Exhibit 2.2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") has been entered into
this 15th day of February, 1999, among Coral Reserves, Inc., an Oklahoma
corporation ("Coral Reserves"), Coral Reserves Energy Corp., an Oklahoma
corporation ("Coral Energy"), Coral Reserves Group, Ltd., an Oklahoma
corporation ("Coral Ltd.") (collectively, Coral Reserves, Coral Energy, and
Coral Ltd. are referred to as "Coral Group"), and Indian Oil Company, an
Oklahoma corporation ("Indian"), with reference to the following circumstances:
A. Coral Reserves is the general partner of three Oklahoma Limited
Partnerships, to wit: Coral Reserves Natural Gas Income Fund 1990 Limited
Partnership, Coral Reserves 1993 Institutional Limited Partnership, and Coral
Reserves 1996 Institutional Limited Partnership. Coral Energy is the general
partner of five Oklahoma Limited Partnerships, to wit: Coral Reserves Natural
Gas 1991 Income Fund Limited Partnership, Coral Reserves Natural Gas Income Fund
1992 Limited Partnership, Coral Reserves Natural Gas Income Fund 1993 Limited
Partnership, Coral Reserves Energy Income Fund 1995 Limited Partnership, and
Coral Reserves Energy Income Fund 1996 Limited Partnership, (collectively, all
the partnerships are referred to as "Coral Partnerships"). The Coral
Partnerships own and conduct as a going concern the production of oil and gas.
Coral Ltd. is the owner of interests and the operator of various xxxxx in which
the Coral Partnerships own interests.
B. Indian owns and conducts as a going concern the production of oil and
gas.
C. Coral Group intends to form Coral Public, Inc., ("Coral Public") and
to consummate the Merger ( hereafter defined) and merge or otherwise reorganize
("Reorganization") the Coral Partnerships and Indian into and with Coral Public
such that the Coral Partnerships and Indian cease to exist and the partners of
the Coral Partnerships and shareholders of Indian receive publicly registered
shares of common stock of Coral Public. It is contemplated that the common
stock of Coral Public to be issued in connection with the Reorganization and
Merger will be publicly registered prior to issuance to the partners of the
Coral Partnerships and Indian shareholders.
The parties acknowledge that the exact name of Coral Public, the
number of authorized shares, par value of shares or even corporate existence of
Coral Public has not been determined or occurred. The timing of the Merger, the
registration of Coral Public shares, and the Reorganization of the Coral
Partnerships into Coral Public has not been determined.
D. The boards of directors of Indian and Coral Group deem it advisable
and in the best interests of their respective shareholders that (i) Indian be
merged with and into Coral Public, pursuant to this Agreement and the applicable
provisions of the Oklahoma General Corporation Act (the "Oklahoma Act"); (ii)
Coral Public acquire all of the issued and outstanding capital stock of Indian,
pursuant to this Agreement; and, (iii) Coral Partnerships enter into a
Reorganization with Coral Public.
E. This Agreement provides for, among other things (i) the Merger of
Indian with and into Coral Public; (ii) the automatic conversion of all the
issued and outstanding shares of Indian at the Effective Time (hereafter
defined) into registered, fully paid and non-assessable shares of Coral Public
common stock (the "Coral Public Common Stock"); and, (iii) the management of
Indian by Coral Ltd. during the period of time from execution of this Agreement
until the Effective Time or earlier
termination of this Agreement.
ACCORDINGLY, premises considered and for the purpose of prescribing the
terms and conditions for the acquisition by Coral Public of Indian by means of
Merger with and into Coral Public, the parties have entered into this Agreement.
1. The Merger of Indian and Coral Public.
1.01 Coral Public Exchange Ratio: The Coral Public Common Stock shall
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be issued pro-rata to Coral Group and Indian based upon the Reserve Report, Bank
Debt, and Net Working Capital (all hereafter defined) subject to adjustments.
Coral Group will receive an amount of Coral Public's Common Stock equal to the
fraction in which the denominator is (i) the aggregate value of Coral Group's
and Indian's Reserve Report plus the Net Working Capital of Indian and Coral
Group at Effective Time minus Indian's and Coral Group's Bank Debt at Effective
Time and the numerator is (ii) the value of Coral Group's Reserve Report plus
Net Working Capital at Effective Time minus Coral Group's Bank Debt at Effective
Time, plus $9,000,000 less amounts paid to Coral Group as payments on the
Contingent Production Payment (hereinafter defined). The Indian shareholders
will receive an amount of Coral Public Common Stock equal to the fraction in
which the denominator is the same as the denominator for Coral Group and the
numerator is (i)the value of Indian's Reserve Report plus Net Working Capital
at Effective Time minus Indian's Bank Debt at Effective Time minus $9,000,000
less amounts paid to Coral Group as payments on the Contingent Production
Payment. Indian will make additional adjustments to its Reserve Report and Net
Working Capital to conform to adjustments made by the Coral Partnerships to
their Reserve Report and Net Working Capital as required by the terms of the
Reorganization.
1.02 Restrictions on Coral Public's Common Stock: The Indian
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shareholders, Xxx Xxxxxxx and Xxxx Xxxxxx shall enter into an agreement, on or
prior to the Effective Time, restricting each person's ability to sell, transfer
or acquire shares of Coral Public Common Stock and granting each person certain
rights regarding such shares. The agreement will allow "small" amounts of Coral
Public Common Stock to be acquired or transferred free from the restrictions.
Each person will negotiate in good faith toward reaching such an agreement.
1.03 Coral Payment; Operation of Indian Pending Merger:
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a. Coral Payment; Contingent Production Payment. Upon execution of
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this Agreement, Coral Group will make a $6,000,000 payment, on
behalf of Indian to Mid First Bank. In return for this payment,
Coral Group will receive a production payment ("Contingent
Production Payment") payable from proceeds of Indian's Interests
(hereinafter defined), in an amount of $56,250 per month. The
Contingent Production Payment will be paid as set forth in
paragraph 1.04. The Contingent Production Payment agreement will
be in form as set forth in Schedule 1.03a.
b. Operation of Indian upon Execution of This Agreement. Coral Ltd.
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and Indian shall execute a management agreement ("Management
Agreement") in form as set forth in Schedule 1.03b which will
provide
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that Coral Ltd. provides management services to Indian pending
the Merger.
1.04 Use of Indian Revenues Pending Merger: From First Closing until
-------------------------------------
Effective Time, Coral Ltd., pursuant to the Management Agreement, will manage
the affairs and operations of Indian. Coral Ltd. will make payment, from
Indian's revenues and Net Working Capital, of the following expenses and
obligations of Indian in order of priority as follows: First, to Indian's
monthly overhead of employee salaries, rent, lease payments, utilities,
supplies, etc.; Second, to payment of Indian's Bank One, Oklahoma, N.A. debt
based on 80 equal monthly payments of principal, plus accrued interest; third,
payment of lease operating expenses; fourth, to payment of interest only on
Indian's MidFirst Bank debt; fifth, to Coral as payment of the Contingent
Production Payment. If Indian's revenues and Net Working Capital are
insufficient, in any month, to pay the Contingent Production Payment, then any
unpaid portion will be paid in the next month in which Indian's revenues and Net
Working Capital are sufficient. Remaining Indian revenues, after maintenance of
sufficient Net Working Capital, as determined in the discretion of Coral Ltd.,
will be used for developmental drilling, reduction of Indian's Bank Debt or
added to Indian's Net Working Capital, at the direction of Indian shareholders.
Payment of the Contingent Production Payment or other discretionary payments
shall not be made if such payments would place Indian in breach of its
agreements and covenants with its lenders. The Indian shareholders agree that
the Net Working Capital of Indian during the period from First Close until
Effective Time and at Effective Time shall not be less than $750,000.
