UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported November 25, 1997
Commission file number 0-8609
Future Petroleum Corporation
(Exact name of small business issuer as specified in charter)
Utah 87-0239185
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2351 West Northwest Highway, Suite 2130
Dallas, Texas 75220
(Address of principal executive offices) (Zip Code)
(214)350-7602
(Issuer's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if changed since last
report)
Transitional Small Business Disclosure Format (Check One): Yes No x
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 25, 1997, the Company acquired from EnCap Equity
1994, Ltd, a Texas limited partnership ("EnCap"), Energy Capital
Investment Co., PLC, an English investment company ("ECIC"), and
Gecko Booty 1994 I, Ltd, a Texas limited partnership ("Gecko Booty")
effective as of November 1, 1997, certain properties and
partnerships interests consisting of one (1) field area in west Texas, one (1)
field area in southeast New Mexico (the "Permian Basin Properties"),
three (3) field areas in the Texas Panhandle and one (1) field area in
northern Oklahoma. The acquisition was accomplished by the
purchase from Gecko Booty of southeast the New Mexico properties, the
purchase from EnCap and ECIC of the general and limited
partnership interests in BMC Development No. 1 Limited
Partnership, a Texas limited partnership which owns the Texas
Panhandle and northern Oklahoma properties, and the purchase from
EnCap and ECIC of the limited partnership interests in Future
Acquisition 1995, Ltd., a Texas limited partnership of which the Company's
Subsidiary, Future Petroleum Corporation ("Future Texas"), is the
general partner and which owns the Texas Panhandle and West Texas properties.
The Company formed a new subsidiary created under the laws of the
state of Nevada, Future Energy Corporation, to own the limited
partnership interests acquired. The general partnership interests
and the Gecko Booty properties will be owned by Future Texas.
The purchase price for the assets and interests acquired was $6.6
million and 1,575,000 shares of the Company's common stock.
The primary producing formations include Grayburg, San Andres
and Strawn in the Permian Basin Properties, the Clearfork,
Brown Dolomite and Granite Wash in the Texas Panhandle and Red
Fork and Meramecian Chet in northern Oklahoma. The properties
include 206 producing oil and natural gas wells on approximately
18,740 gross acres (17,749 net acres).
According to Ryder Scott Co., and Calwey Gillespie, independent
petroleum engineers that evaluated the properties, as of July 1, 1997,
and December 31, 1996 respectively, the properties have proved reserves
of 2 MMBBL of oil and 5.3 BCF of natural gas, or on a barrels of oil
equivalent basis, 3 MMBBL. The reports further estimated the future
net cash flows and the PV-10 for the properties to be $31.8 million
and $16.6 million, respectively, as of July 1, 1997 and December 31,
1996 based on prices of $20 per BBL of oil and $2.00 per MCF of
natural gas. Approximately 48% of the proved reserves were classified
as proved developed producing reserves.
The Company financed the acquisition of the properties by issuing the
sellers promissory notes aggregating $6.6 million and issuing 1,575,000
shares of restricted common stock. Together with the 225,000 shares of
the Company's common stock already held by EnCap and ECIC, EnCap
and ECIC now own in the aggregate 1,800,000 shares of common
stock, representing approximately 30% of the common stock of the
Company. The notes carry a 10% per annum interest rate and mature
in five and one half (5 1/2) years. Under the terms of the notes the
Company will make payments of interest only until June 30, 1998, at
which time payments of principle and interest will begin. The
Company may prepay the note at anytime without penalty. The notes
are secured by all of the properties and interests acquired, as well as
the other assets of the Company and Future Texas.
In connection with the acquisition, the Company has agreed to appoint
a nominee of EnCap and ECIC to the Company's board of directors.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND
EXHIBITS
Exhibits
(a) Financial Statements of Business Acquired. Financial statements
required by this item will be filed by amendment as soon as practicable,
but no later than February 8, 1998.
(b) Pro forma Financial Information. Pro-forma financial statements
required by this item will be filed by amendment as soon as practicable,
but no later than February 8, 1998.
(c) Exhibits
The following exhibits are included as part of this report:
SEC
Exhibit Reference
Number Number Title of Document Location
10 10.01 Purchase and Sale Agreement This filing
dated November 25, 1997,
by and among the Company,
Energy Capital Investment
Company, PLC, EnCap Equity
1994 Limited Partnership, and
Gecko Booty 1994 I Limited
Partnership (Detailed list of
schedules is attached; will
file complete schedule upon
request)
10 10.02 Promissory Noted dated This filing
November 25, 1997, from the
Company to Energy Capital
Investment Company, PLC
10 10.03 Promissory Noted dated This filing
November 25, 1997, from the
Company to EnCap Equity 1994
Limited Partnership
10 10.04 Promissory Noted dated This filing
November 25, 1997, from the
Company to Gecko Booty 1994
I Limited Partnership
10 10.05 Registration Rights Agreement This filing
dated November 25, 1997, by
the Company, Energy Capital
Investment Company, PLC, and
EnCap Equity 1994 Limited
Partnership
10 10.06 Voting Agreement dated This filing
November 25, 1997, by B.
Carl Price, Don Wm.
Reynolds, Energy Capital
Investment Company, PLC,
and EnCap Equity 1994
Limited Partnership
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
FUTURE PETROLEUM CORPORATION
(Registrant)
Dated: December 10, 1997 By: /s/ B. Carl Price
B. Carl Price, President,
Principal Financial and Accounting Officer
Dated: December 10, 1997 By: /s/ Christie Sirera
Christie Sirera,
Secretary
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT dated November 25,
1997, is made by and among Future Petroleum Corporation, a Utah
corporation ("Buyer"), Energy Capital Investment Company PLC, an
English investment company ("Energy PLC"), EnCap Equity 1994
Limited Partnership, a Texas limited partnership ("EnCap LP"), and
Gecko Booty 1994 I Limited Partnership, a Texas limited partnership
("Gecko Booty LP").
RECITALS:
A. Reference is herein made to the following Texas limited
partnerships: BMC Development No. 1 Limited Partnership ("BMC
LP") and Future Acquisition 1995, Ltd. ("Future LP"). BMC LP and
Future LP are herein sometimes called the "Partnerships".
B. Benson-McCown & Company, a Texas corporation ("BMC Inc."),
is the sole general partner of BMC LP. Future Petroleum Corporation,
a Texas corporation and a wholly-owned subsidiary of Buyer ("Future
Texas"), is the sole general partner of Future LP.
C. Energy PLC and EnCap LP are the limited partners of each of the
Partnerships and are herein sometimes called the "LP Sellers". The
interests of Energy PLC as a limited partner in each of the
Partnerships are herein collectively called the "Energy PLC Interests".
The interests of EnCap LP as a limited partner in each of the
Partnerships are herein collectively called the "EnCap LP Interests".
The Energy PLC Interests and the EnCap LP Interests are herein
collectively called the "Interests".
D. Geoscience Exploration CKO, Inc., a Texas corporation ("Geoex"),
is the sole general partner of Gecko Booty LP. Energy PLC and
EnCap LP are the limited partners of Gecko Booty LP. Gecko Booty
LP owns oil and gas properties situated in New Mexico and is herein
sometimes called the "Property Seller".
E. LP Sellers and Property Seller are herein sometime called "Sellers".
F. Each LP Seller desires to sell to Buyer, and Buyer desires to
purchase from each LP Seller, such LP Seller's respective Interests, on
the terms and conditions contained herein.
G. Property Seller desires to sell to Buyer, and Buyer desires to
purchase from Property Seller, Property Seller's interest in its oil and
gas properties, on the terms and conditions contained herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and
the mutual covenants and agreements contained herein, Buyer and
Sellers 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:
"Agreement" shall mean this Agreement, as hereafter changed,
amended or modified in accordance with the terms hereof.
"Assignment" shall have the meaning assigned to such term in Section
7.2(b).
"BMC Inc." shall have the meaning assigned to such term in
Paragraph B of the Recitals hereto.
"BMC LP" shall have the meaning assigned to such term in Paragraph
A of the Recitals hereto.
"Buyer" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
"Change of Control" shall mean the occurrence of either of the
following events: (a) any person or two or more persons acting as a
group shall acquire beneficial ownership (within the meaning of Rule
13d-3 of the Commission under the Exchange Act, and including
holding proxies to vote for the election of directors other than proxies
held by Buyer's management or their designees to be voted in favor of
persons nominated by Buyer's Board of Directors) of 33% or more of
the outstanding voting securities of Buyer, measured by voting power
(including both common stock and any preferred stock or other equity
securities entitling the holders thereof to vote with the holders of
common stock in elections for directors of Buyer) or (b) one-third or
more of the directors of Buyer shall consist of persons not nominated
by Buyer's Board of Directors (not including as Board nominees any
directors which the Board is obligated to nominate pursuant to
shareholders agreements, voting trust arrangements or similar
arrangements).
"Closing" and "Closing Date" shall have the respective meanings
assigned to such terms in Section 7.1.
"Closing Costs" shall mean the reasonable third party out-of-pocket
costs and expenses incurred by Buyer and LP Sellers in connection
with the preparation, negotiation and execution of this Agreement and
all related documents, including the fees and expenses of legal counsel
to LP Sellers.
"Closing Shares" shall mean the shares of Common Stock described in
Section 2.2.
"Collateral" shall mean all property of any kind which is subject to a
Lien in favor of Sellers or which, under the terms of any Note
Document, is purported to be subject to such a Lien.
"Commission" shall mean the Securities and Exchange Commission
(or any successor body thereto).
"Common Stock" shall mean shares of common stock of Buyer, $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 other reorganization.
"Consolidated" refers 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.
"Conveyance" shall have the meaning assigned to such term in Section
7.2(c).
"Default" shall mean an Event of Default and any default, event or
condition which would, with the giving of any requisite notices and
the passage of any requisite periods of time, constitute an Event of
Default.
"Designated Shareholders" shall mean Carl Price and Don Wm.
Reynolds.
"Effective Date" shall have the meaning assigned to such term in
Section 2.1.
"Engineering Report" shall mean the engineering report referenced in
Section 10.2(d).
"Event of Default" shall have the meaning assigned to such term in
Section 12.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated under such Act.
"Fiscal Quarter" shall mean a three-month period ending on March
31, June 30, September 30 and December 31 of any year.
"Fiscal Year" shall mean the twelve-month period ending on
December 31 of any year.
"Future LP" shall have the meaning assigned to such term in
Paragraph A of the Recitals hereto.
"Future Nevada" shall mean Future Energy Corporation, a Nevada
corporation and a wholly-owned subsidiary of Buyer.
"Future Texas" shall have the meaning assigned to such term in
Paragraph B of the Recitals hereto.
"Future Warrants" shall mean Warrants No.'s 1003, 1004, 1005 and
1006 entitling Sellers to acquire 287,500 shares of Common Stock.
"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)
and which, in the case of Buyer and its Consolidated subsidiaries, are
applied for all periods after the date hereof in a manner consistent with
the manner in which such principles and practices were applied to the
Initial Financial Statements.
"Gecko Booty LP" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
"Gecko Properties" shall mean the "Subject Properties," as such term is
used in the Conveyance.
"Geoex" shall have the meaning assigned to such term in Paragraph D
of the Recitals hereto.
"Indebtedness" of any person means Liabilities in any of the following
categories: (a) Liabilities for borrowed money; (b) Liabilities
constituting an obligation to pay the deferred purchase price of
property or services; (c) Liabilities evidenced by a bond, debenture,
note or similar instrument; (d) Liabilities which would under GAAP
be shown on such person's balance sheet as a liability, and is payable
more than one year from the date of creation thereof (other than
reserves for taxes and reserves for contingent obligations);(e)
Liabilities arising under futures contracts, forward contracts, swap, cap
or collar contracts, option contracts, hedging contracts, other
derivative contracts, or similar agreements; (f) Liabilities constituting
principal under leases capitalized in accordance with GAAP; (g)
Liabilities arising under conditional sales or other title retention
agreements; (h) Liabilities owing under direct or indirect guaranties of
Liabilities of any other person or constituting obligations to purchase
or acquire or to otherwise protect or insure a creditor against loss in
respect of Liabilities of any other person (such as obligations under
working capital maintenance agreements, agreements to keep-well, or
agreements to purchase Liabilities, assets, goods, securities or
services), but excluding endorsements in the ordinary course of
business of negotiable instruments in the course of collection; (i)
Liabilities (for example, repurchase agreements) consisting of an
obligation to purchase securities or other property, if such Liabilities
arises out of or in connection with the sale of the same or similar
securities or property; (j) Liabilities with respect to letters of credit or
applications or reimbursement agreements therefor; (k) Liabilities
with respect to payments received in consideration of oil, gas, or other
minerals yet to be acquired or produced at the time of payment
(including obligations under "take-or-pay" contracts to deliver gas in
return for payments already received and the undischarged balance of
any production payment created by such person or for the creation of
which such person directly or indirectly received payment), or (l)
Liabilities with respect to other obligations to deliver goods or services
in consideration of advance payments therefor; provided, however,
that the "Indebtedness" of any person shall not include Liabilities that
were incurred by such person on ordinary trade terms to vendors,
suppliers, or other persons providing goods and services for use by
such person in the ordinary course of its business, unless and until
such Liabilities are outstanding more than 90 days past the original
invoice or billing date therefor.
"Initial Financial Statements" shall have the meaning assigned to such
term in Section 4.9.
"Interests" shall have the meaning assigned to such term in Paragraph
C of the Recitals hereto.
"Liabilities" shall mean, as to any person, all indebtedness, liabilities
and obligations of such person, whether matured or unmatured,
liquidated or unliquidated, primary or secondary, direct or absolute,
fixed or contingent, and whether or not required to be considered
pursuant to GAAP.
"Lien" shall mean, with respect to any property or assets, any right or
interest therein of a creditor to secure Liabilities owed to him or any
other arrangement with such creditor which provides for the payment
of such Liabilities out of such property or assets or which allows him
to have such Liabilities satisfied out of such property or assets prior to
the general creditors of any owner thereof, including any lien,
mortgage, security interest, pledge, deposit, production payment,
rights of a vendor under any title retention or conditional sale
agreement or lease substantially equivalent thereto, tax lien,
mechanic's or materialman's lien, or any other charge or encumbrance
for security purposes, whether arising by law or agreement or
otherwise, but excluding any right of offset which arises without
agreement in the ordinary course of business. "Lien" shall also mean
any filed financing statement, any registration of a pledge (such as
with an issuer of uncertificated securities), or any other arrangement
or action which would serve to perfect a Lien described in the
preceding sentence, regardless of whether such financing statement is
filed, such registration is made, or such arrangement or action is
undertaken before or after such Lien exists.
"LP Sellers" shall have the meaning assigned to such term in
Paragraph C of the Recitals hereto.
"Material Adverse Change" means a material and adverse change,
from the state of affairs presented in the Initial Financial Statements,
to (a) Buyer's and its Subsidiaries' Consolidated financial condition,
(b) the operations or properties of Buyer and its Subsidiaries,
considered as a whole, (c) Borrower's ability to timely pay the
Obligations, or (d) the enforceability of the material terms of any Note
Documents.
"Note Documents" shall mean the Notes, the provisions of Articles X,
XI and XII of this Agreement, and the Security Documents.
"Notes" shall mean the promissory notes described in Section 2.2 and
Section 2.4.
"Obligations" shall mean all Liabilities owing Sellers under or
pursuant to the Notes or any of the Security Documents.
"Partnership Properties" shall mean the oil, gas and/or mineral leases
and related assets owned by the Partnerships.
"Partnerships" shall have the meaning assigned to such term in
Paragraph A of the Recitals hereto.
"PDP Reserves" shall mean Proved Reserves which are categorized as
both "Developed" and "Producing" in the Definitions for Oil and Gas
Reserves promulgated by the Society of Petroleum Engineers (or any
generally recognized successor) as in effect at the time in question.
"PDP Reserves to Debt Ratio" shall mean the ratio obtained by
dividing (a) the pre-income tax value of projected net revenues
attributable to the PDP Reserves of Buyer set forth in the most recent
Engineering Report ascribed to the properties subject to the Security
Documents, by (b) the outstanding unpaid principal amount of the
Notes plus all accrued but unpaid interest thereon.
"Permitted Investment" shall mean any investment, loan, advance,
guaranty or capital contribution by Buyer or any Subsidiary in any of
the following: (a) properties or assets to be used in the ordinary course
of business of Buyer and its Subsidiaries; (b) current assets arising
from the sale of goods and services in the ordinary course of business
of Buyer and its Subsidiaries; (c) investments in one or more of
Buyer's Subsidiaries or in any person that concurrently with such
investment becomes a Subsidiary; (d) any marketable obligation
maturing not later than one year after the date of acquisition therefor,
issued or guaranteed by the United States of America or by any agency
of the United States of America which has the full faith and credit of
the United States of America; (e) commercial paper which is given
the highest rating by a credit rating agency of recognized national
standing and maturing not more than 270 days from the date of
creation thereof; and (f) any demand deposit or time deposit (including
certificates of deposit and money market or sweep accounts) with a
commercial bank or trust company organized and doing business
under the laws of the United States of America or any state thereof
which has capital, surplus and undivided profits of at least
$250,000,000, provided that such deposit must be either payable on
demand or mature not more than twelve months from the date of
investment therein.
