1
EXHIBIT 6
EXCHANGE AGREEMENT
Among
INLAND RESOURCES INC.
INLAND PRODUCTION COMPANY
INLAND REFINING, INC.
and
TRUST COMPANY OF THE WEST,
a California trust company,
as Sub-Custodian for Mellon Bank
for the benefit of Account No. CPFF 873-3032
INLAND HOLDINGS LLC,
a California limited liability company
TCW PORTFOLIO NO. 1555 DR V
SUB-CUSTODY PARTNERSHIP, L.P.,
a California limited partnership
and
JOINT ENERGY DEVELOPMENT INVESTMENTS II LIMITED PARTNERSHIP
Dated as of September 21, 1999
2
TABLE OF CONTENTS
SECTION 1. DEFINITIONS....................................................................................1
SECTION 2. EXCHANGE OF SECURITIES.........................................................................6
2.1 Authorization and Issuance of the Preferred Stock and Common Stock.............................6
2.2 Exchange.......................................................................................7
2.3 The Closing....................................................................................7
2.4 Consent to Exchange............................................................................7
2.5 Simultaneous Transactions......................................................................8
SECTION 3. WARRANTIES, REPRESENTATIONS AND COVENANTS OF THE COMPANIES.....................................8
3.1 Organization and Authorization of the Issuer...................................................8
3.2 Capital Stock..................................................................................9
3.3 Information Regarding the Issuer..............................................................10
3.4 Independent Engineering Report................................................................10
3.5 Litigation....................................................................................10
3.6 Absence of Undisclosed Liability..............................................................11
3.7 Governmental Consent..........................................................................11
3.8 Compliance with Laws and Other Instruments of the Companies...................................11
3.9 No Affiliate Ownership........................................................................11
3.10 Compliance with Laws..........................................................................12
3.11 Hedging.......................................................................................12
3.12 Absence of Certain Changes or Events..........................................................12
3.13 Licenses and Permits..........................................................................12
3.14 Taxes.........................................................................................12
3.15 ERISA Plans and Liabilities...................................................................13
3.16 Private Offering..............................................................................13
3.17 Investment Companies Act and Public Utility Holding Companies Act.............................13
3.18 Environmental Laws............................................................................14
3.19 Labor Relations...............................................................................14
3.20 No Broker's or other Fees.....................................................................15
3.21 Bona Fide Debt Work-out.......................................................................15
SECTION 4. WARRANTIES, REPRESENTATIONS AND COVENANTS OF PURCHASERS and TCW...............................15
4.1 Acquisition for Purchaser's Account...........................................................15
4.2 Investment Experience.........................................................................15
4.3 Securities not Registered.....................................................................15
4.4 Qualified Institutional Buyer; Accredited Investor............................................15
4.5 Acknowledgement of Risk.......................................................................15
4.6 No Public Market..............................................................................16
4.7 Reliance by the Issuer........................................................................16
4.8 No Public Solicitation........................................................................16
4.9 Legal Holder..................................................................................16
4.10 Consent to Farmout............................................................................16
4.11 Bona Fide Debt Work-out.......................................................................16
i
3
4.12 Value of JEDI New Securities..................................................................16
SECTION 5. PURCHASER AND TCW CONDITIONS TO CLOSING.......................................................16
5.1 TCW 's and Holdings' Conditions to Closing....................................................16
5.2 JEDI's Conditions to Closing..................................................................18
5.3 Closing Deliveries of the Companies...........................................................20
SECTION 6. ISSUER'S CONDITIONS TO CLOSING; REQUIRED DELIVERIES...........................................21
SECTION 7. TRANSFERABILITY OF NEW SECURITIES.............................................................21
7.1 Restrictive Legend............................................................................21
7.2 Rule 144 and 144A.............................................................................22
SECTION 8. AFFIRMATIVE COVENANTS OF THE COMPANIES........................................................22
8.1 Financial Statements..........................................................................22
8.2 Management's Discussion and Results of Operations.............................................23
8.3 Certificates; Other Information...............................................................23
8.4 Independent Engineering Report................................................................23
8.5 Inspection of Property; Books and Records; Discussions........................................23
8.6 Conduct of Business and Maintenance of Existence..............................................23
8.7 Maintenance of Property; Insurance............................................................23
8.8 Directors' and Officers' Insurance............................................................24
8.9 Taxes.........................................................................................24
8.10 Replacement of Instruments....................................................................24
8.11 Costs and Expenses............................................................................24
8.12 Contingent Issuance of Options to Holdings and JEDI...........................................24
8.13 Bank Compliance Certificates..................................................................25
8.14 Management Controls...........................................................................25
SECTION 9. Indemnity.....................................................................................27
SECTION 10. MISCELLANEOUS.................................................................................28
10.1 Notices.......................................................................................28
10.2 Survival......................................................................................28
10.3 Successors and Assigns........................................................................28
10.4 Amendment and Waiver, etc.....................................................................28
10.5 Counterparts..................................................................................29
10.6 Severability..................................................................................29
10.7 Governing Law.................................................................................29
10.8 Expenses......................................................................................29
10.9 Specific Performance..........................................................................29
10.10 Arbitration...................................................................................29
ii
4
TABLE OF EXHIBITS AND SCHEDULES
Schedule 3.1 - Subsidiaries and Liens thereon
Schedule 3.2(b) - Convertible Securities and Options
Schedule 3.2(c) - Registration Rights
Schedule 3.4 - Initial Independent Engineering Report
Schedule 3.5 - Litigation
Schedule 3.6 - Liabilities
Schedule 3.7 - Governmental Consents
Schedule 3.8 - Required Consents
Schedule 3.10 - Compliance with Oil and Gas Laws
Schedule 3.12 - Hedging
Schedule 3.15 - ERISA
Schedule 3.18 - Environmental Laws
Schedule 5.1 - Deferred Trade Payables
Schedule 8.12 - Contingent Issuance of Options
Exhibit A - Preferred Stock Designation
Exhibit B - Form of Shareholders Agreement
Exhibit C - Form of Registration Rights Agreement
Exhibit D - Form of Opinion of Washington counsel to the Issuer
Exhibit E - Form of Opinion of New York counsel to the Companies
Exhibit F - Amendment to Farmout Agreement
Exhibit G - Form of Opinion of Utah counsel to the Companies
Exhibit H - [Intentionally Omitted]
Exhibit I - Form of Purchaser Adjustment Option
Exhibit J - Form of JEDI Release Agreement
Exhibit K - Form of TCW Release Agreement
iii
5
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT (this "Agreement") is dated as of
September 21, 1999 among INLAND RESOURCES INC., a Washington corporation (the
"Issuer"), INLAND PRODUCTION COMPANY, a Texas corporation ("IPC"), INLAND
REFINING, INC., a Utah corporation ("Refining" and together with Issuer and IPC,
the "Companies"), TRUST COMPANY OF THE WEST, a California trust company, as
Sub-Custodian for Mellon Bank for the benefit of Account No. CPFF 873-3032
("Fund V"), TCW PORTFOLIO NO. 1555 DR V SUB-CUSTODY PARTNERSHIP, L.P., a
California limited partnership ("Portfolio," and collectively with Fund V,
"TCW"), INLAND HOLDINGS LLC, a California limited liability company ("Holdings")
and Joint Energy Development Investments II Limited Partnership, a Delaware
limited partnership ("JEDI", and together with Holdings, the "Purchasers").
WHEREAS, Fund V is presently the holder of $75 million in
principal amount of junior secured debt of IPC (plus accrued and unpaid interest
to the Closing Date, the "Fund V Debt") and Portfolio is the holder of warrants
(the "Portfolio Warrants," and together with the Fund V Debt, the "TCW
Securities") to purchase 158,512 shares of the Issuer's common stock, $.001 par
value per share (the "Common Stock");
WHEREAS, JEDI is presently the holder of 100,000 shares of
Series C Preferred Stock (as defined below), plus accumulated dividends to the
Closing Date;
WHEREAS, Fund V and Portfolio are members of Holdings;
WHEREAS, the Companies, TCW, Holdings and JEDI desire to
consummate a transaction (the "Exchange") whereby (i) TCW will exchange its
entire interest in the TCW Securities for the issuance to Holdings of (a)
10,757,747 shares (the "D Preferred Shares Number") of Series D Redeemable
Preferred Stock of the Issuer, (b) 5,882,901 shares (the "Z Preferred Shares
Number") of Series Z Preferred Stock of the Issuer and (c) 11,642,949 shares of
the Issuer's Common Stock and (ii) JEDI will exchange its entire interest in
100,000 shares of the Series C Preferred Stock (and any accumulated dividends
thereon, if any) for (a) 121,973 shares (the "E Preferred Shares Number") of the
Series E Redeemable Preferred Stock of the Issuer and (b) 2,920,975 shares of
the Issuer's Common Stock, all subject to the terms and conditions set forth
below.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants, conditions and agreements contained
herein, the parties hereto, intending to be legally bound by the terms hereof,
agree as follows:
SECTION 1. DEFINITIONS
As used herein, the following terms shall have the following
meanings.
"10-Q Filing Date" shall have the meaning set forth in Section
3.3(a) hereof.
"1935 Act" shall have the meaning set forth in Section 3.17
hereof.
1
6
"Agreement" shall have the meaning set forth in the preamble
hereto.
"Annual Budget Plan" shall have the meaning ascribed to such
term in Section 8.14 hereof.
"Approved Annual Budget" shall have the meaning ascribed to
such term in Section 8.14 hereof.
"Approved Budgets" shall have the meaning ascribed to such
term in Section 8.14 hereof.
"Approved Updated Budget" shall have the meaning ascribed to
such term in Section 8.14 hereof.
"Akin Opinion" shall have the meaning set forth in Section
5.1(m) hereof.
"Articles of Incorporation" shall mean the Articles of
Incorporation of the Issuer, as amended from time to time.
"Board of Directors" shall mean, with respect to a party, the
board of directors of such party.
"Closing" shall have the meaning ascribed to such term in
Section 2.3 hereof.
"Closing Date" shall have the meaning ascribed to such term in
Section 2.3(c) hereof.
"Commission" shall mean the United States Securities and
Exchange Commission or any other similar or successor agency of the federal
government administering the Securities Act.
"Common Stock" shall have the meaning set forth in the
recitals hereto.
"Companies" shall have the meaning set forth in the preamble
hereto.
"Credit Agreement" shall mean the Second Amended and Restated
Credit Agreement, among IPC, the Issuer, ING, as agent, and U.S. Bank National
Association and MeesPierson Capital Corp., as lenders party thereto, dated as of
the date hereof.
"D Preferred Shares Number" shall have the meaning set forth
in the recitals hereto.
"E Preferred Shares Number" shall have the meaning set forth
in the recitals hereto.
"Environmental Laws" shall mean any and all Laws relating to
the environment or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment including ambient air, surface water,
ground water, or land.
2
7
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, together with all rules and regulations
promulgated with respect thereto.
"ERISA Affiliate" shall mean each of the Companies and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control that, together with each of
the Companies, are treated as a single employer under Section 414 of the
Internal Revenue Code of 1986, as amended.
