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SECURITIES PURCHASE AGREEMENT
DATED AS OF JULY 21, 1997
BY AND BETWEEN
INLAND RESOURCES INC.
AND
JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
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TABLE OF CONTENTS
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Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Issuance and Purchase of Series C Preferred Stock . . . . . . . . . . . . . . . . . . . . . . 2
(a) Issuance and Purchase of Series C Preferred Stock . . . . . . . . . . . . . . . . . . . . . . 2
(b) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3. Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Consents and Approval; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) Offering of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(e) Broker's or Finder's Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(f) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(g) Publicly Filed Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(h) No Restrictions on Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(i) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(j) Financial Statements; Financial Condition; etc. . . . . . . . . . . . . . . . . . . . . . . . 6
(k) Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(l) Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(m) Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(n) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(o) Investment Company Act; Public Utility Holding Company Act . . . . . . . . . . . . . . . . . 7
(p) True and Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(q) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(r) Ownership of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(s) No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(t) Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(u) Compliance With Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(v) No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(w) Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(x) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4. Representations and Warranties of the Purchaser . . . . . . . . . . . . . . . . . . . . . . 10
(a) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Consents and Approval; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(c) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(c) Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 00
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(x) Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(e) No Restrictions on Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(f) Certain Public Utility Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6. Purchaser's Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Representations and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(c) Tagalong Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(d) Certificate of Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(e) Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(f) Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(g) Conversion of Series B Preferred Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 12
(h) Payment of Expenses and Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(i) Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. Company's Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(a) Representations and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8. Termination, Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9. Maintenance Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(c) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(d) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(e) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(f) Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(g) Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement") is made and
entered into as of the 21st of July, 1997, by and between Inland Resources Inc.
(the "Company") and Joint Energy Development Investments Limited Partnership
(the "Purchaser").
Section 1. Definitions. As used in this Agreement, the
following terms have the meanings indicated:
"AAA" has the meaning ascribed to such term in Section 10(g).
"Affiliate" shall have the meaning given to such term in Rule
405 under the Securities Act.
"Closing" has the meaning ascribed to such term in Section
2(b).
"Closing Date" has the meaning ascribed to such term in
Section 2(b).
"Common Stock" means the common stock, par value $.001 per
share, of the Company.
"Credit Agreement" means the Credit Agreement, among Inland
Production Company, the banks named therein and Canadian Imperial Bank of
Commerce, as agent, dated as of June 30, 1997.
"Dispute" has the meaning ascribed to such term in Section
10(g).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Authority" means the United States, any foreign
country, state, county, city or other political subdivision, agency or
instrumentality thereof.
"Material Adverse Effect" means any material adverse effect on
the financial condition, prospects, assets, business or operations of the
Company and its Subsidiaries taken as a whole.
"Mediator" has the meaning ascribed to such term in Section
10(g).
"Registration Rights Agreement" means the Registration Rights
Agreement in the form attached hereto as Exhibit A.
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"SEC Reports" has the meaning ascribed to such term in Section
3(g).
"Securities Act" means the Securities Act of 1933, as amended.
"Series C Preferred Stock" means the Series C Cumulative
Convertible Preferred Stock, par value $.001 per share, of the Company.
"Subsidiary" means, when used with reference to an entity,
any corporation, a majority of the outstanding voting securities of which are
owned directly or indirectly by such entity. Such term shall also refer to any
other partnership, limited partnership, joint venture, trust, or other business
entity in which such entity has a material interest.
"Shares" has the meaning ascribed to such term in Section
2(a).
"Tagalong Agreement" means the Tagalong Agreement in the form
attached hereto as Exhibit B.
"Transactions" means the issuance and sale of the Shares to
the Purchaser and the other transactions contemplated by this Agreement, the
Registration Rights Agreement and the Tagalong Agreement.
All capitalized terms not defined and used herein shall have
the meaning set forth in the Credit Agreement.
Section 2. Issuance and Purchase of Series C Preferred Stock.
(a) Issuance and Purchase of Series C Preferred Stock.
Subject to the terms and conditions of this Agreement, the Company
agrees to issue and sell to the Purchaser, and the Purchaser (or the
Purchaser's designee) agrees to subscribe for and purchase from the
Company, 100,000 shares (the "Shares") having the relative rights,
preferences, privileges and limitations set forth on the "Articles of
Amendment to the Articles of Incorporation of Inland Resources Inc."
("Certificate of Designation") attached hereto as Exhibit C and
incorporated herein for all purposes by this reference (the "Series C
Preferred Stock"), for an aggregate purchase price of $10,000,000
($100.00 per share of Series C Preferred Stock) (the "Purchase
Price").