"Property Seller" shall have the meaning assigned to such term in
Paragraph D of the Recitals hereto.
"Proved Reserves" shall mean "Proved Reserves" as defined in the
Definitions for Oil and Gas Reserves promulgated by the Society of
Petroleum Engineers (or any generally recognized successor) as in
effect at the time in question.
"Proved Reserves to Debt Ratio" shall mean the ratio obtained by
dividing (a) the pre-income tax value of projected net revenues
attributable to the Proved Reserves of Buyer set forth in the most
recent Engineering Report ascribed to the properties subject to the
Security Documents, by (b) the outstanding unpaid principal amount
of the Notes plus all accrued but unpaid interest thereon.
"Restricted Payment" shall mean any Distribution (as defined below)
in respect of Buyer or any Subsidiary thereof (other than on account of
capital stock or other equity interests of a Subsidiary owned legally or
beneficially by Buyer or another Subsidiary), including any
Distribution resulting in the acquisition by Buyer of securities that
would constitute treasury stock. As used in this definition,
"Distribution" shall mean, in respect of any corporation, partnership or
other business entity (a) dividends or other distributions or payments
on capital stock or other equity interest of such corporation,
partnership or other business entity (except distributions in such stock
or other equity interest) and (b) the redemption or acquisition of such
stock or other equity interests or of warrants, rights or other options to
purchase such stock or other equity interests (except when solely in
exchange for such stock or other equity interests).
"Securities Act" shall mean the Securities Act of 1933, as amended,
and all rules and regulations under such Act.
"Security Documents" shall mean the instruments listed in Exhibit
2.1--Security Documents and all other security agreements, deeds of
trust, mortgages, chattel mortgages, pledges, guaranties, financing
statements, continuation statements, extension agreements and other
agreements or instruments now, heretofore, or hereafter delivered by
Buyer or any Subsidiary thereof to Sellers in connection with this
Agreement or any transaction contemplated hereby to secure or
guarantee the payment of any part of the Obligations or the
performance of any of Buyer's or its Subsidiary's other duties and
obligations under the Note Documents.
"Sellers" shall have the meaning assigned to such term in Paragraph E
of the Recitals hereto.
"Subsidiary" shall mean, with respect to any person, any corporation,
association, partnership, joint venture, or other business or corporate
entity, enterprise or organization which is directly or indirectly
(through one or more intermediaries) controlled by or owned fifty
percent or more by such person.
Section 1.2. References and Construction.
(a) All references in this Agreement to articles, sections, subsections
and other subdivisions refer to corresponding articles, sections,
subsections and other subdivisions of this Agreement unless expressly
provided otherwise.
(b) Titles appearing at the beginning of any of such subdivisions are
for convenience only and shall not constitute part of such subdivisions
and shall be disregarded in construing the language contained in such
subdivisions.
(c) The words "this Agreement", "this instrument", "herein", "hereof",
"hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless
expressly so limited.
(d) Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires. Pronouns in
masculine, feminine and neuter genders shall be construed to include
any other gender.
(e) Unless the context otherwise requires or unless otherwise provided
herein, the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all
renewals, extensions, modifications, amendments or restatements of
such agreement, instrument or document, provided that nothing
contained in this subsection shall be construed to authorize such
renewal, extension, modification, amendment or restatement.
(f) Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.
(g) The word "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) All references herein to "$" or "dollars" shall refer to U.S. Dollars.
(j) Exhibits 2.1--Security Documents, 2.2, 2.4, 2.5, 6.1(d), 6.1(e),
6.2(d), 6.2(e), 7.2(b), 7.2(c), 7.2(d) 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
Agreement to Purchase and Sell Interests and Properties
Section 2.1. Conveyance of Interests. At the Closing, and on the terms
and subject to the conditions set forth in this Agreement, each LP
Seller shall sell to Buyer, and Buyer shall purchase and accept from
the LP Seller, such LP Seller's Interests effective as of 7:00 a.m. local
time on November 1, 1997 (the "Effective Date").
Section 2.2. Purchase Price and Payment for Interests. In
consideration of the transfer by each LP Seller to Buyer of such LP
Seller's Interests, Buyer shall tender to such LP Seller an aggregate
purchase price consisting of (a) a promissory note in the principal
amount set forth opposite such LP Seller's name below and (b) the
number of shares of Common Stock set forth opposite such LP Seller's
name below:
Seller Principal Amount No.of Shares
Energy PLC $3,123,041 765,547
EnCap LP $3,301,959 809,453
Each promissory note shall be substantially in the form set forth in the
attached Exhibit 2.2 in all material respects.
Section 2.3. Conveyance of Gecko Properties. At the Closing, and on
the terms and subject to the conditions set forth in this Agreement,
Property Seller shall sell to Buyer, and Buyer shall purchase and
accept from Property Seller, the Gecko Properties effective as of the
Effective Date.
Section 2.4. Purchase Price and Payment for Gecko Properties. In
consideration of the transfer by Property Seller to Buyer of the Gecko
Properties, Buyer shall tender to Property Seller an aggregate purchase
price consisting of a promissory note in the principal amount of
$175,000, substantially in the form set forth in the attached Exhibit
2.4 in all material respects
Section 2.5. Purchase Price Allocation. Sellers and Buyer agree that
the purchase prices payable under Sections 2.2 and 2.4 shall be
allocated among LP Sellers' Interests (and the amount allocated to
each such Interest shall be allocated among the assets held by the
Partnership to which such Interest relates) and the Gecko Properties,
as set forth in Exhibit 2.5 attached hereto. Buyer shall cause each
Partnership to make an election under Section 754 of the Internal
Revenue Code (in this Section 2.5, the "Code") in its tax return for the
short period ending on the Closing Date to cause the tax bases of the
assets owned by such Partnership to be adjusted under Section 743 of
the Code to reflect the amounts allocated to such assets under the
preceding sentence. In making such allocations, it is agreed that the
Common Stock shall have a value equal to the opening bid price for
the Common Stock on the OTC Bulletin Board on the date of
execution of this Agreement and that such value will be used by Buyer
in calculating the basis adjustments under Section 743 of the Code as
provided above.
ARTICLE III
Representations and Warranties of Sellers
Each Seller hereby severally and as to itself represents and warrants to
Buyer as follows (provided, however, that it is expressly agreed the
representations and warranties contained in Sections 3.7 through 3.15 are
being made solely by LP Sellers on a several basis as to itself and
not by Property Seller):
Section 3.1. Organization and Existence. Such Seller is duly formed
and validly existing under the laws of the jurisdiction of its formation.
Section 3.2. Power and Authority. Such Seller has all requisite
power and 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 such
Seller 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 and validly authorized by all necessary on its
part.
Section 3.3. Valid and Binding Agreement. This Agreement has been
duly executed and delivered by such Seller and constitutes, 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 has been, or when executed will be, duly executed and
delivered by it and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of such Seller,
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 3.4. Non-Contravention. Neither the execution, delivery, and
performance by such Seller 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 nor the consummation by it of the transactions contemplated
hereby and thereby do and will (a) conflict with or result in a violation
of any provision of the partnership agreement or other governing
instruments of such Seller, (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 Seller is a party or by
which such Seller 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 Seller, or (d) violate any applicable law, rule or
regulation binding upon such Seller.
Section 3.5. 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 such Seller in connection with the execution, delivery, or
performance by such Seller of this Agreement and each other
agreement, instrument, or document executed or to be executed by
such Seller 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.
Section 3.6. Pending Litigation. There are no pending suits, actions,
or other proceedings in which such Seller is a party which affect such
Seller's Interests (in the instance of a LP Seller) or the Gecko
Properties (in the instance of the Gecko Properties) or affecting the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
Section 3.7. Title to Interests. Such Seller (a) owns beneficially and of
record such Seller's Interests and (b) has the absolute right to and,
upon execution and delivery of the Assignment at Closing will, sell,
assign, and transfer the interests to Buyer free and clear of all Liens.
For purposes of this Section, the term "Lien" shall mean any
mortgage, pledge, security interest, lien, option, right, restriction on
transfer or encumbrance of any nature other than restrictions that may
be imposed by any federal or state securities laws or those that arise
under the terms of the Partnership Agreements. Except by operation
of this Agreement or the Partnership Agreements, there are no
existing options, warrants, calls, subscriptions or other rights,
agreements, commitments or claims of any nature granted or binding
upon such Seller's granting or vesting in any party any claim or
potential claim to such Seller's Interests.
Section 3.8. BMC LP.
(a) BMC LP is duly formed and validly existing as a limited
partnership under the laws of the State of Texas.
(b) BMC LP has all requisite partnership power and authority to own
its respective Partnership Properties and to conduct its respective
business as currently conducted.
(c) Such Seller is in compliance in all material respects with the terms
and provisions of the Partnership Agreement governing BMC LP.
(d) To the knowledge of such Seller (without having conducted any
independent investigation), all expenses and liabilities of BMC LP
have been, and are being, paid timely by BMC LP in all material
respects, except for an invoice received by BMC LP in the amount of
$11,500 from Price Waterhouse in connection with an audit of its
financial statements for Fiscal Year 1996.
(e) To the knowledge of such Seller (without having conducted any
independent investigation), there are no material liabilities of BMC LP
other than as disclosed in (i) BMC LP's audited balance sheet as of
December 31, 1996, and the related audited statements of income,
stockholders' equity and cash flows for the year then ended, and the
notes and schedules thereto, and (ii) BMC LP's unaudited balance
sheet as of June 30, 1997, other than liabilities which have arisen since
June 30, 1997, in the ordinary course of business.
Section 3.9. Investment Experience. Such Seller is able to bear the
economic risks of its investment in the Closing Shares, and
consequently without limiting the generality of the foregoing, it is able
to hold the Closing Shares acquired pursuant to the terms hereof for an
indefinite period of time and has a sufficient net worth to sustain a loss
of all or a portion of its investment in the Closing Shares in the event
such loss should occur. Such Seller has such knowledge and
experience in financial and business matters that it is capable of
evaluating the risks and merits of an investment in the Closing Shares.
Section 3.10. Investment Intent. Such Seller is acquiring the
Closing Shares for its own account for investment and not with view to
the distribution, resale, subdivision, or fractionalization thereof, and it
has no present plans to enter into any contract, undertaking,
agreement, or arrangement for any such distribution, resale,
subdivision, or fractionalization.
Section 3.11. Restricted Securities. Such Seller is aware that it must
bear the economic risk of its investment in the Closing Shares for an
indefinite period of time because the Closing Shares have not been
registered under the Securities Act or under the securities laws of any
state of the United States, and therefore cannot be sold unless they are
subsequently registered under the Securities Act and any applicable
state securities laws or unless an exemption from such registration is
available. Such Seller also recognizes that no U.S. federal or state
agency has passed upon the Closing Shares to be issued hereunder to
date or made any finding or determination as to the fairness of an
investment in such shares. Such Seller agrees that the Closing Shares
acquired by it hereunder shall not be sold, assigned, pledged,
hypothecated or otherwise transferred unless they are registered under
the Securities Act and applicable state securities laws or unless an
exemption from such registration is available.
Section 3.12. Legend. Such Seller acknowledges that a legend in
substantially the following form will be placed on any certificate(s)
evidencing the Closing Shares issued hereunder:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS
AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING
OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT
COMPLYING WITH RULE 144 IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION OR OTHER COMPLIANCE WITH
THE SECURITIES ACT."
Such Seller further understands that Buyer may refuse to register
transfer of the Closing Shares issued hereunder in the absence of
compliance with Rule 144 unless it furnishes Buyer with a "no-action"
or interpretive letter from the Commission or an opinion of counsel
reasonably acceptable to Buyer stating that the transfer may be effected
without registration under the Securities Act.
Section 3.13. Accuracy of Information. All information which such
Seller has provided to Buyer or its agents or representatives
concerning its suitability to hold the Closing Shares following the
transactions contemplated hereby is complete, accurate and correct.
Section 3.14. No Solicitation. Such Seller was not 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 Closing Shares under this Agreement.
Section 3.15. Accredited Investor. Such Seller is an "accredited
investor," as such term is defined in Regulation D promulgated
pursuant to the Securities Act.
Section 3.16. Disclaimer of Warranties. Other than those expressly
set out in this Article III, each Seller hereby expressly disclaims any
and all representations or warranties with respect to the Interests, the
Gecko Properties or the transaction contemplated hereby, and Buyer
agrees that the Interests and the Gecko Properties are being sold by
each Seller (as applicable) "where is" and "as is". Specifically as a
part of (but not in limitation of) the foregoing, Buyer acknowledges
that each Seller has not made, and each Seller hereby expressly
disclaims, any representation or warranty (express, implied, under
common law, by statute or otherwise) (a) as to the condition of the
Gecko Properties or the Partnership Properties (INCLUDING
WITHOUT LIMITATION, EACH SELLER 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 Gecko Booty or the Partnerships with applicable environmental
laws, (c) as to the status of title to Gecko Properties or the Partnership
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 Gecko Properties or the Partnership Properties.
ARTICLE IV
Representations and Warranties of Buyer
Buyer represents and warrants to the Sellers as follows:
Section 4.1. Organization and Existence. Buyer is a corporation duly
organized, legally existing and in good standing under the laws of the
State of Utah.
Section 4.2. Power and Authority. Buyer 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
Buyer of this Agreement and each other agreement, instrument, or
document executed or to be executed by Buyer 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
Buyer.
Section 4.3. Valid and Binding Agreement. This Agreement has been
duly executed and delivered by Buyer and constitutes, and each other
agreement, instrument, or document executed or to be executed by
Buyer 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 Buyer and constitutes, or when executed and
delivered will constitute, a valid and legally binding obligation of
Buyer, 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 Buyer of this Agreement and each other agreement,
instrument, or document executed or to be executed by Buyer 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 Buyer, (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 Buyer is a party or by which Buyer
or any of its properties may be bound, (c) except as contemplated by
this Agreement, result in the creation or imposition of any lien or
other encumbrance upon the properties of Buyer, or (d) violate any
applicable law, rule or regulation binding upon Buyer.
Section 4.5. Approvals. No consent, approval, order, or authorization
of, or declaration, filing, or registration with, any court or
governmental agency or of any third party is required to be obtained or
made by Buyer in connection with the execution, delivery, or
performance by Buyer of this Agreement and each other agreement,
instrument, or document executed or to be executed by Buyer 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 compliance with any applicable
requirements of the Securities Act and any applicable state securities
laws.
Section 4.6. Pending Litigation. There are no pending suits, actions,
or other proceedings in which Buyer is a party which affect the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
Section 4.7. Knowledgeable Purchaser. Buyer is a knowledgeable
purchaser, owner and operator of oil and gas properties, has the ability
to evaluate (and in fact has evaluated) the Interests for purchase, and is
acquiring the Interests and the Gecko 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 4.8. Closing Shares. The Closing Shares have been duly
authorized for such issuance and, when issued and delivered by Buyer
in accordance with the provisions of this Agreement, will be validly
issued, fully paid, and nonassessable. The issuance of the Closing
Shares under this Agreement is not subject to any preemptive or
similar rights.
Section 4.9. SEC Filings. Buyer is current in its obligations to file all
periodic report and proxy statements with the Commission required to
be filed under the Exchange Act. Parent's Annual Report on Form-
10KSB for the year ended December 31, 1996, and Buyer's Quarterly
Report on Form-10QSB for the quarter ending September 30, 1997 (in
this Section called 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 Buyer included in the SEC Documents (the
"Initial Financial Statements") present fairly in all material respects,
in conformity with GAAP applied on a consistent basis, the
Consolidated financial position of Buyer 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 audit
adjustments in the case of the unaudited interim financial statements).
Since September 30, 1997, there have been no material developments,
transactions or events affecting Buyer (other than developments or
events affecting the oil and gas exploration and production industry
generally) other than as disclosed by Buyer in the SEC Documents or
to Sellers in writing. There are no material liabilities of Buyer
(contingent or otherwise), other than as disclosed in the SEC
Documents and the financial statements included therein.