"ERISA Plan" means any employee pension benefit plan subject
to Title IV of ERISA maintained by any ERISA Affiliate with respect to which any
of the Companies or the Subsidiaries has a fixed or contingent liability.
"Evaluated Properties" shall have the meaning set forth in
Section 3.4 hereof.
"Exchange" shall have the meaning set forth in the recitals
hereto.
"Exchange Act" shall have the meaning set forth in Section
3.3(a) hereof.
"Farmout Agreement" shall mean that certain Farmout Agreement
dated as of June 1, 1998 between IPC, the Issuer and Xxxxx Management, LLC, as
assigned to Xxxxx Energy Partnership effective October 1, 1998 and as amended by
Amendment No. One dated as of November 25, 1998.
"Farmout Restructurings" shall have the meaning set forth in
Section 5.1(f) hereof.
"Financial Statements" shall have the meaning set forth in
Section 3.3(a) hereof.
"Fund V" shall have the meaning set forth in the preamble
hereto.
"Fund V Debt" shall have the meaning set forth in the recitals
hereto.
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time consistent with those
utilized in preparing the audited Financial Statements.
"Governmental Body" shall mean any Federal, state, municipal
or other governmental department, commission, court, tribunal, board, bureau,
agency or instrumentality, domestic or foreign (including, without limitation,
any bank regulatory authority).
"Hazardous Materials" shall mean any substances regulated
under any Environmental Law, whether as pollutants, contaminants, or chemicals,
or as industrial, toxic or hazardous substances or wastes, or otherwise.
"Holdings New Securities" shall have the meaning set forth in
Section 2.2(a) hereof.
"Indemnified Party" shall have the meaning set forth in
Section 9.
3
8
"Independent Engineer" shall mean Xxxxx Xxxxx Company or such
other independent engineering consultant firm acceptable to the Purchasers.
"Independent Engineering Report" shall mean each engineering
report prepared by an Independent Engineer, which shall be (i) effective as of
January 1st of each year, (ii) in a form satisfactory to the Purchasers and
(iii) prepared in accordance with the then existing standards of the Society of
Petroleum Engineers.
"ING" shall mean ING (U.S.) Capital Corporation.
"Initial Independent Engineering Report" shall mean the
engineering report prepared by Xxxxx Xxxxx Company dated as of January 1, 1999
acceptable to the Purchasers and prepared in accordance with the then existing
standards of the Society of Petroleum Engineers.
"IPC" shall have the meaning set forth in the preamble hereto.
"Issuer" shall have the meaning set forth in the preamble
hereto.
"JEDI" shall have the meaning set forth in the preamble
hereto.
"JEDI New Securities" shall have the meaning set forth in
Section 2.2(b) hereof.
"JEDI Release" shall mean a release of the Companies'
obligations with respect to JEDI's 100,000 shares of Series C Preferred Stock,
plus accumulated dividends thereon to the Closing Date, and any documents
related thereto, including without limitation, that certain Securities Purchase
Agreement dated July 21, 1997 between JEDI and Issuer, that certain Registration
Rights Agreement dated July 21, 1997 between JEDI and Issuer and that certain
Tagalong Agreement dated July 21, 1997 between JEDI and Pengo, pursuant to the
Release Agreement in the form attached hereto as Exhibit J.
"Law" shall mean any applicable statute, law, regulation,
ordinance, rule, treaty, judgment, order, decree, permit, concession, license or
other governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, province or
other political subdivision thereof.
"Liability" shall have the meaning set forth in Section 3.6
hereof.
"Lien" shall mean, with respect to any Person, any mortgage,
lien, pledge, adverse claim, charge, security interest or other encumbrance, or
any interest or title of any vendor, lessor, lender or other secured party to or
of such Person under any conditional sale or other title retention agreement or
capital lease, upon or with respect to any property or asset of such Person, or
the signing or filing by or with the consent of such Person of a financing
statement that names such Person as debtor, or the signing of any security
agreement authorizing any other Person as the secured party to file any
financing statement.
"Material Adverse Effect" shall mean, with respect to any
Person, a material adverse effect on the business, properties, financial
condition or operations of such Person.
"New Securities" shall have the meaning set forth in Section
2.2(b) hereof.
4
9
"Order" means any order, writ, injunction, decree, judgment,
award, determination, direction or demand.
"Person" shall mean any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or agency or political
subdivision thereof.
"Portfolio Warrants" shall have the meaning set forth in the
recitals hereto.
"Preferred Stock Designation" shall mean the amendment to the
Articles of Incorporation of the Issuer, setting forth the terms of the Series D
Preferred Stock, Series E Preferred Stock and Series Z Preferred Stock, in the
form attached hereto as Exhibit A or with such changes thereto as approved by
the Purchasers and the Issuer.
"Purchaser Adjustment Options" shall have the meaning set
forth in Section 8.12 hereof.
"Purchasers" shall have the meaning set forth in the preamble
hereto.
"Xxxxxxx Opinion" shall have the meaning set forth in Section
5.1(1) hereof.
"Refining" shall have the meaning set forth in the preamble
hereto.
"Registration Rights Agreement" shall have the meaning set
forth in Section 5.1(h) hereof.
"Related Person" shall mean any of the Companies, their
subsidiaries or affiliates, whether now existing or hereafter formed or
acquired.
"Requisite Ownership" shall have the meaning set forth in
Section 8 hereof.
"Responsible Officer" shall mean all officers of the
Companies.
"Restricted Securities" shall have the meaning set forth under
Rule 144 of the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Senior Creditors" shall mean the lenders under the Credit
Agreement.
"Series C Preferred Stock" shall mean the Issuer's Series C
Cumulative Convertible Preferred Stock, par value $.001 per share, all of the
issued and outstanding shares of which are owned by JEDI.
"Series D Preferred Stock" shall mean the Series D Redeemable
Preferred Stock of the Issuer, par value $.001 per share, with the terms
described in Exhibit A hereto.
5
10
"Series E Preferred Stock" shall mean the Series E Redeemable
Preferred Stock of the Issuer, par value $.001 per share, with the terms
described in Exhibit A hereto.
"Series Z Preferred Stock" shall mean the Series Z Convertible
Preferred Stock of the Issuer, par value $.001 per share, with the terms
described in Exhibit A hereto.
"Shareholders Agreement" shall have the meaning set forth in
Section 5.1(g) hereof.
"Xxxxx Group" shall mean Pengo Securities Corp., Xxxxx Energy
Partnership, Xxxxxxx X. Xxxxx, Xxxxxxx Xxxxxxx Xxxxx, Xxxxxxx X. Xxxxx, Xxxx X.
Xxxxx, Xxxxxx X. Xxxxxx, and their respective affiliates.
"Subsidiary" shall mean any entity in which any of the
Companies has a 50% or greater direct or indirect equity interest.
"TCW" shall have the meaning set forth in the preamble hereto.
"TCW Release" shall mean a release of the Companies'
obligations under or with respect to the outstanding principal of and accrued
interest on the Fund V Debt and any obligation with respect to the Portfolio
Warrants pursuant to the Release Agreement in the form attached hereto as
Exhibit K.
"TCW Securities" shall have the meaning set forth in the
recitals hereto.
"Termination Event" shall mean (a) the occurrence with respect
to any ERISA Plan of (i) a reportable event described in Sections 4043(c)(5) or
(6) of ERISA or (ii) any other reportable event described in Section 4043(c) of
ERISA other than a reportable event not subject to the provision for 30-day
notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by the
Pension Benefit Guaranty Corporation under Section 4043(a) of ERISA, or (b) the
withdrawal of any ERISA Affiliate from an ERISA Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or
(c) the filing of a notice of intent to terminate any ERISA Plan or the
treatment of any ERISA Plan amendment as a termination under Section 4041 of
ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the
Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (e) any
other event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
ERISA Plan.
"Updated Budget" shall have the meaning set forth in Section
8.14 hereof.
"Utah Opinion" shall have the meaning set forth in Section
5.1(n) hereof.
"Z Preferred Shares Number" shall have the meaning set forth
in the recitals hereto.
SECTION 2. EXCHANGE OF SECURITIES
2.1 Authorization and Issuance of the Preferred Stock and
Common Stock. The Issuer has duly authorized the issuance of (a) a number of
shares of the Series D Preferred Stock
6
11
equal to the D Preferred Shares Number, (b) a number of shares of the Series E
Preferred Stock equal to the E Preferred Shares Number, (c) shares of Series Z
Preferred Stock equal to the Z Preferred Shares Number and (d) 14,563,924 shares
of Common Stock, pursuant to the terms of this Agreement.
2.2 Exchange.
(a) Holdings. Upon the terms and conditions set forth herein,
the Issuer agrees to issue to Holdings, and Holdings agrees to accept, (i) the D
Preferred Shares Number of Series D Preferred Stock, (ii) the Z Preferred Shares
Number of Series Z Preferred Stock and (iii) 11,642,949 shares of Common Stock
(collectively, the "Holdings New Securities") upon delivery to the Issuer of the
TCW Release and the notes and certificates evidencing the TCW Securities; TCW
agrees to deliver and the Issuer agrees to accept the TCW Release and the notes
and certificates evidencing the TCW Securities upon delivery to Holdings of the
Holdings New Securities.
(b) JEDI. Upon the terms and conditions set forth herein, the
Issuer agrees to issue to JEDI, and JEDI agrees to accept, (i) the E Preferred
Shares Number of Series E Preferred Stock and (ii) 2,920,975 shares of Common
Stock (collectively, the "JEDI New Securities" and, together with the Holdings
New Securities, the "New Securities") upon delivery to the Issuer of the JEDI
Release and certificates evidencing JEDI's entire interest in 100,000 shares of
the Series C Preferred Stock plus accumulated and unpaid dividends through the
Closing Date; JEDI agrees to deliver and the Issuer agrees to accept the JEDI
Release and the certificates evidencing JEDI's entire interest in 100,000 shares
of Series C Preferred Stock, plus accumulated and unpaid dividends through the
Closing Date, upon delivery to JEDI of the JEDI New Securities.
2.3 The Closing. At the closing of the transactions described
herein (the "Closing"),
(a) (i) TCW shall deliver to the Issuer the notes and
certificates evidencing the TCW Securities, (ii) the Issuer shall accept and
cancel the notes representing the Fund V Debt (including accrued and unpaid
interest through the Closing Date) and the certificates representing the
Portfolio Warrants, (iii) TCW shall deliver to the Issuer the TCW Release and
(iv) the Issuer shall deliver to Holdings certificates representing the Holdings
New Securities, registered in the denominations and names specified by Holdings.
(b) (i) JEDI shall deliver to the Issuer the certificate(s)
evidencing JEDI's entire interest in 100,000 shares of Series C Preferred Stock
and accrued and unpaid dividends through the Closing Date, (ii) the Issuer shall
accept and cancel such certificate(s), (iii) JEDI shall deliver to the Issuer
the JEDI Release and (iv) the Issuer shall deliver to JEDI certificates
representing the JEDI New Securities, registered in the denominations and names
specified by JEDI.
(c) The Closing shall be held at the offices of Akin, Gump,
Strauss, Xxxxx & Xxxx, L.L.P., Houston, Texas, on the business day following
satisfaction of the conditions set forth herein or at such other time and place
as all parties to this Agreement may mutually agree (the "Closing Date").