(b) The Closing. Subject to the terms and conditions of
this Agreement, the issuance and purchase of the Shares shall take
place at a closing (the "Closing") to be held at the offices of the
Purchaser or such other location as may be agreed by the parties at
10:00 a.m. (Denver time) on July 21, 1997, or such later date as may
be agreed by the parties. The date on which the Closing occurs is
referred to herein as the "Closing Date." On the Closing
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Date, the Company will deliver the Shares registered in the name of
the Purchaser and/or the Purchaser's nominees or designees upon
receipt of the Purchase Price therefor by wire transfer of immediately
available funds to an account designated by the Company, or by such
other method as is mutually agreed to by the Purchaser and the
Company. Such certificates shall bear appropriate restrictive legends
deemed necessary by the Company to comply with applicable securities
laws. Prior to the Closing, the Company shall have filed with the
Secretary of State of Washington the Certificate of Designation.
Section 3. Representations and Warranties of the Company. The
Company represents and warrants to the Purchaser as of the date hereof as
follows:
(a) Corporate Status. Each of the Company and its
Subsidiaries (i) is a duly organized and validly existing corporation
or partnership in good standing under the laws of the jurisdiction of
its incorporation or formation, (ii) has the corporate or partnership
power and authority to own its property and assets and to transact the
business in which it is engaged or presently proposed to engage and
(iii) has duly qualified and is authorized to do business and is in
good standing as a foreign corporation or partnership in every
jurisdiction in which it owns or leases real property or in which the
nature of its business requires it to be so qualified, except where
the failure to so quality, individually or in the aggregate, could not
have a Material Adverse Effect. The copy of the Amended and Restated
Articles of Incorporation of Inland Resources Inc. filed as exhibit
3.1 to the Company's Form 10-QSB for the quarter ended June 30, 1996
is a true, correct and complete copy of the Company's Articles of
Incorporation, except for the amendments set forth in the Certificate
of Designation. Except for the Certificate of Designation, no other
amendment to the Company's Articles of Incorporation has been approved
by the Board of Directors or stockholders of the Corporation or filed
with the Washington Secretary of State.
(b) Authority. The Company has all requisite corporate
power and authority to execute and deliver this Agreement and the
Registration Rights Agreement and to consummate the Transactions to be
performed by the Company. The execution and delivery of this
Agreement and the Registration Rights Agreement and the consummation
of the Transactions to be performed by the Company have been duly and
validly authorized by all necessary action on the part of the Board of
Directors of the Company, and no other corporate proceedings are
necessary to authorize the execution and delivery of this Agreement
and the Registration Rights Agreement by the Company or to consummate
the Transactions to be performed by the Company, other than filing the
Certificate of Designation with the Secretary of State of Washington
on the Closing Date, and as a result of the prior approval by at least
a majority of the Company's Board of Directors of the Purchaser's
purchase of Shares the provisions of RCW23B.19.040 of the Washington
Business Corporation Act are inapplicable to the Purchaser. This
Agreement and the Registration Rights Agreement have been duly and
validly executed and delivered by the
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Company and, assuming each of this Agreement and the Registration
Rights Agreement constitutes a valid and binding obligation of the
Purchaser, each of this Agreement and the Registration Rights
Agreement constitutes, a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms. Upon
receipt by the Company of the Purchase Price, the Shares shall be duly
authorized, validly issued, fully paid and non-assessable and free of
any preemptive rights. The shares of Common Stock underlying the
Shares have been reserved for issuance, and such shares of Common
Stock upon conversion of the Shares will be validly issued, fully paid
and non-assessable and free of any preemptive rights.
(c) Consents and Approval; No Violation. Neither the
execution, delivery or performance of this Agreement or the
Registration Rights Agreement by the Company, the consummation of the
Transactions to be performed by the Company nor compliance by the
Company with any of the provisions hereof or of the Registration
Rights Agreement will (i) conflict with or result in any breach of any
provisions of the Articles of Incorporation or by-laws of the Company
or any of its Subsidiaries, assuming, for this purpose, the
Certificate of Designation has been filed with the Secretary of State
of Washington; (ii) require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental
authority, including those of the United States, any foreign country,
state, county, city or other political subdivision, agency or
instrumentality thereof (herein referred to as a "Governmental
Authority"), except for consents, approvals, authorizations, permits,
filings or notifications which have been obtained or made; (iii)
result in a default (with or without due notice or lapse of time or
both) or give rise to any right of termination, cancellation or
acceleration under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, contract, license, agreement or other
instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective assets may be bound, except
for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been
obtained; (iv) result in the creation or imposition of any lien,
charge or other encumbrance on the assets of the Company or any of its
Subsidiaries; or (v) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company, any of its
Subsidiaries or any of their respective assets.
