WARRANT CERTIFICATE
TO PURCHASE SHARES OF COMMON STOCK OF
INLAND RESOURCES INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF WASHINGTON
CERTIFICATE EVIDENCING THE NUMBER OF WARRANTS
SET FORTH IN SECTION 1
1. BASIC TERMS. This certifies that, for good and valuable
consideration, Bill I. Pennington (the "Holder"), is entitled, subject to the
terms and conditions of this Warrant Certificate (the "Certificate"), to
purchase 50,000 shares of the common stock, $.001 par value (the "Common
Stock"), of Inland Resources Inc. (the "Company"), subject to adjustment as
provided in this Certificate, from the Company at the Exercise Price (as defined
below), on delivery of this Certificate to the Company with the exercise form
duly executed and payment of the Exercise Price payable to the Company by
cashier's check or other immediately available funds, for all shares purchased.
One Warrant (herein so called) is required for the purchase of one share of
Common Stock, subject to adjustment as provided herein.
2. EXPIRATION DATE. The right to exercise the Warrants evidenced
by this Certificate shall expire at 12:00 a.m. PST on the tenth (10th)
anniversary of the effective date of this Certificate, provided, however, that
if Holder's employment by the Company as an executive officer is terminated
for any reason other than death or disability then the Warrants evidenced by
this Certificate shall expire ninety (90) days after such termination, but if
termination is as a result of death or disability then the Warrants may be
exercised at any time within one year after the termination of employment for
such reason (the "Expiration Date").
3. EXERCISE PRICE. The purchase price per share of the Common
Stock upon exercise of the Warrants (the "Exercise Price") shall be equal to
$6.27 per share, which is equal to or greater than the fair market value per
share on the date hereof. The Exercise Price may be adjusted from time to
time pursuant to the terms of this Certificate.
4. COMPANY'S WARRANTIES, REPRESENTATIONS AND COVENANTS. The Company
warrants, represents and covenants to the Holder that:
(a) The Company has been duly incorporated and organized and is
validly existing as a corporation in good standing under the laws of
its state of organization.
(b) The Warrants have been duly authorized and are the validly
issued, fully paid and binding obligation of the Company. The Common
Stock of the Company issuable upon exercise of the Warrants are
validly authorized and upon payment of the Exercise Price shall be
validly issued, fully paid and nonassessable
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Common Stock of the Company.
(c) Common Stock deliverable on the exercise of the Warrants
shall, at delivery, be fully paid and nonassessable, free from all
taxes, liens, and charges with respect to the purchase.
(d) The Company shall take any necessary steps to assure that
the par value per share of the Common Stock is at all times equal to
or less than the then current Exercise Price of the Common Stock
issuable pursuant to this Certificate.
(e) The Company shall at all times reserve and hold available
sufficient shares of its Common Stock to satisfy the Common Stock
issuable upon exercise of this Warrant.
(f) The Company shall maintain its books and records in
accordance with generally accepted accounting principles applied on a
consistent basis.
(g) The Company shall permit the Holder through his designated
representatives to visit and inspect any of the properties of the
Company, to examine its books and records, and to discuss its affairs,
finances and accounts with and be advised as to the same by the
officers of the Company at reasonable times and intervals, on the same
basis as any other shareholder.
The provisions of this Section shall continue for so long as the
Holder owns this Certificate.
5. METHOD OF EXERCISE; SHARES ISSUED UPON EXERCISE. Exercise may
be made of all or any part of the Warrants evidenced by this Certificate by
surrendering it, with the exercise form provided for herein duly executed by
or on behalf of the Holder, at the executive office of the Company,
accompanied by payment in full of the Exercise Price payable in respect of
the Warrants being exercised. The Warrants are exercisable at the option of
the Holder in whole or in part at any time prior to the Expiration Date. If
less than all of the Warrants evidenced by this Certificate are exercised,
the Company will, upon such exercise, execute and deliver to the Holder a new
certificate (dated the date hereof) evidencing the Warrants not so exercised.
