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): September 19, 1995
Inland Resources Inc.
(Exact name of registrant as specified in its charter)
Washington 0-16487 91-1307042
(State of incorporation) (Commission File No.) (IRS Employer
Identification
No.)
475 17th Street, Suite 1500, Denver, Colorado 80202
(Address of principal execute offices, including zip code)
(303) 292-0900
(Registrant's telephone number, including area code)
1
Item 2. Acquisition or Disposition of Assets.
On September 19, 1995, Inland Resources Inc. ("Registrant") sold to
Petroglyph Gas Partners, L.P. ("PGP") the Registrant's undivided 50% working
interest in 21,412 gross acres of oil and gas leases in the Antelope Creek and
Duchesne Fields located in Duchesne County, Utah (the "Duchesne County
Fields"), and Registrant's undivided 50% interest in various tangible assets
and gas gathering system relating to the Duchesne County Fields. The purchase
price paid by PGP was (i) $3 million in cash (less $50,000 in net closing
adjustments among the parties); (ii) the assumption by PGP of Registrant's
liability under its Loan Agreement, dated August 24, 1994, with Joint Energy
Development Investments Limited Partnership ("JEDI"), a nonrecourse loan
having an outstanding balance at September 19, 1995 of $2.5 million (the
"Inland Loan Agreement"); and (iii) the assignment by PGP to Inland of PGP's
undivided 47.24% interest in 8,277 gross acres of oil and gas leases in
Duchesne County, Utah (the "Ashley Federal Unit"). The parties agreed that
the sale would be deemed effective as of July 1, 1995, so that from and after
July 1, 1995 PGP would be deemed to own the Duchesne County Fields and related
assets, and Registrant would be deemed to own PGP's undivided 47.24% interest
in the Ashley Federal Unit. JEDI consented to the sale by Registrant and the
assumption of the Inland Loan Agreement by PGP, and Registrant has no further
liability or obligation under the Inland Loan Agreement.
Item 7. Financial Statements and Exhibits.
(b) Attached to this Form 8-K as pages F-1 through F-4 are unaudited pro
forma consolidated financial statements of Registrant reflecting the
results of the sale on a pro forma basis for the periods reflected.
(c) Exhibits. The following exhibits are being filed herewith:
10.1 Asset Purchase and Sale Agreement dated August 25, 1995, but
effective as of July 1, 1995, by and between Inland Resource Inc.
and Petroglyph Gas Partners, L.P. (without exhibits).
10.2 Assignment and Assumption Agreement, First Amendment to Loan
Agreement, and Confirmation of Documents dated September 19, 1995
by and between Inland Resources Inc., Petroglyph Gas Partners,
L.P. and Joint Energy Development Investments Limited Partnership
(without exhibits).
2
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 hereunto duly authorized.
September 25, 1995
INLAND RESOURCES INC.
By: Kyle R. Miller, President and
Chief Executive Officer
3<PAGE>
INLAND RESOURCES INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION:
The accompanying unaudited Pro Forma Consolidated Financial Statements are
presented to illustrate the effect of the sale of the Duchesne County
Fields on Inland Resources Inc.'s (the "Company") consolidated historical
financial condition and results of operations had the transaction occurred
(i) as of June 30, 1995 for the Pro Forma Consolidated Balance Sheet (ii)
as of January 1, 1995 for the Pro Forma Consolidated Statement of
Operations for the six months ended June 30, 1995, and (iii) as of January
1, 1994 for the Pro Forma Consolidated Statement of Operations for the
year ended December 31, 1994.
Inland Production Company (formerly named Lomax Exploration Company) was
acquired effective September 21, 1994. As a result, after the Duchesne
County Fields activity is removed, the 1994 Pro Forma Consolidated
Statement of Operations includes only three months and ten days of
production and sales activity for Inland Production Company. The Company
did not have any other significant oil and gas operations in 1994.
The Pro Forma Consolidated Statement of Operations for 1994 does not
include any reduction to general and administrative expense that may have
been realized if the Company truly operated the initial nine months of the
year without any significant operations. In addition, due to a variety of
factors that result from the Company's current business emphasis and
anticipated drilling schedule, the Company cautions that the Pro Forma
Consolidated Statements of Operations for both periods presented may not
necessarily be indicative of the future operating results of the
consolidated company.
As explained in the Company's 1994 report on Form 10-KSB, the Company has
classified all mining operations as discontinued operations. In accordance
with financial reporting rules, the accompanying Pro Forma Consolidated
Statements of Operations are presented without consideration for
discontinued operations.
F-1<PAGE>
INLAND RESOURCES INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
June 30, 1995
(Unaudited)
Inland Pro Forma Pro Forma
Historical Adjustments Consolidated
ASSETS
Current assets:
Cash and cash equivalents $ 515,942 $ 3,000,000$ 3,515,942
Accounts receivable 663,311 663,311
Inventory 852,344 (278,000) 574,344
Department of Energy contract 182,224 182,224
Other current assets 423,886 423,886
Total current assets 2,637,707 2,722,000 5,359,707
Property, plant and equipment, at cost:
Oil and gas properties
(successful efforts method) 14,591,317 (4,507,000) 10,084,317
Gas and water transportation
facilities 647,833 (500,000) 147,833
Accumulated depletion,
depreciation and amortization (937,549) 635,000 (302,549)
14,301,601 (4,372,000) 9,929,601
Other property, plant and
equipment, net 578,858 578,858
Total assets $ 17,518,166 $(1,650,000)$15,868,166
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $ 2,090,845 $ 2,090,845
Current portion of long-term
debt 3,028,518 (2,500,000) 528,518
Property reclamation costs,
short-term 300,000 300,000
Total current liabilities 5,419,363 (2,500,000) 2,919,363
Long-term debt 3,405,203 3,405,203
Property reclamation costs,
long-term 125,690 125,690
Stockholders' equity:
Preferred Class A stock, par
value $.001; 20,000,000 shares
authorized, 106,850 shares of
Series A issued and outstanding;
liquidation preference of
$5,342,500 107 107
Additional paid-in capital -
preferred 3,672,861 3,672,861
Common stock, par value $.001;
100,000,000 shares authorized;
28,927,999 shares issued and
outstanding 28,928 28,928
Additional paid-in capital -
common 13,168,591 13,168,591
Accumulated deficit (8,302,577) 850,000(7,452,577)
Total stockholders' equity 8,567,910 850,000 9,417,910
Total liabilities and
stockholders' equity $ 17,518,166 $(1,650,000) $15,868,166
F-2
INLAND RESOURCES INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the six months ended June 30, 1995
(Unaudited)
Inland Pro Forma Pro Forma
Historical Adjustments Consolidated
Sales of oil and gas $ 1,128,645 $ (468,000) $ 660,645
Operating expenses:
Lease operating expenses 736,697 (404,000) 332,697
Production Taxes 89,035 (50,000) 39,035
Exploration 14,592 (1,500) 13,092
Depletion, depreciation and
amortization 510,709 (199,000) 311,709
General and administrative, net 779,785 779,785
Total operating expenses 2,130,818 (654,500) 1,476,318
Operating loss (1,002,173) 186,500 (815,673)
Interest expense (421,408) 209,000 (212,408)
Other income, net 67,686 67,686
Loss from continuing
operations $ (1,355,895) $ 395,500$ (960,395)
Net loss per share from
continuing operations $ (.05) $ (.03)
Weighted average common
shares outstanding 28,927,999 28,927,999
F-3
INLAND RESOURCES INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 1994
(Unaudited)
Inland Pro Forma Pro Forma
Historical Adjustments Consolidated
Sales of oil and gas $ 1,063,458 $ (821,000) $ 242,458
Operating expenses:
Lease operating expenses 915,063 (763,000) 152,063
Production taxes 90,222 (80,000) 10,222
Exploration 306,121 (59,000) 247,121
Depletion, depreciation and
amortization 330,110 (232,500) 97,610
General and administrative, net 1,004,891 1,004,891
Total operating expenses 2,646,407 (1,134,500) 1,511,907
Operating loss (1,582,949) 313,500(1,269,449)
Interest expense (142,666) 96,500 (46,166)
Other income, net 54,581 54,581
Loss from continuing
operations $ (1,671,034) $ 410,000 $(1,261,034)
Net loss per share from
continuing operations $ (.09) $ (.07)
Weighted average common shares
outstanding 18,738,492 18,738,492
F-4
EXHIBIT 10.1<PAGE>
ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement (hereinafter
"Agreement") is effective as of the 1st day of July, 1995,
("Effective Date") between INLAND RESOURCES INC., a Washington
corporation, hereinafter referred to as "Inland"), and PETROGLYPH
GAS PARTNERS, L. P., a Delaware limited partnership (hereinafter
referred to as "PGP").