1.05 Sale of Indian Minor Properties: From First Closing until
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Effective Time, Coral Ltd. and Indian shareholders will identify Interests of
Indian's which they believe can be sold without materially affecting Indian's
Borrowing Base, as defined in the Credit Agreement between Indian and Bank One,
Oklahoma, N.A., dated December 22, 1997. Indian, under Coral Ltd.'s management,
will attempt to sell such Interests, with the consent of Coral Ltd., Indian
shareholders and Bank One, Oklahoma, N.A.. Proceeds from the sale of such
Interests shall be used for the purposes as set forth in Section 1.04, or
applied at the direction of the Indian shareholders.
1.06 The Merger: Subject to the terms and conditions of this
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Agreement, Coral Group agrees to cause Indian to be included in the
Reorganization, by virtue of the Merger, and a Certificate of Merger and
Articles of Merger shall be executed by Indian and Coral Public and delivered to
the Secretary of State of Oklahoma for filing on the Second Closing (hereafter
defined). The time of filing by the Secretary of State of Oklahoma is herein
referred to as the "Effective Time." It is intended that the Merger and
Reorganization will have the same Effective Time. At the Effective Time, the
separate existence of Indian and the Coral Partnerships shall cease and Indian
and the Coral Partnerships shall be merged with and into Coral Public. At the
Effective Time, the certificates evidencing the issued and outstanding Indian
capital stock shall be canceled and certificates evidencing Coral Public Common
Stock shall be issued to the Indian shareholders ("Merger").
1.07 Effect of the Merger: At and after the Effective Time, the
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status, rights, liabilities and other matters affecting the Merger of Indian and
Coral Public shall be as provided by the Oklahoma Act.
1.08 Exchange of Certificates: At the Second Closing, Indian shall
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surrender the certificates which prior to the Merger represented 100% of the
issued and outstanding shares of stock
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of Indian to Coral Public. The shareholders of Indian shall thereupon be
entitled to receive in exchange therefore certificates evidencing the shares of
Coral Public Common Stock into which the shares of Indian shall have been
converted at the Effective Time as provided in this Agreement.
1.09 Taking Necessary Action; Further Action: Coral Group and Indian,
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respectively, shall use all reasonable efforts to take all such action as may be
necessary or appropriate in order to effectuate the Merger and Reorganization.
If, at any time after the Effective Time of the Merger, any further action is
necessary or desirable to carry out the purposes of this Agreement, or to vest
Coral Public with full right and title to and possession of all assets,
property, rights, privileges, powers and franchises of Indian, the officers and
directors of Coral Public are fully authorized in the name of Indian or
otherwise to take, and shall take, all such action.
1.10 Stockholders Meeting and Registration Statement:
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a. In order to consummate the Merger, Indian and Coral Group, acting
through their Boards of Directors, shall, in accordance with
applicable law and their certificates of incorporation and by-
laws, (i) timely call, give notice of, convene and hold a special
meeting of stockholders for the purpose of considering and
taking action on the Merger and Reorganization and (ii) include
in the registration statement to be filed with the Securities and
Exchange Commission ("SEC"), as amended or supplemented
("Registration Statement") the proposed terms of the Merger and
Reorganization.
b. Coral Group shall prepare and file with the SEC the Registration
Statement for Coral Public and shall use all reasonable efforts
to have the Registration Statement declared effective by the SEC
as promptly as practicable. Indian shall cooperate with Coral
Group in the preparation of the Registration Statement and shall
furnish to Coral Group such data and information relating to
Indian and the interests (hereinafter defined), as Coral Group
may reasonably request for the purpose of including the data and
information in the Registration Statement. Coral Group shall
give Indian and its counsel the opportunity to review any
registration materials and the Registration Statement prior to
their being filed with the SEC and shall give Indian and its
counsel the opportunity to review all amendments and supplements
thereto and all responses to requests for additional information
and replies to comments prior to their being filed with, or sent
to, the SEC. Coral Group will provide promptly to Indian copies
of all correspondence between Coral Group or any of their
representatives and the SEC. Coral Group will advise Indian
promptly when any supplement to or amendment of the Registration
Statement has been filed, or the
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issuance of any stop order, or of any request by the SEC for
amendment of the Registration Statement.
1.11 Certain Definitions: For purposes of this Agreement the following
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terms shall have the meanings assigned to them:
a. Reserve Report shall mean engineering reports prepared by an
independent third party engineer approved by Coral Group and
Indian setting forth (i) the proven oil and gas reserves
attributable to the oil and gas properties of Coral Group
and Indian, respectively, as of a mutually agreed date, (ii)
the aggregate present value determined on the basis of
stated pricing assumptions, of the future net income with
respect to such oil and gas properties, discounted at a
stated per annum discount rate of proven reserves, and (iii)
projections of the annual rate of production, gross income
and net income with respect to such proven reserves. The
pricing assumptions, discount rates and other criteria shall
be mutually agreed by and applied on the same basis to
Indian's and Coral Group's reserves.
The Reserve Report for Indian and Coral Group, respectively,
shall be adjusted as follows, regardless whether the adjustment is a
Material Adverse Effect:
(i) minus any adjustments for Title Defects;
(ii) plus or minus any adjustments for Gas Imbalances;
(iii) minus the value of production which must be delivered
under any take-or-pay, storage, service, exchange or
similar arrangements, and for which a contemporaneous
payment will not be received; and
(iv) plus or minus any other amounts mutually agreed upon
by Indian and Coral Group.
b. Net Working Capital shall mean current assets less current
liabilities, as determined according to generally accepted
accounting principles, as adjusted pursuant to the terms of
this Agreement.
(i) Income Tax Adjustment. To the extent that Coral Group
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or Indian has income tax payable for activities prior to the
Effective Time, as determined by the accounting firm engaged
by Coral Group in connection with the registration of the
Coral Public Common Stock, the amount of income taxes
payable shall be an adjustment to the respective party's Net
Working Capital regardless whether the adjustment is a
Material Adverse Effect.
(ii) Adjustment for Breach. If it is determined that the
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representations, warranties, covenants or agreements of
Coral Group or Indian are not Substantially True, either at
First Closing or Effective Time, the Net
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Working Capital of the party in breach may be reduced by an
amount equal to the agreed value of the breach, if such
value can be agreed upon.
c. Gas Imbalance shall mean the difference between the volume
of produced gas that Indian or Coral Group (and their
predecessors), respectively, took from a property and the
volume of their gas entitlement for such property.
1.12 Expenses: The expenses of Indian's and Coral Group's Reserve
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Reports shall be borne by each respective party and if the Merger occurs each
party will be reimbursed by Coral Public, to the extent provided in the
Reorganization and Registration Statement. The additional expenses of the
Reorganization and registration of Coral Public Common Stock will be borne by
Coral Group and will be reimbursed to Coral Group by Coral Public, to the extent
provided in the Reorganization and Registration Statement. Any debt incurred by
Coral Group to pay expenses of the Reorganization or registration shall not be
used in the calculation Coral Group's Net Working Capital.
1.13 Conditions to Effectiveness of Agreement: As a condition
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precedent to the requirement of Coral Group or Indian to perform under this
Agreement, all consents from Bank One, Oklahoma, N.A. and MidFirst shall have
been obtained no later than March 1, 1999. If such consents are not timely
obtained, this Agreement shall be deemed null and void and of no further force
or effect. Each party agrees to use their best efforts to obtain all required
consents.
