-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FdXfvkJ9UNvwuC2Rs1vGpbZVPEsee6f+PLKwBGeCDFhSUS0KAfZs6iS6cw0w9xMQ m6U7AwUzjGm8TjwDA57hAw== 0000912057-01-527028.txt : 20010809 0000912057-01-527028.hdr.sgml : 20010809 ACCESSION NUMBER: 0000912057-01-527028 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20010808 GROUP MEMBERS: INLAND HOLDINGS LLC GROUP MEMBERS: TCW PORTFOLIO NO1555 DR V SUB-CUSTODY PARTNERSHIP LP GROUP MEMBERS: TRUST COMPANY OF THE WEST FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TCW GROUP INC CENTRAL INDEX KEY: 0000850401 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 865 SOUTH FIGUEROA ST CITY: LOS ANGELES STATE: CA ZIP: 90017 MAIL ADDRESS: STREET 1: 865 SOUTH FIGUEROA STREET STREET 2: 865 SOUTH FIGUEROA STREET CITY: LOS ANGELES STATE: CA ZIP: 90017 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: INLAND RESOURCES INC CENTRAL INDEX KEY: 0000717754 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 911307042 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-46697 FILM NUMBER: 1700896 BUSINESS ADDRESS: STREET 1: 410 17TH ST STE 700 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3038930102 MAIL ADDRESS: STREET 1: 410 17TH STREET STREET 2: SUITE 700 CITY: DENVER STATE: CO ZIP: 80202 SC 13D/A 1 a2056120zsc13da.txt SC 13D/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D (RULE 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (AMENDMENT NO. 2)* INLAND RESOURCES INC. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $0.001 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 457469-20-3 -------------- (CUSIP Number) Michael E. Cahill, Esq. Managing Director & General Counsel The TCW Group, Inc. 865 South Figueroa Street, Ste. 1800 Los Angeles, California 90017 (213) 244-0000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) August 2, 2001 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. / / NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 14 Pages) * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D - ---------------------- --------------------- CUSIP No. 457469-20-3 Page 2 of 14 Pages - ---------------------- --------------------- - ------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON The TCW Group, Inc. - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) /X/ - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not applicable - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / / - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Nevada - ------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER 0 SHARES -------------------------------------------------- 8 SHARED VOTING POWER BY 297,196 -------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER 0 REPORTING -------------------------------------------------- 10 SHARED DISPOSITIVE POWER PERSON WITH 297,196 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 297,196 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.3% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* HC,CO - ------------------------------------------------------------------------------- *SEE INSTRUCTION BEFORE FILLING OUT! 2 SCHEDULE 13D - ---------------------- --------------------- CUSIP No. 457469-20-3 Page 3 of 14 Pages - ---------------------- --------------------- - ------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON Trust Company of the West - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/ (b) / / - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not applicable - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / / - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION California - ------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER 0 SHARES -------------------------------------------------- 8 SHARED VOTING POWER BY 297,196 -------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER 0 REPORTING -------------------------------------------------- 10 SHARED DISPOSITIVE POWER PERSON WITH 297,196 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 297,196 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.3% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO,HC - ------------------------------------------------------------------------------- *SEE INSTRUCTION BEFORE FILLING OUT! 3 SCHEDULE 13D - ---------------------- --------------------- CUSIP No. 457469-20-3 Page 4 of 14 Pages - ---------------------- --------------------- - ------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON TCW Asset Management Company - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) /X/ - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not applicable - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / / - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION California - ------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER 0 SHARES -------------------------------------------------- 8 SHARED VOTING POWER BY 297,196 -------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER 0 REPORTING -------------------------------------------------- 10 SHARED DISPOSITIVE POWER PERSON WITH 297,196 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 297,196 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.3% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO, IA - ------------------------------------------------------------------------------- *SEE INSTRUCTION BEFORE FILLING OUT! 4 SCHEDULE 13D - ---------------------- --------------------- CUSIP No. 457469-20-3 Page 5 of 14 Pages - ---------------------- --------------------- - ------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON TCW Royalty Company - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) /X/ - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not applicable - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / / - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION California - ------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER 0 SHARES -------------------------------------------------- 8 SHARED VOTING POWER BY 297,196 -------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER 0 REPORTING -------------------------------------------------- 10 SHARED DISPOSITIVE POWER PERSON WITH 297,196 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 297,196 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.3% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO, HC - ------------------------------------------------------------------------------- *SEE INSTRUCTION BEFORE FILLING OUT! 5 SCHEDULE 13D - ---------------------- --------------------- CUSIP No. 457469-20-3 Page 6 of 14 Pages - ---------------------- --------------------- - ------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON TCW Portfolio No. 1555 DR V Sub-Custody Partnership, L.P. - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/ (b) / / - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not applicable - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / / - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION California - ------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER 0 SHARES -------------------------------------------------- 8 SHARED VOTING POWER BY 297,196 -------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER 0 REPORTING -------------------------------------------------- 10 SHARED DISPOSITIVE POWER PERSON WITH 297,196 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 297,196 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.3% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - ------------------------------------------------------------------------------- *SEE INSTRUCTION BEFORE FILLING OUT! 6 SCHEDULE 13D - ---------------------- --------------------- CUSIP No. 457469-20-3 Page 7 of 14 Pages - ---------------------- --------------------- - ------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON Inland Holdings LLC - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/ (b) / / - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not applicable - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / / - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION California - ------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER 0 SHARES -------------------------------------------------- 8 SHARED VOTING POWER BY 297,196 -------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER 0 REPORTING -------------------------------------------------- 10 SHARED DISPOSITIVE POWER PERSON WITH 297,196 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 297,196 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.3% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO - ------------------------------------------------------------------------------- *SEE INSTRUCTION BEFORE FILLING OUT! 7 AMENDMENT NO. 2 TO SCHEDULE 13D ITEM 1. SECURITY AND ISSUER This statement of amendment of Schedule 13D, filed on behalf of The TCW Group, Inc. and the several entities included herein (collectively the "Reporting Persons"), relates to the Common Stock, par value $.001 per share ("Common Stock"), of Inland Resources Inc., a Washington corporation (the "Issuer"), and supplements Amendment No. 1, which was filed on July 10, 2001. The address of the principal executive office of the Issuer is 410 17th Street, Suite 700, Denver, Colorado 80202. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION Pursuant to a Common Stock Purchase Agreement (the "Common Stock Purchase Agreement"), dated as of August 2, 2001, by and between Inland Holdings, LLC ("Holdings") and Hampton Investments LLC ("Hampton Investments"), Hampton Investments purchased an aggregate of 1,455,390 shares of Common Stock from Holdings for $1,000. Hampton Investments obtained the $1,000 purchase price from its internal funds. The foregoing description of the Common Stock Purchase Agreement is qualified in its entirety by the specific terms of such Agreement, which is filed as an Exhibit hereto and incorporated herein by reference. ITEM 4. PURPOSE OF THE TRANSACTION On August 2, 2001, Hampton Investments acquired shares of Common Stock from Holdings pursuant to the Common Stock Purchase Agreement. The information set forth in Item 3 is incorporated herein by reference. In connection therewith, certain other transactions occurred, which are described below (the "Transactions"). Pursuant to a Series E Preferred Stock Purchase Agreement (the "Series E Preferred Stock Purchase Agreement"), dated as of August 2, 2001, by and between Hampton Investments and Holdings, Hampton Investments sold its 121,973 shares of Series E Preferred Stock (the "Series E Preferred Stock") to Holdings for $2,000,000. The foregoing description of the Series E Preferred Stock Purchase Agreement is qualified in its entirety by the specific terms of such Agreement, which is filed as an Exhibit hereto and incorporated herein by reference. Holdings entered into a Termination Agreement (the "TCW Option Termination Agreement") with the Issuer, dated as of August 2, 2001, pursuant to which all warrants, rights and options to purchase Common Stock held by Holdings and its affiliates were terminated. The foregoing description of the TCW Option Termination Agreement is qualified in its entirety by the specific terms of such Agreement, which is filed as an Exhibit hereto and incorporated herein by reference. Pursuant to an Amended and Restated Registration Rights Agreement (the "Registration Rights Agreement"), dated as of August 2, 2001, by and among Holdings, the Issuer and Hampton Investments, the Issuer granted certain demand and piggyback 8 registration rights to Hampton Investments and Holdings in respect of Common Stock held by them. The foregoing description of the Registration Rights Agreement is qualified in its entirety by the specific terms of such Agreement, which is filed as an Exhibit hereto and incorporated herein by reference. The Issuer, Holdings and Hampton Investments entered into an Amended and Restated Shareholders Agreement (the "Shareholders Agreement"), dated as of August 2, 2001, providing for, among other things: (i) certain restrictions on the transfer of the Common Stock; (ii) certain "tag-along" rights for the benefit of Holdings and its affiliates; (iii) certain "drag-along" rights in favor of Hampton Investments; (iv) the preemptive rights described below; and (v) the Board representation rights described below. Subject to certain exceptions, under the Shareholders Agreement, each of Holdings and Hampton Investments has been granted the right to purchase its pro rata share of any capital stock of the Issuer which the Issuer proposes to sell and issue in the future. The preemptive rights granted to Holdings will terminate at such time that (i) Holdings and its affiliate transferees collectively own less than 50% of the Common Stock held by them as of the date of the Shareholders Agreement or (ii) as a result of the failure by Holdings and its affiliate transferees on one or more occasions to exercise their preemptive rights, and/or the transfer by them of the Common Stock held by them as of the date of the Shareholders Agreement, Holdings and its affiliates collectively own shares of Common Stock constituting less than 4% of the Common Stock then outstanding. Pursuant to the Shareholders Agreement, Holdings and Hampton Investments and their respective affiliates agree to vote to ensure that (i) the Company and Subsidiary Boards each consist of six members, subject to certain exceptions, (ii) as long as Hampton Investments and its affiliates hold at least a majority of the Common Stock of the Issuer, Hampton Investments and its affiliates have the right to appoint at least two members to the Company and Subsidiary Boards or, if greater, at least one third of the members of each such Board, and (iii) as long as the provisions in the Exchange and Note Issuance Agreement (defined below) relating to board representation, as described below, are applicable, the Requisite Holders (defined below) have the right to have one or more individuals designated for election to, and be elected to, the Company and Subsidiary Boards (defined below) as provided in such provisions. The Shareholders Agreement provides that only members of the Board who are not employees, affiliates, or employees of affiliates of Hampton Investments or Holdings are entitled to receive compensation at such levels as the Company and Subsidiary Boards may determine from time to time. Pursuant to such Agreement, any member of the Company and Subsidiary Boards designated by the Requisite Holders shall be entitled to receive reimbursement of reasonable travel and other expenses at a level not less than that received by other members of the Boards. Hampton Investments has the right to have the director designated by it, and Holdings has the right to have the director or observer(s) designated by the Requisite Holders, to be appointed to all committees established by the Issuer or its subsidiaries, including, without limitation the audit committee. 9 The Shareholders Agreement will terminate when (i) Common Stock is no longer held by Hampton Investments, Holdings or their respective affiliates and (ii) no TCW Sub Notes (defined below) are outstanding. The foregoing description of the Shareholders Agreement is only a summary thereof and is qualified in its entirety by the specific terms of such Agreement, which is filed as an Exhibit hereto and incorporated herein by reference. As described above, pursuant to the Shareholders Agreement, Holdings and Hampton Investments and their respective affiliates have agreed to vote to ensure that the Requisite Holders of the TCW Sub Notes have the following board representation rights. Pursuant to an Exchange and Note Issuance Agreement (the "Exchange and Note Issuance Agreement"), dated as of August 2, 2001, by and among the Issuer, Inland Production Company and Holdings, the holders (the "Requisite Holders") of 51% of the aggregate principal amount of subordinated notes of the Issuer issued thereunder (the "TCW Sub Notes") have the right to designate either (A) one member to each of the respective Boards of Directors of the Issuer and each of its subsidiaries (the "Company and Subsidiary Boards") and one observer to each of the Company and Subsidiary Boards or (B) up to two observers to each of the Company and Subsidiary Boards. Any person so designated that becomes a member of any such Board will have a term that automatically expires at such time as the TCW Sub Notes are repaid in full. In addition, for every two calendar quarters after the earlier of (i) September 30, 2005 or (ii) the first Quarterly Accrual Date (as defined in the Exchange and Note Issuance Agreement) to occur after the outstanding balance of the Senior Bank Debt (as defined in the Exchange and Note Issuance Agreement) shall be reduced to $40 million or less, in which interest on the TCW Sub Notes is not paid in full, the Requisite Holders have the right to designate an additional director to each of the Company and Subsidiary Boards, not to exceed a total of four directors for each such Board that is comprised of not greater than six members. Any person so designated that becomes a member of any such Board will have a term that automatically expires at such time as the unpaid interest is paid in full. The Exchange and Note Issuance Agreement also provides that upon the occurrence and continuation of specified events of default thereunder, the Requisite Holders have the right to designate an additional director to each of the Company and Subsidiary Boards for each 90 day period after the occurrence of such event of default until cured or waived, not to exceed a total of four directors for each such Board that is comprised of not greater than six members. Any person so designated that becomes a member of any such Board will have a term that automatically expires upon the date such event of default is cured or waived. In connection with these rights to cause a director to be designated to the Company and Subsidiary Boards, the Issuer amended its bylaws to provide that such designated directors have a term that will automatically expire as provided in the Exchange and Note Issuance Agreement. The foregoing description of the Exchange and Note Issuance Agreement is qualified in its entirety by the specific terms of such Agreement, which is filed as an Exhibit hereto and incorporated herein by reference. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER Item 5 is hereby amended and restated in its entirety as follows: 10 (a) As of the date of this Schedule 13D, Holdings holds 297,196 shares of the Issuer's Common Stock. The shares of Common Stock of the Issuer held by Holdings represent approximately 10.3% of the Common Stock of the Issuer (based on the Issuer's having 2,897,732 issued and outstanding shares of Common Stock as of May 9, 2001, as reported on the Issuer's Form 10-Q filed on May 25, 2001). Each of the TCW Related Entities other than Holdings, as a parent corporation or partnership or as a managing partner or member of Holdings, may be deemed to beneficially own the shares of the Issuer held by Holdings. Each of TCWG, TAMCO and TCW (other than in its capacity as TCW as Sub-Custodian) disclaims beneficial ownership of the Issuer's Common Stock (or Common Stock equivalents) reported herein and the filing of this Statement shall not be construed as an admission that such entities and individuals are the beneficial owners of any securities covered by this Statement. (b) TCW as Sub-Custodian and Portfolio, as the members of Holdings, have discretionary authority and control over all of the assets of Holdings pursuant to the Operating Agreement of Holdings, including the power to vote and dispose of the Issuer's Common Stock held by Holdings. Therefore, TCW, as Sub-Custodian, and Portfolio collectively have the power to vote and dispose of 297,196 shares of the Issuer's Common Stock. In addition, TCW Royalty, as the managing general partner of Portfolio, has the discretionary authority and control, together with TCW as Sub-Custodian, over all of the Royalty Entities including the power to vote and dispose of the Issuer's Common Stock held in the name of the Holdings. Therefore, TCW Royalty has the power, together with TCW as Sub-Custodian, to vote and dispose of 297,196 shares of the Issuer's Common Stock. TAMCO, as the parent corporation of TCW Royalty and as the investment manager of the Royalty Entities also has the power, together with TCW as Sub-Custodian, to vote and dispose of the shares of the Issuer's Common Stock held by Holdings. Therefore, TAMCO has the power, together with TCW as Sub-Custodian, to vote and dispose of 297,196 shares of the Issuer's Common Stock. TCWG, as the parent corporation of TCW and TAMCO, may be deemed to beneficially own shares of the Issuer's Common Stock held by the other TCW Related Entities. TCWG, TCW and TAMCO each disclaims beneficially ownership of the shares of the Issuer's Common Stock (and Common Stock equivalents) reported herein and the filing of this Statement shall not be construed as an admission that any such entity is the beneficial owner of any securities covered by this statement. (c) Except for the transactions described herein, none of the TCW Related Entities, and to the best of their knowledge, none of their respective executive officers, directors, or general partners has effected transactions involving the Issuer's Common Stock (or Common Stock equivalents) during the last 60 days. (d) None (e) Not applicable 11 ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER See Item 4. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS The following are filed herewith as Exhibits to this Schedule 13D: Exhibit 4.1 -- Common Stock Purchase Agreement Exhibit 4.2 -- Series E Preferred Stock Purchase Agreement Exhibit 4.3 -- Registration Rights Agreement Exhibit 4.4 -- Shareholders Agreement Exhibit 10 -- Exchange and Note Issuance Agreement Exhibit 99.1 -- TCW Option Termination Agreement 12 SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certify that the information set forth in this Statement is true, complete and correct. Dated as of this 8th day of August, 2001. THE TCW GROUP, INC. By: /s/ LAZARUS N. SUN ----------------------------------- Name: Lazarus N. Sun Title: Authorized Signatory TRUST COMPANY OF THE WEST By: /s/ LAZARUS N. SUN ----------------------------------- Name: Lazarus N. Sun Title: Authorized Signatory TCW ASSET MANAGEMENT COMPANY By: /s/ LAZARUS N. SUN ----------------------------------- Name: Lazarus N. Sun Title: Authorized Signatory TCW ROYALTY COMPANY By: /s/ LAZARUS N. SUN ----------------------------------- Name: Lazarus N. Sun Title: Authorized Signatory 13 TCW PORTFOLIO NO. 1555 DR V SUB-CUSTODY PARTNERSHIP, L.P. By: TCW ROYALTY COMPANY, its managing general partner By: /s/ LAZARUS N. SUN ----------------------------------- Name: Lazarus N. Sun Title: Authorized Signatory INLAND HOLDINGS LLC By: TRUST COMPANY OF THE WEST, as Sub-Custodian for Mellon Bank for the benefit of Account No. CPFF 873-3032, as member By: /s/ LAZARUS N. SUN ----------------------------------- Name: Lazarus N. Sun Title: Authorized Signatory By: TCW PORTFOLIO NO. 1555 DR V SUB-CUSTODY PARTNERSHIP, L.P., as member By: TCW ROYALTY COMPANY, as managing general partner By: /s/ LAZARUS N. SUN ----------------------------------- Name: Lazarus N. Sun Title: Authorized Signatory 14 EX-4.1 3 a2056120zex-4_1.txt EXHIBIT 4.1 EXHIBIT 4.1 COMMON STOCK PURCHASE AGREEMENT This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of August 2, 2001, by and between Inland Holdings, LLC (the "Seller") and Hampton Investments LLC (the "Buyer"). Subject to the terms and conditions hereof, the Seller wishes to sell to the Buyer, and the Buyer wishes to purchase from the Seller, 1,455,390 shares of the common stock, $.001 par value per share, of Inland Resources, Inc. (the "Company") (collectively, the "Shares") for an aggregate purchase price of One Thousand dollars ($1,000.00) (the "Purchase Price"). NOW, THEREFORE, in consideration of the promises contained herein and other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. SALE AND PURCHASE. A. As of the date hereof (the "Closing Date"), the Seller hereby sells, assigns, transfers and conveys to the Buyer all of the Seller's right, title and interest in and to the Shares. On the Closing Date, the Seller shall deliver to the Company's transfer agent (i) the certificate(s) evidencing the Seller's shares in the common stock of the Company, (ii) stock powers duly executed by the Seller transferring the Shares to the Buyer and (iii) instructions to issue a new stock certificate to the Buyer evidencing the Shares and instructions to issue a new stock certificate to the Seller evidencing its remaining shares in the Company, other than the Shares. B. On the Closing Date, Buyer shall pay the Seller the Purchase Price by wire transfer of immediately available funds in accordance with the wire instructions set forth on Schedule 1 hereto. SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER. The Seller hereby represents and warrants to the Buyer, as of the date hereof and as of the Closing Date: A. The Seller has been duly formed, is validly existing and in good standing under the laws of the state of California and has all requisite power and authority to execute and deliver, and to perform all of its obligations under, this Agreement. B. The Seller is the legal and the beneficial owner of the Shares to be sold by the Seller hereunder and is conveying to the Buyer such Shares, free and clear of any liens, claims, interests, charges and encumbrances. C. The execution, delivery and performance of this Agreement and any other instruments and documents executed and delivered by the Seller in connection herewith have been duly authorized by all necessary action and do not and will not (i) require any consent or approval of Seller's shareholders, if applicable, or any other person, firm, entity, court or governmental authority or agency other than any consent or approval that has already been obtained or (ii) violate any law, rule, regulation, order, writ or judgment presently in effect applicable to the Seller or any provision of the charter documents or by-laws. D. Except for filings related to ownership of securities required by the Securities Exchange Act of 1934, as amended, no consent, approval, authorization of, action by, notice to, or filing with any governmental or regulatory authority ("Governmental Body") or any other person, and no lapse of a waiting period, is necessary or required in connection with the execution, delivery or performance by the Seller of this Agreement or the transactions contemplated hereby. E. This Agreement has been duly executed and delivered by Seller and constitutes a legal, valid and binding obligation of the Seller, enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally or by general principles of equity relating to enforceability (regardless of whether considered in a proceeding at law or in equity). F. There are no brokerage commissions, finder's fees or similar fees or commissions payable by Seller in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with, or action taken by, Seller. G. Seller acknowledges that Buyer will be relying upon the representations and warranties set forth in this Section 2 in purchasing the Shares from Seller. SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer hereby represents and warrants to the Seller, as of the date hereof, and as of the Closing Date: A. The Buyer has been duly formed, is validly existing and in good standing under the laws of the state of Delaware and has all requisite power and authority to execute and deliver, and to perform all of its obligations under, this Agreement. B. The execution, delivery and performance of this Agreement and any other instruments and documents executed and delivered by the Buyer in connection herewith have been duly authorized by all necessary action and do not and will not (i) require any consent or approval of Buyer's shareholders, if applicable, or any other person, firm, entity, court or governmental authority or agency other than any consent or approval that has already been obtained or (ii) violate any law, rule, regulation, order, writ or judgment presently in effect applicable to the Buyer or any provision of the charter documents or by-laws. C. Except for filings related to ownership of securities required by the Securities Exchange Act of 1934, as amended, no consent, approval, authorization of, action by, notice to, or filing with any Governmental Body or any other person, and no lapse of a waiting period, is necessary or required in connection with the execution, delivery or performance by the Buyer of this Agreement or the transactions contemplated hereby D. This Agreement has been duly executed and delivered by Buyer and constitutes a legal, valid and binding obligation of Buyer, enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally or by general principles of equity relating to enforceability (regardless of whether considered in a proceeding at law or in equity). E. There are no brokerage commissions, finder's fees or similar fees or commissions payable by Buyer in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with, or action taken by, Buyer. 