery and performance by the Companies of the
Exchange Agreement and the Transaction Documents and the consummation of the
transactions contemplated thereby, including without limitation the Merger, as
such term is defined in the Investors' Agreement (collectively, the
"Transactions") did not and will not (a) conflict with or result in a violation
or breach of any of the terms, conditions or provisions of the articles of
incorporation or bylaws of the Companies, (b) conflict with or result in a
violation or breach of any term or provision of any law, statute, rule or
regulation, or of any other Law or Order applicable to the Companies or any of
their respective assets and properties or (c) (i) conflict with or result in a
violation or breach of, (ii) constitute (with or without notice or lapse of time
or both) a default under, (iii) require the Companies to obtain any consent,
approval or action of, make any filing with or give any notice to any Person as
a result or under the terms of, (iv) result in or give to any Person any right
of termination, cancellation, acceleration or modification in or with respect
to, (v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under or (vi) result
in the creation or imposition of any Lien upon the Companies or any of their
respective assets and properties under
any contract or agreement to which any of the Companies is a party, or by which
any of their respective assets and properties is bound, which contract or
agreement is required to be filed as an exhibit to any public filing made by
Inland under the Securities and Exchange Act of 1934, as amended, within the
five years preceding the date hereof.
5. Other than the filing of the Schedule 13E-3 with the Commission,
no consent, approval or action of, filing with or notice to any Governmental
Person on the part of the Companies is required in connection with the
execution, delivery and performance of the Exchange Agreement or any of the
Transaction Documents to which it is a party or the consummation of the
Transactions.
6. To our knowledge, except as disclosed in Schedule 3.5, there are
no actions or proceedings pending or threatened against, relating to or
affecting the Companies or any of their respective assets and properties which
(a) could reasonably be expected to result in the issuance of an Order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the Transactions, or (b) if determined adversely to the
Companies could reasonably be expected, individually or in the aggregate with
other such actions or proceedings, to have a material adverse effect on the
business or condition of the Company.
2
EXHIBIT I-1
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (this "Amendment") is dated
as of ___________, 2003, by and between INLAND RESOURCES INC., a Delaware
corporation (the "Company"), and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ("Executive").
RECITALS
A. Inland Resources, Inc., a Washington corporation ("Inland") (the
predecessor to the Company) and Executive are parties to that certain Employment
Agreement effective as of February 1, 2001 (the "Employment Agreement").
B. Inland has entered into a series of transactions that has
resulted in the merger of Inland with and into the Company.
C. The Company desires to enter into this Amendment and to continue
to employ the Executive and wishes to be assured of his services on the terms
and conditions set forth in the Employment Agreement and as set forth herein.
D. The Executive desires to enter into this Amendment and to
continue to be employed by the Company and to perform and serve the Company on
the terms and conditions set forth in the Employment Agreement and as set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, terms and conditions set forth herein, the parties hereto agree as
follows:
1. AMENDMENT OF EMPLOYMENT AGREEMENT
1.1 BONUS. The Company and Executive hereby agree that Section 3(b)
of the Employment Agreement is hereby amended by deleting such section in its
entirety and replacing such section with the following:
"(b) Bonus. In addition to the Base Salary, Employee shall be
eligible to receive a bonus of up to $50,000 for the 2003 calendar year
contingent upon the Employer reaching or exceeding each of the annual
performance targets set by the Board of Directors of Employer. Employer shall
set the performance targets for each year of the term of this Agreement at the
same time that the Board of Directors approves the budget for the year. The
performance targets for 2003 are set forth on Exhibit A."
1.2 EXHIBIT A. The Company and Executive hereby agree that Exhibit A
of the Employment Agreement is hereby amended by deleting such exhibit in its
entirety and replacing such Exhibit A with Exhibit A attached hereto.
1.3 OPTIONS. The Company and Executive hereby agree that Section 4
of the Employment Agreement is hereby amended by deleting such section in its
entirety and replacing such section with the following:
"4. OPTIONS. Pursuant to a Non-Qualified Stock Option
Agreement substantially in the form of Exhibit B attached hereto, Employer
agrees to grant to Employee stock options to purchase 430 shares of the common
stock of Inland Resources, Inc., a Delaware corporation ("IRI") (which shall
constitute 4% of the common stock of IRI on a fully diluted basis), immediately
after the merger of Employer into IRI."
2. ACKNOWLEDGMENT
2.1 ACKNOWLEDGMENT BY EXECUTIVE. The Executive hereby acknowledges
that (i) performance targets for the time period from February 1, 2002 through
February 2, 2003 ("Year 2") were not set by the Board of Directors, (ii) as of
the date hereof, no bonuses are due and unpaid (the Executive hereby waives
bonus eligibility for Year 2) and (iii) the stock options to purchase common
stock of Inland previously granted to the Executive will be cancelled upon
consummation of the merger of Inland with and into the Company.
3. GENERAL PROVISIONS
3.1 ENTIRE AGREEMENT. This Amendment, together with the Employment
Agreement, constitutes the entire agreement between the parties pertaining to
the subject matter hereof and supersedes all prior agreements and understandings
of the parties in connection therewith.
3.2 GOVERNING LAW. This Amendment and the legal relations between
the parties shall be governed by and construed in accordance with the laws of
the State of Delaware applicable to contracts made and performed in such state.
3.3 EMPLOYMENT AGREEMENT; INCORPORATION BY REFERENCE. Except as
expressly set forth in this Amendment, the Employment Agreement shall remain in
full force and effect, and the General Provisions contained in Section 12 of the
Employment Agreement shall apply to this Amendment as if such provisions were
set forth herein.
2
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment
as of the date first above written.
INLAND RESOURCES INC.,
a Delaware corporation
By:
--------------------------
Name:
Title:
EXECUTIVE
-------------------------------
Name:
3
EXHIBIT A
2003 PERFORMANCE TARGETS
Successful completion of each of the following targets in the 2003 calendar year
will result in the payment of a $10,000 bonus for each target achieved by Inland
Resources Inc. on or before February 28, 2004.
