AGREEMENT AND PLAN OF MERGER
by and among
XXXXX ENERGY RESOURCES, LTD.,
SCL COMPANY,
FUTURE PETROLEUM CORPORATION
and
FUTURE ENERGY CORPORATION
Dated August 14, 1998
TABLE OF CONTENTS
Page
ARTICLE I Definitions, References and Construction 1
Section 1.1. Certain Defined Terms 1
Section 1.2. References and Construction 4
ARTICLE II Property to be Sold and Purchased 5
ARTICLE III Consideration for Properties 7
ARTICLE IV Representations and Warranties of Seller 7
Section 4.1. Organization and Existence 7
Section 4.2. Power and Authority 7
Section 4.3. Valid and Binding Agreement 7
Section 4.4. Non-Contravention 7
Section 4.5. Approvals 8
Section 4.6. Pending Litigation 8
Section 4.7. No AFE Items or Well Abandonments, No P&A
Liabilities 8
Section 4.8. Production Marketing 9
Section 4.9. Compliance with Applicable Non-Environmental Laws 9
Section 4.10. Tax Partnerships 9
Section 4.11. Permits 9
Section 4.12. Condition of Assets 9
Section 4.13. Investment Experience 9
Section 4.14. Investment Intent 10
Section 4.15. Restricted Securities 10
Section 4.16. Legend 10
Section 4.17. Accuracy of Information. 10
Section 4.18. No Solicitation 11
Section 4.19. Accredited Investor 11
Section 4.20. Disclaimer of Warranties 11
ARTICLE V Representations and Warranties of Future 11
Section 5.1. Organization and Existence 11
Section 5.2. Power and Authority 11
Section 5.3. Valid and Binding Agreement 12
Section 5.4. Non-Contravention 12
Section 5.5. Approvals 12
Section 5.6. Pending Litigation 12
Section 5.7. Knowledgeable Purchaser 12
Section 5.8. Closing Shares. 13
Section 5.9. SEC Filings 13
ARTICLE VI Certain Covenants Pending Closing 13
Section 6.2. Confidentiality 14
Section 6.3. Conduct of Operations on the Properties 15
Section 6.4. Conduct of Future's Business 15
Section 6.5. Employment Agreement 16
Section 6.6. Bylaws 16
Section 6.7. Registration Rights Agreement 16
Section 6.8. Warrants and Options 16
Section 6.9. Credit Facility 16
Section 6.10. Subordination Agreement 16
Section 6.11. Voting Agreement 16
Section 6.12. Directors 16
ARTICLE VII Due Diligence Examination 17
Section 7.1. Inspection and Assertion of Defects 17
Section 7.2. Certain Price Adjustments. 18
Section 7.3. Waiver 19
ARTICLE VIII Conditions Precedent to the Obligations of the Parties;
Termination Rights 19
Section 8.1. Conditions Precedent to the Obligations of
Future 19
Section 8.2. Conditions Precedent to the Obligations of
Seller 20
ARTICLE IX Closing of Transaction 22
Section 9.1. The Closing 22
Section 9.2. Seller's Closing Obligations 22
Section 9.3. Future's Closing Obligations 23
Section 9.4. Delivery of Files 23
ARTICLE X Certain Accounting Adjustments. 23
Section 10.1. Adjustments 23
Section 10.2. Closing and Post-Closing Accounting Settlements 24
ARTICLE XI Assumption and Indemnification 24
ARTICLE XII Notices 25
ARTICLE XIII Commissions 26
ARTICLE XIV Casualty Loss 26
ARTICLE XV Miscellaneous Matters 27
Section 15.1. Survival of Provisions 27
Section 15.2. Further Assurances 27
Section 15.3. Binding Effect; Successors and Assigns 27
Section 15.4. Imbalances 27
Section 15.5. Expenses; Sales Taxes; Filings and Recording Fees28
Section 15.6. Entire Agreement 28
Section 15.7. Public Statements 28
Section 15.8. Injunctive Relief 28
Section 15.9. Deceptive Trade Practices 29
Section 15.10. Amendments 29
Section 15.11. Governing Law 29
Section 15.12. Counterparts 29
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated August 14, 1998, is made by and
among Xxxxx Energy Resources, Ltd., a Texas limited partnership ("Xxxxx"), SCL-
CAL Company, a Texas corporation ("SCL"), Future Petroleum Corporation, a Utah
corporation ("Future"), and Future CAL-TEX Corporation, a Texas corporation
("Future Sub").
WITNESSETH:
WHEREAS, (i) Xxxxx is the record and beneficial owner of all of the issued
and outstanding capital stock of SCL and (ii) Future is the record and
beneficial
owner of all of the issued and outstanding capital stock of Future Sub; and
WHEREAS, the parties hereto have determined that the merger of SCL into
Future Sub upon the terms and subject to the conditions set forth herein is
desirable and in their mutual best interests; and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
consummation of the merger contemplated hereby;
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants and agreements contained herein, Xxxxx, SCL, Future and
Future Sub do hereby agree as follows:
ARTICLE I
Definitions, References and Construction
Section 1.1. Certain Defined Terms. When used in this Agreement, the
following terms shall have the respective meanings assigned to them in this
Section 1.1 or in the section, subsections or other subdivisions referred to
below:
"Affiliate" shall mean, when used with respect to another Person, any
Person directly or indirectly controlling, controlled by or under common
control with such other Person.
"Agreement" shall mean this Agreement, as hereafter changed, amended or
modified in accordance with the terms hereof.
"Xxxxx" shall have the meaning assigned to such term in the introductory
paragraph to this Agreement.
"Xxxxx Disclosure Schedule" shall mean a schedule delivered by the Xxxxx
Entities to Future on the date hereof which sets forth additional information
regarding the representations and warranties of the Xxxxx Entities contained
herein and information called for hereby.
"Xxxxx Entities" shall mean Xxxxx and SCL.
"Xxxxx Nominees" shall have the meaning assigned to such term in Section
6.11(a).
"Xxxxx Registration Rights Agreement" shall have the meaning assigned to
such term in Section 6.7.
"Closing" and "Closing Date" shall have the respective meanings assigned
to such terms in Section 2.3.
"Closing Obligations" shall mean the obligations of SCL to repay the
Xxxxxx Indebtedness and the obligations of SCL to pay certain transaction
costs in connection with this Agreement and the acquisition of the Properties.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission (or any
successor body thereto).
"Commonly Controlled Entity" shall mean any Person which is under common
control with Future within the meaning of Section 4001 of ERISA.
"Consolidated" shall refer to the consolidation of any Person, in
accordance with GAAP, with its properly consolidated subsidiaries. References
herein to a Person's Consolidated financial statements, financial position,
financial condition, liabilities, etc. refer to the consolidated financial
statements, financial position, financial condition, liabilities, etc. of such
Person and its properly consolidated subsidiaries.
" Current Debt Amount" shall mean $5,800,000, which is the indebtedness
of SCL in connection with the Closing Obligations.
"Director Effective Date" shall mean 10 days after the date on which
Future filed with the Commission and transmitted to its stockholders the
information required to be so filed and transmitted under Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder.
"Effective Time" shall have the meaning assigned to such term in Section
2.2.
"Emission Credits" shall mean the emission credits described more
particularly in Section 1.1(f) of the MOC Agreement.
"Employment Agreement" shall have the meaning assigned to such term in
Section 6.5.
"EnCap Fund I" shall mean EnCap Equity 1994 Limited Partnership and
Energy Capital Investment Company PLC.
"EnCap Registration Rights Agreement" shall have the meaning assigned to
such term in Section 6.7.
"Environmental Laws" shall mean any and all laws relating to the
environment or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment including ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations thereunder.
"Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as
amended, and all rules and regulations under such act.
"Future" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
"Future Stock" shall mean the shares of common stock of Future, $0.01
par value per share, and any shares issued or issuable with respect thereto by
way of a stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or reorganization.
"Future Disclosure Schedule" shall mean a schedule delivered by the
Future Entities to the Xxxxx Entities on the date hereof which sets forth
additional information regarding the representations and warranties of the
Future Entities contained herein and information called for hereby.
"Future Entities" shall mean Future and Future Sub.
"Future Sub" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
"GAAP" shall mean those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor).
"Material Adverse Effect" shall mean with respect to any Person, a
material adverse effect on the financial condition, results of operations,
business or prospects of such Person and its consolidated subsidiaries, taken
as a whole.
"Merger" shall have the meaning assigned to such term in Section 2.1.
"Merger Shares" shall have the meaning assigned to such term in Article
III.
"MOC" shall have the meaning assigned to such term in Section 4.7.
"MOC Agreement" shall have the meaning assigned to such term in Section
4.7.
"Partner" shall mean each general or limited partner of Xxxxx.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture, or
any other legally recognizable entity.
"Plan" shall mean, at any time, any employee benefit plan which is
covered by ERISA and in respect of which Future or any Commonly Controlled
Entity is (or if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Price Group" shall mean Xxxx Xxxxx, Don Wm. Xxxxxxxx, Xxxxxxxx Price,
Xxxxxx Xxxxx and Xxxxxxx X. Xxxxxxxx.
"Price Options" means the options to purchase up to 250,000 shares of
Future Stock issued to Xxxx Xxxxx pursuant to the Employment Agreement and
Future's 1993 Stock Incentive Plan.
"Price Registration Rights Agreement" shall have the meaning assigned to
such term in Section 6.7.
"Properties" shall mean the "Assets," as such term is defined in the MOC
Agreement, exclusive of the Emission Credits.
"Returns" shall mean all returns, reports, estimates, declarations and
statements of any nature regarding Taxes prior to the Closing required to be
filed by the taxpayer relating to its income, properties or operations.
"SCL" shall have the meaning assigned to such term in the introductory
paragraph to this Agreement.
"SCL Stock" shall mean the shares of common stock, par value $0.01 per
share, of SCL.
"Securities Act" shall mean the U.S. Securities Act of 1933, as amended,
and all rules and regulations under such Act.
"Senior Credit Facility" shall have the meaning assigned to such term in
Section 6.8.
