EXHIBIT 99.(IV)
March 4, 1997
Horizon Gas Partners, L.P., and
HSRTW, Inc.
Horizon Natural Resources
0000-X Xxxx 00xx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxx, President
RE: Offer to Purchase Certain Oil and Gas Properties
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Dear Xx. Xxxx:
This letter when accepted shall confirm the agreement between Horizon Gas
Partners, L.P., and HSRTW, Inc. ("Seller"), and Gothic Energy Corporation, an
Oklahoma corporation ("Buyer"), with respect to Seller's sale to Buyer of those
oil and gas properties described below, including all undeveloped oil and gas
leasehold acreage corresponding to all such xxxxx.
1. Sale and Purchase. For good and valuable consideration and subject to
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and in accordance with the terms and conditions of this Agreement, Seller hereby
agrees to sell and convey to Buyer and Buyer agrees to purchase and acquire from
Seller all of Seller's right, title and interest in and to the xxxxx, lands and
leasehold interests described in Exhibit "A" hereto, including, without
limitation, mineral interests, overriding royalty interests, all undeveloped oil
and gas leasehold acreage, acreage comprising the spacing unit for such xxxxx,
and well facilities and equipment used in conjunction with such xxxxx to the
extent such interests are owned by or allocable to Seller, specifically
including all operating and other contract rights associated with such xxxxx
(collectively the "Properties").
2. Effective Time. The effective time of the sale and purchase
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contemplated by this Agreement shall be January 1, 1997, at 7:00 a.m. Central
Standard Time (the "Effective Time"). Unless otherwise provided in this
Agreement, Buyer shall be entitled to any amounts realized from and accruing to
the Properties which are attributable to periods of production on and after the
Effective Time and shall be responsible for all expenses for the development and
operation of the Properties attributable to periods on and after the Effective
Time. Seller shall be entitled to all amounts realized from and accruing to the
Properties which are attributable to periods of production prior to the
Effective Time and shall be responsible for all expenses for the development and
operation of the Properties attributable to periods prior to the Effective Time.
3. Closing. Unless extended by mutual written agreement of the parties,
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the closing of the sale and purchase contemplated by this agreement shall occur
on or before February 14, 1997 (the "Closing"), in the offices of Buyer, located
at 0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx, or at such other place
as may be agreed on by the parties.
4. Purchase Price. Subject to adjustments as provided in this Agreement,
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the purchase price payable by Buyer for the Properties shall be $10,000,000 (the
"Purchase Price"), which sum shall be allocated among the Properties and the
well equipment and other personalty (the "Personalty") as set forth in Exhibit
"A" (the "Allocated Values") and shall be fully payable by Buyer at Closing.
5. Access to Information. From and after the date of Seller's acceptance
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of this Agreement, Buyer shall be allowed, at its expense, to examine in
Seller's offices or such other place where pertinent records are maintained, all
land, tax, legal, contract, production, engineering, geological, geophysical,
accounting and revenue, and any other files
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March 4, 1997
Page 2
or data, including computer retained data, relating to the Properties, to verify
title and economics. Buyer shall be entitled to all original files relating to
the Properties at Closing.