(d) Offering of the Shares. The offer, sale and issuance
of the Shares pursuant to this Agreement do not require registration
of the Shares under the Securities Act of 1933, as amended (the
"Securities Act"), or registration or qualification under any
applicable state "blue sky" or securities laws, based on available
non-public offering exemptions which are based, in part, on the
representations of the Purchaser in Section 4(c). The Company has not
taken, directly or indirectly, nor will it take any action which will
subject the issuance or sale of any of the Shares to be in violation
of the provision of Section 5 of the Securities Act or the provisions
of any securities, blue sky law or similar law of any applicable
jurisdiction.
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(e) Broker's or Finder's Commissions. Except as referred
to herein, no broker's or finder's fees or commissions will be payable
by the Company in connection with the issuance and sale of the Shares
or the Transactions.
(f) Capitalization. (i) As of the date hereof, the
authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, and 20,000,000 shares of Class A preferred stock, par
value $.001 per share ("Preferred Shares"). As of the date hereof,
6,319,059 shares of Common Stock and no Series A Preferred Shares or
Series B Preferred Shares (other than the 1,000,000 shares of Series B
Preferred Shares being converted concurrently with the purchase and
sale of Shares at the Closing) were issued and outstanding. All
Series A Preferred Shares and Series B Preferred Shares will have been
canceled and will have been returned to authorized but unissued
Preferred Shares as of the Closing. Except with the consent of the
Purchaser, the Company will not, prior to the Closing, authorize or
issue any Common Stock or Preferred Stock (other than upon exercise of
outstanding options or warrants), and will not repurchase or redeem
any Common Stock or Preferred Stock. All such issued and outstanding
shares of capital stock of the Company are validly issued, fully paid,
non-assessable and free of any preemptive rights. Other than the
Shares issuable pursuant to this Agreement or the shares of Common
Stock underlying the Shares, neither the Company nor any Subsidiary
has any shares of its capital stock reserved for issuance, except for
697,300 shares of Common Stock issuable pursuant to the Company's
employee stock option plans, of which options for 221,300 shares are
outstanding, and 656,911 shares issuable pursuant to other outstanding
subscriptions, options and warrants. There are no other (x)
outstanding options, warrants or securities convertible into Common
Stock or (y) contracts, commitments, agreements, understandings or
arrangements of any kind to which the Company is a party relating to
the issuance of any capital stock of the Company, other than this
Agreement. Except as set forth on Schedule 3(f), the Company is not a
party to or bound by any agreement with respect to any of its
securities which grants registration rights to any person.
(ii) As of the Closing Date, the authorized
capital stock of the Company shall consist of 25,000,000 shares of
Common Stock, and 20,000,000 Preferred Shares, of which 100,000 shares
shall have been designated as Series C Cumulative Convertible
Preferred Stock pursuant to the Certificate of Designation. Upon
issuance at the Closing Date, the Shares will be duly authorized,
validly issued, fully paid and nonassessable and shall have been
issued free of any preemptive right and free from all liens.
(g) Publicly Filed Documents. Each of the Company's
Annual Report on Form 10-KSB for the period ended December 31, 1996,
and its Quarterly Report on Form 10-QSB for the period ended March 31,
1997 (the "SEC Reports"), as of its filing date, complied in all
material respects, both as to form and content, with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder and did not contain any untrue
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statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. The
Company has made all filings required to be made by it with the
Commission pursuant to Sections 12, 13, 14 and 15 of the Exchange Act.
All of such filings, and all filings made by the Company with the
Commission pursuant to such sections, rules and regulations although
not required to be made, complied in all material respects, as to both
form and content, with all applicable requirements of the Exchange Act
and the rules and regulations thereunder, and, at the time of filing,
did not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made,
not misleading.
(h) No Restrictions on Affiliates. Neither the Company
nor any of its Subsidiaries is a party to any agreement that would
purport to impose restrictions or limitations on any affiliate of the
Company (other than its controlled affiliates).
(i) Litigation. There are no actions, suits or
proceedings pending or threatened (i) with respect to any of the
Transactions or (ii) that could, individually or in the aggregate,
result in a Material Adverse Effect.
(j) Financial Statements; Financial Condition; etc. Each
of the financial statements included in the SEC Reports were prepared
in accordance with generally accepted accounting principles
consistently applied and fairly present the financial condition and
the results of operations of the entities covered thereby on the dates
and for the periods covered thereby, except as disclosed in the notes
thereto and, with respect to interim financial statements, subject to
normally recurring year-end adjustments. Neither the Company nor any
of its Subsidiaries has any material liability (contingent or
otherwise) not reflected in such financial statements or in the notes
thereto.