"Shareholders' Agreement" shall have the meaning assigned to such term
in Section 6.10.
"Xxxxxx Indebtedness" shall mean that certain indebtedness of Xxxxx to
Xxxxx X. Xxxxxx in the original principal amount equal to $5,700,000, as
secured by the Xxxxxx Mortgage.
"Xxxxxx Mortgage" shall mean that certain Mortgage, Deed of Trust,
Assignment of Production and Security Agreement by and between Xxxxx and Xxxxx
X. Xxxxxx covering the Properties.
"Subordination Agreement" shall have the meaning assigned to such term
in Section 6.9.
"Subsidiary" means the following entities which are subsidiaries of
Future: Future Petroleum Corporation, a Texas corporation; Future Energy
Corporation, a Nevada corporation; Future Acquisition 1995, Ltd., a Texas
limited partnership; BMC Development No. 1 Limited Partnership, a Texas
limited partnership; NCI-Shawnee Limited Partnership, a Texas limited
partnership; and Future Sub.
"Surviving Corporation" shall have the meaning assigned to such term in
Section 2.1.
"Taxes" shall mean any federal, state, local, foreign or other taxes
(including, without limitation, income, alternative minimum, franchise,
property, sales, use, lease, excise, premium, payroll, wage, employment or
withholding taxes), fees, duties, assessments, withholdings or governmental
charges of any kind whatsoever (including interest, penalties and additions to
tax).
"TBCA" shall have the meaning assigned to such term in Section 2.1.
"Warrant" shall have the meaning assigned to such term in Article III.
Section 1.2. References and Construction.
(a) All references in this Agreement to articles, sections,
subsections and other subdivisions refer to corresponding articles, sections,
subsections and other subdivisions of this Agreement unless expressly provided
otherwise.
(b) Titles appearing at the beginning of any of such subdivisions
are for convenience only and shall not constitute part of such subdivisions
and shall be disregarded in construing the language contained in such
subdivisions.
(c) The words "this Agreement", "this instrument", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited.
(d) Words in the singular form shall be construed to include the
plural and vice versa, unless the context otherwise requires. Pronouns in
masculine, feminine and neuter genders shall be construed to include any other
gender.
(e) Unless the context otherwise requires or unless otherwise
provided herein, the terms defined in this Agreement which refer to a
particular agreement, instrument or document also refer to and include all
renewals, extensions, modifications, amendments or restatements of such
agreement, instrument or document, provided that nothing contained in this
subsection shall be construed to authorize such renewal, extension,
modification, amendment or restatement.
(f) Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.
(g) The word "or" is not intended to be exclusive and the word
"includes" and its derivatives means "includes, but is not limited to" and
corresponding derivative expressions.
(h) No consideration shall be given to the fact or presumption that
one party had a greater or lesser hand in drafting this Agreement.
(i) Unless otherwise indicated, all references herein to "$" or
"dollars" shall refer to U.S. Dollars.
(j) Exhibits III(b), 4.8, 6.5, 6.6, 6.7-1, 6.7-2, 6.7-3, 6.9, 6.10,
7.1(e) and 7.2(e) are attached hereto. Each such Exhibit is incorporated
herein by reference for all purposes and references to this Agreement shall
also include such Exhibit unless the context in which used shall otherwise
require.
ARTICLE II
The Merger
Section 2.. The Merger. At the Effective Time, and on the terms and
subject to the conditions set forth in this Agreement, SCL shall be merged
with and into Future Sub (the "Merger"), Future Sub shall continue its
corporate existence under the Texas Business Corporation Act (the "TBCA") as
the surviving entity in the Merger (sometimes referred to herein as the
"Surviving Corporation"), and the separate corporate existence of SCL shall
cease.
Section 2.2. Effective Time of the Merger. Provided that the
conditions set forth in Article VII have been fulfilled or waived in
accordance with this Agreement, as soon as practicable on the Closing Date,
Future Sub and SCL shall cause the Merger to be consummated by filing with the
Secretary of State of Texas articles of merger in such form as required by,
and executed in accordance with the relevant provisions of, the TBCA. The
Merger shall become effective at the time the articles of merger are duly
filed with the Secretary of State of Texas (the "Effective Time").
Section 2.3. Closing. The closing of the Merger (the "Closing")
shall take place (i) at the offices of Xxxxxxxx & Knight, P.C., located at
0000 Xxxxx Xxxxx, 000 Xxxxxx, Xxxxxxx, Xxxxx 00000, 10:00 a.m., local time, on
August 14, 1998, or (ii) at such other time or place or on such other date as
the parties hereto shall agree. The date on which the Closing occurs is
herein referred to as the "Closing Date".
Section 2.4. Effects of the Merger. The Merger shall have the
effects set forth in the applicable provisions of the TBCA. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time,
all the real estate and other properties, rights, privileges, powers, and
franchises of Future Sub and SCL shall vest in the Surviving Corporation,
without any transfer or assignment having occurred, and all debts,
liabilities, obligations and duties of Future Sub and SCL shall become the
debts, liabilities, obligations and duties of the Surviving Corporation.
Section 2.5. Certificate of Incorporation. The Articles of
Incorporation of Future Sub, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation,
until thereafter amended in accordance with its terms and as provided by the
TBCA.
Section 2.6. Bylaws. The Bylaws of Future Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation, until thereafter amended in accordance with its terms and as
provided by the TBCA.
Section 2.7. Directors. The directors of Future Sub at the
Effective Time shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation and until his or her successor is duly
elected and qualified in accordance with the TBCA or until his or her earlier
death, resignation or removal.
Section 2.8. Officers. The officers of Future Sub at the Effective
Time shall be the initial officers of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation and until his or her successor is duly elected and
qualified in accordance with the TBCA or until his or her earlier death,
resignation or removal.
Section 2.9. Taking of Necessary Action. Each of the parties hereto
shall use its reasonable best efforts to take all such action as may be
necessary or appropriate in order to effectuate the Merger under the TBCA as
promptly as possible.
ARTICLE III
Conversion of Securities; Approval of Merger
Section 3.1. Conversion of Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of Xxxxx, SCL, Future, Future
Sub or any holder of any of the following securities:
(a) Each share of SCL Stock held in the treasury of SCL shall be
canceled and retired and no payment shall be made with respect thereto.
(b) All of the outstanding shares of SCL Stock shall be converted
into (i) 4,694,859 fully paid and non-assessable shares of Future Stock (the
"Merger Shares") and (ii) a warrant to purchase 250,000 shares of Future
Stock, which warrant shall be substantially in the form of that certain Stock
Purchase Warrant attached hereto as Exhibit III(b) (the "Warrant").
Section 3.2. Approval of Merger Agreement and Merger. By execution
of this Agreement, each of Future, as the sole shareholder of Future Sub, and
Xxxxx, as the sole shareholder of SCL, hereby adopts, ratifies and approves
the Merger and the Merger Agreement.
Section 3.3. Waiver of Dissenter's Rights of Appraisal. Each of
Future, as the sole shareholder of Future Sub, and Xxxxx, as the sole
shareholder of SCL, hereby waives any dissenter's rights of appraisal or
similar rights it may have, including the rights under Section 5.11 of the
TBCA.
ARTICLE IV
Representations and Warranties of Xxxxx Entities
Each of the Xxxxx Entities represents and warrants to the Future
Entities as follows:
Section 4.1. Organization and Existence. Xxxxx is a limited
partnership duly formed and validly existing under the laws of the State of
Texas. SCL is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Each Xxxxx Entity has the
power to carry on its business as it is now being conducted or currently
proposed to be conducted. Each Xxxxx Entity is duly qualified to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities make such
qualification necessary, except where the failure to be so qualified will not,
alone or in the aggregate, have a Material Adverse Effect.
Section 4.2. Power and Authority. Xxxxx has full partnership power and
partnership authority, and SCL has full corporate power and corporate
authority, to execute, deliver, and perform this Agreement and each other
agreement, instrument, or document executed or to be executed by it in
connection with the transactions contemplated hereby to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery, and performance by each of the Xxxxx Entities of this
Agreement and each other agreement, instrument, or document executed or to be
executed by it in connection with the transactions contemplated hereby to
which it is a party, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
partnership action, in the instance of Xxxxx, and all necessary corporate
action, in the instance of SCL.
Section 4.3. Valid and Binding Agreement. This Agreement has been duly
executed and delivered by each of the Xxxxx Entities and constitutes, and each
other agreement, instrument, or document executed or to be executed by a Xxxxx
Entity in connection with the transactions contemplated hereby to which it is
a party has been, or when executed will be, duly executed and delivered by
such Xxxxx Entity and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of such Xxxxx Entity,
enforceable against it in accordance with their respective terms, except that
such enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights
generally and (b) equitable principles which may limit the availability of
certain equitable remedies (such as specific performance) in certain
instances.
Section 4.4. Non-Contravention. The execution, delivery, and
performance by a Xxxxx Entity of this Agreement and each other agreement,
instrument, or document executed or to be executed by such Xxxxx Entity in
connection with the transactions contemplated hereby to which it is a party
and the consummation by it of the transactions contemplated hereby and thereby
do not and will not (a) conflict with or result in a violation of any
provision of (i) in the instance of Xxxxx, its partnership agreement or other
governing instruments or (ii) in the instance of SCL, its articles of
incorporation, bylaws and other governing instruments, (b) conflict with or
result in a violation of any provision of, or constitute (with or without the
giving of notice or the passage of time or both) a default under, or give rise
(with or without the giving of notice or the passage of time or both) to any
right of termination, cancellation, or acceleration under, any bond,
debenture, note, mortgage, indenture, lease, contract, agreement, or other
instrument or obligation to which such Xxxxx Entity is a party or by which it
or any of its properties may be bound, (c) result in the creation or
imposition of any lien or other encumbrance upon the properties of such Xxxxx
Entity, or (d) violate any applicable law, rule or regulation binding upon
such Xxxxx Entity.
