<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ________)*
INLAND RESOURCES INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $.001 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
457469 20 3
----------------------------------------
(CUSIP Number)
Julia Heintz Murray, General Counsel - Finance
Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, TX 77002
(713) 853-4794
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
July 21, 1997
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE> 2
SCHEDULE 13D
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------
CUSIP NO.: 457469 20 3 PAGE 2 OF 7 PAGES
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSON
Joint Energy Development Investments Limited Partnership
- ---------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
N/A (b) [ ]
- ---------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS *
WC
- ---------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
- ---------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- ---------------------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
-0-
---------------------------------------------------------------------------------
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER
833,333 shares
---------------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
-0-
---------------------------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH
Same as 8 above.
- ---------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Same as 8 above.
- ---------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
N/A
- ---------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.1 %
- ---------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Page 2 of 7 Pages
<PAGE> 3
SCHEDULE 13D
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------
CUSIP NO.: 457469 20 3 PAGE 3 OF 7 PAGES
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSON
Enron Corp.
- ---------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
N/A (b) [ ]
- ---------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS *
WC
- ---------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
- ---------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Oregon
- ---------------------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
-0-
---------------------------------------------------------------------------------
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER
833,333 shares
---------------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
-0-
---------------------------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH
Same as 8 above.
- ---------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Same as 8 above.
- ---------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
N/A
- ---------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.1 %
- ---------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 7 Pages
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Item 1. Security and Issuer:
This statement relates to the Common Stock, par value $.001 per share
(the "Common Stock"), of Inland Resources Inc., a Washington corporation (the
"Issuer"). The address of the principal executive office of the Issuer is 475
17th Street, Denver, Colorado 80202.
Item 2. Identity and Background:
This statement is being filed by (i) Joint Energy Development
Investments Limited Partnership, a Delaware limited partnership ("JEDI"), which
is engaged primarily in the business of investing in and managing certain
energy related assets and (ii) Enron Corp., an Oregon corporation ("Enron"),
which is an integrated natural gas company that engages, primarily through
subsidiaries, in the gathering, transportation and wholesale marketing of
natural gas, the exploration for and production of natural gas and crude oil,
the production, purchase, transportation and worldwide marketing and trading of
natural gas liquids, crude oil and refined petroleum products, the production
and sale of cogenerated electricity and steam and the purchasing and marketing
of long-term energy-related commitments. JEDI and Enron are referred to herein
as the "Reporting Entities". Additional entities that may be deemed to be
control persons of JEDI are (a) Enron Capital Management Limited Partnership, a
Delaware limited partnership and the general partner of JEDI ("ECMLP"), whose
principal business is to manage oil and gas related investments, (b) Enron
Capital Corp., a Delaware corporation and the general partner of ECMLP ("ECC"),
whose principal business is to manage oil and gas related investments and (c)
Enron Capital & Trade Resources Corp., a Delaware corporation ("ECT"), whose
principal business is the purchase of natural gas, gas liquids and power
through a variety of contractual arrangements and marketing these energy
products to local distribution companies, electric utilities, cogenerators and
both commercial and industrial end users. ECT also provides risk management
services. ECC is a wholly owned subsidiary of ECT and an indirect, wholly
owned subsidiary of Enron.
The address of the principal business office of JEDI, ECMLP, ECC, ECT
and Enron is 1400 Smith Street, Houston, Texas 77002. Schedule I attached
hereto sets forth certain additional information with respect to each director
and each executive officer of ECC and Enron. The filing of this statement on
Schedule 13D shall not be construed as an admission that Enron, ECT, ECC, ECMLP
or any person listed on Schedule I hereto is, for the purposes of Section 13(d)
or 13(g) of the Securities Exchange Act of 1934, the beneficial owner of any
securities covered by this statement.
None of the Reporting Entities, nor, to their knowledge, ECMLP, ECC or
ECT or any person listed on Schedule I hereto, has been, during the last five
years (a) convicted of any criminal proceeding (excluding traffic violations or
similar misdemeanors) or (b) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, U.S.
federal or state securities laws or finding any violations with respect to such
laws.
Item 3. Source and Amount of Funds or Other Consideration:
On July 21, 1997, JEDI purchased 100,000 shares of Issuer's Series C
Cumulative Convertible Preferred Stock (the "Preferred Stock") for
consideration consisting of $10,000,000 in cash. The source of the $10,000,000
consideration paid to Issuer for the Preferred Stock was working capital on
hand.
Item 4. Purpose of Transaction:
The transactions described in Item 3 above occurred as a result of
negotiated transactions with the Issuer. The securities acquired by JEDI were
acquired for investment purposes. JEDI intends to review its investment in the
Issuer on a continuing basis and, depending upon the price of, and other market
conditions relating to, the Common Stock, subsequent developments affecting the
Issuer, the Issuer's business and prospects, other investment and business
opportunities available to JEDI, general stock market and economic conditions,
tax considerations and other factors deemed relevant, may decide to increase or
decrease the size of its investment in Issuer.
Page 4 of 7 Pages
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Each share of Preferred Stock is convertible, at any time at the option
of the holder, into that number of shares of the Issuer's Common Stock that is
equal to the "Redemption Price" per share of $100.00 plus accrued and unpaid
dividends as of the date of conversion, divided by the "Conversion Price" per
share of $12.00 (which Conversion Price per share is subject to antidilution
adjustments). Accordingly, the 100,000 shares of Preferred Stock were
immediately upon issuance thereof, convertible into 833,333 shares of the
Issuer's Common Stock.
The Preferred Stock accrues dividends at the rate of $10.00 per share
per annum, which dividends are cumulative and accrue on a daily basis.
Additional dividends accrue on the amount of dividends accrued but unpaid,
whether or not declared, compounding quarterly, at the rate of 10% per annum.
Dividends are payable only in connection with the liquidation, dissolution or
winding up of the Issuer, or in connection with a redemption of the Preferred
Stock. On the earlier of (i) the later of (a) July 1, 2005 and (b) six months
following the date of maturity of certain long-term debt financing obtained by
the Issuer before July 1, 2005 and (ii) January 21, 2008, the Issuer is
required to redeem all outstanding Preferred Stock at the Redemption Price plus
accrued but unpaid dividends. The Issuer may effect such redemption in cash,
or at its election, in that number of shares of its Common Stock with a value
equal to the Redemption Price plus accrued but unpaid dividends. For purposes
of calculating the number of shares of Common Stock issuable in such a
redemption, the Issuer's Common Stock is valued at 80% of its average price
over the five-day trading period ending immediately prior to the date of
issuance of Common Stock in such a redemption.
In connection with the transactions described in Item 3 above, the
Issuer has granted to JEDI the right (the "Maintenance Right") to purchase a
pro rata share of capital stock, or securities convertible into or exercisable
or exchangeable for capital stock, that are issued or sold by the Issuer
(except, among other transactions, in public offerings and certain
acquisitions). The Maintenance Right is intended to permit JEDI to maintain
its proportionate equity ownership in the Issuer.
Each share of Preferred Stock is entitled to vote on all matters and is
entitled to that number of votes per share equal to the number of shares of
Common Stock into which such share of Preferred Stock is then convertible.
Additionally, holders of the Preferred Stock, acting separately as a class,
have the right to elect the greater of one, or a proportionate number rounded
down to the nearest whole number based upon the percentage of Common Stock into
which the Preferred Stock may be converted, of the members of the Board of
Directors of the Issuer. Additionally, holders of Preferred Stock vote as a
class on (i) any amendment, by merger or otherwise, to the terms of the
Preferred Stock or other terms of the Articles of Incorporation of the Issuer
if such amendment would adversely affect any right, preference, privilege or
voting right of the Preferred Stock, (ii) authorization or issuance of any
securities ranking in parity with or prior to the Preferred Stock in the
payment of dividends, conversion rights, or the distribution of assets upon
liquidation, dissolution or winding up of the Issuer, and (iii) consummation of
any merger, consolidation or share exchange unless the holders of the Preferred
Stock receive or continue to hold in the surviving corporation the equivalent
number of shares, with substantially equivalent rights and preferences,
including priority as to dividends, distribution of assets upon liquidation,
voting and conversion rights, as the Preferred Stock.
Other than the transactions described herein, none of the Reporting
Entities nor to their knowledge, ECMLP, ECC, ECT, or any person listed on
Schedule I hereto, has any plan or proposal that would result in any of the
consequences listed in paragraphs (a) - (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer:
As of the date of this report, JEDI beneficially owns and has the power
to vote and dispose of 100,000 shares of the Preferred Stock, which represents
833,333 shares, or approximately 9.1 %, of the Issuer's Common Stock
outstanding as of the date hereof. Because ECC is an indirect, wholly owned
subsidiary of Enron, Enron may also be deemed to beneficially own such shares.
Enron disclaims beneficial ownership of all such shares.
Other than the transactions described herein, none of the Reporting
Entities nor to their knowledge, ECMLP, ECC, ECT, or any person listed on
Schedule I hereto, has any plan or proposal that would effected any
transactions in shares of Common Stock of the Issuer during the preceding sixty
days.
Page 5 of 7 Pages
<PAGE> 6
Item 6. Contracts, Arrangements, Understanding or Relationships With
Respect to Securities of the Issuer:
Certain registration rights granted to JEDI by the Issuer are set forth
in a Registration Rights Agreement dated July 21, 1997. In addition, JEDI has
entered into a Tagalong Agreement dated July 21, 1997 with Pengo Securities
Corp., a stockholder of the Issuer, granting JEDI the right to sell a pro rata
portion of Issuer's Common Stock acquired by JEDI upon conversion of its
Preferred Stock to any transferee of Pengo in any sale or transfer to such
transferee, in one or a series of related transactions, of a majority of
Pengo's Common Stock of the Issuer.
Item 7. Material to be Filed as Exhibits:
Exhibit 1: Securities Purchase Agreement dated as of July 21, 1997
between the Issuer and JEDI.
Exhibit 2: Registration Rights Agreement dated as of July 21, 1997
between Issuer and JEDI.
Exhibit 3: Tagalong Agreement dated as of July 21, 1997 between JEDI and
Pengo Securities Corp.
Exhibit 4: Articles of Amendment to the Articles of Incorporation of
Inland Resources Inc. Designating a Series of Stock.
Page 6 of 7 Pages
<PAGE> 7
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certify that the information set forth in this
statement is true, complete and correct.
Date: July 31, 1997 JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its general partner
By: Enron Capital Corp., its general
partner
By: /s/ Peggy B. Menchaca
----------------------------------
Name: Peggy B. Menchaca
-------------------------------
Title: Vice President and Secretary
------------------------------
Date: July 31, 1997 ENRON CORP.
By: /s/ Peggy B. Menchaca
----------------------------------
Name: Peggy B. Menchaca
-------------------------------
Title: Vice President and Secretary
------------------------------
Page 7 of 7 Pages
<PAGE> 8
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
ENRON CAPITAL CORP.
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
1400 Smith Street
Houston, TX 77002
James V. Derrick, Jr. U.S.A. Director
Kenneth D. Rice U.S.A. Director
John J. Esslinger U.S.A. Director, Vice Chairman and Managing
Director
Gene E. Humphrey U.S.A. President and Managing Director
Richard A. Causey U.S.A. Managing Director
Andrew S. Fastow U.S.A. Managing Director
Mark E. Haedicke U.S.A. Managing Director and General Counsel
Jeremy M. Blachman U.S.A. Vice President
Richard B. Buy U.S.A. Vice President
Rebecca C. Carter U.S.A. Vice President and Chief Control
Officer
William D. Gathmann U.S.A. Vice President, Finance and
Treasurer
Robert J. Hermann U.S.A. Vice President, Tax
Clifford P. Hickey U.S.A. Vice President
Peggy B. Menchaca U.S.A. Vice President and Secretary
Kristina M. Mordaunt U.S.A. Vice President and Assistant
General Counsel
Julia Heintz Murray U.S.A. Vice President, General Counsel,
Finance and Assistant Secretary
Andrea Vail U.S.A. Vice President
</TABLE>
I-1
<PAGE> 9
DIRECTORS AND EXECUTIVE OFFICERS
ENRON CORP.
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS CITIZENSHIP POSITION AND OCCUPATION
- ------------------------- ----------- -----------------------
<S> <C> <C>
Robert A. Belfer U.S.A. Director
767 Fifth Avenue, 46th Fl. Chairman, President and Chief
New York, NY 10153 Executive Officer,
Belco Oil & Gas Corp.
