REPRESENTATIONS AND WARRANTIES
RE: SALE OF PETROGLYPH ENERGY, INC. COMMON STOCK
Pursuant to the Letter Agreement dated July 29, 1999, by and among
Intermountain Industries, Inc. or its designee and ▇▇▇▇▇ Income Trust, ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
III, Natural Gas Partners, L.P., Natural Gas Partners II, L.P., and Natural Gas
Partners 111, L.P. (each a "NGP Selling Shareholder"), the Letter Agreement
dated August 13, 1999, by and between Purchaser arid ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇▇▇▇," and together with the NGP Selling Shareholders, the "Selling
Shareholders") the undersigned parties make the following representations and
warranties:
I. Representations and Warranties of Selling Shareholders
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Selling Shareholders hereby make the following representations and
warranties attributed to each of them below to Intermountain Industries, Inc.
and III Exploration, Inc., its subsidiary and the designee provided for by the
Letter Agreements (together, the "Purchaser'). These representations and
warranties are material inducement for the Purchaser to purchase all the
Petroglyph Energy, Inc. ("Petroglyph" or the Corporation") voting stock issued
and outstanding in the name of each of the Selling Shareholders, as described by
Exhibit A attached hereto and incorporated by this reference (the "Shares"),
which Shams in the aggregate represent a -majority of the Petroglyph voting
stock currently outstanding.
A. Representations and Warranties by All Selling Shareholders. Each Selling
Shareholder hereby represents and warrants, severally for (itself)(himself), to
the Purchaser as follows.
1. SEC Filings. Such Selling Shareholder has no actual knowledge, after
having conducted reasonable inquiry in the circumstances, that any of
Petroglyph's reports, schedules, statements, and other documents filed with the
Securities and Exchange Commission under the requirements of the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended, are
incomplete or misleading in any material respect as of the respective dates
thereof.
2. Environmental Matters. Such Selling Shareholder has no actual knowledge
contrary in any material respect to the discussion under -the heading
"Environmental Matters" in the Corporation's consolidated financial statements
dated December 31, 1998, and filed with the SEC to the effect that (a) there is
no pending or threatened claim of any violation of any federal, state or local
law or regulation relating to environmental protection, including but not
limited to the generation, storage, handling, emission, transportation or
discharge of materials into the environment or relating to safety or health, (b)
the Corporation is in substantial compliance with current applicable
environmental laws and regulations, and (c) the Corporation has no material
commitments for capital expenditures to comply with existing environmental
requirements.
3. Company Operations and Financial Statements. None of the Selling
Shareholders has any actual knowledge, after having conducted reasonable inquiry
in the
circumstances, that (a) since December 31, 1998, Petroglyph's operations have
materially changed from the pattern of its operations prior to that date in
terms of indebtedness or material contracts, or (b) since December 31, 1998,
Petroglyph's capitalization has materially changed from its capitalization prior
to that date in terms, of classes of stock, warrants, stock options and other
stock rights that could affect the acquisition of the Shares or voting control
by the Purchaser.
4. Due Authorization. Such Selling Shareholder has taken all corporate,
partnership and other applicable action required for authorization of the sale
of such Selling Shareholder's Shams on the terms of the applicable Letter
Agreement referred to above, and has the legal right to sell such Shares free
and clear of all liens, claims and encumbrances (other than restrictions, if
any, on transfer of the Shares arising under applicable securities laws).
5. Ownership and Title to Shares. Such Selling Shareholder has, and upon
purchase thereof by Purchaser as provided in the applicable Letter Agreement
referred to above, Purchaser will have, good and marketable title to the Shares
set forth opposite the name of Selling Shareholder on Exhibit A hereto, free and
clear of all security interests, liens, encumbrances, or other restrictions on
transfer, subject only to restrictions as to marketability imposed by securities
laws and those that may arise by virtue of any actions taken by or on behalf of
Purchaser or its affiliates.
6. Securities Law Representations. Such Selling Shareholder (a) is not in
the business of selling securities, (b) has not solicited any purchasers for the
We of or offered for sale to anyone other than Purchaser, the Shares to be sold
hereunder, and (c) has held the Shares to be sold hereunder for a period of at
least one year prior to the execution of this instrument,
B. Representations and Warranties by Certain Selling Shareholders.
Each of ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ Income Trust and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
represents and warrants, severally for himself, that to his actual knowledge
after having conducted reasonable inquiry in the circumstances:
1. Organization and Corporate Power. The Corporation is a corporation duly
incorporated and validly existing under the laws of the state of Delaware and
the Corporation is qualified to do business in every jurisdiction in which its
ownership of property or conduct of business requires it to qualify, except
where the failure to be so qualified would not have a material adverse effect on
the Corporation and its subsidiaries, taken as a whole. The Corporation has all
requisite corporate power and authority and all material licenses, permits, and
authorizations necessary to own and operate its properties and to carry on its
business as now conducted.