(k) Material Adverse Change. Since March 31, 1997, there
has occurred no event, act or condition which has had, or could have,
a Material Adverse Effect.
(l) Use of Proceeds; Margin Regulations. All proceeds
from the issuance of Shares will be used by the Company only in
accordance with the provisions of Section 5(a). No part of the
proceeds from the issuance of Shares will be used by the Company to
purchase or carry any Margin Stock or to extend credit to others for
the purpose of purchasing or carrying any Margin Stock. Neither the
purchase of the Shares nor the use of the proceeds thereof will
violate or be inconsistent with the provisions of Regulations G, T, U
or X of the Federal Reserve Board.
(m) Tax Returns and Payments. Each of the Company and
its Subsidiaries has filed all tax returns required to be filed by it
and has paid all taxes and assessments payable
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by it which have become due, other than those not yet delinquent or
those that are reserved against in accordance with generally accepted
accounting principles which are being diligently contested in good
faith by appropriate proceedings.
(n) ERISA. Neither the Company nor any of its
Subsidiaries has any Plans other than those listed on Schedule 4.11 to
the Credit Agreement. No accumulated funding deficiency (as defined
in Section 412 of the Code or Section 302 of ERISA) or Reportable
Event has occurred with respect to any Plan. There are no unfunded
benefit liabilities under any Plan. The Company and each member of
its ERISA Controlled Group have complied with the requirements of
Section 515 of ERISA with respect to each Multiemployer Plan and is
not in "default" (as defined in Section 4219(c)(5) of ERISA) with
respect to payments to a Multiemployer Plan. The aggregate potential
total withdrawal liability, and the aggregate potential annual
withdrawal liability payments of the Company and the members of its
ERISA Controlled Group as determined in accordance with Title IV of
ERISA as if the Company and the members of its ERISA Controlled Group
had completely withdrawn from all Multiemployer Plans is not greater
than $500,000 and $100,000, respectively. To the best knowledge of
the Company and each member of its ERISA Controlled Group, no
Multiemployer Plan is or is likely to be in reorganization (as defined
in Section 4241 of ERISA or Section 418 of the Code) or is insolvent
(as defined in Section 4245 of ERISA). No material liability to the
PBGC (other than required premium payments), the Internal Revenue
Service, any Plan or any trust established under Title IV of ERISA has
been, or is expected by the Company or any member of its ERISA
Controlled Group to be, incurred by the Company or any member of its
ERISA Controlled Group. Except as otherwise disclosed on Schedule
4.11 to the Credit Agreement, neither the Company nor any member of
its ERISA Controlled Group has any contingent liability with respect
to any post-retirement benefit under any "welfare plan" (as defined in
Section 3(1) of ERISA), other than liability for continuation coverage
under Part 6 of Title I of ERISA. No lien under Section 412(n) of the
Code or 302(f) of ERISA or requirement to provide security under
Section 401(a)(29) of the Code or Section 307 of ERISA has been or is
reasonably expected by the Company or any member of its ERISA
Controlled Group to be imposed on the assets of the Company or any
member of its ERISA Controlled Group.
(o) Investment Company Act; Public Utility Holding
Company Act. The Company is not an "investment company" or a company
"controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended. The Company does not own
or operate any facility used for the generation, transmission or
distribution for sale of electric energy or any facility used for the
retail distribution of natural or manufactured gas, each within the
meaning of the Public Utility Holding Company Act of 1935, as amended
(the "1935 Act"). The Company is not an "electric utility company" or
a "gas utility company" within the meaning of the 1935 Act. The
Company is not (i) a "holding company," (ii) a "subsidiary company,"
an "affiliate" or "associate company" of a
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"holding company" or (iii) an "affiliate" of a "subsidiary company" of
a "holding company," each within the meaning of the 1935 Act. The
Company is not subject to regulation as a public utility or public
service company (or similar designation) by any state in the United
States, by the United States, by any foreign country or by any agency
or instrumentality of any of the foregoing.
(p) True and Complete Disclosure. All factual
information (taken as a whole) furnished by or on behalf of the
Company in writing to the Purchaser on or prior to the Closing Date,
for purposes of or in connection with this Agreement or any of the
Transactions is true and accurate in all material respects on the date
as of which such information is dated or furnished and not incomplete
by omitting to state any material fact necessary to make such
information (taken as a whole) not misleading at such time. As of the
date hereof, there are no facts, events or conditions known to the
Company which, individually or in the aggregate, have or could be
expected to have a Material Adverse Effect.
(q) Environmental Matters.
