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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 8-K
-------------------------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): DECEMBER 28, 1999
PETROGLYPH ENERGY, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 000-23185 74-2826234
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
1302 N. GRAND
HUTCHINSON, KANSAS 67501
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (316) 665-8500
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
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ITEM 5. OTHER EVENTS
On December 28, 1999, Petroglyph Energy, Inc. ("Petroglyph" or the
"Company") announced the execution of a Purchase and Sale Agreement (the
"Purchase Agreement") with III Exploration Company, an Idaho corporation ("III
Exploration"). III Exploration is a wholly-owned subsidiary of Intermountain
Industries, Inc., an affiliate of the Company through its ownership of 50.4% of
the Company's outstanding common stock. Currently, three members of the
Company's Board of Directors are also members of the Board of Directors of
Intermountain Industries, Inc. Pursuant to the terms of the Purchase Agreement,
Petroglyph has agreed to purchase certain oil and gas producing properties,
located primarily in the Uinta Basin of Utah, from III Exploration, in exchange
for the issuance of 250,000 shares of Series A Convertible Preferred Stock. The
Purchase Agreement follows a letter of intent dated November 30, 1999 between
Petroglyph and III Exploration, which outlined the basic terms of the
acquisition, and provides for an effective date of November 1, 1999. The
preferred stock will pay dividends at a rate of 8% per annum. The payments will
be due quarterly and are payable in additional shares of preferred stock for the
first eight quarters and then in cash for all remaining quarters. The preferred
stock will be convertible, beginning two years from the date of issuance, into
shares of common stock at a conversion price of $3.50 per share of common stock,
based on the preference amount of $10.00 per preferred share. The Company has
the option to redeem the preferred stock at any time after the third anniversary
of the issuance of the shares in whole or in part at a redemption price of
$12.00 per preferred share. The preferred stock to be issued in exchange for the
properties will not be registered under the Securities Act of 1933, as amended,
and may not be offered or sold in the United States absent registration or an
applicable exemption from registration requirements. The acquisition of the
properties and the issuance of the preferred stock is contingent upon the
approval of the stockholders of Petroglyph.
On December 28, 1999, the Company announced the issuance and sale of
1,000,000 shares of its common stock to III Exploration. The issuance was
effected through a privately negotiated sale between the Company and III
Exploration, with a purchase price of $2.00 per share, for aggregate proceeds to
the Company of $2,000,000. The common stock issued in the private placement has
not been registered under the Securities Act of 1933, as amended, and may not be
offered or sold in the United States absent registration or an applicable
exemption from registration requirements. The Company intends to use the
proceeds from the sale for working capital, to finance existing
operations and to finance a portion of the Company's 2000 development plans in
its Uinta Basin and Raton Basin properties.
Attached hereto as Exhibit 99.1 is the press release announcing the
execution of the Purchase Agreement and the consummation of the private
placement.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable
(c) Exhibits
10.1* Purchase and Sale Agreement between III Exploration Company and the
Company dated December 28, 1999.
10.2* Subscription Agreement between III Exploration Company and the Company
dated December 28, 1999.
99.1* Press release dated December 28, 1999 relating to the Purchase of
Certain Oil and Gas Producing Properties and Private Placement.
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*filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PETROGLYPH ENERGY, INC.
By: /s/ ROBERT C. MURDOCK
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Robert C. Murdock
President and Chief Executive Officer
Date: December 29, 1999
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.1* Purchase and Sale Agreement between III Exploration Company
and the Company dated December 28, 1999.
10.2* Subscription Agreement between III Exploration Company and the
Company dated December 28, 1999.
99.1* Press release dated December 28, 1999 relating to the Purchase
of Certain Oil and Gas Producing Properties and Private
Placement.
</TABLE>
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*filed herewith
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EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
between
III Exploration Company
and
Petroglyph Energy, Inc.
December 28, 1999
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I Definitions and References......................................................1
Section 1.1. Certain Defined Terms.................................................1
Section 1.2. References, Titles and Construction...................................2
ARTICLE II Property to be Sold and Purchased...............................................3
ARTICLE III Purchase Price..................................................................4
ARTICLE IV Representations and Warranties of Seller........................................4
Section 4.1. Organization and Existence............................................4
Section 4.2. Power and Authority...................................................4
Section 4.3. Valid and Binding Agreement...........................................4
Section 4.4. Non-Contravention.....................................................5
Section 4.5. Approvals.............................................................5
Section 4.6. Pending Litigation....................................................5
Section 4.7. Basic Documents.......................................................5
Section 4.8. Commitments, Abandonments or Proposals................................6
Section 4.9. Production Sales Contracts............................................6
Section 4.10. Area of Mutual Interest and Other Agreements; Tax Partnerships........6
Section 4.11. Payment of Expenses...................................................6
Section 4.12. Investment Intent.....................................................7
Section 4.13. Investor Sophistication...............................................7
ARTICLE V Representations and Warranties of Buyer.........................................7
Section 5.1. Organization and Existence............................................7
Section 5.2. Power and Authority...................................................7
Section 5.3. Valid and Binding Agreement...........................................8
Section 5.4. Non-Contravention.....................................................8
Section 5.5. Approvals.............................................................8
Section 5.6. Pending Litigation....................................................8
Section 5.7. Capitalization of the Company.........................................9
ARTICLE VI Certain Covenants of Seller Pending Closing.....................................9
Section 6.1. Access to Files.......................................................9
Section 6.2. Conduct of Operations.................................................9
Section 6.3. Restrictions on Certain Actions.......................................9
Section 6.4. Payment of Expenses..................................................10
ARTICLE VII Conditions Precedent to the Obligations of the Parties.........................10
Section 7.1. Conditions Precedent to the Obligations of Buyer.....................10
Section 7.2. Conditions Precedent to the Obligations of Seller....................11
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VIII Closing of Transaction.........................................................12
Section 8.1. The Closing..........................................................12
Section 8.2. Seller's Closing Obligations.........................................12
Section 8.3. Buyer's Closing Obligations..........................................12
Section 8.4. Delivery of Files....................................................12
ARTICLE IX Certain Accounting Adjustments.................................................13
Section 9.1. Adjustments..........................................................13
Section 9.2. Closing and Post-Closing Accounting Settlements......................13
ARTICLE X Indemnification................................................................14
Section 10.1. Indemnification Obligations..........................................14
Section 10.2. Notice of Claim......................................................14
ARTICLE XI Casualty Loss..................................................................14
ARTICLE XII Notices........................................................................15
ARTICLE XIII Commissions....................................................................16
ARTICLE XIV Miscellaneous Matters..........................................................16
Section 14.1. Survival of Provisions...............................................16
Section 14.2. Termination..........................................................16
Section 14.3. Further Assurances...................................................16
Section 14.4. Binding Effect; Successors and Assigns...............................17
Section 14.5. Imbalances...........................................................17
Section 14.6. Expenses.............................................................17
Section 14.7. Entire Agreement - Time of the Essence...............................17
Section 14.8. Public Statements....................................................17
Section 14.9. Injunctive Relief....................................................17
Section 14.10. Amendments..........................................................17
Section 14.11. Governing Law.......................................................17
Section 14.12. Counterparts........................................................17
</TABLE>
TABLE OF EXHIBITS AND SCHEDULES
Exhibit I Certificate of Designations of Series A Convertible Preferred
Stock
Exhibit II List of Wells
Exhibit III Ryder Scott Company - Petroleum Engineers Reserve Report
Exhibit IV Description of Leasehold, Working and Net Revenue Interests
Schedule 4.8 Commitments, etc.
Schedule 4.6 Litigation
Schedule 4.9 Production Sales Contracts
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") dated December 28,
1999 is made by and between III Exploration Company, an Idaho corporation
("Seller"), and Petroglyph Energy, Inc., a Delaware corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller desires to sell, assign and convey to Buyer, and Buyer
desires to purchase and accept, certain oil and gas properties and related
assets located in the States of Utah, Colorado and Wyoming;
WHEREAS, Seller and Buyer deem it in their mutual best interests to
execute and deliver this Agreement; and
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, Seller and Buyer do hereby
agree as follows:
ARTICLE I
DEFINITIONS AND REFERENCES
SECTION 1.1. CERTAIN DEFINED TERMS. When used in this Agreement, the
following terms shall have the respective meanings assigned to them in this
Section 1.1 or in the section, subsections or other subdivisions referred to
below:
"Agreement" shall have the meaning assigned to such term in the
Preamble.