2 F. Buyer is acquiring the Shares for investment for its own account and not with a view to, or for resale in connection with, any distribution thereof in violation of the Securities Act of 1933, as amended. G. Buyer is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act of 1933, as presently in effect. H. Buyer 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 acquiring the Shares. I. Buyer acknowledges that the acquisition of the Shares involves a high degree of risk and represents that it understands the economic risks of such an investment. Buyer is prepared to bear the economic risk of retaining the Shares for an indefinite period, all without prejudice, however, to the rights of Buyer lawfully to sell or otherwise dispose of all or any part of the Shares held by it. J. Buyer has performed its own independent investigation and evaluation of the Company and the transactions contemplated hereby and has not, in connection with the transactions contemplated hereby, relied upon any representations or warranties of any kind whatsoever, whether express or implied by Seller, any of its affiliates or any of their respective officers, employees, representatives or agents except for such representations and warranties expressly set forth herein. K. Buyer acknowledges that Seller will be relying upon the representations and warranties set forth in this Section 3 in selling the Shares to Buyer. SECTION 4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations, warranties, covenants and agreements of the parties contained herein shall survive the consummation of the purchase and sale of the Shares contemplated in this Agreement, and each party recognizes that the other is relying on such other party's representations, warranties, covenants and agreements. SECTION 5. FURTHER ASSURANCES. Each party shall execute and deliver all further documents or instruments, and take all such further actions, reasonably requested by the other party in order to effectuate the intent and purposes of, and carry out terms of, this Agreement and to obtain the full benefit of this Agreement. SECTION 6. GOVERNING LAW. This Agreement shall be governed by and interpreted in accordance with the internal laws of the State of Washington without reference to the conflicts of the law provisions thereof. SECTION 7. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and understanding of the parties hereto, and supersedes all prior agreements and understandings between the parties hereto with respect to the purchase and sale of the Shares contemplated hereby. Except as expressly provided herein, there are no restrictions, promises, representations, warranties, covenants or undertakings of either party hereto. This Agreement shall be binding on, and inure to the benefit of, the parties hereto and their successors and assigns. SECTION 8. COUNTERPARTS. This Agreement may be executed in counterparts each of which when so executed shall be an original, but all such counterparts shall together constitute but one and the same instrument. Transmission by telecopier of an executed counterpart of this Agreement shall be deemed to constitute due and sufficient delivery of such counterpart, PROVIDED that any party that 3 delivers a counterpart by telecopier shall, promptly after such delivery, deliver the original of such counterpart of this Agreement to the other party hereto. SECTION 9. CONFIDENTIALITY. Except to the extent required by law, the parties acknowledge that the terms and conditions of this Agreement are confidential and neither party shall (and each party shall cause its employees, affiliates and representatives not to) disclose to any person or entity the terms and conditions of this Agreement including without limitation, the Purchase Price; PROVIDED, that nothing herein shall prevent the disclosure of any such information (i) to the parties' respective employees, directors, agents, fund participants, attorneys, accountants and other professional advisors, (ii) upon the request or demand of any examiner or other Governmental Body having jurisdiction over such party; or (iii) in connection with the exercise of any remedy hereunder. 4 IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the date first above written. SELLER: 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/ Arthur R. Carlson --------------------------------------- Arthur R. Carlson Managing Director By: /s/ Thomas F. Mehlberg --------------------------------------- Thomas F. Mehlberg Managing Director By: TCW PORTFOLIO NO. 1555 DR V SUB-CUSTODY PARTNERSHIP, L.P., a California limited partnership, Member By: TCW ROYALTY COMPANY, a California corporation, Managing General Partner By: /s/ Thomas F. Mehlberg --------------------------------------- Thomas F. Mehlberg Vice President Address for Notices: Trust Company of the West 865 South Figueroa Street Los Angeles, California 90017 Attention: Arthur R. Carlson Telephone: (213) 244-0000 Facsimile: (213) 244-0604 With a Copy To: Milbank, Tweed, Hadley & McCloy LLP 601 South Figueroa Street, 30th Floor Los Angeles, CA 90017 Attention: David A. Lamb, Esq. Telephone: (213) 892-4000 Facsimile: (213) 629-5063 BUYER: HAMPTON INVESTMENTS LLC, a Delaware limited liability company By: /s/ Steven R. Kamen --------------------------------------- Name: Steven R. Kamen Title: Senior Vice President Address for Notices: Hampton Investments LLC c/o Smith Management LLC 885 3rd Avenue, 34th Floor New York, New York 10022 Attention: General Counsel Telephone: (212) 888-5500 Facsimile: (212) 702-0145 EX-4.2 4 a2056120zex-4_2.txt EXHIBIT 4.2 EXHIBIT 4.2 SERIES E PREFERRED STOCK PURCHASE AGREEMENT This SERIES E PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of August 2, 2001, by and between Hampton Investments LLC (the "Seller") and Inland Holdings, LLC (the "Buyer"). Subject to the terms and conditions hereof, the Seller wishes to sell to the Buyer, and the Buyer wishes to purchase from the Seller, 121,973 shares of the Series E preferred stock, $.001 par value per share, of Inland Resources, Inc. (the "Company") (collectively, the "Shares") for an aggregate purchase price of Two Million dollars ($2,000,000.00) (the "Purchase Price"). NOW, THEREFORE, in consideration of the promises contained herein and other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. SALE AND PURCHASE. A. The Seller hereby agrees to sell, assign, transfer and convey to the Buyer all of the Seller's right, title and interest in and to the Shares. Currently with the execution and delivery by the parties hereto of this Agreement and payment of the Purchase Price by Buyer, the Seller shall deliver to the Buyer the certificate(s) evidencing Shares together with a stock power duly executed by the Seller transferring such Shares to the Buyer. The date on which such delivery is made by the Seller to the Buyer is referred to herein as the "Closing Date." B. On the Closing Date, Buyer agrees to pay the Seller the Purchase Price by cashier's check or other form of payment in cash or cash equivalents acceptable to Buyer. SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER. The Seller hereby represents and warrants to the Buyer, as of the date hereof and as of the Closing Date: A. The Seller has been duly formed, is validly existing and in good standing under the laws of Delaware and has all requisite power and authority to execute and deliver, and to perform all of its obligations under, this Agreement. B. The Seller is the legal and the beneficial owner of the Shares to be sold by the Seller hereunder and is conveying to the Buyer such Shares, free and clear of any liens, claims, interests, charges and encumbrances. C. Except for filings related to ownership of securities required by the Securities Exchange Act of 1934, as amended, no consent, approval, authorization of, action by, notice to, or filing with any governmental or regulatory authority ("Governmental Body") or any other person, and no lapse of a waiting period, is necessary or required in connection with the execution, delivery or performance by the Seller of this Agreement or the transactions contemplated hereby D. This Agreement has been duly executed and delivered by Seller and constitutes a legal, valid and binding obligation of the Seller, enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally or by general principles of equity relating to enforceability (regardless of whether considered in a proceeding at law or in equity). E. There are no brokerage commissions, finder's fees or similar fees or commissions payable by Seller in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with, or action taken by, Seller. F. Seller acknowledges that Buyer will be relying upon the representations and warranties set forth in this Section 2 in purchasing the Shares from Seller. G. The execution, delivery and performance of this Agreement and any other instruments and documents executed and delivered by the Seller in connection herewith have been duly authorized by all necessary action and do not and will not (i) require any consent or approval of Seller's shareholders, if applicable, or any other person, firm, entity, court or governmental authority or agency other than any consent or approval that has already been obtained or (ii) violate any law, rule, regulation, order, writ or judgment presently in effect applicable to the Seller or any provision of the charter documents or by-laws. SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer hereby represents and warrants to the Seller, as of the date hereof, and as of the Closing Date: A. The Buyer has been duly formed, is validly existing and in good standing under the laws of California and has all requisite power and authority to execute and deliver, and to perform all of its obligations under, this Agreement. B. The execution, delivery and performance of this Agreement and any other instruments and documents executed and delivered by the Buyer in connection herewith have been duly authorized by all necessary action and do not and will not (i) require any consent or approval of Buyer's shareholders, if applicable, or any other person, firm, entity, court or governmental authority or agency other than any consent or approval that has already been obtained or (ii) violate any law, rule, regulation, order, writ or judgment presently in effect applicable to the Buyer or any provision of the charter documents or by-laws. C. Except for filings related to ownership of securities required by the Securities Exchange Act of 1934, as amended, no consent, approval, authorization of, action by, notice to, or filing with any Governmental Body or any other person, and no lapse of a waiting period, is necessary or required in connection with the execution, delivery or performance by the Buyer of this Agreement or the transactions contemplated hereby. D. This Agreement has been duly executed and delivered by Buyer and constitutes a legal, valid and binding obligation of Buyer, enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally or by general principles of equity relating to enforceability (regardless of whether considered in a proceeding at law or in equity). E. There are no brokerage commissions, finder's fees or similar fees or commissions payable by Buyer in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with, or action taken by, Buyer. F. Buyer is acquiring the Shares for investment for its own account and not with a view to, or in connection with, any distribution thereof in violation of the Securities Act of 1933, as amended. 2 G. Buyer is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act of 1933, as presently in effect. H. Buyer 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 acquiring the Shares. I. Buyer acknowledges that the acquisition of the Shares involves a high degree of risk and represents that it understands the economic risks of such an investment. Buyer is prepared to bear the economic risk of retaining the Shares for an indefinite period, all without prejudice, however, to the rights of Buyer lawfully to sell or otherwise dispose of all or any part of the Shares held by it. J. Buyer has performed its own independent investigation and evaluation of the Company and the transactions contemplated hereby and has not, in connection with the transactions contemplated hereby, relied upon any representations or warranties of any kind whatsoever, whether express or implied by Seller, any of its affiliates or any of their respective officers, employees, representatives or agents except for such representations and warranties expressly set forth herein. K. Buyer acknowledges that Seller will be relying upon the representations and warranties set forth in this Section 3 in selling the Shares to Buyer. SECTION 4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations, warranties, covenants and agreements of the parties contained herein shall survive the consummation of the purchase and sale of the Shares contemplated in this Agreement, and each party recognizes that the other is relying on such other party's representations, warranties, covenants and agreements. SECTION 5. FURTHER ASSURANCES. Each party shall execute and deliver all further documents or instruments, and take all such further actions, reasonably requested by the other party in order to effectuate the intent and purposes of, and carry out terms of, this Agreement and to obtain the full benefit of this Agreement. SECTION 6. GOVERNING LAW. This Agreement shall be governed by and interpreted in accordance with the internal laws of the State of Washington without reference to the conflicts of the law provisions thereof. SECTION 7. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and understanding of the parties hereto, and supersedes all prior agreements and understandings between the parties hereto with respect to the purchase and sale of the Shares contemplated hereby. Except as expressly provided herein, there are no restrictions, promises, representations, warranties, covenants or undertakings of either party hereto. This Agreement shall be binding on, and inure to the benefit of, the parties hereto and their successors and assigns. SECTION 8. COUNTERPARTS. This Agreement may be executed in counterparts each of which when so executed shall be an original, but all such counterparts shall together constitute but one and the same instrument. Transmission by telecopier of an executed counterpart of this Agreement shall be deemed to constitute due and sufficient delivery of such counterpart, PROVIDED that any party that delivers a counterpart by telecopier shall, promptly after such delivery, deliver the original of such counterpart of this Agreement to the other party hereto. 3 SECTION 9. CONFIDENTIALITY. Except to the extent required by law, the parties acknowledge that the terms and conditions of this Agreement are confidential and neither party shall (and each party shall cause its employees, affiliates and representatives not to) disclose to any person or entity the terms and conditions of this Agreement including without limitation, the Purchase Price; PROVIDED, that nothing herein shall prevent the disclosure of any such information (i) to the parties' respective employees, directors, agents, attorneys, fund participants, accountants and other professional advisors, (ii) upon the request or demand of any examiner or other Governmental Body having jurisdiction over such party; or (iii) in connection with the exercise of any remedy hereunder. 4 IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the date first above written. BUYER: 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/ Arthur R. Carlson -------------------------------------------- Arthur R. Carlson Managing Director By: /s/ Thomas F. Mehlberg -------------------------------------------- Thomas F. Mehlberg Managing Director By: TCW PORTFOLIO NO. 1555 DR V SUB-CUSTODY PARTNERSHIP, L.P., a California limited partnership, Member By: TCW ROYALTY COMPANY, a California corporation, Managing General Partner By: /s/ Thomas F. Mehlberg --------------------------------------- Thomas F. Mehlberg Vice President Address for Notices: Trust Company of the West 865 South Figueroa Street Los Angeles, California 90017 Attention: Arthur R. Carlson Telephone: (213) 244-0000 Facsimile: (213) 244-0604 With a Copy To: Milbank, Tweed, Hadley & McCloy LLP 601 South Figueroa Street, 30th Floor Los Angeles, CA 90017 Attention: David A. Lamb, Esq. Telephone: (213) 892-4000 Facsimile: (213) 629-5063 SELLER: HAMPTON INVESTMENTS LLC, a Delaware limited liability company By: /s/ Steven R. Kamen -------------------------------------------- Name: Steven R. Kamen Title: Senior Vice President Address for Notices: Hampton Investments LLC c/o Smith Management LLC 885 3rd Avenue, 34th Floor New York, New York 10022 Attention: General Counsel Telephone: (212) 888-5500 Facsimile: (212) 702-0145 EX-4.3 5 a2056120zex-4_3.txt EXHIBIT 4.3 EXHIBIT 4.3 AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT DATED AS OF AUGUST 2, 2001 BY AND AMONG INLAND HOLDINGS LLC, INLAND RESOURCES INC., AND HAMPTON INVESTMENTS LLC TABLE OF CONTENTS Page SECTION 1. DEFINITIONS..................................................1 SECTION 2. DEMAND REGISTRATION RIGHTS...................................2 SECTION 3. SHELF REGISTRATION...........................................4 SECTION 4. PIGGY-BACK REGISTRATION......................................4 SECTION 5. RESTRICTIONS ON DISPOSITIONS AND DEMAND REGISTRATIONS........5 SECTION 6. REGISTRATION PROCEDURES......................................6 SECTION 7. REGISTRATION EXPENSES.......................................10 SECTION 8. INDEMNIFICATION; CONTRIBUTION...............................10 SECTION 9. RULE 144....................................................12 SECTION 10. REMEDIES 12 SECTION 11. BINDING EFFECT; TRANSFEREES; TERMINATION....................13 SECTION 12. AMENDMENTS AND WAIVERS......................................13 SECTION 13. NOTICES 13 SECTION 14. ENTIRE AGREEMENT............................................14 SECTION 15. COUNTERPARTS................................................14 SECTION 16. HEADINGS ...................................................14 SECTION 17. GOVERNING LAW...............................................14 SECTION 18. SEVERABILITY................................................14 i AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT -------------------------------------------------- This Amended and Restated Registration Rights Agreement (the "AGREEMENT") is made and entered into as of the __ day of August, 2001, by and among Inland Resources Inc., a Washington corporation (the "Company"), Inland Holdings, LLC, a California limited liability company ("HOLDINGS") and Hampton Investments LLC, a Delaware limited liability company ("SMITH"). WITNESSETH ---------- WHEREAS, the Company, Holdings, TCW Portfolio No. 1555 DRV Sub-Custody Partnership, L.P., a California limited partnership ("PORTFOLIO"), Joint Energy Development Investments II Limited Partnership, a Delaware limited partnership, Pengo Securities Corporation ("PENGO"), Smith Energy Partnership ("SEP"), Randall D. Smith, Jeffrey A. Smith, Barbara Stovall Smith, John W. Adams and Arthur J. Pasmas (collectively, the "SMITH INDIVIDUALS") (Smith, Pengo, SEP and the Smith Individuals, together with any of their respective affiliates, the "SMITH GROUP") entered into that certain Registration Rights Agreement dated September 21, 1999 (the "ORIGINAL AGREEMENT"); WHEREAS, Smith has acquired from the other members of the Smith Group the Registrable Common Stock (as defined in the Original Agreement) and is concurrently herewith acquiring from Holdings 1,455,390 shares of the Registrable Common Stock held by Holdings; WHEREAS, Portfolio no longer holds any options or warrants to acquire Registrable Common Stock and none of the Smith Group (other than Smith) holds any Registrable Common Stock any longer; and WHEREAS, the parties hereto desire to amend and restate the Original Agreement in its entirety as provided herein. The parties hereby agree that the Original Agreement is amended and restated in its entirety as follows: Section 1. DEFINITIONS. As used in this Agreement, the following terms have the meanings indicated: "BOARD OF DIRECTORS" means the board of directors of the Company. "COMMISSION" means the Securities and Exchange Commission or any similar agency having jurisdiction to enforce the Securities Act. "COMMON STOCK" means the common stock, par value $.001 per share, of the Company. "DEMAND REGISTRATION" has the meaning ascribed to such term in SECTION 2(A). 1 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "PERSON" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or governmental or political subdivision, agency or instrumentality thereof or other entity or organization of any kind. "PIGGY-BACK REGISTRATION" has the meaning ascribed to such term in SECTION 4. "REGISTER," "REGISTERED" and "REGISTRATION" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and the declaration or ordering of effectiveness of such registration statement. "REGISTRABLE COMMON STOCK" means, collectively, (a) the shares of Common Stock held by Holdings as of the date hereof, (b) the shares of Common Stock held by Smith as of the date hereof and (c) any shares of Common Stock or other securities issued with respect to the Common Stock described in clauses (a) and (b) of this definition whether by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation, share exchange, reorganization or otherwise held by Holdings or Smith; provided, however, such Common Stock or other securities shall cease to be Registrable Common Stock when (i) a registration statement with respect to the disposition of such Common Stock or other securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with the plan of distribution set forth in such registration statement, (ii) such Common Stock or other securities shall have been sold pursuant to Rule 144 (or any successor provision) under the Securities Act, (iii) such Common Stock or other securities shall have ceased to be outstanding or (iv) all of such Common Stock or other securities held by a Person may be sold pursuant to Rule 144 (or a successor provision) under the Securities Act without being restricted by the volume limitations or method of sale restrictions thereof. "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "SHELF REGISTRATION STATEMENT" has the meaning ascribed to such term in SECTION 2(A). Section 2. DEMAND REGISTRATION RIGHTS. (a) RIGHT TO DEMAND REGISTRATION. Subject to SECTION 2(B), SECTION 2(E) and SECTION 5 hereof, any holder of Registrable Common Stock may make a written request to the Company for registration with the Commission under and in accordance with the provisions of the Securities Act of the disposition of all or part of the Registrable Common Stock (a "DEMAND REGISTRATION"). Subject to SECTION 2(B), all requests made pursuant to this SECTION 2(A) will specify the aggregate amount of Registrable Common Stock to be registered, will specify the intended methods of disposition thereof and will specify whether the registration statement to be filed is a "shelf" registration statement ("SHELF REGISTRATION STATEMENT") pursuant to Rule 415 under the Securities Act (or any similar rule that may be adopted by the Commission). If any holder intends to dispose of any of the Registrable Common Stock pursuant to an underwritten offering, the holder 2 will have the right to select the underwriter, which shall be reasonably acceptable to the Company. No securities other than Registrable Common Stock may be registered in connection with a Demand Registration without the consent of the holders of a majority of the outstanding Registrable Common Stock whose shares are subject to such Demand Registration. (b) NUMBER OF DEMAND REGISTRATIONS; EFFECTIVE REGISTRATION; EXPENSES. Subject to SECTION 5, so long as (i) Holdings holds Registrable Common Stock, it (and its transferees), shall be entitled to initiate and have effected one (1) Demand Registration which shall be a shelf registration and (ii) Smith holds Registrable Common Stock, it (and its transferees) shall be entitled to initiate and have effected an aggregate of three (3) Demand Registrations; PROVIDED THAT unless the Demand Registration covers all Registrable Stock owned by the shareholder owning such stock, the Company shall not be obligated to effect a Demand Registration unless the party initiating the Demand Registration proposes to sell Registrable Common Stock at an aggregate price (calculated based upon the market price of the Registrable Common Stock on the date of filing of the registration statement with respect to such Registrable Common Stock) to the public of not less than $5,000,000. The Company shall pay all Registration Expenses of all such Demand