2.4 Consent to Exchange.
7
12
(a) Prior to giving effect to the Exchange, JEDI is the record
holder of 100,000 shares of Series C Preferred Stock, representing all of the
issued and outstanding Series C Preferred Stock of the Issuer. By entering into
this Agreement, JEDI hereby consents and agrees to the transactions constituting
the Exchange as the sole holder of the Issuer's Series C Preferred Stock. Upon
consummation of the transactions constituting the Exchange, no shares of the
Issuer's Series C Preferred Stock will be outstanding.
(b) Prior to giving effect to the Exchange, Fund V is the
holder of the Fund V Debt and Portfolio is the holder of the Portfolio V
Warrants. By entering into this Agreement, Fund V and Portfolio hereby consent
and agree to the transactions constituting the Exchange. Upon consummation of
such transactions, neither the Fund V Debt nor the Portfolio Warrants will be
outstanding.
2.5 Simultaneous Transactions. All transactions set forth as
part of the Exchange and the transactions contemplated by Sections 5.1(d) and
5.2(e) hereof shall be deemed to take place simultaneously and each transaction
shall be contingent upon the consummation of all such transactions.
SECTION 3. WARRANTIES, REPRESENTATIONS AND COVENANTS OF THE
COMPANIES.
Each of the Companies hereby represent, warrant and covenant
to each of the Purchasers that, as of the date hereof;
3.1 Organization and Authorization of the Issuer.
(a) Each of the Companies, and their respective Subsidiaries
(i) is a duly organized and validly existing corporation in good standing under
the laws of its jurisdiction of organization, (ii) has all requisite power and
authority to own or hold under lease the property it purports to own or hold
under lease and to transact the business in which it is presently engaged or
presently proposes to engage and (iii) is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which the character
of the properties owned or held under lease by it or the nature of the business
transacted by it requires such qualification except where failure to so qualify
could not reasonably be expected to have a Material Adverse Effect on the
Companies taken as a whole.
(b) Each of the Companies has all requisite power and
authority to execute and deliver this Agreement, and any other documents or
agreements contemplated hereby and thereby to which it is a party, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereunder and thereunder. The Issuer has all requisite power and
authority to issue the New Securities. The execution and delivery of this
Agreement and the issuance of New Securities, the performance of this Agreement,
and the execution, delivery and performance of any other documents or agreements
to which any of the Companies is a party contemplated hereby and thereby, and
the consummation of the transactions contemplated hereby and thereby, have been
duly authorized and approved by the Board of Directors of the respective
Companies. Each of this Agreement, and any other document or agreement to which
any of the Companies is a party contemplated hereby or thereby has been (or on
the Closing Date will have been) duly authorized, executed and delivered by, and
each is (or, when duly executed and delivered on the Closing Date, will be) the
valid and
8
13
binding obligation of, such Company, enforceable in accordance with its terms,
except as may be limited by applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws or by legal or equitable principles relating to
or limiting creditors' rights generally.
(c) Schedule 3.1 hereof contains a true and correct list of
the Subsidiaries and their respective partnership interests. Neither the
Companies nor the Subsidiaries own, directly or indirectly, any capital stock,
joint venture or partnership interests in or other equity interest in any other
Person other than those Subsidiaries set forth on Schedule 3.1 hereof. Except as
set forth on Schedule 3.1, each of the Companies has good and valid title to all
the outstanding stock of each of its respective Subsidiaries, in each case, free
and clear of all liens and encumbrances.
3.2 Capital Stock.
(a) Upon the issuance of the New Securities under this
Agreement and after the filing of the Preferred Stock Designation, the total
number of shares of capital stock which the Issuer will have authority to issue
under the Articles of Incorporation is a maximum of (i) 25,000,000 shares of
Common Stock, of which 23,093,689 will be issued and outstanding, all of which
outstanding shares will have been duly and validly issued and will be fully paid
and nonassessable, and (ii) 20,000,000 shares of Class A preferred stock, of
which the D Preferred Shares Number will be designated as Series D Preferred
Stock, the E Preferred Shares Number will be designated as Series E Preferred
Stock and the Z Preferred Shares Number will be designated as Series Z Preferred
Stock and all of which shares will be issued and outstanding, duly and validly
issued and fully paid and nonassessable. Immediately prior to the issuance of
the New Securities under this Agreement, 25,000,000 shares of Common Stock were
authorized, of which 8,529,765 shares were issued and outstanding, and
20,000,000 shares of Class A preferred stock were authorized, of which 100,000
shares, designated as Series C Preferred Stock, were issued and outstanding.
(b) As of the date hereof, the Issuer does not, and as of the
Closing Date, each without giving effect to the Exchange, the Issuer will not,
have outstanding any capital stock or other securities convertible into or
exchangeable for any of its capital stock or any rights to subscribe for or to
purchase, or any options for the purchase of, or any agreements (contingent or
otherwise) providing for the issuance of, or any calls, commitments or claims of
any character relating to, any of its capital stock or any securities
convertible into or exchangeable for any of its capital stock, other than as set
forth on Schedule 3.2(b) hereto (which schedule shall include the exercise price
(except for the warrants of ING, US Bank and MeesPierson post-Closing) and
number of shares on a pre-Closing and post-Closing basis).
(c) As of the date hereof, the Issuer does not have any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any of its capital stock or obligation evidencing the right of the holder
thereof to purchase any of its capital stock. There is not in effect on the date
hereof any agreement by the Issuer (other than this Agreement) or any of its
Subsidiaries pursuant to which any holders of securities of the Issuer or any of
its Subsidiaries have a right to cause the Issuer to register such securities
under the Securities Act other than as set forth on Schedule 3.2(c) hereto.
(d) The New Securities will, when issued in accordance with
this Agreement, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges.
9
14
3.3 Information Regarding the Issuer.
(a) The audited consolidated financial statements of the
Issuer and its Subsidiaries as filed with the Commission in accordance with the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), for the three most recent fiscal years (and the unaudited
interim periods reported therein and through the date hereof) (collectively, the
"Financial Statements") fairly present in all material respects the financial
position of the Issuer and its Subsidiaries as of the respective dates of such
balance sheets and the results of the Issuer and its Subsidiaries operations for
the respective periods covered by such statements of operations, stockholders'
equity and cash flows, and have been prepared in accordance with GAAP
consistently applied throughout the periods involved. There are no material
liabilities, contingent or otherwise, of the Issuer and its Subsidiaries as of
the date hereof and as of the Closing Date required to be reflected in a balance
sheet prepared in accordance with GAAP which are not reflected in such balance
sheets. Since the date of the Issuer's most recent quarterly report on form 10-Q
(the "10-Q Filing Date"), there have been no changes in the assets, liabilities
or financial position of the Issuer and its Subsidiaries from that set forth in
the balance sheet as of such date, other than changes in the ordinary course of
business which have not, either individually or in the aggregate, had a Material
Adverse Effect on the Companies taken as a whole.
(b) As of their respective dates, the Financial Statements did
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Since the 10-Q Filing
Date, there has been no change in the business, properties, financial condition
or operations which has had a Material Adverse Effect on the Companies taken as
a whole.
3.4 Independent Engineering Report. The Companies have
delivered to the Purchasers, in form satisfactory to the Purchasers, results of
the Initial Independent Engineering Report on the fields and properties listed
therein or attached thereto (the "Evaluated Properties") in which the Companies
will have interests as of the Closing Date. The Initial Independent Engineering
Report is the latest engineering report available to the Companies relating to
the Evaluated Properties. To the knowledge of the Responsible Officers, the
Companies have provided no materially false or misleading information to and
have not withheld from the engineer preparing or who prepared the Initial
Independent Engineering Report any material information with respect to the
preparation of the Independent Engineering Report. The Responsible Officers and
the officers of Refining are not aware of any facts or circumstances that should
reasonably cause the Companies to conclude that (i) any of the information that
was supplied by the Companies to the Independent Engineer in connection with its
preparation of the Independent Engineering Report was not correct or (ii) the
Independent Engineering Report is incorrect in any material respect.
3.5 Litigation. Except as set forth in Schedule 3.5, (i) there
are no actions, suits, investigations or legal, equitable, arbitrative or
administrative proceedings pending or, to the knowledge of any Responsible
Officer of the Companies, currently threatened against the Companies or the
Subsidiaries before any Governmental Body which could cause a Material Adverse
Effect on the Companies , either individually or in the aggregate; and (ii)
there are no outstanding judgments, injunctions, writs, rulings or orders by any
Governmental Body against
10
15
any of the Companies, the Subsidiaries or their respective directors or officers
which could have a Material Adverse Effect on the Companies, either individually
or in the aggregate.
3.6 Absence of Undisclosed Liability. None of the Companies
nor any of the Subsidiaries has any material direct or indirect liability,
indebtedness, obligation, expense, claim, deficiency, guarantee or endorsement
of or by any person (other than endorsements of notes, bills and checks
presented to banks for collection deposit in the ordinary course of business) of
any type, whether accrued, absolute, contingent, matured, unmatured or otherwise
(a "Liability"), other than the Liabilities (i) that are reflected, accrued or
reserved for in the most recent quarterly balance sheet of the Issuer filed
pursuant to the Exchange Act with the Commission, or (ii) arising in the
ordinary course of the Companies' or the Subsidiaries' businesses consistent
with past practice which would not result in a Material Adverse Effect on the
Companies taken as a whole or (iii) that are disclosed in Schedule 3.6. Except
as shown in the notes to the Issuer's most recent annual and quarterly financial
statements filed pursuant to the Exchange Act with the Commission or disclosed
on Schedule 3.6 hereof, none of the Companies nor any of the Subsidiaries is
subject to or restricted by any franchise, contract, deed, charter restriction
or other instrument or restriction which could reasonably be expected to have a
Material Adverse Effect on the Companies taken as a whole.
3.7 Governmental Consent. Other than the filing of the
Preferred Stock Designation and filings required by applicable state securities
laws and any other consents or approvals listed in Schedule 3.7 hereof, which
shall be made or obtained prior to Closing by the Companies, neither the nature
of the Companies, the Subsidiaries, their respective businesses or properties,
nor any relationship between the Companies or any Subsidiary and any other
Person, nor (except as expressly provided for in this Agreement) any
circumstance in connection with the offer, issue or sale of the New Securities,
is such as to require consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Body on the part of the
Companies as a condition to the execution, delivery and performance of this
Agreement and any other documents or agreements contemplated hereby.
3.8 Compliance with Laws and Other Instruments of the
Companies. The consummation of the transactions contemplated by this Agreement
and the execution, delivery and performance of the terms and provisions of this
Agreement, the New Securities, or any other document or agreement contemplated
hereby or thereby will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of the Companies or the Subsidiaries under, any corporate charter
or bylaws, or material indenture, mortgage, deed of trust, bank loan or credit
agreement, or other material agreement or instrument to which the Companies or
the Subsidiaries are a party or by which the Companies or the Subsidiaries or
any of their properties may be bound or affected (taking into consideration the
required consents set forth on Schedule 3.8 hereof), (ii) conflict with or
result in a breach of any of the terms, conditions or provisions of any Order of
any court, arbitrator or Governmental Body applicable to the Companies, or (iii)
violate any provision of any statute or other rule or regulation of any
Governmental Body applicable to the Companies or the Subsidiaries.