1. Raise $15 million in new capital
2. Produce and sell 1.7 million barrels of oil equivalent
3. Exceed $23 million of EBITDA
4. Drill and complete 40 ▇▇▇▇▇
5. Not to exceed $11.5 million of Total Operating Expenses
Items 2-5 above to be calculated similar to the attached Schedule I.
4
EXHIBIT I-2
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (this "Amendment") is
dated as of ___________, 2003, by and between INLAND RESOURCES INC., a Delaware
corporation (the "Company"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ("Executive").
RECITALS
A. Inland Resources, Inc., a Washington corporation ("Inland")
(the predecessor to the Company) and Executive are parties to that certain
Employment Agreement effective as of February 1, 2001 (the "Employment
Agreement").
B. Inland has entered into a series of transactions that has
resulted in the merger of Inland with and into the Company.
C. The Company desires to enter into this Amendment and to
continue to employ the Executive and wishes to be assured of his services on the
terms and conditions set forth in the Employment Agreement and as set forth
herein.
D. The Executive desires to enter into this Amendment and to
continue to be employed by the Company and to perform and serve the Company on
the terms and conditions set forth in the Employment Agreement and as set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, terms and conditions set forth herein, the parties hereto agree as
follows:
1. AMENDMENT OF EMPLOYMENT AGREEMENT
1.1 BONUS. The Company and Executive hereby agree that Section
3(b) of the Employment Agreement is hereby amended by deleting such section in
its entirety and replacing such section with the following:
"(b) Bonus. In addition to the Base Salary, Employee shall
be eligible to receive a bonus of up to $50,000 for the 2003 calendar year
contingent upon the Employer reaching or exceeding each of the annual
performance targets set by the Board of Directors of Employer. Employer shall
set the performance targets for each year of the term of this Agreement at the
same time that the Board of Directors approves the budget for the year. The
performance targets for 2003 are set forth on Exhibit A."
1.2 EXHIBIT A. The Company and Executive hereby agree that Exhibit
A of the Employment Agreement is hereby amended by deleting such exhibit in its
entirety and replacing such Exhibit A with Exhibit A attached hereto.
1.3 OPTIONS. The Company and Executive hereby agree that Section 4
of the Employment Agreement is hereby amended by deleting such section in its
entirety and replacing such section with the following:
"4. OPTIONS. Pursuant to a Non-Qualified Stock Option
Agreement substantially in the form of Exhibit B attached hereto, Employer
agrees to grant to Employee stock options to purchase 323 shares of the common
stock of Inland Resources, Inc., a Delaware corporation ("IRI") (which shall
constitute 3% of the common stock of IRI on a fully diluted basis), immediately
after the merger of Employer into IRI."
2. ACKNOWLEDGMENT
2.1 ACKNOWLEDGMENT BY EXECUTIVE. The Executive hereby acknowledges
that (i) performance targets for the time period from February 1, 2002 through
February 2, 2003 ("Year 2") were not set by the Board of Directors, (ii) as of
the date hereof, no bonuses are due and unpaid (the Executive hereby waives
bonus eligibility for Year 2) and (iii) the stock options to purchase common
stock of Inland previously granted to the Executive will be cancelled upon
consummation of the merger of Inland with and into the Company.
3. GENERAL PROVISIONS
3.1 ENTIRE AGREEMENT. This Amendment, together with the Employment
Agreement, constitutes the entire agreement between the parties pertaining to
the subject matter hereof and supersedes all prior agreements and understandings
of the parties in connection therewith.
3.2 GOVERNING LAW. This Amendment and the legal relations between
the parties shall be governed by and construed in accordance with the laws of
the State of Delaware applicable to contracts made and performed in such state.
3.3 EMPLOYMENT AGREEMENT; INCORPORATION BY REFERENCE. Except as
expressly set forth in this Amendment, the Employment Agreement shall remain in
full force and effect, and the General Provisions contained in Section 12 of the
Employment Agreement shall apply to this Amendment as if such provisions were
set forth herein.
2
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
INLAND RESOURCES INC.,
a Delaware corporation
By:
--------------------------
Name:
Title:
EXECUTIVE
-------------------------------
Name:
3
EXHIBIT A
2003 PERFORMANCE TARGETS
Successful completion of each of the following targets in the 2003 calendar year
will result in the payment of a $10,000 bonus for each target achieved by Inland
Resources Inc. on or before February 28, 2004.
1. Raise $15 million in new capital
2. Produce and sell 1.7 million barrels of oil equivalent
3. Exceed $23 million of EBITDA
4. Drill and complete 40 ▇▇▇▇▇
5. Not to exceed $11.5 million of Total Operating Expenses
Items 2-5 above to be calculated similar to the attached Schedule I.
4
EXHIBIT J
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
INLAND RESOURCES INC.
Pursuant to RCW 23B.10.060 and RCW 23B.06.020 of the Washington
Business Corporation Act, the undersigned corporation (the "Corporation") hereby
submits the following amendment(s) to the corporation's Articles of
Incorporation.
1. The name of the Corporation is Inland Resources Inc.
2. The date of filing the original Articles of Incorporation with
the Secretary of State of Washington is August 12, 1985.
3. The Articles of Incorporation of the Corporation are amended
by deleting paragraphs 2, 3 and 4 of Article IV and replacing same with the
following:
"2. 1,100,000 shares of Class A preferred stock, par value $.001
per share, shall be designated Series F Preferred Stock (the
"Series F Preferred Stock"). The Series F Preferred Stock
shall have the following voting powers, preferences and
relative participating, optional and other special rights,
qualifications, limitations and restrictions:
(i) RANKING. The Series F Preferred Stock shall rank
senior to all other capital stock of the Corporation.
No capital stock ranking pari passu to the Series F
Preferred Stock shall be issued without the written
consent of holders of a majority of the Series F
Preferred Stock.
(ii) LIQUIDATION RIGHTS.
(a) In the event of any liquidation, dissolution
or winding up of the Corporation, whether
voluntary or involuntary, the holder of each
share of Series F Preferred Stock then
outstanding shall be entitled to be paid out
of the assets of the Corporation available
for distribution to its shareholders,
whether such assets are capital, surplus or
earnings, before any payment or declaration
and setting apart for payment of any amount
shall be made in respect of the Common
Stock, an amount in cash equal to $100 for
each share of such Series F Preferred Stock,
as adjusted for any stock dividends,
combinations or splits with respect to such
share (the "Liquidation Preference").