ARTICLE V
Certain Covenants Regarding Information and Confidentiality
Section 5.1. Access to Information. From the date hereof until
Closing, each Seller will use its reasonable best efforts to give Buyer,
and its attorneys and other representatives, access at all reasonable
times to the books and records of each Partnership and to any contract
files, lease or other title files, production files, well files and other files
of Gecko Booty (in the instance of Property Seller) and each
Partnership (in the instance of LP Sellers) pertaining to the ownership
or operation of the Gecko Properties or the Partnership Properties (as
applicable), and each Seller will use its reasonable best efforts to
arrange for Buyer, and its attorneys and other representatives, to have
access to any such files in the respective office of Property Seller and
each Partnership (as applicable). No Seller shall be obligated to
provide Buyer with access to any records or data which such Seller
cannot provide to Buyer without, in its reasonable opinion, breaching
confidentiality agreements with other parties. Buyer recognizes and
agrees that all materials made available to it (whether pursuant to this
Section or otherwise) in connection with the transactions contemplated
hereby 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. From the date hereof until Closing,
Buyer will furnish each Seller and its attorneys and other
representatives such information with respect to Buyer as such Seller
shall from time to time reasonably request. Buyer shall not be
obligated to provide Sellers with access to any records or data which
Buyer cannot provide to Sellers without, in its reasonable opinion,
breaching confidentiality agreements with other parties.
Section 5.2. Confidentiality.
(a) Each Receiving Party (as defined below) agrees that all
Confidential Information (as defined below) shall be kept confidential
by the Receiving Party and shall not be disclosed by the Receiving
Party in any manner whatsoever; provided, however, that (i) any of
such Confidential Information may be disclosed to such directors,
officers, employees, and authorized representatives (including without
limitation attorneys, accountants, consultants, and financial advisors)
of the Receiving Party (collectively, for purposes of this Section,
"Receiving Party Representatives") as need to know such information
for the purpose of evaluating the transactions contemplated hereby (it
being understood that each Receiving Party Representative shall be
informed by the Receiving Party of the confidential nature of such
information and shall be required to treat such information
confidentially and that the Receiving Party and a Receiving Party
Representative shall be responsible for any breach of this Section by
such Receiving Party Representative), (ii) any disclosure of
Confidential Information may be made to the extent to which the
Disclosing Party (as defined below) consents in writing, (iii)
Confidential Information may be disclosed by the Receiving Party or
any Receiving Party Representative to the extent that, in the opinion of
counsel for the Receiving Party or such Receiving Party
Representative, the Receiving Party or such Receiving Party
Representative is legally compelled to do so, provided that, prior to
making such disclosure, the Receiving Party or such Receiving Party
Representative, as the case may be, advises and consults with the
Disclosing Party regarding such disclosure and provided further that
the Receiving Party or such Receiving Party Representative, as the
case may be, discloses only that portion of the Confidential
Information as is legally required. The Receiving Party agrees that
none of the Confidential Information will be used for any purpose
other than in connection with the transactions contemplated hereby.
The term "Confidential Information", as used herein, means all
information (irrespective of the form of communication) obtained by
or on behalf of the Receiving Party from the Disclosing Party or its
representatives pursuant to this Section and all similar information
obtained from the Disclosing Party or its representatives by or on
behalf of the Receiving Party prior to the date of this Agreement, other
than information which (A) was or becomes generally available to the
public other than as a result of disclosure by the Receiving Party or
any Receiving Party Representative, (B) was or becomes available to
the Receiving Party on a nonconfidential basis prior to disclosure to
the Receiving Party by the Disclosing Party or its representatives, or
(C) was or becomes available to the Receiving Party from a source
other than the Disclosing Party and its representatives, provided that
such source is not known by the Receiving Party (after reasonable due
inquiry) to be bound by a legal, contractual or fiduciary obligation to
the Disclosing Party. As used in this Section, the term "Receiving
Party" shall mean (x) Buyer, when the Disclosing Party is a Seller, and
(y) a Seller, when the Disclosing Party is Buyer. As used in this
Section, the term "Disclosing Party" shall mean (xx) Buyer, when the
Receiving Party is a Seller, and (yy) a Seller, when the Receiving Party
is Buyer.
(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 or such
Receiving Party Representatives' 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).
ARTICLE VI
Conditions Precedent to the Obligations of the Parties; Termination
Rights
Section 6.1. Conditions Precedent to the Obligations of Buyer. The
obligations of Buyer under this Agreement are subject to each of the
following conditions being met:
(a) Each and every representation of each Seller under this Agreement
shall be true and accurate in all material respects as of the date when
made and shall be deemed to have been made again at and as of the
time of Closing and shall at and as of such time of Closing be true and
accurate in all respects except as to changes specifically contemplated
by this Agreement or consented to by Buyer.
(b) Each Seller shall have performed and complied in all material
respects with (or compliance therewith shall have been waived by
Buyer) each and every covenant, agreement and condition required by
this Agreement to be performed or complied with by each Seller prior
to or at the Closing.
(c) 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.
(d) BMC Inc. shall have executed and delivered to Future Texas an
assignment of its interest in BMC LP substantially in the form
attached hereto as Exhibit 6.1(d) in all material respects.
(e) BMC LP shall have not sold, transferred or otherwise disposed of
any of the Partnership Properties listed in the attached Exhibit 6.1(e),
except that BMC LP shall be permitted to assign to BMC Inc. the
interest of BMC LP in the Logue-Wilson No. 1 well located in Grant
County, Oklahoma, either prior to or contemporaneously with the
Closing.
If any such condition on the obligations of Buyer 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) Buyer is not in breach of its obligations hereunder in the absence
of a Seller also being in breach of its obligations hereunder, this
Agreement may, at the option of Buyer, be terminated, in which case
the parties shall have no further obligations to one another hereunder
(other than the obligations under Sections 5.2 and Article XIV which
will survive such termination).
Section 6.2. Conditions Precedent to the Obligations of Sellers. The
obligations of Sellers under this Agreement are subject to the each of
the following conditions being met:
(a) Each and every representation of Buyer under this Agreement shall
be true and accurate in all material respects as of the date when made
and shall be deemed to have been made again at and as of the time of
Closing and shall at and as of such time of Closing be true and
accurate in all respects except as to changes specifically contemplated
by this Agreement or consented to by Sellers.
(b) Buyer shall have performed and complied in all material respects
with (or compliance therewith shall have been waived by Sellers) each
and every covenant, agreement and condition required by this
Agreement to be performed or complied with by Buyer prior to or at
the Closing.
(c) 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.
(d) Sellers shall have received an opinion of counsel reasonably
acceptable to Sellers dated the Closing Date covering the matters
described in Exhibit 6.2(d) and in a form reasonably acceptable to
Sellers.
(e) The Designated Shareholders shall have executed and delivered
that certain Voting Agreement substantially in the form attached as
Exhibit 6.2(e) in all material respects.
If any such condition on the obligations of Sellers 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) a Seller is not in breach of its obligations hereunder in the
absence of Buyer also being in breach of its obligations hereunder, this
Agreement may, at the option of a Seller, be terminated, in which case
the parties shall have no further obligations to one another hereunder
(other than the obligations under Section 5.2 and Article XIV which
will survive such termination).
ARTICLE VII
Closing of Transaction
Section 7.1. The Closing. The closing (herein called the "Closing")
of the transaction contemplated hereby shall take place in the offices of
Thompson & Knight, P.C., at 1700 Texas Commerce Tower, 600
Travis Street, Houston, Texas, at 10:00 a.m. Central Standard Time,
on November 25, 1997, or at such other date and time as the Buyer
and Sellers may mutually agree upon (such date and time being herein
called the "Closing Date").
Section 7.2. Sellers' Closing Obligations. At the Closing:
(a) each Seller shall deliver to Buyer a certificate executed by an
authorized representative of such Seller dated the Closing Date,
certifying to Buyer that (i) such Seller has complied in all material
respects with all covenants and agreements required by this
Agreement to be performed and complied with by it on or prior to the
Closing Date and (ii) the representations and warranties made by such
Seller herein are true and correct in all material respects as if made on
and as of the Closing Date;
(b) each LP Seller shall execute and deliver that certain Assignment
of Limited Partner Interest (the "Assignment"), substantially in the
form attached hereto as Exhibit 7.2(b) in all material respects;
(c) Property Seller shall execute and deliver that certain Conveyance
(the "Conveyance"), substantially in the form attached hereto as
Exhibit 7.2(c) in all material respects;
(d) each LP Seller shall execute and deliver that certain Registration
Rights Agreement, substantially in the form attached hereto as Exhibit
7.2(d) in all material respects;
(e) LP Sellers shall execute and deliver that certain Waiver,
substantially in the form attached hereto as Exhibit 7.2(e) in all
material respects;
(f) LP Sellers shall deliver for cancellation the Future Warrants; and
(g) LP Sellers shall execute and deliver that certain Voting Agreement
in the form attached hereto as Exhibit 6.2(e) in all material respects.
Section 7.3. Buyer's Closing Obligations. At the Closing, Buyer shall:
(a) deliver to Sellers a certificate of existence and good standing with
respect to Buyer issued by appropriate public officials of the State of
Utah and dated no earlier than three business days prior to the Closing
Date;
(b) deliver to Sellers a certificate of existence and good standing with
respect to Future Texas issued by appropriate public officials of the
State of Texas and dated no earlier than three business days prior to
the Closing Date;
(c) deliver to Sellers a certificate of existence and good standing with
respect to Future Nevada issued by appropriate public officials of the
State of Nevada and dated no earlier than three business days prior to
the Closing Date;
(d) deliver to Sellers a certificate executed by an authorized officer of
Buyer dated the Closing Date, certifying to Sellers that (i) Buyer has
complied in all material respects with all covenants and agreements
required by this Agreement to be performed and complied with by it
on or prior to the Closing Date and (ii) the representations and
warranties made by Buyer herein are true and correct in all material
respects as if made on and as of the Closing Date;
(e) deliver to Sellers an "Omnibus Certificate" of the Secretary and
President of each of Buyer, Future Texas and Future Nevada, which
shall contain the names and signatures of the officers of Buyer, Future
Texas and Future Nevada, respectively, authorized to execute this
Agreement, the Security Documents and the Note Documents to which
entity is a party and which shall certify to the truth, correctness and
completeness of the following exhibits attached thereto: (i) a copy of
the resolutions duly adopted by the Board of Directors of Buyer, Future
Texas and Future Nevada (as applicable), with respect to the
execution, delivery and performance of this Agreement, the Security
Documents and the Note Documents to which such entity is a party;
(ii) a copy of the charter documents of Buyer, Future Texas and Future
Nevada (as applicable); and (iii) a copy of the bylaws of Buyer, Future
Texas and Future Nevada (as applicable);
(f) execute and deliver to Sellers the Notes;
(g) issue and deliver to LP Sellers the Closing Shares;
(h) execute and deliver (or cause to be executed and delivered) to
Sellers each Security Document listed in the attached 2.1--Security
Documents and any collateral to be delivered at Closing thereunder;
and
(i) execute and deliver that certain Registration Rights Agreement
substantially in the form attached hereto as Exhibit 7.2(d) in all
material respects.
Section 7.4. Delivery of Files. Within 30 days after the Closing, (i)
LP Sellers shall deliver (or cause to be delivered) to Buyer the limited
partnership files, records and other materials for BMC LP and (ii)
Property Seller shall deliver to Buyer the files, records and other
materials relating to the Gecko Properties. Notwithstanding the
foregoing, to the extent such files or other materials include items
which cannot be provided to Buyer without, in the reasonable opinion
of Sellers, breaching confidentiality agreements with other parties,
Sellers shall have no obligation to furnish (or cause to be furnished)
such items; provided, that if requested by Buyer, Sellers shall identify
any such agreement and use their reasonable best efforts to obtain an
amendment or waiver of such agreement to permit such materials to be
delivered to Buyer. Sellers may retain copies of all or any parts of the
files or other materials so furnished, and all costs of copying such files
shall be borne by Sellers. So long as such files or other materials so
delivered by Sellers to Buyer are maintained by Buyer, Buyer shall
permit Sellers and their representatives to have access to the same; for
a period of three years after Closing Buyer shall advise Sellers before it
destroys any such files, records or other materials (and will, if
requested by Sellers, deliver to Sellers any files or other materials it
intends to destroy).
Section 7.5. Agreement Regarding Execution and Delivery. Buyer, for
itself and on behalf of the Partnerships, hereby acknowledges and
agrees that (a) the consummation of the transactions contemplated
hereunder, including without limitation the extension of credit under
the Notes, the guarantee by the Partnerships of the Notes, and the
granting of liens and security interests by Buyer and the Partnerships
to secure the Notes and such guarantee, are intended to be
simultaneous for all intents and purposes, and (b) Buyer and each
Partnership shall be deemed to have executed and delivered each Note
Document (including each Security Document), immediately prior to
or simultaneously with the extension of credit under the Notes.
ARTICLE VIII
Certain Agreements Regarding Partnership Costs and Expenses and
Other Matters
Section 8.1. Partnership Costs and Expenses.
(a) With respect to BMC LP, it is specifically agreed by and between
Buyer and LP Sellers as follows: (i) Buyer shall be entitled to receive
all cash distributions attributable to the Interests therein made by BMC
LP on or after the Effective Date (regardless of whether such
distributions are attributable to revenues arising prior to the Effective
Date); and (ii) except as provided below in this subsection (a), Buyer
shall be obligated to bear all costs and expenses of BMC LP unpaid on
or incurred after the Effective Date and attributable to the Interests
therein; provided, however, that Buyer shall have no liability for, and
LP Sellers agree to bear and pay the following costs and expenses: (A)
the reasonable costs and expenses incurred by BMC LP in connection
with the preparation and filing of a federal income tax return covering
the short tax year commencing January 1, 1997 and ending the
Closing Date; and (B) any fees and expenses of the independent public
accountants of BMC LP unpaid as of the Closing Date.
(b) With respect to Future LP, it is specifically acknowledged and
agreed by and between Buyer and LP Sellers as follows: (i) LP Sellers
shall be entitled to receive from Future LP all distributions reflected in
the schedule received in October 1997 with respect to August 1997
production save for and except an amount equal to one-half of the
Closing Costs; (ii) LP Sellers have previously paid their allocable
share of the costs and expenses of Future LP for September 1997 and
shall not be reimbursed by Future LP for such amounts; (iii) Future LP
shall be entitled to retain all net cash flow attributable to production of
Future LP commencing September 1997; and (iv) Future Texas and
Future Nevada shall be responsible for and shall bear all costs of
Future LP commencing October 1, 1997 and LP Sellers shall have no
responsibility to make capital contributions with respect thereto.
(c) Buyer and LP Sellers agree that on or before 90 days after Closing,
they shall meet at a time and place mutually agreeable and review the
status of cash amounts received or paid under subsections (a) and (b)
above for the purpose of reconciling such and other amounts with the
terms and provisions of such subsections and to make any necessary
payments to each other as a result of such reconciliation.
Section 8.2. Production Proceeds. Notwithstanding that, by the terms
of the various Security Documents, Future Texas and the Partnerships
are and will be assigning to Sellers all of the "Production Proceeds" (as
defined therein) accruing to the property covered thereby, so long as
no Default has occurred Future Texas and the Partnerships may
continue to receive from the purchasers of production all such
Production Proceeds, subject, however, to the Liens created under the
Security Documents, which Liens are hereby affirmed and ratified.
Upon the occurrence of a Default, Sellers may exercise all rights and
remedies granted under the Security Documents, including the right to
obtain possession of all Production Proceeds then held by Future Texas
and the Partnerships or to receive directly from the purchasers of
production all other Production Proceeds. In no case shall any failure,
whether purposed or inadvertent, by Sellers to collect directly any such
Production Proceeds constitute in any way a waiver, remission or
release of any of their rights under the Security Documents, nor shall
any release of any Production Proceeds by Sellers to Future Texas or
the Partnerships constitute a waiver, remission, or release of any other
Production Proceeds or of any rights of Sellers to collect other
Production Proceeds thereafter.
ARTICLE IX
Agreement Regarding Specified Breach
(a) The representations and warranties of LP Sellers contained in
Sections 3.8(d) and (e) shall survive the Closing until the one-year
anniversary of the Closing Date (in this Article IX called the "Survival
Date").
(b) Subject to the terms and conditions of this Article IX, each LP
Seller severally (and not jointly and severally) agrees to indemnify and
hold harmless Buyer from and against any and all claims, actions,
liabilities, damages, costs and expenses (including court costs and
attorneys' fees) (in this Article IX, "Damages") incurred by Buyer by
reason of or resulting from a breach by such Seller of its
representations and warranties contained in Sections 3.8(d) and (e).
(c) No Seller shall have any indemnification obligation under this
Article IX unless before the Survival Date it shall have received from
Buyer written notice of the claim for or in respect of which
indemnification is sought (in this Article IX, the "Notice"). The
Notice shall set forth with reasonable specificity (i) the basis under this
Article, and the facts that otherwise form the basis, of such claim and
(ii) the estimate of the amount of the Damages and a calculation or
explanation of how such amount was arrived.
