-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, THv9/4aeyjLxM4Mh0AN5SYKAAv4Syp1DjzxGmHNje6l9oVQLQ9w4I549u5JPiOCM MmpGmV+UhwRkGprRQqSLSw== 0000930661-97-000513.txt : 19970305 0000930661-97-000513.hdr.sgml : 19970305 ACCESSION NUMBER: 0000930661-97-000513 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970218 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970304 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOTHIC ENERGY CORP CENTRAL INDEX KEY: 0000878482 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 222663839 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19753 FILM NUMBER: 97550390 BUSINESS ADDRESS: STREET 1: 5727 S LEWIS AVE STE 700 STREET 2: P O BOX 186 CITY: TULSARD STATE: OK ZIP: 74105 BUSINESS PHONE: 9187495666 FORMER COMPANY: FORMER CONFORMED NAME: TNC MEDIA INC DATE OF NAME CHANGE: 19930328 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20459 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) FEBRUARY 18, 1997 GOTHIC ENERGY CORPORATION ------------------------- (Exact name of registrant as specified in its charter) OKLAHOMA 0-19753 22-2663839 -------- ------- ---------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 5727 SOUTH LEWIS AVENUE, SUITE 700, TULSA, OKLAHOMA 74105 ------------------------------------------------------------ (Address of principal executive offices) Registrant's telephone number, including area code: (918) 749-5666 --------------- --------------------------------------------------------------- (Former name or former address, if changed since last report) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS: On February 18, 1997, the Company acquired from Norse Exploration, Inc., and Norse Pipeline, Inc. (collectively, "Norse"), various working interests in 11 oil and gas producing properties and, through the acquisition of the outstanding capital stock of Norse Pipeline, Inc., its 40.09% general partnership interest in the Sycamore Gas System (the "Sycamore System"), an Oklahoma gathering system, processing plant and storage facility. The oil and gas wells and the gathering system are located in the Springer Field in Carter County, Oklahoma. The total purchase price was $10,750,000, plus two-year warrants to purchase 200,000 shares of the Company's Common Stock at a per share exercise price of $2.50. The estimated fair value of such warrants at the date of acquisition was approximately $254,000. The Company paid a deposit of $1,075,000 toward the purchase price in December 1996. The Company also on February 18, 1997, acquired from H. Huffman & Company ("Huffman"), an Oklahoma limited partnership, various working interests in 13 oil and gas producing properties and an additional 10.97% interest in the Sycamore System. The oil and gas wells are located in the same producing area as the properties acquired from Norse. The total purchase price for the assets acquired was $3,950,000, of which the Company paid a deposit of $287,500 toward the purchase price in December 1996. The Company also acquired, on February 18, 1997, from Horizon Gas Partners, L.P. and HSRTW, Inc. (collectively, "Horizon"), various working and royalty interests in approximately 100 oil and gas producing properties. The producing properties are located in Major and Blaine counties of Oklahoma. The purchase price was $10,000,000. The effective date of all three acquisitions was January 1, 1997. Financing for the acquisition was provided primarily by bank borrowing. On February 17, 1997, the Company and Bank One, Texas, N.A., entered into a Restated Loan Agreement (the "Credit Facility") which currently enables the Company to borrow, from time to time and, subject to meeting certain borrowing base requirements and other conditions, a maximum aggregate of $75,000,000 as of February 17, 1997. The current maximum aggregate available to be borrowed under the Credit Facility is $44,000,000 and is comprised of a $32,000,000 borrowing availability (the "borrowing base") based on the Company's oil and gas reserve reports, a $10,000,000 special advance facility (the "Special Advance Facility") and a $2,000,000 special drilling facility. On February 18, 1997, the Company drew down both the borrowing base and the Special Advance Facility for a total of $41,668,000. These funds were used to repay all existing indebtedness then outstanding owing to the bank in the amount of $21,264,000, to finance the cash consideration paid for the three February 18, 1997 acquisitions discussed above which aggregated $19,404,000, and to pay a $1,000,000 loan fee to Bank One. An aggregate of $1,291,295 of the previously paid deposits against the purchase price for the Norse and 2 Huffman acquisitions had been borrowed from the bank in December 1996 against the Company's borrowing availability at the time. The remaining funds necessary to complete the acquisitions were provided by loans to the Company from two investors. On February 18, 1997, such persons loaned to the Company the aggregate sum of $4,500,000 represented by the Company's promissory notes. Of the aggregate amount, $2,500,000 bears interest at 5% per annum and matures on April 18, 1997, with the remaining $2,000,000 bearing interest at 12% per annum and maturing on October 31, 1997. In the event the principal and accrued interest is not paid when due, such amount is automatically converted into a number of shares of the Company's Common Stock determined by dividing such amount by a sum equal to 75% of the closing bid price for the Company's Common Stock on the five (5) days prior to the maturity date, with respect to the $2,500,000 obligation, and on the maturity date with respect to the $2,000,000 obligation. As additional consideration for making the loan, the investors also purchased at a price of $.01 per share a total of 250,000 shares of the Company's common stock. The fair value of the Company's common stock was $2.63 per share on the date such shares were issued. 3 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of business acquired. It is impracticable for the Registrant to provide the required financial statements for the business acquired at the time this Current Report on Form 8-K is filed. Such financial statements will be filed as soon as practicable but not later than 60 days after the date this Current Report on Form 8-K is required to be filed. (b) Pro forma financial information. It is impracticable for the Registrant to provide the required pro forma financial information for the business acquired at the time this Current Report on Form 8-K is filed. Such proforma financial information will be filed as soon as practicable but not later than 60 days after the date this Current Report on Form 8-K is required to be filed. (c) Exhibits: (i) Sale and Purchase Agreement dated December 11, 1996 between Norse Exploration, Inc., Norse Pipeline, Inc., and the Company. (ii) Common Stock Purchase Warrant issued to Norse Exploration, Inc., and Norse Pipeline, Inc. (iii) Agreement dated December 13, 1996 between the Company and H. Huffman & Company. (iv) Agreement dated January 13, 1997 between Horizon Gas Partners, L.P., HSRTW, Inc., and the Company. 4 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. GOTHIC ENERGY CORPORATION Dated: February 28, 1997 By: /S/ MICHAEL K. PAULK ------------------------------------- Michael K. Paulk, President 5 EX-99.I 2 SALE AND PURCHASE AGREEMENT EXHIBIT 99(i) SALE AND PURCHASE AGREEMENT --------------------------- THIS SALE AND PURCHASE AGREEMENT (this "Agreement") is made and entered as of the 11th day of December, 1996, by and between NORSE EXPLORATION, INC., AND NORSE PIPELINE, INC., both Delaware Corporations, ("Seller"), and GOTHIC ENERGY CORPORATION, an Oklahoma corporation ("Buyer"). WITNESSETH THAT: WHEREAS, Norse Exploration, Inc. is the owner of the Properties, as hereinafter defined; and WHEREAS, Norse Pipeline, Inc. is the owner of the general partnership interest in the Sycamore Gas System, as hereinafter defined; and WHEREAS, Norse Exploration desires to sell its Properties and all of its shares in Norse Pipeline, Inc. to Buyer with the understanding between the parties that Buyer can assign its right to purchase the shares of Norse Pipeline to a wholly owned subsidiary, NOW THEREFORE, in consideration of the premises and of the mutual covenants of the parties hereinafter expressed, it is hereby agreed as follows: ARTICLE 1 INTERESTS --------- 1.1 INTERESTS. Seller Norse Exploration, Inc., is the non-operator owner of (i) undivided interests in and under oil and gas leases covering lands upon which the wells described in Exhibit A is attributed by reason of inclusion in a statutory or voluntary unit, together with undivided interests attributable to said leases in the wells, personal property, fixtures and equipment located on the lands covered by said leases or units, or used or obtained in connection with the agreements, licenses, permits, easements, orders of regulatory agencies and other rights and interests relating thereto, but specifically excluding any royalty, overriding royalty or other interests in or under the leases, hereinafter referred to collectively as the "Properties", and (ii) Seller, Norse Pipeline, Inc. is a 40.09 % general partnership interest in Sycamore Gas System, an Oklahoma general gathering system, processing plant and storage facilities described in Exhibit B (together with all real property, easements, rights of way, surface use agreements and other interests in real property related or appurtenant thereto, all personal property, fixtures and equipment comprising or used in connection therewith, and all contracts and agreements of every 1 nature whatsoever relating thereto, hereinafter referred to as the "Sycamore System". Seller's interests in the Properties, its ownership of all the issued and outstanding shares of Norse Pipeline, Inc. being sold herein, which includes the ownership of Norse Pipeline, Inc. in the general partnership interest in Sycamore are hereinafter referred to collectively as the "Interests". 1.2 EXCLUSION: RESERVATION. To the extent Seller owns a mineral, royalty, ----------------------- overriding royalty, production payment, net profits or other non-cost bearing interest in any of the Properties or the production therefrom, such interest is not intended to be included in the Interests and is specifically reserved to Seller. ARTICLE 2 SALE AND PURCHASE OF THE INTERESTS ---------------------------------- 2.1 AGREEMENT FOR SALE AND PURCHASE: EFFECTIVE TIME. Seller hereby agrees ----------------------------------------------- to sell to Buyer and Buyer hereby agrees to purchase from Seller on the Closing Date (as hereinafter defined) the Interests. The effective time of the sale and purchase of the Interests shall be 7:00 a.m. Central Daylight Time on January 1, 1997 (the "Effective Time"). 2.2 PURCHASE PRICE. The purchase price for the Interests (the "Purchase -------------- Price") shall be the sum of (i) Ten Million Seven Hundred Fifty Thousand and No/100 Dollars $10,750,000.00 (the "Base Price") plus Two Hundred Thousand (200,000) warrants as further described in Article 2.6 below, less (ii) the Net Adjustment (as hereinafter defined) all subject to the Maximum Adjustment set out in Article 3.7 below. The Purchase Price shall be paid by Buyer in immediately available funds at the Closing (as hereinafter defined). 2.3 NET ADJUSTMENT. The Net Adjustment (as limited by Article 3.7) shall -------------- be the sum of the adjustment amounts described in Sections 3.4 (Title Defects), Section 7.4 (Gas Imbalances), Section 7.5 (Disapproved Operations), Section 7.6 (Preferential Rights), Section 7.7 (Operations Subsequent to the Effective Time) and Section 8.5 (Environmental Defects). 2.4 DEPOSIT. Contemporaneously with the execution of this Agreement, ------- Buyer Buyer is delivering to Seller, immediately available funds in accordance with wire instructions furnished by Buyer, the sum of One Million Seventy-Five Thousand and No/100 Dollars $1,075,000.00 [10% of the Base Price] as a deposit toward the Purchase Price (the "Deposit"). In the event that Buyer shall fail to close the transaction contemplated hereby in accordance with the terms of this Agreement, and provided that the conditions precedent to the obligations of Buyer as set forth in Article 9 hereof have been fulfilled or Seller is ready, willing and able to comply with all such conditions precedent, Seller shall be entitled to retain as its sole remedy the Deposit as liquidated damages pursuant to Section 11.2. 2 2.5 AGREED VALUES. The Base Price has been allocated by the parties among -------------- the Properties and Seller's interest in Sycamore as set out in Exhibit D. The amounts so allocated and are referred to herein as the "Agreed Values" of such items of the Interests. 2.6 WARRANTS OF BUYER. The warrants being issued to purchase Two Hundred ------------------ Thousand (200,000) shares of Buyer shall be exercisable at the sole election of the Buyer at any time during the two (2) year period from the date of closing. Such warrants shall be exercisable at a price of $2.50 per share, and in the event of any change in the capitalization of the company after the issuance of the warrants, then in such event, the number of warrants to purchase shares of Buyer shall be proportionately increased to reflect such change in capitalization. Buyer shall piggyback the registration of any shares of Seller from the exercise of the warrants with any registration after the date of this Agreement. In the event the Board of Directors of Buyer authorizes a registration of shares at any time during the 2 year period after the date of this Agreement, then within ten (10) days after such authorization, Buyer shall notify Seller in order for Seller to exercise the warrants and participate in the registration of shares. ARTICLE 3 TITLE EXAMINATION: ADJUSTMENTS ------------------------------ 3.1 TITLE MATERIALS. From the date hereof to the Closing Date, Seller --------------- shall provide Buyer full opportunity to examine the books, records and files of Seller insofar as they pertain to the Interests. Seller makes no warranty or representation, express or implied, with respect to the accuracy or completeness of any title information, records or other data made available to Buyer in connection with this Agreement. 