"Basic Documents" shall have the meaning assigned to such term in
Section 4.7.
"Certificate of Designations" shall mean that certain Certificate of
Designations of Series A Convertible Preferred Stock of Buyer as attached hereto
as Exhibit I.
"Closing" and "Closing Date" shall have the meanings assigned to such
terms in Section 8.1.
"Code" shall mean the Internal Revenue Code, of 1986, as amended from
time to time, and any successor statute thereto.
"Commission" shall mean the Securities and Exchange Commission.
"Conveyance" shall have the meaning assigned to such term in Section
8.2(a).
"Effective Date" shall have the meaning assigned to such term in
Section 8.2(a).
"Oil and Gas Properties" shall have the meaning assigned to such term
in Article II.
"Properties" shall have the meaning assigned to such term in Article
II.
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"Property Exhibits" shall mean Exhibit II, Exhibit III and Exhibit IV
attached, or to be attached, hereto.
"Purchase Price" shall have the meaning assigned to such term in
Article III.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
all rules and regulations under such Act.
"Series A Preferred Stock" shall mean Buyer's Series A Convertible
Preferred Stock, par value $.01 per share, which such stock shall be governed by
the rights, terms and conditions set forth in the Certificate of Designations.
SECTION 1.2. REFERENCES, TITLES AND CONSTRUCTION.
(a) All references in this Agreement to articles, sections, subsections
and other subdivisions refer to corresponding articles, sections, subsections
and other subdivisions of this Agreement unless expressly provided otherwise.
(b) Titles appearing at the beginning of any of such subdivisions are
for convenience only and shall not constitute part of such subdivisions and
shall be disregarded in construing the language contained in such subdivisions.
(c) The words "this Agreement", "this instrument", "herein", "hereof",
"hereby", "hereunder" and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited.
(d) Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires. Pronouns in masculine,
feminine and neuter genders shall be construed to include any other gender.
(e) Unless the context otherwise requires or unless otherwise provided
herein, the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments or restatements of such agreement,
instrument or document, provided that nothing contained in this subsection shall
be construed to authorize such renewal, extension, modification, amendment or
restatement.
(f) Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.
(g) The word "or" is not intended to be exclusive and the word
"includes" and its derivatives means "includes, but is not limited to" and
corresponding derivative expressions.
(h) No consideration shall be given to the fact or presumption that one
party had a greater or lesser hand in drafting this Agreement.
(i) All references herein to "$" or "dollars" shall refer to U.S.
Dollars.
(j) The Exhibits and Schedules listed on page (iii) are attached hereto
or, in the case of Exhibit IV, shall be delivered no later than 10 days prior to
Closing. Each such Exhibit and
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Schedule is incorporated herein by reference for all purposes and references to
this Agreement shall also include such Exhibit unless the context in which used
shall otherwise require.
ARTICLE II
PROPERTY TO BE SOLD AND PURCHASED
Seller agrees to sell and Buyer agrees to purchase, for the
consideration hereinafter set forth, and subject to the terms and provisions
herein contained, the following described properties, rights and interests:
(a) The properties described in the Property Exhibits
attached, or to be attached, hereto and made a part hereof for all
purposes;
(b) Without limitation of the foregoing, all other right,
title and interest (of whatever kind or character, whether legal or
equitable, and whether vested or contingent) of Seller in and to the
oil, gas and other minerals in and under or that may be produced from
the lands and wells described in the Property Exhibits hereto
(including interests in oil, gas and/or mineral leases covering such
lands and wells, overriding royalties, production payments and net
profits interests in such lands, such leases and wells, and fee mineral
interests, fee royalty interests and other interests in such oil, gas
and other minerals), whether such lands be described in a description
set forth in such exhibits or be described in such exhibits by
reference to another instrument (and without limitation by any depth
limitations that may be set forth in such exhibits or in any such
instrument so referred to for description), even though Seller's
interest in such oil, gas and other minerals may be incorrectly
described in, or omitted from, such exhibits;
(c) All rights, titles and interests of Seller in and to, or
otherwise derived from, all presently existing and valid oil, gas
and/or mineral unitization, pooling and/or communitization agreements,
declarations and/or orders which are set forth on the Property Exhibits
and in and to the properties covered and the units created thereby
(including all units formed under orders, rules, regulations or other
official acts of any federal, state or other authority having
jurisdiction, voluntary unitization agreements, designations and/or
declarations) relating to the properties described in paragraphs (a)
and (b) above;
(d) All rights, titles and interests of Seller in and to all
presently existing and valid production sales (and sales related)
contracts, operating agreements and other agreements and contracts
which are set forth on the Property Exhibits and which relate to any of
the properties described in paragraphs (a), (b) and (c) above, or which
relate to the exploration, development, operation or maintenance
thereof or the treatment, storage, transportation or marketing of
production therefrom (or allocated thereto);
(e) All rights, titles and interests of Seller in and to all
materials, supplies, machinery, equipment, improvements and other
personal property and fixtures (including but not by way of limitation,
all wells, wellhead equipment, pumping units, flowlines, tanks,
buildings, injection facilities, saltwater disposal facilities,
compression facilities, gathering systems and other equipment), and all
easements, rights-of-way, surface leases and other surface rights, all
permits and licenses and all other appurtenances being used or held for
use in connection with, or otherwise related to, the exploration,
development, operation or
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maintenance of any of the properties described in paragraphs (a), (b)
and (c) above, or the treatment, storage, transportation or marketing
of production therefrom (or allocated thereto); and
(f) All of Seller's lease files, abstracts and title opinions,
production records, well files, accounting records (but not including
general financial accounting records), seismic records and surveys,
gravity maps, electric logs, geological or geophysical data and
records, and other files, documents and records of every kind and
description which relate to the properties described above.
The properties and interests specified in the foregoing paragraphs (a), (b) and
(c) are herein sometimes collectively called the "Oil and Gas Properties," and
the properties and interests specified in the foregoing paragraphs (a), (b),
(c), (d), (e) and (f) are herein sometimes collectively called the "Properties".
ARTICLE III
PURCHASE PRICE
In consideration of the sale of the Properties by Seller to Buyer,
Buyer shall issue and deliver to Seller at Closing shares of Series A Preferred
Stock having an aggregate Preference Amount (as defined in the Certificate of
Designations) equal to $2,500,000 (the "Purchase Price").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents to Buyer, as of the date of this Agreement and as of
the date of the Closing, that:
SECTION 4.1. ORGANIZATION AND EXISTENCE. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Idaho. The Seller is duly qualified as a foreign corporation to do business, and
is in good standing, in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except in such jurisdictions where the failure to be
duly qualified is not and would not be, either individually or in the aggregate,
reasonably expected to have a material adverse effect on the Seller.
SECTION 4.2. POWER AND AUTHORITY. Seller has the corporate power and
authority to execute, deliver and perform this Agreement and each other
agreement, instrument or document executed or to be executed by Seller in
connection with the transactions contemplated hereby to which it is a party and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by Seller of this Agreement and each other agreement,
instrument or document executed or to be executed by Seller in connection with
the transactions contemplated hereby to which it is a party, and the
consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate action of Seller.
SECTION 4.3. VALID AND BINDING AGREEMENT. This Agreement has been duly
executed and delivered by Seller and constitutes, and each other agreement,
instrument or document executed or
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to be executed by Seller in connection with the transactions contemplated hereby
to which it is a party has been, or when executed will be, duly executed and
delivered by Seller and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of Seller, enforceable
against it in accordance with their respective terms, except that such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
generally and (b) equitable principles which may limit the availability of
certain equitable remedies (such as specific performance) in certain instances.
SECTION 4.4. NON-CONTRAVENTION. Other than requirements (if any) that
there be obtained consents to assignment (or waivers of preferential rights to
purchase) from third parties, and except for approvals required to be obtained
from governmental entities who are lessors under leases forming a part of the
Oil and Gas Properties (or who administer such leases on behalf of such lessors)
which are customarily obtained post-closing and which Seller has no reason to
believe cannot be obtained, neither the execution, delivery and performance by
Seller of this Agreement and each other agreement, instrument or document
executed or to be executed by Seller in connection with the transactions
contemplated hereby to which it is a party nor the consummation by it of the
transactions contemplated hereby and thereby do and will (a) conflict with or
result in a violation of any provision of the charter, bylaws or other governing
instruments of Seller, (b) conflict with or result in a violation of any
provision of, or constitute (with or without the giving of notice or the passage
of time or both) a default under, or give rise (with or without the giving of
notice or the passage of time or both) to any right of termination,
cancellation, or acceleration under, any bond, debenture, note, mortgage or
indenture, or any material lease, contract, agreement or other instrument or
obligation to which Seller is a party or by which Seller or any of its
properties may be bound, (c) result in the creation or imposition of any lien or
other encumbrance upon the properties of Seller, or (d) violate any applicable
law, rule or regulation binding upon Seller or the Properties.