3.9 No Affiliate Ownership. Except as set forth in the
Issuer's most recent Annual Report on Form 10-K, as amended, its most recent
proxy statement, or its Quarterly Reports filed on Form 10-Q after such Annual
Report on file with the Commission, no Person controlled by, controlling or
under common control with any of the Companies (other than the Subsidiaries)
11
16
owns any interest in any of the Evaluated Properties or any other material asset
of the Companies or the Subsidiaries.
3.10 Compliance with Laws. Except as set forth in Schedule
3.10, to the knowledge of the Companies, the Companies and the Subsidiaries have
complied with all applicable laws relating to the production of oil and gas from
their properties, leases or assets and any of their assets, rights or interests
relating thereto, the conduct of drilling and production operations with respect
to their oil and gas properties, leases, or assets and any of their assets,
rights or interests relating thereto and the regulation thereof, except where
the failure to comply could not reasonably be expected to have a Material
Adverse Effect on the Companies taken as a whole.
3.11 Hedging. Except as set forth in Schedule 3.11, as of the
date of this Agreement, neither the Companies nor any of the Subsidiaries is
bound by futures, hedge, swap, collar, put, call, floor, cap, option or other
contracts that are intended to benefit from or reduce or eliminate the risk or
fluctuations in the price of commodities, including hydrocarbons, or securities.
3.12 Absence of Certain Changes or Events. Except for events
contemplated by this Agreement or disclosed in any schedule hereto, since the
filing date of the Issuer's most recent quarterly report on Form 10-Q with the
Commission no event has occurred with respect to the Companies or the
Subsidiaries, or the condition of their material assets or the Evaluated
Properties, that has resulted in or could reasonably be expected to result in a
Material Adverse Effect on the Companies taken as a whole, except as has been
publicly disclosed in the Issuer's filings with the Commission. The Issuer has
reported on the appropriate form all events or happenings with respect to the
Companies or the Subsidiaries or the condition of their material assets or the
Evaluated Properties that are required to be disclosed under the Exchange Act.
3.13 Licenses and Permits. The Companies and the Subsidiaries
have obtained and hold in full force and effect all licenses, permits,
franchises, certificates, authorizations, qualifications, accreditations,
easements, rights of way and other rights, patents, copyrights, trademarks and
trade names, or rights thereto, consents and approvals required to conduct their
business substantially as it is now conducted and as it is currently proposed to
be conducted, without known conflict with the rights of others, except as has
been disclosed in the Issuer's filings with the Commission or except for such
failures to obtain or hold or such conflicts as would not have a Material
Adverse Effect on the Companies taken as a whole.
3.14 Taxes. The Companies and the Subsidiaries have (i) filed
all tax returns with all appropriate Federal, state, local and foreign taxing
authorities that are required to have been filed by or with respect to the
Companies and the Subsidiaries as of the date of this Agreement, and such tax
returns are true, correct and complete in all material respects; and (ii) paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments payable by the Companies and the Subsidiaries to the extent the same
have become due and payable and before they have become delinquent, except for
any taxes and assessments the amount, applicability or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which the Companies have set aside on its books reserves (segregated
to the extent required by GAAP) deemed by it to be adequate. The Companies know
of no proposed material tax assessment against the Companies or the
12
17
Subsidiaries and in the opinion of the Companies all tax liabilities are
adequately provided for on the books of the Companies.
3.15 ERISA Plans and Liabilities. All currently existing ERISA
Plans are listed on Schedule 3.15 hereof. Except as disclosed in the Issuer's
most recent annual and quarterly financial statements filed under the Exchange
Act with the Commission or on Schedule 3.15 hereof, no Termination Event has
occurred with respect to any ERISA Plan and all ERISA Plans are in compliance
with ERISA in all material respects. No ERISA Affiliate is required to
contribute to, or has any other absolute or contingent liability in respect of,
any "multiemployer plan" as defined in Section 4001 of ERISA. Except as set
forth in Schedule 3.15: (i) no "accumulated funding deficiency" (as defined in
Section 412(a) of the Internal Revenue Code of 1986, as amended) exists with
respect to any ERISA Plan, whether or not waived by the Secretary of the
Treasury or his delegate, and (ii) the current value of each ERISA Plan's
benefit obligations does not exceed the current value of such ERISA Plan's
assets available for the payment of such benefits by more than $500,000.
3.16 Private Offering. During the six months prior to the
Closing Date, neither the Companies nor any other Person acting on behalf of the
Companies has offered any of the New Securities or any other securities of the
Companies (excluding options or warrants to employees and shares issuable upon
exercise or conversion of securities outstanding prior to the date hereof) for
sale to, or solicited offers to buy any thereof from, or otherwise approached or
negotiated with respect thereto with, any Person other than prospective
purchasers who are "accredited investors", as defined in Rule 501 of Regulation
D promulgated under the Securities Act. The Companies agree that neither the
Companies nor anyone acting on their behalf has offered or will offer the New
Securities or any part thereof or any similar securities for issue or sale to,
or has solicited or will solicit any offer to acquire any of the same from,
anyone so as to bring the issuance and sale of the New Securities under Section
5 of the Securities Act. Based in part on the representations of the Purchasers
set forth herein and on the Preferred Stock Designation, the offer, sale and
issuance of the New Securities in conformity with the terms of this Agreement
are exempt from the registration requirements of the Securities Act and any
applicable state securities laws.
3.17 Investment Companies Act and Public Utility Holding
Companies Act. None of the Companies or the Subsidiaries is considered an
"investment company" or a person directly or indirectly controlled by or acting
on behalf of an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. None of the Companies or the Subsidiaries owns
or operates any facility used for the generation, transmission or distribution
for sale of electrical energy or any facility used for the retail distribution
of natural or manufactured gas, each within the meaning of the Public Utility
Holding Company Act of 1935, as amended (the "1935 Act"). None of the Companies
or the Subsidiaries is an "electrical utility company" within the meaning of the
1935 Act. None of the Companies or the Subsidiaries is (i) a "holding company,"
(ii) a "subsidiary company," an "affiliate" or "associate company" of a "holding
company" or (iii) an "affiliate" of a "subsidiary company" of a "holding
company," each within the meaning of the 1935 Act. None of the Companies or the
Subsidiaries is 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.
13
18
3.18 Environmental Laws. The sole representations of the
Companies with respect to environmental matters are set forth in this Section
3.18. To the extent representations in other sections of this Agreement also
could apply to environmental matters, including, but not limited to
Environmental Laws, such representations shall be construed to exclude
environmental matters and to apply only to matters other than environmental
matters. Except (a) as to matters not within the Companies' knowledge, (b) as
could not reasonably be expected to have a Material Adverse Effect on the
Companies taken as a whole, or (c) as set forth on Schedule 3.18 hereto,
(a) The Companies and the Subsidiaries are conducting their
businesses in compliance in all material respects with all applicable
Environmental Laws, and have all permits, licenses and authorizations required
under Environmental Laws in connection with the conduct of their businesses, and
each of the Companies and the Subsidiaries is in compliance in all material
respects with the terms and conditions of all such permits, licenses and
authorizations, and with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Environmental Law.
(b) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed, and no investigation or review is pending or to the
knowledge of any of the Companies threatened, by any Governmental Body or any
other Person with respect to (i) any actual or alleged treatment, storage,
transportation, disposal, or release of any Hazardous Materials, either by any
of the Companies or the Subsidiaries or on any property owned by any of the
Companies or the Subsidiaries, (ii) any material remedial action which might be
needed to respond to any such alleged treatment, storage, transportation,
disposal, or release, or (iii) any alleged failure by any of the Companies or
the Subsidiaries to have any permit, license or authorization required in
connection with the conduct of its business or with respect to any such
treatment, storage, transportation, disposal, or release.
(c) No Hazardous Materials have been released or disposed of,
in a quantity or manner required to be reported under or otherwise in violation
of applicable law, by any of the Companies or the Subsidiaries at, on or under
any properties owned or leased by any of the Companies or the Subsidiaries.
(d) There are no Liens existing under or pursuant to any
Environmental Laws on any of the real properties or properties owned or leased
by any of the Companies or the Subsidiaries, and to the knowledge of the
Companies no government actions have been taken or are in process which could
subject any of such properties to such Liens.
3.19 Labor Relations. No material unfair labor practice
complaint or sex, age, race or other discrimination claim has been brought
during the five years prior to the Closing Date against the Companies or any of
the Subsidiaries before the National Labor Relations Board, the Equal Employment
Opportunity Commission or any other Governmental Body. During that period, each
of the Companies and the Subsidiaries has complied in all material respects with
all applicable laws, ordinances, regulations, statutes, rules and restrictions
relating to the employment of labor, including, without limitation, those
relating to hiring, promotion, employment and pay practices, terms and
conditions of employment, federal and state wages and hours laws, immigration,
and collective bargaining. During the five years prior to the Closing Date, no
strike, slowdown, picketing or work stoppage by any union or other group of
employees
14
19
against the Companies, any Subsidiary or any of their properties wherever
located, and no secondary boycott with respect to their products, lockout by
them of any of their employees or any other labor trouble or other occurrence,
event or condition of a similar character, has occurred or, to the knowledge of
the Responsible Officers, been threatened which has had or could be expected to
have a Material Adverse Effect on the Companies taken as a whole.
3.20 No Broker's or other Fees. Other than with respect to the
fairness opinion required pursuant to Section 5.1(i), no broker, finder or
investment banker is entitled to any fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Companies.
3.21 Bona Fide Debt Work-out. Within the meaning of 16 C.F.R.
sec 802.63(a), the acquisition by Holdings of the voting securities of the
Issuer pursuant to the Exchange will be an acquisition of voting securities in
connection with a bona fide debt work-out by a creditor of the Companies.
SECTION 4. WARRANTIES, REPRESENTATIONS AND COVENANTS OF
PURCHASERS and TCW.
Other than with respect to Sections 4.10, 4.11 and 4.12 (which
provisions apply only to the parties specified), each of the Purchasers and TCW,
severally and not jointly, hereby represents, warrants and covenants to the
Issuer with respect to such party, as follows:
4.1 Acquisition for Purchaser's Account Each Purchaser,
severally and not jointly, represents and warrants to the Issuer that it is
acquiring and will acquire its New Securities for its own account, with no
present intention of distributing or reselling such securities or any part
thereof in violation of applicable securities laws.
4.2 Investment Experience. Each Purchaser and TCW has such
knowledge and experience in financial and business matters, including investing
in securities of new and speculative companies, as to be able to evaluate the
merits and risks of an investment in its New Securities.
4.3 Securities not Registered. Each Purchaser acknowledges
that its New Securities have not been registered under the Securities Act or the
securities laws of any state in the United States or any other jurisdiction and
may not be offered or sold by such Purchaser unless subsequently registered
under the Securities Act (if applicable to the transaction) and any other
securities laws or unless exemptions from the registration or other requirements
thereof are available for the transaction.