Registrations in accordance with SECTION 7 hereof. The Company shall not be deemed to have effected a Demand Registration unless and until (i) the Company has filed a registration statement with the Commission and (ii) the registration statement has been declared effective by the Commission. Furthermore, if Holdings' right to make dispositions of Registrable Common Stock pursuant to a Shelf Registration Statement shall be suspended by the Company under Section 5 below for a period of more than 100 days or for a period during which the market price for the Company's common stock shall have reduced by fifty percent (50%) or more from the closing market price on the day preceding the day notice of suspension is given by the Company, then Holdings shall be entitled to initiate and have effective an additional Demand Registration which shall be a shelf registration. (c) GRANT OF NEW REGISTRATION RIGHTS. From and after the date of this Agreement and until this Agreement is terminated, the Company shall not grant any registration rights to any person that could adversely affect the registration rights of either Holdings or Smith hereunder or are inconsistent with the registration rights of either Holdings or Smith hereunder without the prior written consent, as applicable, of Holdings and Smith; PROVIDED, however, that the granting of piggy-back registration rights that are not superior to the registration rights granted under SECTION 4 hereof with respect to cut-backs or reductions required by underwriters shall not, in and of itself, be deemed to adversely affect the rights of either Holdings or Smith or be inconsistent with such rights if the piggy-back registration rights granted after the date of this Agreement are first cut-back or reduced. (d) TERMINATION OF PRIOR REGISTRATION RIGHTS. By entering into this Agreement Holdings and Smith, on behalf of themselves and their affiliates, expressly consents to and acknowledges that any registration right(s) related to any securities of the Company held prior to the date hereof by it is/are terminated as of the date hereof. (e) CONCERNING THE DEMAND REGISTRATION RIGHTS OF HOLDINGS. If the Company, at any time, ceases to be obligated to file reports under the Exchange Act (a "public reporting company"), then the Demand Registration which Holdings (and its transferees) are entitled to 3 initiate and have effected pursuant to SECTION 2(B) above shall expire; PROVIDED, that if the Company at any time thereafter becomes a public reporting company, Holdings (and its transferees), as long as it holds Registrable Common Stock, shall again be entitled to initiate and have effected one (1) Demand Registration which shall be a shelf registration and otherwise subject to the proviso in the first sentence of SECTION 2(B). Section 3. SHELF REGISTRATION. The Company will, as soon as possible following a written request pursuant to SECTION 2(A) for the registration of Registrable Common Stock by means of a Shelf Registration Statement, file a shelf registration statement on Form S-3 covering the Registrable Common Stock and thereafter shall use its best efforts to cause the Shelf Registration Statement to be declared effective as soon as practicable following such filing and to take any and all reasonable action within the Company's control, subject to and in accordance with SECTION 5, as may be necessary or appropriate to maintain such effectiveness until such time as neither any holder nor any of their assignees own any Registrable Common Stock; PROVIDED however, that the Company shall not be required to maintain the effectiveness of any such Shelf Registration Statement for longer than ninety days (90) from the effective date of such registration statement. Section 4. PIGGY-BACK REGISTRATION. (a) If the Company proposes to file a registration statement under the Securities Act with respect to an offering by the Company for its own account or for the account of others (the "INITIATING SHAREHOLDERS") of any class of security (other than pursuant to a registration statement on Forms S-4 or S-8 (or successor forms) or in connection with an exchange offer or an offering of securities solely to the Company's existing stockholders), including a Demand Registration Statement or a Shelf Registration Statement, then, subject to the last sentence of SECTION 2(A), the Company shall in each case give written notice of such proposed filing to the holders of Registrable Common Stock (which notice shall indicate, to the extent then known, the proposed managing underwriter or underwriters, if such offering is to be underwritten, and such other terms of the proposed offering that the Company reasonably believes to be material to the holders of Registrable Common Stock) and shall include in such registration statement all or a portion of the Registrable Common Stock owned by such holders which such holders shall request to be so included by written notice given by such holders to the Company within 10 business days after such holder's receipt of such notice from the Company (a "PIGGY-BACK REGISTRATION"). Subject to the last sentence of SECTION 2(A), the Company shall use its best efforts to effect the registration of all Registrable Common Stock requested to be so registered in such offering on the same terms and conditions as any securities of the Company of the same class included therein. If the managing underwriter or underwriters of an underwritten offering, if any, advise the holders of Registrable Common Stock in writing that in its or their reasonable opinion or, in the case of a Piggyback Registration not being underwritten, the Company shall reasonably determine (and notify the holders of Registrable Common Stock of such determination), after consultation with an investment banker of nationally recognized standing, that the number of shares of Common Stock or other securities proposed to be sold in such registration will adversely affect the success of such offering, the Company will include in such registration the number of securities, if any, which, in the opinion of such underwriter or underwriters, or the Company, as the case may be, can be sold as follows: (A) if such registration was initiated by the Company, (i) FIRST, the shares the Company proposed to sell, (ii) SECOND, the Registrable Common Stock and other shares of Common Stock requested to be included in such registration by the holders thereof entitled to participate in such registration under this Agreement or under any registration rights 4 agreement in effect on the date hereof and (iii) THIRD, the Common Stock requested to be included in such registration by the holders thereof entitled to participate in such registration under a registration rights agreement effective after the date hereof and (B) if such registration was initiated as the result of the exercise of a demand registration right of holders of Common Stock and the holders referred to in the last sentence of SECTION 2(A) have consented to the inclusion of such other securities (i) FIRST, the shares of Common Stock requested to be included in such registration by the demanding holders pro rata among those requesting such registration on the basis of the number of shares of Common Stock requested to be included), (ii) SECOND, shares to be issued and sold by the Company and shares held by Persons other than the demanding holders and requested to be included in such registration either pursuant to this Agreement or pursuant to any registration rights agreement in effect on the date hereof and (iii) THIRD, the Common Stock requested to be included in such registration by the holders thereof entitled to participate in such registration under registration rights agreements effective after the date hereof. To the extent that the privilege of including Registrable Common Stock or other shares of Common Stock in any Piggyback Registration must be allocated among the holders thereof pursuant to clause (A)(ii) or (B)(ii) above, the allocation shall be made pro rata based on the number of shares of Common Stock that each such participant shall have requested to include therein and to the extent that the privilege of including Common Stock in any Piggyback Registration must be allocated among the holders thereof pursuant to clause (A)(iii) or (B)(iii) above, the allocation shall be made pro rata based on the number of shares of Common Stock that each such participant shall have requested to include therein. Notwithstanding the above, if the managing underwriter or underwriters of an underwritten offering, if any, advise the Company that it or they intend to sell, as an over-allotment option, a number of shares of Common Stock or other securities in excess of the number of shares of Common Stock requested to be sold by the parties pursuant to this SECTION 4(A) (the "EXCESS STOCK"), the Excess Stock to be sold shall be sold by the holders of the Registrable Common Stock and shall be allocated among them pro rata based upon the number of shares of Registrable Common Stock that each such holder holds in excess of the stock requested to be sold pursuant to this SECTION 4(A). (b) The holders of Registrable Common Stock to be distributed by such underwriters shall be parties to the underwriting agreement between the Company and such underwriters. The representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of the holders of Registrable Common Stock to be distributed by such underwriters, and the conditions precedent to the obligations of such holders of Registrable Common Stock under such underwriting agreement shall be reasonably satisfactory to such holders. Such holders shall not be required to make any representations or warranties to the Company or its underwriters other than representations or warranties regarding such holder, such holder's interest in the shares to be distributed and such holder's intended method of distribution. The Company shall have the right to discontinue any piggy-back registration under this SECTION 4 at any time prior to the effective date of such registration if the registration of the securities giving rise to such registration under this SECTION 4 is discontinued by the Company, but no such discontinuation shall preclude an immediate or subsequent request by the holders of Registrable Common Stock for registration pursuant to SECTION 2 hereof if otherwise permitted. Section 5. RESTRICTIONS ON DISPOSITIONS AND DEMAND REGISTRATIONS. Notwithstanding anything to the contrary contained herein, the Company shall not be obligated to 5 prepare and file any registration statement pursuant to a Demand Registration or prepare or file any amendment or supplement thereto and may suspend, by giving written notice to the holders of Registrable Common Stock, such holders' rights to make dispositions of Registrable Common Stock pursuant to a Shelf Registration Statement, at any time when the Company reasonably believes that the filing thereof at the time requested, or the offering or sale of securities pursuant thereto, would materially adversely affect a pending or proposed public offering of the Company's securities, or an acquisition, merger, recapitalization, consolidation, reorganization or similar transaction or negotiations, discussions or pending proposals with respect thereto. The rights of holders of Registrable Common Stock to make dispositions thereof pursuant to a Shelf Registration Statement may similarly be suspended by the Company upon written notice to the holders of Registrable Common Stock that the Shelf Registration Statement is unusable as a result of an event requiring a post-effective amendment or supplement, which has not yet been filed, and will remain unusable until the supplement is filed or post-effective amendment is filed and declared effective. The filing of a registration statement, or any amendment or supplement thereto, by the Company cannot be deferred, and the holders' rights to dispose of Registrable Common Stock pursuant to a Shelf Registration Statement cannot be suspended for more than 90 days, and may not be so deferred or suspended more than 180 days during any twelve month period, unless such deferral or suspension is agreed to in writing by the holders of Registrable Common Stock subject to such suspension or deferral and, with respect to suspended dispositions, the Company shall be obligated to maintain the effectiveness of the applicable registration statement for an additional period of time equal to the period of suspension(s). Section 6. REGISTRATION PROCEDURES. (a) CERTAIN COMPANY OBLIGATIONS. Whenever Registrable Common Stock is to be registered pursuant to SECTIONS 2 OR 3 of this Agreement, the Company will use reasonable diligence to effect the registration of such Registrable Common Stock in accordance with the intended method of disposition thereof as quickly as practicable, and in connection with any such request and with the Piggy-back Registration or Demand Registration, the Company will as expeditiously as possible: (i) prepare and file with the Commission a registration statement which includes the Registrable Common Stock requested to be included and use its best efforts to cause such registration statement to become effective (which registration statement, in the case of a Demand Registration, shall in all events be filed with the Commission within 75 days after the Company's receipt of the Demand Registration, subject to the limitations set forth in SECTION 5); provided that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company will furnish to the holders of the Registrable Common Stock covered by such registration statement and the underwriters, if any, draft copies of all such documents proposed to be filed at least five (5) business days prior thereto (or, in the case of any amendments to documents that have previously been filed with the Commission, such shorter period of time if the Company reasonably believes it is necessary in order to effect the registration on a timely basis so long as such period is not less than 24 hours), which documents will be subject to the reasonable review of such holders and underwriters, and provided further that if such registration statement refers to any holder of Registrable Common Stock by 6 name or otherwise as the holder of any securities of the Company, then such holder shall have the right to require (i) the insertion therein of language, in form and substance satisfactory to such holder, to the effect that the holding by such holder of such securities does not necessarily make such holder a "controlling person" of the Company within the meaning of the Securities Act and is not to be construed as a recommendation by such holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such holder will assist in meeting any future financial requirements of the Company, or (ii) in the event that such reference to such holder by name or otherwise is not required by the Securities Act or any rules and regulations promulgated thereunder, the deletion of the reference to such holder; (ii) prepare and file as soon as reasonably practicable with the Commission such amendments and post-effective amendments to the registration statement as may be necessary to keep the registration statement effective for the period of time specified in SECTION 3 with respect to the Shelf Registration Statement and otherwise for 90 days (or such shorter period which will terminate when all Registrable Common Stock covered by such registration statement has been sold or withdrawn); cause the prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act; and comply with the provisions of the Securities Act applicable to it with respect to the disposition of all securities covered by such registration statement during the applicable period in accordance with the intended methods of disposition by the holders thereof set forth in such registration statement or supplement to the prospectus; (iii) furnish to any holder of Registrable Common Stock included in such registration statement and to the managing underwriter or underwriters, if any, without charge, at least one signed copy of the registration statement and any post-effective amendment thereto, upon request, and such number of conformed copies thereof and such number of copies of the prospectus (including each preliminary prospectus) and any amendments or supplements thereto, and any documents incorporated by reference therein, as such holder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Common Stock being sold by such holder; (iv) notify in writing each holder of Registrable Common Stock included in such registration statement, at any time when a prospectus relating-thereto is required to be delivered under the Securities Act, when the Company becomes aware of the happening of any event as a result of which the prospectus included in such registration statement (as then in effect) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading and, as promptly as practicable thereafter, prepare and file with the Commission and furnish a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Common Stock, such prospectus will not contain any 7 untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (v) use reasonable diligence to cause all Registrable Common Stock included in such registration statement to be listed, by the date of the first sale of Registrable Common Stock pursuant to such registration statement, on each securities exchange on which the Common Stock of the Company is then listed or proposed to be listed, if any, and use reasonable diligence to cause all Registrable Common Stock included in such Registration Statement to be quoted on The Nasdaq Stock Market (or other national or small-cap market), if the Common Stock of the Company is then quoted thereon; (vi) make generally available to its security holders an earnings statement satisfying the provisions of SECTION 11(A) of the Securities Act as soon as practicable, which earnings statement shall cover the requisite 12-month period, which requirements will be deemed to be satisfied if the Company timely files complete and accurate information on Forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise complies with Rule 158 under the Securities Act as soon as feasible; (vii) if requested by the managing underwriter or underwriters or any holder of Registrable Common Stock covered by the registration statement, promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters or such holder reasonably requests to be included therein, including, without limitation, with respect to the Registrable Common Stock being sold by such holder to such underwriter or underwriters, the purchase price being paid therefor by such underwriter or underwriters and with respect to any other terms of the underwritten offering of the Registrable Common Stock to be sold in such offering, and promptly make all required filings of such prospectus supplement or post-effective amendment; (viii) on or prior to the date on which the registration statement is declared effective, use reasonable diligence to register or qualify, and cooperate with the holders of Registrable Common Stock included in such registration statement, the underwriter or underwriters, if any, and their counsel, in connection with the registration or qualification of the Registrable Common Stock covered by the registration statement for offer and sale under the securities or blue sky laws of each state and other jurisdiction of the United States as any such holder or underwriter reasonably requests in writing, to use reasonable diligence to keep each such registration or qualification effective, including through new filings, or amendments or renewals, during the period such registration statement is required to be kept effective and to do any and all other acts or things necessary or advisable to enable the disposition in all such jurisdictions of the Registrable Common Stock covered by the applicable registration statement; provided that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so 8 qualified or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject; (ix) cooperate with the holders of Registrable Common Stock covered by the registration statement and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing securities to be sold under the registration statement, and enable such securities to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or such holders may request; (x) enter into such customary agreements (including an underwriting agreement in customary form) and take all such other actions as the holders of the Registrable Common Stock being sold or the underwriters retained by holders participating in an underwritten public offering, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Common Stock; (xi) make available for inspection by the holders, by any underwriter participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by the holders or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company's officers, directors and employees to supply all information, reasonably requested by the holders or any such seller, underwriter, attorney, accountant or agent in connection with such registration statement. In that connection, the Company may require the holders, such underwriter and such other persons to conduct their investigation in a manner which does not disrupt the operations of the Company and to execute such confidentiality agreements as the Company may reasonably determine to be advisable; (xii) notify each holder of Registrable Common Stock of any stop order issued or threatened by the Commission in connection with any registration statement covering Registrable Common Stock and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered; and (xiii) if such sale is pursuant to an underwritten offering, obtain "cold comfort" letters dated the effective date of the registration statement and the date of the closing under the underwriting agreement from the Company's independent public accountants in customary form and covering such matters of the type customarily covered by "cold comfort" letters as the counsel of the holders of Registrable Common Stock may reasonably request or the managing underwriter reasonably requests. (b) CERTAIN OBLIGATIONS OF HOLDERS OF REGISTRABLE COMMON STOCK. Each holder of Registrable Common Stock shall provide the Company in writing such information as the Company reasonably requests in order to effectuate the registration and disposition of such holder's Registrable Common Stock pursuant to this Agreement and such holder shall execute all consents, 9 powers of attorney, registration statements and other documents reasonably required to be signed by such holder in order to effectuate the registration or disposition of Registrable Common Stock by such holder. Section 7. REGISTRATION EXPENSES. The Company shall pay all expenses incident to the Company's performance of or compliance with its obligations hereunder, including, without limitation, all registration, filing and National Association of Securities Dealers, Inc. fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, and the reasonable fees and disbursements of the Company's independent public accountants, the Company's counsel and reasonable fees and expenses of one law firm acting as counsel to the holders requesting registration of all or a portion of their Registrable Common Stock. Holders of Registrable Common Stock requesting registration will be responsible for any other expenses incurred by them, including for their own accountants and representatives, as well as any underwriting discounts and commissions on the sale of the Registrable Common Stock. Section 8. INDEMNIFICATION; CONTRIBUTION. (a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless each holder of Registrable Common Stock, its officers, directors, partners and members (and officers and directors of such partners and members) and each person who controls such holder (within the meaning of the Securities Act) against all losses, claims, damages or liabilities arising out of or based upon any untrue or alleged untrue statement of material fact contained in any registration statement registering the disposition of Registrable Common Stock, any amendment or supplement thereto, any prospectus or preliminary prospectus or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same arise out of or are based upon, any such untrue statement or omission based upon information furnished in writing to the Company by such indemnified person expressly for use therein and will reimburse, as incurred, such holder, officer, director, partner, member or controlling person for any legal or other expenses incurred by such holder, officer, director, partner, member or controlling person in connection with investigating, defending or appearing as a third party witness in connection with any such loss, claim, damage, or liability. In connection with an underwritten offering, the Company will indemnify, and reimburse for expenses, the underwriters thereof, their officers and directors and each person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to holders of Registrable Common Stock. (b) INDEMNIFICATION BY HOLDERS OF REGISTRABLE COMMON STOCK. In connection with any registration statement in which a holder of Registrable Common Stock is participating, such holder will furnish to the Company in writing such information with respect to the name and address of such holder and the amount of Registrable Common Stock held by such holder and such other information as the Company shall reasonably request, for use in connection with any such registration statement or prospectus and agrees to indemnify the Company, its directors and officers, any underwriter (within the meaning of the Securities Act) for the Company or other persons selling securities pursuant to such registration statement, and each person who controls the Company, against any losses, claims, damages, liabilities and expenses resulting from any untrue statement of a material fact or any omission of a material fact required to be stated in the 10 registration statement or prospectus or any amendment thereof or supplement thereto or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information with respect to such holder so furnished in writing by such holder expressly for inclusion in any prospectus or registration statement. In no event shall the liability of any selling holder of Registrable Common Stock hereunder be greater in amount than the dollar amount of the net proceeds received by such holder upon the sale of the Registrable Common Stock giving rise to such indemnification obligation. (c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person entitled to indemnification hereunder agrees to give prompt written notice to the indemnifying party after the receipt by such person of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing as to which such person will claim indemnification or contribution pursuant to this Agreement and, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and the indemnifying party with respect to such claim, permit the indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to such indemnified party. The failure to notify the indemnifying party promptly of such commencement or threat shall not relieve the indemnifying party of its obligation to indemnify the indemnified party, except to the extent that the indemnifying party is actually prejudiced by such failure. Whether or not such defense is assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld). No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. If the indemnifying party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel for the indemnified party or parties with respect to such claim, unless in the reasonable judgment of any indemnified party an actual conflict of interest exists between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnified party shall be obligated to pay the fees and expenses of such additional counsel or counsels. (d) CONTRIBUTION. If the indemnification provided for in this SECTION 8 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact, has been made by, or related to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in SECTION 8(B), any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. 