EXHIBIT (d)(9)
FOURTH AMENDMENT TO
THIRD AMENDED AND
RESTATED CREDIT AGREEMENT
Xxxxxxxx 0, 0000
Xxxxxx Production Company
000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Gentlemen:
This Fourth Amendment to the Third Amended and Restated Credit
Agreement, as amended (the "Amendment") sets forth the amended terms of the
financing transaction by and between INLAND PRODUCTION COMPANY, a Texas
corporation ("Borrower"), FORTIS CAPITAL CORP., a Connecticut corporation as
Agent ("Agent") and as a Lender, and the other Lenders.
WHEREAS, Borrower, Agent, and the Lenders entered into the Third
Amended and Restated Credit Agreement dated as of November 30, 2001, as amended
(the "Credit Agreement"); and
WHEREAS, Inland Resources Inc., the parent company of the Borrower (the
"Parent") and the Guarantor of the Borrower's obligations under the Credit
Agreement, proposes to enter into a series of transactions whereby the existing
holders of subordinated notes will exchange their notes for equity in the Parent
INLAND FOURTH AMENDMENT
pursuant to a Proposed Debt Restructuring Plan attached hereto as Exhibit A (the
"Parent Restructuring Plan"); and
WHEREAS, the Borrower has requested that the Lenders make certain
amendments to the Credit Agreement in order to facilitate the Parent
Restructuring Plan, and the Lenders are willing to do so subject to the terms
and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. DEFINED TERMS. All capitalized terms used but not otherwise
defined in this Amendment shall have the meaning ascribed to them in the Credit
Agreement. Unless otherwise specified, all section references herein refer to
sections of the Credit Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby
amended as follows:
2.1 Section 1.1 Defined Terms
(a) The definition of "Revolving Termination
Date" is amended to read as follows:
"'Revolving Termination Date' means
September 30, 2004."
(b) The following definitions are added to
Section 1.1:
" 'Exchange Agreement' means the Exchange
and Stock Issuance Agreement by and among Inland Resources
Inc., Inland Production Company, Inland Holdings, LLC and
SOLVation Inc. dated as of January 30, 2003."
" 'Fourth Amendment' means the Fourth
Amendment to Third Amended and Restated Credit Agreement dated
February 3, 2003."
INLAND FOURTH AMENDMENT
2
2.2 Term Loan. Section 2.3 is amended to read as follows:
"Section 2.3. Term Loan.
(a) On the Revolving Termination Date
the aggregate outstanding principal amount of Revolving Loans
shall automatically be converted into a term loan (the "Term
Loan") without further action by a party to this Agreement. To
the extent the aggregate principal amount of Revolving Loans
outstanding on the Revolving Termination Date exceeds the
Borrowing Base applicable on such date, such excess amount
must be paid to the Agent for the benefit of the Lenders on
such Date. There will be no advances by the Lenders of any
amounts under the Term Loan. Conversion of the Revolving Loans
pursuant to this Section 2.3 shall not constitute either a
prepayment or a borrowing, and shall not affect the rate of
interest applicable to outstanding Loans. On the Revolving
Termination Date, the Borrower shall issue a new Note (in the
form of Exhibit A) to each Lender in the principal amount of
each Lender's Percentage Share of the Term Loan in exchange
for the Note then held by each such Lender. Except as provided
in Subsection (b) below, the Term Loan shall be repaid by the
Borrower, together with accrued interest, in the amounts set
for below in seventeen (17) quarterly installments on the last
Business Day of each Fiscal Quarter beginning on December 31,
2004, provided however, that the aggregate unpaid balance of
the Term Loan shall mature and be due and payable on December
31, 2008:
PERCENTAGE OF OUTSTANDING
PRINCIPAL ON REVOLVING
FISCAL QUARTER TERMINATION DATE
------------------- -------------------------
2004 - 4th Quarter 4%
2005 - All Quarters 5%
2006 - All Quarters 6%
2007 - All Quarters 6%
2008 - All Quarters 7%
(b) If on or before December 31, 2003,
the Borrower does not close a transaction approved by all of
the Lenders that results in a minimum capital contribution to
the Borrower of $15,000,000, whether in the form of equity,
subordinated debt or a contribution of property, as approved
by all of the Lenders, the Lenders may, in their absolute
discretion, notify the Borrower that notwithstanding
INLAND FOURTH AMENDMENT
3
Subsection (a), the Term Loan shall be repaid by the Borrower,
together with accrued interest, in twelve (12) equal quarterly
installments on the last Business Day of each Fiscal Quarter
beginning on September 30, 2004, provided however, that the
aggregate unpaid balance of the Term Loan shall mature and be
due and payable on June 30, 2007. Such capital contribution
may be made to the Parent provided that the Parent immediately
makes an equivalent capital contribution in the same form to
the Borrower. In such case, the capital contribution to the
Parent shall not be subject to the requirement in Section 7.14
of the Credit Agreement that 80% of the net proceeds of a
securities issuance by the Parent be applied as a repayment of
the Loans."