Section 4.5. Approvals. No consent, approval, order, or authorization
of, or declaration, filing, or registration with, any court or governmental
agency or of any third party is required to be obtained or made by each Xxxxx
Entity in connection with the execution, delivery, or performance by it of
this Agreement and each other agreement, instrument, or document executed or
to be executed by it in connection with the transactions contemplated hereby
to which it is a party or the consummation by it of the transactions
contemplated hereby and thereby other than the filing by SCL of a certificate
of merger with the Secretaries of State of Nevada and Texas in accordance with
the Nevada Statute and the TBCA, respectively.
Section 4.6. Pending Litigation. Except as otherwise set forth in
the Xxxxx Disclosure Schedule, there are no pending suits, actions, or other
proceedings in which a Xxxxx Entity is a party which affect the Properties in
any material respect, or affecting the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby or that
would, if determined adversely to such Xxxxx Entity, (a) result in the
impairment or loss of SCL's title to the Properties, (b) hinder or impede the
operation of all or any portion of any Property or (c) restrain, prohibit or
impose damage on a Future Entity or a Xxxxx Entity with respect to the
transactions contemplated hereby.
Section 4.7. Marathon Agreement. Xxxxx has delivered to Future a
true and correct copy of that certain Purchase and Sale Agreement made and
entered into as of May 11, 1998, by and between Marathon Oil Company ("MOC")
and Xxxxx Operating Company, Inc., and all amendments, modifications or
supplements thereto (the "MOC Agreement"). Xxxxx has delivered to Future true
and correct copies of all written disclosures given by MOC to Xxxxx or its
representatives which pertain to, or otherwise qualify, modify or limit the
representations, warranties, covenants and agreements made by MOC in the MOC
Agreement. The representations and warranties of MOC in the MOC Agreement are
true and correct in all material respects. All covenants and agreements to be
performed by the "Purchaser" under the MOC Agreement either prior to or at the
closing of the transactions contemplated by the MOC Agreement have been
complied with or performed in all material respects or otherwise waived in
accordance with the terms of the MOC Agreement.
Section 4.8. Assets and Liabilities of SCL. During its existence,
SCL has owned or otherwise held no properties or other assets (tangible or
intangible) other than (a) the rights of the "Purchaser" under the MOC
Agreement, (b) the Properties and (c) its rights under this Agreement. SCL
has no liabilities or obligations, contingent or otherwise, other than (i) the
liabilities or obligations incurred or assumed by the "Purchaser" under the
terms of the MOC Agreement, exclusive of any liabilities or obligations
arising or otherwise attributable to the Emission Credits, and (ii) the
Current Debt Amount and (iii) its liabilities and obligations under this
Agreement. Attached hereto as Exhibit 4.8 is a true, correct and complete
copy of a Subscription Agreement, and all amendments or modifications thereto,
whereunder Xxxxx subscribed for SCL Stock and conveyed, assigned and
contributed the Properties to SCL.
Section 4.9. Xxxxxx Indebtedness. Xxxxx has delivered to Future a
true and correct copy of all documents or other instruments evidencing the
Xxxxxx Indebtedness.
Section 4.10. Capitalization of SCL. The authorized capital stock
of SCL consists of 100 shares of SCL Stock. As of the date hereof, 100 shares
of SCL Stock were validly issued and outstanding, fully paid, and
nonassessable, and Xxxxx is the record and beneficial owner of such shares,
free and clear of all liens or other encumbrances. There are no bonds,
debentures, notes or other indebtedness issued or outstanding having the right
to vote on any matters on which SCL's stockholders may vote. Other than as
contemplated by this Agreement, there are no options, warrants, calls,
convertible securities or other rights, agreements or commitments presently
outstanding obligating SCL to issue, deliver or sell shares of its capital
stock or debt securities, or obligating SCL to grant, extend or enter into any
such option, warrant, call or other such right, agreement or commitment.
Section 4.11. Articles of Incorporation and By-laws; Corporate
Records. SCL has delivered to Future true and complete copies of its Articles
of Incorporation and Bylaws, as amended or restated through the date of this
Agreement. The minute book of SCL contains reasonably complete and accurate
records of all corporate actions of the shareholders and board of directors of
SCL, including committees of the board. The stock transfer records of SCL
contain complete and accurate records of all issuances and redemptions of
stock by SCL. Neither SCL nor, to the knowledge of SCL, any of its
Affiliates, is a party to any agreement with respect to the capital stock of
SCL other than this Agreement.
Section 4.12. Investment Experience. Xxxxx and each Partner is an
"accredited investor" as defined in Rule 501(a) of the Securities Act.
Section 4.13. Purchase for Own Account. The Merger Shares and
Warrant to be acquired by Xxxxx and, pursuant to Rule 145 under the Securities
Act, deemed acquired by the Partners, pursuant to this Agreement are being
acquired for their own account and with no intention of distributing or
reselling the Merger Shares, the Warrant or the shares of Future Stock
issuable upon exercise of the Warrant (the "Warrant Shares"), or any part
thereof, in any transaction that would be in violation of the securities laws
of the United States of America, or any state, without prejudice, however, to
the rights of the Xxxxx and the Partners at all times to sell or otherwise
dispose of all or any part of the Merger Shares, the Warrant or the Warrant
Shares under an effective registration statement under the Securities Act, or
under an exemption from such registration available under the Securities Act,
and subject, nevertheless, to the disposition of Xxxxx'x and each Partner's
property being at all times within its control. If Xxxxx or a Partner should
in the future decide to dispose of any of the Merger Shares, the Warrant or
the Warrant Shares, Xxxxx and each Partner understands and agrees that it may
do so only in compliance with the Securities Act and applicable state
securities laws, as then in effect, and that stop-transfer instructions to
that effect, where applicable, will be in effect with respect to the Merger
Shares, the Warrant and the Warrant Shares. Xxxxx and each Partner agrees to
the imprinting, so long as required by law, of a legend on the certificates
representing the Merger Shares, the Warrant and the Warrant Shares,
substantially as follows in all material respects:
[THE SECURITIES REPRESENTED BY THIS CERTIFICATE] [THIS WARRANT AND THE
SECURITIES TO BE RECEIVED UPON THE EXERCISE OF THIS WARRANT] HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH LAWS.
Section 4.14. No Solicitation. Neither Xxxxx or any Partner was at
any time solicited by any leaflet, public promotional meeting, circular,
newspaper or magazine article, radio or television advertisement, or any other
form of general advertising or solicitation in connection with the offer, sale
or purchase of the Merger Shares, the Warrant or the Warrant Shares under this
Agreement.
Section 4.15. Disclaimer of Warranties. Other than those expressly set
out in this Article IV, each Xxxxx Entity hereby expressly disclaims any and
all representations or warranties with respect to the Properties or the
transaction contemplated hereby, and the Future Entities agree that the
Properties are being transferred "where is" and "as is". Specifically as a
part of (but not in limitation of) the foregoing, each Future Entity
acknowledges that no Xxxxx Entity has made, and each Xxxxx Entity hereby
expressly disclaims, any representation or warranty (express, implied, under
common law, by statute or otherwise) (a) except to the limited extent set
forth in Section 4.7, as to the condition of the Properties (INCLUDING WITHOUT
LIMITATION, EACH XXXXX ENTITY DISCLAIMS ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO MODELS OR
SAMPLES OF MATERIALS), (b) as to the compliance by the Xxxxx Entities with
Environmental Laws, (c) as to the status of title to the Properties, or (d) as
to the extent of oil, gas and/or other mineral reserves, the recoverability of
or the cost of recovering any of such reserves, the value of reserves, prices
(or anticipated prices) at which production has been or will be sold and the
ability to sell oil or gas production from the Properties.
ARTICLE V
Representations and Warranties of Future Entities
Each of the Future Entities hereby represents and warrants to the Xxxxx
Entities as follows:
Section 5.1. Organization and Existence. Each Future Entity is a
corporation duly organized, legally existing and in good standing under the
laws of (a) in the instance of Future, the State of Utah, and (b) in the
instance of Future Sub, the laws of the State of Nevada. Future has the power
to carry on its business as it is now being conducted or currently proposed to
be conducted. Future is duly qualified to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities make such qualification
necessary, except where the failure to be so qualified will not, alone or in
the aggregate, have a Material Adverse Effect on Future and its Subsidiaries,
taken together.
Section 5.2. Power and Authority. Each Future Entity has full corporate
power and corporate authority to execute, deliver, and perform this Agreement
and each other agreement, instrument, or document executed or to be executed
by such Future Entity in connection with the transactions contemplated hereby
to which it is a party and to consummate the transactions contemplated hereby
and thereby. The execution, delivery, and performance by each Future Entity
of this Agreement (including the issuance of the Merger Shares and the
Warrant) and each other agreement, instrument, or document executed or to be
executed by such Future Entity in connection with the transactions
contemplated hereby to which it is a party, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action of such Future Entity.
Section 5.3. Valid and Binding Agreement. This Agreement has been duly
executed and delivered by each Future Entity and constitutes, and each other
agreement, instrument, or document executed or to be executed by such Future
Entity connection with the transactions contemplated hereby to which it is a
party has been, or when executed will be, duly executed and delivered by such
Future Entity and constitutes, or when executed and delivered will constitute,
a valid and legally binding obligation of such Future Entity, enforceable
against it in accordance with their respective terms, except that such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights
generally and (b) equitable principles which may limit the availability of
certain equitable remedies (such as specific performance) in certain
instances.
Section 5.4. Non-Contravention. The execution, delivery, and
performance by each Future Entity of this Agreement and each other agreement,
instrument, or document executed or to be executed by such Future Entity in
connection with the transactions contemplated hereby to which it is a party
and the consummation by it of the transactions contemplated hereby and thereby
do not and will not (a) conflict with or result in a violation of any
provision of the charter or bylaws or other governing instruments of such
Future Entity, (b) conflict with or result in a violation of any provision of,
or constitute (with or without the giving of notice or the passage of time or
both) a default under, or give rise (with or without the giving of notice or
the passage of time or both) to any right of termination, cancellation, or
acceleration under, any bond, debenture, note, mortgage, indenture, lease,
contract, agreement, or other instrument or obligation to which such Future
Entity is a party or by which such Future Entity or any of its properties may
be bound, (c) result in the creation or imposition of any lien or other
encumbrance upon the properties of such Future Entity, or (d) violate any
applicable law, rule or regulation binding upon such Future Entity.
