UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
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)
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [x] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The Company had approximately 12,757,015 shares of common stock, par value
$0.01 per share, issued and outstanding as of August 14, 1998.
Transitional Small Business Disclosure Format (Check One): Yes No X
<PAGE>1
PART I. FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets
June 30, 1998 (unaudited)
Statement of Operations and Accumulated Deficit (unaudited)
Three months and six months ended June 30, 1998 and 1997
Statements of Cash Flows (unaudited)
Three months and six months ended June 30, 1998 and 1997
Notes to Consolidated Financial Statements
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION...
PART II. OTHER INFORMATION
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The condensed consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. However, in the opinion of management, all adjustments
(which consist only of normal recurring adjustments) necessary to
present fairly the financial position and results of operations
for the periods presented have been made. These condensed
consolidated financial statements should be read in conjunction
with financial statements and the notes thereto included in the
Company's Form 10-KSB for the year ended December 31, 1997.
<PAGE>
<TABLE>
FUTURE PETROLEUM CORPORATION
Balance Sheets
June 30,1998
<S> <C>
CURRENT ASSETS:
Cash and interest-bearing deposits $ 55,974
Current portion of notes receivable 93,177
Trade accounts receivable:
Joint interest billings 2,398
Accrued oil and gas sales 180,117
--------------
Total Current Assets 331,666
PROPERTY AND EQUIPMENT:
Proved oil and gas properties, using
The full cost method of accounting 13,479,058
Other 49,659
-------------
13,528,717
Less accumulated depletion, deprecation,
Amortization and impairment (795,594)
Net Property and Equipment 12,733,123
LEASE OPERATING RIGHTS:
Lease operating rights 106,000
Less accumulated amortization (15,000)
------------
Net Operating Rights 91,000
OTHER ASSETS:
Mining properties held for sale 39,977
Other 42,361
------------
TOTAL OTHER ASSETS 82,338
TOTAL ASSETS $13,238,127
=============
</TABLE>
<TABLE>
<CAPTION>
Future Petroleum Corporation
Balance Sheets
June 30, 1998
<S> <C>
CURRENT LIABILITIES:
Trade accounts payable $ 240,917
Current portion of notes payable 26,486
Accrued oil and gas proceeds payable 21,379
-----------
Total Current Liabilities 288,782
DEFERRED GAIN ON SALE 40,336
DEFERRED TAX LIABILITY 1,298,650
LONG TERM NOTES PAYABLE 7,256,223
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 200,000
shares authorized, no shares issued --
Common stock, $0.01 par value, 30,000,000 shares authorized,
shares issued and outstanding;
6,047,015 at June 30, 1998 and 60,332
Additional paid-in capital 4,601,394
Accumulated deficit (63,256)
Net income (loss) (244,334)
------------
Total Stockholders' Equity 4,354,136
Total Liabilities and Stockholders' Equity $ 13,238,127
</TABLE>
<TABLE>
<CAPTION>
Future Petroleum Corporation
Statement of Operations and Accumulated Deficit
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ---------------------
1998 1997 1998 1997
------------------- ---------------------
<S> <C> <C> <C> <C>
REVENUE:
Oil and gas sales $ 537,060 56,034 1,031,234 115,278
Well operation fees 37,127 63,204 59,295 107,819
--------------------- -------------------
Total Revenues 574,187 119,238 1,090,529 223,097
COST AND EXPENSES:
Lease operations and
Production taxes 352,720 35,298 643,448 90,778
General and administrative142,786 39,542 220,653 94,423
Interest 116,232 1,498 282,126 3,217
Depletion, depreciation
And amortization 100,616 28,769 202,314 59,114
--------------------- ---------------------
Total Expenses 712,354 105,107 1,348,541 247,532
OTHER INCOME:
Miscellaneous income 6,556 5,290 10,961 29,690
Interest income 609 7,742 2,717 8,566
--------------------- ---------------------
7,165 13,032 13,678 13,821
--------------------- ---------------------
NET INCOME (LOSS) (131,002) 27,163 (244,334) 13,821
--------------------- ---------------------
BEGINNING ACCUMULATED
DEFICIT $(176,588 $(65,780) $(63,256) $(52,438)
--------------------- ---------------------
ENDING ACCUMULATED
DEFICIT $(307,590) $(38,617) $(307,590) $(38,617)
--------------------- ---------------------
NET INCOME (LOSS) PER COMMON SHARE,
(Basic and Deluded) $ (0.02) $ 0.01 $ (0.04) $ 0.00
===================== ====================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 6,033,000 4,092,000 6,033,000 4,092,000
===================== ====================
</TABLE>
<TABLE>
<CAPTION>
Future Petroleum Corporation
Statement of Cash Flows
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ---------------------
1998 1997 1998 1997
------------------- ---------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVATES:
Net Income $ (131,002) 27,163 (244,334) 13,821
Adjustments to reconcile
To net cash used in
continuing operations:
Depreciation, depletion,
and amortization 100,616 28,769 202,314 59,114
Decrease (increase)
in receivables 30,346 105,600 95,107 (4,288)
(Decrease) increase in
accounts payable and
accrued expenses (3,137) (81,552) (44,119) 137,843
Other assets (18,316) (4,968) (11,471) (2,497)
--------------------- -------------------
Net cash provided by
(used in) operations (21,493) 75,012 (2,503) 203,993
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property
And equipment (869,801) (22,111) (1,080,887) (144,683)
--------------------- ---------------------
Net cash provided by (used in)
Investing activities (869,801) (22,111) (1,080,887) (144,683)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale
of stock 191,648 -- 191,649 30,000
Additions to long-term
debt 660,000 -- 660,000 --
Reypayment of long-term
debt (1,627) (5,294) (5,216) (15,341)
--------------------- ---------------------
Net cash provided by
(used in) financing
activities 850,021 (5,294) 846,433 14,659
--------------------- ---------------------
NET INCREASE (DECREASE)
IN CASH and cash
Equivalent (41,273) 47,607 (263,957) 73,969
CASH AND CASH EQUIVALENTS,
beginning of period $ 97,247 $140,512 $292,931 $114,150
--------------------- ---------------------
CASH AND CASH EQUIVALENTS,
end of period $ 55,974 $188,119 $55,974 $188,119
===================== ====================
CASH PAID FOR INTEREST
DURING THE PERIOD 116,232 1,498 282,126 3,217
--------------------- ---------------------
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
This report includes "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended
("Exchange Act"). All statements other than statements of
historical fact, including statements in Management's Discussion
and Analysis or Plan of Operation and elsewhere in this report,
regarding the Company's financial position, estimated quantities
and net present values of reserves and future plans of management
are forward looking statements. The Company can give no assurances
that the assumptions upon which such statements were based will
prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's
expectations ("Cautionary Statements") are disclosed in the
Company's Forms 10-KSB and other periodic reports filed under the
Exchange Act, which are herein incorporated by reference. These
factors include the volatile prices of oil and gas, risks inherent
in operating oil and gas wells, the effect of environmental and
other regulation and the substantial capital requirements to
conduct oil and gas operations. All subsequent written and oral
forward looking statements attributable to the Company or persons
acting on its behalf are expressly qualified by the Cautionary
Statements.
INTRODUCTION
Future Petroleum Corporation (the "Company") is engaged
through its subsidiaries and subsidiary partnerships in the
development of oil and natural gas properties located onshore
primarily in Texas, New Mexico, Oklahoma and, through a recent
acquisition, California.
On August 14, 1998, the Company closed an acquisition by
merger ("Bargo Acquisition") of oil and gas properties from Bargo
Energy Resources, Ltd. ("Bargo") for a purchase price of $5.8
million, 4.7 million shares of Future's common stock and a warrant
to purchase an additional 250,000 shares of common stock. The oil
and gas properties purchased were a 37.68% working interest in the
South Coles Levee Unit in Kern County, California. As of August
1, 1998, the properties had estimated net proved reserves of 500
MBbls of oil and 8 Bcf of natural gas, or 11 Bcfe.
In connection with the Bargo Acquisition, certain
partnerships affiliated with EnCap Investments L.C. ("EnCap")
agreed to modify and extend their outstanding loans to the Company
in the amount of approximately $7.3 million. In connection with
the renewal and amendment of the EnCap loans, the EnCap affiliates
received 2.8 million shares of Future common stock. Following the
transactions, the outstanding common stock of Future was owned
approximately 1/3rd by EnCap affiliates, 1/3rd by Bargo and 1/3rd by
management and public shareholders.
On May 1, 1998, the Company acquired certain producing oil
and gas properties from the EnCap affiliates and NCI Enterprises,
Inc. through the acquisition of partnership interests in NCI-
Shawnee Limited Partnership ("NCI Shawnee Acquisition") in
exchange for $66,000 and 200,000 shares of Future Common Stock.
The oil and gas properties purchased were a 3.26% working interest
in the Shawnee Townsite Unit, Pottawatomie County, Oklahoma. As
of December 1, 1997, the effective date of purchase, the
properties had estimated net proved reserves of 162,000 Bbls of
oil and 16,000 Mcf of natural gas.
RESULTS OF OPERATIONS
The Company's results of operations are dependent upon the
difference between prices received for its oil and gas production
and the costs to find and produce such oil and gas. Oil and gas
prices have been and are expected in the future to be volatile and
subject to fluctuations based on a number of factors beyond the
control of the Company.
The Company uses the full cost method of accounting for its
oil and gas properties. Under the full cost method of accounting,
the costs of successful and unsuccessful exploration and
development wells are capitalized as property and equipment, and
the sum of net capitalized costs and estimated future development
and dismantlement costs is amortized over the production of proved
reserves using the unit of production method. The costs of
unproved properties are excluded from amortization until the
properties are evaluated. Interest on properties not subject to
amortization and in the process of development is capitalized.
Proceeds from the sale of properties are accounted for as
reductions to capitalized costs, unless the sale results in a
significant change in the relationship between costs and the
estimated value of proved reserves or the underlying value of
unproved properties, in which case a gain or loss is recognized.
Unamortized costs of proved properties are subject to a ceiling
test, which limits the maximum amount of such costs to the present
value (discounted at 10%) of future net cash flows, after income
taxes attributable to the Company's estimated net proved reserves.
Accordingly, reductions in the prices of oil and gas, or
reductions in the Company's proved reserves quantities, could
reduce the ceiling below the unamortized costs resulting in a
charge to earnings.
Three Months Ended June 30, 1998 Compared to Three Months Ended
June 30, 1997
Revenues
Oil and gas sales increased from $56,034 during the second
quarter of 1997 to $537,060 during the second quarter of 1998.
Total revenues increased from $119,238 during the second quarter
of 1997 to $574,187 for the same period in 1998. This increase in
oil and gas sales and revenues was a direct result of the
Company's acquisition of producing oil and gas properties in west
Texas, the Permian Basin, the Texas Panhandle and northern
Oklahoma in November 1997 (the "1997 Acquisition") and the NCI
Shawnee Acquisition in May 1998. Offsetting the increase in oil
and gas sales was a 59% decrease in fees from well operations and
lower prices primarily for oil and gas production.
Expenses
During the three months ended June 30, 1998, lease operating
expenses, including production taxes, were $352,720, as compared
to $35,298 for the same period in 1997. General and
administrative expenses and depletion, depreciation and
amortization increased to $142,786 and $100,616, respectively,
during the three months ended June 30, 1998 as compared to $39,542
and $28,769, respectively, for the same period in 1997. This
increase in expenses from $105,107 during the second quarter of
1997 to $712,354 during the second quarter of 1998 was due to the
increase in the number of producing properties owned by the
Company as a result of the 1997 Acquisition and the NCI Shawnee
Acquisition in May 1998 as well as non-recurring expenses
associated with the NCI Shawnee Acquisition incurred in the second
quarter of 1998. Interest expense was $116,232 for the three
months ended June 30, 1998 as compared to $1,498 for the three
months ended June 30, 1997 as a result of the increase in debt
incurred by the Company to finance the 1997 Acquisition and the
NCI Shawnee Acquisition.
Other Income (Expenses)
Other income dropped from $13,032 during the second quarter
of 1997 to $7,165 during the second quarter of 1998, or 55%.
Net Loss
The Company had a net loss of $131,002 for the three months
ended June 30, 1998 as compared to net income of $27,163 for the
same period in 1997.
Six Months ended June 30, 1998 Compared to Six Months Ended June
30, 1997
Revenues
Oil and gas sales increased from $115,278 during the first
half of 1997 to $1,031,234 during the first half of 1998. Total
revenues increased from $223,097 during the first half of 1997 to
$1,090,529 for the same period in 1998. This increase in revenues
was a direct result of the Company's acquisition of the 1997
Acquisition and the NCI Shawnee Acquisition in May 1998.
Offsetting the increase in oil and gas sales was a 55% decrease in
fees from well operations and lower prices for oil and gas
production.
Expenses
During the six months ended June 30, 1998, lease operating
expenses, including production taxes, were $643,448, as compared
to $90,778 for the same period in 1997. General and
administrative expenses and depletion, depreciation and
amortization increased to $220,653 and $202,314, respectively,
during the six months ended June 30, 1998 as compared to $94,423
and $59,114, respectively, for the same period in 1997. This
increase in expenses from $247,532 during the first two quarters
of 1997 to $1,348,541 during the first two quarters of 1998 was
due to the increase in the number of producing properties owned by
the Company as a result of the 1997 Acquisition and the NCI
Shawnee Acquisition in May 1998 as well as expenses associated
with such acquisition. Interest expense was $282,126 for the six
months ended June 30, 1998 as compared to $3,217 for the six
months ended June 30, 1997 as a result of the increase in debt
incurred by the Company to finance the 1997 Acquisition and the
NCI Shawnee Acquisition.
Other Income (Expenses)
Other income dropped from $38,256 during the first two
quarters of 1997 to $13,678 during the first two quarters of 1998,
or 36%.
Net Loss
The Company had a net loss of $244,334 for the six months
ended June 30, 1998 as compared to net income of $13,821 for the
same period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
In the last five years, the Company's primary source of
capital has been from the issuance of debt and restricted stock in
exchange for oil and gas properties or interests in oil and gas
properties and, to a lesser extent, cash flows from operations and
the sale of non-strategic mining properties.
In August 1998, the Company entered into a $20 million credit
facility with Bank of America ("Credit Facility") Maximum amounts
which may be outstanding under the Credit Facility are limited by
a borrowing base currently set at $10.5 million, which will be
adjusted from time to time based on the value of the Company's oil
and gas properties. Borrowings of $7.9 million were used to
finance the purchase price of the Bargo properties in the Bargo
Acquisition, payment of a portion of indebtedness to EnCap and
certain closing costs associated with the Bargo Acquisition.
During the second half of 1998, the Company anticipates that
it will make capital expenditures on oil and gas properties (other
than acquisitions) of approximately $470,000. The Company does not
have a specific acquisition budget but rather examines potential
future acquisitions on a case-by-case basis. The Company continues
to seek financing to fund the development of existing properties
and to acquire additional assets. The Company believes that
proceeds from the issuance of equity and debt, cash flow from
operations, sales of non-strategic properties and borrowings under
the Credit Facility will provide the required capital for funding
the Company's capital budget through 1998.
INFLATION
The Company's activities have not been, and in the near term are
not expected to be, materially affected by inflation or changing
prices in general. The Company's oil exploration and production
activities are generally affected by prevailing prices for oil,
however.
YEAR 2000 ISSUE
The Company has reviewed its current computer software and
hardware systems, and is currently working to resolve the
potential problems associated with the Year 2000 and the
processing of date sensitive information by such systems. Based
on preliminary information, the Company believes that it will be
able to implement successfully the systems and programming changes
necessary to address the Year 2000 issues, and does not expect the
cost of such changes to have a material impact on the Company's
financial position, results of operations or cash flows in future
periods.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not presently a party to any material legal
proceedings.
ITEM 2. CHANGES IN SECURITIES
During the second quarter of 1998, the Company sold
securities without registration under the Securities Act of 1933
("Act") in the following transactions:
On May 1, 1998, the Company acquired certain producing oil
and gas properties from the EnCap affiliates and NCI Enterprises,
Inc. through the acquisition of partnership interests in NCI-
Shawnee Limited Partnership ("NCI Shawnee Acquisition") in
exchange for $66,000 and 200,000 shares of Future common stock,
par value $.01 per share ("Common Stock").
On April 9, 1998, the Company issued (i) 41,621 shares of
Common Stock to Robert Price as compensation for the rental of
certain property, (ii) 25,832 shares of Common Stock to Carl Price
for past services to the Company, (iii) 48,023 shares of Common
Stock to Don Wm. Reynolds for past services to the Company, (iv)
12,000 shares of Common Stock to Charles D. Laudeman for past
services to the Company, and (v) 16,800 shares of Common Stock to
Christine Sirera for past services to the Company. All of these
issuances were based on a purchase price of $0.42 per share.
The securities issued in the transactions described above
were issued in reliance on the exemption from the registration and
prospectus delivery requirements of the Act provided in Section
4(2) thereof.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of shareholders held on June 6, 1998,
the shareholders of the Company elected three individuals as
directors for three year terms, approved an amendment to the
Company's 1993 Employee Incentive Plan and voted to ratify the
appointment of the independent public accountants for the fiscal
year ending December 31, 1998.
Regarding the proposal to amend the 1993 Employee Incentive
Plan, 4,616,042 shares were cast for the proposal, 42,368 shares
were cast against the proposal and 7,462 shares abstained from
voting. Regarding the proposal to approve the appointment of Hein
+ Associates, L.L.P. as the independent public accountants of the
Company, 4,614,407 shares were cast for the proposal, 0 votes were
cast against the proposal and 249 shares abstained from voting.
The Shareholders elected three directors to serve on the
Company's Board of Directors until the 2001 annual meeting of
shareholders.
Directors Elected by Votes Cast
Common Votes Cast Against or
Shareholders For Withheld Abstain
Carl Price 4,664,639 0 1,233
Don Wm. Reynolds 4,664,639 0 1,233
Charles D. Laudeman 4,664,639 0 1,233
In connection with the Bargo Acquisition, Mr. Robert D. Price
and Mr. D. William Reynolds, Jr. will resign from the Company's
Board of Directors. The Company has agreed to expand its Board of
Directors from five to seven persons. Of the four vacancies on
the Board of Directors, two will be filled by nominees of Bargo
and two will be filled by nominees of the EnCap affiliate.
Initially, Mr. Tim J. Goff, who will serve as Chairman of the
Board, and Mr. Thomas D. Barrow will serve as Bargo's nominees,
and Mr. Gary R. Petersen and Mr. D. Martin Philips will serve as
EnCap's nominees. It is expected that the resignations will be
effective and the nominees will take office on August 21, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Number and Description.
2. Plan of acquisition, reorganization, arrangement,
liquidation or succession.
2.1 (a) Purchase and Sale Agreement dated May 1, 1998
by and among the Company, Energy Capital
Investment Company PLC, EnCap Equity 1994
Limited Partnership and NCI Enterprises, Inc.
2.2 (a) Agreement and Plan of Merger dated August 14,
1998 by and among the Company, Bargo Energy
Resources, Ltd., SCL-CAL Company and Future-Cal-Tex
Corporation.
4. Instruments defining the rights of security holders,
including indentures
4.1 (b) Articles of Restatement of the Articles of Incorporation
4.2 (b) Bylaws
4.3 (a) Agreement dated August 14, 1998 by and
among B. Carl Price, Bargo Energy Resources,
Ltd., Energy Capital Investment Company PLC, and
EnCap Equity 1994 Limited Partnership
10. Material Contracts
10.1 (a) Registration Rights Agreement among the Company
and Bargo Energy Resources, Ltd. dated August
14, 1998.
10.2 (a) Registration Rights Agreement among the Company,
Energy Capital Investment Company PLC and EnCap
Equity 1994 Limited Partnership dated August 14,
1998.
10.3 (a) Registration Rights Agreement among the Company,
B. Carl Price and certain other shareholders
dated August 14, 1998.
10.4 (a) Stock Purchase Warrant by the Company to Bargo
Energy Resources, Ltd. dated August 14, 1998.
10.5 (a) Shareholders' Agreement by and among the
Company, Bargo Energy Resources, Ltd., Energy
Capital Investment Company PLC, EnCap Equity
1994 Limited Partnership, B. Carl Price and Don
Wm. Reynolds dated August 14, 1998.
10.6 (a) Amended and Restated Employment Agreement of B.
Carl Price dated August 14, 1998.
10.7 (a) Agreement between the Company and Don Wm.
Reynolds dated as of November 18, 1997.
10.8 (a) Agreement between the Company and Robert Price
dated as of November 18, 1997.
10.9 (a) Note Restructuring Agreement by and among the
Company, Energy Capital Investment Company PLC,
EnCap Equity 1994 Limited Partnership and Gecko
Booty 1994 I Limited Partnership dated August
14, 1998.
10.10 (a) Credit Agreement between the Company and
Bank of America National Trust and Savings
Association dated August 14, 1998.
10.11 (a) Master Subordination Agreement by and
between Bank of America and Energy Capital
Investment Company PLC and EnCap Equity 1994
Limited Partnership dated August 14, 1998.
10.12 (a) Pledge Agreement between Bank of America
and Bargo Energy Resources, Ltd. dated August
14, 1998.
10.13 (a) Pledge Agreement between Bank of America
and Energy Capital Investment Company PLC dated
August 14, 1998.
10.14 (a) Pledge Agreement between Bank of America
and EnCap Equity 1994 Limited Partnership dated
August 14, 1998.
10.15 (a) Pledge Agreement between Bank of America
and B. Carl Price dated August 14, 1998.
10.16 (a) Pledge Agreement between Bank of America
and Don Wm. Reynolds.
10.17 (a) Guaranty dated April 30, 1998 by the
Company in favor of Energy Capital Investment
Company PLC, EnCap Equity 1994 Limited
Partnership, and Gecko Booty 1994 I Limited
Partnership.
10.18 (a) Security Agreement dated May 1, 1998
between the Company and Energy Capital
Investment Company PLC, EnCap Equity 1994
Limited Partnership, and Gecko Booty 1994 I
Limited Partnership.
10.19 (a) Amendment to Renewal Promissory Note
dated May 1, 1998 by the Company to EnCap Equity
1994 Limited Partnership dated August 14, 1998.
10.20 (a) Amendment to Renewal Promissory Note
dated May 1, 1998 by the Company to Energy
Capital Investment Company PLC dated August 14,
1998.
27. Financial Data Schedule
(a) Filed herewith.
(b) Incorporated by reference from the Company's report of
Form 10-K for the fiscal year ended December 31, 1994,
filed with the Securities and Exchange Commission.
(b) Reports on Form 8-K
None.
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)
/s/ Carl Price
B. Carl Price, President (on behalf
of the Registrant and as the
principal financial officer)
Date: August 19, 1998
EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
Dated May 1, 1998
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
NCI Enterprises, Inc.,
a Texas corporation
<PAGE>
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 4
ARTICLE II Agreement to Purchase and Sell Interests 5
Section 2.1. Conveyance of LP Interests 5
Section 2.2. Purchase Price and Payment for LP Interests 5
Section 2.3. Conveyance of GP Interest 5
Section 2.4. Purchase Price and Payment for GP Interest 5
ARTICLE III Representations and Warranties of Sellers 5
Section 3.1. Organization and Existence 5
Section 3.2. Power and Authority 5
Section 3.3. Valid and Binding Agreement 6
Section 3.4. Non-Contravention 6
Section 3.5. Approvals 6
Section 3.6. Pending Litigation 7
Section 3.7. Title to Interest. 7
Section 3.8. The Partnership 7
Section 3.9. Investment Experience 7
Section 3.10. Investment Intent 8
Section 3.11. Restricted Securities 8
Section 3.12. Legend 8
Section 3.13. Accuracy of Information. 8
Section 3.14. No Solicitation 9
Section 3.15. Accredited Investor 9
Section 3.16. Disclaimer of Warranties 9
ARTICLE IV Representations and Warranties of Buyer 9
Section 4.1. Organization and Existence 9
Section 4.2. Power and Authority 9
Section 4.3. Valid and Binding Agreement 10
Section 4.4. Non-Contravention 10
Section 4.5. Approvals 10
Section 4.6. Pending Litigation 10
Section 4.7. Knowledgeable Purchaser 10
Section 4.8. Closing Shares. 11
Section 4.9. SEC Filings 11
ARTICLE V Certain Covenants Regarding Information and
Confidentiality 11
Section 5.1. Access to Information 11
Section 5.2. Confidentiality 12
ARTICLE VI Conditions Precedent to the Obligations of the Parties;
Termination Rights 13
Section 6.1. Conditions Precedent to the Obligations of Buyer 13
Section 6.2. Conditions Precedent to the Obligations of Sellers 13
ARTICLE VII Closing of Transaction 14
Section 7.1. The Closing 14
Section 7.2. Sellers' Closing Obligations 14
Section 7.3. Buyer's Closing Obligations 15
Section 7.4. Delivery of Files 16
Section 7.5. Agreement Regarding Execution and Delivery 16
ARTICLE VIII Certain Agreements Regarding Partnership Costs and
Expenses and Other Matters 16
Section 8.1. Partnership Costs and Expenses 16
Section 8.2. Production Proceeds 17
ARTICLE IX Agreement Regarding Specified Breach 17
ARTICLE X Notices 19
ARTICLE XI Commissions 20
ARTICLE XII Miscellaneous Matters 20
Section 12.1. Survival of Provisions 20
Section 12.2. Further Assurances 20
Section 12.3. Binding Effect; Successors and Assigns 21
Section 12.4. Expenses 21
Section 12.5. Entire Agreement 21
Section 12.6. Public Statements 21
Section 12.7. Injunctive Relief 21
Section 12.8. Deceptive Trade Practices 21
Section 12.9. Amendments 22
Section 12.10. Severability 22
Section 12.11. No Waiver. 22
Section 12.12. Governing Law. 22
Section 12.13. Counterparts 22
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT dated May 1, 1998, 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
NCI Enterprises, Inc., a Texas corporation ("NCI").
RECITALS:
A. Reference is herein made to NCI-Shawnee Limited Partnership, a Texas
limited partnership (the "Partnership").
B. NCI is the sole general partner of the Partnership and herein
sometimes called the "GP Seller". The interest of NCI as a general partner in
the Partnership is herein called the "GP Interest".
C. Energy PLC and EnCap LP are the limited partners of the Partnership
and are herein sometimes called the "LP Sellers". The interest of Energy PLC as
a limited partner in the Partnership is herein called the "Energy PLC LP
Interest". The interest of EnCap LP as a limited partner in the Partnership is
herein called the "EnCap LP Interest". The Energy PLC Interest and the EnCap
LP Interest are herein collectively called the "LP Interests".
D. GP Seller and LP Sellers are herein sometime called "Sellers". The
GP Interest and the LP Interests are herein sometimes called the "Interests".
E. GP Seller desires to sell to Buyer, and Buyer desires to purchase
from GP Seller, the GP Interest, on the terms and conditions contained herein.
F. Each LP Seller desires to sell to Buyer, and Buyer desires to
purchase from each LP Seller, such LP Seller's respective LP Interest, 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:
<PAGE>1
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.
"Buyer" shall have the meaning assigned to such term in the introductory
paragraph to this Agreement.
"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
Sections 2.2 and 2.4.
"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.
"Effective Date" shall mean (a) when used with respect to the GP
Interest, 6:59 a.m. local time on December 1, 1997, and (b) when used with
respect to the LP Interests, 7:00 a.m. local time on December 1, 1997.
<PAGE>2
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated under such Act.
"Future Nevada" shall mean Future Energy Corporation, a Nevada
corporation and a wholly-owned subsidiary of Buyer.
"Future Texas" shall mean Future Petroleum Corporation, a Texas
corporation.
"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.
"GP Seller" shall have the meaning assigned to such term in Paragraph B
of the Recitals hereto.
"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 D
of the Recitals hereto.
"LP Interest" shall have the meaning assigned to such term in Paragraph
C of the Recitals hereto.
"LP Sellers" shall have the meaning assigned to such term in Paragraph C
of the Recitals hereto.
"Notes" shall have the meaning assigned to such term in Section 7.3(e).
"Partnership" shall have the meaning assigned to such term in Paragraph
A of the Recitals hereto.
"Partnership Agreement" shall mean that certain Agreement of Limited
Partnership establishing the Partnership dated as of October 28, 1994, as
amended.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
all rules and regulations under such Act.
"Security Related Documents" shall mean the agreements, documents and
other instruments listed in Exhibit 2.1--Security Related Documents.
<PAGE>3
"Sellers" shall have the meaning assigned to such term in Paragraph D of
the Recitals hereto.
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 Related Documents, 6.2(d), 7.2(a), 7.2(b),
7.2(c), and 7.3(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.
<PAGE>4
ARTICLE II
Agreement to Purchase and Sell Interests
Section 2.1. Conveyance of LP 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 LP Interest effective as of the Effective Date.
Section 2.2. Purchase Price and Payment for LP Interests. In
consideration of the transfer by each LP Seller to Buyer of such LP Seller's
LP Interest, 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 $247,653.12 18,762
EnCap LP $412,346.88 31,238
Section 2.3. Conveyance of GP Interest. At the Closing, and on the
terms and subject to the conditions set forth in this Agreement, GP Seller
shall sell to Buyer, and Buyer shall purchase and accept from GP Seller, the
GP Interest effective as of the Effective Date.
Section 2.4. Purchase Price and Payment for GP Interest. In
consideration of the transfer by GP Seller to Buyer of the GP Interest, Buyer
shall tender to GP Seller an aggregate purchase price consisting of 150,000
shares of Common Stock.
ARTICLE III
Representations and Warranties of Sellers
Each Seller hereby severally and as to itself represents and warrants to
Buyer as follows (except it is agreed that the representations and warranties
contained in Sections 3.8(d) and 3.8(e) are being made by each LP Seller only
to its knowledge without having made any independent investigation with
respect to the matters referenced in such Sections):
Section 3.1. Organization and Existence. Such Seller is duly formed
and validly existing under the laws of the jurisdiction of its formation.
<PAGE>5
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 action 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.
<PAGE>6
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 Interest or which affect the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.
Section 3.7. Title to Interest. Such Seller (a) owns beneficially
and of record such Seller's Interest and (b) has the absolute right to and,
upon execution and delivery of the Assignment at Closing will, sell, assign,
and transfer such Seller's Interest 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
Agreement. Except by operation of this Agreement or the Partnership
Agreement, 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 Interest.
Section 3.8. The Partnership.
(a) The Partnership is duly formed and validly existing as a limited
partnership under the laws of the State of Texas.
(b) The Partnership has all requisite partnership power and authority
to own its properties and other assets and to conduct its business as
currently conducted.
(c) Such Seller is in compliance in all material respects with the
terms and provisions of the Partnership Agreement.
(d) All expenses and liabilities of the Partnership have been, and are
being, paid timely by the Partnership in all material respects.
(e) There are no material liabilities of the Partnership other than as
disclosed in (i) the Partnership'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) the Partnership's unaudited balance sheet as of December 31, 1997, other
than liabilities which have arisen since December 31, 1997, in the ordinary
course of business.
<PAGE>7
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 fractionalizat-
ion.
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.
<PAGE>8
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 such Seller's Interest or the
transaction contemplated hereby, and Buyer agrees that such Seller is selling
its respective Interest to Buyer "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 Partnership's oil and gas 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 the
Partnership with applicable environmental laws, (c) as to the status of title
to the Partnership's oil and gas 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 Partnership's oil and gas 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.
<PAGE>9
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.
<PAGE>10
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 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. Buyer's Annual Report on Form-10KSB for the
year ended December 31, 1997 (in this Section called the "SEC Document") does
not contain 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 light of circumstances then existing.
The audited Consolidated financial statements and unaudited Consolidated
interim financial statements of Buyer included in the SEC Document (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 date thereof and its Consolidated results of
operations and changes in financial position for the period then ended. Since
December 31, 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 Document or to Sellers in writing. There are no material
liabilities of Buyer (contingent or otherwise), other than as disclosed in the
SEC Document 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 the Partnership and to any contract files, lease or other
title files, production files, well files and other files of the Partnership
pertaining to the ownership of the Partnership's properties, 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 the Partnership. 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.
<PAGE>11
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.
<PAGE>12
(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.
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
XI 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:
<PAGE>13
(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.
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 XI
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 Chase Tower, 600 Travis Street, Houston,
Texas, at 10:00 a.m. Central Daylight Time, on April 30, 1998, 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 LP Seller shall execute and deliver that certain
Assignment of Limited Partner Interest (the "LP Assignment"),
substantially in the form attached hereto as Exhibit 7.2(a) in all
material respects;
<PAGE>14
(b) GP Seller shall execute and deliver that certain Assignment
of General Partner Interest (the "GP Assignment"), substantially in the
form attached hereto as Exhibit 7.2(b) in all material respects;
(c) each Seller shall execute and deliver that certain Amendment
No. 1 to Registration Rights Agreement, substantially in the form
attached hereto as Exhibit 7.2(c) in all material respects;
(d) each Seller shall have tendered to the Partnership the cash
amounts to be recontributed to the Partnership as provided in Section
8.1.
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 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 and the other documents contemplated hereby 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 and the other documents
contemplated hereby 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);
(e) execute and deliver to LP Sellers the respective Renewal
Promissory Notes substantially in the form set forth in the attached
Exhibit 7.3(e) in all material respects (the "Notes");
(f) issue and deliver to Sellers the Closing Shares;
<PAGE>15
(g) execute and deliver (or cause to be executed and delivered)
to LP Sellers each of the Security Related Documents and any collateral
to be delivered at Closing thereunder; and
(h) execute and deliver that certain Amendment No. 1 to
Registration Rights Agreement substantially in the form attached hereto
as Exhibit 7.2(c) in all material respects.
Section 7.4. Delivery of Files. Within 30 days after the Closing, GP
Seller shall deliver (or cause to be delivered) to Buyer the limited
partnership files, records and other materials for the Partnership.
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 GP Seller, breaching confidentiality agreements with other parties,
GP Seller shall have no obligation to furnish (or cause to be furnished) such
items; provided, that if requested by Buyer, GP Seller 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 GP Seller 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 Partnership of the Notes, and the granting of liens and
security interests by Buyer, the Partnership and other parties to secure the
Notes and such guarantee, are intended to be simultaneous for all intents and
purposes, and (b) Buyer, the Partnership and such other parties shall be
deemed to have executed and delivered each Security Related 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. Each of the
Sellers agrees that at the Closing it shall contribute cash to the Partnership
in the respective amount set forth opposite such Seller's name below:
<PAGE>16
Seller Amount
Energy PLC $14,258.82
EnCap LP $23,741.18
NCI $473.40
Upon receipt by the Partnership of the amounts set forth above and the closing
of the transactions contemplated hereby, there shall be no further adjustments
hereunder or otherwise among the parties to take into account the Effective
Date of the transfer of the GP Interest and the LP Interests hereby (and the
revenues, costs and expenses attributable to the Partnership, whether before
or after the Effective Date), it being agreed by the parties hereto that Buyer
shall assume full responsibility for any and all costs and expenses of the
Partnership, whether incurred before or after the Effective Date and (without
limitation) whether an administrative or capital cost or expense of the
Partnership.
Section 8.2. Production Proceeds. Notwithstanding that, by the
terms of the various Security Related Documents, Future Texas and the
Partnership are and will be assigning to LP Sellers all of the "Production
Proceeds" (as defined therein) accruing to the property covered thereby, so
long as no Default (as defined in that certain Purchase and Sale Agreement
dated as of November 25, 1997, by and among Buyer, LP Sellers and Gecko Booty
1994 I Limited Partnership) has occurred Future Texas and the Partnership may
continue to receive from the purchasers of production all such Production
Proceeds, subject, however, to the liens created under the Security Related
Documents, which liens are hereby affirmed and ratified. Upon the occurrence
of a Default, LP Sellers may exercise all rights and remedies granted under
the Security Related Documents, including the right to obtain possession of
all Production Proceeds then held by Future Texas and the Partnership or to
receive directly from the purchasers of production all other Production
Proceeds. In no case shall any failure, whether purposed or inadvertent, by
LP 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
Related Documents, nor shall any release of any Production Proceeds by LP
Sellers to Future Texas or the Partnership constitute a waiver, remission, or
release of any other Production Proceeds or of any rights of LP Sellers to
collect other Production Proceeds thereafter.
ARTICLE IX
Agreement Regarding Specified Breach
(a) The representations and warranties of 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").
<PAGE>17
(b) Subject to the terms and conditions of this Article IX, each
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 Seller hereunder shall be
satisfied solely by the transfer and assignment by such 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 Seller's several share
of the Damages, and where "C" is the Average Price. Such transfer and
assignment shall be made by a Seller within 20 days of the date on which it
receives the Notice, unless such 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.
<PAGE>18
(f) Notwithstanding anything to the contrary herein, (i) the maximum
aggregate number of Closing Shares GP Seller shall be obligated to transfer
and assign to Buyer hereunder shall be 150,000 and (ii) the maximum aggregate
number of Closing Shares LP Sellers shall collectively be obligated to
transfer and assign to Buyer hereunder shall be 50,000.
ARTICLE X
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 LP 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 Chase Tower
600 Travis
Houston, Texas 77002
Fax No.: 713-217-2828
If to GP Seller: NCI Enterprises, Inc.
310 West Wall Street
Suite 705
Midland, Texas 79702
Attention: Wayne Newkumet
Fax No.: 915-687-2519
<PAGE>19
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 XI
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 XII
Miscellaneous Matters
Section 12.1. 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 XII inclusive shall survive the
Closing and the delivery of the Assignments.
<PAGE>20
Section 12.2. 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 12.3. 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 12.4. 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 12.5. 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 12.6. 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 12.7. 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 12.8. 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.
<PAGE>21
Section 12.9. 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 Sellers; provided, that
any amendment, modification, supplement, restatement, discharge or waiver to
or under any document or other instrument relating to the securitization of
the Notes shall require the written consent of the Buyer and the LP Sellers
(and not the GP Seller)
Section 12.10. 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 12.11. 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 12.12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
Section 12.13. Counterparts. This Agreement may be executed in
counterparts, all of which are identical and all of which constitute one and
the same instrument.
<PAGE>22
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
NCI ENTERPRISES, INC.
By: /s/ Wayne Newkumet
Name: Wayne Newkumet
Title: Vice President
"BUYER":
FUTURE PETROLEUM CORPORATION, a Utah
Corporation
By: /s/ Carl Price
Name: Carl Price
Title: President
AGREEMENT AND PLAN OF MERGER
by and among
BARGO ENERGY RESOURCES, LTD.,
SCL COMPANY,
FUTURE PETROLEUM CORPORATION
and
FUTURE ENERGY CORPORATION
Dated August 14, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I Definitions, References and Construction 1
Section 1.1. Certain Defined Terms 1
Section 1.2. References and Construction 4
ARTICLE II Property to be Sold and Purchased 5
ARTICLE III Consideration for Properties 7
ARTICLE IV Representations and Warranties of Seller 7
Section 4.1. Organization and Existence 7
Section 4.2. Power and Authority 7
Section 4.3. Valid and Binding Agreement 7
Section 4.4. Non-Contravention 7
Section 4.5. Approvals 8
Section 4.6. Pending Litigation 8
Section 4.7. No AFE Items or Well Abandonments, No P&A
Liabilities 8
Section 4.8. Production Marketing 9
Section 4.9. Compliance with Applicable Non-Environmental Laws 9
Section 4.10. Tax Partnerships 9
Section 4.11. Permits 9
Section 4.12. Condition of Assets 9
Section 4.13. Investment Experience 9
Section 4.14. Investment Intent 10
Section 4.15. Restricted Securities 10
Section 4.16. Legend 10
Section 4.17. Accuracy of Information. 10
Section 4.18. No Solicitation 11
Section 4.19. Accredited Investor 11
Section 4.20. Disclaimer of Warranties 11
ARTICLE V Representations and Warranties of Future 11
Section 5.1. Organization and Existence 11
Section 5.2. Power and Authority 11
Section 5.3. Valid and Binding Agreement 12
Section 5.4. Non-Contravention 12
Section 5.5. Approvals 12
Section 5.6. Pending Litigation 12
Section 5.7. Knowledgeable Purchaser 12
Section 5.8. Closing Shares. 13
Section 5.9. SEC Filings 13
ARTICLE VI Certain Covenants Pending Closing 13
Section 6.2. Confidentiality 14
Section 6.3. Conduct of Operations on the Properties 15
Section 6.4. Conduct of Future's Business 15
Section 6.5. Employment Agreement 16
Section 6.6. Bylaws 16
Section 6.7. Registration Rights Agreement 16
Section 6.8. Warrants and Options 16
Section 6.9. Credit Facility 16
Section 6.10. Subordination Agreement 16
Section 6.11. Voting Agreement 16
Section 6.12. Directors 16
ARTICLE VII Due Diligence Examination 17
Section 7.1. Inspection and Assertion of Defects 17
Section 7.2. Certain Price Adjustments. 18
Section 7.3. Waiver 19
ARTICLE VIII Conditions Precedent to the Obligations of the Parties;
Termination Rights 19
Section 8.1. Conditions Precedent to the Obligations of
Future 19
Section 8.2. Conditions Precedent to the Obligations of
Seller 20
ARTICLE IX Closing of Transaction 22
Section 9.1. The Closing 22
Section 9.2. Seller's Closing Obligations 22
Section 9.3. Future's Closing Obligations 23
Section 9.4. Delivery of Files 23
ARTICLE X Certain Accounting Adjustments. 23
Section 10.1. Adjustments 23
Section 10.2. Closing and Post-Closing Accounting Settlements 24
ARTICLE XI Assumption and Indemnification 24
ARTICLE XII Notices 25
ARTICLE XIII Commissions 26
ARTICLE XIV Casualty Loss 26
ARTICLE XV Miscellaneous Matters 27
Section 15.1. Survival of Provisions 27
Section 15.2. Further Assurances 27
Section 15.3. Binding Effect; Successors and Assigns 27
Section 15.4. Imbalances 27
Section 15.5. Expenses; Sales Taxes; Filings and Recording Fees28
Section 15.6. Entire Agreement 28
Section 15.7. Public Statements 28
Section 15.8. Injunctive Relief 28
Section 15.9. Deceptive Trade Practices 29
Section 15.10. Amendments 29
Section 15.11. Governing Law 29
Section 15.12. Counterparts 29
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated August 14, 1998, is made by and
among Bargo Energy Resources, Ltd., a Texas limited partnership ("Bargo"), SCL-
CAL Company, a Texas corporation ("SCL"), Future Petroleum Corporation, a Utah
corporation ("Future"), and Future CAL-TEX Corporation, a Texas corporation
("Future Sub").
WITNESSETH:
WHEREAS, (i) Bargo is the record and beneficial owner of all of the issued
and outstanding capital stock of SCL and (ii) Future is the record and
beneficial
owner of all of the issued and outstanding capital stock of Future Sub; and
WHEREAS, the parties hereto have determined that the merger of SCL into
Future Sub upon the terms and subject to the conditions set forth herein is
desirable and in their mutual best interests; and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
consummation of the merger contemplated hereby;
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants and agreements contained herein, Bargo, SCL, Future and
Future Sub do hereby agree as follows:
ARTICLE I
Definitions, References and Construction
Section 1.1. Certain Defined Terms. When used in this Agreement, the
following terms shall have the respective meanings assigned to them in this
Section 1.1 or in the section, subsections or other subdivisions referred to
below:
"Affiliate" shall mean, when used with respect to another Person, any
Person directly or indirectly controlling, controlled by or under common
control with such other Person.
"Agreement" shall mean this Agreement, as hereafter changed, amended or
modified in accordance with the terms hereof.
"Bargo" shall have the meaning assigned to such term in the introductory
paragraph to this Agreement.
"Bargo Disclosure Schedule" shall mean a schedule delivered by the Bargo
Entities to Future on the date hereof which sets forth additional information
regarding the representations and warranties of the Bargo Entities contained
herein and information called for hereby.
"Bargo Entities" shall mean Bargo and SCL.
"Bargo Nominees" shall have the meaning assigned to such term in Section
6.11(a).
"Bargo Registration Rights Agreement" shall have the meaning assigned to
such term in Section 6.7.
"Closing" and "Closing Date" shall have the respective meanings assigned
to such terms in Section 2.3.
"Closing Obligations" shall mean the obligations of SCL to repay the
Sowell Indebtedness and the obligations of SCL to pay certain transaction
costs in connection with this Agreement and the acquisition of the Properties.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission (or any
successor body thereto).
"Commonly Controlled Entity" shall mean any Person which is under common
control with Future within the meaning of Section 4001 of ERISA.
"Consolidated" shall refer to the consolidation of any Person, in
accordance with GAAP, with its properly consolidated subsidiaries. References
herein to a Person's Consolidated financial statements, financial position,
financial condition, liabilities, etc. refer to the consolidated financial
statements, financial position, financial condition, liabilities, etc. of such
Person and its properly consolidated subsidiaries.
" Current Debt Amount" shall mean $5,800,000, which is the indebtedness
of SCL in connection with the Closing Obligations.
"Director Effective Date" shall mean 10 days after the date on which
Future filed with the Commission and transmitted to its stockholders the
information required to be so filed and transmitted under Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder.
"Effective Time" shall have the meaning assigned to such term in Section
2.2.
"Emission Credits" shall mean the emission credits described more
particularly in Section 1.1(f) of the MOC Agreement.
"Employment Agreement" shall have the meaning assigned to such term in
Section 6.5.
"EnCap Fund I" shall mean EnCap Equity 1994 Limited Partnership and
Energy Capital Investment Company PLC.
"EnCap Registration Rights Agreement" shall have the meaning assigned to
such term in Section 6.7.
"Environmental Laws" shall mean any and all laws relating to the
environment or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment including ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations thereunder.
"Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as
amended, and all rules and regulations under such act.
"Future" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
"Future Stock" shall mean the shares of common stock of Future, $0.01
par value per share, and any shares issued or issuable with respect thereto by
way of a stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or reorganization.
"Future Disclosure Schedule" shall mean a schedule delivered by the
Future Entities to the Bargo Entities on the date hereof which sets forth
additional information regarding the representations and warranties of the
Future Entities contained herein and information called for hereby.
"Future Entities" shall mean Future and Future Sub.
"Future Sub" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
"GAAP" shall mean those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor).
"Material Adverse Effect" shall mean with respect to any Person, a
material adverse effect on the financial condition, results of operations,
business or prospects of such Person and its consolidated subsidiaries, taken
as a whole.
"Merger" shall have the meaning assigned to such term in Section 2.1.
"Merger Shares" shall have the meaning assigned to such term in Article
III.
"MOC" shall have the meaning assigned to such term in Section 4.7.
"MOC Agreement" shall have the meaning assigned to such term in Section
4.7.
"Partner" shall mean each general or limited partner of Bargo.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture, or
any other legally recognizable entity.
"Plan" shall mean, at any time, any employee benefit plan which is
covered by ERISA and in respect of which Future or any Commonly Controlled
Entity is (or if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Price Group" shall mean Carl Price, Don Wm. Reynolds, Christie Price,
Robert Price and Charles D. Laudeman.
"Price Options" means the options to purchase up to 250,000 shares of
Future Stock issued to Carl Price pursuant to the Employment Agreement and
Future's 1993 Stock Incentive Plan.
"Price Registration Rights Agreement" shall have the meaning assigned to
such term in Section 6.7.
"Properties" shall mean the "Assets," as such term is defined in the MOC
Agreement, exclusive of the Emission Credits.
"Returns" shall mean all returns, reports, estimates, declarations and
statements of any nature regarding Taxes prior to the Closing required to be
filed by the taxpayer relating to its income, properties or operations.
"SCL" shall have the meaning assigned to such term in the introductory
paragraph to this Agreement.
"SCL Stock" shall mean the shares of common stock, par value $0.01 per
share, of SCL.
"Securities Act" shall mean the U.S. Securities Act of 1933, as amended,
and all rules and regulations under such Act.
"Senior Credit Facility" shall have the meaning assigned to such term in
Section 6.8.
"Shareholders' Agreement" shall have the meaning assigned to such term
in Section 6.10.
"Sowell Indebtedness" shall mean that certain indebtedness of Bargo to
James E. Sowell in the original principal amount equal to $5,700,000, as
secured by the Sowell Mortgage.
"Sowell Mortgage" shall mean that certain Mortgage, Deed of Trust,
Assignment of Production and Security Agreement by and between Bargo and James
E. Sowell covering the Properties.
"Subordination Agreement" shall have the meaning assigned to such term
in Section 6.9.
"Subsidiary" means the following entities which are subsidiaries of
Future: Future Petroleum Corporation, a Texas corporation; Future Energy
Corporation, a Nevada corporation; Future Acquisition 1995, Ltd., a Texas
limited partnership; BMC Development No. 1 Limited Partnership, a Texas
limited partnership; NCI-Shawnee Limited Partnership, a Texas limited
partnership; and Future Sub.
"Surviving Corporation" shall have the meaning assigned to such term in
Section 2.1.
"Taxes" shall mean any federal, state, local, foreign or other taxes
(including, without limitation, income, alternative minimum, franchise,
property, sales, use, lease, excise, premium, payroll, wage, employment or
withholding taxes), fees, duties, assessments, withholdings or governmental
charges of any kind whatsoever (including interest, penalties and additions to
tax).
"TBCA" shall have the meaning assigned to such term in Section 2.1.
"Warrant" shall have the meaning assigned to such term in Article III.
Section 1.2. References and Construction.
(a) All references in this Agreement to articles, sections,
subsections and other subdivisions refer to corresponding articles, sections,
subsections and other subdivisions of this Agreement unless expressly provided
otherwise.
(b) Titles appearing at the beginning of any of such subdivisions
are for convenience only and shall not constitute part of such subdivisions
and shall be disregarded in construing the language contained in such
subdivisions.
(c) The words "this Agreement", "this instrument", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited.
(d) Words in the singular form shall be construed to include the
plural and vice versa, unless the context otherwise requires. Pronouns in
masculine, feminine and neuter genders shall be construed to include any other
gender.
(e) Unless the context otherwise requires or unless otherwise
provided herein, the terms defined in this Agreement which refer to a
particular agreement, instrument or document also refer to and include all
renewals, extensions, modifications, amendments or restatements of such
agreement, instrument or document, provided that nothing contained in this
subsection shall be construed to authorize such renewal, extension,
modification, amendment or restatement.
(f) Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.
(g) The word "or" is not intended to be exclusive and the word
"includes" and its derivatives means "includes, but is not limited to" and
corresponding derivative expressions.
(h) No consideration shall be given to the fact or presumption that
one party had a greater or lesser hand in drafting this Agreement.
(i) Unless otherwise indicated, all references herein to "$" or
"dollars" shall refer to U.S. Dollars.
(j) Exhibits III(b), 4.8, 6.5, 6.6, 6.7-1, 6.7-2, 6.7-3, 6.9, 6.10,
7.1(e) and 7.2(e) are attached hereto. Each such Exhibit is incorporated
herein by reference for all purposes and references to this Agreement shall
also include such Exhibit unless the context in which used shall otherwise
require.
ARTICLE II
The Merger
Section 2.. The Merger. At the Effective Time, and on the terms and
subject to the conditions set forth in this Agreement, SCL shall be merged
with and into Future Sub (the "Merger"), Future Sub shall continue its
corporate existence under the Texas Business Corporation Act (the "TBCA") as
the surviving entity in the Merger (sometimes referred to herein as the
"Surviving Corporation"), and the separate corporate existence of SCL shall
cease.
Section 2.2. Effective Time of the Merger. Provided that the
conditions set forth in Article VII have been fulfilled or waived in
accordance with this Agreement, as soon as practicable on the Closing Date,
Future Sub and SCL shall cause the Merger to be consummated by filing with the
Secretary of State of Texas articles of merger in such form as required by,
and executed in accordance with the relevant provisions of, the TBCA. The
Merger shall become effective at the time the articles of merger are duly
filed with the Secretary of State of Texas (the "Effective Time").
Section 2.3. Closing. The closing of the Merger (the "Closing")
shall take place (i) at the offices of Thompson & Knight, P.C., located at
1700 Chase Tower, 600 Travis, Houston, Texas 77002, 10:00 a.m., local time, on
August 14, 1998, or (ii) at such other time or place or on such other date as
the parties hereto shall agree. The date on which the Closing occurs is
herein referred to as the "Closing Date".
Section 2.4. Effects of the Merger. The Merger shall have the
effects set forth in the applicable provisions of the TBCA. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time,
all the real estate and other properties, rights, privileges, powers, and
franchises of Future Sub and SCL shall vest in the Surviving Corporation,
without any transfer or assignment having occurred, and all debts,
liabilities, obligations and duties of Future Sub and SCL shall become the
debts, liabilities, obligations and duties of the Surviving Corporation.
Section 2.5. Certificate of Incorporation. The Articles of
Incorporation of Future Sub, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation,
until thereafter amended in accordance with its terms and as provided by the
TBCA.
Section 2.6. Bylaws. The Bylaws of Future Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation, until thereafter amended in accordance with its terms and as
provided by the TBCA.
Section 2.7. Directors. The directors of Future Sub at the
Effective Time shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation and until his or her successor is duly
elected and qualified in accordance with the TBCA or until his or her earlier
death, resignation or removal.
Section 2.8. Officers. The officers of Future Sub at the Effective
Time shall be the initial officers of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation and until his or her successor is duly elected and
qualified in accordance with the TBCA or until his or her earlier death,
resignation or removal.
Section 2.9. Taking of Necessary Action. Each of the parties hereto
shall use its reasonable best efforts to take all such action as may be
necessary or appropriate in order to effectuate the Merger under the TBCA as
promptly as possible.
ARTICLE III
Conversion of Securities; Approval of Merger
Section 3.1. Conversion of Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of Bargo, SCL, Future, Future
Sub or any holder of any of the following securities:
(a) Each share of SCL Stock held in the treasury of SCL shall be
canceled and retired and no payment shall be made with respect thereto.
(b) All of the outstanding shares of SCL Stock shall be converted
into (i) 4,694,859 fully paid and non-assessable shares of Future Stock (the
"Merger Shares") and (ii) a warrant to purchase 250,000 shares of Future
Stock, which warrant shall be substantially in the form of that certain Stock
Purchase Warrant attached hereto as Exhibit III(b) (the "Warrant").
Section 3.2. Approval of Merger Agreement and Merger. By execution
of this Agreement, each of Future, as the sole shareholder of Future Sub, and
Bargo, as the sole shareholder of SCL, hereby adopts, ratifies and approves
the Merger and the Merger Agreement.
Section 3.3. Waiver of Dissenter's Rights of Appraisal. Each of
Future, as the sole shareholder of Future Sub, and Bargo, as the sole
shareholder of SCL, hereby waives any dissenter's rights of appraisal or
similar rights it may have, including the rights under Section 5.11 of the
TBCA.
ARTICLE IV
Representations and Warranties of Bargo Entities
Each of the Bargo Entities represents and warrants to the Future
Entities as follows:
Section 4.1. Organization and Existence. Bargo is a limited
partnership duly formed and validly existing under the laws of the State of
Texas. SCL is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Each Bargo Entity has the
power to carry on its business as it is now being conducted or currently
proposed to be conducted. Each Bargo Entity is duly qualified to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities make such
qualification necessary, except where the failure to be so qualified will not,
alone or in the aggregate, have a Material Adverse Effect.
Section 4.2. Power and Authority. Bargo has full partnership power and
partnership authority, and SCL has full corporate power and corporate
authority, to execute, deliver, and perform this Agreement and each other
agreement, instrument, or document executed or to be executed by it in
connection with the transactions contemplated hereby to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery, and performance by each of the Bargo Entities of this
Agreement and each other agreement, instrument, or document executed or to be
executed by it in connection with the transactions contemplated hereby to
which it is a party, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
partnership action, in the instance of Bargo, and all necessary corporate
action, in the instance of SCL.
Section 4.3. Valid and Binding Agreement. This Agreement has been duly
executed and delivered by each of the Bargo Entities and constitutes, and each
other agreement, instrument, or document executed or to be executed by a Bargo
Entity in connection with the transactions contemplated hereby to which it is
a party has been, or when executed will be, duly executed and delivered by
such Bargo Entity and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of such Bargo Entity,
enforceable against it in accordance with their respective terms, except that
such enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights
generally and (b) equitable principles which may limit the availability of
certain equitable remedies (such as specific performance) in certain
instances.
Section 4.4. Non-Contravention. The execution, delivery, and
performance by a Bargo Entity of this Agreement and each other agreement,
instrument, or document executed or to be executed by such Bargo Entity in
connection with the transactions contemplated hereby to which it is a party
and the consummation by it of the transactions contemplated hereby and thereby
do not and will not (a) conflict with or result in a violation of any
provision of (i) in the instance of Bargo, its partnership agreement or other
governing instruments or (ii) in the instance of SCL, its articles of
incorporation, bylaws and other governing instruments, (b) conflict with or
result in a violation of any provision of, or constitute (with or without the
giving of notice or the passage of time or both) a default under, or give rise
(with or without the giving of notice or the passage of time or both) to any
right of termination, cancellation, or acceleration under, any bond,
debenture, note, mortgage, indenture, lease, contract, agreement, or other
instrument or obligation to which such Bargo Entity is a party or by which it
or any of its properties may be bound, (c) result in the creation or
imposition of any lien or other encumbrance upon the properties of such Bargo
Entity, or (d) violate any applicable law, rule or regulation binding upon
such Bargo Entity.
Section 4.5. Approvals. No consent, approval, order, or authorization
of, or declaration, filing, or registration with, any court or governmental
agency or of any third party is required to be obtained or made by each Bargo
Entity in connection with the execution, delivery, or performance by it of
this Agreement and each other agreement, instrument, or document executed or
to be executed by it in connection with the transactions contemplated hereby
to which it is a party or the consummation by it of the transactions
contemplated hereby and thereby other than the filing by SCL of a certificate
of merger with the Secretaries of State of Nevada and Texas in accordance with
the Nevada Statute and the TBCA, respectively.
Section 4.6. Pending Litigation. Except as otherwise set forth in
the Bargo Disclosure Schedule, there are no pending suits, actions, or other
proceedings in which a Bargo Entity is a party which affect the Properties in
any material respect, or affecting the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby or that
would, if determined adversely to such Bargo Entity, (a) result in the
impairment or loss of SCL's title to the Properties, (b) hinder or impede the
operation of all or any portion of any Property or (c) restrain, prohibit or
impose damage on a Future Entity or a Bargo Entity with respect to the
transactions contemplated hereby.
Section 4.7. Marathon Agreement. Bargo has delivered to Future a
true and correct copy of that certain Purchase and Sale Agreement made and
entered into as of May 11, 1998, by and between Marathon Oil Company ("MOC")
and Bargo Operating Company, Inc., and all amendments, modifications or
supplements thereto (the "MOC Agreement"). Bargo has delivered to Future true
and correct copies of all written disclosures given by MOC to Bargo or its
representatives which pertain to, or otherwise qualify, modify or limit the
representations, warranties, covenants and agreements made by MOC in the MOC
Agreement. The representations and warranties of MOC in the MOC Agreement are
true and correct in all material respects. All covenants and agreements to be
performed by the "Purchaser" under the MOC Agreement either prior to or at the
closing of the transactions contemplated by the MOC Agreement have been
complied with or performed in all material respects or otherwise waived in
accordance with the terms of the MOC Agreement.
Section 4.8. Assets and Liabilities of SCL. During its existence,
SCL has owned or otherwise held no properties or other assets (tangible or
intangible) other than (a) the rights of the "Purchaser" under the MOC
Agreement, (b) the Properties and (c) its rights under this Agreement. SCL
has no liabilities or obligations, contingent or otherwise, other than (i) the
liabilities or obligations incurred or assumed by the "Purchaser" under the
terms of the MOC Agreement, exclusive of any liabilities or obligations
arising or otherwise attributable to the Emission Credits, and (ii) the
Current Debt Amount and (iii) its liabilities and obligations under this
Agreement. Attached hereto as Exhibit 4.8 is a true, correct and complete
copy of a Subscription Agreement, and all amendments or modifications thereto,
whereunder Bargo subscribed for SCL Stock and conveyed, assigned and
contributed the Properties to SCL.
Section 4.9. Sowell Indebtedness. Bargo has delivered to Future a
true and correct copy of all documents or other instruments evidencing the
Sowell Indebtedness.
Section 4.10. Capitalization of SCL. The authorized capital stock
of SCL consists of 100 shares of SCL Stock. As of the date hereof, 100 shares
of SCL Stock were validly issued and outstanding, fully paid, and
nonassessable, and Bargo is the record and beneficial owner of such shares,
free and clear of all liens or other encumbrances. There are no bonds,
debentures, notes or other indebtedness issued or outstanding having the right
to vote on any matters on which SCL's stockholders may vote. Other than as
contemplated by this Agreement, there are no options, warrants, calls,
convertible securities or other rights, agreements or commitments presently
outstanding obligating SCL to issue, deliver or sell shares of its capital
stock or debt securities, or obligating SCL to grant, extend or enter into any
such option, warrant, call or other such right, agreement or commitment.
Section 4.11. Articles of Incorporation and By-laws; Corporate
Records. SCL has delivered to Future true and complete copies of its Articles
of Incorporation and Bylaws, as amended or restated through the date of this
Agreement. The minute book of SCL contains reasonably complete and accurate
records of all corporate actions of the shareholders and board of directors of
SCL, including committees of the board. The stock transfer records of SCL
contain complete and accurate records of all issuances and redemptions of
stock by SCL. Neither SCL nor, to the knowledge of SCL, any of its
Affiliates, is a party to any agreement with respect to the capital stock of
SCL other than this Agreement.
Section 4.12. Investment Experience. Bargo and each Partner is an
"accredited investor" as defined in Rule 501(a) of the Securities Act.
Section 4.13. Purchase for Own Account. The Merger Shares and
Warrant to be acquired by Bargo and, pursuant to Rule 145 under the Securities
Act, deemed acquired by the Partners, pursuant to this Agreement are being
acquired for their own account and with no intention of distributing or
reselling the Merger Shares, the Warrant or the shares of Future Stock
issuable upon exercise of the Warrant (the "Warrant Shares"), or any part
thereof, in any transaction that would be in violation of the securities laws
of the United States of America, or any state, without prejudice, however, to
the rights of the Bargo and the Partners at all times to sell or otherwise
dispose of all or any part of the Merger Shares, the Warrant or the Warrant
Shares under an effective registration statement under the Securities Act, or
under an exemption from such registration available under the Securities Act,
and subject, nevertheless, to the disposition of Bargo's and each Partner's
property being at all times within its control. If Bargo or a Partner should
in the future decide to dispose of any of the Merger Shares, the Warrant or
the Warrant Shares, Bargo and each Partner understands and agrees that it may
do so only in compliance with the Securities Act and applicable state
securities laws, as then in effect, and that stop-transfer instructions to
that effect, where applicable, will be in effect with respect to the Merger
Shares, the Warrant and the Warrant Shares. Bargo and each Partner agrees to
the imprinting, so long as required by law, of a legend on the certificates
representing the Merger Shares, the Warrant and the Warrant Shares,
substantially as follows in all material respects:
[THE SECURITIES REPRESENTED BY THIS CERTIFICATE] [THIS WARRANT AND THE
SECURITIES TO BE RECEIVED UPON THE EXERCISE OF THIS WARRANT] HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH LAWS.
Section 4.14. No Solicitation. Neither Bargo or any Partner was at
any time solicited by any leaflet, public promotional meeting, circular,
newspaper or magazine article, radio or television advertisement, or any other
form of general advertising or solicitation in connection with the offer, sale
or purchase of the Merger Shares, the Warrant or the Warrant Shares under this
Agreement.
Section 4.15. Disclaimer of Warranties. Other than those expressly set
out in this Article IV, each Bargo Entity hereby expressly disclaims any and
all representations or warranties with respect to the Properties or the
transaction contemplated hereby, and the Future Entities agree that the
Properties are being transferred "where is" and "as is". Specifically as a
part of (but not in limitation of) the foregoing, each Future Entity
acknowledges that no Bargo Entity has made, and each Bargo Entity hereby
expressly disclaims, any representation or warranty (express, implied, under
common law, by statute or otherwise) (a) except to the limited extent set
forth in Section 4.7, as to the condition of the Properties (INCLUDING WITHOUT
LIMITATION, EACH BARGO ENTITY DISCLAIMS ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO MODELS OR
SAMPLES OF MATERIALS), (b) as to the compliance by the Bargo Entities with
Environmental Laws, (c) as to the status of title to the Properties, or (d) as
to the extent of oil, gas and/or other mineral reserves, the recoverability of
or the cost of recovering any of such reserves, the value of reserves, prices
(or anticipated prices) at which production has been or will be sold and the
ability to sell oil or gas production from the Properties.
ARTICLE V
Representations and Warranties of Future Entities
Each of the Future Entities hereby represents and warrants to the Bargo
Entities as follows:
Section 5.1. Organization and Existence. Each Future Entity is a
corporation duly organized, legally existing and in good standing under the
laws of (a) in the instance of Future, the State of Utah, and (b) in the
instance of Future Sub, the laws of the State of Nevada. Future has the power
to carry on its business as it is now being conducted or currently proposed to
be conducted. Future is duly qualified to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities make such qualification
necessary, except where the failure to be so qualified will not, alone or in
the aggregate, have a Material Adverse Effect on Future and its Subsidiaries,
taken together.
Section 5.2. Power and Authority. Each Future Entity has full corporate
power and corporate authority to execute, deliver, and perform this Agreement
and each other agreement, instrument, or document executed or to be executed
by such Future Entity in connection with the transactions contemplated hereby
to which it is a party and to consummate the transactions contemplated hereby
and thereby. The execution, delivery, and performance by each Future Entity
of this Agreement (including the issuance of the Merger Shares and the
Warrant) and each other agreement, instrument, or document executed or to be
executed by such Future Entity in connection with the transactions
contemplated hereby to which it is a party, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action of such Future Entity.
Section 5.3. Valid and Binding Agreement. This Agreement has been duly
executed and delivered by each Future Entity and constitutes, and each other
agreement, instrument, or document executed or to be executed by such Future
Entity connection with the transactions contemplated hereby to which it is a
party has been, or when executed will be, duly executed and delivered by such
Future Entity and constitutes, or when executed and delivered will constitute,
a valid and legally binding obligation of such Future Entity, enforceable
against it in accordance with their respective terms, except that such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights
generally and (b) equitable principles which may limit the availability of
certain equitable remedies (such as specific performance) in certain
instances.
Section 5.4. Non-Contravention. The execution, delivery, and
performance by each Future Entity of this Agreement and each other agreement,
instrument, or document executed or to be executed by such Future Entity in
connection with the transactions contemplated hereby to which it is a party
and the consummation by it of the transactions contemplated hereby and thereby
do not and will not (a) conflict with or result in a violation of any
provision of the charter or bylaws or other governing instruments of such
Future Entity, (b) conflict with or result in a violation of any provision of,
or constitute (with or without the giving of notice or the passage of time or
both) a default under, or give rise (with or without the giving of notice or
the passage of time or both) to any right of termination, cancellation, or
acceleration under, any bond, debenture, note, mortgage, indenture, lease,
contract, agreement, or other instrument or obligation to which such Future
Entity is a party or by which such Future Entity or any of its properties may
be bound, (c) result in the creation or imposition of any lien or other
encumbrance upon the properties of such Future Entity, or (d) violate any
applicable law, rule or regulation binding upon such Future Entity.
Section 5.5. Approvals. No consent, approval, order, or authorization
of, or declaration, filing, or registration with, any court or governmental
agency or of any third party is required to be obtained or made by a Future
Entity in connection the execution, delivery, or performance by such Future
Entity of this Agreement (including the issuance of the Merger Shares and the
Warrant as contemplated hereby) and each other agreement, instrument, or
document executed or to be executed by such Future Entity in connection with
the transactions contemplated hereby to which it is a party or the
consummation by it of the transactions contemplated hereby and thereby, other
than (i) the filing by Future Sub of a certificate of merger with the
Secretaries of State of Nevada and Texas in accordance with the Nevada Statute
and the TBCA, respectively, and (ii) compliance with any applicable
requirements of the Securities Act and any applicable state securities laws.
Section 5.6. Pending Litigation. There are no pending suits,
actions, or other proceedings to which Future or its Subsidiaries is a party
or, to the knowledge of Future, threatened to be made a party which, if
decided adversely to Future or its Subsidiaries, could have a Material Adverse
Effect.
Section 5.7. Capitalization.
(a) The authorized capital stock of Future consists of 30,000,000
shares of Future Stock, and 200,000 shares of Preferred Stock, par value $.01
per share (in this Section, the "Preferred Stock"). As of August 11, 1998,
6,157,015 shares of Future Stock were validly issued and outstanding, fully
paid, and nonassessable, and no shares of Preferred Stock were issued and
outstanding and there have been no changes in such numbers through the date of
this Agreement. As of the date of this Agreement, there are no bonds,
debentures, notes or other indebtedness issued or outstanding having the right
to vote on any matters on which Future's stockholders may vote. As of the
date of this Agreement, other than as set forth in the Future Disclosure
Schedule, there are no options, warrants, calls, convertible securities or
other rights, agreements or commitments presently outstanding obligating
Future to issue, deliver or sell shares of its capital stock or debt
securities, or obligating Future to grant, extend or enter into any such
option, warrant, call or other such right, agreement or commitment, and,
except for exercises thereof, there have been no changes in the number of such
securities through the date of this Agreement; provided, that it is
contemplated Future will issue to EnCap Fund I up to 2,844,859 shares of
Future Stock at Closing in connection with EnCap Fund I's agreement to enter
into the Subordination Agreement. All of the Merger Shares to be issued in
accordance with this Agreement will be, when so issued, duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights and
shall be delivered free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever. Future has duly reserved for
issuance pursuant to the exercise of the Warrant, the Warrant Shares.
(b) The authorized capital stock of Future Sub consists of 1,000,000
shares of common stock, par value $0.01 per share ("Future Sub Stock"). As of
the date hereof, 1,000 shares of Future Sub Stock were validly issued and
outstanding, fully paid, and nonassessable, and Future is the record and
beneficial owner of such shares, free and clear of all liens or other
encumbrances. There are no bonds, debentures, notes or other indebtedness
issued or outstanding having the right to vote on any matters on which Future
Sub's stockholders may vote. Other than as contemplated by this Agreement,
there are no options, warrants, calls, convertible securities or other rights,
agreements or commitments presently outstanding obligating Future Sub to
issue, deliver or sell shares of its capital stock or debt securities, or
obligating Future Sub to grant, extend or enter into any such option, warrant,
call or other such right, agreement or commitment.
Section 5.8. Subsidiaries. Each Subsidiary is a corporation,
partnership or other entity (as indicated on the Future Disclosure Schedule)
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has the corporate or similar power to carry
on its business as it is now being conducted or currently proposed to be
conducted. Each Subsidiary is duly qualified to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary except where the failure to be so qualified, when taken together
with all such failures, has not had, and would not reasonably be expected to
have, a Material Adverse effect on Future and its Subsidiaries, taken
together. The Future Disclosure Schedule sets forth, with respect to each
Subsidiary, its name and jurisdiction of organization and, with respect to
each Subsidiary that is not wholly-owned, the number of issued and outstanding
shares of capital stock or share capital and the number of shares of capital
stock or share capital owned by Future or a Subsidiary. All the outstanding
shares of capital stock or share capital of each Subsidiary are validly
issued, fully paid and nonassessable, and, except as otherwise set forth in
the Future Disclosure Schedule, those owned by Future or by a Subsidiary of
Future are owned free and clear of any liens, claims or encumbrances. There
are no existing options, warrants, calls, convertible securities or other
rights, agreements or commitments of any character relating to the issued or
unissued capital stock or other securities of any of the Subsidiaries of
Future. Future does not directly or indirectly own any interest in any other
corporation, partnership, joint venture or other business association or
entity or have any obligation, commitment or undertaking to acquire any such
interest other than joint ventures of the type customarily entered into in the
oil and gas industry.
Section 5.9. Permits. Each of Future and its Subsidiaries has all
permits, approvals, licenses and franchises from governmental authorities
required to conduct its business as now being conducted, except for such
permits, approvals, licenses and franchises the absence of which would not,
individually or in the aggregate, have a Material Adverse Effect.
Section 5.10. Knowledgeable Purchaser. Each Future Entity is a
knowledgeable purchaser, owner and operator of oil and gas properties, has the
ability to evaluate (and in fact has evaluated) the Properties for purchase,
and is acquiring the Properties for its own account and not with the intent to
make a distribution within the meaning of the Securities Act of 1933 (and the
rules and regulations pertaining thereto) or a distribution thereof in
violation of any other applicable securities laws.
Section 5.11. Certificates for Merger Shares. The certificates
delivered to Bargo at the Closing representing the Merger Shares will conform
to the requirements of the Utah Business Corporation Act.
Section 5.12. SEC Filings. Except as otherwise disclosed to Bargo,
Future is current in its obligations to file all periodic reports and proxy
statements with the Commission required to be filed under the Exchange Act.
Future's Annual Report on Form-10KSB for the year ended December 31, 1997,
Future's Form 8-K/A filed on February 27, 1998, and Future's Quarterly Report
on Form-10QSB for the quarter ending March 31, 1998 (collectively, the "SEC
Documents") are all of the documents the Future was required to file with the
Commission since January 1, 1998. As of their respective dates, the SEC
Documents complied as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations of the Commission thereunder
applicable to such SEC Documents. The SEC Documents do not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of circumstances then existing. The audited Consolidated financial
statements and unaudited Consolidated interim financial statements of Future
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the Commission with respect thereto; present fairly in all
material respects, in conformity with GAAP applied on a consistent basis, the
Consolidated financial position of Future as of the dates thereof and its
Consolidated results of operations and changes in financial position for the
periods then ended (subject to normal year-end adjustments in the case of the
unaudited interim financial statements and the fact that certain information
and notes have been condensed or omitted in accordance with the Exchange Act
and the rules promulgated thereunder); and are in all material respects in
accordance with the books of account and records of Future and its
subsidiaries. There are no material liabilities of Future (contingent or
otherwise), other than as disclosed in the SEC Documents and the financial
statements included therein.
Section 5.13. Absence of Certain Changes or Events. Except as
disclosed in the SEC Documents filed prior to the date of this Agreement or in
the Future Disclosure Schedule, since December 31, 1997, Future and its
Subsidiaries have operated their respective businesses in the ordinary course
of business consistent with past practice and there has not been (a) any
transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of
business) which, alone or in the aggregate, has had, or would reasonably be
expected to have, a Material Adverse Effect; (b) any damage, destruction or
loss, whether or not covered by insurance, which has had, or would reasonably
be expected to have, a Material Adverse Effect; (c) any declaration, setting
aside or payment of any dividend or distribution (whether in cash, stock or
property) with respect to the capital stock of the Future Entities or any
Subsidiary (other than dividends or distributions between Future and its
wholly-owned Subsidiaries); (d) any material change in Future's accounting
principles, practices or methods; (e) any repurchase or redemption with
respect to Future's capital stock; (f) any stock split, combination or
reclassification of any of Future's capital stock or the issuance or
authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for, shares of Future's capital stock; (g) any grant of
or any amendment of the terms of any option to purchase shares of capital
stock of Future; or (h) any agreement (whether or not in writing), arrangement
or understanding to do any of the foregoing.
Section 5.14. Section 61-6-2 of Utah Code. The Utah Control Shares
Acquisition Act will not apply to acquisitions from time to time, in the open
market and otherwise, by Bargo and the Partners, of the shares of Future.
Section 5.15. Articles of Incorporation and By-laws; Corporate
Records. Future and Future Sub have delivered to Bargo true and complete
copies of their respective Certificate or Articles of Incorporation and
Bylaws, as amended or restated through the date of this Agreement. The minute
books of each of Future and its Subsidiaries contain reasonably complete and
accurate records of all corporate actions of the equity owners of the various
entities and of the boards of directors or other governing bodies, including
committees of such boards or governing bodies. The stock transfer records of
Future are maintained by its transfer agent and registrar and, to the
knowledge of Future, contain complete and accurate records of all issuances
and redemptions of stock by Future. The stock transfer records of Future Sub
contain complete and accurate records of all issuances and redemptions of
stock by Future Sub. Except as set forth in the Future Disclosure Schedule,
neither Future nor, to the knowledge of Future, any of its Affiliates, is a
party to any agreement with respect to the capital stock of Future other than
this Agreement.
Section 5.16. Contracts.