11 The parties hereto agree that it would not be just and equitable if contribution pursuant to this SECTION 8(D) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this SECTION 8(D), no underwriter shall be required to contribute any amount in excess of the amount by which the underwriting discount applicable to the Registrable Common Stock purchased by it and distributed to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no selling holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Common Stock of such selling holder was offered to the public exceeds the amount of any damages which such selling holder has otherwise been required to pay by reason of such untrue statement or omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of the Company pursuant to this SECTION 8 shall be further subject to such additional express agreements of the Company as may be required to facilitate an underwritten offering, provided that no such agreement shall in any way limit the rights of the holders of Registrable Common Stock under this Agreement, or create additional obligations of such holders not set forth herein, except as otherwise expressly agreed in writing by any such holders. The obligations of the Company pursuant to this SECTION 8 shall be in addition to any liability or obligation the Company may have at common law or otherwise. Section 9. RULE 144. The Company covenants that for so long as any Holder owns any Registrable Common Stock and the Company is a public reporting company, that it will file, in a timely manner, the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder, and it will take such further action as any holder of Registrable Common Stock may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Common Stock without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any holder of Registrable Common Stock, the Company will deliver to such holder a written statement as to whether it has complied with such requirements. Section 10. REMEDIES. Each holder of Registrable Common Stock in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. If any party hereto fails to perform any of its obligations under this Agreement, then the defaulting party shall pay any and all costs and expenses incurred by the other party on account of such default, including, without limitation, court costs and reasonable attorneys' fees and disbursements. Any such attorneys' fees and other expenses incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from and in addition to any other amount included in such judgment, and 12 such attorneys' fees obligation is intended to be severable from the other provisions of this Agreement and to survive and not be merged into any such judgment. Section 11. BINDING EFFECT; TRANSFEREES; TERMINATION. Except to the extent otherwise provided herein, the provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, legal representatives, successors and permitted assigns. A transferee of Registrable Common Stock, which acquires such securities from a holder of Registrable Common Stock in a transfer, whether in a public distribution or otherwise, which results in such transferred securities not being Registrable Common Stock in the hands of such transferee, shall not be a holder of Registrable Common Stock hereunder and shall not have any rights or obligations hereunder as a result of such transfer of Registrable Common Stock. Except as provided in the preceding sentence, a transferee of a holder of Registrable Common Stock, whether becoming such by sale, transfer, assignment, operation of law or otherwise, shall be deemed to be a holder of Registrable Common Stock hereunder and such transferee shall be entitled to the rights, and subject to the obligations, of such a holder hereunder; provided, (i) notice of such transfer (containing the name and address of the transferee) is given to the Company and (ii) such transferee agrees to be bound by the terms of this Agreement as a holder of Registrable Common Stock. This Agreement shall terminate as to any Person at such time as such Person no longer holds shares of Registrable Common Stock. Section 12. AMENDMENTS AND WAIVERS. This Agreement may be amended, but only with the written consent of each party being adversely affected by such amendment; provided that SECTION 2(C) and the cutback provisions of SECTION 4 may be amended or waived only with the consent of both (i) the holders of a majority of the Registrable Common Stock then held by Holdings and its affiliates, and (ii) the holders of a majority of the Registrable Common Stock then held by Smith and its affiliates. No failure or delay (whether by course of conduct or otherwise) by the parties hereto in exercising any right, power or remedy which they may have under this Agreement shall operate as a waiver thereof or of any other right, power or remedy, nor shall any single or partial exercise by the parties hereto of any such right, power or remedy preclude any other or further exercise thereof or of any other right, power or remedy. No waiver of any provision of this Agreement and no consent to any departure therefrom shall ever be effective unless it is in writing and signed by each party being adversely affected by such waiver or consent; provided that SECTION 2(C) and the cutback provisions of SECTION 4 may be amended or waived with the consent of both (i) the holders of a majority of the Registrable Common Stock then held by Holdings and its affiliates, and (ii) the holders of a majority of the Registrable Common Stock then held by Smith and its affiliates, and then such waiver or consent shall be effective only in the specific instances and for the purposes for which given and to the extent specified in such writing. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the parties at law or in equity or otherwise. Section 13. NOTICES. All notices, requests, consents, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed sufficiently given or furnished upon delivery, when delivered by personal delivery, by telecopy, by delivery service with proof of delivery, or three days after being deposited in the US mail as registered or certified United States mail, postage prepaid, if to a holder of Registrable Common Stock at the most current address given by such holder to the Company; if to the Company at: 13 Inland Resources Inc. 410 17th Street, Suite 700 Denver, Colorado 80202 Attn: Marc MacAluso Telephone: (303) 893-0102 Facsimile: (303) 893-0103 Section 14. ENTIRE AGREEMENT This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof, superseding all prior negotiations, preliminary agreements, correspondence or understandings, written or oral between the parties with respect to the subject matter hereof. Except as expressly provided herein, there are no representations or warranties of any party hereto. Section 15. COUNTERPARTS. Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. Section 16. HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Section 17. GOVERNING LAW. This Agreement shall be governed by and interpreted in accordance with the internal laws of the State of New York without reference to the conflicts of the law provisions thereof. Section 18. SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. [REMAINDER OF PAGE LEFT BLANK] 14 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. INLAND RESOURCES INC., a Washington corporation By: /s/ Marc MacAluso --------------------------------------- Marc MacAluso Chief Executive Officer INLAND HOLDINGS LLC, a California limited liability company, By: TRUST COMPANY OF THE WEST, a California trust company, as Sub-Custodian for Mellon Bank for the benefit of Account No. CPFF 873-3032, Member By: /s/ Arthur R. Carlson --------------------------------------- Arthur R. Carlson Managing Director By: /s/ Thomas F. Mehlberg --------------------------------------- Thomas F. Mehlberg Managing Director By: PORTFOLIO NO. 1555 DR V SUB-CUSTODY PARTNERSHIP, L.P., a California limited partnership, Member By: TCW ROYALTY COMPANY, a California corporation, Managing General Partner By: /s/ Thomas F. Mehlberg ---------------------------------- Thomas F. Mehlberg Vice President HAMPTON INVESTMENTS LLC, a Delaware limited liability company By: /s/ Steven R. Kamen --------------------------------------- Name: Steven R. Kamen Title: Senior Vice President EX-4.4 6 a2056120zex-4_4.txt EXHIBIT 4.4 EXHIBIT 4.4 AMENDED AND RESTATED SHAREHOLDERS AGREEMENT This Amended and Restated Shareholders Agreement (this "AGREEMENT") is made and entered into as of August 2, 2001, by and among Inland Resources Inc., a Washington corporation (the "INLAND"), Inland Holdings, LLC, a California limited liability company ("TCW"), and Hampton Investments LLC, a Delaware limited liability company ("SMITH"). W I T N E S S E T H WHEREAS, Inland, TCW, Fund V (as defined below), Joint Energy Development Investments II Limited Partnership, a Delaware limited partnership ("JEDI"), Pengo Securities Corp., a Delaware corporation ("PENGO"), Smith Energy Partnership, a New York general partnership ("SEP"), Randall D. Smith, Jeffrey A. Smith, Barbara Stovall Smith, John W. Adams and Arthur J. Pasmas (collectively, the "SMITH INDIVIDUALS") (Smith, Pengo, SEP and the Smith Individuals, together with any of their respective affiliates, the "SMITH GROUP") entered into that certain Shareholders Agreement dated as of September 21, 1999 (the "ORIGINAL AGREEMENT"); WHEREAS, Smith has acquired a total of 570,698 shares of Inland's Common Stock (as defined in the Original Agreement) from the other members of the Smith Group and 292,098 shares of Common Stock from JEDI, and Smith is concurrently herewith acquiring from TCW 1,455,390 shares of Common Stock held by TCW; WHEREAS, after the sale of Common Stock by TCW described above, TCW will own 297,196 shares of Inland's Common Stock (the "TCW COMMON STOCK") and no other equity securities of Inland; WHEREAS, after the purchase of Common Stock from TCW described above, Smith will own a total of 2,318,186 shares of Inland's Common Stock (the "SMITH COMMON STOCK") and no other equity securities of Inland; WHEREAS, the parties hereto desire to amend and restate the Original Agreement in its entirety as provided herein; and WHEREAS, TCW and Smith desire to make certain provisions regarding, among other things, the transfer of shares of capital stock of Inland. 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 that the Original Agreement is amended and restated in its entirety as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following terms have the following meanings: 1 "AFFILIATE" or "AFFILIATE" shall mean, with respect to any Person, (i) any other Person directly or indirectly owning, controlling or holding with power to vote 50% or more of the outstanding voting securities of the specified Person; (ii) any other Person 50% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote by the specified Person; (iii) any other Person directly or indirectly controlling, controlled by or under common control with the specified Person; or (iv) any officer, director, partner or sanguineous or affined kin of the specified Person or of any other Person described in clause (iii) above. For the avoidance of doubt and without limiting the generality of the foregoing, the following Persons shall be deemed to be Affiliates of Smith: (a) Randall D. Smith, Jeffrey A. Smith, Barbara Stovall Smith, Arthur J. Pasmas, John W. Adams, (b) any immediate family member of any Person falling within (a) above, (c) any direct lineal descendant of any Person falling within (b) above, (d) any trust established for the benefit of any Person falling within (a) to (c) above, (e) Bruce Schnelwar, and (f) any Person controlling, controlled by or under common control with (a) to (e) above. For the further avoidance of doubt and without limiting the generality of the foregoing, any partner, member, shareholder, participant or beneficial interest owner of any TCW partner, member, shareholder, participant or beneficial interest owner of any of the foregoing shall be deemed to be an Affiliate of TCW. "BOARD" or "BOARD OF DIRECTORS" shall mean the board of directors of Inland and every Subsidiary thereof. "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 mean the common stock of Inland, par value $.001 per share. "DRAG-ALONG NOTICE" shall have the meaning ascribed to such term in SECTION 4. "DRAG-ALONG PARTY" shall have the meaning ascribed to such term in SECTION 4. "DRAG-ALONG PERIOD" shall have the meaning ascribed to such term in SECTION 4. "DRAG-ALONG SHARES" shall have the meaning ascribed to such term in SECTION 4. "DRAG-ALONG TRANSACTION" shall have the meaning ascribed to such term in SECTION 4. "EXCHANGE AND NOTE ISSUANCE AGREEMENT" shall mean that certain Exchange and Note Issuance Agreement dated the date hereof by and among Inland, Inland Production Company, Inland Working Capital Company, Inland Holdings LLC and TCW Portfolio No. 1555 DRV Sub-Custody Partnership, LP. "FUND V" shall mean Trust Company of the West, a California trust company, solely in its capacity as custodian for Mellon Bank for the benefit of Account No. CPFF 873-3032 AND TCW Portfolio No. 1555 DR V Sub-Custody Partnership, L.P., a California limited partnership. 2 "HOLDER" or "HOLDERS" shall mean the Persons holding any of the Securities, either individually or collectively as the context so requires. "NEW SECURITIES" shall have the meaning ascribed to such term in SECTION 8.1(A). "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. "SALE CONTRACT" shall have the meaning ascribed to such term in SECTION 4.3. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any successor Federal statute and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time. "SECURITIES" shall mean the TCW Common Stock and Smith Common Stock. "SMITH COMMON STOCK" shall have the meaning ascribed to such term in the recitals hereto. "SUBSIDIARIES" shall mean the subsidiaries of Inland. "TAG TRANSACTION" shall have the meaning ascribed to such term in SECTION 3.1. "TAGALONG PARTY" shall have the meaning ascribed to such term in SECTION 3.1. "TCW COMMON STOCK" shall have the meaning ascribed to such term in the recitals hereto. "TCW ENTITY" shall have the meaning ascribed to such term in SECTION 4.2. "TCW SUB NOTES" shall mean the unsecured subordinated note(s) of Inland issued pursuant to the Exchange and Note Issuance Agreement. "TRANSFER" shall have the meaning ascribed to such term in SECTION 2. For the avoidance of doubt, the term "Transfer" shall not include a pledge or hypothecation, but shall include any transfer upon the foreclosure or realization of collateral arising from a pledge or hypothecation. "TRANSFEROR" shall have the meaning ascribed to such term in SECTION 3.1. "TRANSFEREE" shall have the meaning ascribed to such term in SECTION 3.1. "VOTING STOCK" shall mean the capital stock of any class or classes of Inland, including, without limitation, the Common Stock, the holders of which are entitled to participate generally in the election of the members of Inland's Board, and any securities of Inland convertible into, or exercisable or exchangeable for, any such capital stock of Inland. 3 SECTION 2. RESTRICTIVE LEGEND AND RIGHT TO TRANSFER 2.1 Each party hereto understands and agrees that Inland will cause the legend set forth below to be placed upon any certificates or other documents or instruments evidencing ownership of the Smith Common Stock and the TCW Common Stock, until such time as the later of a certificate bearing such legend is transferred to a non-affiliate of Smith or TCW or the repayment in full of the TCW Sub Notes (at which time Inland agrees to remove such legend(s) upon request of a holder of such certificate): "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN TAG-ALONG, AND DRAG-ALONG RIGHTS AND VOTING AGREEMENTS AS SET FORTH IN THAT CERTAIN AMENDED AND RESTATED SHAREHOLDERS AGREEMENT DATED AUGUST 2, 2001 AMONG INLAND RESOURCES, INC., INLAND HOLDINGS, LLC AND HAMPTON INVESTMENTS LLC. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. CERTAIN OF SUCH RIGHTS AND AGREEMENTS ARE BINDING ON CERTAIN TRANSFEREES OF THESE SHARES." 2.2 Except as provided in Sections 3 or 4 herein and subject to applicable securities laws, any restrictive legends on certificates evidencing the Securities and any other agreements governing or restricting transfer of the Securities, each of TCW and Smith shall have the right to freely sell, assign, transfer, give away or dispose of (any of the foregoing being hereinafter referred to as a "Transfer") their respective interests in the Securities, whether in whole or in part, to any Person without restriction other than as set forth herein. SECTION 3. TAGALONG RIGHTS 3.1 If Smith or any affiliate thereof ("TRANSFEROR") transfers, other than in a public offering pursuant to a registration statement, any shares of Common Stock held by such Transferor to any Person or Persons other than to an affiliate of Smith (a "TRANSFEREE") in one transaction or a series of related transactions, which transfer or transfers constitute the Transfer of a majority of the shares of Smith Common Stock held by Smith as of the date hereof (a "TAG TRANSACTION"), then TCW or any Affiliate of TCW (the "TAGALONG PARTY") shall have the right to sell to the Transferee, at the same price per share and otherwise on the same terms and conditions as provided with respect to the sale by the Transferor to the Transferee, up to the number of shares of Common Stock (rounded to the nearest whole share) equal to the product of (i) the total number of shares of Common Stock which the Tagalong Party then owns and (ii) a fraction with a numerator equal to the number of shares of Common Stock then proposed to be sold by the Transferor and a denominator equal to the total number of shares of Common Stock owned by the Transferor as of the date hereof. The right of the Transferor to sell shall be subject to the condition that the Transferor shall cause the Transferee that proposes to purchase the shares of the Transferor to offer to purchase, at the same price per share and otherwise on the same terms, such number of shares from the Tagalong Party; PROVIDED, HOWEVER, that if the Transferee is for any reason unwilling or unable to purchase the aggregate number of shares from the Transferor to be purchased together with the Tagalong Party desiring to Transfer shares in such transaction, then the number of shares to be sold by each shall be proportionally reduced (based on the total 4 number of shares originally proposed to tag along or be sold) to such number as, when taken with the number of shares to be sold by each other such party, shall be equal to the number of shares which such Transferee is willing or able to purchase (provided that such Transfer shall satisfy the conditions set forth in the first sentence of this SECTION 3.1). Each Tagalong Party shall only be entitled to sell shares of Common Stock under this SECTION 3 that it owns as of the date hereof and any securities acquired after the date hereof concurrently with securities of the same type acquired by Smith; other securities acquired after the date hereof in any manner shall not be subject to the tagalong rights provided in this SECTION 3. 3.2 The Transferor shall give written notice to TCW, and to any Affiliate of TCW to whom TCW has Transferred TCW Common Stock (notice of which such Affiliate transferees has been given to Smith or any other Transferor) at least fifteen (15) business days prior to any proposed Transfer(s) of Common Stock constituting a Tag Transaction. The notice shall specify the proposed Transferee, the number of shares of Common Stock to be sold, the amount and type of consideration to be received therefor, and the place and date on which the sale is to be consummated. If the Tagalong Party desires to include shares of Common Stock in such sale pursuant to SECTION 3.1, the Tagalong Party shall be required to notify the Transferor not more than ten (10) business days after its receipt of the notice required to be delivered by the Transferor in order to exercise its tagalong rights under SECTION 3.1. 3.3 If a Transferor proposes to Transfer to any Affiliate thereof any of the Smith Common Stock held by such Transferor, then such Transferor, as a condition to the Transfer, (i) shall cause such Affiliate to agree to be bound by this Section 3 and such Affiliate shall thereupon be deemed to be a party hereto and (ii) shall notify TCW of the identity and address of the Affiliate transferee. The tag along rights set forth in this SECTION 3 shall not be applicable to transferees of TCW other than to Affiliates of TCW. SECTION 4. DRAG-ALONG. 4.1 If a Transferor sells, other than in a public offering pursuant to a registration statement, shares of Common Stock held by such Transferor to a Transferee in one transaction or a series of related transactions on arms-length terms which constitute the transfer of all of the Common Stock then owned by Smith and its Affiliates, the Transferor and/or its affiliates may, at their option, cause TCW (together with any party deemed to be included in such definition pursuant to SECTION 4.2 below, a "DRAG-ALONG PARTY") to sell to the Transferee, on the same terms and conditions as provided with respect to the sale by the Transferor to such Transferee in such transaction, all shares of Common Stock which the Drag-Along Party then owns (such shares being "DRAG-ALONG SHARES" and such transaction being a "DRAG-ALONG TRANSACTION"); PROVIDED, HOWEVER, that: (x) the price for the Drag-Along Shares may not be lower than the price per share paid to the Transferor in the same or related transaction; and (y) the consideration for the Drag-Along Shares shall be paid in cash at the closing of the Drag-Along Transaction(s) unless the relevant Drag-Along Party consents to payment in a form other than cash or, at the option of the relevant Drag-Along Party, in the same form of payment as received by the Transferor. 4.2 If TCW or any of its Affiliates (a "TCW ENTITY") proposes to Transfer to any Affiliate thereof any of the Common Stock held by such TCW Entity, then such TCW 5 Entity, as a condition to the Transfer, shall cause such Affiliate to agree to be bound by this SECTION 4 and such Affiliate shall thereupon be deemed to be a party hereto and shall notify Smith of the identity and address of such Affiliate. Thereupon such Affiliate shall also be deemed a "Drag-Along Party" for purposes of this Agreement. The drag-along rights set forth in this SECTION 4 shall not be applicable to transferees of the Drag-Along Party other than to other Affiliates of such Drag-Along Party. 4.3 To exercise a drag-along right, Transferor shall give written notice (the "DRAG-ALONG NOTICE") to the Drag-Along Party against whom the right is to be enforced at least fifteen (15) business days prior to any proposed Transfer of Common Stock. The notice shall specify the terms of such Transfer and certify as to the facts supporting exercise of the drag-along right and include a copy of the contract between the Transferor and Transferee to consummate the Drag-Along Transfer (the "SALE CONTRACT"), if such a Sale Contract has been signed . During the Drag-Along Period (as defined below), the Drag-Along Party in receipt of the Drag-Along Notice may not Transfer any Securities subject to Transferor's drag-along rights under this SECTION 4 to any Person other than Transferor or the Transferee. The "Drag-Along Period" shall be the period commencing on the date the Drag Along Notice is given and terminating on the earlier of (i) the 120th day following delivery of the Drag-Along Notice or (ii) the date of termination of the Sale Contract. SECTION 5. BOARD OF DIRECTORS REPRESENTATION 5.1 BOARD OF DIRECTORS REPRESENTATION. From and after the date hereof, each of Smith and any of its affiliates and successors to the Smith Common Stock and TCW and any of its affiliates and successors to the TCW Common Stock who hold Voting Stock shall vote their respective shares of Voting Stock (including any shares of Voting Stock hereafter acquired, owned or controlled by such Holder), at any regular or special meeting of shareholders of Inland called for the purpose of filling positions on the Board, or in any written consent executed in lieu of such a meeting of shareholders, in such a manner that, and shall otherwise take all actions in their capacities as shareholders necessary to ensure that, (i) the Board of Inland consists of six (6) members (unless the Requisite Holders (as defined in the Exchange and Note Issuance Agreement) have exercised their rights under the Exchange and Note Issuance Agreement and, as a result of the failure of a then existing director to resign or otherwise, it is necessary to increase the size of the Board in order to permit the Requisite Holders to exercise such rights), (ii) for so long as Smith and its Affiliates hold not less than a majority of the Common Stock, Smith and its Affiliates, as a group, shall have the right to appoint not less than two individuals designated for election to, and be elected to, the Board or, if greater, that number of individuals representing not less than one third of the members of the Board, and (iii) for so long as there shall be any TCW Sub Notes outstanding and the provisions of SECTIONS 5.2, 5.3 and 9.2 of the Exchange and Note Issuance Agreement are applicable, the Requisite Holders shall have the right to have one or more individuals designated for election to, and be elected to, the Board as set forth in and pursuant to Sections 5.2, 5.3 and 9.2 of the Exchange and Note Issuance Agreement. In the event that either the Requisite Holders of TCW Sub Notes or Smith has a right to replace a member of each Board designated by the other party with its own designee, Smith or the Requisite Holders of TCW Sub Notes (as the case may be) shall take all necessary action in their capacities as shareholders to cause one of its own designees on the Board to resign 6 from the Board and to ensure that the individual designated for election by the other party is elected to the Board. 