Norman P. Blake, Jr. U.S.A. Director
USF&G Corporation Chairman, United States Fidelity
6225 Smith Ave. LA0300 and Guaranty Company
Baltimore, MD 21209
Ronnie C. Chan U.S.A. Director
Hang Lung Development Chairman of Hang Lung
Company Limited Development Group
28/F, Standard Chartered
Bank Building
4 Des Vouex Road Central
Hong Kong
John H. Duncan U.S.A. Director
5851 San Felipe, Suite 850 Investments
Houston, TX 77057
Joe H. Foy U.S.A. Director
404 Highridge Dr. Retired Senior Partner,
Kerrville, TX 78028 Bracewell & Patterson, L.L.P.
Wendy L. Gramm U.S.A. Director
P.O. Box 39134 Former Chairman, U.S. Commodity
Washington, D.C. 20016 Futures Trading Commission
Robert K. Jaedicke U.S.A. Director,
Graduate School of Business Professor (Emeritus), Graduate
Stanford University School of Business
Stanford, CA 94305 Stanford University
Charles A. Lemaistre U.S.A. Director
13104 Travis View Loop President (Emeritus), University of
Austin, TX 77030 Texas M.D. Anderson Cancer
Center
John A. Urquhart U.S.A. Director and Vice Chairman
John A. Urquhart Assoc. Enron Corp.
111 Beach Road President, John A. Urquhart
Fairfield, CT 06430 Associates
</TABLE>
I-2
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<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS CITIZENSHIP POSITION AND OCCUPATION
- ------------------------- ----------- -----------------------
<S> <C> <C>
John Wakeham U.K. Director
Pinglestone House Former U.K. Secretary of State for
Old Alresford Energy and Leader of the
Hampshire S024 9TB Houses of Commons and Lords
United Kingdom
Charls E. Walker U.S.A. Director
Walker & Walker, LLC. Chairman, Walker & Walker, LLC
10220 River Road, Ste. 105
Potomac, Maryland 20854
Herbert S. Winokur, Jr. U.S.A. Director
Winokur & Associates, Inc. President, Winokur & Associates,
30 East Elm Ct. Inc.
Greenwich, CT 06830
1400 Smith Street
Houston, TX 77002
Kenneth L. Lay U.S.A. Director, Chairman and Chief
Executive Officer
Jeffrey K. Skilling U.S.A. Director, President and Chief
Operating Officer
J. Clifford Baxter U.S.A. Senior Vice President, Corporate
Development
Richard A. Causey U.S.A. Senior Vice President and Chief
Accounting and Information Officer
Edmund P. Segner, III U.S.A. Executive Vice President and Chief of
Staff
James V. Derrick, Jr. U.S.A. Senior Vice President and General
Counsel
Andrew S. Fastow U.S.A. Senior Vice President, Finance
Stanley C. Horton U.S.A. Chairman and Chief Executive Officer,
Enron Gas Pipeline Group
Rebecca P. Mark U.S.A. Chairman and Chief Executive Officer,
Enron International, Inc.
</TABLE>
I-3
<PAGE> 11
DIRECTORS AND EXECUTIVE OFFICERS
ENRON CORP.
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS CITIZENSHIP POSITION AND OCCUPATION
- ------------------------- ----------- -----------------------
<S> <C> <C>
1400 Smith Street
Houston, TX 77002
Thomas E. White U.S.A. Chairman and Chief Executive Officer,
Enron Ventures Corp.
Rodney L. Gray U.S.A. Chairman and Chief Executive Officer,
Enron Global Power & Pipelines L.L.C.
</TABLE>
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<PAGE> 12
EXHIBIT INDEX
Exhibit 1: Securities Purchase Agreement dated as of July 21, 1997
between the Issuer and JEDI.
Exhibit 2: Registration Rights Agreement dated as of July 21, 1997
between Issuer and JEDI.
Exhibit 3: Tagalong Agreement dated as of July 21, 1997 between JEDI
and Pengo Securities Corp.
Exhibit 4: Articles of Amendment to the Articles of Incorporation of
Inland Resources Inc. Designating a Series of Stock.
<PAGE> 1
================================================================================
SECURITIES PURCHASE AGREEMENT
DATED AS OF JULY 21, 1997
BY AND BETWEEN
INLAND RESOURCES INC.
AND
JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
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Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Issuance and Purchase of Series C Preferred Stock . . . . . . . . . . . . . . . . . . . . . . 2
(a) Issuance and Purchase of Series C Preferred Stock . . . . . . . . . . . . . . . . . . . . . . 2
(b) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3. Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Consents and Approval; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) Offering of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(e) Broker's or Finder's Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(f) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(g) Publicly Filed Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(h) No Restrictions on Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(i) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(j) Financial Statements; Financial Condition; etc. . . . . . . . . . . . . . . . . . . . . . . . 6
(k) Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(l) Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(m) Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(n) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(o) Investment Company Act; Public Utility Holding Company Act . . . . . . . . . . . . . . . . . 7
(p) True and Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(q) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(r) Ownership of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(s) No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(t) Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(u) Compliance With Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(v) No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(w) Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(x) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4. Representations and Warranties of the Purchaser . . . . . . . . . . . . . . . . . . . . . . 10
(a) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Consents and Approval; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(c) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(c) Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
(d) Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(e) No Restrictions on Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(f) Certain Public Utility Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6. Purchaser's Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Representations and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(c) Tagalong Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(d) Certificate of Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(e) Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(f) Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(g) Conversion of Series B Preferred Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 12
(h) Payment of Expenses and Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(i) Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. Company's Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(a) Representations and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8. Termination, Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9. Maintenance Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(c) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(d) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(e) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(f) Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(g) Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<PAGE> 4
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement") is made and
entered into as of the 21st of July, 1997, by and between Inland Resources Inc.
(the "Company") and Joint Energy Development Investments Limited Partnership
(the "Purchaser").
Section 1. Definitions. As used in this Agreement, the
following terms have the meanings indicated:
"AAA" has the meaning ascribed to such term in Section 10(g).
"Affiliate" shall have the meaning given to such term in Rule
405 under the Securities Act.
"Closing" has the meaning ascribed to such term in Section
2(b).
"Closing Date" has the meaning ascribed to such term in
Section 2(b).
"Common Stock" means the common stock, par value $.001 per
share, of the Company.
"Credit Agreement" means the Credit Agreement, among Inland
Production Company, the banks named therein and Canadian Imperial Bank of
Commerce, as agent, dated as of June 30, 1997.
"Dispute" has the meaning ascribed to such term in Section
10(g).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Authority" means the United States, any foreign
country, state, county, city or other political subdivision, agency or
instrumentality thereof.
"Material Adverse Effect" means any material adverse effect on
the financial condition, prospects, assets, business or operations of the
Company and its Subsidiaries taken as a whole.
"Mediator" has the meaning ascribed to such term in Section
10(g).
"Registration Rights Agreement" means the Registration Rights
Agreement in the form attached hereto as Exhibit A.
<PAGE> 5
"SEC Reports" has the meaning ascribed to such term in Section
3(g).
"Securities Act" means the Securities Act of 1933, as amended.
"Series C Preferred Stock" means the Series C Cumulative
Convertible Preferred Stock, par value $.001 per share, of the Company.
"Subsidiary" means, when used with reference to an entity,
any corporation, a majority of the outstanding voting securities of which are
owned directly or indirectly by such entity. Such term shall also refer to any
other partnership, limited partnership, joint venture, trust, or other business
entity in which such entity has a material interest.
"Shares" has the meaning ascribed to such term in Section
2(a).
"Tagalong Agreement" means the Tagalong Agreement in the form
attached hereto as Exhibit B.
"Transactions" means the issuance and sale of the Shares to
the Purchaser and the other transactions contemplated by this Agreement, the
Registration Rights Agreement and the Tagalong Agreement.
All capitalized terms not defined and used herein shall have
the meaning set forth in the Credit Agreement.
Section 2. Issuance and Purchase of Series C Preferred Stock.
(a) Issuance and Purchase of Series C Preferred Stock.
Subject to the terms and conditions of this Agreement, the Company
agrees to issue and sell to the Purchaser, and the Purchaser (or the
Purchaser's designee) agrees to subscribe for and purchase from the
Company, 100,000 shares (the "Shares") having the relative rights,
preferences, privileges and limitations set forth on the "Articles of
Amendment to the Articles of Incorporation of Inland Resources Inc."
("Certificate of Designation") attached hereto as Exhibit C and
incorporated herein for all purposes by this reference (the "Series C
Preferred Stock"), for an aggregate purchase price of $10,000,000
($100.00 per share of Series C Preferred Stock) (the "Purchase
Price").
(b) The Closing. Subject to the terms and conditions of
this Agreement, the issuance and purchase of the Shares shall take
place at a closing (the "Closing") to be held at the offices of the
Purchaser or such other location as may be agreed by the parties at
10:00 a.m. (Denver time) on July 21, 1997, or such later date as may
be agreed by the parties. The date on which the Closing occurs is
referred to herein as the "Closing Date." On the Closing
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<PAGE> 6
Date, the Company will deliver the Shares registered in the name of
the Purchaser and/or the Purchaser's nominees or designees upon
receipt of the Purchase Price therefor by wire transfer of immediately
available funds to an account designated by the Company, or by such
other method as is mutually agreed to by the Purchaser and the
Company. Such certificates shall bear appropriate restrictive legends
deemed necessary by the Company to comply with applicable securities
laws. Prior to the Closing, the Company shall have filed with the
Secretary of State of Washington the Certificate of Designation.
Section 3. Representations and Warranties of the Company. The
Company represents and warrants to the Purchaser as of the date hereof as
follows:
(a) Corporate Status. Each of the Company and its
Subsidiaries (i) is a duly organized and validly existing corporation
or partnership in good standing under the laws of the jurisdiction of
its incorporation or formation, (ii) has the corporate or partnership
power and authority to own its property and assets and to transact the
business in which it is engaged or presently proposed to engage and
(iii) has duly qualified and is authorized to do business and is in
good standing as a foreign corporation or partnership in every
jurisdiction in which it owns or leases real property or in which the
nature of its business requires it to be so qualified, except where
the failure to so quality, individually or in the aggregate, could not
have a Material Adverse Effect. The copy of the Amended and Restated
Articles of Incorporation of Inland Resources Inc. filed as exhibit
3.1 to the Company's Form 10-QSB for the quarter ended June 30, 1996
is a true, correct and complete copy of the Company's Articles of
Incorporation, except for the amendments set forth in the Certificate
of Designation. Except for the Certificate of Designation, no other
amendment to the Company's Articles of Incorporation has been approved
by the Board of Directors or stockholders of the Corporation or filed
with the Washington Secretary of State.
(b) Authority. The Company has all requisite corporate
power and authority to execute and deliver this Agreement and the
Registration Rights Agreement and to consummate the Transactions to be
performed by the Company. The execution and delivery of this
Agreement and the Registration Rights Agreement and the consummation
of the Transactions to be performed by the Company have been duly and
validly authorized by all necessary action on the part of the Board of
Directors of the Company, and no other corporate proceedings are
necessary to authorize the execution and delivery of this Agreement
and the Registration Rights Agreement by the Company or to consummate
the Transactions to be performed by the Company, other than filing the
Certificate of Designation with the Secretary of State of Washington
on the Closing Date, and as a result of the prior approval by at least
a majority of the Company's Board of Directors of the Purchaser's
purchase of Shares the provisions of RCW23B.19.040 of the Washington
Business Corporation Act are inapplicable to the Purchaser. This
Agreement and the Registration Rights Agreement have been duly and
validly executed and delivered by the
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<PAGE> 7
Company and, assuming each of this Agreement and the Registration
Rights Agreement constitutes a valid and binding obligation of the
Purchaser, each of this Agreement and the Registration Rights
Agreement constitutes, a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms. Upon
receipt by the Company of the Purchase Price, the Shares shall be duly
authorized, validly issued, fully paid and non-assessable and free of
any preemptive rights. The shares of Common Stock underlying the
Shares have been reserved for issuance, and such shares of Common
Stock upon conversion of the Shares will be validly issued, fully paid
and non-assessable and free of any preemptive rights.