(a) The Future Disclosure Schedule sets forth, as of the date
hereof, a list of all of the following material contracts and other agreements
to which any of Future or its Subsidiaries is a party or by which any of them
or any material portion of their properties or assets are bound or subject
(other than those set forth in any other portion of the Future Disclosure
Schedule):
(i) contracts, severance agreements and other agreements with
any current or former officer, director, employee, consultant, agent or
other representative;
(ii) contracts and other agreements with any labor union or
association representing any employee of the Future or its Subsidiaries;
(iii) contracts, agreements or other agreements relating to
Future and its Subsidiaries between any of the Future or its
Subsidiaries, on the one hand, and any stockholder or any of his, her or
its Affiliates on the other hand;
(iv) joint venture agreements;
(v) contracts and other agreements under which any of Future
or its Subsidiaries agrees to indemnify any party;
(vi) contracts and other agreements relating to the borrowing
of money; or
(vii) any other material contract or other agreement whether
or not made in the ordinary course of business.
There have been delivered or made available to Bargo true and complete copies
of all such contracts and other agreements described above that are referenced
in the Future Disclosure Schedule.
(b) All contracts, agreements and understandings of the type
described above and referenced in the Future Disclosure Schedule are valid and
binding and are in full force and effect and enforceable in accordance with
their respective terms other than contracts, agreements or understandings
which are by their terms no longer in force or effect. Except as set forth in
the Future Disclosure Schedule, (i) no approval or consent of, or notice to,
any Person is needed in order that such contract, agreement or understanding
shall continue in full force and effect in accordance with its terms without
penalty, acceleration or rights of early termination following the
consummation of the transactions contemplated by this Agreement, and (ii) none
of the Future or its Subsidiaries is in violation or breach of or default
under any such contract, agreement or understanding nor, to the knowledge of
Future, is any other party to any such contract, agreement or understanding.
Section 5.17. Oil and Gas Properties.
(a) Each of Future and its Subsidiaries has good and defensible
title to all of its material oil and gas properties and assets, free and clear
of all liens other than as disclosed in the Future Disclosure Schedule;
provided, that no representation or warranty is made with respect to any oil,
gas or mineral property or interest to which no proved oil or gas reserves are
properly attributed. All proceeds from the sale of each Future's and its
Subsidiaries' share of the hydrocarbons being produced from its oil and gas
properties are currently being paid in full to the Future or its Subsidiaries
by the purchasers thereof on a timely basis and none of such proceeds are
currently being held in suspense by such purchaser or any other party.
(b) Future has delivered to Bargo a copy of the reserve report (in
this Section, the "Reserve Report") dated as of August 1, 1998, prepared by
T.J. Smith & Company, Inc, independent reserve engineers (in this Section, the
"Reserve Engineers"), relating to the oil and gas reserves of Future and its
Subsidiaries. The factual information underlying the estimates of the
reserves of Future and its subsidiaries, which was supplied by Future to the
Reserve Engineers for the purpose of preparing the Reserve Report, including,
without limitation, production, volumes, sales prices for production,
contractual pricing provisions under oil or gas sales or marketing contracts
under hedging arrangements, costs of operations and development, and working
interest and net revenue information relating to Future's and its
Subsidiaries' ownership interests in properties, was true and correct in all
material respects on the date of such Reserve Report; the estimates of future
capital expenditures and other future exploration and development costs
supplied to the Reserve Engineers were prepared in good faith and with a
reasonable basis; the information provided to the Reserve Engineers for
purposes of preparing the Reserve Report was prepared in accordance with
customary industry practices; the Reserve Engineers were, as of the date of
the Reserve Report prepared by it, and are, as of the date hereof, independent
petroleum engineers with respect to Future and its Subsidiaries; other than
normal production of the reserves and intervening oil and gas price
fluctuations, Future is not as of the date hereof and as of the date of
Closing will not be, aware of any facts or circumstances that would result in
a materially adverse change in the reserves in the aggregate, or the aggregate
present value of future net cash flows therefrom, as described in the Reserve
Report; estimates of such reserves and the present value of the future net
cash flows therefrom in the Reserve Report comply in all material respects to
the applicable requirements of Regulation S-X and Industry Guide 2 under the
Securities Act.
Section 5.18. Environmental and Safety Matters. Except as set forth
in the Future Disclosure Schedule and except for such of the following as
would not, individually or in the aggregate, have a Material Adverse Effect
with respect to Future and its Subsidiaries: (a) each of Future and its
Subsidiaries is in compliance with all applicable Environmental Laws; (b)
neither Future nor any of its Subsidiaries has received a notice, report or
information regarding any liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), or any corrective, investigatory or remedial
obligations, arising under applicable Environmental Laws with respect to its
past or present operations or properties; (c) Future or a Subsidiary has
obtained, and is and has been in compliance with all terms and conditions of,
all permits, licenses and other authorizations required pursuant to
Environmental Laws for its occupation of the real property owned by Future and
its Subsidiaries (in this Section, an "Owned Property") the property leased by
the Future and its Subsidiaries (in this Section, a "Leased Property") and the
other assets and operations of the Future and its Subsidiaries and the conduct
of their business; and (d) neither Future nor its Subsidiaries has any
contingent liability which is material to Future and its Subsidiaries as a
whole in connection with the release of any hazardous materials into the
environment in violation of any Environmental Law. Future has made available
to Bargo true, complete and correct copies of all environmental reports,
analyses, tests or monitoring in the possession of the Future during the past
two years pertaining to any Owned Property or Leased Property.
Section 5.19. Tax Matters. Each of the following is true with
respect to each of Future and its Subsidiaries to the extent applicable to
such member:
(a) all Returns have been or will be timely filed by Future
and its Subsidiaries when due in accordance with all applicable laws;
all Taxes shown on the Returns have been or will be timely paid when
due; the Returns have been properly completed in compliance with all
applicable laws and regulations and completely and accurately reflect
the facts regarding the income, expenses, properties, business and
operations required to be shown thereon; the Returns are not subject to
penalties under Section 6662 of the Code (or any corresponding provision
of state, local or foreign tax law);
(b) except as set forth in the Future Disclosure Schedule,
Future and its Subsidiaries has paid all Taxes required to be paid by it
(whether or not shown on a Return) or for which it could be liable
(provided that it shall not be considered a breach of this
representation if it is ultimately determined that additional tax
payments are due but such assessment is based on an adjustment to a
return or position, if such member has a reasonable basis for the
position taken with respect to such Taxes), whether to taxing
authorities or to other persons under tax allocation agreements or
otherwise, and the charges, accruals, and reserves for Taxes due, or
accrued but not yet due, relating to its income, properties,
transactions or operations as reflected on its books (including, without
limitation, the balance sheet included in Future's Form 10-QSB for the
quarter ended March 31, 1998) are adequate to cover such Taxes;
(c) there are no agreements or consents currently in effect
for the extension or waiver of the time (i) to file any Return or (ii)
for assessment or collection of any taxes relating to the income,
properties or operations of Future or its Subsidiaries, nor has Future
and its Subsidiaries been requested to enter into any such agreement or
consent;
(d) there are no liens for Taxes (other than for current Taxes
not yet due and payable) upon the assets of Future or its Subsidiaries;
and
(e) to the knowledge of Future, each of Future and its
Subsidiaries has complied in all material respects with all applicable
tax laws.
Section 5.20. ERISA. Future does not maintain nor has it
maintained any Plan. Future does not currently contribute to or have
any obligation to contribute to or otherwise have any liability with
respect to any Plan.
Section 5.21 Future's Assets. The assets of Future and of its
subsidiaries consist solely of (i) reserves of oil, rights to reserves
of oil and associated exploration and production assets with a fair
market value not exceeding $500 million and (ii) other assets with a
fair market value not exceeding $15 million. For purposes of this
Section 5.21, the term "associated exploration and production assets"
shall have the meaning ascribed thereto in Section 802.3 of the Rules
promulgated pursuant to the Hart-Scott-Rodino Antitrust Improvements Act
of 1976.
Section 5.22. No Other Representations or Warranties. Except
for the representations and warranties contained in this Article V,
neither Future, Future Sub nor any other Person makes any other express
or implied representation or warranty on behalf of Future or Future Sub.
ARTICLE VI
Certain Covenants
Section 6.1. Access to Information.
(a) From the date hereof until Closing, each Bargo Entity will
use its reasonable best efforts to give Future, and its attorneys and
other representatives, access at all reasonable times (i) to the
Properties and to any contract files, lease or other title files,
production files, well files and other files of the Bargo Entities
pertaining to the ownership of the Properties, and (ii) the books and
records of SCL, and each Bargo Entity will use its reasonable best
efforts to arrange for Future, and its attorneys and other
representatives, to have access to any such files or records in the
office of Bargo. Each Bargo Entity shall not be obligated to provide
Future with access to any records or data which such Bargo Entity cannot
provide to Future without, in its reasonable opinion, breaching
confidentiality agreements with other parties. Future recognizes and
agrees that all materials made available to it (whether pursuant to this
Section or otherwise) in connection with the Properties are made
available to it as an accommodation and without representation or
warranty of any kind as to the accuracy and completeness of such
materials.
(b) From the date hereof until Closing, Future shall afford to
Bargo and to the officers, employees, accountants, counsel, financial
advisors and other representatives of Bargo, reasonable access during
normal business hours to the premises, books and records of Future and
the Subsidiaries and will furnish to the Bargo (i) a copy of each
report, schedule, registration statement and other documents filed by it
during such period pursuant to the requirements of federal or state
securities laws, and (ii) such other information with respect to its
business and properties as Bargo reasonably requests. Future shall not
be obligated to provide Bargo with access to any records or data which
Future cannot provide to Bargo without, in its reasonable opinion,
breaching confidentiality agreements with other parties. Bargo
recognizes and agrees that all materials made available to it (whether
pursuant to this Section or otherwise) are made available to it as an
accommodation and without representation or warranty of any kind as to
the accuracy and completeness of such materials.
Section 6.2. Confidentiality.
(a) Each Receiving Party (as defined below) agrees that all
Confidential Information (as defined below) shall be kept confidential
by the Receiving Party and shall not be disclosed by the Receiving Party
in any manner whatsoever; provided, however, that (i) any of such
Confidential Information may be disclosed to such directors, officers,
employees, and authorized representatives (including without limitation
attorneys, accountants, consultants, and financial advisors) of the
Receiving Party (collectively, for purposes of this Section, "Receiving
Party Representatives") as need to know such information for the purpose
of evaluating the transactions contemplated hereby (it being understood
that each Receiving Party Representative shall be informed by the
Receiving Party of the confidential nature of such information and shall
be required to treat such information confidentially and that the
Receiving Party and a Receiving Party Representative shall be
responsible for any breach of this Section by such Receiving Party
Representative), (ii) any disclosure of Confidential Information may be
made to the extent to which the Disclosing Party (as defined below)
consents in writing, (iii) Confidential Information may be disclosed by
the Receiving Party or any Receiving Party Representative to the extent
that, in the opinion of counsel for the Receiving Party or such
Receiving Party Representative, the Receiving Party or such Receiving
Party Representative is legally compelled to do so, provided that, prior
to making such disclosure, the Receiving Party or such Receiving Party
Representative, as the case may be, advises and consults with the
Disclosing Party regarding such disclosure and provided further that the
Receiving Party or such Receiving Party Representative, as the case may
be, discloses only that portion of the Confidential Information as is
legally required. The Receiving Party agrees that none of the
Confidential Information will be used for any purpose other than in
connection with the transactions contemplated hereby. The term
"Confidential Information", as used herein, means all information
(irrespective of the form of communication) obtained by or on behalf of
the Receiving Party from the Disclosing Party or its representatives
pursuant to this Section and all similar information obtained from the
Disclosing Party or its representatives by or on behalf of the Receiving
Party prior to the date of this Agreement, other than information which
(A) was or becomes generally available to the public other than as a
result of disclosure by the Receiving Party or any Receiving Party
Representative, (B) was or becomes available to the Receiving Party on a
nonconfidential basis prior to disclosure to the Receiving Party by the
Disclosing Party or its representatives, or (C) was or becomes available
to the Receiving Party from a source other than the Disclosing Party and
its representatives, provided that such source is not known by the
Receiving Party (after reasonable due inquiry) to be bound by a legal,
contractual or fiduciary obligation to the Disclosing Party. As used in
this Section, the term "Receiving Party" shall mean (x) a Future Entity,
when the Disclosing Party is a Bargo Entity, and (y) a Bargo Entity,
when the Disclosing Party is a Future Entity. As used in this Section,
the term "Disclosing Party" shall mean (xx) a Future Entity, when the
Receiving Party is a Bargo Entity , and (yy) a Bargo Entity, when the
Receiving Party is a Future Entity.
(b) If this Agreement is terminated, the Receiving Party shall
promptly return at its expense, and shall cause all Receiving Party
Representatives to promptly return at the Receiving Party's expense, all
Confidential Information to the Disclosing Party without retaining any
copies thereof, provided that such portion of the Confidential
Information as consists of notes, compilations, analyses, reports,
studies, or other documents prepared by the Receiving Party or the
Receiving Party Representatives shall be destroyed (and the Receiving
Party and each Receiving Party Representative shall certify such
destruction in writing to the Disclosing Party if requested by the
Disclosing Party).
Section 6.3. Conduct of Operations on the Properties Prior to
the Effective Time. From the date hereof until the Effective Time, SCL
will continue its actions as a non-operator of the Properties in the
ordinary course of business and will not sell or otherwise dispose of
(or release) any portion of the Properties, without Future's written
approval. SCL may make sales or other dispositions of oil, gas and
other minerals in the ordinary course of business after production (but,
in doing so, will not enter into any new marketing arrangements unless
the same terminate, or can be terminated, (in either case without
penalty or other detriment) upon 31 days written notice or less). SCL
will not, without Future's consent, propose the drilling of any
additional wells, or propose the deepening, plugging back, reworking or
abandoning of any existing wells, or propose the conducting of any other
operations which require consent under the applicable operating
agreement except, in SCL's sole discretion, necessary to prevent
termination or forfeiture of any oil and gas lease. SCL will advise
Future of any such proposals made by other parties, and will consult
with Future concerning such proposals, and will respond in the manner as
required by Future; provided that, if the period for responding to such
a proposal extends beyond the Effective Time, SCL will not respond to
such proposal unless the Closing does not occur prior to the next to
last day allowed to respond (in which case SCL shall respond in the
manner required by Future). SCL will not modify any lease or other
material agreement included in or relating to the Properties or enter
into any new material agreement relating to the Properties without
Future's consent, other than production sales contracts, or other
marketing related agreements, which terminate, or can be terminated, (in
each case without penalty or other detriment) upon 31 days written
notice or less.
Section 6.4. Conduct of Future's Business Prior to the
Director Effective Date. During the period from the date of this
Agreement to the Director Effective Date, Future and its Subsidiaries
shall each use its reasonable best efforts to preserve the goodwill of
suppliers, general partners, customers and others having business
relations with them and to do nothing knowingly to impair their ability
to keep and preserve their businesses as it exists on the date of this
Agreement. Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Director Effective Date,
Future and its Subsidiaries shall not, without the prior written consent
of Bargo:
(a) declare, set aside, increase or pay any dividend
(including any stock dividends), or declare or make any
distribution on, or directly or indirectly combine, redeem,
reclassify, purchase, or otherwise acquire, any shares of its
capital stock or authorize the creation or issuance of, or, other
than the Price Options or as contemplated hereby, issue, deliver
or sell any additional shares of its capital stock or any
securities or obligations convertible into or exchangeable for its
capital stock or effect any stock split or reverse stock split or
other recapitalization.
(b) amend its Certificate of Incorporation or By-laws
otherwise than as contemplated by this Agreement;
(c) pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire,
any such shares, or any other voting securities or convertible
securities;
(d) sell, assign, mortgage, pledge, encumber or
otherwise transfer any oil and gas property or other material
asset (including sales of oil or gas to be produced in the future)
owned by Future or a Subsidiary, other than sales of oil and gas
in the ordinary course of business; enter into any material swap,
hedge or similar agreement covering a material amount of its
future production;
(e) merge, consolidate or enter into a share exchange
with another entity other than as contemplated by this Agreement,
or liquidate;
(f) borrow amounts except amounts under the Senior
Credit Facility necessary (i) to pay the Closing Obligations, (ii)
to make the payment to EnCap Fund I and Gecko Booty 1994 I Limited
Partnership provided by Section 2.1 of the Note Restructuring
Agreement and (iii) to pay transaction costs incurred by it in
connection with this Agreement, the Credit Facility and the Note
Restructuring Agreement and the respective transactions
contemplated thereby;
(g) commit or omit to do any act which act or omission
would cause a breach of any covenant contained in this Agreement
or would cause any representation or warranty contained in this
Agreement to become untrue, as if each such representation and
warranty were continuously made from and after the date hereof;
(h) violate any applicable law, statute, rule,
governmental regulation or order in any material respect;
(i) fail to maintain its books, accounts and records in
the usual manner on a basis consistent with that heretofore
employed;
(j) fail to pay, or to make adequate provision in all
material respects for the payment of, all Taxes, interest payments
and penalties due and payable (for all periods up to the date of
Closing, including that portion of its fiscal year to and
including the date of Closing) to any city, parish, county, state,
the United States, foreign or any other taxing authority, except
those being contested in good faith by appropriate proceedings and
for which sufficient reserves have been established, or make any
elections with respect to taxes;
(k) make any material Tax election that is inconsistent
with any corresponding election made on a prior return or settle
or compromise any income Tax liability for an amount materially in
excess of the liability therefor that is reflected on the Future's
consolidated financial statements included in its Form 10-KSB for
the fiscal year ended December 31, 1997;
(l) other than the Price Options or the Employment
Agreement, (1) increase the compensation or fringe benefits of any
present or former director, officer or employee of any member of
the Future or its Subsidiaries (except for increases in salary or
wages in the ordinary course of business consistent with past
practice), (2) grant any severance or termination pay to any
present or former director, officer or employee of any of the
Future or its Subsidiaries , (3) loan or advance any money or
other property to any present or former director, officer or
employee of any of the Company or its Subsidiaries or (4)
establish, adopt, enter into, amend or terminate any Plan or any
plan, agreement, program, policy, trust, fund or other arrangement
that would be a Plan if it were in existence as of the date of
this Agreement; or
(m) authorize any of, or agree or commit to do any of,
the foregoing actions.
Section 6.5. Employment Agreement. Future and Carl Price
shall enter into an employment agreement at (and subject to the
occurrence of) the Closing in substantially the form of the agreement
attached hereto as Exhibit 6.5 in all material respects (the "Employment
Agreement").
Section 6.6. Bylaws. Future shall amend its Bylaws at (and
subject to the occurrence of) the Closing in substantially the form
attached hereto as Exhibit 6.6 in all material respects.
Section 6.7. Registration Rights Agreements. Future and Bargo
shall enter into a registration rights agreement at (and subject to the
occurrence of) the Closing in substantially the form of the agreement
attached hereto as Exhibit 6.7-1 in all material respects (the "Bargo
Registration Rights Agreement"). Future and Bargo shall use their
reasonable best efforts to cause EnCap Fund I to enter into a
registration rights agreement at (and subject to the occurrence of) the
Closing in substantially the form of the agreement attached hereto as
Exhibit 6.7-2 in all material respects (the "EnCap Registration Rights
Agreement"). Future and Bargo shall use their reasonable best efforts
to cause the members of the Price Group to enter into a registration
rights agreement at (and subject to the occurrence of) the Closing in
substantially the form of the agreement attached hereto as Exhibit 6.7-3
in all material respects (the "Price Registration Rights Agreement").
Section 6.8. Credit Facility. Future shall use its reasonable
best efforts to obtain, and have in place at or prior to Closing, a
senior credit facility of not less than $20,000,000 and with an initial
borrowing base of at least $10,000,000 (the "Senior Credit Facility").
Section 6.9. Subordination Agreement. Future shall use its
reasonable best efforts to cause EnCap Fund I to execute and deliver on
or prior to the Closing that certain Master Subordination Agreement in
substantially the form of the agreement attached hereto as Exhibit 6.9
(the "Subordination Agreement").
Section 6.10. Shareholders' Agreement. Future and Bargo shall
enter into a shareholders' agreement at (and subject to the occurrence
of) the Closing in substantially the form of the agreement attached
hereto as Exhibit 6.10 (the "Shareholders' Agreement") and shall use
their reasonable best efforts to cause EnCap Fund I and the other
parties listed therein to execute and deliver such agreement.
Section 6.11. Directors.
(a) Future shall cause (i) Robert Price and Don Wm. Reynolds,
Jr. to resign as directors of Future effective at the Director Effective
Date, (ii) the appointment of Tim J. Goff and Thomas D. Barrow (the
"Bargo Nominees"), and Gary R. Petersen and D. Martin Phillips as
directors of Future effective immediately at the Director Effective Date
and (iii) the appointment of Tim J. Goff as Chairman of the Board of
Directors of Future effective immediately at the Director Effective
Date.
(b) Future shall promptly take all actions required pursuant
to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations under this Section 6.11
and shall promptly distribute to its stockholders an Information
Statement pursuant to Section 14(f) providing such information with
respect to Bargo and its officers and directors as is required under
Section 14(f) and Rule 14f-1 to fulfill such obligations. Bargo shall
supply to Future and be solely responsible for any information with
respect to Bargo and the Bargo Nominees required by such Section 14(f)
and Rule 14f-1. Future represents to Bargo that the Information
Statement will comply as to form with all requirements of the Exchange
Act and the rules and regulations thereunder, and will not, on the date
filed with the Commission and on the Closing Date and the Effective
Time, contain an untrue statement of a material fact or omit to state a
material fact which, in light of the facts set forth therein, is
misleading; provided that Future is not representing as to the accuracy
of any statement provided by Bargo in writing to Future for use in the
Information Statement. Bargo represents to Future that all information
provided by Future in writing to Bargo for inclusion in the Information
Statement will not, on the date filed with the Commission and on the
Closing Date and at the Effective Time, contain an untrue statement of
a material fact or omit to state a material fact which, in light of the
facts set forth therein, is misleading.
Section 6.12. Payment of the Closing Obligations. Immediately
following the Closing, Future shall cause the Surviving Corporation to
pay (a) the Sowell Indebtedness and use its best efforts to cause the
execution and filing of proper releases of the Sowell Mortgage and (b)
the difference between the Current Debt Amount and the Sowell
Indebtedness to Bargo in immediately available funds by wire transfer to
an account specified by Bargo in writing prior to Closing.
Section 6.13. Certain Affirmative Post-Closing Covenants.
Subject to the occurrence of the Closing, the covenants and agreements
contained in Sections 6.2 through Section 6.8 of that certain Note
Restructuring Agreement of even date herewith by and between Future and
Fund I shall be incorporated herein and Future shall be deemed to have
made such covenants and agreements with Bargo.
ARTICLE VII
Conditions Precedent to the Obligations of the Parties; Termination
Rights
Section 7.1. Conditions Precedent to the Obligations of Future
Entities. The obligations of the Future Entities to consummate the
transactions contemplated by this Agreement shall be subject to the
fulfillment on or prior to the Closing Date of each of the following
conditions (which may be waived by the Future Entities in writing):
(a) Each and every representation of the Bargo Entities under
this Agreement shall be true and accurate as of the date when made and
shall be deemed to have been made again at and as of the time of the
Effective Time and the Closing and shall at and as of the Effective Time
and such time of Closing be true and accurate in all respects except as
to changes specifically contemplated by this Agreement or consented to
by Future.
(b) The Bargo Entities shall have performed and complied in
all material respects with (or compliance therewith shall have been
waived by Future) each and every covenant, agreement and condition
required by this Agreement to be performed or complied with by them
prior to or at the Closing.
(c) Future shall have received a certificate executed by the
general partner of Bargo, dated the Closing Date, representing and
certifying that the conditions set forth in subsections (a) and (b) have
been fulfilled.
(d) No suit, action or other proceedings shall, on the date of
Closing, be pending or threatened before any court or governmental
agency seeking to restrain, prohibit, or obtain damages or other relief
in connection with the consummation of the transactions contemplated by
this Agreement.
(e) The Future Entities shall have received an opinion of
counsel or counsels reasonably acceptable to Future dated the Closing
Date covering the matters described in Exhibit 7.1(e) and in a form
reasonably acceptable to Future.
(f) Future shall have, on or before the Closing, entered into
the Senior Credit Facility on terms and conditions acceptable to Future.
(g) Future shall have, on or before the Closing, entered into
the Subordination Agreement with EnCap Fund I.
(h) EnCap Fund I, Bargo, Carl Price and Don Reynolds shall
have executed and delivered the Shareholders' Agreement.
(i) Future shall have received (i) a copy of the resolutions
of the partners of Bargo authorizing the execution, delivery and
performance by Bargo of this Agreement and each other agreement,
instrument or document executed or to be executed by Bargo in connection
with this Agreement or the transactions contemplated hereby to which it
is a party and (ii) a copy of the resolutions of the board of directors
and the sole shareholder of SCL authorizing the execution, delivery and
performance by SCL of this Agreement and each other agreement,
instrument or document executed or to be executed by SCL in connection
with this Agreement or the transactions contemplated hereby to which it
is a party.
(j) EnCap Fund I shall have executed and delivered the EnCap
Registration Rights Agreement.
(k) Bargo shall have executed and delivered the Bargo
Registrations Rights Agreement.
(l) Carl Price shall have executed and delivered the
Employment Agreement.
(m) At least Carl Price shall have executed and delivered the
Price Registration Rights Agreement.
(n) Bargo shall have delivered its shares of SCL Stock for
cancellation.
If any such condition on the obligations of the Future Entities under
this Agreement is not met as of the Closing Date, or in the event the
Closing does not occur on or before the Closing Date, and (in either
case) the Future Entities are not in breach of their obligations
hereunder in the absence of the Bargo Entities also being in breach of
their obligations hereunder, this Agreement may, at the option of the
Future Entities, be terminated, in which case the parties shall have no
further obligations to one another hereunder (other than the obligations
under Sections 6.2 and 11.4 and Article X which will survive such
termination).
Section 7.2. Conditions Precedent to the Obligations of the
Bargo Entities. The obligations of the Bargo Entities to consummate the
transactions contemplated by this Agreement shall be subject to the
fulfillment on or prior to the Closing Date of each of the following
conditions (which may be waived by the Bargo Entities in writing):
(a) Each and every representation of the Future Entities under
this Agreement shall be true and accurate as of the date when made and
shall be deemed to have been made again at and as of the Effective Time
and the time of Closing and shall at and as of the Effective Time and
such time of Closing be true and accurate in all respects except as to
changes specifically contemplated by this Agreement or consented to by
Bargo.
(b) The Future Entities shall have performed and complied in
all material respects with (or compliance therewith shall have been
waived by Bargo) each and every covenant, agreement and condition
required by this Agreement to be performed or complied with by the
Future Entities prior to or at the Closing.
(c) Bargo shall have received a certificate executed by the
president of Future, dated the Closing Date, representing and certifying
that the conditions set forth in subsections (a) and (b) have been
fulfilled.
(d) No suit, action or other proceedings shall, on the date of
Closing, be pending or threatened before any court or governmental
agency seeking to restrain, prohibit, or obtain damages or other relief
in connection with the consummation of the transactions contemplated by
this Agreement.
(e) The Bargo Entities shall have received an opinion of
counsel or counsels reasonably acceptable to Bargo dated the Closing
Date covering the matters described in Exhibit 7.2(e) and in a form
reasonably acceptable to Bargo.
(f) Future shall have, on or before the Closing, entered into
the Senior Credit facility on terms and conditions acceptable to Bargo.
(g) Future and EnCap Fund I shall have, on or before the
Closing, entered into the Subordination Agreement.
(h) Future shall have received the resignations of Robert
Price and Don Wm. Reynolds, Jr. as directors of Future, such
resignations to be effective at the Director Effective Date.
(i) Tim J. Goff, Gary R. Petersen, D. Martin Phillips and
Thomas D. Barrow shall have been appointed to the Board of Directors of
Future, such appointment to be effective immediately at the Director
Effective Date.
(j) Tim J. Goff shall have been elected as Chairman of the
Board of Directors of Future, such election to be effective immediately
at the Effective Time.
(k) EnCap Fund I, Future, Carl Price and Don Reynolds shall
have executed and delivered the Shareholders' Agreement.
(l) Future shall have executed and delivered the Bargo
Registration Rights Agreement.
(m) Future and EnCap Fund I shall have executed and delivered
the EnCap Registration Rights Agreement.
(n) Future and Carl Price shall have executed and delivered
the Employment Agreement.
(o) Bargo shall have received (i) a copy of the resolutions of
the Board of Directors of Future authorizing the execution, delivery and
performance by Future of this Agreement and each other agreement,
instrument or document executed or to be executed by Future in
connection with this Agreement or the transactions contemplated hereby
to which it is a party and (ii) a copy of the resolutions of the Board
of Directors and sole shareholder of Future Sub authorizing the
execution, delivery and performance by Future Sub of this Agreement and
each other agreement, instrument or document executed or to be executed
by Future Sub in connection with this Agreement or the transactions
contemplated hereby to which it is a party .
(p) Bargo shall have received (i) a certificate or
certificates evidencing the Merger Shares and (ii) the Warrant.
(q) At least Carl Price shall have executed and delivered the
Price Registration Rights Agreement.
(r) Future shall have adopted the amendment to the Bylaws as
contemplated by Section 6.6.
If any such condition on the obligations of the Bargo Entities under
this Agreement is not met as of the Closing Date, or in the event the
Closing does not occur on or before the Closing Date, and (in either
case) the Bargo Entities are not in breach of their obligations
hereunder in the absence of the Future Entities also being in breach of
their obligations hereunder, this Agreement may, at the option of the
Bargo Entities, be terminated, in which case the parties shall have no
further obligations to one another hereunder (other than the obligations
under Sections 6.2 and 11.4 and Article X which will survive such
termination).
ARTICLE VIII
Certain Accounting Adjustments.
Section 8.1. Adjustments. Notwithstanding that for state law
purposes the Merger shall be effective as of the Effective Time, the
parties hereto agree that for purposes of this Article VIII the
Properties will be deemed to have been conveyed and transferred by SCL
to Future Sub as of August 1, 1998 (the "Effective Date") and that
appropriate accounting adjustments shall be made between the Future
Entities and the Bargo Entities so that (a) all expenses (including,
without limitation, all drilling costs, all capital expenditures, and
all overhead charges under applicable operating agreements, and all
other overhead charges actually charged by third parties) which are
incurred in the operation of the Properties after the Effective Date
will be borne by Future Sub, and all proceeds (net of applicable
production, severance, and similar taxes) from sale of oil, gas and/or
other minerals produced from the Oil and Gas Properties after the
Effective Date will be received by Future Sub, and (b) all expenses
which are incurred in the operation of the Properties before the
Effective Date will be borne by the Bargo Entities and all proceeds (net
of applicable production, severance, and similar taxes) from the sale of
oil, gas and/or other minerals produced therefrom before the Effective
Date will be received by the Bargo Entities. It is agreed that, in
making such adjustments: (i) oil which was produced from the Oil and
Gas Properties and which was, on the Effective Date, stored in tanks
located on the Oil and Gas Properties (or located elsewhere but used to
store oil produced from the Oil and Gas Properties prior to delivery to
oil purchasers) and above pipeline connections shall be deemed to have
been produced before the Effective Date (it is recognized that such
tanks were not gauged on the Effective Date for the purposes of this
Agreement and that determination of the volume of such oil in storage
will be based on the best available data, which may include estimates),
and (ii) ad valorem taxes assessed with respect to a period which the
Effective Date splits shall be prorated based on the number of days in
such period which fall on each side of the Effective Date (with the day
on which the Effective Date falls being counted in the period after the
Effective Date), and (iii) no consideration shall be given to the local,
state or federal income tax liabilities of any party.
Section 8.2. Closing and Post-Closing Accounting Settlements.
(a) At or before Closing, the parties shall determine, based
upon the best information reasonably available to them, the amount of
the adjustments provided for in Section 8.1. If the amount of
adjustments so determined which would result in a credit to Future Sub
exceed the amount of adjustments so determined which would result in a
credit to the Bargo Entities, Future Sub shall be entitled to receive a
cash payment from Bargo by the amount of such excess, and, if the
converse is true, Bargo shall be entitled to receive a cash payment from
Future by the amount of such excess. If no adjustment of the type
contemplated under this subsection (a) is made at or before Closing and
Bargo should thereafter receive any net proceeds attributable to oil or
gas produced after the Effective Date, Bargo shall promptly remit such
net proceeds to Future.
(b) On or before 90 days after Closing, Future and Bargo shall
review any additional information which may then be available pertaining
to the adjustments provided for in Section 8.1, shall determine if any
additional adjustments (whether the same be made to account for expenses
or revenues not considered in making the adjustments made at Closing, or
to correct errors made in such adjustments) should be made beyond those
made at Closing, and shall make any such adjustments in the manner
provided in subsection (a) above. Following such additional
adjustments, no further adjustments shall be made under this Article
VIII with respect to the matters contemplated by this Article.
ARTICLE IX
Notices
All notices and other communications required under this Agreement
shall (unless otherwise specifically provided herein) be in writing and
be delivered personally, by recognized commercial courier or delivery
service (which provides a receipt), by telecopier (with receipt
acknowledged), or by registered or certified mail (postage prepaid), at
the following addresses:
If to any Bargo Entity: c/o Bargo Energy Resources, Ltd.
700 Louisiana, Suite 3700
Houston, Texas 77002
Attention: Tim J. Goff
Fax No.:713-236-9799
If to any Future Entity: c/o Future Petroleum Corporation
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 a
Future Entity, on the one hand, or a Bargo Entity, on the other hand,
may specify as its proper address any other post office address within
the continental limits of the United States by giving notice to the
other, in the manner provided in this Article, at least ten (10) days
prior to the effective date of such change of address.
A copy of any notice and other communication given by either a
Future Entity or a Bargo Entity hereunder shall be sent to EnCap
Investments L.C. as follows:
EnCap Investments, L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attention: Gary R. Petersen or Colin Nisbeth
Fax No.: 713-659-6130
ARTICLE X
Commissions
Bargo agrees to indemnify and hold harmless the Future Entities
from and against any and all claims, obligations, actions, liabilities,
losses, damages, costs or expenses (including court costs and attorneys
fees) of any kind or character arising out of or resulting from any
agreement, arrangement or understanding alleged to have been made by, or
on behalf of, any Bargo Entity with any broker or finder in connection
with this Agreement or the transactions contemplated hereby. Future
agrees to indemnify and hold harmless Bargo from and against any and all
claims, obligations, actions, liabilities, losses, damages, costs or
expenses (including court costs and attorneys fees) of any kind or
character arising out of or resulting from any agreement, arrangement or
understanding alleged to have been made by, or on behalf of, any Future
Entity with any broker or finder in connection with this Agreement or
the transactions contemplated hereby.
ARTICLE XI
Miscellaneous Matters
Section 11.1. Survival of Representations and Warranties. All
representations and warranties made herein by the Future Entities and
the Bargo Entities shall be continuing and shall be true and correct on
and as of the date of Closing and shall survive the Closing.
Section 11.2. Further Assurances. From time to time after the
Closing, at the request of any party hereto and without further
consideration, Bargo, on the one hand, and the Future Entities, on the
other hand, shall execute and deliver to the requesting party such
instruments and documents and take such other action (but without
incurring any material financial obligation) as such requesting party
may reasonably request in order to consummate more fully and effectively
the transactions contemplated hereby.
Section 11.3. Binding Effect; Successors and Assigns; No Third
Party Benefit. The Agreement shall be binding on the parties hereto and
their respective successors and permitted assigns. No party hereto
shall have the right to assign its rights under this Agreement without
the prior written consent of the other party first having been obtained.
Notwithstanding anything contained in this Agreement to the contrary,
nothing in this Agreement, either express or implied, is intended to
confer on any person other than the parties hereto or their respective
successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
Section 11.4. Expenses. Each party shall bear and pay all
expenses incurred by it in connection with the transactions contemplated
by this Agreement.
Section 11.5. Entire Agreement. This Agreement contains the
entire understanding of the parties hereto with respect to subject
matter hereof and supersedes all prior agreements, understandings,
negotiations, and discussions among the parties with respect to such
subject matter. Time is of the essence in this Agreement.
Section 11.6. Public Statements. The Bargo Entities, on the one
hand, and the Future Entities, on the other hand, shall consult with
each other with regard to all publicity and other releases at or prior
to Closing concerning this Agreement and the transactions contemplated
hereby and, except as required by applicable law or the applicable rules
or regulations of any governmental body or stock exchange, neither the
Bargo Entities, on the one hand, nor the Future Entities, on the other
hand, shall issue any publicity or other release without the prior
consent of the other.
Section 11.7. Injunctive Relief. The parties hereto acknowledge
and agree that irreparable damage would occur in the event any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement, and shall be
entitled to enforce specifically the provisions of this Agreement, in
any court of the United States or any state thereof having jurisdiction,
in addition to any other remedy to which the parties may be entitled
under this Agreement or at law or in equity.
Section 11.8. Deceptive Trade Practices. To the extent
applicable to the transaction contemplated hereby or any portion
thereof, Future can and does expressly waive the provisions of the Texas
Deceptive Trade Practices-Consumer Protection Act, Section 17.41 et
seq., Texas Business & Commerce Code, other than Section 17.555, which
is not waived, and all other consumer protection laws of the State of
Texas, or any other state, applicable to this transaction that may be
waived by the parties. In connection with such waiver, Future hereby
represents to the Bargo Entities that it (a) is in the business of
seeking or acquiring by purchase or lease, goods or services for
commercial or business use, (b) has knowledge and experience in
financial and business matters that enables it to evaluate the merits
and risks of the transactions contemplated hereby, (c) is not in a
significantly disparate bargaining position and (d) has assets of
$5,000,000 or more according to its most recent financial statements.
Section 11.9. Amendments. This Agreement may be amended,
modified, supplemented, restated or discharged (and provisions hereof
may be waived) only by an instrument in writing signed by the parties
hereto.
Section 11.10. Indemnification. Bargo agrees to indemnify,
defend and hold harmless Future from and against any losses, expenses,
claims, damages or liabilities resulting form the failure of the Merger
to qualify as a tax-free reorganization under Section 368(a)(2)(D) of
the Code, including taxes, interest and attorneys' fees relating
thereto.
Section 11.11. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas.
Section 11.12. Counterparts. This Agreement may be executed in
counterparts, all of which are identical and all of which constitute one
and the same instrument. It shall not be necessary for the Future
Entities and the Bargo Entities to sign the same counterpart.
IN WITNESS WHEREOF, this Agreement is executed by the parties
hereto on the date set forth above.
BARGO ENERGY RESOURCES, LTD.
By: BARGO OPERATING COMPANY, INC.,
General Partner
By:/s/ Tim J. Goff
Tim J. Goff, President
SCL-CAL COMPANY
By: /s/ Tim J. Goff
Tim J. Goff, President
FUTURE PETROLEUM CORPORATION
By: /s/ Carl Price
Carl Price, President
FUTURE CAL-TEX CORPORATION
By:/s/ Carl Price
Carl Price, President
EXHIBIT 4.3
THIS AGREEMENT is made and entered into as of this 14th day of August,
1998, by and among Carl Price, Bargo Energy Resources, Ltd., EnCap Equity 1994
Limited Partnership and Energy Capital Investment Company PLC.
WHEREAS, the undersigned are shareholders of Future Petroleum
Corporation, a Utah corporation ("Future"); and
WHEREAS, the undersigned deem it in their mutual best interests to
enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants contained herein, the undersigned do hereby agree that, in
their capacities as shareholders of Future, the undersigned will cause the
Board of Directors to adopt an amendment to the Bylaws of Future substantially
in the form of the instrument attached hereto as Exhibit A.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the above date.
/s/ Carl Price
Carl Price
BARGO ENERGY RESOURCES, LTD.
By: Bargo Operating Company
By: /s/ Tim J. Goff
Tim J. Goff, President
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: EnCap Investments, L.C.
By: /s/ Gary R. Petersen
Gary R. Petersen, Managing Director
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ Gary R. Petersen
Gary R. Petersen, Director
EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of this 14th day of August, 1998, by and among Future
Petroleum Corporation, a Utah corporation (the "Company"), and Bargo
Resources, Ltd., a Texas limited partnership ("Bargo").
RECITALS:
A. Reference is herein made to that certain Agreement and Plan of
Merger dated as of August 14, 1998 (the "Merger Agreement"), by and among the
Company, Future CAL-TEX Corporation, a Texas corporation ("Future Sub"),
Bargo and SCL-CAL Company, a Texas corporation ("Bargo Sub"). Under the
Merger Agreement, (i) the Bargo Sub will be merged with and into the Future
Sub, with the Future Sub being the surviving corporation, and (ii) Bargo's
shares of capital stock in the Bargo Sub will be converted into, and Bargo
will be entitled to receive, 4,694,859 shares of Common Stock (as defined
herein) and a warrant entitling Bargo to purchase 250,000 shares of Common
Stock.
B. In order to induce Bargo to enter into the Merger Agreement (and
recognizing that it would not be willing to enter into the Merger Agreement in
the absence of this Agreement), the Company has agreed to provide Bargo 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.
"Bargo" shall have the meaning assigned to it in the introductory
paragraph.
"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 Agreement" shall have the meaning assigned to it in Section
11(b).
"EnCap Holders" shall mean "Holders," as such term is defined in the
Bargo Agreement.
"EnCap LP" shall mean EnCap Equity 1994 Limited Partnership, a Texas
limited partnership.
"EnCap Securities" shall mean "Registrable Securities," as such term is
defined in the EnCap Agreement.
"Energy PLC" shall mean Energy Capital Investment Company PLC, an
English investment company.
"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 6(a).
"Merger Agreement" shall have the meaning assigned to it in Paragraph A
of the Recitals hereto.
"Merger Shares" shall have the meaning assigned to it in the Merger
Agreement.
"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.
"Registrable Securities" shall mean (i) the Merger Shares, (ii) the
Warrant Shares and (iii) any securities issued or issuable with respect to any
of the shares described in clauses (i) and (ii) above by way of a stock
dividend or other distribution 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), (ii) and (iii) 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), (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), (C)
securities for which a registration statement with respect to the sale of such
securities has become effective under the Securities Act and such securities
shall have been disposed of in accordance with such registration statement,
(D) such securities have been sold as permitted by Rule 144 (or any successor
provision) under the Securities Act and the purchaser thereof does not receive
"restricted securities" as defined in Rule 144, or (E) such securities shall
have ceased to be outstanding.
"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, filing, listing
and NASD fees, fees and expenses of compliance with securities and blue sky
laws, all word processing, duplicating, printing and engraving expenses,
messenger, telephone and delivery expenses, and fees and disbursements of
counsel for the Company, of its independent certified public accountants and
any of its independent reserve engineers, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance, premiums and other costs of policies of insurance
against liabilities arising out of the public offering of the Registrable
Securities being registered, and fees and disbursements of underwriters
(excluding discounts and commissions); provided, that Registration Expenses
shall not include any Selling Expenses. Without limiting the generality of
any other provision hereof, no holder of Registrable Securities shall be
responsible for any allocation of general and administrative (including all
employee and compensation expenses) expenses incurred by the Company in
connection with an offering.
"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.
"Warrant Shares" shall have the meaning assigned to such term in the
Merger Agreement.
(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) One or more Holders of not less than 20% of the Registrable
Securities ("Initiating Holders") then outstanding 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 (i) unless it has become effective and remained effective for
the lesser of (1) the period necessary to complete the sale or disposition of
the Registrable Securities covered by such registration statement, or (2) 180
days after the effective date of such registration statement, except with
respect to any registration statement filed pursuant to Rule 415 under the
Securities Act, in which case the Company shall use its best efforts to keep
such registration statement effective until such time as all of the
Registrable Securities cease to be Registrable Securities; (ii) if, after it
has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to the selling
Holders and has not thereafter become effective, or (iii) if the conditions to
closing specified in the underwriting agreement, if any, entered into in
connection with such registration are not satisfied or waived, other than
solely by reason of a failure on the part of the selling Holders; 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 Securities then outstanding. In the event a
Holder requests that the Company effect a Demand Registration pursuant to this
Section 2, the Company will (i) promptly give notice of the proposed
registration to all other Holders 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.
(d) If the managing underwriter in any registration effected under
this Section 2 advises the Company that, in its reasonable opinion, the number
of securities requested to be included in such registration exceeds the number
that can be sold in such offering within a price range acceptable to the
Holders of 66 2/3% of the Registrable Securities requested to be included in
such registration, the Company, except as provided in the following sentence,
will include in such registration, to the extent of the number and type that
the Company is so advised can be sold in such offering, Registrable Securities
requested to be included in such registration, pro rata among the Holders
requesting such registration on the basis of the estimated gross proceeds from
the sale thereof. If the total number of Registrable Securities requested to
be included in such registration cannot be included as provided in the
preceding sentence, holders of Registrable Securities requesting registration
thereof pursuant to this Section 2, representing not less than 33-1/3% of the
Registrable Securities with respect to which registration has been requested
and constituting not less than 66 2/3% of the initiating Holders, shall have
the right to withdraw the request for registration by giving written notice to
the Company within 20 days after receipt of such notice by the Company and, in
the event of such withdrawal, such request shall not be counted for purposes
of the requests for registration to which holders of Registrable Securities
are entitled pursuant to this Section 2.
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, whether or not for sale for its
own account, 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 (on the basis of
the estimated proceeds from the sale thereof) 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, the securities to be included in the registration
statement (or registration statements) for any Person other than the Holders,
the EnCap Holders (if the EnCap Holders have exercised their rights under
Section 3 of the EnCap Agreement) and the Company shall be first reduced prior
to any such pro rata reduction and (ii) if such Piggyback Registration is
incident to a secondary registration on behalf of holders of securities of the
Company, the securities to be included in the registration statement (or
registration statements) for any Person not exercising "demand" registration
rights other than the Holders and the EnCap Holders (if the EnCap Holders have
exercised their rights under Section 3 of the EnCap Agreement) shall be first
reduced prior to any such pro rata reduction; provided, further, that if (1)
the Holders have made a request under this Section 3 and the EnCap Holders
have made a request under Section 3 of the EnCap Agreement and (2) all of the
Registrable Securities of the Holders and all of the EnCap Securities of the
EnCap Holders cannot be included in the registration statement(s) under the
terms of such sections, the total number of Registrable Securities of the
Holders and the EnCap Securities of the EnCap Holders 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. Subject to any
applicable underwriting agreement, any Holder of Registrable Securities may
withdraw at any time any Registrable Securities registered under this Section
3. No registration effected under this Section 3 shall relieve the Company of
its obligation to effect any registration upon request under Section 2.
Section 4. Registration Procedures.
(a) Whenever the Holders 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 and remain 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 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 until the earlier of (1)such time as all of such
Registrable Securities covered by such registration statement have been
sold (but not before the expiration of the applicable prospectus
delivery period) or (2) 180 days after the effective date of such
registration statement, except with respect to any registration
statement filed pursuant to Rule 415 under the Securities Act, in which
case the Company shall use its best efforts to keep such registration
statement effective until such time as all of the Registrable Securities
covered thereby cease to be Registrable Securities; 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 Holder of Registrable Securities covered by
the registration statement ("Seller") 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 (it being understood that the Company consents to the use of
the prospectus and any amendment or supplement thereto by each Seller
and the underwriter or underwriters, if any, in connection with the
offering and sale of Registrable Securities covered by the prospectus or
any amendment or supplement thereto);
(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, to keep such registration or qualifications in effect for so
long as such registration statement remains in effect, 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 (including those
set forth in clauses (2) through (6) in paragraph (vii) below 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
promptly prepare and furnish to such seller and each underwriter, if
any, a reasonable number of copies of 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) The Company will also notify each Seller promptly, and
(if requested by a Seller) confirm such notice in writing, (1) when a
prospectus or any prospectus supplement or post-effective amendment has
been filed and, with respect to a registration statement or any post-
effective amendment, when the same has become effective under the
Securities Act and each applicable state law, (2) of any request by the
Commission or any other federal or state governmental authority for
amendments or supplements to a registration statement or related
prospectus or for additional information, (3) of the issuance by the
Commission of any stop order suspending the effectiveness of a
registration statement or the initiation of any proceedings for that
purpose, (4) if at any time the representations or warranties of the
Company or any subsidiary contained in any agreement (including any
underwriting agreement) contemplated hereby cease to be true and correct
in any material respect, (5) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, or (6) of the Company's reasonable
determination that a post-effective amendment to a registration
statement would be appropriate;
(viii) 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;
(ix) 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;
(x) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission and applicable
state securities authorities;
(xi) 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 qualification of any Registrable Securities 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;
(xii) 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;
(xiii) in connection with an underwritten public offering of
securities, use its reasonable best efforts to obtain a signed
counterpart of 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 Sellers reasonably request
and an opinion of counsel for the Company covering such matters with
respect to such registration statement as are customarily covered in
opinions of issuer's counsel and delivered to the underwriters in
underwritten public offerings of securities;
(xiv) the Company shall make available for inspection by the
sellers of such Registrable Securities, any underwriter participating in
any distribution pursuant to such registration statement and any
attorney, accountant or other professional retained by the Holder or
underwriter (in this paragraph collectively referred to as
"inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company as shall be reasonable necessary
to enable them to exercise their due diligence responsibility, and cause
the Company's officers, directors and employees to supply all
information reasonably requested by any such inspectors in connection
with such registration statement;
(xv) cause representatives of the Company to participate in
any "road show" or "road shows" reasonably requested by any underwriter
of an underwritten or "best efforts" offering of any Registrable
Securities; and
(xvi) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all Registrable
Securities covered by such registration agreement from and after a date
not later than the effective date of such registration.
(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 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
Seller, the Registrable Securities held by such Seller 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 Sellers.
Section 5. Expenses of Registration. The Company shall pay all
Registration Expenses in connection with each registration effected pursuant
to Sections 2 and 3. All Selling Expenses incurred by a Seller in connection
with a registration effected pursuant to the terms hereof shall be borne by
such Seller.
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,
its directors, officers, partners, agents, employees 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 (including reasonable costs
of investigation), 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; provided, that each such Seller's liability under such
indemnification shall be limited to the sales proceeds from the sale of the
Company's securities owned by the sellers pursuant to such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement, 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; provided, that each such Seller's
liability under such indemnification shall be limited to the sales proceeds
from the sale of the Company's securities owned by the sellers pursuant to
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement, 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 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 the
Seller shall be required to enter into customary underwriting agreements with
the underwriter.
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.
(a) In order to facilitate the possibility of future public
offerings of Common Stock, the Holders agree that in connection with 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, each such Holder (regardless of whether such Holder is participating in
the offering) will execute a customary agreement with the underwriters of such
offering in substantially the form executed by directors and senior executive
management of the Company in which the Holder agrees not to sell Registrable
Securities owned by it for a period of up to 90 days following the effective
date of the registration statement for such 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.
(b) During a period commencing on the filing by the Company of a
registration statement which includes Registrable Securities (other than
pursuant to Rule 415), the Company agrees not to effect any public sale or
distribution (including by registering securities held by others) of any
securities the same as or similar to those being registered by such
registration statement, or any securities convertible into or exchangeable or
exercisable for such securities, unless such sale or distribution is pursuant
to such registration statement.
Section 10. Existing Fund I Registration Rights. The Company
represents and warrants to Bargo that effective immediately upon the execution
and delivery of the EnCap Agreement by the parties thereto: (i) that certain
Registration Rights Agreement dated as of November 25, 1997, by and among the
Company, Energy PLC and EnCap LP, as amended by that certain Amendment No. 1
to Registration Rights Agreement dated as of May 1, 1998, shall be terminated
and be of no further force and effect whatsoever; and (ii) that the
registration rights accorded Energy PLC and EnCap LP under that certain April
1997 Agreement dated as of April 28, 1997, by and among the Company, Future
Acquisition 1995, Ltd., Energy PLC and EnCap LP shall be terminated and of no
further force and effect whatsoever.
Section 11. Other Existing or Subsequent Registration Rights.
(a) The Company represents and warrants to Bargo that other than the
registration rights referenced in Section 10 (which rights are being
terminated as provided in such Section), the registration rights granted under
this Agreement and the registration rights granted under the EnCap Agreement
and the Price Agreement, the Company is not currently a party to any other
agreement whereby it accords any Person and demand or piggy-back registration
rights with respect to such Person's Common Stock.
(b) Contemporaneously with executing and delivering this Agreement,
the Company is executing and delivering that certain (i) Registration Rights
Agreement dated as of even date herewith by and between the Company, Energy
PLC and EnCap LP. (the "EnCap Agreement") and (ii) Registration Rights
Agreement dated as of even date herewith by and between the Company, Carl
Price, et al (the "Price Agreement"). The Company represents and warrants
that it has provided Bargo with a true, complete and accurate copy of the
EnCap Agreement and the Price Agreement and agrees that it will not agree to
any amendment or other modification to the EnCap Agreement or the Price
Agreement without having first received the written consent of the Holders of
a majority of the Registrable Securities then outstanding.
(c) The Company agrees that it will not hereafter grant to any
Person demand registration rights without the prior written consent of the
Holders of a majority of the number of Registrable Securities then
outstanding. The Company agrees that it will not hereafter grant to any
Person any piggy-back registration rights that are inconsistent with or
violates the rights granted to the Holders of Registrable Securities under
this Agreement.
Section 12. Miscellaneous.
(a) Bargo 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.
(b) 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.
(c) 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 and (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.
(d) 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.
(e) 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 Bargo:
Bargo Energy Resources, Ltd.
700 Louisiana, Suite 3700
Houston, Texas 77002
Telecopier No.: (713) 236-9799
Attention: Tim J. Goff
(f) 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.
(g) 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.
(h) 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.
(i) 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.
(j) The Company agrees to remove any stop transfer orders and
similar instructions and 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.
(k) This Agreement may be amended, modified, supplemented, restated
or discharged (and provisions hereof may be waived) only by an instrument in
writing signed by the Company and the Holders of not less than 95% of the
number of Registrable Securities then outstanding.
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
BARGO ENERGY RESOURCES, LTD;
By: Bargo Operating Company, Inc.,
General Partner
By: /s/ Tim J. Goff
Name: Tim J. Goff
Title: President
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of this 14th day of August, 1998, 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 Agreement and Plan of
Merger dated as of August 14, 1998 (the "Merger Agreement"), by and among the
Company, Future CAL-TEX Corporation, a Texas corporation, Bargo Energy
Resources, Ltd., a Texas limited partnership, and SCL-CAL Company, a Texas
corporation.
B. Energy PLC and EnCap LP are the current record and beneficial
owners of an aggregate 1,850,000 shares of Common Stock (the "Fund I Current
Shares"). In connection with the transaction contemplated by the Merger
Agreement, Energy PLC and EnCap LP have agreed to subordinate certain
indebtedness owed to them by the Company. As part of the consideration for
such agreement, the Company will issue to Energy PLC and EnCap LP an aggregate
of 2,844,859 shares of Common Stock (the "Fund I Additional Shares").
C. In order to induce Energy PLC and EnCap LP to subordinate the
indebtedness referenced in the immediately preceding paragraph (and
recognizing that they would not be willing to take the above described actions
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.
"Bargo Agreement" shall have the meaning assigned to it in Section
11(b).
"Bargo Holders" shall mean "Holders," as such term is defined in the
Bargo Agreement.
"Bargo Securities" shall mean "Registrable Securities," as such term is
defined in the Bargo Agreement.
"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.
"Fund I Additional Shares" shall have the meaning assigned to such term
in Paragraph B of the Recitals hereto.
"Fund I Current Shares" shall have the meaning assigned to such term in
Paragraph B of the Recitals hereto.
"Fund I Shares" shall mean the Fund I Current Shares and the Fund I
Additional Shares.
"Holder" shall mean any Person that holds Registrable Securities.
"Holder Indemnified Parties" shall have the meaning assigned to it in
Section 6(a).
"Merger Agreement" shall have the meaning assigned to it in Paragraph A
of the Recitals hereto.
"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.
"Registrable Securities" shall mean (i) the Fund I Shares and (ii) any
securities issued or issuable with respect to any of the shares described in
clause (i) above by way of a stock dividend or other distribution 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), (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), (C) securities for which a registration statement with respect
to the sale of such securities has become effective under the Securities Act
and such securities shall have been disposed of in accordance with such
registration statement, (D) such securities have been sold as permitted by
Rule 144 (or any successor provision) under the Securities Act and the
purchaser thereof does not receive "restricted securities" as defined in Rule
144, or (E) such securities shall have ceased to be outstanding.
"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, filing, listing
and NASD fees, fees and expenses of compliance with securities and blue sky
laws, all word processing, duplicating, printing and engraving expenses,
messenger, telephone and delivery expenses, and fees and disbursements of
counsel for the Company, of its independent certified public accountants and
any of its independent reserve engineers, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance, premiums and other costs of policies of insurance
against liabilities arising out of the public offering of the Registrable
Securities being registered, and fees and disbursements of underwriters
(excluding discounts and commissions); provided, that Registration Expenses
shall not include any Selling Expenses. Without limiting the generality of
any other provision hereof, no holder of Registrable Securities shall be
responsible for any allocation of general and administrative (including all
employee and compensation expenses) expenses incurred by the Company in
connection with an offering.
"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) One or more Holders of not less than 20% of the Registrable
Securities ("Initiating Holders") then outstanding 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 (i) unless it has become effective and remained effective for
the lesser of (1) the period necessary to complete the sale or disposition of
the Registrable Securities covered by such registration statement, or (2) 180
days after the effective date of such registration statement, except with
respect to any registration statement filed pursuant to Rule 415 under the
Securities Act, in which case the Company shall use its best efforts to keep
such registration statement effective until such time as all of the
Registrable Securities cease to be Registrable Securities; (ii) if, after it
has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to the selling
Holders and has not thereafter become effective, or (iii) if the conditions to
closing specified in the underwriting agreement, if any, entered into in
connection with such registration are not satisfied or waived, other than
solely by reason of a failure on the part of the selling Holders; 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 Securities then outstanding. In the event a
Holder requests that the Company effect a Demand Registration pursuant to this
Section 2, the Company will (i) promptly give notice of the proposed
registration to all other Holders 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.
(d) If the managing underwriter in any registration effected under
this Section 2 advises the Company that, in its reasonable opinion, the number
of securities requested to be included in such registration exceeds the number
that can be sold in such offering within a price range acceptable to the
Holders of 66 2/3% of the Registrable Securities requested to be included in
such registration, the Company, except as provided in the following sentence,
will include in such registration, to the extent of the number and type that
the Company is so advised can be sold in such offering, Registrable Securities
requested to be included in such registration, pro rata among the Holders
requesting such registration on the basis of the estimated gross proceeds from
the sale thereof. If the total number of Registrable Securities requested to
be included in such registration cannot be included as provided in the
preceding sentence, holders of Registrable Securities requesting registration
thereof pursuant to this Section 2, representing not less than 33-1/3% of the
Registrable Securities with respect to which registration has been requested
and constituting not less than 66 2/3% of the initiating Holders, shall have
the right to withdraw the request for registration by giving written notice to
the Company within 20 days after receipt of such notice by the Company and, in
the event of such withdrawal, such request shall not be counted for purposes
of the requests for registration to which holders of Registrable Securities
are entitled pursuant to this Section 2.
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, whether or not for sale for its
own account, 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 (on the basis of
the estimated proceeds from the sale thereof) 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, the securities to be included in the registration
statement (or registration statements) for any Person other than the Holders,
the Bargo Holders (if the Bargo Holders have exercised their rights under
Section 3 of the Bargo Agreement) and the Company shall be first reduced prior
to any such pro rata reduction and (ii) if such Piggyback Registration is
incident to a secondary registration on behalf of holders of securities of the
Company, the securities to be included in the registration statement (or
registration statements) for any Person not exercising "demand" registration
rights other than the Holders and the Bargo Holders (if the Bargo Holders have
exercised their rights under Section 3 of the Bargo Agreement) shall be first
reduced prior to any such pro rata reduction; provided, further, that if (1)
the Holders have made a request under this Section 3 and the Bargo Holders
have made a request under Section 3 of the Bargo Agreement and (2) all of the
Registrable Securities of the Holders and all of the Bargo Securities of the
Bargo Holders cannot be included in the registration statement(s) under the
terms of such sections, the total number of Registrable Securities of the
Holders and the Bargo Securities of the Bargo Holders 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. Subject to any
applicable underwriting agreement, any Holder of Registrable Securities may
withdraw at any time any Registrable Securities registered under this Section
3. No registration effected under this Section 3 shall relieve the Company of
its obligation to effect any registration upon request under Section 2.
Section 4. Registration Procedures.
(a) Whenever the Holders 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 and remain 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 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 until the earlier of (1)such time as all of such
Registrable Securities covered by such registration statement have been
sold (but not before the expiration of the applicable prospectus
delivery period) or (2) 180 days after the effective date of such
registration statement, except with respect to any registration
statement filed pursuant to Rule 415 under the Securities Act, in which
case the Company shall use its best efforts to keep such registration
statement effective until such time as all of the Registrable Securities
covered thereby cease to be Registrable Securities; 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 Holder of Registrable Securities covered by the
registration statement ("Seller") 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 (it being understood that the Company consents to the use of the
prospectus and any amendment or supplement thereto by each Seller and
the underwriter or underwriters, if any, in connection with the offering
and sale of Registrable Securities covered by the prospectus or any
amendment or supplement thereto);
(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, to keep such registration or qualifications in effect for so
long as such registration statement remains in effect, 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 (including those
set forth in clauses (1) through (6) of paragraph (vii) below) 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
promptly prepare and furnish to such Seller and each underwriter, if
any, a reasonable number of copies of 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) The Company will also notify each Seller promptly, and (if
requested by a Seller) confirm such notice in writing, (1) when a
prospectus or any prospectus supplement or post-effective amendment has
been filed and, with respect to a registration statement or any post-
effective amendment, when the same has become effective under the
Securities Act and each applicable state law, (2) of any request by the
Commission or any other federal or state governmental authority for
amendments or supplements to a registration statement or related
prospectus or for additional information, (3) of the issuance by the
Commission of any stop order suspending the effectiveness of a
registration statement or the initiation of any proceedings for that
purpose, (4) if at any time the representations or warranties of the
Company or any subsidiary contained in any agreement (including any
underwriting agreement) contemplated hereby cease to be true and correct
in any material respect, (5) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, or (6) of the Company's reasonable
determination that a post-effective amendment to a registration
statement would be appropriate;
(viii) 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;
(ix) 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;
(x) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission and applicable state
securities authorities;
(xi) 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 qualification of any Registrable Securities 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;
(xii) 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;
(xiii) in connection with an underwritten public offering of
securities, use its reasonable best efforts to obtain a signed
counterpart of 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 Sellers reasonably request
and an opinion of counsel for the Company covering such matters with
respect to such registration statement as are customarily covered in
opinions of issuer's counsel and delivered to the underwriters in
underwritten public offerings of securities;
(xiv) the Company shall make available for inspection by the
sellers of such Registrable Securities, any underwriter participating in
any distribution pursuant to such registration statement and any
attorney, accountant or other professional retained by the Holder or
underwriter (in this paragraph collectively referred to as
"inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company as shall be reasonable necessary
to enable them to exercise their due diligence responsibility, and cause
the Company's officers, directors and employees to supply all
information reasonably requested by any such inspectors in connection
with such registration statement;
(xv) cause representatives of the Company to participate in any
"road show" or "road shows" reasonably requested by any underwriter of
an underwritten or "best efforts" offering of any Registrable
Securities; and
(xvi) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all Registrable
Securities covered by such registration agreement from and after a date
not later than the effective date of such registration.
(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 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
Seller, the Registrable Securities held by such Seller, 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 owned by a Seller
that such information has been furnished to the Company by such Seller.
Section 5. Expenses of Registration. The Company shall pay all
Registration Expenses in connection with each registration effected pursuant
to Sections 2 and 3. All Selling Expenses incurred by a Seller in connection
with a registration effected pursuant to the terms hereof shall be borne by
such Seller
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, its
directors, officers, partners, agents, employees 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 (including reasonable costs
of investigation), 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; provided, that each such Seller's liability under such
indemnification shall be limited to the sales proceeds from the sale of the
Company's securities owned by the sellers pursuant to such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement, 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; provided, that each such Seller's
liability under such indemnification shall be limited to the sales proceeds
from the sale of the Company's securities owned by the sellers pursuant to
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement, 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 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 Seller shall
be required to enter into a customary underwriting agreement with the
underwriter.
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.
(a) In order to facilitate the possibility of future public offerings
of Common Stock, the Holders agree that in connection with 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, each
such Holder (regardless of whether such Holder is participating in the
offering) will execute a customary agreement with the underwriters of such
offering in substantially the form executed by directors and senior executive
management of the Company in which the Holder agrees not to sell Registrable
Securities owned by it for a period of up to 90 days following the effective
date of the registration statement for such 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.
(b) During a period commencing on the filing by the Company of a
registration statement which includes Registrable Securities (other than
pursuant to Rule 415), the Company agrees not to effect any public sale or
distribution (including by registering securities held by others) of any
securities the same as or similar to those being registered by such
registration statement, or any securities convertible into or exchangeable or
exercisable for such securities, unless such sale or distribution is pursuant
to such registration statement.
Section 10. Existing Fund I Registration Rights. The Company, Energy PLC
and EnCap LP agree that effective immediately upon the execution and delivery
of this Agreement by the parties hereto: (i) that certain Registration Rights
Agreement dated as of November 25, 1997, by and among the Company, Energy PLC
and EnCap LP, as amended by that certain Amendment No. 1 to Registration
Rights Agreement dated as of May 1, 1998, shall be terminated and be of no
further force and effect whatsoever; and (ii) that the registration rights
accorded Energy PLC and EnCap LP under that certain April 1997 Agreement dated
as of April 28, 1997, by and among the Company, Future Acquisition 1995, Ltd.,
Energy PLC and EnCap LP shall be terminated and of no further force and effect
whatsoever.
Section 11. Other Existing or Subsequent Registration Rights.
(a) The Company represents and warrants to Energy PLC and EnCap LP
that other than the registration rights referenced in Section 10 (which rights
are being terminated as provided in such Section), the registration rights
granted under this Agreement and the registration rights granted under the
Bargo Agreement, the Company is not currently a party to any other agreement
whereby it accords any Person any demand or piggy-back registration rights
with respect to such Person's Common Stock.
(b) Contemporaneously with executing and delivering this Agreement,
the Company is executing and delivering that certain (i) Registration Rights
Agreement dated as of even date herewith by and between the Company and Bargo
Energy Resources, Ltd. (the "Bargo Agreement") and (ii) Registration Rights
Agreement dated as of even date herewith by and between the Company, Carl
Price, et al. (the "Price Agreement"). The Company represents and warrants
that it has provided Energy PLC and EnCap LP with a true, complete and
accurate copy of the Bargo Agreement and the Price Agreement and agrees that
it will not agree to any amendment or other modification to the Bargo
Agreement or the Price Agreement without having first received the written
consent of the Holders of a majority of the Registrable Securities then
outstanding.
(c) The Company agrees that it will not hereafter grant to any Person
demand registration rights without the prior written consent of the Holders of
a majority of the number of Registrable Securities then outstanding. The
Company agrees that it will not hereafter grant to any Person any piggy-back
registration rights that are inconsistent with or violates the rights granted
to the Holders of Registrable Securities under this Agreement.
Section 12. Miscellaneous.
(a) 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.
(b) 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.
(c) 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 and (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.
(d) 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.
(e) 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
(f) 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.
(g) 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.
(h) 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.
(i) 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.
(j) The Company agrees to remove any stop transfer orders and similar
instructions and 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.
(k) This Agreement may be amended, modified, supplemented, restated or
discharged (and provisions hereof may be waived) only by an instrument in
writing signed by the Company and the Holders of not less than 95% of the
number of Registrable Securities then outstanding.
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
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of this 14th day of August, 1998, by and among Future
Petroleum Corporation, a Utah corporation (the "Company"), Carl Price, Don Wm.
Reynolds, Christie Price, Robert Price and Charles D. Laudeman (collectively,
the "Price Group").
RECITALS:
A. Reference is herein made to that certain Agreement and Plan of
Merger dated as of August 14, 1998 (the "Merger Agreement"), by and among the
Company, Future CAL-TEX Corporation, a Texas corporation, Bargo Energy
Resources, Ltd., a Texas limited partnership, and SCL-CAL Company, a Texas
corporation.
B. The members of the Price Group currently owns shares of Common
Stock or have options to acquire Common Stock, which shares and options are
described more particularly in Exhibit A hereto.
C. The members of the Price Group have provided services and advice
to the Company and, in connection with the Merger Agreement and the
transactions contemplated thereby, the Company deems it in its best interest
to provide 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.
"Bargo Agreement" shall have the meaning assigned to it in Section 9(b).
"Bargo Holders" shall mean "Holders," as such term is defined in the
Bargo Agreement.
"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.
"EnCap Agreement" shall have the meaning assigned to it in Section 9(b).
"EnCap Holders" shall mean "Holders'," as such term is defined in the
EnCap Agreement.
"EnCap LP" shall mean EnCap Equity 1994 Limited Partnership, a Texas
limited partnership.
"Energy PLC" shall mean Energy Capital Investment Company PLC, an
English investment company.
"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 5(a).
"Merger Agreement" shall have the meaning assigned to it in Paragraph A
of the Recitals hereto.
"Option Shares" shall mean the shares of Common Stock received upon the
exerise of any of the "Options" listed in Exhibit A attached hereto.
"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 2.
"Registrable Securities" shall mean (i) the Shares and the Option Shares
and (ii) any securities issued or issuable with respect to any of the shares
described in clause (i) above by way of a stock dividend or other distribution
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), (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), (C) securities for which a
registration statement with respect to the sale of such securities has become
effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (D) such
securities have been sold as permitted by Rule 144 (or any successor
provision) under the Securities Act and the purchaser thereof does not receive
"restricted securities" as defined in Rule 144, or (E) such securities shall
have ceased to be outstanding.
"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, filing, listing
and NASD fees, fees and expenses of compliance with securities and blue sky
laws, all word processing, duplicating, printing and engraving expenses,
messenger, telephone and delivery expenses, and fees and disbursements of
counsel for the Company, of its independent certified public accountants and
any of its independent reserve engineers, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance, premiums and other costs of policies of insurance
against liabilities arising out of the public offering of the Registrable
Securities being registered, and fees and disbursements of underwriters
(excluding discounts and commissions); provided, that Registration Expenses
shall not include any Selling Expenses. Without limiting the generality of
any other provision hereof, no holder of Registrable Securities shall be
responsible for any allocation of general and administrative (including all
employee and compensation expenses) expenses incurred by the Company in
connection with an offering.
"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.
"Shares" shall mean the shares of Common Stock set forth in Exhibit A
attached hereto.
(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. 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, whether or not for sale for its
own account, 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 (on the basis of
the estimated proceeds from the sale thereof) 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, the securities to be included in the registration
statement (or registration statements) for any Person other than the Holders,
the Bargo Holders (if the Bargo Holders have exercised their rights under
Section 3 of the Bargo Agreement), the EnCap Holders (if the EnCap Holders
have exercised their rights under Section 3 of the EnCap Agreement) and the
Company shall be first reduced prior to any such pro rata reduction and (ii)
if such Piggyback Registration is incident to a secondary registration on
behalf of holders of securities of the Company, the securities to be included
in the registration statement (or registration statements) for any Person not
exercising "demand" registration rights other than the Holders, the Bargo
Holders (if the Bargo Holders have exercised their rights under Section 3 of
the Bargo Agreement) and the EnCap Holders (if the EnCap Holders have exercise
their rights under Section 3 of the EnCap Agreement) shall be first reduced
prior to any such pro rata reduction; provided, further, that as betwen the
Holders, on the one hand, and the Bargo Holders and/or the EnCap Holders, on
the other hand, the securities to be included in the registration statement
(or statements) for any Holder shall first be reduced prior to any reduction
to the securities of the Bargo Holders and/or the EnCap Holders. Subject to
any applicable underwriting agreement, any Holder of Registrable Securities
may withdraw at any time any Registrable Securities registered under this
Section 2.
Section 3. Registration Procedures.
(a) Whenever the Holders have requested that any Registrable
Securities be registered pursuant to Section 2, 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 and remain 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 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 until the earlier of (1)such time as all of such
Registrable Securities covered by such registration statement have been
sold (but not before the expiration of the applicable prospectus
delivery period) or (2) 180 days after the effective date of such
registration statement, except with respect to any registration
statement filed pursuant to Rule 415 under the Securities Act, in which
case the Company shall use its best efforts to keep such registration
statement effective until such time as all of the Registrable Securities
covered thereby cease to be Registrable Securities; 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 Holder of Registrable Securities covered by the
registration statement ("Seller") 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 (it being understood that the Company consents to the use of the
prospectus and any amendment or supplement thereto by each Seller and
the underwriter or underwriters, if any, in connection with the offering
and sale of Registrable Securities covered by the prospectus or any
amendment or supplement thereto);
(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, to keep such registration or qualifications in effect for so
long as such registration statement remains in effect, 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 (including those
set forth in clauses (1) through (6) of paragraph (vii) below) 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
promptly prepare and furnish to such Seller and each underwriter, if
any, a reasonable number of copies of 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) The Company will also notify each Seller promptly, and (if
requested by a Seller) confirm such notice in writing, (1) when a
prospectus or any prospectus supplement or post-effective amendment has
been filed and, with respect to a registration statement or any post-
effective amendment, when the same has become effective under the
Securities Act and each applicable state law, (2) of any request by the
Commission or any other federal or state governmental authority for
amendments or supplements to a registration statement or related
prospectus or for additional information, (3) of the issuance by the
Commission of any stop order suspending the effectiveness of a
registration statement or the initiation of any proceedings for that
purpose, (4) if at any time the representations or warranties of the
Company or any subsidiary contained in any agreement (including any
underwriting agreement) contemplated hereby cease to be true and correct
in any material respect, (5) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, or (6) of the Company's reasonable
determination that a post-effective amendment to a registration
statement would be appropriate;
(viii) 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;
(ix) 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;
(x) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission and applicable state
securities authorities;
(xi) 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 qualification of any Registrable Securities 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;
(xii) 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;
(xiii) in connection with an underwritten public offering of
securities, use its reasonable best efforts to obtain a signed
counterpart of 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 Sellers reasonably request
and an opinion of counsel for the Company covering such matters with
respect to such registration statement as are customarily covered in
opinions of issuer's counsel and delivered to the underwriters in
underwritten public offerings of securities;
(xiv) the Company shall make available for inspection by the
sellers of such Registrable Securities, any underwriter participating in
any distribution pursuant to such registration statement and any
attorney, accountant or other professional retained by the Holder or
underwriter (in this paragraph collectively referred to as
"inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company as shall be reasonable necessary
to enable them to exercise their due diligence responsibility, and cause
the Company's officers, directors and employees to supply all
information reasonably requested by any such inspectors in connection
with such registration statement;
(xv) cause representatives of the Company to participate in any
"road show" or "road shows" reasonably requested by any underwriter of
an underwritten or "best efforts" offering of any Registrable
Securities; and
(xvi) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all Registrable
Securities covered by such registration agreement from and after a date
not later than the effective date of such registration.
(b) Whenever the Holders of Registrable Securities have requested that
any Registrable Securities be registered pursuant to Section 2, 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 notice from the Company of the happening of
any event of the kind described in Section 3(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 3(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 3(b)(i) to discontinue disposition of such Registrable
Securities); and
(ii) furnish to the Company such information regarding each
Seller, the Registrable Securities held by such Seller, 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 owned by a Seller
that such information has been furnished to the Company by such Seller.
Section 4. Expenses of Registration. The Company shall pay all
Registration Expenses in connection with each registration effected pursuant
to Section 2. All Selling Expenses incurred by a Seller in connection with a
registration effected pursuant to the terms hereof shall be borne by such
Seller
Section 5. 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, its
directors, officers, partners, agents, employees 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 (including reasonable costs
of investigation), 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; provided, that each such Seller's liability under such
indemnification shall be limited to the sales proceeds from the sale of the
Company's securities owned by the sellers pursuant to such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement, 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; provided, that each such Seller's
liability under such indemnification shall be limited to the sales proceeds
from the sale of the Company's securities owned by the sellers pursuant to
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement, 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 5, 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 5 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 5.
(d) Indemnification similar to that specified in the preceding
subsections of this Section 5 (with appropriate modifications) shall be given
by the Company and each Seller 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 5 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 5, 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 Seller shall
be required to enter into a customary underwriting agreement with the
underwriter.
Section 6. 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 7. Market Standoff Agreement.
(a) In order to facilitate the possibility of future public offerings
of Common Stock, the Holders agree that in connection with 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, each
such Holder (regardless of whether such Holder is participating in the
offering) will execute a customary agreement with the underwriters of such
offering in substantially the form executed by directors and senior executive
management of the Company in which the Holder agrees not to sell Registrable
Securities owned by it for a period of up to 90 days following the effective
date of the registration statement for such 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.
(b) During a period commencing on the filing by the Company of a
registration statement which includes Registrable Securities (other than
pursuant to Rule 415), the Company agrees not to effect any public sale or
distribution (including by registering securities held by others) of any
securities the same as or similar to those being registered by such
registration statement, or any securities convertible into or exchangeable or
exercisable for such securities, unless such sale or distribution is pursuant
to such registration statement.