2.3 Borrowing Base. Section 2.9 is amended to read as
follows:
"Section 2.9. Continuation of Borrowing Base. The
Borrowing Base in effect on the date of the Fourth Amendment,
$83,500,000, shall continue until July 31, 2003, subject to the right
of the Required Lenders to request a Redetermination pursuant to
Section 2.10(a), the Borrower's right to reduce the Borrowing Base
pursuant to Section 2.10(b), and any reductions in the Borrowing Base
under Section 2.10(c)."
2.4 Letters of Credit.
(a) Section 2.17 is amended to read as
follows:
"Section 2.17. Special LC Line. In addition to
Letters of Credit which may be issued pursuant to Section 2.11,
Borrower may request the Agent to issue one or more standby letters of
credit referred to herein as "Special Letters of Credit" on the
following terms:
(a) the aggregate face amount of
Special Letters of Credit which may be issued hereunder is
$5,000,000;
(b) the face amount of such Special
Letters of Credit shall not be limited by the Borrowing Base
and shall not be counted towards Facility Usage;
(c) Special Letters of Credit may be used
only for purposes of supporting Hedging Contracts entered into
by the Borrower as permitted hereunder to be issued in favor
of the counterparty to such Hedging Contracts and, up to a
maximum of $300,000 aggregate face
INLAND FOURTH AMENDMENT
4
amount outstanding at any one time, for purposes of supporting
EPA bonding requirements;
(d) Special Letters of Credit may be issued
only on or before December 31, 2004, and the expiration date
of any such Special Letter of Credit shall be on or before
December 31, 2004, except that prior to the Closing (as
defined therein) of the Exchange Agreement, the expiration
date of any such Special Letter of Credit shall be on or
before April 30, 2003";
(e) Except as noted above, the provisions of
Sections 2.11 through 2.16, including, without limitation, the
obligation of each Lender, pursuant to Section 2.13(c), to
participate in each Letter of Credit issued hereunder, shall
apply to Special Letters of Credit hereunder, except that the
fee payable to the Agent under Section 2.14 shall be three and
three quarters percent (3.75%) per annum; and
(f) Except as provided in this Section 2.17,
Special Letters of Credit shall be considered Letters of
Credit under the Credit Agreement, and the Borrower's
obligations to reimburse the Agent for amounts paid on drafts
or demands for payment drawn or made under any Special Letter
of Credit shall be considered an Obligation under the Credit
Agreement and the Loan Documents."
(b) Section 2.11(b) is amended to
substitute "$5,000,000" for "4,000,000."
2.5 Hedging Contracts. Section 6.21 is amended to read as
follows:
"Section 6.21. Hedging Contracts. Borrower shall have
entered into and at all times shall maintain Hedging Contracts which
comply with Section 7.3 and have the purpose and effect of fixing
prices on the aggregate monthly production equal to or greater than the
following:
(a) on the effectiveness of this Fourth
Amendment, sixty-five percent (65%) of Borrower's aggregate
Projected Oil and Gas Production through December 31, 2003,
and twenty-five percent (25%) of Borrower's aggregate
Projected Oil and Gas Production for 2004;
(b) by June 30, 2003, fifty percent
(50%) of Borrower's aggregate Projected Oil and Gas Production
for 2004; and
INLAND FOURTH AMENDMENT
5
(c) by December 31, 2003, and by each
December 31 thereafter during the term of this Agreement,
fifty percent (50%) of Borrower's aggregate Projected Oil and
Gas Production for the following twelve (12) months."