4.4 Qualified Institutional Buyer; Accredited Investor. Each
Purchaser represents that it is a Qualified Institutional Buyer (as defined in
Rule 144A promulgated under the Securities Act) and/or an Accredited Investor
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act, as presently in effect.
4.5 Acknowledgement of Risk. Each Purchaser acknowledges that
an investment in its New Securities involves a high degree of risk and
represents that it understands the economic risk of such investment. Each
Purchaser is prepared to bear the economic risk of retaining its New Securities
for an indefinite period, all without prejudice, however, to the rights
15
20
of such Purchaser, in accordance with this Agreement, lawfully to sell or
otherwise dispose of all or any part of any New Securities held by it.
4.6 No Public Market. Each Purchaser understands that no
public market now exists for its New Securities and that the Issuer has made no
assurances with respect to any secondary market for such securities.
4.7 Reliance by the Issuer. Each Purchaser understands and
acknowledges that the Issuer will be relying upon its respective representations
and warranties set forth in this Agreement in issuing Purchaser's New Securities
to such Purchaser.
4.8 No Public Solicitation. The issuing of each Purchaser's
New Securities to such Purchaser was made through direct, personal communication
between such Purchaser and a representative of the Issuer and not through public
solicitation and advertising.
4.9 Legal Holder. Each of JEDI and TCW is the sole legal and
beneficial holder of its Securities to be exchanged by such party hereunder and
is conveying its Securities to the Issuer, free and clear of any liens, claims,
interests, charges and encumbrances. Each of JEDI and TCW has neither previously
sold, assigned, conveyed, transferred or otherwise disposed of, in whole or in
part, its securities to be exchanged hereunder, nor entered into any agreement
to sell, assign, convey, transfer or otherwise dispose of, in whole or in part,
its securities to be exchanged hereunder.
4.10 Consent to Farmout. TCW and each Purchaser consents to
the terms of the restructuring or amendment to the terms of the existing Farmout
Agreement described in Sections 5.1(f) and 5.2(g) below.
4.11 Bona Fide Debt Work-out. TCW and Holdings each warrant
and represent that, within the meaning of 16 C.F.R. sec 802.63(a), Holding's
acquisition of voting securities pursuant to the Exchange will be an acquisition
in connection with a bona fide debt work-out by a creditor in a bona fide credit
transaction entered into in the ordinary course of the creditor's business.
4.12 Value of JEDI New Securities. JEDI represents and
warrants that it has determined that the fair market value of the JEDI New
Securities is less than $15,000,000.
SECTION 5. PURCHASER AND TCW CONDITIONS TO CLOSING.
5.1 TCW 's and Holdings' Conditions to Closing. As a condition
to the obligations of TCW and Holdings hereunder and prior to the issuance of
the New Securities, the following conditions precedent shall be satisfied (in
form and substance reasonably satisfactory to TCW, Holdings and their counsel):
(a) Each of the representations and warranties of the
Companies contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date, as though
made on and as of the Closing. TCW and Holdings shall have received one or more
certificates of the Companies signed by the Chief Executive Officer or President
and the Chief Financial Officer or Secretary of such Company to that effect.
16
21
(b) The internal Investment Committee of TCW shall have
approved the terms of this Agreement, the Exchange, the New Securities and any
other transactions related hereto or thereto.
(c) Since the date of this Agreement, there shall not have
occurred any event or events which, individually or in the aggregate, would
have, or could be reasonably expected to have a Material Adverse Effect on the
financial condition, business or prospects of the Companies, the Subsidiaries,
or any of them or their properties.
(d) The Senior Creditors shall have agreed to a restructuring
and commitment with respect to the outstanding indebtedness of the Companies
under the Credit Agreement on terms acceptable to TCW and Holdings including,
but not limited to, a restructuring of the amortization of such debt and a
provision for additional borrowing capacity under the Credit Agreement.
(e) Creditors of the Companies listed on Schedule 5.1 hereto
shall either (i) if such debt is evidenced by a promissory note, deferral
agreement, or other similar document providing for extended payment terms, not
be in default under such promissory note, deferral agreement, or other similar
document or (ii) if such debt is not evidenced by such a document, the holder of
such debt has not commenced any action for the collection of such debt or in
respect of any lien or encumbrance securing such debt.
(f) The Companies and Xxxxx Management LLC (and its affiliates
party thereto) shall have agreed to a restructuring or amendment to the terms of
the existing Farmout Agreement (the "Farmout Restructurings"), such amendment
substantially in the form attached hereto as Exhibit F.
(g) The Xxxxx Group and the Purchasers shall have executed a
shareholders agreement (the "Shareholders Agreement") substantially in the form
attached hereto as Exhibit B.
(h) The Issuer, the Xxxxx Group and the Purchasers shall have
executed a registration rights agreement (the "Registration Rights Agreement"),
in the form attached hereto as Exhibit C.
(i) The Board of Directors of the Issuer and each of IPC's and
Refining's Boards of Directors shall have approved, as applicable, the terms of
this Agreement, the Exchange, the New Securities and any other transactions
related thereto, and the Board of Directors of the Issuer shall have received an
opinion of an investment bank that the Exchange is fair, from a financial point
of view, to the existing public holders of the Issuer's Common Stock.
(j) All consents, approvals and authorizations, including
shareholder, regulatory and other approvals shall have been obtained in form and
in substance reasonably satisfactory to TCW and Holdings.
(k) All other documents required by this Agreement, relating
to the Exchange, the New Securities or any transaction related thereto or as may
be requested by TCW and Holdings, shall have been prepared and shall contain
representations, warranties, and indemnities in form and in substance reasonably
satisfactory to TCW, Holdings and their counsel.
17
22
(l) TCW and Holdings shall have received the opinion of
Xxxxxxx & Danskin P.S., counsel to the Issuer, substantially in the form
attached hereto as Exhibit D (the "Xxxxxxx Opinion") as to matters of Washington
law.
(m) TCW and Holdings shall have received the opinion of Akin,
Gump, Strauss, Xxxxx & Xxxx, L.L.P., counsel to the Companies, substantially in
the form attached hereto as Exhibit E (the "Akin Opinion").
(n) TCW and Holdings shall have received the opinion of Van
Cott, Xxxxxx, Cornwall & XxXxxxxx, counsel to Refining, substantially in the
form attached hereto as Exhibit G (the "Utah Opinion") as to matters of Utah
law.
(o) Each of the Closing Conditions of JEDI set forth in
Section 5.2 hereof shall have been satisfied or waived by JEDI.
(p) Each of the Companies, at Closing, shall have executed the
TCW Release.
(q) Holdings shall have received certificates representing the
Holdings New Securities.
5.2 JEDI's Conditions to Closing. As a condition to the
obligations of JEDI hereunder and prior to the issuance of the New Securities,
the following conditions precedent shall be satisfied (in form and substance
reasonably satisfactory to JEDI and its counsel):
(a) Each of the representations and warranties of the
Companies contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date, as though
made on and as of the Closing. JEDI shall have received one or more certificates
of the Companies signed by the President or Chief Executive Officer and the
Chief Financial Officer or Secretary of such Company to that effect.
(b) JEDI shall have completed a satisfactory due diligence
review of the Companies including, but not limited to, a review of the
engineering, economics and projections of all properties owned or leased by the
Companies, including the refinery, all environmental documents, financial
projections and accounting and control systems of the Companies.
(c) The general partner of JEDI shall have approved the terms
of this Agreement, the Exchange, the New Securities and any other transactions
related hereto or thereto.
(d) Since the date of this Agreement, there shall not have
occurred any event or events which, individually or in the aggregate, would
have, or could be reasonably expected to have a Material Adverse Effect on the
financial condition, business or prospects of the Companies, the Subsidiaries or
any of them or their properties.
(e) The Senior Creditors shall have agreed to a restructuring
and commitment with respect to the outstanding indebtedness of the Companies
under the Credit Agreement on terms acceptable to JEDI including, but not
limited to, a restructuring of the amortization of such debt and a provision for
additional borrowing capacity under the Credit Agreement.
18
23
(f) Creditors of the Companies listed on Schedule 5.1 hereto
shall either (i) if such debt is evidenced by a promissory note, deferral
agreement, or other similar document providing for extended payment terms, not
be in default under such promissory note, deferral agreement, or other similar
document or (ii) if such debt is not evidenced by such a document, the holder of
such debt has not commenced any action for the collection of such debt or in
respect of any lien or encumbrance securing such debt.
(g) The Companies and Xxxxx Management LLC (and its affiliates
party thereto) shall have agreed to a restructuring or amendment to the terms of
the Farmout Agreement, such amendment substantially in the form attached hereto
as Exhibit F.
(h) The Xxxxx Group and the Purchasers shall have executed the
Shareholders Agreement.
(i) The Issuer, the Xxxxx Group and the Purchasers shall have
executed the Registration Rights Agreement.
(j) The Board of Directors of the Issuer and each of IPC's and
Refining's Boards of Directors shall approve, as applicable, the terms of this
Agreement, the Exchange, the New Securities and any other transactions related
thereto, and the Board of Directors of the Issuer shall receive an opinion of an
investment bank that the Exchange is fair, from a financial point of view, to
the existing public holders of the Issuer's Common Stock.
(k) All consents, approvals and authorizations, including
shareholder, regulatory and other approvals shall have been obtained in form and
in substance reasonably satisfactory to JEDI.
(l) All other documents required by this Agreement, relating
to the Exchange, the New Securities or any transaction related thereto or as may
be requested by JEDI, shall have been prepared and shall contain
representations, warranties, and indemnities in form and in substance reasonably
satisfactory to JEDI and its counsel.
(m) JEDI shall have received the Xxxxxxx Opinion.
(n) JEDI shall have received the Akin Opinion.
(o) JEDI shall have received the Utah Opinion.
(p) Each of the Closing Conditions of TCW and Holdings under
Section 5.1 hereof shall have been satisfied or waived by TCW and Holdings and
the closing of the TCW and Holdings transactions in the Exchange shall occur
simultaneously with the closing of the JEDI transactions.
(q) Each of the Companies, at Closing, shall have executed the
JEDI Release.
(r) JEDI shall have received certificates representing the
JEDI New Securities.
19
24
5.3 Closing Deliveries of the Companies. As a condition to the
obligations of TCW and the Purchasers hereunder and prior to the issuance of the
New Securities, the Companies shall have delivered to the Purchasers (in form
and substance satisfactory to TCW, the Purchasers and their counsel):
(a) A certificate, dated as of the Closing Date, of the
Secretary or an Assistant Secretary of each of IPC and Refining,
(i) attaching a true and complete copy of the
resolutions of the Boards of Directors of each of IPC and
Refining, and of all documents evidencing other necessary
corporate or shareholder action taken by each of IPC and
Refining in connection with the matters contemplated by this
Agreement;
(ii) attaching a true and complete copy of the bylaws
of each of IPC and Refining; and
(iii) setting forth the incumbency of the officer or
officers of IPC and Refining who sign this Agreement or any
other documents related hereto, including therein a signature
specimen of such officer or officers.