(d) Any amounts due and owing Buyer by a LP Seller hereunder shall
be satisfied solely by the transfer and assignment by such LP Seller to
Buyer of the number of Closing Shares determined by the following
formula: A = B/C, where "A" is the number of Closing Shares, where
"B" is such LP Seller's several share of the Damages, and where "C" is
the Average Price. Such transfer and assignment shall be made by a
LP Seller within 20 days of the date on which it receives the Notice,
unless such LP Seller in good faith disputes the claim set forth in the
Notice, in which event such transfer and assignment shall be made
within 20 days of the date on which such dispute is resolved (provided
such dispute is resolved in favor of Buyer). As used in this subsection
(d), the term "Average Price" shall equal the average of the last
reported sales prices for the Common Stock for the 15 consecutive
Trading Days (as defined below) immediately preceding the date of the
Notice (or the date on which the dispute is resolved, if applicable and
provided the dispute is resolved in favor of Buyer). The last reported
sales price for each day shall be the last reported sale price of the
Common Stock on such date on the exchange where it is primarily
traded, or, if the Common Stock is not traded on an exchange, the
Common Stock shall be valued at the last reported sale price on such
date on the NASDAQ National Market System, or, if the Common
Stock is not reported on the NASDAQ National Market System or any
similar system of automated dissemination of quotations of securities
prices, the Common Stock shall be valued at the closing bid price (or
average of bid prices) last quoted on such date as reported by an
established quotation service for over-the-counter securities. As used
above, the term "Trading Days" shall mean (i) if the Common Stock is
listed or admitted for trading on any generally recognized U.S.
securities exchange, days on which such securities exchange is open
for business and (ii) if the Common Stock is quoted on the NASDAQ
National Market System or any similar system of automated
dissemination of quotations of securities prices, days on which trades
may be made on such system.
(e) Notwithstanding anything to the contrary herein, no
indemnification shall be required to be made by Sellers pursuant to
this Article IX except to the extent that the aggregate amount of the
Damages exceeds $10,000.
(f) Notwithstanding anything to the contrary herein, the maximum
aggregate number of Closing Shares Sellers shall collectively be
obligated to transfer and assign to Buyer hereunder shall be 150,000.
ARTICLE X
Certain Post-Closing Affirmative Covenants
To induce Sellers to enter into this Agreement, Buyer warrants,
covenants and agrees that until the full and final payment of the
Obligations, unless the LP Sellers have previously otherwise agreed:
Section 10.1. Payment and Performance. Buyer will pay all amounts
due under the Notes in accordance with the terms thereof and will
observe, perform and comply with every covenant, term and condition
expressed or implied in this Agreement. Buyer will cause each of its
Subsidiaries to observe, perform and comply with every such term,
covenant and condition.
Section 10.2. Books, Financial Statements and Reports. Buyer and
each of its Subsidiaries will at all times maintain full and accurate
books of account and records. Buyer will maintain and will cause its
Subsidiaries to maintain a standard system of accounting, will
maintain its Fiscal Year, and will furnish the following statements and
reports to each LP Seller at Buyer's expense:
(a) As soon as available, and in any event within ninety-five (95) days
after the end of each Fiscal Year, complete Consolidated financial
statements of Buyer together with all notes thereto, prepared in
reasonable detail in accordance with GAAP, together with an
unqualified opinion, based on an audit using generally accepted
auditing standards, by independent certified public accountants
selected by Buyer and acceptable to the Sellers, stating that such
Consolidated financial statements have been so prepared. These
financial statements shall contain a Consolidated balance sheet as of
the end of such Fiscal Year and Consolidated statements of earnings,
of cash flows, and of changes in owners' equity for such Fiscal Year,
each setting forth in comparative form the corresponding figures for
the preceding Fiscal Year.
(b) As soon as available, and in any event within fifty (50) days after
the end of each Fiscal Quarter, Buyer's Consolidated balance sheet as
of the end of such Fiscal Quarter and Consolidated statements of
Buyer's earnings and cash flows for the period from the beginning of
the then current Fiscal Year to the end of such Fiscal Quarter, all in
reasonable detail and prepared in accordance with GAAP, subject to
changes resulting from normal year-end adjustments. In addition
Buyer will, together with each such set of financial statements and
each set of financial statements furnished under subsection (a) of this
section, furnish a certificate in a form reasonably acceptable to LP
Sellers signed by the chief financial officer of Buyer stating that such
financial statements are accurate and complete (subject to normal year-
end adjustments) and stating that no Default exists at the end of such
Fiscal Quarter or at the time of such certificate or specifying the nature
and period of existence of any such Default.
(c) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by Buyer to its
stockholders and all registration statements, periodic reports and other
statements and schedules filed by Buyer with any securities exchange,
the Commission or any similar governmental authority.
(d) Annually within 115 days after the end of each Fiscal Year
beginning with the Fiscal Year ending December 31, 1997, a report
containing (i) an estimation of the oil and gas reserves, classified by
appropriate categories, as of the end of the preceding Fiscal Year
attributable to the interest of the Buyer therein, (ii) a projection of the
rate of production of and net income from such reserves with respect to
such interest, (iii) a calculation of the present worth of such net
income discounted at a rate of 10%, and (iv) a schedule or complete
description of all assumptions, estimates and projections made or used
in the preparation of such report. Each such report shall be prepared
by an independent petroleum engineer acceptable to Sellers in
accordance with customary and generally accepted standards and
practices for petroleum engineers, and shall be based on (1) prices
used by Houston Energy Banks, as reported by Madison Energy
Advisors, Inc., escalated at a rate not to exceed 3% per annum, (2)
lease operating expenses and production taxes derived from and
consistent with those actually incurred by Buyer, escalated at the same
rate, if any, being applied to prices, and (3) such other assumptions as
shall be reasonably acceptable to Sellers.
(e) Promptly, such other information with respect to the business and
operations of Buyer and its Subsidiaries, as LP Sellers may reasonably
request.
.
Section 10.3. Notice of Material Events and Change of Address.
Buyer will promptly notify each LP Seller in writing, stating that such
notice is being given pursuant to this Agreement, of:
(a) the occurrence of any Material Adverse Change,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any indebtedness owed by Buyer
or any Subsidiary thereof or of any default by any Buyer or any such
Subsidiary under any indenture, mortgage, agreement, contract or
other instrument to which any of them is a party or by which any of
them or any of their properties is bound, if such acceleration or default
could cause a Material Adverse Change,
(d) any claim of $100,000 or more, any notice of potential liability
under any environmental laws which might exceed such amount, or
any other material adverse claim asserted against Buyer or any
Subsidiary thereof or with respect to Buyer or any of such Subsidiary's
properties, and
(e) the filing of any suit or proceeding against Buyer or any
Subsidiary thereof in which an adverse decision could cause a Material
Adverse Change.
Upon the occurrence of any of the foregoing Buyer and any Subsidiary
thereof will take all necessary or appropriate steps to remedy promptly
any such Material Adverse Change, Default, acceleration or default, to
protect against any such adverse claim, to defend any such suit or
proceeding, and to resolve all controversies on account of any of the
foregoing. Buyer will also notify LP Sellers in writing at least twenty
business days prior to the date that Buyer or any Subsidiary thereof
changes its name or the location of its chief executive office or
principal place of business or the place where it keeps its books and
records concerning the Collateral, furnishing with such notice any
necessary financing statement amendments or requesting LP Sellers to
prepare the same.
Section 10.4. Maintenance of Properties. Buyer and each of its
Subsidiaries will maintain, preserve, protect, and keep all Collateral
and all other property used or useful in the conduct of its business in
good condition and in compliance with all applicable laws, and will
from time to time make all repairs, renewals and replacements needed
to enable the business and operations carried on in connection
therewith to be promptly and advantageously conducted at all times.
Section 10.5. Maintenance of Existence and Qualifications. Buyer and
each of its Subsidiaries will maintain and preserve its existence and
its rights and franchises in full force and effect and will qualify to do
business in all states or jurisdictions where required by applicable law,
except where the failure so to qualify will not cause a Material
Adverse Change.
Section 10.6. Payment of Trade Liabilities, Taxes, etc. Buyer and each
of its Subsidiaries will (a) timely file all required tax returns; (b)
timely pay all taxes, assessments, and other governmental charges or
levies imposed upon it or upon its income, profits or property; (c) pay
when due all Liabilities owed by it on ordinary trade terms to vendors,
suppliers and other persons providing goods and services used by it in
the ordinary course of its business; (d) pay and discharge when due all
other Liabilities now or hereafter owed by it; and (e) maintain
appropriate accruals and reserves for all of the foregoing in accordance
with GAAP. Buyer and each of its Subsidiaries may, however, delay
paying or discharging any of the foregoing so long as it is in good
faith contesting the validity thereof by appropriate proceedings and has
set aside on its books adequate reserves therefor.
Section 10.7. Insurance. Buyer and each of its Subsidiaries will keep
or cause to be kept insured by financially sound and reputable insurers
its properties in such forms and amounts and against such risks as are
customary for persons engaged in the same or similar business of
owning and operating similar properties. Upon demand by LP Sellers
any insurance policies covering Collateral shall be endorsed (a) to
provide for payment of losses to Sellers as its interests may appear and
(b) to provide that such policies may not be canceled or reduced or
affected in any material manner for any reason without fifteen
days prior notice to LP Sellers
Section 10.8. Compliance with Agreements and Law. Buyer and each
of its Subsidiaries will perform all material obligations it is required
to perform under the terms of each indenture, mortgage, deed of trust,
security agreement, lease, franchise, agreement, contract or other
instrument or obligation to which it is a party or by which it or any of
its properties is bound. Buyer and each of its Subsidiaries will conduct
its business and affairs in compliance with all laws applicable thereto.
Section 10.9. Agreement to Deliver Security Documents. Buyer agrees
to deliver and to cause each of its Subsidiaries to deliver, to further
secure the Notes whenever requested by LP Sellers in their sole and
absolute discretion, deeds of trust, mortgages, chattel mortgages,
security agreements, financing statements and other Security
Documents in form and substance satisfactory to Sellers for the
purpose of granting, confirming, and perfecting first and prior liens or
security interests in any real or personal property now owned or
hereafter acquired by Buyer and any such Subsidiary.
Section 10.10. Perfection and Protection of Security Interests and
Liens. Buyer will from time to time deliver, and will cause each of its
Subsidiaries from time to time to deliver, to LP Sellers any financing
statements, continuation statements, extension agreements and other
documents, properly completed and executed (and acknowledged when
required) by Buyer or any such Subsidiary in form and substance
satisfactory to LP Sellers, which LP Sellers request for the purpose of
perfecting, confirming, or protecting any Liens or other rights in
Collateral securing any Obligations.
Section 10.11. Election of LP Sellers' Nominee to Board of Directors.
(a) Within 30 days from the date hereof, Buyer will cause a vacancy to
occur on its Board of Directors and will appoint to fill such vacancy
the Sellers' Nominee. As used in this Section, the "LP Sellers'
Nominee" shall mean a person designated by LP Sellers, subject to the
consent of Buyer (which consent shall not be unreasonably withheld).
(b) Commencing on the date hereof and ending when LP Sellers or its
Affiliates (as defined below) either (i) during the period of time the
Notes are outstanding, no longer beneficially own at least 2% of all
Voting Securities (as defined below), or (ii) after the Notes have been
paid in full, no longer own beneficially at least 10% of all Voting
Securities, Buyer (A) will nominate or cause to be nominated for
election to Buyer's Board of Directors the LP Sellers' Nominee and (B)
will use its reasonable best efforts to cause the LP Sellers' Nominee to
be elected to Buyer's Board of Directors.
(c) In the event of the death, incapacity, resignation or removal of the
LP Sellers' Nominee preventing his or her serving on Buyer's Board of
Directors, Buyer will appoint another LP Sellers' Nominee to fill the
vacancy created thereby.
(d) As used in this Section, (i) the term "Affiliate" shall mean, with
respect to any person, a person directly or indirectly controlling,
controlled by or under common control with, such other person, and
(ii) "Voting Securities" shall mean Common Stock and any other
securities of Buyer entitled to vote generally for the election of
directors of Buyer.
ARTICLE XI
Certain Post-Closing Negative Covenants
To induce Sellers to enter into this Agreement, Buyer warrants,
covenants and agrees that until the full and final payment of the
Obligations, unless LP Sellers have previously otherwise agreed:
Section 11.1. Indebtedness. Neither Buyer nor any Subsidiary thereof
will in any manner owe or be liable for Indebtedness except:
(a) the Obligations.
(b) obligations under operating leases entered into in the ordinary
course of Buyer's or its Subsidiaries' business in arm's length
transactions at competitive market rates under competitive terms and
conditions in all respects.
(c) Indebtedness owed by Buyer or any Subsidiary thereof which is
subordinated to the Obligations upon terms and conditions satisfactory
to LP Sellers in their sole and absolute discretion.
(d) purchase money Indebtedness in an aggregate principal amount not
to exceed $200,000 at any time, provided that the original principal
amount of any such Indebtedness shall not be in excess of the purchase
price of the asset acquired thereby and such Indebtedness shall be
secured only by the acquired asset.
(e) Indebtedness in the principal amount of approximately $20,000
owed Bank One Texas on a workover rig.
(f) Indebtedness in the principal amount of approximately $20,000
owed Sam Henderson.
Section 11.2. Limitation on Liens. Neither Buyer nor any Subsidiary
thereof will create, assume or permit to exist any Lien upon any of the
properties or assets which it now owns or hereafter acquires, except, to
the extent not otherwise forbidden by the Security Documents the following:
(a) Liens which secure Obligations only.
(b) Statutory Liens for taxes, statutory mechanics' and materialmen's
Liens incurred in the ordinary course of business, and other similar
Liens incurred in the ordinary course of business, provided such Liens
do not secure Indebtedness and secure only Indebtedness which is not
delinquent or for which adequate reserves have been set aside.
(c) Liens securing Indebtedness described in Section 11.1(d).
(d) Existing Lien in favor of Sam Henderson covering properties
located in Wichita County, Texas.
(e) Existing Lien in favor of Bank One Texas on the Indebtedness
described in Section 11.1 (e).
Section 11.3. Limitation on Mergers. Except as expressly provided
in this Section neither Buyer nor any Subsidiary thereof will merge or
consolidate with or into any other business entity. Any Subsidiary of Buyer
may, however, be merged into or consolidated with either
Buyer or another Subsidiary which is wholly-owned by Buyer, so long
as Buyer or the Subsidiary wholly-owned by Buyer is the surviving
business entity. Buyer will not issue any securities other than shares
of its common stock or any options or warrants giving the holders
thereof only the right to acquire such shares. No Subsidiary of Buyer
will issue any additional shares of its capital stock or other securities
or any options, warrants or other rights to acquire such additional
shares or other securities except to Buyer. No Subsidiary of Buyer
which is a partnership will allow any diminution of Buyer's interest
(direct or indirect) therein.
Section 11.4. Limitation on Sales of Property. Neither Buyer nor any
Subsidiary thereof will sell, transfer, lease, exchange, alienate or
dispose of any Collateral except, to the extent not otherwise forbidden
under the Security Documents:
(a) equipment which is worthless or obsolete or which is replaced by
equipment of equal suitability and value.
(b) inventory (including oil and gas sold as produced and seismic
data) which is sold in the ordinary course of business on ordinary trade
terms.
(c) other property which is sold for fair consideration not in the
aggregate in excess of $500,000 in any Fiscal Year (commencing with
Fiscal Year 1998), provided that the net proceeds attributable to any
such sales shall be used by Buyer to prepay the Notes.
Section 11.5. Limitation on Investments and New Businesses. Neither
Buyer nor any Subsidiary thereof will make any expenditure or
commitment or incur any obligation or enter into or engage in any
transaction except in the ordinary course of business (which ordinary
course of business includes the acquisition, directly or indirectly, of oil
and gas properties), engage directly or indirectly in any business or
conduct any operations except in connection with or incidental to its
present businesses and operations, make any acquisitions of or capital
contributions to or other investments in any person, other than
Permitted Investments, or make any significant acquisitions or
investments in any properties other than oil and gas properties.
Section 11.6. Transactions with Affiliates. Neither Buyer nor any of
its Subsidiaries will engage in any material transaction with any of its
Affiliates on terms which are less favorable to it than those which
would have been obtainable at the time in arm's-length dealing with
persons other than such Affiliates, provided that such restriction shall
not apply to transactions among Buyer and its wholly-owned
Subsidiaries.
Section 11.7. Restricted Payments. Buyer will not, and will not permit
any of its Subsidiaries to, declare or make, or incur any liability to
declare or make, any Restricted Payment.