(b) After the payment or distribution to the
holders of the Series F Preferred Stock of
their full preferential amounts, the holders
of
Common Stock then outstanding shall be
entitled to receive all the remaining assets
of the Corporation.
(c) If upon any liquidation, dissolution or
winding up of the Corporation, whether
voluntary or involuntary, the assets to be
distributed among the holders of Series F
Preferred Stock pursuant to subparagraph (a)
shall be insufficient to permit the payment
to such shareholders of the full
preferential amounts required by such
subparagraph, then all of the assets of the
Corporation to be distributed shall be
distributed ratably to the holders of
outstanding Series F Preferred Stock based
on the number of shares held by each holder,
and the holders of Common Stock shall
receive no distribution upon such
liquidation, dissolution or winding up of
the Corporation.
(iii) NO REDEMPTION. The Series F Preferred Stock is not
redeemable by the Corporation or by the Holders of
the Series F Preferred Stock.
(iv) CONVERSION. Shares of Series F Preferred Stock shall
be automatically converted into shares of Common
Stock, on the terms and conditions set forth below:
(a) Automatic Conversion. At such time as the
Articles of Incorporation of the Corporation
are amended to increase the authorized
shares of Common Stock to permit the
conversion of all of the Series F Preferred
Stock (the "Authorization Date"), each share
of Series F Preferred Stock shall be
automatically converted into the number of
shares of Common Stock which result from
dividing the Liquidation Preference by the
Conversion Price per share (as defined
herein) in effect at the time of such
conversion. The initial Conversion Price per
share shall be $1.00, and such initial
Conversion Price shall be subject to
adjustment from time to time as provided
herein (the "Conversion Price"). Upon
conversion of the Series F Preferred Stock,
each holder thereof shall be entitled to
receive that number of shares of Common
Stock into which such holder's shares of
Series F Preferred Stock has been converted.
(b) Effect on Conversion Price of Certain
Events. For purposes of determining
adjustments to the Conversion Price, the
following will be applicable:
(1) Issuance of Rights or Options. If
the Corporation in any manner
grants any rights or options to
subscribe for or to purchase Common
Stock or any stock or other
securities convertible into or
exchangeable for Common Stock,
other than shares of Common Stock
issued or issuable to officers,
2
directors or employees of, or
consultants and advisors to, the
Corporation pursuant to a stock
grant, option plan or purchase plan
or other stock incentive program or
arrangement approved by the Board
of Directors for employees,
directors, consultants or advisors
to the Corporation (such rights or
options being herein called
"Options" and such convertible or
exchangeable stock or securities
being herein called "Convertible
Securities"), and the price per
share for which Common Stock is
issuable upon the exercise of such
Options or upon conversion or
exchange of such Convertible
Securities is less than the Fair
Market Value thereof in effect
immediately prior to the time of
the granting of such Options, then
the total maximum number of shares
of Common Stock issuable upon the
exercise of such Options or upon
conversion or exchange of the total
maximum amount of such Convertible
Securities issuable upon the
exercise of such Options will be
deemed to be outstanding and to
have been issued and sold by the
Corporation for such price per
share. For purposes of this
paragraph, the "price per share for
which Common Stock is issuable"
will be determined by dividing (y)
the total amount, if any, received
or receivable by the Corporation as
consideration for the granting of
such Options, plus the minimum
aggregate amount of additional
consideration payable to the
Corporation upon exercise of all
such Options, plus in the case of
such Options which relate to
Convertible Securities, the minimum
aggregate amount of additional
consideration, if any, payable to
the Corporation upon the issuance
or sale of such Convertible
Securities and the conversion or
exchange thereof, by (z) the total
maximum number of shares of Common
Stock issuable upon the exercise of
such Options or upon the conversion
or exchange of all such Convertible
Securities issuable upon the
exercise of such Options. No
further adjustment of the
Conversion Price will be made when
Convertible Securities are actually
issued upon the exercise of such
Options or when Common Stock is
actually issued upon the exercise
of such Options or the conversion
or exchange of such Convertible
Securities.
(2) Issuance of Convertible Securities.
If the Corporation in any manner
issues or sells any Convertible
Securities and the price per share
for which Common Stock is issuable
upon such conversion or exchange is
less than the Fair Market Value
thereof in effect immediately prior
to the time of such issue or sale,
then the maximum number of shares
of Common Stock issuable upon
conversion or
3
exchange of such Convertible
Securities will be deemed to be
outstanding and to have been issued
and sold by the Corporation for
such price per share. For the
purposes of this paragraph, the
"price per share for which Common
Stock is issuable" will be
determined by dividing (y) the
total amount received or receivable
by the Corporation as consideration
for the issue or sale of such
Convertible Securities, plus the
minimum aggregate amount of
additional consideration, if any,
payable to the Corporation upon the
conversion or exchange thereof, by
(z) the total maximum number of
shares of Common Stock issuable
upon the conversion or exchange of
all such Convertible Securities. No
further adjustment of the
Conversion Price will be made when
Common Stock is actually issued
upon the conversion or exchange of
such Convertible Securities, and if
any such issue or sale of such
Convertible Securities is made upon
exercise of any Options for which
adjustments of the Conversion Price
had been or are to be made pursuant
to other provisions of this
paragraph (iv), no further
adjustment of the Conversion Price
will be made by reason of such
issue or sale.
(3) Change in Number of Options, Option
Price or Conversion Rate. If the
number of Options available, the
purchase price provided for in any
Options, the additional
consideration, if any, payable upon
the conversion or exchange of any
Convertible Securities, or the rate
at which any Convertible Securities
are convertible into or
exchangeable for Common Stock shall
change at any time (other than a
change resulting from the
antidilution provisions thereof),
the Conversion Price in effect at
the time of such change will be
readjusted to the Conversion Price
which would have been in effect at
such time had such Options or
Convertible Securities still
outstanding provided for such
changed number, purchase price,
additional consideration or changed
conversion rate, as the case may
be, at the time initially granted,
issued or sold.
(4) Treatment of Expired Options and
Unexercised Convertible Securities.