1.14 Termination and Abandonment of Merger Transaction. Anything
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herein to the contrary notwithstanding, Coral Group's obligation to include
Indian in the Merger contemplated hereby, and Indian's obligation to allow Coral
Group to include Indian in the Reorganization, by virtue of the Merger, may be
terminated at any time before the Effective Time, whether before or after
approval of the Merger by members of the Coral Group, as follows, and in no
other manner:
a. Mutual Consent. By mutual consent of the Boards of Directors
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of Coral Group and Indian;
b. By Coral Group. By the boards of directors of Coral Group
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if, by the Effective Time, the conditions set forth in
Section 6 shall not have been met (or waived as provided in
this Agreement); and
c. By Indian. By the board of directors of Indian if, by the
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Effective Time, the conditions set forth in Section 7 shall
not have been met (or waived as provided in this Agreement).
d. By Either Coral or Indian. By the boards of directors of
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Coral Group or of Indian, if (i) any governmental body shall
have issued an order, decree or ruling, or taken any other
action, permanently enjoining, restraining or otherwise
prohibiting the Merger or the other transactions
contemplated hereby and such order, decree, ruling or other
action shall have become final and non-appealable; (ii) if
the limited partners of the Coral Partnerships shall not
have approved the Merger or the issuance of the
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shares by Coral Public in the Merger or Reorganization on or
before March 1, 2000; or (iii) if the Merger and Effective
Time has not occurred on or before September 1, 2000.
In the event of termination of Coral Group's obligation to include
Indian in the Merger as provided in this Section 1.14, this Agreement shall
remain in effect for the purposes set forth in Section 1.15; provided, however,
that Coral, Ltd. and the Indian shareholders shall agree on a date after which
Coral, Ltd. is no longer obligated to provide services pursuant to the
Management Agreement and the Management Agreement and this Agreement shall
terminate, including for purposes of Section 1.15 below. Nothing contained in
this Section shall relieve any party from liability for any breach of the
representations, warranties, covenants or agreements set forth in this
Agreement.
1.15 Liquidation: Upon termination of Coral Group's obligation to
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include Indian in the Merger transaction contemplated by this Agreement, the
Management Agreement will remain in full force and effect and Coral Group agrees
to cause a manager under the Management Agreement to commence, in accordance
with the Management Agreement, a timely sale and liquidation of Indian's assets.
Coral Group and the Indian shareholders agree they will conduct good faith
negotiations with each other, for a period of 90 days following termination of
Coral Group's obligation to include Indian in the Merger transaction
contemplated by this Agreement, for the purpose of either party acquiring all or
a portion of Indian's Interests. The proceeds of such sale and Indian's Net
Working Capital shall be paid in the following priority:
First, to Indian's overhead;
Second, to Bank One, Oklahoma, N.A. to retire Indian's debt;
Third, to MidFirst Bank to retire Indian's debt;
Fourth, to Coral Group (or its designee) in an amount of $6,000,000,
less amounts previously paid on the Contingent Production Payment; and
Fifth, 50% to Indian's shareholders and 50% to Coral Group (or its
designee).
2. Closing: Subject to the terms and provisions hereof, the execution of
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this agreement (the "First Closing") shall occur at 4:00 p.m. in the offices of
Indian Oil Company, 0000 X. Xxxxxxxx, Xxxxx 000, Xxxxxxxx Xxxx, Xxxxxxxx 00000
on February 15, 1999 (the "Closing Date"). The execution of the Merger
Certificates, issuance of Coral Public Common Stock and other transactions
contemplated to occur upon Merger and Reorganization ("Second Closing") shall
occur simultaneously at a mutually agreed time and place. It is intended that
the Second Closing and the Effective Time occur contemporaneously.
3. Representatives and Warranties of Indian: Indian represents and
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warrants to the Coral Group as follows:
3.01 Organization, Good Standing, Etc.: Indian is a corporation duly
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organized,
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validly existing and in good standing under the laws of the State of Oklahoma.
Indian has the corporate power to own its properties and to carry on its
business as now being conducted. Indian has the corporate power to execute and
deliver this Agreement and, at the Effective Time, will have the corporate power
to consummate the Merger transaction contemplated hereby. At the Effective Time,
Indian will be duly qualified and/or licensed, as may be required, and in good
standing in each of the jurisdictions in which the nature of the business
conducted by it or the character of the property owned, leased or used by it
makes such qualification and/or licensing necessary, except where the failure to
be so qualified and/or licensed, and in good standing would not singly or in the
aggregate have a Material Adverse Effect on Indian. Indian has, or will, make
available to Coral Public copies of the certificate of incorporation, bylaws and
the records of meetings of the shareholders and Board of Directors of Indian
which are complete and correct in all respects. All material corporate actions
taken by Indian since its organization and incorporation through the date hereof
have been or, at the Effective Time, will have been, duly authorized or
subsequently ratified as necessary. Indian is not in default under or in
violation of any provision of its respective certificate of incorporation or
bylaws.
3.02 Capital Stock of Indian: The authorized capital stock of Indian
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consists of 2,000,000 shares of common stock, par value $0.005 per share
("Indian Common Stock"), of which 62,360 shares are issued and outstanding and
all of which are owned by the shareholders listed on Schedule 3.02 ("Indian
Shareholders") which shall be free and clear of all security interests, liens
and encumbrances as of the Effective Time. The issued Indian Common Stock is
validly authorized and issued and fully paid and non-assessable. Indian has
never authorized the creation or issuance of, or issued, or authorized or
effected any split-up or any other recapitalization of, any of its capital
stock, or directly or indirectly redeemed, purchased or otherwise acquired any
of its outstanding capital stock and, except as permitted by this Agreement,
will not do so between the date of this Agreement and the Effective Time of the
Merger. Indian will neither declare or pay any dividends on its capital stock
between the date of this Agreement and the Effective Time. There are no
contractual obligations of Indian to repurchase, redeem or otherwise acquire any
outstanding shares of its capital stock. Further, there are no options,
warrants or other rights to acquire any additional shares of capital stock of
Indian.
3.03 No Breach of Statute or Contract; Governmental Authorizations:
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Neither the execution and delivery of this Agreement nor compliance with the
terms and provisions of this Agreement by Indian will violate any law, statute,
rule or regulation of any governmental authority, or will on the Closing Date or
the Effective Time conflict with or result in a breach of any of the terms,
conditions or provisions of any judgment, order, injunction, decree or ruling of
any court or governmental agency, authority to which Indian is subject or,
except as set forth in Schedule 3.03, of any agreement or instrument to which
Indian is a party or by which it is bound, or constitute a material default
thereunder, or result in the creation of any material lien, charge or
encumbrance upon any of Indian's properties or assets or cause any acceleration
of maturity of any material obligation or loan, or give to others any material
interest or rights, including rights of termination or cancellation, in or with
respect to any of Indian's properties or assets.
3.04 Authorization of Agreement: The execution, delivery and
--------------------------
performance of this Agreement by Indian have been duly and validly authorized by
all requisite corporate action on the part of Indian. The execution, delivery
and performance by Indian of all other agreements and transactions contemplated
hereby have been, or prior to the First Closing and the Effective Time will be,
duly authorized and approved by all requisite corporate action on the part of
Indian. This Agreement has
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been, and the other agreements and instruments contemplated hereby, when
executed and delivered, will be, duly executed and delivered by Indian as
required and, assuming the due authorization, execution and delivery hereof and
thereof by the other parties hereto or thereto, this Agreement constitutes and,
when executed, each of the other agreements contemplated hereby will constitute,
a valid and binding obligation of Indian, enforceable against it in accordance
with its terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance and similar laws affecting creditors' rights
generally from time to time and to general principles of equity.
3.05 Disclosure:
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a. None of the information, including the oil and gas reserve,
well and acreage data, which has been or will be supplied by Indian to Coral
Reserves or Coral Energy (or any amendment thereof or supplement thereto) will
contain any statement which, at the time and in light of the circumstances under
which it is made, is false or misleading with respect to any material fact, or
omit to state any material fact necessary in order to make the statements
therein not false or misleading or necessary to correct any statement in any
earlier communication with respect to the solicitation of a proxy for the same
meeting or subject matter which has become false or misleading.
b. Indian has furnished, or will furnish, Coral Public with
all information required with respect to its assets necessary for Coral Public
to prepare financial statements with respect thereto for inclusion in the
Registration Statement in accordance with applicable rules of the SEC, including
Regulation S-X.