2.6 Negative Covenants.
(a) Section 7.1. Subsection (c)(v) of Section
7.1, Restricted Debt, is amended to read as follows:
"(v) the aggregate outstanding principal
amount of such Restricted Debt of the Restricted Persons
incurred for the purchase of trucks or automobiles does not at
any time exceed $1,000,000, and the aggregate principal amount
of such Restricted Debt which is incurred for such purpose in
any Fiscal Year does not exceed $250,000, and"
(b) Section 7.10. Section 7.10, Current Ratio,
is amended to read as follows:
"Section 7.10. Current Ratio. The ratio of
Parent's Consolidated Current Assets to Parent's Consolidated
Current Liabilities will not be less than .9 to 1.0 for the
Fiscal Quarter ending March 31, 2003 and 1.0 to 1.0 for all
Fiscal Quarters thereafter. For the purposes of this Section
7.10, Consolidated Current Assets and Consolidated Current
Liabilities shall be determined in accordance with GAAP,
except that (a) Consolidated Current Assets and Consolidated
Current Liabilities will be calculated without including any
amounts resulting from the application of FASB Statement 133,
(b) Consolidated Current Liabilities will be calculated
without including any amounts relating to the Subordinated
Debt, (c) the unused portion of the commitment under this
Agreement shall be treated as a Consolidated Current Asset and
(d) crude oil inventory (net to the Parent's interest) will be
included in Consolidated Current Assets. Crude oil inventory
will be calculated by using the net well head oil price per
barrel at the end of each respective quarter times the
Parent's net crude oil barrels in inventory."
(c) Section 7.13. Section 7.13, Debt to EBITDA
Ratio, is amended to read as follows:
"Section 7.13. Debt to EBITDA Ratio. At the
end of any Fiscal Quarter, beginning with the Fiscal Quarter
ending March 31, 2003, the ratio of (i) Parent's Consolidated
Senior Debt to (ii) Parent's
INLAND FOURTH AMENDMENT
6
EBITDA, for the four-Fiscal Quarter period ending with such
Fiscal Quarter will be equal to or less than (a) 4.25 to 1.00
for the Fiscal Quarters ending during 2003, (b) 4.00 to 1.00
for the first two Fiscal Quarters of 2004, (c) 3.75 to 1.00
for the last two Fiscal Quarters of 2004, and (d) 3:50 to 1.00
for any Fiscal Quarter ending therafter."
2.7 Events of Default.
(a) Subsection (b) of Section 8.1 is amended to
read as follows:
"(b) Any Restricted Person fails to pay any
Obligation (other than the Obligations in Section (a) above)
when due and payable, whether at a date for the payment of a
fixed installment or as a contingent or other payment becomes
due and payable or as a result of acceleration or otherwise,
within two (2) Business Days after the same becomes due in the
case of interest or fifteen (15) days thereafter in the case
of any other Obligation;"
(b) Subsection (d) of Section 8.1 is hereby
amended to read as follows:
"(d) Any Restricted Person fails to duly
observe, perform or comply with any covenant, agreement or
provision of Section 6.4 or Article VII and such failure
remains unremedied for a period of ten (10) days after notice
of such failure is given to Agent by Borrower;"
3. Consents and Waivers. The Lenders hereby agree, approve and
consent as follows, and hereby waive the existing Event of Default described as
Exhibit B and any Default that would otherwise arise or result from the
following transactions but for such consent:
3.1 Parent Restructuring Plan. The Parent and Borrower
may enter into and take all necessary steps to implement the Parent
Restructuring Plan, including, without limitation, the execution, delivery and
performance of the Exchange Agreement and the Transaction Documents referred to
therein, provided that such Parent Restructuring Plan specifies that a
liquidation preference on the Series F Preferred Stock may not be paid until all
the Borrower's Obligations under the Credit Agreement have been paid in full.