ARTICLE XII
Post-Closing Events of Default and Remedies
Section 12.1. Events of Default. Each of the following constitutes an
"Event of Default" for purposes of the Notes and this Agreement:
(a) a default in the payment of principal of any Note when and as the
same shall become due and payable;
(b) a default in the payment of any interest upon any Note when such
interest becomes due and payable and continuance of such default for a
period of 5 business days;
(c) a default in the performance or observation of any covenant,
agreement or condition contained in either Article X or Article XI,
which default is not remedied within 30 days after the earlier of (i) the
day on which Buyer first obtains knowledge of such default or (ii) the
day on which written notice thereof is given to Buyer by the holder of
any Note;
(d) the Proved Reserves to Debt Ratio is less than 1.6 to 1, which
default is not remedied within 30 days after the day on which written
notice thereof is given to Buyer by the holder of any Note;
(e) the PDP Reserves to Debt Ratio is less than 1.1 to 1, which default
is not remedied within 30 days after the day on which written notice
thereof is given to Buyer by the holder of any Note;
(f) any "default" or "event of default" occurs under any Note
Document which defines either such term, and the same is not
remedied within the applicable period of grace (if any) provided in
such Note Document;
(g) any representation or warranty previously, presently or hereafter
made in writing by or on behalf of Buyer or any Subsidiary thereof in
connection with this Agreement or any Note Document shall prove to
have been false or incorrect in any material respect on any date on or
as of which made, which default is not remedied within 30 days after
the earlier of (i) the day on which Buyer first obtains knowledge of
such default or (ii) the day on which written notice thereof is given to
Buyer by the holder of any Note;
(h) Buyer or any Subsidiary thereof fails to pay any portion, when such
portion is due, of any of its Indebtedness in excess of $100,000, or
breaches or defaults in the performance of any agreement or
instrument by which any such Indebtedness is issued, evidenced,
governed, or secured, and any such failure, breach or default continues
beyond any applicable period of grace provided therefor;
(i) Buyer or any Subsidiary thereof:
(i) suffers the entry against it of a judgment, decree or order for relief
by a tribunal of competent jurisdiction in an involuntary proceeding
commenced under any applicable bankruptcy, insolvency or other
similar Law of any jurisdiction now or hereafter in effect, including
the federal Bankruptcy Code, as from time to time amended, or has
any such proceeding commenced against it which remains
undismissed for a period of thirty days; or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar Law now or hereafter in effect, including the
federal Bankruptcy Code, as from time to time amended; or applies for
or consents to the entry of an order for relief in an involuntary case
under any such Law; or makes a general assignment for the benefit of
creditors; or fails generally to pay (or admits in writing its inability to
pay) its debts as such debts become due; or takes corporate or other
action to authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of all or a substantial part of its assets or of any part of the Collateral
in a proceeding brought against or initiated by it, and such
appointment or taking possession is neither made ineffective nor
discharged within thirty days after the making thereof, or such
appointment or taking possession is at any time consented to,
requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the payment of
money in excess of $100,000 (not covered by insurance satisfactory to
Sellers in their discretion), unless the same is discharged within thirty
days after the date of entry thereof or an appeal or appropriate
proceeding for review thereof is taken within such period and a stay of
execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any similar process to be
issued by any tribunal against all or any substantial part of its assets or
any part of the Collateral, and such writ or warrant of attachment or
any similar process is not stayed or released within thirty days after the
entry or levy thereof or after any stay is vacated or set aside; and
(j) Any Change in Control occurs; and
(k) Any Material Adverse Change occurs.
Upon the occurrence of an Event of Default described in subsection
(i)(i), (i)(ii) or (i)(iii) of this section with respect to Buyer or a
Subsidiary thereof, all of the Obligations shall thereupon be
immediately due and payable, without demand, presentment, notice of
demand or of dishonor and nonpayment, protest, notice of protest,
notice of intention to accelerate, declaration or notice of acceleration,
or any other notice or declaration of any kind, all of which are hereby
expressly waived by Buyer and each such Subsidiary. Upon the
occurrence of an Event of Default described in subsection (a) or
subsection (b), any Seller may during its continuance, by written
notice to Buyer declare the Note held by it to be due and payable,
whereupon such Note shall forewith mature and become due and
payable. Upon the occurrence of any other Event of Default, the
Majority of Sellers may at any time during its continuance, declare all
of the Notes to be due and payable, whereupon all of the Notes shall
forewith mature and become due and payable. As used in the
immediately preceding sentence, the term "Majority of the Sellers"
shall mean those Seller(s) who hold 51% in aggregate principal
amount of the Notes at the time outstanding, exclusive of any Notes
held by Buyer or any Subsidiary.
Section 12.2. Remedies. If any Default shall occur and be continuing,
each Seller may protect and enforce its rights under the Note
Documents by any appropriate proceedings, including proceedings for
specific performance of any covenant or agreement contained in any
Note Document, and each Seller may enforce the payment of any
Obligations due it or enforce any other legal or equitable right which it
may have; provided, that if (i) an Event of Default has occurred under
Section 12.1(a) or Section 12.1(b) and (ii) for a period of not less than
three months, the outstanding aggregate amount of principal and
interest payments with respect to which Buyer is in Default equals or
exceeds $200,000, Buyer agrees that upon demand from LP Sellers it
will immediately (A) cause the size of Buyer's Board of Directors to be
increased in number such that, after such increase and the terms of
this proviso, the LP Sellers' Nominee plus the persons designated
pursuant to clause (B) below will constitute a majority in number of
Buyer's Board of Directors and (B) appoint to fill such vacancies
persons designated by LP Sellers; further, Buyer agrees that the
persons so selected to serve on Buyer's Board of Directors shall remain
in office for a period of at least six months subsequent to Buyer curing
the above Event of Default and any other outstanding Defaults. All
rights, remedies and powers conferred upon Sellers under the Note
Documents shall be deemed cumulative and not exclusive of any other
rights, remedies or powers available under the Note Documents or at
law or in equity.
ARTICLE XIII
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 Sellers: Energy Capital Investment Company PLC
Encap Equity 1994 Limited Partnership
% EnCap Investments L.C.
1100 Louisiana
Suite 3150
Houston, Texas 77002
Attention: Colin Nisbeth
Fax No.: 713-659-6130
with a copy to:
Michael K. Pierce
Thompson & Knight, P.C.
1700 Texas Commerce Tower
600 Travis
Houston, Texas 77002
Fax No.: 713-217-2828
Gecko Booty 1994 I Limited Partnership
% Benny M. Barton
5720 Templin Way
Plano, Texas 75093
If to Buyer: 2351 West Northwest Highway, Suite 2130
Dallas, Texas 75220
Attention: Carl Price
Fax No.: 214-350-8382
and shall be considered delivered on the date of receipt. Either Buyer
or a Seller 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 party, in the manner provided in this Article, at
least ten (10) days prior to the effective date of such change of address.
ARTICLE XIV
Commissions
Each Seller severally agrees to indemnify and hold harmless Buyer
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, such Seller with any broker or finder in connection
with this Agreement or the transactions contemplated hereby. Buyer
agrees to indemnify and hold harmless Sellers 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, Buyer
with any broker or finder in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE XV
Miscellaneous Matters
Section 15.1. Survival of Provisions. All representations and
warranties made herein by Buyer and Sellers shall be continuing and
shall be true and correct on and as of the date of Closing with the same
force and effect as if made at that time, and (except as provided in
Article IX) all of such representations and warranties shall survive the
Closing and the delivery of the Assignments. The provisions of, and
the obligations of the parties under, Article VIII (to the extent the
same are, by mutual agreement, not performed at Closing), and
Articles IX through XV inclusive shall survive the Closing and the
delivery of the Assignments.
Section 15.2. Further Assurances. From time to time after the
Closing, at the request of any party hereto and without further
consideration, each Seller, on the one hand, and Buyer, 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 15.3. Binding Effect; Successors and Assigns. The
Agreement shall be binding on the parties hereto and their respective
successors and permitted assigns. Buyer, on the one hand, or a Seller,
on the other hand, shall have the right to assign its rights under this
Agreement, without the prior written consent of Sellers or Buyer (as
applicable) first having been obtained.
Section 15.4. Expenses. LP Sellers, on the one hand, and Buyer, on
the other hand, shall each bear and pay one-half of all Closing Costs.
Section 15.5. Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to subject matter
hereof and supersedes all prior agreements, understandings,
negotiations, and discussions among the parties with respect to such
subject matter. Time is of the essence in this Agreement.
Section 15.6. Public Statements. Sellers and Buyer 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 Buyer, on the one hand, nor a Seller, on the other hand, shall
issue any publicity or other release without furnishing the other a copy
of such publicity or release no less than one business day prior to
release.
Section 15.7. Injunctive Relief. The parties hereto acknowledge and
agree that irreparable damage would occur in the event any of the
provisions of this Agreement (including Section 5.2) 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 15.8. Deceptive Trade Practices. To the extent applicable to
the transaction contemplated hereby or any portion thereof, Buyer 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, Buyer represents to Sellers
that they (a) are in the business of seeking or acquiring by purchase or
lease, goods or services for commercial or business use, (b) have
knowledge and experience in financial and business matters that
enable them to evaluate the merits and risks of the transactions
contemplated hereby and (c) are not in a significantly disparate
bargaining position.
Section 15.9. 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 Buyer and
LP Sellers, provided that no amendment, modification, supplement,
restatement, discharge or waiver shall be made which materially and
adversely affects Property Seller without the written consent of
Property Seller.
Section 15.10. Severability. If any provision of this Agreement is
held to be unenforceable, this Agreement shall be considered divisible
and such provision shall be deemed inoperative to the extent it is
deemed unenforceable, and in all other respects this Agreement shall
remain in full force and effect; provided, however, that if any such
provision may be made enforceable by limitation thereof, then such
provision shall be deemed to be so limited and shall be enforceable to
the maximum extent permitted by applicable law.
Section 15.11. No Waiver. The failure of any party hereto to insist
upon strict performance of a covenant hereunder or of any obligation
hereunder, irrespective of the length of time for which such failure
continues, shall not be a waiver of such party's right to demand strict
compliance in the future. No consent or waiver, express or implied, to
or of any breach or default in the performance of any obligation
hereunder shall constitute a consent or waiver to or of any other breach
or default in the performance of the same or any other obligation
hereunder.
Section 15.12. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas.
Section 15.13. Counterparts. This Agreement may be executed in
counterparts, all of which are identical and all of which constitute one
and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement is executed by the parties
hereto on the date set forth above.
"SELLERS":
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ Gary R. Petersen
Name: Gary R. Petersen
Title: Director
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: ENCAP INVESTMENTS L.C., General Partner
By: /s/ Gary R. Petersen
Name: Gary R. Petersen
Title: Managing Director
GECKO BOOTY 1994 I LIMITED PARTNERSHIP
By: GEOSCIENCE EXPLORATION CKO, INC., General Partner
By: /s/ Benny M. Barton
Name: Benny M. Barton
Title: Chairman of the Board
"BUYER":
FUTURE PETROLEUM CORPORATION, a Utah Corporation
By: /s/ Carl Price
Name: Carl Price
Title: President
TABLE OF CONTENTS
Page
RECITALS: 1
ARTICLE I Definitions, References and Construction 2
Section 1.1. Certain Defined Terms 2
Section 1.2. References and Construction 8
ARTICLE II Agreement to Purchase and Sell Interests and Properties 9
Section 2.1. Conveyance of Interests 9
Section 2.2. Purchase Price and Payment for Interests 9
Section 2.3. Conveyance of Gecko Properties 9
Section 2.4. Purchase Price and Payment for Gecko Properties 9
Section 2.5. Purchase Price Allocation 9
ARTICLE III Representations and Warranties of Sellers 10
Section 3.1. Organization and Existence 10
Section 3.2. Power and Authority 10
Section 3.3. Valid and Binding Agreement 10
Section 3.4. Non-Contravention 11
Section 3.5. Approvals 11
Section 3.6. Pending Litigation 11
Section 3.7. Title to Interests 11
Section 3.8. BMC LP 11
Section 3.9. Investment Experience 12
Section 3.10. Investment Intent 12
Section 3.11. Restricted Securities 12
Section 3.12. Legend 13
Section 3.13. Accuracy of Information. 13
Section 3.14. No Solicitation 13
Section 3.15. Accredited Investor 13
Section 3.16. Disclaimer of Warranties 13
ARTICLE IV Representations and Warranties of Buyer 14
Section 4.1. Organization and Existence 14
Section 4.2. Power and Authority 14
Section 4.3. Valid and Binding Agreement 14
Section 4.4. Non-Contravention 14
Section 4.5. Approvals 15
Section 4.6. Pending Litigation 15
Section 4.7. Knowledgeable Purchaser 15
Section 4.8. Closing Shares. 15
Section 4.9. SEC Filings 15
ARTICLE V Certain Covenants Regarding Information and
Confidentiality 16
Section 5.1. Access to Information 16
Section 5.2. Confidentiality 16
ARTICLE VI Conditions Precedent to the Obligations of the Parties;
Termination Rights 17
Section 6.1. Conditions Precedent to the Obligations of Buyer 17
Section 6.2. Conditions Precedent to the Obligations of Sellers 18
ARTICLE VII Closing of Transaction 19
Section 7.1. The Closing 19
Section 7.2. Sellers' Closing Obligations 19
Section 7.3. Buyer's Closing Obligations 20
Section 7.4. Delivery of Files 21
Section 7.5. Agreement Regarding Execution and Delivery 21
ARTICLE VIII Certain Agreements Regarding Partnership Costs and
Expenses and Other Matters 22
Section 8.1. Partnership Costs and Expenses 22
Section 8.2. Production Proceeds 22
ARTICLE IX Agreement Regarding Specified Breach 23
ARTICLE X Certain Post-Closing Affirmative Covenants 24
Section 10.1. Payment and Performance 24
Section 10.2. Books, Financial Statements and Reports 24
Section 10.3. Notice of Material Events and Change of Address 26
Section 10.4. Maintenance of Properties 26
Section 10.5. Maintenance of Existence and Qualifications 26
Section 10.6. Payment of Trade Liabilities, Taxes, etc. 27
Section 10.7. Insurance 27
Section 10.8. Compliance with Agreements and Law 27
Section 10.9. Agreement to Deliver Security Documents 27
Section 10.10. Perfection and Protection of Security Interests and
Liens 27
Section 10.11. Election of LP Sellers' Nominee to Board of Directors 28
ARTICLE XI Certain Post-Closing Negative Covenants 28
Section 11.1. Indebtedness 28
Section 11.2. Limitation on Liens 29
Section 11.3. Limitation on Mergers 29
Section 11.4. Limitation on Sales of Property 30
Section 11.5. Limitation on Investments and New Businesses 30
Section 11.6. Transactions with Affiliates 30
Section 11.7. Restricted Payments 30
ARTICLE XII Post-Closing Events of Default and Remedies 30
Section 12.1. Events of Default 30
Section 12.2. Remedies 33
ARTICLE XIII Notices 33
ARTICLE XIV Commissions 34
ARTICLE XV Miscellaneous Matters 35
Section 15.1. Survival of Provisions 35
Section 15.2. Further Assurances 35
Section 15.3. Binding Effect; Successors and Assigns 35
Section 15.4. Expenses 35
Section 15.5. Entire Agreement 35
Section 15.6. Public Statements 35
Section 15.7. Injunctive Relief 36
Section 15.8. Deceptive Trade Practices 36
Section 15.9. Amendments 36
Section 15.10. Severability 36
Section 15.11. No Waiver. 36
Section 15.12. Governing Law. 36
Section 15.13. Counterparts 37
PURCHASE AND SALE AGREEMENT
Dated November 25, 1997
By and Among
Future Petroleum Corporation, a Utah Corporation;
Energy Capital Investment Company PLC,
an English investment company;
EnCap Equity 1994 Limited Partnership,
a Texas limited partnership; and
Gecko Booty 1994 I Limited Partnership,
a Texas limited partnership
PROMISSORY NOTE
$3,123,041 Houston, Texas November 25, 1997
FOR VALUE RECEIVED, the undersigned, FUTURE PETROLEUM CORPORATION, a Utah
corporation, hereby promises to pay to the order of ENERGY CAPITAL
INVESTMENT COMPANY PLC, an English investment company ("Lender") the
principal sum of THREE MILLION ONE HUNDRED TWENTY-THREE THOUSAND FORTY-ONE
AND NO /100 Dollars ($3,123,041) with interest on the unpaid balance thereof
from the date hereof until maturity at the rate of ten percent (10%) per
annum, both principal and interest payable as hereinafter provided in lawful
money of the United States of America at 1100 Louisiana, Suite 3150
Houston, Texas 77002, or at such other place within Harris County,
Texas as from time to time my be designated by the holder of this Note.
All past due principal and/or interest or installments thereof shall bear
interest at the highest rate for which the undersigned may legally contract
under applicable law or, if no such rate is designated under applicable law,
at the rate of eighteen percent (18%) per annum.
Interest only on this Note shall be due and payable monthly as it accrues on
the last business day of each month, beginning November 30, 1997 and on the
last business day of each succeeding month until June 30, 1998. Thereafter:
(i) the principal of this Note shall be due and payable in monthly
installments of Thirty-Two Thousand Five Hundred Thirty-One and 67/100
Dollars ($32,531.67) each, payable on the last business day of each calendar
month, beginning June 30, 1998, and continuing regularly thereafter
until and including May 31, 2003, on which date all unpaid principal of
and accrued interest on this Note shall be due and payable and (ii)
interest shall be due and payable monthly as it accrues, on the same dates
as, but in addition to, said installments of principal.