Section 5.5. Approvals. No consent, approval, order, or authorization
of, or declaration, filing, or registration with, any court or governmental
agency or of any third party is required to be obtained or made by a Future
Entity in connection the execution, delivery, or performance by such Future
Entity of this Agreement (including the issuance of the Merger Shares and the
Warrant as contemplated hereby) and each other agreement, instrument, or
document executed or to be executed by such Future Entity in connection with
the transactions contemplated hereby to which it is a party or the
consummation by it of the transactions contemplated hereby and thereby, other
than (i) the filing by Future Sub of a certificate of merger with the
Secretaries of State of Nevada and Texas in accordance with the Nevada Statute
and the TBCA, respectively, and (ii) compliance with any applicable
requirements of the Securities Act and any applicable state securities laws.
Section 5.6. Pending Litigation. There are no pending suits,
actions, or other proceedings to which Future or its Subsidiaries is a party
or, to the knowledge of Future, threatened to be made a party which, if
decided adversely to Future or its Subsidiaries, could have a Material Adverse
Effect.
Section 5.7. Capitalization.
(a) The authorized capital stock of Future consists of 30,000,000
shares of Future Stock, and 200,000 shares of Preferred Stock, par value $.01
per share (in this Section, the "Preferred Stock"). As of August 11, 1998,
6,157,015 shares of Future Stock were validly issued and outstanding, fully
paid, and nonassessable, and no shares of Preferred Stock were issued and
outstanding and there have been no changes in such numbers through the date of
this Agreement. As of the date of this Agreement, there are no bonds,
debentures, notes or other indebtedness issued or outstanding having the right
to vote on any matters on which Future's stockholders may vote. As of the
date of this Agreement, other than as set forth in the Future Disclosure
Schedule, there are no options, warrants, calls, convertible securities or
other rights, agreements or commitments presently outstanding obligating
Future to issue, deliver or sell shares of its capital stock or debt
securities, or obligating Future to grant, extend or enter into any such
option, warrant, call or other such right, agreement or commitment, and,
except for exercises thereof, there have been no changes in the number of such
securities through the date of this Agreement; provided, that it is
contemplated Future will issue to EnCap Fund I up to 2,844,859 shares of
Future Stock at Closing in connection with EnCap Fund I's agreement to enter
into the Subordination Agreement. All of the Merger Shares to be issued in
accordance with this Agreement will be, when so issued, duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights and
shall be delivered free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever. Future has duly reserved for
issuance pursuant to the exercise of the Warrant, the Warrant Shares.
(b) The authorized capital stock of Future Sub consists of 1,000,000
shares of common stock, par value $0.01 per share ("Future Sub Stock"). As of
the date hereof, 1,000 shares of Future Sub Stock were validly issued and
outstanding, fully paid, and nonassessable, and Future is the record and
beneficial owner of such shares, free and clear of all liens or other
encumbrances. There are no bonds, debentures, notes or other indebtedness
issued or outstanding having the right to vote on any matters on which Future
Sub's stockholders may vote. Other than as contemplated by this Agreement,
there are no options, warrants, calls, convertible securities or other rights,
agreements or commitments presently outstanding obligating Future Sub to
issue, deliver or sell shares of its capital stock or debt securities, or
obligating Future Sub to grant, extend or enter into any such option, warrant,
call or other such right, agreement or commitment.
Section 5.8. Subsidiaries. Each Subsidiary is a corporation,
partnership or other entity (as indicated on the Future Disclosure Schedule)
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has the corporate or similar power to carry
on its business as it is now being conducted or currently proposed to be
conducted. Each Subsidiary is duly qualified to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary except where the failure to be so qualified, when taken together
with all such failures, has not had, and would not reasonably be expected to
have, a Material Adverse effect on Future and its Subsidiaries, taken
together. The Future Disclosure Schedule sets forth, with respect to each
Subsidiary, its name and jurisdiction of organization and, with respect to
each Subsidiary that is not wholly-owned, the number of issued and outstanding
shares of capital stock or share capital and the number of shares of capital
stock or share capital owned by Future or a Subsidiary. All the outstanding
shares of capital stock or share capital of each Subsidiary are validly
issued, fully paid and nonassessable, and, except as otherwise set forth in
the Future Disclosure Schedule, those owned by Future or by a Subsidiary of
Future are owned free and clear of any liens, claims or encumbrances. There
are no existing options, warrants, calls, convertible securities or other
rights, agreements or commitments of any character relating to the issued or
unissued capital stock or other securities of any of the Subsidiaries of
Future. Future does not directly or indirectly own any interest in any other
corporation, partnership, joint venture or other business association or
entity or have any obligation, commitment or undertaking to acquire any such
interest other than joint ventures of the type customarily entered into in the
oil and gas industry.
Section 5.9. Permits. Each of Future and its Subsidiaries has all
permits, approvals, licenses and franchises from governmental authorities
required to conduct its business as now being conducted, except for such
permits, approvals, licenses and franchises the absence of which would not,
individually or in the aggregate, have a Material Adverse Effect.
Section 5.10. Knowledgeable Purchaser. Each Future Entity is a
knowledgeable purchaser, owner and operator of oil and gas properties, has the
ability to evaluate (and in fact has evaluated) the Properties for purchase,
and is acquiring the Properties for its own account and not with the intent to
make a distribution within the meaning of the Securities Act of 1933 (and the
rules and regulations pertaining thereto) or a distribution thereof in
violation of any other applicable securities laws.
Section 5.11. Certificates for Merger Shares. The certificates
delivered to Xxxxx at the Closing representing the Merger Shares will conform
to the requirements of the Utah Business Corporation Act.
Section 5.12. SEC Filings. Except as otherwise disclosed to Xxxxx,
Future is current in its obligations to file all periodic reports and proxy
statements with the Commission required to be filed under the Exchange Act.
Future's Annual Report on Form-10KSB for the year ended December 31, 1997,
Future's Form 8-K/A filed on February 27, 1998, and Future's Quarterly Report
on Form-10QSB for the quarter ending March 31, 1998 (collectively, the "SEC
Documents") are all of the documents the Future was required to file with the
Commission since January 1, 1998. As of their respective dates, the SEC
Documents complied as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations of the Commission thereunder
applicable to such SEC Documents. The SEC Documents do not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of circumstances then existing. The audited Consolidated financial
statements and unaudited Consolidated interim financial statements of Future
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the Commission with respect thereto; present fairly in all
material respects, in conformity with GAAP applied on a consistent basis, the
Consolidated financial position of Future as of the dates thereof and its
Consolidated results of operations and changes in financial position for the
periods then ended (subject to normal year-end adjustments in the case of the
unaudited interim financial statements and the fact that certain information
and notes have been condensed or omitted in accordance with the Exchange Act
and the rules promulgated thereunder); and are in all material respects in
accordance with the books of account and records of Future and its
subsidiaries. There are no material liabilities of Future (contingent or
otherwise), other than as disclosed in the SEC Documents and the financial
statements included therein.
Section 5.13. Absence of Certain Changes or Events. Except as
disclosed in the SEC Documents filed prior to the date of this Agreement or in
the Future Disclosure Schedule, since December 31, 1997, Future and its
Subsidiaries have operated their respective businesses in the ordinary course
of business consistent with past practice and there has not been (a) any
transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of
business) which, alone or in the aggregate, has had, or would reasonably be
expected to have, a Material Adverse Effect; (b) any damage, destruction or
loss, whether or not covered by insurance, which has had, or would reasonably
be expected to have, a Material Adverse Effect; (c) any declaration, setting
aside or payment of any dividend or distribution (whether in cash, stock or
property) with respect to the capital stock of the Future Entities or any
Subsidiary (other than dividends or distributions between Future and its
wholly-owned Subsidiaries); (d) any material change in Future's accounting
principles, practices or methods; (e) any repurchase or redemption with
respect to Future's capital stock; (f) any stock split, combination or
reclassification of any of Future's capital stock or the issuance or
authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for, shares of Future's capital stock; (g) any grant of
or any amendment of the terms of any option to purchase shares of capital
stock of Future; or (h) any agreement (whether or not in writing), arrangement
or understanding to do any of the foregoing.
Section 5.14. Section 61-6-2 of Utah Code. The Utah Control Shares
Acquisition Act will not apply to acquisitions from time to time, in the open
market and otherwise, by Xxxxx and the Partners, of the shares of Future.
Section 5.15. Articles of Incorporation and By-laws; Corporate
Records. Future and Future Sub have delivered to Xxxxx true and complete
copies of their respective Certificate or Articles of Incorporation and
Bylaws, as amended or restated through the date of this Agreement. The minute
books of each of Future and its Subsidiaries contain reasonably complete and
accurate records of all corporate actions of the equity owners of the various
entities and of the boards of directors or other governing bodies, including
committees of such boards or governing bodies. The stock transfer records of
Future are maintained by its transfer agent and registrar and, to the
knowledge of Future, contain complete and accurate records of all issuances
and redemptions of stock by Future. The stock transfer records of Future Sub
contain complete and accurate records of all issuances and redemptions of
stock by Future Sub. Except as set forth in the Future Disclosure Schedule,
neither Future nor, to the knowledge of Future, any of its Affiliates, is a
party to any agreement with respect to the capital stock of Future other than
this Agreement.
Section 5.16. Contracts.
(a) The Future Disclosure Schedule sets forth, as of the date
hereof, a list of all of the following material contracts and other agreements
to which any of Future or its Subsidiaries is a party or by which any of them
or any material portion of their properties or assets are bound or subject
(other than those set forth in any other portion of the Future Disclosure
Schedule):
(i) contracts, severance agreements and other agreements with
any current or former officer, director, employee, consultant, agent or
other representative;
(ii) contracts and other agreements with any labor union or
association representing any employee of the Future or its Subsidiaries;
(iii) contracts, agreements or other agreements relating to
Future and its Subsidiaries between any of the Future or its
Subsidiaries, on the one hand, and any stockholder or any of his, her or
its Affiliates on the other hand;
(iv) joint venture agreements;
(v) contracts and other agreements under which any of Future
or its Subsidiaries agrees to indemnify any party;
(vi) contracts and other agreements relating to the borrowing
of money; or
(vii) any other material contract or other agreement whether
or not made in the ordinary course of business.