3.2 Merger of Parent. In connection with the Parent
Restructuring Plan as described therein, the Parent may merge into Inland
Resources Inc., a Delaware corporation ("Inland Delaware") provided that such
merger occurs within
INLAND FOURTH AMENDMENT
7
one hundred and twenty (120) days hereof and at such time as the merger is
effective, Inland Delaware expressly assumes the Obligations of the Parent under
the Credit Agreement and the other Loan Documents, and agrees to execute such
documents and instruments as Agent may reasonably request in order to implement
such assumption.
3.3 Payments to Minority Shareholders. In connection with
the Parent Restructuring Plan, the Parent may make payments to its minority
shareholders in the Parent up to $300,000 in connection with the merger
described in Section 3.2.
4. EFFECTIVENESS OF AMENDMENT.
(a) Except as provided in subsection (b) below,
this Amendment shall be effective upon receipt by Agent of:
(i) A Consent and Agreement executed by
Inland Resources Inc. as Guarantor;
(ii) A Compliance Certificate executed
by Borrower;
(iii) An amendment fee equal to $25,000
(0.5% of the amount of Special Letters of Credit which may be
issued under Section 2.17); and
(iv) Evidence that the Exchange
Agreement has been executed and delivered by all the parties
thereto.
(b) Notwithstanding subsection (a) above, the
following Sections of this Fourth Amendment shall not be effective
until the conditions precedent to the obligations of the "Holders" and
"Inland" under the Exchange Agreement have been satisfied and the
Parent Restructuring Plan has occurred: Section 2.1(a), 2.2, 2.3, 2.6,
and 2.7. If the Exchange Agreement has not Closed and the Parent
Restructuring Agreement does not become effective within ninety (90)
days hereof, Section 2.4 of this Fourth Amendment shall be cancelled
and the Special Letter of Credit Line provided for therein shall be
$1,400,000 as provided in the Third Amendment to the Third Amended and
Restated Credit Agreement dated September 10, 2002.
5. RATIFICATIONS, REPRESENTATIONS AND WARRANTIES.
(a) The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and
provisions set forth in the Credit Agreement and, except as expressly
modified and superseded by this
INLAND FOURTH AMENDMENT
8
Amendment, the terms and provisions of the Credit Agreement are
ratified and confirmed and shall continue in full force and effect.
Borrower and Agent agree that the Credit Agreement and the Loan
Documents, as amended hereby, shall continue to be legal, valid,
binding and enforceable in accordance with their respective terms.
(b) In order to induce the Agent to enter into
this Amendment, Borrower represents and warrants to the Agent that:
(i) The representations and warranties
contained in Article V of the Credit Agreement are true and
correct in all material respects at and as of the time of the
effectiveness hereof (except to the extent that such
representations and warranties related solely to an earlier
date and except to the extent that the facts upon which such
representations are based have been or shall be changed by the
transactions contemplated by this Amendment).
(ii) Each Restricted Person is duly
authorized to execute and deliver each Loan Document to the
extent a party thereto and Borrower is and will continue to be
duly authorized to borrow and to perform its obligations under
the Credit Agreement as amended hereby. Each Restricted Person
has duly taken all action necessary to authorize the execution
and delivery of each Loan Document to which it is a party and
to authorize the performance of the obligations of each
Restricted Person thereunder.
6. BENEFITS. This Amendment shall be binding upon and inure to
the benefit of the Lenders and Borrower, and their respective successors and
assigns; provided, however, that Borrower may not, without the prior written
consent of the Lenders, assign any rights, powers, duties or obligations under
this Amendment, the Credit Agreement or any of the other Loan Documents.
7. CONSTRUCTION. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
8. INVALID PROVISIONS. If any provision of this Amendment is held
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and the remaining provisions of this
Amendment shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance.
INLAND FOURTH AMENDMENT
9
9. ENTIRE AGREEMENT. The Credit Agreement, as amended by this
Amendment, contains the entire agreement among the parties regarding the subject
matter hereof and supersedes all prior written and oral agreements and
understandings among the parties hereto regarding same.
10. REFERENCE TO CREDIT AGREEMENT. The Credit Agreement and any
and all other agreements, documents or instruments now or hereafter executed and
delivered pursuant to the terms hereof or pursuant to the terms of the Credit
Agreement, as amended hereby, are hereby amended so that any reference in the
Credit Agreement to the Credit Agreement shall mean a reference to the Credit
Agreement as amended hereby.