5.2 DIRECTOR COMPENSATION. Except for the Chairman of the Board, no member of the Board designated by any party shall be entitled to receive compensation if such member is an employee, an affiliate, or an employee of an affiliate of Smith or TCW (an "AFFILIATED DIRECTOR"). Subject to Section 5.2 of the Exchange and Note Issuance Agreement, any member of the Board who is not an Affiliated Director shall be entitled to receive compensation at such levels as the Board may determine from time to time. Subject to Section 5.2 of the Exchange and Note Issuance Agreement, one member of the Board designated by the Requisite Holders of TCW Sub Notes (whether serving on the board of directors of Inland or any Subsidiary) and one observer designated by the Requisite Holders of TCW Sub Notes shall be entitled to reimbursement of reasonable travel and other expenses at a level not less than that received by other members of the Board. 5.3 REPRESENTATION ON BOARD COMMITTEES. Each of Smith and the Requisite Holders of TCW Sub Notes shall have a right to have the director designated by Smith and the director or observer designated by the Requisite Holders of TCW Sub Notes, respectively, be appointed to all committees established by Inland or Subsidiaries of Inland, including without limitation the audit committee. 5.4 THIRD PARTY BENEFICIARIES. The parties hereto acknowledge and agree that the Requisite Holders of the TCW Sub Notes are express third party beneficiaries of this SECTION 5 and shall be entitled to enforce the provisions hereof. SECTION 6. Waiver of Anti-takeover Rights To the extent permitted by law, TCW and its affiliates and Smith and its affiliates, expressly waive all rights and claims against TCW or Inland or Smith or otherwise with respect to the transactions currently contemplated by the parties hereto or any future or subsequent transactions under any anti-takeover statutes of applicable law including, but not limited to, Chapter 19 of the Washington Business Corporation Act (RCW 23B.19.010 - 19.050). SECTION 7. REPRESENTATIONS AND WARRANTIES 7.1 Smith hereby represents, warrants and covenants to TCW that: (a) Smith owns the Smith Common Stock and no other equity securities of Inland, (b) Smith is the beneficial holder (and has the contractual right to become the record holder) of the Smith Common Stock and (c) Smith has neither sold, assigned, conveyed, transferred or otherwise disposed of, in whole or in part, its securities constituting all or a portion of the Smith Common Stock, nor, as of the date hereof, has entered into any agreement to sell, assign, convey, transfer or otherwise dispose of, in whole or in part, such securities. 7.2 TCW hereby represents, warrants and covenants to Smith that: ( a) TCW owns the TCW Common Stock and no other equity securities of Inland, (b) TCW is the legal and beneficial holder of the TCW Common Stock and (c) TCW has neither sold, assigned, conveyed, transferred or otherwise disposed of, in whole or in part, its securities constituting all or a portion 7 of the TCW Common Stock, nor, as of the date hereof, has entered into any agreement to sell, assign, convey, transfer or otherwise dispose of, in whole or in part, such securities. 7.3 Each of the Smith record owners set forth on the signature pages hereto (the "SMITH RECORD OWNERS") represents that it is a record owner of certain of the Smith Common Stock beneficially owned by Smith as of the date hereof, and has agreed to transfer record ownership of such Smith Common Stock to Smith. Each of the Smith Record Owners agrees that, for so long as such Smith Record Owner is the record owner of Smith Common Stock beneficially owned by Smith, (i) Smith shall be deemed to be the record owner of such Smith Common Stock held by such Smith Record Owner for all purposes under this Agreement (other than the representations in SECTION 7.1 hereof) and (ii) such Smith Record Owner shall be bound by all the terms and conditions of this Agreement on the same basis as Smith. 7.4 Inland hereby represents, warrants and covenants to Smith and TCW, as of the date hereof and immediately thereafter, that the authorized capital stock of Inland will consist solely of (i) 25,000,000 shares of Common Stock, of which 2,897,732 shares of will be issued and outstanding and (ii) 20,000,000 shares of preferred stock, of which no shares will be issued and outstanding. As of the date hereof and immediately thereafter, all of the outstanding shares of the Company's capital stock shall be duly authorized, validly issued, fully paid and nonassessable. SECTION 8. PREEMPTIVE RIGHTS 8.1 Inland hereby grants to TCW and Smith the right to purchase a pro rata share of New Securities (as defined in this SECTION 8.1) which Inland may, from time to time, propose to sell and issue. Each of TCW's or Smith's pro rata share, for purposes of this right, is the ratio of the number of shares of Common Stock owned by TCW or Smith, as the case may be, immediately prior to the issuance of the New Securities, to the total number of shares of Common Stock held by all holders of Common Stock immediately prior to the issuance of the New Securities. This right shall be subject to the following provisions: (a) "NEW SECURITIES" shall mean any capital stock of Inland whether now authorized or not, and rights, options or warrants to purchase such capital stock, and securities of any type whatsoever that are, or may become, convertible into capital stock; PROVIDED that the term "New Securities" does not include (i) securities issued in connection with a merger, acquisition, reorganization or other similar transaction undertaken by Inland; (ii) any borrowings, direct or indirect, from financial institutions or other persons by Inland, whether or not presently authorized, including any type of loan or payment evidenced by any type of debt instrument, even if such borrowings have equity features including warrants, options or other rights to purchase capital stock and are not convertible into capital stock of Inland; (iii) securities issued to employees, consultants, officers or directors of Inland pursuant to any stock option, stock purchase bonus plan, warrant, agreement or arrangement approved by the Board of Directors; (iv) securities issued in connection with obtaining lease financing, whether issued to a lessor, guarantor or other person and such issuance is undertaken for purposes primarily other than equity financing; (v) securities issued in connection with any stock split, stock dividend or recapitalization of Inland; and (vi) any right, option or warrant to acquire any security 8 convertible into the securities excluded from the definition of New Securities pursuant to subsections (i) through (v) above. (b) In the event Inland proposes to undertake an issuance of New Securities, it shall give TCW and Smith (and their respective Affiliate transferees of which Inland has received notice of the name and address of such transferee) written notice of its intention, describing the type of New Securities, their price and the general terms upon which Inland proposes to issue same. TCW or Smith (or their respective Affiliates) shall have ten (10) business days after any such notice is received to agree to purchase TCW's or Smith's pro rata share of such New Securities for the price and upon the terms specified in the notice by giving written notice to Inland and stating therein the quantity of New Securities to be purchased. (c) In the event TCW or Smith (or their respective Affiliates) fail to exercise fully the right within said ten (10) business day period, Inland shall have one hundred eighty (180) business 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 eighty (180) business days from the date of said agreement) to sell the New Securities respecting TCW's or Smith's (or their respective Affiliate's) right option set forth in this SECTION 8.1, at a price and upon terms no more favorable to the purchasers thereof than specified in Inland's notice to TCW and Smith pursuant to SECTION 8.1(B). In the event Inland has not sold the New Securities within such one hundred eighty (180) business day period or entered into an agreement to sell the New Securities in accordance with the foregoing within one hundred eighty (180) business days from the date of said agreement, Inland shall not thereafter issue or sell any New Securities, without first again offering such securities to TCW and Smith (and its Affiliates) in the manner provided in SECTION 8.1(B) above. (d) If the preemptive rights under this SECTION 8 are exercised by the affiliates of TCW or Smith, (i) such affiliates must act together with TCW or Smith as a group, as applicable, in the exercise of the rights under this SECTION 8; and (ii) as a condition to the purchase of the New Securities by such affiliates, each such affiliate must agree to be bound by SECTION 4 of this Agreement as if it were a party hereto and, if it has not already done so, it must notify Smith of its identity and address. (e) The preemptive rights under this SECTION 8 shall not be assignable by either TCW or Smith other than to a respective affiliate thereof which also acquires Common Stock therefrom. (f) The preemptive rights of TCW (and any affiliate transferee thereof) shall terminate at any time that (i) TCW and its affiliate transferees collectively own less than 50% of the TCW Common Stock or (ii) as a result of the failure by TCW (and its affiliate transferees) on one or more occasions to exercise preemptive rights hereunder, and/or the transfer of TCW Common Stock by TCW and its affiliates, TCW and its affiliates, collectively, own shares of Common Stock which constitute less than four percent (4%) of the Common Stock then outstanding. 9 SECTION 9. MISCELLANEOUS 9.1 ATTORNEY'S FEES AND EXPENSES. If any party hereto fails to perform any of its obligations under this Agreement, then the defaulting party shall pay any and all costs and expenses incurred by the other party on account of such default, including, without limitation, court costs and reasonable attorneys' fees and disbursements. Any such attorneys' fees and other expenses incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from and in addition to any other amount included in such judgment, and such attorneys' fees obligation is intended to be severable from the other provisions of this Agreement and to survive and not be merged into any such judgment. 9.2 SUCCESSORS AND ASSIGNS; TERMINATION. Except as otherwise expressly provided herein, this Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto; PROVIDED, HOWEVER, (i) this Agreement shall terminate and not apply when (a) Common Stock is no longer held by Smith, TCW or their respective affiliates and (b) no TCW Sub Notes are outstanding, and (ii) any transferee (or successor) of Voting Stock from Smith during the time any TCW Sub Notes shall be outstanding shall be bound by SECTION 5 and SECTION 9 hereof and Smith (and Smith's successors) shall condition any transfer of such Voting Stock on the prospective transferee's written acknowledgement of the foregoing and agreement to be bound thereby. 9.3 AMENDMENT AND WAIVER, ETC. This Agreement may be amended, but only with the written consent of each of the parties hereto. No failure or delay (whether by course of conduct or otherwise) by the parties hereto in exercising any right, power or remedy which they may have under this Agreement shall operate as a waiver thereof or of any other right, power or remedy, nor shall any single or partial exercise by the parties hereto of any such right, power or remedy preclude any other or further exercise thereof or of any other right, power or remedy. No waiver of any provision of this Agreement and no consent to any departure therefrom shall ever be effective unless it is in writing and signed by each party being adversely affected by such waiver or consent, and then such waiver or consent shall be effective only in the specific instances and for the purposes for which given and to the extent specified in such writing. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the parties at law or in equity or otherwise. 9.4 COUNTERPARTS. Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. 9.5 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. 9.6 SPECIFIC PERFORMANCE. Each party recognizes that money damages may be inadequate to compensate the other parties for a breach hereunder, and each party irrevocably agrees that the other parties shall be entitled to the remedy of specific performance or the granting of such other equitable remedies as may be awarded by a court of competent 10 jurisdiction in order to afford each party the benefits of this Agreement and that each party shall not object and hereby waives 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 other parties. 9.7 NOTICES. All notices, requests, consents, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed sufficiently given or furnished upon delivery, when delivered by personal delivery, by telecopy, by delivery service with proof of delivery, or three (3) days after being deposited in the U.S. mail as registered or certified United States mail, postage prepaid, at the addresses set forth on the signature pages hereto (unless changed by similar notice in writing given by the particular person whose address is to be changed). 9.8 GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the law of the State of Washington. 9.9 ORIGINAL AGREEMENT; ENTIRE AGREEMENT. Upon execution of this Agreement by the parties hereto, the Original Agreement shall be automatically amended and restated in full as provided herein as of the date hereof. This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof, superseding all prior negotiations, preliminary agreements, correspondence or understandings, written or oral between the parties with respect to the subject matter hereof. Except as expressly provided herein, there are no representations or warranties of any party hereto. 11 IN WITNESS WHEREOF, the parties hereto have executed this Shareholders Agreement as of the day and year first above written. INLAND RESOURCES INC., a Washington corporation By: /s/ Marc MacAluso --------------------------------------- Name: Marc MacAluso Title: Chief Executive Officer Address for Notices: 410 17th Street, Suite 700 Denver, Colorado 80202 Attention: Marc MacAluso Telephone: (303) 893-0102 Facsimile: (303) 893-0113 With a Copy To: Glast, Phillips, Murray & Co. 2200 One Galleria Tower 13355 Noel Road, L.B. 48 Dallas, Texas 75240 Attention: Michael D. Parsons, Esq. Telephone: (972) 419-8311 Facsimile: (972) 419-8329 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/ Arthur R. Carlson --------------------------------------- Arthur R. Carlson Managing Director By: /s/ Thomas F. Mehlberg --------------------------------------- Thomas F. Mehlberg Managing Director By: TCW PORTFOLIO NO. 1555 DR V SUB-CUSTODY PARTNERSHIP, L.P., a California limited partnership, Member By: TCW ROYALTY COMPANY, a California corporation, Managing General Partner By: /s/ Thomas F. Mehlberg ------------------------------- Thomas F. Mehlberg Vice President Address for Notices: 865 South Figueroa Street Los Angeles, California 90017 Attention: Arthur R. Carlson Attention: Thomas F. Mehlberg Telephone: (213) 244-0053 Facsimile: (213) 244-0604 With a Copy To: Milbank, Tweed, Hadley & McCloy LLP 601 South Figueroa Street, 30th Floor Los Angeles, CA 90017 Attention: David A. Lamb, Esq. Telephone: (213) 892-4000 Facsimile: (213) 629-5063 HAMPTON INVESTMENTS, LLC, a Delaware limited liability company By: /s/ Steven R. Kamen --------------------------------------- Name: Steven R. Kamen Title: Senior Vice President Address for Notices: Hampton Investments LLC c/o Smith Management LLC 885 3rd Avenue, 34th Floor New York, New York 10022 Attention: General Counsel Telephone: (212) 888-5500 Facsimile: (212) 702-0145 With a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019 Attention: Judith Thoyer, Esq. Telephone: (212) 373-3000 Facsimile: (212) 757-3990 ACKNOWLEDGED AND ACCEPTED: 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/ Thomas F. Mehlberg --------------------------------------- Thomas F. Mehlberg Managing Director By: /s/ Arthur R. Carlson --------------------------------------- Arthur R. Carlson Managing Director Address for Notices: 865 South Figueroa Street Los Angeles, California 90017 Attention: Arthur R. Carlson Telephone: (213) 244-0000 Facsimile: (213) 244-0604 With Copies To: TCW Asset Management Company 1000 Louisiana, Suite 2175 Houston, Texas 77002 Attention: Marc MacAluso Telephone: (713) 615-7415 Facsimile: (713) 615-7460 Milbank, Tweed, Hadley & McCloy LLP 601 South Figueroa Street, 30th Floor Los Angeles, CA 90017 Attention: David A. Lamb, Esq. Telephone: (213) 892-4000 Facsimile: (213) 629-5063 EX-10 7 a2056120zex-10.txt EXHIBIT 10 EXHIBIT 10 EXCHANGE AND NOTE ISSUANCE AGREEMENT by and among INLAND RESOURCES INC., a Washington corporation INLAND PRODUCTION COMPANY, a Texas corporation and INLAND HOLDINGS, LLC, a California limited liability company Dated as of August 2, 2001 TABLE OF CONTENTS ----------------- SECTION 1. DEFINITIONS..................................................1 1.1 DEFINITIONS..................................................1 1.2 ACCOUNTING TERMS AND DETERMINATIONS..........................4 1.3 INTERPRETATION...............................................4 SECTION 2. EXCHANGE OF SECURITIES.......................................4 2.1 AUTHORIZATION................................................4 2.2 EXCHANGE.....................................................5 2.3 THE CLOSING..................................................5 2.4 CONSENTS.....................................................5 2.5 FURTHER ASSURANCES...........................................5 2.6 USE OF PROCEEDS..............................................6 2.7 RATE OF INTEREST.............................................6 2.8 PAYMENT OF INTEREST..........................................6 2.9 COMPUTATION OF INTEREST......................................6 2.10 PAYMENT OF PRINCIPAL.........................................6 2.11 OPTIONAL PREPAYMENTS.........................................6 2.12 GENERAL PAYMENT PROVISION....................................7 2.13 RANKING......................................................8 SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES..............8 SECTION 4. REPRESENTATIONS AND WARRANTIES OF NOTE PURCHASER.............8 4.1 ORGANIZATION OF NOTE PURCHASER...............................8 4.2 AUTHORITY OF NOTE PURCHASER..................................8 4.3 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS...................8 4.4 ACQUISITION FOR PURCHASER'S ACCOUNT..........................9 4.5 INVESTMENT EXPERIENCE........................................9 4.6 SECURITIES NOT REGISTERED....................................9 4.7 QUALIFIED INSTITUTIONAL BUYER; ACCREDITED INVESTOR...........9 4.8 ACKNOWLEDGEMENT OF RISK......................................9 4.9 NO PUBLIC MARKET.............................................9 4.10 NO PUBLIC SOLICITATION.......................................9 4.11 LEGAL HOLDER.................................................9 4.12 DUE DILIGENCE...............................................10 4.13 RELIANCE BY INLAND..........................................10 SECTION 5. AFFIRMATIVE COVENANTS.......................................10 5.1 DEVELOPMENT.................................................10 5.2 BOARD OF DIRECTORS REPRESENTATION...........................10 5.3 INCREASED BOARD OF DIRECTORS REPRESENTATION ARISING FROM INTEREST NON-PAYMENT .......................................11 SECTION 6. NEGATIVE COVENANTS OF THE COMPANIES.........................11 6.1 INDEBTEDNESS................................................12 i 6.2 LIMITATION ON LIENS.........................................12 6.3 NO MERGERS..................................................12 6.4 LIMITATION ON AFFILIATE PAYMENTS............................12 6.5 LIMITATION ON INVESTMENTS AND NEW BUSINESS..................12 6.6 CERTAIN CONTRACTS: AMENDMENTS; MULTIEMPLOYER ERISA PLANS...12 6.7 NO AMENDMENTS...............................................13 6.8 MANAGEMENT CONTROLS.........................................13 SECTION 7. GUARANTY....................................................13 7.1 GUARANTY....................................................13 7.2 OBLIGATIONS UNCONDITIONAL...................................14 7.3 GUARANTEE ENDORSED ON THE TCW SUB NOTES.....................16 SECTION 8. TRANSFERABILITY OF TCW SUB NOTES............................16 8.1 RESTRICTIVE LEGEND..........................................16 8.2 RULE 144 AND 144A...........................................16 SECTION 9. EVENTS OF DEFAULT AND REMEDIES..............................16 9.1 EVENTS OF DEFAULT...........................................16 9.2 REMEDIES....................................................17 SECTION 10. INDEMNITY...................................................18 SECTION 11. MISCELLANEOUS...............................................19 11.1 WAIVERS AND AMENDMENTS; ACKNOWLEDGMENT......................19 11.2 SURVIVAL OF AGREEMENTS; CUMULATIVE NATURE...................20 11.3 NOTICES.....................................................21 11.4 GOVERNING LAW; SUBMISSION TO PROCESS........................21 11.5 LIMITATION ON INTEREST......................................22 11.6 TERMINATION; LIMITED SURVIVAL...............................22 11.7 REGISTRATION, TRANSFER, EXCHANGE AND SUBSTITUTION OF TCW SUB NOTES ...........................................23 11.8 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC.................24 11.9 EXHIBITS AND SCHEDULES; ADDITIONAL DEFINITIONS..............24 11.10 CONFIDENTIALITY OF HOLDERS..................................25 11.11 REPRODUCTION OF DOCUMENTS...................................25 11.12 SUCCESSORS AND ASSIGNS......................................25 11.13 COUNTERPARTS................................................26 11.14 SEVERABILITY................................................26 11.15 EXPENSES....................................................26 11.16 SPECIFIC PERFORMANCE........................................26 ii TABLE OF EXHIBITS AND SCHEDULES ------------------------------- Schedule 1 TCW Warrants and Options Schedule B.1 Subsidiaries Schedule B.2 Convertible Securities Schedule B.5 Litigation Schedule B.6 Undisclosed Liabilities Schedule B.7 Consents/Approvals Schedule B.10 Compliance with Laws Schedule B.14 ERISA Plans Schedule B.17 Environmental Exhibit A - Form of TCW Sub Note Exhibit B - Form of Guarantee iii EXCHANGE AND NOTE ISSUANCE AGREEMENT ------------------------------------ This EXCHANGE AND NOTE ISSUANCE AGREEMENT (this "AGREEMENT") is dated as of August 2, 2001 by and among INLAND RESOURCES INC., a Washington corporation ("INLAND" or "ISSUER"), INLAND PRODUCTION COMPANY, a Texas corporation ("IPC" or the "GUARANTOR"; Guarantor, together with Inland, the "COMPANIES") and INLAND HOLDINGS, LLC, a California limited liability company ("TCW" or "NOTE PURCHASER"). WHEREAS, TCW is presently the holder of 10,757,747 shares of Inland's Series D Preferred Stock (representing all of the outstanding Series D Preferred Stock of Inland) (the "EXCHANGED D PREFERRED STOCK"); WHEREAS, TCW is presently the holder of 121,973 shares of Inland's Series E Preferred Stock (representing all of the outstanding Series E Preferred Stock of Inland) (the "EXCHANGED E PREFERRED STOCK"); WHEREAS, TCW desires to exchange (i) its entire interest in the Exchanged D Preferred Stock and accumulated dividends thereon and (ii) its entire interest in the Exchanged E Preferred Stock and accumulated dividends thereon for (A) a TCW Sub Note in the original principal amount equal to the Purchase Amount (as defined herein), and (B) a check for $2,000,000, subject to the terms and conditions set forth herein; and WHEREAS, upon its acquisition thereof from TCW, Inland desires to retire the Exchanged D Preferred Stock, the Exchanged E Preferred Stock and the TCW Warrants and Options. NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants, conditions and agreements contained herein, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound by the terms hereof, agree as follows: SECTION 1. DEFINITIONS 1.1 DEFINITIONS. As used in this Agreement, each capitalized term has the meaning ascribed to it in this SECTION 1.1 or in ANNEX A attached hereto. "AGREEMENT" shall have the meaning set forth in the preamble hereto. "CALENDAR QUARTER" means the calendar quarter ending on each Quarterly Accrual Date. "CLOSING" shall have the meaning ascribed to such term in SECTION 2.3 hereof. "COMMON STOCK" shall mean the common stock, $.001 par value, of Inland. "COMPANIES" shall have the meaning set forth in the preamble hereto. "CURE EVENT" shall have the meaning set forth in SECTION 5.3. "DESIGNATE" shall mean the delivery of written notice pursuant to SECTION 11.3 hereof to Inland by the Requisite Holders stating (i) that the Requisite Holders wish to exercise their rights pursuant to SECTION 5.2, SECTION 5.3 or SECTION 9.2(B) hereof, as the case may be, and (ii) the identity of the RH Designee; PROVIDED THAT if, at any time, Inland reasonably determines that it is required to comply with Rule 14f-1 promulgated under the Exchange Act with respect to the appointment of such RH Designee, the Requisite Holders shall also be required to furnish to Inland the information required to be reported pursuant to Rule 14f-1 with respect to such RH Designee before the Requisite Holders shall be deemed to have Designated any RH Designee hereunder. The terms "DESIGNATED, "DESIGNATION" and "DESIGNATING" shall each have synonymous meanings. "EVENT OF DEFAULT" has the meaning ascribed to such term in SECTION 9.1. "EXCHANGE" shall have the meaning ascribed to such term in SECTION 2.2(A). "EXCHANGED D PREFERRED STOCK" shall have the meaning set forth in the recitals. "EXCHANGED E PREFERRED STOCK" shall have the meaning set forth in the recitals. "GUARANTOR" shall have the meaning set forth in the preamble hereto. "HIGHEST LAWFUL RATE" means the maximum nonusurious rate of interest that the Holders are permitted under applicable law to contract for, take, charge, or receive with respect to the Obligation in question. "HOLDERS" means the holders of the TCW Sub Notes from time to time. "INDEMNIFIED PARTY" shall have the meaning ascribed to such term in SECTION 10. "INITIAL AMORTIZATION DATE" shall mean the earlier to occur of (i) the first December 30 after the repayment in full of the Senior Bank Debt, or (ii) December 30, 2007. "INLAND" shall have the meaning set forth in the preamble hereto. "INTEREST PAYMENT COMMENCEMENT DATE" means the earlier of (i) September 30, 2005 or (ii) the first Quarterly Accrual Date to occur after the outstanding balance of the Senior Bank Debt shall be reduced to $40 million or less. "IPC" shall have the meaning set forth in the preamble hereto. "ISSUER" shall have the meaning set forth in the preamble hereto. "MAJORITY HOLDER" means a Holder which, together with any Affiliate thereof which is a Holder, holds TCW Sub Notes evidencing more than fifty percent (50%) of the outstanding amount of all TCW Sub Notes. "MATURITY DATE" means September 30, 2009, or the immediately succeeding Business Day. 2 "NOTE PURCHASE DOCUMENTS" means this Agreement, the TCW Sub Notes, the Subordination Agreements and all other agreements, certificates, documents, instruments and writings at any time delivered by Inland in connection with the purchase and sale of the TCW Sub Notes (exclusive of the term sheets, commitment letters, correspondence and similar documents used in the negotiation thereof). "NOTE PURCHASER" shall have the meaning set forth in the preamble hereto. "OBLIGATION" means any part of the Obligations. "OBLIGATIONS" means the sum of all Debt from time to time owing by Issuer to the Holders under or pursuant to any of the Note Purchase Documents. "OBSERVER" shall have the meaning set forth in SECTION 5.2 hereof. "ORDER" means any order, writ, injunction, decree, judgment, award, determination, direction or demand. "PAYMENT DATE" means: (1) each Quarterly Payment Date; (2) any date on which the maturity of the TCW Sub Notes is accelerated in accordance with SECTION 9; (3) any date on which any interest on or principal of the TCW Sub Notes is optionally prepaid in accordance with SECTION 2.11; and (4) the Maturity Date. "PURCHASE AMOUNT" shall have the meaning set forth in SECTION 2.1 hereof. "QUARTERLY ACCRUAL DATE" means each March 31, June 30, September 30 and December 31 commencing September 30, 2001. "QUARTERLY PAYMENT DATE" means each March 31, June 30, September 30 and December 31 or the immediately preceding Business Day, commencing on the Interest Payment Commencement Date. "REGISTER" shall have the meaning ascribed to such term in SECTION 11.7. "REQUISITE HOLDERS" shall mean, depending on the action to be taken, one (1) or more Holders holding the following percentage of the outstanding principal amount of the TCW Sub Notes: (i) with respect to the delivery of notices of Default or Event of Default, Holder(s) holding at least fifty and one-tenth percent (50.1%) of the outstanding principal amount of all TCW Sub Notes; (ii) with respect to amending, modifying or waiving the terms of payment of principal or interest or the rate of interest set forth in SECTION 2.7 below, Holder(s) holding one hundred percent (100%) of the outstanding principal amount of all TCW Sub Notes; and (iii) with respect to all other actions, Holder(s) holding fifty-one percent (51%) of the outstanding principal amount of all TCW Sub Notes. "RESTRICTED SECURITIES" shall have the meaning set forth under Rule 144 promulgated under the Securities Act. 3 "SERIES D PREFERRED STOCK" shall mean the Series D Redeemable Preferred Stock of Inland, par value $.001 per share. "SERIES E PREFERRED STOCK" shall mean the Series E Redeemable Preferred Stock of Inland, par value $.001 per share. "SENIOR SUB NOTES" shall mean the unsecured senior subordinated note(s) of Inland issued pursuant to the Senior Sub Note Purchase Agreement. "TCW" shall have the meaning set forth in the preamble hereto. "TCW CHECK" shall have the meaning ascribed to such term in SECTION 2.2. "TCW SUB NOTE(S)" shall have the meaning ascribed to such term in SECTION 2.1. 