SECTION 4.5. APPROVALS. Other than requirements (if any) that there be
obtained consents to assignment (or waivers of preferential rights to purchase)
from third parties, and except for approvals required to be obtained from
governmental entities who are lessors under leases forming a part of the Oil and
Gas Properties (or who administer such leases on behalf of such lessors) which
are customarily obtained post-closing and which Seller has no reason to believe
cannot be obtained, no consent, approval, order, or authorization of, or
declaration, filing, or registration with, any court or governmental agency or
of any third party is required to be obtained or made by Seller in connection
with the execution, delivery or performance by Seller of this Agreement, each
other agreement, instrument or document executed or to be executed by Seller in
connection with the transactions contemplated hereby to which it is a party or
the consummation by it of the transactions contemplated hereby and thereby.
SECTION 4.6. PENDING LITIGATION. Except as set forth on Schedule 4.6,
there are no pending suits, actions or other proceedings in which Seller is a
party which relate to the Properties (including any actions challenging or
pertaining to Seller's title to any of the Properties), or affecting the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
SECTION 4.7. BASIC DOCUMENTS. The oil, gas and/or mineral leases, and
related joint venture agreements and operating agreements, Seller's interests in
which comprise parts of the Oil and Gas Properties, and all other material
contracts and agreements, licenses, permits and easements, rights-of-way and
other rights-of-surface use comprising any part of or otherwise relating to the
Properties (such leases and such material contracts, agreements, licenses,
permits, easements, rights-of-way and
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other rights-of-surface use being herein called the "Basic Documents"), are in
full force and effect and constitute valid and binding obligations of the
parties thereto. All contracts and agreements which are Basic Documents are
disclosed on the Property Exhibits in connection with the descriptions of the
Oil and Gas Properties to which they relate. To Seller's knowledge, Seller is
not in breach or default (and no situation exists which with the passing of time
or giving of notice would create a breach or default) of its obligations under
the Basic Documents, and (to the best of Seller's knowledge) no breach or
default by any third party (or situation which with the passage of time or
giving of notice would create a breach or default) exists, to the extent such
breach or default (whether by Seller or such a third party) could reasonably be
expected to materially adversely affect the ownership, operation, value or use
of any Oil and Gas Property after the Effective Date. To Seller's knowledge, all
payments (including all delay rentals, royalties, shut-in royalties and valid
calls for payment or prepayment under operating agreements) owing under Basic
Documents have been and are being made (timely, and before the same became
delinquent) by Seller in all material respects (and, where the non-payment of
same by a third party could materially adversely affect the ownership,
operation, value or use of an Oil and Gas Property after the Effective Date,
have been and are being made, to Seller's knowledge, by such third parties). For
the purposes of the representations contained in this Section (and without
limitation of such representations), the non-payment of an amount, or
non-performance of an obligation, where such non-payment, or non-performance,
could result in the forfeiture or termination of rights of Seller under a Basic
Document, shall be considered material.
SECTION 4.8. COMMITMENTS, ABANDONMENTS OR PROPOSALS. Except as set
forth on Schedule 4.8, (a) Seller has incurred no expenses, and has made no
commitments to make expenditures (including Seller has not entered into any
agreements that would obligate Buyer to make expenditures), in connection with
(and no other obligations or liabilities have been incurred which would
adversely affect) the ownership or operation of the Properties after the
Effective Date, other than routine expenses incurred in the normal operation of
existing wells on the Oil and Gas Properties.
SECTION 4.9. PRODUCTION SALES CONTRACTS. There exist no agreements or
arrangements for the sale of production from the Oil and Gas Properties
(including calls on, or other rights to purchase, production, whether or not the
same are currently being exercised) other than (a) production sales contracts
(in this Section, the "Scheduled Production Sales Contracts") disclosed in
Schedule 4.9 or (b) agreements or arrangements which are cancelable on 90 days
notice or less without penalty or detriment. Seller is presently receiving a
price for all production from (or attributable to) each Oil and Gas Property
covered by a Scheduled Production Sales Contract as computed in accordance with
the terms of such contract, and is not having deliveries of gas from any Oil and
Gas Property subject to a Scheduled Production Sale Contract curtailed
substantially below such property's delivery capacity.
SECTION 4.10. AREA OF MUTUAL INTEREST AND OTHER AGREEMENTS; TAX
PARTNERSHIPS. No Oil and Gas Property is subject to (or has related to it) any
area of mutual interest agreements. No Oil and Gas Property is subject to (or
has related to it) any farm-out or farm-in agreement under which any party
thereto is entitled to receive assignments not yet made, or could earn
additional assignments after the Effective Date. No Oil and Gas Property is
subject to (or has related to it) any tax partnership.
SECTION 4.11. PAYMENT OF EXPENSES. All expenses (including all bills
for labor, materials and supplies used or furnished for use in connection with
the Properties, and all severance,
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production, ad valorem, windfall profit and other similar taxes) relating to the
ownership or operation of the Properties, have been, and are being, paid
(timely, and before the same become delinquent) by Seller, except such expenses
and taxes as are disputed in good faith by Seller and for which an adequate
accounting reserve has been established by Seller.
SECTION 4.12. INVESTMENT INTENT. Seller is acquiring the shares of
Series A Preferred Stock for its own account for investment and not with a view
to, or for sale or other disposition in connection with, any distribution of all
or any part thereof, or of any securities into which the Series A Preferred is
convertible, except in an offering covered by a registration statement filed
with the Commission under the Securities Act or pursuant to an applicable
exemption under the Securities Act.
SECTION 4.13. INVESTOR SOPHISTICATION. Seller acknowledges that the
shares of Series A Preferred Stock to be received by Seller as consideration
under this Agreement have not been registered under the Securities Act or any
state securities laws and are being issued in reliance upon one or more
exemptions contained in such acts (including the exemption afforded by Section
4(2) of the Securities Act) and that the Buyer's reliance upon such exemptions
is based in part upon the representations and agreements made by Seller herein.
Seller acknowledges that it has received or has been given access to all
information that it considers necessary or advisable to it to make a decision
concerning the purchase of the Series A Preferred Stock. Seller represents and
warrants that it has such knowledge and experience in financial and business
matters, that it is capable of evaluating the merits and risks of investing in
the Series A Preferred Stock and is able to bear the economic risk of investing
in such securities. Seller represents and warrants that it is an "Accredited
Investor" as defined in Rule 501(a) of Regulation D under the Securities Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents to Seller and Intermountain, as of the date of this Agreement
and as of the date of the Closing, that:
SECTION 5.1. ORGANIZATION AND EXISTENCE. Buyer is a corporation duly
organized, legally existing and in good standing under the laws of the State of
Delaware. Buyer is duly qualified as a foreign corporation to do business, and
is in good standing, in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except in such jurisdictions where the failure to be
duly qualified is not and would not be, either individually or in the aggregate,
reasonably expected to have a material adverse effect on Buyer.
SECTION 5.2. POWER AND AUTHORITY. Buyer has full corporate power and
authority to execute, deliver and perform this Agreement and each other
agreement, instrument or document executed or to be executed by Buyer in
connection with the transactions contemplated hereby to which it is a party and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by Buyer of this Agreement and each other agreement,
instrument or document executed or to be executed by Buyer in connection with
the transactions contemplated hereby to which it is a party, and the
consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate action of Buyer.
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SECTION 5.3. VALID AND BINDING AGREEMENT. This Agreement has been duly
executed and delivered by Buyer and constitutes, and each other agreement,
instrument or document executed or to be executed by Buyer in connection with
the transactions contemplated hereby to which it is a party has been, or when
executed will be, duly executed and delivered by Buyer and constitutes, or when
executed and delivered will constitute, a valid and legally binding obligation
of Buyer, enforceable against it in accordance with their respective terms,
except that such enforceability may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally and (b) equitable principles which may limit the availability
of certain equitable remedies (such as specific performance) in certain
instances.