2. Capital Stock and Related Matters. The authorized capital stock of the
Corporation consists of 25,000,000 shares of common stock, $-01 par value,
5,458,333 of which are issued and outstanding. The Corporation does not have
outstanding and has not agreed, orally or in writing, to issue any stock or
securities convertible or exchangeable for any shares of its stock, nor does it
have outstanding nor has it agreed, orally or in writing, to issue any options
or rights to purchase or otherwise acquire its stock, except as disclosed by
Petroglyph's most
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recent I O-K, I O-Q or proxy statement on file with the Securities Exchange
Commission or as described in Exhibit B attached hereto and incorporated by this
reference. The Corporation is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its stock.
The Corporation has not violated any applicable securities laws or regulations
in connection with the offer or sale of its securities. All of the outstanding
shares of the Corporation's capital stock are validly issued, fully paid, and
nonassessable.
3. Subsidiaries. Except for Rio Cucharas Pipeline Company, Inc., Petroglyph
Operating Company, Inc. and Spanish Peaks Limited Liability Company, the
Corporation does not own or hold any rights to acquire any shares of stock or
any other security or interest in any other corporation or entity.
4. No Undisclosed Liabilities. Neither the Corporation nor any of the
property of the Corporation is subject to any material liability or obligation
that was required to be included or adequately reserved against in the December
31, 1998 ("Statement Date") Financial Statements or described in the notes
thereto that was not so included, reserved against, or described.
5. Absence of Certain Changes. Except as contemplated or permitted by the
Letter Agreements or as described in Petroglyph's most recent I O-K or I O-Q on
file with the Securities Exchanged Commission or as described in Exhibit C,
since the Statement Date there has not been:
(a) Any material adverse change in the business, financial condition,
operations, or assets of the Corporation;
(b) Any damage, destruction, or loss, whether covered by insurance or not
materially adversely affecting the properties or business of the Corporation;
(c) Any sale or transfer by the Corporation of any material tangible or
intangible asset other than in the ordinary course of business, any mortgage or
pledge or the creation of any security interest, lien, or encumbrance on any
such asset, or any lease of property, including equipment, other than tax liens
with respect to taxes not yet due and contract rights of customers in inventory;
(d) Any declaration, setting aside, or payment of a distribution in respect
of or the redemption or other repurchase by the Corporation of any stock of the
Corporation;
(e) Any material transaction not in the ordinary course of business of the
Corporation;
(f) The lapse of any material trademark, assumed name, trade name, service
mark, copyright, or license or any application with respect to the foregoing;
(g) The grant of any increase in the compensation of officers or employees
(including any such increase pursuant to any bonus, pension, profit-sharing, or
other plan) other than customary increases on a periodic basis or required by
agreement or understanding in the
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ordinary course of business and in accordance with past practice and other than
liabilities under severance agreements arising as a result of the change in
control of the Corporation occurring pursuant to the transactions contemplated
herein;
(h) The discharge or satisfaction of any material lien or encumbrance or
the payment of any material liability other than current liabilities in the
ordinary course of business;
(i) The making of any material loan, advance, or guaranty to or for the
benefit of any person except the creation of accounts receivable in the ordinary
course of business; or
(j) An agreement to do any of the foregoing.
6. Litigation. Except as set forth in Petroglyph's most recent I O-K or I
O-Q on file with the Securities Exchanged Commission or as described in Exhibit
D, there are no material actions, suits, proceedings, orders, investigations, or
claims pending or overtly threatened against the Corporation or any of its
property, at law or in equity, or before or by any governmental department,
commission, board, bureau, agency, or instrumentality; the Corporation is not
subject to any arbitration proceedings under collective bargaining agreements or
otherwise or any governmental investigations or inquiries.
7. Tax Matters. Except as set forth in Petroglyph's most recent I O-K or I
O-Q on file with the Securities Exchanged Commission or as described in Exhibit
E, (a) the Corporation has prepared in a substantially correct manner and has
filed all federal, state, local, and foreign tax returns and reports heretofore
required to be filed by it and has paid all taxes shown as due thereon; and (b)
no taxing authority has asserted any deficiency in the payment of any tax or
informed the Corporation that it intends to assert any such deficiency or to
make any audit or other investigation of the Corporation for the purpose of
determining whether such a deficiency should be asserted against the
Corporation.
8. Compliance with Laws. The Corporation is, in the conduct of its
business, in substantial compliance with all laws, statutes, ordinances,
regulations, orders, judgments, or decrees applicable to them, the enforcement
of which, if the Corporation was not in compliance therewith, would have a
materially adverse effect on the business of the Corporation, taken as a whole.