There have been delivered or made available to Xxxxx true and complete copies
of all such contracts and other agreements described above that are referenced
in the Future Disclosure Schedule.
(b) All contracts, agreements and understandings of the type
described above and referenced in the Future Disclosure Schedule are valid and
binding and are in full force and effect and enforceable in accordance with
their respective terms other than contracts, agreements or understandings
which are by their terms no longer in force or effect. Except as set forth in
the Future Disclosure Schedule, (i) no approval or consent of, or notice to,
any Person is needed in order that such contract, agreement or understanding
shall continue in full force and effect in accordance with its terms without
penalty, acceleration or rights of early termination following the
consummation of the transactions contemplated by this Agreement, and (ii) none
of the Future or its Subsidiaries is in violation or breach of or default
under any such contract, agreement or understanding nor, to the knowledge of
Future, is any other party to any such contract, agreement or understanding.
Section 5.17. Oil and Gas Properties.
(a) Each of Future and its Subsidiaries has good and defensible
title to all of its material oil and gas properties and assets, free and clear
of all liens other than as disclosed in the Future Disclosure Schedule;
provided, that no representation or warranty is made with respect to any oil,
gas or mineral property or interest to which no proved oil or gas reserves are
properly attributed. All proceeds from the sale of each Future's and its
Subsidiaries' share of the hydrocarbons being produced from its oil and gas
properties are currently being paid in full to the Future or its Subsidiaries
by the purchasers thereof on a timely basis and none of such proceeds are
currently being held in suspense by such purchaser or any other party.
(b) Future has delivered to Xxxxx a copy of the reserve report (in
this Section, the "Reserve Report") dated as of August 1, 1998, prepared by
X.X. Xxxxx & Company, Inc, independent reserve engineers (in this Section, the
"Reserve Engineers"), relating to the oil and gas reserves of Future and its
Subsidiaries. The factual information underlying the estimates of the
reserves of Future and its subsidiaries, which was supplied by Future to the
Reserve Engineers for the purpose of preparing the Reserve Report, including,
without limitation, production, volumes, sales prices for production,
contractual pricing provisions under oil or gas sales or marketing contracts
under hedging arrangements, costs of operations and development, and working
interest and net revenue information relating to Future's and its
Subsidiaries' ownership interests in properties, was true and correct in all
material respects on the date of such Reserve Report; the estimates of future
capital expenditures and other future exploration and development costs
supplied to the Reserve Engineers were prepared in good faith and with a
reasonable basis; the information provided to the Reserve Engineers for
purposes of preparing the Reserve Report was prepared in accordance with
customary industry practices; the Reserve Engineers were, as of the date of
the Reserve Report prepared by it, and are, as of the date hereof, independent
petroleum engineers with respect to Future and its Subsidiaries; other than
normal production of the reserves and intervening oil and gas price
fluctuations, Future is not as of the date hereof and as of the date of
Closing will not be, aware of any facts or circumstances that would result in
a materially adverse change in the reserves in the aggregate, or the aggregate
present value of future net cash flows therefrom, as described in the Reserve
Report; estimates of such reserves and the present value of the future net
cash flows therefrom in the Reserve Report comply in all material respects to
the applicable requirements of Regulation S-X and Industry Guide 2 under the
Securities Act.
Section 5.18. Environmental and Safety Matters. Except as set forth
in the Future Disclosure Schedule and except for such of the following as
would not, individually or in the aggregate, have a Material Adverse Effect
with respect to Future and its Subsidiaries: (a) each of Future and its
Subsidiaries is in compliance with all applicable Environmental Laws; (b)
neither Future nor any of its Subsidiaries has received a notice, report or
information regarding any liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), or any corrective, investigatory or remedial
obligations, arising under applicable Environmental Laws with respect to its
past or present operations or properties; (c) Future or a Subsidiary has
obtained, and is and has been in compliance with all terms and conditions of,
all permits, licenses and other authorizations required pursuant to
Environmental Laws for its occupation of the real property owned by Future and
its Subsidiaries (in this Section, an "Owned Property") the property leased by
the Future and its Subsidiaries (in this Section, a "Leased Property") and the
other assets and operations of the Future and its Subsidiaries and the conduct
of their business; and (d) neither Future nor its Subsidiaries has any
contingent liability which is material to Future and its Subsidiaries as a
whole in connection with the release of any hazardous materials into the
environment in violation of any Environmental Law. Future has made available
to Xxxxx true, complete and correct copies of all environmental reports,
analyses, tests or monitoring in the possession of the Future during the past
two years pertaining to any Owned Property or Leased Property.
Section 5.19. Tax Matters. Each of the following is true with
respect to each of Future and its Subsidiaries to the extent applicable to
such member:
(a) all Returns have been or will be timely filed by Future
and its Subsidiaries when due in accordance with all applicable laws;
all Taxes shown on the Returns have been or will be timely paid when
due; the Returns have been properly completed in compliance with all
applicable laws and regulations and completely and accurately reflect
the facts regarding the income, expenses, properties, business and
operations required to be shown thereon; the Returns are not subject to
penalties under Section 6662 of the Code (or any corresponding provision
of state, local or foreign tax law);
(b) except as set forth in the Future Disclosure Schedule,
Future and its Subsidiaries has paid all Taxes required to be paid by it
(whether or not shown on a Return) or for which it could be liable
(provided that it shall not be considered a breach of this
representation if it is ultimately determined that additional tax
payments are due but such assessment is based on an adjustment to a
return or position, if such member has a reasonable basis for the
position taken with respect to such Taxes), whether to taxing
authorities or to other persons under tax allocation agreements or
otherwise, and the charges, accruals, and reserves for Taxes due, or
accrued but not yet due, relating to its income, properties,
transactions or operations as reflected on its books (including, without
limitation, the balance sheet included in Future's Form 10-QSB for the
quarter ended March 31, 1998) are adequate to cover such Taxes;
(c) there are no agreements or consents currently in effect
for the extension or waiver of the time (i) to file any Return or (ii)
for assessment or collection of any taxes relating to the income,
properties or operations of Future or its Subsidiaries, nor has Future
and its Subsidiaries been requested to enter into any such agreement or
consent;
(d) there are no liens for Taxes (other than for current Taxes
not yet due and payable) upon the assets of Future or its Subsidiaries;
and
(e) to the knowledge of Future, each of Future and its
Subsidiaries has complied in all material respects with all applicable
tax laws.
Section 5.20. ERISA. Future does not maintain nor has it
maintained any Plan. Future does not currently contribute to or have
any obligation to contribute to or otherwise have any liability with
respect to any Plan.
Section 5.21 Future's Assets. The assets of Future and of its
subsidiaries consist solely of (i) reserves of oil, rights to reserves
of oil and associated exploration and production assets with a fair
market value not exceeding $500 million and (ii) other assets with a
fair market value not exceeding $15 million. For purposes of this
Section 5.21, the term "associated exploration and production assets"
shall have the meaning ascribed thereto in Section 802.3 of the Rules
promulgated pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976.
Section 5.22. No Other Representations or Warranties. Except
for the representations and warranties contained in this Article V,
neither Future, Future Sub nor any other Person makes any other express
or implied representation or warranty on behalf of Future or Future Sub.
ARTICLE VI
Certain Covenants
Section 6.1. Access to Information.
(a) From the date hereof until Closing, each Xxxxx Entity will
use its reasonable best efforts to give Future, and its attorneys and
other representatives, access at all reasonable times (i) to the
Properties and to any contract files, lease or other title files,
production files, well files and other files of the Xxxxx Entities
pertaining to the ownership of the Properties, and (ii) the books and
records of SCL, and each Xxxxx Entity will use its reasonable best
efforts to arrange for Future, and its attorneys and other
representatives, to have access to any such files or records in the
office of Xxxxx. Each Xxxxx Entity shall not be obligated to provide
Future with access to any records or data which such Xxxxx Entity cannot
provide to Future without, in its reasonable opinion, breaching
confidentiality agreements with other parties. Future recognizes and
agrees that all materials made available to it (whether pursuant to this
Section or otherwise) in connection with the Properties are made
available to it as an accommodation and without representation or
warranty of any kind as to the accuracy and completeness of such
materials.
(b) From the date hereof until Closing, Future shall afford to
Xxxxx and to the officers, employees, accountants, counsel, financial
advisors and other representatives of Xxxxx, reasonable access during
normal business hours to the premises, books and records of Future and
the Subsidiaries and will furnish to the Xxxxx (i) a copy of each
report, schedule, registration statement and other documents filed by it
during such period pursuant to the requirements of federal or state
securities laws, and (ii) such other information with respect to its
business and properties as Xxxxx reasonably requests. Future shall not
be obligated to provide Xxxxx with access to any records or data which
Future cannot provide to Xxxxx without, in its reasonable opinion,
breaching confidentiality agreements with other parties. Xxxxx
recognizes and agrees that all materials made available to it (whether
pursuant to this Section or otherwise) are made available to it as an
accommodation and without representation or warranty of any kind as to
the accuracy and completeness of such materials.
Section 6.2. Confidentiality.