SECTION 5.4. NON-CONTRAVENTION. The execution, delivery and performance
by Buyer of this Agreement and each other agreement, instrument or document
executed or to be executed by Buyer in connection with the transactions
contemplated hereby to which it is a party and the consummation by it of the
transactions contemplated hereby and thereby do not and will not (a) conflict
with or result in a violation of any provision of the charter, bylaws or other
governing instruments of Buyer, (b) conflict with or result in a violation of
any provision of, or constitute (with or without the giving of notice or the
passage of time or both) a default under, or give rise (with or without the
giving of notice or the passage of time or both) to any right of termination,
cancellation, or acceleration under, any bond, debenture, note, mortgage,
indenture, lease, contract, agreement, or other instrument or obligation to
which Buyer is a party or by which Buyer or any of its properties may be bound,
(c) result in the creation or imposition of any lien or other encumbrance upon
the properties of Buyer, or (d) violate any applicable law, rule or regulation
binding upon Buyer.
SECTION 5.5. APPROVALS. Except for stockholder approval as contemplated
by Section 7.1(h), no consent, approval, order or authorization of, or
declaration, filing or registration with, any court or governmental agency or of
any third party is required to be obtained or made by Buyer in connection with
the execution, delivery or performance by Buyer of this Agreement and each other
agreement, instrument or document executed or to be executed by Buyer in
connection with the transactions contemplated hereby to which it is a party or
the consummation by it of the transactions contemplated hereby and thereby.
SECTION 5.6. PENDING LITIGATION. There are no pending suits, actions or
other proceedings in which Buyer is a party which affect the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
SECTION 5.7. CAPITALIZATION OF THE COMPANY.
(a) The authorized capital stock of Buyer consists of (i) 25 million
shares of Common Stock, par value $.01 per share (the "Common Stock"), and (ii)
five million shares of preferred stock, par value $.01 per share. As of December
27, 1999, there were issued and outstanding 5,458,333 shares of Common Stock and
no shares of preferred stock. All outstanding shares of capital stock of Buyer
have been validly issued and are fully paid and nonassessable, and no shares of
capital stock of Buyer are subject to, nor have any been issued in violation of,
preemptive or similar rights. All issuances, sales and repurchases by Buyer of
shares of its capital stock have been effected in compliance with all applicable
laws, including without limitation applicable federal and state securities laws.
The Series A Preferred Stock will be, when and if issued, validly authorized and
issued, fully paid and nonassessable, and free of all encumbrances and
restrictions, except restrictions on transfer imposed by applicable securities
laws, or as created by Seller. The relative rights, preferences, restrictions
and other provisions relating to the Series A Preferred Stock are as
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set forth in Certificate of Designations. Buyer has authorized and reserved for
issuance upon conversion or redemption of the Series A Preferred Stock, shares
of Common Stock of Buyer sufficient to effect such conversion or redemption, as
the case may be. The shares of Common Stock to be issued upon conversion or
redemption, as the case may be, of the Series A Preferred Stock will be, when
and if issued, validly authorized and issued, fully paid and nonassessable, and
free of all encumbrances and restrictions, except restrictions on transfer
imposed by applicable securities laws, or as created by the holder of such
shares.
ARTICLE VI
CERTAIN COVENANTS OF SELLER PENDING CLOSING
From the date hereof until Closing,
SECTION 6.1. ACCESS TO FILES. Seller will give, or cause to be given,
to Buyer, and its employees, attorneys, accountants and other representatives,
access at all reasonable times to the Properties and to any contract files,
lease or other title files, production files, well files and other files of
Seller pertaining to the ownership and/or operation of the Properties or
otherwise necessary to prepare, review and verify the information to be included
in Exhibit IV, and Seller will use its best efforts to arrange for Buyer, and
its employees, attorneys, accountants and other representatives, to have access
to any such files in the office of Seller or Seller's representative. Seller
shall not be obligated to provide Buyer with access to any records or data which
Seller cannot provide to Buyer without, in its reasonable opinion, breaching
confidentiality agreements with other parties. If Seller fails to provide any
records or data because of any such confidentiality agreements, Seller shall
identify, in writing, the information not provided to the extent it may do so
without violating such agreement and identify the person or persons whose
consent is necessary in order for Seller to disclose such records and data. All
information obtained by Buyer shall be maintained in strict confidence, for use
solely in connection with its evaluation of the Properties, and shall not be
disclosed to any other party without Seller's prior written consent.
SECTION 6.2. CONDUCT OF OPERATIONS. Seller will (a) act in conformity
with all oil, gas and/or mineral leases, and in conformity (in all material
respects) with all Basic Documents other than such leases, and (b) fulfill all
obligations (including without limitation all obligations to make payments under
leases or other Basic Documents) under such leases, and (in all material
respects) under such other Basic Documents and (in all material respects) under
such laws, rules, regulations and orders (without limitation of the foregoing,
the failure to perform an obligation, when such failure could result in
forfeiture or termination of rights of Seller under a Basic Document, shall be
considered material).
SECTION 6.3. RESTRICTIONS ON CERTAIN ACTIONS. Except as contemplated by
Section 4.8, Seller will not, without Buyer's prior consent:
(a) expend any funds, or make any commitments to expend funds
(including entering into new agreements which would obligate Seller to expend
funds), or otherwise incur any other obligations or liabilities, in connection
with the ownership or operation of the Properties after the Effective Date,
other than routine expenses incurred in the normal operation of the existing
wells on the Oil and Gas Properties, except in the event of an emergency
requiring immediate action to protect life or preserve the Properties;
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(b) except where necessary to prevent the termination of an oil and gas
lease or other material agreement governing Seller's interest in the Properties,
propose the drilling of any additional wells, or propose the deepening, plugging
back or reworking of any existing wells, or propose the conducting of any other
operations which require consent under the applicable operating agreement, or
propose the conducting of any other operations other than the normal operation
of the existing wells on the Oil and Gas Properties, or propose the abandonment
of any wells on the Oil and Gas Properties (and Seller agrees that it will
advise Buyer of any such proposals made by third parties and will respond to
each such proposal made by a third party in the manner requested by Buyer);
(c) sell, transfer or abandon any portion of the Properties other than
oil, gas and other minerals in the ordinary course of business and items of
materials, supplies, machinery, equipment, improvements or other personal
property or fixtures forming a part of the Properties (and then only if the same
is replaced with an item of substantially equal suitability, free of liens and
security interests, which replacement item will then, for the purposes of this
Agreement, become part of the Properties); or
(d) release (or permit to terminate), or modify or reduce its rights
under, any oil, gas and/or mineral lease forming a part of the Oil and Gas
Properties, or any other Basic Document, or enter into any new agreements which
would be Basic Documents, or modify any existing production sales contracts or
enter into any new production sales contracts, except contracts terminable by
Seller with notice of sixty (60) days or less.
SECTION 6.4. PAYMENT OF EXPENSES. Seller will cause all expenses
(including all bills for labor, materials and supplies used or furnished for use
in connection with the Property and all severance, production, windfall profit
and similar taxes) relating to the ownership or operation of the Properties
prior to the date of Closing to be promptly paid and discharged, except for
expenses disputed in good faith.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES
SECTION 7.1. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER. The
obligations of Buyer under this Agreement are subject to each of the following
conditions being met:
(a) Each and every representation of Seller under this Agreement shall
be true and accurate in all material respects as of the date when made and shall
be deemed to have been made again at and as of the time of Closing and shall at
and as of such time of Closing be true and accurate in all respects except as to
changes specifically contemplated by this Agreement or consented to by Buyer.
(b) Seller shall have performed and complied in all material respects
with (or compliance therewith shall have been waived by Buyer) each and every
covenant, agreement and condition required by this Agreement to be performed or
complied with by Seller prior to or at the Closing.
(c) Seller shall have delivered a certificate executed by the president
of Seller dated the Closing Date, representing and certifying in such detail as
Buyer may reasonably request that the conditions set forth in subsections (a)
and (b) above have been fulfilled.
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(d) No suit, action or other proceedings shall, on the date of Closing,
be pending or threatened before any court or governmental agency seeking to
restrain, prohibit or obtain damages or other relief in connection with the
consummation of the transactions contemplated by this Agreement.
(e) Seller shall have delivered Exhibit IV to Buyer.
(f) Buyer shall have received Exhibit IV and completed its due
diligence concerning the Properties and the results of such due diligence shall
be satisfactory to Buyer in its sole opinion.
(g) The transactions contemplated by this Agreement shall have been
approved by the Board of Directors of Buyer.
(h) The issuance of the Series A Preferred Stock pursuant to this
Agreement shall have been approved by the vote of not less than a majority of
the Common Stock of Buyer, as represented in person or by proxy at a special
meeting of Buyer called for such purpose.