WHEREAS, Inland and PGP each own an undivided 50% interest in
and to certain oil and gas properties known as the "Duchesne Field"
and the "Antelope Creek Field", as more particularly set forth in
Exhibit "A" attached hereto, together with like interests in and to
all related oil and gas sales contracts, dedicated acreage,
easements, rights-of-way, attendant equipment, operating rights,
and all other incidents associated therewith, and other assets;
WHEREAS, Inland and PGP each own an undivided 50% interest in
and to that certain gas gathering system consisting of the
rights-of-way and easements set forth in Exhibit "B" attached
hereto, together with like interests in and to all related
contracts, easements, rights-of-way, attendant equipment, operating
rights, and all other incidents associated therewith, and other
assets (hereinafter referred to as the "Gathering System");
WHEREAS, Inland and PGP each own undivided interests in and to
certain oil and gas properties known as the "Ashley Federal Unit",
as more particularly set forth in Exhibit "E" attached hereto,
together with like interests in and to all related oil and gas
sales contracts, dedicated acreage, easements, rights-of-way,
attendant equipment, operating rights, and all other incidents
associated therewith, and other assets;
WHEREAS, Inland and PGP desire to sell and to purchase from
each other certain interests in the Duchesne Field, Antelope Creek
Field, Ashley Federal Unit, Gas Gathering System, and related
assets; and
WHEREAS, the parties wish to effectuate the sale on the terms
and conditions more fully set forth in this Agreement.
NOW, THEREFORE, in consideration of the covenants and promises
contained herein, the parties hereby agree as follows:
I
SALE OF ASSETS BY INLAND
I.1 Purchase and Sale. PGP agrees to purchase and Inland
agrees to sell all its right, title and interest in and to (a) the
oil and gas leases and other assets described on Exhibit "A"
attached hereto, in not less than the percentage working interest
and net revenue interest as specified in Exhibit "A", and (b) the
rights-of-way, easements, and other assets described on Exhibit
"B", together with all right, title, and interest in and to the
Cooperative Plan of Development of the Antelope Creek Field, all
oil and gas sales contracts, dedicated acreage, easements,
rights-of-way, pipelines, gathering systems, processing plants,
compressors, wells, pipeline and other yard inventory, water
trucks, furniture, fixtures, attendant equipment, machinery,
operating rights, permits, franchises, licenses, servitudes,
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surface leases, files, data, information, intellectual property,
seismic information, logs, core samples, and other personal
property, agreements and incidents associated therewith insofar,
and only insofar as such items are attendant or relate solely to
the Exhibit "A" and Exhibit "B" properties, including without
limitation the particular items described on Exhibit "C" attached
hereto (all of which shall hereinafter be referred to as the
"Duchesne/Antelope Creek Assets"). At Closing, Inland shall
execute and deliver in sufficient and recordable form any and all
assignments, conveyances, bills of sale, titles, and other
documents necessary to transfer title in the Duchesne/Antelope
Creek Assets to PGP.
I.2 Purchase Price. PGP agrees to pay to Inland the total
sum of Three Million Dollars ($3,000,000) in readily available
funds by wire transfer to an account to be designated by Inland, at
Closing for the Duchesne/Antelope Creek Assets, based on the
working interest and net revenue interest in the oil and gas
leases, more fully described on Exhibit "A". The allocation of the
purchase price among the various leases and other Duchesne/Antelope
Creek Assets is set forth on Exhibit "D" attached hereto. In the
event Inland's interest is less than the interest stated in
Exhibit "A", the purchase price shall be adjusted accordingly. The
purchase price set forth in this paragraph shall be subject to the
adjustments set forth in paragraph 1.3 below.
I.3 Adjustments to Purchase Price. The purchase price set
forth in paragraph 1.2 above shall be adjusted at Closing, as
follows:
a) Any amounts due and owing from Inland to PGP
or its subsidiary, Petroglyph Operating
Company, Inc. ("POCI"), as of the Effective
Date, resulting from capital costs, operating
expenses, or unpaid revenue, if any, from the
sale of production related to the acquisition,
development, or operation of the Duchesne
Field, Antelope Creek Field, or Ashley Federal
Unit shall be deducted from the purchase
price. In addition, there shall also be
deducted from the purchase price the value of
all oil in storage above the pipeline
connection and all gas that has passed through
the meter at or before the Effective Date that
is credited to PGP's interest in the Ashley
Federal Unit and that is attributable to June,
1995 production. The total of these amounts
is estimated to be approximately $323,552.40
as of June 30, 1995.
b) Any amounts due and owing from PGP or POCI to
Inland as of the Effective Date shall be added
to the purchase price. These amounts shall
include any monies owing due to capital costs,
operating expenses, or unpaid revenues, if
any, from sale of production related to the
acquisition, development, or operation of the
Duchesne Filed, Antelope Creek Field, or
Ashley Federal Unit. In addition, there shall
also be added to the purchase price the value
of all oil in storage above the pipeline
connection and all gas that has passed through
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the meter at or before the Effective Date that
is credited to Inland's interest in both the
Duchesne Field and the Antelope Creek Field
and that is attributable to June, 1995
production. The total of these amounts is
estimated to be approximately $77,525.00 as of
June 30, 1995.
c) Inland's pro rata share of ad valorem taxes
assessed against the Duchesne/Antelope Creek
Assets for the tax year 1995, prorated as of
the Effective Date, shall be deducted from the
purchase price.
d) PGP's pro rata share of ad valorem taxes
assessed against the Ashley Federal Unit for
the tax year 1995, prorated as of the
Effective Date, shall be added to the purchase
price.
(e) The positive or negative value of the Price
Protection Agreement (described in paragraph
1.5 below), as of the day before Closing,
shall be added to or deducted from the
purchase price; provided, however, that in no
event shall the adjustment to the purchase
price, resulting from the Price Protection
Agreement whether positive or negative, be
more than $100,000. The value of the Price
Protection Agreement shall be determined by
Enron Risk Management Services Corp.
A final accounting of the foregoing adjustments shall be had within
sixty (60) days after Closing of this Agreement. Any and all
amounts due from one party to another in accordance with such final
accounting shall be paid within ten (10) days after receipt of such
final accounting.
I.4 Additional Consideration. As additional consideration
for the transfer of the Duchesne/Antelope Creek Assets, PGP shall
sell, assign, and transfer to Inland or, if Inland shall so
request, to Inland Production Company, at Closing all of PGP's
right, title, and interest in and to the following:
a) The Ashley Federal Unit oil and gas leases,
more particularly described on Exhibit "E"
attached hereto, together with all equipment,
leases, easements and rights of way,
contracts, farmout agreement, and other
agreements, and other assets related thereto,
including without limitation the particular
items described on Exhibit "F" attached
hereto;
b) All warrants for the purchase of the common
stock of Inland held by PGP, which are more
particularly described on Exhibit "F"; and
c) That certain water truck previously owned by
Evertson Oil Company, as more particularly
described on Exhibit "F".
3
The foregoing assets are hereinafter referred to as the "Ashley
Unit Assets".
I.5 Assumption of Debt. PGP shall assume all obligations,
liabilities, and rights of Inland under that certain Loan Agreement
dated August 24, 1994 between Joint Energy Development Investments
Limited Partnership ("JEDI") as lender and Inland as borrower
(hereinafter referred to as the "JEDI Loan"), and all documents
related thereto, including without limitation, the Production Note,
Development Note, Assignment of Overriding Royalty Interests, Deed
of Trust, Mortgage, Security Agreement, Assignment of Production of
Proceeds, Financing Statement and Fixture Filing, and ISDA Master
Agreement and confirmations thereunder ("Price Protection
Agreement") related to production of oil or gas from the
Duchesne/Antelope Creek Assets, to the extent and only to the
extent that said agreements relate to the Duchesne/Antelope Creek
Assets. Except as set forth in this paragraph, PGP assumes no
debts, obligations, or liabilities of Inland.
I.6 Gas Transportation Contract. The parties agree to enter
into a standard gas transportation contract, in substantially the
form of Exhibit "G" attached hereto, which will provide Inland
access to the high pressure natural gas pipeline currently owned by
the parties that crosses the Ashley Federal Unit and interconnects
with Questar's pipeline at the Monument Butte interconnection.
Said gas transportation contract shall provide, among other things,
that Inland shall have access up to but not exceeding 50% of the
maximum operating capacity of the pipeline, but in any case not to
exceed 3,500 Mcf per day. The price to be charged Inland for
transporting gas shall be not more than the amount that PGP charges
itself for the transportation of gas through said pipeline which in
no event shall exceed $.50/MCF. The term of this agreement shall
be for five (5) years from Closing.