11. COUNTERPARTS. This Amendment may be separately executed in any
number of counterparts, each of which shall be an original, but all of which,
taken together, shall be deemed to constitute one and the same agreement.
If the foregoing correctly sets forth our mutual agreement, please so
acknowledge by signing and returning this Amendment to the undersigned.
[Remainder of page intentionally left blank]
INLAND FOURTH AMENDMENT
10
Very truly yours,
FORTIS CAPITAL CORP., AS AGENT AND
LENDER
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Vice President
U. S. BANK NATIONAL ASSOCIATION, as Lender
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
ACCEPTED as of the date
written above.
BORROWER:
INLAND PRODUCTION COMPANY
By: /s/ Xxxx X. Xxxxxxxxxx
----------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: President
INLAND FOURTH AMENDMENT
CONSENT AND AGREEMENT
Inland Resources Inc. hereby consents to the provisions of this Fourth
Amendment to Third Amended and Restated Credit Agreement and the transactions
contemplated herein, and hereby ratifies and confirms its Guaranty dated as of
November 30, 2001, as amended, supplemented, or restated to the date hereof,
made by it for the benefit of the Agent and the Lenders, and agrees that its
obligations and covenants thereunder are unimpaired hereby and shall remain in
full force and effect.
INLAND RESOURCES INC.
By: /s/ Xxxx X. Xxxxxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: Chief Financial Officer
Dated: February 3, 2003
CONSENT AND AGREEMENT TO
INLAND FOURTH AMENDMENT
COMPLIANCE CERTIFICATE
February 3, 2003
Reference is made to (i) that certain Third Amended and Restated Credit
Agreement dated as of November 30, 2001 (as amended, supplemented, or restated
to the date hereof, the "Original Agreement"), between Inland Production
Company, a Texas corporation ("Borrower"), Inland Resources Inc., a Washington
corporation ("Parent"), and Fortis Capital Corp., as Agent, and certain other
financial institutions, as Lenders and (ii) that certain Fourth Amendment to
Third Amended and Restated Credit Agreement dated as of February 3, 2003,
between Borrower, Fortis Capital Corp. and Lenders (the "Amendment"; the
Original Agreement as amended by the Amendment is herein referred to as the
"Credit Agreement"). Terms which are defined in the Credit Agreement and which
are used but not defined herein shall have the meanings given them in the Credit
Agreement. The undersigned, Xxxx XxxXxxxx and Xxxx Xxxxxxxxxx, do hereby certify
in the name, and on behalf, of Borrower that Borrower has made a thorough
inquiry into all matters certified herein and based upon such inquiry,
experience, and the advice of counsel, do hereby further certify that:
1. Xxxx XxxXxxxx and Xxxx Xxxxxxxxxx are the duly elected,
qualified, and acting Chief Executive Officer and Chief Financial Officer,
respectively of Borrower.
2. All representations and warranties made by any Restricted
Person in any Loan Document delivered on or before the date hereof (including,
without limitation, the representations and warranties contained in Section 4 of
the Amendment) are true in all material respects on and as of the date hereof
(except to the extent that the facts upon which such representations are based
have been or shall be changed by the transactions contemplated in the Credit
Agreement) as if such representations and warranties had been made as of the
date hereof.
3. After giving effect to Section 3 of the Amendment, no Default
exists on the date hereof.
4. Each Restricted Person has performed and complied with all
agreements and conditions required in the Loan Document to be performed or
complied with by it on or prior to the date hereof.
IN WITNESS WHEREOF, this instrument is executed by the undersigned as
of the date above written.
INLAND PRODUCTION COMPANY
By: /s/ Xxxx XxxXxxxx
---------------------------------------
Xxxx XxxXxxxx
Chief Executive Officer
By: /s/ Xxxx X. Xxxxxxxxxx
---------------------------------------
Xxxx X. Xxxxxxxxxx
Chief Financial Officer
EXHIBIT A
PARENT RESTRUCTURING PLAN
FORM 8-K
REPORT AS OF
JANUARY 30, 2003
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 30, 2003
INLAND RESOURCES INC.