Upon the expiration of any Option
or the termination of any Option or
the termination of any right to
convert or exchange any Convertible
Security without the exercise of
any such Option or right, the
Conversion Price then in effect
hereunder will be adjusted to the
Conversion Price which would have
been in effect at the time of such
expiration or termination had such
Option or Convertible
4
Security, to the extent outstanding
immediately prior to such
expiration or termination, never
been issued.
(c) For the purposes of this paragraph (iv):
(1) Calculation of Consideration
Received. If any Common Stock is
issued or sold or deemed to have
been issued or sold for cash, the
consideration received therefor
will be deemed to be the net amount
received by the Corporation
therefor. In case any Common Stock
is issued or sold or deemed to have
been issued or sold for a
consideration other than cash, the
amount of the consideration other
than cash received by the
Corporation will be the fair value
of such consideration, except where
such consideration consists of
securities, in which case the
amount of consideration received by
the Corporation will be the Fair
Market Value thereof. If any Common
Stock is issued or deemed to be
issued in connection with any
merger in which the Corporation is
the surviving corporation, the
amount of consideration therefor
will be deemed to be the fair value
of such portion of the net assets
and business of the nonsurviving
corporation as is attributable to
such Common Stock. The fair value
of any consideration other than
cash and securities will be
determined jointly by the
Corporation and the holders of a
majority of the outstanding Series
F Preferred Stock.
(2) Integrated Transactions. In case
any Option or Convertible Security
is issued in connection with the
issue or sale of other securities
of the Corporation, together
comprising one integrated
transaction in which no specific
consideration is allocated to such
Option or Convertible Security by
the parties thereto, the Option or
Convertible Security will be deemed
to have been issued without
consideration.
(d) Certain Definitions. For purposes of this
paragraph (iv), "Common Stock Deemed
Outstanding" shall mean the number of shares
of Common Stock actually outstanding at such
time, plus the number of shares of Common
Stock issuable upon the exercise, exchange,
or conversion of all outstanding securities
exercisable or exchangeable for, or
convertible into, shares of Common Stock but
excluding issued and outstanding options to
purchase Common Stock with an exercise price
per share in excess of the Fair Market Value
thereof (as adjusted for stock splits,
consolidations and the like). For purposes
of this paragraph (iv), "Fair Market Value"
means, with respect to any shares of stock
or other securities, (1) if such stock or
securities are listed or admitted to trading
on a
5
national securities exchange or on NASDAQ,
the arithmetic average per share of the
closing bid prices for such security on each
of the ten (10) consecutive trading days
immediately preceding such date of
determination (all such determinations to be
appropriately adjusted for any stock
dividend, stock split or similar transaction
during the pricing period) and (2) if such
stock or security is not so listed or
admitted to unlisted trading privileges, the
current fair market value of such stock or
security as determined jointly by the
Corporation and the holders of a majority of
the outstanding Series F Preferred Stock;
provided that in the case of clause (1), if
the issuance of such stock or securities is
publicly announced prior to the date of
issuance, but not more than 30 days prior to
such issuance, the date of determination
shall be the date of such announcement.
(e) Certain Events. If any event occurs of the
type contemplated by the provisions of this
paragraph (iv) but not expressly provided
for by such provisions, then the
Corporation's Board of Directors will make
an appropriate adjustment in the Conversion
Price so as to protect the rights of the
holders of Series F Preferred Stock;
provided, however, that no such adjustment
will increase the Conversion Price as
otherwise determined pursuant to this
paragraph (iv) or decrease the number of
shares of Common Stock issuable upon
conversion of each share of Series F
Preferred Stock.
(f) Mechanics of Conversion. Promptly following
the Authorization Date, the Corporation
shall mail to record holders of the Series F
Preferred Stock at the address for such
holders on the books of the Corporation,
notice of conversion of the Series F
Preferred Stock. After notification of
conversion by the Corporation, a holder of
Series F Preferred Stock shall surrender all
such holder's certificates therefor, duly
endorsed, at the office of the Corporation
or at the offices of any transfer agent for
the Series F Preferred Stock or Common Stock
(or at such other place designated by the
Corporation in the notice of conversion).
Upon receipt by the Corporation of a
holder's Series F Preferred Stock, the
Corporation shall promptly issue and deliver
to such holder of Series F Preferred Stock a
certificate or certificates for the number
of shares of Common Stock to which such
holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made
immediately prior to the close of business
on the Authorization Date, and the person or
persons whom the Corporation's records
indicate are entitled to receive the shares
of Common Stock issuable upon such
conversion shall be treated for all purposes
as the record holder or holders of such
shares of Common Stock on the day
immediately following such date. The
certificate or certificates representing the
shares of Common Stock issued upon
6
such conversion shall contain the same
restrictive legends, if any, included on the
certificate or certificates of Series F
Preferred Stock surrendered, unless the
shares of Common Stock issuable upon such
conversion have been registered under the
Securities Act of 1933, as amended, and
qualified or registered under applicable
state securities laws.
(g) Adjustment for Stock Splits, Distributions
or Subdivisions. If the Corporation shall at
any time or from time to time after the
first issuance of the Series F Preferred
Stock (the "Issuance Date") issue additional
shares of Common Stock to holders of Common
Stock pursuant to a share dividend, share
distribution, subdivision, share split or
reclassification, then concurrently with the
effectiveness of such event, the Conversion
Price in effect immediately prior to such
event shall be proportionately decreased and
the number of shares issuable on conversion
of a share of Series F Preferred Stock (the
"Series F Conversion Shares") immediately
prior to such event shall be proportionately
increased.
(h) Adjustments for Combinations or
Consolidations. If the Corporation shall at
any time or from time to time after the
Issuance Date, combine or consolidate, by
reclassification, reverse split or
otherwise, into a lesser number of shares of
Common Stock, then concurrently with the
effectiveness of such event, the Conversion
Price in effect immediately prior to such
event shall be proportionately increased and
the number of Conversion Shares issuable
upon conversion of the Series F Preferred
Stock immediately prior to such event shall
be proportionately decreased.