I.7 Water Agreement. PGP shall cause POCI to enter into an
agreement with Inland, in substantially the form of Exhibit "H"
attached hereto, providing for the allocation to Inland for use in
developing the Ashley Federal Unit the following volumes of water
available to POCI pursuant to that certain agreement, as may be
amended from time to time, dated October 1, 1994 by and between
East Duchesne Culinary Water Improvement District and POCI
concerning the purchase of water for use in oil and gas operations
(the "Water Agreement"):
Year One - not to exceed 4,000 barrels per day
Year Two - not to exceed 3,000 barrels per day
Year Three - not to exceed 2,000 barrels per day
Year Four - not to exceed 1,000 barrels per day
Year Five and
beyond - 0 barrels per day
The agreement shall provide further that Inland's use of water
shall at all times be totally subject to and subordinate to the
needs of PGP, POCI, and/or their affiliates; that in the event PGP,
POCI, and/or their affiliates shall require the use of all or a
portion of the amount allocated to Inland, Inland shall have no
recourse against PGP, POCI, and/or their affiliates for such
shortfall; that PGP, POCI, and/or their affiliates shall not be
obligated or liable for the water district's failure to perform
under the Water Agreement; that Inland shall pay for the use of
water the amount set forth in the Water Agreement; and that Inland
shall further pay all costs and expenses caused by, or necessary
4
to, Inland's use of such water, including without limitation the
cost for the purchase or construction of any equipment or
facilities.
I.8 Letters-in-Lieu. Inland shall prepare and the parties
shall execute letters-in-lieu of transfer and division orders at
the time of closing, which shall be sent to each purchaser of
production, instructing said purchasers to distribute proceeds of
the Duchesne/Antelope Creek Assets to PGP as of the Effective Date,
with respect to production from the Duchesne/Antelope Creek Assets
which occurs on and after the Effective Date. PGP shall prepare
and the parties shall execute letters-in-lieu of transfer and
division orders at the time of closing, which shall be sent to each
purchaser of production, instructing said purchasers to distribute
proceeds of the Ashley Federal Unit leases to Inland as of the
Effective Date, with respect to production from the Ashley Federal
Unit leases which occurs on and after the Effective Date.
I.9 Right to Terminate Agreement. Prior to Closing, if PGP
or Inland have not performed all those acts necessary for all of
the conditions precedent to have occurred prior to Closing, then
PGP or Inland, respectively, shall have the unconditional right to
terminate this Agreement, in which case it shall be of no force and
effect as among the undersigned parties. Provided, however, that
in the event that a title defect is discovered as to any of the
assets being transferred pursuant to this Agreement then, at the
option of the party receiving such assets, it may elect to
terminate this Agreement or, as the parties can agree, then the
parties may adjust the purchase price by deleting the asset from
this Agreement and closing on the balance of the assets according
to the terms hereof.
I.10 Conditions Precedent. The party's obligations hereunder
are subject to the following:
a) Confirmation of clear and marketable
title in Inland to the Duchesne/Antelope
Creek Assets (the cost of such title
confirmation to be paid
by PGP);
b) Confirmation of clear and marketable
title in PGP to the Ashley Unit Assets
(the cost of such title confirmation to
be paid by Inland);
c) Receipt of any and all required consents,
waivers, and approvals from third parties
including any governmental, regulatory, or
tribal entities, if any, to the transfers,
conveyances, and assignments necessary to
complete the transactions contemplated under
this Agreement, except for approvals required
to be obtained from governmental entities who
are lessors under leases affected by this
Agreement, or who administer such leases on
behalf of such lessors, which are customarily
obtained post-closing and which the parties
hereto have no reason to believe cannot be
obtained in the ordinary course of business;
5
d) Consent and approval of JEDI to PGP's
assumption of debt as provided for in
paragraph 1.5 above, and acceptance of the
substitution of PGP for Inland under the
agreements described in that paragraph to the
extent that said agreements relate to the
Duchesne/Antelope Creek Assets;
e) Absence of the existence of any default or
event of default under the agreements
described in paragraph 1.5 above;
f) Approval of the transactions contemplated by
this Agreement by all parties whose approval
is necessary under PGP's partnership
agreement; and
g) Approval of the transactions contemplated by
this Agreement by Inland's board of directors.
h) At Closing, Inland and PGP shall each deliver
to the other appropriate opinion of counsel
letters evidencing the authority of such party
to enter into this Agreement and comply with
the terms thereof.
The approvals contemplated by paragraphs f) and g) shall be
obtained by the respective party at or before the time it executes
this Agreement. All other Conditions Precedent shall be satisfied
prior to Closing; provided, however, that PGP in its discretion may
waive the conditions set forth in paragraphs a), c), and f),
insofar as such conditions pertain to the transfer of the
Duchesne/Antelope Creek Assets, and that Inland in its discretion
may waive the conditions set forth in paragraphs b) and c) insofar
as such conditions pertain to the transfer of the Ashley Unit
Assets.
I.11 Conditions Subsequent. The party's obligations hereunder
are subject to receipt of any and all required consents, waivers,
and approvals to the transfers, conveyances, and assignments
necessary to complete the transactions contemplated under this
Agreement, and all other acts contemplated by this Agreement, from
governmental entities who are lessors under leases affected by this
Agreement, or who administer such leases on behalf of such lessors,
which are customarily obtained post-closing and which the parties
hereto have no reason to believe cannot be obtained in the ordinary
course of business. The parties have agreed to close this
Agreement without first obtaining all such consents, waivers, and
approvals; provided, however, that in the event any requests for
required consents, waivers, and approvals from such governmental
entities are denied, then PGP and Inland agree to negotiate in good
faith to attempt to determine the value of the assets affected by
such denial. If these parties mutually agree as to the value of
the affected asset(s), the recipient of this asset shall reconvey
such asset to its assignor, and shall further return the agreed
value to such assigning party. However, if no mutual agreement as
to value can be reached, or the value of such affected assets
exceeds 20% of the purchase price, then either Inland or PGP shall
have the right, but not the obligation, to declare this Agreement
null and void, and the parties shall take such actions as are
necessary to return the parties to the same position they had prior
to the execution of this Agreement, including without limitation,
6
the reconveyance of all properties conveyed at Closing, and the
return of all funds paid hereunder.
I.12 Mutual Release. Each party hereby releases the other
party and the other party's affiliated entities, and the officers,
employees, shareholders, partners, representatives, and agents of
the other party and the other party's affiliated entities, from any
and all claims of every kind whatsoever, whether contingent or
liquidated, direct or indirect, related or unrelated to the assets
that are the subject of this Agreement, arising before Closing,
except claims arising from or under the provisions of this
Agreement or the transactions contemplated hereby.
I.13 Closing. Closing shall occur as soon as all conditions
precedent have been met, at a time and place mutually agreed on by
the parties. The parties shall reasonably endeavor to take all
actions necessary for Closing to occur on or before September 1,
1995, or as soon thereafter as is practicable, but in no event
later than the close of business on September 20, 1995. If Closing
does not occur by this later date, either party shall have the
right, but not the obligation, to cancel this Agreement without
penalty.
AI
REPRESENTATIONS AND WARRANTIES OF INLAND
AI.1 Power and Authority to Enter Into Agreement; Further
Assurances. Inland is fully authorized to enter into and perform
this Agreement and to convey or cause to be conveyed all of its
rights, title and interest in the Duchesne/Antelope Creek Assets.
The consummation of this Agreement will not violate or conflict
with any governmental order, judgment or decree applicable to
Inland. This Agreement has been duly executed and delivered on
behalf of Inland, and at the Closing, all documents and instruments
required hereunder to be executed and delivered by Inland will be
duly authorized, executed and delivered. Inland shall furnish at
Closing a resolution of its Board of Directors authorizing the
execution of this Agreement and all documents and instruments
required hereunder, together with a certificate of Inland's
Secretary identifying Inland's officers.
AI.2 Ownership. Inland owns the working interests and net
revenue interests in and to the oil and gas leases more fully
described on Exhibit "A", together with like interests in the other
Duchesne/Antelope Creek Assets, and warrants and represents that at
Closing it shall sell and transfer marketable title to PGP in not
less than the percentage working interest and net revenue interest
as specified in Exhibit "A" in and to the oil and gas leases and
other Duchesne/Antelope Creek Assets; and that Inland has not
caused by its acts or omissions the filing of any liens, mortgages
or financing statements against the Duchesne/Antelope Creek Assets
being sold hereunder, except the JEDI Loan; nor has Inland assigned
to any other party any of the Duchesne/Antelope Creek Assets being
sold hereunder, since acquisition of said Duchesne/Antelope Creek
Assets by Inland; and that Inland will warrant and forever defend
title to the Duchesne/Antelope Creek Assets, including the
percentage working and net revenue interests shown to be owned by
such Inland on Exhibit "A", against all persons whomsoever lawfully
claiming or to claim the same by, through, or under Inland, but not
otherwise.