3.06 Broker's or Finder's Fees: Indian has not incurred any
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liability, contingent or otherwise, for brokers' or finders' fees in respect of
this Agreement for which any member of the Coral Group shall have any
responsibility whatsoever.
3.07 Permits: At the Effective Time, Indian will have all approvals,
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authorizations, consents, licenses, orders, franchises, rights, registrations
and permits of all governmental agencies, whether federal, state or local,
required to permit the operation of its business as presently conducted (the
"Permits") and each will be in full force and effect and will have been duly and
validly issued, except where the absence of which, singly or in the aggregate,
would not have a Material Adverse Effect on Indian. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
will not result in any revocation, cancellation, suspension or modification of
any such Permit except where such revocation, cancellation, suspension or
modification would not have a Material Adverse Effect on Indian. At the
Effective Time, there will be no outstanding violation of any of the Permits
singly or in the aggregate that would have a Material Adverse Effect on Indian.
3.08 Title to the Assets: Except (i) as set forth in Schedule 3.08
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(ii) for the Excluded Assets, and (iii) the assets to be sold in the minor
assets sales contemplated by Section 1.05 above, Indian will have at the
Effective Time good and defensible title of record to its assets free and clear
of all liens, pledges, claims, charges, security interests, production payments
or other encumbrances except (i) liens for current taxes and assessments not yet
due, or being contested in good faith by appropriate proceedings and (ii) such
imperfections of title and encumbrances, if any, which do not have singly or in
the aggregate a Material Adverse Effect on Indian.
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3.09 Oil and Gas Leases in Good Standing: Except as disclosed in
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Schedule 3.09, all oil and gas leases which are material singly or in the
aggregate to Indian are in full force and effect, and Indian is not default
thereunder.
3.10 Financial Statements: Attached as Schedule 3.10 are the
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following financial statements (collectively the "Financial Statements") for
Indian: (i) audited balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal year ended December
31, 1997 (the "Most Recent Fiscal Year End"); and (ii) an unaudited balance
sheet and statement of income (the "Most Recent Financial Statements") as of and
for the nine months ended September 30, 1998 (the "Most Recent Fiscal Month
End"). The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly in all respects the assets, liabilities,
and financial condition of Indian as of such dates and the results of operations
of Indian for such periods, are correct and complete in all respects, and are
consistent with the books and records of Indian (which books and records are
correct and complete); provided, however, that the Most Recent Financial
Statements are subject to normal year-end adjustments (which will not be
material individually or in the aggregate) and lack footnotes and other
presentation items of the type required in GAAP statements. Indian agrees to
provide to Coral Group audited balance sheets and statements of income, changes
in stockholders' equity, and cash flow as of and for the fiscal year ended
December 31, 1998 as soon as such financial statements are available. The
audited financial statements for the year ended December 31, 1998 shall be
substituted in their entirety for the financial statements for the nine months
ended September 30, 1998 and for all purposes thereafter the audited December
31, 1998 financial statements shall be the Most Recent Fiscal Month End.
3.11 Events Subsequent to Most Recent Fiscal Month End: Since the
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Most Recent Fiscal Month End (as defined in Section 3.10 above), there has not
been any Material Adverse Effect in the business, financial condition,
operations, results of operations, or future prospects of Indian.
3.12 Undisclosed Liabilities: Indian has no liabilities and there is
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no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against Indian giving rise to
any liability, except for (i) liabilities set forth on the face of the Most
Recent Financial Statements, as defined in Section 3.10 above (rather than in
any notes thereto), and (ii) liabilities which have arisen after the Most Recent
Fiscal Month End (as defined in Section 3.10 above) in the ordinary course of
business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement or violation of law), and which liabilities will not, individually
or in the aggregate, have a Material Adverse Effect upon the business,
properties, or condition (financial or otherwise) of Indian.
3.13 Legal Compliance: Indian has complied with, and is conducting
----------------
the business in accordance with, all applicable laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
has been filed or commenced or, to the knowledge of Indian, threatened against
Indian alleging any failure so to comply. There is no basis for any such
action, suit, proceeding or investigation (i) which would have a Material
Adverse Effect on the financial condition, properties, assets, business or
prospects of Indian or (ii) which would impair Indian's ability or obligation to
perform fully on a timely basis any obligations which it may have or will have
under this Agreement. There are no existing violations of any laws which could
have a Material Adverse Effect
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upon the business or the possession, use, occupancy or operation of any of
Indian's facilities or other property.
3.14 Environmental and Safety Matters: To the best of Indian's
--------------------------------
information and belief:
a. Indian is not aware, and has not received notice from any
person, entity or governmental body, agency or commission, of any release,
disposal, event, condition, circumstance, activity, practice or incident
concerning any land, facility, asset or property that (i) interferes with or
prevents compliance or continued compliance by Indian with any United States,
state or local law, regulation, code or ordinance or the terms of any license or
permit issued pursuant thereto, or (ii) gives rise to or results in any common
law or other liability of Indian to any person, entity or governmental body,
agency or commission for damage or injury to natural resources, wildlife, human
health or the environment which would have a Material Adverse Effect on Indian.
b. There is no civil, criminal or administrative action,
lawsuit, demand, litigation, claim, hearing, notice of violation, investigation
or proceeding, pending or threatened, against Indian or any present or former
owner of any interest in, or operator of, any of the lands, facilities, assets
and properties owned or formerly owned, operated, leased or used by Indian as a
result of the violation or breach of any federal, state, or local law,
regulation, code or ordinance or any duty arising at common law to any person,
entity or governmental body, singly or in the aggregate, which if determined
adversely to Indian would have a Material Adverse Effect on Indian.
3.15 The Interests: At First Closing and at Effective Time, Indian
-------------
shall own all right, title and interest in the surface, leasehold, royalty,
overriding royalty, mineral interests, xxxxx, equipment, personal property, oil,
condensate, natural gas, liquids, sulphur and other marketable by-products,
contracts and beneficial interests, surface use agreements, easements, rights-
of-way, licenses, authorizations, permits, and similar rights and interests,
existing or future causes of action, claims, demands, litigation and judgments,
and all other assets used in Indian's business as currently conducted and as
reflected in the Financial Statements. As used herein, the term "Interests"
means the aggregate of all rights, titles and interests owned by Indian except
as specifically excluded.
The Interests, as owned and operated by Indian, shall not include:
The following prospects, as well as all other prospects in the work-up
stage and all geological, geophysical, seismic information
interpretive maps, well logs, and other well data and proprietary
information applying to the prospects:
1. NE Norman Prospect AMI
Sections 1, 2, 11, 12 of T 9N-R 2W
Cleveland County, Oklahoma
XX Xxxxxxx Prospect AMI
Sections 13, 14, 23, 24, 25 of T 295-R 22W
Ford County, Kansas
Page 11 of
Sections 19, 30, of T 295-R 21W
Ford County, Kansas
South Elk City AMI
Sections 1, 2, 3, 4, 10, 11, 12 of T 10N-R 21W
Beckham County, Oklahoma
Sections 33, 34, 35, 36 of T 11N-R21W
Washita County, Oklahoma
2. Indian's Geological Data Base.
3. All of Indian's Section 29 tax credits.
4. All of Indian's cars, art, furniture and office equipment, except
such furniture and office equipment which is necessary for the
continued operation of Indian's business pending and subsequent
to the Merger and Reorganization
5. All of Indian's accounts receivable from directors.
The excluded properties are herein referred to collectively as the
"Excluded Assets".
3.16 Bank Debt: At First Closing, Indian will owe no more than
---------
$20,000,000 to Bank One, Oklahoma, N.A. which is secured by the Indian's
Interests and, after application of Coral's $6,000,000, will owe no more than
$6,000,000 to MidFirst Bank which is not secured by any Indian assets (the debts
to Bank One, Oklahoma, N.A. and MidFirst are referred to as "Bank Debt"). At
First Closing, Indian will have no other liabilities, other than accounts
payable and accrued expenses and other current liabilities, which are reflected
on the Indian Financial Statements. During the period from First Closing to
Effective Time, Indian shall take no action to increase its debt to Bank One,
Oklahoma, N.A. or MidFirst without the consent of Coral Ltd. At Effective Time,
Indian will have no long term debt other than Bank Debt.