(i) Reorganization, Mergers, Consolidations or
Sales of Assets. If at any time or from time
to time there shall be a capital
reorganization of the Common Stock (other
than a subdivision, combination,
reclassification or exchange of shares
provided for elsewhere in this paragraph
(iv)) or a merger or consolidation of the
Corporation with or into another
corporation, or the transfer of all or
substantially all of the Corporation's
properties and assets to any other person,
or a compulsory share exchange, then, as a
part of such reorganization, merger,
consolidation, sale or share exchange,
provision shall be made so that the holders
of a share of Series F Preferred Stock shall
thereafter be entitled to receive, upon
conversion of Series F Preferred Stock, the
number of shares of stock or other
securities or property receivable upon such
reorganization, merger, consolidation, sale
or share exchange by holders of the number
of shares of Common Stock into which such
share of Series F Preferred Stock might have
been converted immediately prior to such
reorganization, merger, consolidation, sale
or share exchange.
7
(j) Certificate of Adjustment. In each case of
an adjustment or readjustment of the
Conversion Price or the number of shares of
Common Stock or other securities issuable
upon conversion of Series F Preferred Stock,
the Corporation, at its expense, shall cause
independent public accountants of recognized
standing selected by the Corporation (who
may be the independent public accountants
then auditing the books of the Corporation)
or the chief financial officer of the
Corporation, at the Board's option, to
compute such adjustment or readjustment in
accordance with the Corporation's Articles
of Incorporation and prepare a certificate
showing such adjustment or readjustments to
be mailed, by first class mail, postage
prepaid, to each registered holder of Series
F Preferred Stock at the holder's address as
shown in the Corporation's books. The
certificates shall set forth such adjustment
or readjustment, showing in detail the facts
upon which such adjustment or readjustment
is based.
(k) Notices of Record Date. In the event (1) any
taking by the Corporation of a record of the
holders of any class of securities for the
purpose of determining the holders thereof
who are entitled to receive any dividend or
other distribution, or (2) any capital
reorganization of the Corporation, any
reclassification or recapitalization of the
capital stock of the Corporation or any
compulsory share exchange or any transfer of
all or substantially all of the assets of
the Corporation to, or any merger or
consolidation with, any other any other
entity or person, or any voluntary or
involuntary dissolution, liquidation or
winding up of the Corporation, the
Corporation shall mail to each holder of
Series F Preferred stock at least thirty
(30) days prior to the record date specified
therein, a notice specifying (A) the date on
which any such record is to be taken for the
purpose of such dividend or distribution and
a description of such dividend or
distribution, (B) the date on which any such
reorganization, reclassification or
recapitalization, compulsory share exchange,
transfer, consolidation, merger,
dissolution, liquidation or winding up is
expected to become effective and a
description of such transaction, and (C) the
time, if any, when the holders of record of
Common Stock (or other securities) shall be
entitled to exchange their shares of Common
Stock (or other securities) for securities
or other property deliverable upon such
reorganization, reclassification or
recapitalization, compulsory share exchange,
transfer, consolidation, merger,
dissolution, liquidation or winding up.
(l) No Fractional Shares. No fractional shares
of Common Stock shall be issued upon the
happening of any event as set forth in this
paragraph (iv). In lieu of any fractional
shares to which the holder would otherwise
be entitled, the Corporation shall pay cash
equal
8
to (1) the product of such fraction
multiplied by the fair market value of one
share of the Corporation's Common Stock on
the date of conversion, as determined by the
closing price (or "last trade" price, if
applicable) on the day prior to the date of
conversion, if such shares are listed and
trading primarily on one or more national
securities exchange or (2) the product of
such fraction multiplied by a value of one
share of the Corporation's Common Stock on
the date of conversion, as determined by the
Board in good faith using methods it
considers appropriate.
(m) Stock Issuable Upon Conversion. The
Corporation shall take all such reasonable
corporate action as may be necessary to
increase the number of authorized but
unissued shares of Common Stock, solely for
the purpose of effecting the automatic
conversion of shares of Series F Preferred
Stock provided for in this paragraph (iv),
to such number of shares of Common Stock as
shall be sufficient to effect the conversion
of all outstanding shares of Series F
Preferred Stock.
(n) Notices Deemed Given. Any notice required by
the provisions of this paragraph (iv) to be
given to the holders of shares of Series F
Preferred Stock shall be deemed given five
(5) business days after the same has been
deposited in the United States mail,
certified or registered mail, return receipt
requested, postage prepaid, and addressed to
each holder of record at such holder's
address appearing on the books of the
Corporation.
(v) VOTING RIGHTS. Each holder of a share of Series F
Preferred Stock shall be entitled to vote with the
Common Stock on a share-for-share basis on all
matters submitted to the shareholders of the
Corporation for approval. Holders of the Series F
Preferred Stock shall be entitled to such number of
votes with respect to their Series F Preferred Stock
as shall equal the total number of shares of Common
Stock into which their shares of Series F Preferred
Stock are then convertible (regardless of whether the
holder thereof is then permitted to effect such
conversion), rounded up to the nearest whole share.
Except as otherwise expressly provided herein or as
mandated by law, the holders of shares of Common
Stock and the Series F Preferred Stock shall vote
together and not as separate voting groups. In the
event voting as a separate voting group by the
holders of Series F Preferred Stock is expressly
required by Washington law, any vote by the holders
of Series F Preferred Stock as a separate voting
group shall be effective if approved by a majority of
the outstanding shares of Series F Preferred Stock.
(vi) CERTAIN RESTRICTIONS.