(Exact name of Registrant as specified in its charter)
Washington 0-16487 00-0000000
----------------------- --------------------- --------------------
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
000 00XX XXXXXX, XXXXX 000, XXXXXX, XXXXXXXX 00000
--------------------------------------------------------------------------------
(Address of Principal Executive Offices, including zip code)
(000) 000-0000
--------------------------
(Registrant's Telephone Number, including area code)
ITEM 5. OTHER EVENTS. Inland Resources Inc. (the "Company") reports
that on January 30, 2003, it entered into an Exchange and Stock Issuance
Agreement (the "Exchange Agreement") with Inland Holdings, LLC ("Holdings"), an
entity managed by an affiliate of Trust Company of the West, and SOLVation, Inc.
("Xxxxx"), an affiliate of Xxxxx Management, LLC, as the holders of the
Company's subordinated debt securities, to exchange $103,968,964 in aggregate
principal amount of such securities plus accrued interest (total of $120,097,000
as of November 30, 2002) for newly issued shares of the Company's Common and
Series F Preferred Stock. The principal terms of the Exchange Agreement and an
agreement between Holdings and Xxxxx executed concurrently are as follows:
STEP 1: EXCHANGE OF HOLDINGS SUB NOTE AND XXXXX XXXXXX SUB NOTE INTO
COMMON STOCK AND SERIES F PREFERRED STOCK
EXCHANGES: Holdings will exchange a subordinated note in the
principal amount of $98,968,964, plus all accrued and
unpaid interest thereon, for 22,053,000 shares of the
Company's common stock and that number of shares of
Series F Preferred Stock equal to 911,588 shares plus
338 shares for each day after November 30, 2002 up to
and including the closing date (the "Holdings
Exchange"). Xxxxx will exchange its Junior
Subordinated Note in the principal amount of
$5,000,000, plus all accrued and unpaid interest
thereon, for that number of shares of Series F
Preferred Stock equal to 68,854 shares plus 27 shares
for each day after November 30, 2002 up to and
including the closing date (the "Xxxxx Exchange").
TERMS OF SERIES F PREFERRED STOCK:
Securities: 1,100,000 shares of the Company's Class A Preferred
Stock will be designated Series F Preferred Stock,
and the Company contemplates issuing approximately
1,000,000 shares of Series F Preferred Stock, in the
aggregate, pursuant to the Holdings Exchange and
Xxxxx Exchange (together, the "Exchange").
Holders: Holdings and Xxxxx
Liquidation Preference: In the event of a voluntary or involuntary
liquidation, dissolution or winding up of the
Company, the holders of the Series F Preferred Stock
shall be entitled to receive, in preference to the
holders of the common stock but only after payment in
full of the senior bank credit facility, a per share
amount equal to $100, as adjusted for any stock
dividends, combinations or splits with respect to
such share, plus all accrued or declared but unpaid
dividends on such share.
Automatic Conversion: Each share of Series F Preferred Stock will be
automatically converted into 100 shares of the
Company's common stock
2
when sufficient shares of Common Stock have been
authorized.
STEP 2: MODIFICATION OF THE COMPANY'S SENIOR BANK CREDIT FACILITY
The Exchange is conditional upon the Company's senior
bank lenders agreeing to the modifications in the
senior credit facility outlined below:
The banks will allow all transactions contemplated by
the Exchange Agreement.
The banks will extend the Company's borrowing base of
$83.5 million through July 31, 2003 and provide a
credit commitment of $5 million for letters of credit
to support certain commodity pricing hedging
obligations and secure certain EPA bonding
obligations.
The banks will extend the date on which the revolving
facility converts to a term loan to September 30,
2004 and permit the term loan to be paid in
installments with a final maturity date of December
31, 2008, if the Company obtains $15 million of
equity, debt or other property approved by the banks
by December 31, 2003.
The banks will modify financial covenants.
The banks will grant a 10-day notice and grace period
upon a breach of a negative covenant (before
acceleration can commence) except for defaults in the
payment of obligations to the Lenders. All existing
defaults will be waived.
The Company will agree to hedge specified percentages
of its aggregate projected oil and gas production by
specified dates.