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AI.3 Conditions of Property. PGP hereby acknowledges and
accepts that on the Closing date the equipment to be sold and
transferred by Inland to PGP will be sold in its then "as is, where
is" condition without any warranties, written or verbal, expressed
or implied, as to the condition of such equipment sold. Inland
makes no warranty as to the condition, safety, or operating
condition of the equipment sold to PGP which will survive the date
of Closing.
AI.4 Consents. Inland has obtained, as of Closing, all
necessary consents and authorizations to the transfer of the
Duchesne/Antelope Creek Assets and attendant rights to PGP, except
for approvals required to be obtained from governmental entities
who are lessors under leases affected by this Agreement, or who
administer such leases on behalf of such lessors, which are
customarily obtained post-closing and which the parties hereto have
no reason to believe cannot be obtained in the ordinary course of
business.
AI.5 Judgments. Inland represents, covenants and warrants to
PGP, its successors and assigns, that on the Closing date there
will be no judgment, injunction, court order, or adverse
administrative ruling in existence against Inland; and that PGP
will be indemnified by Inland against any and all judgments,
lawsuits, court orders and/or administrative rulings existing,
pending or threatened against Inland arising out of Inland's
actions prior to the Closing Date.
AI.6 Preferential Rights. There is no preferential right of
any third party to purchase any of the Duchesne/Antelope Creek
Assets, other than preferential rights which have expired or been
waived as of the time of Closing.
AI
REPRESENTATIONS OF PGP
AI.1 Power and Authority to Enter Into Agreement; Further
Assurances. PGP is fully authorized to enter into and perform this
Agreement and to convey or cause to be conveyed all of its rights,
title and interest in the Ashley Unit Assets. The consummation of
this Agreement will not violate or conflict with any governmental
order, judgment or decree applicable to PGP. This Agreement has
been duly executed and delivered on behalf of PGP, and at the
Closing, all documents and instruments required hereunder to be
executed and delivered by PGP will be duly authorized, executed and
delivered. PGP shall furnish at Closing the consents of all
parties whose consents are required under PGP's partnership
agreement; a resolution of Petroglyph Energy, Inc.'s Board of
Directors authorizing the execution of this Agreement and all
documents and instruments required hereunder, and a certificate of
Petroglyph Energy, Inc.'s Secretary identifying Petroglyph Energy,
Inc.'s officers.
AI.2 Ownership. PGP owns the working interests and net
revenue interests in and to the oil and gas leases more fully
described on Exhibit "E", together with like interests in the other
Ashley Unit Assets, and warrants and represents that at Closing it
shall sell and transfer marketable title to Inland in not less than
the percentage working interest and net revenue interest as
specified in Exhibit "E" in and to the oil and gas leases and other
8
Ashley Unit Assets; and that PGP has not caused by its acts or
omissions the filing of any liens, mortgages or financing
statements against the Ashley Unit Assets being sold hereunder; nor
has PGP assigned to any other party any of the Ashley Unit Assets
being sold hereunder, since acquisition of said Ashley Unit Assets
by PGP; and that PGP will warrant and forever defend title to the
Ashley Unit Assets, including the percentage working and net
revenue interests shown to be owned by such PGP on Exhibit "E",
against all persons whomsoever lawfully claiming or to claim the
same by, through, and under PGP, but not otherwise.
AI.3 Conditions of Property. Inland hereby acknowledges and
accepts that on the Closing date the equipment to be sold and
transferred by PGP to Inland will be sold in its then "as is, where
is" condition without any warranties, written or verbal, expressed
or implied, as to the condition of such equipment sold. Inland
makes no warranty as to the condition, safety, or operating
condition of the equipment sold to Inland which will survive the
date of Closing.
AI.4 Consents. PGP has obtained, as of Closing, all necessary
consents and authorizations to the transfer of the Ashley Unit
Assets and attendant rights to Inland, except for approvals
required to be obtained from governmental entities who are lessors
under leases affected by this Agreement, or who administer such
leases on behalf of such lessors, which are customarily obtained
post-closing and which the parties hereto have no reason to believe
cannot be obtained in the ordinary course of business.
AI.5 Judgments. PGP represents, covenants and warrants to
Inland, its successors and assigns, that on the Closing date there
will be no judgment, injunction, court order, or adverse
administrative ruling in existence against PGP; and that Inland
will be indemnified by PGP against any and all judgments, lawsuits,
court orders and/or administrative rulings existing, pending or
threatened against PGP arising out of PGP's actions prior to the
Closing Date.
AI.6 Preferential Rights. There is no preferential right of
any third party to purchase any of the Ashley Unit Assets, other
than preferential rights which have expired or been waived as of
the time of Closing.
AI
INDEMNIFICATION
AI.1 By Inland Production Company. Upon consummation of the
Closing, and to the extent permissible under applicable law, Inland
Production Company agrees to indemnify and hold harmless PGP, its
employees, partners, and agents from and against any and all liens,
judgments, costs, reasonable attorney's fees, and claims of any
kind or character relating to periods during which Inland
Production Company is or was the operator of the Ashley Unit
insofar as and to the extent such claims become a final non-appealable
order(s) or judgment(s) determining that Inland
Production Company's actions or failure to act caused the damages
or injuries which are the subject of such claims, including, but
not limited to claims for damages to land, stock, crops, fences,
buildings, structures, claims for personal injury to, and death of
persons, and alleged violations of any environmental laws.
9
AI.2 By POCI. Upon consummation of the Closing, and to the
extent permissible under applicable law, POCI agrees to indemnify
and hold harmless Inland, its employees, officers, directors, and
agents from and against any and all liens, judgments, costs,
reasonable attorney's fees, and claims of any kind or character
relating to periods during which POCI is or was the operator of the
Duchesne Field and/or Antelope Creek Field insofar as and to the
extent such claims become a final non-appealable order(s) or
judgment(s) determining that POCI's actions or failure to act
caused the damages or injuries which are the subject of such
claims, including, but not limited to claims for damages to land,
stock, crops, fences, buildings, structures, claims for personal
injury to, and death of persons, and alleged violations of any
environmental laws.
AI
MISCELLANEOUS PROVISIONS
AI.1 Modifications and Amendments. Any changes in the
provisions of this Agreement made subsequent to this execution
shall be made by formal written and executed amendments. It is
stipulated that oral modifications and amendments hereto shall not
be binding, and that no evidence of oral amendments or modifica-
tions shall be admissible during arbitration or adjudication.
AI.2 Governing Laws. The laws of the State of Kansas shall
govern this Agreement in proceedings in court (law and/or equity)
and proceedings in arbitration.
AI.3 Waiver. Any party's failure or delay in protesting,
taking legal action, or demanding arbitration upon the other
party's breach is no waiver of that cause of action; unless that
party's delay to take action exceeds a reasonable time under the
circumstances, exceeds a time-frame limitation set forth elsewhere
herein, or exceeds the statute of limitation. Any party's failure
or delay in protesting or taking legal and/or equitable action, or
demanding arbitration upon the other party's breach is not to be
considered as being a waiver of that party's cause of action for
any subsequent breach.
AI.4 Titles of Articles, Sections and Subsections. The titles
and subtitles of Articles, Section and Subsections of this
Agreement are for convenience only; are not part of the terms of
this Agreement; are without legal or contractual significance; and,
as such, shall not govern the terms of this Agreement or in any way
influence the interpretation of this Agreement.
AI.5 Notices. Any and all written notices hereunder shall be
delivered in person or via registered mail, return receipt
requested, postage prepaid, to the following individuals at the
following address:
PGP: PETROGLYPH ENERGY, INC.
Attn: Robert C. Murdock
6209 North Highway 61
P. O. Box 1839
Hutchinson, KS 67504-1839
FAX: 316-665-8577
10
Inland: INLAND RESOURCES INC.
Attn: Kyle R. Miller
475 17th Street, Suite 1500
Denver, CO 80202
FAX: 303-296-4070
Such agents and/or addresses may be unilaterally altered by either
party upon providing written notice thereof to the other party.
AI.6 Duplicate Originals. This Agreement shall be executed in
duplicate originals, with Inland and PGP each receiving an
original.
AI.7 Further Assurances. The parties hereby agree to execute
and to cause third parties to execute any and all documents,
leases, affidavits, releases, mortgage releases, transfers, change
of operator forms, letters in lieu of transfer orders, assignments,
bills of sale, titles, notes or the like in fulfillment of
obligations set forth herein or in furtherance of the intent hereof
or as may be necessary to assign and convey marketable title to the
Duchesne/Antelope Creek Assets to PGP or to assign and convey
marketable title to the Ashley Unit Assets to Inland.