Section 8. Existing Fund I Registration Rights. The Company represents
and warrants that effective immediately upon the execution and delivery of the
EnCapAgreement by the parties thereto: (i) that certain Registration Rights
Agreement dated as of November 25, 1997, by and among the Company, Energy PLC
and EnCap LP, as amended by that certain Amendment No. 1 to Registration
Rights Agreement dated as of May 1, 1998, shall be terminated and be of no
further force and effect whatsoever; and (ii) that the registration rights
accorded Energy PLC and EnCap LP under that certain April 1997 Agreement dated
as of April 28, 1997, by and among the Company, Future Acquisition 1995, Ltd.,
Energy PLC and EnCap LP shall be terminated and of no further force and effect
whatsoever.
Section 9. Other Existing or Subsequent Registration Rights.
(a) The Company represents and warrants to Energy PLC and EnCap LP
that other than the registration rights referenced in Section 8 (which rights
are being terminated as provided in such Section), the registration rights
granted under this Agreement and the registration rights granted under the
Bargo Agreement and the EnCap Agreement, the Company is not currently a party
to any other agreement whereby it accords any Person any demand or piggy-back
registration rights with respect to such Person's Common Stock.
(b) Contemporaneously with executing and delivering this Agreement,
the Company is executing and delivering that certain (i) Registration Rights
Agreement dated as of even date herewith by and between the Company and Bargo
Energy Resources, Ltd. (the "Bargo Agreement") and (ii) Registration Rights
Agreement dated as of even date herewith by and between the Company, Energy
PLC and EnCap LP (the "EnCap Agreement"). The Company represents and warrants
that it has provided the Price Group with a true, complete and accurate copy
of the Bargo Agreement and the EnCap Agreement and agrees that it will not
agree to any amendment or other modification to the Bargo Agreement or the
EnCap Agreement which would materially and adversely affect the rights of the
Holders hereunder without having first received the written consent of the
Holders of a majority of the Registrable Securities then outstanding.
(c) The Company agrees that it will not hereafter grant to any Person
any piggy-back registration rights that are inconsistent with or violates the
rights granted to the Holders of Registrable Securities under this Agreement.
Section 10. Miscellaneous.
(a) 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) 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.
(b) 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.
(c) 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 and (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.
(d) 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.
(e) 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 a Member of the Price Group:
c/o Carl Price
2351 West Northwest Highway
Dallas, Texas 75220
Telecopier No.: (214)350-8382
(f) 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.
(g) 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.
(h) 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.
(i) 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.
(j) The Company agrees to remove any stop transfer orders and similar
instructions and 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.
(k) This Agreement may be amended, modified, supplemented, restated or
discharged (and provisions hereof may be waived) only by an instrument in
writing signed by the Company and the Holders of not less than 95% of the
number of Registrable Securities then outstanding.
(l) This Agreement shall be binding upon the Company and each member
of the Price Group who executes a counterpart of this Agreement, regardless of
whether all members of the Price Group execute this Agreement.
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
/s/ Carl Price
Carl Price
/s/ Don Wm. Reynolds
Don Wm. Reynolds
/s/ Christie Price
Christie Price
/s/ Robert Price
Robert Price
/s/ Charles D. Laudeman
Charles D. Laudeman
EXHIBIT 10.4
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES
OR BLUE SKY LAWS. NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION
UNDER SAID ACT AND UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS OR
EXEMPTIONS FROM SUCH REGISTRATION. THIS WARRANT MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT UPON THE CONDITIONS SPECIFIED IN
THIS WARRANT, AND NO SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF THIS
WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE
BEEN COMPLIED WITH.
No. 1007 Right to Purchase 250,000 Shares
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Bargo Energy Resources, Ltd., a
Texas limited partnership, or registered assigns, is entitled to purchase from
Future Petroleum Corporation, a Utah corporation (the "Company"), at any time
or from time to time during the period specified in Paragraph 2 hereof, Two
Hundred Fifty Thousand (250,000) fully paid and nonassessable shares of the
Company's Common Stock, par value $0.01 per share (the "Common Stock"), at an
exercise price per share of $0.43 (the "Exercise Price"). The term "Warrant
Shares", as used herein, refers to the shares of Common Stock purchasable
hereunder. The Warrant Shares and the Exercise Price are subject to
adjustment as provided in Paragraph 4 hereof.
This Warrant is subject to the following terms, provisions, and
conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part by the surrender of this Warrant, together with a
completed Exercise Agreement in the form attached hereto, to the Company during
normal business hours on any business day at the Company's principal office in
Dallas, Texas (or such other office or agency of the Company as it may
designate by notice to the holder hereof), and upon payment to the Company
in cash or by certified or official bank check of the Exercise Price for the
Warrant Shares specified in said Exercise Agreement. The Warrant Shares so
purchased shall be deemed to be issued to the holder hereof or its designee
as the record owner of such shares as of the close of business on the date
on which this Warrant shall have been surrendered, the completed Exercise
Agreement delivered, and payment made for such shares as aforesaid.
Certificates for the Warrant Shares so purchased, representing the aggregate
number of shares specified in said Exercise Agreement, shall be delivered to
the holder hereof within a reasonable time, not exceeding seven business
days, after this Warrant shall have been so exercised. The certificates so
delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of said holder or such other name
as shall be designated by said holder. If this Warrant shall have been
exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of said certificates, deliver
to said holder a new Warrant representing the number of shares with respect
to which this Warrant shall not then have been exercised.
The Company shall pay all taxes and other expenses and charges payable in
connection with the preparation, execution, and delivery of stock certificates
(and any new Warrants) pursuant to this Paragraph 1 except that, in case such
stock certificates shall be registered in a name or names other than the holder
of this Warrant, funds sufficient to pay all stock transfer taxes which shall
be payable in connection with the execution and delivery of such stock
certificates shall be paid by the holder hereof to the Company at the time of
the delivery of such stock certificates by the Company as mentioned above.
2. Period of Exercise. This Warrant is exercisable at any time or
from time to time after August 14, 1998, and before 5:00 p.m. local time on
August 14, 2003.
3. Certain Agreements of the Company. The Company hereby covenants
and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance,
be validly issued, fully paid, and nonassessable and free from all taxes,
liens, and charges with respect to the issue thereof.
(b) Reservation of Shares. During the period within which this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of issue upon exercise of this Warrant, a sufficient
number of shares of Common Stock to provide for the exercise of this Warrant.
(c) Certain Actions Prohibited. The Company will not, by amendment of
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action as may reasonably be requested by the
holder of this Warrant in order to protect the exercise privilege of the
holder of this Warrant against dilution or other impairment, consistent with
the tenor and purpose of this Warrant. Without limiting the generality of
the foregoing, (i) the Company will not increase the par value of the shares
of Common Stock receivable upon the exercise of this Warrant above the
Exercise Price then in effect, (ii) before taking any action which would
cause an adjustment reducing the Exercise Price below the then par value of
the shares of Common Stock so receivable, the Company will take all such
corporate action as may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable shares of Common
Stock at such adjusted Exercise Price upon the exercise of this Warrant.
(d) Registration. If the issuance of any Warrant Shares required to
be reserved for purposes of exercise of this Warrant requires registration with
or approval of any governmental authority under any federal or state law (other
than any registration under the Securities Act of 1933, as amended, or under
applicable state securities or blue sky laws) or listing on any national
securities exchange, before such shares may be issued upon exercise of this
Warrant, the Company will, at its expense, use its best efforts to cause such
shares to be duly registered or approved, or listed on the relevant national
securities exchange, as the case may be, at such time, so that such shares may
be issued in accordance with the terms hereof.
4. Antidilution Provisions. The Exercise Price shall be subject to
adjustment from time to time as provided in this Paragraph 4. Upon each
adjustment of the Exercise Price, the holder of this Warrant shall thereafter
be entitled to purchase, at the Exercise Price resulting from such
adjustment, the largest number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number
of Warrant Shares purchasable hereunder immediately prior to such adjustment
and dividing the product thereof by the Exercise Price resulting from such
adjustment. For purposes of this Paragraph 4, the term "Capital Stock", as
used herein,includes the Common Stock and any additional class of stock of
the Company having no preference as to dividends or distributions on
liquidation which may be authorized in the future, provided that the shares
purchasable pursuant to this Warrant shall include only shares of Common
Stock, or shares resulting from any subdivision or combination of the Common
Stock, or in the case of any reorganization, reclassification, consolidation,
merger, or sale of the character referred to in Paragraph 4(g) hereof, the
stock or other securities or property provided for in said Paragraph, but
excludes any Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation (x)
that may be authorized in the future pursuant to currently existing and
outstanding written agreements as listed in Schedule 4 attached hereto or
(y) that may be issued pursuant to the exercise of any
currently existing or future options to purchase Common Stock (or any such
additional class of stock) granted by the Company to its employees.
(a) Issuance of Capital Stock. If and whenever the Company shall
issue or sell any shares of Capital Stock without consideration or for a
consideration per share less than the Exercise Price in effect immediately
prior to the time of such issue or sale, then, forthwith upon such issue or
sale, the Exercise Price shall be reduced to a price (calculated to the
nearest cent) determined by dividing (x) an amount equal to the sum of (aa)
the total number of shares of Capital Stock outstanding immediately prior to
such issue or sale multiplied by the then existing Exercise Price, and (bb)
the consideration, if any, received by the Company upon such issue or sale,
by (y) the total number of shares of Capital Stock outstanding immediately
after such issue or sale.
(b) Treatment of Options and Convertible Securities; Computation of
Consideration. For purposes of Paragraph 4(a) hereof the following provisions
shall also be applicable:
(i) In case the Company shall grant any rights to subscribe for
or purchase, or any options for the purchase of, Capital Stock or
securities convertible into or exchangeable for Capital Stock (such rights
and options being herein called "Options" and such convertible or
exchangeable securities being herein called "Convertible Securities"),
whether or not such Options or the rights to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per
share for which Capital Stock is issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities
(as determined in accordance with the following sentence) shall be less
than the Exercise Price in effect immediately prior to the time of the
granting of such Options, then the total maximum number of shares of
Capital Stock issuable upon the exercise of such Options or upon the
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall (as of the
date of granting of such Options) be deemed to be outstanding and to have
been issued and sold for such price per share. The price per share for
which the Capital Stock is issuable, as provided in the preceding
sentence, shall be determined by dividing (x) the total amount, if any,
received or receivable by the Company as consideration for the granting of
such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of such Options,
plus, in the case of any such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange of such
Convertible Securities, by (y) the total maximum number of shares of
Capital Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options. Except as provided in Paragraph 4(b)(vi)
hereof, no further adjustments of the Exercise Price shall be made upon
the actual issue of such Capital Stock or of such Convertible Securities
upon the exercise of such Options or upon the actual issue of such Capital
Stock upon the conversion or exchange of such Convertible Securities.
(ii) In case the Company shall issue or sell Convertible
Securities, whether or not the rights to convert or exchange such
Convertible Securities are immediately exercisable, and the price per
share for which Capital Stock is issuable upon the conversion or exchange
of such Convertible Securities (as determined in accordance with the
following sentence) shall be less than the Exercise Price in effect
immediately prior to the time of the issue or sale of such Convertible
Securities, then the total maximum number of shares of Capital Stock
issuable upon the conversion or exchange of all such Convertible
Securities shall (as of the date of the issue or sale of such Convertible
Securities) be deemed to be outstanding and to have been issued and sold
for such price per share, provided that (a) except as provided in
Paragraph 4(b)(vi) hereof, no further adjustments of the Exercise Price
shall be made upon the actual issue of such Capital Stock upon the
conversion or exchange of such Convertible Securities, and (b) if any such
issue or sale of such Convertible Securities is made upon exercise of any
Options for which adjustments of the Exercise Price have been or are to be
made pursuant to other provisions of this Paragraph 4(b), no further
adjustment of the Exercise Price shall be made by reason of such issue or
sale. The price per share for which the Capital Stock is issuable, as
provided in the preceding sentence, shall be determined by dividing (x)
the total amount received or receivable by the Company as consideration
for the issue or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (y) the total maximum
number of shares of Capital Stock issuable upon the conversion or exchange
of all such Convertible Securities.
(iii) In case at any time the Company shall pay a dividend
or make any other distribution upon the Capital Stock payable in Capital
Stock, Options or Convertible Securities, any Capital Stock, Options or
Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued without
consideration.
(iv) In case at any time any Capital Stock, Convertible
Securities, or Options shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Company
therefor, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any Capital Stock, Convertible Securities,
or Options shall be issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company
therefor shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Company, except
where such consideration consists of securities, in which case the amount
of consideration received by the Company shall be the market price thereof
(determined as provided in Paragraph 4(e) hereof) as of the date of
receipt, but in each such case without deduction therefrom of any expenses
incurred or any underwriting commissions or concessions paid or allowed by
the Company in connection therewith. In computing the market price of a
note or other obligation that is not listed or admitted to trading on any
securities exchange or quoted in the National Association of Securities
Dealers, Inc. Automated Quotation System or reported by the National
Quotation Bureau, Inc. or a similar reporting organization, the total
consideration to be received by the Company thereunder (including
interest) shall be discounted to present value at the prime rate of
interest of NationsBank of Texas, N.A. in effect at the time the note or
obligation is deemed to have been issued. In case any Capital Stock,
Convertible Securities, or Options shall be issued in connection with any
merger of another corporation into the Company, the amount of
consideration therefor shall be deemed to be the fair value as determined
in good faith by the Board of Directors of the Company of such portion of
the assets of such merged corporation as the Board shall determine to be
attributable to such Capital Stock, Convertible Securities, or Options.
(v) In case at any time the Company shall take a record of
the holders of Capital Stock for the purpose of entitling them (a) to
receive a dividend or other distribution payable in Capital Stock, Options
or Convertible Securities, or (b) to subscribe for or purchase Capital
Stock, Options or Convertible Securities, then such record date shall be
deemed to be the date of the issue or sale of such Capital Stock, Options
or Convertible Securities.
(vi) If the purchase price provided for in any Option
referred to in Paragraph 4(b)(i) hereof, or the price at which any
Convertible Securities referred to in Paragraph 4(b)(i) or (ii) hereof are
convertible into or exchangeable for Capital Stock, shall change at any
time (whether by reason of provisions designed to protect against dilution
or otherwise), the Exercise Price then in effect hereunder shall forthwith
be increased or decreased to such Exercise Price as would have obtained
had the adjustments made upon the issuance of such Options or Convertible
Securities been made upon the basis of (a) the issuance of the number of
shares of Capital Stock theretofore actually delivered upon the exercise
of such Options or upon the conversion or exchange of such Convertible
Securities, and the total consideration received therefor, and (b) the
number of shares of Capital Stock to be issued for the consideration, if
any, received by the Company therefor and to be received on the basis of
such changed price.
(vii) If any adjustment has been made in the Exercise Price
because of the issuance of Options or Convertible Securities and if any of
such Options or rights to convert or exchange such Convertible Securities
expire or otherwise terminate, then the Exercise Price shall be readjusted
to eliminate the adjustments previously made in connection with the
Options or rights to convert or exchange Convertible Securities which have
expired or terminated.
(viii) The number of shares of Capital Stock outstanding at
any given time shall not include shares owned or held by or for the
account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Capital Stock.
(c) Subdivisions and Combinations. In case at any time the Company
shall subdivide the outstanding shares of Capital Stock into a greater number
of shares, the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding
shares of Capital Stock shall be combined into a smaller number of shares,
the Exercise Price in effect immediately prior to such combination shall be
proportionately increased. An adjustment made pursuant to this Paragraph 4(c)
shall become effective immediately after the effective date of such
subdivision or combination.
(d) Extraordinary Dividends and Distributions. In case at any time
the Company shall pay a dividend or make a distribution to all holders of
Capital Stock, as such, of shares of its stock, evidences of its indebtedness,
assets, or rights, options, or warrants to subscribe for or purchase such
shares, evidences of indebtedness, or assets, other than (i) a dividend or
distribution payable in Capital Stock, Options, or Convertible Securities or
(ii) a dividend or distribution payable in cash out of earnings or earned
surplus, then in each such case the Exercise Price shall be adjusted so that
the same shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the record date mentioned below by a fraction, the
numerator of which shall be the total number of shares of Capital Stock
outstanding on such record date multiplied by the market price per share of
Capital Stock (determined as provided in Paragraph 4(e) hereof) on such record
date, less the fair market value (as determined in good faith by the Board of
Directors of the Company) as of such record date of such shares of stock,
evidences of indebtedness, assets, or rights, options, or warrants so paid or
distributed, and the denominator of which shall be the total number of shares
of Capital Stock outstanding on such record date multiplied by the market
price per share of Capital Stock (determined as provided in Paragraph 4(e)
hereof) on such record date. Such adjustment shall be made whenever such
dividend is paid or such distribution is made and shall become effective
immediately after the record date for the determination of shareholders
entitled to receive such dividend or distribution.
(e) Computation of Market Price. For the purpose of any computation
under Paragraph 4(b) or (d) hereof, the market price of the security in
question on any day shall be deemed to be the average of the last reported
sale prices for the security for the 20 consecutive Trading Days (as defined
below) commencing 30 Trading Days before the day in question. The last
reported sale price for each day shall be (i) the last reported sale price of
the security on the National Market of the National Association of Securities
Dealers, Inc. Automated Quotation System, or any similar system of automated
dissemination of quotations of securities prices then in common use, if so
quoted, or (ii) if not quoted as described in clause (i) above, the mean
between the high bid and low asked quotations for the security as reported by
the National Quotation Bureau, Inc. if at least two securities dealers have
inserted both bid and asked quotations for such security on at least 10 of
such 20 consecutive Trading Days, or (iii) if the security is listed or
admitted for trading on any national securities exchange, the last sale
price, or the closing bid price if no sale occurred, of such class of
security on the principal securities exchange on which such class of
security is listed or admitted to trading. If the security is quoted on a
national securities or central market system, in lieu of a market or
quotation system described above, the last reported sale price shall be
determined in the manner set forth in clause (ii) of the preceding sentence if
bid and asked quotations are reported but actual transactions are not, and in
the manner set forth in clause (iii) of the preceding sentence if actual
transactions are reported. If none of the conditions set forth above is met,
the last reported sale price of the security on any day or the average of such
last reported sale prices for any period shall be the fair market value of such
security as determined by a member firm of the New York Stock Exchange, Inc.
selected by the Company. The term "Trading Days", as used herein, means (i) if
the security is quoted on the National Market of the National Association of
Security Dealers, Inc. Automated Quotation System, or any similar system of
automated dissemination of quotations of securities prices, days on which
trades may be made on such system or (ii) if the security is listed or
admitted for trading on any national securities exchange, days on which such
national securities exchange is open for business.
(f) Record Date Adjustments. In any case in which this Paragraph 4
requires that a downward adjustment of the Exercise Price shall become
effective immediately after a record date for an event, the Company may
defer, until the occurrence of such event, issuing to the holder of this
Warrant exercised after such record date and before the occurrence of such
event the additional Warrant Shares issuable upon such exercise by reason of
the adjustment required by such event over and above the Warrant Shares
issuable upon such exercise before giving effect to such adjustment.
(g) Reorganization, Reclassification, Consolidation, Merger, or Sale.
If any capital reorganization of the Company, or any reclassification of the
Capital Stock, or any consolidation or merger of the Company with or into
another corporation or entity, or any sale of all or substantially all the
assets of the Company to another corporation or entity, shall be effected in
such a way that the holders of Common Stock (or any other securities of the
Company then issuable upon the exercise of this Warrant) shall be entitled to
receive stock or other securities or property (including cash) with respect to
or in exchange for Common Stock (or such other securities), then, as a
condition of such reorganization, reclassification, consolidation, merger, or
sale, lawful and adequate provision shall be made whereby the holder of this
Warrant shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions specified in this Warrant, and in
lieu of the shares of Common Stock (or such other securities) immediately
theretofore purchasable and receivable upon the exercise hereof, such stock
or other securities or property (including cash) as may be issuable or
payable with respect to or in exchange
for a number of outstanding shares of Common Stock (or such other securities)
equal to the number of shares of Common Stock (or such other securities)
immediately theretofore purchasable and receivable upon the exercise of this
Warrant, had such reorganization, reclassification, consolidation, merger, or
sale not taken place. In any such case appropriate provision shall be made
with respect to the rights and interests of the holder of this Warrant to
the end that the provisions hereof (including, without limitation, the
provisions for adjustments of the Exercise Price and of the number of
Warrant Shares purchasable upon exercise hereof) shall thereafter be
applicable, as nearly as reasonably may be, in relation to the stock or other
securities or property thereafter deliverable upon the exercise hereof
(including an immediate adjustment of the Exercise Price if by reason of or
in connection with such consolidation, merger, or sale any securities are
issued or event occurs which would, under the terms hereof, require an
adjustment of the Exercise Price). In the event of a consolidation or merger
of the Company with or into another corporation or entity as a result of
which a greater or lesser number of shares of common stock of the surviving
corporation or entity are issuable to holders of Capital Stock in respect of
the number of shares of Capital Stock outstanding immediately prior to such
consolidation or merger, then the Exercise Price in
effect immediately prior to such consolidation or merger shall be adjusted in
the same manner as though there were a subdivision or combination of the
outstanding shares of Capital Stock. The Company shall not effect any such
consolidation, merger, or sale unless prior to or simultaneously
with the consummation thereof the successor corporation or entity (if other
than the Company) resulting from such consolidation or merger or the
corporation or entity purchasing such assets and any other corporation or
entity the shares of stock or other securities or property of which are
receivable thereupon by the holder of this Warrant shall expressly assume,
by written instrument executed and delivered (and satisfactory in form) to
the holder of this Warrant, (i) the obligation to deliver to such holder
such stock or other securities or property as, in accordance with the
foregoing provisions, such holder may be entitled to purchase and (ii) all
other obligations of the Company hereunder.
(h) No Fractional Shares. No fractional shares of Common Stock are to
be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the current market value of a share
of Common Stock, which current market value shall be the last reported sale
price (determined as provided in Paragraph 4(e) hereof) on the Trading Day
immediately preceding the date of the exercise.
(i) Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then and in each such case the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
(j) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Capital Stock
payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of earnings or
earned surplus) to the holders of the Capital Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Capital Stock any additional shares of stock of any class
or other rights;
(iii) there shall be any capital reorganization of the Company,
or reclassification of the Capital Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all its assets
to, another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation, or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a
record shall be taken for determining the holders of Capital Stock entitled
to receive any such dividend, distribution, or subscription rights or for
determining the holders of Capital Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, or winding-up and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, notice of the date (or, if not then known, a
reasonable approximation thereof by the Company) when the same shall take
place. Such notice shall also specify the date on which the holders of
Capital Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Capital Stock for stock or other
securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be given at
least 20 days prior to the record date or the date on which the Company's books
are closed in respect thereto. Failure to give any such notice or any defect
therein shall not affect the validity of the proceeding referred to in clauses
(i), (ii), (iii), and (iv) above.
(k) Certain Events. If any event occurs as to which, in the good
faith judgment of the Board of Directors of the Company, the other provisions
of this Paragraph 4 are not strictly applicable or if strictly applicable
would not fairly protect the exercise rights of the holder of this Warrant
in accordance with the essential intent and principles of such provisions,
then the Board of Directors of the Company shall appoint the Company's
regular independent auditors or another firm of independent public
accountants of recognized national standing who are satisfactory to the
holder of this Warrant which shall give their opinion upon the adjustment,
if any, on a basis consistent with such essential intent and principles,
necessary to preserve, without dilution, the rights of the holder of this
Warrant. Upon receipt of such opinion, the Board of Directors of the Company
shall forthwith make the adjustments described therein; provided that no such
adjustment shall have the effect of increasing the Exercise Price as
otherwise determined pursuant to this Paragraph 4. The Company may make
such reductions in the Exercise Price or increase in the number
of shares of Common Stock purchasable hereunder as it deems advisable,
including any reductions or increases, as the case may be, necessary to
ensure that any event treated for federal income tax purposes as a
distribution of stock rights not be taxable to recipients.
5. Issue Tax. The issuance of certificates for Warrant Shares upon
the exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax in respect thereof, provided that
the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. Availability of Information. The Company will cooperate with the
holder of this Warrant and each holder of any Warrant Shares in supplying such
information as may be necessary for such holder to complete and file any
information reporting forms presently or hereafter required by the Securities
and Exchange Commission as a condition to the availability of an exemption from
the Securities Act of 1933, as amended, for the sale of this Warrant or any
Warrant Shares. The Company will deliver to the holder of this Warrant,
promptly upon their becoming available, copies of all financial statements,
reports, notices, and proxy statements sent or made available generally by the
Company to its shareholders, and copies of all regular and periodic reports and
all registration statements and prospectuses filed by the Company with any
securities exchange or with the Securities and Exchange Commission.
7. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
8. Transfer, Exchange, and Replacement of Warrant.
(a) Warrant Transferable. The transfer of this Warrant and all rights
hereunder, in whole or in part, is registrable at the office or agency of the
Company referred to in Paragraph 8(e) hereof by the holder hereof in person or
by his duly authorized attorney, upon surrender of this Warrant properly
endorsed. Each taker and holder of this Warrant, by taking or holding the
same, consents and agrees that this Warrant, when endorsed in blank, shall
be deemed negotiable, and that the holder hereof, when this Warrant shall
have been so endorsed, may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner and holder hereof for any
purpose and as the person entitled to exercise the rights represented by
this Warrant and to the registration of transfer hereof on the books of the
Company; but until due presentment for registration of transfer on such books
the Company may treat the registered holder hereof as the owner and holder
hereof for all purposes, and the Company shall not be affected by any notice
to the contrary.
(b) Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by (and at the expense of) the holder
hereof at the office or agency of the Company referred to in Paragraph 8(e)
hereof, for new Warrants of like tenor representing in the aggregate the right
to purchase the number of shares of Common Stock which may be purchased
hereunder, each of such new Warrants to represent the right to purchase such
number of shares as shall be designated by said holder hereof at the time of
such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and
amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at the expense of
the holder hereof, will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as
provided in this Paragraph 8, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer
taxes) in connection with the preparation, execution, and delivery of
Warrants pursuant to this Paragraph 8.
(e) Register. The Company shall maintain, at its principal office in
Dallas, Texas (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose
name this Warrant has been issued, as well as the name and address of each
transferee and each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. Anything in this
Warrant to the contrary notwithstanding, if, at the time of the surrender of
this Warrant in connection with any exercise, transfer, or exchange of this
Warrant, this Warrant shall not be registered under the Securities Act of 1933,
as amended, and under applicable state securities or blue sky laws, the Company
may require, as a condition of allowing such exercise, transfer, or exchange,
that (i) the holder or transferee of this Warrant, as the case may be, furnish
to the Company a written opinion of counsel, which opinion and counsel are
acceptable to the Company, to the effect that such exercise, transfer, or
exchange may be made without registration under said Act and under applicable
state securities or blue sky laws and (ii) the holder or transferee execute and
deliver to the Company an investment letter in form and substance acceptable to
the Company. The first holder of this Warrant, by taking and holding the same,
represents to the Company that such holder is acquiring this Warrant for
investment and not with a view to the distribution thereof.
9. Notices. All notices, requests, and other communications required
or permitted to be given or delivered hereunder to the holder of this
Warrant or to the holder of shares acquired upon exercise of this Warrant
shall be in writing, and shall be personally delivered, or shall be sent by
certified or registered mail, postage prepaid and addressed, to such holder
at the address shown for such holder on the books of the Company, or at
such other address as shall have been furnished to the Company by notice
from such holder. All notices, requests, and other communications required
or permitted to be given or delivered hereunder to the Company shall be in
writing, and shall be personally delivered, or shall be sent by certified or
registered mail, postage prepaid and addressed, to the office of the Company
at 2351 West Northwest Highway, Suite 2130, Dallas, Texas, Attention:
President, or at such other address as shall have been furnished to the
holder of this Warrant or to the holder of shares acquired upon exercise of
this Warrant by notice from the Company. Any such notice, request, or other
communication may be sent by telegram or telex, but shall in such case be
subsequently confirmed by a writing personally delivered or sent by
certified or registered mail as provided above. All notices, requests, and
other communications shall be deemed to have been given either at
the time of the delivery thereof to (or the receipt by, in the case of a
telegram or telex) the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 9, or, if mailed, at the completion
of the third full day following the time of such mailing thereof to such
address, as the case may be.
10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCEPT WITH
RESPECT TO THE VALIDITY OF THIS WARRANT AND THE RIGHTS AND DUTIES OF THE
COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER WHICH SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF UTAH.
11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may not be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the party (or any predecessor in interest thereof) against
which enforcement of the same is sought.
(b) Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall
not affect the meaning or construction of any of the provisions hereof.
(c) Successors and Assigns. This Warrant shall be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all the Company's assets.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer under its corporate seal, attested by its duly
authorized officer, on this 14th day of August, 1998.
FUTURE PETROLEUM CORPORATION
By: /s/ Carl Price
Name: Carl Price
Title: President
FORM OF EXERCISE AGREEMENT
Dated: __________, 19___.
To:
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ___________ shares of Common Stock covered
by such Warrant, and makes payment herewith in full therefor at the price
per share provided by such Warrant in cash or by certified or official bank
check in the amount of $____________. Please issue a certificate or
certificates for such shares of Common Stock in the name of and pay any cash
for any fractional share to:
Name:
Signature:
Title of Signing Officer or Agent (if any):
Note: The above signature should correspond exactly with the name on
the face of the within Warrant or with the name of the assignee
appearing in the assignment form.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all
the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:
Name of Assignee Address No. of Shares
, and hereby irrevocably constitutes and appoints
as agent and attorney-in-fact to transfer said Warrant on the books
of the within-named corporation, with full power of substitution in the
premises.
Dated: , 19 .
In the presence of
Name:
Signature:
Title of Signing Officer or Agent (if
any):
Address:
Note: The above signature should correspond
exactly with the name on the face of the
within Warrant.
EXHIBIT 10.5
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (this "Agreement") is made and
entered into this 14th day of August, 1998, by and among Future
Petroleum Corporation, a Utah corporation ("Future"), B. Carl Price, a
Texas resident ("Price"), Don Wm. Reynolds, a Texas resident
("Reynolds"), Energy Capital Investment Company PLC, an English
investment company ("Energy PLC"), EnCap Equity 1994 Limited
Partnership, a Texas limited partnership ("EnCap LP"), and Bargo Energy
Resources, Ltd., a Texas limited partnership ("Bargo").
RECITALS:
A. Price, Reynolds, Energy PLC and EnCap LP are currently
shareholders in Future.
B. As of even date herewith, Bargo is being issued shares of
common stock of Future, $0.01 par value per share ("Common Stock"), in
connection with the consummation of a merger of a wholly-owned
subsidiary of Bargo into and with a wholly-owned subsidiary of Future
pursuant to that certain Agreement and Plan of Merger dated as of August
14, 1998, by and among Bargo, SCL-Cal Company, a Texas corporation,
Future and Future CAL-TEX Corporation, a Texas corporation.
C. As of even date herewith, Energy PLC and EnCap LP are being
issued additional shares of Common Stock in consideration of their
agreement to subordinate certain indebtedness owed to them by Future to
a new senior credit facility.
D. The parties hereto deem it in their mutual best interests
to make the agreements contained herein.
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. Definitions.
(a) The following defined terms shall have the respective
meanings assigned to them below:
(i) "Affiliate" shall mean, with respect to any person,
any person directly or indirectly controlling, controlled by or
under common control with, such other person. For purposes of
this definition, the term "control," when used with respect to any
person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of such person, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling"
and "controlled" shall meanings correlative to the foregoing.
(ii) "Bargo Group" shall mean Bargo and any transferee of
a member of the Bargo Group that executes or is required to
execute an Addendum Agreement.
(iii) "Designated Nominee" shall mean a person designated
by a Subject Shareholder as a nominee for election to Future's
Board of Directors.
(iv) "EnCap Group" shall mean Energy PLC, EnCap LP and
any transferee of a member of the EnCap Group that executes or is
required to execute an Addendum Agreement.
(v) "Market Price" of the Common Stock means the average
closing prices of the Common Stock for the ten trading days
preceding an Offering Notice under Section 4(b) over the principal
securities exchange in which the Common Stock is traded or, if not
traded on an exchange, the average closing price for ten trading
days preceding such Offering Notice as reported on the NASDAQ NMS,
or if not traded on an exchange or the NASDAQ NMS, the average of
the closing bid and asked prices of the Common Stock for such ten
day period.
(vi) "Other Shareholder" shall mean, when used with
respect to a Subject Shareholder, the other Subject Shareholders.
(vii) "Price Group" shall mean Price, Reynolds and any
transferee of a member of the Price Group that executes or is
required to execute an Addendum Agreement.
(viii) "Purchase Price" means, for purposes of Section 4,
an amount stated in dollars equal to the total value of a bona
fide written offer from a person to purchase shares of Common
Stock from a Shareholder determined as follows: (i) cash payable
at closing shall be valued at the amount thereof, (ii) a security
trading on a public market and for which published trading prices
are readily available shall be valued at its closing sales price
(or if a sales price is not available, at the average of its
closing bid and asked prices) on the last business day preceding
the date of the first Offering Notice with respect to such offer,
and (iii) a security not described in clause (ii) or other prop-
erty, including cash payable in one or more installments after
closing, shall be valued at its fair market value on the last
business day preceding the date of the first Offering Notice with
respect to such offer as determined at the option of the Selling
Shareholder (as defined in Section 4) either (a) by a qualified
independent third party appraiser (the expense of which shall be
paid by the Company) or (b) in good faith by the Board of
Directors of the Company (excluding any member of the Board who is
a director, officer or shareholder of the Selling Shareholder or
who has the right to purchase Common Stock under this Agreement)
but only if all of such Board members agree to accept the
assignment to make such determination.
(ix) "Shareholders" shall mean Bargo, Energy PLC, EnCap
LP, Price, Reynolds and any person who executes or is required to
execute an Addendum Agreement (attached hereto as Exhibit "A")
with respect to the Common Stock.
(x) "Subject Shareholder" shall mean either the (i) Price
Group, (ii) EnCap Group or (iii) Bargo Group.
(xi) "Total Voting Power" shall mean the aggregate number
of votes which may be cast by holders of outstanding Voting
Securities.
(xii) "Voting Securities" shall mean Common Stock and any
other securities of Future entitled to vote generally for the
election of directors of Future.
Section 2. Agreement Regarding Board Representation.
(a) The Price Group shall have three Designated Nominees, the
EnCap Group shall have two Designated Nominees and the Bargo Group shall
have two Designated Nominees.
(b) Each Shareholder agrees (i) to use its reasonable best
efforts to cause Future's Board of Directors to be composed of seven
members, (ii) to use its reasonable best efforts to cause Future to
nominate or cause to be nominated to the Future Board of Directors the
Designated Nominees of the Other Shareholders and (iii) to vote or cause
to be voted all Voting Securities beneficially owned by such Shareholder
in favor of the election of the Designated Nominees of the Other
Shareholders to Future's Board of Directors. For purposes of this
Agreement, "beneficial ownership" or "beneficially own" shall be
determined in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934, as amended.
(c) In the event of the death, incapacity, resignation or
removal of a Subject Shareholder's Designated Nominee preventing his or
her serving on Future's Board of Directors, each Shareholder will
promptly cause the election or appointment of another Designated Nominee
of such Subject Shareholder to fill the vacancy created thereby.
(d) Each Shareholder agrees to cause a designee of the Bargo
Group to be elected Chairman of the Board of Directors of Future. Tim
J. Goff shall serve as the Bargo Group's initial designee. In the event
Mr. Goff no longer serves as the Bargo Group's designee, the Bargo Group
agrees that all of its subsequent replacement designees as Chairman of
the Board of Directors shall be subject to the prior approval of a
majority of the Board of Directors of Future, which approval shall not
be unreasonably withheld, and if a replacement designee is not so
approved, the Bargo Group shall designate another designee acceptable to
Future's Board of Directors.
Section 3. Tag Along Rights.
(a) If any Shareholder (for purposes of this Section 3, a
"Selling Shareholder") proposes to sell, dispose of or otherwise
transfer any shares (whether currently owned or hereafter acquired) of
Common Stock (the shares of Common Stock proposed to be transferred
being called the "Subject Shares") other than pursuant to an Exempt
Transfer (as defined below), the Selling Shareholder shall refrain from
effecting such transaction unless, prior to the consummation thereof,
the Shareholders other than the Selling Shareholder (the "Tag Along
Shareholders"), shall have been afforded the opportunity to join in such
sale on the basis hereinafter described. Each of the Shareholders
agrees not to transfer any shares of Common Stock indirectly in a manner
that would be inconsistent with the essential intent of this Section 3.
(b) Not less than 30 nor more than 120 days prior to the
consummation of any proposed sale, disposition or transfer of the
Subject Shares, the Selling Shareholder shall notify, or cause to be
notified, each Tag Along Shareholder in writing of each such proposed
transfer. Such notice ("Sale Notice") shall set forth: (i) the name of
the transferor (the "Proposed Purchaser") and the number of Subject
Shares proposed to be transferred, (ii) the name and address of the
Proposed Purchaser, (iii) the proposed amount and form of consideration
and terms and conditions of payment offered by such Proposed Purchaser
and (iv) that the Proposed Purchaser has been informed of the tag along
right provided for in this Section 3 and has agreed to purchase shares
of Common Stock owned by such Tag Along Shareholder in accordance with
the terms hereof. The tag along right may be exercised by any Tag Along
Shareholder by delivery of a written notice to the Selling Shareholder
proposing to sell the Subject Shares (the "Tag-Along Notice") within 30
days following its receipt of the notice specified above. The Tag-Along
Notice shall state the amount of shares of Common Stock (the "Tag-Along
Shares") that such Tag-Along Shareholder proposes to include in such
transfer to the Proposed Purchaser. If no Tag-Along Notice is received
during the 30-day period referred to above (or if such Notices do not
cover all the Subject Shares proposed to be transferred), the Selling
Shareholder shall have the right, for a 90-day period after the
expiration of the 30-day period referred to above, to transfer the
Subject Shares specified in the Tag-Along Notice (or the remaining
Subject Shares) on terms and conditions no more favorable than those
stated in the Tag-Along Notice and in accordance with the provisions of
this Section 3.
(c) In the event that the number of shares of Common Stock that
the Selling and Tag Along Shareholders propose to sell is greater than
the number of shares of Common Stock that the Proposed Purchaser
proposes to buy, each such Shareholder (a "Participating Shareholder")
shall be permitted to sell the total number of shares of Common Stock
that the Proposed Purchaser agrees to purchase multiplied by the Pro
Rata Percentage (as defined) attributable to such Participating
Shareholder, unless otherwise agreed by all of the Participating
Shareholders. The Pro Rata Percentage shall mean a percentage equal to
X divided by Y, where "X" is equal to the number of issued and
outstanding shares of Common Stock currently held by such Participating
Shareholder, and where "Y" is equal to the aggregate number of shares of
Common Stock then owned by all of the Participating Shareholders.
(d) Any such purchase shall be made on the same price and other
terms and conditions as the Proposed Purchaser has offered with respect
to the Subject Shares. In the event that the Proposed Purchaser does
not purchase the Tag-Along Shares from the Tag Along Shareholders on the
same terms and conditions as specified in the Sale Notice, then the
Selling Shareholder shall not be permitted to sell any Subject Shares to
the Proposed Purchaser in the proposed transfer. The closing of any
purchase from the Tag Along Shareholders shall occur contemporaneously
with the purchase and sale of the Subject Shares or at such other time
as such Tag-Along Shareholder and the Proposed Purchaser shall agree.
(e) As used herein, the term "Exempt Transfer" shall mean any
sale, disposition or transfer of the Subject Shares to be effected (i)
through a registration of such shares under the Securities Act of 1933,
as amended (the "Securities Act"), (ii) pursuant to and in compliance
with Rule 144 promulgated by the Securities and Exchange Commission
pursuant to the Securities Act, or (iii) transfers by a Selling
Shareholder to any person who is a partner or equity holder of such
Selling Shareholder, a successor of, or an entity all of the equity
interests of which are directly or indirectly owned by, the Selling
Shareholder or an Affiliate of the Selling Shareholder; provided that no
transfer pursuant to (iii) above shall be an Exempt Transfer unless the
transferee agrees in writing to be bound by this Agreement and executes
an Addendum Agreement hereto.
(f) The provisions of this Section 3 shall not apply to any
bona fide charge, pledge or mortgage by any Shareholder of any shares of
Common Stock owned or held by it or its rights under this Agreement;
provided that any disposition of any such shares of Common Stock after
foreclosure of such charge, pledge or mortgage shall be governed by the
provisions of this Agreement, and the purchaser or purchasers of the
shares shall have entered into an Addendum Agreement with Future and the
other Shareholders.
Section 4. Right of First Refusal.
(a) No Shareholder may sell, transfer or dispose of any shares
(whether currently owned or hereafter acquired) of Common Stock except
in compliance with this Section 4. If any Shareholder desires to
dispose of any shares of Common Stock owned or held by it pursuant to a
bona fide offer (other than in an Exempt Transfer), such Shareholder
(for purposes of this Section 4, a "Selling Shareholder") shall offer
such shares for sale at the Purchase Price to the other Shareholders,
all in accordance with the following provisions of this Section 4.
(i) The Selling Shareholder shall deliver a written notice
("Offering Notice") to the other Shareholders, and within 30 days
from the receipt of such Offering Notice, the other Shareholders
shall deliver written notice ("Reply Notice") to the Selling
Shareholder. If by their Reply Notice the other Shareholders
accept the offer of the Selling Shareholder, such Reply Notice
shall constitute an agreement binding upon the Selling Shareholder
and the other Shareholders to sell and purchase the offered shares
at the Purchase Price. Once the Offering Notice is delivered, the
offer by the Selling Shareholder may not be withdrawn prior to the
expiration of the option of the other Shareholders, as provided in
this Section 4.
(ii) Any dispute concerning the calculation of the
Purchase Price shall be resolved by the Board of Directors of the
Company, excluding any member of the Board who is, or is a
director, officer, partner or stockholder of, the Selling
Shareholder or who has a right to purchase stock from the Selling
Shareholder in the transaction for which the Purchase Price is
being determined; provided that if all directors are excluded
pursuant to the foregoing, such disputes shall be submitted to
binding arbitration as provided in Exhibit B. The Purchase Price
shall be paid in cash at the closing.
(iii) If the other Shareholders do not accept an offer of
the Selling Shareholder pursuant to the foregoing provisions of
this Section 4 the Selling Shareholder shall be freed and
discharged, except as herein stated, from all obligations under
the terms of this Agreement other than to sell the offered shares
to the purchaser and at the price and upon the terms stated in the
Offering Notice given by the Selling Shareholder pursuant to this
Section 4, but only if such sale shall be completed within a
period of ninety days from the date of delivery of the Offering
Notice to the other Shareholders. If the Selling Shareholder does
not complete such sale within such ninety-day period, all the
provisions of this Agreement, including the provisions of this
Section 4, shall apply to any future sale or offer for sale of
such shares of Common Stock owned by the Selling Shareholder.
(b) Upon any involuntary disposition of a Shareholder's shares
of Common Stock, such Shareholder or its representative shall send
notice thereof, disclosing in full to the Company and the other
Shareholders the nature and details of such involuntary disposition and
offer such shares for sale at the Market Price of Common Stock to the
other Shareholders, all in accordance with the following provisions of
this Section 4. As used in this Section 4(b), the term "Selling
Shareholder" shall mean such Shareholder or its representative, as the
case may be.
(i) The Selling Shareholder shall deliver an Offering
Notice to the other Shareholders. Each of the other Shareholders
shall have 30 days from the receipt of their respective Offering
Notice to deliver a Reply Notice to the Selling Shareholder. If
by their Reply Notice the other Shareholders accept the offer of
the Selling Shareholder, such Reply Notice shall constitute an
agreement binding upon the Selling Shareholder and the other
Shareholders to sell and purchase the offered shares at the price
and upon the terms stated in the Offering Notice of the Selling
Shareholder.
(ii) In connection with any purchase and sale of shares of
Common Stock pursuant to paragraph (i) of this Section 4(b), the
purchaser or purchasers shall pay the purchase price for the
shares in cash at the closing.
(iii) If the Shareholders do not accept the offer of the
Selling Shareholder pursuant to the foregoing provisions of this
Section 4(b), the Selling Shareholder shall be freed and
discharged from all obligations under the terms of this Agreement
except to dispose of the offered shares by involuntary disposition
but only if the transferee under any such disposition shall have
entered into and Addendum Agreement with the Company and the other
Shareholders. If such involuntary disposition is not effected,
all the provisions of this Agreement, including the provisions of
this Section 4, shall apply to any future involuntary disposition
of such shares of Common Stock owned by the Selling Shareholder.
(c) The provisions of this Section 4 shall not apply to any
bona fide charge, pledge or mortgage by any Shareholder of any shares of
Common Stock owned or held by it or its rights under this Agreement;
provided that any disposition of any such shares of Common Stock after
foreclosure of such charge, pledge or mortgage shall be governed by the
provisions of this Agreement, and the purchaser or purchasers of the
shares shall have entered into an Addendum Agreement with Future and the
other Shareholders.
Section 5. Representations and Warranties of Shareholders.
Each Shareholder hereby represents and warrants to the other
Shareholders as follows:
(a) As of the date hereof, such Shareholder is the record and
beneficial owner of the number of shares of Common Stock set forth
opposite its name in the attached Exhibit 4(a).
(b) Such Shareholder, if not a natural person, is duly formed,
validly existing and in good standing under the laws of the jurisdiction
of its formation.
(c) Such 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 Shareholder and constitutes a valid and legally binding
obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms.
(d) The execution, delivery, and performance by such
Shareholder of this Agreement do not and will not (i) if not a natural
person, be in contravention of or violate any provision of its charter
or other governing documents, as amended to the date hereof, (ii)
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 Shareholder is a party or by which such
Shareholder or any of its properties may be bound or (iii) violate any
applicable law, rule or regulation binding upon such Shareholder.
(e) 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
Shareholder in connection with the execution, delivery, or performance
by such Shareholder of this Agreement.
Section 6. 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 7. 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, including, without limitation that
certain Voting Agreement dated November 25, 1997, by and between Future,
Energy PLC, EnCap LP, Carl Price and Don Wm. Reynolds and that certain
Purchase and Sale Agreement dated November 25, 1997, by and among
Future, Energy PLC, EnCap LP and Gecko Booty 1994 I Limited Partnership.
Neither Future nor any Shareholder shall be a party to any agreement
involving any holder of capital stock of Future, as such, unless Future
and all such Shareholders are also parties to that agreement, except
with the written consent of Future and all such Shareholders who are not
parties to such an agreement.
Section 8. Amendments.
This Agreement may be amended, modified, supplemented, restated or
discharged only by an instrument in writing signed by each of the
Subject Shareholders hereto. For purposes of this section, a Subject
Shareholder shall be deemed to have properly executed an amendment
hereto upon the consent of the holders of a majority of the then
outstanding Voting Securities held by the members of such Subject
Shareholder.
Section 9. 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 Bargo: c/o Bargo Energy Company
700 Louisiana, Suite 3700
Houston, Texas 77002
Attention: Tim J. Goff
Fax No.: 713-236-9799
If to B. Carl Price or Don Wm. Reynolds:
c/o Future Petroleum Corporation
2351 West Northwest Highway
Suite 2130
Dallas, Texas 75220
Attention: Carl Price
Fax No.: 214-350-8382
If to Energy PLC or EnCap LP:
c/o EnCap Investments, L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attention: Gary R. Petersen or Colin Nisbeth
Fax No.: 713-659-6130
and shall be considered delivered on the date of receipt. A Shareholder
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 Shareholders, in the manner provided in this Section, at least ten
(10) days prior to the effective date of such change of address.
Any party hereto may designate a different address by notice to the
other parties.
Section 10. Termination.
This Agreement shall terminate upon the earlier of (i) the written
consent of each of the Shareholders, (ii) when the Shareholders
collectively hold an aggregate of less than 30%, or when, with respect
to a Subject Shareholder, such Subject Shareholder owns less than 5% of
the issued and outstanding shares of Common Stock (and this Agreement
shall be terminated solely with respect to such Subject Shareholder but
shall remain in effect as to those Subject Shareholders owning 5% or
more of the issued and outstanding shares of Common Stock).
Section 11. Power of Attorney.
For the purpose of executing an Addendum Agreement, all the
Shareholders hereby appoint Future as their agent and attorney to
execute such Addendum Agreement on their behalf and expressly bind
themselves to the Addendum Agreement by Future's execution of that
Agreement without further action on their part.
Section 12. 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 13. Choice of Law.
This Agreement shall be governed by the laws of the State of Utah.
Section 14. 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 15. References and Construction.
(a) For purposes of this Agreement, whenever any Shareholder is
required to offer shares of Common Stock to the other Shareholders
pursuant to this Agreement, such offer shall be deemed to be made to the
other Shareholders pro rata in accordance with their respective holdings
of shares of Common Stock at the time of the offer, or in such other
proportions as may be agreed upon by all Shareholders electing to accept
the offer who, pursuant to this agreement, would purchase more or less
than their pro rata share. Except as may otherwise be agreed, each
member of the group to whom such shares are so offered shall have the
right to purchase that proportion of the number of such offered shares
that the number of shares of Common Stock owned by such member bears to
the total number of shares of Common Stock owned by the members of the
group electing to accept the offer.
(b) The provisions of Sections 3 and 4 shall not apply to
transactions between members of a group, so that transactions between
members of the Price Group shall not be subject to Sections 3 and 4,
transactions between members of the EnCap Group shall not be subject to
Sections 3 and 4 and transactions between members of the Bargo Group
shall not be subject to Sections 3 and 4 and any shares transferred
pursuant to such transactions shall remain subject to this Agreement.
The parties hereto consent to the pledge of shares of Common Stock
pursuant to those certain Pledge Agreements (stock) by Bargo, Energy PLC
and EnCap LP, B. Carl Price and Don Wm. Reynolds, respectively, in favor
of Bank of America National Trust and Savings Association and agree that
Sections 3 and 4 hereof shall not be applicable to such pledges or any
foreclosures or resales thereunder.
(c) 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.
(d) 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.
(e) 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.
(f) Words in the singular form shall be construed to include
the plural and vice versa, unless the context otherwise requires.
(g) 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.
(h) Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.
(i) The word "or" is not exclusive and the word "includes" and
its derivatives means "includes, but is not limited to" and
corresponding derivative expressions.
(j) No consideration shall be given to the fact or presumption
that one party had a greater or lesser hand in drafting this Agreement.
(k) All references herein to "$" or "dollars" shall refer to
U.S. Dollars.
Section 16. Endorsements.
The certificate or certificates representing the Voting Securities
now owned or hereafter acquired by the Shareholders shall have
conspicuously stamped, printed, or typed on the face or back thereof a
legend substantially in the following form:
"The shares represented hereby are subject to that certain
Shareholders' Agreement dated as of August 14, 1998, by and among
the Company, B. Carl Price, Don Wm. Reynolds, Energy Capital
Investment Company PLC, and EnCap Equity 1994 Limited Partnership
and Bargo Energy Resources, Ltd. A copy of the Shareholders'
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 17. 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 18. 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.
FUTURE PETROLEUM CORPORATION
By: /s/ B. Carl Price
Name: B. Carl Price
Title: President
Name: B. Carl Price
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: Gary R. Petersen
Name: Gary R. Petersen
Title: Director
BARGO ENERGY RESOURCES, LTD.
By: Bargo Operating Company, Inc.,
General Partner
By:
Name: Tim J. Goff
Title: President
EXHIBIT 4(a)
Shareholder Number of Shares of Common Stock
B. Carl Price 1,089,149
Don Wm. Reynolds 753,362
Energy Capital Investment Company PLC 2,269,886
EnCap Equity 1994 Limited Partnership 2,424,973
Bargo Energy Resources, Ltd. 4,694,859
EXHIBIT A
ADDENDUM AGREEMENT
Addendum Agreement made this _____ day of _____________, ____, by
and between ____________________________________________ (the "New
Shareholder") and Future Petroleum Corporation, a Utah corporation (the
"Company"), and the other shareholders (the "Shareholders") of the
Company, who are parties to that certain Shareholders' Agreement dated
August 14, 1998 (the "Agreement"), between the Company and the
Shareholders.
W I T N E S E T H:
WHEREAS, the Company and the Shareholders entered into the
Agreement to impose certain restrictions and obligations upon themselves
and the shares of Common Stock, $0.01 par value, of the Company held by
them (the "Shares");
WHEREAS, the New Shareholder is desirous of becoming a
shareholder of the Company; and
WHEREAS, the Company and the Shareholders have required in the
Agreement that in certain circumstances certain persons being offered
Shares must enter into an Addendum Agreement binding the New Shareholder
to the Agreement to the same extent as if it was an original party
thereto, so as to promote the mutual interests of the Company, the
Shareholders and the New Shareholders by imposing the same restrictions
and obligations on the New Shareholder and the shares of Common Stock to
be acquired by it as were imposed upon the Shareholders under the
Agreement,
NOW, THEREFORE, in consideration of the mutual promises of the
parties, and as a condition of the purchase of the shares of Common
Stock in the Company, the New Shareholder acknowledges that it has read
the Agreement. The New Shareholder shall be bound by, and shall have
the benefit of, all the terms and conditions set out in the Agreement to
the same extent as if it was a "Shareholder" as defined in the
Agreement. This Addendum Agreement shall be attached to and become a
part of the Agreement.
______________________________
New Shareholder
By____________________________
Address for notices under
Section 9 of Agreement:
______________________________
______________________________
______________________________
EXHIBIT B
ARBITRATION
In the event that a dispute or controversy as described in Section
3 should arise, such dispute or controversy shall be settled in
arbitration in Houston, Texas and for this purpose each of the parties
hereby expressly consents to such arbitration in such place. In the
event the parties cannot mutually agree upon an arbitrator to settle
their dispute or controversy, each party to the dispute shall select one
arbitrator. In the event that there are only two parties to the
dispute, the arbitrators selected by each party shall select a third
arbitrator. The decision of said arbitrators shall be binding upon the
parties for all purposes. If any party fails to select an arbitrator
within 15 days after written demand from the other party or parties to
do so, or if, in the event that there are only two parties to the
dispute, the two arbitrators selected fail to select a third arbitrator
within 15 days after the last of such selected arbitrators is appointed,
such other arbitrator or arbitrators shall be selected pursuant to the
then existing rules and regulations of the American Arbitration
Association. Such arbitration shall be conducted in accordance with the
then existing rules and regulations of the American Arbitration
Association to the extent such rules and regulations are not
inconsistent with this Agreement. The expense of each arbitrator shall
be borne by the party selecting the arbitrator. The expense of any
third arbitrator shall be borne equally by the two parties to the
dispute or controversy. For purposes hereof, in the case of a dispute or
controversy where the Offering Notice was submitted by, or the
transaction otherwise involves, more than one Selling Shareholder, all
such Selling Shareholders shall collectively constitute a single party.
Likewise, where the transaction involves more than one purchasing
Shareholder, all such purchasing Shareholders shall constitute a single
party.
EXHIBIT 10.6
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this
"Agreement") is entered into as of August 14, 1998, (the "Effective Date"), by
and between FUTURE PETROLEUM CORPORATION, a Utah corporation (the "Employer"),
and B. CARL PRICE (the "Executive").
RECITALS
WHEREAS, the Executive and the Employer entered into an Executive
Employment Agreement dated as of November 18, 1997 (the "Original Agreement"),
and
WHEREAS, the Executive and the Employer desire to amend and restate the
Original Agreement in its entirety; and
WHEREAS, the Executive desires employment as an employee of the Employer,
and the Employer desires to employ the Executive, under the terms and
conditions hereof.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties agree as follows:
ARTICLE I
ASSOCIATION AND RELATIONSHIP
1.1 Nature of Employment. The Employer hereby employs the Executive
and the Executive hereby accepts employment from the Employer upon the terms
and conditions set forth herein.
1.2 Full Time Services. The Executive shall devote his full working
time, attention, and services to the business and affairs of the Employer and
shall not, without the Employer's written consent, be engaged during the term
of this Agreement in any other substantial business activity other than normal
investment activities, whether or not such business activity is pursued for
gain, profit, or other pecuniary advantages, that significantly interferes or
conflicts with the reasonable performance of his duties hereunder.
1.3 Duties. During the term of this Agreement, the Executive shall
be employed by the Employer and shall initially occupy the office of President
and shall serve as the Employer's chief executive officer. The Executive
agrees to serve in such offices or positions with the Employer or any
subsidiary of the Employer and such substitute or further offices or positions
of substantially consistent rank and authority as shall, from time to time, be
determined by the Employer's board of directors. The Executive agrees to
perform such duties appropriate for an executive officer of the Employer as
may be assigned to him from time to time by the Employer and as described in
the Employer's bylaws. The Employer shall direct, control, and supervise the
duties and work of the Executive.
1.4 Satisfaction of the Employer. The Executive agrees that he will,
at all times faithfully, promptly, and to the best of his ability, experience,
and talent, perform all of the duties that may be required of him pursuant to
the express and implicit terms hereof. Such duties shall be rendered at
Dallas, Texas, and, on a temporary basis, at such other place or places as the
interests, needs, business, and opportunities of the Employer shall require or
make advisable; provided, however, that Executive shall not be required to
move his residence from Dallas, Texas without the mutual consent of the
Employer and the Executive and the reimbursement by the Employer of all
expenses incurred by the Executive in connection with such move.
1.5 Compliance with Rules. The Executive shall observe and comply
with the rules and regulations of the Employer respecting its business and
shall carry out and perform orders, directions, and policies of the Employer
as they may be from time to time communicated to the Executive either orally
or in writing. The Executive shall further observe and comply with all
applicable rules, regulations, and laws governing the business of the
Employer.
ARTICLE II
COMPENSATION AND BENEFITS
2.1 Compensation. For all services rendered by the Executive
pursuant to this Agreement, the Employer shall compensate the Executive as
follows:
(a) Salary. The Executive shall be paid in accordance with the
normal payroll practice of the Employer annual compensation in the
amount of One Hundred Twenty-Five Thousand Dollars ($125,000.00).
(b) Salary Escalation. The rate of salary may be further or
otherwise increased at any time and in such amount as the board of
directors or the designated compensation committee thereof may determine
appropriate, based on results of operations, increased activities of the
Employer, or such other factors as the board of directors or the
designated compensation committee thereof may deem appropriate.
(c) Bonus. The Employer shall provide the Executive with
incentive compensation in the form of cash or stock bonuses not less
often than once each year during the term of this Agreement. The amount
of such bonuses shall be determined in the sole discretion of the board
of directors of the Employer or the designated compensation committee
thereof taking into consideration the growth and profitability of the
Employer, the relative contribution by the Executive to the business of
the Employer, the economy in general, and such other factors as the
board of directors or designated compensation committee deems relevant.
(d) Stock Purchase. The Executive may, at his option, forego
receipt of a portion of the salary and/or bonus otherwise payable to the
Executive hereunder, whereupon such foregone amount shall be deemed to
be paid by the Executive to the Employer as the purchase price for
shares of common stock of the Employer. The portion of the Executive's
salary as to which the Executive may forego pursuant to this section
shall be determined in the sole discretion of the Executive. The
purchase price for the shares of common stock of the Employer under this
section shall be equal to (a) for compensation relating to the period
beginning on the date of the Original Agreement and ending December 31,
1998, $0.42 per share (the average midpoint price between bid and ask
for the five (5) days prior to the date of the Original Agreement); and
(b) for compensation relating to the period beginning on January 1,
1999, and thereafter, the average midpoint price between bid and ask for
the last five (5) days of the calendar year prior to the year to which
the foregone compensation relates. All shares purchased by the Executive
under this section shall be delivered to the Executive on or before
January 31 of the year following the year in which the services for
which compensation is payable hereunder were performed.
(e) Incentive Compensation. The Employer shall grant to the
Executive pursuant to the terms of the 1993 Employee Incentive Plan of
the Employer, options to purchase 250,000 shares of common stock of the
Employer, at an exercise price per share equal to the average midpoint
price between the bid and ask prices of the Employer's common stock for
the five (5) trading days preceding the Effective Date of this
Agreement. The options shall be 100% vested as of the date hereof and
shall expire on the date that is ten years from the date hereof.
(f) Anti-Dilution. In addition to all other compensation
payable to the Executive hereunder, on each anniversary date of this
Agreement, the Employer shall grant to the Executive options to purchase
shares of common stock of the Employer equal to twelve percent (12%)
multiplied by the difference between (i) the issued and outstanding
shares of common stock together with all shares of common stock issuable
on exercise or conversion of all options, warrants and other securities
convertible or exercisable into common stock on a fully diluted basis,
less (ii) the shares of common stock held by the Executive together with
all options, warrants and other securities convertible or exercisable
into common stock held by the Executive. The exercise price of such
options shall be the average midpoint price between the bid and ask
prices of the Employer's common stock for the five (5) trading days
preceding the date of each such grant. The options shall be 100% vested
as of the date of grant and shall expire on the date that is ten years
from the date of grant.
(g) Other Benefits. The Employer shall additionally provide to
the Executive incentive, retirement, pension, profit sharing, stock
option, health, medical, or other employee benefit plans which are
consistent with and similar to such plans provided by the Employer to
its employees generally. All costs of such plans shall be an expense of
the Employer and shall be paid by the Employer.
2.2 Continuation of Compensation During Disability. If the Executive
is unable to perform his services by reason of disability due to illness or
incapacity for a period of more than six (6) consecutive months, the
compensation thereafter payable to him during the next succeeding consecutive
three (3) month period shall be one-half of the compensation provided for in
Section 2.1(a) hereof (as adjusted pursuant to Section 2.1(b)), and during the
following consecutive three (3) month period shall be one-fourth of the salary
provided for in Section 2.1(a) (as adjusted pursuant to Section 2.1(b));
provided, however, that no such compensation shall be payable after the
termination of this Agreement. During such initial six (6) consecutive month
period of disability, the Executive shall be entitled to receive incentive
compensation at the same annual rate as incentive compensation, if any, earned
with respect to the Employer's fiscal year last preceding the date such
illness or incapacity commenced. Notwithstanding the foregoing, if such
illness or incapacity does not cease to exist within the twelve (12)
consecutive month period provided herein, the Executive shall not be entitled
to receive any further compensation from the Employer and the Employer may
thereupon terminate this Agreement. For purposes of this Agreement, the
Executive is "disabled" when he is unable to continue his normal duties of
employment, by reason of a medically determined physical or mental impairment.
In determining whether or not the Executive is disabled, the Employer may rely
upon the opinion of any doctor or practitioner of any recognized field of
medicine or psychiatric practice selected jointly by the Employer and the
Executive and such other evidence as the Employer deems necessary.
2.3 Working Facilities. The Employer shall provide to the Executive
at the Employer's principal executive offices suitable executive offices and
facilities appropriate for his position and suitable for the performance of
his responsibilities.
2.4 Vacations and Meetings. The Executive shall be entitled each
year to a paid vacation of at least four (4) weeks and to attendance at
appropriate meetings and conventions of such duration and at such time as may
be in accordance with the Employer's policy. Vacations shall be taken by the
Executive at a time and with starting and ending dates mutually convenient to
the Employer and the Executive. Vacations or portions of vacations not used
in one employment year shall carry over to the succeeding employment year, but
shall thereafter expire if not used within such succeeding year.
2.5 Expenses. The Employer will reimburse the Executive for expenses
incurred in connection with the Employer's business, including expenses for
travel, lodging, meals, beverages, entertainment, and other items. The
Executive shall provide the following for all expenses for which the
Executive desires reimbursement:
(a) A report in which the Executive has recorded at or near the
time each expenditure was made: (i) the amount of the expenditure;
(ii) the time, date, place and designation of the type of entertainment,
travel or other expense; (iii) the business reason for the expenditure
and the nature of the business benefit derived or expected to be derived
as a result of the expenditure; and (iv) the names, occupations,
addresses and other information concerning each person who was
entertained sufficient to establish the business relationship to the
Employer; and
(b) Documentary evidence (such as receipts or paid bills),
which states sufficient information to establish the amount, date, place
and the essential character of the expenditure, for each expenditure:
(i) of twenty-five dollars ($25.00) or more (except for transportation
charges if not readily available); and (ii) for lodging while traveling
away from home.
2.6 Dues and Club Memberships. The Employer shall assume and pay
reasonable dues of the Executive in local, state, and national societies and
associations, and in such other clubs and organizations, as shall be approved
and authorized by the Employer.
2.7 Automobile. The Employer shall provide to the Executive, at the
election of the Executive, either (a) a company vehicle of a type suitable for
the Executive's position, insured at the Employer's expense, for the exclusive
use of the Executive; or (b) reimbursement of the costs and expenses,
including insurance, of purchasing or leasing and maintenance of the
Executive's personal vehicle.
2.8 Payroll Taxes. The Employer shall withhold from the Executive's
compensation hereunder all federal and state payroll taxes and income taxes on
compensation paid to the Executive and shall provide an accounting to the
Executive for such amounts withheld.
ARTICLE III
COVENANT TO NOT DISCLOSE CONFIDENTIAL INFORMATION
3.1 Definition of Confidential Information. For purposes of this
Agreement, the term "Confidential Information" does not apply to information
generally available to the public or to businesses in the oil and gas
exploration and development industry, but otherwise shall mean information in
written or electronic form under the care or custody of the Executive as a
direct or indirect consequence of or through his employment with the Employer,
including, but not limited to, the special proprietary and economic
information regarding the business, methods, and operation of the Employer
that is designated by the Employer as "Limited," "Private," or "Confidential"
or similarly designated or for which there is any reasonable basis to be
believed is, or which appears to be, treated by the Employer as confidential.
3.2 Protection of Goodwill. The Executive acknowledges that in the
course of carrying out, performing, and fulfilling his responsibilities to the
Employer, the Executive will be given access to and be entrusted with
Confidential Information relating to the Employer's business. The Executive
recognizes that (i) the goodwill of the Employer depends upon, among other
things, its keeping the Confidential Information confidential and that
unauthorized disclosure of the Confidential Information would irreparably
damage the Employer; and (ii) disclosure of any Confidential Information to
competitors of the Employer or to the general public would be highly
detrimental to the Employer. The Executive further acknowledges that in the
course of performing his obligations to the Employer he will be a
representative of the Employer to many clients or other persons and, in some
instances, the Employer's primary contact with such clients or other persons,
and as such will be responsible for maintaining or enhancing the business
and/or goodwill of the Employer with those clients or other persons.
3.3 Covenants Regarding Confidential Information. In further
consideration of the employment of the Executive by the Employer and in
consideration of the compensation to be paid to the Executive during his
employment, the Executive hereby agrees as follows:
(a) Nondisclosure of Confidential Information. The Executive
will not, during his employment with the Employer or at any time after
termination of his employment, irrespective of the time, manner, or
cause of termination, use, disclose, copy, or assist any other person or
firm in the use, disclosure, or copying, of any Confidential
Information.
(b) Return of Confidential Information. All files, records,
documents, drawings, equipment, and similar items, whether in written or
electronic form, relating to the business of the Employer, whether
prepared by the Executive or otherwise coming into his possession, shall
remain the exclusive property of the Employer and shall not be removed
from the premises of the Employer, except where necessary in carrying
out the business of the Employer, without the prior written consent of
the Employer. Upon termination of the Executive's employment, the
Executive agrees to deliver to the Employer all Confidential Information
and all copies thereof along with any and all other property belonging
to the Employer whatsoever.
ARTICLE IV
ENFORCEMENT OF COVENANTS
4.1 Relief. The Executive agrees that a breach or threatened breach
on his part of any covenant contained in this Agreement will cause such damage
to the Employer as will be irreparable and for that reason, the Executive
further agrees that the Employer shall be entitled as a matter of right to an
injunction out of any court of competent jurisdiction restraining any further
violation of such covenants by the Executive, his employers, employees,
partners, or agents. The right to injunction shall be cumulative and in
addition to whatever other remedies the Employer may have, including,
specifically, recovery of damages.
4.2 Survival of Covenants. Subject to Article V below, in the event
the Executive's employment relationship with the Employer is terminated, with
or without cause, the covenants contained in Article III above shall survive
for a period of one (1) year after such termination.
ARTICLE V
TERM AND TERMINATION
5.1 Term. Except as provided herein, the term of this Agreement
shall be for a period of three (3) years commencing on the Effective Date and
shall automatically be extended for an additional one (1) year upon each
anniversary date of the Effective Date unless otherwise terminated pursuant to
the terms hereof.
5.2 Termination. The Executive's employment hereunder may be
terminated without any breach of this Agreement only under the following
circumstances:
(a) Termination for Cause. The Employer shall have the right,
without further obligation to the Executive other than for compensation
previously accrued, to terminate this Agreement for cause ("Cause") by
showing that (i) the Executive has materially breached the terms hereof;
(ii) the Executive, in the determination of the board, has been grossly
negligent in the performance of his duties; (iii) the Executive has
substantially failed to meet written standards established by the
Employer for the performance of his duties; (iv) the Executive has
engaged in material willful or gross misconduct in the performance of
his duties hereunder; or (v) a final non-appealable conviction of or a
plea of guilty or nolo contendere by the Executive to a felony or
misdemeanor involving fraud, embezzlement, theft, or dishonesty or other
criminal conduct against the Employer has been entered. Notwithstanding
the foregoing, the Executive shall not be deemed to have been terminated
for Cause, without (x) reasonable written notice to the Executive
setting forth the reasons for the Employer's intention to terminate for
Cause; (y) an opportunity for the Executive, together with his counsel,
to be heard before the full board of directors of the Employer; and (z)
delivery to the Executive of written notice of termination setting forth
the finding that in the good faith opinion of the board of directors the
Executive was guilty of Cause and specifying the particulars thereof in
detail.
(b) Termination upon Death or Disability of the Executive. This
Agreement shall terminate immediately upon the Executive's death or upon
the disability of the Executive after termination of pay as set forth in
Section 2.2.
(c) Termination Upon Change of Control. Notwithstanding any
provision of this Agreement to the contrary, the Executive may terminate
this Agreement, but not the covenant not to disclose information set
forth in Article III, upon the happening of any of the following events:
(i) The sale by the Employer of substantially all of its
assets to a single purchaser or to a group of associated
purchasers;
(ii) The sale, exchange, or other disposition to a single
person or group of persons under common control in one transaction
or series of related transactions resulting in such person or
persons owning, directly or indirectly, greater than thirty-three
percent (33%) of the combined voting power of the outstanding
shares of the Employer's common stock;
(iii) More than fifty percent (50%) of the members of the
board of directors of the Employer shall be persons who are
neither nominated for election by the board or an authorized
committee of the board nor elected by the board;
(iv) The decision by the Employer to terminate its
business and liquidate its assets;
(v) The merger or consolidation of the Employer in a
transaction in which the shareholders of the Employer immediately
prior to such merger or consolidation receive less than fifty
percent (50%) of the outstanding voting shares of the new or
continuing corporation; or
(vi) A person (within the meaning of Section 3(a)(9) or Section
13(d)(3), as in effect on the date hereof, of the Securities
Exchange Act of 1934 (the "Exchange Act")) shall become the
beneficial owner (within the meaning of rule 13d-3 of the Exchange
Act as in effect on the date hereof) of fifty percent (50%) or
more of the outstanding voting securities of the Employer.
In the event the Executive does not elect to terminate this Agreement
upon the happening of any of the events noted above, and as a result of
such event, the Employer is not the surviving entity, then the
provisions of this Agreement shall inure to the benefit of and be
binding upon the surviving or resulting entity. If as a result of the
merger, consolidation, transfer of assets, or other event listed above,
the duties of the Executive are increased, then the compensation of the
Executive provided for in Section 2.1 of this Agreement shall be
reasonably adjusted upward to compensate for the additional duties and
responsibilities assumed.
(d) Termination by the Executive for Cause. The Executive shall
have the right to terminate this Agreement in the event of (i) the
Employer's intentional breach of any covenant or term of this Agreement,
but only if the Employer fails to cure such breach within twenty (20)
days following the receipt of notice by the Executive setting forth the
conditions giving rise to such breach; (ii) an assignment to the
Executive of any duties inconsistent with, or a significant change in
the nature or scope of, the Executive's authorities or duties from those
authorities and duties held by the Executive as of the date hereof and
as increased from time to time; or (iii) the failure by the Executive to
obtain the assumption of the commitment to perform this Agreement by any
successor corporation.
5.3 Termination Payments.
(a) Termination Other than for Cause. In the event that the
Executive's employment is terminated by the Employer during the term
hereof for reasons other than Cause as defined in Section 5.2(a) or the
Executive terminates this Agreement in accordance with Section 5.2(c) or
Section 5.2(d), the Employer shall:
(i) Pay to the Executive all amounts accrued through the date of
termination, any unreimbursed expenses incurred pursuant to
Section 2.5 of this Agreement, and any other benefits specifically
provided to the Executive under any benefit plan.
(ii) Pay to the Executive an amount equal to two (2) times
the Executive's then current annual salary.
(iii) At the election of the Executive, pay to the
Executive an amount equal to the number of shares subject to such
holder's unexercised options, whether or not vested, times the
amount by which the "Fair Market Value" of the Employer's common
stock exceeds the exercise price of such options. Fair Market
Value shall mean the closing price for such stock on the close of
business on the trading day last preceding the date of such
termination as quoted on a registered national securities exchange
or, if not listed on such an exchange, the Nasdaq Stock Market
("Nasdaq") of the National Association of Securities Dealers,
Inc., or, if not listed on such an exchange or included on Nasdaq,
the closing price (or, if no closing price is available from
sources deemed reliable by the Company, the closing bid quotation)
for such stock as determined by the Company through any other
reliable means of determination available on the close of business
on the trading day last preceding the date of such termination.
If the Executive elects to receive payment as provided above for
Executive's unexercised options, on payment to the Executive of
the amount due from the Employer, the rights to exercise options
with respect to which he has received payment shall terminate. If
the Executive elects not to receive payment as provided above for
the Executive's unexercised options, all forfeiture restrictions
governing stock or options held by the Executive shall immediately
terminate and such common stock or options shall be fully vested
and held free from forfeiture by the Executive.
(iv) Maintain in full force and effect, for the continued
benefit of the Executive for the number of years (including
partial years) remaining in the term of employment hereunder, all
employee benefit plans and programs in which the Executive was
entitled to participate immediately prior to the date of
termination, provided that the Executive's continued participation
is possible under the general terms and provisions of such plans
and programs. In the event that the participation of the
Executive and his family in the Employer's group health plan
and/or life insurance program is barred, the Employer shall
provide the Executive and his family with benefits substantially
similar to those which the Executive would otherwise have been
entitled to receive under such plan and program from which his
continued participation is barred.
(b) Termination upon Death of the Executive. If the Executive
dies during the term of this Agreement, the Employer shall pay to the
estate of the Executive the following:
(i) All amounts accrued through the date of termination, any
unreimbursed expenses incurred pursuant to Section 2.5 of this
Agreement, and any other benefits specifically provided to the
Executive under any benefit plan; and
(ii) In six (6) equal monthly installments commencing on the
first day of the month immediately following the month in which
the Executive dies, an amount equal to one (1) year's then current
salary provided for in Section 2.1(a) (as adjusted pursuant to
Section 2.1(b)) of this Agreement, and payment of the pro rata
portion of the incentive compensation which would have been
payable pursuant to Section 2.1(c), based upon the number of full
months of his employment during the year of his death.
(c) Termination for Cause or Termination by the Executive. If
the Executive terminates this Agreement for any reason other than in
accordance with the provisions of Section 5.2(c) or Section 5.2(d) of
this Agreement, or if the Employer terminates this Agreement on account
of Cause, the Employer shall deliver to the Executive, within ninety
(90) days following the effective date of such termination, all amounts
accrued through the date of termination, any unreimbursed expenses
incurred pursuant to Section 2.5 of this Agreement, and any other
benefits specifically provided to the Executive under any benefit plan.
The Employer shall have no further obligation to the Executive.
5.4 Resignation upon Termination. Upon the termination of this
Agreement for any reason, the Executive hereby agrees to resign from all
positions held in the Employer or an affiliate of the Employer, including
without limitation any position as an officer, agent, or trustee of the
Employer or any affiliate of the Employer.
ARTICLE VI
MISCELLANEOUS
6.1 Exit Interview. To insure a clear understanding of this
Agreement, including but not limited to the protection of the Employer's
business interests, the Executive agrees, at no additional expense to the
Executive, to engage in an exit interview with the Employer at a reasonable
time and place designated by the Employer.
6.2 Severability. If any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect the validity and enforceability of any other provisions
hereof. Further, should any provisions within this Agreement ever be reformed
or rewritten by a judicial body, those provisions as rewritten shall be
binding upon the Employer and the Executive.