(a) Each Receiving Party (as defined below) agrees that all
Confidential Information (as defined below) shall be kept confidential
by the Receiving Party and shall not be disclosed by the Receiving Party
in any manner whatsoever; provided, however, that (i) any of such
Confidential Information may be disclosed to such directors, officers,
employees, and authorized representatives (including without limitation
attorneys, accountants, consultants, and financial advisors) of the
Receiving Party (collectively, for purposes of this Section, "Receiving
Party Representatives") as need to know such information for the purpose
of evaluating the transactions contemplated hereby (it being understood
that each Receiving Party Representative shall be informed by the
Receiving Party of the confidential nature of such information and shall
be required to treat such information confidentially and that the
Receiving Party and a Receiving Party Representative shall be
responsible for any breach of this Section by such Receiving Party
Representative), (ii) any disclosure of Confidential Information may be
made to the extent to which the Disclosing Party (as defined below)
consents in writing, (iii) Confidential Information may be disclosed by
the Receiving Party or any Receiving Party Representative to the extent
that, in the opinion of counsel for the Receiving Party or such
Receiving Party Representative, the Receiving Party or such Receiving
Party Representative is legally compelled to do so, provided that, prior
to making such disclosure, the Receiving Party or such Receiving Party
Representative, as the case may be, advises and consults with the
Disclosing Party regarding such disclosure and provided further that the
Receiving Party or such Receiving Party Representative, as the case may
be, discloses only that portion of the Confidential Information as is
legally required. The Receiving Party agrees that none of the
Confidential Information will be used for any purpose other than in
connection with the transactions contemplated hereby. The term
"Confidential Information", as used herein, means all information
(irrespective of the form of communication) obtained by or on behalf of
the Receiving Party from the Disclosing Party or its representatives
pursuant to this Section and all similar information obtained from the
Disclosing Party or its representatives by or on behalf of the Receiving
Party prior to the date of this Agreement, other than information which
(A) was or becomes generally available to the public other than as a
result of disclosure by the Receiving Party or any Receiving Party
Representative, (B) was or becomes available to the Receiving Party on a
nonconfidential basis prior to disclosure to the Receiving Party by the
Disclosing Party or its representatives, or (C) was or becomes available
to the Receiving Party from a source other than the Disclosing Party and
its representatives, provided that such source is not known by the
Receiving Party (after reasonable due inquiry) to be bound by a legal,
contractual or fiduciary obligation to the Disclosing Party. As used in
this Section, the term "Receiving Party" shall mean (x) a Future Entity,
when the Disclosing Party is a Xxxxx Entity, and (y) a Xxxxx Entity,
when the Disclosing Party is a Future Entity. As used in this Section,
the term "Disclosing Party" shall mean (xx) a Future Entity, when the
Receiving Party is a Xxxxx Entity , and (yy) a Xxxxx Entity, when the
Receiving Party is a Future Entity.
(b) If this Agreement is terminated, the Receiving Party shall
promptly return at its expense, and shall cause all Receiving Party
Representatives to promptly return at the Receiving Party's expense, all
Confidential Information to the Disclosing Party without retaining any
copies thereof, provided that such portion of the Confidential
Information as consists of notes, compilations, analyses, reports,
studies, or other documents prepared by the Receiving Party or the
Receiving Party Representatives shall be destroyed (and the Receiving
Party and each Receiving Party Representative shall certify such
destruction in writing to the Disclosing Party if requested by the
Disclosing Party).
Section 6.3. Conduct of Operations on the Properties Prior to
the Effective Time. From the date hereof until the Effective Time, SCL
will continue its actions as a non-operator of the Properties in the
ordinary course of business and will not sell or otherwise dispose of
(or release) any portion of the Properties, without Future's written
approval. SCL may make sales or other dispositions of oil, gas and
other minerals in the ordinary course of business after production (but,
in doing so, will not enter into any new marketing arrangements unless
the same terminate, or can be terminated, (in either case without
penalty or other detriment) upon 31 days written notice or less). SCL
will not, without Future's consent, propose the drilling of any
additional xxxxx, or propose the deepening, plugging back, reworking or
abandoning of any existing xxxxx, or propose the conducting of any other
operations which require consent under the applicable operating
agreement except, in SCL's sole discretion, necessary to prevent
termination or forfeiture of any oil and gas lease. SCL will advise
Future of any such proposals made by other parties, and will consult
with Future concerning such proposals, and will respond in the manner as
required by Future; provided that, if the period for responding to such
a proposal extends beyond the Effective Time, SCL will not respond to
such proposal unless the Closing does not occur prior to the next to
last day allowed to respond (in which case SCL shall respond in the
manner required by Future). SCL will not modify any lease or other
material agreement included in or relating to the Properties or enter
into any new material agreement relating to the Properties without
Future's consent, other than production sales contracts, or other
marketing related agreements, which terminate, or can be terminated, (in
each case without penalty or other detriment) upon 31 days written
notice or less.
Section 6.4. Conduct of Future's Business Prior to the
Director Effective Date. During the period from the date of this
Agreement to the Director Effective Date, Future and its Subsidiaries
shall each use its reasonable best efforts to preserve the goodwill of
suppliers, general partners, customers and others having business
relations with them and to do nothing knowingly to impair their ability
to keep and preserve their businesses as it exists on the date of this
Agreement. Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Director Effective Date,
Future and its Subsidiaries shall not, without the prior written consent
of Xxxxx:
(a) declare, set aside, increase or pay any dividend
(including any stock dividends), or declare or make any
distribution on, or directly or indirectly combine, redeem,
reclassify, purchase, or otherwise acquire, any shares of its
capital stock or authorize the creation or issuance of, or, other
than the Price Options or as contemplated hereby, issue, deliver
or sell any additional shares of its capital stock or any
securities or obligations convertible into or exchangeable for its
capital stock or effect any stock split or reverse stock split or
other recapitalization.
(b) amend its Certificate of Incorporation or By-laws
otherwise than as contemplated by this Agreement;
(c) pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire,
any such shares, or any other voting securities or convertible
securities;
(d) sell, assign, mortgage, pledge, encumber or
otherwise transfer any oil and gas property or other material
asset (including sales of oil or gas to be produced in the future)
owned by Future or a Subsidiary, other than sales of oil and gas
in the ordinary course of business; enter into any material swap,
hedge or similar agreement covering a material amount of its
future production;
(e) merge, consolidate or enter into a share exchange
with another entity other than as contemplated by this Agreement,
or liquidate;
(f) borrow amounts except amounts under the Senior
Credit Facility necessary (i) to pay the Closing Obligations, (ii)
to make the payment to EnCap Fund I and Gecko Booty 1994 I Limited
Partnership provided by Section 2.1 of the Note Restructuring
Agreement and (iii) to pay transaction costs incurred by it in
connection with this Agreement, the Credit Facility and the Note
Restructuring Agreement and the respective transactions
contemplated thereby;
(g) commit or omit to do any act which act or omission
would cause a breach of any covenant contained in this Agreement
or would cause any representation or warranty contained in this
Agreement to become untrue, as if each such representation and
warranty were continuously made from and after the date hereof;
(h) violate any applicable law, statute, rule,
governmental regulation or order in any material respect;
(i) fail to maintain its books, accounts and records in
the usual manner on a basis consistent with that heretofore
employed;
(j) fail to pay, or to make adequate provision in all
material respects for the payment of, all Taxes, interest payments
and penalties due and payable (for all periods up to the date of
Closing, including that portion of its fiscal year to and
including the date of Closing) to any city, parish, county, state,
the United States, foreign or any other taxing authority, except
those being contested in good faith by appropriate proceedings and
for which sufficient reserves have been established, or make any
elections with respect to taxes;
(k) make any material Tax election that is inconsistent
with any corresponding election made on a prior return or settle
or compromise any income Tax liability for an amount materially in
excess of the liability therefor that is reflected on the Future's
consolidated financial statements included in its Form 10-KSB for
the fiscal year ended December 31, 1997;
(l) other than the Price Options or the Employment
Agreement, (1) increase the compensation or fringe benefits of any
present or former director, officer or employee of any member of
the Future or its Subsidiaries (except for increases in salary or
wages in the ordinary course of business consistent with past
practice), (2) grant any severance or termination pay to any
present or former director, officer or employee of any of the
Future or its Subsidiaries , (3) loan or advance any money or
other property to any present or former director, officer or
employee of any of the Company or its Subsidiaries or (4)
establish, adopt, enter into, amend or terminate any Plan or any
plan, agreement, program, policy, trust, fund or other arrangement
that would be a Plan if it were in existence as of the date of
this Agreement; or
(m) authorize any of, or agree or commit to do any of,
the foregoing actions.
Section 6.5. Employment Agreement. Future and Xxxx Xxxxx
shall enter into an employment agreement at (and subject to the
occurrence of) the Closing in substantially the form of the agreement
attached hereto as Exhibit 6.5 in all material respects (the "Employment
Agreement").
Section 6.6. Bylaws. Future shall amend its Bylaws at (and
subject to the occurrence of) the Closing in substantially the form
attached hereto as Exhibit 6.6 in all material respects.
Section 6.7. Registration Rights Agreements. Future and Xxxxx
shall enter into a registration rights agreement at (and subject to the
occurrence of) the Closing in substantially the form of the agreement
attached hereto as Exhibit 6.7-1 in all material respects (the "Xxxxx
Registration Rights Agreement"). Future and Xxxxx shall use their
reasonable best efforts to cause EnCap Fund I to enter into a
registration rights agreement at (and subject to the occurrence of) the
Closing in substantially the form of the agreement attached hereto as
Exhibit 6.7-2 in all material respects (the "EnCap Registration Rights
Agreement"). Future and Xxxxx shall use their reasonable best efforts
to cause the members of the Price Group to enter into a registration
rights agreement at (and subject to the occurrence of) the Closing in
substantially the form of the agreement attached hereto as Exhibit 6.7-3
in all material respects (the "Price Registration Rights Agreement").
Section 6.8. Credit Facility. Future shall use its reasonable
best efforts to obtain, and have in place at or prior to Closing, a
senior credit facility of not less than $20,000,000 and with an initial
borrowing base of at least $10,000,000 (the "Senior Credit Facility").
Section 6.9. Subordination Agreement. Future shall use its
reasonable best efforts to cause EnCap Fund I to execute and deliver on
or prior to the Closing that certain Master Subordination Agreement in
substantially the form of the agreement attached hereto as Exhibit 6.9
(the "Subordination Agreement").
Section 6.10. Shareholders' Agreement. Future and Xxxxx shall
enter into a shareholders' agreement at (and subject to the occurrence
of) the Closing in substantially the form of the agreement attached
hereto as Exhibit 6.10 (the "Shareholders' Agreement") and shall use
their reasonable best efforts to cause EnCap Fund I and the other
parties listed therein to execute and deliver such agreement.