AI.8 Agreement Subject to Laws. If any provision of this
Agreement, or the application thereof to any party or any
circumstance, shall be found to be contrary to or inconsistent with
or unenforceable under any applicable law, rule, regulation or
order, such applicable law, rule, regulation or order shall control
and this Agreement shall be deemed modified accordingly; but the
remainder of this Agreement, and the application of such provisions
to the other parties or circumstances, shall not be affected
thereby; and in all other respects, the Agreement shall continue in
full force and effect.
AI.9 Assignment. This Agreement may not be assigned by the
parties, except to affiliated entities, without the written consent
of the other party. This Agreement shall be binding the parties
hereto and their respective successors and assigns.
AI.10 Incidental Costs. Each party to this Agreement
shall bear its respective expenses incurred in connection with the
Closing of this transaction, including its own consultant's and
broker's fee, attorneys' fees, accountants' fees and other similar
costs and expenses.
AI.11 Required Financial Information. Inland agrees that,
until January 1, 1999, at PGP's cost and expense, Inland will
provide PGP and its representatives with such financial and other
information, and such access to its books and records, insofar as
such financial and other information and books and records pertains
to the Duchesne/Antelope Creek Assets, as may be necessary for PGP
to comply with any laws or governmental rules or regulations
applicable to it, in such form as is necessary to comply with any
such law, rule or regulation, including without limitation rules
and regulations of the Securities and Exchange Commission or any
successor body. Such information shall be provided to PGP or its
representatives as promptly as is reasonably practicable.
PGP agrees that, until January 1, 1999, at Inland's cost and
expense, PGP will provide Inland and its representatives with such
financial and other information, and such access to its books and
records, insofar as such financial and other information and books
11
and records pertains to the Ashley Unit Assets, as may be necessary
for Inland to comply with any laws or governmental rules or
regulations applicable to it, in such form as is necessary to
comply with any such law, rule or regulation, including without
limitation rules and regulations of the Securities and Exchange
Commission or any successor body. Such information shall be
provided to Inland or its representatives as promptly as is
reasonably practicable.
AI.12 Survival. Except as otherwise noted herein, the
representations and warranties of the parties herein and all
agreements herein shall survive the Closing and delivery of any
assignment, conveyance, or bill of sale, or other instrument
delivered at Closing. Nothing herein shall be construed as
obligating PGP to accept title to or purchase of any Asset which
does not comply with the representations and warranties contained
herein.
AI.13 Final Agreement. This Agreement constitutes the final
agreement of the parties, and supersedes any and all prior
agreements among the parties. Upon Closing of this Agreement, all
prior agreements among the parties, including without limitation
those agreements listed on Exhibit "I" attached hereto, shall
become null and void as between PGP and Inland. The unit agreement
and unit operating agreement for the Ashley Unit shall remain in
full force and effect as between Inland and the other parties to
these Ashley agreements; however, at and after Closing, these
agreements shall be of no further force and effect whatsoever with
regard to PGP, and the leasehold interests assigned by PGP within
the Ashley Unit shall be made specifically subject to the Ashley
unit agreement and the unit operating agreement for this unit, and
Inland shall assume all of PGP's responsibilities, rights,
liabilities, and obligations created by these agreements which
arise after the Effective Date. Any other agreements, contracts,
letter arrangements, or other formal or informal contracts, whether
written, oral, or existing in quantum meruit, shall be deemed
terminated, and extinguished at and as of Closing between Inland
and PGP.
AI.14 Arbitration. All claims, counterclaims, disputes,
and other matters in question arising out of or relating to this
Agreement or the breach hereof, or any transactions contemplated
hereby, will be decided by arbitration in accordance with the Rules
of the American Arbitration Association then in effect. This
agreement to arbitrate will be specifically enforceable under the
prevailing laws of any court having jurisdiction.
Notice of Demand for Arbitration must be filed in writing with
the other party to this Agreement and with the American Arbitration
Association within a reasonable time after the claim, dispute, or
other matter in question has arisen. In no event may the Demand
for Arbitration be made after the time when institution of legal or
equitable proceedings based on such claim, dispute, or other matter
in question would be barred by the applicable statute of
limitations.
Within thirty (30) days of the filing of Notice of Demand for
Arbitration, the parties shall jointly select a single arbitrator
to hear any dispute arising under this Agreement.
All arbitration proceedings shall be had in the city of Salt
Lake City, Utah. In all proceedings under this Agreement, the
12
arbitrator shall be bound by the Federal Rules of Evidence in
effect at the time of arbitration. Any award of the arbitrator
shall be in writing and shall state the findings of fact, the
conclusions of law, and the reasons for the award. A decision of
the arbitrator shall be binding.
The costs of any proceeding shall be shared equally by the
parties. Each party shall otherwise bear its own costs, including
without limitation any attorneys' fees.
IN WITNESS WHEREOF, the parties have executed this Agreement
this 25th day of August, 1995, but effective as of the 1st day of
July, 1995.
Inland: INLAND RESOURCES INC.
By: /s/ Kyle R. Miller
Name: Kyle R. Miller
Title: President
INLAND PRODUCTION COMPANY
By: /s/ Kyle R. Miller
Name: Kyle R. Miller
Title: President
PGP: PETROGLYPH GAS PARTNERS, L. P.
By: PETROGLYPH ENERGY, INC.
its general partner
By: /s/ Robert C. Murdock
Name: Robert C. Murdock
Title: President
POCI: PETROGLYPH OPERATING COMPANY, INC.
By: /s/ Robert C. Murdock
Name: Robert C. Murdock
Title: President
S:\CLIENT-I\09004\30\ASC\ASSET4.AGR
13
EXHIBIT 10.2<PAGE>
INLAND/PGP
ASSIGNMENT AND ASSUMPTION AGREEMENT,
FIRST AMENDMENT TO LOAN AGREEMENT,
AND CONFIRMATION OF DOCUMENTS
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT, FIRST AMENDMENT TO LOAN
AGREEMENT AND CONFIRMATION OF DOCUMENTS (this "Agreement") is made and entered
into as of the 19th day of September, 1995, among INLAND RESOURCES INC., a
Washington corporation, with an address of 475 - 17th Street, Suite 1500,
Denver, Colorado 80202 ("Inland"), PETROGLYPH GAS PARTNERS, L.P., a Delaware
limited partnership, with an address of 6209 N. Highway 61, Hutchinson, Kansas
67504 ("PGP"), and JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP, a
Delaware limited partnership, with an address of 1400 Smith Street, Houston,
Texas 77002 ("Lender").
Recitals
A. Inland and Lender entered into that certain Loan Agreement dated
August 24, 1994 (the "Inland Loan Agreement"), relating to a loan from Lender
to Inland of up to $7,500,000, or such lesser amount as permitted in the Loan
Agreement (the "Inland Loan"). The Inland Loan is evidenced by the following:
Production Note dated August 24, 1994 (the "Inland Production Note") in the
face amount of $1,500,000; and Development Note dated August 24, 1994 (the
"Inland Development Note") in the face amount of $6,000,000. The Inland
Production Note and the Inland Development Note are collectively referred to
herein as the "Inland Notes". All capitalized terms used herein that are not
otherwise defined herein shall have the meanings set forth for such terms in
the Inland Loan Agreement.
B. The Inland Loan Agreement and the Inland Notes are secured by the
following: (1) Deed of Trust, Mortgage, Security Agreement, Assignment of
Production and Proceeds, Financing Statement and Fixture Filing dated
August 24, 1994 (the "Inland Deed of Trust"), from Inland to David H. Little,
Esq., as Trustee, for the benefit of Lender; and (2) Security Agreement dated
August 24, 1994 (the "Inland Security Agreement"), from Inland to Lender,
covering that certain Swap Agreement dated August 4, 1994 and confirmations
thereunder (the "Inland/ERMS Swap Agreement"), between Inland and Enron Risk
Management Services Corp., now Enron Capital & Trade Resources Corp. ("ERMS").
As a material inducement to Lender to make the Inland Loan, Inland also
executed the following: (x) Assignment of Overriding Royalty Interest dated
August 24, 1994 (the "Inland Override"), whereby Inland granted Lender an
overriding royalty interest as more particularly described therein; and (y) an
ISDA Master Agreement (Price Protection Agreement) dated August 24, 1994 and
confirmations thereunder (the "Inland Price Protection Agreement") between
Inland and Lender. The Inland/ERMS Swap Agreement, the Inland Price
Protection Agreement, and the Inland Security Agreement are collectively
referred to herein as the "Inland Swap and Security Documents". The Inland
Loan Agreement, Inland Notes, Inland Deed of Trust and Inland Override,
together with any other document or agreement executed in connection with any
of the foregoing (excluding the Inland Swap and Security Documents), are
collectively referred to herein as the "Inland Documents".