3.17 Board Recommendation: The board of directors of Indian, at a
--------------------
meeting duly called and held, has by unanimous vote, (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are
fair to and in the best interests of the stockholders of Indian, and (ii)
resolved to recommend that the stockholders of Indian approve the Merger.
4. Representations and Warranties of the Coral Group: Each member of the
-------------------------------------------------
Coral Group represents and warrants to Indian as follows:
4.01 Organization, Good Standing, Etc.: Each member of the Coral
---------------------------------
Group is a limited partnership or corporation duly organized, validly existing
and in good standing under the laws of the state of its formation. Each member
of the Coral Group has the corporate power to own its respective properties and
carry on its respective business as now being conducted. Each member of the
Coral Group has the corporate power to execute and deliver this Agreement and,
at the Effective Time, will have the corporate power to consummate the Merger
and Reorganization contemplated hereby.
Page 12 of
At the Effective Time, each member of the Coral Group will be duly qualified
and/or licensed and in good standing in each of the jurisdictions in which the
nature of the business conducted by it or the character of the property owned,
leased or used by it makes such qualification and/or licensing necessary, except
in such jurisdictions where the failure to be so qualified or licensed would not
have a Material Adverse Effect on such member of the Coral Group. No member of
the Coral Group is in default under or in violation of any provision of its
respective certificate of incorporation or bylaws.
4.02 Coral Public: At the Effective Time, Coral Group will cause
------------
Coral Public to make representations and warranties to Indian regarding (i) the
acquisition of Indian's stock and (ii) Coral Public's capital stock and Coral
Public Common Stock, which representations and warranties are usual and
customary in similar transactions and which are substantially similar to the
representations and warranties made by Coral Public to any member of the Coral
Group.
4.03 No Breach of Statute or Contract; Governmental Authorizations:
-------------------------------------------------------------
Neither the execution and delivery of this Agreement nor compliance with the
terms and provisions of this Agreement by any member of the Coral Group will
violate any law, statute, rule or regulation of any governmental authority, or
will on the Closing Date or the Effective Time conflict with or result in a
breach of any of the terms, conditions or provisions of any judgment, order,
injunction, decree or ruling of any court or governmental agency, authority to
which any such member of the Coral Group is subject or of any agreement or
instrument to which any such member of the Coral Group is a party or by which it
is bound, or constitute a material default thereunder, or result in the creation
of any material lien, charge or encumbrance upon any property or assets of any
member of the Coral Group or cause any acceleration of maturity of any material
obligation or loan, or give to others any material interest or rights, including
rights of termination or cancellation, in or with respect to any of the
properties, assets, agreements, contracts or business of any member of the Coral
Group.
4.04 Authorization of Agreement: The execution, delivery and
--------------------------
performance of this Agreement by each member of the Coral Group have been duly
and validly authorized and approved by all requisite action on the part of each
member of the Coral Group. The execution, delivery and performance by each
member of the Coral Group of all other agreements and transactions contemplated
hereby have been or prior to the First Closing and the Effective Time will be,
duly authorized and approved by all requisite action on the part of each member
of the Coral Group. This Agreement has been, and the other agreements
contemplated hereby, when executed and delivered, will be, duly executed and
delivered by each member of the Coral Group as required and, assuming the due
authorization, execution and delivery hereof and thereof by the other parties
hereto or thereto, this Agreement constitutes and, when executed, each of the
other agreements contemplated hereby will constitute, a valid and binding
obligation of each member of the Coral Group that is a party hereto or thereto,
as the case may be, enforceable against each of them in accordance with its
terms subject to applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance and similar laws affecting creditors' rights generally
from time to time and to general principles of equity.
4.05 Disclosure:
----------
a. None of the information, including the oil and gas reserve,
well and acreage data, which has been or will be supplied by any member of the
Coral Group to Indian (or any amendment thereof or supplement thereto) will
contain any statement which, at the time and in light of
Page 13 of
the circumstances under which it is made, is false or misleading with respect to
any material fact, or omit to state any material fact necessary in order to make
the statements therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the solicitation of a
proxy for the same meeting or subject matter which has become false or
misleading.
b. Each member of the Coral Group will furnish all information
required with respect to its respective assets necessary for the preparation of
financial statements with respect thereto for inclusion in the Registration
Statement in accordance with applicable rules of the SEC, including Regulation
S-X.
4.06 Broker's or Finder's Fees: No member of the Coral Group has
-------------------------
incurred any liability, contingent or otherwise, for brokers' or finders' fees
in respect of this Agreement for which Indian shall have any responsibility
whatsoever.
4.07 Permits: At the Effective Time, each member of the Coral Group
-------
will have all approvals, authorizations, consents, licenses, orders, franchises,
rights, registrations and permits of all governmental agencies, whether federal,
state or local, required to permit the operations of their businesses as
presently conducted (the "Permits") and each will be in full force and effect
and will have been duly and validly issued, except where the absence of which,
singly or in the aggregate, would not have a Material Adverse Effect on any
member of the Coral Group. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in any
revocation, cancellation, suspension or modification of any such Permit except
where such revocation, cancellation, suspension or modification would not have a
Material Adverse Effect on any member of the Coral Group. At the Effective
Time, there will be no outstanding violation of any of the Permits singly or in
the aggregate that would have a Material Adverse Effect on any member of the
Coral Group.
4.08 Title to the Assets: Except as set forth in Schedule 4.08, each
-------------------
member of the Coral Group will have at the Effective Time good and defensible
title of record to their respective assets free and clear of all liens, pledges,
claims, charges, security interests, production payments or other encumbrances
except (i) liens for current taxes and assessments not yet due, or being
contested in good faith by appropriate proceedings and (ii) such imperfections
of title and encumbrances, if any, which do not have singly or in the aggregate
a Material Adverse Effect on any member of the Coral Group.
4.09 Oil and Gas Leases in Good Standing: Except as disclosed in
-----------------------------------
Schedule 4.09, all oil and gas leases which are material singly or in the
aggregate to each member of the Coral Group are in full force and effect, and no
member of the Coral Group is in default thereunder.
4.10 Registration Statement Information: Assuming that the
----------------------------------
representations of Indian set forth in Section 3 hereof are true and correct,
neither the Registration Statement nor any amendment thereof or supplement
thereto will contain any statement which, at the time and in light of the
circumstances under which it is made, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation of a proxy for the
same meeting or subject matter which has been false or misleading.
Page 14 of
4.11 Board Recommendation: The boards of directors of each member of
--------------------
Coral Group, at meetings duly called and held, have by unanimous vote, (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger and the Reorganization, and the issuance of Coral Public
Common Stock to Indian in the Merger and pursuant to this Agreement are fair to
and in the best interests of the stockholders and partners, as appropriate, of
each member of the Coral Group, and (ii) resolved to recommend that the partners
of the Coral Partnerships approve the Reorganization and issuance of the shares
of Coral Public Common Stock to be issued to Indian in the Merger.
4.12 Required Vote: The affirmative vote of a majority of the limited
-------------
partners of the Coral Partnerships is the only vote necessary to approve the
issuance of the shares of Coral Public Common Stock to be issued to Indian
pursuant to the Merger and this Agreement. Except for such vote, there is no
vote of the holders of any class or series of securities necessary to approve
this Agreement, the Merger, the Reorganization, or any other transaction
contemplated hereby or thereby.