9
(a) So long as any shares of Series F Preferred
Stock remain outstanding, the Corporation
shall not, without the vote or written
consent by the holders of at least a
majority of the then outstanding shares of
the Series F Preferred Stock:
(1) create (by reclassification or
otherwise) any new class or series
of preferred stock or effect any
issuance of additional Series F
Preferred Stock;
(2) take or approve any action that
results in any merger,
reorganization, sale of control, or
any other transaction in which all
or substantially all of the assets
of the Corporation are sold,
transferred or otherwise disposed
of, or a substantial portion of the
assets are licensed;
(3) authorize, issue or obligate itself
to issue shares of any equity
security, including securities
exercisable into equity securities,
which rank senior to or on a parity
with the Series F Preferred Stock
with respect to rights to receive
distributions upon liquidation,
with respect to dividends or with
respect to redemption or in any
other manner;
(4) increase or decrease the number of
authorized shares of Common Stock
or the Series F Preferred Stock;
(5) redeem, purchase, or otherwise
acquire (or pay into or set aside
for a sinking fund for such
purpose) any of the Common Stock;
provided, however, that this
restriction shall not apply to the
repurchase of shares of Common
Stock from employees, officers,
directors, consultants or other
persons performing services for the
Corporation or any subsidiary
pursuant to agreements under which
the Corporation has the option to
repurchase such shares at cost or
at cost plus interest upon the
occurrence of certain events, such
as the termination of employment;
(6) amend, alter, waive or repeal any
provision of the Articles of
Incorporation, by-laws, or the
resolution providing for the
issuance of the Series F Preferred
Stock, or pass any shareholder
resolutions, including such action
effected by merger or similar
transaction in which the
Corporation is the surviving
corporation, or approve or take any
other action that would change any
of the rights, preferences or
privileges provided for herein for
the benefit of any shares of the
Series F Preferred Stock;
10
(7) issue any new indebtedness, other
than pursuant to the Corporation's
modified credit facility in effect
at the date of filing of these
Articles of Amendment; or
(8) increase the maximum number of
board members beyond six members.
(b) The Corporation shall not permit any
subsidiary of the Corporation to purchase or
otherwise acquire for consideration any
shares of stock of the Corporation unless
the Corporation could, under subparagraph
(a) of this section, purchase or otherwise
acquire such shares at such time and in such
manner.
(vii) NO REISSUANCE OF SERIES F PREFERRED STOCK. No share
or shares of Series F Preferred Stock acquired by the
Corporation by reason of purchase, conversion or
otherwise shall be reissued, and all such shares
shall be canceled, retired and eliminated from the
shares of Series F Preferred Stock which the
Corporation shall be authorized to issue and all such
shares shall be returned to authorized but unissued
shares of Class A preferred stock, par value $.001
per share, of the Corporation and may be issued or
further designated, as determined by the Board in
accordance with the Articles of Incorporation and
applicable law.
(viii) COMMON STOCK. The term "Common Stock", as used
herein, means the Corporation's Common Stock, par
value $.00l per share.
(ix) AMENDMENTS. There shall be no amendment, modification
or waiver of the terms of this paragraph 2 of Article
IV without the prior written consent of holders of at
least a majority of the Series F Preferred Stock,
outstanding at such time."
4. The date of adoption of this amendment was _______ __, 2003.
5. The amendment was duly adopted by the board of directors in
accordance with the provisions of RCW 23B.06.020 and RCW
23B.10.020.
6. These Articles of Amendment will be effective upon filing.
DATED: ___________ __, ▇▇▇▇
▇▇▇▇▇▇ RESOURCES INC.
11
By:
--------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
12
DISCLOSURE SCHEDULE
SCHEDULE 3.1
SUBSIDIARIES
a. On April 28, 1993, the name of Inland Gold and Silver Corp.(a
Washington corporation) was changed to Inland Resources Inc. For the
past five years, Inland Resources Inc.'s places of business have been:
1998 until Present
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
June 1993 until 1998
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Prior to June ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
b. On July 1, 1995, the name of ▇▇▇▇▇ Exploration Company (a Texas
corporation) was changed to Inland Production Company. For the past
five years, Inland Production Company's places of business have been:
October 1998 until Present
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ #33 Also ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Suite 700
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
October 1994 until 1998
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
June 1993 through September 1994
77 West, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Prior to June 1993
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
c. On January 6, 2003, Eagle Drilling Services Inc. (a Utah corporation)
was formed as a wholly owned subsidiary of Inland Resources Inc. Eagle
Drilling Services Inc place of business is ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇.
DISCLOSURE SCHEDULE
SCHEDULE 3.1
SUBSIDIARIES (CONTINUED)
Subsidiaries
a. Inland Production Company - 100% owned by Inland Resources Inc. The
174,889 shares of Inland Production Company's common stock are pledged
to the senior banks.
b. Eagle Drilling Services Inc. - 100% owned by Inland Resources Inc. The
10,000 shares of Eagle Drilling Services Inc.'s common stock are
pledged to the senior banks.
Partnership Interests
a. Inland Production Company is a General Partner in the following Limited
Partnerships:
LOEX Properties 1983, LTD; a Texas limited partnership; Inland
Production Company has a 3.5% interest in the partnership. The
partnership's principal place of business is ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇.
LOEX Properties 1984, LTD; a Texas limited partnership; Inland
Production Company has a 0.62% interest in the partnership.
The partnership's principal place of business is ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇.
b. Inland Production Company is a Managing Partner in the following
General Partnerships:
West Monument Butte Pipeline Company; a Texas general
partnership; Inland Production Company has an 83.9% interest
in the partnership. The partnership's principal place of
business is ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇,
▇▇▇▇▇.