3.2 TITLE DEFECTS; DEFENSIBLE TITLE. ------------------------------- (a) Adjustments to the Base Price for failure of title may be made with respect to the Properties and the Sycamore System (insofar as any title failure affects the value of Seller's interest in Sycamore). The Properties and the Sycamore System are hereinafter referred to collectively as the "Examined Interests". As used herein, the term "Title Defect" shall mean any lien, claim, defect, encumbrance, security interest, burden of deficiency such that (i) Seller does not have Defensible Title (hereinafter defined), as distinguished from technically marketable title, to any of the Properties, or (ii) to the extent of Seller's interest in Sycamore, Sycamore does not have Defensible Title to the assets and properties comprising the Sycamore System; provided, no Permitted Encumbrances (hereinafter defined) shall constitute a Title Defect. (b) As used herein, the term "Defensible Title" (i) with respect to the Sycamore System means clear, unencumbered and uncontested title in Sycamore to the real and personal property comprising the Sycamore System, and (ii) with respect to the 3 Properties means clear, unencumbered and uncontested title in Seller to the Properties such that (A) after giving effect to existing spacing orders, operating agreements, unit agreements, unitization orders and pooling designations, and subject to the limitations, if any, described in Exhibit A, and after taking into account all royalty interests, overriding royalty interests, net profit interests, production payments and other burdens on production, Seller is entitled to a share (expressed as a decimal) of all oil, gas and other minerals produced from each well described in Exhibit A which is not less than the Net Revenue Interest set out in Exhibit A in connection with the description of such well, (B) Seller owns an undivided interest (expressed as a decimal) equal to the Working Interest set out in Exhibit A in connection with the description of each such well in and to all property and rights incident thereto, including all rights in, to and under all agreements, leases, permits, easements, licenses and orders in any way relating thereto, and in and to all wells, personal property, fixtures and improvements thereon, appurtenant thereto or used or obtained in connection therewith or with the production or treatment or sale or disposal of hydrocarbons or water produced therefrom or attributable thereto, (C) Seller is obligated for a fraction of the costs relating to the exploration, development and operation of such well no greater than the Working Interest set out in Exhibit A in connection with the description of such well, and (D) except as shown in Exhibit A, Seller's interests in such wells and the production therefrom are not subject to being reduced by virtue or reversionary interests owned by third parties. (c) As used herein, the term "Permitted Encumbrances" means (i) matters described without material omission in any of the Exhibits or Schedules attached hereto, (ii) royalties, overriding royalties, net profits interests, production payments and other burdens on production which do not reduce Seller's Net Revenue Interest in any of the Properties to less than that described in Exhibit A, (iii) mortgage liens to be discharged at Closing, liens for taxes, assessments, labor and materials where payment is not due, (iv) operating agreements, unit agreements, farmout agreements, letter agreements, easements, rights-of-way, unitization and pooling designations and declarations, gathering and transportation agreements, processing agreements, gas, similar agreements which are not required by the terms of this Agreement to be disclosed on any Schedule hereto, provided (A) all amounts due and payable by Seller thereunder have been paid, and (B) Seller is not in default thereunder, (v) regulatory authority of governmental agencies not presently or previously violated, easements, surface leases and rights, plat restrictions and similar encumbrances, provided that they do not detract from the value, and can increase the cost of operation of any of the Properties or the Sycamore System or otherwise adversely affect the operation thereof, and (vi) liens, charges, encumbrances and irregularities in the chain of title which, because of statutory cure periods or marketable title acts have and cannot affect adversely or interrupt, the claimed ownership of Seller or its predecessors in or the receipt of production revenues from the Properties affected thereby. 4 3.3 TITLE EXAMINATION; NOTICE OF DEFECTS. ------------------------------------- (a) Promptly after execution of this Agreement, Buyer shall, at Buyer's sole cost and expense, commence and pursue such examination of title to the Examined Interests as Buyer deems necessary or proper. Buyer will conclude its title review and give notice to Sellers of any asserted Title Defects affecting the Examined Interests not later than fifteen (15) days prior to the date scheduled for the Closing in Section 12.1 hereof (the "Title Notice Date"). Each such notice shall include a brief description of each Title Defect of which notice is being given, the action required to cure such Title Defect and the proposed adjustment to the Base Price by reason of the existence of such Title Defect. Buyer shall be deemed to have waived any Title Defects existing with respect to the Examined Interests except to the extent such Title Defects are set out in a notice given on or prior to the Title Notice Date. (b) Seller shall have a period of twelve (12) days after the Title Notice Date to cure all or any portion of the Title Defects described in any notice(s) of Title Defects affecting Examined Interests properly given by Buyer prior to such date. In the event Seller is unable or unwilling to cure any of the asserted Title Defects prior to the expiration of each cure period, and exceed ten percent (10%) of the interests set out in Exhibit A, Seller shall have the right to terminate this Agreement, or if Seller elects not to terminate, the parties shall proceed in accordance with Section 3.4. 3.4 ADJUSTMENTS. ----------- (a) If any uncured Title Defect is based on Buyer's substantiated notice in reasonable detail that Seller owns a Net Revenue Interest less than that shown on Exhibit A with respect to a particular Property, then the Agreed Value of such Property shall be reduced in the same proportion that the actual Net Revenue Interest bears to the Net Revenue Interest shown therefor on Exhibit A and the amount of such reduction shall constitute the approved adjustment amount with respect to such Title Defect, and as a result of such reduction, Seller shall only be obligated to convey the exact amount of the interest computed based on the actual Net Revenue Interest and Seller shall retain all amounts in excess thereof. (b) If any uncured Title Defect involves a substantiated claim against or uncertainty with respect to Seller's title to a particular Property or Sycamore's title to the Sycamore System, the parties shall attempt to negotiate a mutually acceptable reduction in the Agreed Value of the affected item of the Interests by reason of such defect. In the event the parties agree on an appropriate reduction in the Agreed Value, such amount shall constitute the principal amount of Buyer's approved claim with respect to such Title Defect. If the parties are unable to agree on an appropriate reduction and Buyer elects not to waive the Title Defect, then Seller shall have the option of (i) proceeding to Closing but reducing the Base Price by the Agreed Value of such item, or (ii) excluding the 5 affected item from the Interests being sold and reducing the Base Price by the Agreed Value of such item. Option (i) and (ii) of this subparagraph 3.4(b) shall not be applicable with respect to unresolved Title Defects affecting the Sycamore System. In the event of any reduction in the Agreed Value as a result of uncured Title Defects, Seller shall only be obligated to convey the exact amount of the interest agreed upon, and Seller shall retain all disputed amounts and revenues related thereto. (c) Notwithstanding the provisions of subsections (a) and (b) above, Buyer shall not be entitled to any adjustment of the Purchase Price at the Closing by reason of asserted Title Defects unless the sum of all such claims approved pursuant to Section 3.4(a), agreed to by Seller pursuant to Section 3.4(b), or treated by Sellers as a reduction of the Base Price pursuant to Section 3.4(b), exceeds the sum of $20,000 and it is agreed adjustments shall be in excess of such amount. 3.5 DELETED. 3.6 DELETED. 3.7 MAXIMUM ADJUSTMENT. In the event of any adjustments in the Purchase ------------------ Price pursuant to Sections 3.4, 7.4, 7.5, 7.6 and 8.5, the Purchaser shall be responsible for all such adjustments up to $500,000. Seller shall be responsible for all adjustments between $500,000 and $1,000,000. In the event adjustments exceed $1,000,000, then in such event, Seller can elect in its sole discretion to either cure the defects or cancel the transaction and return the Deposit to Buyer. ARTICLE 4 REPRESENTATIONS AND WARRANTEES OF SELLER ---------------------------------------- Seller hereby represents and warrants to Buyer as of the date hereof as follows: 4.1 ORGANIZATION. Seller, Norse Exploration, Inc., and Norse Pipeline, ------------ Inc., are Delaware Corporations duly organized and validly existing. Seller has the power and authority to own and use it properties and to transact the business in which it is engaged, and holds all franchises, licenses and permits necessary and required therefor. 4.2 AGREEMENT AUTHORIZED. This Agreement has been duly authorized, -------------------- executed and delivered by Seller and all requisite corporate action has been taken to authorize the execution hereof, the transactions contemplated hereby and all things necessary or desirable in order to accomplish the sale of the Interests, and Seller has all necessary authority and otherwise has good right and lawful authority to consummate the same. 6 4.3 VALID AGREEMENT. This Agreement constitutes the valid and binding --------------- agreement of Seller enforceable against Seller in accordance with its terms, and all instruments required hereunder to be executed and delivered by Seller at the Closing will constitute valid and binding agreements of Seller enforceable against Seller in accordance with their terms. 4.4 BROKERS AND FINDERS. Seller has incurred no liability, contingent or ------------------- otherwise, for brokers' or finders' fees in respect of this transaction for which Buyer shall have any responsibility whatsoever. 4.5 COMPLIANCE WITH AGREEMENTS AND LAWS. No default exists under any of ----------------------------------- the terms and provisions, express or implied, of the leases or any agreement, contract or commitment to which Seller is a party or to which any part of the Interests is subject, and Seller has no received any notice of any claim of such default. To the knowledge of Seller as non operator, all wells included in the Interests have been drilled, completed and operated, and all production thereto, and the Properties and the Sycamore System have been operated, in substantial compliance with all applicable Federal, state and local laws and applicable rules and regulations of the Federal, state and local regulatory authorities having jurisdiction thereof. Seller relies on notices from the operators of the Properties to advise them of any noncompliance with applicable laws where such is in the control of the operators. 4.6 SALE OF PRODUCTION. Except as disclosed in Schedule 4.6, neither ------------------ Seller nor Sycamore is obligated by virtue of any prepayment made under any production sales contract or any other contract containing a take-or-pay clause, or under any similar arrangement, to deliver oil, gas or other minerals produced from or allocated to any of the Properties or the Sycamore System at any time after January 1, 1997, without receiving full payment therefor at the time of delivery. To the knowledge of Seller, except for routine suspense on new wells, proceeds from the sale of oil and gas from the Properties are being received by Seller in a timely manner and are not being held in suspense for any reason. Seller has described in Schedule 4.6 and made extending beyond January 1, 1997 (other than agreements terminable upon less than sixty (60) days' notice) pursuant to which hydrocarbons produced from the Properties are sold, transported, processed or otherwise disposed of or marketed. 4.7 PRODUCTION AND AD VALOREM TAXES. All ad valorem, property, -------------------------------- production, severance and similar taxes based on or measured by the ownership of property or the production or removal of hydrocarbons or the receipt of proceeds therefrom have been timely paid and all required returns and reports related thereto filed. 4.8 MATERIAL EXECUTORY CONTRACTS RELATING TO THE INTERESTS. Unless ------------------------------------------------------- specifically provided otherwise in this Agreement, the sale of the Interests will be subject to all oil, gas and mineral leases, assignments, subleases, farmout agreements, joint operating agreements, partnership agreements, pooling agreements, letter agreements, easements, rights-of-way, gathering and transportation agreements, sales agreements, and all other agreements with respect to or pertaining to the Interests ("Related Agreements"), to the extent that they are binding on 7 Seller. Buyer will assume all of Seller's obligations and liabilities under the Related Agreements as of the Closing Date, and the parties will execute all documents necessary for Buyer to assume the Related Agreements. Buyer's obligation applies to all Related Agreements, whether recorded or not. 4.9 CLAIMS OR LITIGATION. There is neither any suit, action or other -------------------- proceeding pending before any court or governmental agency nor, to the knowledge of Seller, any claim, dispute, suit, action or other proceeding threatened against Seller or any of the Interests or any third party which might result in the impairment or loss of Seller's title to any of the Interests or the value thereof, or increase the cost of operation thereof. 4.10 ASSIGNMENTS PRIOR TO CLOSING. Seller has not since the Effective Time ----------------------------- made any assignment, conveyance or encumbrance of the Interests. 4.11 OPERATIONS. No operations of the types prohibited by Section 6.2 ----------- hereof have been conducted since the Effective Time or are now being conducted. 4.12 CONSUMMATION OF TRANSACTIONS. The consummation of the transactions ------------------------------ contemplated hereby will not constitute a violation or breach of, or an event of default under, any contract or agreement affecting the Interests or constitute the happening of a condition upon which any other party to such a contract may exercise any right or option which will adversely affect any of the Interests. 4.13 SYCAMORE EXISTENCE AND QUALIFICATION: CONSENT TO ASSIGN. Sycamore is -------------------------------------------------------- a partnership duly organized, validly existing and in good standing under the laws of the State of Oklahoma. Sycamore has the power and authority under its partnership agreement and applicable law to own and use its properties and to transact the business in which it is engaged, and holds all franchises, licenses and permits necessary and required therefor. Seller has made available to Buyer true and correct copies of the organizational documents of Sycamore. At or prior to closing, Seller shall obtain all necessary consents to assign its partnership interest in Sycamore to Buyer. ARTICLE 5 REPRESENTATIONS AND WARRANTEES OF BUYER --------------------------------------- Buyer represents and warrants to Seller as follows: 5.1 ORGANIZATION. Buyer is a corporation duly organized and validly ------------- existing under the laws of the State of Oklahoma. 8 5.2 AGREEMENT AUTHORIZED. This Agreement has been duly authorized, -------------------- executed and delivered by Buyer and all requisite corporate action has been taken to authorize the execution hereof, the transactions contemplated hereby and all things necessary or desirable in order to accomplish the purchase of the Interests, and Buyer has all necessary authority under its charter, bylaws and other governing documents and otherwise has good right and lawful authority to consummate the same. 5.3 VALID AGREEMENT. This Agreement constitutes the valid and binding --------------- agreement of Buyer enforceable against Buyer in accordance with its terms, and all instruments required hereunder to be executed and delivered by Buyer at the Closing will constitute valid and binding agreements of Buyer enforceable against Buyer in accordance with their terms. 