(c) Consents and Approval; No Violation. Neither the
execution, delivery or performance of this Agreement or the
Registration Rights Agreement by the Company, the consummation of the
Transactions to be performed by the Company nor compliance by the
Company with any of the provisions hereof or of the Registration
Rights Agreement will (i) conflict with or result in any breach of any
provisions of the Articles of Incorporation or by-laws of the Company
or any of its Subsidiaries, assuming, for this purpose, the
Certificate of Designation has been filed with the Secretary of State
of Washington; (ii) require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental
authority, including those of the United States, any foreign country,
state, county, city or other political subdivision, agency or
instrumentality thereof (herein referred to as a "Governmental
Authority"), except for consents, approvals, authorizations, permits,
filings or notifications which have been obtained or made; (iii)
result in a default (with or without due notice or lapse of time or
both) or give rise to any right of termination, cancellation or
acceleration under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, contract, license, agreement or other
instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective assets may be bound, except
for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been
obtained; (iv) result in the creation or imposition of any lien,
charge or other encumbrance on the assets of the Company or any of its
Subsidiaries; or (v) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company, any of its
Subsidiaries or any of their respective assets.
(d) Offering of the Shares. The offer, sale and issuance
of the Shares pursuant to this Agreement do not require registration
of the Shares under the Securities Act of 1933, as amended (the
"Securities Act"), or registration or qualification under any
applicable state "blue sky" or securities laws, based on available
non-public offering exemptions which are based, in part, on the
representations of the Purchaser in Section 4(c). The Company has not
taken, directly or indirectly, nor will it take any action which will
subject the issuance or sale of any of the Shares to be in violation
of the provision of Section 5 of the Securities Act or the provisions
of any securities, blue sky law or similar law of any applicable
jurisdiction.
-4-
<PAGE> 8
(e) Broker's or Finder's Commissions. Except as referred
to herein, no broker's or finder's fees or commissions will be payable
by the Company in connection with the issuance and sale of the Shares
or the Transactions.
(f) Capitalization. (i) As of the date hereof, the
authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, and 20,000,000 shares of Class A preferred stock, par
value $.001 per share ("Preferred Shares"). As of the date hereof,
6,319,059 shares of Common Stock and no Series A Preferred Shares or
Series B Preferred Shares (other than the 1,000,000 shares of Series B
Preferred Shares being converted concurrently with the purchase and
sale of Shares at the Closing) were issued and outstanding. All
Series A Preferred Shares and Series B Preferred Shares will have been
canceled and will have been returned to authorized but unissued
Preferred Shares as of the Closing. Except with the consent of the
Purchaser, the Company will not, prior to the Closing, authorize or
issue any Common Stock or Preferred Stock (other than upon exercise of
outstanding options or warrants), and will not repurchase or redeem
any Common Stock or Preferred Stock. All such issued and outstanding
shares of capital stock of the Company are validly issued, fully paid,
non-assessable and free of any preemptive rights. Other than the
Shares issuable pursuant to this Agreement or the shares of Common
Stock underlying the Shares, neither the Company nor any Subsidiary
has any shares of its capital stock reserved for issuance, except for
697,300 shares of Common Stock issuable pursuant to the Company's
employee stock option plans, of which options for 221,300 shares are
outstanding, and 656,911 shares issuable pursuant to other outstanding
subscriptions, options and warrants. There are no other (x)
outstanding options, warrants or securities convertible into Common
Stock or (y) contracts, commitments, agreements, understandings or
arrangements of any kind to which the Company is a party relating to
the issuance of any capital stock of the Company, other than this
Agreement. Except as set forth on Schedule 3(f), the Company is not a
party to or bound by any agreement with respect to any of its
securities which grants registration rights to any person.
(ii) As of the Closing Date, the authorized
capital stock of the Company shall consist of 25,000,000 shares of
Common Stock, and 20,000,000 Preferred Shares, of which 100,000 shares
shall have been designated as Series C Cumulative Convertible
Preferred Stock pursuant to the Certificate of Designation. Upon
issuance at the Closing Date, the Shares will be duly authorized,
validly issued, fully paid and nonassessable and shall have been
issued free of any preemptive right and free from all liens.
(g) Publicly Filed Documents. Each of the Company's
Annual Report on Form 10-KSB for the period ended December 31, 1996,
and its Quarterly Report on Form 10-QSB for the period ended March 31,
1997 (the "SEC Reports"), as of its filing date, complied in all
material respects, both as to form and content, with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder and did not contain any untrue
-5-
<PAGE> 9
statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. The
Company has made all filings required to be made by it with the
Commission pursuant to Sections 12, 13, 14 and 15 of the Exchange Act.
All of such filings, and all filings made by the Company with the
Commission pursuant to such sections, rules and regulations although
not required to be made, complied in all material respects, as to both
form and content, with all applicable requirements of the Exchange Act
and the rules and regulations thereunder, and, at the time of filing,
did not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made,
not misleading.
(h) No Restrictions on Affiliates. Neither the Company
nor any of its Subsidiaries is a party to any agreement that would
purport to impose restrictions or limitations on any affiliate of the
Company (other than its controlled affiliates).
(i) Litigation. There are no actions, suits or
proceedings pending or threatened (i) with respect to any of the
Transactions or (ii) that could, individually or in the aggregate,
result in a Material Adverse Effect.
(j) Financial Statements; Financial Condition; etc. Each
of the financial statements included in the SEC Reports were prepared
in accordance with generally accepted accounting principles
consistently applied and fairly present the financial condition and
the results of operations of the entities covered thereby on the dates
and for the periods covered thereby, except as disclosed in the notes
thereto and, with respect to interim financial statements, subject to
normally recurring year-end adjustments. Neither the Company nor any
of its Subsidiaries has any material liability (contingent or
otherwise) not reflected in such financial statements or in the notes
thereto.
(k) Material Adverse Change. Since March 31, 1997, there
has occurred no event, act or condition which has had, or could have,
a Material Adverse Effect.
(l) Use of Proceeds; Margin Regulations. All proceeds
from the issuance of Shares will be used by the Company only in
accordance with the provisions of Section 5(a). No part of the
proceeds from the issuance of Shares will be used by the Company to
purchase or carry any Margin Stock or to extend credit to others for
the purpose of purchasing or carrying any Margin Stock. Neither the
purchase of the Shares nor the use of the proceeds thereof will
violate or be inconsistent with the provisions of Regulations G, T, U
or X of the Federal Reserve Board.
(m) Tax Returns and Payments. Each of the Company and
its Subsidiaries has filed all tax returns required to be filed by it
and has paid all taxes and assessments payable
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<PAGE> 10
by it which have become due, other than those not yet delinquent or
those that are reserved against in accordance with generally accepted
accounting principles which are being diligently contested in good
faith by appropriate proceedings.
(n) ERISA. Neither the Company nor any of its
Subsidiaries has any Plans other than those listed on Schedule 4.11 to
the Credit Agreement. No accumulated funding deficiency (as defined
in Section 412 of the Code or Section 302 of ERISA) or Reportable
Event has occurred with respect to any Plan. There are no unfunded
benefit liabilities under any Plan. The Company and each member of
its ERISA Controlled Group have complied with the requirements of
Section 515 of ERISA with respect to each Multiemployer Plan and is
not in "default" (as defined in Section 4219(c)(5) of ERISA) with
respect to payments to a Multiemployer Plan. The aggregate potential
total withdrawal liability, and the aggregate potential annual
withdrawal liability payments of the Company and the members of its
ERISA Controlled Group as determined in accordance with Title IV of
ERISA as if the Company and the members of its ERISA Controlled Group
had completely withdrawn from all Multiemployer Plans is not greater
than $500,000 and $100,000, respectively. To the best knowledge of
the Company and each member of its ERISA Controlled Group, no
Multiemployer Plan is or is likely to be in reorganization (as defined
in Section 4241 of ERISA or Section 418 of the Code) or is insolvent
(as defined in Section 4245 of ERISA). No material liability to the
PBGC (other than required premium payments), the Internal Revenue
Service, any Plan or any trust established under Title IV of ERISA has
been, or is expected by the Company or any member of its ERISA
Controlled Group to be, incurred by the Company or any member of its
ERISA Controlled Group. Except as otherwise disclosed on Schedule
4.11 to the Credit Agreement, neither the Company nor any member of
its ERISA Controlled Group has any contingent liability with respect
to any post-retirement benefit under any "welfare plan" (as defined in
Section 3(1) of ERISA), other than liability for continuation coverage
under Part 6 of Title I of ERISA. No lien under Section 412(n) of the
Code or 302(f) of ERISA or requirement to provide security under
Section 401(a)(29) of the Code or Section 307 of ERISA has been or is
reasonably expected by the Company or any member of its ERISA
Controlled Group to be imposed on the assets of the Company or any
member of its ERISA Controlled Group.
(o) Investment Company Act; Public Utility Holding
Company Act. The Company is not an "investment company" or a company
"controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended. The Company does not own
or operate any facility used for the generation, transmission or
distribution for sale of electric 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"). The Company is not an "electric utility company" or
a "gas utility company" within the meaning of the 1935 Act. The
Company is not (i) a "holding company," (ii) a "subsidiary company,"
an "affiliate" or "associate company" of a
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<PAGE> 11
"holding company" or (iii) an "affiliate" of a "subsidiary company" of
a "holding company," each within the meaning of the 1935 Act. The
Company is not subject to regulation as a public utility or public
service company (or similar designation) by any state in the United
States, by the United States, by any foreign country or by any agency
or instrumentality of any of the foregoing.
(p) True and Complete Disclosure. All factual
information (taken as a whole) furnished by or on behalf of the
Company in writing to the Purchaser on or prior to the Closing Date,
for purposes of or in connection with this Agreement or any of the
Transactions is true and accurate in all material respects on the date
as of which such information is dated or furnished and not incomplete
by omitting to state any material fact necessary to make such
information (taken as a whole) not misleading at such time. As of the
date hereof, there are no facts, events or conditions known to the
Company which, individually or in the aggregate, have or could be
expected to have a Material Adverse Effect.
(q) Environmental Matters.
(i) Each of the Company and its Subsidiaries and
their Environmental Affiliates are in material compliance with
all applicable Environmental Laws, (y) each of the Company and
its Subsidiaries and their Environmental Affiliates have all
Environmental Approvals required to operate their businesses
as presently conducted or as reasonably anticipated to be
conducted, none of the Company nor its Subsidiaries nor any of
their Environmental Affiliates has received any communications
(written or oral), whether from a governmental authority,
citizens group, employee or otherwise, that alleges that the
Company or its Subsidiaries or Environmental Affiliate is not
in full compliance with all Environmental Laws, and to the
Company's best knowledge after due inquiry, there are no
circumstances that may prevent or interfere with such full
compliance in the future.
(ii) There is no Environmental Claim pending or
threatened against the Company or its Subsidiaries or its
Environmental Affiliate.
(iii) There are no past or present actions,
activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission,
discharge or disposal of any Material of Environmental
Concern, that could form the basis of any Environmental Claims
against any of the Company or its Subsidiaries or any of their
Environmental Affiliates.
(iv) Without in any way limiting the generality of
the foregoing, (x) there are no on-site or off-site locations
in which any of the Company or its Subsidiaries or its
Environmental Affiliate has stored, disposed or arranged for
the disposal of
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<PAGE> 12
Materials of Environmental Concern, (y) there are no
underground storage tanks located on property owned or leased
by any of the Company or its Subsidiaries or its Environmental
Affiliate, (z) there is no asbestos contained in or forming
part of any building, building component, structure or office
space owned or, to the knowledge of the Company or its
Subsidiaries, leased by the Company or its Subsidiaries or its
Environmental Affiliate, and (w) no polychlorinated biphenyls
(PCB's) are used or stored at any property owned or, to the
knowledge of the Company or its Subsidiaries leased by the
Company or its Subsidiaries or its Environmental Affiliate.
(r) Ownership of Property. The Company and its
Subsidiaries have good and marketable fee simple title to or valid
leasehold interests in all of their real property and good title to
all of their personal property subject to no lien of any kind, except
the liens granted pursuant to the Credit Agreement and related
documents. The Company and its Subsidiaries enjoy peaceful and
undisturbed possession under all of their respective leases.
(s) No Default. Neither the Company nor any of its
Subsidiaries is in default under or with respect to any other
agreement, instrument or undertaking to which it is a party or by
which it or any of its property is bound in any respect which could
result in a Material Adverse Effect.
(t) Licenses, etc. The Company and its Subsidiaries have
obtained and hold in full force and effect, all franchises, licenses,
permits, certificates, authorizations, qualifications, accreditations,
easements, rights of way and other rights, consents and approvals
which are necessary for the operation of their respective businesses
as presently conducted.
(u) Compliance With Law. Each of the Company and its
Subsidiaries is in material compliance with all laws, rules,
regulations, orders, judgments, writs and decrees.
(v) No Burdensome Restrictions. Neither the Company nor
its Subsidiaries is a party to any agreement or instrument or subject
to any other obligation or any charter or corporate restriction or
any provision of any applicable law, rule or regulation which,
individually or in the aggregate, could have a Material Adverse
Effect.