6.3 Right of Setoff. The Employer and the Executive shall each be
entitled, at its option and not in lieu of any other remedies to which it may
be entitled, to set off any amounts due from the other or any affiliate of the
other against any amount due and payable by such person or any affiliate of
such person pursuant to this Agreement or otherwise.
6.4 Representations and Warranties of the Executive. The Executive
represents and warrants to the Employer that (a) the Executive understands and
voluntarily agrees to the provisions of this Agreement; (b) the Executive is
not aware of any existing medical condition which might cause him to be or
become unable to fulfill his duties under this Agreement; and (c) the
Executive is free to enter into this Agreement and has no commitment,
arrangement or understanding to or with any third party that restrains or is
in conflict with this Agreement or that would operate to prevent the Executive
from performing the services to the Employer that the Executive has agreed to
provide hereunder.
6.5 Succession. This Agreement and the rights and obligations
hereunder shall be binding upon and inure to the benefit of the parties hereto
and their respective legal representatives, and shall also bind and inure to
the benefit of any successor of the Employer by merger or consolidation or any
assignee of all or substantially all of its property.
6.6 Assignment. Except to any successor or assignee of the Employer
as provided in Section 6.5, neither this Agreement nor any rights or benefits
hereunder may be assigned by either party hereto without the prior written
consent of the other party. Neither the Executive, the Executive's spouse,
the Executive's designated contingent beneficiary, nor their estates shall
have any right to anticipate, encumber, or dispose of any payment due under
this Agreement. Such payments and other rights are expressly declared
nonassignable and nontransferable, except as specifically provided herein.
6.7 Reimbursement of Expenses. In the event that it shall be
necessary or desirable for the Executive to retain legal counsel and/or incur
other costs and expenses in connection with the enforcement of any and all of
the Executive's rights under this Agreement, the Executive shall be entitled
to recover from the Employer reasonable attorneys' fees, costs, and expenses
incurred by the Executive in connection with the enforcement of said rights.
Payment shall be made to the Executive by the Employer at the time such
attorneys' fees, costs, and expenses are incurred by the Executive. If,
however, the Executive does not prevail in such enforcement action, the
Executive shall repay any such payments to the Employer and shall reimburse
the Employer for reasonable attorneys' fees, costs and expenses incurred by
the Employer in connection with such action. Further, the Executive shall
reimburse the Employer for any attorneys' fees and all other costs and
expenses incurred by the Employer in any action brought by the Employer
relating to the enforcement of this Agreement in which the Employer is the
prevailing party. Fees payable hereunder shall be in addition to any other
damages, fees, or amounts provided for herein.
6.8 Indemnification. The Employer shall indemnify the Executive and
hold the Executive harmless from liability for acts or decisions made by the
Executive while performing services for the Employer to the greatest extent
permitted by applicable law. The Employer shall use its best efforts to
obtain coverage for the Executive under any insurance policy now in force or
hereafter obtained during the term of this Agreement insuring officers and
directors of the Employer against such liability. The Executive agrees to
indemnify and to hold the Employer harmless from any and all damages, losses,
claims, liabilities, costs, or expenses arising from the Executive's acts or
omissions in violation of his duties under this Agreement which constitute
fraud, gross negligence, or willful and knowing violations of the terms of
this Agreement.
6.9 Notices. Any notices or other communications required or
permitted under this Agreement shall be sufficiently given if personally
delivered, if sent by facsimile or telecopy transmission or other electronic
communication confirmed by sending a copy thereof by United States mail, if
sent by United States mail, registered or certified, postage prepaid, or if
sent by prepaid overnight courier addressed as set forth on the signature page
hereto or such other addresses as shall be furnished in writing by any party
in the manner for giving notices hereunder, and any such notice or
communication shall be deemed to have been given as of the date so delivered
or sent by facsimile or telecopy transmission or other electronic
communication, one (1) day after the date so sent by overnight courier, or
three (3) days after the date of deposit in the United States mail.
6.10 Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the subject matter contained
herein. No change, addition, or amendment shall be made except by written
agreement signed by the parties hereto.
6.11 Waiver of Breach. The failure by any party to insist upon the
strict performance of any covenant, duty, agreement, or condition of this
Agreement or the failure to exercise any right or remedy consequent upon a
breach hereof shall not constitute a waiver of any such breach or of any
covenant, agreement, term, or condition and the waiver by either party hereto
of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by any party.
6.12 Multiple Counterparts. This Agreement has been executed in a
number of identical counterparts, each of which for all purposes is to be
deemed an original, and all of which constitute, collectively, one agreement.
In making proof of this Agreement, it shall not be necessary to produce or
account for more than one such counterpart.
6.13 Descriptive Headings. In the event of a conflict between titles
to articles and paragraphs and the text, the text shall control.
6.14 Governing Law. The laws of the state of Texas shall govern the
validity, construction, enforcement, and interpretation of this Agreement.
Signed and delivered to be effective as of the Effective Date set forth
above.
EMPLOYER:
Address: Future Petroleum Corporation
2351 West Northwest Highway, Suite 2130
Dallas, Texas 75220
By:/s/ B. Carl Price
Name: B. Carl Price
Title: President
Address: EXECUTIVE:
P.O. Box 25253
Dallas, Texas 75225
/s/ B. Carl Price
B. Carl Price
EXHIBIT 10.7
UNANIMOUS CONSENT OF BOARD OF DIRECTORS
IN LIEU OF SPECIAL MEETING
November 18, 1997
RESOLVED, that Future Petroleum Corporation is hereby authorized to enter
into certain contracts, the terms of which are stated below, with the following
individuals:
B. Carl Price;
Robert Price;
Don Wm. Reynolds.
These contracts are for a term of five (5) years from November 18, 1997. This
unanimous consent agreement will also serve as the contracts between Future
Petroleum Corporation and the above individuals.
In consideration for his services, Mr. Don Wm. Reynolds is guaranteed an annual
sum of not less than $18,000. Mr. Reynolds is granted the right to use one
hundred percent (100%) of this sum to purchase Future Petroleum Corporation
restricted common stock. The purchase price per share for stock purchased under
this right through January 31, 1998, is the average midpoint price between bid
and ask for the five (5) days prior to November 18, 1997, which is forty-two
cents ($0.42) and shall be prorated from November 18, 1997, to December 31,
1997. The price per share for stock purchased under this right after January
31, 1998, will be the average midpoint price between bid and ask for the five
(5) days prior to the agreed date of payment. Payment shall be made on an
annual basis by January 31 following the year of service. The Corporation
reserves the right to make payment to Mr. Reynolds in stock in lieu of cash.
Mr. Reynolds is granted the right to receive the total amount of his annual
compensation for 1998 at any time prior to January 31, 1998. The stock will be
registered at the time it is issued in lieu of cash payment.
IN WITNESS WHEREOF, the undersigned have executed this unanimous consent, in
one or more counterparts, as of the 18th day of November, 1997.
FUTURE PETROLEUM CORPORATION AGREED TO BY:
By /s/ B. Carl Price
B. Carl Price
By /s/Robert Price
Robert Price
By /s/ Don Wm. Reynolds
Don Wm. Reynolds
By /s/Charles Dean Laudeman
Charles Dean Laudeman
By /s/ D. William Reynolds, Jr.
D. William Reynolds, Jr.
EXHIBIT 10.8
UNANIMOUS CONSENT OF BOARD OF DIRECTORS
IN LIEU OF SPECIAL MEETING
November 18, 1997
RESOLVED, that Future Petroleum Corporation is hereby authorized to enter
into certain contracts, the terms of which are stated below, with the following
individuals:
C. Carl Price;
Robert Price;
Don Wm. Reynolds.
These contracts are for a term of five (5) years from November 18, 1997. This
unanimous consent agreement will also serve as the contracts between Future
Petroleum Corporation and the above individuals.
In consideration for the rental of certain property controlled by him and used
as a storage yard by Future Petroleum Corporation, Mr. Robert Price is
guaranteed the annual sum of not less than $15,600. The Corporation, at its
discretion, may make this rental payment in cash or shares of Future Petroleum
Corporation restricted common stock. The price per share for stock in lieu of
cash payment through January 31, 1998, is the average midpoint price between
bid and ask for the five (5) days prior to November 18, 1997, which is forty
- -two cents ($0.42) and shall be prorated from November 18, 1997, to December
31, 1997. The price per share for stock in lieu of cash payment after
January 31, 1998, will be the average midpoint price between bid and ask for
the five (5) days prior to the agreed date of payment. Payment shall be
made on an annual basis by January 31 following the year of rental. The
stock will be registered at the time it is issued in lieu of cash payment.
Mr. Price is granted the right to receive the total amount of his annual
rental payment for 1998 at any time prior to January 31, 1998.
IN WITNESS WHEREOF, the undersigned have executed this unanimous consent,
in one or more counterparts, as of the 18th day of November, 1997.
FUTURE PETROLEUM CORPORATION AGREED TO BY:
By /s/ B. Carl Price
B. Carl Price
By /s/Robert Price
Robert Price
By /s/ Don Wm. Reynolds
Don Wm. Reynolds
By /s/Charles Dean Laudeman
Charles Dean Laudeman
By /s/ D. William Reynolds, Jr.
D. William Reynolds, Jr.
EXHIBIT 10.10
U.S. $20,000,000
CREDIT AGREEMENT,
dated as of August 14, 1998,
between
FUTURE PETROLEUM CORPORATION,
as the Borrower,
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as the Lender
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS -2-
1.1. Defined Terms -2-
1.2. Use of Defined Terms -22-
1.3. Cross-References -22-
1.4. Accounting and Financial Determinations -24-
ARTICLE II COMMITMENTS, BORROWING PROCEDURES AND NOTES -24-
2.1. Commitments -24-
2.1.1. Revolving Loans -24-
2.1.2. Term Loans -24-
2.1.3. Letters of Credit -24-
2.1.4. Lender Not Required To Make Loans, etc. Under Certain Circumstances-24-
2.2. Reduction of Commitment Amounts -25-
2.2.1. Optional -25-
2.2.2. Mandatory -25-
2.3. Borrowing Procedure -25-
2.4. Loan Accounts and Notes -26-
2.5. Borrowing Base Redetermination -26-
2.6. Purposes -27-
ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES -27-
3.1. Repayments and Prepayments and Certain Borrowing Base Matters -27-
3.1.1. Repayments and Prepayments -27-
3.1.2. Borrowing Base Deficiencies and Asset Sales -28-
3.2. Interest Provisions -30-
3.2.1. Rate -30-
3.2.2. Post-Maturity Rates, etc -30-
3.2.3. Payment Dates -30-
3.2.4. Maximum Interest -31-
3.3. Fees -32-
3.3.1. Structuring Fee -32-
3.3.2. Closing Fee -32-
3.3.3. Engineering and Redetermination Fee -32-
3.3.4. Commitment Fees -32-
3.3.5. Letter of Credit Stated Amount Fee -32-
3.3.6. Letter of Credit Issuance Fee -33-
3.3.7. Letter of Credit Administrative Fees -33-
3.3.8. Borrowing Base Fee -33-
3.4. Proceeds Account -33-
ARTICLE IV LETTERS OF CREDIT -33-
4.1. Issuance Requests -33-
4.2. Issuances and Extensions -34-
4.3. Expenses -36-
4.4. Disbursements -36-
4.5. Reimbursement -36-
4.6. Deemed Disbursements -37-
4.7. Nature of Reimbursement Obligations -38-
4.8. Increased Costs; Indemnity -39-
ARTICLE V CERTAIN INTEREST RATE AND OTHER PROVISIONS -40-
5.1. Increased Capital Costs -40-
5.2. Taxes -41-
5.3. Payments, Computations, etc. -42-
5.4. Setoff -42-
5.5. Use of Proceeds -43-
ARTICLE VI CONDITIONS PRECEDENT -43-
6.1. Initial Credit Extension -43-
6.1.1. Resolutions, etc -43-
6.1.2. Delivery of Notes -44-
6.1.3. Guaranties -44-
6.1.4. Pledge Agreements -44-
6.1.5. Security Agreement -45-
6.1.6. Consents and Mortgage Consents -45-
6.1.7. Mortgage -45-
6.1.8. Opinions of Counsel -46-
6.1.9. UCC-11s -46-
6.1.10.Evidence of Insurance -47-
6.1.11.Engineering Reports -47-
6.1.12.Environmental Report -47-
6.1.13.Budget -47-
6.1.14.Intercreditor Agreement -47-
6.1.15.Closing of the Future California Merger -47-
6.1.16.Closing Fees, Expenses, etc -47-
6.1.17.Other Documents -47-
6.2. Inclusion of Hydrocarbon Interests in the Borrowing Base -47-
6.2.1. Environmental Report -48-
6.2.2. Mortgage -48-
6.2.3. UCC-11s -48-
6.2.4. Evidence of Insurance -49-
6.2.5. Engineering Reports -49-
6.2.6. Material Contracts and Related Consents; Security Agreement -49-
6.2.7. Guaranties -49-
6.2.8. Additional Stock or Partnership Pledge -49-
6.2.9. Other Documents -50-
6.3. All Credit Extensions -50-
6.3.1. Compliance with Warranties, No Default, etc -50-
6.3.2. Credit Request -51-
6.3.3. Satisfactory Legal Form -51-
ARTICLE VII REPRESENTATIONS AND WARRANTIES -51-
7.1. Organization, etc. -51-
7.2. Due Authorization, Non-Contravention, etc. -52-
7.3. Government Approval, Regulation, etc. -52-
7.4. Investment Company Act -52-
7.5. Public Utility Holding Company Act -52-
7.6. Validity, etc. -52-
7.7. Financial Information -53-
7.8. No Material Adverse Change -53-
7.9. Litigation, Labor Controversies, etc. -53-
7.10. Ownership of Properties -53-
7.11. Taxes -53-
7.12. Pension and Welfare Plans -54-
7.13. Compliance with Law -54-
7.14. Claims and Liabilities -54-
7.15. No Prohibition on Perfection of Security Documents -54-
7.16. Solvency -55-
7.17. Environmental Warranties -55-
7.18. Regulations G, U and X -57-
7.19. Year 2000 Compliance -57-
7.20. Insurance -57-
7.21. Accuracy of Information -58-
ARTICLE VIII COVENANTS -58-
8.1. Affirmative Covenants -58-
8.1.1. Financial Information, Reports, Notices, etc -58-
8.1.2. Compliance with Laws, etc -61-
8.1.3. Maintenance and Development of Properties -62-
8.1.4. Insurance -62-
8.1.5. Books and Records -63-
8.1.6. Environmental Covenant -63-
8.1.7. Further Assurances -64-
8.2. Negative Covenants -65-
8.2.1. Business Activities -65-
8.2.2. Indebtedness -65-
8.2.3. Liens -67-
8.2.4. Financial Condition -69-
8.2.5. Investments -70-
8.2.6. Restricted Payments, etc -71-
8.2.7. Rental Obligations -71-
8.2.8. Consolidation, Merger, etc -71-
8.2.9. Asset Dispositions, etc -72-
8.2.10.Modification of Certain Documents -72-
8.2.11.Transactions with Affiliates -72-
8.2.12.Negative Pledges, Restrictive Agreements, etc -73-
8.2.13.Take or Pay Contracts -73-
8.2.14.Hydrocarbon Hedging -73-
ARTICLE IX EVENTS OF DEFAULT -74-
9.1. Listing of Events of Default -74-
9.1.1. Non-Payment of Obligations -74-
9.1.2. Breach of Warranty -74-
9.1.3. Non-Performance of Certain Covenants and Obligations -74-
9.1.4. Non-Performance of Other Covenants and Obligations -75-
9.1.5. Default on Other Indebtedness -75-
9.1.6. Judgments -75-
9.1.7. Pension Plans -76-
9.1.8. Control of the Borrower -76-
9.1.9. Bankruptcy, Insolvency, etc -76-
9.1.10.Impairment of Security, etc -77-
9.1.11.Material Adverse Effect -77-
9.2. Action if Bankruptcy -77-
9.3. Action if Other Event of Default -77-
9.4. Rights Not Exclusive -77-
ARTICLE X MISCELLANEOUS PROVISIONS -78-
10.1. Waivers, Amendments, etc. -78-
10.2. Notices -78-
10.3. Payment of Costs and Expenses -79-
10.4. Indemnification -80-
10.5. Survival -81-
10.6. Severability -81-
10.7. Headings -81-
10.8. Execution in Counterparts, Effectiveness, etc. -81-
10.9. Governing Law; Entire Agreement -82-
10.10. Successors and Assigns -82-
10.11. Sale and Transfer of Loans and Notes; Participations in
Loans and Notes -82-
10.11.1.Assignments -82-
10.11.2.Participations -84-
10.12. Forum Selection and Consent to Jurisdiction -85-
10.13. Waiver of Jury Trial -85-
10.14. Notice -86-
SCHEDULE I Disclosure Schedule
SCHEDULE II Subsidiaries
SCHEDULE III Certain Consents and Mortgage Consents
EXHIBIT A Form of Secured Promissory Note
EXHIBIT B Form of Security Agreement
EXHIBIT C Form of Borrowing Request
EXHIBIT D Form of Guaranty
EXHIBIT E-1 Form of California Mortgage
EXHIBIT E-2 Form of Multi-State Mortgage
EXHIBIT F-1 Form of Pledge Agreement (Partnership Interests)
EXHIBIT F-2 Form of Pledge Agreement (Stock)
EXHIBIT G Form of Lender Assignment Notice
EXHIBIT H Form of Opinion of Counsel to the Borrower, et al.
EXHIBIT I-1 Form of Pre-Closing Title Opinion of Special Counsel to the
Borrower
EXHIBIT I-2 Form of Post-Closing Title Opinion of Special Counsel to
the Borrower
EXHIBIT J Form of Consent
EXHIBIT K Form of Issuance Request
EXHIBIT L Form of Letter of Credit
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of August 14, 1998, between FUTURE PETROLEUM
CORPORATION, a Utah corporation (the "Borrower") and BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, a national banking association (the "Lender"),
W I T N E S S E T H:
WHEREAS, the Borrower is engaged in the business of oil and gas exploration
and production, and activities related or ancillary thereto; and
WHEREAS, the Borrower desires to obtain Commitments from the Lender pursuant
to which
(a) Loans will be made to the Borrower from time to time prior to the
applicable Commitment Termination Date; and
(b) Letters of Credit will be issued by an Issuer for the account of the
Borrower from time to time prior to the Availability Termination Date;
in maximum aggregate principal amount of Loans and Letter of Credit
Outstandings at any one time not to exceed in the aggregate the lesser of
(x) the Borrowing Base, or (y) $20,000,000; and
WHEREAS, the Lender is willing, on the terms and subject to the conditions
hereinafter set forth (including Article VI), to extend such Commitments,
and to make such Loans to the Borrower and issue such Letters of Credit; and
WHEREAS, the proceeds of such Loans will be used for general business
purposes, including Acquisitions and the development of Oil and Gas Properties.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION I.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Acquired Properties" means those Oil and Gas Properties and other assets
that are acquired from time to time in an Acquisition.
"Acquisition" means an acquisition by the Borrower or one or more of its
Subsidiaries of Acquired Properties.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners; or
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"Alternate Base Rate" means, on any date and with respect to all Base Rate
Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the rate of interest as announced from time to time by the
Lender as its "reference rate" at its Domestic Office; or
(b) the Federal Funds Rate most recently determined by the Lender
plus 1/2%.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest in connection with extensions of credit. Changes in the rate of
interest on that portion of any Loans maintained as Base Rate Loans will take
effect simultaneously with each change in the Alternate Base Rate. The Lender
will give notice to the Borrower of changes in the Alternate Base Rate.
"Applicable Law" means with respect to any Person or matter, any federal,
state, regional, tribal or local statute, law, code, rule, treaty, convention,
application, order, decree, consent decree, injunction, directive,
determination or other requirement (whether or not having the force of law)
relating to such Person or matter and, where applicable, any interpretation
thereof by a Government Agency having jurisdiction with respect thereto or
charged with the administration or interpretation thereof.
"Approvals" means each and every approval, authorization, license, permit,
consent, variance, land use entitlement, franchise, agreement, filing or
registration by or with any Government Agency or other Person necessary for all
stages of developing, operating, maintaining and abandoning Oil and Gas
Properties.
"Assignee Lender" is defined in Section 10.11.1.
"Authorized Officer" means, relative to any Obligor, those of its officers
(or, in the case of a partnership, those of the officers of its general
partner) whose signatures and incumbency shall have been certified to the
Lender pursuant to Section 6.1.1.
"Availability Termination Date" means August 14, 1999.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Borrower" is defined in the preamble.
"Borrowing Base" means, as at any date, (a) prior to the initial Borrowing
Base Redetermination, $10,500,000 and (b) thereafter, (i) that amount of
indebtedness for borrowed money under the Facility that the Lender determines
can be supported by the Proven Reserves attributable to Hydrocarbon Interests
owned directly by the Borrower or its Subsidiaries which are a part of the
Mortgaged Properties, after an engineering and economic review of such reserves
conducted by the Lender using its normal procedures for oil and gas facilities
of this type, taking into account the value of all those proved developed
producing oil and gas reserves and certain portions of certain other categories
of Proven Reserves attributable to the Mortgaged Properties.
"Borrowing Base Deficiency" means the amount by which (a) the sum of the
aggregate outstanding principal amount of all Loans plus Letter of Credit
Outstandings exceeds (b) the then current Borrowing Base.
"Borrowing Base Deficiency Notification Date" means the date on which any
notice of a Borrowing Base Deficiency is received by the Borrower.
"Borrowing Base Fee" is defined in Section 3.3.8.
"Borrowing Base Redetermination" is defined in Section 2.5.
"Borrowing Request" means a loan request and certificate duly executed by
an Authorized Officer of the Borrower, substantially in the form of Exhibit C
hereto.
"Business Day" means any day which is neither a Saturday or Sunday nor a
legal holiday on which banks are authorized or required to be closed in
Chicago, Illinois.
"Capital Expenditures" means, for any period, (without duplication) the
aggregate amount of all expenditures of the Borrower and its consolidated
Subsidiaries for fixed or capital assets made during such period which, in
accordance with GAAP, would be classified as capital expenditures including,
with respect to any period, payments made by the Borrower and its consolidated
Subsidiaries with respect to Capitalized Lease Liabilities incurred during such
period.
"Capitalization" means, at any time, the sum of (a) the total Debt of the
Borrower and its consolidated Subsidiaries plus (b) the total equity of the
Borrower and its consolidated Subsidiaries.
"Capitalized Lease Liabilities" means all monetary obligations of the
Borrower or any of its consolidated Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, would be classified as capitalized
leases, and, for purposes of this Agreement and each other Loan Document, the
amount of such obligations shall be the capitalized amount thereof, determined
in accordance with GAAP.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one year
after such time, issued or guaranteed by the United States Government;
(b) commercial paper, maturing not more than nine months from the
date of issue, which is issued by
(i) a corporation (other than an Affiliate of the Borrower)
organized under the laws of any state of the United States or of the
District of Columbia and rated at least A-1 by Standard & Poor's
Corporation or P-1 by Moody's Investors Service, Inc., or
(ii) the Lender;
(c) any certificate of deposit or bankers acceptance, maturing
not more than one year after such time, which is issued by
(i) a commercial banking institution that is a member of
the Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than $500,000,000, or
(ii) the Lender; or
(d) any repurchase agreement entered into with the Lender (or
other commercial banking institution of the stature referred to in clause
(c)) which
(i) is secured by a fully perfected security interest in
any obligation of the type described in any of clauses (a) through
(c); and
(ii) has a market value at the time such repurchase
agreement is entered into of not less than 100% of the repurchase
obligation of the Lender (or other commercial banking institution)
thereunder.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means (a) if Bargo Energy Resources, Ltd., EnCap Equity
1994 Limited Partnership and Energy Capital Investment Company PLC shall
fail to collectively own at least 51% of the outstanding capital stock of
the Borrower, on a fully diluted basis, or (b) if the Borrower ceases to
own beneficially and of record 100% of the capital stock of each of Future
Texas, Future Nevada and Future Newco, or (c) if Future Texas or Future
Nevada ceases to own beneficially and of record 100% of the general partner
and limited partner interests, respectively, in the Partnership Subsidiaries.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time, and the regulations promulgated
thereunder.
"Commitment" means the Lender's commitment pursuant to Section 2.1 to make
Loans to the Borrower and to issue Letters of Credit in accordance with the
terms and provisions of this Agreement.
"Commitment Amount" means the lesser of (i) $20,000,000, as reduced from
time to time pursuant to the provisions of Section 2.2, or (ii) the Borrowing
Base.
"Commitment Availability" means, on any date, the excess of
(a) the then applicable Commitment Amount, over
(b) the sum of
(i) the aggregate outstanding principal amount of all Loans
on such date, plus
(ii) the Letter of Credit Outstandings on such date.
"Commitment Termination Date" means the earliest of
(a) the Stated Maturity Date;
(b) the date on which either the Commitment Amount is terminated
in full or reduced to zero pursuant to Section 2.2; and
(c) the date on which any Commitment Termination Event occurs.
"Commitment Termination Event" means
(a) the occurrence of any Default described in clauses (a)
through (d) of Section 9.1.9 with respect to the Borrower or any Subsidiary;
or
(b) the occurrence and continuance of any other Event of Default
and either
(i) the declaration of the Loans and other Obligations to
be due and payable pursuant to Section 9.3, or
(ii) in the absence of such declaration, the giving of
notice by the Lender to the Borrower that the Commitments have been
terminated.
"Consent" means a Consent to Assignment executed and delivered pursuant to
Section 6.2.6, substantially in the form of Exhibit J, as amended,
supplemented, restated or otherwise modified from time to time pursuant to
which the Borrower's counterparty to each Material Contract (i) consents to
the assignment of each such Material Contract to the Lender as security for
the Obligations and (ii) provides the Lender an independent right to cure
defaults under such Material Contract.
"Consolidated Net Income" means, with respect to the Borrower and its
consolidated Subsidiaries for any period, the consolidated net income (or loss)
of the Borrower and its consolidated Subsidiaries for such period determined in
accordance with GAAP.
"Contingent Liability" means, as to any Person, any direct or indirect
liability of that Person, whether or not contingent, with or without recourse,
(a) with respect to any Indebtedness, lease, dividend, letter of credit or
other obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person (i) to purchase, repurchase
or otherwise acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety
Instrument issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; or (c) to purchase
any materials, supplies or other property from, or to obtain the services of,
another Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of such materials,
supplies or other property is ever made or tendered, or such services are ever
performed or tendered.
"Controlled Group" means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Borrower, are
treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
"Credit Extension" means and includes
(a) the advancing of any Revolving Loans by the Lender in
connection with a borrowing hereunder,
(b) the advancing of any Term Loans by the Lender in connection
with a borrowing hereunder, and
(c) any issuance by an Issuer, or the extension of the Stated
Expiry Date by an Issuer, of a Letter of Credit.
"Current Ratio" means, as of the end of each Fiscal Quarter, the ratio of
(a) the current assets (including the unused portion of the
Commitment Amount) of the Borrower and its consolidated Subsidiaries
to
(b) the current liabilities (minus current portion of its long
term Debt) of the Borrower and its consolidated Subsidiaries.
"Debt" means the outstanding principal amount of all Indebtedness of the
Borrower and its consolidated Subsidiaries of the nature referred to in clauses
(a) and (b) of the definition of "Indebtedness".
"Debt to Capitalization Ratio" means, as of the end of each Fiscal Quarter,
the ratio of (a) Debt of the Borrower and its consolidated Subsidiaries to (b)
Capitalization of the Borrower and its consolidated Subsidiaries.
"Default" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Disbursement Date" is defined in Section 4.4.
"Disbursement" means the amount disbursed by the Issuer on a Disbursement
Date.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Lender.
"Distribution Payments" is defined in Section 8.2.6.
"Dollar" and the sign "$" mean lawful money of the United States.
"Domestic Office" means the office of the Lender designated as such on its
signature page hereto or designated in a Lender Assignment Notice or such other
office of the Lender (or any successor or assign of the Lender) within the
United States as may be designated from time to time by notice from the Lender,
as the case may be, to each other Person party hereto.
"EBITDA" means for any period, the sum, without duplication, of the
following:
(a) Consolidated Net Income for such period, plus
(b) Interest Expense for such period, plus
(c) all depreciation and amortization of assets (including
goodwill and other intangible assets) of the Borrower and its consolidated
Subsidiaries deducted in determining Consolidated Net Income for such
period, plus (minus)
(d) all federal, state, local and foreign income taxes of the
Borrower and its consolidated Subsidiaries deducted (or credits added) in
determining Consolidated Net Income for such period, plus (minus)
(e) other non-cash items deducted or added in determining
Consolidated Net Income for such period.
"Effective Date" means the date this Agreement becomes effective pursuant
to Section 10.8.
"Engineering Report" means one or more reports, in form and substance
satisfactory to the Lender, prepared at the sole cost and expense of the
Borrower by a petroleum engineer acceptable to the Lender in its reasonable
business judgment, which shall evaluate the Proven Reserves and probable
reserves attributable to the Hydrocarbon Interests owned directly by the
Borrower and/or its Subsidiaries and constituting part of the Mortgaged
Properties, as of the immediately preceding January 1 or July 1. Each
Engineering Report shall set forth volumes, projections of the future rate of
production, Hydrocarbons prices, escalation rates, discount rate assumptions,
and net proceeds of production, present value of the net proceeds of
production, estimated costs of Remedial Action, operating expenses and
capital expenditures, in each case based upon updated economic assumptions
reasonably acceptable to the Lender.
"Environmental Laws" means all Applicable Laws relating to public health and
safety through protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"Event of Default" is defined in Section 9.1.
"Existing Creditors" means EnCap Equity 1994 Limited Partnership, Energy
Capital Investment Company PLC and Gecko Booty 1994 I Limited Partnership.
"Facility" means the facility providing for the Commitment and the Loans.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published by the Federal Reserve Bank of New York for such
day (or, if such day is not a Business Day, for the next preceding Business
Day) by the Federal Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Lender from three federal funds brokers of
recognized standing selected by it.
Upon written request from the Borrower, the Lender shall advise the Borrower
as to the details of the method of calculation of Federal Funds Rate then
utilized by the Lender.
"Fiscal Quarter" means any quarter ending on the last day of March, June,
September and December of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months ending
on December 31; references to a Fiscal Year with a number corresponding to any
calendar year (e.g., "Fiscal Year 1998") refer to the Fiscal Year ending on the
December 31 occurring during such calendar year.
"F.R.S. Board" means the Board of Governors of the Federal Reserve System
or any successor thereto.
"Future California" means Future CAL-TEX Corporation, a Texas corporation,
the Subsidiary of the Borrower that will acquire the South Coles Levee Unit
property.
"Future Nevada" means Future Energy Corporation, a Nevada corporation, the
sole limited partner of each of the Partnership Subsidiaries and any successor
limited partner or limited partners of any of the Partnership Subsidiaries.
"Future Texas" means Future Petroleum Corporation, a Texas corporation, the
sole general partner of each of the Partnership Subsidiaries and any successor
general partner or general partners of any of the Partnership Subsidiaries.
"GAAP" is defined in Section 1.4.
"Government Agency" means any federal, state, regional, tribal or local
government or governmental department or other entity charged with the
administration, interpretation or enforcement of any Applicable Law.
"Guaranties" means the guaranties of the Obligations, executed and delivered
pursuant to Section 6.1.3 and Section 6.2.7, substantially in the form of
Exhibit D, given by each of the Borrower's Subsidiaries.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum, crude oil or fraction thereof;
(d) any hazardous, dangerous or toxic chemical, material, waste
or substance within the meaning of any Environmental Law;
(e) any radioactive material, including any naturally occurring
radioactive material, and any source, special or by-product material as
defined in 42 U.S.C. 2011 et seq., and any amendments or reauthorizations
thereof;
(f) asbestos-containing materials in any form or condition; or
(g) polychlorinated biphenyls in any form or condition.
"Hedging Agreements" means:
(a) interest rate swap agreements, basis swap agreements,
interest rate cap agreements, forward rate agreements, interest rate floor
agreements and interest rate collar agreements, and all other agreements or
arrangements designed to protect such Person against fluctuations in
interest rates or currency exchange rates, and
(b) forward contracts, options, futures contracts, futures options,
commodity swaps, commodity options, commodity collars, commodity caps,
commodity floors and all other agreements or arrangements designed to
protect such Person against fluctuations in the price of commodities.
"Hedging Obligations" means, with respect to any Person, all liabilities
(including but not limited to obligations and liabilities arising in connection
with or as a result of early or premature termination of a Hedging Agreement,
whether or not occurring as a result of a default thereunder) of such Person
under a Hedging Agreement.
"Highest Lawful Rate" is defined in Section 3.2.4.
"Hydrocarbon Interests" means all rights, titles and interests in and to oil
and gas leases; oil, gas and mineral leases; other Hydrocarbon leases; mineral
interests; mineral servitudes; overriding royalty interests; royalty interests;
net profits interests; production payment interests; and other similar
interests.
"Hydrocarbons" means, collectively, oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate and all other liquid or gaseous
hydrocarbons and related minerals and all products therefrom, in each case
whether in a natural or a processed state.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial
statement of the Borrower, any qualification or exception to such opinion or
certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement;
(c) which relates to the treatment or classification of any item
in such financial statement and which, as a condition to its removal, would
require an adjustment to such item the effect of which would be to cause the
Borrower to be in default of any of its obligations under Section 8.2.4; or
(d) which relates to possible errors generated by financial
reporting and related systems due to the Year 2000 Problem.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all other items which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance sheet of such
Person as of the date at which Indebtedness is to be determined;
(d) net liabilities of such Person under all Hedging Obligations;
(e) all net monetary obligations of such Persons with respect to
Production Payments;
(f) all Capitalized Lease Liabilities;
(g) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred purchase price of
property or services, and indebtedness (excluding prepaid interest thereon)
secured by a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or other title
retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse; and
(h) all Contingent Liabilities of such Person.
For all purposes of this Agreement, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer, unless the Lender expressly
permits exclusion based on non-recourse provisions acceptable to the Lender
set forth in the agreements regarding such Indebtedness.
"Indemnified Liabilities" is defined in Section 10.4.
"Indemnified Parties" is defined in Section 10.4.
"Interest Coverage Ratio" means, for any four consecutive Fiscal Quarters,
the ratio of (a) EBITDA for such Fiscal Quarters to (b) Interest Expense for
such Fiscal Quarters.
"Interest Expense" means, for any period, the consolidated interest expense
of the Borrower and its consolidated Subsidiaries for such period (including
all imputed interest under Hedging Agreements, but excluding all fees paid
under Section 3.3), as determined in accordance with GAAP, including the
interest expense associated with any Capitalized Lease Liabilities of the
Borrower and its consolidated Subsidiaries.
"Investment" means, relative to any Person,
(a) any loan or advance made by such Person to any other Person
(excluding commission, travel and similar advances to officers and employees
made in the ordinary course of business and excluding prepaid expenses
incurred in the ordinary course of business);
(b) any Contingent Liability of such Person; and
(c) any ownership or similar interest held by such Person in any
other Person; provided, however, that (i) Hedging Obligations and (ii)
Production Payments where the Borrower or its Subsidiary is the grantor or
transferror thereof shall not be considered Investments.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if
made by the transfer or exchange of property other than cash, be deemed to
have been made in an original principal or capital amount equal to the fair
market value of such property.
"Issuance Request" means a request for the issuance of a Letter of Credit
and certificate duly executed by the chief executive, accounting or financial
Authorized Officer of the Borrower, in substantially the form of Exhibit K
attached hereto (with such changes thereto as may be agreed upon from time to
time by the Issuer and the Borrower).
"Issuer" means the Lender or its designees, in its capacity as an issuer of
the Letters of Credit.
"Lender Assignment Notice" means a Lender Assignment Notice substantially
in the form of Exhibit G hereto.
"Lender" is defined in the preamble.
"Letter of Credit" is defined in Section 4.1.
"Letter of Credit Availability" means, at any time, the lesser of
(a) the excess of
(i) $1,000,000 over
(ii) the then Letter of Credit Outstandings,
or
(b) the Commitment Availability at such time.
"Letter of Credit Outstandings" means, at any time, an amount equal to the
sum of
(a) the aggregate Stated Amount at such time of all Letters of
Credit then outstanding and undrawn (as such aggregate Stated Amount shall
be adjusted, from time to time, as a result of drawings, the issuance of
Letters of Credit, or otherwise),
plus
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations.
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or otherwise), charge against or interest in Property to secure (i)
the payment of a debt or (ii) the performance of an obligation or other
priority or preferential arrangement of any kind or nature whatsoever in
respect of any Property (including those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease, any financing lease having
substantially the same economic effect as any of the foregoing, or the
filing of any financing statement naming the owner of the asset to which
such lien relates as debtor, under the Uniform Commercial Code or any
comparable law) and any contingent or other agreement to provide any of the
foregoing.
"Loans" means the loans provided for by Section 2.1 and shall include
Revolving Loans and Term Loans.
"Loan Documents" means this Agreement, the Notes, the Security Documents,
all Letters of Credit, all Hedging Agreements and all other agreements relating
to this Agreement entered into from time to time between the Borrower (or
any or all of its Subsidiaries or Affiliates) and the Lender (or any
Affiliate of the Lender), and any document delivered by the Borrower or any
of its Subsidiaries in connection with any of the foregoing.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries or
any other Obligor; or (b) a material adverse effect upon (i) the legality,
validity, binding effect or enforceability against the Borrower, its
Subsidiaries or any other Obligor of any Loan Document, or (ii) the perfection
or priority of any Lien granted under any of the Loan Documents.
"Material Contract" means each acquisition agreement, Hydrocarbon purchase
and sale agreement, or similar contract relating to any Hydrocarbon Interests
included in the Mortgaged Properties.
"Mortgage Consents" means all consents required under existing oil and gas
leases or other agreements and Approvals by Governmental Agencies to the
granting of a Mortgage to the Lender, and as reasonably determined by the
Lender with respect to Acquired Properties that become Mortgaged Properties
after the Effective Date.
"Mortgages" means the Mortgage, Deed of Trust, Assignment, Security
Agreement and Financing Statements executed and delivered pursuant to Section
6.1.7 and Section 6.2.2, substantially in the form of Exhibit E hereto, as
amended, supplemented, restated or otherwise modified from time to time.
"Mortgaged Properties" means the Hydrocarbon Interests, Properties and
interests described in and secured by the Mortgages, as such Properties and
interests are from time to time constituted, all as further provided in Section
6.1.7 and Section 6.2.2.
"Non-Redeemable Stock" means stock issued by the Borrower or any of its
Subsidiaries, provided that such stock is not considered debt for GAAP, tax law
or any other purpose and provided further that neither the Borrower nor any of
its Subsidiaries has any obligation to redeem or purchase or pay dividends on
such stock or to exchange such stock for, or convert such stock to, any other
security, whether such obligation arises pursuant to the terms of such stock or
any other agreement relating thereto or otherwise and whether or not such
obligation exists in all circumstances or only upon the occurrence of a
particular event or condition or upon the passage of time or otherwise.
"Notes" means the secured promissory notes of the Borrower payable to the
order of the Lender, in the form of Exhibit A hereto (as such promissory notes
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to the Lender resulting from
outstanding Loans, and also means all other promissory notes accepted from time
to time in substitution therefor or renewal thereof.
"Obligations" means all obligations (monetary or otherwise) of the Borrower
and/or any other Obligor arising under or in connection with this Agreement,
the Notes and each other Loan Document, including without limitation, all
Hedging Obligations arising under Hedging Agreements between the Borrower
(or any Affiliate of the Borrower) and the Lender (or any Affiliate of the
Lender).
"Obligor" means the Borrower, any of its Subsidiaries or any other Person
(other than the Lender or any Affiliate of the Lender) obligated under, or
otherwise a party to, any Loan Document.
"Oil and Gas Properties" means Hydrocarbon Interests; the Properties now or
hereafter pooled or unitized with Hydrocarbon Interests; all presently existing
or future unitization, pooling agreements and declarations of pooled units and
the units created thereby (including without limitation all units created under
orders, regulations and rules of any Government Agency having jurisdiction)
which may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, joint venture agreements, contracts and other agreements which
relate to any of the Hydrocarbon Interests or the production, sale, purchase,
exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon
Interests; all Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, the lands covered thereby and
all oil in tanks and all rents, issues, profits, proceeds, products,
revenues and other incomes from or attributable to the Hydrocarbon
Interests; all tenements, profits prendre, hereditaments, appurtenances and
Properties in anywise appertaining, belonging, affixed or incidental to the
Hydrocarbon Interests, Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of
any of such Hydrocarbon Interests or Property (excluding drilling rigs,
automotive equipment or other personal property which may be on such
premises for the purpose of drilling a well or for other similar temporary
uses) and including any and all oil wells, gas wells, water wells, injection
wells or other wells, buildings, structures, fuel separators, liquid
extraction plants, plant compressors, pumps, pumping units, field gathering
systems, tanks and tank batteries, fixtures, valves, fittings, machinery and
parts, engines, boilers, meters, apparatus, equipment, appliances, tools,
implements, cables, wires, towers, casing, tubing and rods, surface leases,
rights-of-way, easements and servitudes together with all additions,
substitutions, replacements, accessions and attachments to any and
all of the foregoing.
"Organic Document" means, relative to any corporate Obligor, its certificate
of incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of capital
stock, and, relative to any partnership Obligor, its partnership agreement.
"Participant" is defined in Section 10.11.2.
"Partners" means the general and limited partners constituting the
Partnership Subsidiaries, being Future Texas as the general partner, and Future
Nevada as the limited partner, and any successor general partner or limited
partner of any Partnership Subsidiary.
"Partnership Subsidiary" means any direct or indirect Subsidiary of the
Borrower that is a limited partnership, including Future Acquisition 1995,
Ltd., a Texas limited partnership, BMC Development No. 1 Limited Partnership,
a Texas limited partnership and NCI Shawnee L.P., a Texas limited partnership.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which
the Borrower or any corporation, trade or business that is, along with the
Borrower, a member of a Controlled Group, may have liability, including any
liability by reason of having been a substantial employer within the meaning
of section 4063 of ERISA at any time during the preceding five years, or by
reason of being deemed to be a contributing sponsor under section 4069 of
ERISA.
"Percentage" means, relative to the Lender, 100%, as such percentage may be
adjusted from time to time pursuant to Lender Assignment Notice(s) executed by
the Lender and its Assignee Lender(s) and delivered pursuant to Section 10.11.
"Person" means any natural person, corporation, partnership, joint venture,
limited liability company, firm, association, trust, Government Agency or any
other entity, whether acting in an individual, fiduciary or other capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreement" means a Pledge Agreement of each of the Principal
Shareholders and the Borrower executed and delivered pursuant to Section 6.1.4
and Section 6.2.8, substantially in the form of Exhibit F-1 hereto, and a
Pledge Agreement of each of the Partners executed and delivered pursuant to
Section 6.1.4 and Section 6.2.8, substantially in the form of Exhibit F-2
hereto, in each case as amended, supplemented, restated or otherwise
modified from time to time.
"Principal Shareholders" means Bargo Energy Resources, Ltd., EnCap Equity
1994 Limited Partnership, Energy Capital Investment Company PLC, Carl Price and
Don Reynolds, the controlling shareholders of the Borrower.
"Proceeds Account" is defined in Section 3.4.
"Production Payments" means a production payment (whether volumetric or
dollar denominated) or similar royalty, overriding royalty, net profits
interest or other similar interest in Oil and Gas Properties, or the right
to receive all or a portion of the production or the proceeds from the sale
of production attributable to such Oil and Gas Properties where the holder
of such interest has recourse solely to such interest and the grantor or
transferor thereof has an express contractual obligation to produce and sell
Hydrocarbons from such Oil and Gas Properties, or to cause such Oil and Gas
Properties to be so operated and maintained, in each case in a reasonably
prudent manner.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Proven Reserves" means collectively, "proved oil and gas reserves," "proved
developed producing oil and gas reserves," "proved developed non-producing oil
and gas reserves" (consisting of proved developed shut-in oil and gas reserves
and proved developed behind pipe oil and gas reserves), and "proved undeveloped
oil and gas reserves," as such terms are defined by the U.S. Securities and
Exchange Commission in its standards and guidelines.
"Quarterly Payment Date" means, commencing September, 1998, the last
Business Day of each March, June, September and December.
"Reimbursement Obligation" is defined in Section 4.5.
"Release" means a "release," as such term is defined in CERCLA.
"Remedial Action" means any action under Environmental Laws required to
(a) clean up, remove, treat, dispose of, abate, or in any other way address
pollutants (including Hazardous Materials) in the environment, (b) prevent the
Release or threat of a Release or minimize the further Release of pollutants,
or (c) investigate and determine if a remedial response is needed and to
design such a response and any post-remedial investigation, monitoring,
operation, and maintenance and care.
"Resource Conservation and Recovery Act" means the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect from time to time.
"Restricted Payment Tests" means compliance with each of the following
restrictions (both before and immediately after giving effect to the applicable
Distribution Payment):
(a) Tangible Net Worth shall not be less than the sum of
(i) $5,000,000 plus (ii) fifty percent (50%) of Consolidated Net Income of
the Borrower and its consolidated Subsidiaries (excluding the effects of
consolidated net losses), for all Fiscal Quarters beginning after the
Effective Date and treated as a single accounting period, plus (iii) one-
hundred percent (100%) of the net proceeds received by the Borrower or its
Subsidiaries from the sale of any Non-Redeemable Stock by the Borrower or
any of its Subsidiaries at any time after the Effective Date;
(b) the Current Ratio shall be not less than 1.1:1.0;
(c) the Debt to Capitalization Ratio shall not be greater than
70%;
(d) the Interest Coverage Ratio shall be not less than 3.0:1.0;
(e) there shall exist no Borrowing Base Deficiency; and
(f) no Default shall have occurred and be continuing.
"Revolving Loans" means the loans provided for by Section 2.1.1.
"Security Agreement" means a security agreement and any similar instrument
or agreement executed and delivered pursuant to Section 6.1.5 or Section 6.2.6,
substantially in the form of Exhibit B, as amended, supplemented, restated or
otherwise modified from time to time.
"Security Documents" means, collectively, (a) the Guaranties, (b) the Pledge
Agreements, (c) the Mortgages, (d) the Security Agreements, (e) the Consents
and (f) the Mortgage Consents, together with any exhibits, schedules and
other attachments to such documents and any financing statements related
thereto, as such documents, exhibits, schedules, attachments or financing
statements may be, from time to time, amended, supplemented, restated or
otherwise modified.
"Stated Amount" of each Letter of Credit means the face amount or the
"Stated Amount" of such Letter of Credit (as defined therein).
"Stated Expiry Date" is defined in Section 4.1.
"Stated Maturity Date means that date that is four (4) years after the
Availability Termination Date.
"Subsidiary" means, with respect to any Person, (a) any corporation of which
more than 50% of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person, (b)
any partnership, limited liability company, joint venture, association or
other business entity in which more than 50% of the equity interest or
voting power is at the time directly or indirectly owned by such Person, by
such Person and one or more other Subsidiaries of such Person, or by one or
more other Subsidiaries of such Person or (c) any partnership in which such
Person is a general partner.
"Surety Instruments" means all letters of credit (including standby and
commercial), banker's acceptances, bank guaranties, shipside bonds, surety
bonds and similar instruments.
"Tangible Net Worth" means the consolidated net worth of the Borrower and
its consolidated Subsidiaries after subtracting therefrom the aggregate amount
of any intangible assets of the Borrower and its consolidated Subsidiaries,
including goodwill, franchises, licenses, patents, trademarks, trade names,
copyrights, service marks and brand names.
"Taxes" is defined in Section 5.2.
"Term Loans" means the loans provided for by Section 2.1.2.
"Unavailable Commitment" means $20,000,000 less the Borrowing Base (in each
case as reduced from time to time pursuant to the provisions of Section 2.2).
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"Welfare Plan" means a "welfare plan", as such term is defined in section
3(1) of ERISA.
"Year 2000 Compliant" is defined in Section 7.19.
"Year 2000 Problem" is defined in Section 7.19.
SECTION I.2. Use of Defined Terms. Unless otherwise defined or the context
otherwise requires, terms for which meanings are provided in this Agreement
shall have such meanings when used in the Disclosure Schedule and in each Note,
Borrowing Request, notice and other communication or other Loan Document
delivered from time to time in connection with this Agreement or any other Loan
Document.
SECTION I.3. Cross-References. Unless otherwise specified, references in
this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section in this Agreement or other Loan Document,
as applicable.
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar words
refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section, Schedule and Exhibit references are
to this Agreement or such other Loan Document, as the case may be, and,
unless otherwise specified, references in any Article, Section or definition
to any clause are references to such clause of such Article, Section or
definition.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices
and other writings, however evidenced.
(ii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and
including"; the words "to" and "until" each mean "to but excluding,"
and the word "through" means "to and including."
(iii) The term "property" includes any kind of property or
asset, real, personal or mixed, tangible or intangible.
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments
shall be deemed to include all subsequent amendments and other modifications
thereto, but only to the extent such amendments and other modifications are
not prohibited by the terms of any Loan Document, and (ii) references to any
statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting the statute or regulation.
(e) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance with their terms. Unless otherwise
expressly provided, any reference to any action of the Lender by way of
consent, approval or waiver shall be deemed modified by the phrase "in its
sole discretion."
(f) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Lender, the
Borrower and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lender merely because
of the Lender's involvement in their preparation.
SECTION I.4. Accounting and Financial Determinations. Unless otherwise
specified, all accounting terms used herein or in any other Loan Document shall
be interpreted, all accounting determinations and computations hereunder or
thereunder (including under Section 8.2.4) shall be made, and all financial
statements required to be delivered hereunder or thereunder shall be prepared
in accordance with, those generally accepted accounting principles ("GAAP")
applied in the preparation of the financial statements referred to in
Section 7.7.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
SECTION II.1. Commitments.
SECTION II.1.1. Revolving Loans. On the terms and subject to the
conditions of this Agreement (including Article VI), the Lender agrees to make
revolving loans ("Revolving Loans") to the Borrower equal to the aggregate
amount requested by the Borrower, subject to this Section 2.1. On the terms
and subject to the conditions hereof, the Borrower may from time to time
borrow, prepay and reborrow Revolving Loans. From time to time on any
Business Day during the period from and after the Effective Date to, but not
including, the earlier to occur of (x) the Availability Termination Date,
and (y) the Commitment Termination Date, the Lender will make Revolving
Loans to the Borrower equal to the amount of the Revolving Loans requested
by the Borrower to be made on such day in the applicable Borrowing Request
therefor.
SECTION II.1.2. Term Loans. On the terms and subject to the conditions of
this Agreement (including Article VI), the Lender agrees to convert the
aggregate unpaid principal amount of the Revolving Loans outstanding at the
opening of business on the Availability Termination Date to the principal
amount of a Term Loan, provided that (i) no Event of Default has occurred
and is continuing at that time and (ii) the Borrower has provided a
certificate to the Lender to that effect. Once repaid or prepaid, Term
Loans may not be reborrowed.
SECTION II.1.3. Letters of Credit. From time to time on any Business Day,
the Issuer will issue the Letters of Credit in accordance with Article IV.
SECTION II.1.4. Lender Not Required To Make Loans, etc. Under Certain
Circumstances. The Lender shall not be required to
(a) make any Loan if, after giving effect thereto
(i) the aggregate outstanding principal amount of all Loans would
exceed the Commitment Amount less the Letter of Credit Outstandings, or
(ii) a Borrowing Base Deficiency would exist; or
(iii) an Event of Default has occurred and is continuing; or
(b) cause an Issuer to issue any Letter of Credit if, after giving
effect thereto
(i) all Letter of Credit Outstandings together with the aggregate
outstanding principal amount of all Loans would exceed the Commitment
Amount; or
(ii) a Borrowing Base Deficiency would exist; or
(iii) all Letter of Credit Outstandings would exceed $1,000,000;
or
(iv) an Event of Default has occurred and is continuing.
SECTION II.2. Reduction of Commitment Amounts. Any Commitment Amount is
subject to reduction from time to time pursuant to this Section 2.2.
SECTION II.2.1. Optional. The Borrower may, from time to time on any
Business Day, voluntarily reduce the Commitment Amount; provided, however, that
all such reductions shall require at least three Business Days' prior notice to
the Lender and be permanent, and any partial reduction of either Commitment
Amount shall be in a minimum amount of $100,000 and in an integral multiple of
$50,000.
SECTION II.2.2. Mandatory.
(a) On the Availability Termination Date, the unused portion of
the Commitment Amount shall, without any further action, automatically and
permanently be cancelled.
(b) On any Commitment Termination Date, the Commitment Amount
shall be reduced to zero.
SECTION II.3. Borrowing Procedure. By delivering a Borrowing Request to
the Lender on or before 10:00 a.m. (Chicago time) on a Business Day, the
Borrower may from time to time irrevocably request, on one (1) Business Day's
notice, that a borrowing be made in a minimum amount of $100,000 and an
integral multiple of $50,000, or in the unused amount of the applicable
Commitment. On the terms and subject to the conditions of this Agreement,
each borrowing shall be made on the Business Day specified in such Borrowing
Request. The Lender shall make such funds available to the Borrower by wire
transfer to the accounts the Borrower shall have specified in its Borrowing
Request.
SECTION II.4. Loan Accounts and Notes.
(a) The Loans made by the Lender shall be evidenced by one or
more loan accounts or records maintained by the Lender in the ordinary
course of business. The loan accounts or records maintained by the Lender
shall be rebuttable presumptive evidence of the amount of the Loans made by
the Lender to the Borrower and the interest and payments thereon. Any
failure so to record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Borrower hereunder to pay any amount
owing with respect to the Loans.
(b) The Loans made by the Lender shall also be evidenced by a
Note or Notes payable to the order of the Lender in a maximum principal
amount equal to the original, aggregate Commitment Amount. The Borrower
hereby irrevocably authorizes the Lender to make (or cause to be made)
appropriate notations on the grid attached to the Notes (or on any
continuation of such grid) or in other books and records maintained by the
Lender, which notations, if made, shall evidence, inter alia, the date of,
the outstanding principal of, and the interest rate applicable to the Loans
evidenced thereby (the Borrower may from time to time reasonably request a
copy of such grid). Such notations shall be rebuttable presumptive evidence
of the matters described therein; provided, however, that the failure of the
Lender to make any such notations shall not limit or otherwise affect any
Obligations of the Borrower or any other Obligor.
SECTION II.5. Borrowing Base Redetermination.
(a) Within thirty (30) days after receipt of the Engineering
Report required to be delivered semi-annually, commencing with the
Engineering Report required to be delivered sixty (60) days after January
1, 1999, the Lender shall notify the Borrower in writing of the Borrowing
Base determined by the Lender on the basis of such Engineering Report.
Borrower or Lender may request, and Lender will consider, one additional
determination of the Borrowing Base at any time during each calendar year
following the Effective Date. Each such determination is herein called a
"Borrowing Base Redetermination". Each Borrowing Base Redetermination shall
be effective as of April 1st (with respect to Engineering Reports effective
January 1st), October 1st (with respect to Engineering Reports effective
July 1st) or upon notice from the Lender (with respect to any requested
redetermination) when the Borrower is notified of the amount of the
redetermined Borrowing Base by the Lender.
(b) The Borrowing Base is also subject to adjustment as provided
for in Section 3.1.2.
SECTION II.6. Purposes. The Borrower shall apply the proceeds of each Loan
only for general business purposes including Acquisitions and the development
of Oil and Gas Properties.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION III.1. Repayments and Prepayments and Certain Borrowing Base
Matters. The Borrower shall repay the unpaid principal amount of the Loans as
set forth in this Section 3.1.
SECTION III.1.1. Repayments and Prepayments. The Borrower shall repay in
full the unpaid principal amount of each Revolving Loan, and each Revolving
Loan shall mature and be due and payable, on the Availability Termination Date;
provided, however, that if no Event of Default has occurred and is continuing,
the unpaid principal amount of the Revolving Loans shall, on the Availability
Termination Date, not be due and payable but shall convert to Term Loans. The
Borrower shall repay in full the unpaid principal amount of each Loan upon the
Stated Maturity Date. Prior thereto, the Borrower
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of any
Loans; provided, however, that
(i) all such voluntary prepayments shall require at least
three but no more than five Business Days' prior written notice to
the Lender (which notice is irrevocable); and
(ii) all such voluntary partial prepayments shall be in an
aggregate minimum amount of $100,000 and an integral multiple of
$50,000;
(b) shall, on each date when any reduction in any Commitment
Amount shall become effective, including pursuant to Section 2.2, make a
mandatory prepayment (which shall be applied (or held for application, as
the case may be) by the Lender to the payment of the aggregate unpaid
principal amount of those Loans then outstanding and then to the payment of
the then Letter of Credit Outstandings) equal to the excess, if any, of the
aggregate outstanding principal amount of all Loans and Letter of Credit
Outstandings over such Commitment Amount as so reduced;
(c) shall make prepayments as specified in Section 3.1.2;
(d) shall, on each Quarterly Payment Date after the Availability
Termination Date, make a payment in an amount equal to that necessary to
amortize the principal of all Loans equally over the remaining Quarterly
Payment Dates and the Stated Maturity Date; and
(e) shall, immediately upon any acceleration of the Loans
pursuant to Section 9.2 or Section 9.3, repay all Loans, unless, pursuant
to Section 9.3, only a portion of all Loans is so accelerated.
Each payment or prepayment of any Loans made pursuant to this Section shall be
without premium or penalty, and shall be applicable, to the extent of such
prepayment, in the inverse order of maturity. No voluntary prepayment of
principal of any Loans or any prepayment pursuant to the preceding clause (c)
shall cause a reduction in any Commitment Amount.
SECTION III.1.2. Borrowing Base Deficiencies and Asset Sales.
(a) Upon the occurrence of a Borrowing Base Deficiency, the
Lender may notify the Borrower of such Borrowing Base Deficiency. Within
ten (10) days from and after the Borrowing Base Deficiency Notification
Date, the Borrower shall notify the Lender that it shall take one of the
following actions:
(i) execute and deliver to the Lender supplemental or
additional Security Documents, in form and substance reasonably
satisfactory to the Lender and its counsel, securing payment of the
Notes and the other Obligations and covering additional Oil and Gas
Properties directly owned by the Borrower and its Subsidiaries which
are not then covered by any Loan Document and which are of a type and
nature satisfactory to the Lender, and having a value, in addition to
other Oil and Gas Properties already subject to a Mortgage,
sufficient to eliminate the Borrowing Base Deficiency, all as more
particularly described in Section 8.1.7(a) and (b); or
(ii) make a payment with respect to the Obligations, (which
shall be applied (or held for application, as the case may be) by the
Lender to the payment of the aggregate unpaid principal amount of
those Loans then outstanding and then to the payment of the then
Letter of Credit Outstandings) in an aggregate principal amount
sufficient to eliminate such Borrowing Base Deficiency within sixty
(60) days after the Borrowing Base Deficiency Notification.
If the Borrower shall elect to execute and deliver (or cause its
Subsidiaries to execute and deliver) supplemental or additional Security
Documents to the Lender pursuant to clause (i), it shall provide the Lender
with descriptions of the additional assets to be collaterally assigned
(together with current valuations, Engineering Reports, Security Documents
described in clause (i) and title evidence applicable thereto, each of which
shall be in form and substance reasonably satisfactory to the Lender) within
sixty (60) days after the Borrowing Base Deficiency Notification Date. Such
supplemental or additional Security Documents shall be subject to the terms
of Section 8.1.7. If the Borrower fails to take any of the actions
described in clauses (i) or (ii) above within such ten (10) day period, then
without any necessity for notice to the Borrower or any other person, the
Borrower shall become obligated immediately to pay Obligations in an
aggregate principal amount equal to the applicable Borrowing Base
Deficiency.
(b) If the Borrower or any Subsidiary sells, transfers or
otherwise disposes of Oil and Gas Properties included in the most recent
determination of the Borrowing Base and that have a fair market value in the
aggregate for the Borrower and such Subsidiaries in excess of $500,000
during the period from the effective date of the most recent Borrowing Base
Redetermination until the effective date of the next Borrowing Base
Redetermination, the Borrowing Base shall be immediately reduced, until the
effective date of the next Borrowing Base Redetermination, by an amount as
reasonably determined by the Lender, or if the value of the applicable Oil
and Gas Properties cannot be readily determined by the Lender, by the net
sales proceeds realized from the sale, transfer or other disposition of such
assets.
If such reduction shall result in a Borrowing Base Deficiency, then in lieu
of the provisions of clause (a) of Section 3.1.2, the Borrower shall
immediately make a payment with respect to the Obligations in an amount
equal to such Borrowing Base Deficiency. In addition to and cumulative of
the foregoing , if a Borrowing Base Deficiency exists prior to such sale,
transfer or other disposition of assets, then in lieu of the provisions of
clause (a) of Section 3.1.2, the Borrower shall, with the written consent
of the Lender, immediately make a payment with respect to the Obligations
(which shall be applied (or held for application, as the case may be) by the
Lender first to the payment of the aggregate unpaid principal amount of
those Loans then outstanding, and then to the payment of the then Letter of
Credit Outstandings) in an aggregate principal amount equal to the lesser
of the amount of the Borrowing Base Deficiency (after giving effect to the
applicable sale, transfer or other disposition) or 100% of the net sales
proceeds realized from the applicable sale, transfer or other disposition.
(c) In addition, if the Borrower or any of its Subsidiaries
raises capital through the issuance of any type of equity or issues any
subordinated debt or senior unsecured debt, the proceeds of such issuance
will first be applied to cure any Borrowing Base Deficiency.
SECTION III.2. Interest Provisions. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this
Section 3.2.
SECTION III.2.1. Rate. All Loans shall accrue interest at a rate per annum
equal to the Alternate Base Rate from time to time in effect.
SECTION III.2.2. Post-Maturity Rates, etc. After (w) the date any
principal amount of any Loan shall have become due and payable (whether on the
Stated Maturity Date, upon acceleration or otherwise), (x) the date any other
monetary Obligation of the Borrower shall have become due and payable, (y) the
date any other Event of Default shall have occurred (and so long as such Event
of Default shall be continuing), and (z) the date that is sixty (60) days after
a Borrowing Base Deficiency Notification Date, if the applicable Borrowing Base
Deficiency has not been cured, the Borrower shall pay, but only to the extent
permitted by Applicable Law, interest (after as well as before judgment) on all
Obligations at a rate per annum equal to the sum of the Alternate Base Rate
plus a margin of 3%.
SECTION III.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date;
(b) on the date of any optional or required payment or
prepayment, in whole or in part, of principal outstanding on such Loan and
on that portion of such Loan so paid or prepaid;
(c) on each Quarterly Payment Date occurring after the Effective
Date; and
(d) on that portion of any Loans which is accelerated pursuant to
Section 9.2 or Section 9.3, immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount shall have
become due and payable (whether on the Stated Maturity Date, upon acceleration
or otherwise) shall be payable upon demand.
SECTION III.2.4. Maximum Interest. It is the intention of the parties
hereto to conform strictly to applicable usury laws and, anything herein to the
contrary notwithstanding, the Obligations of the Borrower to the Lender under
this Agreement shall be subject to the limitation that payments of interest
shall not be required to the extent that receipt thereof would be contrary to
provisions of Applicable Law limiting rates of interest which may be charged or
collected by the Lender. Accordingly, if the transactions contemplated hereby
would be usurious under Applicable Law with respect to the Lender then, in that
event, notwithstanding anything to the contrary in this Agreement, it is agreed
as follows:
(a) the provisions of this Section 3.2.4 shall govern and
control;
(b) the aggregate of all consideration which constitutes interest
under Applicable Law that is contracted for, charged or received under this
Agreement, or under any of the other aforesaid agreements or otherwise in
connection with this Agreement by the Lender shall under no circumstances
exceed the maximum amount of interest allowed by Applicable Law (such
maximum lawful interest rate, if any, with respect to the Lender herein
called the "Highest Lawful Rate"), and any excess shall be credited to the
Borrower by the Lender (or, if such consideration shall have been paid in
full, such excess refunded to the Borrower);
(c) all sums paid, or agreed to be paid, to the Lender for the
use, forbearance and detention of the indebtedness of the Borrower to the
Lender hereunder shall, to the extent permitted by Applicable Law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the actual rate of interest is
uniform throughout the full term thereof; and
(d) if at any time the interest provided pursuant to
Sections 3.2.1 and 3.2.2 together with any other fees payable pursuant to
this Agreement and deemed interest under Applicable Law, exceeds that amount
which would have accrued at the Highest Lawful Rate, the amount of interest
and any such fees to accrue to the Lender pursuant to this Agreement shall
be limited, notwithstanding anything to the contrary in this Agreement, to
that amount which would have accrued at the Highest Lawful Rate, but any
subsequent reductions, as applicable, shall not reduce the interest to
accrue to such Lender pursuant to this Agreement below the Highest Lawful
Rate until the total amount of interest accrued pursuant to this Agreement
and such fees deemed to be interest equals the amount of interest which
would have accrued to such Lender if a varying rate per annum equal to the
interest provided pursuant to Sections 3.2.1 and 3.2.2 had at all times been
in effect, plus the amount of fees which would have been received but for
the effect of this Section 3.2.4.
SECTION III.3. Fees. The Borrower agrees to pay the fees set forth in this
Section 3.3. All such fees shall be non-refundable.
SECTION III.3.1. Structuring Fee. The Borrower has paid to the Lender upon
execution of that certain commitment letter and term sheet dated as of July 28,
1998, a structuring fee in the amount of $50,000. As of the Effective Date,
such fee shall be credited against the closing fee provided for in Section
3.3.2.
SECTION III.3.2. Closing Fee. On the Effective Date, the Borrower agrees
to pay to the Lender a closing fee in the amount of $105,000.
SECTION III.3.3. Engineering and Redetermination Fee. The Borrower shall
pay to the Lender an annual engineering and redetermination fee of $25,000, a
prorated portion of which shall be payable quarterly in arrears on each
Quarterly Payment Date and on the earlier of the Commitment Termination Date or
the Availability Termination Date.
SECTION III.3.4. Commitment Fees. The Borrower shall pay to the Lender a
commitment fee, for the period from and including the Effective Date to but not
including the earlier to occur of (x) the Availability Termination Date, and
(y) the Commitment Termination Date, equal to (i) 0.5 of 1% per annum of the
average of the actual daily unused Commitment Availability, based on a year
comprised of three hundred sixty (360) days. Accrued commitment fees shall be
payable in arrears on each Quarterly Payment Date and on the earlier of the
Commitment Termination Date or the Availability Termination Date.
SECTION III.3.5. Letter of Credit Stated Amount Fee. The Borrower agrees
to pay to the Issuer a fee for each Letter of Credit for the period from and
including the date of the issuance of such Letter of Credit to (but not
including) the date upon which such Letter of Credit expires, at a rate per
annum equal to 1% of the Stated Amount of such Letter of Credit, based on a
year comprised of three-hundred and sixty (360) days. A prorated portion of
such fee shall be payable by the Borrower in arrears on each Quarterly
Payment Date, and on the earlier of the Availability Termination Date or the
Commitment Termination Date for any period then ending for which such fee
shall not theretofore have been paid, commencing on the first such date
after the issuance of such Letter of Credit.
SECTION III.3.6. Letter of Credit Issuance Fee. The Borrower agrees to pay
to the Issuer an issuance fee for each Letter of Credit issued by the Issuer
for the period from and including the date of issuance of such Letter of
Credit to (but not including) the date upon which such Letter of Credit
expires, the greater of (x) 0.25% of the Stated Amount of such Letter of
Credit or (y) $300. Such fee shall be payable by the Borrower in arrears on
each Quarterly Payment Date and on the date of issuance of such Letter of
Credit.
SECTION III.3.7. Letter of Credit Administrative Fees. The Borrower agrees
to pay to the Lender, the amounts described in Section 4.3.
SECTION III.3.8. Borrowing Base Fee. The Borrower agrees to pay to the
Lender a Borrowing Base fee in the amount of $45,000 at the first time that the
Borrowing Base is redetermined at an amount in excess of $10,500,000 and in the
amount of $50,000 at the first time that the Borrowing Base is redetermined at
an amount in excess of $15,000,000.
SECTION III.4. Proceeds Account. The Security Documents contain an
assignment to the Lender by the Borrower or its Subsidiaries, as applicable, of
all production of Hydrocarbons and all proceeds attributable thereto properly
allocable to the Mortgaged Properties. Notwithstanding such assignment of
production, the Borrower may, until the Lender shall give notice to the
contrary, receive such proceeds. Thereafter, all such proceeds from the
sale of such production shall be paid directly into an account of the Borrower
maintained with the Lender (the "Proceeds Account"). The Borrower hereby
grants to the Lender, subject to the prior assignment in favor of the Lender
of such production and its proceeds, a security interest in the Proceeds
Account and all proceeds thereof.
ARTICLE IV
LETTERS OF CREDIT
SECTION IV.1. Issuance Requests. By delivering to the Issuer an Issuance
Request on or before 12:00 noon (Chicago time), the Borrower may request, from
time to time prior to the earlier to occur of (x) the Availability Termination
Date and (y) the Commitment Termination Date, and on not less than three (3)
nor more than ten (10) Business Days' notice, that the Issuer issue an
irrevocable standby letter of credit in substantially the form of Exhibit L
hereto, or in such other form as may be mutually agreed by the Borrower and
the Issuer (each a "Letter of Credit"), in support of financial obligations
of the Borrower incurred in the Borrower's ordinary course of business and
which are described in such Issuance Request. Each Letter of Credit shall
by its terms:
(a) be issued in a Stated Amount which
(i) is at least $50,000;
(ii) does not exceed (or would not exceed) the then Letter
of Credit Availability;
(b) be stated to expire on a date (its "Stated Expiry Date") no
later than the earlier of (i) one (1) year after its date of issuance, or
(ii) one (1) year after the Availability Termination Date; and
(c) on or prior to its Stated Expiry Date
(iA terminate immediately upon notice to the Issuer from
the beneficiary thereunder that all obligations covered thereby have
been terminated, paid, or otherwise satisfied in full,
(iiA reduce in part immediately and to the extent the
beneficiary thereunder has notified the Issuer that the obligations
covered thereby have been paid or otherwise satisfied in part, or
(iiiA terminate thirty (30) Business Days after notice to
the beneficiary thereunder from the Lender that an Event of Default
has occurred and is continuing.
So long as no Default has occurred and is continuing, by delivery to the Issuer
of an Issuance Request at least three (3) but not more than ten (10) Business
Days prior to the Stated Expiry Date of any Letter of Credit, the Borrower may
request the Issuer to extend the Stated Expiry Date of such Letter of Credit
for an additional period not to exceed the earlier of one (1) year from its
date of extension, the Availability Termination Date or the Commitment
Termination Date.
SECTION IV.2. Issuances and Extensions. On the terms and subject to the
conditions of this Agreement (including Article VI), the Issuer shall issue
Letters of Credit, and extend the Stated Expiry Dates of outstanding Letters of
Credit, in accordance with the Issuance Requests made therefor. The Issuer
will make available the original of each Letter of Credit which it issues in
accordance with the Issuance Request therefor to the beneficiary thereof and
will notify the beneficiary under any Letter of Credit of any extension of the
Stated Expiry Date thereof. Upon the expiration of any Letter of Credit, the
Borrower may re-use any portion of the Letter of Credit Availability for the
issuance of new Letters of Credit prior to the earlier to occur of the
Availability Termination Date or the Commitment Termination Date.
The Issuer is under no obligation to issue any Letter of Credit if:
(iA any order, judgment or decree of any Government Agency or
arbitrator shall by its terms purport to enjoin or restrain the Issuer from
issuing such Letter of Credit, or any requirement of Applicable Law or any
request or directive (whether or not having the force of law) from any
Government Agency with jurisdiction over the Issuer shall prohibit, or
request that the Issuer refrain from, the issuance of letters of credit
generally or such Letter of Credit in particular or shall impose upon the
Issuer with respect to such Letter of Credit any restriction, reserve or
capital requirement (for which the Issuer is not otherwise compensated
hereunder) not in effect on the Effective Date, or shall impose upon the
Issuer any unreimbursed loss, cost or expense which was not applicable on
the Effective Date and which the Issuer in good faith deems material to it;
(iiA one or more of the applicable conditions contained in
Article VI is not then satisfied;
(iiiA the expiry date of any requested Letter of Credit is prior
to the maturity date of any financial obligation to be supported by the
requested Letter of Credit;
(ivA any requested Letter of Credit does not provide for drafts,
or is not otherwise in form and substance acceptable to the Issuer, or the
issuance of a Letter of Credit shall violate any applicable policies of the
Issuer;
(vA any standby Letter of Credit is for the purpose of supporting
the issuance of any letter of credit by any other Person; or
(viA such Letter of Credit is in a face amount denominated in a
currency other than Dollars.
The Uniform Customs and Practice for Documentary Credits most recently
published by the International Chamber of Commerce at the time of issuance
of any Letter of Credit shall (unless otherwise expressly provided in the
Letters of Credit) apply to the Letters of Credit.
SECTION IV.3. Expenses. The Borrower agrees to pay to the Issuer all
reasonable administrative expenses of the Issuer in connection with the
issuance, maintenance, modification (if any) and administration of each Letter
of Credit issued by the Issuer upon demand from time to time.
SECTION IV.4. Disbursements. The Issuer will notify the Borrower promptly
of the presentment for payment of any Letter of Credit, together with notice of
the date (the "Disbursement Date") such payment shall be made. Subject to the
terms and provisions of such Letter of Credit, the Issuer shall make such
payment to the beneficiary (or its designee) of such Letter of Credit. In
paying any drawing under a Letter of Credit, the Issuer shall not have any
responsibility to obtain any document (other than to obtain and review any
sight draft and certificates expressly required by the Letter of Credit) or to
ascertain or inquire as to the validity or accuracy of any such document or the
authority of the Person executing or delivering any such document. Prior to
12:00 noon (Chicago time) on the Disbursement Date, the Borrower will reimburse
the Issuer for all amounts which it has disbursed under the Letter of Credit.
To the extent the Issuer is not reimbursed in full in accordance with the
preceding sentence, the Borrower's Reimbursement Obligation shall accrue
interest at a fluctuating rate equal to the lesser of (i) the Highest Lawful
Rate or (ii) the Alternate Base Rate, plus a margin of 3% per annum, payable on
demand. In the event the Issuer is not reimbursed by the Borrower on the
Disbursement Date, or if the Issuer must for any reason return or disgorge such
reimbursement, the Lender shall, on the terms and subject to the conditions of
this Agreement, fund the Reimbursement Obligation therefor by making, on the
next Business Day, Loans as provided in Section 2.1.1 (the Borrower being
deemed to have given a timely Borrowing Request therefor for such amount);
provided, however, for the purpose of determining the availability of the
Commitments to make Loans immediately prior to giving effect to the
application of the proceeds of such Loans, such Reimbursement Obligation
shall be deemed not to be outstanding at such time.
SECTION IV.5. Reimbursement. The Borrower's obligation (a "Reimbursement
Obligation") under Section 4.4 to reimburse the Issuer with respect to each
Disbursement (including interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim,
or defense to payment which the Borrower may have or have had against the
Lender, the Issuer or any beneficiary of a Letter of Credit, including any
defense based upon the occurrence of any Default, any draft, demand or
certificate or other document presented under a Letter of Credit proving to
be forged, fraudulent, invalid or insufficient, the failure of any
Disbursement to conform to the terms of the applicable Letter of Credit (if,
in the Issuer's good faith opinion, such Disbursement is determined to be
appropriate) or any non-application or misapplication by the beneficiary of
the proceeds of such Disbursement, or the legality, validity, form,
regularity, or enforceability of such Letter of Credit; provided, however,
that nothing herein shall adversely affect the right of the Borrower to
commence any proceeding against the Issuer for any wrongful Disbursement
made by the Issuer under a Letter of Credit as a result of acts or omissions
constituting gross negligence or wilful misconduct on the part of the
Issuer.
SECTION IV.6. Deemed Disbursements. Upon the occurrence and during the
continuation of any Event of Default or the occurrence of the Commitment
Termination Date, an amount equal to that portion of Letter of Credit
Outstandings attributable to outstanding and undrawn Letters of Credit shall,
at the election of the Lender, and without demand upon or notice to the
Borrower, be deemed to have been paid or disbursed by the Lender under such
Letters of Credit (notwithstanding that such amount may not in fact have
been so paid or disbursed), and, upon notification by the Lender to the
Borrower of its obligations under this Section, the Borrower shall be
immediately obligated to reimburse the Lender the amount deemed to have been
so paid or disbursed by the Lender. Any amounts so received by the Lender
from the Borrower pursuant to this Section shall be held as collateral
security for the repayment of the Borrower's obligations in connection with
the Letters of Credit issued by the applicable Issuer. At any time when
such Letters of Credit shall terminate and all Obligations to the Lender are
either terminated or paid or reimbursed to the Lender in full, the
Obligations of the Borrower under this Section shall be reduced accordingly
(subject, however, to reinstatement in the event any payment
in respect of such Letters of Credit is recovered in any manner from the Lender
or the Issuer), and the Lender will return to the Borrower the excess, if any,
of
(ai the aggregate amount deposited by the Borrower with the
Lender and not theretofore applied by the Lender to any Reimbursement
Obligation
over
(bi the aggregate amount of all Reimbursement Obligations to the
Lender pursuant to this Section, as so adjusted.