DISCLOSURE SCHEDULE
SCHEDULE 3.2
CONVERTIBLE SECURITIES
1997 PLAN:
Option Expiration Exercise Option Shares
Individual Grant Date Date Price 12/31/02
---------- ---------- ---------- -------- -------------
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇ 4/30/97 4/30/07 $90.00 600
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇ 6/30/98 6/30/08 $84.40 600
----------
Total 1,200
----------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 6/30/98 6/30/08 $84.40 600
----------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 4/30/97 4/30/07 $90.00 600
----------
▇▇▇▇ ▇▇▇▇▇ 12/12/97 12/12/07 $110.00 800
▇▇▇▇ ▇▇▇▇▇ 10/14/99 10/14/09 $10.00 3,000
----------
Total 3,800
----------
GRAND TOTAL 1997 OPTIONS 6,200
==========
1988 PLAN:
Option Expiration Exercise Option Shares
Individual Grant Date Date Price 12/31/02
---------- ---------- ---------- -------- -------------
▇▇▇▇▇ ▇. ▇▇▇▇▇ 2/23/93 2/23/03 $43.7500 20
▇▇▇▇▇ ▇. ▇▇▇▇▇ 4/28/93 4/28/03 $34.0000 20
▇▇▇▇▇ ▇. ▇▇▇▇▇ 6/4/93 6/4/03 $41.0000 20
▇▇▇▇▇ ▇. ▇▇▇▇▇ 8/6/93 8/6/03 $43.7500 20
▇▇▇▇▇ ▇. ▇▇▇▇▇ 10/28/93 10/28/03 $40.6300 20
▇▇▇▇▇ ▇. ▇▇▇▇▇ 1/20/94 1/20/04 $43.7500 20
▇▇▇▇▇ ▇. ▇▇▇▇▇ 4/8/94 4/8/04 $34.0000 20
▇▇▇▇▇ ▇. ▇▇▇▇▇ 4/27/94 4/27/04 $37.5000 20
▇▇▇▇▇ ▇. ▇▇▇▇▇ 8/10/94 8/10/04 $37.5000 20
▇▇▇▇▇ ▇. ▇▇▇▇▇ 5/26/95 5/26/05 $34.0000 100
▇▇▇▇▇ ▇. ▇▇▇▇▇ 5/22/96 5/22/06 $50.0000 100
----------
Total 380
----------
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇ 2/23/93 2/23/03 $43.7500 20
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇ 4/28/93 4/28/03 $34.0000 20
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇ 6/4/93 6/4/03 $41.0000 20
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇ 8/6/93 8/6/03 $43.7500 20
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇ 10/28/93 10/28/03 $40.6300 20
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇ 1/20/94 1/20/04 $43.7500 20
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇ 4/8/94 4/8/04 $34.0000 20
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇ 4/27/94 4/27/04 $37.5000 20
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇ 8/10/94 8/10/04 $37.5000 20
----------
Total 180
----------
DISCLOSURE SCHEDULE
SCHEDULE 3.2
CONVERTIBLE SECURITIES (CONTINUED)
1988 PLAN, CONTINUED:
Option Expiration Exercise Option Shares
Individual Grant Date Date Price 12/31/02
---------- ---------- ---------- -------- -------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 2/23/93 2/23/03 $43.7500 20
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 4/28/93 4/28/03 $34.0000 20
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 8/6/93 8/6/03 $43.7500 20
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 10/28/93 10/28/03 $40.6300 20
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1/20/94 1/20/04 $43.7500 20
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 4/8/94 4/8/04 $34.0000 20
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 4/27/94 4/27/04 $37.5000 20
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 8/10/94 8/10/04 $37.5000 20
---------
Total 160
---------
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇. 2/23/93 2/23/03 $43.7500 20
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇. 4/28/93 4/28/03 $34.0000 20
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇. 6/4/93 6/4/03 $41.0000 20
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇. 8/6/93 8/6/03 $43.7500 20
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇. 10/28/93 10/28/03 $40.6300 20
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇. 1/20/94 1/20/04 $43.7500 20
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇. 4/8/94 4/8/04 $34.0000 20
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇. 4/27/94 4/27/04 $37.5000 20
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇. 8/10/94 8/10/04 $37.5000 20
---------
Total 180
---------
▇▇▇▇ ▇. ▇▇▇▇▇ 2/23/93 2/23/03 $43.7500 20
▇▇▇▇ ▇. ▇▇▇▇▇ 4/28/93 4/28/03 $34.0000 20
▇▇▇▇ ▇. ▇▇▇▇▇ 6/4/93 6/4/03 $41.0000 20
▇▇▇▇ ▇. ▇▇▇▇▇ 8/6/93 8/6/03 $43.7500 20
▇▇▇▇ ▇. ▇▇▇▇▇ 10/28/93 10/28/03 $40.6300 20
▇▇▇▇ ▇. ▇▇▇▇▇ 1/20/94 1/20/04 $43.7500 20
▇▇▇▇ ▇. ▇▇▇▇▇ 4/8/94 4/8/04 $34.0000 20
▇▇▇▇ ▇. ▇▇▇▇▇ 4/27/94 4/27/04 $37.5000 20
▇▇▇▇ ▇. ▇▇▇▇▇ 8/10/94 8/10/04 $37.5000 20
▇▇▇▇ ▇. ▇▇▇▇▇ 9/21/94 9/21/04 $31.2500 100
▇▇▇▇ ▇. ▇▇▇▇▇ 5/26/95 5/26/05 $34.0000 100
--------
Total 380
--------
T ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 9/21/94 9/21/04 $31.2500 100
T ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 5/26/95 5/26/05 $34.0000 100
T ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 5/22/96 5/22/06 $50.0000 100
--------
Total 300
--------
▇▇▇▇ ▇. ▇▇▇▇▇ 5/22/96 5/22/06 $50.0000 100
--------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 5/22/96 5/22/06 $50.0000 100
--------
GRAND TOTAL 1988 OPTIONS 1,780
========
DISCLOSURE SCHEDULE
SCHEDULE 3.2
CONVERTIBLE SECURITIES (CONTINUED)
Option Expiration Exercise Option Shares
Individual Grant Date Date Price 12/31/02
---------- ---------- ---------- -------- -------------
Other Options:
▇▇▇▇ ▇▇▇▇▇▇▇▇ (1) 2/1/01 2/1/09 $1.63 90,000
▇▇▇▇ ▇▇▇▇▇▇▇▇ (1) 2/1/01 2/1/09 $2.84 60,000
----------
Total 150,000
----------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (1) 2/1/01 2/1/09 $1.63 90,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (1) 2/1/01 2/1/09 $2.84 60,000
----------
Total 150,000
----------
----------
▇▇▇▇▇▇▇ ▇. War 8/2/00 8/2/05 $9.37 25,000
----------
GRAND TOTAL -OTHER 325,000
==========
(1) Pursuant to their employment agreements, dated effective February
1, 2001, the Company agreed to grant each of ▇▇.▇▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇▇▇▇
options to purchase 90,000 shares of the Company's Common Stock at an exercise
price of $1.625 per share and options to purchase 60,000 shares of the Company's
Common Stock at an exercise price of $2.84 per share, with such options vesting
ratably over twelve fiscal quarters, with the first one-twelfth vesting on March
1, 2001. However, ▇▇. ▇▇▇▇▇▇▇▇▇▇ is fully vested in his 150,000 options due to
change of control of the Company as of August 2, 2001, and ▇▇. ▇▇▇▇▇▇▇▇'▇
options will be fully vested after the Transaction contemplated herein.. The
options for 90,000 shares each (representing approximately 3 percent of the
outstanding shares of the Company) are also subject to automatic increase upon
the issuance of additional shares by the Company in a pro rata amount based on
the percentage increase in the number of outstanding shares of the Company. The
exercise price for such new options would be the same as the issue price of the
new shares issued by the Company.