C. PGP and Lender entered into that certain Loan Agreement dated
August 24, 1994 (the "PGP Loan Agreement"), relating to a loan from Lender to
PGP of up to $7,500,000, or such lesser amount as permitted in the Loan
Agreement (the "PGP Loan"). The PGP Loan is evidenced by the following:
Production Note dated August 24, 1994 (the "PGP Production Note") in the face
amount of $1,500,000; and Development Note dated August 24, 1994 (the "PGP
Development Note") in the face amount of $6,000,000. The PGP Production Note
and the PGP Development Note are collectively referred to herein as the "PGP
Notes".
1
D. The PGP Loan Agreement and the PGP Notes are secured by the
following: (1) Deed of Trust, Mortgage, Security Agreement, Assignment of
Production and Proceeds, Financing Statement and Fixture Filing dated
August 24, 1994 (the "PGP Deed of Trust"), from PGP to David H. Little, Esq.,
as Trustee, for the benefit of Lender; and (2) Security Agreement dated
August 24, 1994 (the "PGP Security Agreement"), from PGP to Lender, covering
that certain Swap Agreement dated August 4, 1994, between PGP and ERMS and
confirmations thereunder. As a material inducement to Lender to make the PGP
Loan, PGP also executed the following: (x) Assignment of Overriding Royalty
Interest dated August 24, 1994 (the "PGP Override"), whereby PGP granted
Lender an overriding royalty interest as more particularly described therein;
and (y) an ISDA Master Agreement (Price Protection Agreement) dated August 24,
1994 and confirmations thereunder (the "PGP Price Protection Agreement")
between PGP and Lender. The PGP Loan Agreement, PGP Notes, PGP Deed of Trust,
PGP Security Agreement, PGP Override, and PGP Price Protection Agreement,
together with any other document or agreement executed in connection with any
of the foregoing, are collectively referred to herein as the "PGP Documents".
E. The Inland Deed of Trust encumbers Inland's interests in certain
oil and gas leases and other property located in Duchesne County, Utah (the
"Inland Interests"). The PGP Deed of Trust encumbers PGP's interests in the
same oil and gas leases and other property as the Inland Interests (the "PGP
Interests").
F. Inland and PGP have entered into an Asset Purchase and Sale
Agreement dated effective as of July 1, 1995 (the "Purchase and Sale
Agreement"), whereby Inland has agreed to sell and PGP has agreed to buy,
inter alia, the Inland Interests. Part of the consideration for the transfer
of the Inland Interests is PGP's assumption of the obligations under the
Inland Documents.
G. As a material inducement to obtain Lender's consent to the
transaction contemplated by the Purchase and Sale Agreement, Inland and PGP
have agreed to the terms and conditions set forth in this Agreement.
Capitalized terms not otherwise defined herein shall be as defined in the
Inland Loan Agreement.
Agreement
NOW, THEREFORE, in exchange for the mutual covenants and agreements set
forth below, the sufficiency of which are hereby acknowledged by each party
hereto, Inland, PGP, and Lender hereby agree as follows:
1. Assignment and Assumption. Inland hereby conveys, transfers, and
assigns to PGP all of Inland's rights, debts, duties, and obligations in, to
and under the Inland Documents. PGP hereby assumes and agrees to discharge
all of Inland's rights, debts, duties, and obligations in and to the Inland
Documents. PGP covenants and agrees that it will not suffer or permit any
default to occur under the Inland Documents, but will faithfully observe and
perform all of the conditions, covenants, and requirements thereof in
accordance with the terms of the Inland Documents and this Agreement.
2. Consent. Lender hereby consents to the transfer of the Inland
Interests from Inland to PGP, and the assignment by Inland and assumption by
PGP of the Inland Documents and the obligations thereunder, and the
assignment to be made pursuant to paragraph 6(b) below by Inland and the
assumption by PGP of the Inland Price Protection Agreement. By a Consent
executed as of the date hereof, and attached hereto, ERMS has consented to the
assignment to be made pursuant to paragraph 6(b) below by Inland and the
assumption by PGP of the Inland Price Protection Agreement by Inland and the
assumption by PGP of the Inland/ERMS Swap Agreement and the Inland/ERMS Hedges
(as such term is defined below), all as more fully set forth in this
Agreement.
2
3. No Release. Inland expressly agrees and acknowledges that Inland
shall continue to be obligated under the Inland Documents with respect to its
own acts and omissions, pursuant to the provisions of section 8.13 of the
Inland Loan Agreement, occurring prior to the date hereof; provided, however,
that if any of the requests for required consents, waivers and approvals from
a governmental entity referred to in Section 1.11 of the Purchase and Sale
Agreement are denied relating to any of the Collateral, then the provisions of
this sentence shall relate to all acts or omissions of Inland regardless of
when they occurred. Notwithstanding the foregoing, nothing contained in this
Agreement or otherwise shall be construed as altering in any way the limited
recourse provisions of the Inland Documents.
4. Amendment to Inland Loan Agreement. The Inland Loan Agreement is
hereby amended as follows:
(a) "Borrower". The term "Borrower" in the Inland Loan Agreement
shall be deemed to mean Inland prior to the date of this Agreement, and PGP
from and after the date of this Agreement; provided, however, that references
to "Borrower" when describing the parties to a document or merger shall
continue to refer to Inland, e.g., in the definition of "Deed of Trust", the
references to "Borrower" in the fourth line shall continue to refer to Inland;
provided, further, that if any requests for required consents, waivers and
approvals from a governmental entity referred to in Section 1.11 of the
Purchase and Sale Agreement are denied relating to any of the Collateral, then
the term "Borrower" shall be deemed to mean both Inland and PGP unless and
until PGP reassigns all of the Inland Interests to Inland in accordance with
the Purchase and Sale Agreement, at which time "Borrower" in each of the
Inland Documents shall be deemed to refer to Inland only.
(b) Section 6.1(b). Section 6.1(b) is hereby amended by
inserting "(ii)" before the phrase "The Borrower" at the beginning of Section
6.1(b), and by adding the following clause at the beginning of Section 6.1(b):
"(i) An "Event of Default" (as that term is defined in the
PGP Loan Agreement) shall have occurred and is continuing; or"
(c) Section 5.7. Section 5.7 is hereby amended in its entirety
to read as follows:
"5.7 Net Worth. The Borrower will not permit its
consolidated net worth to be less than $2.0 million at any time."
(d) Section 8.1. Section 8.1 is hereby amended to add an address
for notice purposes for PGP, as the Borrower from and after the date of this
Agreement, as follows:
"Petroglyph Gas Partners, L.P.
P.O. Box 1839
Hutchinson, Kansas 67504-1839
Attention: Mr. Robert C. Murdock
Fax: (316) 665-8577"
(e) Section 8.11. The last sentence of Section 8.11 is hereby
amended in its entirety effective as of August 24, 1994, to read as follows:
"The parties agree that this Agreement, the Notes and the
rights and obligations of the parties in connection with the loan transactions
evidenced in part by this Agreement shall be construed in accordance with and
governed by the internal laws of the State of Colorado, without regard to its
principles of conflict of laws."
(f) Section 8.23. Section 8.23 is hereby amended as of the date
hereof to read in its entirety as follows:
3
"8.23 [Intentionally Left Blank]"
5. Assumption of Inland Notes. PGP hereby assumes and agrees to
discharge all of Inland's rights, debts, duties, and obligations under each of
the Inland Notes, and the term "Borrower" in each of the Inland Notes shall be
deemed to refer to PGP from and after the date of this Agreement. References
to the "Loan Agreement" in each of the Inland Notes shall be deemed to refer
to the Loan Agreement as it may be amended from time to time, including,
without limitation, as it may be amended by this Agreement; provided, however,
that if any requests for required consents, waivers and approvals from a
governmental entity referred to in Section 1.11 of the Purchase and Sale
Agreement are denied relating to any of the Collateral, then the term
"Borrower" shall be deemed to mean both Inland and PGP unless and until PGP
reassigns all of the Inland Interests to Inland in accordance with the
Purchase and Sale Agreement, at which time "Borrower" in each of the Inland
Documents shall be deemed to refer to Inland only.
6. The Inland Swap and Security Documents. PGP and Inland hereby agree
as follows:
(a) Amendment to Inland Security Agreement. The Inland Security
Agreement is hereby amended so that references to the "Loan Agreement" shall
be deemed to refer to the Loan Agreement as it may be amended from time to
time, including, without limitation, as it may be amended by this Agreement.
(b) The Swap Transactions. Inland and ERMS have a consummated
trade evidenced by a Swap Agreement (Collar) dated August 4, 1994, Contract
No. C00601.0 (the "Inland/ERMS Hedge") in connection with the Inland Loan
Agreement. Inland and Lender have consummated a trade (the "Inland/Lender
Hedge"), evidenced by a Confirmation dated August 26, 1994, Contract
No. I00001 (the "Confirmation"), under the Inland Price Protection agreement
in connection with the Inland Loan Agreement. Pursuant to separate Assignment
and Assumption Agreements dated as of the date hereof, one for each of the
Inland/ERMS Hedge and one for the Inland/Lender Hedge, Inland has assigned all
its rights, duties and obligations under such Inland/ERMS Hedge and the
Confirmation to PGP and PGP has assumed such.