(i) Without limiting the foregoing, Buyer shall have received any other
approvals of its Board of Directors or stockholders of the transactions
contemplated hereby as may be required under Delaware General Corporation Law or
the rules and regulations of The Nasdaq Stock Market.
(j) The transaction shall have an effective date of November 1, 1999.
If any such condition on the obligations of Buyer under this Agreement is not
met as of the Closing Date, or in the event the Closing does not occur on or
before April 30, 2000, and (in either case) Buyer is not in breach of its
obligations hereunder, this Agreement may, at the option of Buyer, be
terminated, in which case the parties shall have no further obligations to one
another hereunder (other than the obligations under Article XIII and Section
14.6, which will survive such termination).
SECTION 7.2. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The
obligations of Seller under this Agreement are subject to each of the following
conditions being met:
(a) Each and every representation of Buyer under this Agreement shall
be true and accurate in all material respects as of the date when made and shall
be deemed to have been made again at and as of the time of Closing and shall at
and as of such time of Closing be true and accurate in all respects except as to
changes specifically contemplated by this Agreement or consented to by Seller.
(b) Buyer shall have performed and complied in all material respects
with (or compliance therewith shall have been waived by Seller) each and every
covenant, agreement and condition required by this Agreement to be performed or
complied with by Buyer prior to or at the Closing.
(c) No suit, action or other proceedings shall, on the date of Closing,
be pending or threatened before any court or governmental agency seeking to
restrain, prohibit, or obtain damages or other relief in connection with the
consummation of the transactions contemplated by this Agreement.
(d) The transactions contemplated by this Agreement shall have been
approved by the Board of Directors of Seller.
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If any such condition on the obligations of Seller under this Agreement is not
met as of the Closing Date, or in the event the Closing does not occur on or
before April 30, 2000, and (in either case) Seller is not in breach of its
obligations hereunder in the absence of Buyer also being in breach of its
obligations hereunder, this Agreement may, at the option of Seller, be
terminated, in which case the parties shall have no further obligations to one
another hereunder (other than the obligations under Article XIII and Section
14.6, which will survive such termination).
ARTICLE VIII
CLOSING OF TRANSACTION
SECTION 8.1. THE CLOSING. The closing (herein called the "Closing") of
the transaction contemplated hereby shall take place within five business days
following the satisfaction of the condition precedent set forth in Section
7.1(h) above or such other date and time as the Buyer and Seller may mutually
agree upon (such date and time being herein called the "Closing Date").
SECTION 8.2. SELLER'S CLOSING OBLIGATIONS. At the Closing, Seller
shall:
(a) execute, acknowledge and deliver to Buyer a conveyance of
the Properties (the "Conveyance"), in the form attached hereto as
Exhibit 8.2(a), effective as to runs of oil and deliveries of gas as of
9:00 o'clock a.m., Central Standard Time on November 1, 1999 (the
"Effective Date");
(b) deliver a copy of the resolutions adopted by the board of
directors of Seller authorizing Seller to execute and deliver this
Agreement and all related documents and instruments and to perform its
obligations hereunder and thereunder, which copy shall be certified by
the secretary or assistant secretary of Seller;
(c) to the extent requested by Buyer, execute and deliver to
Buyer (i) letters in lieu of transfer orders (or similar
documentation), in form acceptable to both parties, and, (ii) an
affidavit or other certification (as permitted by such code) that
Seller is not a "foreign person" within the meaning of Section 1445 (or
similar provisions) of the Internal Revenue Code of 1986 as amended
(i.e., Seller is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate as those terms are defined
in such code and regulations promulgated thereunder).
SECTION 8.3. BUYER'S CLOSING OBLIGATIONS. At the Closing, Buyer shall:
(a) execute, acknowledge and deliver to Buyer a counterpart of
the Conveyance; and
(b) deliver to the Seller a certificate or certificates
representing fully, paid and non-assessable shares of the Series A
Preferred Stock in an aggregate Preference Amount equal to the Purchase
Price.
SECTION 8.4. DELIVERY OF FILES. No later than five business days after
the Closing, Seller shall deliver or cause to be delivered to Buyer such of
Seller's contract files, lease and other title files, production files, well
files and other files and operating financial statements pertaining to the
ownership and/or operation of the Properties as Buyer may request.
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ARTICLE IX
CERTAIN ACCOUNTING ADJUSTMENTS.
SECTION 9.1. ADJUSTMENTS. Appropriate adjustments shall be made between
Buyer and Seller so that (a) all expenses (including all drilling costs, all
capital expenditures, and all overhead charges under applicable operating
agreements, and all other overhead charges actually charged by third parties)
which are incurred in the operation of the Properties after the Effective Date
will be borne by Buyer, and all proceeds (net of applicable production,
severance, and similar taxes) from the sale of oil, gas and/or other minerals
produced from the Oil and Gas Properties after the Effective Date will be
received by Buyer, and (b) all expenses which are incurred in the operation of
the Properties before the Effective Date will be borne by Seller and all
proceeds (net of applicable production, severance, and similar taxes) from the
sale of oil, gas and/or other minerals produced therefrom before the Effective
Date will be received by Seller. It is agreed that, in making such adjustments:
(i) oil which was produced from the Oil and Gas Properties and which was, on the
Effective Date, stored in tanks located on the Oil and Gas Properties (or
located elsewhere but used to store oil produced from the Oil and Gas Properties
prior to delivery to oil purchasers) and above pipeline connections shall be
deemed to have been produced before the Effective Date (it is recognized that
such tanks were not gauged on the Effective Date for the purposes of this
Agreement and that determination of the volume of such oil in storage will be
based on the best available data, which may include estimates), and (ii) ad
valorem taxes assessed with respect to a period which the Effective Date splits
shall be prorated based on the number of days in such period which fall on each
side of the Effective Date (with the day on which the Effective Date falls being
counted in the period after the Effective Date), and (iii) no consideration
shall be given to the local, state or federal income tax liabilities of any
party.
SECTION 9.2. CLOSING AND POST-CLOSING ACCOUNTING SETTLEMENTS.
(a) At or before Closing, the parties shall determine, based upon the
best information reasonably available to them, the amount of the adjustments
provided for in Section 9.1. If the amount of adjustments so determined which
would result in a credit to Buyer exceed the amount of adjustments so determined
which would result in a credit to Seller, Buyer shall receive a credit, for the
amount of such excess, to be paid to Buyer in cash at Closing, and, if the
converse is true, Buyer shall pay at Closing to Seller, through the issuance of
Series A Preferred Stock in addition to amounts otherwise then owed (valued at
the Preference Amount), the amount of such excess.
(b) On or before 90 days after Closing, Buyer and Seller shall review
any additional information which may then be available pertaining to the
adjustments provided for in Section 9.1, shall determine if any additional
adjustments (whether the same be made to account for expenses or revenues not
considered in making the adjustments made at Closing, or to correct errors made
in such adjustments) should be made beyond those made at Closing, and shall make
any such adjustments by appropriate payments from Seller to Buyer or from Buyer
to Seller. Following such additional adjustments, no further adjustments shall
be made under this Article IX.
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ARTICLE X
INDEMNIFICATION
SECTION 10.1. INDEMNIFICATION OBLIGATIONS.
(a) Seller shall, on the date of Closing, agree (and, upon delivery to
Buyer of the Conveyance, shall be deemed to have agreed), subject to the
limitations and procedures contained in this Article X and in Section 14.1,
following the Closing, to indemnify and hold Buyer harmless from and against any
and all claims, obligations, actions, liabilities, damages or expenses
(collectively, "Buyer's Losses") (a) resulting from any misrepresentation or
breach of any warranty, covenant or agreement of Seller contained in this
Agreement or any certificate delivered by Seller at the Closing, or (b) arising
out of or relating to the ownership or operation of the Properties prior to the
Closing Date.
(b) Buyer shall, on the date of Closing, agree (and, upon delivery to
Buyer of the Conveyance, shall be deemed to have agreed), subject to the
limitations and procedures contained in this Article X and in Section 14.1,
following the Closing, to indemnify and hold Seller harmless from and against
any and all claims, obligations, actions, liabilities, damages, costs or
expenses, (collectively, "Seller's Losses") (a) resulting from any
misrepresentation or breach of any warranty, covenant or agreement of Buyer
contained in this Agreement or any certificate delivered by Buyer at the
Closing, or (b) arising out of or relating to the ownership or operation of the
Properties after the Closing Date.