6. Title Review. Buyer shall have until February 1, 1997, or fifteen
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(15) days prior to closing (the "Title Review Period") within which to conduct
title due diligence with respect to the Properties whether through the
examination of lease files, abstracts, xxxxxxx'x ownership reports or physical
inspection of the documents indexed against the Properties. If the records or
materials furnished to or examined by Buyer reflect the existence of any
discrepancy in working or net revenue interests or any material encumbrance,
encroachment or defect in title that renders title to all or any portion of the
Properties, less than defensible, and which Buyer does not waive (the "Title
Defects"), written notice of such specific Title Defects shall be given by Buyer
to Seller on or before expiration of the Title Review Period. No matter shall be
construed as a Title Defect unless so construed under generally accepted oil and
gas industry title examination standards for the State of Oklahoma, but Title
Defects shall specifically include any preferential right to purchase which is
exercised or outstanding. If Title Defects shall be timely asserted by Buyer,
Seller may but shall not be obligated to make reasonable efforts to cure all
such title defects at Seller's sole expense prior to closing. With respect to
any Title Defect which remains uncured forty-eight (48) hours prior to Closing,
then (i) Buyer shall propose an adjustment to the Purchase Price (which shall
not exceed the Allocated Value of the affected Property) which Buyer believes
represents the difference between the Allocated Value and the true value given
the existence of the unresolved Title Defect, (ii) Seller may accept Buyer's
proposed adjustment to the Purchase Price or may negotiate with Buyer a lesser
adjustment to the Purchase Price, and (iii) if Seller and Buyer cannot agree
upon a reduced Purchase Price, the Property affected by the Title Defect shall
not be sold to Buyer, but shall be retained by Seller and the Purchase Price
shall be reduced by the Allocated Value assigned to such Property in Exhibit "A"
hereto. In the event that the Purchase Price shall be reduced by ten percent
(10%) in the aggregate, Seller may at its option terminate this agreement, and
each party hereto shall bear its own costs connected therewith.
7. Environmental. Buyer shall have until February 1, 1997, or fifteen
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(15) days prior to closing (the "Environmental Review Period"), within which to
conduct environmental due diligence with respect to the Properties. If
environmental defects shall be timely asserted by Buyer, Seller may but shall
not be obligated to make reasonable efforts to cure all such environmental
defects at Seller's sole expense prior to closing. With respect to any
environmental defect which remains uncured forty-eight (48) hours prior to
Closing, then (i) Buyer shall propose an adjustment to the Purchase Price (which
shall not exceed the allocated value of the affected property) which Buyer
believes represents the difference between the allocated value and the true
value given the existence of the unresolved environmental defect; (ii) Seller
may accept Buyer's proposed adjustment to the Purchase Price or may negotiate
with Buyer at a lesser adjustment to the Purchase Price; and (iii) if Seller and
Buyer cannot agree upon a reduced Purchase Price, the property affected by the
environmental defect shall not be sold to Buyer, but shall be retained by Seller
and the Purchase Price shall be reduced by the allocated value assigned to such
property in Exhibit "A" hereto. In the event that the Purchase Price shall be
reduced by ten percent (10%) in the aggregate, Seller may at its option
terminate this agreement, and each party hereto shall bear its own costs
connected therewith.
8. Representations of Seller. Seller represents and warrants as follows:
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(a) Legal Power and Ownership. Seller has the full power and right to
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sell and convey the Properties pursuant to the terms of this Agreement and
to perform Seller's other obligations under this Agreement. The interests
as reflected on Exhibit "A" are not materially over or under produced.
(b) Compliance with Laws. The Properties have been operated in
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compliance, in all material respects, with all laws, rules, regulations,
ordinances, orders and permits relating to the Properties, including
Horizon Gas Partners, L.P. and
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March 4, 1997
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all state and federal regulations, ordinances, orders and permits relating
to the Properties, including all state and federal regulations for the
protection of the environment and the protection of the safety and health
of persons and property pertaining to the Properties. Seller is aware of no
administrative order or investigative action of the Environmental
Protection Agency, the Oklahoma Corporation Commission or other state
agency relative to the Properties which would require that remedial
measures be taken for the clean-up, containment of hazardous waste, or the
curtailment of production.
(c) No Conflicts. Seller's execution of this Agreement and
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consummation of the transactions contemplated herein will not violate nor
be in conflict with any material provision of any agreement or instrument
to which Seller is a party or is bound, or any judgment, decree, order,
statute, rule or regulation applicable to Seller.