Unless the Common Stock issuable upon exercise of the Warrants has been
registered under the Securities Act of 1933, as amended (the "1933 Act"), the
certificates evidencing the Common Stock issuable on exercise of the Warrants
will bear the following legend:
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"The shares of stock of Inland Resources Inc. (the "Company")
represented by this certificate have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), or under the
securities laws of any state, and the Holder hereof cannot make any
sale, assignment, or other transfer of any shares of such stock except
pursuant to an offering of such shares duly registered under the 1933
Act and the applicable state securities laws, or under such other
circumstances that, in the opinion of counsel of the Holder hereof,
does not require registration under the 1933 Act and any state
securities laws. Said shares are restricted securities within the
meaning of Rule 144 promulgated under the 1933 Act and may be subject
to the limitations upon resale set forth therein or in other rules and
regulations under the 1933 Act;"
provided, however, that the Company agrees that whenever the shares of Common
Stock issuable upon exercise or conversion of this Warrant shall have been
beneficially held for three (3) years within the meaning of Rule 144(k) of the
1933 Act or any successor rule or statute or any shorter period of time allowed
by such successor rule or statute, and so long as the Holder is not an affiliate
of the Company within the meaning of Rule 144, if required by Rule 144 or such
successor rule or statute, then the Company shall remove all restrictive legends
and stop transfer restrictions at the written request of the owner of the shares
of Common Stock issuable on exercise or conversion of this Warrant.
6. INVESTMENT REPRESENTATION OF HOLDER. Holder represents and
warrants that the Warrants evidenced by this Certificate, and any Warrant
Shares (herein so called) purchased upon exercise of the Warrants, have been,
or will be, acquired or purchased as an investment for Holder's own account
and not with a view toward further distribution thereof. It is expressly
understood that the Warrants cannot be transferred except pursuant to Section
9 hereof, and that the Warrant Shares cannot be sold or transferred except
pursuant to an effective registration statement or an exemption from
applicable securities laws.
7. ADJUSTMENT OF SHARES PURCHASABLE. The number of shares of Common
Stock purchasable hereunder and the Exercise Price per share are subject to
adjustment from time to time as specified in this Certificate.
8. EXCHANGE FOR OTHER DENOMINATIONS. This Certificate is
exchangeable, on its surrender by the Holder to the Company, for new
Certificates of like tenor and date representing in the aggregate the number
of Warrants and the right to purchase the number of shares of Common Stock
purchasable hereunder in denominations designated by the Holder at the time
of surrender.
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9. RESTRICTIONS ON TRANSFER. During the lifetime of Holder, this
Certificate shall be exercisable only by the Holder in person, by attorney or by
mail, on surrender of this Certificate, properly endorsed. Neither this
Certificate nor the Warrants are transferable by Holder by operation of law or
otherwise, except that in the event of death or disability of Holder while
employed by the Company or a subsidiary, the Warrants may be exercised at any
time within one year after such death or disability by the duly appointed
personal representative of Holder, or by any person or persons who shall acquire
the Warrants directly from Holder by bequest or inheritance.
10. ADJUSTMENT OF SHARES. Wherever this Certificate specifies a
number of shares of Common Stock or an Exercise Price per share, the
specified number of shares of Common Stock to be received on exercise and the
Exercise Price per share shall be changed to reflect adjustments (which may
require that additional securities or other property be delivered on
exercise) required by this section, as follows:
(a) If a stock or property dividend is declared to the holders
of shares of the same class of securities of the Company as is
issuable upon exercise of Warrants, there shall be added with respect
to each share of Common Stock issuable upon exercise of Warrants the
amount of the dividend, stock or property, which would have been
issued to the Holder had the Holder been the holder of record of such
issuable share at the dividend record date. Such additional stock or
property resulting from such dividend shall be delivered without
additional cost upon the exercise of Warrants. Any distribution to
the holders of Common Stock of the Company of any kind, other than a
distribution of cash as a dividend out of profits of the Company for
the current year of the dividend, shall be treated as a stock or
property dividend for purposes of this Subsection 10(a). If the
Holder is entitled to receive cash upon exercise of Warrants under
this Subsection 10(a), the Holder may, at the Holder's option, elect
to reduce the Exercise Price by all or part of the cash to be received
by the Holder upon exercise under this Subsection 10(a).
(b) If an increase has been effected in the number of
outstanding shares of the same class of securities of the Company as
is issuable upon exercise of Warrants by reason of a subdivision of
such shares, the number of shares which may thereafter be purchased
upon exercise of Warrants shall be increased with respect to each
share issuable upon exercise of Warrants by the number of shares which
could have been received by the Holder at the time of such subdivision
had it been the holder of record of such issuable shares at the record
and/or effective date of the subdivision. In such event, the Exercise
Price per share of Warrants shall be proportionately reduced.
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(c) If a decrease has been effected in the number of outstanding
shares of the same class of securities of the Company as is issuable
upon exercise of Warrants by reason of a reverse stock split, the
number of shares which may thereafter be purchased upon exercise of
Warrants shall be changed with respect to each share issuable upon
exercise of Warrants to the number of shares which would have been
held by the Holder at the time of said reverse stock split had the
Holder been the holder of such issuable share at the record and/or
effective date of the reverse stock split. In such event, the
Exercise Price per share shall be proportionately increased.