(w) Labor Matters. There are no collective bargaining
agreements or Multiemployer Plans covering the employees of the
Company or any of its Subsidiaries, and none of such Persons has
suffered any strikes, walkouts, work stoppages or other material labor
difficulty within the last five years.
(x) Insurance. The Company and its Subsidiaries maintain
property, casualty, general liability and other insurance policies
with coverage limits in amounts and with
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<PAGE> 13
carriers as in each case are customary in accordance with sound
business practices and which the Company believes are adequate under
the circumstances.
Section 4. Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants to the Company as of the date hereof
as follows:
(a) Authority. The Purchaser has all requisite
partnership power and authority to execute and deliver this Agreement
and to consummate the Transactions to be performed by the Purchaser.
The execution and delivery of this Agreement and the consummation of
the Transactions to be performed by the Purchaser have been duly and
validly authorized by all necessary action on the part of the
Purchaser, and no other proceedings are necessary to authorize the
execution and delivery of this Agreement by the Purchaser or to
consummate the Transactions to be performed by the Purchaser. This
Agreement has been duly and validly executed and delivered by the
Purchaser and, assuming this Agreement constitutes a valid and binding
obligation of the Company, this Agreement constitutes a valid and
binding agreement of the Purchaser, enforceable against the Purchaser
in accordance with its terms.
(b) Consents and Approval; No Violation. Neither the
execution and delivery of this Agreement by the Purchaser, the
consummation of the Transactions to be performed by the Purchaser, nor
compliance by the Purchaser, with any of the provisions hereof will
(i) conflict with or result in any breach of any provisions of the
organizational documents of the Purchaser or any of its Subsidiaries,
(ii) require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Authority, except for
consents, approvals, authorizations, permits, filings or notifications
which have been obtained or made, (iii) result in a default (with or
without due notice or lapse of time or both) or give rise to any right
of termination, cancellation or acceleration under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
contract, license, agreement or other instrument or obligation to
which the Purchaser, or any of its Subsidiaries is a party or by which
the Purchaser or any of its Subsidiaries, or any of their respective
assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained, or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to
the Purchaser, any of its Subsidiaries or any of their respective
assets.
(c) Securities Laws. The Purchaser has such knowledge
and experience in financial and business matters as enables it or him
to evaluate the merits and risks of an investment in the Shares. The
Purchaser is an "accredited investor" as such term is defined in Rule
501 under the Securities Act. The Purchaser is acquiring the Shares
for its own account and not with the view to resale or redistribution
thereof in violation of the Securities Act. The Purchaser
acknowledges that it may not transfer the Shares except pursuant to an
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<PAGE> 14
effective registration statement under the Securities Act or pursuant
to an exemption from the registration requirements of the Securities
Act, and that a legend to such effect shall be included on the
certificate representing the Shares.
Section 5. Covenants.
(a) Use of Proceeds. The entire amount of the cash
proceeds from the issuance of the Securities shall be used by the
Company on the Closing Date for working capital or the acquisition of
oil and gas properties.
(b) Compliance with Laws. The Company shall, and shall
cause each of its Subsidiaries to, comply with all applicable federal,
state and local laws, rules and regulations, including, without
limitation, Environmental Laws, except where failure to comply will
not have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.
(c) Access to Information. The Purchaser shall have the
right (x) to receive prior notice of any proposed action by the
Company's Board of Directors, and to receive reasonable notice of and
to attend any meeting of the Company's Board of Directors, (y) to
receive, promptly after they are produced, all management reports and
management accounts relating to the Company and (z) upon reasonable
notice, to have reasonable access to the books and records of the
Company.
(d) Public Announcements. The Company and the Purchaser
will consult with each other before issuing any press release or
otherwise making any public statements with respect to the existence
of this Agreement or the Transactions and shall not issue any press
release or make any public statement prior to such consultation,
except as may be required by law or by obligations pursuant to any
listing agreements between the Company and NASDAQ.
(e) No Restrictions on Affiliates. Neither the Company
nor any of its Subsidiaries will enter into any agreement that would
purport to impose restrictions or limitations on any affiliate of the
Company (other than its controlled affiliates).
(f) Certain Public Utility Matters. Except as
contemplated herein, the Company will not take any action that would
be inconsistent with the representations contained in paragraph 3(o)
hereof so long as the Purchaser holds any Shares or Common Stock
underlying the Shares.
Section 6. Purchaser's Conditions. The obligations of the
Purchaser to effect the closing of the Shares on the Closing Date are subject
to the satisfaction of the following conditions any one or more of which may be
waived by the Purchaser.
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<PAGE> 15
(a) Representations and Covenants. The representations
and warranties contained in Section 3 hereof shall be true in all
material respects on and as of the Closing Date as if made on and as
of the Closing Date. The Company shall have complied with all of its
obligations contained herein performance of which is required on or
prior to the Closing Date. The Purchaser shall have received a
certificate to the foregoing effect executed by an officer of the
Company.
(b) Registration Rights Agreement. The Company shall
have executed and delivered the Registration Rights Agreement.
(c) Tagalong Agreement. All the parties to the Tagalong
Agreement (other than the Purchaser) shall have executed and delivered
the Tagalong Agreement.
(d) Certificate of Designation. The Certificate of
Designation in the form of Exhibit C shall have been filed with the
Secretary of State of Washington on or before the Closing Date.
(e) Due Diligence. The Purchaser shall, prior to the
Closing Date, be satisfied, in its sole discretion, with the results
of its legal and business due diligence of the Company.
(f) Material Adverse Effect. Since March 31, 1997, there
has occurred no event, act, or condition which has had, or could have,
a Material Adverse Effect.
(g) Conversion of Series B Preferred Shares. All of the
Series B Preferred Shares shall have been converted into an aggregate
of 1,977,671 shares of Common Stock.
(h) Payment of Expenses and Fees. The Company shall have
paid to or on behalf of the Purchaser all amounts payable pursuant to
Section 10(e) and shall have paid to ECT Securities Corp. a
structuring fee in the amount of $400,000.
(i) Opinion of Counsel. The Purchaser shall have
received an opinion of the Company's counsel at the Closing, in the
form reasonably requested by the Purchaser.
Section 7. Company's Conditions. The obligations of the Company
to issue and sell the Shares are subject to the satisfaction of the following
conditions any one or more of which may be waived by the Company:
(a) Representations and Covenants. The representations
and warranties contained in Section 4 hereof shall be true in all
material respects on and as of the Closing Date as if made on and as
of the Closing Date. The Purchaser shall have complied with all of
its obligations contained herein performance of which is required on
or prior to the Closing
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<PAGE> 16
Date. The Company shall have received a certificate to the foregoing
effect executed by an officer of the Purchaser, as applicable.
Section 8. Termination, Amendment and Waiver.
(a) Termination. The transactions contemplated hereby
may be abandoned at any time prior to the Closing, as follows:
(i) By the mutual written consent of the Company
and the Purchaser; or
(ii) by the Company, on one hand, or the
Purchaser, on the other hand, if there shall have been a
breach by the other party of any of the covenants contained
herein or if any representation or warranty made by any other
party is untrue in any material respect.
(b) Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section
8(a)(i) or (ii), this Agreement shall forthwith become void and have
no effect with respect to the Transactions, without any liability in
respect to the Transactions on the part of any party other than
Section 10(e).
Section 9. Maintenance Rights.
(a) The Company hereby grants to the Purchaser the right
to purchase a pro rata share of New Securities (as defined in this
Section 9) which the Company may, from time to time, propose to sell
and issue. The Purchaser's pro rata share, for purposes of this
right, is the ratio of the number of shares of Common Stock owned by
the Purchaser immediately prior to the issuance of New Securities,
assuming full conversion of the Shares, to the total number of shares
of Common Stock outstanding immediately prior to the issuance of New
Securities, assuming full conversion of the Shares and exercise of all
outstanding rights, options and warrants to acquire Common Stock of
the Company. "New Securities" shall mean any capital stock (including
Common Stock and/or Preferred Shares) 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 or exchangeable for capital stock; provided
that the term "New Securities" does not include (i) securities issued
upon conversion of the Shares; (ii) securities issued pursuant to the
acquisition of another business entity or business segment of an
entity or property (other than cash) of an entity or person; (iii)
securities issued to employees, consultants, officers or directors of
the Company pursuant to any stock option, stock purchase or stock
bonus plan, agreement or arrangement approved by the Board of
Directors; (iv) securities issued in a public offering pursuant to a
registration under the Securities Act; and (v) securities issued in
connection with any stock split, stock dividend or recapitalization of
the Company.
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<PAGE> 17
(b) In the event the Company proposes to undertake any
issuance of New Securities, it shall give the Purchaser written notice
of its intention, describing the type of New Securities, and their
price and the general terms upon which the Company proposes to issue
the same. The Purchaser shall have ten (10) days after any such
notice is mailed or delivered to agree to purchase the Purchaser's 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, which
purchase the Purchaser may condition upon the Company selling the
remainder of the New Securities proposed to be sold.
(c) In the event the Purchaser fails to exercise fully
the right within said ten (10) day period, the Company shall have one
hundred 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 one hundred twenty (120)
days from the date of said agreement) to sell the New Securities
respecting which the Purchaser's right set forth in this Section 9 was
not exercised, at a price and upon terms no more favorable to the
purchasers thereof than specified in the Company's notice to the
Purchaser pursuant to Section 9(b). In the event the Company has not
sold within said 120-day period or entered into an agreement to sell
the New Securities in accordance with the foregoing within one hundred
twenty (120) 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 the Purchaser in the manner provided in
Section 9(b) above.
(d) The right set forth in this Section 9 may not be
assigned or transferred, except that such right is assignable by the
Purchaser to any subsidiary or parent of, or to any Affiliate of the
Purchaser.
(e) The Purchaser shall be given a reasonable opportunity
to co-manage any high-yield debt offering or long-term debt offering
by the Company.
(f) The provisions of this Section 9 shall terminate upon
the redemption or conversion of all the Series C Preferred Stock.
Section 10. Miscellaneous. (a) Entire Agreement. This
Agreement and the agreements attached hereto as Exhibits A and B (a) constitute
the entire agreement among the parties with respect to the subject matter
hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and (b) shall not be assigned by operation of law or otherwise.
(b) Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed
to have been duly given when delivered
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<PAGE> 18
in person, by facsimile, or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties as
follows:
If to the Company:
Inland Resources Inc.
475 17th Street
Suite 1500
Denver, Colorado 80202
Fax: 303-296-4070
Attn: Kyle R. Miller
With a copy to:
Glast, Phillips and Murray, P.C.
2200 One Galleria Tower
13355 Noel Road, L.B. 48
Dallas, Texas 75240-6657
Fax: 214-419-8329
Attn: Mike Parsons
If to the Purchaser:
Joint Energy Development Investments Limited Partnership
c/o Enron Corp.
1400 Smith
Houston, Texas 77002
Fax: (713) 646-3602
Attn: Donna Lowry - Director, 28th Floor
Enron Capital & Trade Resources Corp.
1200 17th Street, Suite 2750
Denver, Colorado 80202
Fax: (303) 534-2205
Attn: Phil Walton
(c) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws in the State of Texas
applicable to agreements made and wholly performed in the State of
Texas.
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<PAGE> 19
(d) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same agreement.
(e) Expenses. Except as otherwise provided herein or in
the Registration Rights Agreement, each party shall bear and pay all
costs and expenses incurred by it or on its behalf in connection with
transactions contemplated hereby, including fees and expenses of its
representatives, provided, however, that the Company shall pay all of
the Purchaser's legal fees, professional fees and other transaction
costs up to $25,000 incurred in connection with the evaluation and
negotiation of the transactions contemplated hereby.
(f) Assignment. Except as provided in this Agreement,
neither the Purchaser nor the Company may assign its or his rights or
obligations hereunder; provided, however, the Purchaser may assign its
rights to acquire the Shares to an affiliate, provided such assignment
shall not relieve the Purchaser of its obligations hereunder.
(g) Dispute Resolution. (i) Any controversy, dispute or
claim arising out of or relating to this Agreement or the Registration
Rights Agreement or the Transactions (a "Dispute") shall be submitted
to non-binding mediation upon the request of the Company or the
Purchaser on the following terms. Upon the request of either party, a
neutral mediator acceptable to both parties (the "Mediator") shall be
appointed within fifteen (15) days. The Mediator shall attempt,
through negotiations in any manner deemed reasonably appropriate by
the Mediator, in which the parties shall participate, to resolve the
Dispute. The Mediator shall be compensated at a rate agreeable to the
Company, the Purchaser and the Mediator, and each of the Company and
the Purchaser shall pay its pro rata share of such compensation and
other expenses of the mediation.