(d) Production Sales Contracts. Seller is not obligated by virtue
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of any prepayment made under any production sales contract or any similar
arrangement to deliver oil or gas produced from and after the Effective
time with respect to any Property without receiving payment therefor in the
ordinary course of business. No proceeds of production from any Property
prior to the Effective Time are subject to any refund as a result of the
price paid therefor exceeding the applicable maximum lawful prices. No
purchaser of production from any Property has placed in suspense any funds
owing to Seller which are attributable to any period of time subsequent to
the Effective Time.
(e) Litigation. There are no materially adverse demands, claims,
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notices of violations, filings, governmental investigations, administrative
proceedings, other than increased density actions, actions, causes of
action, suits or other legal proceedings pending or, to Seller's knowledge,
threatened against Seller with respect to any of the Properties.
(f) Leases. All rentals, royalties, overriding royalty interests and
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other payments due under each oil and gas lease comprising the Properties
have been promptly and fully paid.
9. Representations of Buyer.
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(a) Legal Power and Authority. Buyer is a corporation duly organized
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and validly existing under the laws of the State of Oklahoma and has all
requisite power and authority to carry on its business as presently
conducted, to enter into this Agreement and to perform its obligations
under this Agreement.
(b) No Conflicts. Buyer's consummation of the transactions
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contemplated by this Agreement will not violate or be in conflict with any
material provision of any agreement or instrument to which Buyer is a party
or is bound, or any judgment, decree, order, statute, rule or regulation
applicable to Buyer.
(c) Confidentiality. Buyer shall exercise all due diligence in
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safeguarding and maintaining confidential all engineering, geological,
geophysical, accounting and revenue data, reports and maps, and all other
confidential data in possession of Buyer, or made known to Buyer, relating
to the Properties until Closing or one year after the termination of this
Agreement, in the event Closing does not take place.
10. Buyer's Conditions of Closing. The obligations of Buyer to purchase
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the Properties pursuant to this Agreement are subject, at the option of Buyer,
to the fulfillment on or prior to Closing of each of the following conditions:
Horizon Gas Partners, L.P. and
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March 4, 1997
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(a) Representations. The representations and warranties by Seller
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set forth in Paragraph 8 above shall be true and correct in all material
respects as of the date when made and as of the date of Closing.
(b) Changes. There shall have been no material adverse change in the
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condition of the Properties, except (i) depletion through normal production
within authorized allowables and rates of production, (ii) depreciation of
equipment through ordinary wear and tear, and (ii) those material changes
approved in writing by Buyer between the date of this Agreement and
Closing.
(c) Performance. Seller shall have performed or complied with, in
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all material respects, all agreements or covenants required by this
Agreement of which performance or compliance is required prior to or at
Closing, including, but not limited to, the release of any preferential
rights to purchase.
11. Seller's Conditions to Closing. The obligations of Seller to
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consummate the transactions provided for herein are subject to, at the option of
Seller, the fulfillment on or prior to Closing, of each of the following
conditions:
(a) Representations. The representations and warranties by Buyer set
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forth in Paragraph 9 above shall be true and correct in all material
respects as of the date when made and as of the date of Closing.
(b) Performance. Buyer shall have performed or complied with, in all
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material respects, all agreements or covenants required by this Agreement
of which performance or compliance is required prior to or at closing.
12. Closing and Adjustments to the Purchase Price.
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(a) Documents. At closing, Seller shall deliver to Buyer a properly
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executed Assignment, Conveyance and Xxxx of Sale in the form attached
hereto as Exhibit B conveying the Properties to Buyer; which Assignments
shall be in recordable form and shall warrant Seller's title to the
Properties from and after the Effective Time against the claims of any
persons claiming by, through or under Seller, but not otherwise. Seller
shall also deliver to Buyer fully executed releases of all liens, security
interests and other encumbrances or preferential rights burdening the
Properties, together with a check sufficient to cover the costs of
recording such releases.
(b) Purchase Price. Buyer shall deliver by cashier's check or wire
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transfer to Seller's credit into the bank designated by Seller, in
immediately available funds, an amount equal to the Purchase Price, as
adjusted.