(i) Each of the Company and its Subsidiaries and
their Environmental Affiliates are in material compliance with
all applicable Environmental Laws, (y) each of the Company and
its Subsidiaries and their Environmental Affiliates have all
Environmental Approvals required to operate their businesses
as presently conducted or as reasonably anticipated to be
conducted, none of the Company nor its Subsidiaries nor any of
their Environmental Affiliates has received any communications
(written or oral), whether from a governmental authority,
citizens group, employee or otherwise, that alleges that the
Company or its Subsidiaries or Environmental Affiliate is not
in full compliance with all Environmental Laws, and to the
Company's best knowledge after due inquiry, there are no
circumstances that may prevent or interfere with such full
compliance in the future.
(ii) There is no Environmental Claim pending or
threatened against the Company or its Subsidiaries or its
Environmental Affiliate.
(iii) There are no past or present actions,
activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission,
discharge or disposal of any Material of Environmental
Concern, that could form the basis of any Environmental Claims
against any of the Company or its Subsidiaries or any of their
Environmental Affiliates.
(iv) Without in any way limiting the generality of
the foregoing, (x) there are no on-site or off-site locations
in which any of the Company or its Subsidiaries or its
Environmental Affiliate has stored, disposed or arranged for
the disposal of
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Materials of Environmental Concern, (y) there are no
underground storage tanks located on property owned or leased
by any of the Company or its Subsidiaries or its Environmental
Affiliate, (z) there is no asbestos contained in or forming
part of any building, building component, structure or office
space owned or, to the knowledge of the Company or its
Subsidiaries, leased by the Company or its Subsidiaries or its
Environmental Affiliate, and (w) no polychlorinated biphenyls
(PCB's) are used or stored at any property owned or, to the
knowledge of the Company or its Subsidiaries leased by the
Company or its Subsidiaries or its Environmental Affiliate.
(r) Ownership of Property. The Company and its
Subsidiaries have good and marketable fee simple title to or valid
leasehold interests in all of their real property and good title to
all of their personal property subject to no lien of any kind, except
the liens granted pursuant to the Credit Agreement and related
documents. The Company and its Subsidiaries enjoy peaceful and
undisturbed possession under all of their respective leases.
(s) No Default. Neither the Company nor any of its
Subsidiaries is in default under or with respect to any other
agreement, instrument or undertaking to which it is a party or by
which it or any of its property is bound in any respect which could
result in a Material Adverse Effect.
(t) Licenses, etc. The Company and its Subsidiaries have
obtained and hold in full force and effect, all franchises, licenses,
permits, certificates, authorizations, qualifications, accreditations,
easements, rights of way and other rights, consents and approvals
which are necessary for the operation of their respective businesses
as presently conducted.
(u) Compliance With Law. Each of the Company and its
Subsidiaries is in material compliance with all laws, rules,
regulations, orders, judgments, writs and decrees.
(v) No Burdensome Restrictions. Neither the Company nor
its Subsidiaries is a party to any agreement or instrument or subject
to any other obligation or any charter or corporate restriction or
any provision of any applicable law, rule or regulation which,
individually or in the aggregate, could have a Material Adverse
Effect.
(w) Labor Matters. There are no collective bargaining
agreements or Multiemployer Plans covering the employees of the
Company or any of its Subsidiaries, and none of such Persons has
suffered any strikes, walkouts, work stoppages or other material labor
difficulty within the last five years.
(x) Insurance. The Company and its Subsidiaries maintain
property, casualty, general liability and other insurance policies
with coverage limits in amounts and with
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carriers as in each case are customary in accordance with sound
business practices and which the Company believes are adequate under
the circumstances.
Section 4. Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants to the Company as of the date hereof
as follows:
(a) Authority. The Purchaser has all requisite
partnership power and authority to execute and deliver this Agreement
and to consummate the Transactions to be performed by the Purchaser.
The execution and delivery of this Agreement and the consummation of
the Transactions to be performed by the Purchaser have been duly and
validly authorized by all necessary action on the part of the
Purchaser, and no other proceedings are necessary to authorize the
execution and delivery of this Agreement by the Purchaser or to
consummate the Transactions to be performed by the Purchaser. This
Agreement has been duly and validly executed and delivered by the
Purchaser and, assuming this Agreement constitutes a valid and binding
obligation of the Company, this Agreement constitutes a valid and
binding agreement of the Purchaser, enforceable against the Purchaser
in accordance with its terms.