4.13 Financial Statements. Attached as Schedule 4.13 are the
--------------------
following consolidated financial statements (collectively the "Financial
Statements") for the Coral Partnerships: (i) audited balance sheets and
statements of income, and changes in partner's equity as of and for the fiscal
year ended December 31, 1997 (the "Most Recent Fiscal Year End"); and (ii) an
unaudited balance sheet and statement of income (the "Most Recent Financial
Statements") as of and for the twelve months ended December 31, 1998 (the "Most
Recent Fiscal Month End"). The Financial Statements (including the notes
thereto) have been prepared on the basis of accounting used by the Coral
Partnerships for federal income tax reporting purposes applied on a consistent
basis throughout the periods covered thereby, present fairly in all respects the
assets, liabilities, and financial condition of the Coral Partnerships as of
such dates and the results of operations of the Coral Partnerships for such
periods, are correct and complete in all respects, and are consistent with the
books and records of the Coral Partnerships (which books and records are correct
and complete); provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (which will not be material individually
or in the aggregate) and lack footnotes and other presentation items of the type
required. Coral Group agrees to provide to Indian audited balance sheets and
statements of income, and changes in partners equity as of and for the fiscal
year ended December 31, 1998 as soon as such financial statements are available.
The audited financial statements for the year ended December 31, 1998 shall be
substituted in their entirety for the unaudited financial statements for the
twelve months ended December 31, 1998 and for all purposes thereafter the
audited December 31, 1998 financial statements shall be the Most Recent Fiscal
Month End.
4.14 Events Subsequent to Most Recent Fiscal Month End. Since the
-------------------------------------------------
Most Recent Fiscal Month End (as defined in Section 4.13 above), there has not
been any Material Adverse Effect in the business, financial condition,
operations, results of operations, or future prospects of any member of the
Coral Group.
4.15 Undisclosed Liabilities. No member of the Coral Group has any
-----------------------
liabilities and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any member of the Coral Group giving rise to any liability, except for (i)
liabilities set forth on the face of the Most Recent Financial Statements, as
defined in Section 4.13 above (rather than in any notes thereto) and (ii)
liabilities which have arisen after the Most Recent
Page 15 of
Fiscal Month End (as defined in Section 4.13 above) in the ordinary course of
business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement or violation of law), and which liabilities will not, individually
or in the aggregate, have a Material Adverse Effect upon the business,
properties, or condition (financial or otherwise) of any member of the Coral
Group.
4.16 Legal Compliance. Each member of the Coral Group has complied
----------------
with, and is conducting its respective business in accordance with, all
applicable laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been filed or commenced or, to
the knowledge of any member of the Coral Group, threatened against it alleging
any failure so to comply. There is no basis for any such action, suit,
proceeding or investigation (i) which would have a Material Adverse Effect on
the financial condition, properties, assets, business or prospects of any member
of the Coral Group or (ii) which would impair any member of the Coral Group's
ability or obligation to perform fully on a timely basis any obligations which
it may have or will have under this Agreement. There are no existing violations
of any laws which could have a Material Adverse Effect upon the business or the
possession, use, occupancy or operation of any member of the Coral Group's
facilities or other property.
4.17 Environmental and Safety Matters: Except as set forth in
--------------------------------
Schedule 4.17 and to the best of Coral Group's information and belief:
a. No member of the Coral Group is aware, and no member has
received any notice from any person, entity or governmental body, agency or
commission, of any release, disposal, event, condition, circumstance, activity,
practice or incident concerning any land, facility, asset or property that (i)
interferes with or prevents compliance or continued compliance by any member of
the Coral Group with any United States, state or local law, regulation, code or
ordinance or the terms of any license or permit issued pursuant thereto, or (ii)
gives rise to or results in any common law or other liability of any member of
the Coral Group to any person, entity or governmental body, agency or commission
for damage or injury to natural resources, wildlife, human health or the
environment which would have a Material Adverse Effect on any member of the
Coral Group.
b. There is no civil, criminal or administrative action,
lawsuit, demand, litigation, claim, hearing, notice of violation, investigation
or proceeding, pending or threatened, against any member of the Coral Group or
any present or former owner of any interest in, or operator of, any of the
lands, facilities, assets and properties owned or formerly owned, operated,
leased or used by any member of the Coral Group as a result of the violation or
breach of any federal, state, or local law, regulation, code or ordinance or any
duty arising at common law to any person, entity or governmental body, singly or
in the aggregate, which if determined adversely to any member of the Coral Group
would have a Material Adverse Effect on any such member of the Coral Group.
5. Conduct and Transactions Prior to Effective Time:
------------------------------------------------
5.01 Investigation by Indian/Operation of Business of Coral: Between
------------------------------------------------------
the date of this Agreement and the Effective Time (for purposes of this Section
5.01, Coral group shall include Coral Public):
Page 16 of
a. Coral Group and the Coral Partnerships shall give, and shall
cause Coral Public to give, Indian, its agents and
representatives, reasonable access to all of the premises
and books and records of Coral Group and the Coral
Partnerships and agree to cause their respective officers to
furnish Indian, its agents and representatives with such
financial and operating data and other information with
respect to the respective businesses and properties of Coral
Group and the Coral Partnerships as Indian, its agents and
representatives shall from time to time reasonably request,
provided, however, that any such investigations shall not
affect any of the representations and warranties of Coral
Group hereunder, and provided further, that any such
investigation shall be conducted in such manner as not to
interfere unreasonably with the operation of the respective
businesses of Coral Group and the Coral Partnerships. In the
event of termination of this Agreement, except as prevented
by law, Indian will, and shall cause its agents and
representatives to, return to Coral Group all documents,
work papers and other materials obtained from Coral Group
and the Coral Partnerships, in connection with the
transactions contemplated hereby, and all copies, extracts
or other reproductions thereof in whole or in part (the
"Coral Confidential Material").
b. Except as required by law, the Coral Confidential Material
will be kept confidential and will not, without the prior
written consent of Coral Ltd., be disclosed by Indian, in
whole or in part, and will not be used by Indian, directly
or indirectly, for any purpose other than in connection with
this Agreement, the other transactions contemplated by this
Agreement or evaluating, negotiating or advising Indian with
respect to the transactions contemplated herein.
c. Coral Group and the Coral Partnerships will conduct their
business only in the ordinary course and, by way of
amplification and not limitation, will not, without the
prior written consent of Indian (i) issue shares of their
capital stock except pursuant to existing contractual
commitments or in connection with the Reorganization (ii)
amend their Certificates of Incorporation or bylaws, except
as contemplated by this Agreement, (iii) waive any rights of
substantial value, (iv) enter into any agreement not in the
ordinary course of their business, or (v) take any action or
omit to take any action which would result in any of their
representations or warranties set forth in this Agreement
becoming untrue.
5.02 Investigation by Coral Group of Indian. Between the date of
--------------------------------------
this Agreement and
Page 17 of
the Effective Time:
a. Insofar as related to the Interests, Indian shall give Coral
Group, their agents and representatives, reasonable access
to all of the books and records of Indian and the properties
of Indian, and agrees to cause its respective officers to
furnish Coral Group, their agents and representatives with
such financial and operating data and other information with
respect to the respective businesses and properties of
Indian as Coral Group, their agents and representatives
shall from time to time reasonably request; provided,
however, that any such investigation shall not affect any of
the representations and warranties of Indian hereunder, and
provided further, that any such investigation shall be
conducted in such manner as not to interfere unreasonably
with the operation of the business of Indian. In the event
of termination of this Agreement, except as prevented by
law, Coral Group will, and shall cause their agents and
representatives to, return to Indian all documents, work
papers and other materials obtained from Indian, in
connection with the transactions contemplated hereby, and
all copies, extracts or other reproductions thereof in whole
or in part (the "Indian Confidential Material").
b. Except as required by law, the Indian Confidential Material
will be kept confidential and will not, without the prior
written consent of Indian, be disclosed by Coral Group, in
whole or in part, and will not be used by any member of
Coral Group, directly or indirectly, for any purpose other
than in connection with this Agreement, the other
transactions contemplated by this Agreement or evaluating,
negotiating or advising Coral Group with respect to the
transactions contemplated herein.