(b) A certificate, dated as of the Closing Date, of the
Secretary or an Assistant Secretary of the Issuer,
(i) attaching a true and complete copy of the
resolutions of the Board of Directors of the Issuer, and of
all documents evidencing other necessary corporate or
shareholder action (in form and substance reasonably
satisfactory to the Purchasers and to their counsel) taken by
the Issuer in connection with the matters contemplated by this
Agreement;
(ii) attaching a true and complete copy of the
Preferred Stock Designation;
(iii) attaching a true and complete copy of the
bylaws of the Issuer; and
(iv) setting forth the incumbency of the officer or
officers of IPC and Refining who sign this Agreement, the New
Securities or any other document related hereto or thereto,
including therein a signature specimen of such officer or
officers.
(c) Certificates of good standing (including tax status, if
applicable) of the each of the Companies under the laws of their respective
states of incorporation and as foreign corporations in every state in which
their ownership of property or their conduct of business requires qualification
or registration as a foreign corporation, except for jurisdictions wherein the
failure to be so qualified would not have a Material Adverse Effect on the
Companies and the Subsidiaries, taken as a whole.
(d) A copy of the Initial Independent Engineering Report,
certified or otherwise approved by the engineer preparing such report.
20
25
(e) Such other documents, agreements, instruments,
certificates and evidence relating to the matters necessary to undertake the
Exchange as contemplated by this Agreement as the Purchasers or their counsel
shall reasonably require.
SECTION 6. ISSUER'S CONDITIONS TO CLOSING; REQUIRED
DELIVERIES. As a condition to the obligations of the Companies hereunder and
prior to the issuance of the New Securities, the following conditions precedent
shall be satisfied (in form and substance reasonably satisfactory to the
Companies and their counsel):
(a) Each of the representations and warranties of TCW,
Holdings and JEDI contained in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date,
as though made on and as of the Closing. The Companies shall have received a
certificate from each of TCW, Holdings, Portfolio and JEDI to that effect.
(b) All consents, approvals and authorizations, including
shareholder, regulatory and other approvals shall have been obtained in form and
in substance reasonably satisfactory to the Companies.
(c) TCW shall, at Closing, execute and deliver the TCW Release
and JEDI shall, at Closing, execute and deliver the JEDI Release.
(d) The Senior Creditors shall have released all security
interests or similar interests with respect to the property or assets under or
related to the Farmout Agreement.
(e) The Board of Directors of the Issuer shall have received
an opinion of an investment bank that the Exchange is fair, from a financial
point of view, to the existing public holders of the Issuer's Common Stock.
(f) The Issuer shall have received from Fund V cancelled notes
representing the Fund V Debt.
(g) The Issuer shall have received from Portfolio cancelled
certificates representing the Portfolio Warrants.
(h) The Issuer shall have received from JEDI cancelled
certificates evidencing JEDI's entire interest in 100,000 shares of Series C
Preferred Stock.
(i) The Senior Creditors shall have agreed to a restructuring
and commitment with respect to the outstanding indebtedness of the Companies
under the Credit Agreement on terms acceptable to the Issuer and IPC including,
but not limited to, a restructuring of the amortization of such debt and a
provision for additional borrowing capacity under the Credit Agreement.
SECTION 7. TRANSFERABILITY OF NEW SECURITIES.
7.1 Restrictive Legend. Each certificate for Series D
Preferred Stock, Series E Preferred Stock, Series Z Preferred Stock and Common
Stock issued under this Agreement shall be stamped or otherwise imprinted with a
legend in substantially the following form:
21
26
"The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may be transferred only if registered pursuant to the
provisions of such Securities Act or if an exemption from
registration is available."
provided, that such restrictive legend shall not be required after the date on
which the securities evidenced by a certificate bearing such restrictive legend
no longer constitute Restricted Securities, and upon the request of the holder
of such certificate, the Issuer, without expense to the holder, shall issue a
new certificate not bearing the restrictive legend otherwise required to be
borne thereby. In addition, each New Security shall bear the legends required
under the Shareholders Agreement.
7.2 Rule 144 and 144A. At all times, in order to permit the
holders of Series D Preferred Stock, Series E Preferred Stock, Series Z
Preferred Stock and Common Stock, to transfer if they so desire, pursuant to
Rule 144 or 144A promulgated by the Commission (or any successor to such rule),
the Issuer will comply with all rules and regulations of the Commission
applicable in connection with use of Rule 144 and 144A (or any successor rules
thereto), including the provision of information concerning the Issuer to such
holders and the timely filing of all reports with the Commission in order to
enable such holders, if they so elect, to utilize Rule 144 or 144A, and the
Issuer will cause any restrictive legends to be removed and any transfer
restrictions to be rescinded with respect to any sale of Series D Preferred
Stock, Series E Preferred Stock, Series Z Preferred Stock or Common Stock which
is exempt from registration under the Securities Act pursuant to Rule 144 or
144A.
SECTION 8. AFFIRMATIVE COVENANTS OF THE COMPANIES
The Companies hereby warrant, covenant and agree that, so long
as a Purchaser beneficially owns either (i) five percent (5%) of the outstanding
Common Stock and Series Z Preferred Stock or (ii) 10% of the outstanding shares
of Series D Preferred Stock or Series E Preferred Stock, as applicable, acquired
under this Agreement (except with respect to Sections 8.9, 8.10, 8.11, 8.12 and
8.14 below for which no threshold or different ownership thresholds as specified
therein shall apply) (the "Requisite Ownership"):
8.1 Financial Statements. The Companies shall furnish and
deliver to the Purchasers, at the Companies' expense:
(a) as soon as available, but in any event within one hundred
twenty (120) days after the end of each fiscal year, a copy of the consolidated
balance sheet of the Companies and its consolidated Subsidiaries as at the end
of such year and the related consolidated statements of income and retained
earnings and of cash flows for such year, audited by Xxxxxx Xxxxxxxx LLP or
another independent certified public accountants of nationally recognized
standing reasonably acceptable to the Purchasers; and
(b) as soon as available, but in any event within fifty (50)
days after the end of each of the first three quarterly periods of each fiscal
year, the unaudited consolidated balance sheet of the Companies and their
consolidated Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income and retained earnings and of cash
flows for such quarter and the portion of the fiscal year through the end of
such quarter, certified by the chief financial officer of the Issuer as being
fairly stated in all material respects when considered
22
27
in relation to the consolidated financial statements of the Companies and their
consolidated Subsidiaries (subject to normal year-end adjustments).
(c) The requirements of this Section 8.1 shall be satisfied
without further action on the part of the Companies if the Issuer is timely
filing all reports with the Commission under the Exchange Act.
8.2 Management's Discussion and Results of Operations. The
Companies shall furnish and deliver to the Purchasers, at the Companies'
expense, as soon as available, but in any event within fifty (50) days after the
end of each calendar quarter, a quarterly management's discussion and results of
operations as compared to the budget for such quarter. The requirements of this
Section 8.2 shall be satisfied without further action on the part of the
Companies if the Issuer is timely filing all reports with the Commission under
the Exchange Act.
8.3 Certificates; Other Information. The Issuer shall deliver,
not more than thirty (30) days prior to the end of each fiscal year of the
Companies, a copy of the projections by the Companies of the monthly operating
budget and cash flow budget of the Companies and the Subsidiaries for the
succeeding fiscal year, such projections to be accompanied by a certificate of
the chief financial officer to the effect that such projections have been
prepared on the basis of sound financial planning practice and that such officer
has no reason to believe they are incorrect or misleading in any material
respect.
8.4 Independent Engineering Report. As soon as available after
the end of each calendar year, but in any event no later than March 1 of each
such year, the Companies, at their expense, shall promptly furnish, or cause to
be promptly furnished, to the Purchasers, an annual Independent Engineering
Report.
8.5 Inspection of Property; Books and Records; Discussions.
The Companies shall keep proper books of records and account in which full, true
and correct entries in conformity with GAAP and all requirements of law shall be
made of all dealings and transactions in relation to their business and
activities; and permit representatives of the Purchasers to visit and inspect
any of its properties and examine and make abstracts from any of their books and
records at any reasonable time and as often as may reasonably be desired and to
discuss the business, operations, properties and financial and other condition
of the Companies and the Subsidiaries with officers and employees of the
Companies and the Subsidiaries and with their independent certified public
accountants and attorneys.
8.6 Conduct of Business and Maintenance of Existence. The
Companies shall continue to engage in business of the same general type as now
conducted by it and preserve, renew and keep in full force and effect its
corporate existence and take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business. Each of the Companies shall perform all material obligations it is
required to perform under the terms of each indenture, mortgage, deed of trust,
security agreement, lease, franchise, agreement, contract or other instrument or
obligation to which it is a party or by which it or any of its properties is
bound.
8.7 Maintenance of Property; Insurance. The Companies shall
keep all property useful and necessary in its business in good working order and
condition; maintain with financially sound and reputable insurance companies
insurance on all their property in at least
23
28
such amounts and against at least such risks (but including in any event public
liability, product liability and business interruption) as are usually insured
against in the same general area by companies engaged in the same or a similar
business; and furnish to the Purchasers, upon written request, full information
as to the insurance carried.
8.8 Directors' and Officers' Insurance. The Companies shall
maintain, with financially sound and reputable insurance companies, insurance on
all their directors and officers in at least such amounts and against at least
such risks as are in effect as of the date hereof and on or before October 1,
1999, the Companies shall have increased the amount of such policy to an amount
not less than $10 million and furnish to the Purchasers, upon written request,
full information as to the insurance carried.
8.9 Taxes. The Companies will pay all taxes (other than
Federal, State or local income taxes) which may be payable in connection with
the execution and delivery of this Agreement or the issuance and sale of the New
Securities hereunder or in connection with any modification of the New
Securities and will save the Purchasers harmless without limitation as to time
against any and all liabilities with respect to or resulting from any delay in
paying, or omission to pay such taxes. The obligations of the Companies under
this Section 8.9 shall survive any redemption, repurchase or acquisition of the
New Securities by the Companies and the termination of this Agreement.
8.10 Replacement of Instruments. Upon receipt by the Issuer of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any certificate or instrument evidencing any of the
New Securities, and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that, if the owner of the same is a
commercial bank or an institutional lender or investor, its own agreement of
indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof, the Issuer, at its expense, will execute, register and deliver, in lieu
thereof, a new certificate or instrument for (or covering the purchase of) an
equal number of shares of the New Securities.
8.11 Costs and Expenses. So long as Holdings holds any shares
of Series D Preferred Stock, the Companies shall pay the reasonable legal,
engineering and other out-of-pocket costs and expenses of Holdings and its
affiliates relating to their dealings with, for or on behalf of the Companies.
So long as JEDI holds any shares of Series E Preferred Stock, the Companies
shall pay the reasonable legal costs and expenses of JEDI and its affiliates
relating to their dealings with, for or on behalf of the Companies.