At such time when all Events of Default shall have been cured or waived, the
Lender shall return to the Borrower all amounts then on deposit with the Lender
pursuant to this Section. All amounts on deposit pursuant to this Section
shall, until their application to any Reimbursement Obligation or their return
to the Borrower, as the case may be, bear interest for the Borrower's account
at the daily average Federal Funds Rate from time to time in effect (net of
the costs of any reserve requirements, in respect of amounts on deposit
pursuant to this Section, pursuant to F.R.S. Board Regulation D), which
interest shall be held by the Lender as additional collateral security for
the repayment of the Borrower's Obligations in connection with the Letters
of Credit issued by the Lender.
SECTION IV.7. Nature of Reimbursement Obligations. The Borrower shall
assume all risks of the acts, omissions, or misuse of any Letter of Credit by
the beneficiary thereof. Neither the Lender nor any Issuer (except to the
extent of its own gross negligence or willful misconduct) shall be responsible
for:
(ai the form, validity, sufficiency, accuracy, genuineness, or
legal effect of any Letter of Credit or any document submitted by any party
in connection with the application for and issuance of a Letter of Credit,
even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent, or forged;
(bi the form, validity, sufficiency, accuracy, genuineness, or
legal effect of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder
or proceeds thereof in whole or in part, which may prove to be invalid or
ineffective for any reason;
(ci failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(di errors, omissions, interruptions, or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex, facsimile or
otherwise;
(ei any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a Letter
of Credit or of the proceeds thereof;
(fi any change in the time, manner or place of payment of, or in
any other term of, all or any of the obligations of the Borrower in respect
of any Letter of Credit;
(gi the existence of any claim, set-off, defense or other right
that the Borrower may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the Issuer (if other than
the Lender or its Affiliates) or any other Person, whether in connection
with this Agreement, the transactions contemplated hereby or by the Letters
of Credit or any unrelated transaction;
(hi any payment by an Issuer under any Letter of Credit against
presentation of a draft or certificate that does not strictly comply with
the terms of any Letter of Credit; or any payment made by an Issuer under
any Letter of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of any Letter of Credit, including any arising in connection with
any insolvency proceeding; or
(ii any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including any other circumstance that
might otherwise constitute a defense available to, or a discharge of, the
Borrower or a guarantor.
None of the foregoing shall affect, impair, or prevent the vesting of any of
the rights or powers granted the Lender or the Issuer hereunder. In
furtherance and extension, and not in limitation or derogation, of any of
the foregoing, any action taken or omitted to be taken by the Lender or the
Issuer in good faith and not constituting gross negligence or willful
misconduct shall be binding upon the Borrower and shall not put the Lender or
the Issuer under any resulting liability to the Borrower.
SECTION IV.8. Increased Costs; Indemnity. If by reason of
(ai any change in Applicable Law after the Effective Date or any
change in the interpretation or application by any judicial or regulatory
authority of any Applicable Law, or
(bi compliance by the Lender with any direction, request or
requirement (whether or not having the force of law) of any Government
Agency, including Regulation D of the F.R.S. Board:
(iA the Lender shall be subject to any tax (other than
taxes on net income and franchises), levy, charge or withholding of
any nature or to any variation thereof or to any penalty with respect
to the maintenance or fulfillment of its obligations under this
Article IV, whether directly or by such being imposed on or suffered
by the Lender;
(iiA any reserve, deposit or similar requirement is or
shall be applicable, increased, imposed or modified in respect of any
Letters of Credit issued by an Issuer; or
(iiiA there shall be imposed on the Lender any other
condition regarding this Article IV or any Letter of Credit,
and the result of the foregoing is directly or indirectly to increase the cost
to the Lender or the Issuer of issuing or maintaining any Letter of Credit or
to reduce any amount receivable in respect thereof by the Lender or the Issuer,
then and in any such case may, at any time after the additional cost is
incurred or the amount received is reduced, notify the Borrower thereof, and
the Borrower shall pay on demand such amounts as the Lender or the Issuer may
specify to be necessary to compensate the Lender or the Issuer for such
additional cost or reduced receipt, together with interest on such amount
from the date demanded until payment in full thereof at a rate equal at all
times to the Alternate Base Rate plus three percent (3%) per annum. The
determination by the Lender or the Issuer, as the case may be, of any amount
due pursuant to this Section, as set forth in a statement setting forth the
calculation thereof in reasonable detail shall, in the absence of manifest
error, be final and conclusive and binding on all of the parties hereto.
(ci In addition to amounts payable as elsewhere provided in this
Article IV, the Borrower hereby indemnifies, exonerates and holds the Lender
and each Issuer harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities and damages, and expenses incurred
in connection therewith (irrespective of whether the Lender or the Issuer
is a party to the action for which indemnification is sought), including
reasonable attorneys' fees and disbursements, which the Lender or the Issuer
may incur or be subject to as a consequence, direct or indirect, of
(iA the issuance of the Letters of Credit, other than as a
result of the gross negligence or wilful misconduct of the Issuer as
determined by a court of competent jurisdiction, or
(iiA the failure of the Issuer to honor a drawing under any
Letter of Credit as a result of any act or omission, whether rightful
or wrongful, of any present or future de jure or de facto Government
Agency.
ARTICLE V
CERTAIN INTEREST RATE AND OTHER PROVISIONS
SECTION V.1. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any Applicable Law of any Government Agency, affects or would
affect the amount of capital required or expected to be maintained by the
Lender or any Person controlling the Lender, and the Lender determines (in
its sole and absolute discretion) that the rate of return on its or such
controlling Person's capital as a consequence of its Commitments hereunder,
issuance of Letters of Credit or the Loans made by the Lender is reduced to
a level below that which the Lender or such controlling Person could have
achieved but for the occurrence of any such circumstance, then, in any such
case upon notice from time to time by the Lender to the Borrower, the
Borrower shall immediately pay directly to the Lender additional amounts
sufficient to compensate the Lender or such controlling Person for such
reduction in rate of return. A statement of the Lender as to any such
additional amount or amounts (including calculations thereof in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding
upon the Borrower. In determining such amount, the Lender may use any
method of averaging and attribution that it (in its reasonable discretion)
shall deem applicable.
SECTION V.2. Taxes. All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future income,
excise, stamp or franchise taxes and other taxes, levies, assessments, imposts,
deductions, fees, duties, withholdings or other charges and all liabilities
with respect thereto of any nature whatsoever imposed by any taxing
authority, but excluding franchise taxes and taxes imposed on or measured by
the Lender's net income or receipts (such non-excluded items being called
"Taxes"). In the event that any withholding or deduction from any payment
to be made by the Borrower hereunder is required in respect of any Taxes
pursuant to any Applicable Law then (unless the Borrower already knows of
such withholding or deduction, upon notice thereof from the Lender) the
Borrower will
(ai pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(bi promptly forward to the Lender an official receipt or other
documentation satisfactory to the Lender evidencing such payment to such
authority; and
(ci pay to the Lender such additional amount or amounts as is
necessary to ensure that the net amount actually received by the Lender will
equal the full amount the Lender would have received and retained had no
such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Lender with respect to
any payment received by the Lender hereunder, the Lender may pay such Taxes and
the Borrower will promptly pay such additional amounts (including any
penalties, interest or expenses) as is necessary in order that the net
amount received by such person after the payment of such Taxes (including
any Taxes on such additional amount) shall equal the amount such person
would have received had not such Taxes been asserted.
If the Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Lender the required receipts or other
required documentary evidence, the Borrower shall indemnify the Lender for any
incremental Taxes or other liability (including interest, expenses or
penalties) that may become payable by the Lender as a result of any such
failure, whether or not such Taxes or liabilities were correctly or legally
asserted. Payment under this indemnity shall be made within thirty (30)
days after the date the Lender makes written demand therefor.
Upon the request of the Borrower, each Assignee Lender that is organized
under the laws of a jurisdiction other than the United States shall, prior to
the due date of any payment in respect of the Borrowings, execute and deliver
to the Borrower, on or about January 15 of each calendar year, one or more
(as the Borrower may reasonably request) United States Internal Revenue
Service Forms 4224 or Forms 1001 or such other forms or documents (or
successor forms or documents), appropriately completed, as may be applicable
to establish the extent, if any, to which a payment to such Assignee Lender
is exempt from withholding or deduction of Taxes.
SECTION V.3. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the Note or
any other Loan Document shall be made by the Borrower without setoff, deduction
or counterclaim, not later than 11:00 a.m. (Chicago time) on the date due, in
U.S. Dollars in same day or immediately available funds, to such account with
the Lender in Chicago, Illinois as the Lender shall specify from time to time
by notice to the Borrower. Funds received after that time shall be deemed
to have been received by the Lender on the next succeeding Business Day and
any applicable interest or fee shall continue to accrue. All interest shall be
computed on the basis of the actual number of days (including the first day but
excluding the last day) occurring during the period for which such interest is
payable over a year comprised of three hundred sixty-five (365) days or, if
appropriate, three hundred sixty-six (366) days. Whenever any payment to be
made shall otherwise be due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of time
shall be included in computing interest and fees, if any, in connection with
such payment.
SECTION V.4. Setoff. The Lender shall, upon the occurrence of any Default
described in clauses (a) through (d) of Section 9.1.9 or upon the occurrence of
any other Event of Default, have the right to appropriate and apply to the
payment of the Obligations owing to it (whether or not then due), and (as
security for such Obligations) the Borrower hereby grants to the Lender a
continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of the Borrower then or thereafter maintained with or
otherwise held by the Lender, including without limitation, the Proceeds
Account. The Lender agrees promptly to notify the Borrower after any such
setoff and application made by the Lender; provided, however, that the failure
to give such notice shall not affect the validity of such setoff and
application. The rights of the Lender under this Section 5.4 are in addition
to other rights and remedies (including other rights of setoff under
Applicable Law or otherwise) which the Lender may have.
SECTION V.5. Use of Proceeds. The Borrower shall apply the proceeds of
each borrowing in accordance with Section 2.6; without limiting the foregoing,
no proceeds of any Loan will be used to acquire any equity security of a class
which is registered pursuant to Section 12 of the Securities Exchange Act of
1934 or any "margin stock", as defined in F.R.S. Board Regulation U, X or G.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION VI.1. Initial Credit Extension. The obligation of the Lender to
make the initial Credit Extension shall be subject to the prior or concurrent
satisfaction of each of the conditions precedent set forth in this Section 6.1.
SECTION VI.1.1. Resolutions, etc. The Lender shall have received from the
Borrower a certificate, dated not later than the date of the initial Credit
Extension, of the respective Secretary or Assistant Secretary of each of the
Borrower, Future California and the Partners, for themselves and on behalf of
the Partnership Subsidiaries, as to
(ai resolutions of the respective Boards of Directors of the
Borrower, Future California and the Partners then in full force and effect
authorizing the execution, delivery and performance of this Agreement, the
Notes and each other Loan Document to be executed by it;
(bi the incumbency and signatures of those of its officers or
Persons authorized to act with respect to this Agreement, the Notes and each
other Loan Document executed by it;
(ci the Organic Documents of the Borrower, Future California, the
Partners and the Partnership Subsidiaries; and
(di evidence that each of the Borrower, Future California, the
Partners and the Partnership Subsidiaries are in good standing under the
laws of the jurisdiction of its respective organization and, as to the
Partnership Subsidiaries, in each of the jurisdictions where the Mortgaged
Properties are located,
upon which certificates the Lender may conclusively rely until it shall have
received a further certificate of the Borrower canceling or amending such prior
certificate.
SECTION VI.1.2. Delivery of Notes. The Lender shall have received the
Notes duly executed and delivered by the Borrower.
SECTION VI.1.3. Guaranties. The Lender shall have received executed
counterparts of the Guaranties, dated as of the date hereof, duly executed by
each of the Borrower's Subsidiaries.
SECTION VI.1.4. Pledge Agreements. The Lender shall have received executed
counterparts of the Pledge Agreements dated as of the date hereof, duly
executed by (a) the Principal Shareholders pledging all of their interests
in the capital stock of the Borrower, (b) the Borrower pledging all of its
interest in the capital stock of each of the Partners and Future California,
and (c) each of the Partners pledging all of its respective partnership
interests in the Partnership Subsidiaries, in each case together with the
certificates, evidencing all of the issued and outstanding shares of capital
stock or partnership interests pledged pursuant to the Pledge Agreements,
which certificates shall in each case be accompanied by undated stock powers
duly executed in blank, or, if any securities pledged pursuant to the Pledge
Agreements are uncertificated securities, confirmation and evidence
satisfactory to the Lender that the security interest in such uncertificated
securities has been transferred to and perfected by the Lender in accordance
with Section 8-313 and Section 8-321 of the Uniform Commercial Code, as in
effect in the State of Illinois, and, as applicable, with the evidence of
completion (or satisfactory arrangement for the completion) of all filings
and recordings of the Pledge Agreements as may be necessary, or in the
reasonable opinion of the Lender, desirable, effectively to create a valid,
perfected first priority lien against and security interest in
the collateral covered thereby.
SECTION VI.1.5. Security Agreement. The Lender shall have received
executed counterparts of a Security Agreement, dated as of the date hereof,
duly executed by the Borrower and each of its Subsidiaries, as applicable,
together with
(ai executed copies of Uniform Commercial Code financing
statements (Form UCC-1), in proper form for filing, naming the Borrower (or
its Subsidiary, as applicable) as the debtor and the Lender as the secured
party, or other similar instruments or documents, filed under the Uniform
Commercial Code of all jurisdictions as may be necessary or, in the opinion
of the Lender, desirable to perfect the security interest of the Lender
pursuant to such Security Agreement; and
(bi executed copies of proper Uniform Commercial Code Form UCC-3
termination statements, if any, necessary to release all Liens and other
rights of any Person in any collateral described in such Security Agreement
previously granted by any Person together with such other Uniform Commercial
Code Form UCC-3 termination statements as the Lender may reasonably request
from the Borrower.
SECTION VI.1.6. Consents and Mortgage Consents. The Lender shall have
received true and correct copies, certified by the Borrower, of all Mortgage
Consents and Consents required in connection with the Properties to be
encumbered by Mortgages delivered pursuant to Section 6.1.7 or the Security
Agreements delivered pursuant to Section 6.1.5, respectively.
SECTION VI.1.7. Mortgage. The Lender shall have received counterparts of
a Mortgage relating to the Hydrocarbon Interests and related Oil and Gas
Properties of the Borrower and its Subsidiaries that are included in the
Lender's determination of the initial Borrowing Base, dated as of a recent
date, duly executed by the Borrower and/or its Subsidiaries, as applicable,
together with
(ai evidence of the completion (or satisfactory arrangements for
the completion) of all recordings and filings of such Mortgage as may be
necessary or, in the reasonable opinion of the Lender, desirable effectively
to create a valid, perfected first priority Lien against the Properties
purported to be covered thereby;
(bi favorable mortgagee's title opinions in favor of the Lender
(in form and substance and issued by title counsel reasonably satisfactory
to the Lender, substantially in the form of Exhibit I-2 hereto), with
respect to the Property purporting to be covered by the Mortgage setting
forth the working interest and net revenue interest of the Borrower and/or
its Subsidiaries in such Properties and opining that the Borrower's and/or
its Subsidiaries' title to such property is good and marketable and valid
and that the interests created by the Mortgage constitute valid first Liens
thereon free and clear of all defects and encumbrances other than as
approved by the Lender; and
(ci such other approvals, opinions, or documents as the Lender
may reasonably request.
SECTION VI.1.8. Opinions of Counsel. The Lender shall have received
opinions, dated the date of the initial borrowing and addressed to the Lender,
from
(ai Kruse, Landa & Maycock, L.L.C., counsel to the Borrower,
Future California, the Partners, the Partnership Subsidiaries, Carl Price
and Don Reynolds, substantially in the form of Exhibit H hereto;
(bi Thompson & Knight, P.C., counsel to EnCap Equity 1994 Limited
Partnership, substantially in the form of Exhibit H hereto;
(ci Butler & Binion, L.L.P., counsel to Bargo Energy Resources,
Ltd., substantially in the form of Exhibit H hereto;
(di Hobson Audley Hopkins & Wood, counsel to Energy Capital
Investment Company PLC, substantially in the form of Exhibit H hereto; and
(ei Clifford & Brown, as to the Mortgaged Properties located in
the South Coles Levee Unit, and Matthews and Branscomb, as to the Mortgaged
Properties located in Midland County, Texas, Moore County, Texas, and Grant
County, Oklahoma, special title counsel to the Borrower, substantially in
the form of Exhibit I-1 hereto.
SECTION VI.1.9. UCC-11s. The Lender shall have received certified copies
of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or
a similar search report certified by a party acceptable to the Lender, dated a
date reasonably near to the date of the initial borrowing, listing all
effective financing statements which name the Borrower, its Subsidiaries,
and each other Obligor (under their present names and any previous names) as
the debtor and which are filed in the jurisdictions in the States of Texas
and the State of residence (if outside the State of Texas) and the Borrower
and its Subsidiaries in the States of Utah, Oklahoma, New Mexico and
California, together with copies of such financing statements (none of which
shall cover any collateral described in the Existing Mortgages).
SECTION VI.1.10. Evidence of Insurance. The Lender shall have received
certificates of insurance satisfactory to it evidencing the existence of all
insurance required to be maintained by the Borrower by this Agreement and the
other Loan Documents.
SECTION VI.1.11. Engineering Reports. The Lender shall have received an
Engineering Report, dated as of August 1, 1998 from T.J. Smith & Company,
as to Mortgaged Properties.
SECTION VI.1.12. Environmental Report. The Lender shall have received the
Phase I environmental assessments prepared by Grace, Shursen, Moore &
Associates, Inc., EA Services, Inc., E&P Industry Compliance Services, Inc. and
Pilko & Associates, Inc. with respect to the Mortgaged Properties located in
Texas, New Mexico and Oklahoma, and Environmental Compliance Associates with
respect to the Mortgaged Properties located in the South Coles Levee Unit, Kern
County, California; a completed environmental disclosure questionnaire and such
other information with respect to the ownership and past use of the Mortgaged
Properties as the Lender may reasonably request, and such reports and
questionnaire shall be satisfactory in form, substance and scope to the Lender.
SECTION VI.1.13. Budget. The Lender shall have received a budget for the
Borrower for the twelve (12) months immediately following the Effective Date,
in form, scope and detail reasonably satisfactory to the Lender.
SECTION VI.1.14. Intercreditor Agreement. The Lender shall have received
executed counterparts of an intercreditor agreement, dated as of the date
hereof, and satisfactory in form and substance to the Lender, duly executed by
the Borrower and each of its Subsidiaries, as applicable, and each of the
Existing Creditors together with such subordination agreements and related
documents and agreements as are necessary to implement such intercreditor
agreement.
SECTION VI.1.15. Closing of the Future California Merger. The closing
under the Agreement and Plan of Merger among Bargo Energy Resources, Ltd., SCL-
CAL Company, the Borrower and Future California shall have occurred such that
Future California shall have acquired the South Coles Levee Unit property.
SECTION VI.1.16. Closing Fees, Expenses, etc. The Lender shall have
received all reasonable costs and expenses due and payable pursuant to
Sections 3.3 and 10.3, if then invoiced.
SECTION VI.1.17. Other Documents. The Lender shall have received such
other documents, including Approvals, as it may reasonably request.
SECTION VI.2. Inclusion of Hydrocarbon Interests in the Borrowing Base.
The inclusion of any additional Hydrocarbon Interests in the Borrowing Base is
subject to the following conditions having been satisfied and receipt by the
Lender of the following documents, in each case with respect to each
Hydrocarbon Interests and related Oil and Gas Properties which the Borrower
requests be included in the Borrowing Base, and each of which conditions and
documents shall be satisfactory to the Lender in form and substance:
SECTION VI.2.1. Environmental Report. The Lender shall have
received Phase I environmental assessments as of a recent date prepared by an
environmental consulting firm as shall be acceptable to the Lender, a completed
environmental disclosure questionnaire and such other information with respect
to the ownership and past use of the Mortgaged Properties relating to such
Hydrocarbon Interests as the Lender may reasonably request, and such reports
and questionnaire shall be satisfactory in form, substance and scope to the
Lender.
SECTION VI.2.2. Mortgage. The Lender shall have received counterparts of
a Mortgage relating to such Hydrocarbon Interests and related Oil and Gas
Properties, dated as of a recent date, duly executed by the Borrower and/or its
Subsidiaries, as applicable, together with
(ai evidence of the completion (or satisfactory arrangements for
the completion) of all recordings and filings of such Mortgage as may be
necessary or, in the reasonable opinion of the Lender, desirable effectively
to create a valid, perfected first priority Lien against the Properties
purported to be covered thereby;
(bi favorable mortgagee's title opinions in favor of the Lender
(in form and substance and issued by title counsel reasonably satisfactory
to the Lender, substantially in the form of Exhibit I-2 hereto), with
respect to the Property purporting to be covered by the Mortgage setting
forth the working interest and net revenue interest of the Borrower and/or
its Subsidiaries in such Properties and opining that the Borrower's and/or
its Subsidiaries' title to such property is good and marketable and valid
and that the interests created by the Mortgage constitute valid first Liens
thereon free and clear of all defects and encumbrances other than as
approved by the Lender; and
(ci such other approvals, opinions, or documents as the Lender
may reasonably request.
SECTION VI.2.3. UCC-11s. The Lender shall have received certified copies
of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or
a similar search report certified by a party acceptable to the Lender, dated as
of a recent date, listing all effective financing statements which name the
Borrower or its Subsidiaries (under their present names and any previous names)
as the debtor and which are filed in the jurisdictions in the State of Texas or
the state in which such Oil and Gas Properties are located and in which the
Mortgage referenced in Section 6.2.2. is to be filed, together with copies of
such financing statements (none of which shall cover any collateral described
in any such Mortgage).
SECTION VI.2.4. Evidence of Insurance. The Lender shall have received
certificates of insurance satisfactory to it evidencing the existence of all
insurance required to be maintained by the Borrower by this Agreement and the
other Loan Documents with respect to the Hydrocarbon Interests and related Oil
and Gas Properties being added to the Borrowing Base.
SECTION VI.2.5. Engineering Reports. The Lender shall have received an
Engineering Report, dated as of a recent date from a petroleum engineer
reasonably acceptable to the Lender, as to the Hydrocarbon Interests being
added to the Borrowing Base.
SECTION VI.2.6. Material Contracts and Related Consents; Security
Agreement. The Lender shall have received true and correct copies, certified
by the Borrower, and approved the form and substance of, each Material Contract
related to the Hydrocarbon Interests being added to the Borrowing Base. In
addition, the Lender shall have received duly executed counterparts of a
Security Agreement or, if applicable, amendments to an existing Security
Agreement which add any such Material Contract to the Collateral (as defined in
the Security Agreement), a Consent and, as applicable, a Mortgage Consent, for
each such Material Contract, dated as of a recent date.
SECTION VI.2.7. Guaranties. The Lender shall have received duly executed
counterparts of a Guaranty from any Subsidiary which is adding Hydrocarbon
Interests to the Borrowing Base, unless such a Guaranty has already been
delivered to the Lender in connection with a previous addition to the Borrowing
Base or on the Effective Date.
SECTION VI.2.8. Additional Stock or Partnership Pledge. The Lender shall
have received executed counterparts of the Pledge Agreement, dated not later
than the date of such Loan, duly executed by the Borrower or the applicable
Guarantor pledging its interest in the capital stock or partnership interest,
as the case may be, of any Subsidiary which is adding Hydrocarbon Interests
to the Borrowing Base, unless such Pledge Agreement has already been
delivered to the Lender, accompanied by the original share certificate
evidencing such capital stock and executed stock powers (in blank) and the
evidence of satisfactory arrangement for the completion of all filings and
recordings of the Pledge Agreement as may be necessary or, in the reasonable
opinion of the Lender, desirable, effectively to create a valid, perfected
first priority lien against and security interest in the collateral covered
thereby.
SECTION VI.2.9. Other Documents. The Lender shall have received such other
documents as it may reasonably request.
SECTION VI.3. All Credit Extensions. The obligation of the Lender to make
any Credit Extension shall be subject to the satisfaction of each of the
conditions precedent set forth in this Section 6.3.
SECTION VI.3.1. Compliance with Warranties, No Default, etc. Both before
and after giving effect to any Credit Extension (but, if any Default of the
nature referred to in Section 9.1.5 shall have occurred with respect to any
other Indebtedness, without giving effect to the application, directly or
indirectly, of the proceeds of any borrowing) the following statements shall
be true and correct
(ai the representations and warranties set forth in Article VII
(excluding, however, those contained in Section 7.9) shall be true and
correct with the same effect as if then made (unless stated to relate solely
to an earlier date, in which case such representations and warranties shall
be true and correct as of such earlier date);
(bi except as disclosed by the Borrower to the Lender pursuant to
Section 7.9
(iA no labor controversy, litigation, arbitration or
governmental investigation or proceeding shall be pending or, to the
knowledge of the Borrower, threatened against the Borrower or any of
its Subsidiaries which has or might reasonably be expected to have a
Material Adverse Effect; and
(iiA no development shall have occurred in any labor
controversy, litigation, arbitration or governmental investigation or
proceeding disclosed pursuant to Section 7.9 which has or might
reasonably be expected to have a Material Adverse Effect; and
(ci no Default shall have then occurred and be continuing, and
neither the Borrower nor any other Obligor are in material violation of any
Applicable Law or court order or decree if such violation has or might
reasonably be expected to have a Material Adverse Effect.
SECTION VI.3.2. Credit Request. The Lender shall have received a Borrowing
Request or Issuance Request, as the case may be, for such Credit Extension.
Each of the delivery of a Borrowing Request or an Issuance Request and the
acceptance by the Borrower of the proceeds of the borrowing or the issuance of
the Letter of Credit as applicable, shall constitute a representation and
warranty by the Borrower that on the date of such borrowing (both immediately
before and after giving effect to such borrowing and the application of the
proceeds thereof) or the issuance of the Letter of Credit, as applicable, the
statements made in Section 6.3.1 are true and correct.
SECTION VI.3.3. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower or any of its
Subsidiaries shall be reasonably satisfactory in form and substance to the
Lender and its counsel; the Lender and its counsel shall have received all
information, approvals, opinions, documents or instruments as the Lender or its
counsel may reasonably request.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to make Loans
and to issue Letters of Credit hereunder, the Borrower represents and warrants
unto the Lender as set forth in this Article VII.
SECTION VII.1. Organization, etc. The Borrower is a Utah corporation and
each of the Subsidiaries is a corporation or limited partnership, validly
organized and existing and in good standing under the laws of the jurisdiction
of its organization, is duly qualified to do business and is in good standing
as a foreign limited partnership or corporation, as the case may be, in each
jurisdiction where the nature of its business requires such qualification,
where the failure so to qualify would have a Material Adverse Effect, and
has full power and authority and holds all requisite governmental licenses,
permits and other approvals to enter into and perform its Obligations under
this Agreement, the Notes and each other Loan Document to which it is a
party and to own and hold under lease its Property and to conduct its
business substantially as currently conducted by it, in each case where the
failure so to do would have a Material Adverse Effect. As of the Effective
Date, the Principal Shareholders are the owners of 83% of the issued and
outstanding shares of the Borrower. The Borrower is the sole shareholder of
Future California and of each Partner. The Partners are the sole partners
of the Partnership Subsidiaries. As of the Effective Date, the Borrower has
no Subsidiaries other than as listed in Schedule IV.
SECTION VII.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Borrower and each other Obligor of this
Agreement, the Notes and each other Loan Document executed or to be executed by
it are within the Borrower's and each such Obligor's partnership (or corporate
or other, as the case may be) powers, have been duly authorized by all necessary
partnership (or corporate or other, as the case may be) action, and do not
(ai contravene the Borrower's or such Obligor's Organic
Documents;
(bi contravene or result in any violation of or default under any
Applicable Law or any material contractual restriction, court decree or
order, in each case binding on or affecting the Borrower or any other
Obligor or any Properties, businesses, assets or revenues of the Borrower;
(ci result in, or require the creation or imposition of, any Lien
on (except for the Liens of the Loan Documents) any of the Borrower's or any
other Obligor's Properties, businesses, assets or revenues.
SECTION VII.3. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any Government
Agency or other Person is required for the due execution, delivery or
performance by the Borrower or any other Obligor of this Agreement, the Notes
or any other Loan Document to which it is a party.
SECTION VII.4. Investment Company Act. Neither the Borrower, its
Subsidiaries nor any Affiliate thereof, is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
SECTION VII.5. Public Utility Holding Company Act. Neither the Borrower
nor any of its Subsidiaries is a "holding company" or a "subsidiary company" of
a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
SECTION VII.6. Validity, etc. This Agreement constitutes, and the Notes
and each other Loan Document executed by the Borrower or any of its
Subsidiaries will, on the due execution and delivery thereof, constitute,
the legal, valid and binding obligations of the Borrower and such
Subsidiaries, as applicable, enforceable in accordance with their respective
terms, and each Loan Document executed pursuant hereto by each other Obligor
will, on the due execution and delivery thereof by such Obligor, be the
legal, valid and binding obligation of such Obligor enforceable in accordance
with its terms, in each case subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally.
SECTION VII.7. Financial Information. The audited consolidated balance
sheets of the Borrower and each of its consolidated Subsidiaries as at
December 31, 1997 and the related consolidated unaudited statements of
operations and cash flow of the Borrower and each of its Subsidiaries, copies
of which have been furnished to the Lender, have been prepared in accordance
with GAAP consistently applied, and present fairly the consolidated financial
condition of the partnerships and corporations covered thereby as at the date
thereof and the results of their unaudited operations for the period then
ended, and show all material Indebtedness of the Borrower and its consolidated
Subsidiaries, as of the date thereof, including liabilities for taxes, material
commitments and Contingent Liabilities.
SECTION VII.8. No Material Adverse Change. Since the date of the audited
financial statements described in Section 7.7, there has been no change in the
financial condition, operations, assets, business, Properties or prospects of
the Borrower or its Subsidiaries that has or might reasonably be expected to
have a Material Adverse Effect.
SECTION VII.9. Litigation, Labor Controversies, etc. There is no pending
or, to the knowledge of the Borrower, threatened litigation, action,
proceeding, or labor controversy affecting the Borrower or any of its
Subsidiaries, or any of their respective Properties, businesses, assets or
revenues, which has or might reasonably be expected to have a Material
Adverse Effect, except as disclosed in Item 7.9 ("Litigation") of the
Disclosure Schedule.
SECTION VII.10. Ownership of Properties. Each of the Borrower and each of
its Subsidiaries has good and merchantable title to its Properties (including,
without limitation, all Hydrocarbon Interests), free and clear of all Liens
except (a) those referred to in the financial statements referred to in Section
7.7, (b) as disclosed to the Lender in the Disclosure Schedule or (c) as
permitted by Section 8.2.3. After giving full effect to all Liens permitted
under Section 8.2.3, the Borrower and its Subsidiaries own the net interests in
Hydrocarbons produced from the Oil and Gas Properties as reflected in the most
recent Engineering Report, and neither the Borrower nor any of its Subsidiaries
is obligated to bear costs or expenses in respect of the Oil and Gas Properties
in excess of its working interest percentage as reflected in the most recent
Engineering Report.
SECTION VII.11. Taxes. Each of the Borrower and its Subsidiaries has filed
all Federal and other tax returns and reports required by Applicable Law to
have been filed by it and has paid all taxes and other governmental charges
thereby shown to be owing, except any such taxes or charges which are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books.
SECTION VII.12. Pension and Welfare Plans. During the twelve-consecutive-
month period prior to the Effective Date and prior to the date of any borrowing
hereunder, no steps have been taken to terminate any Pension Plan, and no
contribution failure has occurred with respect to any Pension Plan sufficient
to give rise to a Lien under section 302(f) of ERISA. No condition exists or
event or transaction has occurred with respect to any Pension Plan which
might result in the incurrence by the Borrower or any member of the
Controlled Group of any material liability, fine or penalty. Except as
disclosed in Item 7.12 ("Employee Benefit Plans") of the Disclosure Schedule
or as otherwise reflected in the Financial Statements of the Borrower and
its consolidated Subsidiaries, neither the Borrower nor any member of the
Controlled Group has any contingent liability with respect to any post-
retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
SECTION VII.13. Compliance with Law. Neither the Borrower nor any of its
Subsidiaries (a) is in violation of any Applicable Law of, or the terms of any
Approval issued by, any Government Agency; or (b) has failed to obtain any
Approval necessary to ownership of any of its properties or the conduct of its
business (including without limitation any such authorization from the Federal
Energy Regulatory Commission or any state conservation commission or similar
body); which violation or failure could reasonably be expected to have a
Material Adverse Effect.
SECTION VII.14. Claims and Liabilities. Except as disclosed to the Lender
in Item 7.14 ("Claims and Liabilities") of the Disclosure Schedule, neither the
Borrower nor any of its Subsidiaries has accrued any liabilities under gas
purchase contracts for gas not taken, but for which it is liable to pay if not
made up and which, if not paid, would have a Material Adverse Effect. Except as
disclosed to the Lender in Item 7.14 of the Disclosure Schedule, no claims exist
against the Borrower or any of its Subsidiaries for gas imbalances which claims
if adversely determined would have a Material Adverse Effect. No purchaser of
product supplied by the Borrower or any of its Subsidiaries has any claim
against the Borrower or any of its Subsidiaries for product paid for, but for
which delivery was not taken as and when paid for, which claim if adversely
determined would have a Material Adverse Effect.
SECTION VII.15. No Prohibition on Perfection of Security Documents. None
of the terms or provisions of any indenture, mortgage, deed of trust, agreement
or other instrument to which the Borrower or any of its Subsidiaries is a party
or by which the Borrower or any of its Subsidiaries or the property of the
Borrower or any of its Subsidiaries is bound prohibit the filing or recordation
of any of the Loan Documents or any other action which is necessary or
appropriate in connection with the perfection of the Liens evidenced and
created by any of the Loan Documents.
SECTION VII.16. Solvency. Neither the Borrower nor any of its Subsidiaries
is "insolvent", as such term is used and defined in the United States
Bankruptcy Code, 11 U.S.C. 101, et seq.
SECTION VII.17. Environmental Warranties. As a reasonable and prudent
operator of oil and gas producing properties, in the ordinary course of its
business, the Borrower has conducted, with respect to the Acquired Properties
and its existing Oil and Gas Properties, and, on an ongoing basis, conducts a
review of the effect of Environmental Laws on business, operations and
Properties of the Borrower and its Subsidiaries, in the course of which it
identifies and evaluates associated liabilities and costs (including any
capital or operating expenditures required for Remedial Action or other
clean-up or closure of Properties presently owned or operated, any capital
or operating expenditures required for Remedial Action or otherwise to
achieve or maintain compliance with environmental protection standards
imposed by any Environmental Law or as a condition of any Approval, license,
permit or contract, any related constraints on operating activities,
including any periodic or permanent shutdown of any facility or reduction in
the level of or change in the nature of operations conducted thereat and any
actual or potential liabilities to third parties, including employees, and
any related costs and expenses). On the basis of this review, the Borrower
has reasonably concluded that, except as disclosed in Item 7.17
("Environmental Matters") of the Disclosure Schedule, to the best
of its knowledge after due inquiry:
(a) all facilities and Property (including underlying
groundwater) owned, leased or operated by the Borrower or any of its
Subsidiaries have been, and continue to be, owned, leased or operated by the
Borrower or any of its Subsidiaries in compliance with all Environmental
Laws where the failure to do so could reasonably be expected to have a
Material Adverse Effect;
(b) there have been no past, and there are no pending or
threatened
(i) claims, complaints, notices or inquiries to, or
requests for information received by, the Borrower or any of its
Subsidiaries with respect to any alleged violation of any
Environmental Law, that, singly or in the aggregate, have or may
reasonably be expected to have a Material Adverse Effect, or
(ii) claims, complaints, notices or inquiries to, or
requests for information received by, the Borrower or any of its
Subsidiaries regarding potential liability under any Environmental
Law or under any common law theories relating to operations or the
condition of any facilities or Property (including underlying
groundwater) owned, leased or operated by the Borrower or any of its
Subsidiaries that, singly or in the aggregate, have, or may
reasonably be expected to have a Material Adverse Effect;
(c) there have been no Releases of Hazardous Materials at, on or
under any Property now or previously owned or leased by the Borrower or any
of its Subsidiaries that, singly or in the aggregate, have, or may
reasonably be expected to have, a Material Adverse Effect;
(d) each of the Borrower or any of its Subsidiaries, as
applicable, has been issued and is in compliance with all permits,
certificates, approvals, licenses and other authorizations relating to
environmental matters and necessary or desirable for its business where the
failure to do so could reasonably be expected to have a Material Adverse
Effect;
(e) no Property now or previously owned, leased or operated by
the Borrower or any of its Subsidiaries is listed or proposed for listing
on the National Priorities List pursuant to CERCLA, or, to the extent that
such listing may, singly or in the aggregate, have, or may reasonably be
expected to have a Material Adverse Effect, on the CERCLIS or on any other
similar federal or state list of sites requiring investigation or clean-up;
(f) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any Property now or
previously owned, leased or operated by the Borrower or any of its
Subsidiaries that, singly or in the aggregate, have, or may reasonably be
expected to have, a Material Adverse Effect;
(g) neither the Borrower nor any Subsidiaries of the Borrower has
directly transported or directly arranged for the transportation of any
Hazardous Material to any location which is listed or proposed for listing
on the National Priorities List pursuant to CERCLA, or, to the extent that
such listing may, singly or in the aggregate, have, or may reasonably be
expected to have a Material Adverse Effect, on the CERCLIS or on any similar
federal or state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to material
claims against the Borrower or any of its Subsidiaries for any remedial
work, damage to natural resources or personal injury, including claims under
CERCLA;
(h) there are no polychlorinated biphenyls, radioactive materials
or friable asbestos present at any Property now or previously owned or
leased by the Borrower or any of its Subsidiaries that, singly or in the
aggregate, have, or may reasonably be expected to have, a Material Adverse
Effect; and
(i) no condition exists at, on or under any property now or
previously owned or leased by the Borrower or any of its Subsidiaries which,
with the passage of time, or the giving of notice or both, would give rise
to material liability under any Environmental Law that, singly or in the
aggregate have, or may reasonably be expected to have a Material Adverse
Effect.
SECTION VII.18. Regulations G, U and X. Neither the Borrower nor any of
its Subsidiaries is engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock, and no proceeds of any Loans will be
used for a purpose which violates, or would be inconsistent with, F.R.S. Board
Regulation G, U or X. Terms for which meanings are provided in F.R.S. Board
Regulation G, U or X or any regulations substituted therefor, as from time to
time in effect, are used in this Section with such meanings.
SECTION VII.19. Year 2000 Compliance.
(a) The Borrower is: (i) developing a review and assessment
program of all areas with its and each of its Subsidiaries' businesses and
operations (including those affected by suppliers and vendors) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications (as well as imbedded microchips) used by the Borrower or any of
its Subsidiaries (or any of their suppliers and vendors) may be unable to
recognize and perform properly date-sensitive functions involving certain
dates prior to and any date after December 31, 1999); (ii) developing a
plan and a timetable for addressing the Year 2000 Problem on a timely basis;
and (iii) to date, implementing that plan in accordance with that timetable.
(b) The Borrower reasonably believes that all computer
applications (including those of their suppliers and vendors) that are material
to its or its Subsidiaries' businesses and operations will, on a timely basis,
be able to perform properly date-sensitive functions for all dates before and
after January 1, 2000, (that is, be "Year 2000 Compliant"), except to the
extent that a failure to do so could not reasonably be expected to have a
Material Adverse Effect."
SECTION VII.20. Insurance. The Borrower and its Subsidiaries have the
benefit of the insurance coverage described in the certificates of insurance
delivered pursuant to Section 6.1.10 and required to be maintained pursuant to
Section 8.1.4.
SECTION VII.21. Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of the Borrower or
any of its Subsidiaries in writing to the Lender for purposes of or in
connection with this Agreement or any transaction contemplated hereby
(including without limitation each Engineering Report) is, and all other
such factual information hereafter furnished by or on behalf of the Borrower
or any of its Subsidiaries to the Lender will be, true and accurate in every
material respect on the date as of which such information is dated or
certified and as of the date of execution and delivery of this Agreement by
the Lender, and such information is not, or shall not be, as the case may be,
incomplete by omitting to state any material fact necessary to make such
information not misleading.
ARTICLE VIII
COVENANTS
SECTION VIII.1. Affirmative Covenants. The Borrower agrees with the Lender
that, until all Commitments have terminated and all Obligations have been paid
and performed in full, the Borrower and each of its Subsidiaries will perform
the obligations set forth in this Section 8.1.
SECTION VIII.1.1. Financial Information, Reports, Notices, etc.
The Borrower will furnish, or will cause to be furnished, to the Lender copies
of the following financial statements, reports, notices and information:
(a) as soon as available and in any event within 45 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year of
the Borrower, consolidated and consolidating balance sheets of the Borrower
and its consolidated Subsidiaries as of the end of such Fiscal Quarter and
consolidated and consolidating statements of operations and cash flow of the
Borrower and its consolidated Subsidiaries for such Fiscal Quarter and for
the period commencing at the end of the previous Fiscal Year and ending with
the end of such Fiscal Quarter, certified by the chief financial Authorized
Officer of the Borrower;
(b) as soon as available and in any event within 90 days after
the end of each Fiscal Year of the Borrower, a copy of the annual audit
report for such Fiscal Year for the Borrower and its consolidated
Subsidiaries, including therein the audited consolidated and consolidating
balance sheets of the Borrower and its consolidated Subsidiaries as of the
end of such Fiscal Year and audited statements of operations and cash flow
of the Borrower and its consolidated Subsidiaries for such Fiscal Year, in
the case of such audited financials, each case certified (without any
Impermissible Qualification) in a manner reasonably acceptable to the Lender
by an independent public accountant acceptable to the Lender, together with
a certificate from the Chief Financial Officer of the Borrower from such
accountants containing a computation of, and showing compliance with, each
of the financial ratios and restrictions contained in Section 8.2.4 and to
the effect that, in making the examination necessary for the signing of such
annual report by such accountants, they have not become aware of any Default
that has occurred and is continuing, or, if they have become aware of such
Default, describing such Default and the steps, if any, being taken to cure
it;
(c) concurrently with the delivery of the financial statements
referred to is clauses (a) and (b), a certificate, executed by an Authorized
Officer of the Borrower, showing (in reasonable detail and with appropriate
calculations and computations in all respects reasonably satisfactory to the
Lender) compliance with the financial covenants set forth in Section 8.2.4
and also certifying, to such Authorized Officer's best knowledge, that no
Default has occurred and is then outstanding;
(d) on or prior to December 31st of each calendar year, a budget
for the Borrower for the following calendar year, in form, scope and detail
reasonably satisfactory to the Lender;
(e) as soon as possible and in any event within five (5) Business
Days after any responsible officer of the Borrower becomes aware of the
occurrence of each Default and any event which has or is reasonably likely
to have a Material Adverse Effect, a statement of an Authorized Officer of
the Borrower setting forth details of such Default or event and the action
which the Borrower has taken and proposes to take with respect thereto;
(f) as soon as possible and in any event within five (5) Business
Days after any responsible officer of the Borrower becomes aware of (x) the
occurrence of any adverse development with respect to any litigation,
action, proceeding or labor controversy described in Section 7.9 or (y) the
commencement of any litigation, action, proceeding or labor controversy of
the type described in Section 7.9, notice thereof and, to the extent
reasonably requested by the Lender, copies of all documentation relating
thereto not subject to the attorney-client privilege;
(g) as soon as possible and in any event within ten (10) days
after any responsible officer of the Borrower or any of its Subsidiaries has
actual knowledge thereof, notice of
(i) any claim by any Person against the Borrower or any of
its Subsidiaries of nonpayment of, or
(ii) any attempt by any Person to collect upon or enforce
any accounts payable of the Borrower or any of its Subsidiaries, in the case
of any single account payable in excess of $50,000, or in the case of all
accounts payable in the aggregate in excess of $100,000;
(h) upon, but in no event later than ten (10) days after, any
responsible officer of the Borrower or any of its Subsidiaries becomes aware
of (i) any and all enforcement, cleanup, removal or other governmental or
regulatory actions instituted, completed or threatened or other
environmental claims against the Borrower or any Subsidiary or any of its
Properties pursuant to any applicable Environmental Laws which could have
a Material Adverse Effect, and (ii) any environmental or similar condition
on any real property adjoining or in the vicinity of the property of the
Borrower or any Subsidiary that could reasonably be anticipated to cause
such property or any part thereof to be subject to any restrictions on the
ownership, occupancy, transferability or use of such property under any
Environmental Laws;
(i) as soon as available and in any event within sixty (60) days
after January 1, 1999 and January 1st of each calendar year, an Engineering
Report from an independent petroleum engineering firm acceptable to the
Lender in its reasonable judgment, and as soon as available and in any event
within sixty (60) days after July lst of each calendar year commencing in
1999, an Engineering Report from the Borrower's internal reserve engineers,
unless the Lender, at least sixty (60) days before the required delivery
date of such Engineering Report, has requested that it be prepared by an
independent petroleum engineering firm reasonably acceptable to the Lender;
(j) promptly after (i) the sending or filing thereof, copies of
all reports which the Borrower sends to any of its security holders,
(ii) the sending or filing thereof, all material reports and registration
statements which the Borrower or any of its Subsidiaries files with the
Securities and Exchange Commission or any national securities exchange,
(iii) the filing thereof, copies of all tariff and rate cases and other
material reports filed with any regulatory authority (other than routine
operating reports), and (iv) receipt thereof, copies of all notices received
from any regulatory authority concerning material noncompliance by the
Borrower or any of its Subsidiaries with any applicable regulations;
(k) immediately upon becoming aware of the institution of any
steps by the Borrower or any other Person to terminate any Pension Plan, or
the failure to make a required contribution to any Pension Plan if such
failure is sufficient to give rise to a Lien under section 302(f) of ERISA,
or the taking of any action with respect to a Pension Plan which could
result in the requirement that the Borrower furnish a bond or other security
to the PBGC or such Pension Plan, or the occurrence of any event with
respect to any Pension Plan which could result in the incurrence by the
Borrower of any material liability, fine or penalty, or any material
increase in the contingent liability of the Borrower with respect to any
post-retirement Welfare Plan benefit, notice thereof and copies of all
documentation relating thereto;
(l) promptly after the Borrower discovers or determines that any
computer application (including those of its suppliers or vendors) that is
material to the businesses or operations of the Borrower and its
Subsidiaries taken as a whole will not be Year 2000 Compliant on a timely
basis, notice thereof and a copy of the Borrower's plan for dealing with
such problem except to the extent such failure could not reasonably be
expected to have a Material Adverse Effect; and
(m) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as the Lender may from time to time reasonably request
including operational and accounting information with respect to the
Mortgaged Properties including production volumes, revenues, operating
costs, drilling and completion reports and well test data.
SECTION VIII.1.2. Compliance with Laws, etc. The Borrower will, and will
cause each of its Subsidiaries to, comply with all Applicable Laws, except
where failure to so comply would not be reasonably expected to have a
Material Adverse Effect, such compliance to include (without limitation):
(a) the maintenance and preservation of its limited partnership
or corporate existence, as the case may be, and qualification as a foreign
limited partnership or corporation, as the case may be; and
(b) the payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its property
except to the extent being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall
have been set aside on its books.
SECTION VIII.1.3. Maintenance and Development of Properties.
(a) The Borrower will, and will cause each of its Subsidiaries
to, maintain (subject to any disposition permitted by Section 8.2.9),
preserve, protect and keep its Properties in good repair, working order and
condition (ordinary wear and tear excepted), and make necessary and proper
repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times in accordance
with standard industry practices. In particular, the Borrower will, and
will cause each of its Subsidiaries to, operate or cause to be operated its
Oil and Gas Properties as a reasonable and prudent operator.
(b) The Borrower shall use all reasonable efforts to develop and
bring into production in a prudent and businesslike manner all proved
developed non-producing reserves that the Lender has considered in its
determination of the Borrowing Base.
(c) The Borrower shall ensure that at all times it has available
to it, either through its employees or through independent contractors,
petroleum engineers with appropriate experience and expertise in the proper
operation and development of properties similar to the Mortgaged Properties.
SECTION VIII.1.4. Insurance. The Borrower will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained with responsible insurance
companies insurance with respect to its properties and business against such
casualties and contingencies and of such types and in such amounts as is
customary in the case of similar businesses (including, where appropriate, well
control, operator's extra expense and remediation insurance) and will furnish
to the Lender at reasonable intervals at the request of the Lender a
certificate of an Authorized Officer of the General Partner setting forth
the nature and extent of all insurance maintained by the Borrower and its
Subsidiaries in accordance with this Section. The following shall apply to
the insurance required by this Section 8.1.4:
(a) Each policy for property insurance covering the Mortgaged
Property shall show the Lender as loss payee;
(b) Each policy for liability insurance covering the Mortgaged
Property shall show the Lender as additional insured;
(c) Each insurance policy covering the Mortgaged Property shall
provide that at least thirty (30) days prior written notice of cancellation,
reduction in amount or other change in coverage, or of lapse shall be given
to the Lender by the insurer; and
(d) The Borrower shall, if so requested by the Lender, deliver to
the Lender the original or a certified copy of each insurance policy
covering the Mortgaged Property.
SECTION VIII.1.5. Books and Records. The Borrower will, and will cause
each of its Subsidiaries to, keep books and records which accurately reflect
all of its material business affairs and transactions and permit the Lender
or any of its respective representatives, at reasonable times (but in any
event, within three (3) Business Days after notice from the Lender and
during all normal business hours) and at reasonable intervals, to visit all
of its offices, to discuss its financial matters with its officers, directors
and, after forty-eight (48) hours notice to the Borrower and independent
public accountant (and the Borrower hereby authorizes such independent public
accountant to discuss the Borrower's and its Subsidiaries' financial matters
with the Lender or its representatives whether or not any representative of
the Borrower is present) and to examine (and, at the expense of the Borrower,
photocopy extracts from) any of its books or other corporate records. The
Borrower shall pay any reasonable fees of such independent public accountant
incurred in connection with the Lender's exercise of its rights pursuant to
this Section. Furthermore, the Borrower will permit the Lender, or its
agents, at the cost and expense of the Borrower, to enter upon the Oil and
Gas Properties and all parts thereof, for the purpose of investigating and
inspecting the condition and operation thereof, and shall permit reasonable
access to the field offices and other offices, including the principal place
of business, of the Borrower to inspect and examine the Oil and Gas
Properties.
SECTION VIII.1.6. Environmental Covenant. The Borrower will, and will
cause each of its Subsidiaries to,
(a) use, operate and maintain all of its facilities and
Properties in compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations relating
to environmental matters in effect and remain in compliance therewith, and
handle all Hazardous Materials in compliance with all applicable
Environmental Laws where failure to do so would reasonably be expected to
have a Material Adverse Effect;
(b) (i) promptly notify the Lender, and if requested by the
Lender, and provide copies of all written claims, complaints, notices or
inquiries relating to the condition of its facilities and Properties or
compliance with Environmental Laws, (ii) use all reasonable efforts within
ninety (90) days to have dismissed with prejudice any actions or proceedings
relating to compliance with Environmental Laws which would or could in the
reasonable opinion of the Lender have a Material Adverse Effect, and
(iii) diligently pursue cure of any material underlying environmental
problem which forms the basis of any such claim, complaint, notice or
inquiry; and
(c) provide such information and certifications which the Lender
may reasonably request from time to time to evidence compliance with this
Section 8.1.6.
SECTION VIII.1.7. Further Assurances.
(a) The Borrower shall, and shall cause each of its
Subsidiaries to, upon the request of the Lender, take such actions
and execute and deliver such documents and instruments as the Lender
shall require to ensure that the Lender shall, at all times, have
received currently effective, duly executed Loan Documents
encumbering Oil and Gas Properties of the Borrower and its
Subsidiaries constituting 85% of the Proven Reserves to which value
is given in the determination of the then current Borrowing Base
(with accompanying letters in lieu of transfer orders) and
satisfactory title evidence in form and substance reasonably
acceptable to the Lender in its reasonable business judgment as to
ownership of such Oil and Gas Properties; provided that, upon thirty
(30) days notice to the Borrower, the Lender may require, and the
Borrower and/or its Subsidiaries, as applicable, shall execute,
acknowledge and deliver to the Lender, Mortgages effectively
encumbering 100% of the Oil and Gas Properties of the Borrower and
its Subsidiaries to which value is given in the determination of the
then current Borrowing Base.
(b) If the Lender shall determine that, as of the date of
any Borrowing Base Redetermination, the Borrower or any of its
Subsidiaries shall have failed to comply with the preceding
subsection 8.1.7(a), the Lender may notify the Borrower in writing of
such failure and, within thirty (30) days from and after receipt of
such written notice by the Borrower, the Borrower or its Subsidiaries
(as applicable) shall execute and deliver to the Lender supplemental
or additional Loan Documents, in form and substance reasonably
satisfactory to the Lender and its counsel, securing payment of the
Notes and the other Obligations and covering additional assets not
then encumbered by any Loan Documents (together with current
valuations, Engineering Reports, and title evidence applicable to the
additional assets collaterally assigned, each of which shall be in
form and substance reasonably satisfactory to the Lender) such that
the Lender shall have received currently effective duly executed Loan
Documents encumbering Oil and Gas Properties constituting at least
85% (or, as provided in Subsection 8.1.7(a), 100%) of the Proven
Reserves of the Borrower and its Subsidiaries to which value is given
in the determination of the then current Borrowing Base (with
accompanying letters in lieu of transfer orders) and satisfactory
title evidence in form and substance acceptable to the Lender in its
reasonable business judgment as to ownership of such Oil and Gas
Properties.
(c) The Borrower shall ensure that all written information,
exhibits, certificates and reports furnished by or on behalf of the
Borrower to the Lender do not and will not contain any untrue
statement of a material fact and do not and will not omit to state
any material fact or any fact necessary to make the statements
contained therein not misleading in light of the circumstances in
which made, and will promptly disclose to the Lender and correct any
defect or error that may be discovered therein or in any Loan
Document or in the execution, acknowledgment or recordation thereof.
SECTION VIII.2. Negative Covenants. The Borrower agrees with the Lender
that, until all Commitments have terminated and all Obligations have been paid
and performed in full, the Borrower will perform the obligations set forth in
this Section 8.2.
SECTION VIII.2.1. Business Activities. The Borrower will not, and will not
permit its Subsidiaries to, engage in any business activity, except those
described in the first recital and such activities as may be incidental or
related thereto.
SECTION VIII.2.2. Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness, other than,
without duplication, the following:
(a) Indebtedness in respect of the Loans and other Obligations;
(b) Indebtedness in an aggregate principal amount not to exceed
$150,000 at any time outstanding which is incurred by the Borrower or any
of its Subsidiaries to a vendor of any assets to finance its acquisition of
such assets;
(c) unsecured Indebtedness incurred in the ordinary course of
business (including (i) open accounts extended by suppliers on normal trade
terms in connection with purchases of goods and services, and (ii) gas
balancing, but excluding Indebtedness incurred through the borrowing of
money or Contingent Liabilities);
(d) Hedging Obligations incurred pursuant to the Hedging
Agreements approved by the Lender pursuant to Sections 8.2.14;
(e) Contingent Obligations incurred to satisfy bonding
requirements imposed by any Government Agency not to exceed, in the
aggregate, $150,000;
(f) Indebtedness of its Subsidiaries existing as of the Effective
Date which is identified in Item 8.2.2(f) of the Disclosure Schedule;
(g) Indebtedness in respect of Capitalized Lease Obligations in
an amount not to exceed $150,000 at any time outstanding;
(h) Indebtedness owed by the Borrower to any of the Subsidiaries
or by any Subsidiary of the Borrower to the Borrower or any Subsidiary;
(i) endorsements of negotiable instruments for collection in the
ordinary course of business;
(j) subordinated Indebtedness of the Borrower to any of the
Principal Shareholders which contains terms and conditions, including
subordination provisions, acceptable to the Lender;
(k) Indebtedness of the Borrower and its Subsidiaries which are
Investments to the extent permitted by Section 8.2.5(b);
(l) subordinated Indebtedness of the Borrower to Existing
Creditors which contains terms and conditions, including subordination
provisions, acceptable to the Lender;
(m) additional Indebtedness not permitted by clauses (a) through
(l) above, provided, however, that the aggregate amount of all Indebtedness
incurred by the Borrower and its consolidated Subsidiaries pursuant to this
clause (l) shall not exceed $150,000 at any one time outstanding;
provided, however, that no Indebtedness otherwise permitted by clause (b) shall
be permitted if, after giving effect to the incurrence thereof, any Default
shall have occurred and be continuing.
SECTION VIII.2.3. Liens. The Borrower will not, and will not permit any
of the Subsidiaries to create, incur, assume or suffer to exist any Lien upon
any of its Property, revenues or assets, whether now owned or hereafter
acquired, except:
(a) Liens securing payment of the Obligations, granted pursuant
to any Loan Document;
(b) Liens granted to secure payment of Indebtedness of the type
permitted and described in clause (b) of Section 8.2.2 and covering only
those assets acquired with the proceeds of such Indebtedness;
(c) Liens granted to secure payment of Indebtedness of the type
permitted and described in clause (l) of Section 8.2.2;
(d) Hydrocarbon production sales contracts;
(e) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable without penalty or
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside
on its books;
(f) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not overdue
or being diligently contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP shall have been set
aside on its books; provided, that at no time shall such sums exceed in the
aggregate $150,000;
(g) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other
forms of governmental insurance or benefits, or to secure performance of
bonds, licenses, statutory obligations, and performance bonds, tenders,
statutory obligations, leases and contracts (other than for borrowed money),
all other obligations of a like nature entered into in the ordinary course
of business or to secure obligations on surety or appeal bonds, all other
obligations of a like nature;
(h) zoning and similar covenants, restrictions, easements,
servitudes, permits, conditions, exceptions, reservations, minor rights,
minor encumbrances, minor irregularities in title or conventional rights of
reassignment prior to abandonment and similar restrictions and other similar
encumbrances or title defects which do not materially interfere with the
occupation, use and enjoyment by the Borrower of its assets in the ordinary
course of business as presently conducted, or materially impair the value
thereof for the purpose of such business;
(i) judgment Liens in existence less than thirty (30) days after
the entry thereof or with respect to which execution has been stayed or the
payment of which is covered in full (subject to a customary deductible) by
insurance maintained with responsible insurance companies;
(j) deposits of cash to secure insurance in the ordinary course
of business;
(k) banker's liens arising by operation of law securing fees and
costs of such banks, but not liens securing borrowed money;
(l) Liens on cash collateral in favor of counterparties to
Hedging Agreements permitted by Section 8.2.14;
(m) Liens in favor of operators and non-operators under joint
operating agreements or similar contractual arrangements arising in the
ordinary course of the business of the Borrower to secure amounts owing,
which amounts are not yet due or are being contested in good faith by
appropriate proceedings, if such reserve as may be required by GAAP shall
have been made therefor;
(n) production sales agreements, division orders, operating
agreements and other agreements customary in the oil and gas business for
producing, processing, gathering, transporting and selling Hydrocarbons;
(o) the terms any provisions of the leases, unit agreements,
assignments and other transfer of title documents in the chain of title
under which the Borrower acquired the relevant Properties;
(p) any Liens securing Indebtedness, neither assumed nor
guaranteed by the Borrower nor on which it customarily pays interest,
existing upon real estate or rights in or relating to real estate acquired
by the Borrower for substation, metering station, pump station, storage,
gathering line, transmission line, transportation line, distribution line,
or right of way purposes, and any Liens reserved in leases for rent and
compliance with the terms of the leases in the case of leasehold estates,
so long as no default has occurred in the payment or performance thereof,
and to the extent that any such Lien referred to in this clause does not
materially impair the use of the Properties covered by such Lien for the
purposes for which such Properties is held by the Borrower;
(q) the statutory Lien to secure payment of the proceeds of
Hydrocarbon production established by Texas Bus. & Com. Code 9.319 and
similar laws of other jurisdictions;
(r) rights reserved to or vested in any Government Agency by the
terms of any right, power, franchise, grant, license, or permit, or by any
provision of law, to terminate such right, power, franchise, grant, license,
or permit or to purchase, condemn, expropriate, or recapture or to designate
a purchaser of any of the Properties of the Borrower; and
(s) rights of a common owner of any interest in real estate,
rights of way, or easements held by the Borrower and such common owner as
tenant in common or through other common ownership.
SECTION VIII.2.4. Financial Condition. The Borrower will not permit:
(a) Tangible Net Worth to be less than the sum of (i) $3,000,000
(at all times prior to December 31, 1999) and $5,000,000 (at all times from
and after December 31, 1999), plus (ii) fifty percent (50%) of Consolidated
Net Income of the Borrower and its consolidated Subsidiaries (excluding the
effects of consolidated net losses) for all Fiscal Quarters beginning after
the Effective Date and treated as a single accounting period, plus (iii)
one-hundred percent (100%) of the net proceeds received by the Borrower or
its Subsidiaries from the sale of any Non-Redeemable Stock by the Borrower
or any of its Subsidiaries at any time after the Effective Date;
(b) the Current Ratio at any time to be less than 1.1:1.0;
(c) the Debt to Capitalization Ratio at any time to be greater
than 82% (at all times prior to December 31,1999) and 70% (at all times from
and after December 31,1999); or
(d) the Interest Coverage Ratio for any four consecutive Fiscal
Quarters (i) after the Effective Date through and including June 30, 1999,
to be less than 2.0:1.0, and (ii) after June 30, 1999, to be less than
3.0:1.0; provided, however, for purposes of this clause (d) of Section 8.2.4
only, "Interest Expense" shall not include interest on the subordinated
Indebtedness described in clause (l) of Section 8.2.2, which interest is not
paid in cash but added to the principal amount of such Indebtedness.
The Borrower shall not, and shall not suffer or permit any Subsidiary to, make
any significant change in accounting treatment or reporting practices, except
as required by GAAP, or, without the consent of the Lender, such consent not
to be unreasonably withheld, change the fiscal year of the Borrower or of any
Subsidiary.
SECTION VIII.2.5. Investments. The Borrower will not, and will not permit
any of its Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) Cash Equivalent Investments;
(b) without duplication, Investments permitted as Indebtedness
pursuant to Section 8.2.2;
(c) without duplication, Investments in the nature of Capital
Expenditures;
(d) to the extent the formation or acquisition of any Subsidiary
is permitted hereunder, Investments in such Subsidiary; and
(e) Investments permitted by Section 8.2.8;
provided, however, that
(f) any Investment which when made complies with the requirements
of the definition of the term "Cash Equivalent Investment" may continue to
be held notwithstanding that such Investment if made thereafter would not
comply with such requirements; and
(g) no Investment otherwise permitted by clause (b) shall be
permitted to be made if, immediately before or after giving effect thereto,
any Default shall have occurred and be continuing.
SECTION VIII.2.6. Restricted Payments, etc. On and at all times after the
Effective Date:
(a) the Borrower will not, and will not permit any of its
Subsidiaries (other than a wholly-owned Subsidiary) to, declare, pay or make
any dividend or distribution (in cash, property or obligations) on any class
or shares of any class of partnership interest (now or hereafter
outstanding) of the Borrower or such Subsidiary or on any options, warrants
or other rights with respect to any interest or shares of any class of
partnership interest or capital stock (now or hereafter outstanding) of the
Borrower or such Subsidiary or apply any of its funds, property or assets
to the purchase, redemption, sinking fund or other retirement of, any class
of partnership interest or capital stock (now or hereafter outstanding) of
the Borrower, or options, warrants or other rights with respect to any
interest or shares of or in any class of partnership interest or capital
stock (now or hereafter outstanding) of the Borrower or such Subsidiary
(such dividends, distributions or applications being called "Distribution
Payments") other than Distribution Payments which do not cause the Borrower
to be in violation of the Restricted Payment Tests; and
(b) the Borrower will not permit any Subsidiary to make any
Distribution Payments other than to the Borrower; and
(c) the Borrower will not, and will not permit its Subsidiaries
to, make any deposit for any of the foregoing purposes.
SECTION VIII.2.7. Rental Obligations. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into at any time any arrangement
(excluding oil and gas leases entered into in the ordinary course of business)
which involves the leasing by the Borrower or any Subsidiary from any lessor of
any real or personal property (or any interest therein), except arrangements
which, together with all other such arrangements which shall then be in effect,
will not require the payment of an aggregate amount of rentals by the Borrower
or any Subsidiary in excess of (excluding escalations resulting from a rise in
the consumer price or similar index) $100,000 for any Fiscal Year or $500,000
during the full remaining term of such arrangements; provided, however, that
any calculation made for purposes of this Section 8.2.7 shall exclude any
amounts (i) required to be expended for maintenance and repairs, insurance,
taxes, assessments, and other similar charges and (ii) any amounts relating
to Capitalized Lease Obligations.
SECTION VIII.2.8. Consolidation, Merger, etc. The Borrower will not, and
will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate
with, or merge into or with, any other partnership or corporation, unless, in
the case of such consolidation or merger, the Borrower is the surviving entity
and Principal Shareholders retain control over the Borrower. The Borrower will
not create any Subsidiary except with the prior written consent of the Lender.
SECTION VIII.2.9. Asset Dispositions, etc. The Borrower will not, and will
not permit any of its Subsidiaries to, sell, transfer, lease, contribute or
otherwise convey, or grant options, warrants or other rights with respect to,
all or substantially all of the assets of the Borrower or any of its
Subsidiaries in any one transaction or in any series of transactions,
whether or not related; and the Borrower will not, and will not permit any of
its Subsidiaries to, sell, transfer, lease, contribute or otherwise convey,
or grant options, warrants or other rights with respect to, less than all or
any substantial part of its assets (including accounts receivable) to any
Person other than
(a) farmouts under standard industry terms of Properties
not holding Proven Reserves;
(b) abandonment of Properties not capable of producing
Hydrocarbons in paying quantities after the expiration of their
primary terms;
(c) if such assets are not in the Borrowing Base, such
sale, transfer, lease, contribution or conveyance is for cash or
other consideration having a value at least equal to the fair market
value of such assets;
(d) if such assets are in the Borrowing Base, the Borrower
complies with the terms of Section 3.1.2 and such sale, transfer,
lease, contribution or conveyance is for cash in an amount at least
equal to the fair market value of such assets; or
(e) as permitted by Section 2.7 of the Mortgages.
SECTION VIII.2.10. Modification of Certain Documents. Except with respect
to amendments that do not materially affect the rights of Lender under the Loan
Documents, the Borrower will not amend its Organic Documents or consent to any
amendment, supplement or other modification of any of the terms or provisions
contained in, or applicable to, the Material Contracts or any other agreement
affecting the Mortgaged Properties, in each case without the prior written
consent of the Lender.
SECTION VIII.2.11. Transactions with Affiliates. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into, or cause, suffer or
permit to exist any arrangement or contract with any of its other Affiliates
unless such arrangement or contract is fair and equitable to the Borrower and
is an arrangement or contract of the kind which would be entered into by a
prudent Person in the position of the Borrower or such Subsidiary with a
Person which is not one of its Affiliates.
SECTION VIII.2.12. Negative Pledges, Restrictive Agreements, etc. The
Borrower will not, and will not permit any of its Subsidiaries to, enter into
any agreement (excluding this Agreement, any other Loan Document and any
agreement governing any Indebtedness permitted by clauses (b) or (e) of Section
8.2.2 as in effect on the Effective Date as to the assets financed with the
proceeds of such Indebtedness) prohibiting
(a) the creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or hereafter
acquired (other than those assets subject to Liens permitted by
Section 8.2.3(b)), or the ability of the Borrower or any other
Obligor to amend or otherwise modify this Agreement or any other Loan
Document; or
(b) the ability of any Subsidiary to make any payments,
directly or indirectly, to the Borrower by way of dividends,
advances, repayments of loans or advances, reimbursements of
management and other intercompany charges, expenses and accruals or
other returns on investments, or any other agreement or arrangement
which restricts the ability of any such Subsidiary to make any
payment, directly or indirectly, to the Borrower.
SECTION VIII.2.13. Take or Pay Contracts. Except as disclosed to the
Lender in Item 8.2.13 of the Disclosure Schedule, and except for reservation
charges payable for reservations of capacity in gathering systems and pipelines
incurred in the ordinary course of business on an arm's length basis for
volumes reasonably expected to be produced from the Borrowers' Properties to be
transported through such systems and pipelines, the Borrower will not, and will
not permit any of its Subsidiaries to, enter into or be a party to any
arrangement for the purchase of materials, supplies, other property (including
without limitation Hydrocarbons), or services if such arrangement requires that
payment be made by the Borrower or such Subsidiary regardless of whether such
materials, supplies, other property, or services are delivered or furnished to
it.
SECTION VIII.2.14. Hydrocarbon Hedging. The Borrower will not, and will
not permit any of its Subsidiaries to, enter into Hydrocarbon Hedging
Agreements except those that (a) are with counterparties reasonably
acceptable to the Lender, (b) do not result in Hedging Obligations that are
at any time in excess of sixty percent (60%) of the value of the proved
developed producing Hydrocarbon reserves owned by the Borrower and its
Subsidiaries according to the most recent Engineering Report delivered to the
Lender and (c) the amount of the Hedging Obligation for the particular
Hydrocarbon (i.e. - gas or oil) must not be materially in excess of the
proportion that such Hydrocarbon bears to the total amount of proved
developed Hydrocarbon reserves owned by the Borrower and its Subsidiaries.
(For example, if the Borrower and its Subsidiaries owned
proved developed producing Hydrocarbon reserves that were 45% oil-producing
Properties and 55% gas-producing Properties, then any Hydrocarbon Hedging
Obligation of the Borrower or its Subsidiaries for oil could not be materially
more than 45% of 60% of the value of the proved developed producing Hydrocarbon
reserves owned by the Borrower and its Subsidiaries according to the most
recent Engineering Report delivered to the Lender.)
ARTICLE IX
EVENTS OF DEFAULT
SECTION IX.1. Listing of Events of Default. Each of the following events
or occurrences described in this Section 9.1 shall constitute an "Event of
Default".
SECTION IX.1.1. Non-Payment of Obligations. The Borrower shall default in
the payment or prepayment when due of any principal of any Loan; the Borrower
shall default in the payment when due of any Reimbursement Obligation or
Hedging Obligation under a Hedging Agreement in effect between the Borrower
and the Lender or an Affiliate of the Lender; or the Borrower shall default
(and such default shall continue unremedied for a period of five (5) days)
in the payment when due of any interest on any Loan or any fee or of any
other Obligation.
SECTION IX.1.2. Breach of Warranty. Any representation or warranty of the
Borrower or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it or any other writing or certificate
furnished by or on behalf of the Borrower or any other Obligor to the Lender
for the purposes of or in connection with this Agreement or any such other
Loan Document (including any certificates delivered pursuant to Article VI)
is or shall be incorrect when made in any material respect.
SECTION IX.1.3. Non-Performance of Certain Covenants and Obligations. The
Borrower shall default in the due performance and observance of any of its
obligations under Section 3.1.2, Section 8.1 (other than 8.1.2, 8.1.3 and
8.1.6) or Section 8.2.
SECTION IX.1.4. Non-Performance of Other Covenants and Obligations. The
Borrower or any other Obligor shall default in the due performance and
observance of any other agreement contained herein or in any other Loan
Document executed by it, and such default shall continue unremedied for a
period of fifteen (15) days after notice thereof shall have been given to
the Borrower by the Lender.
SECTION IX.1.5. Default on Other Indebtedness.
(a) A default shall occur in the payment when due (subject to any
applicable grace period), whether by acceleration or otherwise, of any
Indebtedness (including any subordinated indebtedness permitted by Section
8.2.2 and any Hedging Agreements in effect between the Borrower and the
Lender or any Affiliate of the Lender, but excluding Indebtedness described
in Section 9.1.1) of the Borrower, any consolidated Subsidiary or other
Obligor having a principal amount, individually or in the aggregate, in
excess of $150,000, or a default shall occur in the performance or
observance of any obligation or condition with respect to such Indebtedness
if the effect of such default is to accelerate the maturity of any such
Indebtedness or such default shall continue unremedied for any applicable
period of time sufficient to permit any holder of such Indebtedness, or any
trustee or agent for such holders, to cause such Indebtedness to become due
and payable prior to its expressed maturity.
(b) A failure to pay when due any royalty, overriding royalty or
similar interest burdening the Oil and Gas Properties of the Borrower, in
the aggregate, in excess of $50,000.
SECTION IX.1.6. Judgments. Any judgment, decree, arbitration award or
order for the payment of money in excess of $150,000 in excess of valid and
collectible insurance in respect thereof the payment of which is not being
disputed or contested by the insurer or insurers shall be rendered against the
Borrower, any consolidated Subsidiary, or other Obligor and either
(a) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order; or
(b) there shall be any period of ten (10) consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect.
SECTION IX.1.7. Pension Plans. Any of the following events shall occur
with respect to any Pension Plan
(a) the institution of any steps by the Borrower, any member of
its Controlled Group or any other Person to terminate a Pension Plan if, as
a result of such termination, the Borrower or any such member could be
required to make a contribution to such Pension Plan, or could reasonably
expect to incur a liability or obligation to such Pension Plan; or
(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA.
SECTION IX.1.8. Control of the Borrower. Any Change in Control shall
occur.
SECTION IX.1.9. Bankruptcy, Insolvency, etc. The Borrower or any other
Obligor shall
(a) become insolvent or generally fail to pay, or admit in
writing its inability or unwillingness to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian for the Borrower or any
other Obligor or any property of any thereof, or make a general assignment
for the benefit of creditors;
(c) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Borrower or any other Obligor or for
a substantial part of the property of any thereof, and such trustee,
receiver, sequestrator or other custodian shall not be discharged within
sixty (60) days, provided that the Borrower and each other Obligor hereby
expressly authorizes the Lender to appear in any court conducting any
relevant proceeding during such 60-day period to preserve, protect and
defend its rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Borrower or any other Obligor, and, if any
such case or proceeding is not commenced by the Borrower or such other
Obligor, such case or proceeding shall be consented to or acquiesced in by
the Borrower or such other Obligor or shall result in the entry of an order
for relief or shall remain for sixty (60) days undismissed, provided that
the Borrower and each other Obligor hereby expressly authorizes the Lender
to appear in any court conducting any such case or proceeding during such
60-day period to preserve, protect and defend its rights under the Loan
Documents; or
(e) take any action authorizing, or in furtherance of, any of the
foregoing.
SECTION IX.1.10. Impairment of Security, etc. Any Loan Document, or any
Lien granted thereunder, shall (except in accordance with its terms), in whole
or in part, terminate, cease to be effective or cease to be the legally valid,
binding and enforceable obligation of any Obligor party thereto; the Borrower,
any other Obligor or any other party shall, directly or indirectly, contest in
any manner such effectiveness, validity, binding nature or enforceability; or
any Lien securing any Obligation shall, in whole or in part, cease to be a
perfected first priority Lien, subject only to those exceptions expressly
permitted by such Loan Document.
SECTION IX.1.11. Material Adverse Effect. Any Material Adverse Effect
shall occur.
SECTION IX.2. Action if Bankruptcy. If any Event of Default described in
clauses (a) through (d) of Section 9.1.9 shall occur with respect to the
Borrower or any other Obligor, the Commitments (if not theretofore terminated)
shall automatically terminate and the outstanding principal amount of all
outstanding Loans and all other Obligations shall automatically be and become
immediately due and payable, without notice or demand.
SECTION IX.3. Action if Other Event of Default. If any Event of Default
(other than any Event of Default described in clauses (a) through (d) of
Section 9.1.9 with respect to the Borrower or any other Obligor) shall occur
for any reason, whether voluntary or involuntary, and be continuing, the
Lender, may by notice to the Borrower declare all or any portion of the
outstanding principal amount of the Loans and other Obligations to be due
and payable and/or the Commitments (if not theretofore terminated) to be
terminated, whereupon the full unpaid amount of such Loans and other
Obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand or presentment,
and/or, as the case may be, the Commitments shall terminate.