Neither any Selling Shareholder nor the Corporation has received any notice of
any asserted present or past failure by the Corporation to comply with such
laws, statutes, ordinances, regulations, orders, judgments, or decrees.
9. No Brokers. There are no claims as a result of any actions of the
Selling Shareholders for brokerage commissions, finders' fees, or similar
compensation owing or that at Closing will arise connection with the purchase
and sale of the Shares.
10. Third Party Agreements. The Corporation is not in default under any
material agreement with any third puny that would have a materially adverse
effect on the business of the Corporation, taken as a whole, nor does there
exist any event that, with notice or the passage of time or both, would
constitute such a default.
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11. Antelope Creek. Petroglyph has entered into a letter of intent to
acquire at a price not to exceed $6.9 million from the ▇▇▇▇▇▇▇▇ Cos., Inc. or
its affiliate ("▇▇▇▇▇▇▇▇") all of the ▇▇▇▇▇▇▇▇ right, title and interest in the
Antelope Creek Properties, that is, the 50% nonoperating working interest in
such properties not currently owned by Petroglyph.
II. Representations and Warranties of Purchaser.
--------------------------------------------
Purchaser hereby makes the following representations and warranties to
the Selling Shareholders.
1. No Solicitation; Independent Investigation. Purchaser hereby
acknowledges and affirms that it is not purchasing the Shares as a result of any
general solicitation by the Corporation through an advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media broadcast, over television or radio, or any presentation at any seminar or
meeting, or other general similar solicitation by a person not previously know
by Purchaser. Purchaser has completed its own independent investigation,
analysis, and evaluation of the Corporation, that it has made all such reviews
and inspections of the business, assets, results of operations, condition
(financial or otherwise), and prospects of the Corporation as it has deemed
necessary or appropriate, and that in making its decision to enter into tills
Agreement and to consummate the transactions contemplated hereby it has relied
solely on (i) its own independent investigation, analysis, and evaluation of the
Corporation and (ii) the representations and warranties of the Selling
Shareholders set forth herein.
2. Investment Intent. Purchaser is acquiring the Shares 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, except (i) in an
offering covered by a registration statement filed with the Securities and
Exchange Commission under the Securities Act covering the Shares or (ii)
pursuant to an applicable exemption under the Securities Act- In acquiring the
Shares Purchaser is not offering or selling, and will not offer or sell, for the
Corporation in connection with any distribution of the Shares, and Purchaser
does not have a participation and will not participate in any such undertaking
or in any underwriting of such an undertaking except in compliance with
applicable federal and state securities laws.
3. Disclosure of Information. Purchaser acknowledges that it or its
representatives have been furnished with substantially the same kind of
information regarding the Corporation and its business, assets, results of
operation, and financial condition as would be contained in a registration
statement prepared in connection with a public sale of the Shares. Purchaser
further represents that it has had an opportunity to ask questions of and
receive answers and requested information from the Corporation regarding the
Corporation and its business, assets, results of operation, and financial
condition and the terms and conditions of the issuance of the Shares and has
carefully reviewed and considered the same. The foregoing, however, shall not
limit or modify the representations and warranties in Paragraph 1, shall not
limit the rights of Purchaser prior to and in anticipation of any issuance of
the Shares pursuant hereto, and shall not limit the disclosure requirements of
applicable federal and state securities laws.
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4. Investment Experience. Purchaser is an "accredited investor" as such
term is defined in Regulation D under the Securities Act and meets the investor
suitability standards imposed by applicable state securities laws, Purchaser can
bear the economic risk of its investment in the Shares, including a complete
loss of its investment in the Shares, for an indefinite period of time.
Purchaser has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of an investment in the
Shares, Purchaser represents that it has not been organized for the purpose of
acquiring the Shares.
5. Restricted Securities. Purchaser understands that the Shares will not
have been registered pursuant to the Securities Act or any applicable state
securities laws, that the Shares will be characterized as "restricted
securities" under federal securities laws, and that under such laws and
applicable regulations the Shares cannot be sold or otherwise disposed of
without registration under the Securities Act or an exemption therefrom. Stop
transfer instructions may be issued to the transfer agent for securities of the
Corporation (or a notation may be made in the appropriate records of the
Corporation) in connection with the Shares. It is agreed and understood by
Purchaser that the certificates representing the Shares shall bear a legend
referring to such restrictions.
III. Miscellaneous.
--------------
1. Survival of Representations and Warranties. All of the representations
and warranties of the parties contained herein or in any certificate,
instrument, or document delivered pursuant hereto shall expire and be terminated
and extinguished on the first anniversary of the date hereof.
