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EXHIBIT 4.13
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.
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"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.
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"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).
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"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.
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"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.
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(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 2.1. 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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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.
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(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
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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,
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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
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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
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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
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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;
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(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,
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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.
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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.
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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.
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(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.
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(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.
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(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
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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.
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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
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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.
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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.
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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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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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
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