5.4 BROKERS AND FINDERS. Buyer has incurred no liability, contingent or -------------------- otherwise, for brokers' or finders' fees in respect of this transaction for which Seller shall have any responsibility whatsoever. 5.5 SECURITIES LAWS. (a) Buyer intends to acquire the Interests for its ---------------- own benefit and account and is not acquiring the Interests with the intent of distributing fractional undivided interests in them or otherwise selling them in a manner that would be subject to regulation by federal or state securities laws. If Buyer sell, transfer, or otherwise dispose of the Interests or fractional undivided interests in them in the future, it will do so in compliance with applicable federal and state laws. (b) Buyer represents that at no time has it been presented with or solicited by or through any public promotion or other form of advertising in connection with this transaction. 5.6 BASIS OF BUYER'S DECISION. Buyer represents as follows: -------------------------- (a) It has reviewed the Interests to its satisfaction to enable it to evaluate the Interests in order to enter into this Agreement. (b) It is knowledgeable and experienced in the evaluation, acquisition, and operation of oil and gas properties. (c) Buyer has performed sufficient review and investigation to evaluate the Interests to its satisfaction and to enable it to make an informed decision, as a prudent and knowledgeable purchaser, to acquire the Interests. (d) It has evaluated the merits and risks of purchasing the Interests and has formed an opinion based solely upon its knowledge and experience and not upon any statements or actions of Seller. (e) It will acquire the Interests "as is, where is". 9 ARTICLE 6 COVENANTS OF SELLER PENDING CLOSING ----------------------------------- Seller covenants and agrees with Buyer that from and after the date of this Agreement and until the Closing, Seller will conduct its business, and will use its best efforts to cause Sycamore to conduct its business, subject to the following provisions and limitations: 6.1 ORDINARY COURSE. To the extent the Seller has the right, the --------------- Properties and the Sycamore System will be maintained and operated in a good and workmanlike manner consistent with historical practices, and Seller will timely pay or cause to be paid all costs and expenses incurred in connection therewith. 6.2 RESTRICTIONS ON OPERATIONS. Subject to the provisions of Section 7.5 --------------------------- hereof, except with Buyer's prior written consent no operations will be conducted for the drilling of any new well, the reworking or redrilling of any existing well or the making of any other capital expenditure on the Properties or the Sycamore System requiring an expenditure by Seller. Insofar as any of the following described actions would affect the Interests, neither Seller nor Sycamore will waive any rights or enter into any new agreements or commitments other than in the ordinary course of business, abandon any well capable of commercial production (based upon prevailing economic conditions), release or abandon any Properties, or encumber, sell or otherwise dispose of any of the Properties other than personal property thereon which is replaced by equivalent property or consumed in the operation of such Properties in the ordinary course of business. 6.3 MAINTENANCE OF FILES. Seller will exercise reasonable diligence in --------------------- safeguarding and maintaining secure all files, books and records currently maintained. 6.4 ACCESS OF BUYER. Buyer shall have access to the employees, offices, --------------- properties, records, files, geological and geophysical data, engineering reports and evaluations, books of account, and all other information of the Seller pertaining to the Interests; provided, however, that such investigation shall be conducted during normal business hours and in a manner that does not unreasonably interfere with Seller's normal operations. During such investigation, Buyer shall have the right, at Buyer's sole cost and expense, to make copies of such records, files and other materials as Buyer may deem advisable. 10 ARTICLE 7 ADDITIONAL AGREEMENTS OF THE PARTIES ------------------------------------ 7.1 RETURN OF INFORMATIONAL MATERIAL. If this Agreement is not -------------------------------- consummated, Buyer shall return to Seller all of the items of information which Seller has delivered to Buyer hereunder, including all copies of same made by Buyer. 7.2 CONFIDENTIALITY OF INFORMATION. If the purchase and sale of the ------------------------------- Interests as contemplated by this Agreement is not completed, Buyer (i) will keep the information furnished to Buyer hereunder or in contemplation hereof strictly confidential, except to the extent such information (a) becomes public other than as a result of dissemination by Buyer, (b) was already known to Buyer other than as a result of a breach of a confidentiality restriction, or (c) is furnished to Buyer by a third party independently of Buyer's investigation pursuant to this Agreement, and (ii) will not use any of such information to Buyer's fumcial advantage or in competition with Seller or Sycamore. Notwithstanding the provisions of Section 14.6 hereof, this provision shall not be construed as superseding or limiting the provisions of any confidentiality agreement heretofore executed by and between Buyer and Seller. 7.3 COMPLIANCE WITH CONDITIONS. Buyer and Seller, respectively, will --------------------------- proceed diligently using all reasonable efforts to cause all of the conditions to the obligations of Seller and Buyer, respectively, to be timely satisfied. 7.4 GAS IMBALANCES. Seller and Buyer acknowledge, but Seller does not --------------- represent or warrant, that certain gas imbalances existed at the Effective Time with respect to production from or attributable to certain of the Properties. The best information concerning such imbalances available to Seller as of the date of this Agreement is set forth on Schedule 7.4 and such imbalances have been taken into account by Buyer in determining the Purchase Price. If, prior to the Title Notice Date, Buyer determines that the net gas imbalance (that is, the difference between aggregate overproduction attributable to Seller's interest in the Properties and the aggregate underproduction attributable to such interest) at the Effective Time was different than that set forth on Schedule 7.4, Buyer shall so notify Seller. If such difference is confirmed, the Base Price shall be adjusted at the Closing by an amount equal to $1.00 per Mcf for the difference from that shown in Schedule 7.4; provided, however, that no adjustment shall be made unless the difference exceeds 20,000 Mcf. 7.5 CAPITAL EXPENDITURES. During the period from the execution of this --------------------- Agreement to the Closing Date, Seller will consult with Buyer from time to time with respect to any operation proposed to be conducted on the Properties or the Sycamore System and reasonably expected to require an expenditure by Seller for any single project, and will provide Buyer with all information reasonably available to Seller with respect thereto. Buyer shall, within ten (10) days after receipt of Seller's recommendation for conducting or participating in any such project, or within such lesser period as may be required by the terms of any applicable agreement, 11 approve or disapprove such project. Failure of Buyer to respond within the time required will be deemed to constitute disapproval by Buyer of the project. In the event Buyer approves such project, Seller shall conduct, propose or elect to participate in such project and shall incur and pay as they become due the expenditures associated therewith. In the event the project or operation is a well proposed by an unrelated third party and Seller must, by operation of an applicable agreement or order of a regulatory agency, elect either to participate in such well or lose the right to participate in such well and/or other rights in the unit in which such well is proposed (for example, but not by way of limitation, a non-consent penalty under a joint operating agreement, requirement to accept consideration in lieu of participation under a pooling or forfeiture of the right to participate in future development under an area of mutual interest agreement), and Buyer disapproves or is deemed to have disapproved participation by Seller in such well, then, five (5) days written notice to Buyer (during which time Buyer may reverse its decision and approve participation by Seller), Seller, at its sole option, may elect to exclude from the Interests and the sale hereunder the Property on which such operation is to be conducted and reduce the Base Price by the Agreed Value of such Property, or terminate this Agreement without further obligation to Buyer. 7.6 CONSENTS; PREFERENTIAL RIGHTS TO PURCHASE. Promptly after execution ------------------------------------------ hereof, Seller will proceed diligently to solicit any consents to the transfers contemplated hereby which are required to be obtained from third parties and will give all notices required by existing contracts with respect to preferential rights to purchase on the part of third parties and to obtain waivers of such preferential rights. Any item of the Interests which requires the consent of a third party for transfer where such consent cannot be obtained prior to the Closing Date (other than routine consents required in connection with federal, state and Indian leases), or which is subject to a preferential right to purchase which has not expired and has been waived prior to the Closing Date, may, at Buyer's option, be excluded from the Interests and the sale hereunder and the Base Price reduced by the Agreed Value of such Property. 7.7 ADJUSTMENTS FOR OPERATIONS SUBSEQUENT TO THE EFFECTIVE TIME. The ------------------------------------------------------------ following adjustments shall be made to the Base Price for operations conducted subsequent to the Effective Time to the extent the following described items of revenue and expense relate to the Interests: (a) The Base Price shall be adjusted upward by all amounts actually paid by Seller in respect of (i) actual direct operating expenses and capital expenditures (other than those prohibited by the terms hereof), (ii) overhead or indirect expenses required to be paid by the terms of existing operating agreements, and (iii) ad valorem, property, production, severance and similar taxes and assessments based upon or measured by the ownership of property, the production of removal of hydrocarbons or the receipt of proceeds therefrom; to the extent such expenditures relate to the period between the Effective Time and the Closing Date on the accrual method of accounting. Ad valorem taxes shall be prorated on the basis of time, and if the taxes cannot be determined for the current taxable year, then the amount thereof for the taxable year most recently ended shall be used in determining ad valorem taxes attributable to a particular period of time. 12 (b) The Base Price shall be adjusted downward by all proceeds actually received by Seller (including proceeds from sale or salvage of any personal property forming a part of the Interests as well as the hydrocarbons produced therefrom and attributable thereto) to the extent such proceeds relate to the period from the Effective Time to the Closing Date on the accrual method of accounting. Proceeds received by Seller after the Effective Time for the sale of production in storage at the Effective Time shall remain the property of Seller and shall not give rise to an adjustment. ARTICLE 8 ENVIRONMENTAL MATTERS --------------------- 8.1 PHYSICAL CONDITION OF THE PROPERTIES. The Properties (solely for ------------------------------------ purposes of this Article, the term "Properties" shall include the Sycamore System) have been used for oil and gas drilling, production, gathering and processing operations, and related oil field operations. Physical changes in or under the Properties or adjacent lands may have occurred as a result of such uses. The Properties also may contain buried pipelines and other equipment, whether or not of a similar nature, the locations of which may not be known to Seller or be readily apparent by a physical inspection of the Properties. Third parties may have used the Properties or the surface rights thereon for other purposes as well. Buyer understands that Seller does not have the requisite information with which to determine the exact nature or condition of the Properties nor the effect any such use has had on the physical condition of the Properties. Buyer is hereby notified that detectable amounts of regulated and unregulated chemicals and other substances which may pose a threat to health or to plants or wildlife, or which are known to cause illnesses, diseases, cancer, birth defects and other reproductive harm, may be found in, on or around the Properties. Adverse physical conditions, including the presence of such chemicals and other substances, may not be revealed by Buyer's investigation. In addition, Buyer acknowledges that some oil field production equipment may contain various contaminants or hazardous substances, including without limitation, asbestos and/or naturally-occurring radioactive material ("NORM"). In this regard, Buyer expressly understands that NORM may affix or attach itself to the inside of wells, materials, pipes and equipment as scale or in other forms, and that wells, materials, pipes and equipment located on the Properties may contain NORM and that NORM-containing materials may be buried or have been otherwise disposed of on the Properties. Buyer also expressly understands that special procedures may be required for the removal and disposal of various contaminants or hazardous substances, including without limitation, asbestos and NORM, from the Properties where it may be found. The statements in this Section 8.1 are intended as disclosures and acknowledgments of possible conditions existing on the Properties. Seller hereby advises that it has not been notified of any noncompliance up to the date of closing. 