1.2 ACCOUNTING TERMS AND DETERMINATIONS. Except as otherwise expressly provided for in this Agreement, all accounting terms used in this Agreement shall be interpreted, all determinations with respect to accounting matters hereunder shall be made and all financial statements and certificates and reports as to financial matters required to be delivered to the Holders under this Agreement shall be prepared in accordance with GAAP applied on a basis consistent with those used in the preparation of the latest financial statements furnished to the Note Purchaser under this Agreement. To enable the ready and consistent determination of compliance with the covenants set forth in SECTIONS 5 and 6, Issuer will not change the last day of its fiscal year from December 31 of each year. 1.3 INTERPRETATION. In this Agreement, unless otherwise indicated, the singular includes the plural and conversely; words importing one gender include the others; references to statutes or regulations are to be construed as including all statutory or regulatory provisions consolidating, amending or replacing the statute or regulation referred to; references to "writing" include printing, typing, lithography and other means of reproducing words in a tangible visible form; the word "or" shall not be exclusive (i.e., shall be deemed to include of and/or"); the words "including," "includes" and "include" shall be deemed to be followed by the words "without limitation"; references to articles, sections (or subdivisions of sections), exhibits, annexes or schedules are to such parts of this Agreement; references to agreements and other contractual instruments shall be deemed to include all subsequent amendments, extensions and other modifications to such instruments (without, however, limiting any prohibition on any such amendments, extensions and other modifications by the terms of this Agreement); and references to Persons include their respective permitted successors and assigns and, in the case of Governmental Persons, Persons succeeding to their respective functions and capacities. SECTION 2. EXCHANGE OF SECURITIES 2.1 AUTHORIZATION. Inland has duly authorized the issuance and sale of its unsecured subordinated notes due September 30, 2009 in an aggregate original principal amount of $98,968,964 (the "PURCHASE AMOUNT") (collectively with any such notes issued in substitution therefor pursuant to SECTION 11.7 of this Agreement, the "TCW SUB Notes"). The TCW Sub Notes shall be substantially in the form set forth in EXHIBIT A, with such changes therefrom as may be approved by the Requisite Holders and Inland. 4 2.2 EXCHANGE. (a) TCW EXCHANGE. Upon the terms and conditions set forth herein, TCW agrees to exchange (the "EXCHANGE") with Inland on the Closing Date, all of TCW's right, title and interest in (i) the Exchanged D Preferred Stock and (ii) the Exchanged E Preferred Stock FOR (x) TCW Sub Notes in the original principal amount equal to the Purchase Amount and (y) a check in the amount of $2,000,000 payable to the order of TCW (the "TCW CHECK"). Inland agrees to issue and deliver to TCW the TCW Sub Notes and the TCW Check in exchange for the Exchanged D Preferred Stock and the Exchanged E Preferred Stock in accordance with the foregoing. (b) WARRANTS AND OPTIONS. On the Closing Date and upon the terms and conditions set forth herein, TCW shall cause Portfolio to execute and deliver to Inland the TCW Option Termination Agreement. 2.3 THE CLOSING. At the closing of the transactions described herein (the "CLOSING"): (i) TCW shall deliver to Inland the certificates evidencing its and its Affiliates' entire interest in the Exchanged D Preferred Stock and the Exchanged E Preferred Stock and TCW shall cause Portfolio to deliver to Inland any certificates evidencing the TCW Warrants and Options; (ii) Inland shall accept the Exchanged D Preferred Stock and the Exchanged E Preferred Stock; (iii) TCW shall deliver to Inland the TCW Option Termination Agreement, (iv) Inland shall deliver to TCW one or more notes representing the TCW Sub Notes, registered in the denominations and names specified by TCW and the TCW Check and (v) Inland shall cancel the Exchanged D Preferred Stock, Exchanged E Preferred Stock and the TCW Warrants and Options. 2.4 CONSENTS. (a) Immediately prior to giving effect to the transactions contemplated hereby, TCW shall be the record holder of 121,973 shares of Exchanged E Preferred Stock, representing all of the issued and outstanding Exchanged E Preferred Stock. By entering into this Agreement, TCW hereby consents and agrees to the transactions contemplated hereby as the sole holder of Series E Preferred Stock. Upon consummation of the transactions contemplated hereby, each of the parties hereto agrees that no shares of Series E Preferred Stock will remain outstanding. (b) Prior to giving effect to the transactions contemplated hereby, TCW is the holder of 10,757,747 shares of Exchanged D Preferred Stock, representing all of the issued and outstanding Exchanged D Preferred Stock of Inland. By entering into this Agreement, TCW hereby consents and agrees to the transactions contemplated hereby as the sole holder of Inland's Series D Preferred Stock. Upon consummation of the transactions contemplated hereby, each of the parties hereto agree that no shares of Inland's Series D Preferred Stock will remain outstanding. 2.5 FURTHER ASSURANCES. At any time or from time to time after the Closing, each of the parties hereto shall execute and deliver to the other parties hereto such other documents and instruments, provide such materials and information and take such other actions 5 as such other parties may reasonably request to consummate the transactions contemplated hereby. 2.6 USE OF PROCEEDS. In no event shall any proceeds from the sale of the TCW Sub Notes be used directly or indirectly by any Person for personal, family, household or agricultural purposes or for the purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or carrying any "margin stock" or any "margin securities" (as such terms are defined respectively in Regulations T, U and X promulgated by the Board of Governors of the Federal Reserve System) or to extend credit to others directly or indirectly for the purpose of purchasing or carrying any such margin stock or margin securities. Inland represents and warrants to the Note Purchaser that Inland is not engaged principally, or as one of Inland's important activities, in the business of extending credit to others for the purpose of purchasing or carrying such margin stock or margin securities. 2.7 RATE OF INTEREST. The TCW Sub Notes shall bear and accrue interest on the unpaid principal amount and accrued unpaid interest from time to time outstanding at the coupon rate of eleven percent (11%) per annum compounded quarterly on each Quarterly Accrual Date, from and after the Closing Date until their repayment in full. 2.8 PAYMENT OF INTEREST. Interest shall be payable in arrears in cash on each Payment Date, subject to any restriction on such payment in the Bank Subordination Agreement. If interest on the TCW Sub Notes is not paid in full on any Payment Date for any reason in cash, such interest shall be accrued until and shall be due and payable on the Maturity Date. Inland shall have the option to accrue interest (in lieu of cash payment thereof) until the Interest Payment Commencement Date at which time quarterly cash interest payments on each Payment Date shall be mandatory, subject to any restriction on such payment in the Bank Subordination Agreement. 2.9 COMPUTATION OF INTEREST. Interest shall be computed on the TCW Sub Notes on the basis of a 360-day year consisting of twelve 30-day months. Interest on the TCW Sub Notes shall be computed as the sum of the daily interest for the period prior to each Payment Date, taking into account the outstanding principal balance of the TCW Sub Notes and accrued unpaid interest on each day of the period (where such balance on any given day shall reflect any payment of principal credited on such date pursuant to SECTION 2.12 hereof). 2.10 PAYMENT OF PRINCIPAL. Inland shall make payments of principal on the TCW Sub Notes each in an amount equal to one-third of the aggregate original principal amount of the TCW Sub Notes commencing on the Initial Amortization Date and on the first and second anniversaries thereof. The outstanding principal balance of the TCW Sub Notes shall be due and payable in full on the Maturity Date to the extent not prepaid pursuant to the first sentence of this SECTION 2.10 or pursuant to SECTION 2.11 below prior thereto. 2.11 OPTIONAL PREPAYMENTS. (a) Prior to September 30, 2009, Inland may, from time to time, upon one (1) Business Day prior written notice to the Holders, prepay the TCW Sub Notes, in whole or in part 6 (including all accrued interest thereon), without the prior consent of the Requisite Holders and without premium or penalty. (b) Each prepayment of principal under this SECTION 2.11 shall be accompanied by all interest then accrued and unpaid on the principal so prepaid. Any principal prepaid pursuant to this SECTION 2.11 shall be (i) in addition to, and not in lieu of, all payments otherwise required to be paid under the Note Purchase Documents at the time of such prepayment and (ii) applied first, to accrued but unpaid interest on the TCW Sub Notes, and second, to amortization payments of principal due under SECTION 2.10 in the direct order of maturity. 2.12 GENERAL PAYMENT PROVISION. (a) Inland shall make each payment which Inland owes under any of the Note Purchase Documents not later than 1:00 p.m., New York, New York time, on the date such payment becomes due and payable, without set-off, deduction or counterclaim, in lawful money of the United States of America, in immediately available funds sent by wire transfer to the bank accounts specified with respect to Note Purchaser (or to such bank and accounts and pursuant to such other directions as the Holders may from time to time specify). Any payment received by the Holders after such time shall be deemed to have been made on the next following Business Day. Should any such payment become due and payable on a day other than a Business Day, the maturity of such payment shall be the succeeding Business Day. Each payment under a Note Purchase Document shall be due and payable at the place provided therein and, if no specific place of payment is provided, shall be due and payable at the place of payment of the TCW Sub Notes. When the Holders collect or receive money on account of the Obligations which is insufficient to pay all Obligations then due and payable, the Holders shall apply such money pursuant to SUBSECTION 2.12(B) below. (b) Payments or prepayments of principal or interest on the TCW Sub Notes shall be applied ratably to such TCW Sub Notes. Except for optional prepayments pursuant to SECTION 2.11 (which shall be applied as provided in SECTION 2.11), any amount received by any Holder, whether as an interest payment or principal payment from or on behalf of Inland, shall be applied as follows in descending order of priority: (i) to all costs and expenses (including reasonable attorneys' fees) payable pursuant to SECTION 11.15 hereto or in enforcing any Obligations of, or in collecting any payments from, any obligor hereunder or under the other Note Purchase Documents; (ii) to Obligations (other than principal or interest) then due and owing Holders under any of the Note Purchase Documents; (iii) to interest which has accrued on any amounts hereunder, including, without limitation, on the TCW Sub Notes pursuant to SECTION 2.8; (iv) to principal that is currently due and payable on the TCW Sub Notes pursuant to SECTION 2.10; 7 (v) to payment of principal on the TCW Sub Notes until paid in full; and (vi) if all Obligations under the Note Purchase Documents have been paid in full, to the Issuer. 2.13 RANKING. The TCW Sub Notes are senior to the Junior Sub Debt pursuant to the terms of the Junior Sub Subordination Agreement and are junior and subordinated to the Senior Bank Debt and Senior Sub Debt pursuant to the Bank Subordination Agreement and the TCW Subordination Agreement, respectively. The TCW Sub Notes shall be senior in all respects to any other debt of Inland which is subordinated thereto. SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES. Each of the Companies hereby represents, warrants and covenants to TCW, as of the date hereof and as of the Closing Date, that each of the representations and warranties set forth in ANNEX B is true and correct in all material respects and by this reference incorporated herein. SECTION 4. REPRESENTATIONS AND WARRANTIES OF NOTE PURCHASER. Note Purchaser hereby represents, warrants and covenants to Inland as follows: 4.1 ORGANIZATION OF NOTE PURCHASER. Note Purchaser represents and warrants to Inland that Note Purchaser is a limited liability company duly formed, validly existing and in good standing under the Laws of California. Note Purchaser has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. 4.2 AUTHORITY OF NOTE PURCHASER. Note Purchaser represents and warrants to Inland that the execution and delivery by such parties of this Agreement, and the performance of its obligations hereunder, has been duly and validly authorized by the all necessary action of Note Purchaser. This Agreement has been duly and validly executed and delivered by Note Purchaser and constitutes the legal, valid and binding obligations of Note Purchaser, respectively, enforceable against Note Purchaser, respectively, in accordance with its terms, except to the extent such enforceability (a) may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally and (b) is subject to general principles of equity. 4.3 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. The consummation of the transactions contemplated by this Agreement and the execution, delivery and performance of the terms and provisions of the Note Purchase Documents will not (i) contravene, result in any breach of, or constitute a default under, any corporate charter or bylaws, or material agreement or instrument to which Note Purchaser is a party, (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 Person 8 applicable to the Companies, or (iii) violate any provision of any statute or other rule or regulation of any Governmental Person applicable to Note Purchaser. 4.4 ACQUISITION FOR PURCHASER'S ACCOUNT. Note Purchaser represents and warrants to Inland that it is acquiring and will acquire the TCW Sub Notes for its own account, with no present intention of distributing or reselling such securities or any part thereof in violation of applicable securities laws. 4.5 INVESTMENT EXPERIENCE. Note Purchaser 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 TCW Sub Notes. 4.6 SECURITIES NOT REGISTERED. Note Purchaser acknowledges that its TCW Sub Notes 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 Note 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. 4.7 QUALIFIED INSTITUTIONAL BUYER; ACCREDITED INVESTOR. Note 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. 4.8 ACKNOWLEDGEMENT OF RISK. Note Purchaser acknowledges that an investment in its TCW Sub Notes involves a high degree of risk and represents that it understands the economic risk of such investment. Note Purchaser is prepared to bear the economic risk of retaining its TCW Sub Notes for an indefinite period, all without prejudice, however, to the rights of Note Purchaser, in accordance with this Agreement, lawfully to sell or otherwise dispose of all or any part of any TCW Sub Notes held by it. 4.9 NO PUBLIC MARKET. Note Purchaser understands that no public market now exists for its TCW Sub Notes and that Inland has made no assurances with respect to any secondary market for such securities. 4.10 NO PUBLIC SOLICITATION. To the best of Note Purchaser's knowledge, the issuing of the TCW Sub Notes to Note Purchaser was made through direct, personal communication between Note Purchaser and a representative of Inland and not through public solicitation and advertising. 4.11 LEGAL HOLDER. TCW is the sole legal and beneficial holder of the Exchanged D Preferred Stock to be exchanged hereunder and shall convey such Exchanged D Preferred Stock free and clear of any liens, claims, interests, charges and encumbrances. TCW shall convey the Exchanged E Preferred Stock free and clear of any liens, claims, interests, charges and encumbrances created by or through TCW. TCW has neither previously sold, assigned, conveyed, transferred or otherwise disposed of, in whole or in part, the Exchanged D Preferred Stock or the Exchanged E Preferred Stock to be exchanged hereunder, nor entered into 9 any agreement other than this Agreement to sell, assign, convey, transfer or otherwise dispose of, in whole or in part, the Exchanged D Preferred Stock or Exchanged E Preferred Stock to be exchanged hereunder. 4.12 DUE DILIGENCE. Note Purchaser has performed its own independent investigation and evaluation of the Companies and the transactions contemplated hereby and has not, in connection with the transactions contemplated hereby, relied upon any representations or warranties of any kind whatsoever, whether express or implied, by the Companies or any of their respective officers, directors, employees, representatives or agents, except for such representations and warranties expressly set forth herein. 4.13 RELIANCE BY INLAND. Note Purchaser understands and acknowledges that Inland will be relying upon its respective representations and warranties set forth in this Agreement in issuing the TCW Sub Notes to such Note Purchaser. SECTION 5. AFFIRMATIVE COVENANTS. To conform with the terms and conditions under which the Note Purchaser is willing to have credit outstanding to Inland, and to induce the Note Purchaser to enter into this Agreement and to purchase the TCW Sub Notes, the Companies hereby jointly and severally warrant, covenant and agree, until the full and final payment of the Obligations and the termination of this Agreement, unless the Requisite Holders have previously agreed otherwise, (i) all of the covenants contained in ANNEX C-1 attached hereto will be observed and (ii) as follows: 5.1 DEVELOPMENT. Inland and IPC will timely develop the oil and gas properties of Inland and its Subsidiaries in accordance with an annual plan of development and annual budget (as may be amended from time to time as long as the overall development objectives are met, collectively, the "DEVELOPMENT PLAN") approved in advance by the Majority Holder, if any. In furtherance thereof, Inland shall provide to the Majority Holder, if any, on or before December 1 of each year, for approval or disapproval, the proposed Development Plan for the following January through December period. The Majority Holder, if any, shall provide notice of approval or disapproval thereof within 20 days of receipt of the proposed Development Plan and failure to disapprove in writing within such 20 day period shall constitute approval. 5.2 BOARD OF DIRECTORS REPRESENTATION. From and after the date hereof until the Obligations are repaid in full, the Requisite Holders shall have the right to Designate, upon written notice to Inland, either (a) one member to each Board of Directors and one observer entitled to receive all notices and distributions to members of each Board of Directors and to attend all meetings thereof (including committees thereof) (an "OBSERVER") or (b) one or two Observers to each Board of Directors. Any such person Designated by the Requisite Holders that is elected to any Board of Directors pursuant to this SECTION 5.2 shall have a term that automatically expires at such time as the Obligations have been repaid in full. Only one member of each Board of Directors (whether serving on the board of directors of Inland or any Subsidiary) so Designated by the Requisite Holders pursuant to this SECTION 5.2, as long as such Designated member is an independent member (I.E., not an employee or Affiliate of TCW or an employee or Affiliate of such Affiliate), shall be entitled to receive compensation, and only one 10 Designated member of each Board of Directors and one Observer shall be entitled to receive reimbursement of reasonable travel and other expenses as provided in the Shareholders Agreement. 5.3 INCREASED BOARD OF DIRECTORS REPRESENTATION ARISING FROM INTEREST NON-PAYMENT. If any cash payment of interest is not made on any Quarterly Payment Date on or after the Interest Payment Commencement Date, solely by reason of a restriction or prohibition on such payment in the Bank Subordination Agreement which is not waived by the Banks (an "INTEREST NON-PAYMENT"), in addition to their rights under SECTION 5.2 hereof, the Requisite Holders shall have the right to Designate one or more individuals ("RH DESIGNEE(S)") to become a member of the Board of Directors and, cause such RH Designee(s) to become a member of each Board of Directors as provided herein. Subject to SECTION 9.2(D), such right shall accrue at the rate of one director on every Board of Directors for each two Calendar Quarter period in which interest is not paid in full commencing on the first day of the Calendar Quarter in which the Interest Non-Payment occurs, until all interest accrued from the first day of the Calendar Quarter in which the first Interest Non-Payment occurred is paid in full in cash. Subject to SECTION 9.2(D), so long as an Interest Non-Payment has occurred and is continuing, such right to cause RH Designees to become a member of every Board of Directors will accumulate and the Requisite Holders shall keep and retain such right even if not exercised at the end of any two Calendar Quarter period and shall have the right to have additional RH Designees to become additional member(s) of every Board of Directors pursuant to the foregoing sentence. By way of example, if an Interest Non-Payment shall occur on September 30, 2005 and shall be continuing on December 31, 2005, on and after January 1, 2006, so long as any Interest Non-Payment is continuing, the Requisite Holders shall have the right to have one RH Designee become a member of every Board of Directors and if any Interest Non-Payment is continuing as of June 30, 2006, the Requisite Holders shall have the right to have two RH Designees become members of every Board of Directors on and after July 1, 2006. The right of the Requisite Holders to have one or more RH Designees become a member of every Board of Directors pursuant to this SECTION 5.3 shall be the sole remedy of the Holders with respect to any Interest Non-Payment that has occurred and is continuing, unless such RH Designee(s) is for any reason does not become a member of every Board of Directors as set forth in SECTION 9.1(A)(II), and the Requisite Holders shall not have the right to deliver the notice of Subordinated Payment Event of Default to the Agent pursuant to SECTION 2(B)(3)(A) of the Bank Subordination Agreement so long as any RH Designee(s) has become a member of every designated Board of Directors as provided herein. Any RH Designee that becomes a member of any Board of Directors pursuant to this SECTION 5.3 may be replaced by the holder(s) of a majority of Inland's Common Stock upon the payment (the "CURE EVENT") in full in cash of interest unpaid and accrued from the first day of the Calendar Quarter in which the Interest Non-Payment occurred, or as an alternate to such replacement, shall resign if requested by TCW and the vacancy shall be filled by the remaining Board of Directors. Any RH Designee that becomes a member of any Board of Directors pursuant to this SECTION 5.3 shall have a term that shall automatically expire upon the occurrence of the Cure Event. SECTION 6. NEGATIVE COVENANTS OF THE COMPANIES. To conform with the terms and conditions under which the Note Purchaser is willing to have credit outstanding to Inland, and to induce the Note Purchaser to enter into this 11 Agreement and purchase the TCW Sub Notes, the Companies hereby warrant, covenant and agree, until the full and final payment of the Obligations and the termination of this Agreement, unless the Requisite Holders otherwise approve in writing, (i) all of the covenants contained in ANNEX C-2 attached hereto will be observed and (ii) as follows: 6.1 INDEBTEDNESS. Except for the Obligations and Permitted Debt, the Companies will not in any manner owe, be liable for, incur, create or suffer any Debt or issue preferred stock which is subject to mandatory redemption prior to the Maturity Date. 6.2 LIMITATION ON LIENS. Inland will not create, assume or permit to exist any Lien upon any of the Properties or assets which Inland, respectively, now owns or hereafter acquires, except (i) Liens which secure the obligations under the Senior Bank Debt only, (ii) Liens for taxes, assessments or governmental charges not yet due or Liens that are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of Inland or (iii) Permitted Liens. 