(c) Nothing in subsections (a) and (b) above shall be construed as
overriding the adjustment procedure provided for in Article IX.
Section 10.2. Notice of Claim. If indemnification pursuant to Section
10.1(a) or 10.1(b) is sought, the party seeking indemnification (the
"Indemnitee") shall give written notice to the indemnifying party of an event
giving rise to the obligation to indemnify, describing in reasonable detail the
factual basis for such claim, and shall allow the indemnifying party to assume
and conduct the defense of the claim or action with counsel reasonably
satisfactory to the Indemnitee, and cooperate with the indemnifying party in the
defense thereof; provided, however, that the omission to give such notice to the
indemnifying party shall not relieve the indemnifying party from any liability
which it may have to the Indemnitee, except to the extent that the indemnifying
party is prejudiced by the failure to give such notice. The Indemnitee shall
have the right to employ separate counsel to represent the Indemnitee if the
Indemnitee is advised by counsel that an actual conflict of interest makes it
advisable for the Indemnitee to be represented by separate counsel and the
reasonable expenses and fees of such separate counsel shall be paid by the
indemnifying party.
ARTICLE XI
CASUALTY LOSS
In the event of damage by fire or other casualty to the Properties
after the Effective Date and prior to the Closing, then this Agreement shall
remain in full force and effect, and (unless Buyer and Seller shall otherwise
agree) in such event:
(a) as to each such Property so damaged which is an Oil and Gas
Property, then, at Buyer's election, either (i) Buyer and Seller shall, with
respect to each such Oil and Gas Property so damaged, attempt to agree upon an
appropriate adjustment to the Purchase Price to account for such damage, or (ii)
the Purchase Price will not be adjusted, and if Seller should be entitled to
make any claims under any insurance policy with respect to such damage, Seller
shall, at Buyer's election, either collect (and when collected pay over to
Buyer), or assign to Buyer, such claims, and
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(b) as to each such Property which is other than an Oil and Gas
Property, Seller shall, at Buyer's election, either collect (and when collected
pay over to Buyer), or assign to Buyer, any and all insurance claims relating to
such loss, and Buyer shall take title to the Property affected by such loss
without reduction of the Purchase Price.
ARTICLE XII
NOTICES
All notices and other communications required under this Agreement
shall (unless otherwise specifically provided herein) be in writing and be
delivered personally, by recognized commercial courier or delivery service
(which provides a receipt), by telecopier (with receipt acknowledged), or by
registered or certified mail (postage prepaid), at the following addresses:
If to Seller:
III Exploration Company
555 S. Cole Road
Boise, ID 83707
Attention: Mr. William C. Glynn
Fax No.: 208-377-6097
With a copy to: Moffatt, Thomas, Barrett, Rock & Fields
101 S. Capitol Blvd., 10th Floor
P.O. Box 829
Boise, Idaho 83701-0829
Attention: Mr. Michael E. Thomas
Fax No.: 208-385-5384
If to Buyer: Petroglyph Energy, Inc.
1302 North Grand
Hutchinson, Kansas 67501
Attention: Mr. Robert C. Murdock
Fax No.: 316-665-0687
With a copy to: Thompson & Knight L.L.P.
1700 Pacific Avenue, Suite 3300
Dallas, TX 75201
Attention: Mr. Craig N. Adams
Fax No.: 214-969-1751
and shall be considered delivered on the date of receipt. Either Buyer or Seller
may specify as its proper address any other post office address within the
continental limits of the United States by giving notice to the other party, in
the manner provided in this Article, at least ten (10) days prior to the
effective date of such change of address.
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ARTICLE XIII
COMMISSIONS
(a) Seller agrees to indemnify and hold harmless Buyer from and against
any and all claims, obligations, actions, liabilities, losses, damages, costs or
expenses (including court costs and attorneys fees) of any kind or character
arising out of or resulting from any agreement, arrangement or understanding
alleged to have been made by, or on behalf of, Seller with any broker or finder
in connection with this Agreement or the transaction contemplated hereby.
(b) Buyer agrees to indemnify and hold harmless Seller from and against
any and all claims, obligations, actions, liabilities, losses, damages, costs or
expenses (including court costs and attorneys fees) of any kind or character
arising out of or resulting from any agreement, arrangement or understanding
alleged to have been made by, or on behalf of, Buyer with any broker or finder
in connection with this Agreement or the transaction contemplated hereby.
ARTICLE XIV
MISCELLANEOUS MATTERS
SECTION 14.1. SURVIVAL OF PROVISIONS. All representations and
warranties of Seller or Buyer contained in this Agreement, any Schedule or in
any certificate delivered at the Closing shall survive the Closing for a period
of two years (the "Indemnification Period"). Any claim for indemnification for a
breach of representation or warranty of either party must be made prior to the
expiration of the Indemnification Period. Notwithstanding the foregoing, the
obligation of each party hereto to indemnify any other party hereto shall
continue after the expiration of the Indemnification Period with respect to any
matter of which the party seeking indemnity hereunder shall have given the other
party written notice as provided herein prior to the expiration of the
Indemnification Period.
SECTION 14.2. TERMINATION. This Agreement and the transactions
contemplated hereby may be terminated and abandoned at any time prior to the
Closing (i) by mutual written agreement of the parties, (ii) by Buyer or Seller
upon written notice to the other if the Closing shall not have taken place by
April 30, 2000, (iii) by Buyer at its sole option in the event of a material
casualty loss with respect to the Properties as described in Article XI as to
which Buyer and Seller are unable to agree to a satisfactory resolution as
described in such article, or (iv) by either Buyer or Seller if (A) any domestic
or international event or act or occurrence has materially disrupted the public
financial markets in the United States; or (B) a banking moratorium has been
declared by a state or federal authority; or (C) a moratorium in foreign
exchange trading by major international banks or persons has been declared.
Except for any breach occurring prior to termination, upon the termination of
this Agreement pursuant to this section, this Agreement shall become null and
void and none of the parties hereto or any of their respective shareholders,
directors, officers, employees, agents, attorneys or consultants shall have any
liability or obligation hereunder or with respect hereto.
SECTION 14.3. FURTHER ASSURANCES. After the Closing, Seller shall
execute and deliver, and shall otherwise cause to be executed and delivered,
from time to time, such further instruments, notices, division orders, transfer
orders and other documents, and do such other and further acts and things, as
may be reasonably necessary to more fully and effectively grant, convey and
assign the Properties to Buyer.
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SECTION 14.4. BINDING EFFECT; SUCCESSORS AND ASSIGNS. The Agreement
shall be binding on the parties hereto and their respective successors and
permitted assigns. Neither party shall have the right to assign its rights under
this Agreement, without the prior written consent of the other party first
having been obtained.
SECTION 14.5. IMBALANCES. On the date of Closing (and, upon the
delivery to Buyer of the Conveyances), Buyer shall succeed to the position of
Seller with respect to all gas imbalances. As a result of such succession Buyer
shall (i) be entitled to receive any and all benefits, including payments of
proceeds of production in excess of amounts which it would otherwise be entitled
to produce and receive by virtue of ownership of the Oil and Gas Properties,
which Seller would have been entitled to receive by virtue of such positions and
(ii) shall be obligated to suffer any detriments (whether the same be in the
form of obligations to deliver production which would have otherwise been
attributable to its ownership of the Oil and Gas Properties without receiving
full payment therefor, or be in the form of the obligation to make payment in
cash) which Seller would have been obligated to suffer by virtue of such
positions.
SECTION 14.6. EXPENSES. Each party shall bear and pay all expenses
incurred by it in connection with the transaction contemplated by this
Agreement.
SECTION 14.7. ENTIRE AGREEMENT - TIME OF THE ESSENCE. This Agreement
contains the entire understanding of the parties hereto with respect to subject
matter hereof and supersedes all prior agreements, understandings, negotiations,
and discussions among the parties with respect to such subject matter. Time is
of the essence in this Agreement.
SECTION 14.8. PUBLIC STATEMENTS. Seller and Buyer shall consult with
each other with regard to all publicity and other releases at or prior to
Closing concerning this Agreement and the transactions contemplated hereby and,
except as required by applicable law or the applicable rules or regulations of
any governmental body or stock exchange, neither party shall issue any publicity
or other release without the prior consent of the other party.
SECTION 14.9. INJUNCTIVE RELIEF. The parties hereto acknowledge and
agree that irreparable damage would occur in the event any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Agreement, and shall be entitled to enforce specifically the provisions
of this Agreement, in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which the parties may be
entitled under this Agreement or at law or in equity.