(d) If there is a capital reorganization, reclassification of
the capital stock of the Company, or any consolidation or merger of
the Company with any other corporation or corporations, or if there is
a sale or distribution of all or substantially all of the Company's
property and assets, the Company shall make adequate provision so that
there shall remain and be substituted under this Certificate with
respect to each share issuable upon exercise of Warrants the stock,
securities and/or assets which would have been issuable or payable in
respect of or in exchange for such issuable shares if the Holder had
been the owner of such share on the applicable record date. All other
provisions of this Certificate shall remain in full force and effect.
11. NOTICE OF ADJUSTMENT. On the happening of any event requiring an
adjustment of the Exercise Price or the shares purchasable hereunder, the
Company shall immediately give written notice to the Holder stating the adjusted
Exercise Price and the adjusted number and kind of securities or other property
purchasable hereunder resulting from the event and setting forth in reasonable
detail the method of calculation and the facts upon which the calculation is
based.
12. NOTICE REQUIREMENT. If at any time the Company proposes or is
aware of any of the following transactions, the Company shall give written
notice to the Holder at least 30 days prior to the proposed transaction: an
anticipated voluntary or involuntary dissolution, liquidation or winding up
of the Company; a merger or consolidation of the Company; the payment or
declaration of a dividend or distribution to shareholders of the Company; or
the vote of shareholders of the Company to amend the certificate or articles
of incorporation of the Company. Such notice shall contain: (a) the date on
which the proposed transaction is to take place; (b) the record date (which
shall be at least 30 days after the giving of the notice) of the proposed
transaction; (c) a brief description of the proposed transaction; (d) a brief
description of any dividends or other distributions to be made to holders of
Common Stock as a result of the proposed transaction; (e) a brief description
of any other effect of the proposed transaction on holders of Common Stock or
this Certificate; and (f) an estimate of the fair value of any dividends or
other distributions to be made to shareholders.
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13. FRACTIONAL SHARES. The Company shall not be required upon the
exercise of any of the Warrants evidenced hereby to issue any fractional shares,
but shall make an adjustment therefore in cash on the basis of the mean between
the low bid and high asked prices on the over-the-counter market as reported by
the NASD Automated Quotation System or the closing market price on a national
securities exchange on the trading day immediately prior to exercise, whichever
is applicable, or if neither is applicable, then on the basis of the market
value of any such fractional interest as shall be reasonably determined by the
Company.
14. NOTICE. Any notice required or permitted by any party to this
Certificate shall be in writing and may be delivered personally to the party
being given notice or to the person in charge of the office of the party being
given notice or by facsimile, national overnight courier service or by mail, at
the party's address indicated below, and any notice will be effective only upon
actual receipt by the party. The addresses of the parties are as follows:
Holder: 475 17th Street, Suite 1500
Denver, Colorado 80202
Company: 475 17th Street, Suite 1500
Denver, Colorado 80202
The names and addresses of persons to receive notice as stated in this Section
may be changed by notice given in accordance with this Section.
15. PARTIES. This Certificate shall bind the respective successors
and assigns of the parties.
16. ENTIRE AGREEMENT. This Certificate represents the entire
agreement of the parties with respect to the subject matter hereof and
supersedes any prior or contemporaneous oral or written agreements or
understandings. The terms of this Certificate may be amended only by a
written instrument executed by the Company and the Holder.
WITNESS the signature of the Company's authorized representative and
the acceptance of the terms hereof by the signature of the Holder dated
effective May 22, 1996.
COMPANY:
INLAND RESOURCES INC.
By:
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Kyle R. Miller, President
HOLDER:
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Bill I. Pennington
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EXERCISE FORM
(To be executed by the Holder to purchase
Common Stock pursuant to the within Warrants)
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The undersigned hereby: (1) irrevocably elects to purchase ______
shares of the Company's Common Stock issuable upon the exercise of the within
Warrants, and encloses payment of $________________ therefor; (2) requests
that a certificate for the shares be issued in the name of the undersigned
and delivered to the undersigned at the address below; and (3) if such number
of shares is not all of the shares purchasable hereunder, that a new
Certificate of like tenor for the balance of the remaining Warrants be issued
in the name of the undersigned and delivered to the undersigned at the
address below.
Date:
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(Please sign exactly as name appears on
Warrant Certificate)
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Address
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