This Note (a) is executed and delivered in connection with and pursuant to
that certain Purchase and Sale Agreement dated November 25, 1997 (the
"Purchase Agreement") between the undersigned and Energy Capital Investment
Company PLC, EnCap Equity 1994 Limited Partnership and Gecko Booty 1994 I
Limited Partnership (collectively, "Sellers') and is one of the "Notes" as
defined therein, (b) is subject to the terms and provisions thereof, which
contains provisions for acceleration of maturity hereof upon the happening of
certain stated events and (c) is secured by and entitled to the benefits of
Security Documents (as identified and defined therein). Reference is hereby
made to (i) Purchase Agreement for a description of certain rights, limitations
of rights, obligations and duties of the parties hereto and for the meanings
assigned to terms used and not defined herein, and (ii) the Security Documents
for a description of the nature and extent of the security thereby provided and
the rights of the parties thereto.
The undersigned shall have the right to prepay, without penalty, at any time
and from time to time prior to maturity, all or any part of the unpaid
principal balance of this Note and/or all or any part of the unpaid interest
accrued to the date of such prepayment, provided that any such principal thus
paid is accompanied by accrued interest on such principal. Any partial
prepayments of principal shall be applied to installments thereof in the
inverse order of maturity.
It is the intent of the payee of this Note and the undersigned in the execution
of this Note and all other instruments now or hereafter securing this Note to
contract in strict compliance with applicable usury law. In furtherance
thereof, the said payee and the undersigned stipulate and agree that none
of the terms and provisions contained in this Note, or in any other instrument
executed in connection herewith, shall ever be construed to create a contract
to pay for the use, forbearance or detention of money, interest at a rate in
excess of the maximum interest rate permitted to be charged by applicable
law; that neither the undersigned nor any guarantors, endorsers or other
parties now or hereafter becoming liable for payment of this Note shall ever
be obligated or required to pay interest on this Note at a rate in excess of
the maximum interest that may be lawfully charged under applicable law; and
that the provisions of this paragraph shall control over all other provisions
of this Note and any other instruments now or hereafter executed in
connection herewith which may be in apparent conflict herewith. The holder of
this Note expressly disavows any intention to charge or collect excessive
unearned interest or finance a result thereof the interest received for the
actual period of existence ofthe loan evidenced by this Note exceeds the
applicable maximum lawful rate, the holder of this Note shall, at its option,
either refund to the undersigned the amount of such excess or credit the
amount of such excess against the principal balance of this Note then
outstanding and thereby shall render inapplicable any and all penalties of
any kind provided by applicable law as a result of such excess interest.
In the event that the said payee or any other holder of this Note shall
contract for, charge or receive any amount or amounts and/or any other
thing of value which are determined to constitute interest which would
increase the effective interest rate on this Note to a rate in excess of that
permitted to be charged by applicable law, an amount equal to interest in
excess of the lawful rate shall, upon such determination, at the option of
the holder of this Note, be either immediately returned to the undersigned or
credited against the principal balance of this Note then outstanding, in
which event any and all penalties of any kind under applicable law as a
result of such excess interest shall be inapplicable. By execution of this
Note the undersigned acknowledges that it believes the loan evidence by this
Note to be non-usurious and agrees that if, at any time, the undersigned
should have reason to believe that such loan is in fact usurious, it will
give the holder of this Note notice of such condition and the undersigned
agrees that said holder shall have ninety (90) days in which to make
appropriate refund or other adjustment in order to correct such condition
if in fact such exists. The term "applicable law" as used in this Note
shall mean the laws of the State of Texas or the laws of the United States,
whichever laws allow the greater rate of interest, as such laws now exist
or may be changed or amended or come into effect in the future.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity or through any bankruptcy, receivership,
probate or other court proceedings or if this Note is placed in the hands
of attorneys for collection after default, the undersigned and all endorsers,
guarantors and sureties of this Note jointly and severally agree to pay to
the holder of this Note in addition to the principal and interest due and
payable hereon all the costs and expenses of said holder in enforcing this
Note including, without limitation, reasonable attorneys' fees and
legal expenses.
The undersigned and all endorsers, guarantors and sureties of this Note
and all other persons liable or to become liable on this Note severally
waive presentment for payment, demand, notice of demand and of
dishonor and nonpayment of this Note, notice of intention to accelerate
the maturity of this Note, protest and notice of protest, diligence in
collecting, and the bringing of suit against any other party, and agree
to all renewals, extensions, modifications, partial payments, releases
or substitutions of security, in whole or in part, with or without notice,
before or after maturity.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES
HEREUNDER SHALL BE GOVERNED FOR ALL PURPOSES BY
THE LAW OF THE STATE OF TEXAS AND THE LAW OF THE
UNITED STATES APPLICABLE TO TRANSACTIONS WITHIN
SUCH STATE.
FUTURE PETROLEUM CORPORATION,
a Utah corporation
By: /s/ B. Carl Price
B. Carl Price, President
PROMISSORY NOTE
$3,301,959 Houston, Texas November 25, 1997
FOR VALUE RECEIVED, the undersigned, FUTURE
PETROLEUM CORPORATION, a Utah corporation, hereby
promises to pay to the order of ENCAP EQUITY 1994 LIMITED
PARTNERSHIP, a Texas limited partnership ("Lender") the principal
sum of THREE MILLION THREE HUNDRED ONE THOUSAND
NINE HUNDRED FIFTY NINE AND NO/100 Dollars ($3,301,959)
with interest on the unpaid balance thereof from the date hereof until
maturity at the rate of ten percent (10%) per annum, both principal
and interest payable as hereinafter provided in lawful
money of the United States of America at 1100 Louisiana, Suite 3150
Houston, Texas 77002, or at such other place within Harris County,
Texas as from time to time my be designated by the holder of this Note.
All past due principal and/or interest or installments thereof shall bear
interest at the highest rate for which the undersigned may legally
contract under applicable law or, if no such rate is designated under
applicable law, at the rate of eighteen percent (18%) per annum.
Interest only on this Note shall be due and payable monthly as it
accrues on the last business day of each month, beginning
November 30, 1997 and on the last business day of each succeeding
month until June 30, 1998. Thereafter: (i) the principal of this Note
shall be due and payable in monthly installments of Thirty-Four
Thousand Three Hundred Ninety-Five and 41/100 Dollars
($34,395.41) each, payable on the last business day of each
calendar month, beginning June 30, 1998, and continuing regularly
thereafter until and including May 31, 2003, on which date all unpaid
principal of and accrued interest on this Note shall be due and payable and
(ii)interest shall be due and payable monthly as it accrues, on the same dates
as, but in addition to, said installments of principal.
This Note (a) is executed and delivered in connection with and
pursuant to that certain Purchase and Sale Agreement dated
November 25, 1997 (the "Purchase Agreement") between the
undersigned and Energy Capital Investment Company PLC,
EnCap Equity 1994 Limited Partnership and Gecko Booty 1994
I Limited Partnership (collectively, "Sellers') and is one of the
"Notes" as defined therein, (b) is subject to the terms and provisions
thereof, which contains provisions for acceleration of maturity
hereof upon the happening of certain stated events and (c) is secured
by and entitled to the benefits of Security Documents (as identified and
defined therein). Reference is hereby made to (i) Purchase Agreement
for a description of certain rights, limitations of rights, obligations and
duties of the parties hereto and for the meanings assigned to terms used
and not defined herein, and (ii) the Security Documents for a description
of the nature and extent of the security thereby provided and
the rights of the parties thereto.
The undersigned shall have the right to prepay, without penalty,
at any time and from time to time prior to maturity, all or any
part of the unpaid principal balance of this Note and/or all or
any part of the unpaid interest accrued to the date of such
prepayment, provided that any such principal thus paid is
accompanied by accrued interest on such principal. Any partial
prepayments of principal shall be applied to installments thereof
in the inverse order of maturity.
It is the intent of the payee of this Note and the undersigned in the
execution of this Note and all other instruments now or hereafter
securing this Note to contract in strict compliance with applicable
usury law. In furtherance thereof, the said payee and the
undersigned stipulate and agree that none of the terms and
provisions contained in this Note, or in any other instrument
executed in connection herewith, shall ever be construed to create
a contract to pay for the use, forbearance or detention of money, interest at
a rate in excess of the maximum interest rate permitted to be charged by
applicable law; that neither the undersigned nor any guarantors, endorsers
or other parties now or hereafter becoming liable for payment of this Note
shall ever be obligated or required to pay interest on this Note at a rate in
excess of the maximum interest that may be lawfully charged under applicable
law; and that the provisions of this paragraph shall control over all other
provisions of this Note and any other instruments now or hereafter executed
in connection herewith which may be in apparent conflict herewith. The
holder of this Note expressly disavows any intention to charge or collect
excessive unearned interest or finance a result thereof the interest received
for the actual period of existence of the loan evidenced by this Note exceeds
the applicable maximum lawful rate, the holder of this Note shall, at its
option, either refund to the undersigned the amount of such excess or credit
the amount of such excess against the principal balance of this Note then
outstanding and thereby shall render inapplicable any and all penalties of
any kind provided by applicable law as a result of such excess interest.
In the event that the said payee or any other holder of this Note shall
contract for, charge or receive any amount or amounts and/or
any other thing of value which are determined to constitute interest which
would increase the effective interest rate on this Note to a rate in excess
of that permitted to be charged by applicable law, an amount equal to
interest in excess of the lawful rate shall, upon such determination, at the
option of the holder of this Note, be either immediately returned to the
undersigned or credited against the principal balance of this Note then
outstanding, in which event any and all penalties of any kind under
applicable law as a result of such excess interest shall be inapplicable.
By execution of this Note the undersigned acknowledges that it believes the
loan evidence by this Note to be non-usurious and agrees that if, at any
time, the undersigned should have reason to believe that such loan is in fact
usurious, it will give the holder of this Note notice of such condition and
the undersigned agrees that said holder shall have ninety (90) days in which
to make appropriate refund or other adjustment in order to correct such
condition if in fact such exists. The term "applicable law" as used in this
Note shall mean the laws of the State of Texas or the laws of the United
States, whichever laws allow the greater rate of interest, as such laws now
exist or may be changed or amended or come into effect in the future.
Should the indebtedness represented by this Note or any part thereof
be collected at law or in equity or through any bankruptcy,
receivership, probate or other court proceedings or if this Note
is placed in the hands of attorneys for collection after default,
the undersigned and all endorsers, guarantors and sureties of
this Note jointly and severally agree to pay to the holder of this
Note in addition to the principal and interest due and payable
hereon all the costs and expenses of said holder in enforcing this
Note including, without limitation, reasonable attorneys' fees and
legal expenses.
The undersigned and all endorsers, guarantors and sureties
of this Note and all other persons liable or to become liable
on this Note severally waive presentment for payment, demand,
notice of demand and of dishonor and nonpayment of this Note,
notice of intention to accelerate the maturity of this Note, protest
and notice of protest, diligence in collecting, and the bringing
of suit against any other party, and agree to all renewals,
extensions, modifications, partial payments, releases or
substitutions o of security, in whole or in part, with or without notice,
before or after maturity.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE
PARTIES HEREUNDER SHALL BE GOVERNED FOR
ALL PURPOSES BY THE LAW OF THE STATE OF
TEXAS AND THE LAW OF THE UNITED STATES
APPLICABLE TO TRANSACTIONS WITHIN SUCH STATE.
FUTURE PETROLEUM CORPORATION,
a Utah corporation
By: /s/ B. Carl Price
B. Carl Price, President
PROMISSORY NOTE
$175,000 Houston, Texas November 25, 1997
FOR VALUE RECEIVED, the undersigned, FUTURE
PETROLEUM CORPORATION, a Utah corporation,
hereby promises to pay to the order of GECKO BOOTY
1994 I LIMITED PARTNERSHIP, a Texas limited partnership
("Lender") the principal sum of ONE HUNDRED SEVENTY-FIVE
THOUSAND AND NO/100 Dollars ($175,000) with interest on
the unpaid balance thereof from the date hereof until maturity at
the rate of ten percent (10%) per annum, both principal and
interest payable as hereinafter provided in lawful money of the
United States of America at 1100 Louisiana, Suite 3150
Houston, Texas 77002, or at such other place within Harris County,
Texas as from time to time my be designated by the holder of this Note.
All past due principal and/or interest or installments thereof shall
bear interest at the highest rate for which the undersigned may
legally contract under applicable law or, if no such rate is designated
under applicable law, at the rate of eighteen percent (18%) per annum.
Interest only on this Note shall be due and payable monthly as it
accrues on the last business day of each month, beginning
November 30, 1997 and on the last business day of each
succeeding month until June 30, 1998. Thereafter: (i) the
principal of this Note shall be due and payable in monthly
installments of One Thousand Eight Hundred Twenty-Two
and 92/100 Dollars ($1,822.92) each, payable on the last business
day of each calendar month, beginning June 30, 1998, and
continuing regularly thereafter until and including May 31, 2003,
on which date all unpaid principal of and accrued interest on this
Note shall be due and payable and (ii) interest shall be due and payable
monthly as it accrues, on the same dates as, but in addition to, said
installments of principal.
This Note (a) is executed and delivered in connection with and
pursuant to that certain Purchase and Sale Agreement dated
November 25, 1997 (the "Purchase Agreement") between the
undersigned and Energy Capital Investment Company PLC,
EnCap Equity 1994 Limited Partnership and Gecko Booty 1994
I Limited Partnership (collectively, "Sellers') and is one of the
"Notes" as defined therein, (b) is subject to the terms and provisions
thereof, which contains provisions for acceleration of maturity hereof
upon the hereof upon the happening of certain stated events and (c)
is secured by and entitled to the benefits of Security Documents (as
identified and defined therein). Reference is hereby made to (i)
Purchase Agreement for a description of certain rights, limitations
of rights, obligations and duties of the parties hereto and for the meanings
assigned to terms used and not defined herein, and (ii) the Security Documents
for a description of the nature and extent of the security thereby provided and
the rights of the parties thereto.
The undersigned shall have the right to prepay, without penalty, at
any time and from time to time prior to maturity, all or any part of
the unpaid principal balance of this Note and/or all or any part of
the unpaid interest accrued to the date of such prepayment,
provided that any such principal thus paid is accompanied by
accrued interest on such principal. Any partial prepayments of
principal shall be applied to installments thereof in the inverse
order of maturity.
It is the intent of the payee of this Note and the undersigned in the
execution of this Note and all other instruments now or hereafter
securing this Note to contract in strict compliance with applicable
usury law. In furtherance thereof, the said payee and the undersigned
stipulate and agree that none of the terms and provisions contained in
this Note, or in any other instrument executed in connection herewith,
shall ever be construed to create a contract to pay for the use,
forbearance or detention of money, interest at a rate in excess
of the maximum interest rate permitted to be charged by applicable law; that
neither the undersigned nor any guarantors, endorsers or other parties now
or hereafter becoming liable for payment of this Note shall ever be obligated
or required to pay interest on this Note at a rate in excess of the maximum
interest that may be lawfully charged under applicable law; and that the
provisions of this paragraph shall control over all other provisions of this
Note and any other instruments now or hereafter executed in connection
herewith which may be in apparent conflict herewith. The holder of this Note
expressly disavows any intention to charge or collect excessive unearned
interest or finance a result thereof the interest received for the actual
period of existence of the loan evidenced by this Note exceeds the applicable
maximum lawful rate, the holder of this Note shall, at its option, either
refund to the undersigned the amount of such excess or credit the amount of
such excess against the principal balance of this Note then outstanding and
thereby shall render inapplicable any and all penalties of any kind provided
by applicable law as a result of such excess interest. In the event that the
said payee or any other holder of this Note shall contract for, charge or
receive any amount or amounts and/or any other thing of value which are
determined to constitute interest which would increase the effective interest
rate on this Note to a rate in excess of that permitted to be charged by
applicable law, an amount equal to interest in excess of the lawful rate
shall, upon such determination, at the option of the holder of this Note, be
either immediately returned to the undersigned or credited against the
principal balance of this Note then outstanding, in which event any and
all penalties of any kind under applicable law as a result of such excess
interest shall be inapplicable. By execution of this Note the undersigned
acknowledges that it believes the loan evidence by this Note to be
non-usurious and agrees that if, at any time, the undersigned should have
reason to believe that such loan is in fact usurious, it will give
the holder of this Note notice of such condition and the undersigned
agrees that said holder shall have ninety (90) days in which to make
appropriate refund or other adjustment in order to correct such condition
if in fact such exists. The term "applicable law" as used in this Note
shall mean the laws of the State of Texas or the laws of the United States,
whichever laws allow the greater rate of interest, as such laws now exist
or may be changed or amended or come into effect in the future.
Should the indebtedness represented by this Note or any part thereof
be collected at law or in equity or through any bankruptcy, receivership,
probate or other court proceedings or if this Note is placed in the hands
of attorneys for collection after default, the undersigned and all endorsers,
guarantors and sureties of this Note jointly and severally agree to pay to
the holder of this Note in addition to the principal and interest due and
payable hereon all the costs and expenses of said holder in enforcing this
Note including, without limitation, reasonable attorneys' fees and
legal expenses.