Section 6.11. Directors.
(a) Future shall cause (i) Xxxxxx Xxxxx and Don Wm. Xxxxxxxx,
Jr. to resign as directors of Future effective at the Director Effective
Date, (ii) the appointment of Xxx X. Xxxx and Xxxxxx X. Xxxxxx (the
"Xxxxx Nominees"), and Xxxx X. Xxxxxxxx and D. Xxxxxx Xxxxxxxx as
directors of Future effective immediately at the Director Effective Date
and (iii) the appointment of Xxx X. Xxxx as Chairman of the Board of
Directors of Future effective immediately at the Director Effective
Date.
(b) Future shall promptly take all actions required pursuant
to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations under this Section 6.11
and shall promptly distribute to its stockholders an Information
Statement pursuant to Section 14(f) providing such information with
respect to Xxxxx and its officers and directors as is required under
Section 14(f) and Rule 14f-1 to fulfill such obligations. Xxxxx shall
supply to Future and be solely responsible for any information with
respect to Xxxxx and the Xxxxx Nominees required by such Section 14(f)
and Rule 14f-1. Future represents to Xxxxx that the Information
Statement will comply as to form with all requirements of the Exchange
Act and the rules and regulations thereunder, and will not, on the date
filed with the Commission and on the Closing Date and the Effective
Time, contain an untrue statement of a material fact or omit to state a
material fact which, in light of the facts set forth therein, is
misleading; provided that Future is not representing as to the accuracy
of any statement provided by Xxxxx in writing to Future for use in the
Information Statement. Xxxxx represents to Future that all information
provided by Future in writing to Xxxxx for inclusion in the Information
Statement will not, on the date filed with the Commission and on the
Closing Date and at the Effective Time, contain an untrue statement of
a material fact or omit to state a material fact which, in light of the
facts set forth therein, is misleading.
Section 6.12. Payment of the Closing Obligations. Immediately
following the Closing, Future shall cause the Surviving Corporation to
pay (a) the Xxxxxx Indebtedness and use its best efforts to cause the
execution and filing of proper releases of the Xxxxxx Mortgage and (b)
the difference between the Current Debt Amount and the Xxxxxx
Indebtedness to Xxxxx in immediately available funds by wire transfer to
an account specified by Xxxxx in writing prior to Closing.
Section 6.13. Certain Affirmative Post-Closing Covenants.
Subject to the occurrence of the Closing, the covenants and agreements
contained in Sections 6.2 through Section 6.8 of that certain Note
Restructuring Agreement of even date herewith by and between Future and
Fund I shall be incorporated herein and Future shall be deemed to have
made such covenants and agreements with Xxxxx.
ARTICLE VII
Conditions Precedent to the Obligations of the Parties; Termination
Rights
Section 7.1. Conditions Precedent to the Obligations of Future
Entities. The obligations of the Future Entities to consummate the
transactions contemplated by this Agreement shall be subject to the
fulfillment on or prior to the Closing Date of each of the following
conditions (which may be waived by the Future Entities in writing):
(a) Each and every representation of the Xxxxx Entities under
this Agreement shall be true and accurate as of the date when made and
shall be deemed to have been made again at and as of the time of the
Effective Time and the Closing and shall at and as of the Effective Time
and such time of Closing be true and accurate in all respects except as
to changes specifically contemplated by this Agreement or consented to
by Future.
(b) The Xxxxx Entities shall have performed and complied in
all material respects with (or compliance therewith shall have been
waived by Future) each and every covenant, agreement and condition
required by this Agreement to be performed or complied with by them
prior to or at the Closing.
(c) Future shall have received a certificate executed by the
general partner of Xxxxx, dated the Closing Date, representing and
certifying that the conditions set forth in subsections (a) and (b) have
been fulfilled.
(d) No suit, action or other proceedings shall, on the date of
Closing, be pending or threatened before any court or governmental
agency seeking to restrain, prohibit, or obtain damages or other relief
in connection with the consummation of the transactions contemplated by
this Agreement.
(e) The Future Entities shall have received an opinion of
counsel or counsels reasonably acceptable to Future dated the Closing
Date covering the matters described in Exhibit 7.1(e) and in a form
reasonably acceptable to Future.
(f) Future shall have, on or before the Closing, entered into
the Senior Credit Facility on terms and conditions acceptable to Future.
(g) Future shall have, on or before the Closing, entered into
the Subordination Agreement with EnCap Fund I.
(h) EnCap Fund I, Xxxxx, Xxxx Price and Xxx Xxxxxxxx shall
have executed and delivered the Shareholders' Agreement.
(i) Future shall have received (i) a copy of the resolutions
of the partners of Xxxxx authorizing the execution, delivery and
performance by Xxxxx of this Agreement and each other agreement,
instrument or document executed or to be executed by Xxxxx in connection
with this Agreement or the transactions contemplated hereby to which it
is a party and (ii) a copy of the resolutions of the board of directors
and the sole shareholder of SCL authorizing the execution, delivery and
performance by SCL of this Agreement and each other agreement,
instrument or document executed or to be executed by SCL in connection
with this Agreement or the transactions contemplated hereby to which it
is a party.
(j) EnCap Fund I shall have executed and delivered the EnCap
Registration Rights Agreement.
(k) Xxxxx shall have executed and delivered the Xxxxx
Registrations Rights Agreement.
(l) Xxxx Xxxxx shall have executed and delivered the
Employment Agreement.
(m) At least Xxxx Xxxxx shall have executed and delivered the
Price Registration Rights Agreement.
(n) Xxxxx shall have delivered its shares of SCL Stock for
cancellation.
If any such condition on the obligations of the Future Entities under
this Agreement is not met as of the Closing Date, or in the event the
Closing does not occur on or before the Closing Date, and (in either
case) the Future Entities are not in breach of their obligations
hereunder in the absence of the Xxxxx Entities also being in breach of
their obligations hereunder, this Agreement may, at the option of the
Future Entities, be terminated, in which case the parties shall have no
further obligations to one another hereunder (other than the obligations
under Sections 6.2 and 11.4 and Article X which will survive such
termination).
Section 7.2. Conditions Precedent to the Obligations of the
Xxxxx Entities. The obligations of the Xxxxx Entities to consummate the
transactions contemplated by this Agreement shall be subject to the
fulfillment on or prior to the Closing Date of each of the following
conditions (which may be waived by the Xxxxx Entities in writing):
(a) Each and every representation of the Future Entities under
this Agreement shall be true and accurate as of the date when made and
shall be deemed to have been made again at and as of the Effective Time
and the time of Closing and shall at and as of the Effective Time and
such time of Closing be true and accurate in all respects except as to
changes specifically contemplated by this Agreement or consented to by
Xxxxx.
(b) The Future Entities shall have performed and complied in
all material respects with (or compliance therewith shall have been
waived by Xxxxx) each and every covenant, agreement and condition
required by this Agreement to be performed or complied with by the
Future Entities prior to or at the Closing.
(c) Xxxxx shall have received a certificate executed by the
president of Future, dated the Closing Date, representing and certifying
that the conditions set forth in subsections (a) and (b) have been
fulfilled.
(d) No suit, action or other proceedings shall, on the date of
Closing, be pending or threatened before any court or governmental
agency seeking to restrain, prohibit, or obtain damages or other relief
in connection with the consummation of the transactions contemplated by
this Agreement.
(e) The Xxxxx Entities shall have received an opinion of
counsel or counsels reasonably acceptable to Xxxxx dated the Closing
Date covering the matters described in Exhibit 7.2(e) and in a form
reasonably acceptable to Xxxxx.
(f) Future shall have, on or before the Closing, entered into
the Senior Credit facility on terms and conditions acceptable to Xxxxx.
(g) Future and EnCap Fund I shall have, on or before the
Closing, entered into the Subordination Agreement.
(h) Future shall have received the resignations of Xxxxxx
Xxxxx and Don Wm. Xxxxxxxx, Jr. as directors of Future, such
resignations to be effective at the Director Effective Date.
(i) Xxx X. Xxxx, Xxxx X. Xxxxxxxx, D. Xxxxxx Xxxxxxxx and
Xxxxxx X. Xxxxxx shall have been appointed to the Board of Directors of
Future, such appointment to be effective immediately at the Director
Effective Date.
(j) Xxx X. Xxxx shall have been elected as Chairman of the
Board of Directors of Future, such election to be effective immediately
at the Effective Time.
(k) EnCap Fund I, Future, Xxxx Xxxxx and Xxx Xxxxxxxx shall
have executed and delivered the Shareholders' Agreement.
(l) Future shall have executed and delivered the Xxxxx
Registration Rights Agreement.
(m) Future and EnCap Fund I shall have executed and delivered
the EnCap Registration Rights Agreement.
(n) Future and Xxxx Xxxxx shall have executed and delivered
the Employment Agreement.
(o) Xxxxx shall have received (i) a copy of the resolutions of
the Board of Directors of Future authorizing the execution, delivery and
performance by Future of this Agreement and each other agreement,
instrument or document executed or to be executed by Future in
connection with this Agreement or the transactions contemplated hereby
to which it is a party and (ii) a copy of the resolutions of the Board
of Directors and sole shareholder of Future Sub authorizing the
execution, delivery and performance by Future Sub of this Agreement and
each other agreement, instrument or document executed or to be executed
by Future Sub in connection with this Agreement or the transactions
contemplated hereby to which it is a party .
(p) Xxxxx shall have received (i) a certificate or
certificates evidencing the Merger Shares and (ii) the Warrant.
(q) At least Xxxx Xxxxx shall have executed and delivered the
Price Registration Rights Agreement.
(r) Future shall have adopted the amendment to the Bylaws as
contemplated by Section 6.6.