c. Except as contemplated by this Agreement and the Management
Agreement, Indian will conduct its business only in the
ordinary course and, by way of amplification and not
limitation, it will not, without the prior written consent
of Coral Ltd. (i) issue, sell or otherwise dispose of shares
of its capital stock, or (ii) INTENTIONALLY OMITTED, or
(iii) declare, set aside, or pay any dividend or
distribution with respect to the capital stock of Indian, or
(iv) directly or indirectly redeem, purchase or otherwise
acquire any capital stock of Indian, or (v) effect a split
or reclassification of any capital stock of Indian or a
recapitalization of Indian, or (vi) change the charter or
bylaws of Indian, or (vii) permit Indian to grant any
increase in the compensation payable to its employees other
than regularly scheduled merit increases, or (viii) borrow,
except as provided in this Agreement and for working capital
purposes and except in the ordinary course of
Page 18 of
business, or agree to borrow any funds, or guarantee or agree to
guarantee the obligations of others, or (ix) waive any rights of
substantial value, or (x) except in the ordinary course of
business enter into an agreement, contract or commitment which,
if entered into prior to the date of this Agreement, would be
required to be listed in a Schedule attached to this Agreement,
or materially amend or change the terms of any such agreement,
contract or commitment, or (xi) take any action or omit to take
any action which would result in any of its representations or
warranties set forth in this Agreement becoming untrue.
d. Indian will maintain its books of account in the usual, regular
and ordinary manner.
6. Conditions and Obligations of Coral Group: The obligations of Coral
-----------------------------------------
Group to cause Indian to be included in the Merger contemplated by this
Agreement shall be subject to the following conditions:
6.01 Resolutions of Board of Directors: Indian shall have furnished
---------------------------------
Coral Group with certified copies of resolutions duly adopted by the Board of
Directors of Indian authorizing all necessary and proper corporate action to
enable Indian to comply with the terms of the Merger.
6.02 Representations and Warranties of Indian to be True: Except to
---------------------------------------------------
the extent waived in writing by Coral Group (i) the representations and
warranties of Indian herein contained shall be Substantially True (hereinafter
defined) as of the Effective Time with the same effect as though made at such
time (except if a representation and warranty speaks as of a different date, in
which case it shall be Substantially True as of such date); and (ii) Indian
shall have performed all material obligations and complied with all material
covenants required by this Agreement to be performed or complied with by it at
or prior to the Effective Time. Indian shall have also delivered to Coral Group
a certificate of Indian, dated the Effective Date, signed by two of its
officers, to both of the aforementioned effects. If Coral Group and Indian are
able to agree on a basis upon which to adjust the consideration to be received
among them in the Merger and Reorganization, after taking into account any
representation or warranty that is not Substantially True as provided in this
Section 6.02, then, for purposes of Section 1.14(b), this condition shall be
deemed satisfied, regardless of the fact that Indian's representations and
warranties will not be Substantially True at the Effective Time.
6.03 Third Party Consents: Indian shall have obtained and delivered to
--------------------
Coral Group at the Effective Time consents to the Merger contemplated by this
Agreement from the parties whose consent is required by contract or otherwise.
6.04 Coral Partnership Approval: A majority of the limited partnership
--------------------------
interests in each of the Coral Partnerships shall have approved the Merger and
the Reorganization and the issuance of the Coral Public Common Stock
contemplated by this Agreement.
6.05 No Material Adverse Change: There shall not have occurred since
--------------------------
the First Closing (i) any material adverse change in the financial condition,
results of operations or business of
Page 19 of
Indian excluding any change or effect resulting from general economic
conditions, any occurrence or condition affecting the oil and gas industry
generally and any occurrence or condition arising out of the transactions
contemplated by this Agreement or the Management Agreement, or (ii) any loss or
damage to any of the properties or assets (whether or not covered by insurance)
of Indian or its assets, which, in any case, would have a Material Adverse
Effect on Indian.
6.06 Statutory Requirements: All statutory and regulatory
----------------------
requirements and approvals for the valid consummation by Indian of the Merger
transaction contemplated by this Agreement shall have been fulfilled and all
authorizations, consents and approvals of all governmental bodies required to be
obtained in order to permit consummation by Indian of the transactions
contemplated by the Merger shall have been obtained. Between the date of this
Agreement and the Effective Date, no action or proceeding shall have been
instituted or, to the knowledge of Indian, shall have been threatened by any
party (public or private) before a court or other governmental body to restrain
or prohibit the transactions contemplated by this Agreement or to obtain damages
in respect thereof.
7. Conditions and Obligations of Indian: The obligations of the Indian
------------------------------------
to allow Coral Group to include Indian in the Merger contemplated by this
Agreement shall be subject to the following conditions:
7.01 Resolutions of Boards of Directors; Partners: Each member of the
--------------------------------------------
Coral Group shall have furnished Indian with certified copies of resolutions
duly adopted by the Boards of Directors or partners of each Coral Group
authorizing all necessary and proper corporate action to enable each member of
the Coral Group to comply with the terms of the Merger.
7.02 Representations and Warranties of Coral Group to be True: Except
--------------------------------------------------------
to the extent waived in writing by Indian (i) the representations and warranties
of each member of the Coral Group herein contained shall be Substantially True
at the Effective Time with the same effect as though made at such time (except
if a representation and warranty speaks as of a different date, in which case it
shall be Substantially True as of such date); and (ii) each member of the Coral
Group shall have performed all material obligations and complied with all
material covenants required by this Agreement to be performed or complied with
by it at or prior to the Effective Time. Each member of the Coral Group shall
have also delivered to Indian a certificate of each such member, dated the
Effective Time and signed by two of its officers, if it is a corporation, or
signed by its general partner(s), if it is a limited partnership, to both of the
aforementioned effects. If Coral Group and Indian are able to agree on a basis
upon which to adjust the consideration to be received among them in the Merger
and the Reorganization, after taking into account any representation or warranty
that is not Substantially True as provided in this Section 7.02, then, for
purposes of Section 1.14(c), this condition shall be deemed satisfied,
regardless of the fact that any member of Coral Group's representations and
warranties will not be Substantially True at the Effective Time.
7.03 Third Party Consents: Each member of the Coral Group shall have
--------------------
obtained and delivered to Indian at the Effective Time consents to the Merger
and the Reorganization contemplated by this Agreement from the parties to all
material contracts which require such consent.
7.04 Coral Partnerships Approval: The general partners of, and the
---------------------------
holders of a
Page 20 of
majority of the limited partnerships interests in, each of the Coral
Partnerships shall have approved the Merger and the issuance of the Coral Public
Common Stock contemplated by this Agreement, and Coral Group shall have
furnished to Indian certified copies of resolutions to this effect.
7.05 No Material Adverse Change: There shall not have occurred since
--------------------------
the First Closing (i) any material adverse change in the business, properties,
results of operations or financial condition of any member of the Coral Group
excluding any change or effect resulting from general economic conditions, any
occurrence or condition affecting the oil and gas industry generally and any
occurrence and condition arising out of the transactions contemplated by this
Agreement, or (ii) any loss or damage to any of the properties or assets
(whether or not covered by insurance) of any member of the Coral Group or any of
their consolidated subsidiaries which, in either case, would have a Material
Adverse Effect on such member of the Coral Group.
7.06 Statutory Requirements: All statutory and regulatory
----------------------
requirements and approval for the valid consummation by each member of the Coral
Group and Coral Public of the Merger and the Reorganization contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals of all governmental bodies required to be obtained in order to permit
consummation by each member of the Coral Group and Coral Public of the
transactions contemplated by the Merger and the Reorganization shall have been
obtained. Between the date of this Agreement and the Effective Time, no action
or proceeding shall have been instituted or, to the knowledge of any member of
the Coral Group, shall have been threatened by any party (public or private)
before a court or other governmental body to restrain or prohibit the
transactions contemplated by this Agreement or to obtain damages in respect
thereof.