(ii) In the event that the Dispute has not been
resolved within 30 days after the appointment of the Mediator, the
Dispute shall be resolved by arbitration administered by the American
Arbitration Association (the "AAA") in accordance with the terms of
this Section 10(g), the Commercial Arbitration Rules of the AAA, and,
to the maximum extent applicable, the United States Arbitration Act.
Judgment on any matter rendered by arbitrators may be entered in any
court having jurisdiction. Any arbitration shall be conducted before
three arbitrators. The arbitrators shall be individuals knowledgeable
in the subject matter of the Dispute. Each party shall select one
arbitrator and the two arbitrators so selected shall select the third
arbitrator. If the third arbitrator is not selected within thirty
(30) days after the request for an arbitration, then any party may
request the AAA to select the third arbitrator. The arbitrators may
engage engineers, accountants or other consultants they deem necessary
to render a conclusion in the arbitration proceeding. To the maximum
extent practicable, an arbitration proceeding hereunder shall be
concluded within 180 days of the filing of the Dispute with the AAA.
Arbitration proceedings shall be conducted in
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<PAGE> 20
Houston, Texas. Arbitrators shall be empowered to impose sanctions
and to take such other actions as the arbitrators deem necessary to
the same extent a judge could impose sanctions or take such other
actions pursuant to the Federal Rules of Civil Procedure and
applicable law. At the conclusion of any arbitration proceeding, the
arbitrators shall make specific written findings of fact and
conclusions of law. The arbitrators shall have the power to award
recovery of all costs and fees to the prevailing party. All fees of
the arbitrators and any engineer, accountant or other consultant
engaged by the arbitrators, shall be shared equally unless otherwise
awarded by the arbitrators.
(iii) Nothing in this Section 10(g) shall limit or
delay the right of the Purchaser to exercise the remedies available to
it under the Certificate of Designation.
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<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Securities Purchase
Agreement as of the date first written above.
INLAND RESOURCES INC.
By: /s/ KYLE R. MILLER
-------------------------------------
Name: Kyle R. Miller
-----------------------------------
Title: President / CEO
----------------------------------
JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its General Partner
By: Enron Capital Corp., its
General Partner
By: /s/ CLIFFORD P. HICKEY
-------------------------------------
Name: Clifford P. Hickey
-----------------------------------
Title: Vice President
----------------------------------
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<PAGE> 1
================================================================================
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JULY 21, 1997
BY AND BETWEEN
INLAND RESOURCES INC.
AND
JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Demand Registration Rights . . . . . . . . . . . . . . . . . 2
Section 3. Shelf Registration . . . . . . . . . . . . . . . . . . . . . 3
Section 4. Piggy-back Registration . . . . . . . . . . . . . . . . . . 3
Section 5. Restrictions on Dispositions and Demand Registrations . . . 4
Section 6. Registration Procedures . . . . . . . . . . . . . . . . . . 4
Section 7. Registration Expenses . . . . . . . . . . . . . . . . . . . 8
Section 8. Indemnification; Contribution . . . . . . . . . . . . . . . 8
Section 9. Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 10. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 11. Binding Effect; Transferees; Termination . . . . . . . . . . 11
Section 12. Amendments and Waivers . . . . . . . . . . . . . . . . . . . 11
Section 13. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 15. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 16. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 12
Section 17. Severability . . . . . . . . . . . . . . . . . . . . . . . . 12
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<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of the 21st day of July, 1997, by and between Inland Resources
Inc. (the "Company"), and Joint Energy Development Investments Limited
Partnership (the "Purchaser").
This Agreement is made pursuant to the Securities Purchase Agreement
dated as of July __, 1997 (the "Purchase Agreement"), between the Company and
the Purchaser. In order to induce the Purchaser to enter into the Purchase
Agreement, the Company has agreed to provide the registration and other rights
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to the closing under the Purchase Agreement.
The parties hereby agree as follows:
Section 1. Definitions. As used in this Agreement, the
following terms have the meanings indicated:
"Commission" means the Securities and Exchange Commission or
any similar agency thus having jurisdiction to enforce the Securities Act.
"Common Stock" means the common stock, par value $.001 per
share, of the Company.
"Demand Registration" has the meaning ascribed to such term
in Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"person" means any individual, corporation, partnership, 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.
"Piggy-back Registration" has the meaning ascribed to such
term in Section 4.
"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 Common Stock" means, collectively, the shares of
Common Stock acquirable upon the conversion or issuable upon redemption of the
Series C Preferred Stock issued to the Purchaser pursuant to the Purchase
Agreement, and any shares of Common Stock or other securities issued with
respect to such Common Stock by way of stock dividend or stock split or in
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<PAGE> 4
connection with a combination of shares, recapitalization, merger,
consolidation, share exchange, reorganization or otherwise; provided, however,
such Common Stock or other securities shall cease to be Registrable Common
Stock when (i) a registration statement with respect to the disposition of such
Common Stock or other 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 Common Stock or other securities shall have been sold pursuant to Rule 144
(or any successor provision) under the Securities Act, or (iii) such Common
Stock or other securities shall have ceased to be outstanding.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Series C Preferred Stock" means the Series C Cumulative
Convertible Preferred Stock of the Company.
"Shelf Registration Statement" has the meaning ascribed to
such term in Section 2(a).
Section 2. Demand Registration Rights.
(a) Right to Demand. Subject to Section 2(b) and Section
5 hereof, any holder of Registrable Common Stock may make a written request to
the Company for registration with the Commission under and in accordance with
the provisions of the Securities Act of the disposition of all or part of the
Registrable Common Stock (a "Demand Registration"). All requests made pursuant
to this Section 2(a) will specify the aggregate amount of Registrable Common
Stock to be registered, will specify the intended methods of disposition
thereof and will specify whether the registration statement to be filed is a
"shelf" registration statement ("Shelf Registration Statement") pursuant to
Rule 415 under the Securities Act (or any similar rule that may be adopted by
the Commission). If any holder intends to dispose of any of the Registrable
Common Stock pursuant to an underwritten offering, the holder will have the
right to select the underwriter. No securities other than Registrable Common
Stock may be registered in connection with a Demand Registration without the
consent of the holders of a majority of the outstanding Registrable Common
Stock.
(b) Number of Demand Registrations; Effective
Registration; Expenses. The holders of Registrable Common Stock, in the
aggregate, shall be entitled to initiate and have effected two Demand
Registrations, and the Company shall pay all Registration Expenses of such
Demand Registrations in accordance with Section 7 hereof. The Company shall
not be deemed to have effected a Demand Registration unless and until (i) the
Company has filed a registration statement with the Commission and (ii) the
registration statement has been declared effective by the Commission.
(c) Issuance of New Demand Registration Rights. From and
after the date of this Agreement and until no Registrable Common Stock remains
outstanding, the Company shall not
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<PAGE> 5
issue any registration rights to any person that could adversely affect the
rights of the Purchaser hereunder or are inconsistent with the rights of the
Purchaser hereunder without the prior written consent of the Purchaser.
Section 3. Shelf Registration. The Company will, as soon as
possible following a written request pursuant to Section 2(a) for the
registration of Registrable Common Stock by means of a Shelf Registration
Statement, file a shelf registration statement on Form S-3 covering the
Registrable Common Stock and thereafter shall use its best efforts to cause the
Shelf Registration Statement to be declared effective as soon as practicable
following such filing and to take any and all reasonable action within the
Company's control, subject to and in accordance with Section 5, as may be
necessary or appropriate to maintain such effectiveness until such time as
neither any holder nor any of their assignees own any Registrable Common Stock,
not to exceed two years from the effective date of such registration statement.
Section 4. Piggy-back Registration. If the Company proposes to
file a registration statement under the Securities Act with respect to an
offering by the Company for its own account or for the account of others of any
class of security (other than pursuant to a registration statement on Forms S-4
or S-8 (or successor forms) or in connection with an exchange offer or an
offering of securities solely to the Company's existing stockholders), then the
Company shall in each case give written notice of such proposed filing to the
holders of Registrable Common 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 Registrable Common
Stock) and shall include in such registration statement all or a portion of the
Registrable Common Stock 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 holder's receipt of such notice from the Company (a
"Piggy-back Registration"). The Company shall use reasonable diligence to
effect the registration of all Registrable Common Stock requested to be so
registered in such offering on the same terms and conditions as any similar
securities of the Company included therein. Notwithstanding the foregoing, if
the managing underwriter or underwriters of such offering advise the Company
that the number of shares of Common Stock or other securities sought to be
included in such underwritten offering would create a substantial risk that the
sale of some or all of such Common Stock or other securities will interfere
with the successful marketing of the securities offered by the Company or
substantially reduce the proceeds or price per unit that could be derived from
such underwritten offering, then the number of shares of Common Stock or other
securities to be sold by holders of Registrable Common Stock shall be reduced
to the greatest number of shares of Common Stock or other securities, if any,
that, together with any shares of Common Stock or other securities to be
included in such offering by the Company and other persons, would, in the
opinion of such managing underwriter or underwriters, not create such a risk or
interference, and such reduced number of shares of Common Stock or other
securities, if any, to be sold by such holders shall be allocated among such
holders and other persons in proportion to the number of shares of Common Stock
then owned by such holders. The holders of Registrable Common Stock to be
distributed by such
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<PAGE> 6
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters and 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 such holders and the
conditions precedent to the obligations of such holders of Registrable Common
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 holder and such holder's intended method of
distribution. The Company shall have the right to discontinue any registration
under this Section 4 at any time prior to the effective date of such
registration if the registration of the securities giving rise to such
registration under this Section 4 is discontinued, but no such discontinuation
shall preclude an immediate or subsequent request by the holders of Registrable
Common Stock for registration pursuant to Section 2 hereof if otherwise
permitted.
Section 5. Restrictions on Dispositions and Demand
Registrations. Notwithstanding anything to the contrary contained herein, the
Company shall not be obligated to prepare and file any registration statement
pursuant to a Demand Registration or prepare or file any amendment or
supplement thereto and may suspend, by giving written notice to the holders of
Registrable Common Stock, such holders' rights to make dispositions of
Registrable Common Stock pursuant to a Shelf Registration Statement, at any
time when the Company, in the good faith judgment of its Board of Directors,
reasonably believes that the filing thereof at the time requested, or the
offering or sale of securities pursuant thereto, would materially adversely
affect a pending or proposed public offering of the Company's securities, or an
acquisition, merger, recapitalization, consolidation, reorganization or similar
transaction or negotiations, discussions or pending proposals with respect
thereto. The rights of holders of Registrable Common Stock to make
dispositions thereof pursuant to a Shelf Registration Statement may similarly
be suspended by the Company upon written notice to the holders of Registrable
Common Stock that the Shelf Registration Statement is unusable as a result of
an event requiring a post-effective amendment or supplement, which has not yet
been filed, and will remain unusable until the supplement is filed or
post-effective amendment is filed and declared effective. The filing of a
registration statement, or any amendment or supplement thereto, by the Company
cannot be deferred, and the holders' rights to dispose of Registrable Common
Stock pursuant to the Shelf Registration Statement cannot be suspended,
pursuant to the provisions of the preceding two sentences for more than 90 days
after the date of the Board's judgment referred to in the preceding sentence,
and may not be so deferred or suspended more than 180 days during any twelve
month period unless such deferral or suspension is agreed to in writing by the
holders of Registrable Common Stock.
Section 6. Registration Procedures.