SECTION IX.4. Rights Not Exclusive. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by Applicable Law or
in equity, or under any other instrument, document or agreement now existing or
hereafter arising.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION X.1. Waivers, Amendments, etc. The provisions of this Agreement
and of each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented
to by the Borrower and the Lender. No failure or delay on the part of the
Lender in exercising any power or right under this Agreement or any other
Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to
or demand on the Borrower in any case shall entitle it to any notice or
demand in similar or other circumstances. No waiver or approval by the
Lender under this Agreement or any other Loan Document shall, except as may
be otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
SECTION X.2. Notices.
(a) All notices and other communications provided to any party
hereto under this Agreement or any other Loan Document shall be in writing
and shall be hand delivered or sent by overnight courier, certified mail
(return receipt requested), or telecopy to such party at its address or
telecopy number set forth on the signature pages hereof or set forth in the
Lender Assignment Notice or at such other address or telecopy number as may
be designated by such party in a notice to the other parties. Without
limiting any other means by which a party may be able to provide that a
notice has been received by the other party, a notice shall be deemed to be
duly received (a) if sent by hand, on the date when left with a responsible
person at the address of the recipient; (b) if sent by telefax, on the date
of receipt by the sender of an acknowledgment or transmission reports
generated by the machine from which the telefax was sent indicating that the
telefax was sent in its entirety to the recipient's telefax number.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the
date deposited into the U.S. mail, or if delivered, upon delivery.
(c) Any agreement of the Lender herein to receive certain notices
by telephone or facsimile is solely for the convenience and at the request
of the Borrower. The Lender shall be entitled to rely on the authority of
any Person purporting to be a Person authorized by the Borrower to give such
notice and the Lender shall not have any liability to the Borrower or other
Person on account of any action taken or not taken by the Lender in reliance
upon such telephonic or facsimile notice. The obligation of the Borrower
to repay the Loans shall not be affected in any way or to any extent by any
failure by the Lender to receive written confirmation of any telephonic or
facsimile notice or the receipt by the Lender of a confirmation which is at
variance with the terms understood by the Lender to be contained in the
telephonic or facsimile notice.
SECTION X.3. Payment of Costs and Expenses. The Borrower agrees to pay
within thirty (30) days after written demand all reasonable expenses of the
Lender (including the reasonable fees and out-of-pocket expenses of internal
and external counsel to the Lender and of local counsel, if any, who may be
retained by counsel to the Lender) in connection with
(a) the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document, including schedules and exhibits,
and any amendments, waivers, consents, supplements or other modifications
to this Agreement or any other Loan Document as may from time to time
hereafter be required, whether or not the transactions contemplated hereby
are consummated,
(b) the filing, recording, refiling or rerecording of the
Mortgages, the Security Agreements, the Pledge Agreements and/or any Uniform
Commercial Code financing statements relating thereto and all amendments,
supplements and modifications to, and all releases and terminations of, any
thereof and any and all other documents or instruments of further assurance
required to be filed or recorded or refiled or rerecorded by the terms
hereof or of the Mortgages, the Security Agreements and the Pledge
Agreements, and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save the Lender harmless from all
liability for, any stamp or other taxes (other than any income or franchise tax
of the Lender) which may be payable in connection with the execution or
delivery of this Agreement, the borrowings hereunder, the issuance of the
Notes, the issuance of the Letters of Credit, or any other Loan Documents.
The Borrower also agrees to reimburse the Lender within thirty (30) days
after written demand for all reasonable out-of-pocket expenses (including
attorneys' fees and legal expenses of internal and external attorneys, and
the expenses of any accountant, engineer or other expert retained or
utilized in connection therewith) incurred by the Lender in connection with
(x) the negotiation of any restructuring or "work-out", whether or not
consummated, of any Obligations and (y) the enforcement of any Obligations.
All requests for payment under this Section 10.3 shall be accompanied by
invoices containing reasonable details.
SECTION X.4. Indemnification. In consideration of the execution and
delivery of this Agreement by the Lender and the extension of the Commitments,
the Borrower hereby indemnifies, exonerates and holds the Lender, any Issuer
and each of their respective officers, directors, employees and agents
(collectively, the "Indemnified Parties") free and harmless from and against
any and all actions, causes of action, suits, losses, costs, liabilities and
damages, and expenses incurred in connection therewith (irrespective of whether
any such Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys' fees and disbursements
(collectively, the "Indemnified Liabilities"), incurred by the Indemnified
Parties or any of them as a result of, or arising out of, or relating to
(a) this Agreement, any Loan Document or any document
contemplated by or referred to herein;
(b) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Loan, including any
Acquisition, or the use of any Letter of Credit;
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or assets of any Person,
whether or not the Lender is party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to any
Environmental Law or the condition of any facility or Property owned, leased
or operated by the Borrower or any of its Subsidiaries;
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any facility
or Property owned, leased or operated by the Borrower or any of its
Subsidiaries thereof of any Hazardous Material (including any losses,
liabilities, damages, injuries, costs, expenses or claims asserted or
arising under any Environmental Law), regardless of whether caused by, or
within the control of, the Borrower or any of its Subsidiaries; or
(f) any misrepresentation, inaccuracy or breach in or of
Section 7.17 or Section 8.1.6,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or wilful misconduct. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under Applicable Law. The
obligations in this Section 10.4 shall survive payment of all other
Obligations. At the election of any Indemnified Party, the Borrower shall
defend such Indemnified Party using legal counsel satisfactory to such
Indemnified Party in such Person's sole discretion, at the sole cost and
expense of the Borrower. All amounts owing under this Section 10.4 shall be
paid within thirty (30) days after written demand.
SECTION X.5. Survival. The obligations of the Borrower under Sections 10.3
and 10.4 shall in each case survive any termination of this Agreement, the
payment in full of all Obligations and the termination of all Commitments. The
representations and warranties made by each Obligor in this Agreement and in
each other Loan Document shall survive the execution and delivery of this
Agreement and each such other Loan Document.
SECTION X.6. Severability. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall,
as to such provision and such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity
or enforceability of such provision in any other jurisdiction.
SECTION X.7. Headings. The various headings of this Agreement and of each
other Loan Document are inserted for convenience only and shall not affect the
meaning or interpretation of this Agreement or such other Loan Document or any
provisions hereof or thereof.
SECTION X.8. Execution in Counterparts, Effectiveness, etc. This Agreement
may be executed by the parties hereto in several counterparts, each of which
shall be executed by the Borrower and the Lender and be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective when counterparts hereof
are executed on behalf of the Borrower and the Lender. This Agreement is
made and entered into for the sole protection and legal benefit of the
Borrower and the Lender and Persons indemnified hereunder, and their
permitted successors and assigns, and no other Person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of
action or claim in connection with, this Agreement or any of the other Loan
Documents.
SECTION X.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTES
AND EACH OTHER LOAN DOCUMENT (OTHER THAN THE MORTGAGES OR AS EXPRESSLY PROVIDED
IN ANY SUCH DOCUMENT) SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. This Agreement, the
Notes and the other Loan Documents constitute the entire understanding among
the parties hereto with respect to the subject matter hereof and supersede
any prior agreements, written or oral, with respect thereto.
SECTION X.10. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the Lender; and
(b) the rights of sale, assignment and transfer of the Lender are
subject to Section 10.11.
SECTION X.11. Sale and Transfer of Loans and Notes; Participations in Loans
and Notes. The Lender may assign, or sell participations in, its Loans and
Commitments to one or more other Persons in accordance with this Section 10.11.
SECTION X.11.1. Assignments. The Lender may at any time assign and
delegate to one or more Persons, including without limitation, banks or other
financial institutions (each Person to whom such assignment and delegation is
to be made, being hereinafter referred to as an "Assignee Lender"), all or any
fraction of the Lender's total Loans and Commitments (which assignment and
delegation shall be of a constant, and not a varying, percentage of all the
Lender's Loans and Commitments) in a minimum aggregate amount of $1,000,000 (or
the entire remaining amount of the Lender's Loans and Commitments); provided,
however, that the Lender is required at all times to maintain Loans, Letter of
Credit Outstandings and Commitments hereunder in an aggregate amount of
$1,000,000 (unless the Lender shall have reduced its Loans, Letter of Credit
Outstandings and Commitments to zero); provided, further, however, that the
Borrower and each other Obligor shall be entitled to continue to deal solely
and directly with the Lender in connection with the interests so assigned and
delegated to an Assignee Lender until
(a) written notice of such assignment and delegation, together
with payment instructions, addresses and related information with respect
to such Assignee Lender, shall have been given to the Borrower by the Lender
and such Assignee Lender,
(b) such Assignee Lender shall have executed and delivered to the
Borrower and the Lender a Lender Assignment Notice, accepted by the Lender,
and
(c) the processing fees described below shall have been paid.
From and after the date that the Assignee Lender delivers such Lender
Assignment Notice, (x) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights
and obligations hereunder have been assigned and delegated to such Assignee
Lender in connection with such Lender Assignment Notice, shall have the
rights and obligations of a Lender hereunder and under the other Loan
Documents, and (y) the assignor Lender, to the extent that rights and
obligations hereunder have been assigned and delegated by it in connection
with such Lender Assignment Notice, shall be released from its obligations
hereunder and under the other Loan Documents. Within five Business Days
after its receipt of notice that the Lender has received an executed Lender
Assignment Notice and the Borrower has received from the Lender execution
copies of appropriate Notes, the Borrower shall execute and
deliver to the relevant Assignee Lender new Notes evidencing such Assignee
Lender's assigned Loans and Commitments and, if the assignor Lender has
retained Loans and Commitments hereunder, replacement Notes in the principal
amount of the Loans and Commitments retained by the assignor Lender hereunder
(each such Note to be in exchange for, but not in payment of, the
corresponding Note then held by such assignor Lender). The assignor Lender
shall mark the predecessor Note "exchanged" and deliver it to the Borrower.
Accrued interest on that part of the predecessor Note evidenced by the new
Notes, and accrued fees, shall be paid as provided in the Lender Assignment
Notice. Accrued interest on that part of the predecessor Note evidenced by
the replacement Notes shall be paid to the assignor Lender. Accrued interest
and accrued fees shall be paid at the same time or times provided in the
predecessor Notes and in this Agreement. Such assignor Lender or such
Assignee Lender must also pay a processing fee to the Lender upon delivery
of any Lender Assignment Notice in the amount of $2,500. Any attempted
assignment and delegation not made in accordance with this Section
10.11.1 shall be null and void. Nothing contained in this Agreement shall
prohibit any Lender from pledging or assigning any Note to any Federal Reserve
Bank in accordance with Applicable Law.
SECTION X.11.2. Participations. The Lender may at any time sell to one or
more Persons, including without limitation commercial banks (each of such
commercial banks and other Persons being herein called a "Participant")
participating interests in any of the Loans, Commitments, or other interests of
the Lender hereunder; provided, however, that
(a) no participation contemplated in this Section 10.11.2 shall
relieve the Lender from its Commitments or its other obligations hereunder
or under any other Loan Document,
(b) the Lender shall remain solely responsible for the
performance of its Commitments and such other obligations,
(c) the Borrower and each other Obligor shall continue to deal
solely and directly with the Lender in connection with the Lender's rights
and obligations under this Agreement and each of the other Loan Documents,
and
(d) the Borrower shall not be required to pay any amount under
Section 5.2 or Section 10.3 that is greater than the amount which it would
have been required to pay had no participating interest been sold.
(e) the Lender shall not transfer, grant or assign any
participation under which the Participant shall have rights to approve any
amendment to or waiver of this Agreement except to the extent such amendment
or waiver would (i) increase the amount of the Participants' Loans or
Commitment, (ii) reduce the principal of, or interest on, any of the
Lender's Loans, or any fees payable to the Lender hereunder, (iii) postpone
any date fixed for any scheduled payment of principal of, or interest on,
any of the Lender's Loans, or any fees or other amounts payable to the
Lender hereunder or (iv) release all of substantially collateral security
for any Obligation, and
(f) in a participation certificate or other document evidencing
such participating interest, the Participant shall acknowledge that the
confidentiality obligations of Section 10.14 shall be binding upon the
Participant.
Each Participant shall be entitled to the benefits of Section 4.8, 5.1, 5.2,
5.4, 10.3 and 10.4; provided that no Participant shall be entitled to receive
any greater amount pursuant to such Sections than the transferor Lender would
have been entitled to receive in respect of the amount of the participating
interest transferred by such transferor Lender to such Participant had no such
transfer occurred; and provided further that the Borrower shall not be required
to pay an amount under any Loan Document that is greater than the amount which
it would have been required to pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
Sections 5.1 and 5.2 (except as provided in Section 10.11.2(d)), 10.3 and 10.4,
shall be considered a Lender.
SECTION X.12. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE LENDER OR THE BORROWER
SHALL BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF ILLINOIS OR IN
THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS;
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL
OR OTHER PROPERTY MAY BE BROUGHT, AT THE LENDER'S OPTION, IN THE COURTS OF
ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE
BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS
SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE BORROWER
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND
ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE
BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION X.13. Waiver of Jury Trial. THE LENDER AND THE BORROWER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE LENDER OR THE BORROWER. THE BORROWER ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND
EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS
AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
SECTION X.14. Notice THIS WRITTEN AGREEMENT TOGETHER WITH THE OTHER LOAN
DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
FUTURE PETROLEUM CORPORATION, a Utah corporation
/s/ Carl Price
By Carl Price
Title: President
Address: 2351 West Northwest Highway
Suite 2130, Dallas, TX 75220
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Title:
Address: 231 South LaSalle Street
Chicago, Illinois 60697
All notices should be sent to:
333 Clay Street, Suite 4550
Houston, Texas 77002
Fax: (713) 651-4888
(The Schedules and Exhibits will be provided upon request)
SCHEDULE I Disclosure Schedule
SCHEDULE II Subsidiaries
SCHEDULE III Certain Consents and Mortgage Consents
EXHIBIT A Form of Secured Promissory Note
EXHIBIT B Form of Security Agreement
EXHIBIT C Form of Borrowing Request
EXHIBIT D Form of Guaranty
EXHIBIT E-1 Form of California Mortgage
EXHIBIT E-2 Form of Multi-State Mortgage
EXHIBIT F-1 Form of Pledge Agreement (Partnership Interests)
EXHIBIT F-2 Form of Pledge Agreement (Stock)
EXHIBIT G Form of Lender Assignment Notice
EXHIBIT H Form of Opinion of Counsel to the Borrower, et al.
EXHIBIT I-1 Form of Pre-Closing Title Opinion of Special Counsel to the
Borrower
EXHIBIT I-2 Form of Post-Closing Title Opinion of Special Counsel to
the Borrower
EXHIBIT J Form of Consent
EXHIBIT K Form of Issuance Request
EXHIBIT L Form of Letter of Credit
EXHIBIT 10.11
MASTER SUBORDINATION AGREEMENT
THIS MASTER SUBORDINATION AGREEMENT (this "Subordination Agreement"),
dated as of August 14, 1998, is between ENCAP EQUITY 1994 LIMITED PARTNERSHIP,
a Texas limited partnership ("EnCap 1994") and ENERGY CAPITAL INVESTMENT
COMPANY PLC, an English investment company ("EnCap PLC"; together with EnCap
1994, sometimes collectively herein called "Junior Creditor") and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association, as agent (together with its successors, transferees and
assigns, "Senior Creditor").
W I T N E S S E T H:
A. FUTURE PETROLEUM CORPORATION, a Utah corporation ("Borrower"),
FUTURE CAL-TEX CORPORATION, a Texas corporation ("Newco"), FUTURE ACQUISITION
1995, LTD., a Texas limited partnership ("Future 1995"), BMC DEVELOPMENT NO. 1
LIMITED PARTNERSHIP, a Texas limited partnership ("BMC") and NCI-SHAWNEE
LIMITED PARTNERSHIP, a Texas limited partnership ("Shawnee"; together with
Borrower, BMC, Future 1995 and Newco, sometimes collectively called the
"Company"), is the owner of certain oil and gas leases and other related
real and personal property interests located in various counties and states,
as more fully described on Exhibit A hereto (the "Land"), together with the
buildings, structures and other improvements located and constructed thereon,
the "Real Property".
B. Borrower is indebted to Junior Creditor and GECKO BOOTY 1994 I
LIMITED PARTNERSHIP, a Texas limited partnership ("Gecko"), which indebtedness
is evidenced by (i) that certain Renewal Promissory Note executed by Borrower,
on or about May 1, 1998, in favor of EnCap 1994, in the original principal sum
of $3,714,305.88; (ii) that certain Renewal Promissory Note executed by
Borrower, on or about May 1, 1998, in favor of EnCap PLC, in the original
principal sum of $3,370,694.12; (iii) that certain Renewal Promissory Note
executed by Borrower, on or about May 1, 1998, in favor of Gecko, in the
original principal sum of $175,000 (collectively, the "Junior Note"; the
obligations of Company to Junior Creditor, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due, are hereinafter collectively referred to as
the "Junior Obligations").
C. The Junior Obligations are secured by, among other things,
those certain mortgages and deeds of trust, covering the Real Property, more
fully described in Schedule I hereto (collectively, the "Junior Mortgages").
The Junior Obligations are also secured by, among other things, those certain
guaranties, pledges, security agreements and other documents and instruments
more fully described in Schedule I hereto (such agreements and instruments,
together with the Junior Mortgages, herein called the "Junior Security
Documents" and the real property and personal property collateral now or
hereafter encumbered by the Junior Security Documents herein called the "Junior
Collateral").
D. Contemporaneously with the execution and delivery of this
Subordination Agreement, Borrower has (i) paid in full all amounts due and
owing to Gecko under the Junior Note such that Gecko no longer has any right,
title or interest in the Junior Note, the Junior Security Documents or the
Junior Collateral, and (ii) paid a portion of the indebtedness to Junior
Creditor evidenced by the Junior Note, such that the amount currently
utstanding under the Junior Note is less than the original principal amount
thereof.
E. Company is also indebted to Senior Creditor under that certain
Credit Agreement dated as of August 14, 1998 (as the same may be from time to
time amended, modified, supplemented or amended and restated, the "Credit
Agreement"), between Borrower and Senior Creditor.
F. It is a condition precedent to extension of credit under the Credit
Agreement that Company execute and deliver, and cause each of the Subsidiaries
of the Borrower (collectively, the "Subsidiary Guarantors") to execute and
deliver mortgages, guaranties, pledges, security agreements and other documents
and instruments more fully described in Schedule II hereto (such agreements and
instruments herein called the "Senior Security Documents" and the real property
and personal property collateral now or hereafter encumbered by the Senior
Security Documents herein called the "Senior Collateral"), in favor of Senior
Creditor to secure the payment and performance by Company of the Obligations
under the Credit Agreement.
G. It is a condition precedent to the making of the loans under the
Credit Agreement that Junior Creditor subordinate its debt and liens from
Company and the Subsidiary Guarantors, including its liens against and security
interests in the Real Property arising under the Junior Mortgages and its
security interest in the other Junior Collateral to that of Senior Creditor and
its right to payment of the Junior Obligations to the Senior Obligations.
H. Junior Creditor has duly authorized the execution, delivery and
performance of this Subordination Agreement.
I. It is in the best interests of Junior Creditor to execute this
Subordination Agreement inasmuch as Junior Creditor will derive substantial
direct and indirect benefits from the extension of credit to Company by Senior
Creditor.
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce Senior Creditor to extend
credit pursuant to the Credit Agreement, Junior Creditor agrees, for the
benefit of Senior Creditor, as follows:
SECTION 1. Definitions. Capitalized terms used but not otherwise defined
herein shall have the respective meanings given to them in the Credit
Agreement. As used in this Subordination Agreement, the following terms
shall have the following respective meanings:
BMC is defined in Recital A.
Company is defined in Recital A.
Credit Agreement is defined in the Recital D.
Junior Collateral is defined in Recital C.
Junior Mortgages is defined in Recital C.
Junior Obligations is defined in Recital B.
Junior Note is defined in Recital B.
Junior Security Documents is defined in Recital C.
Land is defined in Recital A.
Real Property is defined in Recital A.
Senior Collateral is defined in Recital E.
Senior Creditor is defined in the preamble.
Senior Interest is defined in Section 3(b).
Senior Obligations means all Obligations to the Senior Creditor under
the Credit Agreement and the other Loan Documents (including (i) principal,
(ii) interest, including without limitation any and all interest accruing on
any of the Senior Obligations after the commencement of any proceedings
referred to in Section 4 hereof, notwithstanding any provision or rule of
law which might restrict the rights of Senior Creditor, as against the
Company or anyone else, to collect such interest, (iii) any Hedging
Obligation, (iv) costs, (v) fees (including reasonable attorneys' fees and
disbursements), (vi) expenses, and (vii) other liability or obligation
arising under or in connection with the Credit Agreement), howsoever
created, arising or evidenced under such documents, whether direct or
indirect, absolute or contingent, now or hereafter existing, or due or to
become due. For the purposes of this Subordination Agreement, Senior
Obligations shall include all liabilities described in this definition,
notwithstanding any right or power of the Company or any other Person to assert
any claim or defense as to the invalidity or unenforceability of any such
liabilities, and no such claim or defense shall affect or impair the agreements
and obligations of Junior Creditor hereunder.
Senior Security Documents is defined in Recital E.
Subordinate Interest is defined in Section 3(b).
Subordination Agreement is defined in the preamble.
SECTION 2. Notice of Junior Obligations, etc. Junior Creditor will, from
time to time: (a) promptly notify Senior Creditor of the creation of any
Junior Obligations, and of the issuance of any promissory note or other
instrument to evidence any Junior Obligations and (b) upon request by Senior
Creditor, cause any Junior Obligations which are not then evidenced by a
promissory note or other instrument of Company to be so evidenced. Such
note shall contain the following provision:
"The indebtedness evidenced by this instrument is subordinated
to the prior payment in cash in full of the Senior Obligations (as
defined in the Master Subordination Agreement, dated as of August
14, 1998, made by and between the "Junior Creditor" therein
(including the payee named herein) and Future Petroleum Corporation,
a Utah Corporation, Future CAL-TEX Corporation, a Texas corporation,
Future Acquisition 1995, Ltd., a Texas limited partnership, BMC
Development No. 1 Limited Partnership, a Texas limited partnership,
NCI Shawnee Limited Partnership, a Texas limited partnership, Future
Energy Corporation, a Nevada corporation and Future Petroleum
Corporation, a Texas corporation, in favor of Bank of America
National Trust and Savings Association (the "Subordination
Agreement") pursuant to, and to the extent provided in, the
Subordination Agreement by the maker hereof and payee named herein
in favor of Bank of America National Trust and Savings Association
and any person now or hereafter designated as its designees, agents,
successors or assigns."
SECTION 3. Subordination. Except as Senior Creditor may hereafter
otherwise expressly consent in writing,
(a) the payment of all Junior Obligations shall be postponed and
subordinated to the indefeasible payment in full of all Senior Obligations (and
the termination of all Commitments), and no payments or other distributions
whatsoever in respect of any Junior Obligations shall be made, nor shall any
property or assets of Company or any Subsidiary Guarantor be applied to the
purchase or other acquisition or to the defeasance or retirement of any Junior
Obligations; provided, that from time to time commencing on August 14, 2003,
Borrower may pay and Junior Creditor may receive and retain regularly scheduled
interest payments on the Junior Note so long as, both before and after the
making of each such interest payment, no Default shall have occurred and be
continuing, including without limitation, a Default under Section 8.2.4 of the
Credit Agreement,
(b) all mortgage or deed of trust liens and security interests under the
Junior Security Documents or otherwise, now existing or hereafter acquired by
Junior Creditor in any of the Junior Collateral or the Senior Collateral (the
"Subordinate Interest") shall be subordinated to the security interest of
Senior Creditor, under the Senior Security Documents or otherwise, in the
Senior Collateral (the "Senior Interest"), irrespective of the time or order of
attachment or perfection of any security interest (or any defects or omissions
in respect thereof) or the time or order of filing of any financing statements
or other documents, or any statutes, rules, law, or court decisions to the
contrary.
For the purposes of this Subordination Agreement, the Senior Obligations shall
not be deemed to have been indefeasibly paid in cash in full until the Senior
Creditor shall have received full payment of the Senior Obligations in cash,
which payment shall have been retained by the Senior Creditor for a period of
time in excess of all applicable preference or other similar periods under
applicable bankruptcy, insolvency or creditors' rights laws and all Commitments
of the Senior Creditor under the Credit Agreement shall have irrevocably
terminated.
SECTION 4. Bankruptcy, Insolvency, etc. In the event of any
dissolution, winding up, liquidation, readjustment, reorganization or other
similar proceedings relating to Company, any Subsidiary Guarantor or to any of
their creditors, as such, or to its property (whether voluntary or involuntary,
partial or complete, and whether in bankruptcy, insolvency or receivership, or
upon an assignment for the benefit of creditors, or any other marshalling of
the assets and liabilities of Company or any Subsidiary Guarantor, or any
sale of all or substantially all of the assets of Company or any Subsidiary
Guarantor, or otherwise), the Senior Obligations shall first be paid in full
in cash and all Commitments terminated before the Junior Creditor shall be
entitled to receive and to retain any payment or distribution in respect of
the Junior Obligations and, in order to implement the foregoing: (a) all
payments and distributions of any kind or character in respect of the Junior
Obligations to which Junior Creditor would be entitled if the Junior
Obligations were not subordinated, or subordinated and pledged or assigned
pursuant to this Subordination Agreement, shall be made directly to Senior
Creditor; (b) Junior Creditor shall promptly file a claim or claims, in the
form required in such proceedings, for the full outstanding amount of the
Junior Obligations, and shall cause said claim or claims to be approved and
all payments and other distributions in respect thereof to be made directly
to Senior Creditor; and (c) Junior Creditor hereby irrevocably agrees that,
notwithstanding any agreement between Junior Creditor and the Company or the
Subsidiary Guarantors to the contrary, Senior Creditor may, at its sole
discretion, in the name of Junior Creditor or otherwise, demand, sue for,
collect, receive and receipt for any and all such payments or distributions,
and file, prove and vote or consent in any such proceedings with respect to
any and all claims of Junior Creditor relating to the Junior Obligations.
SECTION 5. Payments Held in Trust. In the event that Junior Creditor
receives any payment or other distribution of any kind or character from
Company or any Subsidiary Guarantor, or from any other source whatsoever, in
respect of any of the Junior Obligations, such payment or other distribution
shall be received in trust for Senior Creditor and promptly turned over by
Junior Creditor to Senior Creditor. Junior Creditor will mark its books and
records, and cause Company to mark its books and records, so as clearly to
indicate that the Junior Obligations are subordinated in accordance with the
terms of this Subordination Agreement, and will cause to be clearly inserted
in any promissory note or other instrument which at any time evidences any
of the Junior Obligations the statement described in Section 1. Junior
Creditor will execute such further documents or instruments and take such
further action as Senior Creditor may reasonably from time to time request
to carry out the intent of this Subordination Agreement.
SECTION 6. Application of Payments; Limited Subrogation. All payments
and distributions received by Senior Creditor in respect of the Junior
Obligations, to the extent received in or converted into cash, may be applied
by Senior Creditor first to the payment of any and all expenses (including
attorneys' fees and legal expenses) paid or incurred by Senior Creditor in
enforcing this Subordination Agreement, or any security therefor, and any
balance thereof shall, solely as between Junior Creditor and Senior Creditor,
be applied by Senior Creditor in such order of application as Senior Creditor
may from time to time select, toward the payment of the Senior Obligations
remaining unpaid; but, as between Company, any Subsidiary Guarantor and any
of their creditors, no such payments or distributions of any kind or
character shall be deemed to be payments or distributions in respect of the
Senior Obligations; and, notwithstanding any such payments or distributions
received by Senior Creditor in respect of the Junior Obligations and so
applied by Senior Creditor toward the payment of the Senior Obligations,
Junior Creditor shall be subrogated to the then existing rights of Senior
Creditor, if any, in respect of the Senior Obligations, only at such time as
this Subordination Agreement shall have terminated and Senior Creditor shall
have received indefeasible payment of the full amount of the Senior
Obligations and all Commitments shall have terminated.
SECTION 7. Waivers by Junior Creditor. Junior Creditor hereby
waives: (a) notice of acceptance by Senior Creditor or any holder of the
Senior Note of this Subordination Agreement; (b) all notices that may be
required by statute, rule of law or otherwise, now or hereafter in effect,
to preserve intact any rights against Junior Creditor, including notice of
the existence or creation or non-payment of all or any of the Senior
Obligations or the exercise of any remedies under the Loan Documents or with
respect to the Senior Collateral; (c) all diligence in collection or
protection of or realization upon the Senior Obligations or any thereof or
any security therefor, including any claim that any Senior Creditor may not
have disposed of any such security in a commercially reasonable manner or
that any Senior Creditor failed to exhaust any remedies (including against
any guarantor) or to mitigate the damages resulting from a Senior Default;
(d) any notice of any sale, transfer or other disposition by any Person of
any right under title to or interest in any Loan Document or the Collateral;
(e) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge, release or defense of a junior creditor or
that might otherwise limit exercise by any Senior Creditor of its rights
against Junior Creditor hereunder and (f) all rights and defenses arising
out of any election of remedies by any Senior Creditor, even though such
election of remedies may impair or destroy any rights of subrogation Junior
Creditor may have against the Company or any Subsidiary Guarantor by operation
of law or otherwise.
SECTION 8. Obligations of Junior Creditor. Junior Creditor will not,
without prior written consent of Senior Creditor, (a) transfer, assign, or
attempt to enforce or collect any Junior Obligations or any rights in respect
thereof, including without limitation the declaration of any default or breach
under or the acceleration of the maturity of the Junior Obligations, or any
attempt to liquidate, foreclose, enforce or realize on any of the Junior
Collateral (provided that nothing herein shall prevent Junior Creditor from
filing proofs of claim in any bankruptcy proceeding so long as Junior Creditor
is otherwise in compliance with its obligations in this Subordination
Agreement); (b) take any additional collateral for any Junior Obligations
except for liens on and security interests in the Senior Collateral where
such liens and security interests have been subordinated to the Senior
Interest as provided in this Subordination Agreement; (c) convert any
Junior Obligations into stock of Company or any Subsidiary Guarantor; (d)
sell, assign, transfer, endorse, pledge, encumber or otherwise dispose of
any of the Junior Obligations; (e) permit the terms of any of the Junior
Obligations to be changed in such a manner as to have an adverse effect upon
the rights or interests of the Senior Creditor; or (f) commence, or join
with any other creditor in commencing, any bankruptcy, reorganization or
insolvency proceedings with respect to Company or any Subsidiary Guarantor.
SECTION 9. Continuing Subordination; Termination. This Subordination
Agreement shall, in all respects, be a continuing agreement and shall
remain in full force and effect (notwithstanding, without limitation, the
dissolution of Junior Creditor) until the indefeasible payment in full of
all of the Senior Obligations and the termination of all Commitments.
Junior Creditor agrees that following such termination this Subordination
Agreement shall be automatically reinstated if for any reason any payment
made on the Senior Obligations is resginded or must be otherwise restored by
Senior Creditor, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise.
SECTION 10. Rights of Senior Creditor. Senior Creditor may, from time to
time, whether before or after any discontinuance of this Subordination
Agreement, at its discretion and without notice to Junior Creditor, take any or
all of the following actions: (a) retain or obtain a security interest in any
property to secure any of the Senior Obligations; (b) retain or obtain the
primary or secondary obligations of any other obligor or obligors with respect
to any of the Senior Obligations; (c) extend or renew for one or more periods
(whether or not longer than the original period), alter or exchange any of the
Senior Obligations, or release or compromise any obligation of any nature of
any obligor with respect to any of the Senior Obligations; and (d) release its
security interest in, or surrender, release or permit any substitution or
exchange for all or any part of any property securing any of the Senior
Obligations, or extend or renew for one or more periods (whether or not longer
than the original period), or release, compromise, alter or exchange any
obligations of any nature of any obligor with respect to any such property.
SECTION 11. Transfer of Senior Obligations. Senior Creditor may, from
time to time, whether before or after any discontinuance of this Subordination
Agreement, without notice to Junior Creditor, assign or transfer any or all of
the Senior Obligations, or any interest therein; and, notwithstanding any such
assignment or transfer or any subsequent assignment or transfer thereof, such
Senior Obligations shall be and remain Senior Obligations for the purposes of
this Subordination Agreement, and every immediate and successive assignee or
transferee of any of the Senior Obligations or of any interest therein shall,
to the extent of the interest of such assignee or transferee in the Senior
Obligations, be entitled to the benefits of this Subordination Agreement to the
same extent as if such assignee or transferee were the Senior Creditor;
provided, however, that, unless the Senior Creditor shall otherwise consent in
writing, the Senior Creditor shall have an unimpaired right, prior and superior
to that of any such assignee or transferee, to enforce this Subordination
Agreement, for the benefit of the Senior Creditor, as to those of the Senior
Obligations which the Senior Creditor has not assigned or transferred.
SECTION 12. Transfer of Collateral. Senior Creditor may, from time to
time, whether before or after any termination of this Subordination Agreement,
without notice to Junior Creditor, dispose of, and exercise any other rights
with respect to, any or all of the Collateral, free of the Subordinate
Interest; provided, however, that Junior Creditor does not waive hereby any
rights that may not be waived under Applicable Law. Junior Creditor shall,
upon any disposition of any of the Collateral by Senior Creditor, execute
and deliver any and all releases or other documents or agreements requested
by Senior Creditor to accomplish the disposition of any of the Collateral
free of the Subordinate Interest.
SECTION 13. Miscellaneous. Neither Senior Creditor, nor any holder
of the Senior Note shall be prejudiced in its rights under this Subordination
Agreement by any act or failure to act of Company, any Subsidiary Guarantor or
Junior Creditor, or any noncompliance of Company, any Subsidiary Guarantor or
Junior Creditor with any agreement or obligation, regardless of any knowledge
thereof which Senior Creditor, or any holder of the Senior Note may have, or
with which Senior Creditor, or such holder may be charged; and no action
permitted hereunder of Senior Creditor, or any holder of the Senior Note shall
in any way affect or impair the rights of Senior Creditor, or any holder of the
Senior Note, and the obligations of Junior Creditor under this Subordination
Agreement. No delay on the part of Senior Creditor, or any holder of the
Senior Note in the exercise of any right or remedy shall operate as a waiver
thereof, and no single or partial exercise by Senior Creditor, or any holder
of the Senior Note of any right or remedy shall preclude other or further
exercise thereof, or the exercise of any other right or remedy; nor shall any
modification or waiver of any of the provisions of this Subordination Agreement
be binding upon Senior Creditor, or any holder of the Senior Note, except by
the express written consent of Senior Creditor set forth in a writing duly
signed and delivered on behalf of Senior Creditor. For the purposes of this
Subordination Agreement, Senior Obligations shall include all obligations of
Company under or in connection with the Senior Note, notwithstanding any right
or power of Company or anyone else to assert any claim or defense as to the
invalidity or unenforceability of any such obligation, and no such claim or
defense shall affect or impair the agreements and obligations of Junior
Creditor hereunder.
SECTION 14. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telegraphic
communication) and, if to Senior Creditor or the Junior Creditor,
respectively, addressed, delivered or transmitted to it, at the address or
facsimile number set forth below its signature hereto or, as to either party,
at such other address or facsimile number as shall be designated by such
party in a written notice to each other party complying as to delivery with
the terms of this Section 14. Any notice, if mailed and properly addressed
and sent by prepaid courier service, shall be deemed given when received;
and notice, if transmitted by facsimile, shall be deemed given upon receipt
of the confirmation of transmission.
SECTION 15. Senior Creditor Appointed Attorney-in-Fact. Junior Creditor
hereby appoints Senior Creditor Junior Creditor's attorney-in-fact, with full
power of substitution, for the purpose of taking such action and executing
agreements, instruments and other documents in the name of Junior Creditor, or
otherwise, as Senior Creditor may deem necessary or advisable to accomplish the
purposes hereof, which appointment is coupled with an interest and is
irrevocable.
SECTION 16. Section Captions. Section captions used in this
Subordination Agreement are for convenience of reference only, and shall not
affect the construction of this Subordination Agreement.
SECTION 17. Severability. Wherever possible each provision of this
Subordination Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Subordination
Agreement shall be prohibited by or invalid under such law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Subordination Agreement.
SECTION 18. Governing Law, Entire Agreement, etc. THIS SUBORDINATION
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO CHOICE OF LAW OR
CONFLICTS OF LAW PROVISIONS. This Subordination Agreement constitutes the
entire understanding among the parties hereto with respect to the subject
matter hereof and supersedes any prior agreements, written or oral, with
respect thereto.
SECTION 19. Execution in Counterparts. This Subordination Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
SECTION 20. Binding Effect. This Subordination Agreement shall be
binding upon Junior Creditor, and upon the successors and assigns of Junior
Creditor; and all references herein to Company and to Junior Creditor,
respectively, shall be deemed to include any successor or successors, whether
immediate or remote, to Company and to Junior Creditor.
SECTION 21. Recorded Instruments. In order to effect the subordination
described in this Subordination Agreement, Junior Creditor and Senior Creditor
agree to execute, acknowledge and deliver such other recordable agreements and
instruments as may be reasonably necessary or desirable under the laws of the
jurisdictions in which the Junior Collateral and/or the Senior Collateral is or
may be located to give notice to third parties of this Subordination Agreement
and to otherwise implement this Subordination Agreement.
IN WITNESS WHEREOF, this Subordination Agreement has been executed
and delivered by Junior Creditor and Senior Creditor as of the date above first
written.
ENCAP EQUITY 1994 LIMITED PARTNERSHIP, a
Texas limited partnership
By: EnCap Investments L.C., General Partner
By: /s/ Gary R. Petersen
Name: Gary R. Petersen
Title: Managing Director
Address: 1100 Louisiana Street
Suite 3150
Houston, TX 77002
Attention: Gary R. Petersen
Facsimile: 713-659-6130
ENERGY CAPITAL INVESTMENT COMPANY PLC, an
English investment company
By: /s/ Gary R. Petersen
Name: Gary R. Petersen
Title: Director
Address: 1100 Louisiana Street
Suite 3150
Houston, TX 77002
Attention: Gary R. Petersen
Facsimile: 713-659-6130
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking
association, as agent
By: /s/ Richard A. Bernardy
Name: Richard A. Bernardy
Title: Vice President
Address: 333 Clay Street
Suite 4550
Houston, TX 77002
Attention: Richard A. Bernardy
Facsimile: 713-651-4888
Exhibit A and Schedule I will be provided on request.
Schedule II
Senior Security Documents
ACKNOWLEDGMENT AND AGREEMENT
Borrower and Subsidiary Guarantors each hereby acknowledge receipt of a
copy of the foregoing Master Subordination Agreement and consent to the terms
thereof. Borrower and Subsidiary Guarantors each agrees to be bound by the
terms and provisions of the foregoing Master Subordination Agreement, to make
no payments or distributions contrary to the terms and provisions thereof,
and to do every other act and thing necessary or appropriate to carry out
such terms and provisions.
Dated: August 14, 1998.
Company:
FUTURE PETROLEUM CORPORATION, a Utah
corporation
By: /s/ Carl Price
Name: Carl Price
Title: President
FUTURE CAL-TEX CORPORATION, a Texas
corporation
By:/s/ Carl Price
Name: Carl Price
Title: President
FUTURE ACQUISITION 1995, LTD., a Texas
limited partnership
By: Future Petroleum Corporation, a
Texas corporation, General Partner
By:/s/ Carl Price
Name: Carl Price
Title: President
BMC DEVELOPMENT NO. 1 LIMITED
PARTNERSHIP, a Texas limited partnership
By: Future Petroleum Corporation, a
Texas corporation, General Partner
By:/s/ Carl Price
Name: Carl Price
Title: President
NCI-SHAWNEE LIMITED PARTNERSHIP, a Texas
limited partnership
By: Future Petroleum Corporation, a
Texas corporation, General Partner
By:/s/ Carl Price
Name: Carl Price
Title: President
FUTURE ENERGY CORPORATION, a Nevada
corporation
By:/s/ Carl Price
Name: Carl Price
Title: President
FUTURE PETROLEUM CORPORATION, a Texas
corporation
By:/s/ Carl Price
Name: Carl Price
Title: President
EXHIBIT 10.12
PLEDGE AGREEMENT
(Stock)
THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of August 14,
1998, made by BARGO ENERGY RESOURCES, LTD., a Texas limited partnership, (the
"Pledgor"), in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
a national banking association (the "Lender").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, dated as of August 14, 1998
(together with all amendments and other modifications, if any, from time to
time thereafter made thereto, the "Credit Agreement"), between FUTURE PETROLEUM
CORPORATION, a Utah corporation (the "Borrower") and the Lender, the Lender has
extended Commitments to make Loans to, and issue Letters of Credit at the
request of, the Borrower; and
WHEREAS, the Borrower or an Affiliate (as defined in the Credit Agreement)
of the Borrower has entered into or may enter into certain Hedging Agreements
(as defined in the Credit Agreement) with the Lender or an Affiliate of the
Lender, pursuant to the terms of the Credit Agreement;
WHEREAS, as a condition precedent to the making of the initial Loan and
the issuance of Letters of Credit under the Credit Agreement, and the Lender's
or such Affiliate of the Lender's obligations under the Hedging Agreements
referred to above, the Pledgor is required to execute and deliver this Pledge
Agreement; and
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lender to make Loans (including
the initial Loan) to, and to issue Letters of Credit at the request of, the
Borrower pursuant to the Credit Agreement, and to induce the Lender or such
Affiliate of the Lender to enter into Hedging Agreements with the Borrower or
an affiliate of the Borrower, the Pledgor agrees, for the benefit of the
Lender, as follows:
ARTICLE I
DEFINITIONS
SECTION I.1 Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Borrower" is defined in the first recital.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the first recital.
"Distributions" means all stock dividends, liquidating dividends, shares
of stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock constituting Collateral, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect to
any Pledged Shares or other Pledged Property made in the ordinary course of
business and not a liquidating dividend.
"Lender" is defined in the preamble.
"Pledge Agreement" is defined in the preamble.
"Pledged Property" means all Pledged Shares, and all other pledged shares
of capital stock, all other securities, all assignments of any amounts due
or to become due with respect to the Pledged Shares, all other instruments
which are now being delivered by the Pledgor to the Lender or may from time
to time hereafter be delivered by the Pledgor to the Lender for the purpose
of pledge under this Pledge Agreement or any other Loan Document, and all
proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Attachment 1 hereto
as the issuer of the Pledged Shares identified opposite the name of such Person.
"Pledged Shares" means all shares of capital stock of any Pledged Share
Issuer which are delivered by the Pledgor to the Lender as Pledged Property
hereunder.
"Pledgor" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"U.C.C." means the Uniform Commercial Code as in effect in the State of
Illinois.
SECTION I.2 Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION I.3 U.C.C. Definitions. Unless otherwise defined herein or
the context otherwise requires, terms for which meanings are provided in the
U.C.C. are used in this Pledge Agreement, including its preamble and recitals,
with such meanings.
ARTICLE II
PLEDGE
SECTION II.1 Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Lender, and hereby grants to the Lender a continuing security interest in, all
of the following property (the "Collateral"):
II.1.1 All issued and outstanding shares of capital stock of
each Pledged Share Issuer identified in Attachment 1 hereto.
II.1.2 All other Pledged Shares issued from time to time.
II.1.3 All other Pledged Property, whether now or hereafter
delivered to the Lender in connection with this Pledge Agreement.
II.1.4 All Dividends, Distributions, interest, and other
payments and rights with respect to any Pledged Property.
II.1.5 All proceeds of any of the foregoing.
SECTION II.2 Security for Obligations. This Pledge
Agreement secures the prompt payment and performance in full of (a) all
Obligations now or hereafter existing under the Credit Agreement, the Notes and
each other Loan Document, whether for principal, interest, costs, fees,
expenses, or otherwise, including without limitation, Reimbursement
Obligations, and (b) all other obligations of the Borrower or the Pledgor to
the Lender or any Affiliate of the Lender, now or hereafter owing, howsoever
created, arising or evidenced, whether direct or indirect, primary or
secondary, fixed or absolute or contingent, joint or several, regardless of
how evidenced or arising, including without limitation all Hedging
Obligations (as defined in the Credit Agreement) arising under the Hedging
Agreements, between the Borrower or any other Affiliate or now or hereafter
existing or due or to become due and (c) all other obligations of the
Borrower or any Affiliate of the Borrower and the
Lender or any Affiliate of the Lender, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent or now or hereafter existing
or due or to become due (all such Obligations and other obligations being the
"Secured Obligations").
SECTION II.3 Delivery of Pledged Property. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares, shall be delivered to and held by or on behalf of the Lender pursuant
hereto, shall be in suitable form for transfer by delivery, and shall be
accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION II.4 Dividends on Pledged Shares. In the event that any
Dividend is to be paid on any Pledged Share at a time when no Default has
occurred and is continuing, such Dividend may be paid directly to the Pledgor.
If any such Default has occurred and is continuing then any such Dividend shall
be paid directly to the Lender.
SECTION II.5 Continuing Security Interest. This Pledge Agreement
shall create a continuing security interest in the Collateral and shall
II.5.1 Remain in full force and effect until payment in full of
all Secured Obligations and the termination of the Commitments and any
other commitments of the Lender to the Pledgor,
II.5.2 Be binding upon the Pledgor and its successors,
transferees and assigns, and
II.5.3 Inure to the benefit of the Lender and its successors,
transferees, and assigns.
Without limiting the foregoing clause (c), the Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan to any other Person or
entity, and such other Person or entity shall thereupon become vested with all
the rights and benefits in respect thereof granted to the Lender under any Loan
Document (including this Pledge Agreement) or otherwise, subject, however, to
any contrary provisions in such assignment or transfer, and to the provisions
of Section 10.11 of the Credit Agreement. Upon the indefeasible payment in
full of all principal and interest comprising the Secured Obligations and the
termination of the Commitments and any other commitments of the Lender to the
Pledgor, the security interest granted herein shall terminate and all rights to
the Collateral shall revert to the Pledgor. Upon any such termination, the
Lender will, at the Pledgor's sole expense, deliver to the Pledgor, without any
representations, warranties or recourse of any kind whatsoever, all
certificates and instruments representing or evidencing all Pledged Shares,
together with all other Collateral held by the Lender hereunder, and execute
and deliver to the Pledgor such documents as the Pledgor shall reasonably
request to evidence such termination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION III.1 Warranties, etc. The Pledgor represents and warrants
unto the Lender, as at the date of each pledge and delivery hereunder
(including each pledge and delivery of Pledged Shares) by the Pledgor to the
Lender of any Collateral, as set forth in this Article.
III.1.1 Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full
right and authority to pledge and assign) such Collateral, free and clear
of all liens, security interests, options, or other charges or
encumbrances, except any lien or security interest granted pursuant hereto
in favor of the Lender.
III.1.2 Valid Security Interest. The delivery of such
Collateral to the Lender together with stock powers endorsed in blank is
effective to create a valid, perfected, first priority security interest
in such Collateral and all proceeds thereof, securing the Secured
Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
III.1.3 As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly
authorized and validly issued, fully paid, and non-assessable, and
constitute 36.80% of the issued and outstanding shares of capital stock of
each Pledged Share Issuer.
III.1.4 Authorization, Approval, etc. No authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority, regulatory body or any other Person is required
either
(a) for the pledge by the Pledgor of any Collateral
pursuant to this Pledge Agreement or for the execution, delivery,
and performance of this Pledge Agreement by the Pledgor, or
(b) for the exercise by the Lender of the voting or
other rights provided for in this Pledge Agreement, or, except with
respect to any Pledged Shares, as may be required in connection with
a disposition of such Pledged Shares by laws affecting the offering
and sale of securities generally, the remedies in respect of the
Collateral pursuant to this Pledge Agreement.
III.1.5 Compliance with Laws. The Pledgor is in compliance with
the requirements of all applicable laws (including, without limitation,
the provisions of the Fair Labor Standards Act), rules, regulations and
orders of every governmental authority, the non-compliance with which
could materially adversely affect the business, properties, assets,
operations, condition (financial or otherwise) or prospects of the Pledgor
or the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION IV.1 Protect Collateral; Further Assurances, etc. The Pledgor
will not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Lender hereunder). The Pledgor will warrant
and defend the right and title herein granted unto the Lender in and to the
Collateral (and all right, title, and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever. The Pledgor agrees
that at any time, and from time to time, at the expense of the Pledgor, the
Pledgor will promptly execute and deliver all further instruments, and take all
further action, that may be necessary or desirable, or that the Lender may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Lender to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
SECTION IV.2 Stock Powers, etc. The Pledgor agrees that all Pledged
Shares (and all other shares of capital stock constituting Collateral)
delivered by the Pledgor pursuant to this Pledge Agreement will be
accompanied by duly executed undated blank stock powers, or other equivalent
instruments of transfer acceptable to the Lender. The Pledgor will, from
time to time upon the request of the Lender, promptly deliver to the Lender
such stock powers, instruments, and similar documents, satisfactory in form
and substance to the Lender, with respect to the Collateral as the Lender may
reasonably request and will, from time to time upon the request of the Lender
after the occurrence of any Event of Default, promptly transfer any Pledged
Shares or other shares of common stock constituting Collateral into the name
of any nominee designated by the Lender.
SECTION IV.3 Continuous Pledge. Subject to Section 2.4, the
Pledgor will, at all times, keep pledged to the Lender pursuant hereto all
Pledged Shares and all other shares of capital stock constituting Collateral,
all Dividends and Distributions with respect thereto, and all other Collateral
and other securities, instruments, proceeds, and rights from time to time
received by or distributable to the Pledgor in respect of any Collateral.
SECTION IV.4 Voting Rights; Dividends, etc. The Pledgor agrees:
IV.4.1 After any Default shall have occurred and be continuing,
promptly upon receipt thereof by the Pledgor and without any request
therefor by the Lender, to deliver (properly endorsed where required
hereby or requested by the Lender) to the Lender all Dividends,
Distributions, all interest, all principal, all other cash payments, and
all proceeds of the Collateral, all of which shall be held by the Lender
as additional Collateral for use in accordance with Section 6.4; and
IV.4.2 After any Event of Default shall have occurred and be
continuing and the Lender has notified the Pledgor of the Lender's
intention to exercise its voting power under this Section 4.4.2
(a) the Lender may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of
ownership with respect to any Pledged Shares or other shares of
capital stock constituting Collateral and the Pledgor hereby grants
the Lender an irrevocable proxy, exercisable under such
circumstances, to vote the Pledged Shares and such other Collateral,
and
(b) promptly to deliver to the Lender such additional
proxies and other documents as may be necessary to allow the Lender
to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and
proceeds which may at any time and from time to time be held by the Pledgor but
which the Pledgor is then obligated to deliver to the Lender, shall, until
delivery to the Lender, be held by the Pledgor separate and apart from its
other property in trust for the Lender. The Lender agrees that unless an
Event of Default shall have occurred and be continuing and the Lender shall
have given the notice referred to in Section 4.4.2, the Pledgor shall have
the exclusive voting power with respect to any shares of capital stock
(including any of the Pledged Shares) constituting Collateral and the Lender
shall, upon the written request of the Pledgor, promptly deliver such
proxies and other documents, if any, as shall be reasonably requested by the
Pledgor which are necessary to allow the Pledgor to exercise voting power
with respect to any such share of capital stock (including any of the Pledged
Shares) constituting Collateral; provided, however, that no vote shall be
cast, or consent, waiver, or ratification given, or action taken by the
Pledgor that would cause an Event of Default, impair any Collateral or be
inconsistent with or violate any provision of the Credit Agreement or any
other Loan Document (including this Pledge Agreement).
SECTION IV.5 Additional Undertakings. The Pledgor will not, without
the prior written consent of the Lender, (a) sell, assign, transfer, pledge, or
encumber in any other manner Pledgor's interest in the Pledged Share Issuer, or
(b) permit any of the assets of the Pledged Share Issuer to be sold, assigned,
transferred, pledged, or encumbered in any other manner.
ARTICLE V
THE LENDER
SECTION V.1 Lender Appointed Attorney-in-Fact. The Pledgor hereby
irrevocably appoints the Lender the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time in the Lender's discretion, to take any action
and to execute any instrument which the Lender may deem necessary or advisable
to accomplish the purposes of this Pledge Agreement, including without
limitation:
V.1.1 After the occurrence and continuance of a Default, to ask,
demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral.
V.1.2 To receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with Section 5.1.1
above.
V.1.3 To file any claims or take any action or institute any
proceedings which the Lender may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Lender with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
Notwithstanding the foregoing, prior to the occurrence of an Event of Default,
the Lender agrees that it shall first request that the Pledgor perform such
action and, if the Pledgor shall not have performed such action within five (5)
days following such request, the Lender shall be entitled to take such action
pursuant hereto.
SECTION V.2 Lender May Perform. If the Pledgor fails to perform
any agreement contained herein after being requested in writing to so perform,
the Lender may itself perform, or cause performance of, such agreement, and the
reasonable expenses of the Lender incurred in connection therewith shall be
payable by the Pledgor pursuant to Section 6.5.
SECTION V.3 Lender Has No Duty. The powers conferred on the Lender
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty on it to exercise any such powers. Except for the reasonable
care of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Lender shall have no duty as to any Collateral or
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Property, whether or not the Lender has or is deemed to have knowledge
of such matters, or (b) taking any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
SECTION V.4 Reasonable Care. The Lender is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral, if it
takes such action for that purpose as the Pledgor reasonably requests in
writing at times other than upon the occurrence and during the continuance
of any Event of Default, but failure of the Lender to comply with any such
request at any time shall not in itself be deemed a failure to exercise
reasonable care.
ARTICLE VI
REMEDIES
SECTION VI.1 Certain Remedies. If any Event of Default shall have
occurred and be continuing:
VI.1.1 The Lender may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured
party on default under the U.C.C. (whether or not the U.C.C. applies to
the affected Collateral) and also may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Lender's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Lender may deem commercially reasonable. The Pledgor agrees that, to the
extent notice of sale shall be required by law, at least ten days' prior
notice to the Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Lender may
adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
VI.1.2 The Lender may
(a) transfer all or any part of the Collateral into the
name of the Lender or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder;
(b) notify the parties obligated on any of the Collateral
to make payment to the Lender of any amount due or to become due
thereunder;
(c) enforce collection of any of the Collateral by suit
or otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any obligations of any nature
of any party with respect thereto;
(d) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral;
(e) take control of any proceeds of the Collateral; and
(f) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION VI.2 Securities Laws. If the Lender shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section
6.1, the Pledgor agrees that, upon request of the Lender, the Pledgor will,
at its own expense:
VI.2.1 Execute and deliver, and cause each issuer of the
Collateral contemplated to be sold and the directors and officers thereof
to execute and deliver (in each case to the extent required by law), all
such instruments and documents, and do or cause to be done all such other
acts and things, as may be necessary or, in the opinion of the Lender,
advisable to register such Collateral under, or otherwise permit the
Collateral to be privately sold or transferred in compliance with, the
provisions of the Securities Act of 1933, as from time to time amended
(the "Securities Act"), and to cause the registration statement relating
thereto to become effective and to remain effective for such period as
prospectuses are required by law to be furnished, and to make all
amendments and supplements thereto and to the related prospectus which, in
the opinion of the Lender, are necessary or advisable, all in conformity
with the requirements of the Securities Act and the rules and regulations
of the Securities and Exchange Commission applicable thereto.
VI.2.2 Use its best efforts to qualify the Collateral under, or
to permit the Collateral to be privately sold or transferred in compliance
with, the state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Collateral, as requested by the
Lender.
VI.2.3 Cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement that will satisfy
the provisions of Section 11(a) of the Securities Act.
VI.2.4 Do or cause to be done all such other acts and things as
may be necessary to make such sale of the Collateral or any part thereof
valid and binding and in compliance with applicable law.
SECTION VI.3 Compliance with Restrictions. The Pledgor agrees that in
any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Lender is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Pledgor further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Lender be liable nor accountable to the
Pledgor for any discount allowed by the reason of the fact that such
Collateral is sold in compliance with any such limitation or restriction.
SECTION VI.4 Application of Proceeds. All cash proceeds received
by the Lender in respect of any sale of, collection from, or other realization
upon, all or any part of the Collateral may, in the discretion of the Lender,
be held by the Lender as additional collateral security for, or then or at
any time thereafter be applied (after payment of any amounts payable to the
Lender pursuant to Sections 10.3 and 10.4 of the Credit Agreement and
Section 6.5 hereof) in whole or in part by the Lender against, all or any
part of the Secured Obligations in such order as the Lender shall elect.
Any surplus of such cash or cash proceeds held by the Lender and remaining
after payment in full of all the Secured Obligations, and the termination of
all Commitments and any other commitments by the Lender to the Pledgor, shall
be paid over to the Pledgor or to whomsoever may be lawfully entitled to
receive such surplus.
SECTION VI.5 Indemnity and Expenses. The Pledgor hereby indemnifies
and holds harmless the Lender from and against any and all claims, losses, and
liabilities arising out of or resulting from this Pledge Agreement (including
enforcement of this Pledge Agreement), except claims, losses, or liabilities
resulting from the Lender's gross negligence or wilful misconduct. Upon
demand, the Pledgor will pay to the Lender the amount of any and all reasonable
expenses, including the reasonable fees and disbursements of its counsel and of
any experts and agents, which the Lender may incur in connection with:
(a) the exercise or enforcement of any of the rights of
the Lender hereunder; or
(b) the failure by the Pledgor to perform or observe any
of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION VII.1 Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION VII.2 Amendments, etc. No amendment to or waiver of
any provision of this Pledge Agreement nor consent to any departure by the
Pledgor herefrom shall in any event be effective unless the same shall be in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it is given.
SECTION VII.3 Protection of Collateral. The Lender may from time
to time, at its option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Lender may from time to time take any other action which the Lender reasonably
deems necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein.
SECTION VII.4 Addresses for Notices. All notices and other
communications provided to any party hereto under this Pledge Agreement
shall be in writing and shall be hand delivered or sent by a nationally
recognized overnight courier, certified mail (return receipt requested), or
telecopy to such party at its address or telecopy number set forth on the
signature pages hereof or at such other address or telecopy number as may be
designated by such party in a notice to the other party. Without limiting
any other means by which a party may be able to provide that a notice has
been received by the other party, a notice shall be deemed to be duly
received (a) if sent by hand, on the date when left with a responsible
person at the address of the recipient; (b) if sent by certified mail, on
the fifth business day after delivery to the U.S. Post Office; (c) if sent
by overnight courier, on the first business day after delivery to such
courier; or (d) if sent by telecopy, on the date of receipt by
the sender of an acknowledgment or transmission reports generated by the
machine from which the telecopy was sent indicating that the telecopy was
sent in its entirety to the recipient's telecopy number.
SECTION VII.5 Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION VII.6 Severability. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
SECTION VII.7 The Lender as Agent for its Affiliates. As described
above, certain Affiliates of the Lender are or may become parties to certain
Hedging Agreements with the Pledgor and/or Affiliates of the Pledgor. This
Pledge Agreement secures the obligations of the Pledgor and such Affiliates, as
the case may be, under such Hedging Agreements, and the parties hereto
acknowledge for all purposes that the Lender acts as agent on behalf of such
Affiliates of the Lender which are so entitled to share in the rights and
benefits accruing to the Lender under this Pledge Agreement.
SECTION VII.8 Governing Law, Entire Agreement, etc. THIS
PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF ILLINOIS, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF ILLINOIS. THIS PLEDGE AGREEMENT AND THE OTHER LOAN
DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS,
WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.9 Non-Recourse Nature of Liability.
(a) Notwithstanding anything to the contrary contained or
implied in this Pledge Agreement, the Pledgor shall not be personally liable
under any theory for any amount due under the Credit Agreement, the Notes or
such other Loan Documents, and the Lender shall not seek a deficiency or
personal judgment against the Pledgor for payment of the Obligations evidenced
by the Credit Agreement, the Notes or such other Loan Documents. No property
or assets of the Pledgor, other than the Collateral pledged pursuant to this
Pledge Agreement, shall be sold, levied upon or otherwise used to satisfy any
judgment rendered in connection with any action brought against the Borrower
or its Subsidiaries with respect to this Pledge Agreement, the Credit
Agreement, the Notes or such other Loan Documents.
(b) Notwithstanding the provisions of Section 7.9(a) to the
contrary, nothing contained in this Pledge Agreement, the Credit Agreement or
any other Loan Document shall be construed to (i) impair or limit the rights of
the Lender arising under this Pledge Agreement, or any other Security Document
or other documents to which the Pledgor is a party thereto in its individual
capacity; (ii) impair or limit any of the Obligations of the Borrower or its
Subsidiaries under any Loan Document to which it is a party; (iii) impair or
limit the validity of the indebtedness evidenced by this Pledge Agreement, the
Credit Agreement, the Notes or the other Loan Documents or prevent the taking
of any action permitted by law against the Borrower or its Subsidiaries or the
assets of the Borrower or its Subsidiaries or the proceeds of such assets; or
(iv) prevent the commencement of any action, suit or proceeding against any
Person (or prevent the service of papers under any Person) for the purpose of
obtaining jurisdiction over the Borrower or its Subsidiaries.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
BARGO ENERGY RESOURCES, LTD.,
a Texas limited partnership
By: Bargo Operating Company, Inc.,
a Texas corporation, General Partner
By: /s/ Timothy J. Goff
Name: Timothy J. Goff
Title: President
Address: 700 Louisiana Street
Suite 4650
Houston, Texas 77002
Facsimile No.: (713) 236-9799
Attention: Timothy J. Goff
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:/s/ Richard A. Bernardy
Name: Richard A. Bernardy
Title: Vice President
Address: 333 Clay Street
Suite 4550
Houston, TX 77002
Facsimile No.: (713) 651-4888
Attention: Richard A. Bernardy
<TABLE>
<CAPTION> ATTACHMENT 1
to
Pledge Agreement
Pledged Shares
Pledged Share Issuer Common Stock
Authorized Outstanding Number of Shares %of Shares
Shares Shares Pledged Pledged
---------------------------------------------------------
<S> <C> <C> <C> <C>
Future Petroleum
Corporation, 30,000,000 12,757,015 4,694,859 36.80%
a Utah corporation
</TABLE>
The Pledgor also pledges as Collateral its rights to purchase 250,000 fully
paid and nonassessable shares of the Future Petroleum Corporation's, a Utah
corporation ("Future Utah"), common stock, par value $0.01 per share at an
exercise price per share of $0.43, or as may be adjusted pursuant to
Paragraph 4 of the Stock Purchase Warrant No. 1007 issued by Future Utah in
favor of the Pledgor on August 14, 1998 (the "Stock Purchase Warrant"),
granted pursuant to the Stock Purchase Warrant and exerciable at any time
through August 14, 2003.
EXHIBIT 10.13
PLEDGE AGREEMENT
(Stock)
THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of August 14,
1998, made by ENERGY CAPITAL INVESTMENT COMPANY PLC, an English investment
company (the "Pledgor"), in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association (the "Lender").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, dated as of August 14, 1998
(together with all amendments and other modifications, if any, from time to
time thereafter made thereto, the "Credit Agreement"), between FUTURE PETROLEUM
CORPORATION, a Utah corporation (the "Borrower") and the Lender, the Lender has
extended Commitments to make Loans to, and issue Letters of Credit at the
request of, the Borrower; and
WHEREAS, the Borrower or an Affiliate (as defined in the Credit Agreement)
of the Borrower has entered into or may enter into certain Hedging Agreements
(as defined in the Credit Agreement) with the Lender or an Affiliate of the
Lender, pursuant to the terms of the Credit Agreement;
WHEREAS, as a condition precedent to the making of the initial Loan and
the issuance of Letters of Credit under the Credit Agreement, and the Lender's
or such Affiliate of the Lender's obligations under the Hedging Agreements
referred to above, the Pledgor is required to execute and deliver this Pledge
Agreement; and
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lender to make Loans (including
the initial Loan) to, and to issue Letters of Credit at the request of, the
Borrower pursuant to the Credit Agreement, and to induce the Lender or such
Affiliate of the Lender to enter into Hedging Agreements with the Borrower or
an affiliate of the Borrower, the Pledgor agrees, for the benefit of the
Lender, as follows:
ARTICLE I
DEFINITIONS
SECTION I.1 Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Borrower" is defined in the first recital.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the first recital.
"Distributions" means all stock dividends, liquidating dividends, shares
of stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock constituting Collateral, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect to
any Pledged Shares or other Pledged Property made in the ordinary course of
business and not a liquidating dividend.
"Lender" is defined in the preamble.
"Pledge Agreement" is defined in the preamble.
"Pledged Property" means all Pledged Shares, and all other pledged shares
of capital stock, all other securities, all assignments of any amounts due
or to become due with respect to the Pledged Shares, all other instruments
which are now being delivered by the Pledgor to the Lender or may from time
to time hereafter be delivered by the Pledgor to the Lender for the purpose
of pledge under this Pledge Agreement or any other Loan Document, and all
proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Attachment 1 hereto
as the issuer of the Pledged Shares identified opposite the name of such Person.
"Pledged Shares" means all shares of capital stock of any Pledged Share
Issuer which are delivered by the Pledgor to the Lender as Pledged Property
hereunder.
"Pledgor" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"U.C.C." means the Uniform Commercial Code as in effect in the State of
Illinois.
SECTION I.2 Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION I.3 U.C.C. Definitions. Unless otherwise defined herein or
the context otherwise requires, terms for which meanings are provided in the
U.C.C. are used in this Pledge Agreement, including its preamble and recitals,
with such meanings.
ARTICLE II
PLEDGE
SECTION II.1 Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Lender, and hereby grants to the Lender a continuing security interest in, all
of the following property (the "Collateral"):
II.1.1 All issued and outstanding shares of capital stock of
each Pledged Share Issuer identified in Attachment 1 hereto.
II.1.2 All other Pledged Shares issued from time to time.
II.1.3 All other Pledged Property, whether now or hereafter
delivered to the Lender in connection with this Pledge Agreement.
II.1.4 All Dividends, Distributions, interest, and other
payments and rights with respect to any Pledged Property.
II.1.5 All proceeds of any of the foregoing.
SECTION II.2 Security for Obligations. This Pledge
Agreement secures the prompt payment and performance in full of (a) all
Obligations now or hereafter existing under the Credit Agreement, the Notes and
each other Loan Document, whether for principal, interest, costs, fees,
expenses, or otherwise, including without limitation, Reimbursement
Obligations, and (b) all other obligations of the Borrower or the Pledgor to
the Lender or any Affiliate of the Lender, now or hereafter owing, howsoever
created, arising or evidenced, whether direct or indirect, primary or
secondary, fixed or absolute or contingent, joint or several, regardless of
how evidenced or arising, including without limitation all Hedging
Obligations (as defined in the Credit Agreement) arising under the Hedging
Agreements, between the Borrower or any other Affiliate or now or hereafter
existing or due or to become due and (c) all other obligations of the
Borrower or any Affiliate of the Borrower and the Lender or any Affiliate of
the Lender, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent or now or hereafter existing
or due or to become due (all such Obligations and other obligations being the
"Secured Obligations").
SECTION II.3 Delivery of Pledged Property. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares, shall be delivered to and held by or on behalf of the Lender pursuant
hereto, shall be in suitable form for transfer by delivery, and shall be
accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION II.4 Dividends on Pledged Shares. In the event that any
Dividend is to be paid on any Pledged Share at a time when no Default has
occurred and is continuing, such Dividend may be paid directly to the Pledgor.
If any such Default has occurred and is continuing then any such Dividend shall
be paid directly to the Lender.
SECTION II.5 Continuing Security Interest. This Pledge Agreement
shall create a continuing security interest in the Collateral and shall
II.5.1 Remain in full force and effect until payment in full of
all Secured Obligations and the termination of the Commitments and any
other commitments of the Lender to the Pledgor,
II.5.2 Be binding upon the Pledgor and its successors,
transferees and assigns, and
II.5.3 Inure to the benefit of the Lender and its successors,
transferees, and assigns.
Without limiting the foregoing clause (c), the Lender may assign or
otherwise transfer (in whole or in part) any Note or Loan to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to the Lender under
any Loan Document (including this Pledge Agreement) or otherwise, subject,
however, to any contrary provisions in such assignment or transfer, and to
the provisions of Section 10.11 of the Credit Agreement. Upon the
indefeasible payment in full of all principal and interest comprising the
Secured Obligations and the termination of the Commitments and any other
commitments of the Lender to the Pledgor, the security interest granted
herein shall terminate and all rights to the Collateral shall revert to the
Pledgor. Upon any such termination, the Lender will, at the Pledgor's sole
expense, deliver to the Pledgor, without any representations, warranties or
recourse of any kind whatsoever, all certificates and instruments
representing or evidencing all Pledged Shares, together with all
other Collateral held by the Lender hereunder, and execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence such
termination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION III.1 Warranties, etc. The Pledgor represents and warrants
unto the Lender, as at the date of each pledge and delivery hereunder
(including each pledge and delivery of Pledged Shares) by the Pledgor to the
Lender of any Collateral, as set forth in this Article.
III.1.1 Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full
right and authority to pledge and assign) such Collateral, free and clear
of all liens, security interests, options, or other charges or
encumbrances, except any lien or security interest granted pursuant hereto
in favor of the Lender.
III.1.2 Valid Security Interest. The delivery of such
Collateral to the Lender together with stock powers endorsed in blank is
effective to create a valid, perfected, first priority security interest
in such Collateral and all proceeds thereof, securing the Secured
Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
III.1.3 As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly
authorized and validly issued, fully paid, and non-assessable, and
constitute 17.80% of the issued and outstanding shares of capital stock of
each Pledged Share Issuer.
III.1.4 Authorization, Approval, etc. No authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority, regulatory body or any other Person is required
either
(a) for the pledge by the Pledgor of any Collateral
pursuant to this Pledge Agreement or for the execution, delivery,
and performance of this Pledge Agreement by the Pledgor, or
(b) for the exercise by the Lender of the voting or
other rights provided for in this Pledge Agreement, or, except with
respect to any Pledged Shares, as may be required in connection with
a disposition of such Pledged Shares by laws affecting the offering
and sale of securities generally, the remedies in respect of the
Collateral pursuant to this Pledge Agreement.
III.1.5 Compliance with Laws. The Pledgor is in compliance with
the requirements of all applicable laws (including, without limitation,
the provisions of the Fair Labor Standards Act), rules, regulations and
orders of every governmental authority, the non-compliance with which
could materially adversely affect the business, properties, assets,
operations, condition (financial or otherwise) or prospects of the Pledgor
or the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION IV.1 Protect Collateral; Further Assurances, etc. The Pledgor
will not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Lender hereunder). The Pledgor will warrant
and defend the right and title herein granted unto the Lender in and to the
Collateral (and all right, title, and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever. The Pledgor agrees
that at any time, and from time to time, at the expense of the Pledgor, the
Pledgor will promptly execute and deliver all further instruments, and take all
further action, that may be necessary or desirable, or that the Lender may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Lender to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
SECTION IV.2 Stock Powers, etc. The Pledgor agrees that all Pledged
Shares (and all other shares of capital stock constituting Collateral)
delivered by the Pledgor pursuant to this Pledge Agreement will be
accompanied by duly executed undated blank stock powers, or other equivalent
instruments of transfer acceptable to the Lender. The Pledgor will, from
time to time upon the request of the Lender, promptly deliver to the Lender
such stock powers, instruments, and similar documents, satisfactory in form
and substance to the Lender, with respect to the Collateral as the Lender
may reasonably request and will, from time to time upon the request of the
Lender after the occurrence of any Event of Default, promptly transfer any
Pledged Shares or other shares of common stock constituting Collateral into
the name of any nominee designated by the Lender.
SECTION IV.3 Continuous Pledge. Subject to Section 2.4, the
Pledgor will, at all times, keep pledged to the Lender pursuant hereto all
Pledged Shares and all other shares of capital stock constituting Collateral,
all Dividends and Distributions with respect thereto, and all other Collateral
and other securities, instruments, proceeds, and rights from time to time
received by or distributable to the Pledgor in respect of any Collateral.
SECTION IV.4 Voting Rights; Dividends, etc. The Pledgor agrees:
IV.4.1 After any Default shall have occurred and be continuing,
promptly upon receipt thereof by the Pledgor and without any request
therefor by the Lender, to deliver (properly endorsed where required
hereby or requested by the Lender) to the Lender all Dividends,
Distributions, all interest, all principal, all other cash payments, and
all proceeds of the Collateral, all of which shall be held by the Lender
as additional Collateral for use in accordance with Section 6.4; and
IV.4.2 After any Event of Default shall have occurred and be
continuing and the Lender has notified the Pledgor of the Lender's
intention to exercise its voting power under this Section 4.4.2
(a) the Lender may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of
ownership with respect to any Pledged Shares or other shares of
capital stock constituting Collateral and the Pledgor hereby grants
the Lender an irrevocable proxy, exercisable under such
circumstances, to vote the Pledged Shares and such other Collateral,
and
(b) promptly to deliver to the Lender such additional
proxies and other documents as may be necessary to allow the Lender
to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and
proceeds which may at any time and from time to time be held by the Pledgor but
which the Pledgor is then obligated to deliver to the Lender, shall, until
delivery to the Lender, be held by the Pledgor separate and apart from its
other property in trust for the Lender. The Lender agrees that unless an
Event of Default shall have occurred and be continuing and the Lender shall
have given the notice referred to in Section 4.4.2, the Pledgor shall have
the exclusive voting power with respect to any shares of capital stock
(including any of the Pledged Shares) constituting Collateral and the Lender
shall, upon the written request of the Pledgor, promptly deliver such
proxies and other documents, if any, as shall be reasonably requested by the
Pledgor which are necessary to allow the Pledgor to exercise voting power
with respect to any such share of capital stock (including any of the
Pledged Shares) constituting Collateral; provided, however, that no vote
shall be cast, or consent, waiver, or ratification given, or action taken by
the Pledgor that would cause an Event of Default, impair any Collateral or
be inconsistent with or violate any provision of the Credit Agreement or any
other Loan Document (including this Pledge Agreement).
SECTION IV.5 Additional Undertakings. The Pledgor will not, without
the prior written consent of the Lender, (a) sell, assign, transfer, pledge, or
encumber in any other manner Pledgor's interest in the Pledged Share Issuer, or
(b) permit any of the assets of the Pledged Share Issuer to be sold, assigned,
transferred, pledged, or encumbered in any other manner.
ARTICLE V
THE LENDER
SECTION V.1 Lender Appointed Attorney-in-Fact. The Pledgor hereby
irrevocably appoints the Lender the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time in the Lender's discretion, to take any action
and to execute any instrument which the Lender may deem necessary or advisable
to accomplish the purposes of this Pledge Agreement, including without
limitation:
V.1.1 After the occurrence and continuance of a Default, to ask,
demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral.
V.1.2 To receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with Section 5.1.1
above.
V.1.3 To file any claims or take any action or institute any
proceedings which the Lender may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Lender with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
Notwithstanding the foregoing, prior to the occurrence of an Event of Default,
the Lender agrees that it shall first request that the Pledgor perform such
action and, if the Pledgor shall not have performed such action within five (5)
days following such request, the Lender shall be entitled to take such action
pursuant hereto.
SECTION V.2 Lender May Perform. If the Pledgor fails to perform
any agreement contained herein after being requested in writing to so perform,
the Lender may itself perform, or cause performance of, such agreement, and the
reasonable expenses of the Lender incurred in connection therewith shall be
payable by the Pledgor pursuant to Section 6.5.
SECTION V.3 Lender Has No Duty. The powers conferred on the Lender
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty on it to exercise any such powers. Except for the reasonable
care of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Lender shall have no duty as to any Collateral or
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Property, whether or not the Lender has or is deemed to have knowledge
of such matters, or (b) taking any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
SECTION V.4 Reasonable Care. The Lender is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral, if it
takes such action for that purpose as the Pledgor reasonably requests in
writing at times other than upon the occurrence and during the continuance of
any Event of Default, but failure of the Lender to comply with any such
request at any time shall not in itself be deemed a failure to exercise
reasonable care.
ARTICLE VI
REMEDIES
SECTION VI.1 Certain Remedies. If any Event of Default shall have
occurred and be continuing:
VI.1.1 The Lender may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured
party on default under the U.C.C. (whether or not the U.C.C. applies to
the affected Collateral) and also may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Lender's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Lender may deem commercially reasonable. The Pledgor agrees that, to the
extent notice of sale shall be required by law, at least ten days' prior
notice to the Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Lender may
adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
VI.1.2 The Lender may
(a) transfer all or any part of the Collateral into the
name of the Lender or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder;
(b) notify the parties obligated on any of the Collateral
to make payment to the Lender of any amount due or to become due
thereunder;
(c) enforce collection of any of the Collateral by suit
or otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any obligations of any nature
of any party with respect thereto;
(d) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral;
(e) take control of any proceeds of the Collateral; and
(f) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION VI.2 Securities Laws. If the Lender shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section
6.1, the Pledgor agrees that, upon request of the Lender, the Pledgor will,
at its own expense:
VI.2.1 Execute and deliver, and cause each issuer of the
Collateral contemplated to be sold and the directors and officers thereof
to execute and deliver (in each case to the extent required by law), all
such instruments and documents, and do or cause to be done all such other
acts and things, as may be necessary or, in the opinion of the Lender,
advisable to register such Collateral under, or otherwise permit the
Collateral to be privately sold or transferred in compliance with, the
provisions of the Securities Act of 1933, as from time to time amended
(the "Securities Act"), and to cause the registration statement relating
thereto to become effective and to remain effective for such period as
prospectuses are required by law to be furnished, and to make all
amendments and supplements thereto and to the related prospectus which, in
the opinion of the Lender, are necessary or advisable, all in conformity
with the requirements of the Securities Act and the rules and regulations
of the Securities and Exchange Commission applicable thereto.