6.3 NO MERGERS. Inland will not (a) merge or consolidate with or into any other business entity other than IPC; PROVIDED, that Inland shall be the surviving entity, (b) sell all or substantially all of the assets of the Companies, taken as a whole, or (c) permit any Subsidiary to issue any stock other than to Inland or a wholly owned Subsidiary of Inland. 6.4 LIMITATION ON AFFILIATE PAYMENTS. Inland will not declare or make, without the Requisite Holders' prior written consent, which the Requisite Holders may withhold in their sole and absolute discretion, any Affiliate Payment, except Permitted Distributions, and reimbursements of expenses in connection with the administration of Inland. 6.5 LIMITATION ON INVESTMENTS AND NEW BUSINESS. Inland will not and will not permit any Subsidiary to: (a) engage directly or indirectly in any business or conduct any operations except in connection with or incidental to its present businesses and operations; (b) acquire any equity interest of, or make any other acquisitions of, or capital contributions to, or investments in (including extensions of credit, advances or loans), any Person, other than Permitted Investments; or (c) make any acquisitions of, or investments in, any material properties, except for Permitted Investments and pursuant to existing lease commitments, and except as otherwise contemplated from time to time in the Development Plan. 6.6 CERTAIN CONTRACTS: AMENDMENTS; MULTIEMPLOYER ERISA PLANS. Inland will not: (a) enter into any "take-or-pay" contract or other contract or arrangement for the purchase of goods or services which obligates Inland, to pay for such goods or service regardless of whether they are delivered or furnished to it; 12 (b) incur any obligation to contribute to any "multiemployer plan" as defined in Section 4001 of ERISA other than those existing as of the Closing Date; or (c) amend or permit any change to any contract or lease which has a Material Adverse Effect. Furthermore, Inland will ensure that no other Related Person controlled by Inland makes or permits any amendment described in clause (c) above. 6.7 NO AMENDMENTS. Inland shall not reissue, modify or supplement any provision of any Senior Sub Note Purchase Document or Junior Sub Note Purchase Document to which it is a party, without the prior written consent of the Requisite Holders. 6.8 MANAGEMENT CONTROLS Inland shall not hire or terminate its Chief Executive Officer, President, or Chief Financial Officer, without the prior written consent of the Majority Holder, if any. SECTION 7. GUARANTY. 7.1 GUARANTY. (a) The Guarantor, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, effective as of the Closing, hereby unconditionally and irrevocably guarantees to each Holder of the TCW Sub Notes at any time outstanding (a) the prompt, indefeasible payment in full, in dollars, when due (whether at stated maturity, by acceleration, by prepayment or otherwise) of the Obligations and (b) the prompt performance and observance by Inland of all covenants, agreements and conditions on its part to be performed and observed hereunder, in each case strictly in accordance with the terms thereof (such payments and other obligations being herein collectively called the "GUARANTEED OBLIGATIONS"). (b) The Guarantor hereby further agrees that if Inland shall default in the payment or performance of any of the Guaranteed Obligations, the Guarantor will (x) promptly pay or perform the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration, by prepayment or otherwise) in accordance with the terms of such extension or renewal and (y) pay to the Holder of any TCW Sub Note such amounts, to the extent lawful, as shall be sufficient to pay the costs and expenses of collection or of otherwise enforcing any of such Holder's rights under this Agreement, including, without limitation, reasonable counsel fees. Anything in any Note Purchase Document to the contrary notwithstanding, the maximum liability of the Guarantor under this Agreement shall in no event exceed the amount which can be guaranteed by the Guarantor under applicable Laws relating to the insolvency of debtors (after giving effect to the right of contribution established in the following paragraph). the Guarantor further agrees that the Guaranteed Obligations may at any time and from time to time exceed the amount of the liability of the Guarantor under this Agreement without impairing the guarantee contained in this Section or affecting the rights and remedies of any Holder of any TCW Sub Notes. 13 (c) All obligations of the Guarantor under this Section shall survive any transfer of any TCW Sub Note, and any obligations of the Guarantor under this Section with respect to which the underlying obligation of Inland is expressly stated to survive payment of any TCW Sub Note shall also survive payment of such TCW Sub Note. 7.2 OBLIGATIONS UNCONDITIONAL. (a) Upon effectiveness, the obligations of the Guarantor hereunder constitute a present and continuing guaranty of payment and not of collectibility and are absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of the Obligations, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable Law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section that the obligations of the Guarantor hereunder shall, upon effectiveness, be absolute and unconditional, under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantor hereunder which shall remain absolute and unconditional as described above: (i) any amendment or modification of any provision of this Agreement or any of the TCW Sub Notes or any assignment or transfer thereof, including without limitation the renewal or extension of the time of payment of any of the TCW Sub Notes or the granting of time in respect of such payment thereof, or of any furnishing or acceptance of security or any additional guarantee or any release of any security or guarantee so furnished or accepted for any of the TCW Sub Notes; (ii) any waiver, consent, extension, granting of time, forbearance, indulgence or other action or inaction under or in respect of this Agreement or the TCW Sub Notes, or any exercise or non-exercise of any right, remedy or power in respect hereof or thereof; (iii) any bankruptcy, receivership, insolvency, reorganization, arrangement, readjustment, composition, liquidation or similar proceedings with respect to Inland or any other Person or the Properties or creditors of any of them; (iv) the occurrence of any Default or Event of Default under, or any invalidity or any unenforceability of, or any misrepresentation, irregularity or other defect in, this Agreement, the TCW Sub Notes or any other Note Purchase Document; (v) any transfer of any assets to or from Inland, including without limitation any transfer or purported transfer to Inland from any Person, any invalidity, illegality of, or inability to enforce, any such transfer or purported transfer, any consolidation or merger of Inland with or into any Person, any change in the ownership of any shares of capital stock or similar equity interests 14 of Inland, or any change whatsoever in the objects, capital structure, constitution or business of Inland; (vi) any default, failure or delay, willful or otherwise, on the part of Inland or any other Person to perform or comply with, or the impossibility or illegality of performance by Inland or any other Person of, any term of this Agreement, the TCW Sub Notes or any other Note Purchase Document; (vii) any suit or other action brought by, or any judgment in favor of, any beneficiaries or creditors of, Inland or any other Person for any reason whatsoever, including without limitation any suit or action in any way attacking or involving any issue, matter or thing in respect of this Agreement, the TCW Sub Notes or any other Note Purchase Document; (viii) any lack or limitation of status or of power, incapacity or disability of Inland or any trustee or agent thereof; or (ix) any other thing, event, happening, matter, circumstance or condition whatsoever, not in any way limited to the foregoing. (b) The Guarantor hereby unconditionally waives diligence, presentment, demand of payment, protest and all notices whatsoever and any requirement that any Holder of a TCW Sub Note exhaust any right, power or remedy against Inland under this Agreement or the TCW Sub Notes or any other Note Purchase Document, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations. (c) In the event that the Guarantor shall at any time pay any amount on account of the Guaranteed Obligations or take any other action in performance of its obligations hereunder, the Guarantor shall not exercise any subrogation or other rights hereunder or the TCW Sub Notes and the Guarantor hereby waives all rights it may have to exercise any such subrogation or other rights, and all other remedies that it may have against Inland, in respect of any payment made hereunder unless and until the Guaranteed Obligations shall have been indefeasibly paid in full. If any amount shall be paid to the Guarantor on account of any such subrogation rights or other remedy, notwithstanding the waiver thereof, such amount shall be received in trust for the benefit of the Holders of the TCW Sub Notes and shall forthwith be paid to such Holders to be credited and applied upon the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof. The Guarantor agrees that its obligations under this Section shall be automatically reinstated if and to the extent that for any reason any payment (including payment in full) by or on behalf of Inland is rescinded or must be otherwise restored by any Holder of a TCW Sub Note, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid. (d) The guarantee in this Section is a continuing guarantee and shall apply to the Guaranteed Obligations whenever arising. Each default in the payment or performance of any of the Guaranteed Obligations shall give rise to a separate claim and cause of action hereunder, and separate claims or suits may be made and brought, as the case may be, hereunder as each such default occurs. 15 7.3 GUARANTEE ENDORSED ON THE TCW SUB NOTES. Each TCW Sub Note shall have endorsed thereon a Guarantee executed by the Guarantor in the form of EXHIBIT B attached hereto. SECTION 8. TRANSFERABILITY OF TCW SUB NOTES. 8.1 RESTRICTIVE LEGEND. Each note evidencing the TCW Sub Notes issued by Inland shall be stamped or otherwise imprinted with a legend in substantially the following form: "THE SECURITIES EVIDENCED BY THIS TCW SUB NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION." PROVIDED, that such restrictive legend shall not be required after the date on which the securities evidenced by a TCW Sub Note bearing such restrictive legend no longer constitute Restricted Securities, and upon the request of the holder of such certificate and subject to the last sentence of SECTION 8.2, Inland, without expense to the Holder, shall issue a new TCW Sub Note not bearing the restrictive legend otherwise required to be borne thereby. 8.2 RULE 144 AND 144A. At any time when Inland is subject neither to Section 13 nor Section 15(d) of the Exchange Act, Inland will, with reasonable promptness upon the request of any Holder, in order to permit such Holders to transfer if they so desire, pursuant to Rule 144 or 144A promulgated by the Commission (or any successor to such rule), comply with all rules and regulations of the Commission applicable in connection with use of Rule 144 and 144A (or any successor rules thereto), including the provision of information concerning Inland to such 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 Inland will cause any restrictive legends to be removed and any transfer restrictions to be rescinded with respect to any sale of TCW Sub Notes which is exempt from registration under the Securities Act pursuant to Rule 144 or 144A. If the Note Purchaser shall request that the restrictive legend on the TCW Sub Note be removed, the Note Purchaser, if requested by Inland, will have the obligation in connection with such request, at the Note Purchaser's expense, of delivering an opinion of counsel in form and substance reasonably satisfactory to Inland, in connection with such request, to the effect that the removal of such restrictive legend would not be in violation of the Securities Act or any applicable state securities laws. SECTION 9. EVENTS OF DEFAULT AND REMEDIES. 9.1 EVENTS OF DEFAULT. (a) If (i) any of the events listed on ANNEX D attached hereto (other than with respect to the failure to comply with SECTION 5.3 hereof), shall occur and be continuing it shall 16 constitute an "Event of Default" under this Agreement, or (ii) any RH Designee Designated by the Requisite Holders pursuant to SECTION 5.3 to any Board of Directors shall not become a member of such Board of Directors for any reason whatsoever on or before the fifteenth (15th) day (or thirtieth (30th) day if Rule 14f-1 promulgated under the Exchange Act is applicable) after the date the Requisite Holders give notice to Inland of the Designation of such RH Designee(s) to become a member of each Board of Directors, it shall constitute an "Event of Default" under this Agreement. (b) Subject to the restrictions in the Bank Subordination Agreement, upon the occurrence and continuation of an Event of Default described in clauses (e)(i) - (iii) of SECTION D-1 of ANNEX D or the acceleration of the Senior Bank Debt, the Senior Sub Debt or the Junior Sub Debt, all of the Obligations shall thereupon be immediately due and payable, without demand, presentment, notice of demand or of dishonor and nonpayment, protest, notice of protest, notice of intention to accelerate, declaration or notice of acceleration, or any other notice or declaration of any kind, all of which are hereby expressly waived by Inland. Subject to the restrictions in the Bank Subordination Agreement, during the continuance of any other Event of Default (except as provided below in SECTION 9.2), the Requisite Holders at any time and from time to time may without notice to Inland declare any or all of the Obligations immediately due and payable, and all such obligations shall thereupon be immediately due and payable, without demand, presentment, notice of demand or of dishonor and nonpayment, protest, notice of protest, notice of intention to accelerate, declaration or notice of acceleration, or any other notice or declaration of any kind, all of which are hereby expressly waived by Inland. 9.2 REMEDIES. (a) Subject to the restrictions in the Bank Subordination Agreement, if any Event of Default shall occur, the Requisite Holders may protect and enforce their rights under the Note Purchase Documents by any appropriate proceedings, including proceedings for specific performance of any covenant or agreement contained in any Note Purchase Document, and the Requisite Holders may enforce the payment of any Obligations due or enforce any other legal or equitable right. Notwithstanding SECTION 9.1 above or this SECTION 9.2, if any Event of Default shall occur as a result of a breach of the working capital covenant set forth in SECTION C-1.9 of ANNEX C hereto while the Senior Bank Debt is still outstanding, the Holders shall not be entitled to take any action including without limitation acceleration of the TCW Sub Notes or the exercise of other remedies under SECTION 9.1 or this SECTION 9.2, unless there has been an acceleration of the Senior Bank Debt as a result thereof. (b) Upon the occurrence and continuation of any Event of Default (other than pursuant to SECTION 9.1(A)(II) of this Agreement), the Requisite Holders shall have the unqualified right to Designate RH Designees for election and cause such RH Designees to become members of each Board of Directors as provided herein. Such right shall accrue immediately upon the occurrence of such Event of Default and thereafter at the rate of one director for each ninety day period after the date on which such Event of Default occurs until all Events of Default are cured or waived. So long as any Event of Default (other than pursuant to SECTION 9.1(A)(II) of this Agreement) shall be continuing, the Requisite Holders shall keep and retain such right even if not exercised and shall have the right to have additional RH Designees become additional member(s) of every Board of Directors which shall become exercisable every 17 ninety (90) days thereafter. The foregoing right and remedy of Holders shall not be an exclusive remedy with respect to any Event of Default (other than pursuant to SECTION 9.1(A)(II) of this Agreement) and shall be cumulative with all other remedies. Any RH Designee that becomes a member of any Board of Directors pursuant to this SECTION 9.2(B) shall have a term that shall automatically expire upon the date such Event of Default is cured or waived. (c) Any RH Designee elected to any Board of Directors pursuant to SECTION 9.2(B) may be replaced by the holder(s) of a majority of Inland's Common Stock upon the cure of all outstanding Events of Default (other than pursuant to SECTION 9.1(A)(II) of this Agreement), or as an alternate to such replacement, shall resign if requested by TCW and the vacancy shall be filled by the remaining Board of Directors. (d) Notwithstanding any provision of SECTION 5, SECTION 9, or any Transaction Document which might be construed to the contrary, as long as each Board of Directors has no more than six members, the Requisite Holders shall not be entitled to Designate or elect more than four of the six members at any time that Hampton shall own more than 50% of the outstanding Common Stock of Inland. SECTION 10. INDEMNITY. The Companies jointly and severally agree to indemnify each Indemnified Party, upon demand, from and against any and all liabilities, obligations, claims, losses, damages, penalties, fines, actions, judgments, suits, settlements, costs, expenses or disbursements (including reasonable fees of attorneys, accountants, experts and advisors) of any kind or nature whatsoever (in this section collectively called "LIABILITIES AND COSTS") which to any extent (in whole or in part) may be imposed on, incurred by, or asserted against such Indemnified Party arising out of, resulting from or in any other way associated with (i) the Note Purchase Documents or any transaction contemplated thereby, (ii) any matter, event or occurrence with respect to the Note Purchaser and its Affiliates as shareholders and the Holders as noteholders of the TCW Sub Notes or (iii) 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 TCW Asset Management Company, a California corporation, Trust Company of the West, a California trust company and 18 the Note Purchaser, (and each of their respective Affiliates) and each director, officer, agent, trustee, manager, member, partner, shareholder, principal, attorney, employee, representative and Affiliate of any such Person acting in such capacity. SECTION 11. MISCELLANEOUS. 11.1 WAIVERS AND AMENDMENTS; ACKNOWLEDGMENT. (a) WAIVERS AND AMENDMENTS. No failure or delay (whether by course of conduct or otherwise) by the Holders in exercising any right, power or remedy which either may have under any of the Note Purchase Documents shall operate as a waiver thereof or of any other right, power or remedy, nor shall any single or partial exercise by the Holders of any such right, power or remedy preclude any other or further exercise thereof or of any other right, power or remedy. No waiver of any provision of any Note Purchase Document and no consent to any departure therefrom shall ever be effective unless it is in writing and signed by the Requisite Holders, or, if so specified, by the Majority Holder, if any, and may be given or withheld in its sole and absolute discretion and then such waiver or consent shall be effective only in the specific instances and for the purposes for which given and to the extent specified in such writing. This Agreement and the other Note Purchase Documents set forth the entire understanding and agreement of the parties hereto and thereto with respect to the transactions contemplated herein and therein and supersede all prior discussions and understandings with respect to the subject matter hereof and thereof, and no modification or amendment of or supplement to this Agreement or the other Note Purchase Documents shall be valid or effective unless the same is in writing and signed by the party against whom it is sought to be enforced. THIS WRITTEN AGREEMENT AND THE OTHER NOTE PURCHASE DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. This Agreement may be amended, but only with the written consent of each of the Companies and the Requisite Holders. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Holders at Law or in equity or otherwise. (b) ACKNOWLEDGMENTS AND ADMISSIONS. Inland hereby represents, warrants, acknowledges and admits that: (i) it has been advised by counsel in the negotiation, execution and delivery of the Note Purchase Documents to which it is a party; (ii) it has made an independent decision to enter into this Agreement and the other Note Purchase Documents to which it is a party, without reliance on any representation, warranty, covenant or undertaking by the Note Purchaser, whether written, oral or implicit, other than as expressly set out in this Agreement or in another Note Purchase Document delivered on or after the date hereof, (iii) there are no representations, warranties, covenants, undertakings or agreements by the Note Purchaser as to the Note Purchase Documents except as 19 expressly set out in this Agreement or in another Note Purchase Document delivered on or after the date hereof, (iv) The Note Purchaser, in its capacity as Note Purchaser or a Holder, does not owe any fiduciary duty to Inland with respect to any Note Purchase Document or the transactions contemplated thereby; (v) the relationship pursuant to the Note Purchase Documents between Inland, on the one hand, and the Note Purchaser, on the other hand, is and shall be solely that of debtor and creditor, respectively; (vi) no partnership or joint venture exists with respect to the Note Purchase Documents between Inland and the Note Purchaser; (vii) should an Event of Default or Default occur or exist, the Note Purchaser will determine in its sole discretion and for its own reasons what remedies and actions it will or will not exercise or take at that time; (viii) without limiting any of the foregoing, Inland is not relying upon any representation or covenant by the Note Purchaser, or any representative thereof, and no such representation or covenant has been made, that the Note Purchaser will, at the time of an Event of Default or Default, or at any other time, waive, negotiate, discuss, or take or refrain from taking any action permitted under the Note Purchase Documents with respect to any such Event of Default or Default or any other provision of the Note Purchase Documents; and (ix) the Note Purchaser has relied upon the truthfulness of the acknowledgments in this Section in deciding to execute and deliver this Agreement and to purchase the TCW Sub Notes. 11.2 SURVIVAL OF AGREEMENTS; CUMULATIVE NATURE. All of the Companies' various representations, warranties, covenants and agreements in this Agreement and the Note Purchase Documents shall survive the execution and delivery of this Agreement and the other Note Purchase Documents and the performance hereof and thereof, including the purchase of the TCW Sub Notes and the delivery of the TCW Sub Notes and the other Note Purchase Documents, and shall further survive until all of the Obligations are paid in full to the Holders and all of the Holders' obligations to Inland hereunder are terminated or otherwise satisfied. Except as expressly provided herein, the representations, warranties, and covenants made by Inland in the Note Purchase Documents, and the rights, powers and privileges granted to the Holders in the Note Purchase Documents, are cumulative, and, except for expressly specified waivers and consents, no Note Purchase Document shall be construed in the context of another to diminish, nullify, or otherwise reduce the benefit to the Holders of any such representation, warranty, covenant, right, power or privilege. In particular and without limitation, no exception set out in this Agreement to any representation, warranty or covenant herein contained shall apply to any similar representation, warranty or covenant contained in any other Note Purchase Document, and each such similar representation, warranty or covenant shall be subject only to 20 those exceptions which are expressly made applicable to it by the terms of the various Note Purchase Documents. 