7. Confirmation of Documents. Inland and PGP hereby acknowledge and
agree as follows:
(a) Confirmation of Documents. The agreements and obligations of
Inland and PGP under the Inland Documents and the Inland Swap and Security
Documents, as they may be amended by this Agreement, are hereby renewed,
reaffirmed, and ratified.
(b) No Extension of Maturity Date. Inland and PGP acknowledge
and confirm that the final maturity date for the Inland Notes is December 31,
1995. Inland and PGP also acknowledge and confirm that Lender has advised
Inland and PGP that Lender will not make any further advances under either of
the Inland Notes or the Inland Loan Agreement, and Inland and PGP consent and
agree thereto.
(c) Additional Documents. Inland, PGP, or both will execute such
other documents as Lender may reasonably request in connection with carrying
out the intent of any of the Inland Documents (the "Additional Documents").
8. Limited Waiver. (a) Lender has agreed to waive and does hereby
waive its right through October 13, 1995 to declare an Event of Default as a
result of Borrower's failure to be in compliance with the provisions of
Section 5.9 of the Inland Loan Agreement for all monthly reports due on or
before September 15, 1995 (relating to the period ending with July 1995).
Lender retains the right to declare a default at any time after October 13,
4
1995 if the monthly report of Monthly Net Cash Flow that was provided
September 15, 1995 (for May, June and July 1995) or any monthly report due
thereafter, does not satisfy the requirements of Section 5.9 of the Inland
Loan Agreement, after taking into account the 30-day period to cure any
deficiency by making an equity contribution to the Project. On or before
October 13, 1995, Borrower shall have either (i) made a cash contribution to
the Project in the amount of at least $114,804.34 in order to bring the
September 15, 1995 monthly report into compliance, or (ii) provide to Lender a
revised Monthly Net Cash Flow report in the form of Exhibit F to the PGP Loan
Agreement for the Reporting Month ending July 1995 (which report shall be
dated as of September 15, 1995) showing an equity contribution to the Project
in an amount at least equal to $114,804.34, together with a certificate of PGP
certifying as to its equity contribution in accordance with the provisions of
Section 5.9 of the PGP Loan Agreement and evidence of such equity contribution
satisfactory to Lender. Such contribution shall be evidenced by Borrower's
deposit of such sum in its segregated bank account at Sunflower Bank, N.A. and
described in Section 5.14(e) of the PGP Loan Agreement. Such cash
contribution shall be used only in accordance with the provisions of Section
5.14 of the Inland Loan Agreement. Inland and PGP hereby acknowledge and
agree that Lender's waiver in this paragraph shall in no event result in a
waiver of any defaults in existence under Section 5.9 after October 13, 1995,
nor shall this waiver in any event be construed as affecting any of Lenders'
other rights or remedies under the Inland Documents.
(b) Lender hereby agrees to release from the lien of the Deed of
Trust the following: (i) State of Utah Mineral Lease No. 43538 insofar and
only insofar as it covers the following described land: all of Section 2, T.
9 S., R. 15 E., S.L.B. & M., and (ii) the 1978 Ford LT9000 Tandem "Water
Truck" (VIN U902UAK0069), and Lender agrees to waive its right to require
Inland or PGP to mortgage its interest in the Ashley Federal Unit located in
Duchesne County, Utah and located in Sections 1, 2, 3, 10-15 and 22-27 of T. 9
S., R. 15 E., S.L.M.
(c) The foregoing waivers shall be effective solely with respect
to the matters described above and is not a waiver of any other term or
condition of the Inland Loan Agreement or of any other event or transaction,
known or unknown. Except as expressly waived hereby, all of the provisions of
the Inland Loan Agreement shall continue to be, and shall remain, in full
force and effect in accordance with their terms.
9. Waiver. Inland and PGP by this Agreement, for themselves and their
respective successors and assigns, do hereby ACQUIT, QUITCLAIM, RELEASE,
SETTLE, AND DISCHARGE, (this "release") Lender, Enron Capital & Trade
Resources Corp., Enron Capital Corp., Enron Risk Management Services Corp.
(now Enron Capital & Trade Resources Corp.), and all officers, directors,
employees and agents of any of the foregoing (collectively, the "Released
Parties) of and from any and all claims, demands, cause or causes of action,
at law or in equity, whether statutory, contractual, or in tort, as well as
any other kind or character of action, whether known or unknown, past,
present, or future, now held, or owned, or possessed, by Inland or PGP or
both, in whole or in part, or which Inland or PGP or both may hold or claim to
hold, for or on account of or growing out of, related to, or concerning,
whether directly or indirectly, proximately or remotely, any and all matters
and dealings of any nature whatsoever between Inland, PGP or both and any of
the Released Parties and relating to the Inland Documents, the Inland Swap and
Security Documents, this Agreement, and the Additional Documents, provided,
however, that this release shall apply only with respect to events or conduct
which occurred prior to the date hereof; and provided further, this release
shall not affect or impair any obligation of Lender to make payments under the
terms of the Inland Price Protection Agreement or the obligation of ERMS to
make payments under the terms of the Inland/ERMS Swap Agreement. Without
limiting the foregoing, this release shall include the following matters:
5
This Agreement, the Inland Documents, the Inland Swap and
Security Documents, the Additional Documents, and all other documents entered
into in connection herewith, and all other documents entered into in
connection with any of the foregoing (all of the foregoing agreements are
hereafter referred to as the "Agreements"), and the negotiations between
Inland, PGP, or both and any of the Released Parties and the decisions by any
of the Released Parties as to whether or not to advance additional funds under
the Inland Documents.
Except as limited hereinabove, the release is intended to release all
liability of any character claimed for damages, of any type or nature, for
injunctive or other relief, for attorney's fees, interests or any other
liability whatsoever, whether statutory, or contract, or tort in character, or
of any other nature or character, now or henceforth in any way related to any
and all matters and dealings of any nature whatsoever asserted or assertable
by Inland, PGP, or both against any of the Released Parties, including,
without limitation, any loss, cost, or damage in connection with, or based
upon, any breach of fiduciary duty, breach of any duty of fair dealing or good
faith, breach of confidence, breach of funding commitment, breach of any other
duty or obligation, breach of any statutory right, usury, undue influence,
duress, economic coercion, conflict of interest, negligence, bad faith,
malpractice, violations of the Racketeer Influenced and Corrupt Organization
Act, intentional or negligent infliction of mental distress, tortious
interference with contractual relations or other prospective business
advantage, breach of contract, deceptive trade practices, libel, slander,
conspiracy, or any other cause of action.
Inland and PGP each hereby certify that in respect of this release each
such party is not relying on any statement, representation, warranty,
covenant, or agreement by any of the Released Parties except to the extent set
forth herein and in the other documents executed in connection with this
Agreement. Inland and PGP understand and agree that this is a full, final,
and complete release, and agree that this release may be pleaded as an
absolute and final bar and defense to any or all suit or suits pending or
which may hereafter by filed or prosecuted by Inland, PGP, or both in respect
of any of the matters released hereby, and that no recovery on account of the
matters described herein may hereafter be had for anyone whomsoever, and that
the consideration given for this release is not an admission of liability and
that neither Inland nor PGP nor those claiming under any of such parties will
ever claim that it is.
10. Representations and Warranties. Inland and PGP each hereby
represent and warrant with respect to itself as follows:
(a) Existence. Inland is a corporation duly organized, legally
existing, and in good standing under the laws of the State of Washington, and
is duly qualified as a foreign corporation to do business in the States of
Colorado and Utah. PGP is a limited partnership, duly organized, legally
existing, and in good standing under the laws of the State of Delaware, and is
duly qualified as a foreign limited partnership in the States of Kansas and
Utah.
(b) Authorization. Inland has all necessary corporate power and
authority to execute, deliver, and perform its obligations under this
Agreement and the Additional Documents, and the execution, delivery, and
performance by Inland of this Agreement and the Additional Documents has been
duly authorized by all necessary corporate action. PGP has all necessary
partnership power and authority to execute, deliver, and perform its
obligations under this Agreement and the Additional Documents, and the
execution, delivery, and performance by PGP of this Agreement and the
Additional Documents has been duly authorized by all necessary partnership
action.
6
(c) Binding Obligations. This Agreement and the Additional
Documents constitute the legal, valid and binding obligations of both Inland
and PGP enforceable in accordance with their terms (except that enforcement
may be subject to any applicable bankruptcy, insolvency, or similar laws
generally affecting the enforcement of creditors' rights).