(b) Consents and Approval; No Violation. Neither the
execution and delivery of this Agreement by the Purchaser, the
consummation of the Transactions to be performed by the Purchaser, nor
compliance by the Purchaser, with any of the provisions hereof will
(i) conflict with or result in any breach of any provisions of the
organizational documents of the Purchaser or any of its Subsidiaries,
(ii) require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Authority, except for
consents, approvals, authorizations, permits, filings or notifications
which have been obtained or made, (iii) result in a default (with or
without due notice or lapse of time or both) or give rise to any right
of termination, cancellation or acceleration under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
contract, license, agreement or other instrument or obligation to
which the Purchaser, or any of its Subsidiaries is a party or by which
the Purchaser or any of its Subsidiaries, or any of their respective
assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained, or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to
the Purchaser, any of its Subsidiaries or any of their respective
assets.
(c) Securities Laws. The Purchaser has such knowledge
and experience in financial and business matters as enables it or him
to evaluate the merits and risks of an investment in the Shares. The
Purchaser is an "accredited investor" as such term is defined in Rule
501 under the Securities Act. The Purchaser is acquiring the Shares
for its own account and not with the view to resale or redistribution
thereof in violation of the Securities Act. The Purchaser
acknowledges that it may not transfer the Shares except pursuant to an
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effective registration statement under the Securities Act or pursuant
to an exemption from the registration requirements of the Securities
Act, and that a legend to such effect shall be included on the
certificate representing the Shares.
Section 5. Covenants.
(a) Use of Proceeds. The entire amount of the cash
proceeds from the issuance of the Securities shall be used by the
Company on the Closing Date for working capital or the acquisition of
oil and gas properties.
(b) Compliance with Laws. The Company shall, and shall
cause each of its Subsidiaries to, comply with all applicable federal,
state and local laws, rules and regulations, including, without
limitation, Environmental Laws, except where failure to comply will
not have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.
(c) Access to Information. The Purchaser shall have the
right (x) to receive prior notice of any proposed action by the
Company's Board of Directors, and to receive reasonable notice of and
to attend any meeting of the Company's Board of Directors, (y) to
receive, promptly after they are produced, all management reports and
management accounts relating to the Company and (z) upon reasonable
notice, to have reasonable access to the books and records of the
Company.
(d) Public Announcements. The Company and the Purchaser
will consult with each other before issuing any press release or
otherwise making any public statements with respect to the existence
of this Agreement or the Transactions and shall not issue any press
release or make any public statement prior to such consultation,
except as may be required by law or by obligations pursuant to any
listing agreements between the Company and NASDAQ.
(e) No Restrictions on Affiliates. Neither the Company
nor any of its Subsidiaries will enter into any agreement that would
purport to impose restrictions or limitations on any affiliate of the
Company (other than its controlled affiliates).
(f) Certain Public Utility Matters. Except as
contemplated herein, the Company will not take any action that would
be inconsistent with the representations contained in paragraph 3(o)
hereof so long as the Purchaser holds any Shares or Common Stock
underlying the Shares.
Section 6. Purchaser's Conditions. The obligations of the
Purchaser to effect the closing of the Shares on the Closing Date are subject
to the satisfaction of the following conditions any one or more of which may be
waived by the Purchaser.
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15
(a) Representations and Covenants. The representations
and warranties contained in Section 3 hereof shall be true in all
material respects on and as of the Closing Date as if made on and as
of the Closing Date. The Company shall have complied with all of its
obligations contained herein performance of which is required on or
prior to the Closing Date. The Purchaser shall have received a
certificate to the foregoing effect executed by an officer of the
Company.
(b) Registration Rights Agreement. The Company shall
have executed and delivered the Registration Rights Agreement.
(c) Tagalong Agreement. All the parties to the Tagalong
Agreement (other than the Purchaser) shall have executed and delivered
the Tagalong Agreement.
(d) Certificate of Designation. The Certificate of
Designation in the form of Exhibit C shall have been filed with the
Secretary of State of Washington on or before the Closing Date.
(e) Due Diligence. The Purchaser shall, prior to the
Closing Date, be satisfied, in its sole discretion, with the results
of its legal and business due diligence of the Company.
(f) Material Adverse Effect. Since March 31, 1997, there
has occurred no event, act, or condition which has had, or could have,
a Material Adverse Effect.
(g) Conversion of Series B Preferred Shares. All of the
Series B Preferred Shares shall have been converted into an aggregate
of 1,977,671 shares of Common Stock.
(h) Payment of Expenses and Fees. The Company shall have
paid to or on behalf of the Purchaser all amounts payable pursuant to
Section 10(e) and shall have paid to ECT Securities Corp. a
structuring fee in the amount of $400,000.
(i) Opinion of Counsel. The Purchaser shall have
received an opinion of the Company's counsel at the Closing, in the
form reasonably requested by the Purchaser.