(c) Records. Seller shall deliver to Buyer all of the records
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relating to the Properties in Seller's possession. For a period of five
(5) years after the Closing, Buyer shall permit Seller reasonable access to
such files and records.
(d) Taxes. Ad valorem, property, production, severance, and similar
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taxes and assessments based upon or measured by ownership of property, or
the production of hydrocarbons or receipt of proceeds therefrom, on the
Properties shall be prorated between Buyer and Seller as of the Effective
Time. Buyer shall pay all sales taxes, if any, due with respect to the
Personalty.
(e) Adjustments. The Purchase Price shall be adjusted (the "Adjusted
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Purchase Price"), upward or downward, by the following at the time of
Closing:
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March 4, 1997
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(i) Upward Adjustments:
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(A) Any lease operating expenses or capital expenditures
which have been incurred and paid by Seller and are attributable
to periods after the Effective Time.
(B) Any other amount required hereunder or otherwise
agreed upon by Buyer and Seller, including adjustments for
prepaid expenses and production in the tanks.
(ii) Downward Adjustments:
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(A) Deductions due to any Title Defects or Environmental
Defects disclosed and agreed to, but not cured by, Seller as of
Closing pursuant to Paragraph 7 above.
(B) The amount of proceeds of production received by
Seller or accrued with respect to the Properties after the
Effective Time.
(C) Any other amount required under the provisions hereof
or otherwise agreed upon by Seller and Buyer.
(iii) Best Information. Should any information necessary to any
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such adjustments not yet be available on or before the Closing, such
adjustments shall be made on the basis of the best available
information and shall be adjusted at Final Settlement (hereinafter
defined).
(f) Buyer will provide operator bonds necessary to cause Seller's
bonds to be released by all applicable authorized authorities.
13. Final Settlement. Not later than April 15, 1997, a final accounting
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statement (the "Final Statement") will be prepared by Buyer, subject to
verification by Seller, based on the actual income and expenses between the
Effective Time and Closing. Within ten (10) days after the Final Statement has
been agreed upon by the parties, Buyer or Seller, as the case may be, shall pay
to the other such sums as may be found due in the Final Statement. If the
parties are unable to agree on the Final Statement on or before April 30, 1997
("Final Settlement"), the matter shall be submitted to binding arbitration to
Coopers & Xxxxxxx accountants (the fees and expenses associated with such
arbitration to be equally share by the parties, unless the arbitrator's award
otherwise specifies). The determination of the Final Statement by such
arbitration shall be binding upon the parties. Within two (2) business days
after the arbitrator's final determination, Buyer or Seller, as the case may be,
shall pay by wire transfer, bank check or cashier's check to the other party,
the amount, if any, determined as being due to the other party.
14. Indemnities.
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(a) Indemnity by Seller. Subject to the limitations contained herein
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and as set forth in subparagraph (c) below, Seller shall indemnify and hold
harmless Buyer, its affiliates, successors and assigns, from and against
any damage, liability, loss, cost, expense, attorney's fees, judgment, or
deficiency that Buyer shall pay or become obligated to pay arising out of
or resulting from, (i) an inaccuracy in any representation of the breach of
any warranty of Seller under this Agreement; (ii) a failure of Seller to
duly perform or observe any term, provision, covenant, or agreement to be
performed or observed by Seller hereunder; (iii) Seller's ownership,
management or control of the Properties prior to Closing; or (iv) acts,
omissions or violations by
Horizon Gas Partners, L.P. and
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March 4, 1997
Page 6
Seller of any state or federal environmental laws; provided, however, that
in no event shall Seller have any liability for any obligation with respect
to (A) any tortious actions, breaches of contract or other wrongful acts of
Buyer from and after the Effective Time, or (B) which Buyer's claim based
thereupon is not communicated in writing to Seller prior to the expiration
of 3 years following Closing.