If any such condition on the obligations of the Xxxxx Entities under
this Agreement is not met as of the Closing Date, or in the event the
Closing does not occur on or before the Closing Date, and (in either
case) the Xxxxx Entities are not in breach of their obligations
hereunder in the absence of the Future Entities also being in breach of
their obligations hereunder, this Agreement may, at the option of the
Xxxxx Entities, be terminated, in which case the parties shall have no
further obligations to one another hereunder (other than the obligations
under Sections 6.2 and 11.4 and Article X which will survive such
termination).
ARTICLE VIII
Certain Accounting Adjustments.
Section 8.1. Adjustments. Notwithstanding that for state law
purposes the Merger shall be effective as of the Effective Time, the
parties hereto agree that for purposes of this Article VIII the
Properties will be deemed to have been conveyed and transferred by SCL
to Future Sub as of August 1, 1998 (the "Effective Date") and that
appropriate accounting adjustments shall be made between the Future
Entities and the Xxxxx Entities so that (a) all expenses (including,
without limitation, all drilling costs, all capital expenditures, and
all overhead charges under applicable operating agreements, and all
other overhead charges actually charged by third parties) which are
incurred in the operation of the Properties after the Effective Date
will be borne by Future Sub, and all proceeds (net of applicable
production, severance, and similar taxes) from sale of oil, gas and/or
other minerals produced from the Oil and Gas Properties after the
Effective Date will be received by Future Sub, and (b) all expenses
which are incurred in the operation of the Properties before the
Effective Date will be borne by the Xxxxx Entities and all proceeds (net
of applicable production, severance, and similar taxes) from the sale of
oil, gas and/or other minerals produced therefrom before the Effective
Date will be received by the Xxxxx Entities. It is agreed that, in
making such adjustments: (i) oil which was produced from the Oil and
Gas Properties and which was, on the Effective Date, stored in tanks
located on the Oil and Gas Properties (or located elsewhere but used to
store oil produced from the Oil and Gas Properties prior to delivery to
oil purchasers) and above pipeline connections shall be deemed to have
been produced before the Effective Date (it is recognized that such
tanks were not gauged on the Effective Date for the purposes of this
Agreement and that determination of the volume of such oil in storage
will be based on the best available data, which may include estimates),
and (ii) ad valorem taxes assessed with respect to a period which the
Effective Date splits shall be prorated based on the number of days in
such period which fall on each side of the Effective Date (with the day
on which the Effective Date falls being counted in the period after the
Effective Date), and (iii) no consideration shall be given to the local,
state or federal income tax liabilities of any party.
Section 8.2. Closing and Post-Closing Accounting Settlements.
(a) At or before Closing, the parties shall determine, based
upon the best information reasonably available to them, the amount of
the adjustments provided for in Section 8.1. If the amount of
adjustments so determined which would result in a credit to Future Sub
exceed the amount of adjustments so determined which would result in a
credit to the Xxxxx Entities, Future Sub shall be entitled to receive a
cash payment from Xxxxx by the amount of such excess, and, if the
converse is true, Xxxxx shall be entitled to receive a cash payment from
Future by the amount of such excess. If no adjustment of the type
contemplated under this subsection (a) is made at or before Closing and
Xxxxx should thereafter receive any net proceeds attributable to oil or
gas produced after the Effective Date, Xxxxx shall promptly remit such
net proceeds to Future.
(b) On or before 90 days after Closing, Future and Xxxxx shall
review any additional information which may then be available pertaining
to the adjustments provided for in Section 8.1, shall determine if any
additional adjustments (whether the same be made to account for expenses
or revenues not considered in making the adjustments made at Closing, or
to correct errors made in such adjustments) should be made beyond those
made at Closing, and shall make any such adjustments in the manner
provided in subsection (a) above. Following such additional
adjustments, no further adjustments shall be made under this Article
VIII with respect to the matters contemplated by this Article.
ARTICLE IX
Notices
All notices and other communications required under this Agreement
shall (unless otherwise specifically provided herein) be in writing and
be delivered personally, by recognized commercial courier or delivery
service (which provides a receipt), by telecopier (with receipt
acknowledged), or by registered or certified mail (postage prepaid), at
the following addresses:
If to any Xxxxx Entity: c/x Xxxxx Energy Resources, Ltd.
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxx X. Xxxx
Fax No.:000-000-0000
If to any Future Entity: c/o Future Petroleum Corporation
0000 Xxxx Xxxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxx
Fax No.: 000-000-0000
and shall be considered delivered on the date of receipt. Either a
Future Entity, on the one hand, or a Xxxxx Entity, on the other hand,
may specify as its proper address any other post office address within
the continental limits of the United States by giving notice to the
other, in the manner provided in this Article, at least ten (10) days
prior to the effective date of such change of address.
A copy of any notice and other communication given by either a
Future Entity or a Xxxxx Entity hereunder shall be sent to EnCap
Investments L.C. as follows:
EnCap Investments, L.C.
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxxx or Xxxxx Xxxxxxx
Fax No.: 000-000-0000
ARTICLE X
Commissions
Xxxxx agrees to indemnify and hold harmless the Future Entities
from and against any and all claims, obligations, actions, liabilities,
losses, damages, costs or expenses (including court costs and attorneys
fees) of any kind or character arising out of or resulting from any
agreement, arrangement or understanding alleged to have been made by, or
on behalf of, any Xxxxx Entity with any broker or finder in connection
with this Agreement or the transactions contemplated hereby. Future
agrees to indemnify and hold harmless Xxxxx from and against any and all
claims, obligations, actions, liabilities, losses, damages, costs or
expenses (including court costs and attorneys fees) of any kind or
character arising out of or resulting from any agreement, arrangement or
understanding alleged to have been made by, or on behalf of, any Future
Entity with any broker or finder in connection with this Agreement or
the transactions contemplated hereby.
ARTICLE XI
Miscellaneous Matters
Section 11.1. Survival of Representations and Warranties. All
representations and warranties made herein by the Future Entities and
the Xxxxx Entities shall be continuing and shall be true and correct on
and as of the date of Closing and shall survive the Closing.
Section 11.2. Further Assurances. From time to time after the
Closing, at the request of any party hereto and without further
consideration, Xxxxx, on the one hand, and the Future Entities, on the
other hand, shall execute and deliver to the requesting party such
instruments and documents and take such other action (but without
incurring any material financial obligation) as such requesting party
may reasonably request in order to consummate more fully and effectively
the transactions contemplated hereby.
Section 11.3. Binding Effect; Successors and Assigns; No Third
Party Benefit. The Agreement shall be binding on the parties hereto and
their respective successors and permitted assigns. No party hereto
shall have the right to assign its rights under this Agreement without
the prior written consent of the other party first having been obtained.
Notwithstanding anything contained in this Agreement to the contrary,
nothing in this Agreement, either express or implied, is intended to
confer on any person other than the parties hereto or their respective
successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
Section 11.4. Expenses. Each party shall bear and pay all
expenses incurred by it in connection with the transactions contemplated
by this Agreement.
Section 11.5. Entire Agreement. This Agreement contains the
entire understanding of the parties hereto with respect to subject
matter hereof and supersedes all prior agreements, understandings,
negotiations, and discussions among the parties with respect to such
subject matter. Time is of the essence in this Agreement.
Section 11.6. Public Statements. The Xxxxx Entities, on the one
hand, and the Future Entities, on the other hand, shall consult with
each other with regard to all publicity and other releases at or prior
to Closing concerning this Agreement and the transactions contemplated
hereby and, except as required by applicable law or the applicable rules
or regulations of any governmental body or stock exchange, neither the
Xxxxx Entities, on the one hand, nor the Future Entities, on the other
hand, shall issue any publicity or other release without the prior
consent of the other.
Section 11.7. Injunctive Relief. The parties hereto acknowledge
and agree that irreparable damage would occur in the event any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement, and shall be
entitled to enforce specifically the provisions of this Agreement, in
any court of the United States or any state thereof having jurisdiction,
in addition to any other remedy to which the parties may be entitled
under this Agreement or at law or in equity.
Section 11.8. Deceptive Trade Practices. To the extent
applicable to the transaction contemplated hereby or any portion
thereof, Future can and does expressly waive the provisions of the Texas
Deceptive Trade Practices-Consumer Protection Act, Section 17.41 et
seq., Texas Business & Commerce Code, other than Section 17.555, which
is not waived, and all other consumer protection laws of the State of
Texas, or any other state, applicable to this transaction that may be
waived by the parties. In connection with such waiver, Future hereby
represents to the Xxxxx Entities that it (a) is in the business of
seeking or acquiring by purchase or lease, goods or services for
commercial or business use, (b) has knowledge and experience in
financial and business matters that enables it to evaluate the merits
and risks of the transactions contemplated hereby, (c) is not in a
significantly disparate bargaining position and (d) has assets of
$5,000,000 or more according to its most recent financial statements.
Section 11.9. Amendments. This Agreement may be amended,
modified, supplemented, restated or discharged (and provisions hereof
may be waived) only by an instrument in writing signed by the parties
hereto.
Section 11.10. Indemnification. Xxxxx agrees to indemnify,
defend and hold harmless Future from and against any losses, expenses,
claims, damages or liabilities resulting form the failure of the Merger
to qualify as a tax-free reorganization under Section 368(a)(2)(D) of
the Code, including taxes, interest and attorneys' fees relating
thereto.
Section 11.11. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas.
Section 11.12. Counterparts. This Agreement may be executed in
counterparts, all of which are identical and all of which constitute one
and the same instrument. It shall not be necessary for the Future
Entities and the Xxxxx Entities to sign the same counterpart.
IN WITNESS WHEREOF, this Agreement is executed by the parties
hereto on the date set forth above.
XXXXX ENERGY RESOURCES, LTD.
By: XXXXX OPERATING COMPANY, INC.,
General Partner
By:/s/ Xxx X. Xxxx
Xxx X. Xxxx, President
SCL-CAL COMPANY
By: /s/ Xxx X. Xxxx
Xxx X. Xxxx, President
FUTURE PETROLEUM CORPORATION
By: /s/ Xxxx Xxxxx
Xxxx Xxxxx, President
FUTURE CAL-TEX CORPORATION
By:/s/ Xxxx Xxxxx
Xxxx Xxxxx, President