Section 7. Company's Conditions. The obligations of the Company
to issue and sell the Shares are subject to the satisfaction of the following
conditions any one or more of which may be waived by the Company:
(a) Representations and Covenants. The representations
and warranties contained in Section 4 hereof shall be true in all
material respects on and as of the Closing Date as if made on and as
of the Closing Date. The Purchaser shall have complied with all of
its obligations contained herein performance of which is required on
or prior to the Closing
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16
Date. The Company shall have received a certificate to the foregoing
effect executed by an officer of the Purchaser, as applicable.
Section 8. Termination, Amendment and Waiver.
(a) Termination. The transactions contemplated hereby
may be abandoned at any time prior to the Closing, as follows:
(i) By the mutual written consent of the Company
and the Purchaser; or
(ii) by the Company, on one hand, or the
Purchaser, on the other hand, if there shall have been a
breach by the other party of any of the covenants contained
herein or if any representation or warranty made by any other
party is untrue in any material respect.
(b) Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section
8(a)(i) or (ii), this Agreement shall forthwith become void and have
no effect with respect to the Transactions, without any liability in
respect to the Transactions on the part of any party other than
Section 10(e).
Section 9. Maintenance Rights.
(a) The Company hereby grants to the Purchaser the right
to purchase a pro rata share of New Securities (as defined in this
Section 9) which the Company may, from time to time, propose to sell
and issue. The Purchaser's pro rata share, for purposes of this
right, is the ratio of the number of shares of Common Stock owned by
the Purchaser immediately prior to the issuance of New Securities,
assuming full conversion of the Shares, to the total number of shares
of Common Stock outstanding immediately prior to the issuance of New
Securities, assuming full conversion of the Shares and exercise of all
outstanding rights, options and warrants to acquire Common Stock of
the Company. "New Securities" shall mean any capital stock (including
Common Stock and/or Preferred Shares) of the Company whether now
authorized or not, and rights, options or warrants to purchase such
capital stock, and securities of any type whatsoever that are, or may
become, convertible into or exchangeable for capital stock; provided
that the term "New Securities" does not include (i) securities issued
upon conversion of the Shares; (ii) securities issued pursuant to the
acquisition of another business entity or business segment of an
entity or property (other than cash) of an entity or person; (iii)
securities issued to employees, consultants, officers or directors of
the Company pursuant to any stock option, stock purchase or stock
bonus plan, agreement or arrangement approved by the Board of
Directors; (iv) securities issued in a public offering pursuant to a
registration under the Securities Act; and (v) securities issued in
connection with any stock split, stock dividend or recapitalization of
the Company.
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(b) In the event the Company proposes to undertake any
issuance of New Securities, it shall give the Purchaser written notice
of its intention, describing the type of New Securities, and their
price and the general terms upon which the Company proposes to issue
the same. The Purchaser shall have ten (10) days after any such
notice is mailed or delivered to agree to purchase the Purchaser's pro
rata share of such New Securities for the price and upon the terms
specified in the notice by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased, which
purchase the Purchaser may condition upon the Company selling the
remainder of the New Securities proposed to be sold.
(c) In the event the Purchaser fails to exercise fully
the right within said ten (10) day period, the Company shall have one
hundred twenty (120) days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered
thereby shall be closed, if at all, within one hundred twenty (120)
days from the date of said agreement) to sell the New Securities
respecting which the Purchaser's right set forth in this Section 9 was
not exercised, at a price and upon terms no more favorable to the
purchasers thereof than specified in the Company's notice to the
Purchaser pursuant to Section 9(b). In the event the Company has not
sold within said 120-day period or entered into an agreement to sell
the New Securities in accordance with the foregoing within one hundred
twenty (120) days from the date of said agreement, the Company shall
not thereafter issue or sell any New Securities, without first again
offering such securities to the Purchaser in the manner provided in
Section 9(b) above.
(d) The right set forth in this Section 9 may not be
assigned or transferred, except that such right is assignable by the
Purchaser to any subsidiary or parent of, or to any Affiliate of the
Purchaser.
(e) The Purchaser shall be given a reasonable opportunity
to co-manage any high-yield debt offering or long-term debt offering
by the Company.
(f) The provisions of this Section 9 shall terminate upon
the redemption or conversion of all the Series C Preferred Stock.
Section 10. Miscellaneous. (a) Entire Agreement. This
Agreement and the agreements attached hereto as Exhibits A and B (a) constitute
the entire agreement among the parties with respect to the subject matter
hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and (b) shall not be assigned by operation of law or otherwise.
(b) Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed
to have been duly given when delivered
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18
in person, by facsimile, or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties as
follows:
If to the Company:
Inland Resources Inc.