VI.2.2 Use its best efforts to qualify the Collateral under, or
to permit the Collateral to be privately sold or transferred in compliance
with, the state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Collateral, as requested by the
Lender.
VI.2.3 Cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement that will satisfy
the provisions of Section 11(a) of the Securities Act.
VI.2.4 Do or cause to be done all such other acts and things as
may be necessary to make such sale of the Collateral or any part thereof
valid and binding and in compliance with applicable law.
SECTION VI.3 Compliance with Restrictions. The Pledgor agrees that in
any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Lender is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Pledgor further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Lender be liable nor accountable to the
Pledgor for any discount allowed by the reason of the fact that such
Collateral is sold in compliance with any such limitation or restriction.
SECTION VI.4 Application of Proceeds. All cash proceeds received
by the Lender in respect of any sale of, collection from, or other realization
upon, all or any part of the Collateral may, in the discretion of the Lender,
be held by the Lender as additional collateral security for, or then or at
any time thereafter be applied (after payment of any amounts payable to the
Lender pursuant to Sections 10.3 and 10.4 of the Credit Agreement and Section
6.5 hereof) in whole or in part by the Lender against, all or any part of the
Secured Obligations in such order as the Lender shall elect. Any surplus of
such cash or cash proceeds held by the Lender and remaining after payment in
full of all the Secured Obligations, and the termination of all Commitments and
any other commitments by the Lender to the Pledgor, shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to receive such surplus.
SECTION VI.5 Indemnity and Expenses. The Pledgor hereby indemnifies
and holds harmless the Lender from and against any and all claims, losses, and
liabilities arising out of or resulting from this Pledge Agreement (including
enforcement of this Pledge Agreement), except claims, losses, or liabilities
resulting from the Lender's gross negligence or wilful misconduct. Upon
demand, the Pledgor will pay to the Lender the amount of any and all reasonable
expenses, including the reasonable fees and disbursements of its counsel and of
any experts and agents, which the Lender may incur in connection with:
(a) the exercise or enforcement of any of the rights of
the Lender hereunder; or
(b) the failure by the Pledgor to perform or observe any
of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION VII.1 Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION VII.2 Amendments, etc. No amendment to or waiver of
any provision of this Pledge Agreement nor consent to any departure by the
Pledgor herefrom shall in any event be effective unless the same shall be in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it is given.
SECTION VII.3 Protection of Collateral. The Lender may from time
to time, at its option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Lender may from time to time take any other action which the Lender reasonably
deems necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein.
SECTION VII.4 Addresses for Notices. All notices and other
communications provided to any party hereto under this Pledge Agreement shall
be in writing and shall be hand delivered or sent by a nationally recognized
overnight courier, certified mail (return receipt requested), or telecopy to
such party at its address or telecopy number set forth on the signature pages
hereof or at such other address or telecopy number as may be designated by such
party in a notice to the other party. Without limiting any other means by
which a party may be able to provide that a notice has been received by the
other party, a notice shall be deemed to be duly received (a) if sent by
hand, on the date when left with a responsible person at the address of the
recipient; (b) if sent by certified mail, on the fifth business day after
delivery to the U.S. Post Office; (c) if sent by overnight courier, on the
first business day after delivery to such courier; or (d) if sent by
telecopy, on the date of receipt by the sender of an acknowledgment or
transmission reports generated by the machine from which the telecopy was
sent indicating that the telecopy was sent in its entirety to the recipient's
telecopy number.
SECTION VII.5 Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION VII.6 Severability. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
SECTION VII.7 The Lender as Agent for its Affiliates. As described
above, certain Affiliates of the Lender are or may become parties to certain
Hedging Agreements with the Pledgor and/or Affiliates of the Pledgor. This
Pledge Agreement secures the obligations of the Pledgor and such Affiliates, as
the case may be, under such Hedging Agreements, and the parties hereto
acknowledge for all purposes that the Lender acts as agent on behalf of such
Affiliates of the Lender which are so entitled to share in the rights and
benefits accruing to the Lender under this Pledge Agreement.
SECTION VII.8 Governing Law, Entire Agreement, etc. THIS
PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF ILLINOIS, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF ILLINOIS. THIS PLEDGE AGREEMENT AND THE OTHER LOAN
DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS,
WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.9 Non-Recourse Nature of Liability.
(a) Notwithstanding anything to the contrary contained or
implied in this Pledge Agreement, the Pledgor shall not be personally liable
under any theory for any amount due under the Credit Agreement, the Notes or
such other Loan Documents, and the Lender shall not seek a deficiency or
personal judgment against the Pledgor for payment of the Obligations evidenced
by the Credit Agreement, the Notes or such other Loan Documents. No property
or assets of the Pledgor, other than the Collateral pledged pursuant to this
Pledge Agreement, shall be sold, levied upon or otherwise used to satisfy any
judgment rendered in connection with any action brought against the Borrower
or its Subsidiaries with respect to this Pledge Agreement, the Credit
Agreement, the Notes or such other Loan Documents.
(b) Notwithstanding the provisions of Section 7.9(a) to the
contrary, nothing contained in this Pledge Agreement, the Credit Agreement or
any other Loan Document shall be construed to (i) impair or limit the rights of
the Lender arising under this Pledge Agreement, or any other Security Document
or other documents to which the Pledgor is a party thereto in its individual
capacity; (ii) impair or limit any of the Obligations of the Borrower or its
Subsidiaries under any Loan Document to which it is a party; (iii) impair or
limit the validity of the indebtedness evidenced by this Pledge Agreement, the
Credit Agreement, the Notes or the other Loan Documents or prevent the taking
of any action permitted by law against the Borrower or its Subsidiaries or the
assets of the Borrower or its Subsidiaries or the proceeds of such assets; or
(iv) prevent the commencement of any action, suit or proceeding against any
Person (or prevent the service of papers under any Person) for the purpose of
obtaining jurisdiction over the Borrower or its Subsidiaries.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
ENERGY CAPITAL INVESTMENT COMPANY PLC,
an English investment company
By: /s/ Gary R. Petersen
Name: Gary R. Petersen
Title: Director
Address: 1100 Louisiana Street
Suite 3150
Houston, Texas 77002
Facsimile No.: (713) 659-6130
Attention: Gary R. Petersen
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Richard A. Bernardy
Name: Richard A. Bernardy
Title: Vice President
Address: 333 Clay Street
Suite 4550
Houston, TX 77002
Facsimile No.: (713) 651-4888
Attention: Richard A. Bernardy
<TABLE>
<CAPTION> ATTACHMENT 1
to
Pledge Agreement
Pledged Shares
Pledged Share Issuer Common Stock
Authorized Outstanding Number of Shares % of Shares
Shares Shares Pledged Pledged
------------------------------------------------------------
<S> <C> <C> <C> <C>
Future Petroleum
Corporation, 30,000,000 12,757,015 2,269,886 17.80%
a Utah corporation
</TABLE>
EXHIBIT 10.14
PLEDGE AGREEMENT
(Stock)
THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of August 14,
1998, made by ENCAP EQUITY 1994 LIMITED PARTNERSHIP, a Texas limited
partnership (the "Pledgor"), in favor of BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking association (the "Lender").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, dated as of August 14, 1998
(together with all amendments and other modifications, if any, from time to
time thereafter made thereto, the "Credit Agreement"), between FUTURE PETROLEUM
CORPORATION, a Utah corporation (the "Borrower") and the Lender, the Lender has
extended Commitments to make Loans to, and issue Letters of Credit at the
request of, the Borrower; and
WHEREAS, the Borrower or an Affiliate (as defined in the Credit Agreement)
of the Borrower has entered into or may enter into certain Hedging Agreements
(as defined in the Credit Agreement) with the Lender or an Affiliate of the
Lender, pursuant to the terms of the Credit Agreement;
WHEREAS, as a condition precedent to the making of the initial Loan and
the issuance of Letters of Credit under the Credit Agreement, and the Lender's
or such Affiliate of the Lender's obligations under the Hedging Agreements
referred to above, the Pledgor is required to execute and deliver this Pledge
Agreement; and
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lender to make Loans (including
the initial Loan) to, and to issue Letters of Credit at the request of, the
Borrower pursuant to the Credit Agreement, and to induce the Lender or such
Affiliate of the Lender to enter into Hedging Agreements with the Borrower or
an affiliate of the Borrower, the Pledgor agrees, for the benefit of the
Lender, as follows:
ARTICLE I
DEFINITIONS
SECTION I.1 Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Borrower" is defined in the first recital.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the first recital.
"Distributions" means all stock dividends, liquidating dividends, shares
of stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock constituting Collateral, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect to
any Pledged Shares or other Pledged Property made in the ordinary course of
business and not a liquidating dividend.
"Lender" is defined in the preamble.
"Pledge Agreement" is defined in the preamble.
"Pledged Property" means all Pledged Shares, and all other pledged shares
of capital stock, all other securities, all assignments of any amounts due or
to become due with respect to the Pledged Shares, all other instruments which
are now being delivered by the Pledgor to the Lender or may from time to time
hereafter be delivered by the Pledgor to the Lender for the purpose of pledge
under this Pledge Agreement or any other Loan Document, and all proceeds of any
of the foregoing.
"Pledged Share Issuer" means each Person identified in Attachment 1 hereto
as the issuer of the Pledged Shares identified opposite the name of such Person.
"Pledged Shares" means all shares of capital stock of any Pledged Share
Issuer which are delivered by the Pledgor to the Lender as Pledged Property
hereunder.
"Pledgor" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"U.C.C." means the Uniform Commercial Code as in effect in the State of
Illinois.
SECTION I.2 Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION I.3 U.C.C. Definitions. Unless otherwise defined herein or
the context otherwise requires, terms for which meanings are provided in the
U.C.C. are used in this Pledge Agreement, including its preamble and recitals,
with such meanings.
ARTICLE II
PLEDGE
SECTION II.1 Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Lender, and hereby grants to the Lender a continuing security interest in, all
of the following property (the "Collateral"):
II.1.1 All issued and outstanding shares of capital stock of
each Pledged Share Issuer identified in Attachment 1 hereto.
II.1.2 All other Pledged Shares issued from time to time.
II.1.3 All other Pledged Property, whether now or hereafter
delivered to the Lender in connection with this Pledge Agreement.
II.1.4 All Dividends, Distributions, interest, and other
payments and rights with respect to any Pledged Property.
II.1.5 All proceeds of any of the foregoing.
SECTION II.2 Security for Obligations. This Pledge
Agreement secures the prompt payment and performance in full of (a) all
Obligations now or hereafter existing under the Credit Agreement, the Notes and
each other Loan Document, whether for principal, interest, costs, fees,
expenses, or otherwise, including without limitation, Reimbursement
Obligations, and (b) all other obligations of the Borrower or the Pledgor to
the Lender or any Affiliate of the Lender, now or hereafter owing, howsoever
created, arising or evidenced, whether direct or indirect, primary or
secondary, fixed or absolute or contingent, joint or several, regardless of
how evidenced or arising, including without limitation all Hedging
Obligations (as defined in the Credit Agreement) arising under the Hedging
Agreements, between the Borrower or any other Affiliate or now or hereafter
existing or due or to become due and (c) all other obligations of the
Borrower or any Affiliate of the Borrower and the Lender or any Affiliate of
the Lender, howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent or now or hereafter existing
or due or to become due (all such Obligations and other obligations being the
"Secured Obligations").
SECTION II.3 Delivery of Pledged Property. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares, shall be delivered to and held by or on behalf of the Lender pursuant
hereto, shall be in suitable form for transfer by delivery, and shall be
accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION II.4 Dividends on Pledged Shares. In the event that any
Dividend is to be paid on any Pledged Share at a time when no Default has
occurred and is continuing, such Dividend may be paid directly to the Pledgor.
If any such Default has occurred and is continuing then any such Dividend shall
be paid directly to the Lender.
SECTION II.5 Continuing Security Interest. This Pledge Agreement
shall create a continuing security interest in the Collateral and shall
II.5.1 Remain in full force and effect until payment in full of
all Secured Obligations and the termination of the Commitments and any
other commitments of the Lender to the Pledgor,
II.5.2 Be binding upon the Pledgor and its successors,
transferees and assigns, and
II.5.3 Inure to the benefit of the Lender and its successors,
transferees, and assigns.
Without limiting the foregoing clause (c), the Lender may assign or
otherwise transfer (in whole or in part) any Note or Loan to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to the Lender under
any Loan Document (including this Pledge Agreement) or otherwise, subject,
however, to any contrary provisions in such assignment or transfer, and to
the provisions of Section 10.11 of the Credit Agreement. Upon the
indefeasible payment in full of all principal and interest comprising the
Secured Obligations and the termination of the Commitments and any other
commitments of the Lender to the Pledgor, the security interest granted
herein shall terminate and all rights to the Collateral shall revert to the
Pledgor. Upon any such termination, the Lender will, at the Pledgor's sole
expense, deliver to the Pledgor, without any representations, warranties or
recourse of any kind whatsoever, all certificates and instruments
representing or evidencing all Pledged Shares, together with all other
Collateral held by the Lender hereunder, and execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence such
termination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION III.1 Warranties, etc. The Pledgor represents and warrants
unto the Lender, as at the date of each pledge and delivery hereunder
(including each pledge and delivery of Pledged Shares) by the Pledgor to the
Lender of any Collateral, as set forth in this Article.
III.1.1 Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full
right and authority to pledge and assign) such Collateral, free and clear
of all liens, security interests, options, or other charges or
encumbrances, except any lien or security interest granted pursuant hereto
in favor of the Lender.
III.1.2 Valid Security Interest. The delivery of such
Collateral to the Lender together with stock powers endorsed in blank is
effective to create a valid, perfected, first priority security interest
in such Collateral and all proceeds thereof, securing the Secured
Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
III.1.3 As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly
authorized and validly issued, fully paid, and non-assessable, and
constitute 19.01% of the issued and outstanding shares of capital stock of
each Pledged Share Issuer.
III.1.4 Authorization, Approval, etc. No authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority, regulatory body or any other Person is required
either
(a) for the pledge by the Pledgor of any Collateral
pursuant to this Pledge Agreement or for the execution, delivery,
and performance of this Pledge Agreement by the Pledgor, or
(b) for the exercise by the Lender of the voting or
other rights provided for in this Pledge Agreement, or, except with
respect to any Pledged Shares, as may be required in connection with
a disposition of such Pledged Shares by laws affecting the offering
and sale of securities generally, the remedies in respect of the
Collateral pursuant to this Pledge Agreement.
III.1.5 Compliance with Laws. The Pledgor is in compliance with
the requirements of all applicable laws (including, without limitation,
the provisions of the Fair Labor Standards Act), rules, regulations and
orders of every governmental authority, the non-compliance with which
could materially adversely affect the business, properties, assets,
operations, condition (financial or otherwise) or prospects of the Pledgor
or the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION IV.1 Protect Collateral; Further Assurances, etc. The Pledgor
will not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Lender hereunder). The Pledgor will warrant
and defend the right and title herein granted unto the Lender in and to the
Collateral (and all right, title, and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever. The Pledgor agrees
that at any time, and from time to time, at the expense of the Pledgor, the
Pledgor will promptly execute and deliver all further instruments, and take all
further action, that may be necessary or desirable, or that the Lender may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Lender to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
SECTION IV.2 Stock Powers, etc. The Pledgor agrees that all Pledged
Shares (and all other shares of capital stock constituting Collateral)
delivered by the Pledgor pursuant to this Pledge Agreement will be
accompanied by duly executed undated blank stock powers, or other equivalent
instruments of transfer acceptable to the Lender. The Pledgor will, from
time to time upon the request of the Lender, promptly deliver to the Lender
such stock powers, instruments, and similar documents, satisfactory in form
and substance to the Lender, with respect to the Collateral as the Lender may
reasonably request and will, from time to time upon the request of the Lender
after the occurrence of any Event of Default, promptly transfer any Pledged
Shares or other shares of common stock constituting Collateral into the name
of any nominee designated by the Lender.
SECTION IV.3 Continuous Pledge. Subject to Section 2.4, the
Pledgor will, at all times, keep pledged to the Lender pursuant hereto all
Pledged Shares and all other shares of capital stock constituting Collateral,
all Dividends and Distributions with respect thereto, and all other Collateral
and other securities, instruments, proceeds, and rights from time to time
received by or distributable to the Pledgor in respect of any Collateral.
SECTION IV.4 Voting Rights; Dividends, etc. The Pledgor agrees:
IV.4.1 After any Default shall have occurred and be continuing,
promptly upon receipt thereof by the Pledgor and without any request
therefor by the Lender, to deliver (properly endorsed where required
hereby or requested by the Lender) to the Lender all Dividends,
Distributions, all interest, all principal, all other cash payments, and
all proceeds of the Collateral, all of which shall be held by the Lender
as additional Collateral for use in accordance with Section 6.4; and
IV.4.2 After any Event of Default shall have occurred and be
continuing and the Lender has notified the Pledgor of the Lender's
intention to exercise its voting power under this Section 4.4.2
(a) the Lender may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of
ownership with respect to any Pledged Shares or other shares of
capital stock constituting Collateral and the Pledgor hereby grants
the Lender an irrevocable proxy, exercisable under such
circumstances, to vote the Pledged Shares and such other Collateral,
and
(b) promptly to deliver to the Lender such additional
proxies and other documents as may be necessary to allow the Lender
to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and
proceeds which may at any time and from time to time be held by the Pledgor but
which the Pledgor is then obligated to deliver to the Lender, shall, until
delivery to the Lender, be held by the Pledgor separate and apart from its
other property in trust for the Lender. The Lender agrees that unless an
Event of Default shall have occurred and be continuing and the Lender shall
have given the notice referred to in Section 4.4.2, the Pledgor shall have
the exclusive voting power with respect to any shares of capital stock
(including any of the Pledged Shares) constituting Collateral and the Lender
shall, upon the written request of the Pledgor, promptly deliver such proxies
and other documents, if any, as shall be reasonably requested by the Pledgor
which are necessary to allow the Pledgor to exercise voting power with
respect to any such share of capital stock (including any of the Pledged
Shares) constituting Collateral; provided, however, that no vote shall be
cast, or consent, waiver, or ratification given, or action taken by the
Pledgor that would cause an Event of Default, impair any Collateral or be
inconsistent with or violate any provision of the Credit Agreement or any
other Loan Document (including this Pledge Agreement).
SECTION IV.5 Additional Undertakings. The Pledgor will not, without
the prior written consent of the Lender, (a) sell, assign, transfer, pledge, or
encumber in any other manner Pledgor's interest in the Pledged Share Issuer, or
(b) permit any of the assets of the Pledged Share Issuer to be sold, assigned,
transferred, pledged, or encumbered in any other manner.
ARTICLE V
THE LENDER
SECTION V.1 Lender Appointed Attorney-in-Fact. The Pledgor hereby
irrevocably appoints the Lender the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time in the Lender's discretion, to take any action
and to execute any instrument which the Lender may deem necessary or advisable
to accomplish the purposes of this Pledge Agreement, including without
limitation:
V.1.1 After the occurrence and continuance of a Default, to ask,
demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral.
V.1.2 To receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with Section 5.1.1
above.
V.1.3 To file any claims or take any action or institute any
proceedings which the Lender may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Lender with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
Notwithstanding the foregoing, prior to the occurrence of an Event of Default,
the Lender agrees that it shall first request that the Pledgor perform such
action and, if the Pledgor shall not have performed such action within five (5)
days following such request, the Lender shall be entitled to take such action
pursuant hereto.
SECTION V.2 Lender May Perform. If the Pledgor fails to perform
any agreement contained herein after being requested in writing to so perform,
the Lender may itself perform, or cause performance of, such agreement, and the
reasonable expenses of the Lender incurred in connection therewith shall be
payable by the Pledgor pursuant to Section 6.5.
SECTION V.3 Lender Has No Duty. The powers conferred on the Lender
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty on it to exercise any such powers. Except for the reasonable
care of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Lender shall have no duty as to any Collateral or
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Property, whether or not the Lender has or is deemed to have knowledge
of such matters, or (b) taking any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
SECTION V.4 Reasonable Care. The Lender is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral, if it
takes such action for that purpose as the Pledgor reasonably requests in
writing at times other than upon the occurrence and during the continuance
of any Event of Default, but failure of the Lender to comply with any such
request at any time shall not in itself be deemed a failure to exercise
reasonable care.
ARTICLE VI
REMEDIES
SECTION VI.1 Certain Remedies. If any Event of Default shall have
occurred and be continuing:
VI.1.1 The Lender may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured
party on default under the U.C.C. (whether or not the U.C.C. applies to
the affected Collateral) and also may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Lender's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Lender may deem commercially reasonable. The Pledgor agrees that, to the
extent notice of sale shall be required by law, at least ten days' prior
notice to the Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Lender may
adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
VI.1.2 The Lender may
(a) transfer all or any part of the Collateral into the
name of the Lender or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder;
(b) notify the parties obligated on any of the Collateral
to make payment to the Lender of any amount due or to become due
thereunder;
(c) enforce collection of any of the Collateral by suit
or otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any obligations of any nature
of any party with respect thereto;
(d) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral;
(e) take control of any proceeds of the Collateral; and
(f) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION VI.2 Securities Laws. If the Lender shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section
6.1, the Pledgor agrees that, upon request of the Lender, the Pledgor will,
at its own expense:
VI.2.1 Execute and deliver, and cause each issuer of the
Collateral contemplated to be sold and the directors and officers thereof
to execute and deliver (in each case to the extent required by law), all
such instruments and documents, and do or cause to be done all such other
acts and things, as may be necessary or, in the opinion of the Lender,
advisable to register such Collateral under, or otherwise permit the
Collateral to be privately sold or transferred in compliance with, the
provisions of the Securities Act of 1933, as from time to time amended
(the "Securities Act"), and to cause the registration statement relating
thereto to become effective and to remain effective for such period as
prospectuses are required by law to be furnished, and to make all
amendments and supplements thereto and to the related prospectus which, in
the opinion of the Lender, are necessary or advisable, all in conformity
with the requirements of the Securities Act and the rules and regulations
of the Securities and Exchange Commission applicable thereto.
VI.2.2 Use its best efforts to qualify the Collateral under, or
to permit the Collateral to be privately sold or transferred in compliance
with, the state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Collateral, as requested by the
Lender.
VI.2.3 Cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement that will satisfy
the provisions of Section 11(a) of the Securities Act.
VI.2.4 Do or cause to be done all such other acts and things as
may be necessary to make such sale of the Collateral or any part thereof
valid and binding and in compliance with applicable law.
SECTION VI.3 Compliance with Restrictions. The Pledgor agrees that in
any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Lender is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Pledgor further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Lender be liable nor accountable to the
Pledgor for any discount allowed by the reason of the fact that such
Collateral is sold in compliance with any such limitation or restriction.
SECTION VI.4 Application of Proceeds. All cash proceeds received
by the Lender in respect of any sale of, collection from, or other realization
upon, all or any part of the Collateral may, in the discretion of the Lender,
be held by the Lender as additional collateral security for, or then or at
any time thereafter be applied (after payment of any amounts payable to the
Lender pursuant to Sections 10.3 and 10.4 of the Credit Agreement and Section
6.5 hereof) in whole or in part by the Lender against, all or any part of the
Secured Obligations in such order as the Lender shall elect. Any surplus of
such cash or cash proceeds held by the Lender and remaining after payment in
full of all the Secured Obligations, and the termination of all Commitments and
any other commitments by the Lender to the Pledgor, shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to receive such surplus.
SECTION VI.5 Indemnity and Expenses. The Pledgor hereby indemnifies
and holds harmless the Lender from and against any and all claims, losses, and
liabilities arising out of or resulting from this Pledge Agreement (including
enforcement of this Pledge Agreement), except claims, losses, or liabilities
resulting from the Lender's gross negligence or wilful misconduct. Upon
demand, the Pledgor will pay to the Lender the amount of any and all reasonable
expenses, including the reasonable fees and disbursements of its counsel and of
any experts and agents, which the Lender may incur in connection with:
(a) the exercise or enforcement of any of the rights of
the Lender hereunder; or
(b) the failure by the Pledgor to perform or observe any
of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION VII.1 Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION VII.2 Amendments, etc. No amendment to or waiver of
any provision of this Pledge Agreement nor consent to any departure by the
Pledgor herefrom shall in any event be effective unless the same shall be in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it is given.
SECTION VII.3 Protection of Collateral. The Lender may from time
to time, at its option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Lender may from time to time take any other action which the Lender reasonably
deems necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein.
SECTION VII.4 Addresses for Notices. All notices and other
communications provided to any party hereto under this Pledge Agreement shall
be in writing and shall be hand delivered or sent by a nationally recognized
overnight courier, certified mail (return receipt requested), or telecopy to
such party at its address or telecopy number set forth on the signature pages
hereof or at such other address or telecopy number as may be designated by such
party in a notice to the other party. Without limiting any other means by
which a party may be able to provide that a notice has been received by the
other party, a notice shall be deemed to be duly received (a) if sent by
hand, on the date when left with a responsible person at the address of the
recipient; (b) if sent by certified mail, on the fifth business day after
delivery to the U.S. Post Office; (c) if sent by overnight courier, on the
first business day after delivery to such courier; or (d) if sent by
telecopy, on the date of receipt by the sender of an acknowledgment or
transmission reports generated by the machine from which the telecopy was
sent indicating that the telecopy was sent in its entirety to the recipient's
telecopy number.
SECTION VII.5 Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION VII.6 Severability. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
SECTION VII.7 The Lender as Agent for its Affiliates. As described
above, certain Affiliates of the Lender are or may become parties to certain
Hedging Agreements with the Pledgor and/or Affiliates of the Pledgor. This
Pledge Agreement secures the obligations of the Pledgor and such Affiliates, as
the case may be, under such Hedging Agreements, and the parties hereto
acknowledge for all purposes that the Lender acts as agent on behalf of such
Affiliates of the Lender which are so entitled to share in the rights and
benefits accruing to the Lender under this Pledge Agreement.
SECTION VII.8 Governing Law, Entire Agreement, etc. THIS
PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF ILLINOIS, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF ILLINOIS. THIS PLEDGE AGREEMENT AND THE OTHER LOAN
DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS,
WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.9 Non-Recourse Nature of Liability.
(a) Notwithstanding anything to the contrary contained or
implied in this Pledge Agreement, the Pledgor shall not be personally liable
under any theory for any amount due under the Credit Agreement, the Notes or
such other Loan Documents, and the Lender shall not seek a deficiency or
personal judgment against the Pledgor for payment of the Obligations evidenced
by the Credit Agreement, the Notes or such other Loan Documents. No property
or assets of the Pledgor, other than the Collateral pledged pursuant to this
Pledge Agreement, shall be sold, levied upon or otherwise used to satisfy any
judgment rendered in connection with any action brought against the Borrower
or its Subsidiaries with respect to this Pledge Agreement, the Credit
Agreement, the Notes or such other Loan Documents.
(b) Notwithstanding the provisions of Section 7.9(a) to the
contrary, nothing contained in this Pledge Agreement, the Credit Agreement or
any other Loan Document shall be construed to (i) impair or limit the rights of
the Lender arising under this Pledge Agreement, or any other Security Document
or other documents to which the Pledgor is a party thereto in its individual
capacity; (ii) impair or limit any of the Obligations of the Borrower or its
Subsidiaries under any Loan Document to which it is a party; (iii) impair or
limit the validity of the indebtedness evidenced by this Pledge Agreement, the
Credit Agreement, the Notes or the other Loan Documents or prevent the taking
of any action permitted by law against the Borrower or its Subsidiaries or the
assets of the Borrower or its Subsidiaries or the proceeds of such assets; or
(iv) prevent the commencement of any action, suit or proceeding against any
Person (or prevent the service of papers under any Person) for the purpose of
obtaining jurisdiction over the Borrower or its Subsidiaries.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
ENCAP EQUITY 1994 LIMITED PARTNERSHIP,
a Texas limited partnership
By: EnCap Investments L.C., General Partner
By: /s/ Gary R. Petersen
Name: Gary R. Petersen
Title: Managing Director
Address: 1100 Louisiana Street
Suite 3150
Houston, Texas 77002
Facsimile No.: (713) 659-6130
Attention: Gary R. Petersen
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Richard A. Bernardy
Name: Richard A. Bernardy
Title: Vice President
Address: 333 Clay Street
Suite 4550
Houston, TX 77002
Facsimile No.: (713) 651-4888
Attention: Richard A. Bernardy
<TABLE>
<CAPTION>
ATTACHMENT 1
to
Pledge Agreement
Pledged Shares
Pledged Share Issuer Common Stock
Authorized Outstanding Number of Shares % of Shares
Shares Shares Pledged Pledged
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Future Petroleum
Corporation, 30,000,000 12,757,015 2,424,973 19.01%
a Utah corporation
</TABLE>
EXHIBIT 10.15
PLEDGE AGREEMENT
(Stock)
THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of August 14,
1998, made by CARL PRICE, an individual, (the "Pledgor"), in favor of BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association
(the "Lender").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, dated as of August 14, 1998
(together with all amendments and other modifications, if any, from time to
time thereafter made thereto, the "Credit Agreement"), between FUTURE PETROLEUM
CORPORATION, a Utah corporation (the "Borrower") and the Lender, the Lender has
extended Commitments to make Loans to, and issue Letters of Credit at the
request of, the Borrower; and
WHEREAS, the Borrower or an Affiliate (as defined in the Credit Agreement)
of the Borrower has entered into or may enter into certain Hedging Agreements
(as defined in the Credit Agreement) with the Lender or an Affiliate of the
Lender, pursuant to the terms of the Credit Agreement;
WHEREAS, as a condition precedent to the making of the initial Loan and
the issuance of Letters of Credit under the Credit Agreement, and the Lender's
or such Affiliate of the Lender's obligations under the Hedging Agreements
referred to above, the Pledgor is required to execute and deliver this Pledge
Agreement; and
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lender to make Loans (including
the initial Loan) to, and to issue Letters of Credit at the request of, the
Borrower pursuant to the Credit Agreement, and to induce the Lender or such
Affiliate of the Lender to enter into Hedging Agreements with the Borrower or
an affiliate of the Borrower, the Pledgor agrees, for the benefit of the
Lender, as follows:
ARTICLE I
DEFINITIONS
SECTION I.1 Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Borrower" is defined in the first recital.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the first recital.
"Distributions" means all stock dividends, liquidating dividends, shares
of stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock constituting Collateral, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect to
any Pledged Shares or other Pledged Property made in the ordinary course of
business and not a liquidating dividend.
"Lender" is defined in the preamble.
"Pledge Agreement" is defined in the preamble.
"Pledged Property" means all Pledged Shares, and all other pledged shares
of capital stock, all other securities, all assignments of any amounts due or
to become due with respect to the Pledged Shares, all other instruments which
are now being delivered by the Pledgor to the Lender or may from time to time
hereafter be delivered by the Pledgor to the Lender for the purpose of pledge
under this Pledge Agreement or any other Loan Document, and all proceeds of any
of the foregoing.
"Pledged Share Issuer" means each Person identified in Attachment 1 hereto
as the issuer of the Pledged Shares identified opposite the name of such Person.
"Pledged Shares" means all shares of capital stock of any Pledged Share
Issuer which are delivered by the Pledgor to the Lender as Pledged Property
hereunder.
"Pledgor" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"U.C.C." means the Uniform Commercial Code as in effect in the State of
Illinois.
SECTION I.2 Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION I.3 U.C.C. Definitions. Unless otherwise defined herein or
the context otherwise requires, terms for which meanings are provided in the
U.C.C. are used in this Pledge Agreement, including its preamble and recitals,
with such meanings.
ARTICLE II
PLEDGE
SECTION II.1 Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Lender, and hereby grants to the Lender a continuing security interest in, all
of the following property (the "Collateral"):
II.1.1 All issued and outstanding shares of capital stock of
each Pledged Share Issuer identified in Attachment 1 hereto.
II.1.2 All other Pledged Shares issued from time to time.
II.1.3 All other Pledged Property, whether now or hereafter
delivered to the Lender in connection with this Pledge Agreement.
II.1.4 All Dividends, Distributions, interest, and other
payments and rights with respect to any Pledged Property.
II.1.5 All proceeds of any of the foregoing.
SECTION II.2 Security for Obligations. This Pledge
Agreement secures the prompt payment and performance in full of (a) all
Obligations now or hereafter existing under the Credit Agreement, the Notes and
each other Loan Document, whether for principal, interest, costs, fees,
expenses, or otherwise, including without limitation, Reimbursement
Obligations, and (b) all other obligations of the Borrower or the Pledgor to
the Lender or any Affiliate of the Lender, now or hereafter owing, howsoever
created, arising or evidenced, whether direct or indirect, primary or
secondary, fixed or absolute or contingent, joint or several, regardless of
how evidenced or arising, including without limitation all Hedging
Obligations (as defined in the Credit Agreement) arising under the Hedging
Agreements, between the Borrower or any other Affiliate or now or hereafter
existing or due or to become due and (c) all other obligations of the
Borrower or any Affiliate of the Borrower and the Lender or any Affiliate of
the Lender, howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent or now or hereafter existing or due or to
become due (all such Obligations and other obligations being the
"Secured Obligations").
SECTION II.3 Delivery of Pledged Property. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares, shall be delivered to and held by or on behalf of the Lender pursuant
hereto, shall be in suitable form for transfer by delivery, and shall be
accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION II.4 Dividends on Pledged Shares. In the event that any
Dividend is to be paid on any Pledged Share at a time when no Default has
occurred and is continuing, such Dividend may be paid directly to the Pledgor.
If any such Default has occurred and is continuing then any such Dividend shall
be paid directly to the Lender.
SECTION II.5 Continuing Security Interest. This Pledge Agreement
shall create a continuing security interest in the Collateral and shall
II.5.1 Remain in full force and effect until payment in full of
all Secured Obligations and the termination of the Commitments and any
other commitments of the Lender to the Pledgor,
II.5.2 Be binding upon the Pledgor and its successors,
transferees and assigns, and
II.5.3 Inure to the benefit of the Lender and its successors,
transferees, and assigns.
Without limiting the foregoing clause (c), the Lender may assign or
otherwise transfer (in whole or in part) any Note or Loan to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to the Lender under
any Loan Document (including this Pledge Agreement) or otherwise, subject,
however, to any contrary provisions in such assignment or transfer, and to
the provisions of Section 10.11 of the Credit Agreement. Upon the
indefeasible payment in full of all principal and interest comprising the
Secured Obligations and the termination of the Commitments and any other
commitments of the Lender to the Pledgor, the security interest granted
herein shall terminate and all rights to the Collateral shall revert to the
Pledgor. Upon any such termination, the Lender will, at the Pledgor's sole
expense, deliver to the Pledgor, without any representations, warranties or
recourse of any kind whatsoever, all certificates and instruments
representing or evidencing all Pledged Shares, together with all
other Collateral held by the Lender hereunder, and execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence such
termination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION III.1 Warranties, etc. The Pledgor represents and warrants
unto the Lender, as at the date of each pledge and delivery hereunder
(including each pledge and delivery of Pledged Shares) by the Pledgor to the
Lender of any Collateral, as set forth in this Article.
III.1.1 Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full
right and authority to pledge and assign) such Collateral, free and clear
of all liens, security interests, options, or other charges or
encumbrances, except any lien or security interest granted pursuant hereto
in favor of the Lender.
III.1.2 Valid Security Interest. The delivery of such
Collateral to the Lender together with stock powers endorsed in blank is
effective to create a valid, perfected, first priority security interest
in such Collateral and all proceeds thereof, securing the Secured
Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
III.1.3 As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly
authorized and validly issued, fully paid, and non-assessable, and
constitute 8.54% of the issued and outstanding shares of capital stock of
each Pledged Share Issuer.
III.1.4 Authorization, Approval, etc. No authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority, regulatory body or any other Person is required
either
(a) for the pledge by the Pledgor of any Collateral
pursuant to this Pledge Agreement or for the execution, delivery,
and performance of this Pledge Agreement by the Pledgor, or
(b) for the exercise by the Lender of the voting or
other rights provided for in this Pledge Agreement, or, except with
respect to any Pledged Shares, as may be required in connection with
a disposition of such Pledged Shares by laws affecting the offering
and sale of securities generally, the remedies in respect of the
Collateral pursuant to this Pledge Agreement.
III.1.5 Compliance with Laws. The Pledgor is in compliance with
the requirements of all applicable laws (including, without limitation,
the provisions of the Fair Labor Standards Act), rules, regulations and
orders of every governmental authority, the non-compliance with which
could materially adversely affect the business, properties, assets,
operations, condition (financial or otherwise) or prospects of the Pledgor
or the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION IV.1 Protect Collateral; Further Assurances, etc. The Pledgor
will not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Lender hereunder). The Pledgor will warrant
and defend the right and title herein granted unto the Lender in and to the
Collateral (and all right, title, and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever. The Pledgor agrees
that at any time, and from time to time, at the expense of the Pledgor, the
Pledgor will promptly execute and deliver all further instruments, and take all
further action, that may be necessary or desirable, or that the Lender may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Lender to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
SECTION IV.2 Stock Powers, etc. The Pledgor agrees that all Pledged
Shares (and all other shares of capital stock constituting Collateral)
delivered by the Pledgor pursuant to this Pledge Agreement will be
accompanied by duly executed undated blank stock powers, or other equivalent
instruments of transfer acceptable to the Lender. The Pledgor will, from
time to time upon the request of the Lender, promptly deliver to the Lender
such stock powers, instruments, and similar documents, satisfactory in form
and substance to the Lender, with respect to the Collateral as the Lender may
reasonably request and will, from time to time upon the request of the Lender
after the occurrence of any Event of Default, promptly transfer any Pledged
Shares or other shares of common stock
constituting Collateral into the name of any nominee designated by the Lender.
SECTION IV.3 Continuous Pledge. Subject to Section 2.4, the
Pledgor will, at all times, keep pledged to the Lender pursuant hereto all
Pledged Shares and all other shares of capital stock constituting Collateral,
all Dividends and Distributions with respect thereto, and all other Collateral
and other securities, instruments, proceeds, and rights from time to time
received by or distributable to the Pledgor in respect of any Collateral.
SECTION IV.4 Voting Rights; Dividends, etc. The Pledgor agrees:
IV.4.1 After any Default shall have occurred and be continuing,
promptly upon receipt thereof by the Pledgor and without any request
therefor by the Lender, to deliver (properly endorsed where required
hereby or requested by the Lender) to the Lender all Dividends,
Distributions, all interest, all principal, all other cash payments, and
all proceeds of the Collateral, all of which shall be held by the Lender
as additional Collateral for use in accordance with Section 6.4; and
IV.4.2 After any Event of Default shall have occurred and be
continuing and the Lender has notified the Pledgor of the Lender's
intention to exercise its voting power under this Section 4.4.2
(a) the Lender may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of
ownership with respect to any Pledged Shares or other shares of
capital stock constituting Collateral and the Pledgor hereby grants
the Lender an irrevocable proxy, exercisable under such
circumstances, to vote the Pledged Shares and such other Collateral,
and
(b) promptly to deliver to the Lender such additional
proxies and other documents as may be necessary to allow the Lender
to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and
proceeds which may at any time and from time to time be held by the Pledgor but
which the Pledgor is then obligated to deliver to the Lender, shall, until
delivery to the Lender, be held by the Pledgor separate and apart from its
other property in trust for the Lender. The Lender agrees that unless an
Event of Default shall have occurred and be continuing and the Lender shall
have given the notice referred to in Section 4.4.2, the Pledgor shall have
the exclusive voting power with respect to any shares of capital stock
(including any of the Pledged Shares) constituting Collateral and the Lender
shall, upon the written request of the Pledgor, promptly deliver such proxies
and other documents, if any, as shall be reasonably requested by the Pledgor
which are necessary to allow the Pledgor to exercise voting power with
respect to any such share of capital stock (including any of the Pledged
Shares) constituting Collateral; provided, however, that no vote shall be
cast, or consent, waiver, or ratification given, or action taken by the
Pledgor that would cause an Event of Default, impair any Collateral or be
inconsistent with or violate any provision of the Credit Agreement or any
other Loan Document (including this Pledge Agreement).
SECTION IV.5 Additional Undertakings. The Pledgor will not, without
the prior written consent of the Lender, (a) sell, assign, transfer, pledge, or
encumber in any other manner Pledgor's interest in the Pledged Share Issuer, or
(b) permit any of the assets of the Pledged Share Issuer to be sold, assigned,
transferred, pledged, or encumbered in any other manner.
ARTICLE V
THE LENDER
SECTION V.1 Lender Appointed Attorney-in-Fact. The Pledgor hereby
irrevocably appoints the Lender the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time in the Lender's discretion, to take any action
and to execute any instrument which the Lender may deem necessary or advisable
to accomplish the purposes of this Pledge Agreement, including without
limitation:
V.1.1 After the occurrence and continuance of a Default, to ask,
demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral.
V.1.2 To receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with Section 5.1.1
above.
V.1.3 To file any claims or take any action or institute any
proceedings which the Lender may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Lender with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
Notwithstanding the foregoing, prior to the occurrence of an Event of Default,
the Lender agrees that it shall first request that the Pledgor perform such
action and, if the Pledgor shall not have performed such action within five (5)
days following such request, the Lender shall be entitled to take such action
pursuant hereto.
SECTION V.2 Lender May Perform. If the Pledgor fails to perform
any agreement contained herein after being requested in writing to so perform,
the Lender may itself perform, or cause performance of, such agreement, and the
reasonable expenses of the Lender incurred in connection therewith shall be
payable by the Pledgor pursuant to Section 6.5.
SECTION V.3 Lender Has No Duty. The powers conferred on the Lender
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty on it to exercise any such powers. Except for the reasonable
care of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Lender shall have no duty as to any Collateral or
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Property, whether or not the Lender has or is deemed to have knowledge
of such matters, or (b) taking any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
SECTION V.4 Reasonable Care. The Lender is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral, if it
takes such action for that purpose as the Pledgor reasonably requests in
writing at times other than upon the occurrence and during the continuance
of any Event of Default, but failure of the Lender to comply with any such
request at any time shall not in itself be deemed a failure to exercise
reasonable care.
ARTICLE VI
REMEDIES
SECTION VI.1 Certain Remedies. If any Event of Default shall have
occurred and be continuing:
VI.1.1 The Lender may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured
party on default under the U.C.C. (whether or not the U.C.C. applies to
the affected Collateral) and also may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Lender's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Lender may deem commercially reasonable. The Pledgor agrees that, to the
extent notice of sale shall be required by law, at least ten days' prior
notice to the Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Lender may
adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
VI.1.2 The Lender may
(a) transfer all or any part of the Collateral into the
name of the Lender or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder;
(b) notify the parties obligated on any of the Collateral
to make payment to the Lender of any amount due or to become due
thereunder;
(c) enforce collection of any of the Collateral by suit
or otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any obligations of any nature
of any party with respect thereto;
(d) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral;
(e) take control of any proceeds of the Collateral; and
(f) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION VI.2 Securities Laws. If the Lender shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section
6.1, the Pledgor agrees that, upon request of the Lender, the Pledgor will,
at its own expense:
VI.2.1 Execute and deliver, and cause each issuer of the
Collateral contemplated to be sold and the directors and officers thereof
to execute and deliver (in each case to the extent required by law), all
such instruments and documents, and do or cause to be done all such other
acts and things, as may be necessary or, in the opinion of the Lender,
advisable to register such Collateral under, or otherwise permit the
Collateral to be privately sold or transferred in compliance with, the
provisions of the Securities Act of 1933, as from time to time amended
(the "Securities Act"), and to cause the registration statement relating
thereto to become effective and to remain effective for such period as
prospectuses are required by law to be furnished, and to make all
amendments and supplements thereto and to the related prospectus which, in
the opinion of the Lender, are necessary or advisable, all in conformity
with the requirements of the Securities Act and the rules and regulations
of the Securities and Exchange Commission applicable thereto.
VI.2.2 Use its best efforts to qualify the Collateral under, or
to permit the Collateral to be privately sold or transferred in compliance
with, the state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Collateral, as requested by the
Lender.
VI.2.3 Cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement that will satisfy
the provisions of Section 11(a) of the Securities Act.
VI.2.4 Do or cause to be done all such other acts and things as
may be necessary to make such sale of the Collateral or any part thereof
valid and binding and in compliance with applicable law.
SECTION VI.3 Compliance with Restrictions. The Pledgor agrees that in
any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Lender is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Pledgor further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Lender be liable nor accountable to the
Pledgor for any discount allowed by the reason of the fact that such
Collateral is sold in compliance with any such limitation or restriction.
SECTION VI.4 Application of Proceeds. All cash proceeds received
by the Lender in respect of any sale of, collection from, or other realization
upon, all or any part of the Collateral may, in the discretion of the Lender,
be held by the Lender as additional collateral security for, or then or at
any time thereafter be applied (after payment of any amounts payable to the
Lender pursuant to Sections 10.3 and 10.4 of the Credit Agreement and Section
6.5 hereof) in whole or in part by the Lender against, all or any part of the
Secured Obligations in such order as the Lender shall elect. Any surplus of
such cash or cash proceeds held by the Lender and remaining after payment in
full of all the Secured Obligations, and the termination of all Commitments and
any other commitments by the Lender to the Pledgor, shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to receive such surplus.
SECTION VI.5 Indemnity and Expenses. The Pledgor hereby indemnifies
and holds harmless the Lender from and against any and all claims, losses, and
liabilities arising out of or resulting from this Pledge Agreement (including
enforcement of this Pledge Agreement), except claims, losses, or liabilities
resulting from the Lender's gross negligence or wilful misconduct. Upon
demand, the Pledgor will pay to the Lender the amount of any and all reasonable
expenses, including the reasonable fees and disbursements of its counsel and of
any experts and agents, which the Lender may incur in connection with:
(a) the exercise or enforcement of any of the rights of
the Lender hereunder; or
(b) the failure by the Pledgor to perform or observe any
of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION VII.1 Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION VII.2 Amendments, etc. No amendment to or waiver of
any provision of this Pledge Agreement nor consent to any departure by the
Pledgor herefrom shall in any event be effective unless the same shall be in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it is given.
SECTION VII.3 Protection of Collateral. The Lender may from time
to time, at its option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Lender may from time to time take any other action which the Lender reasonably
deems necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein.
SECTION VII.4 Addresses for Notices. All notices and other
communications provided to any party hereto under this Pledge Agreement shall
be in writing and shall be hand delivered or sent by a nationally recognized
overnight courier, certified mail (return receipt requested), or telecopy to
such party at its address or telecopy number set forth on the signature pages
hereof or at such other address or telecopy number as may be designated by such
party in a notice to the other party. Without limiting any other means by
which a party may be able to provide that a notice has been received by the
other party, a notice shall be deemed to be duly received (a) if sent by
hand, on the date when left with a responsible person at the address of the
recipient; (b) if sent by certified mail, on the fifth business day after
delivery to the U.S. Post Office; (c) if sent by overnight courier, on the
first business day after delivery to such courier; or (d) if sent by
telecopy, on the date of receipt by the sender of an acknowledgment or
transmission reports generated by the machine from which the telecopy was
sent indicating that the telecopy was sent in its entirety to the recipient's
telecopy number.
SECTION VII.5 Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION VII.6 Severability. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
SECTION VII.7 The Lender as Agent for its Affiliates. As described
above, certain Affiliates of the Lender are or may become parties to certain
Hedging Agreements with the Pledgor and/or Affiliates of the Pledgor. This
Pledge Agreement secures the obligations of the Pledgor and such Affiliates, as
the case may be, under such Hedging Agreements, and the parties hereto
acknowledge for all purposes that the Lender acts as agent on behalf of such
Affiliates of the Lender which are so entitled to share in the rights and
benefits accruing to the Lender under this Pledge Agreement.
SECTION VII.8 Governing Law, Entire Agreement, etc. THIS
PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF ILLINOIS, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF ILLINOIS. THIS PLEDGE AGREEMENT AND THE OTHER LOAN
DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS,
WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.9 Non-Recourse Nature of Liability.
(a) Notwithstanding anything to the contrary contained or
implied in this Pledge Agreement, the Pledgor shall not be personally liable
under any theory for any amount due under the Credit Agreement, the Notes or
such other Loan Documents, and the Lender shall not seek a deficiency or
personal judgment against the Pledgor for payment of the Obligations evidenced
by the Credit Agreement, the Notes or such other Loan Documents. No property
or assets of the Pledgor, other than the Collateral pledged pursuant to this
Pledge Agreement, shall be sold, levied upon or otherwise used to satisfy any
judgment rendered in connection with any action brought against the Borrower
or its Subsidiaries with respect to this Pledge Agreement, the Credit
Agreement, the Notes or such other Loan Documents.
(b) Notwithstanding the provisions of Section 7.9(a) to the
contrary, nothing contained in this Pledge Agreement, the Credit Agreement or
any other Loan Document shall be construed to (i) impair or limit the rights of
the Lender arising under this Pledge Agreement, or any other Security Document
or other documents to which the Pledgor is a party thereto in its individual
capacity; (ii) impair or limit any of the Obligations of the Borrower or its
Subsidiaries under any Loan Document to which it is a party; (iii) impair or
imit the validity of the indebtedness evidenced by this Pledge Agreement, the
Credit Agreement, the Notes or the other Loan Documents or prevent the taking
of any action permitted by law against the Borrower or its Subsidiaries or the
assets of the Borrower or its Subsidiaries or the proceeds of such assets; or
(iv) prevent the commencement of any action, suit or proceeding against any
Person (or prevent the service of papers under any Person) for the purpose of
obtaining jurisdiction over the Borrower or its Subsidiaries.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
CARL PRICE
By:/s/ Carl Price
Carl Price
Address: c/o Future Petroleum Corporation
2351 West Northwest Highway
Suite 2130
Dallas, Texas 75220
Facsimile No.: (214) 350-3832
Attention: Carl Price
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:/s/Richard A. Bernardy
Name: Richard A. Bernardy
Title: Vice President
Address: 333 Clay Street
Suite 4550
Houston, TX 77002
Facsimile No.: (713) 651-4888
Attention: Richard A. Bernardy
<TABLE>
<CAPTION>
ATTACHMENT 1
to
Pledge Agreement
Pledged Shares
Pledged Share Issuer Common Stock
Authorized Outstanding Number of Shares % of Shares
Shares Shares Pledged Pledged
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Future Petroleum
Corporation, 30,000,000 12,757,015 1,089,149 8.54%
a Utah corporation
</TABLE>
The Pledgor also pledges as Collateral his options to purchase 487,720 shares
of the common stock of Future Petroleum Corporation, a Utah corporation
("Future Utah"), owned as of, and after, August 14, 1998, on the following
terms:
<TABLE>
<CAPTION>
Amount of Options Expiration Date Price in US $
<S> <C> <C>
37,720 2/28/99 0.267
200,000 1/10/02 0.44275
350,000 See below See below
</TABLE>
The 350,000 options expire on 8/14/2008 or, if Carl Price resigns or is
terminated from Future Utah, within one year from the date of his resignation
or termination. The exercise price of these 350,000 options is the average
midpoint price between the bid and the ask price of a share of common stock of
Future Utah for 5 trading days prior to August 14, 1998.
EXHIBIT 10.16
PLEDGE AGREEMENT
(Stock)
THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of August 14,
1998, made by DON Wm. REYNOLDS, an individual, (the "Pledgor"), in favor of
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association (the "Lender").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, dated as of August 14, 1998
(together with all amendments and other modifications, if any, from time to
time thereafter made thereto, the "Credit Agreement"), between FUTURE PETROLEUM
CORPORATION, a Utah corporation (the "Borrower") and the Lender, the Lender has
extended Commitments to make Loans to, and issue Letters of Credit at the
request of, the Borrower; and
WHEREAS, the Borrower or an Affiliate (as defined in the Credit Agreement)
of the Borrower has entered into or may enter into certain Hedging Agreements
(as defined in the Credit Agreement) with the Lender or an Affiliate of the
Lender, pursuant to the terms of the Credit Agreement;
WHEREAS, as a condition precedent to the making of the initial Loan and
the issuance of Letters of Credit under the Credit Agreement, and the Lender's
or such Affiliate of the Lender's obligations under the Hedging Agreements
referred to above, the Pledgor is required to execute and deliver this Pledge
Agreement; and
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lender to make Loans (including
the initial Loan) to, and to issue Letters of Credit at the request of, the
Borrower pursuant to the Credit Agreement, and to induce the Lender or such
Affiliate of the Lender to enter into Hedging Agreements with the Borrower or
an affiliate of the Borrower, the Pledgor agrees, for the benefit of the
Lender, as follows:
ARTICLE I
DEFINITIONS
SECTION I.1 Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Borrower" is defined in the first recital.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the first recital.
"Distributions" means all stock dividends, liquidating dividends, shares
of stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock constituting Collateral, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect to
any Pledged Shares or other Pledged Property made in the ordinary course of
business and not a liquidating dividend.
"Lender" is defined in the preamble.
"Pledge Agreement" is defined in the preamble.
"Pledged Property" means all Pledged Shares, and all other pledged shares
of capital stock, all other securities, all assignments of any amounts due
or to become due with respect to the Pledged Shares, all other instruments
which are now being delivered by the Pledgor to the Lender or may from time
to time hereafter be delivered by the Pledgor to the Lender for the purpose
of pledge under this Pledge Agreement or any other Loan Document, and all
proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Attachment 1 hereto
as the issuer of the Pledged Shares identified opposite the name of such Person.
"Pledged Shares" means all shares of capital stock of any Pledged Share
Issuer which are delivered by the Pledgor to the Lender as Pledged Property
hereunder.
"Pledgor" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"U.C.C." means the Uniform Commercial Code as in effect in the State of
Illinois.
SECTION I.2 Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION I.3 U.C.C. Definitions. Unless otherwise defined herein or
the context otherwise requires, terms for which meanings are provided in the
U.C.C. are used in this Pledge Agreement, including its preamble and recitals,
with such meanings.
ARTICLE II
PLEDGE
SECTION II.1 Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Lender, and hereby grants to the Lender a continuing security interest in, all
of the following property (the "Collateral"):
II.1.1 All issued and outstanding shares of capital stock of
each Pledged Share Issuer identified in Attachment 1 hereto.
II.1.2 All other Pledged Shares issued from time to time.
II.1.3 All other Pledged Property, whether now or hereafter
delivered to the Lender in connection with this Pledge Agreement.
II.1.4 All Dividends, Distributions, interest, and other
payments and rights with respect to any Pledged Property.
II.1.5 All proceeds of any of the foregoing.
SECTION II.2 Security for Obligations. This Pledge
Agreement secures the prompt payment and performance in full of (a) all
Obligations now or hereafter existing under the Credit Agreement, the Notes and
each other Loan Document, whether for principal, interest, costs, fees,
expenses, or otherwise, including without limitation, Reimbursement
Obligations, and (b) all other obligations of the Borrower or the Pledgor to
the Lender or any Affiliate of the Lender, now or hereafter owing, howsoever
created, arising or evidenced, whether direct or indirect, primary or
secondary, fixed or absolute or contingent, joint or several, regardless of
how evidenced or arising, including without limitation all Hedging
Obligations (as defined in the Credit Agreement) arising under the Hedging
Agreements, between the Borrower or any other Affiliate or now or hereafter
existing or due or to become due and (c) all other obligations of the
Borrower or any Affiliate of the Borrower and the Lender or any Affiliate of
the Lender, howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent or now or hereafter existing or due or to
become due (all such Obligations and other obligations being the
"Secured Obligations").
SECTION II.3 Delivery of Pledged Property. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares, shall be delivered to and held by or on behalf of the Lender pursuant
hereto, shall be in suitable form for transfer by delivery, and shall be
accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION II.4 Dividends on Pledged Shares. In the event that any
Dividend is to be paid on any Pledged Share at a time when no Default has
occurred and is continuing, such Dividend may be paid directly to the Pledgor.
If any such Default has occurred and is continuing then any such Dividend shall
be paid directly to the Lender.
SECTION II.5 Continuing Security Interest. This Pledge Agreement
shall create a continuing security interest in the Collateral and shall
II.5.1 Remain in full force and effect until payment in full of
all Secured Obligations and the termination of the Commitments and any
other commitments of the Lender to the Pledgor,
II.5.2 Be binding upon the Pledgor and its successors,
transferees and assigns, and
II.5.3 Inure to the benefit of the Lender and its successors,
transferees, and assigns.
Without limiting the foregoing clause (c), the Lender may assign or
otherwise transfer (in whole or in part) any Note or Loan to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to the Lender under
any Loan Document (including this Pledge Agreement) or otherwise, subject,
however, to any contrary provisions in such assignment or transfer, and to
the provisions of Section 10.11 of the Credit Agreement. Upon the
indefeasible payment in full of all principal and interest comprising the
Secured Obligations and the termination of the Commitments and any other
commitments of the Lender to the Pledgor, the security interest granted
herein shall terminate and all rights to the Collateral shall revert to the
Pledgor. Upon any such termination, the Lender will, at the Pledgor's sole
expense, deliver to the Pledgor, without any representations, warranties or
recourse of any kind whatsoever, all certificates and instruments
representing or evidencing all Pledged Shares, together with all other
Collateral held by the Lender hereunder, and execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence such
termination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION III.1 Warranties, etc. The Pledgor represents and warrants
unto the Lender, as at the date of each pledge and delivery hereunder
(including each pledge and delivery of Pledged Shares) by the Pledgor to the
Lender of any Collateral, as set forth in this Article.
III.1.1 Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full
right and authority to pledge and assign) such Collateral, free and clear
of all liens, security interests, options, or other charges or
encumbrances, except any lien or security interest granted pursuant hereto
in favor of the Lender.
III.1.2 Valid Security Interest. The delivery of such
Collateral to the Lender together with stock powers endorsed in blank is
effective to create a valid, perfected, first priority security interest
in such Collateral and all proceeds thereof, securing the Secured
Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
III.1.3 As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly
authorized and validly issued, fully paid, and non-assessable, and
constitute 1.16% of the issued and outstanding shares of capital stock of
each Pledged Share Issuer.
III.1.4 Authorization, Approval, etc. No authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority, regulatory body or any other Person is required
either
(a) for the pledge by the Pledgor of any Collateral
pursuant to this Pledge Agreement or for the execution, delivery,
and performance of this Pledge Agreement by the Pledgor, or
(b) for the exercise by the Lender of the voting or
other rights provided for in this Pledge Agreement, or, except with
respect to any Pledged Shares, as may be required in connection with
a disposition of such Pledged Shares by laws affecting the offering
and sale of securities generally, the remedies in respect of the
Collateral pursuant to this Pledge Agreement.
III.1.5 Compliance with Laws. The Pledgor is in compliance with
the requirements of all applicable laws (including, without limitation,
the provisions of the Fair Labor Standards Act), rules, regulations and
orders of every governmental authority, the non-compliance with which
could materially adversely affect the business, properties, assets,
operations, condition (financial or otherwise) or prospects of the Pledgor
or the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION IV.1 Protect Collateral; Further Assurances, etc. The Pledgor
will not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Lender hereunder). The Pledgor will warrant
and defend the right and title herein granted unto the Lender in and to the
Collateral (and all right, title, and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever. The Pledgor agrees
that at any time, and from time to time, at the expense of the Pledgor, the
Pledgor will promptly execute and deliver all further instruments, and take all
further action, that may be necessary or desirable, or that the Lender may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Lender to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
SECTION IV.2 Stock Powers, etc. The Pledgor agrees that all Pledged
Shares (and all other shares of capital stock constituting Collateral)
delivered by the Pledgor pursuant to this Pledge Agreement will be
accompanied by duly executed undated blank stock powers, or other equivalent
instruments of transfer acceptable to the Lender. The Pledgor will, from
time to time upon the request of the Lender, promptly deliver to the Lender
such stock powers, instruments, and similar documents, satisfactory in form
and substance to the Lender, with respect to the Collateral as the Lender may
reasonably request and will, from time to time upon the request of the Lender
after the occurrence of any Event of Default, promptly transfer any Pledged
Shares or other shares of common stock constituting Collateral into the name
of any nominee designated by the Lender.
SECTION IV.3 Continuous Pledge. Subject to Section 2.4, the
Pledgor will, at all times, keep pledged to the Lender pursuant hereto all
Pledged Shares and all other shares of capital stock constituting Collateral,
all Dividends and Distributions with respect thereto, and all other Collateral
and other securities, instruments, proceeds, and rights from time to time
received by or distributable to the Pledgor in respect of any Collateral.
SECTION IV.4 Voting Rights; Dividends, etc. The Pledgor agrees:
IV.4.1 After any Default shall have occurred and be continuing,
promptly upon receipt thereof by the Pledgor and without any request
therefor by the Lender, to deliver (properly endorsed where required
hereby or requested by the Lender) to the Lender all Dividends,
Distributions, all interest, all principal, all other cash payments, and
all proceeds of the Collateral, all of which shall be held by the Lender
as additional Collateral for use in accordance with Section 6.4; and
IV.4.2 After any Event of Default shall have occurred and be
continuing and the Lender has notified the Pledgor of the Lender's
intention to exercise its voting power under this Section 4.4.2
(a) the Lender may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of
ownership with respect to any Pledged Shares or other shares of
capital stock constituting Collateral and the Pledgor hereby grants
the Lender an irrevocable proxy, exercisable under such
circumstances, to vote the Pledged Shares and such other Collateral,
and
(b) promptly to deliver to the Lender such additional
proxies and other documents as may be necessary to allow the Lender
to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and
proceeds which may at any time and from time to time be held by the Pledgor but
which the Pledgor is then obligated to deliver to the Lender, shall, until
delivery to the Lender, be held by the Pledgor separate and apart from its
other property in trust for the Lender. The Lender agrees that unless an
Event of Default shall have occurred and be continuing and the Lender shall
have given the notice referred to in Section 4.4.2, the Pledgor shall have
the exclusive voting power with respect to any shares of capital stock
(including any of the Pledged Shares) constituting Collateral and the Lender
shall, upon the written request of the Pledgor, promptly deliver such proxies
and other documents, if any, as shall be reasonably requested by the Pledgor
which are necessary to allow the Pledgor to exercise voting power with
respect to any such share of capital stock (including any of the Pledged
Shares) constituting Collateral; provided, however, that no vote shall be
cast, or consent, waiver, or ratification given, or action taken by the
Pledgor that would cause an Event of Default, impair any Collateral or be
inconsistent with or violate any provision of the Credit Agreement or any
other Loan Document (including this Pledge Agreement).
SECTION IV.5 Additional Undertakings. The Pledgor will not, without
the prior written consent of the Lender, (a) sell, assign, transfer, pledge, or
encumber in any other manner Pledgor's interest in the Pledged Share Issuer, or
(b) permit any of the assets of the Pledged Share Issuer to be sold, assigned,
transferred, pledged, or encumbered in any other manner.
ARTICLE V
THE LENDER
SECTION V.1 Lender Appointed Attorney-in-Fact. The Pledgor hereby
irrevocably appoints the Lender the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time in the Lender's discretion, to take any action
and to execute any instrument which the Lender may deem necessary or advisable
to accomplish the purposes of this Pledge Agreement, including without
limitation:
V.1.1 After the occurrence and continuance of a Default, to ask,
demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral.
V.1.2 To receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with Section 5.1.1
above.
V.1.3 To file any claims or take any action or institute any
proceedings which the Lender may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Lender with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
Notwithstanding the foregoing, prior to the occurrence of an Event of Default,
the Lender agrees that it shall first request that the Pledgor perform such
action and, if the Pledgor shall not have performed such action within five (5)
days following such request, the Lender shall be entitled to take such action
pursuant hereto.
SECTION V.2 Lender May Perform. If the Pledgor fails to perform
any agreement contained herein after being requested in writing to so perform,
the Lender may itself perform, or cause performance of, such agreement, and the
reasonable expenses of the Lender incurred in connection therewith shall be
payable by the Pledgor pursuant to Section 6.5.
SECTION V.3 Lender Has No Duty. The powers conferred on the Lender
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty on it to exercise any such powers. Except for the reasonable
care of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Lender shall have no duty as to any Collateral or
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Property, whether or not the Lender has or is deemed to have knowledge
of such matters, or (b) taking any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
SECTION V.4 Reasonable Care. The Lender is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral, if it
takes such action for that purpose as the Pledgor reasonably requests in
writing at times other than upon the occurrence and during the continuance
of any Event of Default, but failure of the Lender to comply with any such
request at any time shall not in itself be deemed a failure to exercise
reasonable care.
ARTICLE VI
REMEDIES
SECTION VI.1 Certain Remedies. If any Event of Default shall have
occurred and be continuing:
VI.1.1 The Lender may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured
party on default under the U.C.C. (whether or not the U.C.C. applies to
the affected Collateral) and also may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Lender's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Lender may deem commercially reasonable. The Pledgor agrees that, to the
extent notice of sale shall be required by law, at least ten days' prior
notice to the Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Lender may
adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
VI.1.2 The Lender may
(a) transfer all or any part of the Collateral into the
name of the Lender or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder;
(b) notify the parties obligated on any of the Collateral
to make payment to the Lender of any amount due or to become due
thereunder;
(c) enforce collection of any of the Collateral by suit
or otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any obligations of any nature
of any party with respect thereto;
(d) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral;
(e) take control of any proceeds of the Collateral; and
(f) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION VI.2 Securities Laws. If the Lender shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section
6.1, the Pledgor agrees that, upon request of the Lender, the Pledgor will,
at its own expense:
VI.2.1 Execute and deliver, and cause each issuer of the
Collateral contemplated to be sold and the directors and officers thereof
to execute and deliver (in each case to the extent required by law), all
such instruments and documents, and do or cause to be done all such other
acts and things, as may be necessary or, in the opinion of the Lender,
advisable to register such Collateral under, or otherwise permit the
Collateral to be privately sold or transferred in compliance with, the
provisions of the Securities Act of 1933, as from time to time amended
(the "Securities Act"), and to cause the registration statement relating
thereto to become effective and to remain effective for such period as
prospectuses are required by law to be furnished, and to make all
amendments and supplements thereto and to the related prospectus which, in
the opinion of the Lender, are necessary or advisable, all in conformity
with the requirements of the Securities Act and the rules and regulations
of the Securities and Exchange Commission applicable thereto.
VI.2.2 Use its best efforts to qualify the Collateral under, or
to permit the Collateral to be privately sold or transferred in compliance
with, the state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Collateral, as requested by the
Lender.
VI.2.3 Cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement that will satisfy
the provisions of Section 11(a) of the Securities Act.
VI.2.4 Do or cause to be done all such other acts and things as
may be necessary to make such sale of the Collateral or any part thereof
valid and binding and in compliance with applicable law.
SECTION VI.3 Compliance with Restrictions. The Pledgor agrees that in
any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Lender is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Pledgor further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Lender be liable nor accountable to the
Pledgorfor any discount allowed by the reason of the fact that such
Collateral is sold in compliance with any such limitation or restriction.
SECTION VI.4 Application of Proceeds. All cash proceeds received
by the Lender in respect of any sale of, collection from, or other realization
upon, all or any part of the Collateral may, in the discretion of the Lender,
be held by the Lender as additional collateral security for, or then or at
any time thereafter be applied (after payment of any amounts payable to the
Lender pursuant to Sections 10.3 and 10.4 of the Credit Agreement and Section
6.5 hereof) in whole or in part by the Lender against, all or any part of the
Secured Obligations in such order as the Lender shall elect. Any surplus of
such cash or cash proceeds held by the Lender and remaining after payment in
full of all the Secured Obligations, and the termination of all Commitments and
any other commitments by the Lender to the Pledgor, shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to receive such surplus.
SECTION VI.5 Indemnity and Expenses. The Pledgor hereby indemnifies
and holds harmless the Lender from and against any and all claims, losses, and
liabilities arising out of or resulting from this Pledge Agreement (including
enforcement of this Pledge Agreement), except claims, losses, or liabilities
resulting from the Lender's gross negligence or wilful misconduct. Upon
demand, the Pledgor will pay to the Lender the amount of any and all reasonable
expenses, including the reasonable fees and disbursements of its counsel and of
any experts and agents, which the Lender may incur in connection with:
(a) the exercise or enforcement of any of the rights of the Lender
hereunder; or
(b) the failure by the Pledgor to perform or observe any
of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION VII.1 Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION VII.2 Amendments, etc. No amendment to or waiver of
any provision of this Pledge Agreement nor consent to any departure by the
Pledgor herefrom shall in any event be effective unless the same shall be in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it is given.
SECTION VII.3 Protection of Collateral. The Lender may from time
to time, at its option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Lender may from time to time take any other action which the Lender reasonably
deems necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein.
SECTION VII.4 Addresses for Notices. All notices and other
communications provided to any party hereto under this Pledge Agreement shall
be in writing and shall be hand delivered or sent by a nationally recognized
overnight courier, certified mail (return receipt requested), or telecopy to
such party at its address or telecopy number set forth on the signature pages
hereof or at such other address or telecopy number as may be designated by such
party in a notice to the other party. Without limiting any other means by
which a party may be able to provide that a notice has been received by the
other party, a notice shall be deemed to be duly received (a) if sent by
hand, on the date when left with a responsible person at the address of the
recipient; (b) if sent by certified mail, on the fifth business day after
delivery to the U.S. Post Office; (c) if sent by overnight courier, on the
first business day after delivery to such courier; or (d) if sent by
telecopy, on the date of receipt by the sender of an acknowledgment or
transmission reports generated by the machine from which the telecopy was
sent indicating that the telecopy was sent in its entirety to the recipient's
telecopy number.
SECTION VII.5 Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION VII.6 Severability. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
SECTION VII.7 The Lender as Agent for its Affiliates. As described
above, certain Affiliates of the Lender are or may become parties to certain
Hedging Agreements with the Pledgor and/or Affiliates of the Pledgor. This
Pledge Agreement secures the obligations of the Pledgor and such Affiliates, as
the case may be, under such Hedging Agreements, and the parties hereto
acknowledge for all purposes that the Lender acts as agent on behalf of such
Affiliates of the Lender which are so entitled to share in the rights and
benefits accruing to the Lender under this Pledge Agreement.
SECTION VII.8 Governing Law, Entire Agreement, etc. THIS
PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF ILLINOIS, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF ILLINOIS. THIS PLEDGE AGREEMENT AND THE OTHER LOAN
DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS,
WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.9 Non-Recourse Nature of Liability.
(a) Notwithstanding anything to the contrary contained or
implied in this Pledge Agreement, the Pledgor shall not be personally liable
under any theory for any amount due under the Credit Agreement, the Notes or
such other Loan Documents, and the Lender shall not seek a deficiency or
personal judgment against the Pledgor for payment of the Obligations evidenced
by the Credit Agreement, the Notes or such other Loan Documents. No property
or assets of the Pledgor, other than the Collateral pledged pursuant to this
Pledge Agreement, shall be sold, levied upon or otherwise used to satisfy any
judgment rendered in connection with any action brought against the Borrower
or its Subsidiaries with respect to this Pledge Agreement, the Credit
Agreement, the Notes or such other Loan Documents.
(b) Notwithstanding the provisions of Section 7.9(a) to the
contrary, nothing contained in this Pledge Agreement, the Credit Agreement or
any other Loan Document shall be construed to (i) impair or limit the rights of
the Lender arising under this Pledge Agreement, or any other Security Document
or other documents to which the Pledgor is a party thereto in its individual
capacity; (ii) impair or limit any of the Obligations of the Borrower or its
Subsidiaries under any Loan Document to which it is a party; (iii) impair or
limit the validity of the indebtedness evidenced by this Pledge Agreement, the
Credit Agreement, the Notes or the other Loan Documents or prevent the taking
of any action permitted by law against the Borrower or its Subsidiaries or the
assets of the Borrower or its Subsidiaries or the proceeds of such assets; or
(iv) prevent the commencement of any action, suit or proceeding against any
Person (or prevent the service of papers under any Person) for the purpose of
obtaining jurisdiction over the Borrower or its Subsidiaries.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
DON Wm. REYNOLDS
By:/s/ Don Wm. Reynolds
Don Wm. Reynolds
Address: c/o Future Petroleum Corporation
2351 West Northwest Highway
Suite 2130
Dallas, Texas 75220
Facsimile No.: (214) 350-3832
Attention: Don Wm. Reynolds
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Richard a. Bernardy
Name: Richard A. Bernardy
Title: Vice President
Address: 333 Clay Street
Suite 4550
Houston, TX 77002
Facsimile No.: (713) 651-4888
Attention: Richard A. Bernardy
<TABLE>
<CAPTION>
ATTACHMENT 1
to
Pledge Agreement
Pledged Shares
Pledged Share Issuer Common Stock
Authorized Outstanding Number of Shares % of Shares
Shares Shares Pledged Pledged
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Future Petroleum
Corporation, 30,000,000 12,757,015 148,000 1.16%
a Utah corporation
</TABLE>
EXHIBIT 10.17
GUARANTY
THIS GUARANTY dated as of April 30, 1998 by the undersigned Guarantor,
is in favor of 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 (collectively, "Sellers").
RECITALS:
1. Future Petroleum Corporation, a Utah corporation ("Buyer") has executed
those certain Renewal Promissory Notes of even date herewith, payable to
the order of Sellers in the aggregate principal amount of $7,260,000
(such promissory notes, as from time to time amended, and all promissory
notes given in substitution, renewal or extension therefor or thereof,
in whole or in part, collectively, the "Notes").
2. The Notes were executed pursuant to (i) a Purchase and Sale Agreement
dated November 25, 1997 (as amended, supplemented, or restated, the
"November 1997 Purchase Agreement"), by and between Buyer and Sellers,
and (ii) a Purchase and Sale Agreement dated April 30, 1998 (as amended,
supplemented, or restated, the "April 1998 Purchase Agreement), by and
between Buyer, Energy Capital Investment Company PLC, EnCap Equity 1994
Limited Partnership and NCI Enterprises, Inc. The November 1997
Purchase Agreement and the April 1998 Purchase Agreement are herein
sometimes collectively called the "Purchase Agreement".
3. It is a condition precedent to Sellers' obligation to extend credit to
Buyer pursuant to the April 1998 Purchase Agreement that Guarantor shall
execute and deliver to Sellers a satisfactory guaranty of Buyer's
obligations under the Notes and the Purchase Agreement.
4. Buyer owns directly or indirectly all of the partnership interests of
Guarantor.
5. Buyer, Guarantor and the other direct and indirect subsidiaries of
Buyer are mutually dependent on each other in the conduct of their
respective businesses under a holding company structure, with the credit
needed from time to time by each often being provided by another or by
means of financing obtained by one such affiliate with the support of
the others for their mutual benefit and the ability of each to obtain
such financing being dependent on the successful operations of the
others.
6. The board of directors of the general partner of Guarantor has
determined that Guarantor's execution, delivery and performance of this
Guaranty may reasonably be expected to benefit Guarantor, directly or
indirectly, and are in the best interests of Guarantor.
NOW, THEREFORE, in consideration of the premises, of the benefits which
will inure to Guarantor from Sellers' extension of credit to Buyer under the
Notes, and of Ten Dollars and other good and valuable consideration, the
receipt and sufficiency of all of which are hereby acknowledged, and in order
to induce Sellers to extend credit under the Notes, Guarantor hereby agrees
with Sellers, as follows:
AGREEMENTS
Section 1. Definitions. Reference is hereby made to the Purchase
Agreement for all purposes. All terms used in this Guaranty which are defined
in the Purchase Agreement and not otherwise defined herein shall have the same
meanings when used herein. All references herein to any Obligation Document,
Note Document, Security Related Document or other document or instrument refer
to the same as from time to time amended, supplemented or restated. As used
herein the following terms shall have the following meanings:
"Obligations" means collectively all of the indebtedness, obligations,
and undertakings which are guaranteed by Guarantor and described in
subsections (a) and (b) of Section 2.