SECTION 14.10. AMENDMENTS. This Agreement may be amended, modified,
supplemented, restated or discharged (and provisions hereof may be waived) only
by an instrument in writing signed by the party against whom enforcement of the
amendment, modification, supplement, restatement or discharge (or waiver) is
sought.
SECTION 14.11. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah.
SECTION 14.12. COUNTERPARTS. This Agreement may be executed in
counterparts, all of which are identical and all of which constitute one and the
same instrument. It shall not be necessary for Buyer and Seller to sign the same
counterpart.
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IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on
the date set forth above.
SELLER:
III EXPLORATION COMPANY
By: /s/ William C. Glynn
-------------------------------------
Name: William C. Glynn
Title: President
BUYER:
PETROGLYPH ENERGY, INC.
By: /s/ Robert C. Murdock
-------------------------------------
Name: Robert C. Murdock
Title: President and Chief Executive Officer
18
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EXHIBIT 10.2
December 28, 1999
Petroglyph Energy, Inc.
1302 North Grand
Hutchinson, Kansas 67501
Gentlemen:
1. SUBSCRIPTION.
(a) The undersigned subscriber, III Exploration Company (the
"Subscriber"), intending to be legally bound, irrevocably agrees to purchase
from Petroglyph Energy, Inc., a Delaware corporation (the "Company"), one
million shares (collectively, the "Shares") of the Company's Common Stock, par
value $.01 per share (the "Common Stock"), for $2.00 per share, for an aggregate
purchase price of $2,000,000 (the "Purchase Price").
(b) The Shares are being offered in a private offering of shares of
Common Stock by the Company to the Subscriber, a qualified offeree, without
registration under the Securities Act of 1933, as amended (the "Securities
Act"), or qualification under applicable state securities laws ("Blue Sky
Laws").
2. PAYMENT. Pursuant to the terms of this subscription agreement, the
undersigned shall, on the date hereof, transmit by wire transfer of immediately
available funds the Purchase Price into the account designated by the Company.
Concurrently therewith, the Company shall issue the Shares to the Subscriber.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SUBSCRIBER. In
order to induce the Company to sell the Shares to the Subscriber, the Subscriber
hereby represents, warrants and covenants to the Company as follows:
(a) The Subscriber is a corporation, duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
(b) The Subscriber has full power and authority to execute, deliver and
perform this subscription agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by the Subscriber
of this subscription agreement, and the consummation by it of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
actions of the Subscriber. This subscription agreement has been duly and validly
executed and delivered by the Subscriber and constitutes the legal, valid and
binding obligation of the Subscriber, enforceable against the Subscriber in
accordance with its terms, except to the extent that enforcement may be limited
by applicable bankruptcy laws, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by general equitable principles
(regardless of whether enforcement is sought in equity or at law).
(c) The execution, delivery and performance of this subscription
agreement and the purchase of the Shares do not and will not conflict with,
violate or constitute a default under any applicable law or regulation or any
agreement or arrangement to which the Subscriber is a party or by which the
Subscriber may be bound.
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(d) The Subscriber represents and warrants that in order to make an
informed decision in connection with the purchase of the Shares:
(i) the Subscriber has reviewed the merits and risks of an
investment in the Shares with such tax and legal counsel to the extent
deemed advisable by the Subscriber and is not relying on the Company
nor any director, stockholder, employee, advisor or affiliate of the
Company with respect to the economic, tax and other considerations
relevant to the Subscriber relating to this investment;
(ii) the Subscriber (A) is familiar with the business and
operations of the Company, has been provided with sufficient
information with respect to the business and operations of the Company
and has carefully reviewed the same, (B) has been provided with such
additional information with respect to the Company as the Subscriber
has requested and (C) has had the opportunity to discuss such
information with members of the management of the Company and any
questions that the Subscriber has had with respect thereto have been
answered to the full satisfaction of the Subscriber;
(iii) the Subscriber recognizes that an investment in the
Shares involves a high degree of risk; and
(iv) the Subscriber is a highly sophisticated investor who has
such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of an investment in the
Shares.
(e) The Subscriber is acquiring the Shares solely for the Subscriber's
own account, for investment purposes only and not with a view to, or for,
subdivision, resale, distribution or fractionalization thereof, or for the
account, in whole or in part, of any other person or entity. The Subscriber
recognizes the restrictions on the transferability of the Shares and is able to
bear the substantial economic risk of an investment in the Shares, including a
complete loss thereof, for an indefinite period of time. The Subscriber has no
need for liquidity of this investment and has no reason to anticipate any change
in circumstances, financial or otherwise, or other particular occasion or event
that might cause or require the Subscriber to attempt to sell or transfer any of
the Shares.
(f) The Subscriber understands that the sale of the Shares to the
Subscriber is intended to be exempt from registration under the Securities Act
by virtue of Section 4(2) of the Securities Act and under applicable Blue Sky
Laws. The Subscriber will not sell or otherwise transfer any or all of the
Shares other than pursuant to a registration statement under the Securities Act
that has become effective or pursuant to a specific exemption from registration
under the Securities Act and applicable Blue Sky Laws. If any such transfer is
pursuant to an exemption, such transfer shall be made only upon the Subscriber
first having delivered to the Company a favorable written opinion of counsel,
reasonably satisfactory in form and substance to the Company, to the effect that
the proposed sale or transfer is exempt from registration under the Securities
Act and any applicable Blue Sky Laws; provided, however, that no such opinion of
counsel shall be required for a sale duly made in compliance with Rule 144
promulgated under the Securities Act, or any successor or analogous rule to Rule
144, or if the holder would be permitted to transfer the securities pursuant to
paragraph (k) of Rule 144 (it being agreed that the Company shall have the right
to receive evidence satisfactory to it regarding compliance with such Rule or
any successor or analogous rule prior to the registration of any such transfer).
(g) The Subscriber understands that the Shares are not registered under
the Securities Act or applicable Blue Sky Laws and such securities must be held
indefinitely, unless the subsequent disposition thereof is registered under the
Securities Act and applicable Blue Sky Laws or an exemption from such
registration is available. The Subscriber acknowledges that the Company has not
undertaken to register any of the Shares pursuant to the Securities Act and,
except as provided in any existing registration rights
<PAGE> 3
agreement, will have no obligation to effect on behalf of the Subscriber any
registration under the Securities Act or to assist the Subscriber in complying
with any exemption from registration under the Securities Act or any Blue Sky
Laws. The Subscriber understands that the exemption from registration afforded
by certain rules and regulations under the Securities Act depends upon the
satisfaction of various conditions and that, if applicable, such rules and
regulations may afford the basis for sales of the Shares only in limited
amounts.
(h) The Subscriber acknowledges that the certificates evidencing the
Shares, and any substitutions or replacements thereof, shall bear legends in
substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED OR DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION, UNLESS THEY ARE FIRST REGISTERED PURSUANT TO
THAT ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE
COMPANY RECEIVES A WRITTEN OPINION OF COUNSEL, WHICH OPINION
AND COUNSEL ARE SATISFACTORY TO THE COMPANY, TO THE EFFECT
THAT SUCH REGISTRATION IS NOT REQUIRED."
Upon request of a holder of such certificate, the Company shall remove the
foregoing transfer legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received a written opinion of legal counsel who is reasonably
satisfactory to the Company, addressed to the Company, to the effect that the
foregoing transfer legend is no longer required in order to ensure compliance
with the Securities Act and applicable Blue Sky Laws, provided that a sale of
stock registered under the Act or transferred pursuant to Section 3(f)(B) hereof
shall be issued to the transferee free of such legend.
(i) The Subscriber represents and warrants that the Subscriber is an
"accredited investor", as that term is defined in Rule 501 promulgated under the
Securities Act, by virtue of the Subscriber being:
(i) a corporation, not formed for the specific purpose of
acquiring the securities offered hereby, with total assets in excess of
$5,000,000; and
(ii) a corporation all of whose shareholders or other equity
owners are themselves accredited investors by virtue of this
subparagraph or by subparagraphs (i) above.
(j) The Subscriber represents and warrants that it meets the investor
suitability standards imposed by applicable Blue Sky Laws.
(k) The Subscriber is not subscribing to purchase the Shares as a
result of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio, or presented at any seminar or meeting, or any
solicitation of a subscription by a person not previously known to the
Subscriber in connection with investments in securities generally.