8.2 ENVIRONMENTAL ASSESSMENT. Buyer shall have the right, at Buyer's sole ------------------------- cost, risk, and expense, to undertake an environmental assessment of the Properties during the period ending on the Title Notice Date (the "Inspection Period"). Buyer and its agents shall have the 13 same right as Seller to enter upon the Properties, inspect the same, conduct soil and water sampling, analysis and monitoring, including soil borings (and, after notice and consultation with Seller, drilling groundwater monitoring wells), and generally conduct such tests, examinations, investigations and studies as Buyer deems necessary or appropriate for preparing appropriate engineering and other reports and making judgments relating to the Properties, their condition, and the presence of chemicals and other substances. Seller shall cooperate with any efforts of Buyer and its agents to obtain third party consents for access to those parcels of land within the Properties to which Seller may not presently have access. Buyer and its agents shall have reasonable access to Seller's agents and employees in the course of conducting Buyer's environmental assessment. Buyer agrees to provide to Seller a copy of all facts discovered in the course of conducting Buyer's environmental assessment, including all direct observations (if in writing or other tangible or transferable medium), data and summaries thereof. Buyer shall keep any data or information acquired in the course of such examinations and the results of all analyses of such data and information strictly confidential and not disclose same to any person or agency without the prior written approval of Seller, except that Buyer may disclose to authorities having jurisdiction such information as is required by law or by court order at the same time that Buyer provides such information to Seller. If Buyer determines that conditions on a Property do not satisfy the environmental standards set forth in Section 8.4 below in a material respect, then Buyer may notify Seller of such condition by providing Seller, on or prior to the Title Notice Date, a written "Notice of Environmental Defect" setting forth in detail the facts giving rise to the claimed defect, the environmental standard which Buyer claims is not satisfied, any Applicable Environmental Law (hereinafter defined) which Buyer contends has been breached or violated and, if the claimed defect arises from information contained in a document, a copy of such document or the relevant parts thereof. Buyer shall be deemed to have accepted without objection (i) the environmental conditions described in Schedule 8.4, and (ii) any Property which does not meet the environmental standards or which is subject to an environmental defect unless a Notice of Environmental Defect is given with respect to such Property on or prior to the First Title Notice Date. 8.3 ACCESS; INDEMNIFICATION. Access to the Properties to conduct Buyer's ------------------------ environmental assessment shall be subject to the following conditions: Buyer waives and releases all claims against Seller and its successors, assigns, directors, officers, contractors, affiliates, partners, employees and agents, for injury to or death of persons or damage to property arising in any way from the exercise of rights granted to Buyer hereby or the activities of Buyer or its employees, agents or contractors on the Properties, provided that Buyer does not hereby assume the risk of damage, injury or death attributable to the willful misconduct or gross negligence of Seller. Buyer shall indemnify Seller, its partners, employees, and agents, and shall hold each and all of said indemnities harmless from and against any and all loss whatsoever arising out of (i) any and all statutory or common-law liens or other encumbrances for labor or materials furnished in connection with such tests, samplings, studies or surveys as Buyer may conduct with respect to the Properties, and (ii) any injury to or death of persons or damage to property occurring in, on or about the Properties as a result of such exercise or activities (except for any such injuries or damages caused by the gross negligence or willful misconduct of any 14 said indemnities). Notwithstanding any provision of this Agreement to the contrary, the foregoing obligation of indemnity shall survive the Closing or the termination of this Agreement without Closing. 8.4 ENVIRONMENTAL STANDARDS. This section sets out the environmental ------------------------ standards applicable to the Properties for purposes of this Agreement and do not constitute covenants, representations or warranties of Seller. Seller disclaims all warranties and representations regarding and makes no covenants with respect to environmental conditions on the Properties. (a) The Properties shall not have been used for the generation, treatment, storage or disposal of a Hazardous Substance (as defined below) in a manner or to an extent that would subject Seller to a material liability for violation of any Applicable Environmental Laws (as defined below). Except as disclosed in Schedule 8.4, there shall not have been any release or discharge of a Hazardous Substance from the Properties in a manner or to an extent that would subject Seller to a material liability for violation of any Applicable Environmental Laws. "Hazardous Substance" shall mean any hazardous substance, pollutant, contaminant, solid or hazardous waste, hazardous waste constituents, hazardous material or toxic substance subject to regulation or liability under Applicable Environmental Laws in force as of the date hereof, including asbestos, radioactive substances, and any other substance or material that would constitute or cause a health, safety or environmental hazard on or at the Properties under Applicable Environmental Laws. "Applicable Environmental Laws" shall mean (i) all federal statutes regulating or prescribing restrictions regarding the use of the Properties or other activities affecting the environmental (air, water, land, animal and plant life), including but not limited to the following: the Clean Air Act, Clean Water Act, Comprehensive Environmental Response, Compensation and Liability Act, Emergency Planning and Community Right-to-Know Act, Endangered Species Act, Hazardous Materials Transportation Act, Migratory Bird Treaty Act, National Environmental Policy Act, Occupational Safety and Health Act, Oil Pollution Act of 1990, Resource Conservation and Recovery Act, Safe Drinking Water Act, and Toxic Substances Control Act; (ii) any regulations promulgated under such federal statutes; (iii) any state law counterparts of such federal statutes and the regulations promulgated thereunder; (iv) any other state or local statutes, rules regulations or ordinances regulating the use of or affecting the environmental; and (v) all common law rights, duties and obligations regarding the use of or matters affecting the environment. (b) Except as disclosed in Schedule 8.4, there are no agreements, consent or administrative orders, injunctions, decrees, judgments, license or permit conditions, or other directives of governmental authorities based on any Applicable Environmental Laws that require any material change in the present condition of the Properties, and Seller has not received any notice from any government authority or private or public entity advising Seller that it is or is potentially responsible for response costs under an 15 Applicable Environmental Law as a result of Seller's ownership or activities in connection with the Properties. (c) Except as disclosed in Schedule 8.4, no conditions or circumstances exist on the Properties that would subject Seller to any material damages, penalties, injunctive relief or clean-up or closure costs under any Applicable Environmental Laws or that would require clean-up, removal, remedial or corrective action or other response involving a material expenditure by Seller pursuant to Applicable Environmental Laws. 8.5 PROPERTIES SUBJECT TO ENVIRONMENTAL DEFECT. Seller shall have a ------------------------------------------- period of twelve (12) days after the title Notice Date to cure or remediate the environmental defect(s) set out in any Notice of Environmental Defect timely and properly given by Buyer. In the event Seller is unable or unwilling to cure or remediate any such defect prior to Closing, one of the following shall occur: (a) The parties shall agree upon an adjustment to the Purchase Price to compensate Buyer (i) for the defect and all future liability associated therewith or resulting therefrom, and (ii) for agreeing to indemnify, defend and hold harmless Seller from and against any and all loss, cost, liability or expense associated therewith or resulting therefrom. (b) Deleted. (c) Notwithstanding the provisions of (a) above, Purchaser shall not be entitled to an adjustment of the Base Price pursuant to the provisions of this Section 8.5 unless the amount of the adjustment for each occurrence exceeds $25,000 to the interest of Seller. Buyer shall be responsible for all adjustments up to $25,000, and Seller shall be responsible for amounts in excess of $25,000. In the event there is an adjustment in excess of $50,000 to the interest of Seller for each occurrence, then in such event, Seller at its sole election can remove such property from the transaction, close and agree to adjust the purchase price. 8.6 INDEMNIFICATION OF SELLER. All liabilities attributable to conditions -------------------------- existing and operations conducted on the Properties assigned to Buyer, under Applicable Environmental Laws and under all future environmental laws, shall be liabilities of Buyer, and Buyer shall indemnify, defend, and hold harmless Sellers from and against all loss, cost, liability or expense attributable thereto or resulting therefrom. 8.7 MATERIALITY DEFINED. For purposes of this Article VIII, material and -------------------- materiality is hereby defined as any matter in excess of $25,000.00 chargeable to the interests of Seller per occurrence. 16 ARTICLE 9 CONDITIONS TO OBLIGATIONS OF BUYER ---------------------------------- The obligation of Buyer to consummate the transactions provided for in this Agreement shall be subject to the satisfaction of each of the following conditions on or before the Closing Date, subject to the right of Buyer to waive any one or more of such conditions: 9.1 REPRESENTATIONS AND WARRANTIES OF SELLER. At and as of the Closing ---------------------------------------- Date, the representations and warranties of Seller contained in Article 4 hereof shall be true and correct in all material aspects as though made on such date. 9.2 PERFORMANCE OF THIS AGREEMENT. Seller shall have duly performed or ----------------------------- complied in all material respects with all of the obligations to be performed or complied with by Seller under the terms of this Agreement on or prior to the Closing Date. 9.3 EFFECT OF CLOSING. In the event Buyer proceeds to Closing ----------------- in the absence of satisfaction or affirmative waiver of any of the foregoing conditions, Buyer shall be deemed to have waived its right not to close by reason thereof. ARTICLE 10 CONDITIONS TO OBLIGATIONS OF SELLER ----------------------------------- The obligations of Seller to consummate the transactions provided for in this Agreement shall be subject to the satisfaction of each of the following conditions on or before the Closing Date, subject to the right of Seller to waive any one or more of such conditions: 10.1 REPRESENTATIONS AND WARRANTIES OF BUYER. The representations and --------------------------------------- warranties of Buyer contained in Article 5 hereof shall be true and correct in all material respects at and as of the Closing Date. 10.2 PERFORMANCE OF THIS AGREEMENT. Buyer shall have duly performed or ----------------------------- complied in all material respects with all of the obligations to be or complied with by Buyer under the terms of this Agreement on or prior to the Closing Date. 10.3 EFFECT OF CLOSING. In the event Seller proceeds to Closing in the ----------------- absence of satisfaction or affirmative waiver of any of the foregoing conditions, Seller shall be deemed to have waived its right not to close by reason thereof. 17 ARTICLE 11 TERMINATION ----------- 11.1 NONCOMPLIANCE BY SELLER. Buyer may terminate this Agreement by ----------------------- written notice to Seller if the conditions to Buyer's obligations under this Agreement, as set forth in Article 9 hereof, shall not have been complied with or performed in all material respects (and Seller shall not be prepared to comply with or perform the same) by the date on which the Closing is to occur (as set forth in Section 12. 1), and such non-compliance or non-performance shall not have been waived in writing by Buyer. Under such circumstances, Buyer shall be entitled to a return of the Deposit, which shall be Buyer's sole remedy hereunder unless such termination is a result or Seller's failure or refusal to close the transaction contemplated hereby under circumstances in which all conditions precedent to Seller's obligations as set forth in Article 10 have been performed or satisfied in all respects, in which event Buyer shall be entitled to pursue any remedies existing at law or in equity. 11.2 NONCOMPLIANCE BY BUYER. Seller may terminate this Agreement by ----------------------- written notice to Buyer if the conditions to Seller's obligations under this Agreement, as set forth in Article 10 hereof, shall not have been complied with or performed in all material respects (and Buyer shall not be prepared to comply with or perform the same) by the date on which the Closing is to occur (as set forth in Section 12. 1), and such non-compliance or non-performance shall not have been waived in writing by Seller. In such event, Seller shall retain the Deposit as liquidated damages for Buyer's failure to purchase the Interests at the time specified herein. The parties hereto agree that time is of the essence for the consummation of the transactions contemplated hereby, that the amount of damages caused by Buyer's breach would be very difficult to calculate exactly, and that the provision for liquidated damages contained in this Section 11.2 shall not be construed as a penalty provision. Such right to liquidated damages shall be Seller's sole remedy hereunder. 11.3 COOPERATION BY BUYER. In the event of termination of this Agreement, --------------------- Seller shall be free to sell the Interests to any third party without any limitation under or by reason of this Agreement. Buyer shall cooperate with Seller in effectuating any such sale by promptly executing any instrument reasonable requested by Seller evidencing the termination of this Agreement or Buyer's right to acquire the Interests. 11.4 ARBITRATION. Unless otherwise specified in this Agreement, any ------------ controversy arising under this Agreement which the parties are unable to resolve by mutual agreement, shall be submitted to binding arbitration in Dallas, Texas in accordance with the then current rules of The Judicial Arbitration & Mediation Services, Inc. (hereinafter referred to as the "JAMS"). Either party may give to the other written notice of its desire to have a matter arbitrated, in which event a hearing thereon shall commence within a reasonable time (not to exceed fifteen (15) days thereafter. Any decision of the arbitrators shall be conclusive as to the matters submitted to them, shall be final and binding upon the parties hereto, and may be enforced in any court of 18 competent jurisdiction. Notwithstanding anything herein to the contrary, the parties agree that any decision or award resulting from arbitration which exceeds the sum of $ 1,000,000 shall be subject to appeal and judicial review upon petition of either party. ARTICLE 12 CLOSING ------- 12.1 DATE AND PLACE. The Closing shall be held on or before at 10 a.m. on -------------- February 15, 1997 (the date on which the Closing actually occurs is referred to herein as the "Closing Date"). The Closing shall take place in the offices of the Seller, 2500 Tanglewilde, Suite 250, Houston, Texas 77063, or such other place as mutually agreed between the parties. 12.2 SATISFACTION OF CONDITIONS. Not later than two (2) business days -------------------------- prior to the Closing Date, each party shall provide the other party such evidence of satisfaction of conditions under Section 9.2 and 10.2 hereof as the other party shall have reasonably and timely requested. 12.3 ASSIGNMENTS. At the Closing, Seller shall deliver to Buyer (i) a ----------- fully executed and acknowledged Assignment, Conveyance and Bill of Sale, in the form attached hereto as Exhibit F, assigning to Buyer Seller's interest in the Properties, and (ii) a fully executed and acknowledged Assignment of General Partnership Interest, in the form attached hereto as Exhibit G, assigning to Buyer Seller's general partnership interest in Sycamore. 