8.12 Contingent Issuance of Options to Holdings and JEDI. The
parties hereto acknowledge and agree that the numbers of shares of Series Z
Preferred Stock and Common Stock of Issuer to be issued to Holdings and JEDI in
the Exchange have been agreed to by Holdings and JEDI based upon certain
understandings and agreements that such shares would represent certain
percentages of the fully diluted ownership of the Series Z Preferred Stock and
Common Stock of the Issuer which percentages would change if any of the options
or warrants listed on Schedule 8.12 (individually, a "Schedule 8.12 Option" and
collectively, the "Schedule 8.12 Options") are exercised. In consideration of
the agreement of Holdings and JEDI not to require an increase in the number of
shares of Series Z Preferred Stock and Common Stock to be
24
29
issued in the Exchange, the parties hereto agree that if at any time any
Schedule 8.12 Option is exercised by the holder thereof (an "Exercised 8.12
Option"), then within twenty (20) days after the date notice of such exercise is
received by the Issuer, the Issuer shall issue to Holdings and JEDI options to
purchase shares of Common Stock in the form attached hereto as Exhibit I (the
"Purchaser Adjustment Options") having the same per share exercise price and
termination date as the Exercised 8.12 Option, except that (a) the Purchaser
Adjustment Option issued to Holdings shall be for a number of shares equal to
200% of the number of shares issued with respect to the Exercised 8.12 Option,
(b) the Purchaser Adjustment Option issued to JEDI shall be for a number of
shares equal to 33.33% (rounding to the nearest whole number of shares) of the
number of shares issued with respect to the Exercised 8.12 Option, and (c) the
Purchaser Adjustment Options shall have a minimum term of not less than sixty
(60) days. In the event that any Schedule 8.12 Option is hereafter amended or
otherwise modified, then the Purchaser Adjustment Options issuable upon the
exercise thereof shall be similarly amended or modified; provided, that no
amendments to the Schedule 8.12 Options or the Purchaser Adjustment Options may
be made as to per share exercise price or shares issuable upon conversion
thereof. In addition, the voluntary cancellation or termination of any Schedule
8.12 Option either concurrently with or substantially contemporaneously with the
issuance to the holders of such cancelled or terminated Schedule 8.12 Options of
new options or rights to purchase securities of Issuer hereafter approved by the
Issuer's Board shall not be deemed or construed to be an amendment or
modification of the Schedule 8.12 Options for purposes of this section.
8.13 Bank Compliance Certificates. The Companies shall deliver
to Purchasers at the same time as the Companies deliver to the agent under the
Credit Agreement or the agent under any replacement credit agreement all
compliance certificates pursuant to Section 6.13 of the Credit Agreement
delivered to the agent under the Credit Agreement and any other similar notices
or reports pursuant to the Credit Agreement or a replacement credit agreement.
8.14 Management Controls. The failure by the Issuer to comply
with any of the covenants set forth below, unless specifically waived in writing
by Holdings, shall entitle Holdings to a right to specific performance, other
equitable remedies or damages available under applicable law. The holders of the
Series E Preferred Stock shall have no rights or remedies under this Section
8.14 other than the right to receive copies of the Annual Budget Plan, Approved
Annual Budget, Updated Budget and Approved Updated Budget pursuant to
subsections (a) and (b) hereof.
(a) The Issuer hereby agrees that, so long as Holdings
controls or holds Series D Preferred Stock with a liquidation preference of $25
million or more, the Issuer shall within thirty (30) days prior to the fiscal
year end deliver to Holdings, a proposed detailed budget plan (the "Annual
Budget Plan"), on both a consolidated and consolidating basis, for the
operations of the Companies and the Subsidiaries for the next fiscal year,
prepared by the Issuer's officers and employees and certified by the chief
financial officer of the Issuer, which Holdings shall have the right, in its
sole discretion to approve, modify or disapprove in whole or in part, including
on a "line item" basis. Any Annual Budget Plan (or any portion thereof) approved
in writing by Holdings is herein referred to as an "Approved Annual Budget". A
copy of the Annual Budget Plan and the Approved Annual Budget shall be provided
to holders of the Series E Preferred Stock holding in excess of 49% of the
outstanding Series E Preferred Stock, unless such holders request not to receive
copies of such budgets.
25
30
(b) The Issuer hereby agrees that, so long as Holdings
controls or holds Series D Preferred Stock with a liquidation preference of $25
million or more, the Issuer shall deliver on or immediately prior to June 10 of
each year to Holdings, an update of the Approved Annual Budget for that year
(the "Updated Budget"), on both a consolidated and consolidating basis, for the
operations of the Companies and the Subsidiaries for that year, prepared by the
Issuer's officers and employees and certified by the chief financial officer of
the Issuer, which Holdings shall have the right, in its sole discretion to
approve, modify or disapprove in whole or in part, including on a "line item"
basis. Any Updated Budget (or any items therein or portion thereof) approved in
writing by Holdings is herein referred to as an "Approved Updated Budget" and
together with the Approved Annual Budget, the "Approved Budgets." A copy of the
Updated Budget and the Approved Updated Budget shall be provided to the holders
of the Series E Preferred Stock holding in excess of 49% of the outstanding
Series E Preferred Stock, unless such holders request not to receive copies of
such budgets. No actions on the part of the Issuer's Board or its officers or
employees shall be permitted without prior approval of Holdings after June 30 of
each year for which an Updated Budget for such year has not been approved (until
such time as an Updated Budget for such year has been approved in accordance
herewith).
(c) The Issuer hereby agrees that, so long as Holdings
controls or holds Series D Preferred Stock with a liquidation preference of $25
million, without the prior written approval of Holdings, the Issuer shall not,
and shall not permit any of its subsidiaries to, directly or indirectly:
(i) Make or commit to make any individual
expenditures over $25,000 for any purpose that is not set
forth or otherwise expressly contemplated in the latest
Approved Budget;
(ii) Convey, sell, lease, assign, transfer or
otherwise dispose of any property, business or assets
(including, without limitation, receivables and leasehold
interests) with a value that exceeds $25,000 individually
whether now owned or hereafter acquired;
(iii) Approve the annual or other compensation for
any officer or director, or any salary increases or bonus
payments, benefit packages, form of employment agreements,
expense reimbursement guidelines (and exceptions thereto) or
any other adjustment to the compensation for any officer or
director;
(iv) Change any of its accounting practices or
procedures;
(v) Create, incur, assume or suffer to exist any
indebtedness for borrowed money or any other indebtedness in
an individual amount in excess of $25,000, except indebtedness
under hedging contracts approved by the Board in compliance
with the senior debt of the Issuer;
(vi) Assume any liabilities or issue any guarantees
for any amount, except in the case of any liabilities or
guarantees in an individual amount that does not exceed
$25,000;
(vii) Commence or settle any litigation where the
amount in controversy exceeds $25,000 or injunctive relief is
sought;
26
31
(viii) Transfer, loan, assign or otherwise convey any
assets or monies to subsidiaries of the Companies;
(ix) Amend or alter the Credit Agreement or any
documents relating to other indebtedness in an individual
amount in excess of $25,000;
(x) Approve any reimbursements to the senior officers
of the Companies for expense accounts, travel expenses or any
other reimbursable out-of-pocket expenses in excess of $3,000
in any calendar month with respect to any officer; and
(xi) Approve the hiring or termination of management
employees.
provided, however, that nothing in this Section 8.14 shall be
construed to require the approval of Holdings for, or
otherwise render invalid, any action by any Company, taken or
directed by an officer or other employee of any Company in
good faith in or in response to explosion, fire, flood or
other emergency or exigent circumstances to prevent loss of
life or injury to persons or property or to comply with
applicable governmental or regulatory requirements including
without limitation Environmental Laws, but the Companies
shall, as promptly as possible, report such emergency or
exigent circumstances and the actions taken with respect
thereto to Holdings.
SECTION 9. INDEMNITY. The Companies jointly and severally
agree to indemnify each Indemnified Party, upon demand, from and against any and
all liabilities, obligations, claims, losses, damages, penalties, fines,
actions, judgments, suits, settlements, costs, expenses or disbursements
(including reasonable fees of attorneys, accountants, experts and advisors) of
any kind or nature whatsoever (in this section collectively called "liabilities
and costs") which to any extent (in whole or in part) may be imposed on,
incurred by, or asserted against such Indemnified Party growing out of,
resulting from or in any other way associated with this Agreement, the Exchange
or any of the transactions and events (including the enforcement or defense
thereof) at any time associated therewith or contemplated therein (including any
violation or noncompliance with any Environmental Laws by any Related Person or
any liabilities or duties of any Related Person or of any Indemnified Party with
respect to Hazardous Materials found in or released into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART,
UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY OR ARE IN ANY EXTENT CAUSED, IN
WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY
INDEMNIFIED PARTY,
provided only that no Indemnified Party shall be entitled under this section to
receive indemnification for that portion, if any, of any liabilities and costs
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment. As used in this section the term
"Indemnified Party" refers to each of Fund V, Portfolio, TCW Asset Management
Company, a California corporation, Trust Company of the West, a California trust
company, Holdings, JEDI (and each of their affiliates) and each director,
officer, agent,
27
32
trustee, manager, member, partner, shareholder, principal, attorney, employee,
representative and affiliate of any such Person.
SECTION 10. MISCELLANEOUS
10.1 Notices.
(a) All communications under this Agreement shall be in
writing and shall be effective (a) upon hand delivery or delivery by telecopy or
facsimile, if delivered on a business day during normal business hours where
such notice is to be received or the first business day following such delivery
if delivered other than on a business day during normal business hours where
such notice is to be received or (b) on the second business day following the
date of mailing by first class mail, postage prepaid or by express courier
service, fully prepaid or upon actual receipt of such mailing, whichever shall
first occur:
(i) if to any party hereto, at its address for
notices specified beneath its name on the signature page
hereof, or at such other address as it may have furnished in
writing to the Issuer, or
(ii) if to any other Person who is the registered
holder of any New Securities, to the address for the purpose
of such holder as it appears in the stock ledger of the
Issuer.
10.2 Survival. All representations and warranties and
covenants made by the Companies herein or in any certificate or other instrument
delivered by them or on their behalf under this Agreement shall be considered to
have been relied upon by TCW and the Purchasers and shall survive the issuance
of the New Securities regardless of any investigation made by or on behalf of
TCW and/or the Purchasers.
10.3 Successors and Assigns. Except as otherwise expressly
provided herein, this Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties whether so expressed or
not; provided, that the benefits of Section 8 shall inure to the benefit of
affiliates of the Purchasers or their transferees holding the Requisite
Ownership.
10.4 Amendment and Waiver, etc. This Agreement may be amended,
but only with the written consent of each of the Companies, TCW and the
Purchasers. No failure or delay on the part of any of TCW, the Purchasers or the
Companies in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to TCW
and/or the Purchasers at law or in equity or otherwise. No waiver of or consent
to any departure by the Companies from any provision of this Agreement shall be
effective unless signed in writing by each of the Purchasers who then holds
either five percent (5%) of the outstanding Common Stock and Series Z Preferred
Stock or any Series D Preferred Stock or Series E Preferred Stock.
28
33
10.5 Counterparts. Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument.
10.6 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
10.7 Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of New York as applicable
to contracts.