"Obligation Documents" means this Guaranty, the Notes, the Purchase
Agreement, the Note Documents, the Security Related Documents and all other
documents and instruments under, by reason of which, or pursuant to which any
or all of the Obligations are evidenced, governed, secured, or otherwise dealt
with, and all other documents, instruments, agreements, certificates, legal
opinions and other writings heretofore or hereafter delivered in connection
herewith or therewith.
"Obligors" means Buyer, Guarantor and any other endorsers, guarantors or
obligors, primary or secondary, of any or all of the Obligations.
"Security" means any rights, properties, or interests of Sellers, under
the Obligation Documents or otherwise, which provide recourse or other
benefits to Sellers in connection with the Obligations or the non-payment or
non-performance thereof, including collateral (whether real or personal,
tangible or intangible) in which Sellers have rights under or pursuant to any
Obligation Documents, guaranties of the payment or performance of any
Obligation, bonds, surety agreements, keep-well agreements, letters of credit,
rights of subrogation, rights of offset, and rights pursuant to which other
claims are subordinated to the Obligations.
Section 2. Guaranty.
(a) Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees to each Seller the prompt, complete, and full payment when due, and
no matter how the same shall become due, of:
(i) the Notes, including all principal, all interest thereon and
all other sums payable thereunder; and
(ii) All other sums payable under the other Obligation Documents,
whether for principal, interest, fees or otherwise.
Without limiting the generality of the foregoing, Guarantor's liability
hereunder shall extend to and include all post-petition interest, expenses,
and other duties and liabilities of Buyer described above in this subsection
(a), or below in the following subsection (b), which would be owed by Buyer
but for the fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization, or similar proceeding involving
Buyer.
(b) Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees to each Seller the prompt, complete and full performance, when due,
and no matter how the same shall become due, of all obligations and
undertakings of Buyer to such Seller under, by reason of, or pursuant to any
of the Obligation Documents.
(c) If Buyer shall for any reason fail to pay any Obligation, as and
when such Obligation shall become due and payable, whether at its stated
maturity, as a result of the exercise of any power to accelerate, or
otherwise, Guarantor will, forthwith upon demand by Sellers, pay such
Obligation in full to the Seller to whom such Obligation is owed. If Buyer
shall for any reason fail to perform promptly any Obligation, Guarantor will,
forthwith upon demand by Sellers, cause such Obligation to be performed or, if
specified by Sellers, provide sufficient funds, in such amount and manner as
Sellers shall in good faith determine, for the prompt, full and faithful
performance of such Obligation by Sellers or such other Person as Sellers
shall designate.
(d) If either Buyer or Guarantor fails to pay or perform any Obligation
as described in the immediately preceding subsections (a), (b), or (c)
Guarantor will incur the additional obligation to pay to Sellers, and
Guarantor will forthwith upon demand by Sellers pay to Sellers, the amount of
any and all expenses, including fees and disbursements of Sellers' counsel and
of any experts or agents retained by Sellers, which Sellers may incur as a
result of such failure.
(e) As between Guarantor and Sellers, this Guaranty shall be considered
a primary and liquidated liability of Guarantor.
(f) Guarantor and Sellers (by their acceptance hereof), hereby confirm
that it is their intention that the guarantee hereunder not constitute a
fraudulent transfer or fraudulent conveyance for purposes of any federal or
state law. To effectuate the foregoing intention, Guarantor and Sellers (by
their acceptance hereof) hereby irrevocably agree and understand that,
notwithstanding any other provision of this Guaranty, the liability of
Guarantor hereunder shall be limited to the maximum amount of liability that
can be incurred without rendering this Guaranty, as it relates to Guarantor,
voidable under applicable law relating to fraudulent conveyances or fraudulent
transfers, and not for any greater amount. Subject to the foregoing
limitations, the obligations and duties of Guarantor hereunder are their joint
and several obligations.
Section 3. Unconditional Guaranty.
(a) No action which any Seller may take or omit to take in connection
with any of the Obligation Documents, any of the Obligations (or any other
indebtedness owing by Buyer to any Seller), or any Security, and no course of
dealing of any Seller with any Obligor or any other Person, shall release or
diminish Guarantor's obligations, liabilities, agreements or duties hereunder,
affect this Guaranty in any way, or afford Guarantor any recourse against any
Seller, regardless of whether any such action or inaction may increase any
risks to or liabilities of any Seller or any Obligor or increase any risk to
or diminish any safeguard of any Security. Without limiting the foregoing,
Guarantor hereby expressly agrees that Sellers may, from time to time, without
notice to or the consent of Guarantor, do any or all of the following:
(i) Enter into amendments, changes or modifications, in whole or
in part, any one or more of the Obligation Documents, and give or refuse
to give any waivers or other indulgences with respect thereto.
(ii) Neglect, delay, fail, or refuse to take or prosecute any
action for the collection or enforcement of any of the Obligations, to
foreclose or take or prosecute any action in connection with any
Security or Obligation Document, to bring suit against any Obligor or
any other Person, or to take any other action concerning the Obligations
or the Obligation Documents.
(iii) Accelerate, change, rearrange, extend, or renew the time,
rate, terms, or manner for payment or performance of any one or more of
the Obligations (whether for principal, interest, fees, expenses,
indemnifications, affirmative or negative covenants, or otherwise).
(iv) Compromise or settle any unpaid or unperformed Obligation or
any other obligation or amount due or owing, or claimed to be due or
owing, under any one or more of the Obligation Documents.
(v) Take, exchange, amend, eliminate, surrender, release, or
subordinate any or all Security for any or all of the Obligations,
accept additional or substituted Security therefor, and perfect or fail
to perfect Sellers' rights in any or all Security.
(vi) Discharge, release, substitute or add Obligors.
(vii) Apply all monies received from Obligors or others, or from
any Security for any of the Obligations, as Sellers may determine to be
in their best interest, without in any way being required to marshall
Security or assets or to apply all or any part of such monies upon any
particular Obligations.
(b) No action or inaction of any Obligor or any other Person, and no
change of law or circumstances, shall release or diminish Guarantor's
obligations, liabilities, agreements, or duties hereunder, affect this
Guaranty in any way, or afford Guarantor any recourse against any Seller.
Without limiting the foregoing, the obligations, liabilities, agreements, and
duties of Guarantor under this Guaranty shall not be released, diminished,
impaired, reduced, or affected by the occurrence of any or all of the
following from time to time, even if occurring without notice to or without
the consent of Guarantor:
(i) Any voluntary or involuntary liquidation, dissolution, sale
of all or substantially all assets, marshalling of assets or
liabilities, receivership, conservatorship, assignment for the benefit
of creditors, insolvency, bankruptcy, reorganization, arrangement, or
composition of any Obligor or any other proceedings involving any
Obligor or any of the assets of any Obligor under laws for the
protection of debtors, or any discharge, impairment, modification,
release, or limitation of the liability of, or stay of actions or lien
enforcement proceedings against, any Obligor, any properties of any
Obligor, or the estate in bankruptcy of any Obligor in the course of or
resulting from any such proceedings.
(ii) The failure by any Seller to file or enforce a claim in any
proceeding described in the immediately preceding subsection (i) or to
take any other action in any proceeding to which any Obligor is a party.
(iii) The release by operation of law of any Obligor from any of
the Obligations or any other obligations to any Seller.
(iv) The invalidity, deficiency, illegality, or unenforceability
of any of the Obligations or the Obligation Documents, in whole or in
part, any bar by any statute of limitations or other law of recovery on
any of the Obligations, or any defense or excuse for failure to perform
on account of force majeure, act of God, casualty, impossibility,
impracticability, or other defense or excuse whatsoever.
(v) The failure of any Obligor or any other Person to sign any
guaranty or other instrument or agreement within the contemplation of
any Obligor or any Seller.
(vi) The fact that Guarantor may have incurred directly part of
the Obligations or is otherwise primarily liable therefor.
(vii) Without limiting any of the foregoing, any fact or event
(whether or not similar to any of the foregoing) which in the absence of
this provision would or might constitute or afford a legal or equitable
discharge or release of or defense to a guarantor or surety other than
the full and final payment and performance of the Obligations.
(c) Sellers may invoke the benefits of this Guaranty before pursuing
any remedies against any Obligor or any other Person and before proceeding
against any Security now or hereafter existing for the payment or performance
of any of the Obligations. Sellers may maintain an action against Guarantor
on this Guaranty without joining any other Obligor therein and without
bringing a separate action against any other Obligor.
(d) If any payment to any Seller by any Obligor is held to constitute a
preference or a voidable transfer under applicable state or federal laws, or
if for any other reason any Seller is required to refund such payment to the
payor thereof or to pay the amount thereof to any other Person, such payment
to such Seller shall not constitute a release of Guarantor from any liability
hereunder, and Guarantor agrees to pay such amount to such Seller on demand
and agrees and acknowledges that this Guaranty shall continue to be effective
or shall be reinstated, as the case may be, to the extent of any such payment
or payments. Any transfer by subrogation which is made as contemplated in
Section 6 prior to any such payment or payments shall (regardless of the terms
of such transfer) be automatically voided upon the making of any such payment
or payments, and all rights so transferred shall thereupon revert to and be
vested in Sellers.
(e) This is a continuing guaranty and shall apply to and cover all
Obligations and renewals and extensions thereof and substitutions therefor
from time to time.
Section 4. Waiver. Guarantor hereby waives, with respect to the
Obligations, this Guaranty, and the other Obligation Documents:
(a) notice of the incurrence of any Obligation by Buyer, and notice of
any kind concerning the assets, liabilities, financial condition,
creditworthiness, businesses, prospects, or other affairs of Buyer (it being
understood and agreed that: (i) Guarantor shall take full responsibility for
informing itself of such matters, (ii) neither Seller shall have any
responsibility of any kind to inform Guarantor of such matters, and (iii)
Sellers are hereby authorized to assume that Guarantor, by virtue of its
relationships with Buyer which are independent of this Guaranty, has full and
complete knowledge of such matters whenever Sellers extend credit to Buyer or
take any other action which may change or increase Guarantor's liabilities or
losses hereunder).
(b) notice that any Seller, any Obligor, or any other Person has taken
or omitted to take any action under any Obligation Document or any other
agreement or instrument relating thereto or relating to any Obligation.
(c) notice of acceptance of this Guaranty.
(d) demand, presentment for payment, and notice of demand, dishonor,
nonpayment, or nonperformance.
(e) notice of intention to accelerate, notice of acceleration, protest,
notice of protest, notice of any exercise of remedies (as described in the
following Section 5 or otherwise), and all other notices of any kind
whatsoever.
Section 5. Exercise of Remedies. Each Seller shall have the right to
enforce, from time to time, in any order and at such Seller's sole discretion,
any rights, powers and remedies which such Seller may have under the
Obligation Documents or otherwise, including judicial foreclosure, the
exercise of rights of power of sale, the taking of a deed or assignment in
lieu of foreclosure, the appointment of a receiver to collect rents, issues
and profits, the exercise of remedies against personal property, or the
enforcement of any assignment of leases, rentals, oil or gas production, or
other properties or rights, whether real or personal, tangible or intangible;
and Guarantor shall be liable to each Seller hereunder for any deficiency
resulting from the exercise by any Seller of any such right or remedy even
though any rights which Guarantor may have against Buyer or others may be
destroyed or diminished by exercise of any such right or remedy. No failure
on the part of any Seller to exercise, and no delay in exercising, any right
hereunder or under any other Obligation Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any right preclude any
other or further exercise thereof or the exercise of any other right. The
rights, powers and remedies of each Seller provided herein and in the other
Obligation Documents are cumulative and are in addition to, and not exclusive
of, any other rights, powers or remedies provided by law or in equity. The
rights of each Seller hereunder are not conditional or contingent on any
attempt by any Seller to exercise any of its rights under any other Obligation
Document against any Obligor or any other Person.
Section 6. Limited Subrogation. Until all of the Obligations have been
paid and performed in full, no Guarantor shall have any right to exercise any
right of subrogation, reimbursement, indemnity, exoneration, contribution or
any other claim which it may now or hereafter have against or to any Obligor
or any Security in connection with this Guaranty, and Guarantor hereby waives
any rights to enforce any remedy which Guarantor may have against Buyer and
any right to participate in any Security until such time. If any amount shall
be paid to Guarantor on account of any such subrogation or other rights, any
such other remedy, or any Security at any time when all of the Obligations and
all other expenses guaranteed pursuant hereto shall not have been paid in
full, such amount shall be held in trust for the benefit of Sellers, shall be
segregated from the other funds of Guarantor and shall forthwith be paid over
to Sellers to be held by Sellers as collateral for, or then or at any time
thereafter applied in whole or in part by Sellers against, all or any portion
of the Obligations, whether matured or unmatured, in such order as Sellers
shall elect. If Guarantor shall make payment to Sellers of all or any portion
of the Obligations and if all of the Obligations shall be finally paid in
full, Sellers will, at Guarantor's request and expense, execute and deliver to
Guarantor (without recourse, representation or warranty) appropriate documents
necessary to evidence the transfer by subrogation to Guarantor of an interest
in the Obligations resulting from such payment by Guarantor; provided that
such transfer shall be subject to Section 3(d) above and that without the
consent of Sellers (which Sellers may withhold in its discretion) no Guarantor
shall have any right to be subrogated to any claim or right against any
Obligor which has become owned by any Seller, whose ownership has otherwise
changed in the course of enforcement of the Obligation Documents, or which
Sellers otherwise have released or wish to release from its Obligations.
Section 7. Successors and Assigns. No Guarantor's rights or
obligations hereunder may be assigned or delegated, but this Guaranty and such
obligations shall pass to and be fully binding upon the successors of
Guarantor, as well as Guarantor. This Guaranty shall apply to and inure to
the benefit of Sellers and their successors or assigns. Without limiting the
generality of the immediately preceding sentence, each Seller may in
compliance with the Note Documents assign, grant a participation in, or
otherwise transfer any Obligation held by it or any portion thereof, and each
Seller may assign or otherwise transfer its rights or any portion thereof
under any Obligation Document, to any other Person, and such other Person
shall thereupon become vested with all of the benefits in respect thereof
granted to such Seller hereunder unless otherwise expressly provided by such
Seller in connection with such assignment or transfer.
Section 8. Subordination and Offset. Guarantor hereby subordinates and
makes inferior to the Obligations any and all indebtedness now or at any time
hereafter owed by Buyer to Guarantor. Each Guarantor agrees that after the
occurrence of any Default it will neither permit Buyer to repay such
indebtedness or any part thereof nor accept payment from Buyer of such
indebtedness or any part thereof without the prior written consent of Sellers.
If Guarantor receives any such payment without the prior written consent of
Sellers, the amount so paid shall be held in trust for the benefit of Sellers,
shall be segregated from the other funds of Guarantor, and shall forthwith be
paid over to Sellers to be held by Sellers as collateral for, or then or at
any time thereafter applied in whole or in part by Sellers against, all or any
portions of the Obligations, whether matured or unmatured, in such order as
Sellers shall elect. Guarantor hereby grants to each Seller a right of offset
to secure the payment of the Obligations and Guarantor's obligations and
liabilities hereunder, which right of offset shall be upon any and all monies,
securities and other property (and the proceeds therefrom) of Guarantor now or
hereafter held or received by or in transit to any Seller from or for the
account of Guarantor, whether for safekeeping, custody, pledge, transmission,
collection or otherwise, and also upon any and all deposits (general or
special), credits and claims of Guarantor at any time existing against any
Seller. Upon the occurrence of any Event of Default, each Seller is hereby
authorized at any time and from time to time, without notice to Guarantor, to
offset, appropriate and apply any and all items hereinabove referred to
against the Obligations and Guarantor's obligations and liabilities hereunder
irrespective of whether or not such Seller shall have made any demand under
this Guaranty and although such obligations and liabilities may be contingent
or unmatured. Each Seller agrees promptly to notify Guarantor after any such
offset and application made by such Seller, provided that the failure to give
such notice shall not affect the validity of such offset and application. The
rights of each Seller under this section are in addition to, and shall not be
limited by, any other rights and remedies (including other rights of offset)
which Sellers may have.
Section 9. Representations and Warranties. Guarantor hereby represents
and warrants as follows:
(a) The Recitals at the beginning of this Guaranty are true and correct
in all respects.
(b) Guarantor is duly organized, validly existing and in good standing
under the laws of the state of its organization as set forth on the signature
pages hereto; and Guarantor has all requisite power and authority to execute,
deliver and perform this Guaranty.
(c) The execution, delivery and performance by Guarantor of this
Guaranty have been duly authorized by all necessary action and do not and will
not contravene its organizational documents.
(d) The execution, delivery and performance by Guarantor of this
Guaranty do not and will not contravene any law or governmental regulation or
any contractual restriction binding on or affecting Guarantor or any of its
Affiliates or properties, and do not and will not result in or require the
creation of any lien, security interest or other charge or encumbrance upon or
with respect to any of its properties.
(e) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or other regulatory body or third
party is required for the due execution, delivery and performance by Guarantor
of this Guaranty.
(f) This Guaranty is a legal, valid and binding obligation of
Guarantor, enforceable against Guarantor in accordance with its terms except
as limited by bankruptcy, insolvency or similar laws of general application
relating to the enforcement of creditors' rights.
(g) There is no action, suit or proceeding pending or, to the knowledge
of Guarantor, threatened against or otherwise affecting Guarantor before any
court, arbitrator or governmental department, commission, board, bureau,
agency or instrumentality which may materially and adversely affect
Guarantor's financial condition or its ability to perform its obligations
hereunder.
(h) The direct or indirect value of the consideration received and to
be received by Guarantor in connection herewith is reasonably worth at least
as much as the liability and obligations of Guarantor hereunder, and the
incurrence of such liability and obligations in return for such consideration
may reasonably be expected to benefit Guarantor, directly or indirectly.
(i) Guarantor is not "insolvent" on the date hereof (that is, the sum
of Guarantor's absolute and contingent liabilities, including the Obligations,
does not exceed the fair market value of Guarantor's assets).
Notwithstanding anything to the contrary herein, the representations and
warranties, set forth in subsections (b), (g) and (i) above are to Guarantor's
best knowledge.
Section 10. No Oral Change. No amendment of any provision of this
Guaranty shall be effective as to Guarantor unless it is in writing and signed
by Guarantor and Sellers, and no waiver of any provision of this Guaranty, and
no consent to any departure by Guarantor therefrom, shall be effective unless
it is in writing and signed by Sellers, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
Section 11. Invalidity of Particular Provisions. If any term or
provision of this Guaranty shall be determined to be illegal or unenforceable
all other terms and provisions hereof shall nevertheless remain effective and
shall be enforced to the fullest extent permitted by applicable law.
Section 12. Headings and References. The headings used herein are for
purposes of convenience only and shall not be used in construing the
provisions hereof. The words "this Guaranty," "this instrument," "herein,"
"hereof," "hereby" and words of similar import refer to this Guaranty as a
whole and not to any particular subdivision unless expressly so limited. The
phrases "this section" and "this subsection" and similar phrases refer only to
the subdivisions hereof in which such phrases occur. The word "or" is not
exclusive, and the word "including" (in its various forms) means "including
without limitation". Pronouns in masculine, feminine and neuter genders shall
be construed to include any other gender, and words in the singular form shall
be construed to include the plural and vice versa, unless the context
otherwise requires.
Section 13. Term. This Guaranty shall be irrevocable until all of the
Obligations have been completely and finally paid and performed, no Seller has
any obligation to extend credit to Buyer, and all obligations and undertakings
of Buyer under, by reason of, or pursuant to the Obligation Documents have
been completely performed, and this Guaranty is thereafter subject to
reinstatement as provided in Section 3(d). All extensions of credit and
financial accommodations heretofore or hereafter made by Sellers to Buyer
shall be conclusively presumed to have been made in acceptance hereof and in
reliance hereon.
Section 14. Notices. Any notice or communication required or permitted
hereunder shall be given as provided in the Purchase Agreement.
Section 15. Limitation on Interest. Sellers and Guarantor intend to
contract in strict compliance with applicable usury law from time to time in
effect, and the provisions of the Notes limiting the interest for which
Guarantor is obligated are expressly incorporated herein by reference.
Section 16. Note Document. This Guaranty is a Note Document, as
defined in the Purchase Agreement, and is subject to the provisions of the
Purchase Agreement governing Note Documents. Guarantor hereby ratifies,
confirms and approves the Purchase Agreement, the Notes and the other Note
Documents and, in particular, any provisions thereof which relate to
Guarantor.
Section 17. Counterparts. This Guaranty may be executed in any number
of counterparts, each of which when so executed shall be deemed to constitute
one and the same Guaranty.
Section 18. GOVERNING LAW. THIS GUARANTY IS TO BE PERFORMED IN THE STATE OF
TEXAS AND SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF SUCH STATE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
GUARANTOR HEREBY IRREVOCABLY SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION
OF THE STATE AND FEDERAL COURTS OF SUCH STATE AND AGREES AND CONSENTS THAT
SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING
HERETO BY ANY MEANS ALLOWED UNDER TEXAS OR FEDERAL LAW.
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
as of the date first written above.
NCI-SHAWNEE LIMITED PARTNERSHIP,
a Texas limited partnership
By: Future Petroleum Corporation,
a Texas corporation, General Partner
By:/s/ B. Carl Price
B. Carl Price, President
EXHIBIT 10.18
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made as of May 1, 1998 by
the undersigned ("Debtor"), in favor of 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 (collectively, "Secured Party").
RECITALS:
1. Future Petroleum Corporation, a Utah corporation ("Buyer") has executed
those certain Renewal Promissory Notes of even date herewith, payable to
the order of Secured Party in the aggregate principal amount of
$7,260,000 (such promissory notes, as from time to time amended, and all
promissory notes given in substitution, renewal or extension therefor or
thereof, in whole or in part, collectively, the "Notes").
2. The Notes were executed pursuant to (i) a Purchase and Sale Agreement
dated November 25, 1997 (as amended, supplemented, or restated, the
"November 1997 Purchase Agreement"), by and between Buyer and Secured
Party, and (ii) a Purchase and Sale Agreement datedMay 1, 1998 (as
amended, supplemented or restated, the "May 1998 Purchase Agreement"),
by and between Buyer, Energy Capital Investment Company PLC, EnCap
Equity 1994 Limited Partnership and NCI Enterprises, Inc. The November
1997 Agreement and the May 1998 Agreement are herein sometimes
collectively called the "Purchase Agreement".
3. Pursuant to the Purchase Agreement, Debtor is concurrently giving or has
given to Secured Party a Guaranty (as from time to time amended,
supplemented or restated, the "Guaranty") of all of the indebtedness of
Buyer under the Purchase Agreement and the Notes.
4. It is a condition precedent to Secured Party's obligation to extend
credit to Buyer pursuant to the Purchase Agreement that Debtor shall
execute and deliver to Secured Party a satisfactory security agreement
granting liens on and security interests in all of its assets to secure
Debtor's obligations under the Purchase Agreement, the Notes and the
Guaranty.
5. Buyer owns directly (i) all of the issued and outstanding shares of
capital stock of Future Energy Corporation, a Nevada corporation, which
in turn owns a 99% limited partnership interest in Debtor, and (ii) all
of the issued and outstanding shares of capital stock of Future
Petroleum Corporation, a Texas corporation, which in turn owns a 1%
general partnership interest in Debtor.
6. Buyer, Debtor and the other direct and indirect subsidiaries of Buyer
are mutually dependent on each other in the conduct of their respective
businesses under a holding company structure, with the credit needed
from time to time by each often being provided by another or by means of
financing obtained by one such affiliate with the support of the others
for their mutual benefit and the ability of each to obtain such
financing being dependent on the successful operations of the others.
7. The board of directors of the general partner of Debtor has determined
that Debtor's execution, delivery and performance of this Agreement may
reasonably be expected to benefit Debtor, directly or indirectly, and is
in the best interests of Debtor.
NOW, THEREFORE, in consideration of the premises, of the benefits which
will inure to Debtor from Secured Party's extension of credit under the Notes,
and of Ten Dollars and other good and valuable consideration, the receipt and
sufficiency of all of which are hereby acknowledged, and in order to induce
Secured Party to extend credit under the Purchase Agreement, Debtor hereby
agrees with Secured Party as follows:
ARTICLE I - Definitions and References
Section 1.1. General Definitions. As used herein, the terms
"Agreement", "Debtor", "Secured Party", "Buyer", "Notes", "Purchase Agreement"
and "Guaranty" shall have the meanings indicated above, and the following
terms shall have the following meanings:
"Collateral" means all property, of whatever type, which is described in
Section 2.1 as being at any time subject to a security interest granted
hereunder to Secured Party.
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing Inventory, Equipment, or other
goods.
"Equipment" means all equipment (as defined in the UCC) in whatever
form, wherever located, and whether now or hereafter existing, and all parts
thereof, all accessions thereto, and all replacements therefor.
"General Intangibles" means all general intangibles (as defined in the
UCC) of any kind (including choses in action, tax refunds, insurance proceeds,
and contract rights), and all instruments, security agreements, leases,
contracts, and other rights (except those constituting Receivables, Documents,
or Instruments) to receive payments of money or the ownership or possession of
property.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (as each is defined in" the UCC).
"Inventory" means all inventory (as defined in the UCC) in all of its
forms, wherever located and whether now or hereafter existing, including (a)
all movable property and other goods held for sale or lease, all movable
property and other goods furnished or to be furnished under contracts of
service, all raw materials and work in process, and all materials and supplies
used or consumed in a business, (b) all movable property and other goods which
are part of a product or mass, (c) all movable property and other goods which
are returned to or repossessed by the seller, lessor, or supplier thereof, (d)
all goods and substances in which any of the foregoing is commingled or to
which any of the foregoing is added, and (e) all accessions to, products of,
and documents for any of the foregoing.
"Obligation Documents" means the Purchase Agreement, the Notes, the
Guaranty, the Note Documents, and all other documents and instruments under,
by reason of which, or pursuant to which any or all of the Secured Obligations
are evidenced, governed, secured, guaranteed, or otherwise dealt with, and all
other agreements, certificates, and other documents, instruments and writings
heretofore or hereafter delivered in connection herewith or therewith.
"Other Liable Party" means any Person, other than Debtor, who may now or
may at any time hereafter be primarily or secondarily liable for any of the
Secured Obligations or who may now or may at any time hereafter have granted
to Secured Party a Lien upon any property as security for the Secured
Obligations.
"Proceeds" means, with respect to any property of any kind, all proceeds
of, and all other profits, products, rentals or receipts, in whatever form,
arising from any sale, exchange, collection, lease, licensing or other
disposition of, distribution in respect of, or other realization upon, such
property, including all claims against third parties for loss of, damage to or
destruction of, or for proceeds payable under (or unearned premiums with
respect to) insurance in respect of, such property (regardless of whether
Secured Party is named a loss payee thereunder), and any payments paid or
owing by any third party under any indemnity, warranty, or guaranty with
respect to such property, and any condemnation or requisition payments with
respect to such property, in each case whether now existing or hereafter
arising.
"Receivables" means (a) all accounts (as defined in the UCC) and all
other rights to payment for goods or other personal property which have been
(or are to be) sold, leased, or exchanged or for services which have been (or
are to be) rendered, regardless of whether such accounts or other rights to
payment have been earned by performance and regardless of whether such
accounts or other rights to payment are evidenced by or characterized as
accounts receivable, contract rights, book debts, notes, drafts or other
obligations of indebtedness, (b) all Documents and Instruments of any kind
relating to such accounts or other rights to payment or otherwise arising out
of or in connection with the sale, lease or exchange of goods or other
personal property or the rendering of services, (c) all rights in, to, or
under all security agreements, leases and other contracts securing or
otherwise relating to any such accounts, rights to payment, Documents, or
Instruments, (d) all rights in, to and under any purchase orders, service
contracts, or other contracts out of which such accounts and other rights to
payment arose (or will arise on performance), and (e) all rights in or
pertaining to any goods arising out of or in connection with any such purchase
orders, service contracts, or other contracts, including rights in returned or
repossessed goods and rights of replevin, repossession, and reclamation.
"Secured Obligations" has the meaning given such term in Section 2.2.
"UCC" means the Uniform Commercial Code in effect in the State of Texas
on the date hereof.
Section 1.2. Incorporation of Other Definitions. Reference is hereby
made to the Purchase Agreement for a statement of the terms thereof. All
capitalized terms used in this Agreement which are defined in the Purchase
Agreement and not otherwise defined herein shall have the same meanings herein
as set forth therein. All terms used in this Agreement which are defined in
the UCC and not otherwise defined herein or in the Purchase Agreement shall
have the same meanings herein as set forth therein, except where the context
otherwise requires.
Section 1.3. Attachments. All exhibits or schedules which may be
attached to this Agreement are a part hereof for all purposes.
Section 1.4. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein, references in this
Agreement to a particular agreement, instrument or document (including, but
not limited to, references in Section 2.1) also refer to and include all
renewals, extensions, amendments, modifications, supplements or restatements
of any such agreement, instrument or document, provided that nothing contained
in this Section shall be construed to authorize any Person to execute or enter
into any such renewal, extension, amendment, modification, supplement or
restatement.
Section 1.5. References and Titles. All references in this Agreement
to Exhibits, Articles, Sections, subsections, and other subdivisions refer to
the Exhibits, Articles, Sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any subdivision are for convenience only and do not constitute
any part of any such subdivision and shall be disregarded in construing the
language contained in this Agreement. The words "this Agreement", "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. The phrases "this Section" and "this subsection" and similar phrases
refer only to the Sections or subsections hereof in which the phrase occurs.
The word "or" is not exclusive, and the word "including" (in all of its forms)
means "including without limitation". Pronouns in masculine, feminine and
neuter gender shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice versa unless
the context otherwise requires.
ARTICLE II - Security Interest
Section 2.1. Grant of Security Interest. As collateral security for
all of the Secured Obligations, Debtor hereby pledges and assigns to Secured
Party, and grants to Secured Party a continuing security interest, in and to
all right, title and interest of Debtor in and to any and all of the following
property, whether now owned or existing or hereafter acquired or arising and
regardless of where located:
(a) all Receivables.
(b) all General Intangibles.
(c) all Documents.
(d) all Instruments.
(e) all Inventory.
(f) all Equipment.
(g) All books and records (including customer lists, marketing
information, credit files, price lists, operating records, vendor and supplier
price lists, sales literature, computer software, computer hardware, computer
disks and tapes and other storage media, printouts and other materials and
records) of Debtor pertaining to any of the Collateral.
(h) All moneys and property of any kind of Debtor in the possession or
under the control of Secured Party.
(i) All Proceeds of any and all of the foregoing Collateral.
In each case, the foregoing shall be covered by this Agreement, whether
Debtor's ownership or other rights therein are presently held or hereafter
acquired and howsoever Debtor's interests therein may arise or appear (whether
by ownership, security interest, claim or otherwise).
Debtor and Secured Party, by its acceptance hereof, hereby confirm that
it is their intention that the security interests granted by Debtor hereunder
not constitute a fraudulent transfer or fraudulent conveyance for purposes of
any federal or state law. To effectuate the foregoing intention, Debtor and
Secured Party (by its acceptance hereof) hereby irrevocably agree and
understand that, notwithstanding any other provision of this Agreement, the
Collateral granted by Debtor hereunder shall be limited to the maximum amount
of Collateral that can be pledged without rendering this Agreement, as it
relates to Debtor, voidable under applicable law relating to fraudulent
conveyances or fraudulent transfers, and not for any greater amount.
Section 2.2. Secured Obligations. The security interest created hereby
in the Collateral constitutes continuing collateral security for all of the
following obligations, indebtedness and liabilities, whether now existing or
hereafter incurred or arising:
(a) Purchase Agreement Indebtedness. The payment by Buyer as and when
due and payable, of the "Obligations", as defined in the Purchase Agreement,
and of all amounts from time to time owing by Buyer under or in respect of the
Purchase Agreement, the Notes or any of the other Obligation Documents.
(b) Guaranty Indebtedness. The payment by Debtor as and when due and
payable, of all amounts from time to time owing by Debtor under or in respect
of the Guaranty, or any of the other Obligation Documents to which Debtor is a
party, and the due performance by Debtor of all of its other respective
obligations under or in respect of the Guaranty and such other Obligation
Documents.
(c) Renewals. All renewals, extensions, amendments, modifications,
supplements, or restatements of or substitutions for any of the foregoing.
(d) Performance. The due performance and observance by Debtor of all
of its other obligations from time to time existing under or in respect of any
of the Obligation Documents.
As used herein, the term "Secured Obligations" refers to all present and
future indebtedness, obligations and liabilities of whatever type which are
described above in this section, including any interest which accrues after
the commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of Debtor. Debtor hereby
acknowledges that the Secured Obligations are owed to each Secured Party and
that each Secured Party is entitled to the benefits of the Liens given under
this Agreement.
ARTICLE III - Representations, Warranties and Covenants
Section 3.1. Representations and Warranties. Debtor hereby represents
and warrants to Secured Party as follows:
(a) Ownership Free of Liens. Debtor has good and marketable title to
the Collateral, free and clear of all Liens, encumbrances or adverse claims
except for the security interest created by this Agreement and the security
interests and other encumbrances expressly permitted by the Purchase
Agreement. No dispute, right of setoff, counterclaim or defense exists with
respect to all or any part of the Collateral. No effective financing
statement or other registration or instrument similar in effect covering all
or any part of the Collateral is on file in any recording office except any
which have been filed in favor of or assigned to Secured Party. None of the
Collateral is in the possession of any Person other than Debtor or Secured
Party, except for Collateral being transported in the ordinary course of
business.
(b) No Conflicts or Consents. Neither the ownership or the intended
use of the Collateral by Debtor, nor the grant of the security interest by
Debtor to Secured Party herein, nor the exercise by Secured Party of its
rights or remedies hereunder, will (i) conflict with any provision of (a) any
Law, (b) the organizational documents of Debtor, or (c) any agreement,
judgment, license, order or permit applicable to or binding upon Debtor, or
(ii) result in or require the creation of any Lien, charge or encumbrance upon
any assets or properties of Debtor or any Restricted Person except as
expressly contemplated in the Obligation Documents. Except as expressly
contemplated in the Obligation Documents, no consent, approval, authorization
or order of, and no notice to or filing with any Tribunal or third party is
required in connection with the grant by Debtor of the security interest
herein, or the exercise by Secured Party of its rights and remedies hereunder.
(c) Security Interest. Debtor has and will have at all times full
right, power and authority to grant a security interest in the Collateral to
Secured Party as provided herein, free and clear of any Lien, adverse claim,
or encumbrance, except for the security interests and other encumbrances
expressly permitted by the Purchase Agreement. This Agreement creates a valid
and binding first priority security interest in favor of Secured Party in the
Collateral, which security interest secures all of the Secured Obligations.
(d) Perfection. The taking possession by Secured Party of all
Instruments and money constituting Collateral from time to time will perfect,
and establish the first priority of, Secured Party's security interest
hereunder in such Collateral. The filing of the financing statements
delivered concurrently herewith by Debtor to Secured Party will perfect, and
establish the first priority (subject only to the security interests and other
encumbrances expressly permitted by the Purchase Agreement) of, Secured
Party's security interest hereunder in all other Collateral. No further or
subsequent filing, recording, registration, other public notice or other
action is necessary or desirable to perfect or otherwise continue, preserve or
protect such security interest except for continuation statements or filings
described in Section 3.2(b).
(e) Receivables. Each Receivable represents the valid and legally
binding indebtedness of a bona fide account debtor arising from the sale or
lease by Debtor of goods or the rendition by Debtor of services and is not
subject to contra-accounts, setoffs, defenses or counterclaims by or available
to account debtors obligated on the Receivables except as disclosed to Secured
Party. Subject to adjustments made (or to be made) in the ordinary course of
business, Goods which have been delivered to, and services which have been
rendered by Debtor to the account debtor on each such Receivable have been
accepted by such account debtor, and the amount shown as to each Receivable on
Debtor's books is the true and undisputed amount owing and unpaid thereon,
subject only to discounts, allowances, rebates, Purchases and adjustments to
which such account debtor has a right.
(f) General Intangibles. Each General Intangible included within the
Collateral which is material to Debtor's business constituting a right to
collect amounts due or to become due thereunder represents the valid and
legally binding obligation of each other Person who is a party thereto or who
is otherwise stated to be obligated thereunder, subject to no contra-accounts,
setoffs, defenses, counterclaims, discounts, allowances, rebates, credits or
adjustments by or available to account debtors obligated thereon, except for
those which do not materially impair the value to Debtor or the enforcement by
Debtor of such General Intangibles.
(g) Documents and Instruments. All Documents and Instruments included
within the Collateral are valid and genuine. Any such Document or Instrument
has only one original counterpart which constitutes collateral within the
meaning of the UCC or the Law of any applicable jurisdiction, and, if
requested by Secured Party, all such original counterparts (other than checks
delivered in payment of Receivables in the ordinary course of business) have
been delivered into the possession of Secured Party.
(h) Goods. None of the Collateral which constitutes goods (i) is
covered by any Document (other than Documents which are subject hereto and
have been delivered to Secured Party), (ii) is subject to any landlord's lien
or similar Lien (other than the security interests and other encumbrances
expressly permitted by the Purchase Agreement), (iii) has been related to,
attached to, or used in connection with any real property so as to constitute
a fixture upon such real property (except for real property which is subject
to a Lien in favor of Secured Party), (iv) is now kept or is intended to be
kept at any location other than as disclosed to Secured Party in writing
(except for goods in transit in the ordinary course of Debtor's business), (v)
is installed in or affixed to other goods so as to be an accession to such
other goods (unless such other goods are included in the Collateral), or (vi)
has been produced in violation of the Fair Labor Standards Act, as amended.
All such goods are insured to the extent required under the Purchase
Agreement.
Section 3.2. General Covenants Applicable to All Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this Section 3.2 from the date hereof
and so long as any part of the Secured Obligations is outstanding.
(a) Change of Name, Location, or Structure; Additional Filings. Debtor
recognizes that financing statements pertaining to the Collateral have been or
may be filed where Debtor maintains any Collateral, has its records concerning
any Collateral or has its chief executive office or chief place of business.
Without limitation of any other covenant herein, Debtor will not cause or
permit any change to be made in its name, identity or organizational
structure, or any change to be made to a jurisdiction other than as
represented in Section 3.1 hereof in (i) the location of any Collateral
(except with respect to Equipment which may be relocated within the original
filing jurisdiction applicable thereto), (ii) the location of any records
concerning any Collateral or (iii) in the location of its chief executive
office or principal place of business, unless Debtor shall have first (1)
notified Secured Party of such change at least thirty (30) days prior to the
effective date of such change, (2) taken all action requested by Secured Party
(under the following subsection (b) or otherwise) for the purpose of further
confirming and protecting Secured Party's security interests and rights under
this Agreement and the perfection and priority thereof, and (3) if requested
by Secured Party, provide to Secured Party a legal opinion to its satisfaction
confirming that such change will not adversely affect in any way Secured
Party's security interests and rights under this Agreement or the perfection
or priority thereof. In any notice furnished pursuant to this subsection,
Debtor will expressly state that the notice is required by this Agreement and
contains facts that may require additional filings of financing statements or
other notices for the purposes of continuing perfection of Secured Party's
security interest in the Collateral.
(b) Further Assurances. Debtor will, at its expense as from time to
time reasonably requested by Secured Party, promptly execute and deliver all
further instruments, agreements, filings and registrations, and take all
further action that may be necessary or that Secured Party may in good faith
request in order: (i) to confirm and validate this Agreement and Secured
Party's rights and remedies hereunder, (ii) to correct any errors or omissions
in the descriptions herein of the Secured Obligations or the Collateral or in
any other provisions hereof, (iii) to perfect, register and protect the
security interests and rights created or purported to be created hereby and
the first priority of such security interests and rights, (iv) to enable
Secured Party to exercise and enforce its rights and remedies hereunder in
respect of the Collateral, or (v) to otherwise give Secured Party the full
benefits of the rights and remedies described in or granted under this
Agreement. As part of the foregoing Debtor will, whenever reasonably
requested by Secured Party (1) execute and file any financing statements,
continuation statements, and other filings or registrations relating to
Secured Party's security interests and rights hereunder, and any amendments
thereto, (2) mark its books and records relating to any Collateral to reflect
that such Collateral is subject to this Agreement and the security interests
hereunder and (3) deliver to Secured Party (upon request, to the extent not
otherwise required hereunder to be delivered without request) all originals of
chattel paper, Documents or Instruments which are from time to time included
in the Collateral. Upon the occurrence and during the continuation of a
Default, to the extent requested by Secured Party from time to time, Debtor
will obtain from any material account debtor or other obligor on the
Collateral the acknowledgment of such account debtor or obligor that such
Collateral is subject to this Agreement.
(c) Inspection and Information. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all
representatives appointed by Secured Party, including independent accountants,
agents, attorneys, appraisers and any other persons, to inspect any of the
Collateral and the books and records of or relating to the Collateral at any
time during normal business hours, and to make photocopies and photographs
thereof, and to write down and record any information as such representatives
shall obtain. Upon request from time to time by Secured Party, Debtor will
furnish to Secured Party (i) any information concerning any covenant,
provision or representation contained herein or any other matter in connection
with the Collateral or Debtor's business, properties, or financial condition,
and (i) statements and schedules identifying and describing the Collateral and
other reports and information requested in connection with the Collateral, all
in reasonable detail.
(d) Ownership, Liens, Possession and Transfers. Debtor will maintain
good and marketable title to all Collateral, free and clear of all Liens,
encumbrances or adverse claims except for the security interest created by
this Agreement and Liens permitted under the Purchase Agreement, and Debtor
will not grant or allow any such Liens, encumbrances or adverse claims to
exist. Debtor will not grant or allow to remain in effect, and Debtor will
cause to be terminated, any financing statement or other registration or
instrument similar in effect covering all or any part of the Collateral,
except any which have been filed in favor of (or assigned to) Secured Party.
Debtor will defend Secured Party's right, title and special property and
security interest in and to the Collateral against the claims of any Person.
Debtor (i) will insure that all of the Collateral -- whether goods, Documents,
Instruments, or otherwise -- is and remains in the possession of Debtor or
Secured Party (or a bailee selected by Secured Party who is holding such
Collateral for the benefit of Secured Party), except for goods being
transported in the ordinary course of business, and (ii) will not sell, assign
(by operation of Law or otherwise), transfer, exchange, lease or otherwise
dispose of any of the Collateral except in the ordinary course of business.
(e) Impairment of Security Interest. Debtor will not take or fail to
take any action which would in any manner impair the value or enforceability
of Secured Party's first priority security interest in any Collateral.
(f) Insurance.
(i) Debtor will, at its own expense, maintain insurance with
respect to all Collateral which constitutes goods in such amounts,
against such risks, in such form and with such insurers, as shall be
required under the Purchase Agreement. Each policy for liability
insurance shall provide for all losses to be paid on behalf of Secured
Party and the Debtor that owns the Collateral as their respective
interests may appear, and each policy for property damage insurance
shall provide for all losses to be paid directly to Secured Party. Each
such policy shall in addition (A) name the Debtor who owns the
Collateral and Secured Party as insured parties thereunder (without any
representation or warranty by or obligation upon Secured Party) as their
interests may appear, (B) contain the agreement by the insurer that any
loss thereunder shall be payable to Secured Party notwithstanding any
action, inaction or breach of representation or warranty by Debtor, (C)
do not provide any recourse against Secured Party for payment of
premiums or other amounts with respect thereto and (D) provide that at
least thirty (30) days' prior written notice of cancellation or of lapse
shall be given to Secured Party by the insurer. Debtor will, if so
requested by Secured Party, deliver to Secured Party original or
duplicate policies of such insurance and, as often as Secured Party may
reasonably request, a report of a reputable insurance broker with
respect to such insurance. Debtor will also, at the request of Secured
Party, duly execute and deliver instruments of assignment of such
insurance policies and cause the respective insurers to acknowledge
notice of such assignment.
(ii) Reimbursement under any liability insurance maintained by
Debtor pursuant to this Section 3.2(f) may be paid directly to the
Person who has incurred the loss or damage covered by such insurance.
With respect to any loss involving damage to Collateral which
constitutes goods as to which subsection (iii) of this Section 3.2(f) is
not applicable, Debtor will make or cause to be made the necessary
repairs to or replacements of such Collateral owned by it, and any
proceeds of insurance maintained by Debtor pursuant to this Section
3.2(f) shall be paid to Debtor by Secured Party as reimbursement for the
costs of such repairs or replacements as such repairs or replacements
are made or acquired.
(iii) Upon the occurrence and during the continuance of an Event
of Default or upon the occurrence of a loss in excess of $50,000 per
occurrence of any Collateral which constitutes goods, all insurance
payments in respect of such Collateral shall be paid to Secured Party
and applied as specified in Section 4.3 hereof.
Section 3.3. Covenants for Specified Types of Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this Section 3.3 from the date hereof
and so long as any part of the Secured Obligations is outstanding.
(a) Receivables. Debtor will, except as otherwise provided in
Sections 4.1(e) or 4.2(a), collect at its own expense all amounts due or to
become due under each Receivable which is included within the Collateral. In
connection with such collections, Debtor may (and, upon the occurrence and
during the continuance of a Default, at Secured Party's direction, will) take
such action (not otherwise forbidden hereunder) as Debtor (or, upon the
occurrence and during the continuance of a Default, Secured Party) may deem
necessary or advisable to enforce collection or performance of each such
Receivable. Except for actions and omissions in the ordinary course of
business which do not in the aggregate cause losses or reductions in excess of
five percent (5%) of the aggregate face amount of all such Receivables
outstanding at any time, Debtor (i) will duly perform and cause to be
performed all of its obligations with respect to the goods or services, the
sale or lease or rendering of which gave rise or will give rise to each such
Receivable, and (ii) will not (whether through failure to duly perform its
obligations under any contracts, instruments, and agreements which are related
to any such Receivable, or by any written instrument, or otherwise) take or
allow any action or omission which causes any such Receivable to become
subject to any contra-accounts, setoffs, defenses, counterclaims, discounts,
allowances, rebates, credits or adjustments by or available to account debtors
obligated on such Receivable.
(b) General Intangibles. Debtor will, except as otherwise provided
in Sections 4.1(e) or 4.2(a), collect at its own expense all amounts due or to
become due under each General Intangible included within the Collateral. In
connection with such collections, Debtor may (and, upon the occurrence and
during the continuance of a Default, at Secured Party's direction, will) take
such action (not otherwise forbidden hereunder) as Debtor (or, upon the
occurrence and during the continuance of a Default, Secured Party) may deem
necessary or advisable to enforce collection or performance of each such
General Intangible. Debtor will duly perform and cause to be performed all of
its obligations under any contracts, instruments, and agreements which are, or
which are related to, any General Intangibles of Debtor. Debtor will not
(whether through failure to duly perform its obligations under any contracts,
instruments, and agreements which are related to any such General Intangibles,
or by any written instrument, or otherwise) take or allow any action or
omission which causes any such General Intangibles to become subject to any
contra-accounts, setoffs, defenses, counterclaims, discounts, allowances,
rebates, credits or adjustments by or available to account debtors obligated
on such General Intangibles, except for those which (i) in the case of such
General Intangibles under which money is owing to Debtor, do not in the
aggregate exceed five percent (5%) of the aggregate face amount of all such
General Intangibles owing to Debtor, and (ii) in the case of other General
Intangibles included within the Collateral, do not materially impair the value
or enforcement of such General Intangibles.
(c) Documents and Instruments. Debtor will at all times cause any
Documents or Instruments which are included within the Collateral to be valid
and genuine. Debtor will cause all Instruments included within the Collateral
to have only one original counterpart. If requested by Secured Party, Debtor
will promptly deliver to Secured Party all originals of Documents or
Instruments which are included within the Collateral. Debtor will not
(whether through failure to duly perform its obligations under any contracts,
instruments, and agreements which are related to any Documents or Instruments
which are included within the Collateral, or by any written instrument, or
otherwise) take or allow any action or omission which causes any Documents or
Instruments which are included within the Collateral to become subject to any
contra-accounts, setoffs, defenses, counterclaims, discounts, allowances,
rebates, credits or adjustments by or available to the Persons obligated
thereon. Upon request by Secured Party, Debtor will mark each chattel paper
which is included within the Collateral with a legend indicating that such
chattel paper is subject to the security interest granted by this Agreement.
(d) Inventory. Debtor will maintain, preserve, protect and store all
Inventory included within the Collateral in good condition, repair and working
order and in a manner which will not make void or cancelable any insurance
with respect to such Collateral. Debtor will promptly furnish to Secured
Party a statement respecting any loss or damage to any such Inventory with an
aggregate value in excess of $50,000. Except for transportation of Inventory
in the ordinary course of business, Debtor will not allow any such Inventory
to be located in any jurisdiction other than those in which is filed an
effective financing statement which perfects Secured Party's security interest
hereunder in such Inventory. Except for Documents delivered into the
possession of Secured Party, Debtor will not allow any Inventory included
within the Collateral to be covered by any Document. Except for
transportation and storage of Inventory in the ordinary course of business,
Debtor will not cause or permit the removal of any item of Inventory from
Debtor's possession, control and risk of loss, and Debtor will not sell,
assign (by operation of Law or otherwise), transfer, exchange, lease or
otherwise dispose of any Inventory, other than in connection with the
following:
(i) Sales or leases, other than during the continuance of an
Event of Default, of Inventory in the ordinary course of business, and
(ii) Possession of Inventory by Secured Party or by a bailee
selected by Secured Party who is holding such Inventory for the benefit
of Secured Party.
(e) Equipment. Debtor will maintain, preserve, protect and keep all
Equipment included within the Collateral in good condition, repair and working
order, ordinary wear and tear excepted, and will cause such Equipment to be
used and operated in a good and workmanlike manner, in accordance with
applicable Law and in a manner which will not make void or cancelable any
insurance with respect to such Equipment. Debtor will promptly make or cause
to be made all repairs, replacements and other improvements to or in
connection with such Equipment which are necessary or desirable or that
Secured Party may request to such end. Debtor will promptly furnish to
Secured Party a statement respecting any loss or damage to any of such
Equipment with an aggregate value in excess of $50,000. Except for
transportation of Equipment in the ordinary course of business, Debtor will
not allow any Equipment included within the Collateral to be located in any
jurisdiction other than those in which is filed an effective financing
statement which perfects Secured Party's security interest hereunder in such
Equipment. Debtor will not cause or permit the removal of any item of
Equipment from Debtor's possession, control and risk of loss, and Debtor will
not sell, assign (by operation of Law or otherwise), transfer, exchange, lease
or otherwise dispose of any Equipment, other than in connection with the
following:
(i) Sale or other disposal, other than during the continuance of
an Event of Default, of any item of Equipment which is worn out or
obsolete or which has been replaced by an item of equal suitability and
value, owned by Debtor and made subject to the security interest under
this Agreement, but which is otherwise free and clear of any Liens,
encumbrances or adverse claims, and
(ii) Possession of Equipment by Secured Party or by a bailee
selected by Secured Party who is holding such Equipment for the benefit
of Secured Party.
Debtor will not permit any of the Collateral which constitutes Equipment to at
any time become so related to attached to, or used in connection with any
particular real property so as to become a fixture upon such real property, or
to be installed in or affixed to other goods so as to become an accession to
such other goods unless such other goods are also included in the Collateral.
(f) Certificates of Title. To the extent that there is at any time any
Collateral in which a security interest may be perfected by a notation on the
certificate of title or similar evidence of ownership of such Collateral,
Debtor will:
(i) concurrently with the execution hereof, with respect to any
items of such Collateral with a book value in excess of $50,000 in which
Debtor presently has any interest,
(ii) promptly after the acquisition thereof, with respect to any
items of such Collateral with a book value in excess of $50,000 in which
Debtor hereafter acquires any interest, and
(iii) promptly upon request by Secured Party, with respect to any
other items of such Collateral,
deliver to Secured Party all such certificates of title and similar evidences
of ownership, all applications therefor, and all other documents needed or
helpful in registering Secured Party's security interest in such Collateral on
such certificates of title, other evidences of ownership, and applications and
in otherwise perfecting Secured Party's security interest in such Collateral.
ARTICLE IV. - Remedies, Powers and Authorizations
Section 4.1. Normal Provisions Concerning the Collateral.
(a) Additional Financing Statement Filings. Debtor hereby authorizes
Secured Party to file, without the signature of Debtor where permitted by Law,
one or more financing or continuation statements, and amendments thereto,
relating to the Collateral. Debtor further agrees that a carbon, photographic
or other reproduction of this Agreement or any financing statement describing
any Collateral is sufficient as a financing statement and may be filed in any
jurisdiction by Secured Party may deem appropriate.
(b) Power of Attorney. Debtor hereby irrevocably appoints Secured
Party as Debtor's attorney-in-fact and proxy, with full authority in the place
and stead of Debtor and in the name of Debtor or otherwise, from time to time
in Secured Party's discretion, upon the occurrence and during the continuance
of a Default, to take any action, and to execute or indorse any instrument,
certificate or notice, which Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement including any action or instrument:
(i) to obtain and adjust any insurance required to be paid to Secured Party
pursuant hereto; (ii) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral; (iii) to receive, indorse and
collect any drafts or other Instruments or Documents; (iv) to enforce any
obligations included among the Collateral; and (v) to file any claims or take
any action or institute any proceedings which Secured Party may deem necessary
or desirable for the collection of any of the Collateral or otherwise to
enforce, perfect, or establish the priority of the rights of Debtor or Secured
Party with respect to any of the Collateral. Debtor hereby acknowledges that
such power of attorney and proxy are coupled with an interest, are
irrevocable, and are to be used by Secured Party.
(c) Performance by Secured Party. If Debtor fails to perform any
agreement or obligation contained herein, Secured Party may itself perform, or
cause performance of, such agreement or obligation, and the expenses of
Secured Party incurred in connection therewith shall be payable by Debtor
under Section 4.5.
(d) Bailees. If at any time Debtor surrenders possession or control of
any Collateral to any warehouseman, bailee or any of Debtor's agents or
processors, Debtor shall, upon the request of Secured Party, notify such
warehouseman, bailee, agent or processor of Secured Party's rights hereunder
and instruct such Person to hold all such Collateral for Secured Party's
account subject to Secured Party's instructions. (No such request by Secured
Party shall be deemed a waiver of any provision hereof which was otherwise
violated by such Collateral being held by such Person prior to such
instructions by Debtor.)
(e) Collection Rights. Secured Party shall have the right at any time,
upon the occurrence and during the continuance of a Default or an Event of
Default, to notify (or to require Debtor to notify) any and all obligors under
any Receivables, General Intangibles, Instruments or other rights to payment
included among the Collateral of the assignment thereof to Secured Party under
this Agreement and to direct such obligors to make payment of all amounts due
or to become due to Debtor thereunder directly to Secured Party and, upon such
notification and at the expense of Debtor and to the extent permitted by Law,
to enforce collection of any such Receivables, General Intangibles,
Instruments or other rights to payment and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as Debtor
could have done. After Debtor receives notice that Secured Party has given
(and after Secured Party has required Debtor to give) any notice referred to
above in this subsection:
(i) all amounts and proceeds (including instruments and writings)
received by Debtor in respect of such Receivables, General Intangibles,
Instruments or other rights to payment shall be received in trust for
the benefit of Secured Party hereunder, shall be segregated from other
funds of Debtor and shall be forthwith paid over to Secured Party in the
same form as so received (with any necessary indorsement) to be, at
Secured Party's discretion, either (A) held as cash collateral
and released to Debtor upon the remedy of all Defaults and Events of
Default, or (B) if any Event of Default shall have occurred and be
continuing, applied as specified in Section 4.3, and
(ii) Debtor will not adjust, settle or compromise the amount or
payment of any such Receivable, General Intangible, Instrument or other
right to payment or release wholly or partly any account debtor or
obligor thereof or allow any credit or discount thereon.
Section 4.2. Event of Default Remedies. If an Event of Default shall
have occurred and be continuing, Secured Party may from time to time in its
discretion, without limitation and without notice except as expressly provided
below:
(a) exercise in respect of the Collateral, in addition to any other
rights and remedies provided for herein, under the other Obligation Documents,
or otherwise available to it, all the rights and remedies of a secured party
on default under the UCC (whether or not the UCC applies to the affected
Collateral);
(b) require Debtor to, and Debtor hereby agrees that it will at its
expense and upon request of Secured Party promptly, assemble all or part of
the Collateral as directed by Secured Party and make it (together with all
books, records and information of Debtor relating thereto) available to
Secured Party at a place to be designated by Secured Party which is reasonably
convenient to both parties;
(c) prior to the disposition of any Collateral, (i) to the extent
permitted by applicable Law, enter, with or without process of Law and without
breach of the peace, any premises where any of the Collateral is or may be
located, and without charge or liability to Secured Party seize and remove
such Collateral from such premises, (ii) have access to and use the Company's
books, records, and information relating to the Collateral, and (iii) store or
transfer any of the Collateral without charge in or by means of any storage or
transportation facility owned or leased by Debtor, process, repair or
recondition any of the Collateral or otherwise prepare it for disposition in
any manner and to the extent Secured Party deems appropriate and, in
connection with such preparation and disposition, use without charge any
copyright, trademark, trade name, patent or technical process used by Debtor;
(d) reduce its claim to judgment or foreclose or otherwise enforce, in
whole or in part, the security interest created hereby by any available
judicial procedure;
(e) dispose of, at its office, on the premises of Debtor or elsewhere,
all or any part of the Collateral, as a unit or in parcels, by public or
private proceedings, and by way of one or more contracts (it being agreed that
the sale of any part of the Collateral shall not exhaust Secured Party's power
of sale, but sales may be made from time to time, and at any time, until all
of the Collateral has been sold or until the Secured Obligations have been
paid and performed in full), and at any such sale it shall not be necessary to
exhibit any of the Collateral;
(f) buy (or allow one or more Secured Party to buy) the Collateral, or
any part thereof, at any public sale;
(g) buy (or allow one or more Secured Party to buy) the Collateral, or
any part thereof, at any private sale if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject
of widely distributed standard price quotations; and
(h) apply by appropriate judicial proceedings for appointment of a
receiver for the Collateral, or any part thereof, and Debtor hereby consents
to any such appointment.
Debtor agrees that, to the extent notice of sale shall be required by Law, at
least five (5) days' notice to Debtor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. Secured Party shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. Secured
Party may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
Section 4.3. Application of Proceeds. If any Event of Default shall
have occurred and be continuing, Secured Party may in its discretion apply any
cash held by Secured Party as Collateral, and any cash proceeds received by
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral, to any or all of the following in such
order as Secured Party may elect:
(a) To the repayment of all costs and expenses, including reasonable
attorneys' fees and legal expenses, incurred by Secured Party in connection
with (i) the administration of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization
upon, any Collateral, (iii) the exercise or enforcement of any of the rights
of Secured Party hereunder, or (iv) the failure of Debtor to perform or
observe any of the provisions hereof;
(b) To the payment or other satisfaction of any Liens, encumbrances, or
adverse claims upon or against any of the Collateral;
(c) To the reimbursement of Secured Party for the amount of any
obligations of Debtor or any Other Liable Party paid or discharged by Secured
Party pursuant to the provisions of this Agreement or the other Obligation
Documents, and of any expenses of Secured Party payable by Debtor hereunder or
under the other Obligation Documents;
(d) To the satisfaction of any other Secured Obligations;
(e) By holding the same as Collateral;
(f) To the payment of any other amounts required by applicable Law
(including any provision of the UCC); and
(g) By delivery to Debtor or to whoever shall be lawfully entitled to
receive the same or as a court of competent jurisdiction shall direct.
Section 4.4. Deficiency. In the event that the proceeds of any sale,
collection or realization of or upon Collateral by Secured Party are
insufficient to pay all Secured Obligations and any other amounts to which
Secured Party is legally entitled, Debtor shall be liable for the deficiency,
together with interest thereon as provided in the governing Obligation
Documents or (if no interest is so provided) at such other rate as shall be
fixed by applicable Law, together with the costs of collection and the
reasonable fees of any attorneys employed by Secured Party to collect such
deficiency.
Section 4.5. Indemnity and Expenses. In addition to, but not in
qualification or limitation of, any similar obligations under other Obligation
Documents:
(a) Debtor will indemnify Secured Party from and against any and all
claims, losses and liabilities growing out of or resulting from this Agreement
(including enforcement of this Agreement),
WHETHER OR NOT SUCH CLAIMS, LOSSES AND LIABILITIES ARE IN ANY WAY OR TO ANY
EXTENT OWED, IN
WHOLE OR PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED BY
OR ARISING OUT OF
SUCH INDEMNIFIED PARTY'S OWN NEGLIGENCE,
except to the extent such claims, losses or liabilities are proximately caused
by such indemnified party's gross negligence or willful misconduct.
(b) Debtor will upon demand pay to Secured Party the amount of any and
all costs and expenses, including the fees and disbursements of Secured
Party's counsel and of any experts and agents, which Secured Party may incur
in connection with (i) the perfection and preservation of this security
interest created under this Agreement, (ii) the administration of this
Agreement; (iii) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any Collateral; (iv) the
exercise or enforcement of any of the rights of Secured Party hereunder; or
(v) the failure by Debtor to perform or observe any of the provisions hereof,
except expenses resulting from Secured Party's individual gross negligence or
willful misconduct.
Section 4.6. Non-Judicial Remedies. In granting to Secured Party the
power to enforce its rights hereunder without prior judicial process or
judicial hearing, Debtor expressly waives, renounces and knowingly
relinquishes any legal right which might otherwise require Secured Party to
enforce its rights by judicial process. In so providing for non-judicial
remedies, Debtor recognizes and concedes that such remedies are consistent
with the usage of trade, are responsive to commercial necessity, and are the
result of a bargain at arm's length. Nothing herein is intended, however, to
prevent Secured Party or Debtor from resorting to judicial process at its
option.
Section 4.7. Other Recourse. Debtor waives any right to require
Secured Party to proceed against any other Person, to exhaust any Collateral
or other security for the Secured Obligations, to have any Other Liable Party
joined with Debtor in any suit arising out of the Secured Obligations or this
Agreement, or to pursue any other remedy in Secured Party's power. Debtor
further waives any and all notice of acceptance of this Agreement and of the
creation, modification, rearrangement, renewal or extension for any period of
any of the Secured Obligations of any Other Liable Party from time to time.
Debtor further waives any defense arising by reason of any disability or other
defense of any Other Liable Party or by reason of the cessation from any cause
whatsoever of the liability of any Other Liable Party. Until all of the
Secured Obligations shall have been paid in full, no Debtor shall have any
right to subrogation and Debtor waives the right to enforce any remedy which
Secured Party has or may hereafter have against any Other Liable Party, and
waives any benefit of and any right to participate in any other security
whatsoever now or hereafter held by Secured Party. Debtor authorizes Secured
Party, without notice or demand, without any reservation of rights against
Debtor, and without in any way affecting Debtor's liability hereunder or on
the Secured Obligations, from time to time to (a) take or hold any other
property of any type from any other Person as security for the Secured
Obligations, and exchange, enforce, waive and release any or all of such other
property, (b) apply the Collateral or such other property and direct the order
or manner of sale thereof as Secured Party may in its discretion determine,
(c) renew, extend for any period, accelerate, modify, compromise, settle or
release any of the obligations of any Other Liable Party in respect to any or
all of the Secured Obligations or other security for the Secured Obligations,
(d) waive, enforce, modify, amend or supplement any of the provisions of any
Obligation Document with any Person other than Debtor, and (e) release or
substitute any Other Liable Party.
Section 4.8. Limitation on Duty of Secured Party in Respect of
Collateral. Beyond the exercise of reasonable care in the custody thereof,
Secured Party shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent or bailee or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. Secured Party shall be deemed to have exercised reasonable care in
the custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act
or omission of any warehouseman, carrier, forwarding agency, consignee or
other agent or bailee selected by Secured Party in good faith.
Section 4.9. Appointment of Collateral Agents. At any time or times,
in order to comply with any legal requirement in any jurisdiction, Secured
Party may appoint any bank or trust company or one or more other Persons,
either to act as co-agent or co-agents, jointly with Secured Party, or to act
as separate agent or agents on behalf of Secured Parties, with such power and
authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment. In so doing
Secured Party may, in the name and on behalf of Debtor, give to such co-agent
or separate agent indemnities and other protections similar to those provided
in Section 4.5.
ARTICLE V. - Miscellaneous
Section 5.1. Notices. Any notice or communication required or
permitted hereunder shall be given as provided in the Purchase Agreement.
Section 5.2. Amendments. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by Debtor and
Secured Party, and no waiver of any provision of this Agreement, and no
consent to any departure by Debtor therefrom, shall be effective unless it is
in writing and signed by Secured Party, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given and to the extent specified in such writing.
Section 5.3. Preservation of Rights. No failure on the part of Secured
Party to exercise, and no delay in exercising, any right hereunder or under
any other Obligation Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. Neither the execution
nor the delivery of this Agreement shall in any manner impair or affect any
other security for the Secured Obligations. The rights and remedies of
Secured Party provided herein and in the other Obligation Documents are
cumulative and are in addition to, and not exclusive of, any rights or
remedies provided by Law or otherwise. The rights of Secured Party under any
Obligation Document against any party thereto are not conditional or
contingent on any attempt by Secured Party to exercise any of its rights under
any other Obligation Document against such party or against any other Person.
Section 5.4. Unenforceability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or invalidity
without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 5.5. Survival of Agreements. All representations and
warranties of all Debtor herein, and all covenants and agreements herein shall
survive the execution and delivery of this Agreement, the execution and
delivery of any other Obligation Documents and the creation of the Secured
Obligations.
Section 5.6. Other Liable Parties. Neither this Agreement nor the
exercise by Secured Party or the failure of Secured Party to exercise any
right, power or remedy conferred herein or by Law shall be construed as
relieving any Other Liable Party from liability on the Secured Obligations or
any deficiency thereon. This Agreement shall continue irrespective of the
fact that the liability of any Other Liable Party may have ceased or
irrespective of the validity or enforceability of any other Obligation
Document to which Debtor or any Other Liable Party may be a party, and
notwithstanding the reorganization, death, incapacity or bankruptcy of any
Other Liable Party, and notwithstanding the reorganization or bankruptcy or
other event or proceeding affecting any Other Liable Party.
Section 5.7. Binding Effect and Assignment. This Agreement creates a
continuing security interest in the Collateral and (a) shall be binding on
Debtor and its successors and permitted assigns and (b) shall inure, together
with all rights and remedies of Secured Party hereunder, to the benefit of
Secured Party and their respective successors, transferees and assigns, as
permitted by the Purchase Agreement. Without limiting the generality of the
foregoing, Secured Party may (except as otherwise provided in the Purchase
Agreement) pledge, assign or otherwise transfer any or all of their respective
rights under any or all of the Obligation Documents to any other Person, and
such other Person shall thereupon become vested with all of the benefits in
respect thereof granted to Secured Party, herein or otherwise. None of the
rights or duties of Debtor hereunder may be assigned or otherwise transferred
without the prior written consent of Secured Party.
Section 5.8. Termination. It is contemplated by the parties hereto
that there may be times when no Secured Obligations are outstanding, but
notwithstanding such occurrences, this Agreement shall remain valid and shall
be in full force and effect as to subsequent outstanding Secured Obligations.
Upon the satisfaction in full of the Secured Obligations, upon the
termination or expiration of the Purchase Agreement and any other commitment
of Secured Party to extend credit to Borrower, and upon written request for
the termination hereof delivered by Borrower to Secured Party, this Agreement
and the security interest created hereby shall terminate and all rights to the
Collateral shall revert to Debtor. Secured Party will thereafter, upon
Debtor's request and at Debtor's expense, (a) return to Debtor such of the
Collateral in Secured Party's possession as shall not have been sold or
otherwise disposed of or applied pursuant to the terms hereof; and (b) execute
and deliver to Debtor such documents as Debtor shall reasonably request to
evidence such termination.
Section 5.9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT AS REQUIRED BY MANDATORY
PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE PRIORITY, PERFECTION AND
THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST CREATED
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.
Section 5.10. "Note Document". This Agreement is a "Note Document", as
defined in the Purchase Agreement, and, except as expressly provided herein to
the contrary, this Agreement is subject to all provisions of the Purchase
Agreement governing such Note Documents.
IN WITNESS WHEREOF, Debtor has caused this Agreement to be executed and
delivered this Agreement by its officer thereunto duly authorized, as of the
date first above written.
NCI-SHAWNEE LIMITED PARTNERSHIP,
a Texas limited partnership
By: Future Petroleum Corporation,
a Texas corporation, General Partner
By: /s/ B. Carl Price
B. Carl Price, President
Address of Debtor:
2351 West Northwest Highway
Dallas, Texas 75220
Attention: Carl Price
Telecopy: 214-350-8382
FINANCING STATEMENT
This instrument is prepared and is intended to be a Financing Statement
complying with the formal requisites therefor as set forth in the Uniform
Commercial Code.
1a The name and address of the Debtor ("Debtor") is:
NCI-Shawnee Limited Partnership
2351 West Northwest Highway
Dallas, Texas 75220
Attention: Carl Price
2a The name and address of the secured parties ("Secured Party") are:
Energy Capital Investment Company PLC
c/o EnCap Investments L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attention: Colin Nisbeth
EnCap Equity 1994 Limited Partnership
c/o EnCap Investments L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attention: Colin Nisbeth
Gecko Booty 1994 I Limited Partnership
c/o EnCap Investments L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attention: Colin Nisbeth
3a This Financing Statement covers the following types or items of
property (collectively, the "Collateral"):
All right, title and interest of Debtor in and to any and all of the following
property, whether now owned or existing or hereafter acquired or arising and
regardless of where located:
(a) all Receivables.
(b) all General Intangibles.
(c) all Documents.
(d) all Instruments.
(e) all Inventory.
(f) all Equipment.
(g) All books and records (including customer lists, marketing
information, credit files, price lists, operating records, vendor and supplier
price lists, sales literature, computer software, computer hardware, computer
disks and tapes and other storage media, printouts and other materials and
records) of Debtor pertaining to any of the Collateral.
(h) All moneys and property of any kind of Debtor in the possession or
under the control of Secured Party.
(i) All Proceeds of any and all of the foregoing Collateral.
In each case, the foregoing shall be covered by this Agreement, whether
Debtor's ownership or other rights therein are presently held or hereafter
acquired and however Debtor's interests therein may arise or appear (whether
by ownership, security interest, claim or otherwise).
4a This Financing Statement is presented for filing to the Secretary of
State of Texas.
NCI-SHAWNEE LIMITED PARTNERSHIP,
a Texas limited partnership
By: Future Petroleum Corporation,
a Texas corporation, General Partner
By: /s/ B. Carl Price
B. Carl Price, President
EXHIBIT 10.19
AMENDMENT
to Renewal Promissory Note dated May 1, 1998
in the original principal amount of $3,714,305.88
executed by FUTURE PETROLEUM CORPORATION,
a Utah corporation,
and payable to the order of
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
THIS AMENDMENT is attached to, made a part of, and amends
that certain Renewal Promissory Note dated May 1, 1998 (the
"Note") in the original principal amount of $3,714,305.88,
executed by Future Petroleum Corporation, a Utah Corporation
("Future") and payable to the order of EnCap Equity 1994 Limited
Partnership, a Texas limited partnership ("Lender").
The Note was issued in connection with and pursuant to (i)
that certain Purchase and Sale Agreement dated November 25, 1997
between Future and Energy Capital Investment Company PLC, EnCap
Equity 1994 Limited Partnership and Gecko Booty 1994 I Limited
Partnership and (ii) that certain Purchase and Sale Agreement
dated May 1, 1998 between Future and Energy Capital Investment
Company PLC, EnCap Equity 1994 Limited Partnership and NCI
Enterprises, Inc., each of which has been restated and superseded
by that certain Note Restructuring Agreement of even date
herewith among Future, Energy Capital Investment Company PLC and
EnCap Equity 1994 Limited Partnership, as from time to time
amended, supplemented or restated (the "Note Agreement").
Future and Lender hereby agree to amend the terms of the
Note to provide that, notwithstanding the payment schedule
specified in the Note, interest on, and the principal amount of,
the Note, shall be due and payable as follows:
Interest only on the Note shall be due and payable quarterly
as it accrues on the last business day of each quarter,
beginning September 30, 1998 and continuing regularly
thereafter until and including December 31, 2003, on which
date all unpaid principal of and accrued interest on the
Note shall be due and payable.
<PAGE>1
Future and Lender hereby further agree that, notwithstanding
anything in the Note or in the Note Agreement to the contrary,
Future shall have the option, exercisable with respect to each of
the first eight quarterly installments of interest due under the
Note, not to pay any such quarterly installment of interest, in
which event (a) such non-payment of interest shall not constitute
a "Default" or "Event of Default," as such terms are defined in
the Note Agreement, (ii) any such unpaid installment of interest
shall not bear interest at the default rate set forth in the
second paragraph of the Note and (iii) the amount of any unpaid
installment of interest shall automatically be added to the
principal amount of the Note, effective as of the date such
unpaid installment of interest was due under the Note, and shall
bear interest at the rate of interest set forth in the Note.
IN WITNESS WHEREOF, Future has caused this Amendment to be
executed and delivered by an officer thereunto validly
authorized, and Lender has accepted this Amendment and caused the
same to be attached to and become a part of the Note.
Date: August 14, 1998 FUTURE PETROLEUM CORPORATION,
a Utah corporation
By: /s/ B. Carl Price
B. Carl Price, President
Accepted this 14th day of August, 1998
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: ENCAP INVESTMENTS, L.C., General Partner
By: /s/ Gary R. Petersen
Gary R. Petersen, Managing Director
<PAGE>2
EXHIBIT 10.20
AMENDMENT
to Renewal Promissory Note dated May 1, 1998
in the original principal amount of $3,370,694.12
executed by FUTURE PETROLEUM CORPORATION,
a Utah corporation,
and payable to the order of
ENERGY CAPITAL INVESTMENT COMPANY PLC
THIS AMENDMENT is attached to, made a part of, and amends
that certain Renewal Promissory Note dated May 1, 1998 (the
"Note") in the original principal amount of $3,370,694.12,
executed by Future Petroleum Corporation, a Utah Corporation
("Future") and payable to the order of Energy Capital Investment
Company PLC, an English investment company ("Lender").
The Note was issued in connection with and pursuant to (i)
that certain Purchase and Sale Agreement dated November 25, 1997
between Future and Energy Capital Investment Company PLC, EnCap
Equity 1994 Limited Partnership and Gecko Booty 1994 I Limited
Partnership and (ii) that certain Purchase and Sale Agreement
dated May 1, 1998 between Future and Energy Capital Investment
Company PLC, EnCap Equity 1994 Limited Partnership and NCI
Enterprises, Inc., each of which has been restated and superseded
by that certain Note Restructuring Agreement of even date
herewith among Future, Energy Capital Investment Company PLC and
EnCap Equity 1994 Limited Partnership, as from time to time
amended, supplemented or restated (the "Note Agreement").
Future and Lender hereby agree to amend the terms of the
Note to provide that, notwithstanding the payment schedule
specified in the Note, interest on, and the principal amount of,
the Note, shall be due and payable as follows:
Interest only on the Note shall be due and payable quarterly
as it accrues on the last business day of each quarter,
beginning September 30, 1998 and continuing regularly
thereafter until and including December 31, 2003, on which
date all unpaid principal of and accrued interest on the
Note shall be due and payable.
<PAGE>1
Future and Lender hereby further agree that, notwithstanding
anything in the Note or in the Note Agreement to the contrary,
Future shall have the option, exercisable with respect to each of
the first eight quarterly installments of interest due under the
Note, not to pay any such quarterly installment of interest, in
which event (a) such non-payment of interest shall not constitute
a "Default" or "Event of Default," as such terms are defined in
the Note Agreement, (ii) any such unpaid installment of interest
shall not bear interest at the default rate set forth in the
second paragraph of the Note and (iii) the amount of any unpaid
installment of interest shall automatically be added to the
principal amount of the Note, effective as of the date such
unpaid installment of interest was due under the Note, and shall
bear interest at the rate of interest set forth in the Note.
IN WITNESS WHEREOF, Future has caused this Amendment to be
executed and delivered by an officer thereunto validly
authorized, and Lender has accepted this Amendment and caused the
same to be attached to and become a part of the Note.
Date: August 14, 1998
FUTURE PETROLEUM CORPORATION,
a Utah corporation
By:/s/ B. Carl Price
B. Carl Price, President
Accepted this 14th day of August, 1998
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ Gary R. Petersen
Gary R. Petersen, Director
<PAGE>2
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<ARTICLE> 5
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 55974
<SECURITIES> 0
<RECEIVABLES> 275692
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 331666
<PP&E> 13479058
<DEPRECIATION> (795594)
<TOTAL-ASSETS> 13238127
<CURRENT-LIABILITIES> 288782
<BONDS> 0
0
0
<COMMON> 60332
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13238127
<SALES> 0
<TOTAL-REVENUES> 574187
<CGS> 142786
<TOTAL-COSTS> 712354
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
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<EXTRAORDINARY> 0
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