2. Liability of Selling Shareholders. It is specifically acknowledged and
agreed by the parties that none of the Selling Shareholders nor any shareholder,
partner, director, officer,, employee, or affiliate of such party shall have any
liability whatsoever pursuant hereto with respect to any representation or
warranty made to Purchaser in excess of the purchase price received by such
Selling Shareholder from the sale of the Shares set forth opposite the name of
such Selling Shareholder on Exhibit A hereto.
3. Payment of Fees and Expenses. All fees and expenses, including fees and
expenses of counsel, incurred in connection with this agreement and the
transactions contemplated hereby shall be paid by the party incurring such fee
or expense, whether or not the closing of the purchase of the Shares shall have
occurred.
4. NGP Representative. Each of the NGP Selling Shareholders hereby
irrevocably appoints Natural Gas Partners, L.L.C. ("NGP'), as agent for the NGP
Selling Shareholders hereunder, and grants an irrevocable Power of Attorney to
NGP to act on behalf of each of the Sellers to (i) deliver the Shares to the
Buyer, (ii) provide notices and instructions to the Corporation's transfer
agent, (iii) collect the purchase price payable to the NOP Selling Shareholders,
and (iii) approve any amendment, waiver or extension of the terms of the
Agreement.
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5. Extension of Agreement. The parties hereto agree that the expiration
date of the Letter Agreement dated July 29, 1999 referred to above, shall be
extended from August 15, 1999 to August 18, 1999.
6. Counterparts. This instrument may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument.
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In witness whereof, the parties have executed and delivered this instrument
this 18th day of August, 1999.
Selling Shareholders
Natural Gas Partners, ▇.▇. ▇▇▇▇▇ Income Trust
By: G.F.W. Energy, L.P., general partner
By: /s/ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------- --------------------------
▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, General Partner ▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustee
Natural Gas Partners II, L.P.
By: G.F.W. Energy II, L.P., general partner
By: GFW II, L.L.C., general partner /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Authorized Member
/s/ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------
▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Natural Gas Partners III, L.P.
By: G.F.W. Energy III, L.P., general partner
By: GFW III, L.L.C., general partner
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Authorized Member
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
--------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
8
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
Purchaser
III Exploration, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
Schedule of Exhibits
Exhibit A Petroglyph Energy, Inc. voting stock issued and outstanding in
the name of each of the selling Shareholders.
Exhibit B Outstanding stock or option or rights to purchase stock.
Exhibit C Absence of certain changes.
Exhibit D Pending litigation.
Exhibit E Tax matters.
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Exhibit A
Petroglyph Energy, Inc. voting stock issued and outstanding
-----------------------------------------------------------
in the name of each of the Selling Shareholders
-----------------------------------------------
Selling Shareholder Number of Shares
------------------- ----------------
Natural Gas Partners, L.P.................................... 1,137,883
Natural Gas Partners 11, L.P................................. 648,920
Natural Gas Partners 111, L.P................................ 28,291
▇▇▇▇▇ Income Trust........................................... 50,000
▇▇▇▇▇ ▇. ▇▇▇▇▇ (as nominee for ▇▇▇▇▇ Income Trust)........... 52,220
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇......................................... 96,043
▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇............................................ 17,407
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇............................................. 13,055
▇▇▇▇ ▇. ▇▇▇▇▇▇............................................... 8,703
▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇ III.......................................... 870
---------
Total Shares 2,753,392
=========
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Exhibit B
Outstanding stock or options or rights to purchase stock.
---------------------------------------------------------
All outstanding options and warrants are described in the Corporation's proxy,
10K and 10Q.
11
Exhibit C
Absence of certain changes.
During the second quarter of 1999, the Company successfully completed the sale
of its Utah and Texas compression assets for net proceeds of $1,475,000.
On August 15, 1998, a down-hole logging tool was lost in one of the Company's
▇▇▇▇▇, 28-02D4. The third party service provider is currently in negotiations
with the Company's insurer and it is expected that substantially all of the
loss, net of deductibles, will covered by insurance.
In lieu of receiving severance benefits pursuant to an existing severance
arrangement, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ will be discharged from any liability under
that certain Promissory Note, dated December 31, 1998, of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
in favor of the Company.
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Exhibit D
Pending litigation.
-------------------
None other than as disclosed.
13
Exhibit E
Tax matters.
------------
None.
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Exhibit C
Absence of certain changes.
---------------------------
During the second quarter of 1999, the Company successfully completed the sale
of its Utah and Texas compression assets for net proceeds of $1,475,000.
On August 15, 1998, a down-hole logging tool was lost in one of the Company's
▇▇▇▇▇ 2802D4. The third party service provider is currently.-in negotiations
with the Company's insurer and it is expected that substantially all of the
loss, net of deductibles, will covered by insurance,
In lieu of receiving severance benefits Pursuant to an existing severance
arrangement, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ will be discharged from any liability under
that certain Promissory Note, dated December 31, 1998. of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
in favor of the Company.
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