STEP 3: MODIFICATION OF THE XXXXX SENIOR SUBORDINATED NOTE
The terms of the Senior Subordinated Note Purchase
Agreement dated as of August 2, 2001 (regarding the
Senior Subordinated Note held by Xxxxx in the
principal amount of $5,000,000) will be amended (i)
to extend the maturity date to be six months after
the banks' maturity date (or earlier repayment in
full) but no later than July 1, 2009, provided that
if the Company enters into any additional borrowings
during the term period of the bank credit facility,
the Senior Subordinated Note must be repaid in full,
and (ii) to amend and conform certain affirmative and
negative covenants.
3
STEP 4: GOING PRIVATE TRANSACTION
Formation of Newco: Holdings, Xxxxx and an affiliate of Xxxxx which
currently owns a majority of the common stock of the
Company (Xxxxx and such affiliate, together, the
"Xxxxx Parties") will form a new Delaware corporation
to be known as Inland Resources Inc. ("Newco").
Immediately following completion of Steps 1, 2 and 3
above, Holdings will contribute to Newco all of
Holdings' interests in the Company's common stock and
Series F Preferred Stock in exchange for 92.5% of the
common stock of Newco, and each of the Xxxxx Parties
will contribute to Newco all of their respective
interests in the Company's common stock and Series F
Preferred Stock in exchange for an aggregate of 7.5%
of the common stock of Newco. Newco will then own
99.7% of the Company's common stock and common stock
equivalents.
Short Form Merger: Upon the formation of Newco and closing of the
Exchange, the Board of Directors of Newco will meet
to pass a resolution for the Company to merge with
and into Newco, with Newco surviving as a Delaware
corporation (the "Merger"). No action is required by
the Company's shareholders or Board of Directors
under the relevant provisions of Washington and
Delaware law in order to effect a "short-form" merger
of a subsidiary owned more than 90% by its parent
corporation. All outstanding shares and options to
purchase shares of the Company will be cancelled in
the Merger, and shareholders of the Company other
than Holdings, Xxxxx and their affiliates will
receive $1.00 per share in cash in payment of their
cancelled shares.
Appraisal Rights: Shareholders of the Company will have the right to
dissent from the Merger and have a court appraise the
value of their shares. Shareholders electing this
remedy must comply with the procedures of Section
23B.13 of the Washington Business Corporation Act.
Shareholders electing to exercise their right of
appraisal will not receive the $1.00 per share paid
to all other public shareholders, but will instead
receive the appraised value, which may be more or
less than $1.00 per share.
Effect of the Merger: The Merger will result in the Company terminating its
status as a reporting company under the Securities
Exchange Act of 1934 and its stock ceasing to be
traded on the over-the-counter bulletin board. Its
successor, Newco, will be a private company owned by
two shareholders. Newco will assume all obligations
of the Company in the Merger.
4
Management Options: Xxxx XxxXxxxx and Xxxx X. Xxxxxxxxxx, executive
officers of the Company, will each receive an
amendment to their Employment Agreements with the
Company, which will survive and be assumed by Newco.
Such agreements will provide that Xx. XxxXxxxx and
Xx. Xxxxxxxxxx receive stock options to purchase 4%
and 3%, respectively, of the common stock of Newco
for an exercise price equivalent to the exchange
value in the Exchange.
Details of the Exchange and Merger, including financial statements and
pro forma financial statements, will be included in a Schedule 13E-3 Transaction
Statement which will be filed with the Securities and Exchange Commission and
disseminated to shareholders in the near future.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
1. Exchange and Stock Issuance Agreement dated January
30, 2003
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused the report to be signed on its behalf by the
undersigned hereunto duly authorized.
INLAND RESOURCES INC.
February 3, 2003 By: /s/ Xxxx XxxXxxxx
--------------------------------------
Xxxx XxxXxxxx,
Chief Executive Officer
5
EXHIBIT B
EXISTING EVENT OF DEFAULT
Failure by the Borrower to meet the Debt to EBITDA Ratio set forth at Section
7.13 of the Credit Agreement for the Fiscal Quarters ending on June 30, 2002,
September 30, 2002 and December 31, 2002.