(b) Indemnity by Buyer. Subject to the limitations contained herein
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and as set forth in subparagraph (c) below, Buyer shall indemnify and hold
harmless Seller, their representatives and assigns, from and against any
damage, liability, loss, cost, expense, attorney's fees, judgment, or
deficiency that Seller shall pay or become obligated to pay arising out of
or resulting from (i) an inaccuracy in any representation or the breach of
any warranty of Buyer under this Agreement; (ii) a failure of Buyer to duly
perform or observe any term, provision, covenant, or agreement to be
performed or observed by Buyer hereunder; (iii) Buyer's ownership,
management or control of the Properties after Closing; or (iv) violations
by Buyer of any state or federal environmental laws; provided, however,
that in no event shall Buyer have any liability for any obligation with
respect to any tortious actions, breaches of contract or other wrongful
acts of Seller.
(c) Limitations on Indemnities. No claim or indemnity (which shall
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not exceed the allocated value of the affected property) shall be made
hereunder until the amounts involved, per Property per defect and per
occurrence, actual or alleged, exceed $20,000; and, any such claim for
indemnity shall then be limited to the amount by which such claim exceeds
$20,000.
(d) Right to Contest and Defend. The indemnitor hereunder shall be
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entitled, at its cost and expense, to contest and defend by all appropriate
legal proceedings, any claim with respect to which it is called upon to
indemnify the other party hereunder; provided, that notice of the intention
to so contest shall be delivered by the indemnitor to the indemnitee within
15 calendar days from the date indemnitor received notice of the
indemnitee's claim. Any such contest may be conducted in the name and on
behalf of the indemnitor or the indemnitee as may be appropriate. Such
contest shall be conducted by reputable counsel employed by the indemnitor,
but the indemnitee shall have the right to participate in such proceedings
and to be represented by counsel of its own choosing at its sole cost and
expense. If the indemnitee joins in any such contest, the indemnitor shall
have full authority to determine all action to be taken with respect
thereto; provided, however, that the indemnitor shall not have the
authority to subject the indemnitee to any obligation whatsoever, other
than the performance of purely ministerial tasks (e.g., the execution of
settlement agreements and other documentation) or obligations not involving
significant expense. If the indemnitor does not elect to contest any such
claim, the indemnitor shall be bound by any judicial result obtained with
respect thereto by the indemnitee. Indemnitor shall not be bound by any
settlement that it does not expressly approve.
15. Tax Free Exchange. Buyer and Seller hereby agree that Seller, in lieu
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of the sale of the Properties to Buyer for the cash consideration provided
herein, shall have the right at any time prior to Closing to assign all or a
portion of its rights under this Agreement to a qualified intermediary, in order
to accomplish the transaction in a manner that will comply, either in whole or
in part, with the requirements of a like kind exchange pursuant to (S) 1031 of
the Internal Revenue Code of 1986, as amended. In the event Seller does assign
its rights under this Agreement pursuant to this Section, Seller agrees to
notify Buyer in writing of such assignment not less than seven (7) days before
Closing. If Seller assigns its rights under this Agreement, Buyer agrees to (i)
consent to Seller's assignment of its rights in this Agreement, and (ii) deposit
the Purchase Price with the qualified escrow or qualified trust account at
Closing.
Horizon Gas Partners, L.P. and
HSRTW, Inc.