11.3 NOTICES. All notices, requests, consents, demands and other communications required or permitted under any Note Purchase Document shall be in writing, unless otherwise specifically provided in such Note Purchase Document, and shall be deemed sufficiently given or furnished upon delivery, when delivered by personal delivery, by telecopy, by delivery service with proof of delivery, or three days after being deposited in the United States mail as registered or certified United States mail, postage prepaid, to Issuer or the Note Purchaser at the addresses set forth on the signature pages hereto (unless changed by similar notice in writing given by the particular Person whose address is to be changed) and: If to Issuer or IPC: 410 17th Street, Suite 700 Denver, Colorado 80202 Attention: Marc MacAluso Telephone: (303) 893-0102 Facsimile: (303) 893-0103 with a copy to: Glast, Phillips, Murray & Co. 13355 Noel Road, L.B. 48 Dallas, Texas 75240 Attention: Michael D. Parsons, Esq. Telephone: (972) 419-8311 Facsimile: (972) 419-8329 11.4 GOVERNING LAW; SUBMISSION TO PROCESS. EXCEPT TO THE EXTENT THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A NOTE PURCHASE DOCUMENT, THE NOTE PURCHASE DOCUMENTS, INCLUDING THIS AGREEMENT, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW; PROVIDED, THAT THE PROVISIONS OF SECTIONS 5.2, 5.3 AND 9.2 SHALL BE GOVERNED BY THE LAW OF THE STATE OF WASHINGTON. INLAND HEREBY IRREVOCABLY SUBMITS ITSELF AND EACH OTHER RELATED PERSON TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE STATE OF NEW YORK AND THE COUNTY OF NEW YORK AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT OR ANY OF ITS SUBSIDIARIES IN ANY LEGAL PROCEEDING RELATING TO THE NOTE PURCHASE DOCUMENTS OR THE OBLIGATIONS BY ANY MEANS ALLOWED UNDER NEW YORK OR FEDERAL LAW. INLAND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 21 11.5 LIMITATION ON INTEREST. (a) The Holders, Inland and any other parties to the Note Purchase Documents intend to contract in strict compliance with applicable usury law from time to time in effect. In furtherance thereof such Persons stipulate and agree that none of the terms and provisions contained in the Note Purchase Documents shall ever be construed to create a contract to pay, for the use, forbearance or detention of money, interest in excess of the maximum amount of interest permitted to be charged by applicable law from time to time in effect. Neither Inland nor any present or future guarantors, endorsers, or other Persons hereafter becoming liable for payment of any Obligation shall ever be liable for unearned interest thereon or shall ever be required to pay interest thereon in excess of the maximum amount that may be lawfully charged under applicable law from time to time in effect, and the provisions of this Section shall control over all other provisions of the Note Purchase Documents which may be in conflict or apparent conflict herewith. (b) The Holders expressly disavow any intention to contract for, charge or collect unearned interest or finance charges in the event the maturity of any Obligation is accelerated. If (i) the maturity of any Obligation is accelerated for any reason, (ii) any Obligation is prepaid and as a result any amounts held to constitute interest are determined to be in excess of the legal maximum, or (iii) the Holders or any other holder of any or all of the Obligations shall otherwise collect moneys which are determined to constitute interest which would otherwise increase the interest on any or all of the obligations to an amount in excess of that permitted to be charged by applicable Law then in effect, then all such sums determined to constitute interest in excess of such legal limit shall, without penalty, be promptly applied to reduce the then-outstanding principal of the related Obligations or, at the Holders' option, promptly returned to Inland or the other payor thereof upon such determination. (c) In determining whether or not the interest paid or payable under any specific circumstances exceeds the maximum amount permitted under applicable Law, the Holders and the Related Persons (and any other payors thereof) shall, to the greatest extent permitted under applicable law, (i) characterize any non-principal payment as an expense, fee or premium rather than as interest, (ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and spread the total amount of interest throughout the entire contemplated term of the instruments evidencing the Obligations in accordance with the amounts outstanding from time to time thereunder and the Highest Lawful Rate from time to time in effect under applicable Law in order to lawfully charge the maximum amount of interest permitted under applicable Law. 11.6 TERMINATION; LIMITED SURVIVAL. Inland may, in its sole and absolute discretion at any time that no Obligation is owing under the Note Purchase Documents, elect in a notice delivered to the Holders to terminate this Agreement. Upon receipt by the Holders of such a notice, if no such Obligation is then owing, then this Agreement and all other Note Purchase Documents shall thereupon be terminated and the parties thereto released from all prospective obligations thereunder. Notwithstanding the foregoing or anything herein to the contrary, any waivers or admissions made by Inland in any Note Purchase Documents and any obligations which any Person may have to indemnify or compensate the Holders shall survive any termination of this Agreement or any other Note Purchase Document. At Inland's request 22 and expense, the Holders shall prepare and execute all necessary instruments to reflect and effect such termination of the Note Purchase Documents. All representations and warranties and covenants made herein by the Companies 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 shall survive the issuance of the TCW Sub Notes regardless of any investigation made by or on behalf of TCW. 11.7 REGISTRATION, TRANSFER, EXCHANGE AND SUBSTITUTION OF TCW SUB NOTES. Inland shall keep at its principal executive office a register for the registration and registration of transfers of TCW Sub Notes (the "Register"). The name and address of each Holder, each transfer thereof and the name and address of each transferee of one or more TCW Sub Notes shall be registered in such Register. Prior to due presentment for registration of transfer, the Person in whose name any TCW Sub Notes shall be registered shall be deemed and treated as the owner and Holder thereof for all purposes hereof, and Inland shall not be affected by any notice or knowledge to the contrary. Inland shall give to any Holder, promptly upon request therefor, a complete and correct copy of the names and addresses of all registered Holders of TCW Sub Notes. (a) TRANSFER AND EXCHANGE OF TCW SUB NOTES. Upon surrender of any TCW Sub Note at the principal executive office of Inland for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered Holder of such TCW Sub Note or its attorney duly authorized in writing and accompanied by the address for notices of each transferee of such TCW Sub Note or part thereof), Inland shall execute and deliver, at Inland's expense, one or more new TCW Sub Note (as requested by the Holder thereof) of the same series in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered TCW Sub Note; provided, however, that no transfer of TCW Sub Notes may be made (i) to a transferee who is not an accredited institutional investor or a qualified institutional buyer and (ii) unless such transfer is made pursuant to an exemption from registration under the securities laws of the United States including without limitation any resale of any TCW Sub Notes under Rule 144A of the Securities Act. Any purported transfer of a TCW Sub Notes or an interest therein which is prohibited hereby shall be null and void ab initio and of no force or effect whatever. Each such new TCW Sub Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit A. Each such new TCW Sub Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered TCW Sub Note or dated the date of the surrendered TCW Sub Note if no interest shall have been paid thereon. TCW Sub Notes shall not be transferred in denominations of less than $1,000,000 provided that if necessary to enable the registration of transfer by a Holder of its entire holding of TCW Sub Notes, one TCW Sub Note may be in a denomination of less than $1,000,000. If the Note Purchaser shall request that the restrictive legend on the TCW Sub Note be removed, the Note Purchaser, if requested by Inland, will have the obligation in connection with such request, as applicable, at the Note Purchaser's expense, of delivering an opinion of counsel in form and substance reasonably satisfactory to Inland, in connection with such request to the effect that the removal of such restrictive legend would not be in violation of the Securities Act or any applicable state securities laws. 23 (b) REPLACEMENT OF TCW SUB NOTES. Upon receipt by Inland of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any TCW Sub Notes, and (i) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the Holder of such TCW Sub Note is, or is a nominee for, the Note Purchaser or another Holder of a TCW Sub Note with a minimum net worth of at least $5,000,000, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or in the case of mutilation, upon surrender and cancellation thereof, Inland at its own expense shall execute and deliver, in lieu thereof, a new TCW Sub Note of the same series, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated TCW Sub Note or dated the date of such lost, stolen, destroyed or mutilated TCW Sub Note if no interest shall have been paid thereon. 11.8 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF INLAND AND THE HOLDERS HEREBY: (a) KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THE NOTE PURCHASE DOCUMENTS OR THE PURCHASE AND SALE OF ANY TCW SUB NOTES CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (b) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (c) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS; AND (d) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER NOTE PURCHASE DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION. 11.9 EXHIBITS AND SCHEDULES; ADDITIONAL DEFINITIONS. All Exhibits and Schedules to this Agreement are a part hereof for all purposes. 24 11.10 CONFIDENTIALITY OF HOLDERS. (a) Notwithstanding the termination of this Agreement and except as otherwise provided herein or in subsection (a) or (b) below, Inland shall maintain the confidentiality of the identities of (i) any Holder or any holder of any Obligation other than the TCW Sub Notes; and (ii) any owner of a beneficial interest in the TCW Sub Notes (collectively, "CONFIDENTIAL INFORMATION") and shall not, without the Requisite Holders' prior written consent, disclose any such information to another Person or use such information for purposes other than those contemplated herein. (b) Inland may disclose Confidential Information to its directors, officers, members, employees, and agents (including attorneys, accountants, and consultants) to whom such disclosure is reasonably necessary for the execution or effectuation hereof, provided Inland notifies all such Persons that the Confidential Information disclosed to them is subject to this section and requires them not to disclose or use such information in breach of this Section. Inland may also disclose Confidential Information in filings with the Commission to the extent required to be disclosed therein. (c) If Inland is requested or required by legal process (including law or regulation, oral questions, interrogatories, request for information or documents, subpoena, and civil investigative demand) to disclose any Confidential Information, Inland shall promptly notify the Holders of such request prior to complying with such process so that the Holders may seek an appropriate protective order or waive the respondent's compliance with this section. If, after such notice and after providing the Holders a reasonable opportunity to obtain a protective order or to grant such waiver (so long as the granting of such time does not put Inland in breach of its obligations to disclose), Inland is nonetheless legally compelled to disclose such information, Inland may do so without liability under this Section. (d) Any Confidential Information which becomes publicly available through no breach by Inland of its obligations hereunder or a breach by a third party of a confidential obligation to the Holders shall no longer be deemed to be Confidential Information. 11.11 REPRODUCTION OF DOCUMENTS This Agreement and all documents relating hereto may be reproduced by you and by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original documents so produced. Each of the parties hereto agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. 11.12 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. 25 11.13 COUNTERPARTS. Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. 11.14 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. 11.15 EXPENSES. The Companies will pay all reasonable costs and expenses incurred by TCW and any other Holders (a) relating to the negotiation, preparation, execution and delivery of this Agreement and the other Note Purchase Documents and the issuance of the TCW Sub Notes (including, without limitation, reasonable fees, office charges and expenses of counsel to TCW and Portfolio, Milbank, Tweed, Hadley & McCloy LLP), (b) relating to printing the instruments evidencing the TCW Sub Notes, (c) relating to any amendments, waivers or consents under this Agreement to the same extent as set forth in clause (a) and (b) above, (d) relating to the filing, recording, refiling and re-recording of any Note Purchase Documents and any other documents or instruments or further assurances required to be filed or recorded or refiled or re-recorded by the terms of any Note Purchase Document, or any other event with respect to which Inland shall have the right to recover from any party expenses or costs paid or reimbursed to Holders, (e) incident to the enforcement by the Holders of, or the protection or preservation of any right or remedy of the Holders under, this Agreement and the other Note Purchase Documents, or any other document or agreement furnished pursuant hereto or thereto or in connection herewith or therewith (including, without limitation, reasonable fees and expenses of counsel) and (f) relating to any bankruptcy, insolvency or other similar action or proceeding in any jurisdiction involving any of the Companies. The Companies shall pay such costs and expenses, to the extent then payable, on the date of issuance of the TCW Sub Notes or, with respect to those matters described in clauses (b) through (f) above, thereafter from time to time upon demand by TCW upon presentation, in each such case, of a reasonably detailed statement thereof. The Companies' obligations under this SECTION 11.15 shall survive the payment of the TCW Sub Notes, but only with respect to expenses incurred prior to payment in full of the TCW Sub Notes and any other obligations under the Note Purchase Documents. 11.16 SPECIFIC PERFORMANCE. The Companies recognize that money damages may be inadequate to compensate the Holders for a breach by the Companies of their obligations hereunder, and the Companies irrevocably agree that the Holders shall be entitled to the remedy of specific performance or the granting of such other equitable remedies as may be awarded by a court of competent jurisdiction in order to afford the Holders the benefits of this Agreement and that the Companies shall not object and hereby waive any right to object to such remedy or such granting of other equitable remedies on the grounds that money damages will be sufficient to compensate the Holders. 26 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written. ISSUER: INLAND RESOURCES INC., a Washington corporation By: /s/ Marc MacAluso --------------------------------------- Marc MacAluso Chief Executive Officer 410 17th Street, Suite 700 Denver, Colorado 80202 Attention: Marc MacAluso Telephone: (303) 893-0102 Facsimile: (303) 893-0103 With a copy to: Glast, Phillips, Murray & Co. 13355 Noel Road, L.B. 48 Dallas, Texas 75240 Attention: Michael D. Parsons, Esq. Telephone: (972) 419-8311 Facsimile: (972) 419-8329 GUARANTOR: INLAND PRODUCTION COMPANY, a Texas corporation By: /s/ Bill I. Pennington --------------------------------------- Name: Bill I. Pennington Title: President/Chief Financial Officer Address for Notices: 410 17th Street, Suite 700 Denver, Colorado 80202 Attention: Telephone: (303) 893-0102 Facsimile: (303) 893-0103 With a copy to: Glast, Phillips, Murray & Co. 13355 Noel Road, L.B. 48 Dallas, Texas 75240 Attention: Michael D. Parsons, Esq. Telephone: (972) 419-8311 Facsimile: (972) 419-8329 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/ Arthur R. Carlson --------------------------------------- Arthur R. Carlson Managing Director By: /s/ Thomas F. Mehlberg --------------------------------------- Thomas F. Mehlberg Managing Director By: TCW PORTFOLIO NO. 1555 DR V SUB-CUSTODY PARTNERSHIP, L.P., a California limited partnership, Member By: TCW ROYALTY COMPANY, a California corporation, Managing General Partner By: /s/ Thomas F. Mehlberg ---------------------------------- Thomas F. Mehlberg Vice President Address for Notices: 865 S. Figueroa Street Los Angeles, California 90017 Attention: Arthur R. Carlson Thomas F. Mehlberg Telephone: (213) 244-0053 Facsimile: (213) 244-0604 With a copy to: Milbank, Tweed, Hadley & McCloy LLP 601 S. Figueroa Street Los Angeles, California 90017 Attention: David A. Lamb, Esq. Telephone: (213) 892-4000 Facsimile: (213) 629-5063 EXHIBIT A [Form of TCW Sub Note] SUBORDINATED NOTE $_________ August 2, 2001 R-[________] FOR VALUE RECEIVED, the undersigned, Inland Resources Inc., a Washington corporation (the "INLAND"), hereby promises to pay to Inland Holdings, LLC ("NOTE PURCHASER") or its registered assigns (the "Holder"), in the manner provided in Exchange and Note Issuance Agreement referred to below, the principal sum of __________________ (or so much thereof as shall not have been prepaid) in lawful money of the United States of America and in immediately available funds, on or before September 30, 2009. The undersigned also promises to pay to the Holder hereof interest on the unpaid principal amount of this TCW Sub Note, in like money and funds, at the rate set forth in, and payable in accordance with SECTIONS 2.7, 2.8, 2.9, 2.10, 2.11 and 2.12 of that certain Exchange and Note Issuance Agreement, dated as of August 2, 2001 (the "AGREEMENT")(capitalized terms used herein without definition shall have the meanings ascribed to them in the Agreement), among Inland, IPC, and the Note Purchaser. This TCW Sub Note is one of the TCW Sub Notes issued pursuant to the Agreement. Payments of interest shall be computed on the basis set forth in the Agreement and shall be payable on the unpaid principal amount of this TCW Sub Note in arrears on each Payment Date as provided in the Agreement, until this TCW Sub Note shall be paid in full. Payments of principal and interest are to be made in lawful money of the United States of America. The Agreement provides for the acceleration of the maturity of this TCW Sub Note upon the occurrence of certain events and for prepayments of this TCW Sub Note upon the terms and conditions specified therein. This TCW Sub Note and entitled to the benefits provided in, the Note Purchase Documents, in each case to the extent provided in said agreements. THE SECURITIES EVIDENCED BY THIS TCW SUB NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. ALL INDEBTEDNESS EVIDENCED BY THIS TCW SUB NOTE IS SUBORDINATED TO OTHER INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED IN, AND IS OTHERWISE SUBJECT TO THE TERMS OF, THE SUBORDINATION AGREEMENT DATED AS OF AUGUST 2, 2001 (THE "BANK SUBORDINATION AGREEMENT"), AS THE SAME MAY BE AMENDED, MODIFIED OR OTHERWISE SUPPLEMENTED FROM TIME TO TIME, BY AND AMONG INLAND PRODUCTION COMPANY, AS BORROWER, INLAND RESOURCES INC., AS GUARANTOR, AND FORTIS CAPITAL CORP., AS AGENT FOR THE LENDERS PARTIES TO THE SENIOR CREDIT AGREEMENT REFERRED TO IN THE BANK SUBORDINATION AGREEMENT, AND THE HOLDERS FROM TIME TO TIME OF THE OBLIGATIONS ARISING UNDER THE SUBORDINATED LOAN AGREEMENT REFERRED TO IN THE BANK SUBORDINATION AGREEMENT, INCLUDING, WITHOUT LIMITATION, THIS TCW SUB NOTE. ALL INDEBTEDNESS EVIDENCED BY THIS TCW SUB NOTE IS SUBORDINATED TO OTHER INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED IN, AND IS OTHERWISE SUBJECT TO THE TERMS OF, THE SUBORDINATION AGREEMENT DATED AS OF AUGUST 2, 2001 (THE "TCW SUBORDINATION AGREEMENT"), AS THE SAME MAY BE AMENDED, MODIFIED OR OTHERWISE SUPPLEMENTED FROM TIME TO TIME, BY AND AMONG INLAND RESOURCES INC., AS BORROWER, INLAND PRODUCTION COMPANY, AS GUARANTOR, AND THE HOLDERS FROM TIME TO TIME OF THE OBLIGATIONS ARISING UNDER THE SUBORDINATED NOTE AGREEMENT REFERRED TO IN THE TCW SUBORDINATION AGREEMENT, INCLUDING, WITHOUT LIMITATION, THIS TCW NOTE. This Sub Note is a registered Sub Note and, as provided in the Agreement, upon surrender of this Sub Note for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered Holder of this Sub Note or such Holder's attorney duly authorized in writing pursuant to SECTION 11.7 of the Agreement), one or more new TCW Sub Notes for a like aggregate principal amount will be issued to, and registered in the name of, the transferee. Prior to the due presentment for registration and transfer, Inland may treat the Person in whose name this Sub Note is registered as the Holder and the owner of this Sub Note for the purpose of receiving payment and for all other purposes of this Sub Note and the Agreement. Notwithstanding anything to the contrary herein, the right to receive payments of interest and principal under this Sub Note shall be transferable only upon surrender for cancellation of this Sub Note, and the issuance of a new Sub Note registered in the name of the transferee. In addition, Inland shall maintain a register in which it shall record the name of the Note Purchaser or any transferee, and no transfer shall be valid unless so registered. This Sub Note shall be governed by, and construed in accordance with, the laws of the State of New York (without giving effect to the conflict of laws provisions thereof). INLAND RESOURCES INC., a Washington corporation By: _______________________________________ Marc MacAluso Chief Executive Officer EXHIBIT B FORM OF GUARANTEE For value received, the undersigned hereby unconditionally and irrevocably, guarantees to the Holder of the foregoing Sub Note the due and punctual payment of the principal and interest on said Sub Note, as more fully provided in the Agreement referred to in said Sub Note. EX-99.1 8 a2056120zex-99_1.txt EXHIBIT 99.1 EXHIBIT 99.1 TERMINATION AGREEMENT This TERMINATION AGREEMENT (this "AGREEMENT") is dated as of August 2, 2001 (but is effective as of the Effective Time, as defined in SECTION 8 hereof) by and among Inland Resources Inc., a Washington corporation (the "ISSUER") and Inland Holdings, LLC, a California a California limited liability company ("HOLDINGS"). WHEREAS, Holdings is the holder of warrants, rights and options to purchase the common stock, par value $.001 per share, of Issuer ("COMMON STOCK"), set forth on Schedule 1 hereto (all such warrants and options held by Holdings being referred to as the "TCW WARRANTS AND OPTIONS"); WHEREAS, Holdings is a party to that certain Exchange and Note Issuance Agreement (the "EXCHANGE AGREEMENT") dated as of August 2, 2001, by and among the Issuer and Inland Production Company, a Texas corporation; and WHEREAS, it is a condition to the obligations of Issuer under the Exchange Agreement that Holdings execute this Agreement to terminate the TCW Warrants and Options, including any documentation related thereto. NOW, THEREFORE, in consideration of their respective obligations under the Exchange Agreement, Holdings and the Issuer hereby agree: Section 1. TERMINATION. Holdings and the Issuer hereby terminate the TCW Warrants and Options, and no party shall have any further rights or obligations to any other party with respect to the TCW Warrants and Options. Holdings shall return to the Issuer, on or before the Effective Time (as defined below), either originals of any certificates evidencing the TCW Warrants and Options in the possession of Holdings for cancellation by the Issuer or an affadavit of lost certificate with respect to any such certificate(s). The TCW Warrants and Options shall be null and void as of the Effective Time. Section 2. CONCERNING THE TERMINATED TCW WARRANTS AND OPTIONS. Holdings represents and warrants that (a) Holdings has full title to the TCW Warrants and Options, (b) Holdings has all authority, consents and approvals necessary to enter into this Agreement and to perform fully its obligations hereunder and (c) this Agreement has been duly executed and delivered by Holdings and constitutes a legal, valid and binding obligation of Holdings, enforceable against it in accordance with its terms. Section 3. FURTHER ASSURANCES. Holdings shall perform such acts and duly authorize, execute, acknowledge, deliver, file and record such additional releases, agreements, documents, instruments and certificates as the Issuer may reasonably deem necessary or appropriate to carry out the purposes of this Agreement. Section 4. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties whether so expressed or not. Section 5. COUNTERPARTS. Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. Section 6. SEVERABILITY. In the event that any one or more of the provisions, or portion thereof, contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision, or portion thereof, in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. Section 7. GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the law of the State of Washington. Section 8. SIMULTANEOUS EFFECTIVENESS. For purposes of this Agreement, the "EFFECTIVE TIME" is the time at which the transactions contemplated under the Exchange Agreement, which take place simultaneously, are effective. Section 9. DEFINITIONS. Capitalized terms not otherwise defined herein have the respective meanings set forth in the Exchange Agreement. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written. INLAND RESOURCES INC., a Washington corporation By: /s/ MARC MACALUSO ------------------------------- Marc MacAluso Chief Executive Officer 410 17th Street, Suite 700 Denver, Colorado 80202 Attention: Marc MacAluso Telephone: (303) 893-0102 Facsimile: (303) 893-0103 With a copy to: Glast, Phillips, Murray & Co. 13355 Noel Road, L.B. 48 Dallas, Texas 75240 Attention: Michael D. Parsons, Esq. Telephone: (972) 419-8311 Facsimile: (972) 419-8329 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/ ARTHUR R. CARLSON ------------------------------- Arthur R. Carlson Managing Director By: /s/ THOMAS F. MEHLBERG ------------------------------- Thomas F. Mehlberg Managing Director By: TCW HOLDINGS NO. 1555 DR V SUB-CUSTODY PARTNERSHIP, L.P., a California limited partnership, Member By: TCW ROYALTY COMPANY, a California corporation, Managing General Partner By: /s/ THOMAS F. MEHLBERG --------------------------- Thomas F. Mehlberg Vice President Address for Notices: 865 South Figueroa Street Los Angeles, California 90017 Attention: Arthur R. Carlson Attention: Thomas F. Mehlberg Telephone: (213) 244-0053 Facsimile: (213) 244-0604 With a copy to: Milbank, Tweed, Hadley & McCloy LLP 601 S. Figueroa Street, 30th Floor Los Angeles, California 90017 Attention: David A. Lamb, Esq. Telephone: (213) 892-4000 Facsimile: (213) 629-5063 SCHEDULE 1 TO TERMINATION AGREEMENT The "Purchaser Adjustment Options" described in Section 8.12 of that certain Exchange Agreement dated as of September 21, 1999 between Issuer, Holdings and others. -----END PRIVACY-ENHANCED MESSAGE-----