12.4 DETERMINATION AND PAYMENT OF PURCHASE PRICE. On the day that is two ------------------------------------------- (2) business days prior to the Closing Date, Seller shall furnish to Buyer (i) a summary of the Base Price adjustments to be effected at the Closing pursuant to Section 3.4, 7.4, 7.5, 7.6, 7.7 and 8.5 hereof, and subject to the provisions of Section 3.7, and (ii) based upon the information at (i), a calculation of the Purchase Price. Buyer and Seller shall work together diligently and in good faith prior to the Closing in an effort to agree upon the amount of the adjustments necessary to determine the Purchase Price, and if they do so agree, the agreed amount shall be paid by Buyer to Seller by wire transfer of immediately available funds at the Closing (less any amount deposited in escrow by Buyer pursuant to Section 3.5) If the parties cannot agree on the adjustment amounts necessary to determine the Purchase Price, the Closing shall occur as scheduled based on Seller's reasonable, good faith estimate of the Purchase Price ("Seller's Estimate") and the difference between Seller's Estimate and Buyer's calculation of the Purchase Price (less any amount deposited in escrow by Buyer pursuant to Section 3.5) shall be deposited in escrow with the Escrow Agent pending a determination of the final Purchase Price. In such event the final Purchase Price shall be determined either (i) by subsequent agreement of the parties, or (ii) by binding arbitration pursuant to an arbitration proceeding initiated and conducted substantially in accordance with the procedures set out in Section 11.4 hereof. In the event arbitration is necessary to determine the Purchase Price, prior to initiating the arbitration, each party shall furnish to the other a statement of such party's calculation of the Purchase Price. All 19 fees and expenses of the arbitration, including attorneys' fees, expert witness fees and all other out-of-pocket expenses of both parties, shall be paid by the party whose calculation of the Purchase Price bears the greatest difference from the Purchase Price determined by the arbitrator. The award of the arbitrator shall not be subject to appeal or judicial review of any nature and shall be promptly furnished to the Escrow Agent who shall make distribution of the escrowed funds in a manner consistent with such award. 12.5 LETTERS IN LIEU. Seller shall execute and deliver to Buyer at the ---------------- Closing, on forms prepared by Buyer in the form set out in Exhibit H, transfer orders or letter in lieu thereof directing all purchasers of production to make payment to Buyer of proceeds attributable to production from the Interests. 12.6 BUYER'S CERTIFICATE. Buyer shall execute and deliver to Seller at -------------------- Closing, Buyer's certificate that all its representations and warranties under this Agreement are true and correct as of the Closing Date. ARTICLE 13 POST-CLOSING MATTERS -------------------- 13.1 SALES TAXES. It is understood that the Purchase Price does not ------------ include sales taxes imposed on account of the transactions contemplated hereby. Buyer will be responsible for all such taxes, and Buyer hereby agrees to hold harmless Seller and will hold Seller harmless with respect thereto, including any penalties, costs, attorneys fees or interest assessed for late payment. 13.2 RECEIPTS AND DISBURSEMENTS. If, after the Closing, Buyer receives any --------------------------- funds relating to operations on or production from the Interests prior to the Effective Time, or Seller receives any funds relating to operations on or production from the Interests after the Effective Time, then the party receiving such funds shall account therefor and pay the same to the other party promptly after receipt thereof. Likewise, if Buyer shall be required to pay any amount relating to items of the Interests which accrued to the owner of the Interests before the Effective Time, or if Seller shall be required to pay any amount (not otherwise prohibited by the ten-ns of this Agreement) relating to items of the Interests which accrued to the owner of the Interests after the Effective Time, then the party making such payment shall invoice the other party for the amount of such payment and the party receiving such invoice promptly shall pay the same. Notwithstanding the foregoing, there shall be no accounting for amounts received or paid which have already been taken into account in calculating the Purchase Price. In determining the amount paid by a party accruing during a period of time in respect of ad valorem taxes, the taxes shall be prorated as provided in Section 7.7. 20 13.3 ALLOCATION OF LIABILITY. Seller shall, except as otherwise provided ----------------------- in clause (ii) of Section 13.4 hereof, remain liable and responsible for all costs and expenses attributable to the ownership or operation of the Interests prior to the Effective Time. Buyer shall cause Seller to remain on policies of insurance until any unknown claims are barred by statute of limitations. Buyer shall be liable and responsible for all costs and expenses attributable to the ownership or operation of the Interests after the Effective Time, together with those additional liabilities and obligations assumed by Buyer pursuant to clause (ii) of Section 13.4 hereof. 13.4 ASSUMPTION. By acceptance of the Assignment, Conveyance and Bill of ---------- Sale at the Closing, Buyer shall be deemed to have accepted and assumed responsibility for all obligations and liabilities of Seller (i) accruing from and after the Effective Time under the terms of the leases included in the Interests, under all prior assignments in the chain of title to said leases, and under all joint operating agreements and other similar agreements to which said leases are subject or pursuant to which operations are conducted on the Land, (ii) relating to the environmental condition of and other conditions on and under the Land, whether existing as of the Effective Time or thereafter arising, and whether created by statute, regulation, rule, order, common law or contract, including, without limitation, any obligation to plug, replug or repair any well, or to restore, clean up or remediate the surface of the Land, and (iii) all obligations attributable to the Interests relating to gas overproduction, including balancing rights of third parties and any cash balancing obligations determined by contract, common law, settlement or court order or judgment. By acceptance of the Assignment of General Partnership Interest at the Closing, Buyer shall be deemed to have accepted and assumed responsibility for all obligations and liabilities of Seller as a general partner in Sycamore arising from and after the Effective Time. 13.5 BOOKS AND RECORDS. Seller shall deliver to Buyer, as soon as ----------------- practicable after the Closing Date (but in no event more than thirty (30) days after the Closing Date), all books, files, records and other information of Seller (including, without limitation, land, geological, geophysical and accounting files, records and other material) relating to the Interests. For a period of five (5) years after the delivery of such files and records, Buyer shall permit Seller reasonable access to such files and records, bust such right of access shall not constitute an obligation of Buyer to maintain such files in the same form as maintained by Seller prior to delivery thereof. ARTICLE 14 MISCELLANEOUS ------------- 14.1 NOTICES. All communications required or permitted to be given under -------- this Agreement shall be in writing and delivered, mailed or transmitted to the parties at the addresses set out below. Notices shall be deemed given when received except that notices given by 21 facsimile transmission on weekends, holidays or after 5:00 p.m. Central Time, shall be deemed received on the next business day. If delivered by commercial delivery service or mailed by registered or certified mail, the delivery receipt shall be evidence of the date of receipt. Either party may, by written notice so delivered to the other, change the address to which delivery shall thereafter be made. (a) Notices to Buyer: Gothic Energy Corporation 5727 South Lewis Avenue - Suite 700 Tulsa, Oklahoma 74105-7148 Attn: Mr. Mike Paulk With copy to: Pray, Walker, Jackman, Williamson & Marlar 900 Oneck Plaza - 100 West 5th Street Tulsa, Oklahoma 74103-4218 (918) 581-5599 Facsimile Attn: Mr. Ira L. Edwards, Jr. (b) Notices to Seller: Norse Exploration, Inc. Norse Pipeline, Inc. 2500 Tanglewilde, Suite 250 Houston, Texas 77063 (713) 975-0221 Facsimile Attn: Mr. Oivind Risberg With copy to: Steelhammer & Miller, P.C. Three Riverway, Suite 700 Houston, Texas 77056 (713) 960-9204 Facsimile Attn: Mr. Robert H. Steelhammer 14.2 BINDING, EFFECT. This Agreement shall be binding upon and shall ---------------- inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that Buyer may not assign this Agreement or any of its rights or obligations hereunder without the prior written consent of Seller, which consent may be withheld in Seller's sole discretion. 22 14.3 COUNTERPARTS. This Agreement may be executed in any number of ------------- counterparts which taken together shall constitute one and the same instrument and each of which shall be considered an original for all purposes. 14.4 EXPENSES. Each party hereto will bear and pay its own expenses of --------- negotiating and consummating the transactions contemplated hereby. 14.5 SECTION HEADINGS. The section headings contained in this Agreement ---------------- are for convenient reference only and shall not in any way affect the meaning or interpretation of this Agreement. 14.6 SUPERSEDING, EFFECT. This Agreement supersedes any prior agreement or --------------------- understanding between the parties with respect to the subject matter hereof 14.7 GOVERNING LAW; ENFORCEMENT. This Agreement shall be governed by, --------------------------- construed and enforced in accordance with the laws of the state of Oklahoma applicable to contracts made and to be performed entirely therein. The prevailing party in any litigation initiated to enforce rights under or collect damages for breach of this Agreement shall be entitled to reimbursement from the non-prevailing party of all costs and expenses, including attorneys' fees, incurred by the prevailing party in connection with such litigation. 14.8 EXHIBITS AND SCHEDULES. The Exhibits and Schedules referred to herein ----------------------- are attached hereto and by this reference made a part hereof. 14.9 ANNOUNCEMENTS. Seller and Buyer shall consult with each other with -------------- regards to all press releases and other announcements issued by either party concerning this Agreement or the transaction contemplated hereby and, except as may be required by applicable laws or the applicable rules and regulations of any governmental agency or stock exchange, neither Buyer nor Seller shall issue any such press release or other publicity without the prior written consent of the other party. 14.10 SURVIVAL. The representations and warranties of Seller set in -------- Article 4 hereof shall expire at, and be of no further force or effect after, the Closing, and Buyer shall have no claim against Seller for inaccuracy of any such representation or breach of any such warranty from and after the Closing. Buyer's only recourse for discovery of the inaccuracy of any representation or the breach of any warranty set out in Section 4 hereof shall be excused performance of Buyer's obligation to close pursuant to Section 9. 1 hereof. The representations and warranties of Buyer as set out in Article 5 hereof shall survive the Closing. The covenants of the parties under this Agreement shall survive the Closing (for this purpose, nothing contained in Article 4 hereof shall be deemed to be a covenant). 14.11 FURTHER ASSURANCES. After the Closing, the parties shall, at the ------------------- sole cost and expense of the requesting party if more than an immaterial expense is involved, (i) furnish such 23 additional information, (ii) execute and deliver such additional documents, and (iii) perform such additional acts, as may be necessary and reasonably requested by the other party or parties to effect the transaction contemplated by this Agreement. 14.12 WAIVER. The rights and remedies of the parties to this Agreement ------- are cumulative and not alternative. Neither the failure nor any delay by any party exercising any right, power or privilege under this Agreement or the documents referred to herein will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. Except as otherwise provided in this Agreement, to the maximum extent permitted by applicable law, (i) no waiver of any claim or right under this Agreement will be valid unless evidenced by a writing signed by the waiving party, (ii) no waiver given by a party will be applicable except in the specific instance for which it is given, and (iii) no notice to or demand on a party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to herein. ARTICLE 15 HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976 ---------------------------------------------------- The parties have determined that the Hart-Scott-Rodino Antitrust Act of 1976 does not apply to this transaction. ARTICLE 16 DISCLAIMERS OF WARRANTIES ------------------------- Seller has not made, and will not make, any warranty or representation, express, implied, or statutory, whatsoever in connection with this Agreement or the transaction contemplated by it, including the accuracy or completeness of data, information, or materials furnished at any time to Buyer in connection with the Interests, or the quality or quantity of hydrocarbons reserves (if any) attributable to the Properties, or the ability of the Properties to produce hydrocarbons. None of Seller's Associated Parties is authorized to make any warranty or representation on Seller's behalf. All data, information, and other materials furnished by Seller are provided to Buyer as a convenience, and reliance on or use of them is at Buyer's sole risk. 24 Executed as of the date first above written. SELLERS: NORSE EXPLORATION, INC., A DELAWARE CORPORATION BY: -------------------------------------------------- BRUCE L. TAYLOR, VICE PRESIDENT LAND * EXECUTED SUBJECT TO THE RECEIPT OF DEPOSIT IN THE AMOUNT OF $1,075,000 PER ARTICLE 2.4. AND NORSE PIPELINE, INC., A DELAWARE CORPORATION BY: -------------------------------------------------- BRUCE L. TAYLOR, VICE PRESIDENT LAND * EXECUTED SUBJECT TO THE RECEIPT OF DEPOSIT IN THE AMOUNT OF $1,075,000 PER ARTICLE 2.4. AND BUYER: GOTHIC ENERGY CORPORATION AN OKLAHOMA CORPORATION BY: -------------------------------------------------- MICHAEL PAULK, PRESIDENT 25 EX-99.II 3 COMMON STOCK PURCHASE WARRANT EXHIBIT 99(II) THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND THE HOLDER HEREOF AGREES THAT THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE SHALL NOT BE TRANSFERRED AND ANY TRANSFER OR PURPORTED TRANSFER SHALL NOT BE RIGHTFUL UNDER THE UNIFORM COMMERCIAL CODE AND THE ISSUER OF SUCH SECURITIES SHALL HAVE NO DUTY TO REGISTER A TRANSFER OF SUCH SECURITIES UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO, OR (ii) RECEIPT OF AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, BOTH AS TO THE IDENTITY OF SUCH OTHER COUNSEL AND THE FORM AND SUBSTANCE OF THE OPINION OF SUCH OTHER COUNSEL, TO THE EFFECT THAT REGISTRATION UNDER THE SECURITIES ACT OF 1933 IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER, OR (iii) A "NO- ACTION" LETTER HAS BEEN OBTAINED FROM THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT REGISTRATION UNDER SUCH ACT IS NOT REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER. THE RESTRICTIONS CONTAINED HEREIN ARE BINDING ON THE HOLDER HEREOF AND HIS SUCCESSORS AND ASSIGNS. COMMON STOCK PURCHASE WARRANT ----------------------------- GOTHIC ENERGY CORPORATION ------------------------- Void after February 18, 1999 Right to Purchase 200,000 Shares Warrant No. 97-1 of Common Stock Gothic Energy Corporation, an Oklahoma corporation (the "Company"), hereby certifies that, for value received, Norse Exploration, Inc. and Norse Pipeline, Inc., or registered assigns, is entitled, subject to the terms set forth below, to purchase from the Company at any time or from time to time before 5 P.M., New York City time, on or before February 18, 1999, 200,000 fully paid and non-assessable shares of the Common Stock, par value $.01 per share, of the Company, at a price (the "Purchase Price") of $2.50 per share, which amount is equal to the closing sale price of the Company's Common Stock on the Nasdaq SmallCap Market on December 10, 1996. The term "Common Stock" shall mean, unless the context otherwise requires, the stock and, under certain circumstances, other securities and property at the time receivable upon the exercise of this Warrant. 