March 4, 1997
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16. Maintenance of Properties. Seller will cause the Properties to be
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maintained and operated, from and after the date of this Agreement through
Closing, in a good and workmanlike manner; will pay or cause to be paid all
bills and invoices for all costs and expenses incurred in connection with the
development, operation and maintenance of the Properties before bills or
invoices become delinquent; and will continue to operate the Properties in the
ordinary course of business; provided, however, that Seller shall not (i) enter
into any new commitment with respect to any of the Properties which shall
require a gross expenditure of $10,000 for any single operation without the
consent of Buyer, which consent shall not be unreasonably withheld, or (ii)
waive, compromise or settle any right or claim that would adversely affect the
ownership, operation or value of any of the Properties. Seller will use all
reasonable efforts after Closing to assist Buyer (or its designee) in being
designated operator under applicable joint operating agreements and regulatory
orders of all xxxxx included within the Properties and Seller will allow Buyer,
or its designee, to take over operations of such xxxxx as of 7:00 a.m., local
time, on the first day of the month following Closing. Promptly after Closing,
Seller will exercise reasonable efforts to assist Buyer in filing any necessary
forms or applications with the appropriate regulatory authority to amend any
records or orders under which Seller is acting as operator so as to substitute
Buyer, or its designee.
17. Transfer Orders. At Closing, Seller agrees to execute such transfer
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orders, letters in lieu of transfer orders, or other documents as may be
necessary to effect payment of revenues to Buyer.
18. Miscellaneous.
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(a) Seller and Buyer shall each pay their own expenses and costs
(including, without limitation, any and all broker's or finder's fees and
commissions and attorney's fees) in connection with this Agreement and the
transactions contemplated hereby, except as otherwise provided herein.
(b) This Agreement shall be construed in accordance with and shall be
governed by the substantive laws of the State of Oklahoma.
(c) Buyer, at its option after closing, may assign all or any portion
of its rights under this Agreement to any third party, but shall remain
liable for Buyer's obligations hereunder unless specifically released by
Seller. This Agreement shall be binding upon the undersigned and their
respective successors and assigns.
(d) All representatives, warranties and covenants contained in this
Agreement shall be deemed to survive Closing.
(e) This Agreement may be executed in any number of counterparts and
each such signed counterpart shall constitute an original of this
Agreement.
(f) All notices under this Agreement shall be in writing and shall be
deemed given (i) when received if delivered personally, (ii) when sent if
by facsimile transmission and a confirmation is received, (iii) one
business day after deposit with an express courier if carried on a
nationally recognized express courier, or (iv) two business days after
deposit with the United States Mail Service if mailed by registered or
certified mail (return receipt requested, postage prepaid). All notices to
the parties shall be at the following addresses (or at such other address
as either party shall hereinafter specify in writing):
Horizon Gas Partners, L.P. and
HSRTW, Inc.
March 4, 1997
Page 8
Seller Buyer
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Horizon Gas Partners, L.P. Gothic Energy Corporation
c/o Xxxx Xxxx, President 0000 Xxxxx Xxxxx, Xxxxx 000
Horizon Natural Resources Xxxxx, Xxxxxxxx 00000
0000-X Xxxx 00xx Xxxxxx
Xxxxx, XX 00000
-and- -and-
HSRTW, Inc. Xxx X. Xxxxxxx, Xx., Esq.
c/o Xxx Xxxx Pray, Walker, Jackman,
0000 Xxxxx Xxxxxxxx, Xxxxx 000 Xxxxxxxxxx & Xxxxxx
Xxxxx, Xxxxxxxx 00000 000 XXXXX Xxxxx
000 Xxxx 0xx Xxxxxx
Xxxxx, Xxxxxxxx 00000-0000
(000) 000-0000 (Facsimile)
Please indicate your acceptance of this offer by executing it in the spaces
designated below and returning one (1) executed counterpart to each of the
undersigned. Upon our receipt of a signed counterpart, this Agreement shall be
deemed to have been executed and binding on the parties as of the date provided
below.
GOTHIC ENERGY CORPORATION
/s/ XXXXXXX XXXXX
Xxxxxxx Xxxxx, President
AGREED and ACCEPTED this 22nd day of January, 1997.
HORIZON GAS PARTNERS, L.P.
HORIZON NATURAL RESOURCES, INC., General Partner
By: /s/ XXXX XXXX
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Xxxx Xxxx, President
HSRTW, INC.
By: /S/ XXXXXX X. XXXXXX
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Xxxxxx X. Xxxxxx, Its Vice President
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