(a) Certain Company Obligations. Whenever Registrable
Common Stock is to be registered pursuant to Sections 2 or 3 of this Agreement,
the Company will use reasonable diligence to effect the registration of such
Registrable Common Stock in accordance with the intended method of disposition
thereof as quickly as practicable, and in connection with any such
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<PAGE> 7
request and with the Piggy-back Registration or Demand Registration, the
Company will as expeditiously as possible:
(i) prepare and file with the Commission a
registration statement which includes the Registrable Common
Stock and use reasonable diligence to cause such registration
statement to become effective (which registration statement,
in the case of a Demand Registration, shall in all events be
filed with the Commission within 45 days after the Company's
receipt of the Demand Registration); 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 Common Stock covered by such
registration statement and the underwriters, if any, draft
copies of all such documents proposed to be filed at least
three business days prior thereto, 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 Common Stock by
name or otherwise as the holder of any securities of the
Company, then such holder shall have the right to require (i)
the insertion therein of language, in form and substance
satisfactory to such holder, to the effect that the holding by
such holder 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 (ii) 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
the period of time specified in Section 3 with respect to the
Shelf Registration Statement and otherwise for 90 days (or
such shorter period which will terminate when all Registrable
Common 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;
(iii) furnish to any holder of Registrable Common
Stock included in such registration statement and the managing
underwriter or underwriters, if any, without
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<PAGE> 8
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 Common Stock being sold by such
holder;
(iv) notify each holder of Registrable Common
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 Common 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 Common Stock included in such registration
statement to be listed, by the date of the first sale of
Registrable Common 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
Common Stock included in such Registration Statement to be
quoted on the NASDAQ National Market System (or other national
market), if the common stock of the Company is then quoted
thereon or is proposed to be 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 said 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 Act as soon as feasible;
(vii) if requested by the managing underwriter or
underwriters or any holder of Registrable Common 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
-6-
<PAGE> 9
requests to be included therein, including, without
limitation, with respect to the Registrable Common Stock being
sold by such holder to such underwriter or underwriters, the
purchase price being paid therefor by such underwriter or
underwriters and with respect to any other terms of the
underwritten offering of the Registrable Common 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 Common 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 Common 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, to 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 Common 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
Common 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 a majority of
the Registrable Common 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 Common 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
-7-
<PAGE> 10
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 confidentiality
agreements as the Company may reasonably determine to be
advisable; and
(xii) notify each holder of Registrable Common
Stock of any stop order issued or threatened by the Commission
in connection with any registration statement covering
Registrable Common Stock and take all reasonable actions
required to prevent the entry of such stop order or to remove
it if entered.
(b) Certain Obligations of Holders of Registrable Common
Stock. Each holder of Registrable Common 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 Common
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 Common Stock by such holder.
Section 7. 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 counsel and of its
independent public accountants. Holders of Registrable Common Stock will be
responsible for any expenses incurred by them, including for their own counsel,
accountants, underwriters and representatives.
Section 8. Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees
to indemnify and hold harmless each holder of Registrable Common Stock, its
officers, directors and partners 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, 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, any such untrue
statement or omission based upon information with respect to such indemnified
person furnished in writing to the Company by such indemnified person expressly
for use therein and will reimburse, as incurred, such holder, officer,
director, partner or controlling person for any legal or other expenses
incurred by such holder,
-8-
<PAGE> 11
officer, director, partner 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 Common
Stock.
(b) Indemnification by Holders of Registrable Common
Stock. In connection with any registration statement in which a holder of
Registrable Common 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 Common Stock held by such holder 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, such other persons selling
securities, and each person who controls the Company, such underwriters or
other persons (within the meaning of the Securities Act) 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 Common Stock hereunder be greater in amount than the dollar
amount of the proceeds received by such holder upon the sale of the Registrable
Common 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 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
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<PAGE> 12
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 with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying 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 8 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 8(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 8(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 8(d), no underwriter
shall be required to contribute any amount in excess of the amount by which the
underwriting discount applicable to the Registrable Common 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 Common 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.
If indemnification is available under this Section 8, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 8(a) and (b) without regard to the relative fault of said indemnifying
party of indemnified party or any other equitable consideration provided for in
this Section 8(d).
-10-
<PAGE> 13
The obligations of the Company pursuant to this Section 8 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
Common 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 8
shall be in addition to any liability or obligation the Company may have at
common law or otherwise.
Section 9. Rule 144. The Company covenants that for so long as
any Holder owns any Registrable Common Stock 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
Common Stock may reasonably request, all to the extent required from time to
time to enable such holder to sell Registrable Common Stock without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any holder of Registrable Common Stock,
the Company will deliver to such holder a written statement as to whether it
has complied with such requirements.
Section 10. Remedies. Each holder of Registrable Common 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.
Section 11. 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 assigns. A transferee
of Registrable Common Stock, which acquires such securities from a holder of
Registrable Common Stock in a transfer, whether in a public distribution or
otherwise, which results in such transferred securities not being Registrable
Common Stock in the hands of such transferee, shall not be a holder of
Registrable Common Stock hereunder and shall not have any rights or obligations
hereunder as a result of such transfer of Registrable Common Stock. Except as
provided in the preceding sentence, a transferee of a holder of Registrable
Common Stock, whether becoming such by sale, transfer, assignment, operation of
law or otherwise, shall be deemed to be a holder of Registrable Common Stock
hereunder and such transferee shall be entitled to the rights, and subject to
the obligations, of such a holder hereunder.
Section 12. Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented without the written agreement of each of the parties.
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<PAGE> 14
Section 13. Notices. All notices and other communications
provided for or permitted hereunder shall be in writing and shall be deemed to
have been duly given if delivered personally or sent by telex or telecopier,
registered or certified mail (return receipt requested), postage prepaid or
courier to the parties at the following addresses (or at such other address for
any party as shall be specified by like notice, provided that notices of a
change of address shall be effective only upon receipt thereof). Notices sent
by mail shall be effective two days after mailing; notices sent by telex shall
be effective when answered back, notices sent by telecopier shall be effective
when receipt is acknowledged, and notices sent by courier guaranteeing next day
delivery shall be effective on the next business day after timely delivery to
the courier:
(i) if to a holder of Registrable Common Stock at the
most current address given by such holder to the Company in writing;
(ii) if to the Company at its address set forth in the
Purchase Agreement.
Section 14. Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
Section 15. Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
Section 16. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas applicable to
contracts made and to be performed wholly within that State.
Section 17. Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained herein shall not
be in any way impaired thereby, it being intended that all of the rights and
privileges of the parties hereto shall be enforceable to the fullest extent
permitted by law.
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<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
INLAND RESOURCES INC.,
a Washington corporation
By: /s/ KYLE R. MILLER
---------------------------------------
Name: Kyle R. Miller
-------------------------------------
Title: President / CEO
------------------------------------
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its General Partner
By: Enron Capital Corp., its
General Partner
By: /s/ CLIFFORD P. HICKEY
---------------------------------------
Name: Clifford P. Hickey
-------------------------------------
Title: Vice President
------------------------------------
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<PAGE> 1
TAGALONG AGREEMENT
This Agreement is made and entered into as of July 21, 1997, among Joint
Energy Development Investments Limited Partnership ("Purchaser"), Pengo
Securities Corp., a Delaware corporation ("Pengo").
Whereas, Purchaser has agreed to purchase 100,000 shares of Series C
Cumulative Convertible Preferred Stock of Inland Resources Inc. ("Inland"),
which is convertible into shares of common stock of Inland ("Common Stock"),
pursuant to a Securities Purchase Agreement dated as of July 21, 1997 between
Inland and Purchaser (the "Securities Purchase Agreement").
Whereas, as of the date hereof, Pengo owns 2,250,401 shares of Common
Stock before giving effect to the conversion of Series B Preferred Stock into
Common Stock, which conversion will occur concurrently with the issuance of the
Series C Cumulative Convertible Preferred Stock into Common Stock, and
Whereas, in order to induce Purchaser to enter into the Securities
Purchase Agreement, Pengo agreed to entered into this Agreement.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each of the parties to this
Agreement, Purchaser and Pengo hereby agree as follows:
SECTION 1. TAGALONG. (a) If Pengo or any affiliate of Pengo (a
"Transferor") sells, other than in an offering pursuant to a registration
statement or pursuant to Rule 144 under the Securities Act of 1933, any shares
of Common Stock owned by the Transferor to any individual or entity (a
"Transferee") in one transaction or a series of related transactions which
constitute a majority of the shares of Common Stock owned by Pengo and its
affiliates (collectively, the "Smith Group"), Purchaser shall have the right to
sell to the Transferee, on the same terms and conditions as provided with
respect to the sale by the Transferor to such Transferee, the number of shares
of Common Stock (rounded to the nearest whole share) equal to the product of
(i) the total number of shares of Common Stock which Purchaser then owns that
were acquired upon conversion of the Series C Cumulative Convertible Preferred
Stock and the number of shares Purchaser may acquire upon conversion of the
Series C Cumulative Convertible Preferred Stock Purchaser then owns and (ii) a
fraction with a numerator equal to the number of shares of Common Stock then
being sold by the Transferor and a denominator equal to the total number of
shares of Common Stock owned by the Transferor and the other members of the
Smith Group. The right of the Transferor to sell shall be subject to the
condition that the Transferor shall cause the Transferee that proposes to
purchase the shares of the Transferor to offer to purchase, on such terms
(including closing date), such number of shares from Purchaser; provided,
however, that if the Transferee is for any reason unwilling or unable to
purchase the aggregate number of shares from the Transferor and Purchaser
contemplated by the foregoing, the number of shares to be sold by each shall be
reduced to such number as, when taken with the numbers of shares to be sold by
each other such party, shall be equal to the number
<PAGE> 2
of shares which such Transferee is willing or able to purchase and shall comply
with the first sentence of this Section 1(a). Purchaser may only sell shares
of Common Stock hereunder that it has acquired upon conversion of Series C
Cumulative Convertible Preferred Stock.
(b) The Transferor shall give written notice to Purchaser at
least 3 business days prior to any proposed sale of Common Stock subject to
this Agreement. The notice shall specify the proposed Transferee, the number
of shares of Common Stock to be sold, the amount and type of consideration to
be received therefor, and the place and date on which the sale is to be
consummated. If Purchaser desires to include shares of Common Stock in such
sale pursuant to Section 1(a), Purchaser shall notify the Transferor not more
than 2 business days after its receipt of the notice from Transferor.
(c) If Pengo proposes to transfer, or an affiliate of Pengo
proposes to transfer, to a Transferee, whether by merger, consolidation, sale
or otherwise, all or substantially all the outstanding equity securities or
assets of Pengo or such affiliate, then Pengo or such affiliate shall, as a
condition to the exercise of such right of transfer, cause such Transferee to
agree to be bound by the provisions hereof.
(d) Pengo agrees that, if any shares of Common Stock owned by
it are transferred to one of its affiliates, it will obtain the agreement of
such affiliate to be bound by the provisions hereof.
(e) If Pengo or any affiliate of Pengo should distribute
Common Stock in kind, as a dividend, a distribution in full or partial
liquidation or otherwise without consideration, Pengo or such affiliate will
require, as a condition to effectuation of such distribution, that each
recipient thereof shall agree to be bound by the provisions of Section 1 of
this Agreement as fully as Pengo and any such affiliate, and, in that regard
and for purposes only of interpretation of such Section 1, each such recipient
shall be deemed to be an affiliate of Pengo.
SECTION 2 MISCELLANEOUS. (a) 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 assigns. If Purchaser transfers all the Common
Stock it then owns to any person or entity other than in a public distribution,
such transferee shall be deemed thereafter to be the Purchaser for purposes of
this Agreement.
(b) The provisions of this Agreement may not be amended,
modified or supplemented without the written agreement of Purchaser and Pengo.
(c) This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
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<PAGE> 3
(d) This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas applicable to contracts made and
to be performed wholly within that State.
(e) In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
(f) For purposes of this Agreement, "affiliate" shall have the
meaning given to such term in Rule 405 under the Securities Act of 1933, as
amended.
(g) This Agreement shall terminate on the earlier of (i) July
21, 2001 and (ii) the first date that the Smith Group's fully diluted ownership
of Common Stock is less than 25%.
(h) Pengo agrees that it will cause all of the other members
of the Smith Group, including Randall D. Smith, to abide by the terms of this
Agreement.
(i) Pengo agrees that Purchaser shall have the piggyback
registration rights set forth in the Registration Rights Agreement referred to
in the Securities Purchase Agreement.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have signed this Tagalong
Agreement as of the date first written above.
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its General Partner
By: Enron Capital Corp., its General
Partner
By: /s/ CLIFFORD P. HICKEY
------------------------------------
Name: Clifford P. Hickey
------------------------------------
Title: Vice President
------------------------------------
PENGO SECURITIES CORP.
By: /s/ DAVID A. PERSING
-----------------------------------------
David A. Persing
Senior Vice President
-4-
<PAGE> 1
ARTICLES OF AMENDMENT TO
THE ARTICLES OF INCORPORATION
OF INLAND RESOURCES INC.
DESIGNATING A SERIES OF STOCK
Pursuant to RCW 23B.06.020 and RCW 23B.10.020 of the Washington
Business Corporation Act, INLAND RESOURCES INC. (the "Corporation"), hereby
submits this Articles of Amendment to its Articles of Incorporation thereby
designating and establishing the following series of stock:
I. The name of the Corporation is INLAND RESOURCES INC.
II. The date of filing of the original Articles of Incorporation
with the Secretary of State of Washington is August 12, 1985.