7.07 Effectiveness of Registration Statement: Coral Public's
---------------------------------------
Registration Statement has been filed with the SEC in accordance with the
requirements of the Securities Act of 1933 and such Registration Statement has
become effective.
7.09 Terms of the Merger. The Reorganization shall have occurred and
-------------------
Indian shall be included in the Merger on substantially the same terms and
conditions as the other members of the Coral Group in the Reorganization, and
the terms of such Merger and Reorganization shall, in any event, be similar to
the terms of other oil and gas limited partnership reorganizations.
8. General Provisions:
------------------
8.01 Amendments: Subject to applicable law, this Agreement and the
----------
form of any exhibit attached hereto may be amended upon authorization by the
boards of directors of the parties hereto at any time prior to the Effective
Time.
8.02 Survival of Covenants, Representations and Warranties: The
-----------------------------------------------------
representations and warranties of Coral Group and Indian shall survive the First
Closing until the Effective Time and shall then terminate.
8.03 Certain Definitions: As used in this Agreement, a "Material
-------------------
Adverse Effect" on any one or more of the parties hereto is an event or
condition that has an adverse financial impact of more than $500,000 on Indian,
and $500,000 on Coral Group, and the statement that the
Page 21 of
representations and warranties of the parties are to be "Substantially True"
shall be true if the cumulative adverse financial impact of all untrue
representations and warranties is less than $500,000 in the case of Indian and
$500,000 in the case of the Coral Group. Notwithstanding anything else in this
Agreement to the contrary, no event resulting from general economic conditions,
no occurrence or condition affecting oil and gas industry generally and no
occurrence or condition arising out of the transactions contemplated by this
Agreement thereof shall be considered adverse or make any representation or
warranty herein untrue.
8.04 Governing Law: This Agreement and the legal relations between
-------------
the parties shall be governed by and construed in accordance with the laws of
the State of Oklahoma.
8.05 Notices: All notices, requests, demands or other communications
-------
required or permitted by this Agreement shall be in writing and effective when
received, and delivery shall be made personally or by registered or certified
mail, return receipt requested, postage prepaid, or overnight courier or
confirmed facsimile transmission, addressed as follows:
a. If to Coral Group:
Coral Reserves Group, Ltd.
000 X. Xxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxx Xxxxxxx, President
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx & Bunch
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
b. If to Indian:
Indian Oil Company
0000 X. Xxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Facsimile: (405)
Page 22 of
With a copy to:
Xxxxxxx Xxxxxx & Xxxxx
000 Xxxxxx X. Xxxx, Xxxxx 0000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
8.06 No Assignment: This Agreement may not be assigned by operation of
-------------
law or otherwise; provided, however, Coral Group may assign its rights to an
affiliate formed for that purpose but such assignment shall not relieve Coral
Group of its obligations hereunder.
8.07 Fees and Expenses: Except as set forth in Section 1.12, all fees
-----------------
and expenses, including attorneys' fees, incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by the
respective party who has incurred such fee or expense.
8.08 Headings: The descriptive headings of the Sections and
--------
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
8.09 Counterparts: This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to each of the other parties hereto.
8.10 Entire Agreement: This Agreement and the other agreements
----------------
contemplated hereby constitutes the entire agreement among the Coral Group and
Indian with respect to the subject matter hereof. Unless this Agreement is
specifically amended in writing, it supersedes all other agreements and under
standings among the parties with respect to the subject matter hereof and
thereof.
8.11 No Third Party Beneficiaries: Nothing in this Agreement, whether
----------------------------
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any person other than the parties to it, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement, nor shall any
provision give any third persons any rights of subrogation or action over or
against any party to this Agreement.
8.12 Specific Performance: Coral Group and Indian each acknowledge
--------------------
that neither would have an adequate remedy at law for money damages in the event
that this Agreement were not performed in accordance with its terms, and
therefore, agree that Coral Group and Indian each shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which it may
be entitled, at law or in equity.
8.13 Partial Illegality or Unenforceability: Wherever possible, each
--------------------------------------
provision hereof shall be interpreted in such manner as to be effective under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be illegal or unenforceable in any
Page 23 of
respect, such illegality or unenforceability shall not affect any other
provision of this Agreement, and this Agreement shall be construed as if such
illegal or unenforceable provision or provisions had never been contained herein
unless the deletion of such provision or provisions would result in such a
material change as to cause completion of the transactions contemplated hereby
to be unreasonable.
EXECUTED and delivered the day and year first above written.
Coral Reserves, Inc.
By:_______________________________
Coral Reserves Energy Corp.
By:_______________________________
Coral Reserves Group, Ltd.
By:_______________________________
Indian Oil Company
By:_______________________________
Page 24 of
PRODUCTION PAYMENT
------------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, Indian Oil Company ("Indian") for and in
consideration of Ten Dollars and other good and valuable consideration, receipt
of which is hereby acknowledged, does hereby sell, assign, convey, transfer and
set over unto Coral Reserves, Inc. and Coral Reserves Energy Corp.,
(collectively called "Coral") jointly and severally, a production payment of
Nine Million ($9,000,000) Dollars payable out of the proceeds realized from the
sale of oil, gas, casinghead gas, and other petroleum products produced and
saved from the leasehold, royalty, overriding royalty and mineral interests,
including any extension, renewal, replacement, substitution or reversionary
interest, now owned or hereafter acquired by Indian, wherever located, free and
clear of all operating and development expenses. The proceeds used to pay this
production payment shall be allocated and paid in priority and in accordance
with the terms and conditions of an Agreement and Plan of Merger among Indian,
Coral and other entities, dated February 15, 1999 ("Merger Agreement").
The production payment shall terminate when all monies due Coral have
been paid and received by Coral or at such time as Indian has been liquidated
and all payments have been made to Coral pursuant to the Merger Agreement.
Dated this 15th day of February, 1999.
INDIAN OIL COMPANY, an Oklahoma
Corporation
By: /s/
---------------------------------
Xxxxx Xxxxxx, President
CORAL RESERVES, INC., an Oklahoma
Corporation
By: /s/
---------------------------------
Xxx X. Xxxxxxx
CORAL RESERVES ENERGY CORP., an
Oklahoma Corporation
By: /s/
---------------------------------
Xxx X. Xxxxxxx
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
BETWEEN
CORAL GROUP AND INDIAN OIL COMPANY
1. This is the First Amendment to the Agreement and plan of Merger among Coral
Reserves, Inc., Coral Reserves Energy Corp., Coral Reserves Group, Ltd. and
Indian Oil Company dated February 15, 1999 ("Original Agreement"). All
terms and conditions of the Original Agreement remain in full force and
effect unless expressly modified by this amendment.
2. Upon execution of the Original Agreement, Coral Group shall deposit Two
Million ($2,000,000) Dollars into an escrow account with MidFirst Bank,
N.A. The terms of the escrow will provide that the funds will remain in
escrow until the earlier of (i) the consent of BancOne is obtained to the
terms of the Original Agreement, at which time the funds will be removed
from escrow and applied to Indian's debt with MidFirst Bank, or (ii) March
1, 1999, at which time the funds will be removed from escrow and paid to
Coral Group.
3. If the consent of BancOne is obtained to the terms of the Original
Agreement, Coral Group will immediately pay the remainder of its Six
Million ($6,000,000) Dollar obligation pursuant to Section 1.03(a) of the
Original Agreement.
Dated: February 15, 1999
CORAL RESERVES, INC.
By: /s/
---------------------------------
Xxx X. Xxxxxxx
CORAL RESERVES ENERGY CORP.
By: /s/
---------------------------------
Xxx X. Xxxxxxx
CORAL RESERVES GROUP, LTD.
By: /s/
--------------------------------
Xxx X. Xxxxxxx
INDIAN OIL COMPANY
By: /s/
---------------------------------
Xxxxx Xxxxxx