000 00xx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Fax: 000-000-0000
Attn: Xxxx X. Xxxxxx
With a copy to:
Glast, Xxxxxxxx and Xxxxxx, P.C.
2200 One Galleria Tower
00000 Xxxx Xxxx, X.X. 00
Xxxxxx, Xxxxx 00000-0000
Fax: 000-000-0000
Attn: Xxxx Xxxxxxx
If to the Purchaser:
Joint Energy Development Investments Limited Partnership
c/o Enron Corp.
0000 Xxxxx
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxx Xxxxx - Director, 28th Floor
Enron Capital & Trade Resources Corp.
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attn: Xxxx Xxxxxx
(c) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws in the State of Texas
applicable to agreements made and wholly performed in the State of
Texas.
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19
(d) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same agreement.
(e) Expenses. Except as otherwise provided herein or in
the Registration Rights Agreement, each party shall bear and pay all
costs and expenses incurred by it or on its behalf in connection with
transactions contemplated hereby, including fees and expenses of its
representatives, provided, however, that the Company shall pay all of
the Purchaser's legal fees, professional fees and other transaction
costs up to $25,000 incurred in connection with the evaluation and
negotiation of the transactions contemplated hereby.
(f) Assignment. Except as provided in this Agreement,
neither the Purchaser nor the Company may assign its or his rights or
obligations hereunder; provided, however, the Purchaser may assign its
rights to acquire the Shares to an affiliate, provided such assignment
shall not relieve the Purchaser of its obligations hereunder.
(g) Dispute Resolution. (i) Any controversy, dispute or
claim arising out of or relating to this Agreement or the Registration
Rights Agreement or the Transactions (a "Dispute") shall be submitted
to non-binding mediation upon the request of the Company or the
Purchaser on the following terms. Upon the request of either party, a
neutral mediator acceptable to both parties (the "Mediator") shall be
appointed within fifteen (15) days. The Mediator shall attempt,
through negotiations in any manner deemed reasonably appropriate by
the Mediator, in which the parties shall participate, to resolve the
Dispute. The Mediator shall be compensated at a rate agreeable to the
Company, the Purchaser and the Mediator, and each of the Company and
the Purchaser shall pay its pro rata share of such compensation and
other expenses of the mediation.
(ii) In the event that the Dispute has not been
resolved within 30 days after the appointment of the Mediator, the
Dispute shall be resolved by arbitration administered by the American
Arbitration Association (the "AAA") in accordance with the terms of
this Section 10(g), the Commercial Arbitration Rules of the AAA, and,
to the maximum extent applicable, the United States Arbitration Act.
Judgment on any matter rendered by arbitrators may be entered in any
court having jurisdiction. Any arbitration shall be conducted before
three arbitrators. The arbitrators shall be individuals knowledgeable
in the subject matter of the Dispute. Each party shall select one
arbitrator and the two arbitrators so selected shall select the third
arbitrator. If the third arbitrator is not selected within thirty
(30) days after the request for an arbitration, then any party may
request the AAA to select the third arbitrator. The arbitrators may
engage engineers, accountants or other consultants they deem necessary
to render a conclusion in the arbitration proceeding. To the maximum
extent practicable, an arbitration proceeding hereunder shall be
concluded within 180 days of the filing of the Dispute with the AAA.
Arbitration proceedings shall be conducted in
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20
Houston, Texas. Arbitrators shall be empowered to impose sanctions
and to take such other actions as the arbitrators deem necessary to
the same extent a judge could impose sanctions or take such other
actions pursuant to the Federal Rules of Civil Procedure and
applicable law. At the conclusion of any arbitration proceeding, the
arbitrators shall make specific written findings of fact and
conclusions of law. The arbitrators shall have the power to award
recovery of all costs and fees to the prevailing party. All fees of
the arbitrators and any engineer, accountant or other consultant
engaged by the arbitrators, shall be shared equally unless otherwise
awarded by the arbitrators.
(iii) Nothing in this Section 10(g) shall limit or
delay the right of the Purchaser to exercise the remedies available to
it under the Certificate of Designation.
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21
IN WITNESS WHEREOF, the parties have executed this Securities Purchase
Agreement as of the date first written above.
INLAND RESOURCES INC.
By: /s/ XXXX X. XXXXXX
-------------------------------------
Name: Xxxx X. Xxxxxx
-----------------------------------
Title: President / CEO
----------------------------------
JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its General Partner
By: Enron Capital Corp., its
General Partner
By: /s/ XXXXXXXX X. XXXXXX
-------------------------------------
Name: Xxxxxxxx X. Xxxxxx
-----------------------------------
Title: Vice President
----------------------------------
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