DISCLOSURE SCHEDULE
SCHEDULE 3.3
FINANCIAL INFORMATION
The Company's financial statements for the year ended December 31, 2001 are
being restated and reaudited by the Company's new auditors, KPMG, LLC. In 2001
and prior years, the Company entered into certain commodity derivative contracts
with Enron North America Corp. ("ENAC"), a subsidiary of Enron Corp. ("Enron").
On December 2, 2001, Enron and ENAC filed for Chapter 11 bankruptcy, and the
Company determined that the ENAC contracts no longer qualified for cash flow
hedge accounting under Statement of Financial Accounting Standards ▇▇. ▇▇▇
("▇▇▇▇ ▇▇. ▇▇▇"). Consequently, the Company recorded a loss of $5.5 million for
the year ended December 31, 2001 and deferred a corresponding amount in
accumulated other comprehensive income, based on the estimated fair value of the
derivative contracts based on future commodity prices at November 28, 2001.
The Company subsequently determined it should have ceased accounting for the
derivative contracts as ▇▇▇▇▇▇ at an earlier date, corresponding to the
deterioration in the credit of ENAC and Enron in mid October 2001. At this date,
changes in the fair value of the derivatives no longer were considered effective
in offsetting changes in the cash flows of the hedged production. Accordingly,
the Company adjusted the loss and the corresponding amount deferred in other
comprehensive income previously recorded to reflect the estimated fair value of
the derivative contracts at that date of $2.2 million. An adjustment was also
recorded to reclassify to earnings $480,000 for the year ended December 31,
2001, representing the portion of the fair value of the derivative attributable
to the originally scheduled settlements in 2001.
As a result, the Company has restated the accumulated other comprehensive income
and accumulated deficit balances included in the accompanying December 31, 2001
balance sheet to reflect the adjustments discussed above.
On August 2, 2001, the Company's Series D Preferred and Series E Preferred stock
held by Inland Holdings LLC, a company controlled by TCW Asset Management
Company ("TCW") were exchanged for an unsecured subordinated note due September
30, 2009 and $2 million in cash from the Company. The note amount was for
$98,968,964 and represented the face value plus accrued dividends of the Series
D Preferred stock as of August 2, 2001. As a result of the exchange, the Company
retired both the Series D and Series E Preferred stock.
When recording the transaction discussed above, the Company originally recorded
additional accretion on the Series D and Series E Preferred stock of $9,092,000
and $2,542,000, respectively, as decreases to additional paid-in capital. In
addition due to the related party nature of the transaction, the difference
between the aggregate subordinated note balance and $2 million cash paid to TCW
and the aggregate liquidation value of the Series D and Series E Preferred stock
(including the additional accretion) plus accrued dividends resulted in an
increase to additional paid-in capital of $13,083,00. Further when calculating
net income (loss) attributable to common stockholders for the year
ended December 31, 2001, the Company included the $13,083,000 increase to
additional paid-in capital as the component of net income (loss) attributable to
common stockholders, but did not include the aggregate $11,634,000 decrease to
additional paid-in capital as a component of net income (loss) attributable to
common stockholders.
As a result, the Company has restated the accompanying statement of
stockholders' equity for the year ended December 31, 2001 to eliminate the
additional accretion of $11,634,000 and to correspondingly reduce the excess
carrying value of the Series D and Series E Preferred stock from $13,083,000 to
$1,449,000. There was no net impact to stockholders' equity as a result of these
adjustments. However, the Company has restated net income (loss) attributable to
common stockholders to reflect the reduction to the excess carrying value of the
Series D and Series E Preferred stock from $13,083,000 to $1,449,000.
The report of KPMG LLP that accompanies the restated financial statements as of
and for the year ended December 31, 2001, contained in Amendment No. One to Form
10K/A, states that "the Company has suffered losses from operations, has a net
capital deficiency and has defaulted on its senior indebtedness subsequent to
year-end which raise substantial doubt about its ability to continue as a going
concern".
DISCLOSURE SCHEDULE
SCHEDULE 3.5
LITIGATION
a. WEXPRO CASE. Inland Refining, Inc. ("IRI") was joined in a suit brought
against Crysen Refining ("Crysen") by Wexpro Company (WEXPRO COMPANY, Plaintiff
vs. CRYSEN REFINING, INC. a.k.a. SOUND REFINING, INC. INLAND REFINING INC., and
▇▇▇▇ DOES I-X in the Third District court in and for Salt Lake County, State of
Utah, Case No. 990911524CN), alleging that payment for crude oil purchased by
Crysen in 1993 amounting to $43,556 was not made. IRI purchased Crysen in
December 31, 1997. In January 2000, IRI was sold to Silver Eagle Inc., but
Inland Resources Inc. retained any potential liability associated with the
Wexpro complaint. IRI claims no liability for such earlier claims.
DISCLOSURE SCHEDULE
SCHEDULE 3.6
UNDISCLOSED LIABILITIES
None.
DISCLOSURE SCHEDULE
SCHEDULE 3.7
CONSENTS / APPROVALS
Consent to the Transactions in the Agreement are subject to approval by the
Company's Senior Lenders.
DISCLOSURE SCHEDULE
SCHEDULE 3.10
COMPLIANCE WITH LAWS
None.
DISCLOSURE SCHEDULE
SCHEDULE 3.13
ERISA PLANS
Currently existing ERISA Plans of Inland Resources Inc. and Inland
Production Company:
o Inland Resources Inc. 401 (k) Plan
o Inland Resources Inc. Employee Benefits Trust
o Inland Resources Inc. 125 Cafeteria Plan
DISCLOSURE SCHEDULE
SCHEDULE 3.16
ENVIRONMENTAL
None.