III. The Articles of Incorporation of the Corporation are hereby
amended by the addition of a new paragraph 4 to Article IV
containing the following provisions fixing the voting powers,
preferences and relative, participating, optional, and other
special rights, qualifications, limitations and restrictions
of the Series C Cumulative Convertible Preferred Stock, par
value $0.001 per share, as fixed by the Board of Directors of
the Corporation pursuant to authority vested in it by the
Articles of Incorporation:
"4. 100,000 shares of Class A preferred stock, par value
$0.001 per share, shall be designated Series C
Cumulative Convertible Preferred Stock ("Series C
Preferred Stock"). The Series C Preferred Stock
shall have the following voting powers, preferences
and relative, participating, optional and other
special rights, qualifications, limitations and
restrictions:
(i) DIVIDENDS. The Series C Preferred
Stock shall bear dividends at the rate of $10.00 per
share per annum, which dividends shall be cumulative
and shall accrue on a daily basis from the date of
issuance, whether or not declared, and shall be
payable only (a) in connection with the liquidation,
dissolution or winding up of the Corporation as
provided in paragraph (ii), (b) in connection with
the redemption of the Series C Preferred Stock as
provided in paragraph (iii) and (c) at such time as
the Corporation and the holders of a majority of the
outstanding shares of Series C Preferred Stock shall
agree. Dividends paid shall only be payable out of
funds legally available therefor, to the record
holders of Series C Preferred Stock as of the record
date therefor or, if there is no such record date, as
of the date of payment thereof. Additional dividends
shall be deemed to accrue on the amount of dividends
accrued but unpaid, whether or not declared,
<PAGE> 2
compounding quarterly, at the rate of 10% per annum,
which additional dividends shall be payable only as
provided in this paragraph (i). "Unpaid dividends"
shall include all accrued dividends, whether or not
declared and whether or not then payable.
No dividends shall be paid or declared, and
no distribution (of securities of the Corporation or
any other property) shall be made, on any Junior
Securities (as defined below), and no monies shall be
made available for the purchase or redemption of any
Junior Securities while any shares of Series C
Preferred Stock remain outstanding other than the
distribution of Common Stock on shares of Common
Stock. "Junior Securities" means any of the
Corporation's capital stock other than the Series C
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 C Preferred Stock then outstanding
shall be entitled to be paid out of the
assets of the Corporation available for
distribution to its stockholders, 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 any Junior Securities, an
amount in cash equal to one hundred dollars
($100.00) for each share of such Series C
Preferred Stock, together with any accrued
and unpaid dividends thereon (the
"Liquidation Value").
(b) After the payment or
distribution to the holders of Series C
Preferred Stock of the full preferential
amounts aforesaid, the holders of Junior
Securities then outstanding shall together be
entitled to receive ratably all the remaining
assets of the Corporation.
(c) A consolidation or merger of
the Corporation with or into any other
corporation or corporations shall not be
deemed to be a liquidation, dissolution or
winding up of the Corporation as those terms
are used in this paragraph (ii).
(d) 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
C Preferred Stock pursuant to subparagraph
(a) shall be insufficient to permit the
payment to such stockholders 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
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<PAGE> 3
Series C Preferred Stock based on the number
of shares held by each holder, and the
holders of Junior Securities shall receive no
distribution upon such liquidation,
dissolution or winding up of the Corporation.
(iii) REDEMPTION OF SERIES C PREFERRED
STOCK.
(a) The Series C Preferred Stock may be
redeemed at any time following July 21, 2000
by the Corporation, at its option, prior to
liquidation, dissolution or winding up of the
Corporation, upon fifteen (15) days advance
written notice by the Corporation to the
record holders of such Series C Preferred
Stock on the books of the Corporation, by
paying to the record holders of such Series C
Preferred Stock an amount in cash equal to
one hundred dollars ($100.00) for each share
of such Series C Preferred Stock (the
"Redemption Price"), together with any
accrued and unpaid dividends thereon. The
holders of Series C Preferred Stock shall be
deemed to have received written notice of
such redemption five (5) days after the
Corporation's mailing of the notice of
redemption by 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. Upon redemption of the
Series C Preferred Stock, each holder shall
be entitled to payment of the Redemption
Price and any accrued and unpaid dividends.
Any record holder of Series C Preferred Stock
may convert all or a portion of its Series C
Preferred Stock in accordance with the
provisions of paragraph (iv) prior to such
date of redemption by delivering written
notice to the Corporation of such holder's
election to convert all or a portion of such
shares of Series C Preferred Stock (and
dividends payable thereon) held of record by
such holder. The Redemption Price (and
dividends payable thereon) payable to the
holders of Series C Preferred Stock who have
not elected to convert their shares shall be
payable by the Corporation within ten (10)
days after expiration of the aforementioned
fifteen (15) days notice period.
(b) On the earlier of (i) the later
of (a) July 21, 2005 and (b) six months
following the date of maturity of any high
yield debt offering or long-term debt
financing which may be obtained by the
Corporation in an aggregate amount of at
least $25,000,000 after the Issuance Date and
prior to July 21, 2005, and (ii) January 21,
2008 (such earlier date, the "Mandatory
Redemption Date"), the Corporation shall
redeem all of the Series C Preferred Stock at
the Redemption Price, together with any
accrued and unpaid dividends, payable in (i)
cash or (ii) if the Company so elects and so
indicates in
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<PAGE> 4
the written notice provided for in the next
succeeding sentence and if the Common Stock
is then traded on a securities exchange or
other national market system or NASDAQ small
cap issuer system, the number of shares of
Common Stock, rounded up to the nearest whole
share, equal in value to such cash amount
(the "Cash Equivalent Amount"). The
Corporation shall provide at least fifteen
(15) days advance written notice to the
record holders of Series C Preferred Stock on
the books of the Corporation of such
redemption. The holders of Series C
Preferred Stock shall be deemed to have
received written notice five (5) days after
the Corporation's mailing of such notice by
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. For purposes of determining the
Cash Equivalent Amount, the shares of Common
Stock shall be valued at 80% multiplied by
the 5-Day Average Price of the Common Stock.
The Cash Equivalent Amount shall be
determined as of the date immediately prior
to the date of issuance of any such Common
Stock. The "5-Day Average Price" per share
of Common Stock shall mean the average
closing price (or average of the closing bid
and ask if on the NASDAQ small cap issuer
system) of the Common Stock on the securities
exchange or other national market system or
NASDAQ small cap issuer system, as
applicable, on which the Common Stock is then
listed or traded over the 5-day trading
period ending immediately prior to such date.
At least thirty (30) days prior to a
Mandatory Redemption Date relating to the
redemption of Series C Preferred Stock
payable in shares of Common Stock, the
Corporation shall prepare and file with the
Securities and Exchange Commission
("Commission") a "shelf" registration
statement (a "Shelf Registration") on any
appropriate form pursuant to Rule 415 under
the Securities Act (or similar rule that may
be adopted by the Commission), and shall use
its best efforts to cause such Shelf
Registration to become and continuously
remain effective until the first to occur of
two years after the date of such Shelf
Registration or the sale of all shares of
Common Stock covered thereby. The
Corporation shall prepare and file with the
Commission amendments and supplements to the
Shelf Registration and the prospectus
therewith as may be necessary to keep the
Shelf Registration continuously effective and
to comply with the provisions of the
Securities Act of 1933, as amended, with
respect to the transfer of all securities
covered by the Shelf Registration.
(c) In the event that the
Corporation proposes to engage in any
transaction that results in the Corporation,
directly or indirectly
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<PAGE> 5
through subsidiaries or controlled
affiliates, being engaged in any line of
business other than the exploration,
development and production of oil and gas,
the Corporation shall provide at least
forty-five (45) days written notice (prior to
the proposed closing date of such
transaction) to the record holders of the
Series C Preferred Stock on the books of the
Corporation of such proposed transaction,
setting forth the material terms of the
proposed transaction and the proposed closing
date. Holders of the Series C Preferred
Stock may request such additional information
as is reasonably required to review such
proposed transaction, and following such
review may, at their option, require the
Corporation, upon fifteen (15) days written
notice (prior to the proposed closing date of
such transaction) to the Corporation, to
redeem for cash all of the Series C Preferred
Stock at the Redemption Price, together with
any accrued and unpaid dividends thereon,
subject to the consummation of the proposed
transaction. In the event that the holders
of Series C Preferred Stock elect such
redemption, the Corporation shall redeem the
Series C Preferred Stock no later than three
(3) days following the closing of such
transaction on the terms set forth in the
written notice provided to the holders of the
Series C Preferred Stock. The Corporation
may not engage in any line of business other
than the exploration, development and
production of oil and gas without complying
with the terms of this subparagraph (c). For
purposes of this subparagraph (c), by way of
illustration and not of limitation, engaging
in the business of exploration, development
and production of oil and gas does not
include the refinery business.
(d) In the event that the
Corporation proposes to enter into any
merger, consolidation or share exchange
pursuant to which (i) the holders of Common
Stock preceding such merger, consolidation or
share exchange will receive any consideration
in the merger, consolidation or share
exchange other than shares of common stock of
the surviving corporation and (ii) the fair
value of the consideration to be received by
a holder of one share of Common Stock in such
merger, consolidation or share exchange is
less than the then Conversion Price, holders
of the Series C Preferred Stock may, at their
option, within 15 days of receipt of the
notice provided to such holders under
paragraph (iv)(j), require the Corporation to
redeem for cash all of the Series C Preferred
Stock, together with any accrued and unpaid
dividends thereon, subject to and upon the
consummation of the proposed transaction.
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<PAGE> 6
(iv) CONVERSION. The holders of Series C
Preferred Stock shall have the following conversion
rights (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share
of Series C Preferred Stock shall be
convertible, at the option of the holder
thereof, at any time after the date of
issuance of such share, at the office of the
Corporation or any transfer agent for the
Series C Preferred Stock or Common Stock,
into the number of shares of Common Stock
which result from dividing the Redemption
Price, together with any accrued and unpaid
dividends to the date of conversion, 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 $12.00, and such initial
Conversion Price shall be subject to
adjustment from time to time as provided
herein.
(b) MECHANICS OF CONVERSION.
Before any holder of Series C Preferred Stock
shall be entitled to convert the same into
shares of Common Stock, such holder shall
surrender the certificates therefor, duly
endorsed, at the office of the Corporation or
of any transfer agent for the Series C
Preferred Stock or Common Stock, and shall
give written notice to the Corporation at
such office that such holder elects to
convert the same and shall state therein the
number of shares of Series C Preferred Stock
being converted. Thereupon the Corporation
shall promptly issue and deliver at such
office to such holder of Series C 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 date of such surrender of the
shares of Series C Preferred Stock to be
converted, 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
such date. The certificate or certificates
representing the shares of Common Stock
issued upon such conversion shall contain the
same restrictive legends, if any, included on
the certificate or certificates of Series C
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
applicable state securities laws, in which
case they will not be legended.
(c) ADJUSTMENT FOR STOCK SPLITS AND
COMBINATIONS. If the Corporation shall at
any time or from time to time after the
issuance of the Series C Preferred Stock (the
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<PAGE> 7
"Issuance Date") effect a subdivision of the
outstanding Common Stock, the Conversion
Price then in effect immediately before the
subdivision shall be proportionately
decreased, and conversely, if the Corporation
shall at any time or from time to time after
the Commitment Date combine the outstanding
shares of Common Stock, the Conversion Price
then in effect immediately before the
combination shall be proportionately
increased. Any adjustment under this
subparagraph (c) shall become effective at
the close of business on the date the
subdivision or combination becomes effective.
(d) ADJUSTMENT FOR CERTAIN
DIVIDENDS AND DISTRIBUTIONS. In the event
the Corporation at any time, or from time to
time, after the Issuance Date shall make or
issue, or fix a record date for the
determination of holders of Common Stock
entitled to receive a dividend or other
distribution payable in shares of Common
Stock, then and in each such event the
Conversion Price then in effect shall be
decreased as of the time of such issuance or
in the event such a record date shall have
been fixed, as of the close of business on
such record date, by multiplying the
Conversion Price then in effect by a
fraction:
(i) the numerator of which shall
be the total number of shares of
Common Stock issued and outstanding
immediately prior to the time of
such issuance or the close of
business on such record date; and
(ii) the denominator of which
shall be the total number of shares
of Common Stock issued and
outstanding immediately prior to the
time of such issuance or the close of
business on such record date plus
the number of shares of Common Stock
issuable in payment of such dividend
or distribution;
provided, however, that if such record date
shall have been fixed and such dividend is
not fully paid or if such distribution is not
fully made on the date fixed therefor the
Conversion Price shall be recomputed
accordingly as of the close of business on
such record date and thereafter the
Conversion Price shall be adjusted pursuant
to this subparagraph (d) as of the time of
actual payment of such dividends or
distributions.