The undersigned and all endorsers, guarantors and sureties of this Note
and all other persons liable or to become liable on this Note severally
waive presentment for payment, demand, notice of demand and of
dishonor and nonpayment of this Note, notice of intention to accelerate
the maturity of this Note, protest and notice of protest, diligence in
collecting, and the bringing of suit against any other party, and
agree to all renewals, extensions, modifications, partial payments,
releases or substitutions of security, in whole or in part, with or
without notice, before or after maturity.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES
HEREUNDER SHALL BE GOVERNED FOR ALL PURPOSES BY
THE LAW OF THE STATE OF TEXAS AND THE LAW OF THE
UNITED STATES APPLICABLE TO TRANSACTIONS WITHIN
SUCH STATE.
FUTURE PETROLEUM CORPORATION,
a Utah corporation
By: /s/ B. Carl Price
B. Carl Price, President
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of this 25th day of November, 1997, by and among Future Petroleum
Corporation, a Utah corporation (the "Company"), Energy Capital Investment
Company PLC, an English investment company ("Energy PLC"), and EnCap Equity
1994 Limited Partnership, a Texas limited partnership ("EnCap LP").
RECITALS:
A. Reference is herein made to that certain Purchase and Sale Agreement dated
as of even date herewith (the "Purchase Agreement") by and among the parties
hereto and Gecko Booty 1994 I Limited Partnership, a Texas limited partnership.
B. In order to induce Energy PLC and EnCap LP to enter into the Purchase
Agreement (and recognizing that Energy PLC and EnCap LP would not be willing
to enter into the Purchase Agreement in the absence of this Agreement), the
Company has agreed to provide Energy PLC and EnCap LP with the registration
rights set forth herein.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing Recitals and the
mutual covenants contained herein, the sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby
agree as follows:
Section 1. Definitions and References.
(a) When used in this Agreement, the following terms shall have the respective
meanings assigned to them in this Section 1 or in the sections, subsections or
other subdivisions referred to below:
"Agreement" shall mean this Agreement, as hereafter changed, modified or
amended in accordance with the terms hereof.
"Commission" shall mean the Securities and Exchange Commission (or any
successor body thereto).
"Company" shall have the meaning assigned to it in the introductory paragraph
hereof.
"Common Stock" shall mean the common stock of the Company, $0.01 par
value per share.
"Demand Registration" shall have the meaning assigned to it in Section 2(a).
"EnCap LP" shall have the meaning assigned to it in the introductory paragraph
hereof.
"Energy PLC" shall have the meaning assigned to it in the introductory
paragraph hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and all rules and regulations promulgated under such Act.
"Holder" shall mean any Person that holds Registrable Securities.
"Holder Indemnified Parties" shall have the meaning assigned to it in Section
9(a).
"Person" shall mean any individual, corporation, partnership, joint venture,
limited partnership, limited liability company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Piggyback Registration" shall have the meaning assigned to it in Section 3.
"Purchase Agreement" shall have the meaning assigned to it in Paragraph A
of the Recitals hereto.
"Registrable Securities" shall mean (i) the shares of Common Stock and/or
other securities issued pursuant to this Agreement and (ii) any securities
issued or issuable with respect to the shares described in clause (i) above
by way of a stock dividend or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other reorganization;
provided, that a share of Common Stock or security described in clauses (i)
and (ii) shall cease to be a Registrable Security for purposes of this
Agreement at such time as either (A) counsel to the Company renders an
opinion to the Holder of such share or security to the effect that such share
or security can be freely transferred without registration under the
Securities Act (which counsel and opinion shall be reasonably acceptable to
such Holder) or (B) counsel to a Holder of such share or security renders an
opinion to the Company to the effect that such share or security can be
freely transferred without registration under the Securities Act (which
counsel and opinion shall be reasonably acceptable to the Company).
"Registration Expenses" shall mean all expenses incident to the Company's
performance of or compliance with the registration rights granted hereunder,
including (without limitation) all registration and filing fees, fees and
expenses of compliance with securities and blue sky laws, printing and
engraving expenses, messenger, telephone and delivery expenses, and fees and
disbursements of counsel for the Company, all independent certified public
accountants and underwriters (excluding discounts and commissions);
provided, that Registration Expenses shall not include any Selling Expenses.
"Securities Act" shall mean the Securities Act of 1933, as amended, and all
rules and regulations under such Act.
"Selling Expenses" shall mean underwriting discounts or commissions, any
selling commissions and stock transfer taxes attributable to sales of
Registrable Securities and the fees and expenses of counsel for any Holder.
(b) All references in this Agreement to sections, subsections and other
subdivisions refer to corresponding sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. 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 herein. 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. 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.
Section 2. Demand Registration Rights.
(a) A Holder may request at any time after the expiration of the one-year
period commencing as of the date hereof a registration by the Company under
the Securities Act of all or a part its Registrable Securities (a "Demand
Registration").
(b) Notwithstanding subsection (a) above or anything else herein to the
contrary, the Company shall not be obligated to effect more than two
registrations pursuant to this Section 2; provided, however, that any
registration requested pursuant to this Section 2 will not be deemed to have
been effected unless it has become effective and remained effective for the
lesser of either the period necessary to complete the sale or disposition of
the Registrable Securities covered by such registration statement;
provided, further, that any such registration which does not become
effective after the Company has filed a registration statement in
accordance with the provisions of this Section 2 solely by reason of
the refusal to proceed of the Holder or Holders that have requested
the Demand Registration pursuant to subsection (a) above, including
failure to comply with the provisions of this Agreement (other than
any refusal to proceed based upon the advice of counsel to such Holder
or Holders that the registration statement, or the prospectus contained
therein, contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing, or that such registration statement or
such prospectus, or the distribution contemplated thereby, otherwise
violates or would, if such distribution using such prospectus took
place, violate any applicable state or federal securities law) shall
be deemed to have been effected by the Company at the request of
such Holder or Holders.
(c) Notwithstanding subsection (a) above or anything else herein to the
contrary, it is hereby agreed that a Demand Registration must cover no less
than 50% of the Registrable Shares then outstanding. In the event a Demand
Registration is made pursuant to this Section 2, The Company will (i)
promptly give notice of the proposed registration to any other Holder, if
any, of Registrable Securities and (ii) use its reasonable best efforts to
effect the registration of the Registrable Securities specified in the
request, together with the Registrable Securities of any other Holder joining
in such request as are specified in a written request received by the Company
within 20 days after receipt of the notice referred to in clause (i) above.
Section 3. Piggyback Registration Rights. If the Company proposes to
register any of its securities under the Securities Act other than (a)
under employee compensation or benefit programs, (b) an exchange
offer or an offering of securities solely to the existing stockholders or
employees of the Company, or (c) securities to be issued in a
transaction described in Rule 145(a) promulgated under the Securities
Act, and the registration form to be used may be used for the
registration of Registrable Securities, the Company will give prompt
written notice to Holders of Registrable Securities of its intention to
effect such a registration and will include in such registration all
Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 15 days after the receipt
of the Company's notice (a "Piggyback Registration"). The Company
shall use its reasonable best efforts to cause the managing underwriters
of a proposed underwritten offering to permit the Registrable
Securities requested to be included in the registration statement (or
registration statements) for such offering to be included therein on the
same terms and conditions as any similar securities of the Company
included therein. Notwithstanding the foregoing, if the Company
gives notice of such a proposed registration, the total number of
Registrable Securities which shall be included in such registration
shall be reduced pro rata to such number, if any, as in the reasonable
opinion of the managing underwriters of such offering would not
adversely affect the marketability or offering price of all of the
securities proposed to be offered by the Company in such offering;
provided however, that (i) if such Piggyback Registration is incident to
a primary registration on behalf of the Company, and to the extent not
prohibited by any written registration rights agreements existing on
the date hereof, the securities to be included in the registration
statement (or registration statements) for any person other than the
Holders and the Company shall be first reduced prior to any such pro
rata reduction, and (i) if such Piggyback Registration is incident to a
secondary registration on behalf of holders of securities of the
Company and to the extent not prohibited by any written registration
rights agreements existing on the date hereof, the securities to be
included in the registration statement (or registration statements) for
any person not exercising "demand" registration rights other than the
Holders shall be first reduced prior to any such pro rata reduction.
Section 4. Registration Procedures.
(a) Whenever the holders of Registrable Securities have requested that
any Registrable Securities be registered pursuant to Section 2 or
Section 3, the Company will as expeditiously as possible:
(i) prepare and file with the Commission a registration statement on
the appropriate form with respect to such Registrable Securities, and
use its reasonable best efforts to cause such registration statement to
become effective as soon as reasonably practicable after the filing
thereof (provided, that before filing a registration statement or
prospectus or any amendments or supplements thereto, The Company
will furnish copies of all such documents proposed to be filed to any
holder of Registrable Securities covered by such registration
statement);
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than the period set forth in
such section or such shorter period which will terminate when
Registrable Securities covered by such registration statement have
been sold (but not before the expiration of the applicable prospectus
delivery period) and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement;
(iii) notify each seller of Registrable Securities requesting registration
promptly after the Company shall receive notice thereof of the time
when such registration statement has been filed;
(iv) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration
statement (including, without limitation, each preliminary prospectus)
and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned
by such seller;
(v) use its reasonable best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such
jurisdictions within the United States as any seller reasonably requests
and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by
such seller (provided that the Company will not be required to qualify
generally to do business or subject itself to any general service of
process in any jurisdiction where it is otherwise not then so subject);
(vi) notify each seller of such Registrable Securities, at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event which requires the
making of any change in the prospectus included in such registration
statement so that such document will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading,
and, at the request of any such seller, the Company will prepare a
supplement or amendment to such prospectus so that such prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading;
(vii) use its reasonable best efforts to cause all such Registrable
Securities to be listed on each securities exchange or exchanges,
automated quotation system or over-the-counter market upon which
securities of the Company of the same class are then listed;
(viii) enter into such customary agreements (including, without
limitation, underwriting agreements in customary form, substance and
scope) and take all such other action as the Holders of a majority of the
Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of
such Registrable Securities;
(ix) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission;
(x) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the
disqualification of any common stock included in such registration
statement for sale in any jurisdiction, the Company will use its
reasonable best efforts promptly to obtain the withdrawal of such
order;
(x) use its reasonable best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may
be necessary to enable the sellers thereof to consummate the
disposition of such Registrable Securities; and
(xi) use its reasonable best efforts to obtain a comfort letter from the
Company's public accountants in customary form and covering such
matters of the type customarily covered by comfort letters with respect
to offerings of the type being made pursuant to the registration
statement as the Holders of the Registrable Securities reasonably
request.
(b) Whenever the Holders of Registrable Securities have requested that
any Registrable Securities be registered pursuant to Section 2 or
Section 3, each Holder of Registrable Securities (including Registrable
Securities in any registration statement filed pursuant to this
Agreement) will be deemed to have agreed as follows:
(i) upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 4(a)(vi), the Holders of
Registrable Securities covered by such registration statement will
forthwith discontinue disposition of any such Registrable Securities
until the Holders of Registrable Securities receive copies of the
supplemented or amended prospectus contemplated by Section
4(a)(vi), or until they are advised in writing by the Company that the
use of the applicable prospectus may be resumed, and they have
received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such
prospectus (it being the agreement of the parties hereto, however, that
the obligation of the Company with respect to maintaining the subject
registration statement current and effective shall be extended by a
period of days equal to the period the Holders of Registrable Securities
are required by this Section 4(b)(i) to discontinue disposition of such
Registrable Securities); and
(ii) furnish to the Company such information regarding each Holder,
the Registrable Securities held by such Holder and the intended
method of disposition thereof as the Company shall reasonably request
and as shall be reasonably required in connection with the preparation
of the applicable registration statement and other actions taken by the
Company under this Agreement, and it shall be a condition precedent
to the obligation of the Company to take any action pursuant to this
Agreement in respect of the Registrable Securities that such
information has been furnished to the Company by the Holders of
Registrable Securities.
Section 5. Expenses of Registration. The Company shall pay all
Registration Expenses in connection with each registration effected
pursuant to Sections 2 and 3 and, in any event, shall pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal and accounting duties), the
expense of any annual audit and the fees and expenses incurred in
connection with the listing of the securities to be registered on each
securities exchange on which securities pro rata based upon the
number of Registrable Securities included in such registration.
Section 6. Indemnification.
(a) The Company shall indemnify and hold harmless, with respect to
any registration statement filed by it, to the full extent permitted by
law, each Holder of Registrable Securities covered by such registration
statement, and each other Person, if any, who controls such Holder
within the meaning of Section 15 of the Securities Act (collectively,
"Holder Indemnified Parties") against all losses, claims, damages,
liabilities and expenses, joint or several to which any such Holder
Indemnified Party may become subject under the Securities Act, the
Exchange Act, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of
a material fact contained in any registration statement in which such
Registrable Securities were included as contemplated hereby or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary, final or summary
prospectus, together with the documents incorporated by reference
therein (as amended or supplemented if the Company shall have filed
with the Commission any amendment thereof or supplement thereto),
or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or (iii) any violation by the Company of
any federal, state or common law rule or regulation applicable to the
Company and relating to action of or inaction by the Company in
connection with any such registration; and in each such case, the
Company shall reimburse each such Holder Indemnified Party for any
reasonable legal or other expenses incurred by any of them in
connection with investigating or defending any such loss, claim,
damage, liability, expense, action or proceeding; provided, however,
that the Company shall not be liable to any such Holder Indemnified
Party in any such case to the extent, that any such loss, claim, damage,
liability or expense (or action or proceeding, whether commenced or
threatened, in respect thereof) arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission
made in such registration statement or amendment thereof or
supplement thereto or in any such preliminary, final or summary
prospectus in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any such
Holder Indemnified Party for use in the preparation thereof. Such
indemnity and reimbursement of expenses and other obligations shall
remain in full force and effect regardless of any investigation made by
or on behalf of the Holder Indemnified Parties and shall survive the
transfer of such securities by such Holder Indemnified Parties.
(b) Each Holder of Registrable Securities participating in any
registration hereunder shall severally (and not jointly or jointly and
severally) indemnify and hold harmless, to the fullest extent permitted
by law, the Company, its directors, officers, employees and agents, and
each Person who controls the Company (within the meaning of
Section 15 of the Securities Act) (collectively, "Company Indemnified
Parties") against all losses, claims, damages, liabilities and expenses to
which any Company Indemnified Party may become subject under the
Securities Act, the Exchange Act, at common law or otherwise, insofar
as such losses, claims, damages, liabilities or expenses (or actions or
proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any registration
statement in which such Holder's Registrable Securities were included
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary, final or
summary prospectus, together with the documents incorporated by
reference therein (as amended or supplemented if the Company shall
have filed with the Commission any amendment thereof or supplement
thereto), or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading to the extent in the cases described in
clauses (i) and (ii), that such untrue statement or omission was
furnished in writing by such Holder for use in the preparation thereof,
or (iii) any violation by such Holder of any federal, state or common
law rule or regulation applicable to such Holder and relating to action
of or inaction by such Holder in connection with any such registration;
and in each such case, such Holder shall reimburse each such
Company Indemnified Party for any reasonable legal or other expenses
incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability, expense, action or proceeding.
Such indemnity obligation shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company
Indemnified Parties (except as provided above) and shall survive the
transfer of such securities by such Holder.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) of written notice of the commencement of any action, suit,
proceeding, investigation or threat thereof made in writing with
respect to which a claim for indemnification may be made pursuant to
this Section 6, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written
notice to the indemnifying party of the threat or commencement
thereof; provided, however, that the failure to so notify the
indemnifying party shall not relieve it from any liability which it may
have to any indemnified party except to the extent that the
indemnifying party is actually prejudiced by such failure to give
notice. If any such claim or action referred to under subsection (a) or
(b) is brought against any indemnified party and it then notifies the
indemnifying party of the threat or commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the
extent that it wishes, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. After notice from
the indemnifying party to such indemnified party of its election so to
assume the defense of any such claim or action, the indemnifying party
shall not be liable to such indemnified party under this Section 6 for
any legal expenses of counsel or any other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation unless the
indemnifying party has failed to assume the defense of such claim or
action or to employ counsel reasonably satisfactory to such
indemnified party. Under no circumstances will the indemnifying
party be obligated to pay the fees and expenses of more than one law
firm for all indemnified parties. The indemnifying party shall not be
required to indemnify the indemnified party with respect to any
amounts paid in settlement of any action, proceeding or investigation
entered into without the written consent of the indemnifying party,
which consent shall not be unreasonably withheld. No indemnifying
party shall consent to the entry of any judgment or enter into any
settlement without the consent of the indemnified party unless (i) such
judgment or settlement does not impose any obligation or liability
upon the indemnified party other than the execution, delivery or
approval thereof, and (ii) such judgment or settlement includes as an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a full release and discharge from all liability
in respect of such claim for all persons that may be entitled to or
obligated to provide indemnification or contribution under this Section
6.