(d) No Legal Bar or Resultant Lien. The execution, delivery, and
performance by Inland and PGP of this Agreement and the Additional Documents
do not and will not violate any provisions of their respective organizational
documents, or any contract, agreement, instrument, or Governmental Requirement
to which each is a party or is subject, or result in the creation or
imposition of any Lien upon any Properties of Inland or PGP, other than those
provided for in this Agreement or the Additional Documents.
(e) No Consent. The execution, delivery, and performance by
Inland and PGP of this Agreement and the Additional Documents does not require
the consent or approval of any other Person which has not been obtained,
including without limitation any regulatory authority or governmental body of
the United States of America or any state thereof, or any political
subdivision of the United States of America or any state thereof, or any
tribal authority.
(f) Purchase and Sale Agreement. Attached hereto as Exhibit A is
a true, correct and complete copy of the Purchase and Sale Agreement, and
there are no amendments or waivers relating to the Purchase and Sale Agreement
except as included in Exhibit A.
11. Conditions Precedent. The agreements and amendments provided for
in this Agreement shall not become effective until Lender has received the
following:
(a) A counterpart hereof duly executed by each of Inland and PGP;
(b) A counterpart of the executed Assignment, Bill of Sale and
Conveyance and Assumption of Lien dated effective as of July 1, 1995 (the
"Assignment") from Inland to PGP and relating, in part, to the Collateral,
together with evidence satisfactory to the Lender that the transactions
provided for in the Purchase and Sale Agreement have been consummated;
(c) An opinion of Morris, Laing, Evans, Brock & Kennedy,
Chartered, counsel for PGP in form and substance acceptable to Lender and
covering such matters as may be requested by Lender;
(d) Copies of the letters-in-lieu of transfer and division orders
to be provided by Inland pursuant to Section 1.8 of the Purchase and Sale
Agreement;
(e) Copies of title opinions or other evidence of Inland's title
to be provided pursuant to Section 1.10 of the Purchase and Sale Agreement;
and
(f) Payment by PGP of Lender's fees and expenses incurred in
connection with the negotiation, preparation and execution of this Agreement
and the Additional Documents and all documents and agreements executed in
connection with any of the foregoing, and one-half of the environmental fees
pursuant to an invoice dated August 30, 1994, up to the total amount of
$16,000; provided, however, that the $16,000 cap shall not apply to fees and
expenses incurred by Lender in connection with the Inland Loan after the
execution of this Agreement.
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12. Conditions Subsequent.
(a) If any of the requests for required consents, waivers and
approvals from a governmental entity referred to in Section 1.11 of the
Purchase and Sale Agreement are denied relating to any of the Collateral,
(i) Inland and PGP agree to take whatever action is
necessary or advisable, in Lender's sole judgement, for such party within a
practicable amount of time, but in no event later than thirty (30) days after
the date of such denial: (A) to protect and perfect Lender's lien and
security interest granted under the Inland Documents, including without
limitation the Inland Deed of Trust and the Inland Security Agreement, and
(B) to have the owner of all or any portion of the Collateral assume and
confirm its obligations under the Inland Documents with respect to such
portion of the Collateral.
(ii) Lender agrees to reasonably cooperate with PGP and
Inland to effect the following: (A) an assignment by PGP and an assumption by
Inland, on terms and conditions reasonably satisfactory to Lender, of the
Inland Documents, the Inland/Lender Hedge (including without limitation the
Confirmation), the Inland/ERMS Hedge, and the Inland Security Agreement, in
order to effectively reverse the provisions of paragraphs 1, 5 and 6(b) of
this Agreement; and (B) an amendment or amendments to the Inland Documents to
effectively delete the changes made in paragraph 4(a), (b), (c), (d) and (f)
of this Agreement, and return the sections of the Inland Documents affected by
those changes to their form immediately prior to execution of this Agreement;
provided, that the agreement of Lender shall not be enforceable unless and
until PGP has reassigned title to all of the Inland Interests to Inland in
accordance with the terms of the Purchase and Sale Agreement.
(b) If any of the requests for required consents, waivers and
approvals from a governmental entity referred to in Section 1.11 of the
Purchase and Sale Agreement are denied relating to any of the Collateral, or
if either Inland or PGP fails to comply with the provisions of paragraph 12(a)
within the time period specified therein, Lender shall also have the right to
declare an Event of Default under the Inland Documents if, in Lender's
judgement, the effect of the occurrence of such condition may cause a
Material Adverse Property Effect (as applied to either Inland or PGP).
(c) PGP shall provide a written report to Lender by the 5th day
of each month, commencing October 15, 1995, as to the status of the approvals
and other conditions subsequent referred to in Section 1.11 of the Purchase
and Sale Agreement, including without limitation, status of the approval of
the Assignment by the Bureau of Indian Affairs until all such approvals and
other conditions subsequent have been satisfied.
(d) PGP hereby agrees within thirty days from the date hereof to
do each of the following:
(i) Grant a lien on and security interest in all oil and
gas leases and other lands or in interests acquired at any time by PGP in the
Project Area, including, without limitation, the interests being acquired by
PGP from Inland pursuant to the Purchase and Sale Agreement, to or for the
benefit of Lender, such grant to be in form and substance acceptable to
Lender:
(ii) Provide Lender with sufficient information to satisfy
Lender regarding any discrepancies in the Net Revenue Interests ("NRI")
between the NRI shown in the Deed of Trust and the NRI shown in the Purchase
and Sale Agreement for the same lease or other property;
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(iii) Execute and deliver an amendment to the Deed of Trust
to correct the discrepancies in the lease descriptions in the Deed of Trust
from the description in the Purchase and Sale Agreement, together with any
other discrepancies or errors that are subsequently identified;
(iv) Provide Lender with one or more opinions as to the due
execution, authorization, and enforceability of the amendment to the Deed of
Trust and the grant of a lien and security interest pursuant to clauses (i)
and (iii) above, together with such other matters as Lender may reasonably
require, provided, however, that Lender shall not require opinions as to title
to any of the interests so encumbered pursuant to clause (i) above, except as
may otherwise be permitted under the terms of the Inland Loan Agreement at a
future time.
(e) Payment by PGP of $125,000 on or before November 1, 1995, to
be applied to repayment of principal on the Inland Loan, in consideration of
Lender's agreement to release Collateral as set forth in paragraph 8(b) above.
13. Amendment and Waivers. Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and
is signed by PGP and the Lender. Any waiver shall be effective only in the
specific instance and for the specific purpose for which given.
14. Successors and Assigns. All covenants and agreements contained by
or on behalf of Inland or PGP under this Agreement shall bind their respective
successors and assigns and shall inure to the benefit of the Lender and its
successors and assigns. Neither Inland nor PGP, however, shall have the right
to assign their respective rights under this Agreement or any interest herein
without the prior written consent of the Lender. The Lender may, without the
consent of either Inland or PGP, sell, assign, transfer, pledge, grant a
security interest in, and grant participations in all or any portion of its
interest under this Agreement, but the Lender agrees that at all times the
Lender or an Affiliate of Enron Corp. will have and exercise the
decision-making responsibility for making future advances on the Inland Notes
without the prior written consent of PGP.
15. Governing Law. This Agreement shall be construed in accordance
with and governed by the internal laws of the State of Colorado (without
regard to principles of conflict of laws).
16. Counterparts. This Agreement may be executed in two or more
counterparts, and its shall not be necessary that the signatures of all
parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be
duly executed as of the date first above written.
INLAND RESOURCES INC.,
a Washington corporation
By: Kyle R. Miller
President
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PETROGLYPH GAS PARTNERS, L.P.,
a Delaware limited partnership
By: PETROGLYPH ENERGY INC.,
a Kansas corporation,
as General Partner
By: Robert G. Murdock
President
JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP,
a Delaware limited partnership
By: ENRON CAPITAL CORP.,
a Delaware corporation,
as General Partner
By: Clifford Hickey
Vice President
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EXHIBIT A
(Purchase and Sale Agreement dated as of July 1, 1995, between Inland
and PGP)
11
CONSENT
(Attached to and made a part of that certain Assignment and Assumption
Agreement, First Amendment to Loan Agreement and Confirmation of Documents
(the "Agreement"))
All capitalized terms used in this Consent that are not otherwise
defined herein shall have the meanings set forth for such terms in the
Agreement. Enron Capital & Trade Resources Corp. hereby joins in the
foregoing Agreement for the sole purpose of consenting to the assignment made
pursuant to paragraph 6(b) of the Agreement by Inland and assumption by PGP of
the Inland/ERMS Hedge, all as more fully set forth in the Agreement.
ENRON CAPITAL & TRADE RESOURCES CORP.,
a Delaware corporation
By: Clifford Hickey,
Vice President
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