1. The Warrants. As used herein, the term "Issue Date" shall mean ------------ December 11, 1996 and the term "Warrant" refers to this Warrant and "Warrants" refers to all of the substantially identical warrants issued concurrently herewith unless the context should otherwise require. This Warrant has been issued as partial consideration for the assets purchased by the Company pursuant to the Sale and Purchase Agreement dated December 11, 1996 between the Company and Norse Exploration, Inc. and Norse Pipeline, Inc. 2. Exercise of Warrant; Partial Exercise. This Warrant may be exercised ------------------------------------- for the full number of shares of Common Stock (herein referred to as "Warrant Stock") at the time called for hereby and exercisable as herein provided by the holder surrendering this Warrant, properly endorsed, to the Company at its principal office in Tulsa, Oklahoma, or to the Company's transfer agent, American Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005, or successor transfer agent, accompanied by payment, in cash or by certified or official check, payable to the order of the Company, of the sum (the "Sum") obtained by multiplying (a) the number of shares of Common Stock called for on the face of this Warrant or with respect to which this Warrant is exercisable by (b) the Purchase Price. This Warrant may be exercised for less than the full number of shares of Common Stock at the time called for hereby and exercisable hereunder by such a surrender except that the number of shares receivable upon the exercise of this Warrant as a whole, and the amount payable upon the exercise of this Warrant as a whole, shall be proportionately reduced. Upon any such partial exercise, the Company, at its expense, will forthwith issue to the holder hereof a new Warrant or Warrants of like tenor calling in the aggregate on their face for the number of shares of Common Stock issuable upon exercise of this Warrant less the number of shares purchased on such exercise, issued in the name of the holder hereof or as such holder (upon payment by such holder of any applicable transfer taxes) may direct; provided that, in case this Warrant shall not have been registered under the Securities Act of 1933, as amended (the "Act"), the Company shall not be obligated to issue and deliver any Warrant or Warrants to or in the name of any person other than the holder of this Warrant unless, in the opinion of counsel to the Company, such Warrant or Warrants may be so issued and delivered without registration under the Act. 3. Delivery of Stock Certificates on Exercise. As soon as practicable ------------------------------------------ after the exercise of this Warrant and payment of the Purchase Price, the Company, at its expense (including the payment by it of any applicable issue tax) will cause to be issued in the name of and delivered to the holder hereof, or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, a certificate or certificates for the number of full shares of Common Stock to which such holder would be entitled upon such exercise, plus, in lieu of any fractional shares to which such holder would otherwise be entitled, cash equal to such fraction multiplied by the greater of (i) the then current market value of one full share, or (ii) the book value per share as of the close of the Company's most recent fiscal quarter, provided that, in case such -2- shares or other securities shall not have been registered under the Act, (i) the Company may require that such holder furnish to the Company a written statement that such holder is purchasing such shares or other securities for such holder's own account for investment and not with a view to the distribution thereof (other than sales permitted by the Act or the rules and regulations thereunder to be made without registration), subject, nevertheless, to any requirement of law that the disposition of the property of such holder shall at all times be within its own control, and further agreeing that the legend hereinafter provided shall appear on the certificates for the shares of Common Stock and be applicable to a transfer thereof, (ii) the Company shall not be obligated to issue and deliver any certificate for Common Stock to or in the name of any person other than the holder of this Warrant unless, in the opinion of counsel to the Company, such certificate may be so issued and delivered without registration under the Act, and (iii) the Company may place on each certificate delivered to any such person a legend substantially identical to the legend appearing at the beginning of this Warrant, applicable however to the Common Stock, evidencing that the shares represented thereby have not been registered under the Act. 4. Adjustment for Dividends in Other Stock, Property; Reclassifications. ------------------------------------------------- ----------------- In case at any time or from time to time after the Issue Date, the holders of the Common Stock of the Company (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, (i) other or additional stock or other securities or property (other than cash) by way of dividend or spin-off, (ii) any cash paid or payable out of capital or paid-in surplus or surplus created as a result of a revaluation, or (iii) other or additional stock or other securities or property (including cash) by way of stock-split, split-up, reclassification, combination of shares or similar corporate rearrangement, (other than additional shares of Common Stock of the Company, or any other stock or securities into which such Common Stock shall have been changed, or any other stock or securities convertible into or exchangeable for such Common Stock or such other stock or securities, adjustments in respect of which shall be covered by the terms of Paragraph 5), then and in each such case, the holder of this Warrant, upon the exercise hereof as provided in Paragraph 2, shall be entitled to receive the amount of stock and other securities and property (including cash in the cases referred to in clauses (ii) and (iii) above) which such holder would hold on the date of such exercise if on the Issue -3- Date he had been the holder of record of the number of shares of Common Stock of the Company called for on the face of this Warrant and had thereafter, during the period from the Issue Date to and including the date of such exercise, retained such shares and/or all other or additional stock and other securities and property (including cash in the cases referred to in clauses (ii) and (iii) above) receivable by him as aforesaid during such period, giving effect to all adjustments called for during such period by Paragraph 5. 5. Adjustment for Reorganization, Consolidation, Merger. In case of any ---------------------------------------------------- reorganization of the Company (or any other corporation, the stock or other securities of which are at the time receivable on the exercise of this Warrant) after the Issue Date or in case, after the Issue Date, the Company (or any other corporation) shall consolidate with or merge with or into another corporation, whether or not the Company shall be the surviving corporation, or convey all or substantially all its assets to another corporation, then and in each such case the holder of this Warrant, upon the exercise hereof as provided in Paragraph 2 at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise of this Warrant prior to such consummation, the stock or other securities or property (including cash) to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Paragraph 4; in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after such consummation. 6. No Dilution or Impairment. The Company will not, by amendment of its ------------------------- certificate of incorporation or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Warrants, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of the Warrants against dilution or other impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of stock receivable upon the exercise of the Warrants above the amount payable therefor upon such exercise, (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares upon the exercise of all Warrants at the time outstanding, and (c) will take no action to amend its certificate of incorporation which would change to the detriment of the holders of Common Stock (whether or not any Common Stock be at the time outstanding) the dividend or voting rights of the Company's Common Stock as constituted on the Issue Date. -4- 7. Officer's Certificate as to Adjustments. In each case of an --------------------------------------- adjustment in the Purchase Price (including the adjustment referred to in the first paragraph of this Warrant) or in the shares of Common Stock or other stock, securities or property receivable on the exercise of the Warrants, the Company, at its expense, shall cause its principal financial officer to compute such adjustment in accordance with the terms of the Warrants and prepare a certificate setting forth such adjustment and showing in detail the facts upon which such adjustment is based, including, without limitation, a statement of the Adjusted Purchase Price. The Company will forthwith mail a copy of each such certificate to each holder of a Warrant at the time outstanding. 8. Notices of Record Date. In case ---------------------- (i) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of the Warrants) for the purpose of entitling them to receive any dividend (other than a cash dividend), or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right; or (ii) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation, or any conveyance of all or substantially all of the assets of the Company to another corporation; or (iii) of any voluntary dissolution, liquidation or winding-up of the Company; then, and in each such case, the Company will mail or cause to be mailed to each holder of a Warrant at the time outstanding a notice specifying, as the case may be, (a) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (b) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time receivable upon the exercise of the Warrants) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be mailed at least 30 days prior to the date therein specified. -5- 9. Registration of Common Stock ---------------------------- 9.1 Incidental Registrations. ------------------------ (a) In the event the Company hereafter shall take action to register any of its equity securities under the Act for the purpose of registering under the Act securities of the Company to be sold by security-holders of the Company, the Company agrees that it will give to the holder or holders of the Warrants and any shares previously issued on exercise thereof notice that such registration of securities is to be effected and that registration of the shares of Common Stock of the Company issuable on exercise of the Warrants will then be effected by the Company under the then applicable law and regulations and practices of the Securities and Exchange Commission or other governmental agency substituted therefor. All of the shares of Common Stock issuable on exercise of such Warrants and all shares of Common Stock previously issued to such Holder on exercise of a Warrant held by such holder will be included in such registration unless, within 15 days of the receipt of such notice, such holder notifies the Company in writing that such holder desires none or only a portion (specifying the number) of the shares to be included in such registration whereupon the Company shall include in such registration only the number of shares specified in such notice from the holder. The Company will, at its own expense, take action to register thereunder the shares of Common Stock to be registered and such other action as may be requested by such holder to effect qualification under and compliance with any state laws or other governmental requirements, as above provided. (b) Any holder whose securities shall be included in the Company's registration under the Act pursuant to subsection (a) of this Paragraph 9.1 shall furnish to the Company such information regarding his holdings of shares of Common Stock to be registered and the proposed manner of distribution thereof as the Company may request in writing and as shall be required in connection with any registration, qualification or compliance referred to in subsection (a) of this Paragraph 9.1 and shall otherwise cooperate with the Company in connection with such registration, qualification or compliance. The Company, at its expense, will furnish to holders of shares of Common Stock included in such registration such number of prospectuses, offering circulars or other documents incident to any registration, qualification or compliance referred to in this Paragraph 9.1 as such holders from time to time reasonably may request, and will indemnify and defend each such holder of shares of Common Stock being sold by any such holder (and any person who controls such holder within the meaning of Section 15 of the Act) against all claims, losses, damages, liabilities and expenses resulting from any untrue statement or alleged untrue statement of a material fact contained therein (or in any related registration statement, notification or the like) or from any omission or alleged omission to state therein a material fact -6- required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same may have been based upon information furnished in writing to the Company by such holder expressly for use therein, and with respect to such information furnished to the Company, such holder will indemnify and defend the Company against all claims, losses, damages, liabilities and expenses resulting from any untrue statement or alleged untrue statement of a material fact contained therein or any omission or alleged omission to state a material fact required to be stated or necessary to make the information not misleading. Notwithstanding anything herein contained, the Company shall not be obligated to pay any underwriting or brokers' discounts or commissions applicable to the holder's shares of Common Stock or fees or disbursements of counsel to the selling stockholders. (c) Notwithstanding anything herein to the contrary, the Company shall not be obligated to offer to include the shares of Common Stock issuable or previously issued on exercise of such warrants on any occasion other than the first occasion after the date hereof that the Company files a registration statement under the Act relating to securities of the Company to be sold by security-holders of the Company. In addition, the Company's obligations under this Section 9 shall terminate on the date when all of the shares issuable and issued on exercise of this Warrant are permitted to be sold without registration pursuant to Rule 144(k) under the Act or any similar successor rule. 9.2. Registration Procedures. If and whenever the Company is ----------------------- required to use reasonable efforts to effect or cause the registration of any Common Stock under the Act as provided in this Section 9, the Company will, as expeditiously as possible: (a) prepare and file with the Securities and Exchange Commission a registration statement with respect to such Common Stock and use reasonable efforts to cause such registration statement to become effective; (b) prepare and file with the Securities and Exchange Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than nine months or such shorter period in which the disposition of all securities in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement shall be completed, and to comply with the provisions of the Act (to the extent applicable to the Company) with respect to such dispositions; (c) furnish to each seller of such Common Stock such number of copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus), in conformity with -7- the requirements of the Act, and such other documents, as such seller may reasonably request, in order to facilitate the disposition of the Common Stock owned by such seller; (d) use of its reasonable efforts to register or qualify such Common Stock covered by such registration statement under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests, and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Common Stock owned by such seller, except that the Company will not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not, but for the requirements of this Paragraph 9.2(d) be obligated to be qualified, to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any such jurisdiction; and (e) notify each seller of such Common Stock at any time when a prospectus relating thereto is required to be delivered under the Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the Company will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Common Stock, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading. 