(d) Indemnification similar to that specified in the preceding
subsections of this Section 6 (with appropriate modifications) shall be
given by the Company and each seller of Registrable Securities with
respect to any required registration or qualification of securities under
any state securities or blue sky laws.
(e) If the indemnification provided for in this Section 6 is unavailable
to or insufficient to hold harmless an indemnified party under
subsection (a) or (b), then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the
losses, claims, damages, liabilities or expenses (or actions or
proceedings in respect thereof) referred to in subsection (a) or (b) in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and the indemnified party on the
other in connection with the statements, omissions, actions or
inactions which resulted in such losses, claims, damages, liabilities or
expenses as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and the indemnified party shall
be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied
by the indemnifying party or the indemnified party, any action or
inaction by any such party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement, omission, action or inaction. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages,
liabilities or expenses (or actions or proceedings in respect thereof)
pursuant to this subsection (e) shall be deemed to include, without
limitation, any reasonable legal or other expenses incurred by such
indemnified party in connection with investigating or defending any
such action or claim (which shall be limited as provided in subsection
(c) if the indemnifying party has assumed the defense of any such
action in accordance with the provisions thereof) which is the subject
of this subsection (e). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. Promptly after
receipt by an indemnified party under this subsection (e) of written
notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing with respect to which a
claim for contribution may be made against an indemnifying party
under this subsection (e), such indemnified party shall, if a claim for
contribution in respect thereof is to be made against an indemnifying
party, give written notice to the indemnifying party in writing of the
commencement thereof (if the notice specified in subsection (c) has
not been given with respect to such action); provided, however, that
the failure to so notify the indemnifying party shall not relieve it from
any obligation to provide contribution which it may have to any
indemnified party under this subsection (e) except to the extent that
the indemnifying party is actually prejudiced by the failure to give
notice.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this paragraph were determined by pro rata
allocation or by any other method of allocation which does not take
account the equitable considerations referred to in the immediately
preceding paragraph.
If indemnification is available under this Section 6, the indemnifying
parties shall indemnify each indemnified party to the fullest extent
provided in subsections (a) and (b), without regard to the relative fault
of said indemnifying party or any other equitable consideration
provided for in this subsection. The provisions of this subsection shall
be in addition to any other rights to indemnification or contribution
which any indemnified party may have pursuant to law or contract,
shall remain in full force and effect regardless of any investigation
made by or on behalf of any indemnified party, and shall survive the
transfer of securities by any such party.
(f) In connection with any underwritten offering contemplated by this
Agreement which includes Registrable Securities, the Company and
all sellers of Registrable Securities included in any registration
statement shall agree to customary provisions for indemnification and
contribution (consistent with the other provisions of this Section 6) in
respect of losses, claims, damages, liabilities and expenses of the
underwriters of such offering.
Section 7. Selection of Underwriters. If a registration effected
pursuant to Section 2 is an underwritten offering or a best efforts
underwritten offering, the investment bankers or investment bankers
and manager or managers that will administer the offering shall be
selected by the Holders of a majority of the Registrable Securities to be
registered in such registration; provided, however, that such
investment bankers and managers must be reasonably satisfactory to
the Company.
Section 8. Rule 144. The Company covenants to each Holder that, to
the extent that the Company shall be required to do so under the
Exchange Act, the Company shall (a) timely file the reports required
to be filed by it under the Exchange Act or the Securities Act
(including, but not limited to, the reports under Section 13 and 15(d)
of the Exchange Act referred to in subparagraph (c) (1) of Rule 144
adopted by the Commission under the Securities Act) and the rules
and regulations adopted by the Commission thereunder, and (b) take
such further action as any Holder may reasonably request, all to the
extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the Securities Act
within the limitations of the exemption provided by Rule 144 under
the Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission.
Upon the request of any Holder, the Company shall deliver to such
Holder a written statement as to whether it has complied with such
requirements.
Section 9. Market Standoff Agreement. In order to facilitate the
possibility of future public offerings of Common Stock, the Holders
(and any subsequent Holder) agree that the Registrable Securities will
not be resold during a period commencing on the filing by the
Company of a registration statement under the Securities Act for an
underwritten public offering for cash by the Company of its Common
Stock or securities convertible into or exercisable or exchangeable for
its Common Stock and continuing until the earlier of the abandonment
of the proposed public offering or 120 days following the date of the
last closing in the public offering without the consent of the
underwriters of such offering, except to the extent such shares are
included in such registration. Holders of such Registrable Securities
also agree that they will cooperate with the Company in providing
reasonable written assurances respecting the foregoing to the
underwriter of any such public offering. Holders agree that during the
above restricted period they will not directly or indirectly sell, offer to
sell, contract to sell (including without limitation any short sale), grant
an option to purchase or otherwise transfer of dispose of (other than
donees who agree to be similarly bound) shares of Registrable
Securities at any time during such period except securities included in
such registration. In order to enforce the foregoing covenant, the
Company may impose stop-order instructions with respect to such
shares of Registrable Securities held by each Holder, which shall be
binding upon any assignee or successor of such Holder (and the shares
or securities of every other person subject to the foregoing restriction),
until the end of the restricted period.
Section 10. Miscellaneous.
(a) From and after the date of this Agreement, the Company will not,
without the prior written consent of the Holders of a majority of the
number of Registrable Securities then outstanding, enter into any
agreement with respect to its securities which is inconsistent with or
violates the rights granted to the Holders of Registrable Securities in
this Agreement.
(b) Energy PLC and EnCap LP agree, and each other Holder of
Registrable Securities (including Registrable Securities in any
registration statement filed pursuant to this Agreement) will be
deemed to have agreed, as follows:
(i) if any Registrable Securities are being registered in any registration
pursuant to this Agreement, the Holder thereof will comply with all
anti-stabilization, manipulation and similar provisions of Section 10 of
the Exchange Act, as amended, and any rules promulgated thereunder
by the Commission and, at the request of the Company, will execute
and deliver to the Company and to any underwriter participating in
such offering, an appropriate agreement to such effect; and
(ii) at the end of any period during which the Company is obligated to
keep a registration statement current and effective as described herein,
the Holders of Registrable Securities included in the registration
statement shall discontinue sales thereof pursuant to such registration
statement.
(c) All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal law,
and not the law of conflicts, of the State of Texas.
(d) All covenants and agreements in this Agreement by or on behalf of
any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto. In addition, the
rights and obligations under this Agreement shall automatically be
transferred to and binding on any transferee or assignee of the
Registrable Securities; provided, that (i) the Company is, within a
reasonable time after such transfer, furnished with written notice of
the name and address of such transferee or assignee and the
Registrable Securities with respect to which such registration rights
are being transferred or assigned, (ii) such transferee or assignee
agrees in writing to be bound by and subject to the terms and
conditions of this Agreement, (iii) the transfer and assignment of the
subject Registrable Securities is in compliance with the Securities Act
and applicable state securities laws or an exemption from the
registration requirements of the Securities Act and applicable state
securities laws, and (iv) such assignment of rights and obligations
under this Agreement shall be effective only if immediately following
such transfer the further disposition of such Registrable Securities by
the transferee or assignee is restricted under the Securities Act.
(e) This Agreement is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement
of the agreement and understanding of the parties hereto in respect of
the subject matter herein contained. There are no restrictions,
promises, warranties or undertakings, other than those set forth or
referred to herein, with respect to the registration rights granted by the
Company to the Holders of the Registrable Securities. This
Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
(f) All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered
personally or sent by reputable express courier service (charges
prepaid), or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid, or sent by telefax, to the
parties at the following address (or to such other address or to the
attention of such other person as the recipient party has specified by
prior like notice to the sending party):
If to the Company:
Future Petroleum Corporation
2351 West Northwest Highway
Dallas, Texas 75220
Telecopier No.: (214)350-8382
Attention: Carl Price
If to Energy PLC or EnCap LP:
c/o EnCap Investments L.C.
1100 Louisiana
Suite 3150
Houston, Texas 77002
Telecopier No.: (713) 659-6130
Attention: Gary R. Petersen, Managing Director
(g) If any provision of this Agreement is held to be unenforceable, this
Agreement shall be considered divisible and such provision shall be
deemed inoperative to the extent it is deemed unenforceable, and in all
other respects this Agreement shall remain in full force and effect;
provided, however, that if any such provision may be made enforceable
by limitation thereof, then such provision shall be deemed to be so
limited and shall be enforceable to the maximum extent permitted by
applicable law.
(h) This Agreement may be executed by the parties hereto in any
number of counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same agreement. Each
counterpart may consist of a number of copies hereof each signed by
less than all, but together signed by all, the parties hereto.
(i) Each Holder of Registrable Securities, in addition to being entitled
to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of breach by
it of the provisions of this Agreement and hereby agrees to waive (to
the extent permitted by law) the defense in any action for specific
performance that a remedy of law would be adequate.
(j) In any action or proceeding brought to enforce any provision of this
Agreement, or where any provision hereof is validly asserted as a
defense, the successful party shall be entitled to recover reasonable
attorneys' fees in addition to any other available remedy.
(k) The Company agrees to remove any legends on certificates
representing Registrable Securities describing transfer restrictions
applicable to such securities upon the sale of such securities (i)
pursuant to an effective Registration Statement under the Securities
Act or (ii) in accordance with the provisions of Rule 144 under the
Securities Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
FUTURE PETROLEUM CORPORATION, a Utah corporation
By: /s/ Carl Price
Name: Carl Price
Title: President
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ Gary R. Petersen
Name: Gary R. Petersen
Title : Director
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: EnCap Investments L.C., General Partner
By: /s/ Gary R. Petersen
Name: Gary R. Petersen
Title: Managing Director
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is made and
entered into this 25th day of November, 1997, by and among B. Carl
Price, a Texas resident, Don Wm Reynolds, a Texas resident, Energy
Capital Investment Company PLC, an English investment company
("Energy PLC"), and EnCap Equity 1994 Limited Partnership, a Texas
limited partnership ("EnCap LP").
RECITALS:
A. Messrs. Price and Reynolds are shareholders in Future Petroleum
Corporation, a Utah corporation ("Future"), and are herein sometimes
called the "Existing Shareholders".
B. Future, Energy PLC, EnCap LP, and Gecko Booty 1994 I Limited
Partnership, a Texas limited partnership ("Gecko Booty"), are
entering into that certain Purchase and Sale Agreement of even date
herewith (the "Purchase Agreement"), whereby (i) Energy PLC and
EnCap LP will sell to Future, and Future will purchase from Energy
PLC and EnCap LP, certain limited partnership interests more
particularly described in the Purchase Agreement, in exchange for
promissory notes issued by Future and shares of common stock of
Future, $0.01 par value per share ("Common Stock"), and (ii) Gecko
Booty will sell to Future, and Future will purchase from Gecko Booty,
certain oil, gas and/or mineral leases and related assets of Gecko
Booty, in exchange for a promissory note issued by Future. Energy
PLC and EnCap LP are herein sometimes called the "New
Shareholders" and Energy PLC and EnCap LP are herein sometime
called the "EnCap Entities".
C. Under the Purchase Agreement, Future has made certain
agreements with the New Shareholders with respect to the
appointment and election to the Board of Directors of Future of certain
persons designated by the EnCap Entities. Any person or persons so
designated by the EnCap Entities under the Purchase Agreement shall
be herein called an "EnCap Designee".
D. The parties hereto deem it in their mutual best interests to enter
into this Agreement, it being specifically acknowledged that the New
Shareholders would not be willing to enter into the Purchase
Agreement and consummate the transactions thereby without the
covenants and agreements of the Existing Shareholders.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing
Recitals and the mutual agreements contained herein, the sufficiency
of which is hereby acknowledged and confirmed, the parties hereto,
intending to be legally bound hereby, agree as follows:
Section 1. Voting Agreement Regarding Designated Nominees.
(a) So long as Future is required under either Section 10.11 or Section
12.2 of the Purchase Agreement to appoint or nominate (or cause to be
nominated) an EnCap Designee to the Future Board of Directors, each
Existing Shareholder (i) shall vote or cause to be voted all Voting
Securities beneficially owned by such Existing Shareholder in favor of
the EnCap Designee's election to Future's Board of Directors and (ii)
shall use his reasonable best efforts to cause the EnCap Designee to be
elected to Future's Board of Directors. As used herein, the term
"Voting Securities" shall mean Common Stock and any other
securities of Future entitled to vote generally for the election of
directors of Future.
(b) If EnCap Designees have been appointed to Future's Board of
Directors under Section 12.2 of the Purchase Agreement (and are so
serving), such EnCap Designees agree to nominate for election
nominees designated by the Existing Shareholders.
Section 2. Representations and Warranties of Existing Shareholders.
Each Existing Shareholder hereby severally represents and warrants
to the EnCap Entities as follows:
(a) Such Existing Shareholder is the record and beneficial owner of
the number of shares of Common Stock set forth opposite his name in
the attached Exhibit 2(a).
(b) Such Existing Shareholder has full power and authority to
execute, deliver, and perform this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly
executed and delivered by such Existing Shareholder and constitutes a
valid and legally binding obligation of such Existing Shareholder,
enforceable against such Existing Shareholder in accordance with its
terms.
(c) The execution, delivery, and performance by such Existing
Shareholder of this Agreement do not and will not (i) 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 Existing
Shareholder is a party or by which such Existing Shareholder or any of
its properties may be bound or (ii) violate any applicable law, rule or
regulation binding upon such Existing Shareholder.
(d) 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 such Existing
Shareholder in connection with the execution, delivery, or
performance by such Existing Shareholder of this Agreement.
Section 3. Survival of Provisions. All representations, warranties and
covenants made by each party hereto in this Agreement or any other
document contemplated hereby shall be considered to have been relied
upon by the other parties hereto and shall survive the execution and
delivery of this Agreement or such other document, regardless of any
investigation made by or on behalf of any such party.
Section 4. Entire Agreement. This Agreement and the other
documents contemplated hereunder contain the entire understanding
of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations, and
discussions among the parties with respect to such subject matter.
Section 5. Amendments. This Agreement may be amended, modified,
supplemented, restated or discharged only by an instrument in writing
signed by all of the parties hereto.
Section 6. No Waiver. The failure of any party hereto to insist upon strict
performance of a covenant hereunder or of any obligation
hereunder, irrespective of the length of time for which such failure
continues, shall not be a waiver of such party's right to demand strict
compliance in the future. No consent or waiver, express or implied, to
or of any breach or default in the performance of any obligation
hereunder shall constitute a consent or waiver to or of any other breach
or default in the performance of the same or any other obligation
hereunder.
Section 7. Choice of Law. This Agreement shall be governed by the
laws of the State of Utah.
Section 8. Successors and Assigns. This Agreement shall be binding
on and inure to the benefit of the parties hereto and their respective
successors and assigns.
Section 9. References and Construction.
(a) All references in this Agreement to articles, sections, subsections
and other subdivisions refer to corresponding articles, sections,
subsections and other subdivisions of this Agreement unless expressly
provided otherwise.
(b) Titles appearing at the beginning of any of such subdivisions are
for convenience only and shall not constitute part of such subdivisions
and shall be disregarded in construing the language contained in such
subdivisions.
(c) The words "this Agreement", "this instrument", "herein", "hereof",
"hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless
expressly so limited.
(d) Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires.
(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 "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) All references herein to "$" or "dollars" shall refer to U.S. Dollars.
Section 10. Endorsements. The certificate or certificates representing
the Voting Securities now owned or hereafter acquired by the Existing
Shareholders shall have conspicuously stamped, printed, or typed on
the face or back thereof a legend substantially in the following form:
dated as of November 25, 1997, by and among B. Carl Price, Don
Wm. Reynolds, Energy Capital Investment Company PLC, and EnCap
Equity 1994 Limited Partnership. A copy of the Voting Agreement
and all applicable amendments thereto will be furnished by the
Company to the holder hereof without charge upon written request to
the Company at its principal place of business or registered office."
Section 11. Specific Performance. Each of the parties hereto
recognizes that any breach of the terms of this Agreement may give
rise to irreparable harm for which money damages would not be an
adequate remedy, and accordingly agree that, in addition to other
remedies, any nonbreaching party shall be entitled to enforce the terms
of this Agreement by a decree of specific performance without the
necessity of proving the inadequacy as a remedy of money damages.
Section 12. Counterparts. This Agreement may be executed in
multiple counterparts, with each such counterpart constituting an
original and all of such counterparts constituting but one and the same
agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date and year first above written.
/s/ B. Carl Price
Name: B. Carl Price
/s/ Don Wm. Reynolds
Don Wm. Reynolds
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: EnCap Investments L.C., General Partner
By: /s/ Gary R. Petersen
Name: Gary R. Petersen
Title: Managing Director
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ Gary R. Petersen
Name: Gary R. Petersen
Title: Director