10.8 Expenses. Whether or not the transactions contemplated by
this Agreement close, the Companies will pay all costs and expenses incurred by
the Purchasers (a) relating to the negotiation, execution and delivery of this
Agreement and the issuance of the New Securities (including, without limitation,
reasonable fees, office charges and expenses of counsel to TCW, Milbank, Tweed,
Xxxxxx & XxXxxx LLP, and counsel to JEDI, Xxxxxx & Xxxxxx), (b) relating to
printing the instruments evidencing the New Securities, (c) relating to any
amendments, waivers or consents under this Agreement to the same extent as set
forth in clause (a) and (b) above incident to the enforcement by the Purchasers
of, or the protection or preservation of any right or remedy of the Purchasers
under, this Agreement, or any other document or agreement furnished pursuant
hereto or thereto or in connection herewith or therewith (including, without
limitation, reasonable fees and expenses of counsel), (d) relating to third
party engineering and outside accounting costs, and (e) relating to any future
dealings associated with the transactions relating to this Agreement and the
Exchange (including any engineering, legal, and outside accounting costs). The
Companies shall pay such costs and expenses, to the extent then payable, on the
date of issuance of the New Securities or, with respect to those matters
described in clauses (b), (c), (d) and (e) above thereafter from time to time
upon demand by the Purchasers upon presentation, in each such case, of a
statement thereof. Additionally, the Companies shall pay an additional $25,000
to each of TCW and JEDI (in addition to any payments made for each party's costs
and expenses as set forth herein) at Closing.
10.9 Specific Performance. The Companies recognize that money
damages may be inadequate to compensate the Purchasers for a breach by the
Companies of their obligations hereunder, and the Companies irrevocably agree
that the Purchasers shall be entitled to the remedy of specific performance or
the granting of such other equitable remedies as may be awarded pursuant to the
arbitration described in Section 10.10 below or by a court of competent
jurisdiction after the arbitration in Section 10.10 below in order to afford the
Purchasers the benefits of this Agreement and that the Companies shall not
object and hereby waive any right to object to such remedy or such granting of
other equitable remedies on the grounds that money damages will not be
sufficient to compensate the Purchasers.
10.10 Arbitration. THE PARTIES AGREE THAT IF ANY DISPUTE
SHOULD ARISE UNDER THE TERMS AND PROVISIONS OF THIS AGREEMENT, EACH PARTY WAIVES
ANY RIGHT TO COMMENCE LEGAL ACTION OR ARBITRATION OTHER THAN AS PROVIDED UNDER
THE TERMS OF THIS AGREEMENT, AND THIS AGREEMENT SHALL PROVIDE THE SOLE AND
EXCLUSIVE REMEDY FOR RESOLUTION OF DISPUTES.
29
34
(a) THE DETERMINATION OF THE ARBITRATOR WILL BE FINAL AND
BINDING UPON EACH PARTY AND EACH PARTY SPECIFICALLY WAIVES ANY RIGHT TO CLAIM
THAT THE ARBITRATOR HAS EXCEEDED THE SCOPE OF THE ARBITRATION, HAS DISREGARDED
EVIDENCE OR PRINCIPLES OF LAW, AND FURTHER WAIVES ANY RIGHT TO DISCLAIM THE
QUALIFICATION OR FUNCTION OF THE ARBITRATOR IN ANY MANNER OR FASHION.
(b) IF SUCH A DISPUTE HAS ONLY TWO PARTIES, EACH PARTY SHALL
SELECT ONE ARBITRATOR, AND THOSE ARBITRATORS SHALL SELECT A THIRD ARBITRATOR. IF
THE PARTIES DISPUTE THE SELECTION OF THE ARBITRATOR(S) AND CANNOT AGREE UPON THE
IDENTIFICATION OF THE ARBITRATOR(S) WITHIN THIRTY (30) DAYS FROM THE MAILING OF
THE OBJECTION, A PETITION FOR APPOINTMENT OF ARBITRATOR SHALL BE FILED WITH THE
SUPERIOR COURT OF THE COUNTY OF LOS ANGELES, CALIFORNIA. IF SUCH A DISPUTE HAS
MORE THAN TWO PARTIES, ALL SUCH PARTIES SHALL WITHIN THIRTY (30) DAYS (i)
APPOINT TWO ARBITRATORS UPON AGREEMENT OF ALL SUCH PARTIES OR IF SUCH PARTIES
CANNOT SO AGREE (ii) APPROVE TWO ARBITRATOR'S SELECTED BY THE AMERICAN
ARBITRATION ASSOCIATION. THE TWO ARBITRATORS SELECTED SHALL THEN SELECT A THIRD
ARBITRATOR. THE ARBITRATION SHALL BE HELD IN LOS ANGELES, CALIFORNIA PURSUANT TO
THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION AND THE
NEW YORK CODE OF CIVIL PROCEDURE.
(c) THE ARBITRATOR'S FEES AND FEES AND COSTS OF PETITIONING
FOR THE APPOINTMENT OF THE ARBITRATOR SHALL BE PAID BY THE COMPANIES. THE
ARBITRATOR, UPON RENDERING ITS AWARD, SHALL DETERMINE THE PARTY THAT PREVAILED
BASED UPON WRITTEN STATEMENTS MADE BY EACH PARTY AT THE COMMENCEMENT OF THE
ARBITRATION AS TO THE POSITION OF THE PARTIES AND THEIR ALTERNATIVES FOR
SETTLING THE MATTER AND THEREAFTER IN ACCORDANCE WITH THE RULES FOR THE FURTHER
PRESENTATION OF EVIDENCE AS SET FORTH BY THE ARBITRATOR. A STATEMENT OF A
PROPOSED SETTLEMENT SHALL NOT BE BINDING UPON ANY PARTY AND SHALL NOT BE
CONSIDERED AS EVIDENCE BY THE ARBITRATOR EXCEPT TO THE EXTENT THAT THE
ARBITRATOR UPON MAKING ITS SOLE AND INDEPENDENT DETERMINATION SHALL DETERMINE
THE PARTY WHICH PREVAILED BASED UPON THE PROPOSALS FOR SETTLEMENT OF THE MATTER
MADE BY EACH PARTY AND SHALL DETERMINE THAT THE NON-PREVAILING PARTY SHALL PAY
SOME OR ALL OF THE COSTS OF ARBITRATION INCLUDING ANY COSTS INCURRED BY THE
ARBITRATOR IN EMPLOYING EXPERTS TO ADVISE THE ARBITRATOR IN REGARD TO SPECIFIC
SUBJECTS OR QUESTIONS. THE ARBITRATOR MAY FURTHER AWARD THE COST OF ATTORNEYS'
FEES OR EXPERT WITNESSES CONSULTED OR EMPLOYED IN THE PREPARATION OR
PRESENTATION OF EVIDENCE TO THE ARBITRATOR BY THE PREVAILING PARTY IF, IN THE
ARBITRATOR'S DETERMINATION, THE POSITION OF THE NONPREVAILING PARTY WAS NOT
REASONABLY TAKEN OR MAINTAINED OR WAS BASED UPON A FAILURE TO PROPERLY EXCHANGE
OR COMMUNICATE INFORMATION WITH THE PREVAILING PARTY IN REGARD TO THE SUBJECT
SUBMITTED TO ARBITRATION.
30
35
(d) THE ARBITRATOR'S DETERMINATION MAY FURTHER PROVIDE FOR
PROSPECTIVE ENFORCEMENT AND DIRECTIONS FOR THE PARTIES TO COMPLY WITH INCLUDING
WITHOUT LIMITATION PERMANENT INJUNCTIVE RELIEF. UNDER SUCH CIRCUMSTANCES, THE
ARBITRATOR'S AWARD SHALL BE BINDING UPON THE PARTIES AND SHALL BE UNDERTAKEN AND
PERFORMED BY EACH OF THE PARTIES UNTIL SUCH TIME AS THE ARBITRATOR'S DIRECTIONS
TO THE PARTY SHALL LAPSE BY THEIR TERM, OR THE ARBITRATOR SHALL NOTIFY THE
PARTIES THAT THOSE TERMS ARE NO LONGER IN FORCE OR EFFECT OR SHALL MODIFY THOSE
TERMS.
31
36
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Exchange Agreement as of the date first above written.
INLAND RESOURCES INC.,
a Washington corporation
By: /s/ XXXX X. XXXXXX
---------------------------------
Xxxx X. Xxxxxx
Co-Chief Executive Officer
000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
INLAND PRODUCTION COMPANY,
a Texas corporation
By: /S/ XXXX X. XXXXXX
---------------------------------
Xxxx X. Xxxxxx
Chief Executive Officer
Address for Notices:
000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
37
INLAND REFINING, INC.,
a Utah corporation
By: /s/ XXX X. XXXXXXX
-------------------------------
Name: Xxx X. Xxxxxxx
Title:
Address for Notices:
000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
38
TRUST COMPANY OF THE WEST,
a California trust company,
as Sub-Custodian for Mellon
Bank for the benefit of
Account No. CPFF 873-3032,
By: /s/ XXXXXX X. XXXXXXXX
---------------------------------
Xxxxxx X. Xxxxxxxx
Managing Director
By: /s/ XXXX XXXXXXXX
---------------------------------
Xxxx XxxXxxxx
Senior Vice President
Address for Notices:
000 X. Xxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With copies to:
TCW Asset Management Company
0000 Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx XxxXxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Milbank, Tweed, Xxxxxx & XxXxxx LLP
000 X. Xxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
39
INLAND HOLDINGS LLC, a California
limited liability company,
By: TRUST COMPANY OF THE WEST,
a California trust company, as
Sub-Custodian for Mellon Bank
for the benefit of Account No.
CPFF 873-3032, Member
By: /s/ XXXXXX X. XXXXXXXX
-----------------------------------------
Xxxxxx X. Xxxxxxxx
Managing Director
By: /s/ XXXX XXXXXXXX
-----------------------------------------
Xxxx XxxXxxxx
Senior Vice President
By: TCW PORTFOLIO NO. 1555 DR V
SUB-CUSTODY PARTNERSHIP, L.P.,
a California limited partnership,
Member
By: TCW ROYALTY COMPANY V,
a California corporation, Managing
General Partner
By: /s/ XXXXXX X. XXXXXXXX
-------------------------------
Xxxxxx X. Xxxxxxxx
Vice President
Address for Notices:
000 X. Xxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With copies to:
TCW Asset Management Company
0000 Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx XxxXxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Milbank, Tweed, Xxxxxx & XxXxxx LLP
000 X. Xxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
40
JOINT ENERGY DEVELOPMENT INVESTMENTS
II LIMITED PARTNERSHIP, a Delaware
limited partnership
By: Enron Capital Management II
Limited Partnership, its
General Partner
By: Enron Capital II Corp.,
its General Partner
By: /s/ XXXX XXXXXX
--------------------------------------
Name: Xxxx Xxxxxx
Title: Vice President
Address for Notices:
Enron North America Compliance Department
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000/4946
41
TCW PORTFOLIO NO. 1555 DR V
SUB-CUSTODY PARTNERSHIP, L.P.,
a California limited partnership
By: TCW ROYALTY COMPANY V,
a California corporation, Managing
General Partner
By: /s/ XXXXXX X. XXXXXXXX
---------------------------
Xxxxxx X. Xxxxxxxx
Vice President
Address for Notices:
000 X. Xxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With copies to:
TCW Asset Management Company
0000 Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx XxxXxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Milbank, Tweed, Xxxxxx & XxXxxx LLP
000 X. Xxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