9.3 Registration and Selling Expenses. --------------------------------- (a) All expenses incurred by the Company in connection with the Company's performance of or compliance with this Section 9, including, without limitation (i) all registration and filing fees (including all expenses incident to filing with the National Association of Securities Dealers, Inc.), (ii) blue sky fees and expenses, (iii) all necessary printing and duplicating expenses and (iv) all fees and disbursements of counsel and accountants for the Company (including the expenses of any audit of financial statements), retained by the Company (all such expenses being herein called ("Registration Expenses"), will be paid by the Company except as otherwise expressly provided in this Paragraph 9.3. (b) The Company will, in any event, in connection with any registration statement, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal, accounting or other duties in connection therewith and expenses of audits of year-end financial statements), and the expenses and fees for listing the securities to be registered on one or more securities exchanges on which similar securities issued by the Company are then listed. -8- (c) The holders of Common Stock covered by such registration statement shall pay or reimburse the Company for any incremental Registration Expenses incurred by reason of the inclusion of such Common Stock in such registration. (d) Notwithstanding any of the foregoing, all underwriting discounts, selling commissions and stock transfer taxes applicable to sales of Common Stock in connection with such registration statement shall be borne by all persons who are selling Common Stock pursuant to such Registration Statement in proportion to the dollar value of the securities being sold by each such person. (e) All fees and expenses required to be paid by the holders of Common Stock in connection with such registration statement shall be borne by said holders in proportion to the dollar value of the securities of such holder covered by such registration statement. 9.4 Transferees of Warrant Stock. Notwithstanding anything else ---------------------------- set forth in this Section 9, no person to whom this Warrant or Warrant Stock is transferred shall have any rights under this Section 9 as a holder of such Warrant or Warrant Stock unless such person agrees to be bound by the terms and conditions of this Section 9. 9.5 Exercise of Warrant. As a condition to including the shares of ------------------- Warrant Stock in any registration statement to be filed under the Act, the holder shall agree that exercise of this Warrant into Common Stock in accordance with the terms hereof will be undertaken immediately before such registration statement has become effective. 9.6 Stand-off. In connection with any registration of shares of --------- Common Stock pursuant to Paragraph 9.1 hereof, the holder thereof shall agree, as a condition to the inclusion of such shares of Common Stock in the registration statement and if requested by any managing underwriter of any offering of securities on behalf of the Company, to refrain from offering or selling any securities of the Company held by him for a period of six (6) months from the effective date of any registration statement relating to an underwritten public offering of securities on behalf of the Company. 10. Reservation of Stock Issuable on Exercise of Warrants. The Company ----------------------------------------------------- will at all times reserve and keep available, solely for issuance and delivery upon the exercise of the Warrants at the time outstanding, all such shares of Common Stock and other stock, securities and property as from time to time shall be receivable upon the exercise of the Warrants. -9- 11. Listing on Securities Exchanges; Registration. In case at any time any --------------------------------------------- Common Stock or other stock or securities of a character at the time receivable upon the exercise of the Warrants shall be listed on any securities exchange or quotation system, the Company will also list and keep listed thereon, on official notice of issuance upon the exercise of Warrants (provided that the rules of such exchange shall permit such listing), all shares of Common Stock and other stock and securities from time to time receivable upon the exercise of all Warrants at the time outstanding, and will register the same and keep the same registered under the Securities Exchange Act of 1934 and any other statute at the time applicable and will timely file all reports which may be required to be filed thereunder by companies having a class of equity securities so registered. 12. Exchanges of Warrants. Upon surrender for exchange of this Warrant to --------------------- the Company at its principal office in Tulsa, Oklahoma, the Company, at its expense, will issue and deliver a new Warrant or Warrants of like tenor, calling in the aggregate on their face for the same number of shares of Common Stock, in the denomination or denominations requested, to and in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct; provided that, in case the Warrant or Warrants so surrendered shall not have been registered under the Act, the Company shall not be obligated to issue and deliver any Warrant or Warrants to or in the name of any person other than the holder of the Warrant or Warrants so surrendered or in the denominations other than the denominations of this Warrant or Warrants so surrendered unless, in the opinion of counsel to the Company, such Warrant or Warrants may be so issued and delivered without registration under the Act. 13. Replacement of Warrants. Upon receipt of evidence reasonably ----------------------- satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement in such reasonable amount as the Company may determine, or (in the case of mutilation) upon surrender and cancellation thereof, the Company, at its expense, will issue, in lieu thereof, a new Warrant of like tenor. 14. Transferrability. Until this Warrant is transferred on the books of ---------------- the Company, the Company may treat the registered holder of this Warrant as absolute owner hereof for all purposes without being affected by any notice to the contrary. 15. Notices. All notices and other communications from the Company to the ------- holder of this Warrant shall be mailed by first-class registered or certified mail, postage prepaid, to the address furnished to the Company in writing by the holder of this Warrant. -10- 16. Change; Waiver. Neither this Warrant nor any term hereof may be -------------- changed, waived, discharged or terminated orally but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 17. Headings. The headings in this Warrant are for purposes of -------- convenience of reference only, and shall not be deemed to constitute a part hereof. 18. Law Governing. This Warrant is delivered in the State of Oklahoma and ------------- shall be construed and enforced in accordance with and governed by the laws of such State. 19. Expiration. This Warrant will be wholly void and of no effect after 5 ---------- P.M., New York City time, on February 18, 1999, provided that, if the last day on which this Warrant may be exercised, or on which it may be exercised at a particular Purchase Price, shall be a Sunday or a legal holiday or a day on which banking institutions doing business in the Borough of Manhattan, City and State of New York, are authorized by law to close, this Warrant may be exercised prior to 5 P.M., New York City, time, on the next succeeding full business day, with the same force and effect and at the same Purchase Price, as if exercised on such last day specified herein. Dated: February 18, 1997 GOTHIC ENERGY CORPORATION By: /s/ Michael Paulk ---------------------------------- President ATTEST: /s/ John Rainwater - ------------------------------------ [CORPORATE SEAL OF GOTHIC ENERGY Secretary CORPORATION APPEARS HERE] -11- FORM TO BE USED TO EXERCISE COMMON STOCK PURCHASE WARRANT Date: ------------------------------------ Gothic Energy Corporation 5727 South Lewis Avenue - Suite 700 Tulsa, Oklahoma 74105 The undersigned hereby elects irrevocably to exercise the within Common Stock Purchase Warrant and to purchase __________ Shares of Gothic Energy Corporation, and hereby makes payment of $__________ (at the rate of $__________ per Share) in payment of the Purchase Price pursuant thereto. Please issue the Common Stock as to which this Common Stock Purchase Warrant is exercised in accordance with the instructions given below. -------------------------------------------------- Signature -------------------------------------------------- Signature Guaranteed NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE WITHIN COMMON STOCK PURCHASE WARRANT IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A BANK, OTHER THAN A SAVINGS BANK, OR BY A TRUST COMPANY OR BY A FIRM HAVING MEMBERSHIP ON A REGISTERED NATIONAL SECURITIES EXCHANGE. INSTRUCTIONS FOR REGISTRATION OF SECURITIES Name: --------------------------------------------------------------------------- Address: ------------------------------------------------------------------------ City, State, Zip: --------------------------------------------------------------- -12- FORM TO BE USED TO ASSIGN COMMON STOCK PURCHASE WARRANT ASSIGNMENT (To be executed by the registered Holder to effect a transfer of the within Common Stock Purchase Warrant) For value received, _________________________ does hereby sell, assign and transfer unto ____________________ the right to purchase __________ Shares of Gothic Energy Corporation (the "Company") evidenced by the within Common Stock Purchase Warrant, and does hereby authorize the Company to transfer such right on the books of the Company. Dated: _______________, 199___ -------------------------------------------------- Signature NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE WITHIN COMMON STOCK PURCHASE WARRANT IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. -13- EX-99.III 4 AGREEMENT BETWEEN COMPANY AND HUFFMAN AND CO. EXHIBIT 99 (III) H. Huffman & Co. 301 N.W. 63rd St., Suite 510 Oklahoma City, Oklahoma 73116 ATTN: Huston Huffman, Jr. RE: Offer to Purchase Certain Oil and Gas Properties and Partnership ---------------------------------------------------------------- Interest -------- Gentlemen: This letter when accepted shall confirm the agreement between H. Huffman & Co., an Oklahoma limited partnership ("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 wells, together with all of Seller's 10.97% general partnership interest in Sycamore Gas System, an Oklahoma general partnership ("Sycamore"). 1. Sale and Purchase. For good and valuable consideration and subject to ----------------- 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 wells, lands and leasehold interests described in Exhibit "A" hereto, including, without limitation, all undeveloped oil and gas leasehold acreage, acreage comprising the spacing unit for such wells, and well facilities and equipment used in conjunction with such wells to the extent such interests are owned by or allocable to Seller, specifically including all operating and other contract rights associated with such wells (collectively the "Properties"). The Properties do not include, and there is expressly reserved unto Seller, all mineral interests, royalties, overriding royalties and similar interests owned in lands and leases included in the Properties. The net revenue interests attributable to such excluded interests are not included in the net revenue interests shown in Exhibit A. In addition, Seller hereby agrees to sell to Buyer Seller's 10.97% general partnership interest in Sycamore (the "Sycamore Interest"). 2. Effective Time. The effective time of the sale and purchase -------------- 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, ------- 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 Seller, located at 301 N.W. 63rd Street, Suite 510, Oklahoma City, Oklahoma, or at such other place as may be agreed on by the parties. 4. Purchase Price. Subject to adjustments as provided in this Agreement, -------------- the purchase price payable by Buyer for the Properties and the Sycamore Interest shall be $5,750,000 (the "Purchase Price"), which sum shall be H.Huffman & Co. December 13, 1996 Page 2 allocated among the Properties and the well equipment and other personalty, including the Sycamore Interest (the "Personalty") as set forth in Exhibit "A" (the "Allocated Values") and shall be fully payable by Buyer at Closing. Immediately upon the execution of this letter agreement by Seller, Buyer shall deliver to Seller in immediately available funds a deposit in the sum of $287,500.00 (5% of the Purchase Price) as a deposit toward the Purchase Price (the "Deposit"). In the event that Buyer shall fail to close the transaction contemplated hereby in accordance with the terms of this agreement, and provided that the conditions precedent to the obligations of Buyer set forth herein, have been fulfilled or Seller is ready, willing and able to comply with all such conditions precedent, Seller shall be entitled to retain this Deposit as liquidated damages. The parties hereto agree that the amount of damages caused by Buyer's breach or failure to close would be very difficult to calculate exactly and that the provision for liquidated damages herein is not a penalty provision. Such right to liquidated damages shall be Seller's sole remedy hereunder. 