(l) If the Subscriber is acting in a fiduciary capacity in purchasing
the Shares, the fiduciary represents and warrants that he or she has authority
to execute this Subscription Agreement on behalf of the person or persons for
whom the Shares are being purchased, that such persons have been given this
Subscription Agreement and have confirmed to the fiduciary that they have
reviewed the same, and that the representations and warranties contained in this
subscription agreement (and in any other written statement or document delivered
to the Company) shall be deemed to have been made on behalf of such person or
persons.
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(m) All information which the Subscriber has furnished and is
furnishing to the Company, including, without limitation, the representation as
to the Subscriber's status as an "accredited investor" within the meaning of
Rule 501 promulgated under the Securities Act and all other representations
contained in this Subscription Agreement, are true, correct and complete as of
the date of this subscription agreement, and if there should be any material
change in such information prior to the Subscriber's receipt of the Shares, the
Subscriber will immediately furnish such revised or corrected information to the
Company. The Subscriber is executing and delivering this subscription agreement
with full awareness of its implications and in recognition of the fact that the
Company is relying on the Subscriber's representations and warranties contained
herein in selling the Shares to the Subscriber, and that the Company and other
investors may be damaged if such representations and warranties are false,
incorrect or incomplete.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. In order
to induce the Subscriber to subscribe for the Shares, the Company hereby
represents, warrants and covenants to the Subscriber as follows:
(a) The Company is a corporation, duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation.
(b) The Company has full power and authority to execute, deliver and
perform this subscription agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by the Company of
this subscription agreement, and the consummation by it of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
actions of the Company. This subscription agreement has been duly and validly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except to the extent that enforcement may be limited by
applicable bankruptcy laws, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by general equitable principles
(regardless of whether enforcement is sought in equity or at law).
(c) The execution, delivery and performance of this subscription
agreement and the issuance of the Shares do not and will not conflict with,
violate or constitute a default under any applicable law or regulation or any
agreement or arrangement to which the Company is a party or by which the Company
may be bound.
(d) The authorized capital stock of the Company consists of (i) 25
million shares of Common Stock, and (ii) five million shares of preferred stock,
par value $.01 per share. As of the date of this Agreement, there were issued
and outstanding 5,458,333 shares of Common Stock and no shares of preferred
stock. All outstanding shares of capital stock of the Company have been validly
issued and are fully paid and nonassessable, and no shares of capital stock of
the Company are subject to, nor have any been issued in violation of, preemptive
or similar rights. All issuances, sales and repurchases by Buyer of shares of
its capital stock have been effected in compliance with all applicable laws,
including without limitation applicable federal and state securities laws.
5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
6. CONSENT TO JURISDICTION.
(a) The parties hereto hereby irrevocably submit to the exclusive
jurisdiction of the courts of the State of Delaware and the federal courts of
the United States of America located in Delaware, and appropriate appellate
courts therefrom, over any dispute arising out of or relating to this Agreement
or any of the transactions contemplated hereby, and each party hereby
irrevocably agrees that all claims in
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respect of such dispute or proceeding may be heard and determined in such
courts. The parties hereby irrevocably waive, to the fullest extent permitted by
applicable law, any objection which they may now or hereafter have to the laying
of venue of any dispute arising out of or relating to this subscription
agreement or any of the transactions contemplated hereby brought in such court
or any defense of inconvenient forum for the maintenance of such dispute. Each
of the parties hereto agrees that a judgment in any such dispute may be enforced
in other jurisdictions by suit on the judgment or in any other manner provided
by law. This consent to jurisdiction is being given solely for purposes of this
subscription agreement and is not intended to, and shall not, confer consent to
jurisdiction with respect to any other dispute in which a party to this
Agreement may become involved.
(b) Each of the parties hereto hereby consents to process being served
by any party to this Agreement in any suit, action, or proceeding of the nature
specified in subsection (a) above by the mailing of a copy thereof to the
address for such party set forth below.
7. SPECIAL BLUE SKY NOTICE. SPECIAL INFORMATION AND DISCLOSURES
REQUIRED BY APPLICABLE BLUE SKY LAWS MAY APPEAR ON THE IMMEDIATELY FOLLOWING
PAGE.
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The Subscriber, by signing below as of the date indicated, acknowledges
and agrees to the foregoing and subscribes to the purchase of the number of
Shares set forth below.
SUBSCRIBER:
III EXPLORATION COMPANY
By: /s/ William C. Glynn
-----------------------------
William C. Glynn
President
Address of Subscriber: Number of Shares of Common Stock
- ---------------------------
1,000,000
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If Subscriber is an entity, please indicate
Tax I.D. Number of Subscriber: DATE and JURISDICTION of organization:
- --------------------------- ---------------------------
Agreed to and accepted this 28th day of December, 1999.
PETROGLYPH ENERGY, INC.
By: /s/ Robert C. Murdock
------------------------
Robert C. Murdock
President and Chief Executive Officer
S-1
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EXHIBIT 99.1
PETROGLYPH ENERGY, INC. ANNOUNCES ACQUISITION OF PRODUCING PROPERTIES AND
CLOSING OF PRIVATE PLACEMENT
HUTCHINSON, Kansas, December 28, 1999 -- Petroglyph Energy, Inc.
(NASDAQ:PGEI) announced the execution of a Purchase and Sale Agreement with III
Exploration Company, a wholly-owned subsidiary of Intermountain Industries,
Inc., which is the Company's current majority stockholder. Pursuant to the terms
of the Purchase and Sale Agreement, Petroglyph has agreed to purchase certain
oil and gas producing properties, located primarily in the Uinta Basin of Utah,
from III Exploration, in exchange for the issuance of 250,000 shares of Series A
Convertible Preferred Stock. The Purchase and Sale Agreement follows a letter of
intent dated November 30, 1999 between Petroglyph and III Exploration , which
outlined the basic terms of the acquisition, and provides for an effective
transaction date of November 1, 1999. The preferred stock will pay dividends at
a rate of 8% per annum. The payments will be due quarterly and will be payable
in additional shares of the preferred stock for the first eight payments and in
cash for any subsequent quarters. The preferred stock will be convertible,
beginning two years from the date of issuance, into shares of common stock at a
conversion price of $3.50 per share of common stock, based on the preference
amount of $10.00 per preferred share. The Company has the option to redeem the
preferred stock at any time after the third anniversary of the issuance of the
shares in whole or in part at a redemption price of $12.00 per preferred share.
The acquisition of the properties and the issuance of the preferred stock is
contingent upon Petroglyph stockholder approval. The Company intends to file a
proxy statement with the Securities and Exchange Commission in anticipation of a
special meeting and vote of the stockholders early in 2000.
Robert Murdock, President and CEO of Petroglyph, said "This acquisition
will significantly increase the Company's producing reserves, while further
concentrating our investment in successful Uinta Basin waterflood oil
production. Additionally, the properties will provide an improvement to
production and cash flow per share during 2000 from existing levels."
PRIVATE PLACEMENT
Additionally, in a separate transaction, the Company announced the sale today of
1,000,000 shares of common stock to III Exploration . The issuance was effected
through a privately negotiated sale between the Company and III Exploration,
with a purchase price of $2.00 per share, for aggregate proceeds to the Company
of $2,000,000. The common stock issued in the private placement has not been
registered under the Securities Act of 1933, as amended, and may not be offered
or sold in the United States absent registration or an applicable exemption from
registration requirements. The Company intends to use the proceeds from the sale
for working capital, to finance existing operations and to finance a portion of
the Company's 2000 development plans in its Uinta Basin and Raton Basin
properties.
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Petroglyph Energy, Inc. is an independent energy company located in
Hutchinson, Kansas engaged in the exploration, development and acquisition of
oil and gas properties. Petroglyph's properties are concentrated in Utah and
Colorado.
FORWARD LOOKING STATEMENTS
Certain statements contained herein constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include but are not limited to
risks inherent in drilling and other development activities, the timing and
extent of changes in commodity prices, unforeseen engineering and mechanical or
technological difficulties in drilling wells, inaccuracies in measurement,
implementing enhanced oil or coalbed methane gas recovery programs, the
availability, proximity and capacity of refineries, pipelines and processing
facilities, shortages or delays in the delivery of equipment and services, land
issues, federal and state regulatory developments and other risks more fully
described in Petroglyph's filings with the Securities and Exchange Commission.
For additional information, contact Tim A. Lucas, Vice President and
Chief Financial Officer or Robert C. Murdock, President and CEO at telephone
(316) 665-8500 or by fax at (316) 665-8577.