(e) ADJUSTMENTS FOR OTHER DIVIDENDS
AND DISTRIBUTIONS. In the event the
Corporation at any time or from
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<PAGE> 8
time to time after the Issuance Date shall
make or issue or fix a record date for the
determination of holders of Common Stock
entitled to receive a dividend or other
distribution payable in securities of the
Corporation other than shares of Common
Stock, then and in such event provision shall
be made so that the holders of Series C
Preferred Stock shall receive upon conversion
thereof in addition to the number of shares
of Common Stock receivable thereupon, the
amount of securities of the Corporation which
they would have received had their Series C
Preferred Stock been converted into Common
Stock on the date of such event and had they
thereafter, during the period from the date
of such event to and including the conversion
date, retained such securities receivable by
them as aforesaid during such period, giving
application to all adjustments called for
during such period under this paragraph (iv)
with respect to the rights of the holders of
the Series C Preferred Stock.
(f) ADJUSTMENT FOR
RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If the Common Stock issuable upon the
conversion of the Series C Preferred Stock
shall be changed into the same or different
number of shares of any class or classes of
stock, whether by capital reorganization,
reclassification or otherwise (other than a
subdivision or combination of shares or stock
dividend provided for above, or a
reorganization, merger, consolidation or sale
of assets or compulsory share exchange
provided for elsewhere in this paragraph
(iv)), then and in each such event the
holders of each share of Series C Preferred
Stock shall have the right thereafter to
convert such share into the kind and amount
of shares of stock and other securities and
property receivable upon such reorganization,
reclassification or other change by holders
of the number of shares of Common Stock into
which such share of Series C Preferred Stock
might have been converted immediately prior
to such reorganization, reclassification or
other change, all subject to further
adjustment as provided herein.
(g) REORGANIZATION, MERGERS,
CONSOLIDATIONS OR SALES OF ASSETS. Subject
to the Corporation's obligation to redeem the
Series C Preferred Stock in connection with
the occurrence of a transaction as provided
in paragraph (iii)(c), 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 sale of all or substantially all of
the Corporation's properties and assets to
any other person, or a compul-
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<PAGE> 9
sory share exchange, then, as a part of such
reorganization, merger, consolidation, sale
or share exchange, provision shall be made so
that the holders of Series C Preferred Stock
shall thereafter be entitled to receive, upon
conversion of Series C 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 C Preferred Stock might have been
converted immediately prior to such
reorganization, merger, consolidation, sale
or share exchange. In any such case,
appropriate adjustment shall be made in the
application of the provisions of this
paragraph (iv) with respect to the rights of
the holders of Series C Preferred Stock after
the reorganization, merger, consolidation,
sale or share exchange to the end that the
provisions of this paragraph (iv) (including
provisions for the adjustment of the
Conversion Price then in effect and the
number of shares acquirable upon conversion
of the Series C Preferred Stock) shall be
applicable after that event and be as nearly
equivalent to the provisions hereof as is
practicable.
(h) ADJUSTMENT FOR ISSUANCE OF
COMMON STOCK AT LESS THAN CONVERSION PRICE.
If the Corporation at any time after the
Issuance Date (i) issues any shares of Common
Stock (other than pursuant to the Agreement
dated effective June 12, 1996 between Smith
Management Company, Inc., Farmout Inc.,
Randall D. Smith, Jeffrey A. Smith, John W.
Adams, Inland Production Company and the
Corporation, or other than pursuant to
warrants, options or convertible securities
outstanding as of the Issuance Date, or other
than pursuant to the Corporation's Amended
1988 Option Plan or 1997 Stock Option Plan),
for a per share consideration less than the
Conversion Price then in effect hereunder, or
(ii) issues rights, warrants, or options to
acquire, or securities convertible into, or
exchangeable for, shares of Common Stock
(other than options to purchase Common Stock
pursuant to options which may be granted
under the Corporation's Amended 1988 Option
Plan, 1997 Stock Option Plan and similar
benefit plans subsequently adopted by the
Corporation for the benefit of its
employees), that permit exercise or
conversion for a per share consideration less
than the Conversion Price then in effect
hereunder, then effective automatically on
the date of such issuance the Conversion
Price hereunder shall automatically be
adjusted as follows: the number of shares of
the Corporation's Common Stock outstanding
(or deemed to be outstanding as hereinafter
provided) immediately prior to such issue
shall be multiplied by the Conversion Price
in effect at the time of such issue and there
shall be added to the product so obtained the
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<PAGE> 10
aggregate consideration, if any, (a) received
by the Corporation upon such issue of
additional shares of Common Stock pursuant to
(i) and (b) received by the Corporation, or
which will be received by the Corporation,
pursuant to (ii) upon the issue and upon the
subsequent exercise, conversion or exchange
of any such additional rights, warrants,
options or convertible or exchangeable
securities. The sum so obtained shall be
divided by the number of shares of the
Corporation's Common Stock outstanding (or
deemed to be outstanding as hereinafter
provided) immediately after such issue
(including, for this purpose, the shares to
be subsequently issued under any rights,
warrants, options or convertible or
exchangeable securities which triggered the
requirement to apply this adjustment to the
Conversion Price), and the resulting quotient
shall be the adjusted Conversion Price (which
shall in no event be higher than the
Conversion Price prior to such adjustment).
For purposes of determining outstanding
shares of Common Stock for applying the
foregoing formula, all options, rights,
warrants and securities convertible into
Common Stock outstanding as of the Issuance
Date shall be deemed to be outstanding shares
of Common Stock, and any options, rights,
warrants or convertible or exchangeable
securities issued after the Issuance Date
pursuant to (ii) above, which have resulted
in a previous adjustment of the Conversion
Price shall be considered outstanding shares
of Common Stock for all subsequent
applications of the formula to arrive at
subsequent adjustments of the Conversion
Price.
(i) ACCOUNTANTS' 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
C 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 and shall mail such
certificate, by first class mail, postage
prepaid, to each registered holder of Series
C 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.
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<PAGE> 11
(j) NOTICES OF RECORD DATE. In the
event (i) 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 (ii)
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 C 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, that
is to be fixed as to 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.
(k) FRACTIONAL SHARES. No
fractional shares of Common Stock shall be
issued upon conversion of Series C Preferred
Stock. In lieu of any fractional shares to
which the holder would otherwise be entitled,
the Corporation shall pay cash equal to 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 closing "bid" price, if applicable)
on the day prior to the date of conversion.
(l) RESERVATION OF STOCK ISSUABLE
UPON CONVERSION OR FOR DIVIDENDS. The
Corporation shall at all times reserve and
keep available out of the authorized but
unissued shares of Common Stock, solely for
the purpose of effecting the conversion of
shares of Series C Preferred Stock, such
number of its shares of Common Stock as shall
from time to time be sufficient to effect the
conversion of all outstanding shares of
Series C Preferred Stock; and if at any time
thereafter the number of authorized but
unissued shares of Common Stock shall not be
sufficient to effect the
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<PAGE> 12
conversion of all then outstanding shares of
Series C Preferred Stock, the Corporation will
take such corporate action as may, in the
opinion of its counsel, be necessary to
increase its authorized but unissued shares of
Common Stock to such number of shares as shall
be sufficient for such purpose.
(m) NOTICES DEEMED GIVEN. Any
notice required by the provisions of this
paragraph (iv) to be given to the holders of
shares of Series C 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 any
share of Series C Preferred Stock shall be entitled
to vote on all matters and shall be entitled to such
number of votes per share of Series C Preferred Stock
equal to such number of shares of Common Stock into
which such share of Series C Preferred Stock is then
convertible rounded down to the nearest whole share.
Each holder of shares of any of the Common Stock
shall be entitled to one vote on all matters and
shall be entitled to one vote for each share of
Common Stock held. Except as otherwise expressly
provided herein or as mandated by law, the holders of
shares of Common Stock and Series C Preferred Stock
shall vote together and not as separate voting groups
or classes. In the event voting as a separate voting
group by the holders of Series C Preferred Stock is
expressly provided herein or mandated and required by
Washington law, any vote by the holders of Series C
Preferred Stock as a separate voting group shall be
effective if approved by a majority of the
outstanding shares of Series C Preferred Stock.
The approval of the holders of the Series C
Preferred Stock, voting as a separate voting group,
is required for the Corporation to (i) make any
amendment, whether directly or by merger or
otherwise, to (x) the terms of the Series C Preferred
Stock as described under paragraph (ix) or (y) to the
other terms of the Articles of Incorporation of the
Corporation if such amendment would adversely affect
any right, preference, privilege or voting right of
the Series C Preferred Stock or the holders thereof,
(ii) authorize or issue any class or series of stock
ranking pari passu with or senior to the Series C
Preferred Stock as to dividends, as to the
distribution of assets upon liquidation and as to
conversion rights or (iii) consummate any merger,
consolidation or share exchange, unless each holder
of shares of Series C Preferred Stock immediately
preceding such merger, consolidation or share
exchange shall receive or continue to hold in the
surviving corporation the equivalent number of
shares, with substantially the same rights and
prefer-
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<PAGE> 13
ences including priority as to dividends, as to the
distribution of assets upon liquidation, and as to
voting and conversion rights (except as contemplated
by paragraph (iv)(g)), as correspond to the shares of
Series C Preferred Stock.
The holders of the Series C Preferred Stock
shall have the right, exercisable at any time and
acting separately as a voting group or class, to
elect the greater of one, or a proportionate number
rounded down to the nearest whole number based on the
percentage of Common Stock into which the shares of
Series C Preferred Stock may be converted, of the
members of the Board of Directors of the Corporation.
Upon the taking of any such action by the holders of
Series C Preferred Stock, the authorized number of
members of the Board of Directors shall automatically
be increased as appropriate. A director elected by
the holders of Series C Preferred Stock pursuant to
this paragraph (v) shall serve until his successor is
duly elected and qualified or until his removal by
the holders of Series C Preferred Stock.
Cumulative voting by holders of Series C
Preferred Stock and holders of Common Stock is
expressly denied.
(vi) PREEMPTIVE RIGHTS. Except as
provided in paragraph (iv), no holder of any shares
of Series C Preferred Stock shall be entitled as a
matter of right to subscribe or receive additional
shares of any class of stock of the Corporation,
whether now or hereafter authorized, or any bonds,
debentures or other securities convertible into such
stock, but such additional shares of stock or other
securities convertible into stock may be issued or
disposed of by the Board to such persons and on such
terms as in the Board's discretion the Board shall
deem advisable.
(vii) NO REISSUANCE OF SERIES C PREFERRED
STOCK. No share or shares of Series C Preferred
Stock acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall
be reissued, and all such shares shall be canceled,
retired and eliminated from the shares of Series C
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 $0.001 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 $.001
par value Common Stock and any capital stock of any
class of the Corporation authorized after the date
the Series C Preferred Stock is established which is
not limited to a fixed sum or percentage of par or
stated value in respect of the rights of holders
thereof to
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<PAGE> 14
participate in dividends or in the distribution of
assets upon any liquidation, dissolution or winding
up of the Corporation.
(ix) AMENDMENTS. There shall be no
amendment, modification or waiver of the terms hereof
without the prior written consent of holders of at
least a majority of the Series C Preferred Stock
outstanding at such time. The designation by the
Board of one or more additional series of Class A
preferred stock or any other class of stock of the
Corporation with dividend, liquidation or conversion
rights pari passu with or having priority over or
having greater or more beneficial rights per share
than the Series C Preferred Stock shall be deemed to
constitute an amendment to the Articles of
Incorporation of the Corporation for which the
holders of shares of Series C Preferred Stock are
entitled to vote hereunder as a separate voting
group. Except as otherwise expressly provided in
this paragraph (ix) or paragraph (v), any changes or
amendments to the Articles of Incorporation of the
Corporation may be made in accordance with applicable
law.
IV. The foregoing amendment to the Articles of Incorporation of
Inland Resources Inc. was authorized by the majority vote of
the Board of Directors of the Corporation on the 21st day of
July, 1997.
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<PAGE> 15
IN WITNESS WHEREOF, these Articles of Amendment have been executed on
behalf of the Corporation by its President on this 18th day of July, 1997.
/s/ KYLE R. MILLER
-----------------------------
Kyle R. Miller
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