5. Access to Information. From and after the date of Seller's acceptance --------------------- 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 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 (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, landman's 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, in the opinion of Buyer or its attorneys, 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, attempt to cure or remove 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. 7. Environmental. Buyer shall have until February 1, 1997, or fifteen ------------- (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, attempt to cure or remedy such 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 H.Huffman & Co. December 13, 1996 Page 3 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. 8. Representations of Seller. Seller represents and warrants as follows: ------------------------- (a) Legal Power and Ownership. Seller has the full power and right to ------------------------- sell and convey the Properties pursuant to the terms of this Agreement and to perform Seller's other obligations under this Agreement. (b) Compliance with Laws. To Seller's knowledge, the Properties have -------------------- been operated in compliance, in all material respects, with all laws, rules, regulations, ordinances, orders and permits relating to the Properties, including 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 ------------ 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 -------------------------- 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. Seller has not initiated, consummated or waived the "Good Faith Negotiation Procedure" under FERC Order 451 with respect to any Property and Seller is not obligated to make any refunds or other payments after the Effective Time with respect to any take-or-pay settlements affecting any Property. (e) Litigation. There are no demands, claims, notices of violations, ---------- filings, governmental investigations, administrative proceedings, 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. To Seller's knowledge, all rentals, royalties, ------ overriding royalty interests and other payments due under each oil and gas lease comprising the Properties have been promptly and fully paid. 9. Representations of Buyer. ------------------------ (a) Legal Power and Authority. Buyer is a corporation duly organized ------------------------- 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. H.Huffman & Co. December 13, 1996 Page 4 (b) No Conflicts. Buyer's consummation of the transactions ------------ 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 --------------- 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 ----------------------------- 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: (a) Representations. The representations and warranties by Seller 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 ------- 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 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 ------------------------------ 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 --------------- 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 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. --------------------------------------------- (a) Documents. At closing, Seller shall deliver to Buyer (i) a --------- properly executed Assignment, Conveyance and Bill 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; and (ii) a properly executed Assignment of General Partnership Interest, in the form attached hereto as Exhibit C, assigning to Buyer Seller's general partnership interest in Sycamore. Seller shall also deliver to Buyer fully executed releases of all liens, security interests and other encumbrances or preferential rights burdening the Properties, together a check sufficient to cover the costs of recording such releases. H.Huffman & Co. December 13, 1996 Page 5 (b) Purchase Price. Buyer shall deliver by cashier's check or wire -------------- 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 ------- 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 ----- 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 ----------- Purchase Price"), upward or downward, by the following at the time of Closing: (i) Upward Adjustments: ------------------ (A) Any lease operating expenses or capital expenditures approved by Buyer 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 gas underproduction as provided for in Paragraph 15. (ii) Downward Adjustments: -------------------- (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, including adjustments for gas overproduction provided for in Paragraph 15. (iii) Best Information. Should any information necessary to any ---------------- 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) Consent to Assign. Buyer's obligation to purchase the Sycamore ----------------- Interest shall be conditioned upon Seller furnishing to Buyer at the Closing the written consent of the Managing General Partner of Sycamore. Seller shall immediately upon execution of this letter agreement request permission from the Managing General Partner of Sycamore to approve the sale of the Sycamore Interest as required under the terms of the General Partnership Agreement. Seller shall notify Buyer immediately of the Managing General Partner's consent or failure to consent to the purchase of such interest. In the event permission is not H.Huffman & Co. December 13, 1996 Page 6 obtained, the Purchase Price shall be reduced by the value allocated to the interest in the General Partnership as allocated in Exhibit "A" to this agreement. 13. Final Settlement. Not later than April 15, 1997, a final accounting ---------------- 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 such independent accountants as may be jointly selected by the parties (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. ----------- (a) Indemnity by Seller. Subject to the limitations contained herein ------------------- 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; or (ii) a failure of Seller to duly perform or observe any term, provision, covenant, or agreement to be performed or observed by Seller hereunder; however, in no event shall Seller's indemnification obligation cover or extend to any matter relating to title to or the environmental condition of the Properties. (b) Indemnity by Buyer. Subject to the limitations contained herein ------------------ 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 shall be made -------------------------- hereunder until the amounts involved, per Property 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 --------------------------- 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 H.Huffman & Co. December 13, 1996 Page 7 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 the result obtained with respect thereto by the indemnitee. 15. Balancing. The Purchase Price specified herein is based, in part, upon --------- the assumption there will not exist, at the Effective Time, a material net gas imbalance with respect to the Properties. To the extent net gas overproduction with respect to the Properties is discovered to be more or less than 1,000 Mcf, the Purchase Price shall be adjusted at Closing downward by $1.50 (net of royalties and taxes) for each Mcf by which Seller's interest in the Properties is overproduced by more than 1,000 Mcf at the Effective Time. Any adjustments not made at Closing due to gas imbalances shall be made by the appropriate party not later than the Final Settlement. 16. Maintenance of Properties. Seller will use its reasonable best efforts ------------------------- as a non-operator to cause the Properties to be 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; 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 its reasonable best efforts as a non-operator to support the election of Buyer (or its designee) as operator under applicable joint operating agreements and regulatory orders of all wells included within the Properties. 17. Transfer Orders. At Closing, Seller agrees to execute such transfer --------------- orders, letters in lieu of transfer orders, or other documents as may be necessary to effect payment of revenues to Buyer. 18. Miscellaneous. -------------- (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, 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. H.Huffman & Co. December 13, 1996 Page 8 (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): Seller Buyer ------ ----- Huston Huffman, Jr. Gothic Energy Corporation H. Huffman & Co. 5727 South Lewis, Suite 700 301 N.W. 63rd St., Suite 510 Tulsa, Oklahoma 74105 Oklahoma City, OK 73116 -and- -and- C. David Stinson, Esq. Ira L. Edwards, Jr., Esq. McAfee & Taft, Pray, Walker, Jackman, A Professional Corporation Williamson & Marlar 10th Floor, Two Leadership Square 900 ONEOK Plaza Oklahoma City, OK 73102 100 West 5th Street (405) 235-0439 (Facsimile) Tulsa, Oklahoma 74103-4218 (918) 581-5599 (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/ Michael Paulk ----------------------------------- Michael Paulk, President AGREED and ACCEPTED this 13th day of December, 1996. H. HUFFMAN & CO. By: /s/ [ILLEGIBLE SIGNATURE] ------------------------------------- Its General Partner ---------------------------------- EX-99.IV 5 AGREEMENT BETWEEN HORIZON GAS AND THE CO. EXHIBIT 99.(IV) March 4, 1997 Horizon Gas Partners, L.P., and HSRTW, Inc. Horizon Natural Resources 2512-C East 71st Street Tulsa, Oklahoma 74136 Attention: Dale Rich, President RE: Offer to Purchase Certain Oil and Gas Properties ------------------------------------------------ Dear Mr. Rich: 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 wells. 1. Sale and Purchase. For good and valuable consideration and subject to ----------------- 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 wells, 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 wells, and well facilities and equipment used in conjunction with such wells to the extent such interests are owned by or allocable to Seller, specifically including all operating and other contract rights associated with such wells (collectively the "Properties"). 2. Effective Time. The effective time of the sale and purchase -------------- 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, ------- 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 5727 South Lewis Avenue, Suite 700, Tulsa, Oklahoma, or at such other place as may be agreed on by the parties. 4. Purchase Price. Subject to adjustments as provided in this Agreement, -------------- 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 --------------------- 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 Horizon Gas Partners, L.P. and HSRTW, Inc. 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 ------------ (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, landman's 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 ------------- (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: ------------------------- (a) Legal Power and Ownership. Seller has the full power and right to ------------------------- 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 -------------------- 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 HSRTW, Inc. March 4, 1997 Page 3 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 ------------ 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 -------------------------- 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, ---------- 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 ------ other payments due under each oil and gas lease comprising the Properties have been promptly and fully paid. 9. Representations of Buyer. ------------------------ (a) Legal Power and Authority. Buyer is a corporation duly organized ------------------------- 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 ------------ 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 --------------- 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 ----------------------------- 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 HSRTW, Inc. March 4, 1997 Page 4 (a) Representations. The representations and warranties by Seller --------------- 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 ------- 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 ----------- 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 ------------------------------ 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 --------------- 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 ----------- 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. --------------------------------------------- (a) Documents. At closing, Seller shall deliver to Buyer a properly --------- executed Assignment, Conveyance and Bill 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 -------------- 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 ------- 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 ----- 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 ----------- Purchase Price"), upward or downward, by the following at the time of Closing: Horizon Gas Partners, L.P. and HSRTW, Inc. March 4, 1997 Page 5 (i) Upward Adjustments: ------------------ (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: -------------------- (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 ---------------- 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 ---------------- 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 & Lybrand 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. ----------- (a) Indemnity by Seller. Subject to the limitations contained herein ------------------- 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 HSRTW, Inc. 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 ------------------ 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 -------------------------- 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 --------------------------- 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 ----------------- 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 Page 7 16. Maintenance of Properties. Seller will cause the Properties to be ------------------------- 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 wells included within the Properties and Seller will allow Buyer, or its designee, to take over operations of such wells 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 --------------- orders, letters in lieu of transfer orders, or other documents as may be necessary to effect payment of revenues to Buyer. 18. Miscellaneous. -------------- (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 ------ ----- Horizon Gas Partners, L.P. Gothic Energy Corporation c/o Dale Rich, President 5727 South Lewis, Suite 700 Horizon Natural Resources Tulsa, Oklahoma 74105 2512-C East 71st Street Tulsa, OK 74136 -and- -and- HSRTW, Inc. Ira L. Edwards, Jr., Esq. c/o Kim Goss Pray, Walker, Jackman, 6666 South Sheridan, Suite 250 Williamson & Marlar Tulsa, Oklahoma 74133 900 ONEOK Plaza 100 West 5th Street Tulsa, Oklahoma 74103-4218 (918) 581-5599 (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/ MICHAEL PAULK Michael Paulk, President AGREED and ACCEPTED this 22nd day of January, 1997. HORIZON GAS PARTNERS, L.P. HORIZON NATURAL RESOURCES, INC., General Partner By: /s/ DALE RICH ----------------------------------------------- Dale Rich, President HSRTW, INC. By: /S/ GEORGE H. SOLICH ----------------------------------------------- George H. Solich, Its Vice President ------------------------- -----END PRIVACY-ENHANCED MESSAGE-----